The decision of the Cabinet Committee on Economic Affairs to allow increase in Foreign Direct Investment in the insurance sector from 26 per cent to 49 per cent was opposed by representatives of the Insurance Corporation Employees’ Union under the banner of All India Insurance Employees’ Association of the Visakhapatnam division.
Speaking to mediapersons here on Friday, they felt that such a move would allow greater penetration of foreign players in the insurance sector. “We consider the increase in the FDI limit as an unwelcome initiative and request the government to withdraw it immediately,” association general secretary N. Ramanachalam said.
Financial riskMembers of the association fear that the proposed capital infusion in the insurance sector weakens the present set-up and raises the financial risk. “In tune with the increased FDI cap, the government is now keen on passing the Insurance Laws (Amendment) Bill, which has been put on hold in the Rajya Sabha for the last six years. We are planning to stage a nation-wide protest if it is passed,” Mr. Ramanachalam announced.
Instead of attracting long-term capital gains, the higher foreign equity limit would only gain greater access to overseas investors taking control over the domestic savings. This in particular would affect the policyholders and deter them from investing further, he lamented.
Despite some 23 private insurance players contributing to the market share of the Indian economy, LIC alone accounts for 84.44 per cent to the investment in life insurance. “With the total premium income amounting to Rs.2,40,040 crore last fiscal, there is a visible growth of 15 per cent in the sector. Allowing more foreign investors will only dilute the LIC and weaken our economy,” the members said.
