Irdai Panel to Implement Insurance Law Amendments

New Delhi, Feb 20 (PTI) The Insurance Regulatory and Development Authority of India (Irdai) has set up a seven-member committee headed by former chairman of State Bank of India (SBI) Dinesh Khara to examine proposed amendments to the Insurance Act, 1938 and suggest a framework for its implementation.

The government has proposed amendment to insurance law to increase foreign direct investment to 100 per cent and other changes.

Finance Minister Nirmala Sitharaman had announced in her Budget on February 1 that the FDI limit for the insurance sector would be raised from 74 to 100 per cent.

"This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified," she had said.

The panel headed by Khara held its first meeting earlier this week, according to sources.

The other members of the seven-member committee are N S Kannan, former MD and CEO of ICICI Prudential Life Insurance, Girish Radhakrishnan, former CMD of United India Insurance, Rakesh Joshi, former member of Irdai, Saurabh Sinha, former executive director of RBI, Alok Misra, MD and CEO of MFIN, and L Vishwanathan, a legal expert.

"Once amended, the Insurance Act will have a lot of enabling provisions, for example, pertaining to 100 per cent FDI, composite licence, penetration, and entry of new players. The mandate of the committee is to suggest framework and rules. The committee will see how those provisions can be enabled through regulations and circulars," sources said.

To enhance the FDI limit, the government will have to bring amendments to the Insurance Act 1938, the Life Insurance Corporation Act 1956, and the Insurance Regulatory and Development Authority Act 1999.

The Insurance Act 1938 serves as the principal Act to provide the legislative framework for insurance in India.

It provides the framework for the functioning of insurance businesses and regulates the relationship between an insurer, its policyholders, shareholders and the regulator -- Irdai.

The entry of more players in the sector would not only push penetration but also result in greater job creation across the country.

Currently, there are 25 life insurance companies and 34 non-life or general insurance firms in India. These include companies like Agriculture Insurance Company of India Ltd and ECGC Ltd.

"We have almost completed the internal governmental consultations. Then, we will take the next course of action. Along with this, there are also other rules, how the investments will be made and the profits will be repatriated if there is FDI. That will also be part of the proposed amendment Bill, which will be brought to Parliament," Financial Services Secretary M Nagaraju had said.

"Once it is approved, those rules also will be notified, so that all the reforms we intend to do in the insurance sector to improve penetration will be done through these measures... Composite licence is also part of the reforms," he had said.

The FDI limit in the insurance sector was last raised -- from 49 per cent to 74 per cent -- in 2021.

In 2015, the government had hiked the FDI cap in the insurance sector from 26 per cent to 49 per cent.