Insurance Amendment Bill: The upcoming monsoon session of Parliament is going to be very important for the insurance sector. According to sources, the Insurance Act (Amendment) Bill can be introduced only in the 2022 monsoon session. This will include important changes like increasing the limit of Foreign Direct Investment (FDI) to 100 percent in the Composite licensing and insurance sector.
The news agency Reuters reported on May 19 that India is considering changing the FDI rules from e-commerce to pharma. However, sources say the exact information of the amendments is not yet clear, the insurance sector is much higher than the possibility of increasing FDI by 100 percent.
What is composite licensing?
Composite licensing is a proposed system. Under this, an insurance company will be able to provide both “life insurance” and “general insurance” services to an insurance company through a single license.
Currently, insurance companies are divided into two different categories. The first are life insurance companies, such as LIC, Max Life, SBI Life. At the same time, there are other general insurance companies, such as ICICI Lombard, New India Assurance, Bajaj Allianz General
Different licenses are to be obtained for both these segments, and the operation rules of both are also different. Insurance companies will be able to sell both life insurance and general insurance products under the same unit by composite licensing. This will make their operations simple and more efficient.
The strategy of insurance companies is changing
Amrit Singh, Chief Financial Officer of Axis Max Life Insurance, had hoped in a conversation with Moneycontrol after the March quarter results that the composite licensing could be applicable in the monsoon session, after which the company would pursue its proposed IPO similiation.
This development has come to light at a time when Life Insurance Corporation of India (LIC) has entered into a strategic agreement with Manipalcigna Health Insurance. Although detailed information of this agreement has not been revealed, this step indicates LIC’s expansion strategy in the health insurance sector.
Finance Minister announced in the budget
This year i.e. in the Union Budget of 2025, Finance Minister Nirmala Sitharaman announced to increase the FDI limit by 100 percent in the insurance sector to attract more global investors and capital. This amendment is part of the Insurance Act, which is likely to be introduced in the monsoon session.
What will be other amendments to the insurance law?
Under the Bill, many important reforms are also proposed to simplify the capital structure of companies. Such as composed license allowed, increase in FDI limits and make minimum capital requirement more flexible. Currently, a minimum limit of Rs 100 crore for life and general insurance and Rs 200 crore for rehabilitation companies is fixed.
Insurance Regulator in this- Indian Insurance Regulatory and Development Authority (IRDAI) will also be given more autonomy.
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