Finance Ministry Proposal To Change Insurance And IRDAI Acts

The Finance Ministry has proposed far-reaching changes to the IRDAI Act and Insurance Act to attain the target of ‘Insurance for All’ by 2047 and invited comments for the same.

Finance Ministry Proposal To Change Insurance And IRDAI Acts
The proposed changes seek to revamp insurance laws.

THE INSURANCE Regulatory and Development Authority of India recently approved a number of proposals. The regulator is making it easier for public insurers to raise capital, widen their distribution channels and enjoy greater flexibility in compensating agents.

Meanwhile the Departnment of Financial Services under the Ministry of Finance has proposed issuing composite licences.

IRDAI has raised the maximum tie-up limit for corporate agents like banks and insurance marketing firms or IMFs. As such, banks can sell insurance policies of nine life, nine non-life and nine standalone health insurers while IMFs can sell policies from six insurers in each category, up from the present two.

Moreover, IRDAI has approved raising capital through subordinated debt and preference shares for insurers without seeking permission beforehand. The upper limit for these instruments has also been increased from 25 to 50 per cent of paid-up capital and premium. 

Lower solvency requirements have been proposed for the unit linked business (without guarantee) from 0.80 per cent to 0.60 per cent and for the Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) from 0.10 per cent to 0.05 per cent. 

In the PM Fasal Bima Yojana, besides lowering the solvency factor related to crop insurance from 0.70 to 0.50, the period for recognising delay in premium dues has been increased from 180 days to 365 days. 

In a statement, IRDAI said, “In order to enable the policyholders/prospects to have wider choice and access to insurance through various distribution channels and facilitate the reach of insurance to the last mile, the maximum number of tie ups for corporate agents (CA) and insurance marketing firms (IMF) have been increased. Now, a CA can tie up with 9 insurers (earlier 3 insurers) and IMF can tie up with 6 insurers (earlier 2 insurers) in each line of business of life, general and health for distribution of their insurance products. The area of operation of IMF has also been expanded to cover entire state in which they are registered.”

The Finance Ministry has invited comments by December 15 on the proposed amendments to the Insurance Act, 1938, and Insurance Regulatory and Development Act (IRDA), 1999.

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