The Hindu Business Line : `Insurance investment laws need re-look'

THE laws that dictate the ways in which insurance companies can invest need another look if the policyholder's interest has to improve in the wake of changes in the capital market, said Mr C.S. Rao, Chairman, Insurance Regulatory and Development Authority.

At a seminar organised by the Consumers Association of India here on Monday, Mr Rao felt the entire capital market is undergoing change. Subsequently, on the sidelines, he stated that IRDA did not plan to change rules now to allow insurance companies to invest abroad.

Insurance companies had earlier asked the Law Commission, which is preparing a law to update and consolidate different sets of rules for the industry, to allow them to invest abroad.

Mr Rao drew attention to the prevailing problem of confusion among insurers and people following an increase in the variety of policies. He asked the industry to find a proper balance and design policies to suit people's needs.

A good policy should be supported by well-trained agents who could help buyers understand the product, said Mr Rao. "In this regard, great work has to be done," he felt.

Do we need agents?

"Life insurance is always sold and not bought," said Mr S.R. Krishnaswamy, Executive Director of Life Insurance Corporation, while explaining the importance of the insurance agent. Other industry hands at the seminar agreed with the view.

Dr U. Srinivasa Raghavan, Chief Post Master General in Chennai, questioned conventional wisdom, and felt "personally, there is no need for agents."

The postal department began to sell insurance policies in 1884, but the law restricts their market to rural areas and government employees. Dr Raghavan said the department communicated directly with people interested in insurance, thereby lowering the cost of running the business. The cost savings had been passed on to policyholders, he added.

"This year, rural postal life insurance in Tamil Nadu alone is likely to be Rs 2,000 crore," said Dr Raghavan. He added the postal department sold straightforward policies, which made insurance agents unnecessary.