Business Daily from THE HINDU group of publications
Wednesday, Sep 06, 2006
Business Daily from THE HINDU group of publications Wednesday, Sep 06, 2006 |
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Money & Banking
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Life Insurance Industry & Economy - Economic Offences Marketing - Rural Marketing Anti-money laundering norms hit rural insurance Radhika Menon
For insurance companies, selling insurance in rural areas is a part of the minimum obligation stipulated by the IRDA.
Mumbai , Sept. 5 Rural insurance has been dealt a blow by Anti Money Laundering (AML) regulation effective August 1 even as the Insurance Regulatory and Development Authority (IRDA) has been pushing for the interiors. The challenge for insurance companies is in seeking proof of identity, address and income of the rural populace. "It is cumbersome getting the documentation done for policies where the premium could be as small as Rs 300-400. In cases where there is no proof of identity, one requires a letter from the panchayat with a photograph and photocopies may also have to be made," said Mr Vijay Sinha, Assistant Director, Agency, Tata AIG Life Insurance.
`Tough to enforce'
"The AML guidelines will be tough to enforce in rural areas. For instance, one needs to track changes in residence and an individual might just have a post box as an address," said Mr Rahul Sinha, Vice-President-Marketing, Kotak Mahindra Old Mutual Life Insurance. Insurance officials dismiss money laundering in cases where premia are small. "Globally, there is a minimum threshold and `Know Your Customer' (KYC) norms apply only beyond the limit. One needs to make a distinction between money laundering and tax evasion," said the Chief Financial Officer of a private insurance company.
Administration cost
Officials also added that the cost of administration would be too high and make the policy unviable. For insurance companies, selling insurance in rural areas is a part of the minimum obligation stipulated by the IRDA. Despite the IRDA issuing micro insurance guidelines in November last year, not many companies have filed products as they find it unviable to sell small policies, given the high costs of distribution. Since most insurance companies have tie-ups with NGOs, additional training would be required for KYC norms to be implemented, adding to the cost. AML will also make it tough to tap rich farmers. "It will be particularly difficult to verify income from agriculture. In the case of rich farmers, there might be genuine income but no real tax records as they are exempt from tax," said Mr Muralidharan, Chief Marketing Officer, SBI Life Insurance.
Related Stories: More Stories on : Life Insurance | Economic Offences | Rural Marketing | Regulatory Bodies & Rulings
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