There are currently 26 general insurers in India, with the General Insurance Corporation serving as the only reinsurer. (Credit: marcyano79/Adobe Stock)

Major insurance reform is in the works for India with the Insurance Amendment Bill, which is on the agenda for the winter session of Parliament. If passed, the bill would bump the foreign direct investment (FDI) ceiling for insurance companies from 74% to 100%, the Times of India reports.

As explained by the Organisation for Economic Cooperation and Development, FDI is “a category of cross-border investment in which an investor resident in one economy establishes a lasting interest in and a significant degree of influence over an enterprise resident in another economy. Ownership of 10 percent or more of the voting power in an enterprise in one economy by an investor in another economy is evidence of such a relationship. FDI is a key element in international economic integration because it creates stable and long-lasting links between economies.”

The Insurance Amendment Bill would also relax regulations on insurers that provide only one type of policy and allow for the entry of larger insurers into the country.

This is part of a movement from the Insurance Regulatory and Development Authority of India (IRDAI) to enable “insurance for all” in the country by 2047. Currently, the Times of India reports, there are some sectors in which insurance penetration in the country is only 4%. There are 26 general insurers in the country, with the General Insurance Corporation serving as the only reinsurer.

The Insurance Amendment Bill would also allow individual agents to sell policies from multiple insurance carriers. While some agents are already offering policies from multiple insurers, they are unable to do it directly. The Times of India reports that many get around this regulation by having their spouse or another family member register as agents for other carriers.

More insurance reform could be forthcoming, as IRDAI has also proposed amendments that will allow for the use of composite licenses and ease solvency requirements.

In a 2022 release detailing the “Insurance for All” plan, the IRDAI indicated its focus is to strengthen the “three pillars” of the insurance ecosystem: policyholders, insurers and intermediaries.

The goals of their plan include:

• Making the right products available to the right customers;
• Creating a robust grievance redressal mechanism;
• Facilitating the ease of doing business in the insurance sector;
• Ensuring the regulatory architecture is aligned with market dynamics; and
• Boosting innovation, competition and distribution efficiency while mainstreaming technology and moving toward a principle-based regulatory regime.

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