According to the insurance regulator, the changes will facilitate business operations and streamline the process of establishing an insurance company in India.
The Insurance Regulatory and Development Authority of India (IRDAI) has announced that insurance promoters can now dilute their stake up to 26%. However, the dilution will only occur if the insurer is a listed entity with a “satisfactory” five-year solvency history.
Additionally, it made it optional for private equity (PE) funds to invest through Special Purpose Vehicles (SPV), enabling them to make direct investments in insurance companies.
Apart from that, corporate agents, such as banks, will now be permitted to partner with nine insurers (up from three), and insurance marketing firms will be able to distribute products from six insurers (up from two earlier) in each of the business lines of life, general, and health insurance.
Insurance companies will now be able to raise capital without prior IRDAI approval in the form of subordinated debt and preference shares. These choices were made at the board meeting of the insurance regulator on Friday. According to the IRDAI, the changes will facilitate business operations and streamline the process of establishing insurance in India. These reforms will increase business efficiency, liberate distribution strategies, promote customer-centred innovations, and increase the sector’s investment appeal. According to Bhargav Dasgupta, MD and CEO of ICICI Lombard General Insurance, the regulator has addressed several long-standing issues facing the industry.
According to insurers, this will increase investment in the Indian insurance industry. India has drawn a lot of investment over the past four to five years. Although the insurance industry has been appealing, we have yet to observe the amount of funding entering the industry. PE funds are where the real money is, but investor-friendly regulations still need to be implemented.
IRDAI has also stated that promoter stakes may decrease to 26 percent if the company is listed and has a positive solvency history over five years. The regulations have delayed a lot of investment, but it will now begin to materialise, according to Kamesh Goyal, chairman of Digit Insurance.
Insurers believe that the decision by the insurance regulator to permit corporate agents to collaborate with more insurers will increase competition. According to Goyal, “This will allow corporate agents to sell more customer-friendly goods and services, further assisting in raising the penetration of insurance in India.”
Corporate agents will benefit from the change, but individual agents with similar demands may have to wait longer. “At the meeting, it was anticipated that this topic would be covered and that changes to the Insurance Act would be suggested. On the other hand, it might be discussed at the following board meeting, according to a senior official from an industry organisation who spoke on the record. IRDAI also approved Kshema General Insurance Company’s registration, and 19 additional applications are currently being processed.