The entire exercise to bring the new legislation into effect will take about three years. The government, in the meantime will go ahead with a comprehensive amendment of the Insurance Act, based on the recommendations by the Irda.
It is learnt that the foreign direct investment (FDI) cap will remain at 26%due to pressure from the Left parties. Though a key agenda was to increase the FDI cap from the current level to 49% through the amendment of the Insurance Act, it is unlikely to be tampered with, official sources said, adding the clause dealing with this will remain a policy issue. Earlier, there were talks of bring out the FDI issue from the purview of the legislation and bring it under the regulator to facilitate alteration of the FDI limit as and when required.
At present, there are various legislation including General Insurance Business Nationalisation Act, Insurance Act and LIC Act that govern the insurance sector. Additionally, the Irda Act deals with the regulator and its functions.
A source also pointed out that some of them like the GIBNA would lose their relevance.
The finance ministry is also planning to simplify governance in the banking and insurance sector by reducing number of legislation. The source added there would be different clauses dealing with different areas in a single Act.
The ministry is currently studying the recommendations made by the Irda on the amendment of the Insurance and LIC Acts.