Convergence between other financial services and insurance on -- Rangachary

Convergence between other financial services and insurance on -- Rangachary
ENS ECONOMIC BUREAU

NEW DELHI, NOV 23: Convergence between other financial services and insurance is already under way though much of it is taking place underground. Out of the 12 applications received by the Insurance Regulatory Development Authority (IRDA), only 2 applications are from applicants in the non-financial sector.

This was stated by the Chairman of the IRDA, N Rangachary on Thursday. Addressing the Valedictory session of the CII summit on Insurance, Rangachary said that rest of the applicants are either from the pure financial sector or applied financial sector. The rest of the applicants are likely to be big banks who have showed interest in the insurance sector.

This is inspite of a feeling that ``we have not reached an age where convergence is necessary,'' he added. According to him, even the RBI guidelines has demarcated between the banks and the insurance companies. Inspite of all these, one regulator is still talked about, he stated.

The convergence is on since there is a synergy between insurance and the other financial services. The financial sector players also want another feather in their cap through their insurance foray, Rangachary added.

Ealier, speaking on the industry's role in the insurance sector, Rangachary stated that now the IRDA has put in place the regulations, it is upon the industry to take up the challenge and go ahead to tap the enormous potential in the sector.

Eradi committee to submit report soon

The expert committee on taxation in the life insurance sector is expected to submit its report early next month.

``The committee will soon submit the draft report, which is to be circulated for suggestion on the equitable and reasonable ways of taxation," V U Eradi, heading the committee, said on the sidelines of the CII conference on Insurance.

The committee, set up by the government to look into the possible changes in the tax structure of the life insurance sector, felt that taxation methods based on actuarial valuation basis would be better for the newly opened up sector than the current investment income-expenditure (I-E) method.

In India, life insurance sector was taxed till 1976 on the basis of profit of I-E basis and valuation of surplus basis, but later changed to a flat rate of 12.5 per cent on the taxable profits of life insurance companies.

In addition, the investment profits made on shareholders'fund are taxed at a full corporate tax rate of 38.5 per cent including the surcharge.

Expressing apprehension that adverse tax rates and method may thwart the furture growth of the newly opened up sector, Eradi said tax authorities should evolve new laws on insurance only after consultation with IRDA.

Eradi also said that the tax authorities should not'meddle' with the books of the new insurance companies.