The official said the industry raised several issues at the meeting with the finance minister and he asked the IRDA chairman to look into them.
"The two met twice late last month. And on Monday, Chidambaram announces a slew of measures," said another industry official, preferring anonymity.
"What we have been telling the IRDA for the past couple of years, the finance minister has announced them in a short time," S.L. Mathur, former secretary general of the Life Insurance Council of India (LICI), the lobby body for life insurers, told IANS.
"The industry welcomes Chidambaram's announcement. It is the need of the hour," V. Manickam, the current secretary general of the LICI, told IANS.
Major announcements like allowing banks to sell products of more than one life insurer were on the industry's wish list for a long time but were not considered by the IRDA.
"The government has certainly stepped in favour of the industry as the regulator did not look at their demands favourably. If the regulations are not up to the mark, then the government has to step in," a chief executive officer (CEO) of a private life insurer told IANS.
"However, the government was not abrasive. It facilitated a discussion between the industry and the regulator. The finance minister met the regulator twice and discussed the issues involved before he came out with his statement," he added.
"The industry has to be blamed for losing the regulator's trust. For the first 10 years, the IRDA was in favour of the sector but the companies were not customer-friendly. It then started to take action," the ceo of another private life insurer told IANS.
The life insurance sector hit a roadblock in 2010 after the IRDA brought in customer-friendly regulations like capping commissions and guaranteeing return on pension policies.
"After that there were not much of confidence-building measures on the part of the regulator," an industry official said.
Meanwhile, the regulator went ahead with levying penalties on companies for paying their agents more than what was stipulated.
"Incidentally, the government has asked the IRDA to allow the insurers to manage their overall management expenses within the maximum limits prescribed by law without any granular stipulations except the maximum commissions stipulated by the Insurance Act," an insurance company official said, arguing that the government was asserting itself.
One of the common complaints against the IRDA is the long time taken in approving new products and also the lack of uniformity in approving products - some companies getting the nod to launch a product and others not getting the sanction to introduce similar policies.
While the IRDA approves new products on file and use basis, Chidambaram wanted the regulator to introduce a system of use and file in respect of certain standard products.
On the other hand, the IRDA welcomed Chidambaram's statement and said it "has noted that several issues, which the industry has raised, could be addressed in a consultative and constructive manner entirely within the framework of the insurance law and regulations as they stand".