Insurance lobbying hots up

This attitude of the insurance industry reflects the ground realities of the political situation. A BJP-led government is unlikely to allow immediate entry of foreign players into the insurance sector. BJP had blockedthe IRA Bill last year by insisting that the United Front government give an undertaking that foreign companies will not be allowed to enter this sector.

In its 13-day rule, the BJP government had made it clear that it was in favour of opening the insurance sector to the Indian industry first and the foreign companies later.

There is also a group of Indian industrialists which shares this view of the BJP. In fact it is believed that the pressure from this group contributed to the hard stand on foreign participation of the BJP.

Insurance companies realise that if they insist on the issue of foreign participation, there will be little movement in insurance reforms. Once it is set up, the IRA will oversee further reforms in the insurance sector. IRA can be convinced about the entry of foreign companies.

Says the head of the insurance division of a Delhi-based business house, “Even the Indian companies know that they can’t last in the insurance business for too long without foreign help. To begin with,they will lobby for a small stake of the foreign company in a insurance joint venture. Once this happens, then it will be matter of time before the government allows the foreign companies to increase the stake.”

One of the formulas being suggested by the industry is that the foreign companies be allowed to pick up 40 per cent of the promoters stake in a insurance joint venture. With a promoter stake of 40 per cent, this would work out to about 18 per cent. Indian companies would happily sell this stake to foreign partners and the government would not find it difficult to defend it. And in the current circumstances, the foreign companies would not mind a toe-hold in the Indian insurance market.