Insurance reform bill tabled in Parliament

Insurance reform bill tabled in Parliament

New Delhi: The insurance reforms bill, introduced on Monday in the Rajya Sabha amid Left protest, is aimed at increasing the cap on foreign investment in private companies in the sector from 26% to 49% and allowing state-owned general insurance companies to raise funds from capital markets.

The Insurance Laws (Amendments) Bill seeks to raise “the foreign equity in the Indian insurance company from 26% to 49% and maintain foreign direct investment cap at 26% for the insurance cooperative societies," its statement of objects and reasons said.

Among other things, the bill is also aiming to permit nationalised general insurance companies to go public and raise funds from capital markets.

Once the bill becomes an Act, the four state-owned general insurance companies -- Oriental Insurance Company, New India Assurance, United India Insurance and National Insurance Company -- will be able to hit capital markets to raise funds after obtaining permission from the government.

The minimum investment limit for health insurance companies is proposed to be fixed at Rs50 crore. At present, the companies entering in insurance business -- life or general insurance -- are required to have a minimum paid-up capital of Rs100 crore.

The move to lower the investment limit is expected to encourage companies with less capital to launch health insurance business and increase the penetration of this important segment of insurance business.

The insurance sector reforms have been pending for long. Although, then Finance Minister P. Chidambaram in his budget speech in July 2004 expressed the intention of the government to raise the FDI cap in private insurance companies to 49%, it failed to push the proposal due to stiff resistance from then outside supporters, the Left parties.