Just very recently, a radical move has been proposed and agreed upon by the governing agency over all Life insurance companies of India primarily to bring into the scenario a more dependable and stronger foundation of the Life Insurance system all over India. The reality of disclosing the assets and financial status of these Life Insurances are basically the one which is demanded by IRDA so as to check and balance all of the income and expenditures of the many Life Insurance businesses mushrooming in India. This is both beneficial to the clients to be, the government of India and the Life Insurance Companies as well together with their possible investors.
Hence, because of this memorandum of agreement, Life insurance companies planning to raise money from bourses will now have to provide a financial account and disclose the investment performance of various unit-linked insurance plans (Ulips) over the past five years in order to help prospective investors gauge risks better. In this way, investors will be able to decide on whether to invest or not from those said prospective Life Insurance Companies.
Moreover, these companies will also have to give guidance on earnings from their present business and agreements with foreign promoters this way, clients and investors alike will be able to have a bigger and clearer picture of the entire business company where they will invest their money. This set up is basically to be followed and implemented according to new norms cleared by an inter-regulatory panel set up by SEBI. Good thing is, most of IRDA’s suggestions on disclosures have been accepted by the panel, said a senior official privy to the development. This new development is therefore close to being a great success.
It is interesting to note that Ulips are similar to equity schemes of mutual funds, but with an insurance cover thrown in. This is something safe and secured due to the cover insurance itself. This category accounts for over 80% of the portfolio of private insurers. Insurance watchdog IRDA, which has been granted the right to regulate Ulips after a public spat with SEBI, has tightened regulations to ward off criticism against untoward selling of this hybrid product. This practice will prevent abuses from the Life Insurance Companies.
Finally, loss-making companies will be allowed to tap the equity market since given the nature of the business, insurers can’t wait forever till they make profits, said another person familiar with the developments. “They should make all disclosures and let investors take the call,” the person said. This may not be a good signal to these losing companies but the most important fact is that all parties will be able to find where to stand and start all over again by finding the remedy with the help of everyone concerned.
As a conclusion, IRDA, all Life Insurance Companies, the would-be investors and all prospective clients should exert efforts in trying to iron things out and finding the best possible solutions to remedy the problem that may emerge from the Life Insurance Companies’ not disclosing their respective assets and financial transactions. This would provide all sectors the best plans and evaluation in view of making the most of their business endeavors that will surely bring the economy to its apex progress and the lives of the citizens and these said companies stable.