Insurers eye higher gains
New Delhi: A committee set up by Irdai has suggested a host of changes in the life insurance sector, including investment norms, to improve the returns generated by the funds.
If the suggestions are accepted, insurers would be able to allocate a greater corpus in stocks.
The insurance regulator had notified the Irdai (Non- Linked Insurance Products) Regulations, 2013 and IRDAI (Linked Insurance Products) Regulations in February, 2013.
However, it was observed that there was a need to review the regulations because of the changing market and economic environment, the Insurance Regulatory and Development Authority (Irdai) said.
In January this year, it constituted an eight-member committee to make recommendations on the amendments required in the regulations.
The committee in its report has recommended that the investment norms "should undergo significant change" to improve the returns generated by the funds while taking account of the risks inherent in various asset classes.
The report said the current investment norms were quite restrictive, making it difficult, if not impossible, to provide competitive returns to the policyholders.
The regulations mandating investment in certain asset classes limit the returns .
Referring to customers' "reasonable expectation", it said life insurance savings products were often compared with products offered by banks such as fixed deposits .
The report also observed that the expectation of generating a return of at least 8 per cent per annum was a "tall order", given that at least 50 per cent of the assets of the insurer are mandatorily to be backed by government securities (G-Secs), which yield about 6.7-7.2 per cent annually.
The panel has suggested to "lower the mandatory proportion of 'G-Secs' in the life fund and the pension and general annuity funds and allow for higher exposure in alternative higher yielding assets (like equity or property) or high rated corporate bonds". PTI