Insurance regulator IRDAI has constituted a committee to develop a concept paper on standalone micro-insurance companies.
Micro-insurance products offer coverage to low-income groups who have little savings and is tailored specifically for lower valued assets.
In doing so, the 10-member panel is required to assess the desirability and feasibility of formation of standalone micro-insurance companies; review the legal and regulatory framework to enable such an entity; and recommend the maximum sum insured per person that may be accepted by the proposed firm.
Considering the aspect of ease of doing business, the panel has also been tasked to suggest the applicability and/or relaxation of existing provisions for micro-insurance companies.
Stating this, an order constituting the committee of the Insurance Regulatory and Development Authority of India said capital and solvency; underwriting, product and claims; finance and accounting; investments; operations; and corporate governance are the indicative regulatory aspects to be studied. On reasons behind its decision to form the panel, the regulator said India is seen as a pioneer in the micro-insurance sector globally and has set an example with its micro-insurance regulations. “IRDAI has received suggestions on allowing standalone insurers for transaction of exclusive micro-insurance business, as it may boost the micro-insurance penetration in India with geographical spread,” the order said.
The committee has been given three months to submit its recommendations. Mirai Chatterjee, director of SEWA, Ahmedabad, will be the chairperson of the Committee, whose members include consultants and representatives from the banking and financial sector, both from insurance sector as well as officials of IRDAI.
The formation of the panel comes close on the heels of the recommendations made by another panel the regulator had set up on micro-insurance. Noting that micro-insurance is intended for protection of low income people, the panel in its report recommended that micro-insurance product benefits should be simple such that they could be easily conveyed by the distributor and understood by the customer. The ‘Gives & Gets’ for the customer should be clearly spelt out. It also recommended an option to permit payment of single premium in daily, fortnightly, monthly and quarterly instalments.
