IRDA, pension regulator PFRDA to lock horns
Two years after tensions rose between the pension and insurance regulator over commissions, a fresh round of friction between the two is in the offing.
The latest cause for friction is Pension Fund Regulatory and Development Authority's move to list life insurers to provide annuities to subscribers of the National Pension System (NPS). The NPS, which is administered and regulated by PFRDA, accumulates savings for a regular monthly annuity payment after retirement for government employees and those in the unorganized sector. However, the conversion of the accumulated savings into a monthly income stream can only be done by a life insurance company as per law.
PFRDA has invited expressions of interest (EoI) from life companies. In its invitation for EoI, it has said that annuities will be bought directly by the annuitants from the list of Annuity Service Providers (ASPs) approved by PFRDA from among the schemes accepted by PFRDA. PFRDA has also outlined seven options which life insurers can provide.
According to a senior official from the life industry, if PFRDA is going to allow only select companies to provide annuities, pricing might be an issue for selection. However, insurers can quote a price for an annuity plan only after their product is approved by the regulator.
Recently, the Insurance Regulatory and Development Authority (IRDA) had expressed reservations over a proposal to allow agents of life insurance companies to distribute pension products. IRDA chairman J Harinarayan , at a recent insurance summit, had said that life insurance companies were not mandated to act as intermediaries for third-parties.
In 2009, a committee headed by former pension regulator D Swarup had proposed that commission for insurance agents be scrapped completely and all agents should be converted into independent financial advisers who would be regulated by a Financial Well-Being Board of India (FINWEB).
The planners were expected to advise on all products, including those administered by PFRDA. The proposals were, however, never implemented by the government.
Earlier too there was an issue of who would regulate pension plans after the formation of PFRDA. Although the PFRDA's mandate was to manage pension plans in the government and unorganized sector, the insurance regulator made it clear that any pension plan floated by an insurance company would be its sole jurisdiction.
Source: Economic Times
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