Finance minister P Chidambaram will soon announce a slew of steps for the insurance industry which could be aimed at boosting premium income by way of innovative product launches, faster approvals and tweaking investment rules for the insurance firms to ensure greater funds flow into infrastructure. Chidambaram and his aides in the finance ministry had a two-day detailed discussion with J Hari Narayan, chairman, Insurance Regulatory and Development Authority.
FM will announce the steps agreed upon with Irda, financial services secretary DK Mittal said when asked about the outcome of the meeting. Sources said some of the steps that could be announced pertain to raising the ceiling on infrastructure exposure beyond the present limit of 15%, allow insurers to invest in “A-” rated corporate bonds and mutual fund units of infrastructure debt funds (IDF-MFs).
At present, life insurance companies are allowed to invest up to 50% in government securities, 15% in infrastructure bonds and rest in “AAA” rated corporate bonds and equities.
The regulator may also speed up approvals for products filed by insurers and allow low-premium schemes to increase penetration or risk coverage in the hinterland.
The idea is to increase insurance penetration, raise premium income and more products can be introduced at lower premium, an official said. A roadmap have been agreed upon for faster approval of products by Irda, he added.
The finance ministry is trying to revive investor sentiment so that more long-term funds can flow into the infrastructure, which in turn can boost the overall economic growth.
Apart from insurance companies, the government is also urging the Pension Fund Regulatory and Development Authority and Employees Provident Fund Organisation to ease investment norms so that more funds can be channelled to infrastructure.