The government is planning a big push to the insurance sector by bringing second-generation reforms by amending the existing legislation.
As part of the reforms, the government is planning to allow small companies to operate in the sector, sources said. The financial sector, wherein microfinance institutions and small-time non-banking finance companies are allowed to operate under the Reserve Bank regulations, may serve as a template for this, the sources added.
Insurtech players are already riding on the back of microfinance institutions to sell small-time insurance products in rural India, thereby increasing insurance penetration.
As part of the proposals, the government may remove the threshold limit of Rs 100 crore, according to the sources.
The finance ministry has initiated consultations with the Insurance Regulatory Development Authority of India (IRDAI) in this regard.
As the government focuses on ease of doing business, the ‘use and file’ practice may also get a look in.
The IRDAI has already proposed the introduction of use-and-file practice, which allows insurers to launch a product first and then file its details with the regulator. This may be introduced across health insurance, life, and general insurance products.
The proposed reforms may allow health insurers to include yoga services and ambulance services among others, as part of the health coverage.
The proposed amendments may take a relook at definitions of life insurance and non-life cover.
Another big change proposed is the removal of interlocutors in the insurance business. Historically, insurance is sold through insurance advisors-the interlocutors between insurance companies and customers.
Once the new law comes into effect, the insurance companies may have to directly deal with customers.
The amendments proposed are the biggest reforms in the sector after the 1990 reforms when private companies were allowed in the insurance business.
It was, however, immediately not known whether foreign direct investment in the sector will be hiked to 100 per cent from the present 74 per cent.
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