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| Irda mulls Fee cap on traditional policies |
| BS Reporter / Mumbai Jan 13, 2010, 00:16 IST |
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IPO guidelines next month; derivatives products on cards.
The Insurance Regulatory and Development Authority (Irda) has said it would consider capping the charges on traditional insurance products.
“I would like to see the experience in Ulips (unit-linked insurance products). We will see for another six-seven months how the cap on Ulip charges turns out and then decide how it can be done or whether it should be done,” Irda Chairman J Hari Narayan told reporters on the sidelines of an insurance conference organised by the Federation of Indian Chambers of Commerce and Industry here on Tuesday.
Last July, after the securities markets regulator, the Securities and Exchange Board of India, banned entry load on mutual funds, the insurance regulator capped overall charges on Ulips from October 2009 for new products and January 2010 for existing products.
The difference between the net and the gross yield was capped at 3 per cent for products with a tenure of less than 10 years and at 2.25 per cent for products with a tenure of more than 10 years.
Recently, a committee headed by former pension regulator D Swarup suggested that the commission paid to agents should not be embedded in the premium. Insurance companies and Irda have opposed this and a final decision is expected to be taken by the high-level committee on capital markets, comprising representatives from regulatory agencies and the government.
Micro insurance
Emphasising the need for micro insurance (assured sums below Rs 50,000), the regulator said, “If we can have a Nano car and Nano flats, why can’t we have Nano insurance products (affordably-priced ones)?”
“It will be necessary for the government and insurance companies to work hand in hand and what insurers can bring is better management and hassle-free claims settlement,” he said.
IPO, derivative norms
The Irda chairman also said the regulator was examining basic no-frill derivatives that could be issued by companies in the sector and was expected to come up with the details during the course of the year.
On IPO (initial public offering) guidelines for the sector, in the works for nearly a year, the Irda chairman said these were now expected to be ready by the end of February. He said the guidelines were stuck on valuation since there was no standard methodology.
“We have set up a committee. The process should be completed in February. We have sought the help of Institute of Actuaries of India,” he said.
Irda will come up with valuation norms before the IPO norms. “There should be adequate disclosures by insurance companies for a certain period of time, which will enable experts, analysts and investors assess their performance before investing,” he said.
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