Bill’s provisions
- Raises FDI cap in insurance from 26 to 49 per cent; mandates full Indian ownership of firm
- Defines health insurance business; says any firm interested in health insurance must retain a capital of Rs 100 cr
- Insurance firms have to timely pay fees to IRDA or face action
- Raises penalty for offenders fromRs 5 lakh in UPA Bill to Rs 25 crore
Aditi Tandon
Tribune News Service
New Delhi, March 4
The Lok Sabha today passed the Insurance Laws Amendment Bill 2015 replacing the related ordinance promulgated in January to raise the limit of foreign direct investment (FDI) in the sector from 26 to 49 per cent. The Bill, however, mandates full Indian control of the insurance firm effectively implying that foreign investors can’t appoint their CEOs.
The government had yesterday introduced the Bill in the Lok Sabha though its original version is pending in the Rajya Sabha since 2008.
In the last winter session, the majority Opposition has blocked the consideration of the Bill which led the government to bring an ordinance.
Even today in the LS, Congress’ Shashi Tharoor opposed the Bill citing legislative impropriety and misuse of ordinance route. Another Congress objection was – the Bill raises the capital cap requirement for health insurers from Rs 50 crore in the UPA version to Rs 100 crore now.
“Don’t we want more people to have health insurance? This level of capital requirement will discourage companies from entering the health insurance sector,” Tharoor said. Moments later, two CPM amendments to the Bill (including one to prevent raising FDI cap) were negated in voting and the Bill passed with MoS Jayant Sinha in charge.
The Congress, CPM and AIADMK opposed the Bill on grounds that it diluted the powers of the Insurance Regulatory Development Authority (IRDA). Tharoor also asked why a foreign investor would come when the Bill mandated complete Indian ownership of firms. “Foreign shareholders can invest but cannot appoint CEOs. Why will they come?” he asked.
The passage of the Bill by the LS brings some movement to an 11-year-old deliberation on the need to change insurance laws.
The Law Commission had in June 2004 recommended large-scale changes in all insurance laws. Consequently, a panel was set up and the first Insurance Laws Amendment Bill was drafted by the UPA in 2006.
This was referred to a GoM which recommended that the LIC Act 1956 be dealt with separately while Insurance Act 1938; General Insurance Business Nationalisation Act 1972 and the IRDA Act be amended as one. So, a 111-clause Insurance Laws Amendment Bill 2008 was introduced in the Rajya Sabha on December 22, 2008.
This was referred to the Standing Committee on Finance which reported back in December 2011. The government finally proposed 88 amendments to the 2008 version, but the same could not be taken up.
Following the change of government in May last, the BJP proposed 11 additional amendments to the 2008 Bill pending in the RS but the Opposition forced it to be referred to a Select Committee which reported in the winter session last year.
The government again made changes to the Bill and gave notice for it to be taken up but a disruptive Opposition blocked the move. That was when the ordinance was promulgated. The passage by LS is however half the job done with the RS hurdle remaining.
But the government is moving ahead to create a condition to take the Bill to a joint session of Parliament as one House has now passed it.
