The government is planning to introduce a few measures targeted at restructuring the insurance industry and is leaning hard on regulator IRDA to ease rules that it believes are hampering the growth of the industry.
According to IRDA (Insurance Regulatory and Development Authority) chairman J Hari Narayan, FDI in insurance would enable the companies to grow and infuse more capital in the business as most of the insurance companies are going through capital crunch. Mr Narayan was addressing an ASSOCHAM event in Mumbai today.
The coming weeks may witness relaxation in investment norms for insurers, changes in tax and investment norms in the sector, banks buying a stake in insurance industry and enhancing the pool of insurance agents to reduce the high levels of agent attrition.
The government is also looking at lowering the service tax on insurance premiums. Certain tax measures will be beneficiary and will encourage the growth of insurance industry. Finance Minister P Chidambaram has convened a meeting with the IRDA on Wednesday to discuess proposals to increase retail participation in insurance.
The industry wants the IRDA to speed up the process of product approval. The insurers have suggested to allow a 'use and file' system for insurance products to facilitate faster launches. At present, insurers can launch products only after obtaining the sector regulator's approval. According to IRDA, what matters is the quality of products that have been cleared and not the speed.
The finance ministry’s intervention to restructure the insurance sector is much awaited; hopefully these meetings will yield positive results.