The finance ministry is contemplating changes in insurance laws, including reduction in minimum capital requirement, with a view to increasing the insurance penetration in the country. Insurance penetration in India increased from 3.76 per cent in 2019-20 to 4.20 per cent in 2020-21, registering a growth of 11.70 per cent. Insurance penetration measured as the percentage of insurance premium to GDP witnessed handsome growth during the year, mainly due to the outbreak of COVID-19.
The ministry is doing a comprehensive review of the Insurance Act, 1938 and also looking at making relevant changes to help push growth of the sector, sources said, adding the process is at a preliminary stage.
One of the provisions being considered is lowering the minimum capital requirement of Rs 100 crore for setting up an insurance business, the sources said.
With the ease of entry capital norms, sources said, there could be entry of companies focussed on micro insurance, agriculture insurance or insurance firms with regional approach.
So for them, the solvency margin requirement would also be different but without compromising on policyholders’ interest, the sources said.
Entry of more players would not only push penetration but result in greater job creation in the country.
