Irdai seeks host of changes for returns

New Delhi: A committee constituted by Irdai has suggested multiple changes in the life insurance sector, including in the investment norms to improve the returns generated by the funds.

The regulator had notified the Irdai (non-linked insurance products) regulations, 2013 and Irdai (linked insurance products) Regulations in February, 2013.

However, it was observed that there is a need to review the regulations due to changing market and economic environment, Irdai said.

In January, it constituted an eight-member committee to make recommendations on the amendments required in the regulations.

The committee in its report among other things has recommended that the investment norms “should undergo significant change” with a view to improve the returns generated by the funds while taking account of the risks inherent in the various asset classes.

Currently, it said, investment norms governing traditional business are quite restrictive, making it difficult, if not impossible, to provide competitive returns to the policyholders. The investment regulations mandating investment in certain asset classes limit the returns that may be generated to enable better return.

Referring to customers “reasonable expectation”, it said life insurance savings products are often compared to products offered by banks such as fixed deposits and recurring deposits.

It also observed that the expectation of generating a return of at least 8 per cent per annum is a “tall order” given that at least 50 per cent of assets of the insurer are mandatorily to be backed by government securities, which currently yield about 6.7 per cent - 7.2 per cent annually.