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|December 2, 1999||
Lok Sabha passes insurance bill with 4 amendments
The Lok Sabha today passed by voice vote the Insurance Regulatory and Development Authority Bill, 1999, aimed at opening up the insurance sector to private companies amidst walkout by the Left, Samajwadi Party and Rashtriya Janata Dal.
The house adopted the bill after rejecting all the Opposition's amendments and accepting the four moved by Finance Minister Yashwant Sinha following pressure from the Congress.
Earlier, in his reply, Sinha had informed the members that the government had accepted most of the suggestions made by the Congress.
The IRDA Bill 1999, providing for a maximum foreign equity of 26 per cent, passed the first stage with its passage in the Lok Sabha after the government bowed to Congress pressure and moved four official amendments.
A seven-hour discussion marked the adoption of the IRDA Bill. The amendments included one for inserting the social obligation clause and penalty provision for defaulters.
The amendment moved by Rupchand Pal (CPI-M) was subjected to division. Some others were withdrawn.
The bill seeks to open insurance, presently dominated by the public sector the General Insurance Corporation and the Life Insurance Corporation to the private sector.
Responding to a demand from Communist Party-Marxist member Rupchand Pal and others that the private insurance companies provide for 25 per cent of the investible funds for the social sector, Snha said, ''We are agreeing to 50 per cent. What percentage are you talking about? Such regulations shall apply uniformally to all the insurance.''
After the six-and-a-half hour debate, only one amendment moved by Pal was subjected to division and all the others were either withdrawn or negatived by voice vote.
The bill seeks to provide for a maximum of 26 per cent foreign equity in the insurance sector, presently dominated by the public sector GIC and LIC.
The bill provides for:
The IRDA Bill 1999 is another step in the hourglass after the British rulers brought the insurance business under regulation in 1938.
In 1956, the Indian government nationalised the life insurance business and created the Life Insurance Corporation of India.
Another step came in 1972 when the General Insurance business was nationalised by creating the GIC, resulting in diminishing the role of Controller of Insurance.
The Narasimha Rao government set up a high power committee, headed by R N Malhotra, in April, 1993 to examine the structure of insurance sector.
The committee, which submitted its report on January 7, 1994 recommended the establishment of a strong regulator on the lines of SEBI.
The interim Insurance Regulatory Authority was set up by the Narasimha Rao government.
The United Front government, headed by H D Deve Gowda, in its first budget, announced setting up of a statutory insurance body.
A bill, seeking to set up a statutory insurance body, was introduced on December 20, 1996 by the then finance minister P Chidambaram. The bill was later referred to the standing committee of the ministry of finance.
The standing committee submitted its report on May 9, 1997.
The BJP and Left parties forced the government to withdraw the Insurance Regulatory Authority Bill 1997 when it was at the consideration stage in the Lok Sabha.
The bill lapsed with the dissolution of the 11th Lok Sabha.
The BJP government, which took over in March 1998, also announced in its first budget that it would open insurance sector for private companies.
A fresh bill, the IRDA Bill 1998 was introduced in December 1998.
The bill was referred on January 4,1999 to the standing committee on finance.
The standing committee recommended a cap of 26 per cent foreign equity in its report, submitted to the government, which circulated it on March 18, 1999.
The bill could not taken up for consideration by the 12th Lok Sabha following its dissolution in April 1999.
The newly drafted IRDA Bill 1999 was again introduced by the Vajpayee government on Octobor 28 in the first session of 13th Lok Sabha.
All about the amendments
The government has accepted all suggestions of the main opposition Congress and moved four amendments including inserting social obligation clause and penalty provision for defaulters in the bill.
Now under Section 32C of the bill, every insurer has to discharge obligations specified under Section 32B to provide life insurance or general insurance policies to the persons residing in the rural sector, workers in the unorganised or informal sector or for economically vulnerable or backward classes of society and other categories of persons as may be specified by regulations made by the Insurance Regulatory Authority and such insurance policies will also include insurance for crops.
To make the social clause compulsory, the government has decided to impose heavy penalty on the private companies on every default.
The new section 105C states: ''If an insurer fails to comply with the provision of Section 32C, he shall be liable to a penalty not exceeding Rs 2.5 million for each such failure and in the case of subsequent and continuing failure, the registration granted to such insurer shall be cancelled by the authority.''
Under the new section 1A in the bill, the authority may give specific directions for the time, manner and other conditions, subject to which the funds of policy holders shall be invested in the infrastructure sector as may be specified by regulations made by the authority and such regulations shall apply uniformly to all the insurers carrying on the business of life insurance, general insurance or re-insurance in India on or after the commencement of Insurance Regulatory and Development Authority Act 1999.
Another new section 2AA inserted in the bill after sub-section (2A) states: ''The authority shall give perference to register the applicant and grant him a certificate of registration of such applicants agrees, in the form and manner as may be specified by regulations made by the authority, to carry on the life insurance business or general insurance business for providing health cover to individuals or group of individuals.''
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