Chennai, Mar 1 (IANS) The Insurance Regulatory and Development Authority (IRDA) has no issues with banks becoming insurance brokers and insurers trading directly in the debt segment provided the norms are satisfied, said a senior IRDA official.
Presenting the union budget for 2013-14 Thursday, Finance Minister P.Chidambaram declared that banks can become insurance brokers and insurance companies will be allowed to trade directly in debt market with the approval of sectoral regulator.
"The banks have to take up with RBI. We will issue broking licence to banks if norms are satisfied. For insurers to trade directly in the debt segment the Securities and Exchange Board of India (SEBI) has to amend its rules," the official told IANS preferring anonymity.
According to him, presently SEBI rules permit only Life Insurance Corporation of India and General Insurance Corporation of India to trade in the debt segment.
"If other insures are to be allowed SEBI has to amend its rules appropriately," he said.
Meanwhile industry officials termed the budget proposal of extending the Rashtriya Swasthya Bima Yojana (RSBY), a group health insurance policy for below the poverty line people, will fuel healthcare cost inflation.
"It will fuel health care cost inflation by not providing anything to promote the setting up of healthcare infrastructure to ease the supply side constraints on this front but with the extension of RSBY schemes to more categories will increase demand for health care services. And this demand supply gap will lead to higher health care costs inflation rates and therefore higher health premiums in the future," Amarnath Ananthanarayanan, ceo and managing director, Bharti Axa General Insurance, told IANS.
"The consolidation of all government schemes like RSBY to extend coverage to rickshaw, taxi driver, rag pickers and mine workers will increase the overall premium for the industry," he added.
According to him, the budget disappointed the general insurance industry as there was no increase in the exemption under Section 80D of Income Tax Act.
"The non exemption of General Insurance companies from Minimum Alternative Tax (MAT) like for life insurance companies is another disappointment," Ananthanarayanan added.
He said the industry was looking forward to the passage of the insurance bill in the budget session which in turn would allow foreign direct investment (FDI) in insurance sector to 49 percent from the current 26 percent and also scrapping of administered pricing mechanism for motor third party insurance.
A senior official of another private life insurance company, preferring anonymity, also told IANS: "The Finance Minister's proposal of treating foreign investor's holding in a company up to 10 percent as foreign institutional investment (FII) and holdings exceeding 10 percent as FDI does not make any difference to the insurance sector."
"The FDI limit of 26 percent includes FII holdings," he said.
According to the official, the Finance Bill has proposed an amendment to the Income Tax Act to clarity that sum assured payable under the keyman insurance policy will be taxable in the hands of the company buying the policy even if the policy is assigned.
He said companies would be discouraged from assigning the keyman insurance policy.
Referring to the 25 percent increase in import duty on luxury cars to 100 percent Ajay Bimbhet, managing director at Royal Sundaram Alliance Insurance Company Ltd said the proposal "may affect a few customers with higher insurance premium."