Asks govt to transfer some issues under insurance laws to the rules.
In a move aimed at getting more flexibility in regulating companies, the Insurance Regulatory & Development Authority (Irda) has asked the government to transfer some of the issues under the insurance laws to the rules.
If the government accedes to the demand, the regulator will be able to change the regulations without having to wait for parliamentary approval.
The government is in the process of finalising amendments to insurance laws, including an increase in the foreign investment ceiling from 26 per cent to 49 per cent. A Bill will be moved as soon as a group of ministers approves the proposed amendments.
In the past, there have been suggestions to put the foreign investment ceiling in the rules instead of the Insurance Act, 1938, but Irda’s proposals are limited to aspects such as the solvency requirement and the commission paid to intermediaries.
“Fundamentally, there are various requirements that are stipulated in the Act. So, we have suggested empowerment of Irda to issue regulations governing certain aspects. Tomorrow if you wish to have greater flexibility on certain aspects, it is easier to revise or amend a regulation than to amend the Act. Of course, all regulations are placed before Parliament,” Irda Chairman J Hari Narayan told Business Standard in an interview.
The insurance regulator said that foreign investment limit is a policy decision and not a regulatory issue. “The level of foreign equity is an issue on which Irda has no particular view. Irda will follow what Parliament decides,” Hari Narayan added.
The clause limiting foreign investment at 26 per cent was inserted into the legislation in 1999 after Parliamentarians laid it down as a condition for opening up the insurance sector to private competition. At present, insurers are required to maintain a solvency margin of 150 per cent which means that they need a capital base of Rs 150 in case the policies sold by them are worth Rs 100.