The Hindu Business Line : Practical approach, say insurers

Hyderabad, Feb. 13 The Insurance Regulatory and Development Authority (IRDA) has adopted a practical approach in fixing the rural and social obligations for the insurers, leaving the industry by and large satisfied.

The Regulations 2008, notified by the regulator on Tuesday, did not make any significant departure from the previous regime and prescribed the percentage of rural business in the range of 5 to 20 per cent for life and general insurers and 25,000 to 50,000 lives in the social sector (depending on the year of operations of a particular company).

The norms in fact have already been met by many a player in the industry led by the Life Insurance Corporation of India (LIC).

The rationale behind the not-so-ambitious approach of IRDA is bringing down the possibility of non-compliance particularly by the private players, a senior official of IRDA told Business Line.

``We thought it wise to adopt LIC’s performance in the rural and social sectors as a benchmark.

With a vast reach and solid base, LIC now does over 20 per cent of business in rural areas. ``We cannot expect the newcomers to repeat the show in just five or six years,” he said.

IRDA is also of the opinion that the current state of rural penetration of insurance and cover to economically weaker sections is on the ‘right path’ and could be allowed to continue without “practically difficult” targets. “We always welcome surpassing the targets. But non-compliance can cause very serious trouble and we would like to avoid it,” he explained.

The industry, by and large, appears to be relieved on the new obligations. ``This is not an issue for us and we are ahead of targets,” Mr Uday Sankar Roy, Managing Director and CEO, SBI Life, said.

Mr G L N Sarma, Chief Actuary, Bharti AXA Life Insurance, said the norms underlined the importance of a clear mass market strategy to expand insurance spread in the country.

“In the very first year of operations, we had spread our branch network to tier 2 and 3 cities and towns, to reach out to the neighbouring rural potential,” he added.

A spokesperson for Aviva Life said the firm had far more exceeded the targets.

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