Irda to ban highest NAV-guaranteed products

The Insurance Regulatory and Development Authority (Irda) is set to ban the controversial highest net asset value (NAV)-guaranteed products, its chairman J Hari Narayan said on Saturday.

“Yes, we are considering it. We have not really issued any order, but we are actively considering it,” Hari Narayan told reporters on the sidelines of a seminar on ‘Policyholder Protection and Welfare’ here.

Another senior Irda official said the insurance regulator is likely to issue an order banning the highest NAV-guaranteed products in a month.

The decision is not surprising, as Irda has been discouraging such products over the past six months. “We were expecting this. Though officially there is no ban, the regulator had stopped approving any new product in the lines of highest NAV guarantee from last year,” said a senior official with a private life insurance company.

According to industry players, Irda said in a communication to all life insurers last month that “marketing of products labelled as Highest NAV Product shall not be allowed”.

The controversy surrounding these products surfaced in September last year, when Irda informally sounded out its discomfort on the grounds of perceived “systemic risk” associated with the way such funds are managed. The discomfort is such products give more emphasis on debt instruments and run the risk of heavy sell-off in equities in case of a stock market fall.

Separately, Hari Narayan said the insurance regulator is unlikely to relax its annuity clause in pension guidelines. “One thing the insurers are looking at as relaxation is that they don’t have to provide the annuity. That we will not relax. They have to provide annuity,” he said.

He did not offer a time frame by when Irda would release the final guidelines on bancassurance, but said the regulator would stick to the zone-wise model mentioned in the draft norms.

Hari Narayan also dismissed suggestions that an increase in the entry age to 65 years for taking health insurance policies would lead to higher underwriting losses for insurers.

“I think the fears are unfounded. This regulation is not something new. It was there. Insurance cannot be denied merely on the ground that a party is more than 65 years. It may be denied because of some other reason. But the denial has to be justified, it cannot be arbitrary. In fact, in many societies, there are no such (age) restrictions,” he said.