Significant changes in regulatory framework, especially in reducing the capital requirement are essential for the spread of microinsurance in India, the Committee on the Standalone Microinsurance Company set up by the Insurance Regulatory and Development Authority of India (IRDAI) in February 2020 concluded in its report released last week.
Among its recommendations, the committee has suggested to reduce entry-level capital requirement to Rs 20 crore from the current Rs 100 crore, allowing co-operatives, mutual and companies to act as composite microinsurers, transacting both life and non-life business through a single entity.
“Reasons for the slow growth and outreach of microinsurance in India include lack of awareness and understanding of insurance, absence of need-based products customised to the low income segment of our citizens and cumbersome claims processes and procedures requiring much documentation and delays in disbursing claims. Most insurance companies do not see microinsurance as a long-term and sustainable business proposition due to its very limited contribution to their top line. Also, most insurance companies do not enjoy the trust of low income clientele. There have been instances of misselling and fraud and people are understandably sceptical,” said Mirai Chatterjee, Director SEWA Social Security, chairperson of the committee while addressing a press conference.
Another key recommendation is the amending the Insurance Act 1938 to bring standalone microinsurance under its purview, including defining microinsurance, microinsurers and reducing the capital requirement or vesting the powers to do so with the IRDAI.
Ashaben Ajmeri, chairperson of VimoSEWA, an insurance co-operative that provides financial protection to the self-employed women workers and their families on the recommendations said, “We are grateful that such practical recommendations have been made. It is our long-standing dream to have to be a full-fledged microinsurer but the capital required was too high for us.”
VimoSEWA, the insurance cooperative of the Self-Employed Women’s Association, SEWA, has been one of the first to provide suitable microinsurance products to informal women workers and their families. It currently has 1,00,000 policy-holders in five states- Bihar, Delhi, Gujarat, Madhya Pradesh and Rajasthan-and has contributed its 25 years of experiences and data to the Committee.
During the Covid-19 pandemic, as many as 360 claims of Rs 60 lakh were disbursed to women policyholders and their families while 47 health claims due to Covid-19 of Rs 7 lakh were disbursed by VimoSEWA, Shreekant Kumar, CEO of VimoSEWA said. Further, the committee has recommended end-to-end digital technology for transparency, accountability and monitoring. The report argues that this will both reduce transaction costs over time and help in regulatory oversight.
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