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Soon insurance companies can open different line of businesses like life, non-life, health and reinsurance through a single license.
The Department of Financial Services (DFS), the Ministry of Finance has proposed some amendments to the existing sections of Insurance Regulatory and Development Authority (IRDAI) Act, 1999 in which it has recommended that insurance companies should be granted a composite license which essentially means that insurance companies will be allowed to sell life, general, health and re-insurance through a single license.
The government also proposed that insurers should be allowed to sell other financial products like mutual funds. However, there is no clarity on execution of this proposal as SEBI regulates financial products like mutual funds and PFRDA regulates NPS.
If the proposal goes through, agents will be able to offer multiple products. Currently, they can have tie up with three insurers – one each in life, non-life and standalone health.
The department has also proposed that IRDAI should do away with stringent paid up equity capital norms in which life insurance, general insurance and health insurers will have to maintain paid up capital of Rs.100 crore.
In a covering note, the DFS said, “The proposed amendments primarily focus on enhancing the financial security of the policyholders, promoting policyholders' interests, improving returns to the policyholders, facilitating entry of mote players in insurance market leading to economic growth and employment generation, enhancing efficiencies of the insurance industry - operational as well as financial and enabling ease of doing business.”
The DFS further said, “The proposal includes various measures such as opening up registration to various classes, sub-classes and types of insurers with appropriate minimum capital requirements as specified by IRDAI, allowing services to insurers that are incidental or related to insurance business as well as distribution of other financial products as specified by IRDAI, enabling newer channels of distribution, providing for efficient use of capital and resources, etc.”
