The Indian government is preparing a series of significant reforms in the insurance sector, aiming to curb mis-selling, enhance consumer protection, and boost insurance penetration nationwide. These changes include extending the free-look period, introducing a composite insurance licence, and restricting insurance sales to trained agents only.
Extended Free-Look Period for Policyholders
One of the most impactful proposed changes is the extension of the free-look period from the current one month to a full year. The free-look period allows policyholders to review their insurance policy’s terms and conditions and cancel the policy if it does not meet their expectations. Extending this period to one year would provide consumers with more time to assess their coverage and avoid being locked into policies that may not suit their needs.
Composite Insurance Licence for Greater Flexibility
The government is also working on introducing a composite insurance licence, which would enable insurers to offer life, non-life, and health insurance under a single entity. This move aims to simplify operations for insurance providers and offer customers a more comprehensive range of insurance products from a single source.
Trained Agents to Reduce Mis-Selling Risks
Another key aspect of the reform is ensuring that only trained and certified agents can sell insurance policies. By restricting sales to qualified professionals, the government hopes to minimize instances of mis-selling, where customers are often sold policies that do not align with their financial goals or coverage needs.
100% FDI in Insurance Under Consideration
Financial Services Secretary M Nagaraju announced these reforms during a press conference, stating that the proposal to allow 100% foreign direct investment (FDI) in the insurance sector is also under active discussion. However, implementing this change would require a legal amendment, and discussions within the government on this matter are nearing completion. The legislative changes would also impact investment norms, profit repatriation, and the management structure of insurance companies.
Also read: FDI in Insurance Sector Increased to 100%
Regulatory Amendments Await Parliamentary Approval
Once Parliament approves these reforms, the updated regulations will be formally notified. Finance Minister Nirmala Sitharaman had previously outlined plans to open the insurance sector to 100% FDI as part of broader economic reforms, aimed at increasing insurance penetration and accessibility in India.
These measures are expected to significantly impact the insurance industry, providing consumers with better protection and transparency while encouraging foreign investment in the sector. The government aims to implement these changes through legislative reforms that will reshape the industry’s regulatory framework in the coming months.
