HYDERABAD: The Insurance Regulatory and Development Authority (IRDA) will soon launch a drive to inspect insurance companies, both life and non-life, with a view to protecting consumer interests.

While almost all private insurance companies conduct their back office operations like underwriting and settlement of policy claims at their respective central offices, the Life Insurance Corporation of India (LIC) does it either at the branch level or at the divisional office.

Therefore, the IRDA teams would randomly inspect the branches and divisional offices of the LIC, apart from the central offices of private insurance companies, said Chairman of IRDA, C. S. Rao, in an interview on Tuesday.

Mr. Rao ruled out the possibility of re-introducing traditional long-term key-man insurance policies. It would remain a pure term-based policy, so that the proceeds would not be "misused as a non-taxable sop" by the key-men employees or key-men proprietors.

For, the premium amount paid towards key-man insurance was totally exempt from the income tax bracket.

The insurance regulator stipulated a condition to all private companies, which had completed six or seven years, that 18 per cent of their total number of policies must be from rural areas.

As a result, almost every company was setting up rural verticals. A start-up company should earmark seven per cent of its policies to the rural market and increase it as it grew.

After the advent of unit-linked insurance policies (ULIPs), 70 per cent of buyers of insurance products preferred ULIPs because they offered a choice of investment.

Mr. Rao said the removal of tariff, in consonance with the roadmap prescribed by the regulator in 2005, on non-life insurance products did not cause any dent in the premiums earned by the companies.

Even the re-insurers were satisfied with the performance of non-life polices, he said.

On the available solvency to required solvency ratio which should be 1.5, the chairman said LIC was yet to reach the mark. It moved from 1 to 1.3. LIC's capital requirement could not be enhanced to Rs. 100 crore, like in the case of other companies, as the LIC of India Act would have to be amended. As of now, the capital requirement of the LIC remained at Rs. 5 crore.

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