IRDA News: Slew of reforms on cards for insurance sector

The Union finance ministry is lining up a slew of reforms to revive the insurance sector.

 

While the Cabinet is likely to soon consider hiking the foreign direct investment (FDI) limit in the sector from 26% now to 49%, the finance ministry will hold a meeting today with the insurance sector regulator to discuss service tax and other tax relief measures for the industry.

Insurance Regulatory and Development Authority (IRDA) chairman J Harinarayan and finance minister P Chidambaram held a meeting on Wednesday to consider measures for the sector, which is caught in ade-growth trap.

According to sources, the finance minister asked the IRDA chairman to set up a mechanisms for faster product approvals.

“Delay in product approvals is definitely a road block for the insurance sector. Faster product approvals will be a healthy step to boost growth and innovation in the sector,” said a senior industry official on condition of anonymity

In order to increase insurance penetration and reach of basic insurance cover to the rural areas, the ministry and the regulator have agreed upon designing insurance products with low insurance premiums and basic cover.

Discussions on relaxing investment norms for life insurers, too, were taken up in the meeting. Relief will be given in such a way that the funds will be used for financing the infrastructure sector. Earlier, the government has held discussions on allowing insurers and bankers to invest in infrastructure debt funds.

“Currently, the investment norms for insurance companies do not allow them to invest in such funds as they are not AAA rated,” said the chief investment officer of a private insurance company.

“Any relaxation on this front will allow the companies to invest in A+ and A rated securities. This will give some more room for insurers to generate investment income,” he said.

“Insurance, like many other sectors in India, requires greater levels of investments and in that regard we would welcome steps to increase FDI in the insurance industry.” the IRDA chief had said earlier this week.

Insurance industry said the sector requires capital infusion and reforms for a robust and sustained growth, going forward.

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