There is a compelling need to introduce safe-landing provision in the annuity instrument (retirement-income insurance) of defined contribution of pension insurance schemes—-as pensioners having their funds heavily loaded on equity side is likely to lose their investment in the event of a market crash during retirement, said R Kannan, member, Insurance Regulatory Development Authority (Irda) at the seminar of repositioning insurance industry in the emerging environment.
Under the safe-landing provisions, claim contribution amount could be dislodged from equity to debt apparently to fixed interest money market so as a pensioner would receive a stable yield during post-retirement phase, he said.
Annuity is a fixed contract in India where as the variable annuity process exist abroad, he said. There are limitations in making available the variable annuity and index-linked annuity products in the Indian market, he pointed out. The institute of actuaries of India is currently working on publishing the morbidity and mortality data table that would help Insurance companies to arrive at effective health and annuity instrument pricing, he added.
Speaking about the Indian insurance companies remaining unscathed in the context of global financial meltdown, he said Irda?s adoption of policies like combination of risk based supervision and rule based supervision has helped the Indian insurance industry to comply and stay above the benchmarked solvency margins prescribed by IAIS (International Association of Insurance Supervisors) and Basel II norms.
While briefing on the possibility of introducing health insurance portability in India, he said it is possible, but for issues of cost on medical expenditure inflation differentials existing among various small and big cities in the country.
Observing an increasing trend in the underwriting losses amounting to Rs 3,179 crore in financial year 2008-09 against Rs 2309 in the previous year, he said there is a 38% year-on-year increase in addition to the increasing of loss, expense and operating ratio. Kannan said that Irda is developing a web portal that will be shortly launched to enable customers to check online their claim disposal status by their insuring companies.
He expressed concern over the low insurance penetration in India, till 2007 the insurance penetration is around 4.7% of gdp when compared to Asia?s 6.20% and world?s penetration of 7.5%. Underlining the challenges in the penetration of rural Indian market, he added that though it provides an opportunity, but low literacy and income levels require customized solutions. The industry players should also come up with products for unorganised sector, said the Irda member.