The Insurance Regulatory and Development Authority (Irda) today issued a draft proposal on a composite standard insurance product for the rural and social sector. Companies have been given 30 days to respond with suggestions. The draft proposes the sum assured be available in a range from Rs 40,000 to Rs 2 lakh, with multiples of Rs 10,000.
Irda’s proposal said insurers shall be given one unit credit for each life cover and each non-life cover for the sale of one standard product. It also said insurers shall not be allowed to market any other product to meet social and rural sector obligations. These are products offering either lower benefits for the premiums charged in the standard product or a higher premium which offers lower benefits than the standard product for the premium charged.
Irda said the period of cover shall be offered between five and 25 years in all cases of individual assurances/insurance policies and one-year group renewability covers may be offered to groups. “However, the general insurers shall offer the term as three years, with continuous guaranteed renewability condition for the subsequent three-year periods. If the balance of period is less than three years, general insurers shall renew the policy only for such balance period and shall provide the premium rates at the outset for this balance period of less than three years,” the regulator added.
The minimum age at entry for such products would be 18 years and the maximum age at entry would be 50 years. For a life cover, the maximum age for continuation of cover in all cases is proposed at 70 years and there would not be any exit age for a health insurance cover. Irda proposed this product would facilitate supplementing or topping-up of any existing social security benefit and not overlap with such benefits.
The regulator proposed that during the years 2012-18, all insurers shall fulfil at least 50 per cent of the target group specified by it each year through standard product sales and the remaining half by any other approved rural and social sector products.
“The bases for expenses, commission & profit margin shall not exceed 25 per cent of the premium. Renewal expense bases shall not exceed two per cent of the premium,” said Irda in the draft.
It added the premium for the base plan with all the add-ons/riders shall not exceed Rs 1,000 to Rs 7,500 per annum. Also, life and general insurance covers may provide an option to continue the covers even in the event of non-payment of premiums due continuously for a maximum period of two years in a five-year cycle. This is, however, subject to payment of an additional 30 per cent of the annual premium.
For distribution, each state shall be allotted to two general insurers and two life insurers for offering the standard product. Insurers shall be required to meet at least 75 per cent of their rural and social sector obligations from such allotted state(s) and the remaining 25 per cent of their rural and social obligations from the remaining states. Such a life insurer shall issue policies under this standard product and have a tie-up with a similar non-life insurer for the benefit structure relating to a ‘general’ or such a non-life insurer shall issue policies under this standard product and have a tie-up with a lead life insurer for the benefit structure relating to ‘Life’.
Irda said the life benefit structure would include benefits such as a term life cover on death during the defined term, a personal accident-partial and permanent disability, and health insurance, among others. For the general benefit structure, benefits such as personal accident-partial and permanent disability, critical illness and fire-stock would be included.