The bill simplifies regulatory procedures for insurance intermediaries by introducing one-time licensing and allowing suspension of licenses rather than immediate cancellation. For insurers, the threshold for seeking prior regulatory approval for share capital transfers has been increased from 1% to 5%.
Foreign Reinsurance Branches will now have a reduced Net Owned Fund requirement, decreasing from Rs 5,000 Crore to Rs 1,000 Crore. LIC has been granted autonomy to open zonal offices nationwide and align its foreign operations with respective jurisdictional regulations, thereby promoting operational flexibility.
Policyholder Protection and Awareness
To safeguard policyholders’ interests, the bill mandates the creation of a Policyholders’ Education and Protection Fund. The fund aims to enhance public awareness about insurance products and promote informed decision-making. Additionally, policyholder data will be collected and protected in accordance with the Digital Personal Data Protection Act, 2023.
Strengthening Regulatory Oversight
The reforms also focus on improving regulatory governance. Standard operating procedures will now guide the formulation of regulations, ensuring consultative processes. The Insurance Regulatory and Development Authority of India (IRDAI) has been empowered to disgorge wrongful gains from insurers and intermediaries, while penalties have been rationalized with defined factors for their imposition.
These measures collectively aim to extend insurance coverage to households, individuals, and enterprises, enhance transparency, and reinforce governance mechanisms in the insurance sector, contributing to financial resilience in the Indian economy.
Global Best Practices and Sectoral Growth
By allowing greater foreign participation and promoting adoption of international standards, the bill is expected to modernize India’s insurance landscape. The influx of global expertise and capital is anticipated to accelerate innovation in products, improve customer service, and deepen penetration across urban and rural areas.