The ongoing Winter Session of Parliament is probably going to see the Insurance Amendment Bill. The Central Government is all geared up to present the bill in this session and it is expected that this will bring some of the most prominent and long-awaited reforms in the insurance sector of India. So what are the changes that the government is going to propose in this bill? How will these changes affect the insurance sector? Let’s find out.
Key Changes in the Insurance Amendment Bill
The changes in the Insurance Amendment Bill, which can be crucial to the industry as a whole include the following:
- Composite Insurance License: In this amendment bill, a composite insurance license may be proposed and introduced to the industry. This license will allow general insurers to sell life insurance products and life insurers to sell general insurance products such as auto or health insurance.
If this amendment is implemented, then the competition within the industry will grow healthily and encourage integration. It will also inject flexibility and the insurers will get a diversified product portfolio to offer to their clients.
- Captive Insurance License: Another license that may be introduced if this bill passes in this winter session, is the captive insurance license. This will allow the big business houses, corporates, and business conglomerates to have their captive insurance entities with which they can cover their business risks.
This amendment may offer better control for the businesses and better risk management but this will reduce the demand for traditional insurance in the business sector which can affect the insurance sector adversely.
- Initial Capital Requirements: The changes in the Insurance Amendment Bill may also include a reduction of the initial capital required for setting up an insurance firm. The present capital requirement for starting an insurance business is around ₹ 100 crore while the same for reinsurers is ₹ 200 crore. As per the Insurance amendment bill, the capital requirement may be decided according to the companies’ size and operations.
This amendment can help the niche-specific insurers to grow and start their business with lower capital requirements and in turn, the overall entry barrier in the industry will be reduced.
- Wider Product Base: The bill can widen the product base for the insurers as they may be permitted to offer other financial products along with insurance to grow their businesses. For instance, an insurer will be able to sell mutual funds, credit cards, loans, and bank deposits as well keeping insurance as the main product.
This can help the insurance sector grow immensely and generate a new stream of income.
- Changes in Investment Guidelines: The most talked about amendment in this bill is the IRDAI gaining its authority back for deciding investment limits for insurers. IRDAI has proposed 100% FDI in this sector, which is currently at 74%.
IRDAI having the authority to set and change investment limits for equity and other investments in this sector can help the sector grow, as the investment would be according to the market dynamics, which can maximize the returns for the policyholders. On the other hand, a 100% FDI can help the insurance sector boom and act as a catalyst in achieving the government target of “Insurance for All” by 2047.
Wrapping up
The insurance sector is eagerly waiting for the insurance amendment bill to be presented in the winter session. It will be interesting to see how the bill turns the insurance industry for better and whether IRDAI gets a nod for 100% FDI or not.
Source: MoneyControl
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