The Ministry of Finance is considering changes to the insurance law, including lowering the minimum capital requirements, with the aim of increasing insurance penetration in the country. Insurance penetration in India recorded a growth of 11.70%, increasing from 3.76% in 2019-20 to 4.20% in 2020-21. Insurance penetration, measured as premiums as a percentage of GDP, experienced significant growth throughout the year, mainly due to the COVID-19 outbreak.
The ministry is conducting a comprehensive review of the Insurance Act 1938 and is also considering making relevant changes to boost sector growth, sources said, adding that the process is in the preliminary stages. added. One of the provisions being considered is to lower his Rs 10 crore minimum capital requirement for setting up an insurance business, the sources said. Relaxed capital requirements will allow the entry of differentiated insurers like the banking sector with categories such as universal banks, small finance banks and payment banks.
Sources said the easy-to-enter capital standards could attract firms focused on microinsurance, agricultural insurance, or insurers with a regional approach. As such, the solvency margin requirements will also be different, but will not hurt the interests of policyholders, the sources said. The entry of more players will not only drive adoption, but also create jobs in the country.
There are currently 24 life insurance companies and 31 property or casualty insurance companies, including specialized companies such as Agriculture Insurance Company of India Ltd and ECGC Limited.
Last year, the government amended the Insurance Law to allow insurance companies to increase their foreign ownership ratio from 49% to 74%. Additionally, Congress passed the General Insurance Business (Nationalization) Amendment Bill of 2021, allowing the central government to invest less than his 51% of the share capital of certain insurance companies, paving the way for privatization. opened.
In 2015, the Insurance Law was amended to raise the foreign investment cap from 26% to 49%. All these modifications since the privatization of the insurance sector have resulted in exponential growth.
India is likely to become the world’s sixth largest insurance market in the next decade, according to research, supported by increased regulation and rapid economic expansion.
India’s total insurance premiums will grow at an average annual rate of 14% in nominal local currency terms over the next decade, moving India from 10th place in 2021 to 6th place by 2032. Insurance companies have collected insurance premiums of Rs. 82 lakh between 2020 and 2021.
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