The government's move to introduce composite insurance licences by amending the Insurance Act is likely to put public-sector insurers at a disadvantage vis-a-vis their private sector counterparts as only the latter will be eligible for these licences under the proposed amendment.
Excluding state-controlled insurers from obtaining composite licences may raise concerns about their long-term viability and ability to compete with private-sector players.
On 26 November, the Finance Ministry had proposed an Insurance (Amendment) Act, 2024 by amending various provisions of the Insurance Act, 1938, including raising foreign direct investment (FDI) in the insurance sector to 100% and the provision of composite licences allowing insurers to undertake life/general/health in a single registration, reported The Indian Express. A composite licence is currently not allowed.
However, going by ongoing plans, after legislative changes, the composite licences can only be provided to private-sector insurers and not by state-run insurers, insurance sector officials said.
If the PSU insurers want to hold composite licences, the government needs to amend the two existing Acts — The Life Insurance Corporation Act of 1956 and the General Insurance Business (Nationalisation) Act, 1972 (GIBNA). However, as per the Office Memorandum (OM) and the list of proposed amendments, no such provisions have been made in these documents.
The Finance Ministry said that a comprehensive review of the legislative framework governing the sector was carried out in consultation with the IRDAI and the industry.
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