Pan requirement worries life insurers

Life insurance companies are deeply concerned over the proposal to extend the requirement of permanent account number (PAN) to all financial transactions.

Union Finance Minister P Chidambaram's proposal in his 2008 Budget speech has created confusion on whether insurance products will also come under the ambit.

A senior Life Insurance Corporation of India (LIC) executive told Business Standard, "If PAN is made compulsory for insurance, it will badly affect the rural business, which currently accounts for more than 40 per cent of the overall insurance industry business."

He also noted that insurance companies will find it difficult to meet the Irda's mandatory requirement on rural business. According to the regulator, an insurer should sell seven per cent, nine per cent, 12 per cent, 14 per cent, 16 per cent and 19 per cent of their policies in rural areas in the first, second, third, fourth, fifth and seventh financial years respectively.

"The rural population is unaware about PAN and do not even know how to obtain it. There are no proper facilities to apply for PAN, especially in Tier III towns and villages. Hence, the PAN requirement should be waived for investors in small towns and rural areas," the executive added.

In any case, insurance companies are reportedly keeping tabs on individual investments beyond Rs 1 lakh, under the anti-money laundering (AML) guidelines. They have been collecting PAN and financial statements from customers in the metros while gathering land and property tax receipts from the rural areas.

Moreover, insurance is a social tool and a protection against risk. It is not a product which is sold, but a promise. Therefore, insurance should not come under the ambit of a typical financial transaction, industry sources said.

Meanwhile, LIC has written to the finance ministry seeking details about the Rs 1,000-crore rural insurance programme announced in the Budget last week.