Insurance companies should follow IRDAI regulations while investing in Corporates: Subhash Chandra Khuntia

Insurance companies will have to abide by IRDAI regulations while investing in the corporate companies, says Subhash Chandra Khuntia, Chairman, Insurance Regulatory Development Authority of India (IRDAI). In an interview with Anurag Shah, Zee Business, Khuntia asked insurance companies to be careful while investing in corporate companies to make sure that the policyholder is not at the receiving end. Edited Excerpts:

Q: DHFL is going through a bad phase. So, insurance subsidiaries of  DHFL are also in pressure as few policyholders are worried?
A: DHFL insurance subsidiaries don't have a problem,  their solvency and financial conditions are as per regulations and balanced. There are no such issues related to it.

Q:  insurance companies invest in corporate companies and we have seen that several companies have defaulted. So, have you issued any instructions related to investment or any sort of provisioning for insurance companies?
A: They will have to look into on the minimum ratings as per the regulations before investing in the companies. Apart from looking at the ratings that are provided by the rating agencies, the insurance companies should also have a look at the standing of the companies to be sure that they are investing in good companies.

Q: But what about the insurance companies which invested in IL&FS, as they will be on a risk?
A: The investments in IL&FS will be treated separately but we have asked companies to be careful before investing in the future and make sure that the policyholder is not at the receiving end.

Q: New life insurance product guidelines minimum sum assured on death can be seven times the annualised premium? But it is contradicting with the Income Tax deduction under 80C of maximum 10% premium of Sum assured. Keeping this in mind, will you ask the Finance Ministry to change it?
A: If there is a coverage of 10 times or more, then one will get the income tax exemption. However, there is no income tax exemption for 7-10 times, but people can opt for the policy without getting exemption in income tax. For instance, those who got themselves insured/go for life insurance will need 7-8 times as 10 times is a hard thing for them, and they will not get any income tax exemption. But we had requested to Finance Ministry to reduce the 10 times of the income tax to 7 times. This could not happen in the budget of this year and we will look for the same at this the next year’s budget. 

 Q: What is the game-changer rules that the IRDAI plans to bring in the health insurance sector? What are its features that can change the entire health insurance sector?
A: The Pradhan Mantri Jan Aarogya Yojana is a major health insurance scheme and around 50 crore people will receive its coverage. While it is an insurance model in some states, in others it is a hybrid model and trust model. I think many states will come under the insurance model in future, as it is a decent model and benefit people.
 

Q:  There are certain diseases which are available in the exclusion list but what will happen when they come into the inclusion list as proposed in New Health product Draft guidelines? Do you think that this inclusion will put additional pressure on common policyholders?
Ans: A: Yes, inclusion will put a bit pressure on them, but it will not too huge to have an adverse effect on them. But generally, it will be beneficial for everyone because exclusion will become less.

Q: By when the new guideline will come out?
Ans: We are looking at the exclusion, but it will be released soon.

Q: What is the progress on rules associated with sandbox and what interest has been shown on that?
A: In the sandbox, we got support from start-up companies as well as from insurance companies and it has been approved and the guidelines will be issued in next few days and then will begin will it.

Q: Many Insurance companies stated that there is a decrease in auto sales and increased insurance cost for long-term insurance is one of the reasons for that. So, should we expect that the IRDAI will introduce some new changes in the segment?
A:  Renewal will not be long-term. However, this change of long-term insurance - under which the third-party insurance should be for 3 years for a new two-wheeler and 5 years for a four-wheeler - was issued in the backdrop of the supreme court’s order. But the comprehensive insurance is not compulsory and according to bundle policy, one year will be given for own damage and three years for the third party. It will help in reducing the financial burden.

Q: Will IRDAI will give an approval under which small products or products of limited size will be sold even at the pharmaceuticals and medical stores. What is the progress on it?
A: The distribution channel can appoint a person, but they should be trained so that they know about the process of selling insurance.

Q: Have you asked something from the government to improve the health of three non-listed companies because they are weakening day by day?
Ans: The government is monitoring it and they are public sector companies with good market share. But there is a need to improve their financial and solvency conditions and we have written for the same to the government.

Q: What is the timeline for reduction of the stake of Life Insurance Corporation of India in IDBI Bank?
As per IRDAI norms, insurers are allowed to only hold 15 per cent equity stake in an entity. A special dispensation had been given to LIC to hold 51 per cent stake in IDBI Bank after the insurer bought the stake from the government. LIC will give a deadline which the IRDAI will look into.