Insurers miss out on rural, social obligations

Three general insurers missed out on their rural obligations, while three more missed fulfiling social obligations as spelled out by sector regulator Insurance Regulatory Development Authority (Irda).

According to Irda’s guidelines, life insurers should earn 7 per cent of their total policies in the first financial year to 20 per cent in the tenth year from the rural sector. For a non-life insurer (general insurer), it is compulsory to write 2 per cent of the gross premium income from the first year to 7 per cent in the ninth financial year onwards. Irda had revised the obligations of insurers towards the rural and social sector for Life Insurance Corporation of India (LIC) and the other four public sector non-life insurers.

Oriental Insurance Company, Tata AIG and Iffco Tokio missed out their rural sector obligations while, New India, National Insurance and HDFC Ergo could not meet their social sector obligations for 2007-08.

However, another twelve private sector non-life insurers fulfiled their rural sector obligation, while three public insurers fulfiled their stipulated rural obligations.

Irda penalises insurers in case of not fulfiling the obligatory requirements. In most of the cases, it penalises the insurer with a fine of Rs 5 lakh, depending on its past experience and track record of meeting the stipulated norms.

For the public sector non-life insurers, rural obligation stood at 6 per cent for 2007-08 and 7 per cent for the next two years. Social obligation, in their case, is to cover 5.50 lakh lives, or the average number of lives covered by the respective insurer in the social sector from 2002-03 to 2004-05.

Iffco Tokio, which was in its seventh year of operations, earned 5.80 per cent gross premium from the rural sector. The gross premium income collected by the private insurer stood at Rs 1,946.42 crore during 2007-08. Tata AIG, which was in its sixth year of operations, earned less than 6 per cent gross premium from the rural sector. It managed a total premium income of Rs 814 crore during 2007-08.

However, the number of lives covered by these companies is not known at the moment. The company’s executives claimed that there was some miss-interpretation of data and they have fulfiled all obligatory requirements.

Oriental Insurance, the only public insurer who could not fulfil the rural obligatory requirement, earned a gross premium income of Rs 3,856 crore.

HDFC Chubb, now known as HDFC Ergo General Insurance, in its fifth year of operation, also could not fulfil its social sector requirements, while New India and National Insurance – the two public insurers – also sold policies that were less than the stipulated number in the social sector.

United India Insurance met the stipulated norms in both social and rural sectors.