Premium offer The parliamentary standing committee did India a great disfavour by recommending further amendments to the insurance regulatory authority bill. The best that can be said is that half a loaf is better than none. After years of delay, a law is now desperately needed to kickstart the moribund insurance sector. And to be viable, such a bill must have three key elements: an end to the public sector monopoly, an open door for foreign participation and an independent regulatory body. The more these three issues are diluted, the more incomplete and ineffective reform becomes. Modernising India's insurance industry by increased competition and the entry of outside players is central to the country's ability to compete globally. First, the global economy is highly flexible, if not volatile. It produces great returns and fast growth. However, it generates a lot of risk. Both individuals and companies need to be assured against that risk. Second, in the worldwide race for investment and exports India is crippled by its decrepit infrastructure. Surplus grain rots in the field because ports cannot load ships fast enough. Indian goods are more expensive because of inefficient transport. Insurance companies, being staid and conservative, are among the few financial institutions prepared to put their money in slow gestating power plants and highways. The domestic political debate, as was seen during the standing committee's hearings, revolves around the degree of foreign participation in insurance. Most of the arguments are driven by ideology rather than economics. Talk of job losses and national sovereignty are largely vacuous. The simple truth is that public sector insurance companies are incapable of providing the security Indians want or the infrastructure funding the Indian economy needs to become a global player. The Life Insurance Corporation has tapped only a fifth of the total insurable population. By one study it charges premiums 20 to 50 per cent more than counterparts in the United Kingdom. Its service is a byword for incompetence. General insurance has an equally poor track record. Indian firms complain that the types of coverage are obsolete in a complex global economy. The General Insurance Corporation, for example, was slow to provide industrial all risk policies to Indian firms and, when it did, its premiums were three to eight times higher than those in east Asia. On top of this, the public sector insurance firms have been unable to mobilise or generate anything like the sort of money India needs for its infrastructure development. The Rakesh Mohan committee calculated the country needs as much as Rs 120 trillion for infrastructure in the coming decade. India's insurers together can contribute only a few drops to that ocean of capital. The third world suffers from capital shortage. It scrounges for money everywhere to finance its ambitious development plans. Western insurance companies suffer from too much capital and too few clients. In addition, insurance companies are just the sort of stable, long term investors that developing countries try hardest to attract. Most developing countries already recognise this is a match made in financial heaven. Brazil, Nigeria, Sri Lanka and South Korea are among those that have dropped all limits on foreign ownership in insurance. Even Malaysia, rhetorically prone to Western bashing, allows 51 per cent foreign control. It says something about India's myopia towards the benefits of globalisation that a parliamentary standing committee reduced foreign participation in insurance to 26 per cent - and that compared to the nonsensical stances of left and rightwing extremists this was a moderate stance. It should be no surprise if foreign insurance companies end up investing less in the country than is hoped. India's most pressing need is perhaps an insurance policy against the damage done to the country's fortunes by ideological supporters of obsolete mindsets.