The insurance regulator IRDAI is in the process of tweaking capital requirements for insurance companies, Mr Nilesh Sathe, Member (Life) of the regulatory authority, has said.
"In India, the capital requirement at present is INR100 crore ($13.9m), which is quite high as compared to advanced nations," Mr Sathe said, according to a report by the Press Trust of India.
This amount would be changed so that many aspirants could join the insurance sector, he told reporters on the sidelines of a seminar on 13 December. The insurers would also not need to offer a plethora of products but could stick to select ones, he said.
Risk based capital
Mr Sathe also said that the proposed risk-based capital (RBC) framework is likely to be in place by 2020-21.
“Right now, there is a standard capital requirement irrespective of what business you do. But in advanced nations, it is not so. If there are some players looking only for a regional presence or are looking at some specific line of business, then there is no need to keep aside so much capital. This is what the risk-based capital will address,” he said, according to a report in Hindu Business Line.
This might encourage new players to enter the Indian insurance market with specific offerings, thereby improving insurance penetration in the country.
The regulator is also working on adopting a sandbox approach to promoting innovation in the industry.
“We have formed a committee, which is looking into this. We will come up with guidelines soon,” Mr Sathe said.
A sandbox approach allows insurance companies to experiment and test certain innovative products before filing for approval of the same. The approach would also help contain the impact of failures.