Irda introduces measures to revive life insurance

Monday 01, October, 2012 To revive the sagging life insurance industry, the insurance regulator has agreed to introduce changes enabling faster clearances of products, increasing investment into infrastructure and opening up bancassurance. In a country with low spread and penetration of life insurance, the objective should be to sell simple and easily understood products. At present, IRDA approves all insurance products on 'File & Use' basis. Irda has decided to introduce use & file system for certain standard products. So, if the insurance company complies with the conditions attached to the standard product, such products will automatically be deemed approved after 15 days of intimating to Irda. The ministry has asked Irda to expand the list of such standard products. Irda will clear products within 30 days after November after it lays down principles underlying the design of insurance product. "Based on the recommendations of the Working Group that has been set up, IRDA will issue draft guidelines and, after consultations, final guidelines will be issued by the end of November, 2012," the statement said. Banking correspondents will be allowed to sell micro insurance products. Though, this facility will apply only to micro insurance products. Irda will make regulations for this purpose. Irda has allowed banks to act as broker to be able to sell policies of more then one insurance company. Currently, the policy on bancassurance is one bank one insurance company. "As insurance broker, the bank may sell the products of more than one insurance company. This will provide the intended policy-holder a bouquet of products from which he/she may chose the appropriate product based on his/her needs and will also prevent mis-selling," FM said in a statement. The insurance regulator will consider relaxing minimum requirement of 75% in AAA instruments. At present, there is a stipulation that 75% of investments in debt, excluding investments in government securities. The regulator has decided to include g-sec in the minimum stipulation. This is expected to release a space of about 12.5% for investments in less than AAA rated debt instruments. Also, to encourage investments in infrastructure, Irda will allow investments in an infrastructure SPV floated by any company where the SPV is a wholly-owned subsidiary (WOS) of the parent company. This would be possible when the debt instrument issued by the SPV is guaranteed by the parent company, having due regard to rating criteria. The ministry has decided to reduce service tax on first year regular premium as well as single premium policies. Also, investment in some insurance pension products may be included in the separate limit over and above the limit of Rs.1,00,000 under section 80C of the Income tax Act for the purpose of income tax deduction on the premium paid.

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