This is a blog created specially for the readers of the book Indian Economy Key Concepts. This is mostly to provide Indian Economy related news that is published in various newspapers under one umbrella. My own write ups will be posted very rarely.
Insurance companies can invest up to 15 per cent in the equity of a company depending on the size of funds they control.
As of now, they are allowed to invest only up to 10 per cent in a single entity.
This was one of the key reforms cleared by the Insurance Regulatory and Development Authority (IRDA) on Friday, shortly before the superannuation of its present Chairman J. Hari Narayan.
Hari Narayan, who strongly opposed investment beyond 10 per cent in a single entity earlier, told Business Line that the changed industry scenario was the reason for the increase.
“The takeover code was earlier 15 per cent, but now it stands at 25 per cent. I also found that the existing Act does permit investments beyond 10 per cent in certain cases,” he said.
When asked about IRDA’s stand on allowing LIC to invest up to 30 per cent, he said: “I still say that it is not prudent as anything above 25 per cent stake can trigger open offer.”
A better investment option is now given for small, mid- and large-sized insurers in tune with their scale of funds, he said. “I believe that this is appropriate given the size of funds under consideration, and without compromising on the prudential management of investments,” Hari Narayan said. The previously announced draft norms in traditional life insurance plans, health insurance were also finalised today. A standard proposal form for sale of life-insurance products was made mandatory, among others. This was aimed at improving the service levels to prospective policy-holders and to further minimise the chances of mis-sale. “In health insurance too, we have just laid foundation for a healthy system,” Hari Narayan said.
Standard definitions to key terms used in health insurance and exclusion of ailments such as skin cancer and HIV from critical illness category are some key reforms approved.
Decision on the long-pending reforms in bancassurance regulations, however, has been deferred on the issue of whether to allow banks to function as corporate agency of more than one insurer.