Consider the following. All the government need do to ensure insurance liberalisation is to repeal the acts of insurance nationalisation and bring back the old Insurance Act. The old Act can be amended to prescribe licensing conditions and the ownership pattern of new insurance companies, and allow the LIC and GIC to continue under government ownership (which may or may not be diluted). The new insurance companies (like any other company) will report on the do's and don'ts prescribed by the government to the department of company affairs. Let us face it: regulation is the business of the government. Overseeing conformity with regulations is the job of chartered accountants who also report to shareholders. True, the government may delegate its powers to a regulatory authority; but the objective of the delegation, if it is to be consistent with liberalisation, must be to operate the regulations flexibly in order to move with the times. But the IRA bill lays down regulations in detail. Flexibility is ruled out.All IRA will do is to issue licences, that is, keep out competitors, and operate a club. The new IRA bill has been created by the bureaucracy for the bureaucracy. The political authority--the BJP--facing a seige within, and afraid of Left criticism, has abandoned initiative.

So what kind of liberalisation will we have under IRA? The bill virtually prescribes how insurance companies should run their business, allows no flexibility in premium structure and leaves very little room for treasury management. So long as competition is held at bay, more insurers will not mean different perceptions on risk-taking or new thrusts in financial management. This is no reform. The IRA bill is not worth the paper it is written upon.