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LIC unfairly favoured, concedes Irda chief

Source : BUSINESS_STANDARD
Last Updated: Fri, Dec 07, 2012 21:01 hrs

pThe Insurance Regulatory and Development Authority Irda has said it cannot allow the same relaxation on investment norms for private insurers which the finance ministry recently gave to government-owned Life Insurance Corporation of India LIC The latter was recently allowed to invest up to 30 per cent in a company by the ministry up from the 10 per cent hitherto applicable for allpp"The regulator is very clear that the insurance industry has to be regulated on prudential norms We will not sacrifice those norms" said J Hari Narayan chairman of IrdappQueried on the duality he conceded it was not defensible but he was helpless "Our view is that it the finance ministry favour to LIC is not in conformity with the Act But I understand the ministry of law has clarified that the view of Irda is not correct They said the government has the power to frame the investment regulations for LIC The regulator only operates according to the law enacted by Parliament If the ministry of law says both are legal then its legal What can we do" he said here on FridayppAsked if it was case of some being more equal than others he agreed this was the reality Private insurers had recenlty sought an increase in the current investment ceiling in a company to 20 per cent something Narayan had refused to considerppstrongProduct guidelinesstrongbr Hari Narayan said the revised product design guidelines would be out by the end of this year "We are working with the industry to figure out a design template about what we wish to see in products and what we dont The guidelines are in an advanced stage of evaluation Hopefully they will become regulations shortly" he saidppIf a company wishes to sell a pension product it must have the responsibility to provide the annuity If a pension product is not going to end in a pension then it cannot be called a pension product Similarly any life insurance product must have a minimum guaranteed death benefit Otherwise it is not a life insurance product The guidelines would include templates like these he saidpp"There are certain fundamental principles we cannot compromise on in the interests of policyholder protection" he saidppHe said the issues raised by companies in the sector at a meeting with the finance minister earlier this year were already a part of the draft guidelines However the meeting helped expedite and also attain a consensus opinion on the direction the regulator and those in the sector wished to goppstrong Bancassurance normsstrongbr The guidelines on bancassurance the norms under which banks are allowed to sell insurance products would be ready by the later part of January 2013 according to himppOn whether a bank should sell the products of only one insurance company or more Hari Narayan said banks had misunderstood the insurance laws "If banks wish to perform the function of an agent then they can have a tie-up with only one company Supposing they wanting to tie up with more than one company they should function like a broker and then this particular bank comes under broking regulations" he said Banks cannot he held say they want to function like a broker but also want to be an agentppstrongProducts in for a changestrongbr Hari Narayan said the sector was is in for a change in terms of the kind of products people wished to buy He cited the experience of countries in Europe and America where personal incomes were on the rise Pension and direct savings-oriented products with smaller tenure in those countries had become popular while endowment products had practically vanishedpp"I would think that even in India increasingly the trend will be in that direction It is not yet so clear because traditional products are still selling well But I think in time this will change" he saidppstrongTrendstrongbr The life insurance sector which has seen a decline in growth over the past few years has stabilised and there won&rsquot be negative growth hereafter though growth this year would be close to zero he said As the non-life sector is proportionately very small compared with life insurance unlike in other countries where both are of equal size growth opportunities in this segment were more he said The insurance premiums collected in India were a little less than five per cent of GDP a healthy number he saidppHari Narayan demits office in February He said he was hopeful of finalising the regulations on the health sector and on micro insurance before the end of his termp


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