Parliament panel proposes composite licence for insurers, cut in GST rates

In a significant boost to the insurance segment in the country, the Standing Committee on Finance of the Lok Sabha has recommended that insurance companies should be allowed composite licensing which will enable an insurer to offer both life and non-life insurance products, including health, motor and term policies. The committee has also proposed a reduction in GST rates from the current level of 18 per cent in the case of health insurance and term policies

A composite licence can cut costs and compliance hassles for insurers, as they can run different insurance lines under one roof. “It can offer customers more choice and value, such as a single policy that covers life, health, and savings,” the panel said in its performance review and regulation of the insurance sector.

The House panel, headed by Jayant Sinha, said the Insurance Act, 1938, and the regulations of the Insurance Regulatory Development Authority of India do not allow composite licensing for an insurer to undertake life, general, or health insurance under one entity. It can boost insurance reach and awareness in India, as customers can get all-in-one insurance from one provider, with lower premiums and easier claims.

The committee has recommended that the government should hold deliberations with stakeholders to find solutions to these issues and introduce a provision for composite licensing for insurance companies and make the related amendment in legislation at the earliest.

On the GST issue, the committee said there is a need to rationalize the GST rate on insurance products, especially health and term insurance, which is 18% at present. The high rate of GST results in a high premium burden, which acts as a deterrent to getting insurance policies, it said. The committee recommended that GST rates applicable to health insurance products, particularly retail policies for senior citizens and microinsurance policies (up to limits prescribed under PMJAY, presently Rs. 5 lakh), and term policies may be reduced.

Insurance companies have been arguing for a cut in GST rates for some time now.

On catastrophe insurance, the committee recommended that the government should explore options as to how homes and properties, especially those of economically vulnerable groups, can be insured in areas susceptible to catastrophic damages with the aid of Central/State Government. This may require a specialized insurance business to be set up by one of the PSU general insurance companies with subsidized premiums for disaster-prone areas, it said.

The House panel said that India has been ranked three after the US and China, in recording the highest number of natural disasters since 1900. “By disaster type, India is marred mostly by floods. The committee feels that the natural disasters can cause lot of damage to the infrastructure in India, a country that faces many natural hazards because of its demographic and geographic features. Also, many houses are not safe enough to resist earthquakes and floods,” it said.

The committee proposed that IRDAI should set up a Working Group with all concerned stakeholders to examine all these issues in detail and then provide appropriate policy recommendations to address this important this issue, it said.

Read more at: The Indian Express