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Delhi News

FinMin mulls changes in insurance laws to boost penetration: Report



The ministry is contemplating changes in laws, including reduction in minimum capital requirement, with a view to increasing the penetration in the country.


penetration in India increased from 3.76 per cent in 2019-20 to 4.20 per cent in 2020-21, registering a growth of 11.70 per cent. Insurance penetration measured as the percentage of insurance premium to GDP witnessed handsome growth during the year, mainly due to the outbreak of COVID-19.


The ministry is doing a comprehensive review of the Insurance Act, 1938 and also looking at making relevant changes to help push growth of the sector, sources said, adding the process is at a preliminary stage.


One of the provisions being considered is lowering the minimum capital requirement of Rs 100 crore for setting up an insurance business, the sources said.


Easing capital requirement would allow entry of differentiated insurance companies like in the banking sector, which has categories like universal bank, small bank and payments bank.


With the ease of entry capital norms, sources said, there could be entry of companies focussed on micro insurance, agriculture insurance or insurance firms with regional approach.


So for them, the solvency margin requirement would also be different but without compromising on policyholders’ interest, the sources said.


Entry of more players would not only push penetration but result in greater job creation in the country.


Presently, there are 24 life insurance companies and 31 non-life or general insurance firms, including specialised players like the Agriculture Insurance Company of India Ltd and ECGC Limited.


Last year, the government brought an amendment in the Insurance Act to allow increasing foreign holding in insurers from 49 per cent to 74 per cent. Besides, Parliament passed the General Insurance Business (Nationalisation) Amendment Bill, 2021, allowing the central government to pare stake to less than 51 per cent of the equity capital in a specified insurer, paving the way for privatisation.


In 2015, the Insurance Act was amended for raising the foreign investment cap from 26 per cent to 49 per cent. All these amendments since privatisation of the insurance sector have led to exponential growth.


According to a study, India is likely to become the sixth largest insurance market in the world in the next 10 years, supported by regulatory push and rapid economic expansion.


Total insurance premiums in India will grow by an average 14 per cent per annum in nominal local currency terms over the next decade, making India the sixth largest in terms of total premium volume by 2032 from 10th largest in 2021.


Both life and non-life insurers collected a premium of Rs 8.2 lakh crore during 2020-21.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)



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Delhi News

Post LIC IPO, 60% of insurance biz to be with listed entities


After the initial public offering (IPO) of LIC, about 60 per cent of the insurance business will be with listed companies, Additional Secretary in the Finance Ministry Amit Agrawal said on Saturday.

The Cabinet Committee on Economic Affairs (CCEA) had in July given its in-principle approval for the listing of insurance behemoth Life Insurance Corporation of India (LIC). The IPO of the state-owned life insurer is part of the government’s efforts to raise Rs 1.75 lakh crore through disinvestment in the current financial year.

Speaking at an event to mark Actuaries Day, Agrawal said amid global challenges, India has continued to develop as an emerging economy with a financial system that has matured, deepened and achieved scale.

The needs of this emerging India are in many ways different, he said, adding the insurance sector, over the two decades since the introduction of competition and regulation, has matured with 69 insurers today as against only eight in 2000.

“A majority of these have crossed their initial breakeven phase. Once the proposed listing of LIC happens, about 60 per cent of the insurance industry business would be with listed entities. The sector as a whole has been growing at a pace significantly higher than that of the overall economy,” he said.

Currently, there are four listed life insurers, and two in the non-life segment. State-owned re-insurer General Insurance Corporation of India is also listed on bourses. Agrawal further said in the development of new solutions needed by this emerging India and its maturing insurance sector, the actuarial profession have a key role to play.



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