Mumbai, Sept 24 (PTI): The insurance industry needs big investments for growth in the coming years and will welcome an increase in the FDI or foreign direct investment limit, according to the chief of the sector regulator.
The industry needs a lot investment for future growth, Insurance Regulatory Development Authority (Irda) Chairman J Hari Narayan said to a query on the sidelines of an Assocham summit here. “So, we will welcome the steps to increase the FDI in insurance sector,” he added.
The government has so far limited FDI in the insurance sector at 26 per cent. With the government taking policy reform initiatives last week, especially allowing FDI in multi-brand retail and aviation sectors, there is expectation that the limit in the insurance industry may be raised.
Hari Narayan also said Irda thinking of following the lead insurance model based on geography, which is followed by the banking industry known as 'lead banking model', for growth in the sector.
In the banking sector, the model is followed in specific areas to give emphasis on availability of various services in one particular zone, which the regulator is considering to replicate.
“Irda has proposed the lead insurance model on the basis of geography, just like the banking industry,” Hari Narayan said, adding that the regulator is waiting for feedback from the life insurance and non-life insurance council.
Talking about approval of pension products, Hari Narayan said those filed by companies are not pension products.
“They may call it pension product. Its much like a mutual fund products. That is you make a periodic investment and you can pull back at any point of time. So, these products will not be approved.
“What we have said is that a pension product should have an annuity. So product without any element of pension will not be approved,” he explained.
Hari Narayan further said Finance Minister P Chidambaram had met with select insurers earlier in September, where insurers had suggested some measures for the growth of life insurance industry.
“So, there is a list of issues which will be further discussed in another meeting with the Finance Minister on Wednesday, like income tax, service tax. We believe that certain tax measures will be helpful for the growth of the industry,” Hari Narayan said.
Referring to draft guidelines on product design, he said, it will be sent to the Life Council in 2-3 weeks.
The regulator also pointed out its concerns relating to next growth areas in general insurance industry in the wake of slowing motor insurance segment coupled with reducing margins in health insurance.
He said, however, that motor pool, which is one of the highest loss making segments of general insurance industry, will stop bleeding by next year.
Talking about bancassurance, Hari Narayan said, one is to one agency system (one bank selling products of one insurance company) is as per the law, however, banks can work as insurance brokers to sell products of multiple insurance companies.
He also stressed on rationalisation in commission structure, saying that management cost should be reduced.