According to him, it would be better to say board representation to the promoters would be in their shareholding ratio. With foreign equity capped at 49 percent the majority of the board positions will be for Indians.

"As per the Insurance Act voting right of every shareholder of an insurance company should be proportionate to the paid-up capital held by him," he added.

The industry officials are also apprehensive about routing the FDI proposals through Foreign Investment Promotion Board (FIPB) instead of the current automatic route.

"In the banking sector FDI up to 49 percent is under automatic route. There are lots of checks and balances in the insurance sector. With stiff solvency norms policy holders will not lose their monies. There need not be any differential treatment between these two sectors," another senior industry official told IANS.

However former member of Insurance Regulatory and Development Authority (IRDA) K.K.Srinivasan has a different take on the issue.

"Being a multifaceted body, FIPB can perhaps look at FDI proposals in greater depth, than, say, the finance department of IRDA. Also it gives an opportunity to rectify short comings, if any, in the earlier 26 percent FDI cases already cleared. But the flip side is that it is reintroduction of some kind of license-permit raj considering the fact that FIPB is largely populated by civil servants," Srinivasan told IANS.

The other issue that bothers the life insurers is the budget proposal of two percent withholding tax.

As per the proposal, life insurers have to deduct the tax on all payments to policy holders exceeding 100,000 in a fiscal, except death claims, on policies where the premium payable on any year exceeds 10 percent of the sum insured. "In the long run it is a positive move as it would discourage policy surrenders. In the short run, life insurers have to face some problems," HDFC Standard Life's Padalkar said.

According to an industry official, those who had largely sold single premium life policies, pension policies would be impacted by the withholding tax proposal.

Read More: Budget-2014: 15 Percent Tax for Foreign Portfolio Investors