Bill to reform insurance sector may come in monsoon session
2 min read 09 Feb 2023, 10:43 PM ISTThe draft bill allows insurance companies the freedom to sell different financial products
PremiumNew Delhi: The government is likely to introduce the Insurance Laws (Amendment) Bill 2022 in the monsoon session of Parliament to bring deep reforms in the insurance sector, including a provision for composite insurance licence and flexibility in entry barriers, two people aware of the development said.
According to them, stakeholder consultation on the draft bill is expected to be completed by the end of March before the final version is presented for cabinet approval, followed by its introduction and passage in Parliament.
“The Bill is almost ready but the industry wants certain clarifications and changes in some of the provisions. We were expecting it to get Parliamentary approval in the Budget session itself but a need is felt to discuss the provisions of the Bill threadbare considering inputs from stakeholders so that a progressive and growth-oriented legislation is drafted," said one of the people quoted above.
Queries to the finance ministry remained unanswered till press time.
However, an official said anonymously that insurance sector reforms were top of the government agenda and that a progressive, forward-looking legislation is on its way.
The government is not looking at intruding into the independence of general and life insurance councils and the insurance law is thus unlikely to change the composition of councils by including a government representative. The person said the industry wanted wider representation in the councils and if the changes impact autonomy, it should be avoided.
Under grant of composite licence to insurers, a single entity could offer both life and non-life products, the bill says.
The bill has divided the industry, with certain sections favouring the move as progressive, while others, including state-run general insurance companies, opposing such licences for insurers, which they feel can further fragment the market and allow entry of various “non-serious" and financially weaker players into the vast Indian insurance market.
The general insurance council, the prime industry body of general insurers, had initially opposed the move to introduce composite licence, but reversed its stand in a January meeting, where it endorsed grant of composite licences with checks.
Questions sent to the general insurance council remained unanswered till the time of going to press.
“There are several issues where further discussions are required. The government is going with an open mind to draft a legislation that addresses all concerns of the industry and makes regulations easier. So, merits of all the suggestions, including newer ones, would be studied before finalising the draft bill," said the person.
Among other things, the draft bill also allows insurance companies the freedom to sell different financial products, just like banks. These could include products such as mutual funds, but clarity on this would emerge once rules governing the amended legislation are drafted.
The draft bill suggests doing away with the existing requirement of paid-up equity capital of ₹100 crore for setting up a life, general, or health insurance business.
The finance ministry has instead proposed a differential licensing regime, where an insurance company is allowed to commence business considering the size and scale of operations, class or sub-class of the business, and the category or type of insurer.
Many of these proposed amendments in the draft bill were carried on the basis of the recommendations that the insurance regulator had sent to the government ahead of the Budget session.
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