Parliament tonight approved the NDA government's first major economic reform measure as the long-pending bill...
Parliament tonight approved the PM Narendra Modi-led NDA government’s first major economic reform measure as the long-pending bill providing for raising foreign investment cap to 49 per cent in insurance was passed by Rajya Sabha after main opposition Congress and some other parties came on board.
The controversial Insurance Laws (Amendment) Bill, 2015, which replaced an ordinance promulgated in December last, was passed by voice vote after walkout by Trinamool Congress and DMK.
The smooth sailing of the bill in the Upper House, where the ruling NDA is in a minority, was possible with the help of opposition parties like Congress, AIADMK, NCP and BJD besides allies Shiv Sena and Akali Dal. (Read: FE Editorial: Insuring a face saving)
The bill was introduced this evening after a heated debate and adjournments over technicalities as a similar legislation was pending in the House.
Arundhati Bhattacharya, Chairman, SBI
With financial inclusion proceedings in full force, the timing of increase in limit for FDI in insurance sector is a blessing in disguise. In our estimate, the FDI limit hike in insurance could result in immediate inflow of around Rs. 20,000 crore. Furthermore, FDI hike in insurance is de jure increase in FDI limits for pension sector also.
The original bill, which was brought by Congress in 2008, was withdrawn and the new bill was passed after a debate of about two-and-a-half hours.
Trinamool Congress and Left parties strongly opposed the measure. While Trinamool, DMK as also SP, BSP and JD(U) staged a walkout, Left members moved amendments which were negated.
The bill, which was passed by Lok Sabha on March 4, provides for raising the foreign investment cap in insurance sector from 26 per cent 49 per cent and is expected to bring in funds to the thousands of crores.
The bill was introduced after Deputy Chairman P J Kurien ruled that the new legislation, as passed by the Lok Sabha, could be taken up as it was a “unique and unprecedented” situation.
Sandeep Patel, MD and CEO, Cigna TTK
The Insurance Amendment Bill will further support the development and enhancement of the health insurance industry with an infusion of capital and the ability to operate as a separate line of business. The investments and separate business classification will promote customer-centric product and service innovations with an enhancement to technology, deepening market penetration besides improving distribution efficiencies. A paradigm shift moment for the Indian insurance sector.
Moving the bill for consideration and passage, Minister of State for Finance Jayant Sinha said the measure was necessary for expanding the penetration of insurance in the country which is very low at present.
He said the measure would help go beyond life insurance to cover other aspects of like health and crop besides providing more funds for development of infrastructure.
Seeking to allay apprehensions, Sinha said the premium will not flow out of the country but will remain within the country and the interests of policy holders will be protected by the IRDA.
Sanjiv Bajaj, MD, Bajaj Capital
The strenuous efforts of the government have paid off, and finally, after much contemplations and debates the Insurance bill has been passed by the Rajya Sabha. The bill will play a great role in determining the future of insurance industry and its growth , and there are likely to be many interesting moves in the sector in the time to come.
The bill provides for imprisonment of up to 10 years for selling policies without registration with the regulator IRDA.
The legislation will also allow PSU general insurers to raise funds from the capital market and provides for increased penalty to deter multilevel marketing of insurance products.
He said more and more FDI is required in the sector to provide more coverage to people of India.
Sinha also sought to allay apprehensions that state-run LIC would be hurt if foreign companies come in, saying it was a very competitive body and match global players.
Rajesh Sud, MD & CEO, Max Life Insurance
The approval of Insurance Laws (Amendment) Bill, 2014 is a welcome step because it ends the uncertainty. This shows the Government’s resolve to take forward its reform agenda. The Bill approves increase in foreign capital cap to 49%, which will allow the much required flow of long-term capital to the sector and the flexibility of different capital structures depending on each company’s requirements. With the availability of additional capital, the industry will be in a position to expand its distribution reach. In this critical phase of growth in the Life Insurance sector, the passing of this Bill will also attract the much needed domain capital.
In a rapidly evolving sector, the Bill, by mandating the IRDAI to prescribe regulations on a number of insurance related subjects has equipped the Regulator to make course correction without having to wait for legislative amendments. We expect some constructive and enabling regulatory changes and the industry looks forward to working with IRDAI on that agenda. We are hopeful that in order to nurture the industry and get it up for a growth trajectory, the IRDAI would follow a phased regulatory agenda allowing for stability and growth, deepening access and eventually strengthening industry structure.
The approval of Insurance Laws (Amendment) Bill 2014 is a milestone for the insurance industry and I am confident that it will trigger growth of the industry, improvement in processes and greater customer centricity.
At the same time, Sinha said the country needs not one, but five to 10 LICs.
The agreed to incorporate suggestions made by Congress leader Anand Sharma for infusing capital in General Insurance Corporation (GIC) and strengthening it.
“You need capital to pay out claims. We do not have a developed insurance market… Capital is required for provisioning… (Insurance Companies should) have enough capital in hand… If we do not have capital we cannot grow the industry,” the MoS Finance said.
He said capital will flow after raising the cap as large insurance companies want legislation and clarity.
The recent Rs 1.5 lakh crore MoU between LIC and Railways shows that insurance sector could play an important role in the country’s infrastructure development, Sinha said.
The Minister said large insurance companies would benefit citizens “twice” as they will be protected and also avail of better infrastructure.
The law provides that 15 per cent of the premium should be invested in building infrastructure.
Allaying concerns of members about investment by FIIs, he said investment will remain with the company irrespective of what happens in the secondary market.
He also said that the Insurance regulator IRDA is being equipped to deal with complaints and claims and will also have Ombudsman.