Insurance promoters will now be able to dilute their stake up to 26 percent, the Insurance Regulatory and Development Authority of India (IRDAI) has said. The dilution, however, will be linked to the insurer being a listed entity with a ‘satisfactory’ solvency record for the preceding five years.
It also made the investment through Special Purpose Vehicle (SPV) optional for private equity (PE) funds, with the objective of enabling them to directly invest in insurance companies.
This apart, corporate agents, including banks, will now be allowed to tie up with nine insurers (up from three), and insurance marketing firms can distribute products of six insurers (up from two earlier) in each line of business - life, general, and health insurance.
These decisions were taken at the insurance regulator’s board meeting on Friday. The IRDAI said the amendments will promote ease of doing business and simplify the process of setting up insurance in India.
“(These reforms) will improve ease of doing business, free up distribution models, encourage customer-centric innovations and make the sector attractive for investment. The regulator has addressed a number of long pending issues of the industry,” said Bhargav Dasgupta, MD and CEO, ICICI Lombard General Insurance.
Insurers believe this will lead to growth in investments in the Indian insurance sector. “In the last 4-5 years, India has attracted a lot of investment. Insurance has been an attractive sector, but we have not seen that sort of money coming into the sector. The real money is with PE funds, but regulations were not very investor-friendly. Also, now, the IRDAI has said promoters’ stake can go down to 26 percent, provided the company is listed with a satisfactory solvency record over five years. A lot of investment, which has been waiting for some time due to the regulations, will now actually crystallise,” said Kamesh Goyal, Chairman, Digit Insurance.
The insurance regulator’s decision to allow corporate agents to tie up with more insurers will boost competition, insurers feel. “This will enable corporate agents to sell more customer-friendly products and services, which will further help in increasing insurance penetration in India,” said Goyal.
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.