Parliamentary Panel Urges IRDAI to Speed Up Risk-Based Capital, GST Review
A parliamentary panel has asked IRDAI to fast-track the risk-based capital framework and urged the government to rationalise GST on insurance to improve affordability and penetration.
A parliamentary committee has called on the insurance regulator to accelerate the rollout of a risk-based capital (RBC) framework, while also urging the government to reconsider the goods and services tax (GST) levied on insurance products. The recommendations, made by the Committee on Public Undertakings (CoPU), were tabled in Parliament on August 6.
The panel highlighted that the current 18% GST on insurance policies has made them less affordable, hurting penetration in a country where insurance coverage remains well below global averages. It has asked the government to examine GST rationalisation for health, term life, agricultural insurance, and reinsurance products, keeping in mind the goal of 'Insurance for All by 2047' while ensuring fiscal prudence.
Expressing concern over the shrinking share of public sector insurers, the committee has recommended that each state-owned insurance company develop a clear market positioning strategy. To strengthen their financial resilience and improve risk management, it has urged the Insurance Regulatory and Development Authority of India (IRDAI) to expedite the implementation of the RBC framework, which ties capital requirements to the actual risk profile of insurers.
The panel also flagged the weak financial health of three public sector general insurers. It has recommended board-approved solvency restoration plans with quarterly milestones, and stressed that government capital infusion should be a last resort, used only after internal reforms have been exhausted.
On the technology front, the committee observed uneven digital maturity among public sector insurers. It has advised the Department of Financial Services to set measurable digital transformation benchmarks, and called for wider adoption of claims automation, artificial intelligence, machine learning, fraud analytics, and customer self-service platforms. Integration with the Bima Sugam platform was also suggested to improve operational efficiency and customer service.