New Delhi: The finance ministry has proposed allowing insurers to diversify operations beyond insurance business. A draft proposal inviting public comments talks about diversification, giving insurers the ability to offer guarantee and indemnity services, manage and sell repossessed properties, and establish employee welfare funds for staff and retirees.
The draft proposal talks about letting insurers engage in activities incidental to promoting insurance.
However, another proposal from the Insurance Amendment Bill 2022, which specifically talked about permitting insurers to distribute financial products like mutual funds, was dropped in the current draft.
Market experts argue that specifically including this provision would help insurers to use existing networks for cross-selling, on par with banks distributing insurance products.
Also, agency reforms under consideration could allow individual agents to represent multiple insurers, working as independent financial advisors, which could increase agent income while offering choice for customers.
The draft is open for comments from stakeholders. Some insurers are preparing a response asking the government to explicitly include the distribution of financial products to take the benefit of cross-sector opportunities.
Other proposals include allowing composite registration for insurers to operate across life, general, and health insurance under a single registration, reducing minimum capital requirements for insurers serving underserved populations to not less than ₹50 crore, and cutting the net owned fund requirement for reinsurers from ₹5,000 crore to ₹1,000 crore. Also, registration for intermediaries could become perpetual against need to renew every three years at present.
The major reform is proposing FDI increase to 100%. Penalties for non-compliance and misstatements are significantly raised, with fines up to ₹10 crore or ₹5 lakh per day. The government has asked for public comments on the draft until December 10, 2024.
