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IRDAI's Product Regulations Review Committee Report, 2017 submits report

IRDAI's Product Regulations Review Committee Report, 2017 submits report

It was observed that there is a need to review the regulations due to changing market and economic environment, Insurance Regulatory and Development Authority. So in January 2017, IRDAI constituted an eight member committee to make recommendations on the amendments required in the regulations. The committee constituted by the IRDAI has suggested host of changes in the life insurance sector, including in the investment norms to improve the returns generated by the funds.

About the Committee:

  • The eight member committee will be chaired by Amitabh Chaudhry, chief executive officer and managing director, HDFC Standard Life Insurance Co. Ltd. The committee would review product regulations in light of current market environment, policyholders’ interests and distribution incentives.
  • It will also review the recommendations of the Sumit Bose Committee, which had some big bang suggestions.
  • The product committee constituted by IRDAI is expected to submit its report in 2 months and is likely to meet on 20 January to set the agenda. The committee would do well to focus on standardising costs, removing exit barriers and simplifying the investment benefits through proper disclosures.

Highlights of the report:

  • The committee in its report among other things has recommended that the investment norms "should undergo significant change" with a view to improve the returns generated by the funds while taking account of the risks inherent in the various asset classes.
  • Currently, the report said, the investment norms governing traditional business are quite restrictive, making it difficult, if not impossible, to provide competitive returns to the policyholders.
  • The report also observed that the expectation of generating a return of at least 8 per cent per annum is a "tall order" given that at least 50 per cent of assets of the insurer are mandatorily to be backed by government securities (G-Secs), which currently yield about 6.7 per cent - 7.2 per cent annually.

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