Indian insurers do not see any logic or reason for restricting the rights of foreign promoters while allowing 49 percent foreign direct investment (FDI), said industry officials.
The complaint is against the revised definition of an Indian insurance company in the Insurance Act.
According to a senior official of a private life insurer, Section 2(7A) is proposed to be amended to define an Indian insurance company as one which is formed and registered under the Companies Act, 1956 and in which the aggregate holding by foreign investors does not exceed 49 percent of its paid up equity capital.
The proposed law also puts a rider that the Indian insurance company should be Indian owned and controlled in such a manner as may be prescribed.
The aggregate foreign holding includes portfolio investors and promoters.
"The words Indian owned and controlled has not been defined. While the Central Government may frame rules in this regard, the basic intention of the words will have to be understood first," the official said.
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According to him, if the government plans to restrict the voting rights of the foreign partners to 26 percent (the current FDI limit) or have no say in the appointment of key persons then there will be a problem.
He said foreign promoters in every sector expect to exercise influence over the operations of their joint venture -- whether it is approval of business plan, taking a strategic decision or contribution of their expertise in the running of the venture.
"Why should a foreign partner like to make additional investments if he is not going to have any additional say," another senior official of a private insurer told IANS, preferring anonymity.
"There should be equity in restrictions. Let the government follow what is there in the banking sector -- restricting voting rights for all shareholders at a particular level," he added.
According to officials, the Indian promoters do not have the required expertise to run an insurance company and it is the foreign partners who bring the needed knowledge.
When pointed out that the sector was opened up in 2000 and 14 years is more than sufficient to learn the business, officials said: "That may be true. But the country does not have the actuarial talent and it is the foreign partner who brings that knowledge."