CHENNAI - India’s insurance regulator now appears to be following the corporate sector’s credo - tough times are the right time to take difficult decisions.

The Insurance Regulatory and Development Authority (IRDA) is drawing up plans to strictly monitor insurers’ expenses and premium charged for group and guaranteed return policies.

‘We are contemplating making insurers get all the payments made to a company over a threshold limit certified by an external auditor,’ R. Kannan, member (actuary) of IRDA, told IANS on phone from Hyderabad.

The certificate should also specify the kind of services insurers receive from the intermediaries for the payment they make.

Now the insurers are paying huge sums to corporate agents and bancassurance partners - banks that sell insurance policies - apart from the agents’ commission for selling their policies.

In the past, there were cases when the insurers had to pay up to Rs.600 million (Rs.60 crore) as joining premium to banks and Rs.100 million to corporate agents.

This, according to IRDA officials, is a dangerous practice as insurers are forced to set aside huge sums only to save their partnership agreements in a highly competitive atmosphere.

Though the expense certification regulation is expected to check this practice, Kannan did not set any time frame for the implementation of the proposal.

He, however, added that the IRDA was also looking closely at the pricing of group insurance and guaranteed insurance policies as the premium of several such policies is too low.

‘Some of the rates quoted for software companies are mind- boggling. The rates are not even sufficient to cover the stamp duty payable on the policies,’ said Kannan.

He added: ‘We will study carefully the adequacy the policy charges and the premium levied by the life insurers in their policies that guarantee returns.’

After the stock market’s recent fall, consumers have become wary of buying unit-linked insurance policies (ULIP), where the investment risk is borne by the policyholders.

Many companies are now launching policies that guarantee payment of highest net asset value during the policy term or at the time of maturity.

Industry officials said promoting such capital-intensive policies, where companies have to provide higher sum for solvency, is a bad business practice and would have disastrous consequences.

‘It will be difficult for the companies to survive with such products if the stock market indices go up the sky and crash to the earth once again as has happened now,’ an official told IANS.

He added that there was a lot of mis-selling going on in the guaranteed policy market.

‘Policyholders think there is whole lot of stock market investment activity being done on their behalf and they would immensely benefit. Actually it is not so. Life insurers will largely invest in debt and liquid securities and a very low percentage in equity,’ the official said.