Mumbai: Much to the relief of existing life insurance Companies, their growing pension business will continue under the supervision of the Insurance Regulatory & Development Authority (Irda). Only new pension fund managers will operate under the watchful eye of the newly established Pension Fund Regulatory & Development Authority (PFRDA).
Earlier, the establishment of an exclusive pension regulator had led to some confusion among life insurance players that their pension business would henceforth be supervised by PFRDA, while the life insurance business would continue to be regulated by Irda.
But sources within the fledgling regulator point out that PFRDA only has the mandate to oversee the pension business of newly created pension fund managers and that, effectively, the existing pension business of life insurance Companies would continue to be regulated by Irda.
Such a scenario, where two regulators would have regulated life insurance Companies, would have burdened these firms with operating within a dual regulatory framework for similar business, thus leading to rather a complex situation, said the chief of a private sector life insurance company. “I am happy that clarity has emerged on the issue,’’ said a senior official of Birla Sun Life Insurance.
Earlier, sensing the possible problems arising from a dual regulatory regime, the life insurance industry had opposed the formation an exclusive pension funds regulator. The life insurance Companies had apprehended that they would either have to report to PFRDA for their pension business or shift pension to completely new Companies floated exclusively for the business.
Both were unacceptable to life insurers who now have been earning up to a quarter of their incomes from pension alone. In fact, both unit-linked insurance plans (Ulips) and pension products have become the mainstay for life insurance Companies.
The Companies, which are currently growing at almost 100%, would have substantially low growth if they sold only traditional products. “One buys insurance products to meet two kind of risks: living short and living long. Both Ulips and pension products have come in handy to meet the expectations of Indian customers,’’ said an official of SBI Life.
Moreover, each of the life insurance Companies is now planning to set up separate pension funds when regulations allow
