Amendments to Insurance Act unlikely this year

New Delhi, Aug 3 | Updated: Aug 4 2005, 05:30am hrs
Even as the KP Narasimhan Committee has submitted its recommendations on the Insurance Act amendments to the Insurance Regulatory and Development Authority (Irda), the government appears to be in no hurry to carry out the proposed amendments. The Act is unlikely to be amended in the current year, sources said.

Earlier, the finance ministry had indicated that it was keen to amend the Act according to the changing needs in the insurance sector.

The Irda has set up an expert committee to study the recommendations of the Narasimhan committee. "It is unlikely that the UPA government would initiate any move to bring in amendments in the existing Act, considering the political pressures," an official source said.

It may be noted that the committee has made no mention of altering the foreign direct investment level from the current 26%, though finance minister P Chidambaram had proposed in his 2004 Budget that the limit be increased to 49%.

Meanwhile, the committee has suggested that health and agriculture insurance should be treated as separate categories. At present, there are only two categories -- life insurance and general insurance. A large number of health insurance companies are waiting in the wings to enter the market, once there is clarity with regards to guidelines. "There has to be four categories in the insurance sector to boost growth and development," a member of the committee said. Currently, the general and life insurance companies are covering the health portfolio as riders to their original products. There are no specific health insurance companies in the market.

It is learnt that the 11-member committee, in its draft report, has also stressed the need to bring down the minimum required capital base for insurance companies to encourage competition in the sector.