At a time when the government is struggling hard to hike the foreign direct investment cap to 49 per cent in insurance, the Economic Survey called for raising the limit on foreign equity to 100 per cent in specialised segments like health and weather insurance.
“Raise foreign equity share in insurance to 49 per cent. In addition, consider allowing 100 per cent foreign equity in a special category of insurance companies that provide all types of insurance (health, weather) to rural residents and for all agriculture-related activities including ago-processing,” the survey said.
This may help dispel fears of foreign equity in insurance, it added. The government earlier had proposed raising foreign direct investment cap in its budget in 2004-05. However, opposition from Left parties eluded consensus on the issue.
Rise in insurers
However, the survey noted that since the opening up, the number of participants in the sector has gone up from six in 2000 to 44 insurers operating in the life, non-life and reinsurance segments as in March 2009.
Of the 22 life insurers, as many as 19 are in joint ventures with foreign partners, the survey said, adding, that of the 15 new private insurer in the general insurance 14 are in joint venture with the foreign partners. In all, it said, there are 33 insurance firms having collaboration with established foreign insurance companies as at end-March 2009.
Foreign partners
Besides, two standalone health insurance companies have been set up with joint venture foreign partners, it said.
With the growth in the sector, life insurance density (ratio of premium underwritten in a year to the total population) increased to US$40.4 in 2007 against US$33.2 in the previous year.
In case of general insurance, the density was, however, lower at US$6.2 in 2007 against US$ 5.2 in 2006. Citing recent initiatives to develop insurance sector, the survey said, Insurance Regulatory & Development Authority in 2008-09 issued instruction on the interpretation of pre-existing condition in health insurance, which came into effect from June 1, 2008.
The standardisation of terminology would help the insured by increasing clarity and ensure comparability of health insurance products across insurers, it said.
Metlife India Insurance Managing Director Rajesh Relan said, “we would expect the Centre to continue with the financial reforms to further liberalise the insurance sector.”
