Mumbai: The life insurance industry is bearing the brunt of a 90 per cent fall in pension business due to a special tax treatment for the New Pension System and a regulatory clause that makes it mandatory for life insurers to offer guaranteed returns to subscribers.
The pension business of life insurance players is down to a meagre Rs 2,000 crore in 2014-15, from Rs 20,000 crore in 2009-10.
Pushed to the wall, the industry has called for a level-playing field.
The plunge has been more pronounced since the introduction of the clause in 2009-10 which made it compulsory for life insurers to offer guaranteed returns on pension products.
The Budget provision of Rs 50,000 worth of additional tax-free incentive to NPS investment over and above the existing Rs 1.5 lakh has only made their life harder.
"The regulator has asked insurers to offer guaranteed pension which they find it difficult, given volatile market conditions. Second, by introducing specific exemption of Rs 50,000, NPS has hijacked the pension business from life insurers," Life Insurance Council Secretary General V Manickam told PTI.
"Life insurers' pension business is not growing because the government didn't allow life insurers with pension products to be treated at par with NPS in which one can invest Rs 50,000 in addition to the already existing limit of Rs 1.5 lakh which will be tax-free," IRDAI Member (Life) Nilesh Sathe said.
The largest life insurer, Life Insurance Corporation (LIC), has said the extra benefit for NPS may put pressure on its pension product sale.
"So far, we have not been hit, but going forward it may put pressure on our pension sales," LIC MD Vijay Kumar Sharma said.
