IRDAI also gave the final approval to Go-digit General Insurance Company for listing and also in-principle approval to IndiaFirst Life Insurance Company. It has also approved the merger of Exide Life with HDFC Life.
The objective of these changes was to strengthen policyholders, insurance companies and distributors to facilitate ‘insurance for all by 2047’, the regulator said.
IRDAI allowed private companies to directly invest in insurance companies, making investment through a special purpose vehicle (SPV) optional. Investors can now take a 25% stake in insurance companies without being designated as promoter. Promoters of listed entities have been allowed to dilute their stake up to 26% in insurance companies, subject to having a satisfactory solvency record for preceding 5 years.
Also in an important consumer facing have banks and other corporate agents can tie up with nine insurers up from three earlier, while insurance brokers can tie up with 6 insurers up from two earlier in each line of business of life, general and health.
The changes in regulations were done after taking stakeholder comments and taking views of the insurance advisory committee, IRDAI said.
Solvency norms for both general and life insurance companies have been eased with general insurers now asked to maintain a solvency on crop insurance of 0.50% from 0.70% and the timeline to consider state and central government premium dues has been increased to 365 days from 180 days which will release Rs 1460 crore of capital for general insurers.
For unit linked plans of life insurers, the solvency ratio has been reduced to 0.60% from 0.80% while for Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) it has been reduced to 0.05% from 0.10%. This will reduce capital requirements for life insurance companies by around Rs 2000 crore.
Insurance companies which were awaiting these reform measures by the regulator, welcomed the move.
“These are path-breaking reforms that will improve 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 of the industry in one stroke,” said Bhargav Dasgupta, CEO at ICICI Lombard General Insurance Co.
Companies can now raise capital via subordinated debt or preference shares, without the prior approval of IRDAI. The threshold limits for raising such capital has also been increased to 50% of paid up capital & premium.
The regulator has also given actuaries new provisions for identification, monitoring, reporting and recommending actions for risks affecting the solvency position of the companies.
“We believe that registration of Indian insurance companies and other forms of capital proposals should lead to improved access to capital for the industry, which will drive insurance penetration. We welcome changes to the regulatory sandbox framework in the form of increasing the experimentation period from 6 months to up to 36 months, and believe that this will encourage the industry to promote innovation, develop experience and launch newer products for the customers on a continuous basis,” Ritesh Kumar, CEO HDFC Ergo General Insurance said.
The regulatory sandbox provides a testing environment to companies in innovative products, technologies, in a controlled regulatory setting. The experimentation period has been increased from 6 months to upto 36 months.
In its board meeting the regulator also gave the final approval to Go Digit General Insurance Co and in-principle approval to IndiaFirst Life Insurance Co for listing in the stock exchanges.
Acquisition of Exide Life Insurance by HDFC Life was also approved and the registration of Kshema General Insurance Co was also given the go ahead. Nineteen more applications are in pipeline at various stages, out of which one is expected to be approved in the next meeting, IRDAI said.
Other reforms on the anvil included replacing the various segmental caps on expenses of management with a single overall limit in general and health insurance. For life insurance, the segmental limits of expenses for certain segments are proposed to be enhanced, with overall regulatory monitoring at the company level.
Commissions have been proposed to be linked to the overall limit of expense of management. “This will enable insurers to devise commission structures incentivizing the intermediaries in line with their solicitation efforts and also making insurance more affordable,” IRDAI said.