Lok Sabha Committee Advocates Composite Licensing for Insurers

• 07 Feb 2024

On 6^th February, 2024, the Standing Committee on Finance of the Lok Sabha proposed significant reforms in the insurance sector, suggesting composite licensing for insurers and a reduction in GST rates on health and term policies.

Key Points

• Composite Licensing Proposal: The committee advocates for composite licensing, enabling insurers to offer life, non-life, and health insurance products under one entity.
• This move aims to streamline operations, enhance customer choice, and simplify compliance for insurance companies.
• GST Reduction: Highlighting the deterrent effect of high GST rates on insurance uptake, especially for health and term policies, the committee recommends a reduction in GST rates. Lower premiums and easier claims processing are expected to incentivize policy adoption.
• Catastrophe Insurance Focus: Addressing the need for catastrophe insurance, particularly in disaster-prone areas, the committee urges government intervention to insure vulnerable homes and properties. Specialized insurance schemes with subsidized premiums are proposed to mitigate risks.
• Enhanced Vehicle Insurance Compliance: Concerned about uninsured vehicles posing risks on roads, the committee suggests stricter enforcement measures and data integration to ensure vehicle owners have adequate insurance coverage. Financial institutions are urged to consider insurance proof before providing vehicle loans.
• Long-Term Bonds for Insurers: To facilitate long-term investment opportunities for insurers, the committee proposes extending the maximum tenure of bonds to 50 years.
• This initiative aims to provide insurers with stable investment avenues and support financial security.
• IRDAI Working Group Proposal: Emphasizing the need for comprehensive policy recommendations, the committee suggests the establishment of an IRDAI Working Group to address various insurance sector challenges.