Life insurers hope for reforms by the new government

May 17th, 2009 - 5:19 pm ICT by IANS  

Chennai, May 17 (IANS) A much stronger Congress-led coalition to form the next government bodes well for the life insurance sector clamouring for reforms, says the industry’s representative organisation.
“Two important amendment bills relating to the insurance sector reforms are pending in Parliament. We expect them to be passed this time,” said S.B. Mathur, secretary general of Life Insurance Council that has 22 life insurance companies as members.

“Before the financial meltdown set in, Indian life insurers had little problem raising funds. But after the meltdown, fund mobilisation has become difficult. If the amendment bills are passed, it would ease the situation,” Mathur told IANS over phone from Mumbai.

The two bills are LIC (Amendment) Bill (seeking to raise Life Insurance Corp’s equity capital to Rs.100 crore from Rs.5 crore) and the Insurance (Amendment) Bill, an omnibus legislation proposing to amend the Insurance Act 1938, General Insurance Business Nationalisation Act, 1972 and Insurance Regulatory and Development Authority Act, 1999.

The Insurance (Amendment) Bill envisages an increase in foreign investment limit to 49 percent from 26 percent; letting foreign re-insurers in; reducing the start-up capital limit for pure health insurance companies to Rs.50 crore from Rs.100 crore; and enabling the regulator to stipulate the expense and commission limits.

“In a dynamic market environment, it is better for the regulator to prescribe limits rather than giving exemptions to individual companies, a decision that can be questioned by anybody in a court of law,” Mathur said.

Referring to a new - and more stable - government assuming office at the centre, he said: “There will be more stability at the government level as well as in the markets. The capital market is expected to revive and the unit-linked insurance policy (ULIP) segment may grow again.”

Echoing similar hopes is Bajaj Allianz Life chief executive Kamesh Goyal. “We expect the amendment bills to be passed as it was this government that introduced them. We also expect further stimulus package for the economy in general,” Goyal told IANS from Pune over phone.

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