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Hyderabad , Dec. 8

THE Insurance Regulatory and Development Authority has initiated measures to evolve a separate regulatory framework for self-help groups (SHGs) and non-governmental organisations (NGOs) to enable them sell micro-insurance products and also create opportunities for the insurance players cash in on the rising rural income levels, the IRDA Chairman, Mr C.S. Rao, has said.

Speaking on the sidelines of the Eighth `Insurance Summit' organised by the Confederation of Indian Industry (CII) here on Monday, Mr Rao said the regulator was currently in discussions with the insurance players, both public and private, on the need for introducing tailor-made insurance products to address the specific needs of the rural markets.

While acknowledging the significant growth rates of by the life insurance sector (26 per cent) and the general insurance sector (23 per cent) during the last couple of years after the opening up of the sector, Mr Rao, however, said, "The matter for concern is that we are not able to reach the masses in the rural market."

Citing the recent study by the Foundation of Research, Training and Education in Insurance (FORTE), Mr Rao said that about 73 per cent of the population in the rural areas did not have life insurance and the penetration rate for non-life insurance in rural areas was only 14 per cent, which was again mainly for motor insurance.

"This segment is untapped and the opening up of the sector to private participation had no impact in the rural areas."

According to him, another area of concern was health insurance. The public health expenditure in India was close to 0.9 per cent of GDP, which is lower than the average of low-income regions of the world and sub-Saharan Africa. Citing a study by the World Bank, he said the hospitalised Indian spends more than half of his total annual expenditure on buying health care, more than 40 per cent of whom borrow money or sell assets to cover expenses and 35 per cent are below the poverty line. The study further revealed that 2.2 per cent of the population fall below the poverty line in one year just due to out-of-pocket medical costs, he said.

"Clearly, there is much scope and potential for the insurance industry to provide for health insurance in India. Various studies and research have been conducted in regard to the potential of both the rural and health insurance market. However, unless companies actually get into the business, the potential can never be realised," Mr Rao cautioned.

Other untapped areas, according to Mr Rao, include personal lines of insurance and the growing needs of the ageing population, especially providing annuities and pension-related products. Further professional liability insurance needs to be explored in greater depth.

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