Government’s action plan for life insurance


The Finance Minister in October 2013 announced a package for the life insurance sector to benefit the companies as well as the policy holders. The package includes easing investment norms for insurers, faster clearance for new products, easing of procedures and allowing banks to sell products of more than one insurance company.
The highlights of the action plan are:
(i)Insurance Regulatory and Development Authority (IRDA), will consider relaxing norms for insurance companies investing in debt instruments to encourage investments in securities other than the AAA-rated ones.
(ii)RDA to consider ‘Use and File’ system for introduction of simple and easily understood products.
(iii)Life insurance companies, subject to some conditions, can introduce a product even without getting formal approval from the IRDA.
(iv)IRDA to consider 30-day norm for clearance of products.
(v)IRDA will evolve, notify guidelines in order to reduce the arbitrage between ‘units’ and ‘traditional products’.
(vi)All banking correspondents may be allowed to sell micro insurance products.
(vii)An insurance company may appoint ‘mentors’ for mentoring agents .
(viii)Relaxation in investment norms for life insurance companies is under consideration.
(ix)The investment in infrastructure SPVs floated by any company and not just by PSEs will be allowed.
(x)Banks are allowed to act as insurance brokers so they can sell products of more than one insurance company. At present, banks can sell products of just one insurance company through the bancassurance policy.
(xi)Banks could act as brokers and the fiduciary responsibility of the bank will be to the policyholders.
(xii)Reduction in service tax on first year regular premium as well as single-premium policies.
(xiii)Treating the annuity policy at par with NPS.
(xiv)Exempt premium for social security insurance schemes from service tax.
(xv)New avenue for Income-Tax exemption. Department of Revenue to consider allowing some insurance pension products to be included in separate limit over and above Rs 1 lakh under Section 80(C) of the Income Tax Act.
   India has 24 life insurance companies and an equal number of general insurance companies. The government on 22 August 2012, approved 49 per cent foreign direct investment (FDI) in the insurance and pension sector from 26 per cent.

Friday, 18th Oct 2013, 07:36:57 AM

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