The Parliamentary Committee on Public Undertakings (CoPU) has highlighted the declining market share of public sector insurers. In response, the committee has urged the Insurance Regulatory and Development Authority of India (IRDAI) to expedite the implementation of the Risk-Based Capital (RBC) framework. Additionally, they recommended that the government consider rationalising the GST to enhance insurance penetration nationwide.
The Committee observed that affordability and insurance penetration have been impacted by the 18% GST on insurance products. Therefore, it suggested that the government urgently analyse GST rationalisation for health, term life, agricultural insurance, and reinsurance products, taking into account the objective of insurance for all by 2047 while balancing fiscal sustainability.
The panel observed that insurance in India is below the global average and suggested, “DFS and IRDAI establish time-bound annual targets for increasing both life and non-life insurance penetration.” It noted the reducing market share of the public sector insurers and suggested that each insurance sector CPSU develop a market positioning method, and thus suggested that IRDAI immediately implement the Risk-Based Capital (RBC) framework to make financial resilience stronger, enhance risk management practices, and improve policyholder protection.
The CoPU shows concern over the poor financial health of three public sector general insurers and suggested Board-approved solvency restoration plans with quarterly milestones, and prompted the government to consider capital investment as a last resort after using internal reforms.
The Committee reviewed digital transformation and claims automation within Central Public Sector Undertakings (CPSUs) in the insurance sector and noted significant differences in digital maturity. They recommended that the Department of Financial Services (DFS) establish measurable benchmarks for digital transformation. Additionally, the Committee suggested a broader implementation of claims automation, artificial intelligence, machine learning, fraud analytics, customer self-service platforms, and integration with Bima Sugam to enhance operational efficiency and improve customer service.
