The Indian government is implementing a major reform of the insurance sector, in the context of its drive to foster economic development.
The Insurance Laws (Amendment) Act (passed in March 2015) opens the sector to stronger collaboration with the global economy and with private sector. A key measure in the bill raises the cap on Foreign Direct Investment (FDI) from 26% to 49% thus contributing to frame India as one of the fastest growing economy and most favourable destination for investments.
With over 1 billion population, India is the world’s second largest country. Still the insurance penetration is among the lowest, with only about 30% of the population covered by general insurance. The government recognises privatisation can help fill this gap bringing about not just increased capital inflows but also technology, expertise and effective management to ensure greater penetration for a large and varied society as India is.
The Insurance Regulatory and Development and Authority of India (IRDA) explains in a dedicated journal (The Insurance Laws (Amendment) Act, 2015 - A Game - Changer for the Insurance Industry) the benefits to be derived from this the paradigm shift, as well as counter-measures in place to ensure consumer protection.
Following the notification of the Act, the IRDAI is currently working on new regulations that will be rolled out over the upcoming months in support to its implementation. Among the proposals under scrutiny, the revision of the health insurance guidelines, that will impact various areas from products and distribution to actuarial aspects and claims experience, to better respond to growing demand for health coverage.
With very low public spending (1% of GDP) healthcare has been relying on private sector providers, and out of pocket expenses sustained by citizens. As anticipated by The Times of India, the new proposal will amend the Employees' State Insurance Act of 1948, India's first social security legislation, in order to give workers the right to individual choice between a scheme run by the ESIC - Employees' State Insurance Corporation (up to now compulsory for certain employers) or an insurance product available in the market. State-run ESIC schemes mandate employers to contribute 4.75% of an employees' gross salary with a 1.75% matching premium payment from employees.
Workers covered under an ESIC scheme will be allowed to subscribe to a health insurance product if approved by the Insurance Regulatory Development Authority Competition on costs and product innovation are among the expected benefits. Restrictions on contracts duration could be removed with employers gaining access to long term plans, while at the moment they have to be annually renewed.
Long-term plans, health savings accounts and single-premium health insurance policies could be available to individuals. More on IRDAI.