The Insurance Regulatory and Development Authority of India (Irdai) has formed a high-powered committee, led by Dinesh Khara, former chairman of State Bank of India, to scrutinise various aspects of the Insurance Act 1938 and suggest amendments. The Irdai move has come at a time when the Indian government is gearing up to introduce the Insurance Amendment Bill in Parliament, which proposes allowing 100 per cent foreign direct investment (FDI) in the insurance sector.
The committee has already held its first meeting, indicating a swift move towards implementing the proposed changes. The government’s proposal to increase FDI limits in the insurance sector is expected to attract foreign investment, improve insurance penetration, and increase competition in the market.
The seven-member panel includes NS Kannan, former MD and CEO of ICICI Prudential Life Insurance; Girish Radhakrishnan, former CMD of United India Insurance; Rakesh Joshi, former member of Irdai; Saurabh Sinha, former executive director of RBI; Alok Misra, MD and CEO of MFIN and legal expert L Vishwanathan.
It may be recalled that the Insurance Act, 1938, was originally passed in British India to regulate the insurance sector. It provides the broad legal framework within which the industry operates. It also led to establishment of the regulatory authority, Irdai, which oversees the implementation of the act. The Insurance Act, 1938, outlines the various types of insurance policies that can be offered in India, such as life insurance, general insurance and health insurance and allows insurers to appoint insurance agents for soliciting and procuring insurance business.
Earlier, while presenting the Budget for FY26 in the Lok Sabha, Finance Minister Nirmala Sitharaman had announced the proposal to raise the FDI limit in the Indian insurance sector from 74 per cent to 100 per cent.
Sitharaman further stated that the Centre is working on more reforms in the insurance sector. Guardrails are being put so that citizens’ money towards premium payment for insurance is kept within the country, she said.
M Nagaraju, secretary, financial services, Ministry of Finance, had said internal consultations have been completed for the same, and it includes allowing composite licences, details regarding investments and the repatriation of profits in case of foreign direct investment (FDI).
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“We have almost completed the internal governmental consultations. Then, we will take the next course of action by bringing the proposed amendment bill to Parliament. Once it is approved, those rules will also be notified so that all the reforms we intend to do in the insurance sector to improve penetration will be done through these measures,” Nagaraju said on the proposed reforms.
The government’s major reforms proposals include composite licence, differential capital, reduction in solvency norms, issuing captive licence, change in investment regulations, one-time registration for intermediaries and allowing insurers to distribute other financial products.
The government had earlier planned to repeal the Insurance Act, 1938, as it has undergone many changes since its inception and has become cumbersome to understand for common people.
The legislative move to amend the Act with new amendments is in line with the government’s ongoing exercises involving review of all pre-Independence Acts from the point of view of their utility and relevance, said sources. The government now wants that the entire legal code of the country should remain purely Indian and existing laws made by a legislature of the Pre-Constitution era should be replaced with laws made by the legislature that is in place post-independence.
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