A parliamentary panel has pitched for composite licensing for an insurer to undertake life, general or health insurance under one entity as it can cut costs and compliance hassles for insurers, and they can run different insurance lines under one roof.

It has called for a reduction in GST for health insurance and micro insurance products from 18 per cent at present.

The report stated that “allowing composite licensing could provide further impetus to the insurance sector owing to its various benefits. It can cut costs and compliance hassles for insurers, as they can run different insurance lines under one roof. Customers can get all-in-one insurance from one provider, with lower premiums and easier claims.”

Allowing services that are incidental or related to the line of business and distribution of other financial products by insurance companies are among the key proposed amendments to the Insurance Act 1938 and the Insurance Regulatory Development Authority Act, 1999.

The idea of a composite licence has been welcomed by the insurance companies. The industry expects composite licences to give insurers the necessary economies of scale and customers the option to buy multiple products from the same insurer, in turn lowering the cost of distribution.

For policyholders, this is also expected to reduce the burden of excessive documentation and remembering renewal timelines.

However, the regulations on finalisation would have to specify how the products would be designed, how the tenures would be adjusted (life being a longer product than health), how much cross-selling would be permitted and what kind of solvency would be required to protect policyholder interest.

In an LIC earnings call, Dinesh Pant, appointed actuary and executive director, actuarial team - LIC, had said when a call is finally being taken on the composite licence, it needs to be determined to what extent the amount of cross-selling is allowed between insurance companies.

“In the current scheme of things, whatever is allowed to us, we are trying to integrate all those things to provide as close as a life cycle solution we can provide to our customers. Going forward, when the regulations change or larger participation is allowed, that will also be integrated into our processes and product offering,” he added.

“There are many layers. It could be in terms of riders. It could be in terms of embedding health solutions within a life product and so on. We do have a few ideas on which we are ready to press the button if we are allowed to sell it,” Vibha Padalkar, MD and CEO, HDFC Life Insurance, had said.

The lowering of GST rates from 18 per cent to 5 per cent is also a long-standing demand.

“GST rate cut from 18 per cent to 5 per cent on the health insurance premiums will be a huge respite, especially for senior citizens. At present, on most insurance products the GST is 18 per cent, which thrusts the premium to 118 per cent for the end-user,” said Prasun Sikdar, MD & CEO, ManipalCigna Health Insurance.