Budget 2024: Government to Propose Changes to Insurance Laws
In a significant move towards achieving 'Insurance for All by 2047', the government is set to introduce a bill seeking amendments to the Insurance Act, 1938, during the upcoming Budget session. The proposed amendments aim to reform the insurance sector, making it more inclusive and efficient ().
Key Provisions in the Amendment Bill
The amendment bill is expected to include several key provisions such as the introduction of composite licenses, differential capital requirements, reduction in solvency norms, issuance of captive licenses, changes in investment regulations, one-time registration for intermediaries, and permission for insurers to distribute other financial products.‘Amendments aim to revolutionize insurance accessibility. #insuranceforall #medindia’
The introduction of composite licenses would allow life insurers to underwrite health and general insurance policies, a significant change from the current provisions of the Insurance Act, 1938, which restrict life insurers to only offering life insurance covers. Similarly, general insurers are currently limited to offering non-life insurance products such as health, motor, fire, and marine insurance.
This move would enable the entry of differentiated insurance companies, akin to the banking sector which includes universal banks, small finance banks, and payments banks. Such differentiation is expected to enhance the efficiency and reach of the insurance sector.
Focus on Policyholder Interests and Economic Growth
Sources indicate that the draft bill is ready and awaiting Cabinet approval. The finance ministry is hopeful that the bill will be introduced in the upcoming Budget session.The proposed amendments are primarily aimed at enhancing policyholder interests, improving returns, facilitating the entry of more players, and boosting economic growth and employment. The amendments also seek to enhance the operational and financial efficiencies of the insurance industry, making it easier to do business.
In December 2022, the finance ministry invited comments on the proposed amendments to the Insurance Act, 1938, and the Insurance Regulatory and Development Authority Act, 1999. These acts form the legislative framework for insurance in India, regulating the relationship between insurers, policyholders, shareholders, and the regulator-the Insurance Regulatory and Development Authority of India (IRDAI).
Currently, India has 25 life insurance companies and 32 non-life or general insurance firms, including specialized entities like the Agriculture Insurance Company of India Ltd and ECGC Limited.
The government's initiative to amend the Insurance Act, 1938, is a step towards a more inclusive and efficient insurance sector, aligning with the vision of 'Insurance for All by 2047'.
Reference:
- Insurance Laws (Amendment) Ordinance, 2014 to Make Amendments to the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and the Insurance Regulatory and Development Authority Act, 1999 - (https:pib.gov.in/newsite/PrintRelease.aspx?relid=114145)
Source: Medindia