One step forward, two steps...

The long-awaited Insurance Laws (Amendment) Bill was issued in 2022 and then revised after consultation with the Insurance Regulatory and Development Authority of India and other stakeholders and following public comments.

- ASHVIN PAREKH

As we are told, it will be tabled in Parliament during the monsoon session. The draft Bill of 2024 proposes some significant changes to the Insurance Act, 1938, the Insurance Regulatory and Development Authority Act, 1999, and the Life Insurance Corporation Act, 1956.

The stated objective of the amendment is to make insurance cover available to all by 2047. One of the major ingredients for the objective is to open the sector to 100% foreign direct investment (FDI). The other key aspect is to expand the existing scope of business undertaken by insurers by registering the class(es) of insurance business. The multiple classes of business are a deviation from the mono-line businesses such as life, general, and stand-alone health insurance, as it is today. Then there are a few major reforms, including empowering the regulator to form regulations for differentiated registration with smaller mandatory capital.

This article attempts to examine each of these major reforms and evaluate the possible impact on the sector. The efficacy of the reforms needs to measure up to the stated objective. Before any evaluation, we need to understand some fundamental characteristics of the insurance business. The prevailing truism that insurance covers have to be sold and not necessarily bought is very valid. We can see that even with motor third-party insurance, a mandatory requirement, only around 40% of vehicles in the country have an insurance cover.