Changes likely in accounting norms for insurance cos

HYDERABAD: Insurance Regulatory Development Authority (IRDA) is looking at changes in the accounting standards for insurers in sync with global norms to improve disclosures and protect policy holders’ interests.

The Indian accounting standards will fully converge with the International Financial Reporting Standards by 2011. So the insurance regulator, along with the Institute of Chartered Accountants of India (ICAI), has initiated the ground work to adopt this standard. The ICAI is a nodal agency for setting accounting standards in the country, while the IFRS are standards adopted by the International Standards Accounting Board.

“With several foreign companies investing in insurance joint ventures, the effort should be to have universal norms that can be interpreted by all. The common goal should be to protect the policyholders’ interest,” said IRDA chairman CS Rao.

Private insurance companies have mushroomed over the last 7-8 years since the sector was opened to competition. Many of them are offering a variety of plans: insurance schemes, for instance, are bundled with investment schemes, giving mutual fund like returns. This has led to complexities in accounting.

“Greater transparency in accounting will be required, especially when insurance companies go for an initial public offering to raise funds. This will happen in the next two to three years. We are therefore looking at changes in the accounting framework in convergence with the IFRS,” said IRDA member CR Muralidharan.