Insurance amendments likely to fall prey to POTO

Harjeet Ahluwalia

New Delhi, Dec 6: For the insurance industry, POTO and the fact that Shivraj Patil has stepped into the shoes of late Madhavrao Scindia as deputy leader of the Opposition have come as a double whammy.

With Parliament in session, his new role has left Shivraj Patil with no time to convene standing committee meetings, government sources said. The standing committee on finance — which Mr Patil chairs — was expected to take evidence from insurance companies and government officials by now.

Industry had hoped for its report on the Insurance (Amendment) Bill, 2001, before the session-end.

However, the hectic spate of meetings and discussions triggered by POTO have taken such a toll on the schedules of parliamentarians that they have little time to spare for matters with economic significance, the officials regretted.

Effectively, this implies that the standing committee report may now be ready only by the Budget session. In the worst-case scenario, if the members get too engrossed with their respective parties’ pre-budget agendas and later the budgetary demands for grants, the preparation of the report may well have to wait for passage of the Budget. It is learnt that a committee meeting on some action-taken reports — slated for next week — had been called off because of the preoccupation of various political parties with the POTO debate.

The private insurance industry is viewing these developments with “deep disappointment”, because it was setting great store by Mr Patil’s assertion at a public forum that a broad consensus on the provisions of the Bill should not be difficult to arrive at.

The Bill provides for allowing payment of commission to intermediaries like brokers as well, against just agents as permissible at present. Apparently, this is a sticking point with some members of even the ruling coalition. Public sector employees have even approached the petitions committee against allowing brokers because it would harm the agency workforce in the country.

The Bill also aims at diluting norms for corporate agents. Industry sources stressed that the business plans of quite a few new entrants hinged on the corporate agency route. Some have aligned with banks already in expectation of the amendment being passed.

However, some committee members were opposed to the very idea of opening up insurance to banks. They have refused to swallow the line that risk-free, fee-based income from distributing insurance would bolster the banking sector.

Again, the ministry was trying to steer the Bill through by pitching for entry of cooperatives into the sector. It is said that a number of MPs too have a vested interest in seeing cooperatives get a push. But the flip side could be their insistence that the capital base for such insurers be lowered from the present Rs 100 crore. The standing committee has so far held only one meeting with chambers and employee organisations.