India: New revival package for life insurance, investment norms to be eased

Monday, October 01, 2012
Indian Finance Minister
P Chidambaram [File Photo]
New Delhi:In an attempt to ease the insurance policy in the nation Indian Finance Minister P Chidambaram announced a revival package for the life insurance sector on Monday.

The announced package is intended to benefit the companies as well as the policy holder.

The package is aimed to ease investment norms for insurers, faster clearance for new products, easing of procedures and allowing banks to sell products of more than one insurance company.

Addressing presser here in New Delhi P Chidambaram said the country's insurance regulator, Insurance Regulatory and Development Authority (IRDA), will consider ‘Use and File’ system for introduction of simple and easily understood products. Life insurance companies, subject to some conditions, can introduce a product even without getting formal approval from the IRDA.

IRDA will also consider relaxing norms for insurance companies investing in debt instruments to encourage investments in securities other than the AAA-rated ones.

Notably, existing rules allows insurance companies to put 75 per cent of their debt market investment into AAA-rated securities.

The finance ministry has also agreed to address tax-related issues, such as a reduction in service tax, tax treatment of annuity products on a par with the New Pension Scheme and Tax Deducted at Source on commission payments made to agents, of insurance companies.

The Finance Minister said banks should act as brokers and the fiduciary responsibility of the bank will be to the policyholders.

Insurance reform is widely seen as crucial because according to IRDA estimates, the sector needs a capital infusion of over $12 billion over the next five years.

India has 24 life insurance companies and an equal number of general insurance companies.

The Finance Ministry, on 22 August 2012, approved 49 per cent foreign direct investment (FDI) in the insurance and pension sector from 26 per cent.

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