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Wednesday, July 18, 2018

Rich in choice

To provide a comprehensive insurance package to the economically weaker sections in rural and urban areas,the Insurance Regulatory and Development Authority has come out with a draft exposure to make standard products more flexible and simple.

Written by Fe Bureau | Published: September 25, 2012 3:28:14 am

Irda’s exposure draft aims to make standard products more flexible & simple to ensure better coverage for economically weaker sections

To provide a comprehensive insurance package to the economically weaker sections in rural and urban areas,the Insurance Regulatory and Development Authority (Irda) has come out with a draft exposure to make standard products more flexible and simple. The products will have defined options and provide choice and flexibility to customers to cater to individual circumstances.

For a term cover,the regulator has fixed the minimum sum assured at R40,000. The base term plan will include term life,critical illness and personal accident partial and permanent disability (PAPPD) as mandatory cover; the remaining covers can be offered as riders or add-ons.

Under additional plans,the cover offered would be the same as in the base plan. However,the sum assured options would range from R40,000 to R2 lakh with multiples of R10,000 for the term life cover.

As part of life insurance,health insurance,pre- and post- hospitalisation,and a lump sum amount will be payable on maturity. In general insurance cover,fire dwelling,fire assets,such as pump set,agricultural tools,farm machinery and firm stocks including livestock,will be included. The exposure draft on composite package of standard insurance products for rural and social sector mentions that the sum assured or insured will be linked between lines of business — 100% for death cover in term life,200 to 300% for PAPPD,25-50% for each of health insurance and critical illness.

The minimum entry age for the cover will be 18 years and maximum age will be 50. For life cover,the maximum age for continuing of cover in all cases will be 70 years and there will not be any exit age for health insurance cover. The standard product may be extended to the family members at the option of the insured.

The insurance regulator is making it mandatory for insurers to cover the target group in proportion to their market share and it will fix an annual target so as to cover the entire below-the-poverty-line population in the next five years. To make insurers more accountable,from 2012 to 2018,the insurers would have to fulfill at least 50% of the target group in standard product sales and the remaining 50% would be fulfilled by any other approved rural and social sector products.

The sum assured to be offered would be in line with limits in the Kissan Credit Scheme (KCC) or other verifiable monetary values serving as proxies to income of insured. “General insurance products covers only certain named perils like personal accident,loss of belongings,natural catastrophes. Each of these in particular is a separate policy. Similarly,death is a separate policy. Considering the range of perils and the nature of life covered in contingency,the prospect will be required to acquire many policies. It would be more effective to have a single policy which covers all the above type of perils. Further,such a policy should also enable savings and offer a choice to a prospect to purchase a policy according to his cash flows and his perception of needs and capacity to pay,” the exposure draft underlines.

One can get the standard insurance product from any regulated intermediaries like regional rural banks,scheduled banks,self-help groups and micro-insurance agents. The premiums for the standard product will be determined by the insurer according to the actuarial principles. For each of the cover — the base plan and other listed riders — the insurers will file the entire bases,the methodology used to determine the premiums and past performance of the product with the insurance regulator for approval under file and use procedures.

The premium for the base plan with all the add-ons or riders,according to the exposure draft,will not exceed R1,000 per annum to R7,500 per annum and the premium for the additional plans — for higher sum assured — may be suitably loaded. Life insurance covers and general insurance covers would continue to the policyholder even if there is non-payment of premiums for two continuous years in a five-year cycle. The option shall be allowed,subject to payment of an additional premium of 30% of the annual premium.

All premiums for general insurance covers and all premiums pertaining to personal accident,health and critical illness offered by life insurers may be subject to a reviewability clause to review premium rates once in every three years.

Moreover,to make the policies more appealing,simple,clear and transparent language without vague and ambiguous statements will be used in framing the policy document and the prospectus considering the target market. Life and non-life insurers will have to furnish half-yearly statements to the insurance regulator on the performance of the product,district-wise and distribution channel-wise,in respect of each state.

Irda roots for wider coverage

* Irda’s draft says the insurance products would have defined options and provide choice and flexibility to customers to cater to individual circumstances

* For a term cover,the regulator has fixed the minimum sum assured at R40,000

* The base term plan will include term life,critical illness and personal accident partial and permanent disability (PAPPD) as mandatory cover; the remaining covers can be offered as riders or add-ons

* Under additional plans,the cover offered would be the same as in the base plan. However,the sum assured options would range from R40,000 to R2 lakh with multiples of R10,000 for the term life cover

* The insurance regulator is making it mandatory for insurers to cover the target group in proportion to their market share and it will fix an annual target so as to cover the entire below-the-poverty-line population in the next five years

* To make insurers more accountable,from 2012 to 2018,the insurers would have to fulfill at least 50% of the target group in standard product sales and the remaining 50% would be fulfilled by any other approved rural and social sector products

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