General Insurance Corporation of India will be able to make investments in foreign currencies to match its liabilities when it underwrites risks abroad.

Greater power will be entrusted to the Insurance Regulatory and Development Authority, wherein the watchdog can modify the foreign investment norms without the need for Cabinet and Parliamentary approval every time.

Once the government announces a change in the investment pattern of insurers, the insurance regulator will be able to make the necessary modification by passing a notification.

These are some of the changes the insurance industry can expect with the rationalisation of the Insurance Act, 1938, and the IRDA Act.

P B Ramanujam, managing director of GIC, said, with the rationalisation and consolidation of the insurance acts, the insurance council will be empowered with a greater role to play.

Ramanujam was speaking at a one-day session on 'strategies, opportunities and solutions to dynamic Indian insurance" at the Indian Merchants' Chamber, Mumbai.

"The insurance council will set the guiding rates for the industry as the sector will be de-tariffed by April 2006. Tariffs are archaic and the market needs greater freedom in terms of pricing and product differentiation," said Ramanujam.

T K Banerjee, an IRDA member who delivered the inaugural address at the meet, said, "The regulator is currently walking on a tight rope: it does not wish to stifle growth by excessive regulations, and at the same time, it does not intend to allow unsound industry practices."

"A consumer loses when financial institutions fail. But the need for excessive regulations is not required in the insurance industry as opposed to the banking sector," said Banerjee.

The IRDA has expressed concern over the lack of interest in pushing the development of the healthcare sector especially in light of the potential growth opportunity which could be as high as six per cent of the gross domestic product.

This is as against less than 0.25 per cent of the population having any form of voluntary health cover.

"The IRDA will play a significant role in checking unhealthy practices through health insurance reforms, as the government spends six per cent of GDP on government hospitals," said Banerjee.

Banerjee said foreign direct investment in insurance sector currently stands at Rs 967.5 crore (Rs 9.67 billion) on a capital base of Rs 5,155.86 crore (Rs 51.59 billion).

On this figure, insurance players did a considerable business with total written premiums at Rs 71,376 crore (Rs 713.76 billion) as on March 31, 2003.