Insurance Sector Seeks Clarity on Budget Proposals


CHENNAI: Indian insurance officials hope the insurance bill will have a smooth passage in parliament like the TRAI bill and provide clarity to the 2014-15 budget proposals, say industry officials.

"The passage of the TRAI bill gives us the hope that the insurance bill (Insurance Laws (Amendment) Bill) will also be passed. But the finance minister's budget speech and some of the proposals are confusing and need better clarity," Vibha Padalkar, executive director and chief financial officer at HDFC Standard Life Insurance Company, told IANS.

The private insurance industry-life and non-life-is looking forward to the passage of the insurance bill so that the foreign direct investment (FDI) goes up from the current 26 percent to 49 percent.

However, what is confusing the officials is the Finance Minister Arun Jaitley's budget speech and other proposals like the two percent withholding tax on payments made to policy holders.

"The composite cap in the Insurance sector is proposed to be increased up to 49 percent from the current level of 26 percent, with full Indian management and control, through the FIPB route," Jaitley said, presenting his maiden budget. "What does the composite cap, full Indian management and control mean is not clear," Padalkar said.

Echoing her, several industry officials wondered whether full Indian management and control would be achieved through differential voting rights, or through compelling the insurers to have their board majorly with Indians and the company to be headed only by an Indian.

"It is not clear whether the voting rights would be capped at 26 percent for foreign partner or they would have normal rights upto 26 percent and the remaining 23 percent would be subjected to differential voting rights," they said.

"The finance minister's rider that Indian promoters will have full management control is discriminatory. It is best to leave the selection of the CEO-Indian or foreigner- to the promoters. The government should not decide on that," a senior official of a private life insurer told IANS preferring anonymity.

Source: IANS