Mumbai: Big bang reforms are set to take place in the insurance industry with the regulator's final nod to 'insurance repositories' — that will facilitate demat policies —coupled with major relaxations in investment guidelines for life companies.
IRDA chairman J Harinarayan announced on Monday the draft investment guidelines that allow insurance companies to buy credit protection through derivatives, lend up to 10% of their shares and carry out short-term repo transaction in bonds. The regulator is also set to ease investment limits that will give Life Insurance Corporation of India more leeway to invest in companies.
Speaking at the sidelines of the 15th insurance summit organized by the Confederation of Indian Industry, Harinarayan said dematerialized life insurance policies will soon become a reality with the insurance regulator set to grant certificate of registration to five entities for setting up insurance repositories. Demat policies will enable consumers to get their policies serviced anywhere and, more importantly, allow a one-time 'know your customer' process that will be valid for all insurance purchases across companies.
The six companies that have received IRDA approval for setting up insurance repositories are: NSDL, CDSL, Karvy, CAMS and STCI. According to Cams Repository Services CEO S V Ramanan, demat policies will benefit policyholders as they will not have to worry about losing the document which has to be preserved for 20-30 years and it will also do away with the need to transfer their policies if they shift their home. Repository services will also conduct basic policy servicing on behalf of insurance companies.
Harinarayan said that the regulator will also come out with a whistleblower policy on the lines of Reserve Bank of India. Addressing the insurance summit, Harinarayan flagged off the absence of annuities in the product portfolio of private companies , high level of attrition among insurance employees, and the complex languages in insurance contracts as a matter of concern.
