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FateofInsuranceBillremainsuncertain
LastdayofParliament'sWinterSessionunlikelytoseepassageofBillordinanceroutestillnot
ruledout
MSaraswathy|MumbaiDecember24,2014LastUpdatedat00:50IST
TheInsuranceLaws(Amendment)Bill,whichproposesraisingthe
foreigninvestmentcapinthesectorfrom26percentto49percent,
amongotherprovisions,couldntbepassedintheRajyaSabhaon
Tuesday,astheHousewasadjournedsinedieonthelastdayofthe
wintersession.Thoughthegovernmentisplanningtotakethe
ordinanceroutetopasstheBill,sourcessayitwilltaketimetobe
implemented.
OneofthekeyreformsproposedbytheNationalDemocratic
Alliancegovernment,theBillwastobepresentedintheUpper
Housefirst,followedbytheLokSabha.However,itcouldnotbetakenupduetoseveraldisruptionsin
thewintersession.
AccordingtotheBill,thecaponforeigninvestmentwillincludeallformsofforeigndirectinvestment
(FDI),foreigninstitutionalinvestment(FII)andforeignportfolioinvestment.Wehavebeenawaiting
thepassageoftheBillforseveralyears.Whilethistime,industrywasconfidentofitbeingpassed,the
hurdlesarestillthere.Wearehopinganordinancetothiseffectwillbebroughtoutbythegovernment,at
leastbeforetheendofthisfinancialyear,saidthechiefexecutiveofaprivatelifeinsurer.
TheBillalsoproposesIndianmanagementcontrolofcompaniesinthesector.Officialsclaimtheyhave
observedinjointventurefirms,foreignpartnersinfluencedecisions,addingthroughthisreform,their
influencewillbecurtailed.
Seniorexecutivesofsmalllifeandgeneralinsurancecompaniessaidforeignpartnerswerewaitingfor
theFDIcaptoberaisedbeforepumpinginadditionalcapital.Apartfromexistingjointventurepartners,
manylargeplayersfromAsiahavebeeninterestedinenteringIndiaassoonasthecapisraised.Lackof
structureddecisionmakingonthisfrontbypolicymakershasbeendetrimentalforthesector.An
ordinancemightbebroughtouttothiseffect,butwillfacestiffopposition,saidtheunderwritingheadat
aprivatenonlifeinsurer.
TheBillhasprovisionsforreinsurers,too.Initially,theBillproposedtoallowforeigninsurerstocarry
onthebusinessofreinsuranceinIndia,throughabranchoffice.However,thedefinitionofinsurerhas
beenwidenedtoincludeaforeigncompanyengagedinreinsurancebusiness,throughabranch
establishedinIndia.
WHATTHEBILLWANTS
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Therevisedsection45intheBillsaysnoclaimcanberepudiatedafterthreeyearsofthepolicy
beinginforce,evenifafraudisdetected.Thiswillmeancustomerswhohavebeenmisssolda
policycangettheirclaimspassedevenifdiscrepanciesareseeninthepolicyorclaim
TheminimumcapitalforhealthinsurancecompanieswillbeRs100crore,againsttheproposed
Rs50crore.Thiswillmeanonlyseriouscompaniesenterthisbusiness
Healthinsurancehasbeendefinedascontractsthatprovideforsicknessbenefitsormedical,
surgicalorhospitalexpensebenefits,inpatientoroutpatienttravelcoverandpersonalaccident
cover
Indianmanagementcontrolhasbeenproposed.Clarityisawaitedonwhatthiswillmeanand
whethertherewillbeacaponvotingrights
InsurerscanapproachtheSecuritiesAppellateTribunalforredressalofgrievancesagainsttheIrda
Section40AoftheinsuranceAct,whichrelatestoagentcommissionlimits,hasbeenomittedin
theBill.Irdawillhavetobringoutfreshnormsforagentcommissionandcapsthereof

Severallifeandgeneralinsurershavepresignedshareholderagreementsthatallowforeignpartnersto
automaticallyincreasetheirstaketo49percentwhentheBillispassed.
Thechiefexecutiveofamidsizedlifeinsurancecompanysaidincreasingtheforeignpartnersstake
wouldhavemoreskininthegamebywayofinvestmentsintechnology,personnelandproduct
innovation.
InhisinterimBudgetspeech,FinanceMinisterArunJaitleyhadsaidtheFDIcapintheinsurancesector
wouldberaisedto49percent,asthesectorwascapitalstarved.
WhentheBillwasfirstintroducedin2008,theproposalrelatedtoFDIfacedhugeopposition.Various
routeswereproposed,including23percentthroughtheFIIrouteand26percentthroughFDI.However,
Parliamentwasunabletoarriveataconsensus.
TheUnitedProgressiveAlliancegovernmenthadconsideredraisingtheFDIcapininsuranceto49per
centwithoutanyincreaseinvotingrights.This,however,wasnotacceptedbytheotherparties.Though
upto49percentFDIininsuranceandpensionwasearliermootedbyPranabMukherjee(whenhewas
financeminister),adecisiononthiswasdeferredbytheCabinet.

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