The upcoming monsoon session of Parliament is expected to bring major changes to the insurance sector.
According to sources, the Insurance Laws (Amendment) Bill, 2022 might be introduced during this session.
This bill is likely to include key reforms such as composite licensing and raising the foreign direct investment (FDI) limit in insurance to 100 percent.
On May 19, news agency Reuters reported that India is looking at updating FDI rules across various sectors like e-commerce and pharma.
While the exact details of the proposed changes are still unclear, increasing FDI in insurance to 100% seems very likely.
What is Composite Licensing?
Composite licensing is a new proposed system. Under this system, a single insurance company will be allowed to offer both life insurance and general insurance services using one license.
At present, insurance companies are divided into two types. The first are life insurance companies like LIC, Max Life, and SBI Life.
The second are general insurance companies, such as ICICI Lombard, New India Assurance, and Bajaj Allianz General.
Right now, these two types of companies need separate licenses, and they operate under different rules.
With composite licensing, companies will be able to offer both types of products under one license, making it easier and more efficient to run their business.
Insurance companies are changing their strategies
After the March quarter results, Amrit Singh, CFO of Axis Max Life Insurance, told Moneycontrol that the company expects composite licensing to be introduced in the monsoon session.
Once it happens, the company plans to go ahead with its IPO simplification plans.
At the same time, LIC has signed a strategic agreement with ManipalCigna Health Insurance.
While details of the deal are not yet public, it shows LIC’s intention to expand in the health insurance sector.
Announcement in the Union Budget
In the Union Budget 2025, Finance Minister Nirmala Sitharaman announced the plan to raise the FDI limit in insurance to 100%.
The goal is to bring in more global investment and capital. This change will be included in the upcoming amendment to the Insurance Act, which is likely to be introduced in the monsoon session.
What other changes are planned under the Insurance Amendment Bill?
The bill will introduce several major reforms to make business easier for insurance companies. These include:
Allowing composite licenses
Raising the FDI limit to 100%
Making the minimum capital requirements more flexible
Currently, companies need a minimum of Rs 100 crore for life or general insurance, and Rs 200 crore for reinsurance companies.
The bill will also give more powers to the Insurance Regulatory and Development Authority of India (IRDAI), allowing it greater control and flexibility in overseeing the sector.
