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Foreign equity in insurance will be capped at 26 pc, reassures IRA chief

Foreign equity in the insurance sector would be capped at 26 per cent in the Insurance Regulatory Authority Bill. The Indian promoter would be permitted to reduce his holding in the venture to the same level within ten years.

Insurance Regulatory Authority chairman N Rangachary said this week in New Delhi that the revised draft of the IRA Bill will be passed in Parliament soon after a new government takes over. The draft has extended the time period for the Indian promoter to offload upto 48 per cent stake in favour of the public from six to ten years.

Stating that the private insurers would be up and running by the end of 2000, Rangachary said the entire Rs 1 billion net worth of these companies has to be in the form of equity. ''There is no serious doubt about that. The bill is presently in limbo. If by 1999-end, a legislation is in place, we can see the new companies functioning by the end of 2000. But for this, steps need to be taken to see that an enabling legislation is in place.''

The entire net worth criterion has to be met through equity, he added.

On the reasons for capping the foreign equity at 26 per cent from the initially recommended 40 per cent, he said, it was felt that with the additional 14 per cent shares which were to be allotted to NRIs, foreign companies had the benefit of manipulating the clause and becoming the largest shareholder. ''Our interest was to keep the Indian partner the majority equity-holder. And later, after ten years, once the divestment is through, the holding of both the Indian and the foreign partner would be at an equal level.''

He said the IRA would be totally independent of the government and would enforce regulations in the areas of licensing/legislation, intermediaries, enforcement and consumer satisfaction. ''The intentions are rather clear and customer satisfaction would be the top most desire.''

Rangachary further stated that a new legislation would be introduced to cover recruitment and training of the scores of insurance agents presently operating in the country.

''The agents, who are the intermediary forces are largely uneducated. We are now looking at introducing a legislation and even keep a minimum educational qualification for new agents.

"Besides, the agents would be largely kept under the wings of the insurance companies. However, after a period of ten years, if an agent wishes to be independent, he can do so but with the consent of the company.

''An agent can do both life and general insurance, but has to undergo training and appear for an exam for the same.''

A set of 12 ombudsmen for the insurance industry, comprising retired judges, civil servants and industry representatives, would be put in place by June-end, he said.

The four civil servants have already been appointed in Bombay, Delhi, Lucknow and Madras and the remaining eight will take office within the next one month, he said.

The ombudsmen are being set up to minimise the time taken and the harrassment in settling insurance claims. ''With this, we are planning to put in place an effective claims settlement system.''

UNI

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