IRDA awaits govt nod on pension funds

Kochi: The Insurance Regulatory and Development Authority (IRDA) is waiting for the government to suggest further steps to be taken on the report on the pension funds, according to IRDA chairman N Rengachary.

Rengachary was delivering the keynote address at the wealth management seminar organised by Geojit Securities here on 18 February. The report, submitted in October 2001, deals with a system devised to give pension cover to the unorganised and self-employed people.

Rengachary said of the 320-million working population, only 11 per cent is at present covered by a pension. This includes mostly government employees and industrial workers. A vast majority of 89 per cent does not have a pension cover.

In this time of nuclear families, the relevance of the pension system has assumed importance as a major source of income to protect people during the non-earning stage of life. The authority wants every citizen to come under the pension cover.

He allayed fears of solvency of the private insurance companies that have entered the market saying the firms have been asked by IRDA to ensure solvency level at every point of time. The solvency has to be at 150 per cent the 50-per cent reserve to meet any liability that arises.

Every year the companies have to value the assets and liabilities. If there is a deficit, the companies have to pump in money and if there is a surplus, it has to be diverted to a surplus account to declare a bonus. The investor has access to IRDA on any complaints on the insurance company. Though the minimum investment for the insurance company is Rs 100 crore, many need to have around 400 crore to meet future liabilities.

As of now, 92.5 per cent of the returns has been set apart for shareholders, leaving just 7.5 per cent for the participating company. IRDA is planning to enhance the share of the companies from 7.5 per cent to 10 per cent, so investment in insurance will not be affected by a lack of return.

IRDA has given permission for 13 private companies to start business in the life insurance sector. Further, two applications are pending approval. In general insurance, six private companies have been given permission to operate, he said.

Presiding over the function, Kerala State Industrial Development Corporation managing director Jiji Thomson said with several insurance firms in the fray, quality of service will be the benchmark to distinguish them.

Speaking on personal risk management and the role of life insurance in personal financial planning, Venkitesh Mysore, managing director of MetLife India Insurance, with which Geojit has tied up for distributing insurance products, said a company has six steps to achieve success in the insurance field setting goals and prioritising them, gathering facts, analysing, recommending, implementing strategies and reviewing the plans.

Geojit chairman A P Kurian in his presentation on asset allocation and financial planning said wealth centres of the company give advise on financial planning like doctors prescribing medicines after diagnosis.

In his welcome speech, Geojit managing director C J George said Geojit has emerged as a provider of a complete range of financial management solutions aimed at retail market after its tie-up with MetLife.

The first policy was handed to the policyholder Varghese Jose by Mysore. George handed over Rs 4.5-crore of insurance proposals to Venkitesh.