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The Insurance Laws (Amendment) Bill, along with the report of the Rajya Sabha select committee on the legislation, is likely to be presented in Parliament on Monday.
One of the reforms proposed by Prime Minister Narendra Modi’s government, it would be presented in the Upper House first, and then the Lok Sabha.
While the Bill’s aim is to improve the overall condition of the insurance sector with respect to products and services, the key reform being proposed is to increase foreign direct investment (FDI) from 26 per cent to 49 per cent.
A composite limit, it will include all forms of foreign direct investment (FDI), foreign institutional investors (FII) and foreign portfolio investors. This could be a significant move to generate and invite FDI, and help the industry expand.
Officials hope that new money will be pumped into the sector from investors abroad. However, existing shareholders will also be allowed to dispose of their stakes.
Management control would be Indian, according to the Rajya Sabha select committee. The board of directors of the insurance companies are likely to comprise Indian members, and the policy decision would be taken by them.
Officials claim they have observed foreign partners in join venture firms influencing the decision-making process but with this reform their influence would be curtailed.
Detractors of the Bill, however, claim the amendment does not forbid the representation of joint venture partners as directors running the company.
Policyholders are also likely to gain once the Bills is passed. According to Section 45 of the Bill, insurers would have to honour claims on policies after three years of purchase, even in case of fraud.
