The Insurance Regulatory and Development Authority (Irda) is likely to issue new guidelines for life insurance products on February 8 after taking a final review on the same day.
“The Insurance Advisory Committee had already considered these guidelines at the last meeting. According to the procedure, it has to be placed before the authority and the authority is meeting on February 8 after which it will be gazetted,” said Irda Chairman J Hari Narayan here today.
He played down criticism that the timing for such guidelines was not right in the light of a slowdown in life insurance business. He said it would be good to bring out a new model when the industry was down.
Irda has been working on new design templates for various insurance products after taking a critical view on the current industry practices. Earlier, it had said a life insurance product should have a guaranteed death benefit, while a pension product must provide stipulated annuity.
Replying to a question, he said the new products being launched by insurance companies were largely in line with the spirit of the new guidelines.
He added the ‘highest net asset value (NAV) guaranteed products’ would be withdrawn when the new guidelines come into effect, lest these could mislead the consumer into what he is buying in relation to his expectation.
Hari Narayan said, “What is deemed to be the highest NAV guaranteed products should not be confused with what is the highest index or how the market is performing. An NAV product tends to become a debt product to maintain that guaranteed NAV. As far as the marketing of these product goes, the consumer is left with a feeling that it grows along with the market or is somehow linked with the Sensex.”
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He added the new guidelines would have a provision for staggered implementation so companies could readjust their processes, while still being able to continue to service the policies they had already sold.
Narayan said the life insurance business was likely to touch Rs 20 lakh crore in the current financial year, compared with Rs 18 lakh crore as in March 2012.
Total assets under management of the insurance companies stood at Rs 8 lakh crore in 2008, the year when Hari Narayan took over as chairman. When the industry was opened up to the private sector in 2000, the insurance business was Rs 1 lakh crore. Narayan is set to retire later this month.
The non-life sector, accounting for Rs 4.5 lakh crore of the total insurance business, is exceeding expectations in terms of growth and is likely to post 18 per cent year-on-year growth. Life insurance, accounting for largest chunk of the business, is, however, facing problems.
He said, “There was a marginal decrease in the life insurance business in the third quarter compared with last year. What is encouraging is single (and) multi-pay premiums have increased significantly. FY13 will be more or less flat in terms of growth on the life side.”