In Centre's Big Reform For Insurance Sector, A Push For Smaller Firms

The government is planning a big push to the insurance sector by bringing second-generation reforms by amending the existing legislation.

Small companies will be allowed to operate in the sector, sources said, and the Rs 100 crore cap for entry into the sector may be removed.

The financial sector, wherein microfinance institutions and small-time non-banking finance companies are allowed to operate under the Reserve Bank of India (RBI) 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.

The finance ministry has initiated consultations with the Insurance Regulatory Development Authority of India (IRDAI).

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.

Smaller companies may soon enter the insurance sector and yoga and ambulance services may be covered by health insurance as part of big reforms planned by the government. The government is finalising changes to the law ahead of the winter session of parliament, sources have told NDTV.

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.