New Delhi/Chennai, March 12
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 percent to
49 percent. 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
percent foreign capital will be under the automatic route, the balance
23 percent 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 Insurance Laws
(Amendment) Bill, 2015 being cleared by Parliament investment of around
Rs.200 billion is likely to come into the Indian insurance sector over
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."
The salient features of the bill are:
* 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 be empowered to 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.
* For insurance companies, the bill provides
for more distribution points for insurance policies, less dependence on
insurance agents, ability to raise capital from the market, adoption of
international best practices by joint ventures (JVs) and greater role of
technology to
increase electronic issuance of policies.
* Foreign reinsurers will be allowed to open branch offices in India.
