IRDAI’s Vision 2047 for Viksit Bharat

Insurance regulatory and development authority of India (IRDAI), watchdog of the Indian insurance industry has committed to “Insurance for all” by 2047 in such a way that every citizen would have appropriate insurance coverage in terms of life and non-life insurance. IRDAI plans to achieve this commitment by strengthening the three basic pillars of the insurance ecosystem i.e. insurance provider (insurer), insurance distributor (intermediary) and insurance customer (policyholder). This task could be achieved by achieving the following objectives set by IRDA which are detailed below:

Objective I: Ease of Doing Business

The first objective of IRDA is to simplify the process of setting up insurance business in India and thereby promote ease of doing business. This would in turn be achieved through:

Registration of Insurance Companies

• Now private equity (PE) firms can directly invest in Indian insurance companies without a need for a Special Purpose Vehicle (SPV). 
• Subsidiary companies can also act as promoters of the insurance companies but are subject to certain terms and conditions. 
• Earlier, investment up to 10% of paid -up capital by a single investor and 25% for all the investors collectively was treated as investor and anything above this was treated as “Promoter”. But, IRDA has increased the limit to 25% for single investors and 50% for all the investors collectively to be called as “investor” and anything above this limit would be referred to as “Promoter”.
• A new provision would reduce exit barriers for the investors in insurance companies. Now promoters can dilute their stake up to 26%, subject to a condition that the solvency ratio of the insurance company was satisfactory in the preceding 5 years time frame. In addition to this the lock-in period for investors and promoters has been fixed on the basis of the age of the insurance company. 

Increase in Tie-up Limit for Intermediaries

• With an aim to provide more options to the customers, IRDA has permitted Corporate agents and Insurance Marketing firms to tie-up with 9 and 6 insurers respectively. Earlier this limit was 3 & 2 respectively. Corporate agents such as banks could now tie-up with 9 insurance companies including life, general and health to provide wider options to their customers. 

Raising Capital

• IRDAI has now allowed insurance companies to raise other forms of capital such as subordinate debt or preference shares without the prior approval of IRDAI subject to the condition that the threshold limit would not exceed 50% of the paid-up capital of the company.

Objective II: Creation of Robust Grievance Redressal Mechanism

Bima Bharosa/ Sugam

• IRDA has launched Bima Bharosa & Bima Sugam which is a centralized and online portal where the insurance company as well as a customer can interact. This would provide complete access and control to IRDA to monitor the market and address policyholder grievances effectively. Any complaint registered through Bima bharosa would flow to the portal of the insurance company for further redressal.

Objective III: Making available right products to right customers

Multiple insurance licenses:

• IRDA has announced that it would increase the number of insurance players in the market by issuing new licenses. At present IRDAI has 18 licenses pending with it for approval in various stages. IRDAI believes that by doing away with minimum capital requirements of Rs.100 Crore, more number of small, niche and specialized insurance players would enter the market thereby increasing insurance penetration and density in the country.

Objective IV: Ensuring the regulatory architecture is aligned with the market dynamics

Appointed Actuary

• Appointed actuaries play a crucial role in the operations of an insurer such as filing the products, creating the products etc. In addition, the appointed actuary also takes care of the solvency ratio and strives to maintain it as per the limits set by the regulator. But, only a few actuaries are available in the Indian market with the current conditions stipulated by the regulator. To overcome this issue, IRDAI has relaxed the experience and qualification requirements of actuary professionals.

Solvency Norms

• Solvency norms have also been modified by the regulator. In the updated solvency norms, the solvency ratio to be maintained by a general insurance company was reduced from 0.70 to 0.50. For life insurance companies, the solvency ratio is reduced from 0.80% to 0.60% for Unit Linked Business and from 0.10% to 0.05% for Pradhan Mantri Jeevan Jyoti Bima Yojana. This reduction in solvency ratio would free up the capital held with the insurance companies that could be used elsewhere by them.

Objective V: Boosting Innovation, Competition & Distribution efficiencies at the same time mainstreaming technology and moving towards principle based regulatory regime

Regulatory Sandbox

• Sandbox is an initiative launched by IRDAI in 2019 to provide a testing environment for the insurance companies to test their new products that are deemed to be innovative, technologically superior in the market without having to go through the arduous process of “File and Use” regulations. Earlier the time for a sandbox initiative was 6 months which was further increased to 36 months and at the same time giving clearances on a continuous basis instead of batch wise.

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