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Sector Reforms
The insurance sector was opened for private participation with the enactment of the Insurance Regulatory and Development Authority Act, 1999. The Insurance Regulatory and Development Authority of India (IRDAI) is functioning from its head office in Hyderabad, Telangana. The mission of the Authority includes: (i) To protect the interest of and secure fair treatment to policyholders; (ii) To bring about speedy and orderly growth of the insurance industry (including annuity and superannuation payments), for the benefit of the common man and to provide long term funds for accelerating growth of the economy; (iii) To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates; (iv) To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery; (v) To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players; (vi) To take action where such standards are inadequate or ineffectively enforced; (vii) To bring about optimum amount of self-regulation in day-to-day working of the industry consistent with the requirements of prudential regulation.
Since the opening up this sector for private and foreign investment in the year 2000, the number of participants in the insurance industry has gone up from seven (7) insurers (including the Life Insurance Corporation of India, four public sector general insurers, one specialized insurer and General Insurance Corporation as the national re-insurer) to sixty-seven (67) insurers as on March 31, 2021 operating in the life, general, and reinsurance segments (including specialized insurers, namely Export Credit Guarantee Corporation Limited and Agricultural Insurance Company of India Limited). As on March 31, 2021, there are 24 Life insurers including one in Public Sector, 25 general insurers including four in public sector, two specialized insurers in Public Sector, five Stand-Alone Health Insurers (SAHI) and 11 reinsurers including one in Public Sector.
One of the key reforms undertaken in this sector is the passing of Insurance Laws (Amendment) Act, 2015, which paved the way for major reform related amendments in the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and the Insurance Regulatory and Development Authority (IRDA) Act, 1999. The amendment Act removed the redundant provisions in the legislation and incorporated certain provisions to provide IRDAI with the flexibility to discharge its functions more effectively and efficiently. It also provided for enhancement of the foreign investment cap in an Indian insurance company from 26 per cent to an explicitly composite limit of 49 per cent with the safeguard of Indian ownership and control. The Amendment Act enabled foreign reinsurers to set up branches in India. It also enabled Lloyds of UK and its members to operate in India through setting up of branches for the purpose of reinsurance business or as investors in an Indian Insurance Company within the 49 per cent cap. This Act has recognized 'health insurance business' as a separate vertical by retaining the capital requirements for health insurers as applicable for Life and Non-life insurance companies.
Pursuant to the amendment to the Indian Insurance Companies (Foreign Investment) Rules, 2015 by the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2019, the cap to foreign equity investment for intermediaries or insurance intermediaries was removed which paved the way to open this channel with 100 per cent FDI.
Further amendment in the Insurance Act, 1938 was brought by promulgating the Insurance (Amendment) Act, 2021 enacted on March 25, 2021 by which the Government has further enhanced the FDI cap from 49 per cent to 74 per cent in Indian Insurance Companies. Based on this amendment and the corresponding rules issued by the Government, IRDAI has issued a regulation namely IRDAI (Indian Insurance Companies) (Amendment) Regulations, 2021 vide Gazette notification dated July 07, 2021.
Net Owned Fund requirement for foreign insurers engaged in reinsurance business through a branch established in International Financial Services Centre has been reduced from Rs.5000 crore to Rs.1000 crore vide Finance Act, 2019, dated 1.8.2019.
IRDAI (regulation of insurance business in Special Economic Zone) Rules, 2015 were amended through IRDAI (regulation of insurance business in Special Economic Zone) Amendment Rules, 2020 notified on 30.7.2020 to include a provision for the Insurance Intermediaries to operate in Special Economic Zones.
In 2014, orders passed by the IRDAI and Pension Fund Regulatory and Development Authority (PFRDA) were also made appealable in Securities Appellate Tribunal (SAT). Insurance (Appeal to Securities Appellate Tribunal) Rules, 2016 and Insurance (Procedure for Holding Inquiry by Adjudicating Officer) Rules,2016 were notified on 17.02.2016. The Insurance (Appeal to Securities Appellate Tribunal) Rules, 2016 were amended vide Insurance (Appeal to Securities Appellate Tribunal) Amendment Rules, 2021 notified on 15.4.2021 to provide a reasonable time limit within which the appellant can rectify the defect in his memorandum of appeal and also the manner in which the defect in the Memorandum of Appeal shall be communicated to the appellant in respect of cases where the appeal has been sent by post.
To resolve complaints of all personal lines of insurance, group insurance policies, policies issued to sole proprietorship and micro enterprises on the part of Insurance companies and their agents and intermediaries in a cost effective and impartial manner. The Central Government notified the Insurance Ombudsman Rules, 2017 on 27.04.2017. These rules were amended vide the Insurance Ombudsman (Amendment) Rules, 2018 on 17.08.2018. The said rules were further amended vide notification dated 02.03.2021 and 18.05.2021 on the recommendations of the Committee on Subordinate Legislation (CoSL), Lok Sabha to make institution of Insurance Ombudsman more efficient and transparent.
In order to facilitate Initial Public Offer (IPO) of Life Insurance Corporation of India (LIC), Life Insurance Corporation Act, 1956 (LIC Act) was amended through Finance Act, 2021.Amended provisions of LIC Act became effective from 30.6.2021. The amendments in LIC Act include amendments in respect of capital structure, Corporate Governance, financial disclosures & audit and distribution of surplus besides other related amendments. Rules and regulations under LIC Act have also been amended pursuant to the said amendment.
The General Insurance Business (Nationalisation) Act, 1972 has been amended through the General Insurance Business (Nationalisation) Amendment Act, 2021 (No. 37 of 2021) and notified on August 19, 2021 to enable greater private participation in the public sector insurance companies under the Act. The said Act has come into force with effect from 27.08.2021.
The Government disinvested 3.5% of its shares in LIC on 17th May, 2022 with the objective to unlock the value of Government’s investment. It also enabled LIC to raise capital for meeting its future growth requirements, without depending on the public exchequer and improve governance through greater market discipline and transparency, arising from listing requirements and disclosures. IPO has also enabled the public to acquire stake in LIC and benefit from the same. LIC shares were listed on both NIFTY and Sensex.
Keeping in view the global practices, a notification has been issued under section 2CA of the Insurance Act, 1938 on 4.7.2022 to apply certain sections of the said Act to an insurer carrying on the business of insurance as a financial institution in an International Financial Services Centre only with such exceptions, modifications and adaptations as specified therein.
Pradhan Mantri Vaya Vandana Yojana
Pradhan Mantri Vaya Vandana Yojana (PMVVY) – Pradhan Mantri Vaya Vandana Yojana (PMVVY)is offered by the Life Insurance Corporation of India (LIC)and supported by Government, to provide senior citizens of age 60 years or more an assured minimum pension for a term of 10 years, linked to the price at which they purchase the pension policy. The scheme enables old age income security for senior citizens through provision of assured pension / return linked to the subscription amount based on government guarantee to Life Insurance Corporation of India (LIC).
PMVVY is open for subscription upto 31st March, 2023 and has provided an assured rate of return of 7.40% per annum for the year 2020-21. For the years 2021-22 and 2022-23, while the scheme is in operation upto March, 2023, there is a provision for annual reset of assured rate of return with effect from April 1stof the financial year in line with applicable rate of return of Senior Citizens Saving Scheme (SCSS) upto ceiling of 7.75% with fresh appraisal of the scheme on breach of this threshold at any point. Accordingly, an assured return of 7.40% per annum remained unchanged for 2021-22 and an assured return of 7.40% per annum is being offered under PMVVY for the subscribers who opted for the scheme during the year 2022-23 policy duration of 10 years.
The Government bears the cost of any shortfall in the returns earned annually on the policy purchase price vis-a-vis the minimum return required for paying the assured minimum pension. A total of more than 8.59 lakh subscribers have benefited under the scheme as on 31.08.2022.
COVID-19 measures in Insurance Sector
Pradhan Mantri Garib Kalyan Package
An insurance scheme for the health workers fighting COVID-19 under Pradhan Mantri Garib Kalyan Package (PMGKP) was launched by Ministry of Health and Family Welfare on 30.03.2020 through New India Assurance Company Limited (NIACL). Under this scheme, Rs. 50 lakh insurance cover has been provided to 22.12 lakh public healthcare providers on loss of life due to COVID19, and accidental death on account of COVID-19 related duty. It also includes private hospital staff and retired/volunteer/local urban bodies/ contracted/daily-wage/ad-hoc/outsourced staff requisitioned by States/ Central hospitals/ autonomous hospitals of Central/ States/UTs, AIIMS and INIs/ hospital of Central Ministries drafted for COVID 19 related responsibilities. The benefit/claim under this policy is available in addition to the amount payable under any other policies. The scheme was extended twice and finally it was concluded on 24.03.2021. Thereafter, benefits under the scheme were further extended till 18.4.2022. Further, the scheme was renewed again w.e.f. 19.4.2022 and is valid upto 15.10.2022. Under PMGKP, as on 31.8.2022, 988 claims of Rs.50 lakh have been paid to Health workers under the scheme valid upto 24.3.2021 and 974 eligible claims have been paid under the scheme commencing from 24.04.2021 and valid upto 18.4.2022.
Corona Kavach Policy
IRDAI vide press release dated 10.07.2020 designed a standard Covid-specific product to address basic health insurance needs of the public with health insurance cover ranging from Rs.50,000 to Rs.5,00,000. The Authority has mandated general and health insurers to offer this indemnity based Individual Covid Standard Health Policy called “Corona Kavach” with policy period ranging from three and a Half Months (3 ½ months), Six and a Half Months (6 ½ months) to Nine and Half Months (9 ½ months) including waiting period. The coverage includes cost of treatment incurred by the insured for availing treatment at home for Covid on positive diagnosis up to 14 days per incident, which in normal course would require care and treatment at a hospital but is actually taken while confined at home. For the purpose of this policy, any set-up designated by the government as hospital for the treatment of Covid shall also be considered as hospital.
The IRDAI guidelines allow the insurance companies to give a discount of 5% in payment of premium of “Corona Kavach” to doctors, nurses and other healthcare workers. The insurers have also been allowed to offer Corona Kavach Policy as group insurance product.
Corona Rakshak Policy
All Insurers (General, Health and Life) transacting Health Insurance business have been encouraged by IRDAI vide circular dated 26.6.2020 to offer a benefit based COVID-19 product - ' Corona Rakshak'. Under the policy, a lump sum benefit equal to 100% of the Sum Insured is payable on positive diagnosis of COVID-19 arising out of hospitalization for its treatment.
Further, insurers were advised by IRDAI to continue offering Corona Kavach and Corona Rakshak Policies and also to renew these policies in May,2021.As per the information provided by IRDAI, a total of 26,88,489 claims amounting to Rs.24,457 crores have been paid upto 31.7.2022 by the general insurer industry in respect of COVID-19.
Arogya Sanjeevani Policy
IRDAI issued circular dated 01.01.2020 to instruct all general and health insurers to offer a standard individual health insurance cover called “Arogya Sanjeevani” Policy to the public w.e.f. 01.04.2020 to take care of their basic health insurance needs. The policy provides the basic health covers such as hospitalization expenses, pre and post hospitalization expenses, AYUSH treatment, cumulative bonus etc. which are uniform across the market. The policy also covers Covid – 19 treatments. The terms and conditions of the policy are same across insurers except that premium rates are left to be fixed by the insurers. No add-ons or optional covers are allowed to be offered along with this standard product. Also, no deductibles are permitted in this product.
The standard policy can also be offered as a group policy under the same name with similar terms and conditions.The same is expected to cater to the medical needs of a large number of employees engaged in manufacturing, services, SMEs, MSMEs, logistics sector and migrant workers.
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Sector Reforms
The insurance sector was opened for private participation with the enactment of the Insurance Regulatory and Development Authority Act, 1999. The Insurance Regulatory and Development Authority of India (IRDAI) is functioning from its head office in Hyderabad, Telangana. The mission of the Authority includes: (i) To protect the interest of and secure fair treatment to policyholders; (ii) To bring about speedy and orderly growth of the insurance industry (including annuity and superannuation payments), for the benefit of the common man and to provide long term funds for accelerating growth of the economy; (iii) To set, promote, monitor and enforce high standards of integrity, financial soundness, fair dealing and competence of those it regulates; (iv) To ensure speedy settlement of genuine claims, to prevent insurance frauds and other malpractices and put in place effective grievance redressal machinery; (v) To promote fairness, transparency and orderly conduct in financial markets dealing with insurance and build a reliable management information system to enforce high standards of financial soundness amongst market players; (vi) To take action where such standards are inadequate or ineffectively enforced; (vii) To bring about optimum amount of self-regulation in day-to-day working of the industry consistent with the requirements of prudential regulation.
Since the opening up this sector for private and foreign investment in the year 2000, the number of participants in the insurance industry has gone up from seven (7) insurers (including the Life Insurance Corporation of India, four public sector general insurers, one specialized insurer and General Insurance Corporation as the national re-insurer) to sixty-seven (67) insurers as on March 31, 2021 operating in the life, general, and reinsurance segments (including specialized insurers, namely Export Credit Guarantee Corporation Limited and Agricultural Insurance Company of India Limited). As on March 31, 2021, there are 24 Life insurers including one in Public Sector, 25 general insurers including four in public sector, two specialized insurers in Public Sector, five Stand-Alone Health Insurers (SAHI) and 11 reinsurers including one in Public Sector.
One of the key reforms undertaken in this sector is the passing of Insurance Laws (Amendment) Act, 2015, which paved the way for major reform related amendments in the Insurance Act, 1938, the General Insurance Business (Nationalization) Act, 1972 and the Insurance Regulatory and Development Authority (IRDA) Act, 1999. The amendment Act removed the redundant provisions in the legislation and incorporated certain provisions to provide IRDAI with the flexibility to discharge its functions more effectively and efficiently. It also provided for enhancement of the foreign investment cap in an Indian insurance company from 26 per cent to an explicitly composite limit of 49 per cent with the safeguard of Indian ownership and control. The Amendment Act enabled foreign reinsurers to set up branches in India. It also enabled Lloyds of UK and its members to operate in India through setting up of branches for the purpose of reinsurance business or as investors in an Indian Insurance Company within the 49 per cent cap. This Act has recognized 'health insurance business' as a separate vertical by retaining the capital requirements for health insurers as applicable for Life and Non-life insurance companies.
Pursuant to the amendment to the Indian Insurance Companies (Foreign Investment) Rules, 2015 by the Indian Insurance Companies (Foreign Investment) Amendment Rules, 2019, the cap to foreign equity investment for intermediaries or insurance intermediaries was removed which paved the way to open this channel with 100 per cent FDI.
Further amendment in the Insurance Act, 1938 was brought by promulgating the Insurance (Amendment) Act, 2021 enacted on March 25, 2021 by which the Government has further enhanced the FDI cap from 49 per cent to 74 per cent in Indian Insurance Companies. Based on this amendment and the corresponding rules issued by the Government, IRDAI has issued a regulation namely IRDAI (Indian Insurance Companies) (Amendment) Regulations, 2021 vide Gazette notification dated July 07, 2021.
Net Owned Fund requirement for foreign insurers engaged in reinsurance business through a branch established in International Financial Services Centre has been reduced from Rs.5000 crore to Rs.1000 crore vide Finance Act, 2019, dated 1.8.2019.
IRDAI (regulation of insurance business in Special Economic Zone) Rules, 2015 were amended through IRDAI (regulation of insurance business in Special Economic Zone) Amendment Rules, 2020 notified on 30.7.2020 to include a provision for the Insurance Intermediaries to operate in Special Economic Zones.
In 2014, orders passed by the IRDAI and Pension Fund Regulatory and Development Authority (PFRDA) were also made appealable in Securities Appellate Tribunal (SAT). Insurance (Appeal to Securities Appellate Tribunal) Rules, 2016 and Insurance (Procedure for Holding Inquiry by Adjudicating Officer) Rules,2016 were notified on 17.02.2016. The Insurance (Appeal to Securities Appellate Tribunal) Rules, 2016 were amended vide Insurance (Appeal to Securities Appellate Tribunal) Amendment Rules, 2021 notified on 15.4.2021 to provide a reasonable time limit within which the appellant can rectify the defect in his memorandum of appeal and also the manner in which the defect in the Memorandum of Appeal shall be communicated to the appellant in respect of cases where the appeal has been sent by post.
To resolve complaints of all personal lines of insurance, group insurance policies, policies issued to sole proprietorship and micro enterprises on the part of Insurance companies and their agents and intermediaries in a cost effective and impartial manner. The Central Government notified the Insurance Ombudsman Rules, 2017 on 27.04.2017. These rules were amended vide the Insurance Ombudsman (Amendment) Rules, 2018 on 17.08.2018. The said rules were further amended vide notification dated 02.03.2021 and 18.05.2021 on the recommendations of the Committee on Subordinate Legislation (CoSL), Lok Sabha to make institution of Insurance Ombudsman more efficient and transparent.
In order to facilitate Initial Public Offer (IPO) of Life Insurance Corporation of India (LIC), Life Insurance Corporation Act, 1956 (LIC Act) was amended through Finance Act, 2021.Amended provisions of LIC Act became effective from 30.6.2021. The amendments in LIC Act include amendments in respect of capital structure, Corporate Governance, financial disclosures & audit and distribution of surplus besides other related amendments. Rules and regulations under LIC Act have also been amended pursuant to the said amendment.
The General Insurance Business (Nationalisation) Act, 1972 has been amended through the General Insurance Business (Nationalisation) Amendment Act, 2021 (No. 37 of 2021) and notified on August 19, 2021 to enable greater private participation in the public sector insurance companies under the Act. The said Act has come into force with effect from 27.08.2021.
The Government disinvested 3.5% of its shares in LIC on 17th May, 2022 with the objective to unlock the value of Government’s investment. It also enabled LIC to raise capital for meeting its future growth requirements, without depending on the public exchequer and improve governance through greater market discipline and transparency, arising from listing requirements and disclosures. IPO has also enabled the public to acquire stake in LIC and benefit from the same. LIC shares were listed on both NIFTY and Sensex.
Keeping in view the global practices, a notification has been issued under section 2CA of the Insurance Act, 1938 on 4.7.2022 to apply certain sections of the said Act to an insurer carrying on the business of insurance as a financial institution in an International Financial Services Centre only with such exceptions, modifications and adaptations as specified therein.
Pradhan Mantri Vaya Vandana Yojana
Pradhan Mantri Vaya Vandana Yojana (PMVVY) – Pradhan Mantri Vaya Vandana Yojana (PMVVY)is offered by the Life Insurance Corporation of India (LIC)and supported by Government, to provide senior citizens of age 60 years or more an assured minimum pension for a term of 10 years, linked to the price at which they purchase the pension policy. The scheme enables old age income security for senior citizens through provision of assured pension / return linked to the subscription amount based on government guarantee to Life Insurance Corporation of India (LIC).
PMVVY is open for subscription upto 31st March, 2023 and has provided an assured rate of return of 7.40% per annum for the year 2020-21. For the years 2021-22 and 2022-23, while the scheme is in operation upto March, 2023, there is a provision for annual reset of assured rate of return with effect from April 1stof the financial year in line with applicable rate of return of Senior Citizens Saving Scheme (SCSS) upto ceiling of 7.75% with fresh appraisal of the scheme on breach of this threshold at any point. Accordingly, an assured return of 7.40% per annum remained unchanged for 2021-22 and an assured return of 7.40% per annum is being offered under PMVVY for the subscribers who opted for the scheme during the year 2022-23 policy duration of 10 years.
The Government bears the cost of any shortfall in the returns earned annually on the policy purchase price vis-a-vis the minimum return required for paying the assured minimum pension. A total of more than 8.59 lakh subscribers have benefited under the scheme as on 31.08.2022.
COVID-19 measures in Insurance Sector
Pradhan Mantri Garib Kalyan Package
An insurance scheme for the health workers fighting COVID-19 under Pradhan Mantri Garib Kalyan Package (PMGKP) was launched by Ministry of Health and Family Welfare on 30.03.2020 through New India Assurance Company Limited (NIACL). Under this scheme, Rs. 50 lakh insurance cover has been provided to 22.12 lakh public healthcare providers on loss of life due to COVID19, and accidental death on account of COVID-19 related duty. It also includes private hospital staff and retired/volunteer/local urban bodies/ contracted/daily-wage/ad-hoc/outsourced staff requisitioned by States/ Central hospitals/ autonomous hospitals of Central/ States/UTs, AIIMS and INIs/ hospital of Central Ministries drafted for COVID 19 related responsibilities. The benefit/claim under this policy is available in addition to the amount payable under any other policies. The scheme was extended twice and finally it was concluded on 24.03.2021. Thereafter, benefits under the scheme were further extended till 18.4.2022. Further, the scheme was renewed again w.e.f. 19.4.2022 and is valid upto 15.10.2022. Under PMGKP, as on 31.8.2022, 988 claims of Rs.50 lakh have been paid to Health workers under the scheme valid upto 24.3.2021 and 974 eligible claims have been paid under the scheme commencing from 24.04.2021 and valid upto 18.4.2022.
Corona Kavach Policy
IRDAI vide press release dated 10.07.2020 designed a standard Covid-specific product to address basic health insurance needs of the public with health insurance cover ranging from Rs.50,000 to Rs.5,00,000. The Authority has mandated general and health insurers to offer this indemnity based Individual Covid Standard Health Policy called “Corona Kavach” with policy period ranging from three and a Half Months (3 ½ months), Six and a Half Months (6 ½ months) to Nine and Half Months (9 ½ months) including waiting period. The coverage includes cost of treatment incurred by the insured for availing treatment at home for Covid on positive diagnosis up to 14 days per incident, which in normal course would require care and treatment at a hospital but is actually taken while confined at home. For the purpose of this policy, any set-up designated by the government as hospital for the treatment of Covid shall also be considered as hospital.
The IRDAI guidelines allow the insurance companies to give a discount of 5% in payment of premium of “Corona Kavach” to doctors, nurses and other healthcare workers. The insurers have also been allowed to offer Corona Kavach Policy as group insurance product.
Corona Rakshak Policy
All Insurers (General, Health and Life) transacting Health Insurance business have been encouraged by IRDAI vide circular dated 26.6.2020 to offer a benefit based COVID-19 product - ' Corona Rakshak'. Under the policy, a lump sum benefit equal to 100% of the Sum Insured is payable on positive diagnosis of COVID-19 arising out of hospitalization for its treatment.
Further, insurers were advised by IRDAI to continue offering Corona Kavach and Corona Rakshak Policies and also to renew these policies in May,2021.As per the information provided by IRDAI, a total of 26,88,489 claims amounting to Rs.24,457 crores have been paid upto 31.7.2022 by the general insurer industry in respect of COVID-19.
Arogya Sanjeevani Policy
IRDAI issued circular dated 01.01.2020 to instruct all general and health insurers to offer a standard individual health insurance cover called “Arogya Sanjeevani” Policy to the public w.e.f. 01.04.2020 to take care of their basic health insurance needs. The policy provides the basic health covers such as hospitalization expenses, pre and post hospitalization expenses, AYUSH treatment, cumulative bonus etc. which are uniform across the market. The policy also covers Covid – 19 treatments. The terms and conditions of the policy are same across insurers except that premium rates are left to be fixed by the insurers. No add-ons or optional covers are allowed to be offered along with this standard product. Also, no deductibles are permitted in this product.
The standard policy can also be offered as a group policy under the same name with similar terms and conditions.The same is expected to cater to the medical needs of a large number of employees engaged in manufacturing, services, SMEs, MSMEs, logistics sector and migrant workers.