IRDAI should fast-track risk-based capital framework; GST on insurance needs rationalisation: Parliamentary panel
New Delhi, August 7
Falgging the declining market share of public sector insurers, Parliamentary Committee on Public Undertakings called on the Insurance Regulatory and Development Authority of India to fast-track the implementation of the Risk-Based Capital framework and also recommended the government to examine GST rationalisation to boost insurance pentration across the country, as per a report tabled on August 6.
The Committee noted that the 18 per cent GST on insurance products has adversely affected affordability and insurance penetration. Thus, it "recommended that the Government examine GST rationalisation for health, term life, agricultural insurance and reinsurance products on priority, keeping in view the objective of Insurance for All by 2047 while balancing fiscal sustainability," the report noted.
The panel noted India's insurance penetration remains significantly below the global average and recommended: "DFS and IRDAI establish time-bound annual targets for increasing both life and non-life insurance penetration."
It observed the declining market share of public sector insurers and "recommended that each Insurance Sector CPSU formulate a clear market positioning strategy, and therefore, recommended that IRDAI expedite implementation of the Risk-Based Capital (RBC) framework to strengthen financial resilience, improve risk management practices and enhance policyholder protection," the report said.
Expressing concern over the weak financial health of three public sector general insurers, the CoPU has recommended Board-approved solvency restoration plans with quarterly milestones, while urging the government to treat capital infusion as a last resort after exhausting internal reforms.
"Government capital infusion should remain a supplementary measure after maximising internal reforms," it recommended, as per the report.
On digital transformation and claims automation, the Committee observed varying levels of digital maturity across insurance sector Central Public Sector Undertakings (CPSUs) and recommended the Department of Financial Services (DFS) to establish measurable digital transformation benchmarks.
"The Committee recommended wider adoption of claims automation, artificial intelligence, machine learning, fraud analytics, customer self-service platforms and integration with Bima Sugam to improve operational efficiency and customer service," it said.
— ANI
Reader Comments
The point about declining market share of public sector insurers is very concerning. LIC and other PSU insurers have been the backbone of insurance in India for decades. Instead of just complaining, they need to modernize their operations and compete with private players. The RBC framework should have been implemented long back - better late than never.
Interesting to see the Indian government focusing on insurance penetration. But I wonder if reducing GST alone will solve the problem. Insurance is still not a priority for many middle-class families in India. Awareness and trust are equally important. The digital transformation part is promising though - AI and automation could really help in claims processing.
"Insurance for All by 2047" is a noble goal, but we need to be realistic about it. The panel is right about GST rationalisation - health insurance is becoming unaffordable for ordinary Indians. But I also think the insurance companies need to simplify their policies and make them more transparent. People are scared of buying insurance because they think claims won't be settled. Bima Sugam integration is a step in the right direction.
The solvency concerns about public sector general insurers are real. We have seen cases where claims got delayed because of the weak financial health of some companies. The recommendation that capital infusion should be the last resort is good - they need to fix their internal processes first. Also, giving quarterly milestones is a good idea to keep them accountable. Let's hope this isnt just another report that gets shelved.
As someone who has worked in the insurance sector in India, I can say the digital maturity gap between public and private
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