The insurance regulator is set to drop the 4.5 per cent guaranteed return clause in the controversial pension product norms. The revised guidelines for pension products will do away with this guaranteed annual rate of return, linked to the reverse repo rate prevailing in September 2010, when the guidelines were issued. Instead, insurers will have to provide only a capital guarantee. This is a major relief for life insurers, as pension products used to account for nearly 30 per cent of their sales before the new regulations came into force. “The regulator has indicated there will be only one guarantee, and that is capital guarantee,” said a senior official of a private life insurance company. Insurance Regulatory and Development Authority (Irda) Chairman J Hari Narayan confirmed the authority was working on the proposal. “We are examining that model. There should be one form of guarantee which is necessary to protect the interests of policy holders. Insurers are free to provide other guarantees, but as riders,” he said.
Source : Business Standard
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