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Saturday, December 20, 2008

IRDA expects 10% drop in policy rates of pension, annuity plans

The Insurance Regulatory and Development Authority (IRDA) expects a 10 per cent drop in the policy rates of ‘other than pure term’ products such as pension, annuity and health insurance over the next couple of months.

The drop in policy rates is expected because of the recent move by the insurance regulatory authority to reduce the solvency margins under this category which has been lowered from the existing 4 per cent to 3 per cent. The revised norms would come into effect from December 31.

“The move was initiated to harmonise the solvency margin across the board for pure term and other than pure term products,” Dr R. Kannan, Member (Actuary), IRDA, told Business Line.

Dr Kannan observed that when IRDA reduced the solvency margin of pure term products last year, policy rates came down by 10 to 15 per cent over a six month period.

IRDA expects the move to help give more encouragement for selling non-unit linked insurance products (ULIPs) and promotion of traditional insurance products.

“In the case of ULIPs the major problem is the fortune is tied to the capital markets and we are all seeing the volatility there. Also, we believe that sale of non-ULIP products is where the core competence of an insurance company lies,” he said.

source: Business Line


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