IRDAI relaxes investment rules and permits corporate representatives to form up to 9 tie-ups
- ByStartupStory | November 26, 2022
The Insurance Regulatory and Development Authority of India (IRDAI) has announced that insurance promoters will now be able to dilute their policies up to 26%. However, the dilution will only occur if the insurer is a listed firm with an “acceptable” five-year history of solvency.
Additionally, it made it optional for private equity (PE) funds to invest through Special Purpose Vehicles (SPV) in order to allow them to make direct investments in insurance businesses. Apart from that, corporate agents, such as banks, will now be permitted to partner with nine insurers (up from three), and insurance marketing organizations will be able to distribute products from six insurers (up from two earlier) in each of the business lines of life, general, and health insurance. These choices were made during the board meeting of the insurance regulator on Friday. According to the IRDAI, the changes will facilitate business operations and streamline the process of establishing insurance in India.
“(These reforms) will improve the ease of doing business, free up distribution models, encourage customer-centric innovations, and make the sector attractive for investment. The regulator has addressed a number of long-pending issues in the industry,” said Bhargav Dasgupta, MD, and CEO of ICICI Lombard General Insurance.
Insurers believe this will lead to increased investment in the Indian insurance sector. “In the last 4-5 years, India has attracted a lot of investment. Insurance has been an attractive sector, but we have not seen that sort of money coming into the sector. The real money is with PE funds, but regulations were not very investor-friendly. Also, now, the IRDAI has said promoters’ stakes can go down to 26 percent, provided the company is listed with a satisfactory solvency record over five years. A lot of investment, which has been waiting for some time due to regulations, will now actually crystallize,” said Kamesh Goyal, Chairman of Digit Insurance.
The insurance regulator’s decision to allow corporate agents to tie up with more insurers will boost competition, insurers feel. “This will enable corporate agents to sell more customer-friendly products and services, which will further help in increasing insurance penetration in India,” said Goyal. Corporate agents will benefit from the change, but individual agents with similar requests may have to wait longer. “There was an expectation that this issue would be discussed at the meeting and amendments to the Insurance Act proposed. However, it might be taken up at the next board meeting,” said a senior official from an industry body who spoke on the condition of anonymity.
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