The Insurance Regulatory and Development Authority of India has said that insurance promoter's stake can now be increased to 26 percent. The insurer will be linked to its solvency record for the preceding five years in order for the dilution to happen.
The objective was to enable private equity funds to invest in insurance companies.
Insurance marketing firms can distribute products of six insurers in each line of business, and corporate agents can tie up with nine insurers.
The decisions were made at the board meeting. The amendments will make it easier to do business and set up insurance in India.
There will be easier capital requirement norms and quicker regulatory approvals for insurers in the near future.
The reforms will make the sector attractive for investment and improve the ease of doing business. A number of long pending issues of the industry have been addressed by the regulators.
India has attracted a lot of investment in recent years. We haven't seen the kind of money coming into the insurance sector. The regulations for PE funds were not investor friendly. If the company has a good solvency record over the next five years, the stake of the promoter can be reduced to 26 percent. The regulations will crystallise a lot of investment which has been waiting for some time.
Competition will be boosted by the insurance regulators decision to allow corporate agents to tie up with more insurers. Increasing insurance penetration in India will be helped by this, as corporate agents will be able to sell more customer-friendly products and services.
There is a proposal for a single management expense limit.
While the move will benefit corporate agents, individual agents who have had similar demands might have to wait longer. “There was an expectation that this issue would be discussed at the meeting and amendments to the Insurance Act proposed. However, it might be taken up at the next board meeting,” said a senior official from an industry body who spoke on the condition of anonymity.
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