Rajya Sabha Approves Insurance Bill Thursday March 12,2015

 

Parliamentary approval was accorded on Thursday March 12,2015 to the Insurance Laws (Amendment) Bill, 2015, with the Rajya Sabha, despite opposition protests, adopting the measure hiking the foreign equity cap on domestic companies from 26% to 49 %

Formally called the Insurance Laws (Amendment) Bill, the measure – which seeks to replace an ordinance that was promulgated  in December 2013 during the inter-session period – was passed by the Lok Sabha on March 4,2015

Under the legislation, while up to 26 % foreign capital will be under the automatic route, the balance 23 % has to secure approval from the Foreign Investment Promotion Board (FIPB)

The Bill  was passed by a voice vote after a walkout by the Trinamool Congress, the Dravida Munnetra Kazhagam, the Janata Dal (United), the Samajwadi Party and the Bahujan Samaj Party.

The Bill, which has been pending since 2008, got support from the BJD and the NCP, and the AIADMK

The Bill will now be sent to President Pranab Mukherjee for his approval before it becomes a law. 

The BJP’s ally, Shiva Sena, did not oppose the Insurance Laws (Amendment) Bill, 2015, but did “register reservations” that it had over certain provisions that allow an increase in the foreign direct investment cap from 26% to 49 %
Another BJP ally, the Shiromani Akali Dal(SAD), asked the government to ensure that foreign investments did not benefit a “select few”. 

The Left parties, which had earlier moved a statutory resolution disapproving the Ordinance promulgated in December 2013, also came together to register their opposition to the Bill. P. Rajeeve and Tapan Sen of the CPI (M) and D. Raja of the CPI insisted on a “division.” “This Bill should not be passed without any protest registered,” Mr. Rajeeve said turning down Parliamentary Affairs Minister M. Venkaiah Naidu’s request to not push for a division

Derek O’Brien of the TMC, which has been vociferous in its opposition to the Bill, said his party had been consistent in resisting the move. Hitting out at the Congress for breaking ranks with the rest of the Opposition, he said a “new alliance” of the Congress and the BJP had come together to pass the Bill.


The Congress was not opposed to the Bill in principle but had issues with some of its provisions

The ordinance on the insurance sector was to lapse April 5,2015. The passage of the Bill came as a big relief for the NDA Government which will now have to bring the Opposition on board on land acquisition bill passed by the Lok Sabha


Several insurers, including Bharti, Reliance, Max and SBI groups, said their overseas partners would now raise their stakes from 26 to 49 % in the JV's and approval would bring in $8-10billion into the insurance industry. 

 A Long Journey of the Bill

• 2004: Then finance minister P Chidambaram  proposes to raise FDI cap in private insurers from 26% to 49% in the first Budget of UPA-I
   
• 2008: UPA-I tables the Insurance Laws (Amendment) Bill to this effect
   
• 2011: Standing committee on finance, headed by former finance minister Yashwant Sinha, recommends against raising FDI cap from 26%
   
• 2012: Cabinet clears a revised Bill to raise FDI cap to 49%
   
• 2014: Bill is referred to a select committee, headed by BJP MP Chandan Mitra
   
• 2015: Cabinet approves amendments in line with select committee recommendations
   
• 2015: Ordinance issued to this effect, as Parliament isn't in session
   
• 2015: Old Bill withdrawn in RS; new Bill passed

The salient features of the bill are:
* Public sector general insurance companies would be allowed to raise funds from the capital market.
* Start up capital for health insurers would be Rs.100 crore
* Life Insurance Council and the General Insurance Council will be empowered to act as self-regulating bodies
* Legal recourse to individual customers against insurers
* Flexibility in paying premium through instalments, faster claim settlement, simpler policies, capping on agents’ commissions and consumer redressal.
* For insurance companies, the bill provides for more distribution points for insurance policies, less dependence on insurance agents, ability to raise capital from the market, adoption of international best practices by joint ventures (JVs) and greater role of technology to
increase electronic issuance of policies.
* Foreign reinsurers will be allowed to open branch offices in India.