Insurance stocks rise on the government’s joint license proposal for all insurance businesses | Daily News Byte


  • Shares of major insurance companies rose after the finance ministry proposed amendments that would allow insurers to obtain a common license for all insurance business.
  • The ministry has also proposed to allow insurance companies to distribute other financial products such as mutual funds.
  • Analysts suggest that the amendment will be a big boost to the industry as currently insurance companies need separate licenses to sell general, life and health insurance products.

Shares of major insurance companies have risen in the past month after the finance ministry proposed changes to the existing Insurance Act of 1938 and the Insurance Regulatory and Development Authority Act of 1999 that would allow insurers to sell life, general and health insurance. products through a single license, except for the distribution of other financial products such as mutual funds.

The Nirmala Sitharaman-led finance ministry announced its proposed amendments on November 29 and invited comments from stakeholders.

“The proposal includes various measures such as opening of registration for various classes, sub-classes and types of insurers with appropriate minimum capital requirements as specified by IRDAI, enabling services to insurers incidental to or related to the business of insurance and distribution of other financial products as specified by IRDAI , enabling newer distribution channels, enabling efficient use of capital and resources, etc.,” the ministry announced.

Allowing insurance companies to get one common license to sell multiple insurance products will be a big boost as they currently have to get separate licenses for general, life and health insurance, market experts told Business Insider India.

“Insurance stocks have rallied since investors got excited after the government proposed a joint license to sell all insurance products.” There are also expectations that some public sector general insurance companies that are not performing well or are not getting adequate valuations could be merged with LIC,” Deepak Jasani, head of retail research at HDFC Securities, told Business Insider India.

After that, shares of several insurance companies rallied on hopes of easier business.

Company % change in the last month
New India Assurance Company 33%
General Insurance Corporation of India 27%
LIC 13%
ICICI Lombard General Insurance 8%
HDFC Life Insurance 7%

Source: NSE, change as of 14:25, 21 December 2022

“The proposed amendments to the Law on Amendments to the Law on Insurance are aligned with the vision of the regulator “Insurance for All”. These changes will facilitate long-term growth of the industry and bring India closer to global practices,” said Sumit Rai, MD & CEO at Edelweiss Tokio Life Insurance.

He added that it will also allow insurance companies to tap into their distribution infrastructure across different financial product segments instead of starting from scratch for each product.

In November, the Insurance Regulatory and Development Agency (IRDAI) announced its vision of “Insurance for All by 2047”, where every citizen has adequate life, health and property insurance coverage and every business supports appropriate insurance solutions.

In this regard and in order to improve insurance penetration in the country, the regulator increased the limits for corporate agents, allowing them to connect with nine companies each in the life, health and general insurance segments, compared to the previous limit of three.

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