Mumbai, Sep 2 (IANS): Finance Minister Pranab Mukherjee said the new norms for unit-linked insurance plans (ULIPs) which kicked in Wednesday are aimed at building investor confidence.
"Reforms are not static, they must keep flowing," Mukherjee said, addressing an insurance summit organised by industry chamber ASSOCHAM here, and lauded the Insurance Regulatory Development Authority (IRDA) for laying down a strong regulatory framework.
According to the IRDA, the new norms are aimed at making the products cheaper and more beneficial for investors.
But life insurance companies fear that their margins will be squeezed and profits will be hit as charges of ULIPs get capped.
Mukherjee also asked the insurance industry to promote micro insurance in rural and remote areas for greater financial inclusion in the country.
Micro insurance products are characterised by low premium payments and low coverage limits.
Mukherjee said micro-insurance is essential for financial inclusion and urged the insurance industry to broad-base the insurance market by covering the rural and semi-urban areas.
"The United Progressive Alliance (UPA) has laid special emphasis on insurance by launching Aam Admi Bima Yojana, Jan Shree Bima, Rashtriya Swasthya Yojana and crop insurance schemes to protect and economically empower the weaker sections of society," he said.
The finance minister pointed out that health insurance covered a miniscule percentage of the population and called for a big push to promote it among the masses. He said there is "an urgent need" to step up outreach programmes to create awareness about the insurance products.
The insurance penetration in the country, which grew to 4.6 percent of gross domestic product (GDP) in 2009 from 1.84 percent in 1996, still remains low owing to factors such as lack of awareness and availability of products.
Touching upon the role of insurance in disaster management, Mukherjee said: "Insurance plays a key role in mitigating the losses arising out of disasters and our companies must explore international re-insurance markets to protect their interests and render services."