Irda plans to set up investor protection fund

Following in the footsteps of the Securities and Exchange Board of India, the Insurance Regulatory and Development Authority (Irda) plans to set up an investor protection fund. The fund will work to protect the interests of policyholders and spread awareness about insurance.

“We are planning to set up this fund to reach out to policyholders through mass media campaigns. We will hold regional conferences. Also, if there are a large number of complaints against a particular product or a company, we will organise a forum and discuss the matter,” said a senior Irda official, who did not wish to be identified.

The initial corpus would be around Rs 100 crore. The official said the regulator would set up the fund after its board, scheduled to meet on December 28, approves the proposal. It is likely to come up with the draft guidelines within a week.

Unclaimed policies, which form a part of the miscellaneous income of insurance companies, will go into this fund.

“Unclaimed policies are a big part of income of established insurance companies. Insurers should not make profit from unclaimed policies. But it is difficult to trace a policyholder, as insurance is a long-term contract and customers’ records are not maintained for a long period. Eventually, the profits should be used to educate policyholders,” said P Nandagopal, managing director and chief executive officer of IndiaFirst Life Insurance. There is no centrally-managed database of policyholders.

“This is a welcome step, as more and more people will be made aware of insurance. The fund should be used to create awareness about the rights and duties of policyholders so that they benefit from insurance,” said Future Generali India Life Insurance Co’s Appointed Actuary, G N Agarwal.

Amitabh Chaudhry, managing director and chief executive officer of HDFC Standard Life, said though there was nothing wrong in having such a fund, the question was who would manage it.