The Insurance Regulatory and Development Authority (IRDA) is in the process of devising a new micro-insurance policy for the rural masses which will offer the multiple benefits of life insurance, health insurance and asset protection. IRDA has requested the Life Insurance Council of India to assess the pros and cons of such a multiple benefit insurance policy and submit a report at the earliest.
For a long time, IRDA has been studying the feasibility of offering products that can cover different risks like life, accident, health, travel etc for the individuals in rural and semi-urban areas. Such products are referred to as Micro insurance policies and are capped at a coverage amount of Rs.50,000. Micro insurance products were launched with the idea of solving the needs of low-income households.
According to IRDA chairman J HariNarayan, a single insurance product will reduce the cost of the product and will improve the efficiency of distribution. He suggested that one single product which protects all assets, accidents, cattle, health and life should be developed. To test waters, IRDA has appointed a couple of insurance companies to design, develop and distribute such micro insurance products. Post some feedback and results, IRDA will try and build a framework for such products and roll out to all the insurance companies.
According to IRDA the distribution channels used are non-governmental organization, self- help groups and microfinance institutions apart from insurance agents, brokers & corporate agents. Most of the insurance products areoffered by microfinance institutions in combination with microloans. But the problem observed is that they are usually bundled with loans by microfinance institutions. Clearly, IRDA is not happy with such a distribution process.
The insurance regulator is relentlessly trying for ways to penetrate the rural India with effective and long-term approaches. Micro-insurance policy with low cost and simple distribution model is one such initiative.
