Cabinet can discuss the Insurance Act Amendment Bill today: 5 things to expect – CNBC TV18

The Cabinet may take the Insurance Act amendment bill in its meeting on Friday (7 February). Proposed changes can affect the insurance sector, especially in foreign direct investment (FDI), licensing, merger and investment rules.

Here are important things to expect:

100% FDI in Insurance

The government is considering increasing the current 74% to 100% in the insurance sector.

Finance Minister Nirmala Sitarman had already announced this proposal in Budget 2025.

This step can attract more foreign capital, benefit domestic insurers, especially to companies seeking additional investment.

Mixed insurance license

The amendment proposed to introduce an overall insurance license, allowing life insurers to expand in health and other non-life insurance segments, and vice versa.

This change will enable companies to diversify their offerings and increase their market appearance.

LIC has already announced a plan to get a health insurance company and enter the health insurance business.

HDFC Life has also expressed interest in entering the health insurance section, while Star is trying to expand in health life and motor insurance.

Merger between insurers and non-prescriptions

The proposed changes will allow insurance companies to merge with non-settlement institutions. This can be a significant change in the industry, which creates new opportunities for strategic partnership.

If approved, companies such as Max Financial, who are searching for trade expansion strategies, may benefit from this regulatory change.

Agents allowed to tie with many life insurers

Currently, individual insurance agents can only be linked to a life, a general and a health insurer. The proposed amendment aims to remove this restriction, allowing agents to work with several insurers in each category.

This change can accelerate competition in the industry, benefiting private life insurers by expanding its agent network.

Changes in investment rules for insurers

The government is also trying to modify investment rules for insurance companies. Currently, investment limitations are built -in within the Insurance Act, but the amendment has proposed to empower the Insurance Regulatory and Development Authority (IRDAI) to determine these limitations.

This change will allow more flexibility in determining investment allocation.

If approved, IRDAI may allow insurers to invest more in equity or other asset classes.

For life insurance companies, the proposed guidelines suggest at least 25% investment in government securities, with at least 25% of the government and other approved securities. Up to 50% can be allocated for equity, corporate loans, infrastructure and social sector investment, subject to Ire approval.

This is a significant change from the current mandate, which requires minimum 50% and approved securities in the government, with a ban on corporate loans and equity investment.

For general and health insurers, the proposed investment criteria will require a minimum of 25% in government securities and at least 10% in other approved securities. They can invest up to 65% in equity, corporate loans and other investments, subjected to Idardi’s approval.