The bill also aims to relax restrictions on insurance agents, permitting them to sell policies from multiple insurers rather than being tied to a single company.
India currently caps FDI in insurance companies at 74% while intermediaries face fewer restrictions. The market includes 24 life insurers, 26 general insurers, six standalone health insurers, and one reinsurer – General Insurance Corporation.
Raising The FDI Limit - to 100% aims to attract international insurers with the financial resources required to grow in a capital-intensive industry. The entry of such players is expected to complement existing domestic firms like SBI, ICICI, HDFC, and prominent conglomerates such as the Tata and Birla groups.
The proposed changes may also prompt foreign companies to reconsider their market strategies. For instance, Allianz, reportedly exploring an end to its partnership with Bajaj Finserv, could potentially enter the Indian market as an independent operator under the new framework.
Relaxing Restrictions On Agents - is another key element of the proposed reforms. Currently, agents often register family members to represent additional insurers, a practice that the new rules would legitimize. By allowing agents to sell products from multiple companies, the government hopes to streamline the market and enhance transparency.
India’s insurance penetration stands at approximately 4%, prompting calls for increased investment and structural reforms to grow the market.
To address this, IRDAI is exploring additional measures, including the introduction of composite licenses. This change would allow insurers to offer life and non-life policies through a single entity, potentially benefiting companies like Life Insurance Corporation of India, which is reportedly seeking to acquire a health insurer to diversify its offerings.
Further proposals include reducing solvency requirements to free up capital, which would enable insurers to expand their underwriting capacity.
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