The package includes easing investment norms for insurers, faster clearance for new products, easing of procedures and allowing banks to sell products of more than one insurance company.
Mr Chidambaram said the country's insurance regulator, Insurance Regulatory and Development Authority (IRDA), will consider relaxing norms for insurance companies investing in debt instruments to encourage investments in securities other than the AAA-rated ones.
Under the existing rules, insurance companies are required to put 75 per cent of their debt market investment into AAA-rated securities.
The finance ministry has also agreed to address tax-related issues, such as a reduction in service tax, tax treatment of annuity products on a par with the New Pension Scheme and Tax Deducted at Source on commission payments made to agents, of insurance companies.
The ministry has decided to allow banks to act as insurance brokers so they can sell products of more than one insurance company. At present, banks can sell products of just one insurance company through the bancassurance policy.
The Finance Minister said banks should act as brokers and the fiduciary responsibility of the bank will be to the policyholders.
Insurance reform is widely seen as crucial because according to IRDA estimates, the sector needs a capital infusion of over $12 billion over the next five years.
India has 24 life insurance companies and an equal number of general insurance companies.
The Finance Ministry, on 22 August 2012, approved 49 per cent foreign direct investment (FDI) in the insurance and pension sector from 26 per cent.
Domestic and foreign insurers, which have invested billions of dollars in India over the last decade, have been lobbying the government for years to raise the FDI limit to 49 per cent.
Copyright @ Thomson Reuters 2012