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बेसिक इंग्लिश का दूसरा सत्र (कक्षा प्रारंभ : 22 अक्तूबर, शाम 3:30 से 5:30)
Q. Draft norms for listing of Indian insurers: In the draft norms IRDA proposed that promoters of insurance companies should maintain their shareholding at 50% even after listing. Critically analyse.
Jun 22, 2016 Related to : GS Paper-3

Ans :

Introduction-

To pave the way for listing of insurance companies, Insurance Regulatory and Development Authority (IRDA) in its draft norms proposed that the minimum shareholding by promoters should, at all times, be maintained at 50% of the paid-up equity capital.

Background-

At present, no Indian insurance company is listed. Furthermore, ownership limits for all shareholders other than promoters or group, in a definitive time frame, should be based on categorization of the shareholders under two broad categories—natural persons (individuals) and legal persons (institutions).

Finance minister in his budget speech proposed the listing of 4 wholly owned PSU general insurance companies (New India Assurance Company, National Insurance Company, Oriental Insurance Company, United India Insurance Company). In this regard IRDS realised draft norms for listing of insurance companies.

Analysis-

  • Though the propose move look good for time being, but it may not acceptable long run. Because policyholders’ premium payments lie on the books of insurers, and prudential norms call for insurance companies to increase capital as premium collections go up. The proposed norm contradicts it.
  • Holding 50% of the equity always by promoter will either restrict the growth of the concerned company or allow only very large players to remain in insurance sector.
  • It is neither in the interest of public nor of promoter. Post listing, when the cycle turns and capital requirement stabilises, promoters should have the choice to exit by selling their stakes.

Suggestions-

  • IRDA must ensure that insurance companies honours its commitment to the consumer and must protect their interest.
  • For that it requires wider ownership from various sections and a culture of active shareholder democracy in listed insurance companies.
  • Also it requires sound regulation to protect the interest of consumers.

Conclusion-

Governments move to list the wholly owned insurance companies is welcome move as it will attract the more capital and it will benefits to consumers. But the norms proposed by IRDA are not in line with long term vision. Hence in the interest of larger public IRDA should ease the norms and make it more investor


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