JOIN USThe government had first mentioned raising FDI ceiling in insurance sector to 49 per cent from the current 26 per cent in the 2004 Union Budget and introduced a Bill to do so over a year ago.
The Insurance Laws (Amendment) Bill, 2008, has since been referred to a Parliamentary Standing Committee. The Parliamentary panel’s report is expected before the Budget session in February next year and passage of the Bill is likely during the same year.
Although the global financial meltdown of last year hit top insurers like AIG, life insurers in India have seen new business premium collections rise 10-fold over as many years.
The new premium collection has increased to Rs 86,983 crore in 2009 compared to Rs 8,299 crore 10 years ago when the sector was opened to private players. There are 23 life insurance companies and 21 general insurers operating in the country, but their growth potential has not been tapped for want for capital — which could be addressed through raising FDI ceiling.
Entry of foreign partners enabled the sector to attract Rs 6,000 crore FDI, even as the bill to increase the FDI cap to 49 per cent is still pending in Parliament. The Comprehensive amendment of insurance laws among other things also seeks to permit nationalised general insurance companies to go public to raise funds from capital market. The four state-owned general insurance companies — Oriental Insurance Company, New India Assurance, United India Insurance and National Insurance Company — will be able to hit capital markets once the bill becomes Act. As far as expansion of the sector is concerned, a number of new players ventured into different segments this year. For instance, Bank of India and Union Bank of India promoted life insurance venture ‘Star Union Dai-ichi’ started operations during the year. Besides, the general insurance venture of SBI — with Insurance Australia Group got clearance from IRDA. Bank of Baroda- promoted India First Life Insurance Company also got IRDA’s approval to enter into the life space.