New Delhi/ Chennai: Parliamentary approval was accorded on Thursday to the insurance law amendment bill, with the Rajya Sabha, despite opposition protests, adopting the measure hiking the foreign equity cap on domestic companies from 26 per cent to 49 per cent. India Inc hailed the bill’s passage as a major milestone in the government’s reform programme.
Formally called the Insurance Laws (Amendment) Bill, the measure – which seeks to replace an ordinance that was promulgated during the inter-session period – was passed by the Lok Sabha on March 4.
Under the legislation, while up to 26 per cent foreign capital will be under the automatic route, the balance 23 per cent has to secure approval from the Foreign Investment Promotion Board (FIPB).
“The increase in FDI limit will help attract the much needed long term capital for the sector and would have multiplier effect on the state of economy especially in meeting the huge infrastructure financing requirements,” Chandrajit Banerjee, director general, CII said in a statement here.
While the bill had secured easy approval in the Lok Sabha, its passage in the upper house, where the ruling National Democratic Alliance (NDA) does not enjoy majority, was the crucial test.
The Left parties questioned the need for a hike in the FDI limit. Members opposing the bill also pointed to the minuscule claims rejection rate of the Life Insurance Corporation of India (LIC) while the rejection rate was around eight percent for private life insurers.
The Rajya Sabha had earlier in the day took up discussion on the bill after initial reservations from the opposition benches about an identical bill remaining pending with the house.
Deputy Chairman P.J. Kurien, however, ruled that there was nothing in the rule book or the constitution that could prevent the government from bringing the bill but added that the situation was “unprecedented”.
The issue was, however, sorted later after the house was adjourned for half an hour for discussions, after which the bill was taken up and passed after debate.
A top industry official quipped that it seems the proverbial seven year itch has made both the houses of parliament pass the long pending insurance bill into a law.
“The bill should have been passed in 2008. But due to various factors it got postponed. We are glad it has been finally passed today (Thursday),” V.Manickam, secretary general, Life Insurance Council told IANS.
“The passage of the insurance bill gives a bigger signal for investors. For the insurance industry, the new law would help to expand the market and increase the penetration which is abysmally low at around three percent,” Vibha Padalkar, executive director and chief financial officer at HDFC Standard Life Insurance Company told IANS.
Shashwat Sharma, partner, international accounting firm KPMG in India, said: “With the bill being cleared investment of around Rs.200 billion is likely to come over the next few years. There is a lot of interest among foreign insurance companies to enter the market here as it has a lot of potential of growth.” (IANS)
Salient features
* Public sector general insurance companies would be allowed to raise funds from the capital market.
* Start up capital for health insurers would be Rs.100 crore
* Life Insurance Council and the General Insurance Council will act as self-regulating bodies
* Legal recourse to individual customers against insurers
* Flexibility in paying premium through instalments, faster claim settlement, simpler policies, capping on agents’ commissions and consumer redressal.
* Foreign reinsurers will be allowed to open branch offices in India.