E-Paper
Delay in FDI hike, service tax hits insurance industry
Policy-holders got a raw deal as Govt imposed service tax on insurance in 2004 while hopes of foreign players on FDI hike remained unfulfilled.
Policy-holders got a raw deal as Government imposed service tax on insurance in 2004 while the hopes of foreign players on FDI hike remained unfulfilled due to stiff resistance from UPA allies.
While the 10 per cent service tax and two per cent education cess on insurance policies was viewed as retrograde step dampening growth of long term savings, UPA's policy to carry forward pension reform was the only silver-lining for debt-ridden Central and state governments and also for private players eyeing this segment for almost a decade.
However, confusion prevailed over FDI cap in pension sector, with a section in Government favouring 100 per cent as in mutual funds while Left parties strongly objecting to it.
It was a busy year for Insurance Regulatory & Development Authority, which eased norms and allowed insurers to treat investments in mega IPOs as "approved securities" and pushed for de-tariffing motor and other general insurance businesses.
IRDA also tightened grip over insurers by mandating a maximum five per cent exposure limit in promoters' holding firms even if it is through mutual funds, while cancelling licences of some of the erring brokers and training institutes.
Eclipsing all these developments, insurance sector was abuzz with speculations on FDI hike from 26 to 49 per cent after Finance Minister P Chidambaram's Budget announcement and the stiff opposition of Left parties thereafter.
IRDA chairman CS Rao supported India Inc's plea for hike in FDI limit, as it would ease Indian promoters and encourage foreign players in infusing more capital in their joint ventures to sustain growth momentum in insurance sector.
After eroding one-fifth of its market share in four years, Life Insurance Corporation decided to go for a major restructuring exercise following the recommendations of global management consultant Deloitte & Touche.
