HYDERABAD: At a time when low income group families have been hit hard by Covid-19, a committee set up by the Insurance Regulatory and Development Authority of India (Irdai) has mooted easing of regulations to encourage standalone microinsurance companies to set up shop and improve the overall insurance penetration in the country.
Pointing out that the share of microinsurance business in the total insurance business remains extremely low due to the low-ticket size of this business, lack of trust, high cost of business acquisition and challenges in claim settlements, the committee noted that in 2019-20, microinsurance accounted for just 1.80% in the life segment and 1.16% in general insurance.
Microinsurance is small ticket size insurance primarily aimed at covering low-income segment of the population.
The committee has recommended that the entry-level capital requirement for standalone microinsurance entities should be reduced from the existing Rs 100 crore to Rs 20 crore. It also said that microinsurance companies should be allowed to offer both, life and non-life policies, through a single entity.
It has also said that Irdai can set up a separate microinsurance division to fast-track product approvals, enable offsite supervision of such companies and undertake capacity-building of staff.
In its report, the panel has also suggested the setting up of a Microinsurance Development Fund with an initial corpus of Rs 50 crore by the Centre or Irdai to support such players.
It also said the insurance regulator can facilitate reinsurance of microinsurance through the existing licenced insurance/reinsurance companies, it said.
To encourage the usage of digital technologies for this segment, the report said that a common IT platform for all microinsurance companies can be developed on the lines of the IT platform in place for mutual funds. “This will not only reduce transaction costs but also bring greater transparency and regulatory oversight,” the committee said.
And while the panel has also proposed an amendment of the Insurance Act, 1938, to bring the standalone microinsurance business under the purview of the Act, it said as this may take time, the Centre can issue rules giving IRDAI powers to put in place a regulatory framework for standalone microinsurance companies.