Deepak Parekh, HDFC's non-executive chairman, has urged the government to overcome the coalition pressures and allow higher foreign direct investment (FDI) in the insurance sector and enable the industry to go public as all private insurers are making losses.
"The government is unable to take a decision because of coalition, since some parties don't want it. To us it is important, but to the government, insurance is not (that important)," Parekh said.
"I would like the 49 per cent (FDI in insurance sector) decision not to drag on because uncertainty is huge. We all want to do IPO (initial public offer) because we have put in huge sums of money. You cannot do IPO till the 26 (per cent) becomes 49 (per cent)."
As per the existing norms, a foreign player is not allowed to invest more than 26 per cent in a private sector insurance company. However, a Bill seeking to up FDI cap to 49 per cent in pending before Parliament since 2008.
"We all want IPO to happen. We want insurance companies to make profits. Today they all are losing money," he said.
A number of private insurers, including those belonging to HDFC and Anil Ambani group, have already expressed their intention to go public and are waiting for a favourable regulatory framework.
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At the same time, he said the industry must change its face by putting in place stringent distribution norms and flexibility in their investment decisions.
"There must be stricter and more stringent distribution norms because you cannot take 40-50 per cent as commission. It is all right in a 30-year policy (traditional policies like endowment and term-insurance) to do that," he said.
"The commission should also be spread over longer period of time...Rationalisation of commission and spreading it over longer period of time, instead of just taking it out of the first-year premium," he said.
Such rationalisation of Ulip commissions could also help narrow the gap between it and mutual funds, he said responding to queries over how a compromise could be reached between insurance regulator Irda and capital market watchdog Sebi on the Ulip row.
The two regulators have been engaged in a public spar over who controls Ulips, which invest heavily in stocks and bonds and get promoted much more by intermediaries as against mutual funds because of higher commission payouts.
At the same time, Parekh said the industry is looking at it and also more flexibility in investment norms.
"Today flexibility is not there. You must put 25 per cent in government bonds. You must put 25 per cent either in state government bonds or Central government bonds. You must put some percentage in infrastructure bonds, so the residual amount of investment is very limited," he said, adding "let each one of them decide where they want to invest."
"Too much money is parked in government papers both Central and states today," Parekh said, adding, there is a need to make some changes in investment norms by reducing the bias toward parking fund in government securities.
"May be over time it's time we look at government reducing it. From 50-60 per cent level to 30-40 per cent," he said.