The Hindu : Business : IRDA to come out with norms for ULIP soon

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Thursday, Nov 24, 2005

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Business

IRDA to come out with norms for ULIP soon

Minimum percentage of premium and minimum lock-in period favoured Minimum percentage of premium and lock-in period favoured

Motor insurance to be detariffed from January 2007 Special provision of old vehicles No age barrier for insuring a vehicle

INNOVATION IN INSURANCE: The Chairman of Insurance Regulatory and Development Authority, C. S. Rao (right), with the President of Federation of Indian Chambers of Commerce and Industry, Onkar S. Kanwar, at the FICCI's 10th conference on insurance in New Delhi on Wednesday. — Photo: Ramesh Sharma

NEW DELHI: The Insurance Regulatory and Development Authority (IRDA) will unveil separate guidelines for Unit Linked Insurance Policies (ULIP) in two to three weeks, C. S. Rao, Chairman, said here on Wednesday.

Speaking on the sidelines of a FICCI conference on insurance here, Mr. Rao said, ``some issues need to be resolved like the relationship between the premium and insurance cover and investment,'' adding that a minimum percentage of premium might be stipulated for insurance cover.

There could be a minimum lock-in period along with limits on insurance component for every top-up payment and on withdrawals.

To provide a major relief to general insurers, Mr. Rao said, motor insurance would be detariffed from January 2007.

He said all companies had agreed for a detariffed regime from 2007 but there was some apprehension on motor insurance, especially of old vehicles.

In this context, the IRDA proposed a `Declined Motor Insurance Pool,' which would cover the risks of old vehicles.

"In case two to three insurers have declined to underwrite the risk cover for a old vehicle, it would be taken up by the Pool. If the amount of corpus in the Pool is less than the claims, the difference would be met by the insurers,'' he said.

"There will be no age barrier for insuring a vehicle,'' Mr. Rao said, adding that the IRDA would like to ensure that no vehicle, which had a valid registration and had permission to ply on roads, went without a proper insurance cover.

After the motor insurance business was free from a tariff regime, the tariff for owners damage (OD) would come down, while it would go up for third party liability (TPL).

With the economy posting a sustained high growth, Mr. Rao asked insurers to tap household savings and invest in the infrastructure sector.

Since insurers needed to infuse more capital to sustain their growth, the IRDA had been advocating raising the FDI cap so that foreign players could bring in additional funds and Indian partners were not strained, he said. "We have always said the FDI cap should be raised to 49 per cent,'' Mr. Rao said.

Foreign partners in companies like ICICI Prudential Life, Max New York Life, Aviva and ING Vysya had been demanding a hike in the FDI cap for a long time. The Government had notified the FDI hike in civil aviation from 40 to 49 per cent and in telecom from 49 to 74 per cent, but was yet to do so for insurance, as it requires amendment of the IRDA Act.

Apart from FDI, the Finance Ministry was awaiting the IRDA's report on a comprehensive piece of legislation on insurance. "We are compiling a report. We will submit it to the Government in two weeks,'' Mr. Rao said. The IRDA was in the process of vetting the reports of the KP Narasimhan panel and the Law Commission, Mr. Rao said.

LIC plans combo policy

As part of its Golden Jubilee bash, Life Insurance Corporation is coming out with a unique policy that will have all four features — whole-life, money-back, endowment and maturity repayment, its Chairman, A. K. Shukla said on the sidelines of the FICCI conference.

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