Even as the regulatory tussle over unit-linked insurance plans is yet to be resolved, Finance Minister Pranab Mukherjee said on Tuesday he was pleased with the way the insurance regulator had gone about reforming these investment-cum-insurance products.
He said the tussle would be resolved soon.
At the inauguration of the new building of Insurance Institute of India, Mukherjee said, "I understand that the Insurance Regulatory and Development Authority has taken some very positive steps in respect of regulations of Ulips which are in the interest of both the insurance industry and the policyholders."
Recently, Irda extended the minimum term of the policy to five years. It also brought in compulsory annuitisation in pension policies and proposed to cap surrender charges.
Earlier, the regulator had capped the overall charge on Ulips.
Mukherjee referred to these changes as reforms. "I am sure the insurance industry and Irda will continue to bring in these reforms so that the interests of all stakesholders are secured," he said.
"I am also aware of some issues arising in the life insurance industry, especially concerning unit-linked insurance policies. We will resolve this issue soon," he said.
The finance minister had earlier asked both Irda and the market regulator, the Securities and Exchange Board of India, to seek a joint legal mandate over regulation of Ulips.
But later, Sebi backed out of this. While its contention is that Ulips are more investment than insurance products, Irda says these are approved under the the Insurance Act.
The finance minister had to intervene as Sebi had banned 14 life insurance companies from selling Ulips and a day later Irda asked insurance companies to do business as usual.
Industry experts believe that the high commission in Ulips is the main bone of contention. After Sebi banned entry load in mutual funds in August last year, inflows into Ulips had fallen.
"A lot of concern has been shown on the commission paid by insurers. The total commission paid as a proportion of the total commission is only 7 per cent," said J Hari Narayan, chairman Irda.
He added that remuneration was not excessive as it involved meeting the right prospect and selling the product. He said there could not be a cheaper method of selling life insurance.
The minister urged insurance companies to reinsure more, saying we are a disaster-prone country. He said there was an immense need for disaster management in controlling catastrophic risk in India.
"The insurance industry should prepare to deal with any kind of catastrophic losses.
"The insurance companies should concentrate on exploring the world reinsurance market so that the impact of heavy losses can be mitigated," he said.
Decision on fuel prices soon, says Pranab
India's finance minister said he would meet other cabinet ministers on Thursday to decide on the date for the next meeting to discuss the issue of fuel deregulation which was deferred on Monday.
Pranab Mukherjee said the decision on fuel prices would be taken shortly and there was no need to press the panic button due to the euro zone crisis.
India's government deferred till next week a decision on raising fuel prices on Monday, the second time in a year it has tripped on pushing politically-sensitive reform measures that could help trim a budget deficit.