It seems the proverbial seven year itch made both houses of parliament pass the long pending insurance bill into a law, an industry official said on Thursday.
The Insurance Regulatory and Development Authority of India (IRDAI) was in the process of drafting around 40 regulations, the official said.
"The bill should have been passed in 2008. But due to various factors, it got postponed. We are glad it was finally passed today (Thursday)," V. Manickam, secretary general of the Life Insurance Council, told IANS.
Despite opposition protests, the Rajya Sabha on Thursday passed the insurance sector amendment bill, which seeks to hike the foreign equity cap on domestic companies from 26 percent to 49 percent, allowing tier-II capital among other things.
Formally called the Insurance Laws (Amendment) Bill, the measure seeks to replace an ordinance that was promulgated during the inter-session period.
The bill was already passed in the Lok Sabha on March 4.
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"The passage of the insurance bill gives a bigger signal for investors. For the insurance industry, the new law would help to expand the market and increase the penetration which is abysmally low at around three percent," Vibha Padalkar, executive director and chief financial officer at HDFC Standard Life Insurance Company, told IANS.
Queried about Britain's Standard Life increasing its stake, she said: "The joint venture agreement allows equal partnership. The foreign partner may even decide to increase its holding at a level lower than 49 percent."
She said there were several policy-holder friendly features in the new law.
"There is now Securities Appellate Tribunal (SAT) and companies may go on appeal against IRDAI's decisions," she remarked.
Industry officials told IANS that IRDAI has drafted many regulations that are needed to implement the new law and would soon come out with them.
Some of the new regulations would deal with commission to intermediaries, expenses of the management, raising of tier-II capital and others.
Earlier, IRDAI chairman T.S. Vijayan told IANS that the new law would empower the regulator to run a modern insurance industry.
He said the capital management by the companies would be more efficient and the expenses of the management would come down.
He said that earlier, health insurance was considered part of the non-life insurance sector which was largely into insuring assets whereas health insurance was for human beings.
With the passage of the bill, health insurance is recognised as a separate segment.
According to him, allowing the foreign reinsurance players to open branch offices in India would see a drastic change in this sector.
According to IRDAI, there are 53 insurers (24 life, 28 non-life and one re-insurer) in India.
Shachindra Nath, group CEO of Religare Enterprises Ltd., said: "The parliament's nod to the insurance bill has finally ushered in a long pending reform and paved the way to hike FDI in insurance to 49 percent. This will surely send a positive signal to global insurance players in particular and foreign investors in general.
"A number of foreign partners have been eagerly waiting to raise their stake in domestic insurance ventures and parliament's approval will facilitate this much needed investment flow."