IRDAI Sets Up High-Powered Committee to Review Insurance Act, 1938

The Insurance Regulatory and Development Authority of India (IRDAI) has announced the formation of a high-powered committee to review key aspects of the Insurance Act, 1938. Led by Dinesh Khara, the former chairman of the State Bank of India (SBI), the committee aims to propose significant reforms to the insurance sector. The committee, which includes top industry experts, is expected to submit its recommendations in the next three months.

A Step Toward Insurance Reforms

The committee’s formation is seen as a crucial step in the process of modernizing India’s insurance laws, a goal that has been gaining momentum in recent months. Following the committee’s recommendations, IRDAI plans to submit proposed changes to the Union finance ministry. Subsequently, the Department of Financial Services will issue a draft bill for public feedback.

Key members of the committee include Dinesh Khara, former SBI chairman; N Kannan, ex-CEO of ICICI Prudential Life Insurance; Saurabh Sinha, former executive director at RBI; Girish Radhakrishnan, former CMD of United India Insurance; Alok Mishra, MD and CEO of Microfinance Institutions Network (MFIN); Rakesh Joshi, former WTM at IRDAI; and legal expert L Vishwanathan.

Foreign Investment and Composite Insurance Companies

The committee’s formation comes in the wake of announcements made by Finance Minister Nirmala Sitharaman in the 2024 Union Budget. Sitharaman had highlighted the government’s intention to amend the Insurance Act to allow 100% foreign direct investment (FDI) in the insurance sector. This move is expected to open doors for more international investments, boosting the industry’s growth.

In addition to the FDI provision, Sitharaman also announced plans to allow composite insurance companies to operate. These firms will be able to provide life, non-life, and health insurance under a single entity, streamlining operations and enhancing market competition.

Challenges and Future Outlook

While these proposed reforms are promising, industry sources suggest that the process of overhauling insurance laws may take longer than initially anticipated. The formation of the Khara committee suggests that IRDAI is laying the groundwork to ensure a smooth transition once the new rules are implemented.

The committee’s review of the Insurance Act, which has been in place for decades, is expected to bring the sector in line with current global standards and address challenges faced by the industry. This could help attract more investment, enhance insurance penetration, and ultimately benefit consumers.

As the committee gets to work, all eyes will be on its upcoming recommendations. Will these changes revitalize India’s insurance sector and open new avenues for growth? Only time will tell, but the government is clearly taking bold steps in that direction.