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Insurance regulator IRDAI has proposed to make insurance coverage, including life, health and motor, obligatory on the part of insurance companies in gram panchayats across the country in order to achieve the objective of “insurance for all”.
The minimum number of lives to be covered by all life insurers in all gram panchayats in the country should be 30 per cent in each gram panchayat subject to a minimum of 25,000 gram panchayats as driven by lead insurer in the first year, IRDAI has proposed. This increases to 40 per cent lives subject to a minimum 50,000 gram panchayats and 50 per cent lives subject to a minimum of 75,000 gram panchayats in year 2 and 3 respectively, IRDAI said in its draft Rural, Social Sector and Motor Third Party Obligations Regulations, 2024.
The same formula will be applicable in the case of dwellings under fire insurance, motor (comprehensive and third party) and lives under health and personal accident insurance.
Over 40 crore people still don’t have health insurance coverage in India. On motor third party insurance, the obligations are specified for goods carrying and passenger carrying vehicles as nearly 50 per cent of the vehicles in these 2 categories are uninsured.
These vehicles are important segments of the motor insurance business and widely exposed to third party claims. “Every general insurer is therefore required to underwrite at least 20 per cent increase over total number of goods carrying and passenger carrying vehicles as compared to what was covered in the last financial year or 20,000 vehicles under these categories or 10,000 vehicles in each category, whichever is higher,” the draft norms said.
Motor TP obligation fulfilment should be contributed by renewal of the existing vehicles and uninsured vehicles that are insured provided the gap in insurance is at least 30 days, it said. Every new insurer should underwrite a minimum of 10,000 goods carrying and 10,000 passenger carrying vehicles in the first financial year of its operations, the regulator said.
The insurers are allowed to buy and sell the obligations from out of the surplus to the extent of 20 per cent. The insurer who has sold the obligations will continue to be the insurer and should be responsible for servicing the insurance policy and settling claim under it.
Insurance business pertaining to Government social security schemes such as Pradhan Mantri Awas Yojana, Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJY) where total or partial premium is paid by the government, with or without any contribution from the members/ beneficiaries covered should be considered for rural and social sector obligations. BPL cardholders, MNREGA cardholders, eShram cardholders, DBT beneficiaries, Ayushman Bharat cardholders, Pradhan Mantri Mudra Yojana beneficiaries, Jan Dhan account holders, beneficiaries of PM Kisan Samman Nidhi Yojana and PM Viswakarma Yojana would qualify for Social Sector Obligation, IRDAI said.
According to the IRDAI, insurance penetration increased from 2.71 per cent in 2001-02 to 4.2 per cent in 2021-22. Insurance density has increased from US $ 11.5 in 2001-02 to $ 91 in the year 2021-22. Total insurance premium increased from Rs 62,818 crore in 2001- 02 to Rs 9.17 lakh crore in 2021-22, registering a growth of 14.34 per cent.
Claims increased from Rs 25,425 crore in the year 2001-02 to Rs 6.42 lakh crore in 2021-22. Assets under management increased from Rs 2.18 lakh crore in 2001-02 to Rs 54.37 lakh crore in 2021-22 and insurance distribution network/ points increased from 8.26 lakh in 2001-02 to around 52.65 lakh in 2021-22.
The Standing Committee on Finance of the Lok Sabha recently recommended that insurance companies should be allowed composite licensing which will enable an insurer to offer both life and non-life insurance products, including health, motor and term policies. The committee has also proposed a reduction in GST rates from the current level of 18 per cent in the case of health insurance and term policies.
