At a time when insurance companies have burnt their fingers in the shares of Adani group companies, as many as 65 CEOs from general insurance companies, standalone health insurers, life insurance companies, foreign reinsurance branches (FRBs) and GIC Re will converge in Hyderabad this week to take stock of the developments in the sector, especially the reform agenda being initiated by the regulator.
The meeting on March 1-2 has been convened by insurance regulator IRDAI to deliberate and discuss the way forward, according to an insurance sector official. Some of the insurance companies, especially LIC, had witnessed a fall in market valuation of their investments in the Adani group.
CEOs are expected to give their feedback and suggestions on the pending insurance reforms. The reports submitted by the Regulatory Review Committee (RRC) set up by both the councils — General Insurance Council and Life Insurance Council at the instance of the IRDAI – are expected to come up for discussion.
When asked about the reform agenda, KK Srinivasan, former Member, IRDAI, criticised the recent proposals to dilute the investment norms and reduce the capital requirements.
Last one year or so have seen a slew of “revolutionary” regulatory pronouncements, uncharacteristic of any financial services industry that require care and prudence for healthy, stable development and growth, he said.
“Some of these include dangerous proposals like deleting Section 27 of the Insurance Act that deals with strict investment norms for policyholders funds and reducing capital requirements to paltry amounts paving the way for emergence of ‘mushroom’ insurance companies,” Srinivasan told The Indian Express.
“Many of these proposals are attributed to meetings and consultations with insurers. There is a perception that the regulatory body has abrogated its role and responsibility by leaving it to the two councils of insurance companies and others to come out with ‘convenient’ regulatory changes,” Srinivasan said.
The Department of Financial service has issued the Insurance Laws (Amendment) Bill, 2022 for public feedback. The Bill proposes some major changes in the Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999. The amendments proposed changes and new insertions in the definition section. Some notable changes include the insurance intermediary, captive insurer, insurance business, Indian insurance company, insurance cooperative society, insurer, personal accident insurance business, premium, principal officer, surveyor and travel insurance business.
The insurance industry is reportedly in the midst of huge tax scams for facilitat ing humongous payments of doubtful nature to “box” entities to enjoy tax reliefs. “The regulatory body’s seeming silence on this does not add to the comfort of policy holders and other stakeholders. A nagging question that arises is: Is the Insurance industry on a disaster path aided by regulatory abrogation?” Srinivasan asked.
The insurance industry is now waiting for the new IRDAI norms on expenses of management (EoM) that will provide larger space for incurring expenses on marketing and distribution for private sector insurers.
The proposed amendments suggest that the minimum paid-up capital be specified by IRDAI considering the size and scale of operations, class or subclass of insurance business and the category or type of insurer. As of now, the paid-up capital required to start general, life or standalone health insurance business is Rs 100 crore and for reinsurance business Rs 200 crore.
As per the proposed Bill, an applicant may apply for a composite license enabling any type of insurance business. This means an insurer can do both life and non-life business with a composite licence.
RRC had roped in Cyril Amarchand Mangaldas to prepare a blueprint for a complete overhaul of the regulatory framework of the Indian insurance industry as outlined by IRDAI chairman Debasish Panda.The legal firm has already submitted its reports for both life and general insurance industries which may be discussed in detail during the 2-day CEO meet before changing the existing regulatory framework, according to an official.
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