Last week some insurers asked the regulator to ease proposed investment norms in unlisted firms.

They wanted a higher quantum of investible funds to be allowed in unlisted firms by tweaking a certain basis of calculation proposed. Regulator IRDAI lays down investment norms and different view points and requirements lead to the dialogues.

All large firms, apart from core business, also maintain an investment portfolio spanning the securities markets, government debt, money market, international currency and so on. The income from that is called ‘other income.’

Insurers have significantly large investment portfolios and are big institutional investors.

The premium is invested and it is with that income the insurers run operations, sell more policies and pay claims. This is because it is a long and difficult road to profit in core insurance business, called underwriting profit. And in general insurance, underwriting profit can be elusive even after decades since they deal with catastrophic and long-tail risks which can be difficult to quantify and manage.

This is why insurance norms take a strict view of investments by insurers. The percentage of total investment in each category of investment is laid out. The overarching goal of this norm is fund safety not high returns.

However, since profit is also important, the regulations allow a certain, measured, portion of the portfolio to be invested in the securities market and some other instruments where the risk is higher and so is the chance of reward.

Investment in unlisted companies is considered riskier than in listed companies, other things being equal. Yet, they can give impressive returns as we have seen in the case of tech startups and the unicorns.

So, what does all this have to do with you, an individual? And this page, which is about personal finance? You should be aware of how your money is safeguarded. Because, investment is not a one-size-fits-all activity.

A case in point, years ago, a young relative came home to give my mother the good news that he had got a job in the marketing team of a mutual fund.

When he learnt of my insurance background, he complained bitterly that insurance companies were not allowed (then) to invest in mutual funds and that the insurers were losing out a golden investment opportunity (and he, a golden sale!).

I explained to him that the insurance company was investing his personal life insurance premium and asked how safe he wanted that money to be, right up to the day when a claim is made. The penny dropped and he accepted that all investments are not for everyone.

There are many reasons why insurance is a difficult business. It requires large investments, significant staying power until breakeven which can be over a decade later, sustained marketing and repeated shoring up of solvency as per regulations.

With all this pressure for continuing investment, your funds need to be safeguarded and that is what the regulations do.

They ensure that your money is in a safe investment until you call for it by way of a claim.

You definitely don’t want to see it frittered away on some dubious investment or shiny ponzi scheme as my neighbour did with his retirement settlement and found himself figuratively on the streets.

(The writer is a business journalist specialising in insurance & corporate history)

Published on July 20, 2026