Dinesh Khara-led 7-member Committee To Review Amendments to Insurance Act

Moneylife Digital Team 20 February 2025

Investor Interest

The insurance regulatory and development authority of India (IRDAI) has constituted a seven-member committee, chaired by Dinesh Khara, former chairman of the State Bank of India (SBI), to review proposed amendments to the Insurance Act of 1938 and recommend a regulatory framework for their implementation.

According to a report from Indian Express, the committee has already held its first meeting, indicating a swift move towards implementing the proposed changes.

The committee is formed as the Union government prepares to introduce the Insurance Amendment Bill in Parliament. The proposed amendments include increasing the foreign direct investment (FDI) cap in the insurance sector from 74% to 100%, reducing paid-up capital requirements, introducing a composite licence system, and streamlining regulatory processes.

Other members of the Khara committee are: N Kannan, former chief executive officer (CEO) of ICICI Prudential Life Insurance; Saurabh Sinha, former executive director (ED) of Reserve Bank of India (RBI); Girish Radhakrishnan, former chairman and managing director (CMD) of United India Insurance; Alok Mishra, MD&CEO of the Micro Finance Institutions Network (MFIN); Rakesh Joshi, former member of IRDAI; and legal expert L Vishwanathan.

Quoting industry sources, a report from Business Standard says the committee's mandate is strictly limited to reviewing the proposed changes and determining their implementation through regulations and circulars, without suggesting additional amendments.

“The Insurance Act, once amended, will have several enabling provisions, including those related to 100 percent FDI, improving insurance penetration, and facilitating the entry of new players,” a source familiar with the matter told the newspaper. “The committee’s role is to ensure that these provisions are effectively implemented.”

The Insurance Act of 1938 serves as the primary regulatory framework for the country’s insurance industry and led to the establishment of IRDAI. The Act defines the scope of life, general, and health insurance in the country and regulates the role of insurance agents.

In her Union Budget speech, finance minister (FM) Nirmala Sitharaman proposed raising the FDI limit in the insurance sector to 100% as part of broader financial sector reforms. The government aims to attract foreign investment, enhance competition, and expand insurance penetration in India. "This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified," the FM said.

Last week, M Nagaraju, secretary of the department of financial services (DFS), confirmed that internal consultations for the Insurance Amendment Bill had been completed. The Bill is expected to address key issues such as investment norms, the repatriation of profits under FDI, and the introduction of a composite licence system, allowing insurers to operate in multiple segments under a single licence.

“We have almost completed the internal governmental consultations. The next step is to introduce the amendment bill in Parliament. Once approved, the corresponding rules will be notified to ensure the smooth implementation of all intended reforms,” Mr Nagaraju stated.

The Insurance Amendment Bill is expected to be introduced in Parliament soon, setting the stage for a transformational shift in India’s insurance landscape.

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