Insurance regulator Irdai on Tuesday constituted a six-member working group to examine various aspects for allowing life insurance companies to offer index-linked products.
The current regulations of Insurance Regulatory and Develop Authority of India (Irdai) do not specifically permit insurers to sell index-linked products.
Life insurers had approached Irdai with a request to allow them to offer index-linked products. Life insurance companies currently offer two product categories — unit-linked insurance plans and traditional plans.
“Taking into considerations requests from life insurers, it has been decided to constitute a working group to examine various aspects of Index-Linked products in life insurance segment,” Irdai said in an order.
The working group will be headed by Dinesh Pant, appointed actuary of LIC, and submit the report within two months.
Other members include Anil Kumar Singh, appointed actuary, Aditya Birla Sun Life Insurance; Jose C John, appointed actuary, Max Life Insurance; Manish Kumar, chief investment officer, ICICI Pru Life Insurance; Y Srinivasa Rao, DGM, investment department, IRDAI and DNK LNK Chakravarthi, AGM, actuarial department, IRDAI.
The working group will examine the need for index-linked products in the country, especially with respect to the availability of various indexes and how it will better serve the needs and interests of customers relative to traditional savings product, the regulator said.
It will also examine the index-linked products, which were earlier available for sale in the country in terms of product structure, ease of customer understanding and administrative processes, sales volumes and any other matter of relevance.
The group has also been asked to give recommendations on specific aspects like product structure as well as its pricing, the regulator said.
The working group may invite external experts in the meeting for discussion on need basis, Irdai added.
Vivek Jain, Head-Investments, Policybazaar.com said index-linked products are insurance products whose returns are linked to benchmark indices.
“It can be linked to the 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,” he said.