The Ordinance to increase the FDI cap from 26 per cent to 49 per cent in the insurance sector will affect the companies in the public sector such as Life Insurance Corporation (LIC) and the General Insurance Corporation (GIC), in the long run, said Professor C.P. Chandhrasekhar, from the Centre for Economic Studies and Planning School of Social Sciences, Jawaharlal Nehru University, Delhi.
The professor in economics was here to deliver a lecture at a seminar on ‘FDI hike in insurance sector – a boon or a bane’, organised by the local chapter of Insurance Institute of India (III), as part of III-Mumbai, diamond jubilee celebrations.
According to Prof. Chandrasekhar, the foreign companies will try to gain ground by introducing products that make profits in quicker time. This move will increase the fragility of the insurance companies and this model had failed miserably in the West.
He also expressed concern on the final stake of the foreign players. “As of now, the cap is increased to 49 per cent, but the affectivity of the share depends on the structure of the other 51 per cent. The 51 per cent could be owned by one single company or distributed among many. In which case the foreign player will have a dominant role to play and will become the major share holder,” he said.
MLC M.V.R. Sarma in his address pointed out that the short term gains model will largely affect the LIC and GIC model of business. “Both LIC and GIC have been practising the long term scheme models, but with the entry of the foreign players, even they have to change and the trend has already set in. Short term schemes will neither benefit the companies or the policy holders nor for that matter the national economy,” he said. B.B. Ganesh of Insurance Corporation Employees’ Union in his address said that the foreign companies failed miserably when it came to claim settlements in the US and Europe, and now the same companies want to replicate those failed models here. He exhorted that private players should not be allowed into the insurance sector.
A.V.R.K. Murthy and S. Madhusudan from the local chapter of the institute also spoke.
