FM holds brainstorming with public sector insurers

 Aiming to improve insurance penetration and channelise the investment into infrastructure sector, Finance Minister P Chidambaram on Tuesday held a brainstorming session with state-run insurers and sought suggestions on reviving the insurance sector in India.

“The discussion revolved around deploying long-term insurance funds for its development and protecting the interests of customers, without hurting the interests of insurance companies,” a senior official said.

One of the major demands of the insurance companies includes improvement of commissions for unit-linked insurance policies, which have seen their premium fall to 15 per cent  last year from a high of around 70 per cent in 2008-09 mainly due to regulatory changes.

Soon after taking charge of the ministry last month, Chidambaram had promised measures to make insurance and mutual fund industry more attractive to people.

He had also cleared a proposal to increase the foreign direct investment limit in the sector from 26 per cent to 49 per cent. A note is expected to be sent to the Cabinet soon.
Emerging after the meeting, Financial Services Secretary D K Mittal said, the issue of channelising their investment into productive sectors, particularly the infrastructure sector to prop up the economy, was discussed.

As per the current Insurance Regulatory Development Authority (Irda) norms, insurance companies can invest only in highest rated ‘AAA’ or ‘AA’ credit-rated debt instruments. But, their investment corpus is so large that if it is channelised into the infrastructure sector, it will, to  agreat extent, help the government fulfil its requirement for $1 trillion investment in the sector.   

“There is a need to revisit investment norms for insurance companies. We will look at revising investment regulations over the next month,” Irda Chairman J Harinarayan said. Currently, there are 24 life insurance companies in the country, with LIC dominating the sector with a market share of about 70 per cent.