The Select Committee on the Insurance Laws (Amendment) Bill, 2008 has recommended a composite cap of 49 per cent on foreign investment in insurance. This will include all forms of FDI and foreign portfolio investments. At present the Foreign Direct Investment limit in the sector is 26 per cent. The report tabled by the Committee Chairman Dr Chandan Mitra in the Rajya Sabha today endorsed the government Bill to amend the Insurance Act.Disagreeing with the argument of not increasing the cap in the sector, it said, the hike will benefit the country’s insurance sector and facilitate to meet its capital requirements. In its report, the panel said that incremental equity should ideally be used for expansion of capital base to strengthen the insurance sector. The panel has suggested inclusion of a person from the insurance industry in the Securities Appellate Tribunal as an expert.
The Committee also recommended amendments to Securities and Exchange Board of India Act. It has suggested to link the imposition of penalties on the companies on the basis of gravity of the offence committed by them.The Committee strongly recommended that the health sector should be given utmost priority and capital requirements of health insurers should be retained at 100 crore rupees.
The Committee was unanimous that a reduction in the paid up equity capital in the sector as compared to life and general insurance would encourage non-serious players. It also felt that Insurance Regulatory Development Authority, IRDA, in consultation with the Medical Council of India should formulate regulations to ensure that malpractices in the health insurance sector could be avoided.
The report includes dissenting notes of four members P Rajeev of CPIM, Derek O Brien of TMC, Ram Gopal Yadav of SP and K C Tyagi of Janata Dal (United). The Rajya Sabha had appointed a 15-member Select committee, in August this year, to scrutinize the long pending Insurance Laws (Amendment) Bill, 2008. The Bill was held up for nearly six years on account of political differences. The government is likely to bring the Bill for consideration of the Upper House as early as next week.
