Two Parliamentary Standing Committees (December 1996 and December 1998) have examined insurance deregulation. In the five years since Malhotra, there has been little advance in the rationale for deregulation. Insurance (life and general) was nationalised to preempt financial savings for investment by the state. Post-1991, the state's role in investment took a back seat.

The private sector was brought to the fore and with this its access to financial savings (for investment) needed to be widened. But nothing comparable to what has been done in banking (reduction in the SLR, for example) has been pushed through in insurance. Instead, there has been vague talk of getting the insurance sector (by increasing the number of players) to provide mega funding for infrastructure. But the follow-up in this regard has been half-hearted.Thus the legislation before Parliament puts a cap of 26 per cent on foreign equity of new players in insurance in the case of joint ventures. But few corporates are willing to providethe balance to the minimum required equity of Rs 100 crore. Public subscription into primary equity issues of new insurance companies can be expected to be hesitant.

Aggressive private investment in insurance seems hardly likely in the medium term. Note that following the passage of the proposed bill, the IRA will take no less than three months to invite applications for licences and no less than seven months thereafter to complete scrutinising these before awarding licences (which, unlike the ones for cell-phones, have been declared non-tradable). There will be no new insurance company in place before the end of next year. Mega-funding dreamed up for backing infrastructure can start trickling in only after 2000 AD. That is, assuming new insurance companies surface. In life business, despite LIC's dominant network, a couple of new ventures may come up (thanks to income-tax concessions) to skim the creamy layer of urban (mainly metropolitan) business. The prospect is less cheerful for general insurance where risk data (claims ratio) are held close to the chest by existing players. The insurance tariff advisory committee is in no position to prescribe rational tariffs. Thiswill deter new entrants in the foreseeable future.