insurance

By Sneha Shah, mydigitalfc.com -

After ensuring cheaper unit-linked life insurance policies (Ulips) by lowering commissions, the
insurance regulator has cracked its whip on micro-insurance policies.

In its draft exposure guidelines announced on Thursday, the Insurance Regulatory and Development
Authority (Irda) wants life and general insurers to provide composite insurance policy offering a
minimum life insurance sum assured of Rs 100,000 for a premium of Rs 2,224.

The minimum cover on micro-life insurance policies have been enhanced from Rs 10,000 to Rs
100,000. “The cover offered previously was just not enough,” a senior Irda official said. The maximum
cover that the insurers can offer under micro-insurance policies is Rs 10 lakh as per the proposed
revised guidelines. Financial Chronicle reported this first on August 28.

The regulator wants these policies to be sold as supplementary to the already existent government
insurance schemes. “This product will facilitate supplementing or topping up of any existing social
security benefit and would not overlap such benefits,” Irda said in its draft guidelines.

The agents’ commissions have been capped at 10 per cent of first year premium and 2 per cent for
every renewal premium earned for individual life policies. For group policies, commissions will be
capped at 2 per cent for the first year premium and 0.5 per cent for every renewal premium. The
commissions until now on micro-insurance products were 20 per cent for the first year and 10 per cent
for the rest of the tenure.

Life insurers have to do a minimum business under the social and rural obligation. 35,000 lives
annually have to be covered under the social obligation, while 20 per cent of the total number of
policies sold has to be in the rural area.

According to a senior Irda official, this is the first time they are offering a captive market distribution
for the insurers where only two insurers, general and life, will be allowed per state.

The minimum entry age prescribed by Irda is 18 years, with a maximum of 50. The minimum term of
the policy has been set at 10 years by Irda.

The insurers are also supposed to offer standard products with pension benefits in line with the Pension
Fund Regulatory and Development Authority (PFRDA).

General insurance covers such as personal accident and accidental death benefit, personal accident
policy covering total and permanent disability, partial and permanent disability and medical expenses
have been mandated by Irda. According to the guidelines, insurers have to offer health insurance cover
with three variants — pre-hospitalisation, hospitalisation and post-hospitalisation.

Maximum sum insured for personal accident cover has been mandated at Rs 500,000, health and
critical illness cover of Rs 500,000, fire insurance for dwelling of Rs 500,000, fire insurance for all
assets of Rs 200,000, fire insurance for livestock of Rs 100,000, motor insurance (own damage) of Rs
300,000 and weather insurance of Rs 200,000.

The regulator has proposed four layers of options. The first is base option (term life cover bundled with
personal accident policy covering permanent disability, health insurance and fire insurance),
intermediate option (base option benefits plus pension benefits, permanent accident cover, health
insurance policy with post-hospitalisation benefits and motor insurance), superior option (in addition to
the base and intermediate package, health insurance with pre-hospitalisation benefits). The fourth
option will have all above mentioned benefits plus critical illness, fire insurance for livestock and
weather insurance.