Government to Introduce Amendments to Insurance Act, 1938 for ‘Insurance for All by 2047’ Initiative

The Indian government is gearing up to introduce a bill during the upcoming Budget session that aims to revolutionize the insurance sector and make ‘Insurance for All by 2047’ a reality. The proposed amendments to the Insurance Act, 1938, and the Insurance Regulatory Development Act, 1999, are expected to bring about significant changes that will benefit both policyholders and the insurance industry as a whole.

One of the key provisions that could be included in the amendment bill is the introduction of composite licenses for insurance companies. This would allow life insurers to underwrite health insurance or general insurance policies, breaking the traditional barriers that restricted them to offering only Life insurance covers. Currently, life insurers are limited to providing Life insurance products, while general insurers can offer a range of non-life products such as health, motor, fire, and marine insurance.

The move towards composite licensing is aimed at promoting innovation and competition in the insurance sector, similar to the differentiated banking models that exist today. By allowing insurers to diversify their product offerings, it is expected to enhance customer choice and drive greater penetration of insurance products across the country.

In addition to composite licensing, the proposed amendments also include provisions for differential capital requirements, reduction in solvency norms, issuing captive licenses, changing investment regulations, and allowing insurers to distribute other financial products. These changes are intended to improve returns for policyholders, attract more players to the insurance market, boost economic growth, and generate employment opportunities.

The draft bill is currently awaiting approval from the Cabinet, with the finance ministry hopeful that it will be introduced in the upcoming session. The amendments have been designed to prioritize the interests of policyholders, enhance operational and financial efficiencies in the insurance industry, and create a more conducive environment for doing business.

The relaxation of capital norms is expected to pave the way for the entry of specialized insurance companies focused on micro-insurance, agriculture insurance, or regional insurance services. This could lead to a more diverse and competitive insurance landscape, ultimately benefiting consumers and driving job creation across the country.

With 25 Life insurance companies and 32 non-life or general insurance firms currently operating in India, the proposed amendments are poised to bring about a significant transformation in the insurance sector. By enabling insurers to offer a wider range of products and services, the amendments aim to make insurance more accessible and affordable for all Indians, ultimately moving closer to the goal of ‘Insurance for All by 2047’.