The Hindu Business Line : IRDA to allow tie-ups for micro-insurance products

THE Insurance Regulatory Development Authority (IRDA) will allow a life insurance company to tie up with a non-life insurance company to spin-off micro-insurance products.

It will also introduce regulations to promote micro-insurance and create guidelines that stipulate the insurance cover in unit-linked insurance mroducts (ULIPs).

Mr T.K. Banerjee, member-life insurance, IRDA, expressed concern about low insurance cover in rural areas. Talking at a seminar here, he said: "We are in the process of bringing out a regulation that will provide an infrastructure within which micro-insurance can be developed in a proper manner. For such products the regulator will allow a tie up between a life and a non-life insurance company so that a composite product is available to the rural poor through a single window."

For this, a new band of micro-insurance agents will be introduced wherein they will undergo 25 hours of training as opposed to the mandatory 100 hours as is the norm. They will, however, be allowed to work only in the area of micro- insurance. These regulations will be introduced in the next two to three months.

Mr Banerjee said there are few insurance covers that are affordable to the poor and new insurance companies have opened very few branches that cater to them. "The regulator at present is not insisting on a quota on rural branches, but if this continues it will have to introduce a system for opening of branches, so that the spread over the entire geographical area is ensured," he said.

IRDA will be introducing strict guidelines on ULIPs about a part of the corpus going towards insurance cover. Although some insurance companies have begun complying with these norms, those who are not will have to phase out their products over a period of time. These are companies that deploy a major portion of the corpus in the capital market. However, this will not apply to ULIPs that fall under pension plans.

It is expected that these guidelines will be announced in the next two to three weeks.

In the light of the litigations against insurance companies with respect to group insurance, he said IRDA would introduce guidelines as to how a group (for group insurance) should be defined. There were several discrepancies in the way a group was interpreted, he said.

Mr Banerjee said the health insurance working group of IRDA would come out with recommendations about grading of hospitals and the provision of data in a post-tariff regime. The provision of a database is something that could be taken up by the Tariff Advisory Council in a post-tariff situation, he said.

Offline inspection conducted by IRDA will be outsourced to chartered accountants. Per capita insurance premium has gone up from Rs 300 in 2000 to Rs 750 in 2004 ever since the sector was opened up, Mr Banerjee said.

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