Page 10 - The Insurance Times January 2025

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IRDAI to Limit Insurers' report criticizes the regulator's ap-
Private Insurers Likely proach as "misdirected," noting that
Reliance on Parent Banks
to Benefit from Com- changes to distribution models may
The Insurance Regulatory and Devel- deter investors and undermine listed
posite Licence Amend- opment Authority of India (IRDAI) insurers' performance.

ment plans to curb life insurers' heavy reli- While IRDAI aims to reduce
ance on parent banks for selling poli-
The government's proposal to in- overdependence on bank channels, the
cies, aiming to promote balanced
troduce composite licences under growth across multiple distribution report highlights that persistency data
the Insurance Act is expected to channels. Bancassurance, a partner- suggests bancassurance-driven insur-
favor private insurers, leaving pub- ship between banks and insurers, has ers perform relatively well. Industry
lic sector insurers at a disadvan- faced criticism for mis-selling and leaders have expressed concerns over
regulatory uncertainty, including im-
tage. The amendment, part of the forced policy purchases. pending changes under the Insurance
proposed Insurance (Amendment) IRDAI has formed a task force to re- Amendment Bill 2024. The task force
Act, 2024, allows private insurers view the current framework and will reviewing bancassurance is expected
to operate across life, health, and
issue a draft seeking stakeholder feed- to propose reforms to improve trans-
general insurance under a single back. While officials acknowledge parency and efficiency while address-
licence. However, PSU insurers bancassurance's efficiency, they em- ing consumer complaints of mis-selling.
would require additional amend- phasize the need for diversification to
ments to the Life Insurance Corpo- ensure long-term industry stability. Finance Ministry Proposes
ration Act, 1956, and the General Critics argue that overregulation could
Insurance Business (Nationali- stifle sector growth. Both the Finance Insurer Diversification Be-
sation) Act, 1972, to access the Minister and IRDAI chairman have yond Core Operations
same benefits. stressed the need to restore customer The Finance Ministry has proposed al-
trust while urging banks to focus on lowing insurers to expand into services
Experts warn this could hinder PSU
core banking services. like guarantees, property manage-
insurers in competing with their
private counterparts, who already ment, and employee welfare funds, as
part of its draft Insurance Amendment
dominate the domestic market. IRDAI's Bancassurance
Bill. The draft, open for comments
The amendment also includes pro- Cap Risks Sector Growth: until December 10, 2024, also suggests
visions for increasing FDI to 100% Report composite licences, reduced capital
and reducing capital require- requirements, and increased foreign
ments. Stakeholders have raised A report by Emkay Research warns direct investment to 100%.
that IRDAI's plans to limit the share of
concerns over the inequitable play-
bancassurance in life insurance could Notably, provisions for distributing fi-
ing field created by the proposed stifle industry growth without address- nancial products like mutual funds have
changes.
ing the root issue of mis-selling. The been dropped, despite calls from insur-
The Insurance Times January 2025 9