'Insurance cos' listing will boost scrutiny'

MUMBAI: The insurance regulator has signalled that it’s watching the issue of corporate governance of investee companies and said listing of insurers will bring in the scrutiny required for efficient management of the companies.

The regulator also brushed aside the debate over the composition of foreign direct investment in Indian companies on which the limits are being raised to 49%, from 26%. “Time has come to look at governance of corporates with which they are investing so that investors get the best returns on their money invested," said TS Vijayan, chairman, Insurance Regulatory and Development Authority (Irda).

Insurance companies are among the biggest investors in the Indian stock and bond markets with them generating a corpus of about Rs 3.6 lakh crore a year. If the companies have dubious accounting practices, like the erstwhile Satyam Computer Services, where figures were fudged, investors end up losing money.

Vijayan, a former top executive at the state-run Life Insurance Corporation of India, also said there is a need for transparency in the way insurers design and sell their products. “It’s time that insurance companies address the issue of transparency of insurance products," Vijayan told the audience at the Foundation day of New India Assurance. “At the very beginning, the customer should know what benefit he would get out of it."

Thousands of investors lost crores of rupees because of the misleading sales pitch in the past five years when investors were lured into the so called unit-linked insurance plans, or Ulips, which had high commission rates. After a public spat between Sebi and Irda, the insurance regulator set things right with Ulips.

He was dismissive of the colour of money in foreign investment. “We don’t care from where the capital is coming," said Vijayan. “It is for the government to see. We are only interested in knowing whether the player would be able to meet the solvency margins."