Govt Asked To Ensure Level Field Before Opening Insurance Sector

Standing panel on finance seeks changes in insurance acts

The standing committee on finance has said that the Life Insurance Corporation Act and the General Insurance Business Nationalisation Act should be amended to ensure a level playing field for the private and public sectors as and when the insurance sector is opened to private companies.

Approving the insurance regulatory authority bill, the report of the standing committee, placed in Parliament yesterday, has also recommended an increase in the premium rates for motor insurance. Increase in the rates had triggered last months country-wide strike by the All India Motor Transport Congress.

 

The report has suggested that the Tariff Advisory Committee (TAC) be immediately superseded, as it had failed to approve and introduce economical premium rates for the portfolio of motor insurance.

In view of the increased liability for payment of compensation on motor insurance, because of higher accidents and courts awarding higher amounts as compensation, the committee has stressed a need for regular revision of the premium to cover the risk.

The committee expressed concern that the government had not taken any step to check losses worth nearly Rs 600 crore incurred by the General Insurance Corporation (GIC) on motor insurance over the last three years. The accumulated losses have now touched Rs 1,500 crore, partly because GIC was allowed to increase tariffs by only 30 per cent in 1989-90, although it had sought an increase of 60 per cent.

The report has come down heavily on TAC, saying that it had failed to perform its assigned task of tariff revision, which should have been done more regularly. It has also castigated the government for having been a mute spectator to the mounting losses of GIC.

Biplab Dasgupta of CPI(M), in his dissenting note to the report, said the IRA bill should not be allowed to be passed, as it would open the gates for domination of the domestic financial sector by multi-national companies.

Dasgupta said the choice was not between the private and public sectors, but between the Indian public sector and foreign private investors. Without a clear decision on whether such foreign private entry is desirable from our point of view, the mere introduction of the bill is infructuous.

The competition in the insurance sector, he said, could be increased by making the four GIC units function independently.

All India Motor Transport Congress secretary-general Chittaranjan Dass, in response to the committees report, opposed the proposal to raise the motor insurance premia. He said the public should not be made to pay for the inefficiency of GIC. Dass however agreed with the recommendation to supersede TAC.