Insurance Act Amendment Bill: More Competition And Better Products For Policyholders

Several clauses in the Insurance Act Amendment Bill are against the spirit of nationalization, a LIC union leader has said, according to recent media reports. The government is gearing up to introduce the bill in the parliament and The Insurance Regulatory and Development Authority of India (Irdai) has formed a high-powered committee, to look closely at the various aspects of the Insurance Act 198 and propose amendments. We take a look at some key proposed changes in the  Insurance Amendment Bill and how they will benefit policyholders. 

100 Per Cent FDI In Insurance

The bill proposed to bring 100 per cent foreign direct investment (FDI) in insurance, and Budget 2025 opened the insurance industry to 100 per cent FDI compared to 74 per cent earlier. This would mean that more foreign players will enter the insurance market and that will lead to more competition. That would result in better product offerings tailored to customer needs, better customer service, and more competitive pricing, thus benefiting the policyholders. 

Agents Can Sell Products From Multiple Insurers

According to the government's proposed amendments to the Insurance Act, insurance agents can now partner with multiple insurers in life and general (including health) insurance. At present, agents can only partner with a single insurer in every category. If the proposal is approved, the Insurance Regulatory and Development Authority of India (Irdai) would need to establish a new set of regulations to avoid conflicts of interest. 

This would mean that a single agent can now sell products from multiple insurers, including life, general, and health insurance. At present, agents can only partner with a single insurer in every category. If the proposal is approved, the Insurance Regulatory and Development Authority of India (Irdai) would need to establish a new set of regulations to avoid conflicts of interest. 

According to the experts, the policyholders will benefit a lot if the proposal comes through. At present, when a customer interacts with an insurance agent, they are limited by products offered by a single insurer. In this way, they cannot compare options. Now when agents can represent multiple insurers, customers will have the freedom to choose a product that matches their specific needs and budgets. Earlier, when a customer was associated with a certain agent, he or she would always buy life or health insurance from a single insurer. 

Composite License For Insurers

Another proposal is to initiate a composite license for insurance companies. Currently, if a company wants to sell both life and general insurance products, then they require separate licenses. The new proposal would mean that insurers can now reduce their compliance burden while expanding their product offerings. Again, this would mean more options for customers with more varied product offerings.