Business Standard

Malhotra Committee Recommendations

Allow entry to the private sector; but the number of new entrants should be controlled;

The immediate paid-up capital for a new entrant should be Rs 100 crores;

The promoters holding in a private insurance company should not exceed 40 per cent and should, at no time, be less than 26 per cent of the total paid-up capital;

If and when entry to foreign insurance companies is permitted, they should be required to float Indian companies and should preferably enter the market by way of joint ventures with Indian partners;

There was an urgent need to establish a strong and effective Insurance Regulatory Authority on the lines of the Securities and Exchange Board of India;

Restructure and decentralise the Life Insurance Corporation of India;

GIC to cease being the holding company of the four subsidiary companies and would function exclusively as a Reinsurance company and as the Indian Reinsurer under the Companies Act;

Mandated investment of funds of LIC and GIC should be reduced from 76 and 70 per cent to 50 and 35 per cent respectively; Investment in non-mandated part should comply with prescribed prudential norms;

New entrants in life insurance should be required to transact a certain minimum business in rural areas;

LIC should review its product pricing with a view to improving returns to policy holders and to rationalise premia under various plans;

It would be inadvisable to abolish the premium tariff regime in general insurance now, but the life insurance covers should be taken off the Tariff regime at the earliest. The area under Tariff should be progressively reduced to promote competition and to improve underwriting skills in general insurance; The Tariff Advisory Committee should function as a separate statutory body under the supervision of the Insurance Regulatory Authority, which would comprise economists, accountants, actuaries and engineers.

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