Private monopolies have also hurt householders equally. The stock exchanges were a monopoly of a few brokers till some time ago. I recollect even at the turn of this decade paying commission of 2 per cent to brokers in Mumbai just to buy shares of Reliance or Tisco. What was even worse was the lack of transparency, which gave rise to the saying on the street, ``you get the lowest price when you have sold and the highest price when you have bought.''

The advent of the National Stock Exchange dramaticallychanged the scenario by introducing competition into a monopolistic industry. Today, commissions on the bourses represent value-addition. As far as quality of service goes one gets contract notes before the end of the day with the time and price printed out.

Hence, from the point of view of breaking monopolies alone, the opening up of the insurance sector which is today run by just one company and four of its subsidiaries - which are in effect its clones - should be welcomed.

It is my submission that this is not the only reason why insurance should be open for all. The country needs enormous resources for infrastructure development. Traditionally such funds come in larger measure from the insurance sector. Opening up the sector will ensure larger flow of funds in two ways. More investment will take place in the sector. Further, India is a highly under-insured nation and through competition a much higher portion of household savings will find its way into infrastructure through insurance companies.

Wehave already opened up the economy to foreigners in the areas of capital markets (through FII and mutual funds) and banking. Even the NBFC segment has been opened up totally with GE Capitals, Avcos and Rabos in full play. So it is illogical not to open up insurance. The capital invested in insurance is the longest term in the financial system, whereas in the case of FIIs, the capital can literally disappear in 24 hours with profits.

The insurance industry is defined as ``the industry whose only product is risk-taking''. Hence it is highly technology-driven and India lacks the technology in many areas. Better insurance means better quality of life for the common man. For example there is no pension scheme in India worth the name. Our insurance schemes are so similar that they could do with new ideas.

Having said all this it does not necessarily follow that licence to operate is tantamount to licence to exploit. It is essential that we as a nation show enough maturity and skill in making foreign investmentwork to our advantage. The biggest fear in opening up insurance to foreigners is that these foreign investors would eventually end up owning and controlling the companies that they enter into as a partner, much like the Arab and the camel.

One cannot hence over-emphasise the importance of ensuring that the foreign investors do exactly what they are licensed to do. From this point of view the key thing is to ensure that the foreigners do not control the management of the private sector insurance companies through the back door. After the experience in telecom, foreign investors may be tempted to manipulate the Indian system and control the insurance company even with a minority stake.

They may be able to do this in one of the two ways. After the enactment of Fera, many multinationals did go down to a minority stake of 40 per cent but continued to control the management. This scenario can get repeated again. Secondly, Indian promoters are right now very strapped for cash and would be only too willing tohave side agreements whereby even though they appear to have majority stake on record, in effect the foreigners are in command.

So as to ensure that neither of these things happen and totally dilute the spirit of the law, it should be specifically stipulated by the Insurance Regulatory Authority that the day-to-day management should be with the Indian majority partner. It should also be clearly laid down that the largest single shareholder should be the Indian promoter and any change in the status would lead to either cancellation of licence or nationalisation by the government. No indirect hold of shares by foreigners through shell companies promoted by intermediaries should be countenanced.

There is also this fear that the foreigner would tend to cherry pick and hence these insurance companies would not fulfil their due role in the economic development of the country. To prevent this from happening, uniform investment norms should be made applicable for the entire industry including GIC andsubsidiaries. After all, level-playing fields is the mantra of capitalism and our foreign friends should not object to it.

On balance, it is most likely that opening up of insurance would bring great benefits to the middle-class householders through more imaginative products, better customer service and competitive pricing. However, the fears that an important segment of the economy will pass into foreign hands are not entirely ill founded. While the government has shown great wisdom in opening up the sector, the next few months will show whether our political and bureaucratic system has the necessary commitment to the long-term interests of the nation so as to ensure that we do not end playing second fiddle.