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In a recent interview with CNBC Awaaz, Finance Secretary M Nagaraju said that the government will enable open architecture in insurance distribution by allowing agents to sell policies of multiple insurers.
Earlier, the Department of Financial Services, GOI has proposed to omit the clause, which makes it mandatory for insurance agents to work with only one life, one health and one non-life insurer.
With this, insurance agents would be allowed to work with multiple insurance companies soon.
Nagaraju explained the major changes coming to India's insurance sector through the Union Budget. These changes focus on Foreign Direct Investment (FDI), rules for running insurance companies, and the proposed composite license that will allow all insurance types to be sold.
Nagaraju expanded on the insurance licenses "Either you want to do life, general, or health. Whatever it is you want to do, you can do that. Single license or composite license." He continued "And the agent also, he can sell any product now he wants, once it is done." But Nagaraju made it clear that "The agent has to be trained. The agent has to be skilled."
Nagaraju also pointed out that in 24 years, India has received only Rs. 82,000 crore in insurance FDI. There were many other strict rules that kept foreign companies away, like having only Indian board members and CEOs, and restrictions on taking money back home.
Now that the government is changing these rules, Nagaraju said they expect huge FDI flows. The government understands that foreign companies want more say in running their business, and this is normal global practice.
Here are the highlights from the discussion:
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Despite raising the FDI limit to 50% in 2015 and 74% in 2021, foreign investment remained low
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The government is now easing these rules to make investing in India’s insurance sector more appealing
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If an insurer wants to offer all three products, then their solvency position and capital will be seen separately
Foreign insurers want control over their investments, including the ability to appoint their own leadership, which is a common global practice.