Pension and Insurance

Economic and Social Issues Rural Banking and financial institutions

INSURANCE SECTOR IN INDIA

Insurance is a subject listed in the Union list in the Seventh Schedule to the Constitution of India where only centre can legislate.

In 1972, Government of India passed of the General Insurance Business (Nationalisation) Act, under which Government took control of all the private insurance companies of India and created 4 companies; National Insurance Company Ltd, New India Assurance Company Ltd, Oriental Insurance Company Ltd, United India Insurance Company Ltd. LIC was created in 1956 is owned 100% by GOI

IRDA

IRDA is the statutory body which regulates the insurance sector in India. It was formed on recommendations of Malhotra Committee regulatory authority in India. It has 10 member governing body appointed by GOI.

Insurance Ombudsman:

Role of IO is to Receive and consider complaints in respect of insurance from any person who has any problem against an insurer. In normal circumstances it has to pass an award within 3 months after receiving complaint.
The award of IO can be challenged in other venues like Consumer Forums and Courts of law for redressal of his grievances.
A committee comprising of Chairman, IRDA, Chairman, LIC, Chairman, GIC and a representative of the Central Government select the Insurance Ombudsman appoint the IO from Insurance Industry, Civil Services and Judicial Services.
Reinsurer in India: Insurance sector needs insurance for their working which is provided by General Insurance Corporation of India.
Foreign direct investment up to 49% is allowed in insurance sector from july 2014.
IRDA has allowed portability in life insurance products from 2011.

Pension sector in India

In India, in the absence of a country-wide social security system along with large number of the ageing population and social change are important considerations for introducing pension reform in the unorganised sector. Fiscal stress of the defined benefit pension system was the major factor driving pension reforms for employees in the organised public sector.

The Government had introduced the New Pension System (NPS) from 1st January, 2004 for new entrants to Central Government service, except to Armed Forces. The Government has constituted an interim regulator, the Interim Pension Fund Regulatory and Development Authority (PFRDA) through a Government Resolution in October, 2003 as a precursor to a statutory regulator.

The design features of the New Pension System (NPS) are self-sustainability, scalability, individual choice, maximising outreach, low-cost yet efficient, and pension system based on sound regulation (Please see the Press Release on NPS).

The National Securities Depository Limited (NSDL) has been selected as the Central Recordkeeping and Accounting Agency (CRA) by PFRDA

The accumulation and contribution of subscribers of NPS, who are Central Government Employees, are invested based on the investment guidelines prescribed for the non-government provident funds by the Ministry of Finance (Please see the Press Release and the Notification on Investment Pattern)

NPS has also been extended to new segments (autonomous bodies, State Governments and un-organised sector) and introducing micro-pension initiatives.

The PFRDA Bill authorizes the PFRDA to establish a Pension Advisory Committee by notification under Clause 44 of the PFRDA Bill, 2011. The object of the Pension Advisory Committee shall be to advise the Authority on matters relating to the making of the regulations under the PFRDA Act.

Market based returns and wide coverage based on several investment options in the pension sector will build up the confidence in the subscribers, whereas withdrawals for limited purposes from Tier-I pension account will be an incentive for them to join NPS.Investor can opt for dividend option and get some gains during the lock-in period.