Insurers charge legislators with lack of seriousness

Harjeet Ahluwalia

New Delhi, Jan 3: Insurance companies are chafing at the delay in amendments to the Insurance Act of 1938, accusing both the government and the legislature of not according priority to the amendment Bill.

With Mr N Janardhan Reddy now replacing Shivraj Patil as chairman of the standing committee on finance, the process of taking evidence on outstanding issues would be stalled till he has been through his paces, some insurers pointed out. The composition of the committee has also undergone a change, which would also impact the pace of progress.

Speaking on condition of anonymity, chief executives of some private and public sector insurers felt that the delays in pushing through the changes in the Act were affecting the growth of the insurance sector. The Insurance (Amendment) Bill, 2001, was introduced in the Monsoon session and was referred to the standing committee thereafter. Only a couple of meetings had taken place before the Winter session, and there the matter rested with the debate on POTO overshadowing all other business. The attack on Parliament effectively blocked prospects for any more discussions.

Another pending legislation pertaining to delinking of the four subsidiaries from the General Insurance Corporation is also facing a similar fate. While there is little room for manoeuvring on the issue of delinking, the panel is also expected to pronounce on the proposal made by the committee on public undertakings that the four general insurers be merged.

Among the major proposals of the Insurance Amendment Bill are allowing cooperatives into the sector, step up the shareholders share of profits in the life insurance business, diluting of the requirements for setting up corporate agencies, and permitting the entry of brokers and payment of commission to them.

A top life insurance functionary pointed out that unless the restrictive corporate agency norms were liberalised, it would be difficult, especially for new players, to penetrate the rural market. Indeed, the standing committee had quizzed private companies on their rural plans, but it failed to appreciate the role it needed to play itself, he regretted.

A private insurer remarked that public sector unions were vehemently lobbying against allowing brokers into the sector, and that the government needed to make its own stand clear rather fast. Foreign partners used to working with brokers were somewhat restive about the outcome of this debate too, he added.

Another insurer noted that the finance minister had admonished private companies for seeking higher foreign equity so early on without “proving” themselves, but the government was itself doing little now to remove irritants.