Composite licence for insurers can be a game-changer

financialexpress.com:

A parliamentary panel has suggested introducing a composite licence for insurance companies which will enable them to offer both life and non-life insurance products. Saikat Neogi explains how it will give insurers economies of scale and benefit customers at the same time

l  Composite licence for insurers

A parliamentary panel headed by BJP leader Jayant Sinha has recommended that insurance companies should be allowed a composite licence to offer life and general insurance products, including health, under one entity. Prospective insurers can even apply for sub-class of business such as accident, health and motor insurance. However, reinsurers are prohibited from seeking registration of any other class of insurance business.

Current regulations prohibit insurers from selling general and life insurance policies to customers through a single entity. So, to enable composite licensing, the government will have to bring amendments to the existing Insurance Act, 1938 and Insurance Regulatory and Development Authority Act, 1999. The composite licence will help increase the overall insurance penetration in the country, which currently stands at a mere 4%.

l  Advantages for insurance companies

A composite licence will reduce costs of insurance companies and reduce their compliance hassles as they can run different insurance lines under one roof. Insurance companies can innovate their product line, especially in life and health insurance, as they will be able to integrate and analyse data of people’s life and health records.

With a composite licence in hand, life insurance companies will be able to sell indemnity-based health insurance products. At present, life insurance companies can sell only fixed benefit health plans and pay