Call to keep investment rules for insurers off Act

The dynamic investment environment of today "" as interest rates move south and equities look up "" warrants that investment guidelines for the insurance industry be kept under a regulatory framework, and not form part of the Insurance Act, according to industry captains.

As the Insurance Act is being recast owing to the expectation of greater teeth being granted to the Insurance Regulatory and Development Authority (Irda), the life insurance industry has made representations that operational issues "" such as commission structure and investment guidelines, among others "" be delegated to the regulator.

ING Vysya managing director and CEO Yvo Metzelaar told Business Standard: "All operational issues should be delegated to the regulator and not rest with under the Insurance Act."

The industry has been pushing for changes in the investment norms in view of the several investment opportunities that prove attractive to long-term investors, but do not form part of the Insurance Act.

The National Law Commission of India has recommended merging the provisions of the Irda Act with the Insurance Act 1938 to avoid multiplicity of legislations.

It has also favoured overhauling the investment policy of players. While suggestions pertaining to investments such as investing overseas is attractive to insurers, they have asked that the investment policy be made flexible and be regulated by the Irda.

"Investment guidelines should be more dynamic so as to ensure that they can quickly adapt to the changing environment. Hence the need that they be put under the regulator," said Metzelaar.

Today insurance companies are unable to tap some of the opportunities in the secondary market such as fixed income deals like mortgaged-back securities, he added.

Further, the insurance industry is also of the view that commission levels ought to be decided by the Irda, and not be incorporated in the Insurance Act that is being revised.

Birla Sun Life chief financial officer Peter Akers added that certain tax benefits ought to be given to insurance agents to encourage skilled and quality manpower.

"Tax deducted at source on insurance commission to non-corporate is 10 per cent and that for corporate entities is as high as 20 per cent under section 194D. As it would take some time for them (corporates) to make some reasonable profits, at this juncture TDS at 20 per cent is too high," he added.

"Flexibility in remuneration of different distribution channels equally should be left to the regulator in order to develop the various channels," said a senior consultant to a private insurer.