Cooperative societies may enter insurance sector, says IRA chief

New Delhi, Nov 9: The Government may consider allowing cooperative societies to enter insurance business once the Insurance Regulatory an...

New Delhi, Nov 9: The Government may consider allowing cooperative societies to enter insurance business once the Insurance Regulatory and Development Authority (IRDA) Bill is passed by Parliament and the sector is opened up.

Speaking to newspersons after releasing a KPMG Insight report on insurance, Insurance Regulatory Authority (IRA) chairperson N Rangachari said that the Parliamentary Standing Committee on Finance had suggested that cooperative societies be allowed to enter insurance business once the sector is opened up to private parties. Rangachari said that now the Government might examine them to enter this business.

At present, the IRDA Bill which has been introduced in the Lok Sabha does not contain this provision.

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If the Government takes a decision to this effect, it will assume significance since world over wherever insurance sector is liberalised, cooperative societies have been allowed to enter this business. In India, certain fertiliser cooperatives had urged the Government that they beallowed to enter the insurance business.

Rangachari said that as per the provisions of the Bill, insurance companies would have to invest 50 per cent of their investible funds in either Government securities or Government-approved securities. The IRA will frame guidelines as to where all the remaining 50 per cent can be invested. As per this provision, LIC’s investible funds in Government securities will come down from the present 75 per cent to 50 per cent and GIC’s from the present 55 per cent to 50 per cent. Rangachari said that once the IRDA Bill was passed, the Government will take up two other Bills — the Chartered Actuaries Bill and a Bill on Institution of Surveyors — the draft of which has already been prepared and sent to the Government by the IRA.

Rangachari said that there was no cause for misapprehensions with regard to IRDA Bill since the outer limit for foreign equity was 26 per cent and it was not mandatory for Indian companies to have a foreign partner. A 100-per cent Indian insurancecompany can also be formed, he said. He said that it was wrong to say that funds will be repatriated by foreign companies since the Bill provides that the amounts collected by way of premium will not be repatriated but has to be spent inside the country. Only dividend can be repatriated. Rangachari said that similarly it was wrong to assume that the market will be swamped by foreign companies, since 26 per cent equity was too less to influence Government policy et al.

Dwelling on the KPMG report, Rangachari said that statistics showed that wherever the sector has been opened up, there has been no major shake-up, only the market gets deepened and broadened and gathers more by way of business premium and generates more prosperity. He said that statistics proved that even after 10-12 years of operation, new players were not able to take 10-12 per cent of the business.