Insurance Bill draft report pro-consumer: Rajya Sabha MP

Naresh Gujral, too a Rajya Sabha MP and member of select panel on insurance hopes the report will be taken to the Cabinet this week. He adds that the money that comes in must go into insurance companies.

Below is the verbatim transcript of Rajeev Chandrasekhar and Naresh Gujral's interview with CNBC-TV18's Rituparna Bhuyan.

Q: The Select Committee has recommended a composite cap of 49 percent. Now the report also says that incremental equity should ideally be used for expansion of capital base. What does this recommendation mean if you can just explain it to us?

Chandrasekhar: The composite cap is a simple point which is that the 49 percent should include both the Foreign Institutional Investor (FII) and the Foreign Direct Investment (FDI) investment and the reason for that is that is what is consistent with other sectors. There is an argument that FII should be kept outside the cap but that reform has to be something that is separate from the insurance bill.

The issue of bringing in capital into the company in terms of expanding the 49 percent equity is something that Naresh has raised very strongly in the committee. That is consistent with the desire and the objectives of raising the FDI cap to increase penetration and to increase FDI and to prevent this from being essentially away for Indian promoters to sell out and gain windfall gains. So that protection has been put in the report, let us see what the parliament decides.

Q: Since you have given some valuable inputs especially regarding the FDI cap and safeguards within. So when the report says that incremental liquidity should ideally be used for expansion do you believe that given the fact that 49 percent FDI most likely will be allowed, there is a risk that Indian promoters will sell out their stake and walk out and that has been one of the primary concerns of many parties?

Gujral: As Mr Chandrasekhar just explained the basic reason why we are taking it up from 26 to 49 is that we want to give financial muscle to the companies so that there is greater penetration. Now the idea is to strengthen the companies and not give windfall gains to a few select individuals in this country. You may recall that at the time of 2G this is exactly what had happened that a few individuals had gained. So, we want the money to go into the companies and not into the pockets of a few rich individuals.

Q: The select panel report was tabled today in Rajya Sabha but now in the sense the real test begins. Do you believe that within this session itself the National Democratic Alliance (NDA) government will be able to not only table it but also pass it?

Gujral: I am very hopeful that the bill would be tabled very soon. It has to go to the Cabinet. Hopefully they would do it over the weekend and probably you will see it being tabled in parliament next week.

Q: The bill also talks about the current regulatory regime as far as the insurance sector is concerned and it also talks about the health insurance sector. It say Rs 100 crore should be the minimum capitalisation that should be retained. Can you just explain to us what was the rationale behind that particular observation?

Chandrasekhar: There are two questions you are raising, one is that most of us in the committee believe that insurance sector must be governed more and more by the independent regulator and through regulations of the independent regulator and not through a hard coding of the law that gives very little flexibility if everything is put in the law. It is important that the independent regulator as an institution is allowed to grow and allowed to empower the sector.

Health insurance in India is one of the pressing issues that is required because there is very low penetration of organised health insurance into the Indian consumers. So allowing health insurers to be separately grown as an industry is something that is in the bill while there was an argument that the Rs 100 crore threshold should be brought down tor Rs 50 crore people felt that that does not give enough of an entry barrier against unscrupulous health insurance.

So the bill as of today creates a Rs 100 crore threshold for insurance providers. I am sure that as the industry grows and there is a need for maybe faster penetration for better insurance regulatory oversight maybe that threshold will come down.

Q: Do you believe foreign companies will be interested given the current structure of the bill? You are talking about a composite cap now. Will that be attractive for prospective foreign investors?

Gujral: India is a huge market and the foreign companies are not foolish. They are eyeing our market and they have been trying for so long that it should go up from 26 to 49. Ideally they want 74 if not 100 percent. So, of course they will come, about that there is no doubt, but the money that comes in must go into the insurance companies. That is what majority of the members felt.

Q: Congress has not given any dissent note on this, which effectively means that they are okay with the Select Committee panel report. But when will this report get tabled? Do you believe that the same party will help NDA government?

Chandrasekhar: In my opinion for every fair thinking Member of Parliament and fair minded Indian this is a pro consumer, pro choice legislation. It creates more competition, it offers more choice to the insurance consumers and it will in the end benefit the Indian consumer of insurance; health, life or general. So, there is really no reason for anybody to oppose this bill, oppose increase of capital, oppose in creation of more competitors. There is really no argument to oppose it.

There are some parties who have ideological oppositions to the concept of foreign investment and they will continue to oppose it. They oppose it mainly on the grounds of not practicalities but on the grounds of political ideologies and that is something that we can’t argue with.

Q: And the bill will be likely to be tabled next week?

Chandrasekhar: Yes, and we are hopeful that the parliament will pass it.