The insurance regulator wants the removal of the Rs 100 crore minimum entry capital requirement to set up an insurance business in a bid to ease the entry of multiple players such as independent microinsurers and niche players.
Debasish Panda, chairman of the Insurance Regulatory and Development Authority of India (Irdai), said it should be left to the regulator to decide what the entry fee should be for interested players, depending on the size of the business and operations. Under current rules, insurers must have a minimum paid-up capital of Rs 100 million.
“We propose asking the government to modify the [IRDA] Law and eliminates the so-called minimum requirement. It should let the regulator decide that, based on regulations that will be framed and modified from time to time based on market conditions,” Panda said in his opening address to the industry and the press on Thursday.
Among the many regulatory changes Panda is seeking are investment guidelines. “Current investment guidelines for assets under management are being reviewed, and the request from the industry is that they should be given a little more leeway so they can invest in riskier instruments like infrastructure finance,” Panda said.
The regulator is also considering revising current investment rules to streamline them and attract more investment to the country.
The Irdai boss also called on insurance companies to come up with a roadmap when it comes to going public. “Our idea is to encourage them to list and thus have access to the markets to raise capital,” Panda said. “Today with the price of the LIC, about 60% of the market is quoted. That brings a lot of transparency, disclosures and market access to raise capital. This will help them grow, and our ultimate goal of deepening insurance penetration will become a reality.”
The insurance regulator also intends to reduce the compliance burden on insurance companies, which will help reduce the cost of compliance for businesses and reduce the need for resources and time. A working group will be formed to investigate this.
Irdai also wants to renew the product certification process, in which players will be able to follow the “use and file” system instead of “file and use”.
“We will have light touch regulations. And these will be based on principles rather than rules. Rule-based regulations do not provide flexibility. The industry has matured and understands the rules of the game,” said Panda.
The regulator has plans to introduce new distribution channels and expand the reach of existing channels to ensure wide availability of insurance products. It is exploring the launch of Bima Mitra on the lines of Bank Mitras to improve the scope of insurance distribution.
It also wants to facilitate the reduction of operating costs and review the structure of commissions and remuneration of insurance products with the aim of reducing costs for policyholders.
“The general view is that all Indians should have life insurance coverage; every household must have health insurance coverage. Likewise, all people who are at the end of the period must have home insurance coverage. We also want to have comprehensive insurance solutions for MSMEs. We also want to provide income security for the aging population through annuity and pension products,” said Panda.
Commenting on the state of the three state general insurers, Panda said: “The government is very aware of the current finances of the insurance companies. The regulator has given some leniency with the advice that they have to inject more capital to function at an optimal level.”