Budget 2024: Major Insurance Act Overhaul Proposed to Boost Coverage and Market Growth

Finance Minister Nirmala Sitharaman plans to introduce a bill in Budget 2024-2025 to amend the Insurance Act of 1938. The proposed changes aim to enhance policyholder benefits, allow composite licenses, and facilitate new market entrants to achieve "Insurance for All by 2047."

Union Finance Minister Smt. Nirmala Sitharaman is expected to present a bill during the Union Budget 2024-2025 to amend the Insurance Act of 1938 as per the Prime Minister Narendra Modi’s thought process of ‘Insurance for All by 2047. ’ The bill is still with the Cabinet for approval and if enacted it will bring a drastic change in the Indian insurance sector.

The primary aim of the proposed amendments mainly revolves around advancing policyholder’s interest and increasing the rate of returns. Key changes include:

1. The liberalization of entry through the issue of composite licenses which enables a life insurance company to transact health or general business.

2. Specifically, the global standards with reference to capital adequacy contain several elements, namely the implementation of differential capital requirements.

3. Reduction in solvency norms.

4. Issuance of captive licenses.

5. Modifications to investment regulations.

6. One-time registration for intermediaries.

7. The right to offer other financial products and services to potential customers.

These changes are believed to help the emergence of the new players in the insurance segment, similar to the banking segment’s universal, small, and payments bank models. This was done to encourage more companies to enter into the sector especially those that are focused on Micro-insurance, Agriculture insurance and the regional markets.

The amendments also aim at increasing operational and financial effectiveness of insurance industry and easing the business environment. This way, the government sees insurance penetration growing, more job opportunities created, and enhanced economic growth with more players in the market.

India has 25 life insurance players and 32 non-life or general insurance players at the current gueat. The Insurance Act of 1938 gives legal basis of insurance in India, it controls the rights between the insurance company, policyholder, shareholders and the Insurance Regulatory and Development Authority of India (IRDAI).

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In the course of passing this bill, it holds the key to a new direction to the development and growth of India’s insurance industry towards the attainment of the vision of universal Insurance for all by year 2047.