State-Owned Life Insurance Entity To Rival Lic Proposed

The parliamentary standing committee on finance is set to recommend the creation of another life insurance company in the public sector and infusing serious competition among the four subsidiaries of the General Insurance Corporation (GIC).

The committee, which is deliberating on the bill to give statutory powers to the Insurance Regulatory Authority of India (IRAI), is expected to submit its report to Parliament on March 7.

The four GIC subsidiaries should be made totally independent companies and allowed to compete among themselves in the real sense. The Life Insurance Corporation (LIC) could either be split into three or four separate companies to bring about competition in the life insurance business or an altogether new life insurance company could be set up, said one committee member.

 

The committee is, however, divided over the bill on the insurance regulatory authority. Some members are in favour of blocking the bill altogether until the government comes up with a clear assurance that foreign insurance companies will not be allowed entry into the industry. A few members are, however, of the view that the bill will do no harm because it is not enough to open the doors to private or foreign companies as long as the GIC and LIC Acts are not amended.

The agenda for the current session does not include any bill to amend any of the insurance laws.

In their discussions with government representatives, most of the committee members have indicated that they were opposed to the entry of foreign insurance companies. They expressed their apprehension that foreign companies will siphon off savings generated within the country.

The committee members belonging to the Bharatiya Janata Party (BJP) have, however, contended that the domestic private firms be allowed to enter the sector.

Finance minister P Chidambaram has repeatedly indicated that he will announce fresh measures regarding the sector in his budget to be presented today. Any move to open up the sector will depend on the committees views on the IRAI bill.

Three members of the committee said that they did not expect the finance minister to announce any drastic measures for opening up the industry to private sector participation.

If anything, Chidambaram will announce measures to provide greater autonomy to the existing insurance companies.

We are not going to compromise on this issue, Nirmal Chatterjee, a Communist Party of India (Marxist) member of the committee said.

The committee has interviewed the LIC and GIC chiefs, who are believed to have expressed apprehensions about the entry of foreign companies.

They have, however, taken the public stance that they were prepared to face competition from the private sector.