US upset with India's insurance laws

WASHINGTON: Foreign partners in the Indian insurance companies operate in an "extremely uncertain" environment due to snake and ladder like laws governing the sector, the US Trade office said. 

While an Insurance Laws (Amendment) Bill is pending with the Standing Committee of Parliament for increasing the foreign investment in insurance joint ventures to 49 per cent, an existing regulation requires that after completing 10 years of operation, overseas investment in such companies would have to be brought back to 26 per cent. 

Several of the insurance joint ventures, includingReliance Life are about to complete 10 years of operations in India. Whereas HDFC Standard Lifehas already completed a decade of business here. 

So, unless this provision is amended, passage of the Insurance Laws (Amendment) Bill allowing foreign equity to 49 per cent would be meaningless. 

The US Trade Office in its 2011 National Trade Estimate Report on Foreign Trade Barriers talks about this paradox in the Indian insurance laws. 

"While the Insurance Regulatory and Development Authority ( IRDA) said it plans to publish a clarification of these regulations, foreign investors continue to operate in an extremely uncertain environment," the US said. 

India first opened its insurance sector for foreign participation of up to 26 per cent in both life and non-life segment in 1999. A bill pertaining to raising FDI ceiling to 49 per cent in the sector is pending before Parliament. 

The Bill, when enacted, would allow raising the FDI cap for the industry to 49 per cent. However, it has been awaiting approval since 2008, as it was delayed by strong opposition from the Left parties during UPA-I government. 

"As with other sectors being considered by the government for greater FDI liberalisation, opposition party lawmakers are concerned that passing the Insurance Bill will result in foreign companies' holdings increasing significantly," the report said. 

Keen to enter the Indian insurance market, legendary investor Warren Buffett had also said during his recent visit to New Delhi that a foreign investment cap of 26 per cent in insurance sector here was a deterrent. 

Buffett's Berkshire Hathaway had recently forayed into the Indian non-life insurance sector as a corporate agent of Bajaj Allianz General. 

In India, besides, state-owned LIC, 22 private companies offer life insurance policies. While the general insurance sector has 21 players, which include four PSUs. 

-------------------------------------------------------------------------------------------------------------

Let us fight unitedly against the insurance amendment act 2008 and frustrate the US design