Hike in insurance FDI against policyholders' interests, says officers association

The all-India association of general insurance officers has opposed the government's decision to increase foreign direct investment (FDI) limit in insurance sector to 49 per cent from the present 26 per cent, saying such a measure would be detrimental to the interests of the policyholders.

The government seems to have not learned any lesson from the recent global financial crisis, P P Mohanan, general secretary of the Kerala unit of the association, said in a statement.

He said the collapse of AIG (American International Group) had only a minimum impact on Tata-AIG policy holders as the foreign investment was limited to 26 per cent.

The centre has approved the proposal to increase FDI limit in insurance sector to 49 per cent from the current 26 per cent. The government would introduce a bill in parliament in the forthcoming session to effect this change. However, the bill is unlikely to pass due to lack of time and opposition by the communist parties.

Finance minister P Chidambaram said the government would introduce the Insurance (Amendment) Bill, 2008 to amend the Insurance Act 1938, General Insurance Business (Nationalisation) Act, 1972 and Insurance Regulatory and Development Act, 1999 in the Rajya Sabha as it was not a money bill.

The government would also introduce Life Insurance Corporation (Amendment) Bill in the Lok Sabha. It is aimed at increasing equity base of LIC from the current Rs5 crore to Rs100 crore.

LIC, however, is not covered under IRDA Act due to special provisions while other insurers have to maintain minimum paid-up capital of Rs100 crore as per the IRDA Act. The bill is again unlikely to pass due to lack of time.