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Irda looks to revamp micro-insurance plans

23 November, 2011

The Insurance Regulatory and Development Authority (Irda) is working on guidelines to revamp micro-insurance products. Irda wants to increase the life cover offered in these policies and reduce the premium, an Irda official said.
Irda will also look at allowing insurers to look at different forms of distributions such as a banking correspondent-like model to increase the reach of micro-insurance policies.
The new guidelines are aimed to improve the penetration of micro-insurance policies. Micro-insurance products are small ticket-size insurance policies.
" The regulator is of the view that penetration of micro- insurance should increase from the present levels. We are also looking at taking steps to bring down the premium of micro-insurance products, " the official said.
Irda is looking at changing the definition of micro- insurance policies to broaden the scope of micro- insurance. Micro-insurance policies are generally sold under group schemes.
For distribution, insurers tie up with agencies such as micro-finance companies, cooperative banks and non-government organisations (NGOs). " There is a lack of efficient delivery of micro-insurance products. We are examining the various options that insurance companies can look at for distribution, " added the official.
At present, all insurance companies, both life and non-life, are mandated to do 20 per cent of their business from micro and rural insurance policies. Micro-insurance is not a profitable business segment for insurance companies because the premium generated is very low. For most insurance companies, distribution costs of micro-insurance products is often more than total premium earned.
In 2009-10, life insurers earned new business premium of Rs 401.641 crore from micro-insurance policies.
Recently at an industry conference, Irda's chairman J Hari Narayan expressed concerns over the low penetration of micro-insurance products. He said, " There are some structural issues in micro-insurance products in terms of benefits payout. We are examining that."