The Insurance Regulatory and Development Authority (Irda) today said that domination of one company in the pension market could be risky and it was important for other insurance companies to participate actively.
"There is a structural problem that will unwind for the regulator and the industry as a whole, and will affect the country. More than 90% of all the pensions are actually in the LIC. There is such a huge concentration in one institution. I think that is a recipe for high risk," Irda Chairman J Hari Narayan said at an insurance summit here.
"I think it is too much of a risk to be allowed to continue. Therefore, we must build up mechanisms which allow other companies also to participate actively in the pension market," he added.
Narayan further said that pension funds should offer life annuity and companies that sell pension products should have a guaranteed capital.
"I think at the very minimum that every product that is sold as a pension product should have a capital guarantee so that the principal is safe," he said.
Pension plans are estimated to account for about 30% of the life insurance industry's business.
Meanwhile, Narayan said that the regulatory body was working towards creating an exchange for re-insurance, but did not divulge when the mechanism would be in place.
"We have tried to create a platform on re-insurance, which is more transparent and more like a re-insurance exchange. Initial work is going on. What we visualise is that all matters on re-insurance will be routed only through the exchange. The advantage will be that transactions are clear and there cannot be any glitches in terms of the fine print of the policy," he said.
