The Hindu Business Line : CII, FICCI press for more insurance reforms

ACKNOWLEDGING the impressive developments in the insurance sector since its opening up, two leading trade bodies — the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI) — have urged the Government to immediately address some of the key bottlenecks faced by the sector.

In a submission to the Insurance Regulatory and Development Authority (IRDA), the trade bodies said the biggest concern confronting the industry at present was its size compared to the growth rate of the economy and the large population. They said that the insurance players had the onerous task of creating awareness about `need to insure' and also a tremendous potential in expanding the markets.

Among the issues highlighted was the need to enhance the cap on foreign equity participation, removal of high entry capital barriers in health insurance, amending insurance laws, abolishing the tariff system, spreading of insurance awareness, tapping the rural markets and checking the unhealthy practice of rebating.

While some of the issues are to be tackled by the Government, the regulator itself could address others, they said.

The CII felt that the true benefits of liberalisation would not accrue to the consumer unless there was competition in the pricing of non-life insurance products.

Saying that liberalisation and tariff structure did not go hand in hand, the FICCI said detariffing was a critical element of insurance reforms.

On the 26 per cent cap on foreign equity participation, the CII felt that it would becomes difficult for the foreign investors to participate in this sector without adequate control over operations. It suggested that the cap be raised to 49 per cent. Echoing similar views on the issue, the FICCI said, "The 26 per cent foreign equity in insurance joint ventures continues to be an issue of concern and needs to be reviewed." Viewing that the insurance players did not tap the new markets, FICCI suggested it was time to start looking at the B and C population segments since the metro and large urban markets would saturate in three to five years. "The future success will be determined by the insurers' ability to innovate and distribute simple products for B and C population segments."

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