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Irdai flags reforms for investment, expenses

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MUMBAI: The Insurance Regulatory and Development Authority of India (Irdai) has backed its growth push by flagging off reforms in the areas of investment, distribution and management expenses for insurers. The reforms envisage easing limits on investing in the financial sector and allowing insurers to invest in bonds issued for financing infrastructure and affordable housing over their financial sector investment.
Infrastructure and housing are expected to be big investment drivers in the current year. Giving insurers more headroom to invest in long-term bonds issued by banks will enable a better return for policyholders. The regulator also aims to relax the dividend criteria for investment in equities and preference shares under ‘approved investments’, which will give room to invest in new age companies.
According to insurance officials, the new Irdai chairman, Debashish Panda, has given growth targets to insurers and is facilitating this through reforms. Distribution reforms include allowing corporate agents (which include banks) to tie up with nine insurers each in life, general and health. Currently, corporate agents can sell products of three companies in each segment.
There is also a proposal to allow insurance marketing firms to tie up with six insurance companies in each segment.
Also, corporate agents can sell insurance to businesses without any limit on the sum insured. The move will allow smaller insurance companies to gain share by tying up with large distributors who already have reached the ceiling in terms of the number of companies. For customers, this would mean more choices of insurance companies. This will be one more step in the direction of ‘open architecture’ where distributors can sell any company’s products.
To facilitate growth, there is also a proposal to allow insurers to raise other forms of capital without prior approval. Also the limit for issuing such capital is likely to be increased to 50% of the paid up capital or net worth of the insurer.

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