Indian govt. is looking to revisions in LIC (Life insurance Corporation) Act at the recommendations of IRDA (Insurance Regulatory & Development Authority).
Indian govt. is looking at the recommendations of IRDA (Insurance Regulatory & Development Authority) for suggested revisions in LIC (Life insurance Corporation) Act. The govt. will try carry out these changes in the Indian insurance sector at the same time.
Vinod Raj, Banking Secretary said that they are examining every recommendation and are looking though a broader vision on all of these recommendations. However, he didn't reveal whether these revisions would be made at the same time or not.
Among the proposed alterations, is increasing the FDI cap in private insurance industry to 49 % from 26 %, which is not being favored by Left parties. Also, govt. has been asked by the IRDA to review its guarantees regarding LIC policies. IRDA has also asked the govt. to allow LIC to have own reserves for solvency needs like private insurers.
According to law, 95 % of surplus generated is provided to policyholder while the rest goes to the govt. as dividend. LIC is currently planning to inject around Rs. 70 billion to fill the solvency margin gap, as it plans to raise solvency margin from 130 % to 150 % by 2009.
Solvency margin is the money that is used as a support against a default. As per the law, there is no reserve for solvency margin for LIC, which is presently met through current shareholders' fund.
"Since deregulation has been put in place, market share of LIC has come down to 71.4%, while private players have captured around 17% market in the general insurance segment. Public sector insurance companies such as LIC and New India Assurance have registered impressive double-digit growths, reflected on the overall health of the Indian insurance sector," as per the report "Indian Insurance Industry Forecast (2007-2009)" published by RNCOS.
IRDA has also suggested LIC to reduce minimum capital requirement from worth Rs. 500 million & increasing its FDI cap to 51% for health industry.
IRDA chairman appeared satisfied seeing the way insurance firms are gearing up to counter de-tarrifing when IRDA will no longer fix up the prices for insurance prices from 1st of January. As per de-tarrifing scheme, insurance products' prices, except vehicles, is expected to fall due to growing competition.
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