| Readying the Insurance Runway |
The government has several initiatives on the anvil with regard to the improvement of investments in the insurance sector. These initiatives include legislative and procedural changes and also a rewriting of the Insurance Act, 1938. Brokerage firms will be thereby permitted to operate in these markets and statutory statuses would be given to surveyors and loss approvers. A key change would be the permission to brokers to operate in India, which is expected to be on the immediate agenda. A new Insurance Act is expected to be in place next year with the process of drafting the new Insurance Act to be initiated soon. The government is in the process of identifying areas, which require amendments and will wait for a couple of months before initiating the process for a new Act. The new Act will focus on simplification of norms.
The Insurance Regulatory and Development Authority (IRDA) had submitted a draft for the new Act as far back as 1996 seeking a few procedural changes in the present Act. There have been several requests to the finance ministry for amendments. Most matters are pending at the ministry and a final decision has not been taken. The Act does not provide for payment of remuneration to brokers and does not permit the payment of insurance premium by other means than cash and cheques. These amendments pertaining to section 64 V B are to be put up during the winter session of the parliament. The session would also address the issue of giving statutory status to insurance surveyors and loss approvers, which would similar to the status of a chartered account.
On another front, the ministry has mooted a proposal to permit 26 per cent foreign direct investment through the automatic route; Insurance companies would no longer be required to approach the Foreign Investment Promotion Board for FDI clearances.
On the registration certificates front, nine licenses are expected to be issued by the month of November. IRDA will be issuing registration certificates (R3) in lots of five to six licenses. Companies who have filed the R1 applications have been asked to submit the R2 applications.In the first round of licenses, which are to be issued this month, IRDA had set August 30 as the cut-off date. Of all the applications that have been till date the applications of four companies v.i.z Sundaram Royal & Sun Alliance, ICICI-Prudential, Reliance (non-life) and HDFC-Standard Life have been asked to file R2 applications. Dabur All State has withdrawn its R1 application subsequent to US insurance major All State deciding to withdraw from the venture. IRDA would probably issue the licenses before October 23 if the companies file their R2 applications in time.
On the whole, the runway for the insurance take-off needs to be readied for a smooth run in for the companies in this sector, which will bring about the necessary changes in the sector in the Indian context. The IRDA needs to make sure that plans go according to schedules without further ado. Singing off on the act would be the opportunity knock on the door for the insurance sector...It must be cashed upon.
Deepak V Kuriakose