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The government is likely to introduce a bill seeking amendments to the Insurance Act, 1938, during the upcoming Budget session to achieve 'Insurance for All by 2047'.
Some of the provisions, which could be part of the amendment bill, include composite license, differential capital, reduction in solvency norms, issuing captive license, change in investment regulations, one-time registration for intermediaries and allowing insurers to distribute other financial products, sources said.
The move will enable the entry of differentiated insurance companies like in the banking sector.
The banking sector is currently categorised as universal bank, small finance bank, and payments bank.
The provision of composite licenses would allow life insurers to underwrite health insurance or general insurance policies.
As per the provisions of the Insurance Act, 1938, life insurers can only offer life insurance covers, while general insurers can offer non-insurance products like health, motor, fire, marine, etc.
The Irdai does not allow composite licensing for insurance companies, which means that an insurance company cannot offer both life and non-life products as one entity.
The draft bill is ready and it has to go to the Cabinet for its approval, sources said, adding that the finance ministry is hoping that it gets introduced in the upcoming session.
The proposed amendments primarily focus on enhancing the policyholders' interests, improving returns to the policyholders, facilitating the entry of more players leading to economic growth and employment generation, enhancing efficiencies of the insurance industry - operational as well as financial and enabling ease of doing business, sources said.
The finance ministry in December 2022 invited comments on the proposed amendments to the Insurance Act, 1938, and the Insurance Regulatory Development Act, 1999.
The Insurance Act, 1938, serves as the principal Act to provide the legislative framework for insurance in India.
It provides the framework for the functioning of insurance businesses and regulates the relationship between an insurer, its policyholders, shareholders and the regulator Insurance Regulatory and Development Authority of India.
According to the sources, the easing of capital norms can allow the entry of companies focused on micro-insurance, agriculture insurance, or insurance firms with a regional approach.
The entry of more players in the sector would not only push penetration but result in greater job creation across India.
Currently, there are 25 life insurance companies and 32 non-life or general insurance firms in India.
These also include companies like the Agriculture Insurance Company of India Ltd and ECGC Limited.