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Insurance companies’ rural and social sector obligations will depend on how long they have been in business, according to the Insurance Regulatory and Development Authority of India (Irdai)’s draft regulations, issued on Monday.
According to Irdai (Obligations of Insurers to Rural and Social Sectors) Regulations (draft), the rural sector obligations for life insurers would vary between seven and 25 per cent of the total policies. For general insurers, it is in the two to seven per cent range.
Rural sector means the areas classified as 'rural' in the latest census data. Social sector includes the unorganised sector, informal sector, economically vulnerable or backward classes and other categories of persons, both in rural and urban areas.
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Irdai proposes every insurer must undertake social, rural sector obligations. In the first financial year, life insurers have to ensure at least seven per cent of the total policies are sold in the rural sector. This is nine per cent in the second financial year, which goes up to 20 per cent in the 10-15 financial years and 25 per cent from the 16th financial year onwards.
For general insurers, it is two per cent in the first financial year, three per cent in the second financial year, and seven per cent in the ninth financial year.
For stand-alone health insurers, it is 50 per cent of the obligations prescribed for general insurers. In the social sectors, for all insurers (life, non-life, health), it starts with 0.5 per cent of total business procured in the preceding financial year to five per cent for the 10th year.
The total business for the purpose of these regulations is the total policies issued for individual insurance and the number of lives covered in case of group insurance.
If an insurance company commences operations in the second half of the financial year and is in operations for less than six months as on March 31 of the relevant financial year, no rural and social sector obligations shall be applicable for the said period.
