New Delhi: The Insurance Laws Amendment Bill was introduced in the Lok Sabha Tuesday to replace an ordinance in this regard, amid stiff opposition from Left and TMC.
The bill seeks to raise foreign investment cap to 49 percent in the insurance sector and provides for imprisonment of up to 10 years for selling policies without registration with the regulator IRDA.
The Insurance Laws (Amendment) Bill, 2015, will also allow PSU general insurers to raise funds from the capital market and provides for increased penalty to deter multilevel marketing of insurance products.
Under the new provisions, the Life Insurance Council and the General Insurance Council would act as self-regulating bodies for the sector.
"The proposed amendments are aimed at bringing about improvements and revisions in the laws relating to insurance business in India to remove archaic provisions and incorporate modern day practices emerging in a changing dynamic environment, which includes private participation," says the Statement of Objects and Reasons of the Bill.
The Bill seeks to raise foreign investment limit in the sector from 26 percent to 49 percent. While up to 26 percent will be under the automatic route, the remaining would be cleared through the FIPB.
The bill, which has been pending for long, was introduced by Minister of State for Finance Jayant Sinha after a Division of Votes, pushed for by Left and TMC. 131 votes were polled in favour and 45 against.
Left and TMC members contended that the House has no legislative competence as similar bill is pending in the RS.
The bill is pending in Rajya Sabha. A bid to withdraw it from the Upper House last week was scuttled by opposition.
The Bill, which provides for a penalty of up to Rs 25 crore with imprisonment of up to 10 years for carrying out the business of insurance without obtaining IRDA certificate, has also raised the penalty for other offences.
As per the Bill, an insurer will be prohibited from challenging the life insurance policy on any ground after a period of three years of selling it.
It also allows insurers to raise capital through new instruments and do away with the restrictions on divestment of stake by Indian promoters of the joint venture.
The Bill seeks to put a minimum capital requirement for health insurers at Rs 100 crore.
Earlier participating in the discussion, CPI-M leader P Karunakaran as also his party colleague A Sampath said the government has "no right or power" to bring the bill as an identical bill is pending in the Rajya Sabha and has not been disposed of yet.
Saugata Roy (TMC) said that in Parliamentary history in India, a bill has never been introduced in one House while an identical one is pending in the other House.
He said his party opposed raising the FDI cap in the sector, but he will not raise the issue at the introduction stage.
The Minister of state for Finance said the government was well within its right to introduce the bill which seeks to replace an Ordinance.
He said it is the Constitutional responsibility of the government to ensure that the bill is passed within six weeks of the ordinance.
The Congress-led UPA had also attempted to pass a bill on raising the FDI in insurance sector. It had introduced the bill in the Rajya Sabha in 2008, after which it was referred to a select committee.
