The IRDAI has constituted a six-member committee to examine various aspects of index-linked products in the life insurance segment, the regulator announced in a statement.
The IRDAI said that it formed the panel following requests from various life insurance companies to allow them to sell index-linked products.
Current regulations do not specifically permit insurers to sell index-based products. At present, life insurers can offer products under two categories: participating products and non-participating products.
The working group has representatives from the IRDAI, Aditya Birla Sun Life Insurance, Max Life Insurance and ICICI Pru Life Insurance.
The terms of reference of the working group is as follows:
3.1.To examine the need for index-linked products in India especially w.r.t availability of various indexes and how the products will better serve the needs and interests of customers relative to traditional savings products.
3.2.To examine index linked products which were earlier available for sale in the Indian market in terms of product structure, ease of customer understanding and administrative processes, sales volumes and any other matter of relevance.
3.3.To study practices in other jurisdictions with respect to the product structure and operations of index linked products.
3.4.To provide recommendations on specific aspects of index linked products, like product structure, pricing and reserving along with suggestions on possible amendments to current regulations like Product and Investment Regulations.
Experts say that linked insurance products can be benchmarked to 10-year government bonds or equity indices such as Sensex or Nifty. While those linked to government bonds are less risky, those linked to equity-based indices would have fluctuations in returns, based on stock market performance, reported CNBC TV18.
The IRDAI has asked the working group to submit its report within two months from 1 September.
Asia Insurance Review