KOLKATA: The insurance regulator, Irda, wants risk cover providers to offer maturity benefits on every micro-insurance plan
to make it attractive. It may allow business correspondents of banks to
sell policies in the country's rural belt to push the product.
Insurance Regulatory and Development Authority is revising the micro-insurance guidelines to include this proposal and boost sales. Micro-insurance, which is being sold to the economically weaker section, has seen a steady decline since 2010. "We need simple and cost-effective policies with some reasonable returns to push micro-insurance," said Sudhin Roy Chowdhury, member (life), Irda.
A majority of the 14.8-million micro-policies sold in FY12 was term insurance, which offers no maturity benefit to the policy holders. The sum assured is disbursed only in the case of death or accident or hospitalisation of the policy holder according to the policy terms. Irda now feels that without reasonable returns and maturity benefits, it is difficult to make poor people buy risk cover. So, if Irda changes the guidelines, it will perhaps mean that insurers can sell only endowment policy and withdraw term policies from their product basket.
"This will be difficult to implement," said Shashwat Sharma, partner at KPMG India. "What Irda is possibly saying is that insurers will have to offer a standardised package covering different benefits, including endowment benefit," Sharma said.
The regulator said it will bring in a revised set of guidelines for micro-insurance in a coupe of months. It issued the first guidelines in 2005. Irda is planning to allow business correspondents of banks or local kirana shops to sell micro-insurance policies to expand the distribution channel.
Roy Chowdhury said the mushrooming of chit funds and money circulating schemes, especially in the eastern region, has hampered the growth of insurance sale. He said laws need to be tightened to prevent insurance agents from selling dubious collective investment schemes. Companies running money-circulating schemes, including Saradha Realty India, had engaged post office and insurance agents to raise funds from public to increase their credibility.
Insurance Regulatory and Development Authority is revising the micro-insurance guidelines to include this proposal and boost sales. Micro-insurance, which is being sold to the economically weaker section, has seen a steady decline since 2010. "We need simple and cost-effective policies with some reasonable returns to push micro-insurance," said Sudhin Roy Chowdhury, member (life), Irda.
A majority of the 14.8-million micro-policies sold in FY12 was term insurance, which offers no maturity benefit to the policy holders. The sum assured is disbursed only in the case of death or accident or hospitalisation of the policy holder according to the policy terms. Irda now feels that without reasonable returns and maturity benefits, it is difficult to make poor people buy risk cover. So, if Irda changes the guidelines, it will perhaps mean that insurers can sell only endowment policy and withdraw term policies from their product basket.
"This will be difficult to implement," said Shashwat Sharma, partner at KPMG India. "What Irda is possibly saying is that insurers will have to offer a standardised package covering different benefits, including endowment benefit," Sharma said.
The regulator said it will bring in a revised set of guidelines for micro-insurance in a coupe of months. It issued the first guidelines in 2005. Irda is planning to allow business correspondents of banks or local kirana shops to sell micro-insurance policies to expand the distribution channel.
Roy Chowdhury said the mushrooming of chit funds and money circulating schemes, especially in the eastern region, has hampered the growth of insurance sale. He said laws need to be tightened to prevent insurance agents from selling dubious collective investment schemes. Companies running money-circulating schemes, including Saradha Realty India, had engaged post office and insurance agents to raise funds from public to increase their credibility.
Source : http://economictimes.indiatimes.com
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