Irda plans new norms for micro insurance

Seeks cost effective regulations with better returns than premium deposited for investors

The Insurance Regulatory and Development Authority (Irda) will issue new guidelines for the micro-insurance sector within this financial year.

Irda had asked insurance firms to design up to four-five new micro-insurance products, which will be cost-effective, and at the same time provide better returns to investors, said Sudhin Roy Chowdhury, member (life) at a seminar on the insurance sector here on Friday.

Currently, the micro insurance policies fall under the Irda (Micro-Insurance) Regulations, 2005. A general or life insurance policy with a sum assured of Rs 50,000 or less falls under the category of micro-insurance.

In FY12, the new business premium in the micro-insurance sector was nearly Rs 230 crore, a drop of nearly 21 per cent over fresh collections in the previous year. About 90 per cent of the premium was from the public sector. In terms of the number of policies sold, micro-insurance policies came down to 14.8 million in FY12, against 18.9 million in the previous year, according to a report on insurance industry by consultancy firm KPMG.

Notably, the first premium income of many insurance companies, including state-owned Life Insurance Corporation (LIC), has been falling. One of the reasons for this was high penetration of ponzi schemes, said Chowdhury.

New premium collection by life insurers was down by 6.12 per cent in the last financial year.

“Due to ponzi schemes, the first premium income of the insurance industry has come down. There needs to be a separate law for life and general insurance agents, which should curb the selling of such schemes,” said Chowdhury.

This apart, allowing foreign direct investment in the insurance sector will bring the much-needed capital in the sector, he added.