Life insurance companies are in a spot on account of the decreasing interest rate scenario. G N Bajpai chairman Life Insurance Corporation of India (LIC) said that in the last 12 months with the interest rates having fallen by 300 basis points, "it has become a great challenge for us to deliver satisfactory returns".
Bajpai was speaking at the Insurance Forum 2001 organised in Mumbai. He commented on the restrictions imposed by the investment regulations of the Insurance Regulatory and Development Authority (IRDA), especially since the life insurance companies need to ensure that the pricing works out right. Earlier this week, LIC invested Rs 1,000 crore in Reserve Bank of India's open market operations. Bajpai said this would fetch considerable returns at 10.8 per cent.
ICICI Prudential CEO and managing director Shikha Sharma identified that pricing of products depended upon how well the product designing team worked with the investment committee to see that the returns are sustainable and in line with present scenario.
While she admitted that the regulations posed certain constraints on life insurance companies, they ensured safety, and gave enough leeway to insurance companies. "We are not here to beat the returns offered by the market or mutual funds, but rather to offer steady, consistent and inflation-beating returns," Sharma added.