MICROCAPITAL BRIEF: India’s Insurance Regulatory and Development Authority (IRDA) to Revise Microinsurance Product Structure in Effort to Encourage Growth of Industry

The Insurance Regulatory and Development Authority (IRDA), the government agency charged with overseeing India’s insurance market, reportedly is set to release revised guidelines on the structure and features of microinsurance products in order to allow insurance companies to incentivize third-party institutions to sell the products. A microinsurance product is defined by IRDA as either a general or life insurance policy with a sum assured of less than INR 50,000 (USD 823). Prior to the revision, the average amount insured for such policies ranges from INR 2,000 (USD 33) to INR 5,000 (USD 66), but insurance companies have asked IRDA to allow for amounts insured of up to INR 100,000 (USD 1,650) so that policy distributors can earn higher sales commissions. According to a statement attributed to an unspecified executive of a private insurance company, “For insurers, unless these products are sold in huge volumes, it is not a big business proposition. So unless the ticket-size goes up, companies may not make a big investment into this segment.”

IRDA has announced that the list of legal distributors of microinsurance products is going to include rural banks, microfinance institutions (MFIs), district cooperative banks, NGOs, self-help groups, public telephone call offices and the government’s fair-price shops that are located in rural locations. In addition, the revised guidelines are expected to allow microinsurance distributors to work with only one life insurance company and one general insurance company as well as the government-backed Agricultural Insurance Company of India to offer crop microinsurance.

By Benjamin Krupp, Research Associate

About Insurance Regulatory and Development Authority (IRDA)

The Insurance Regulatory and Development Authority (IRDA) is the regulator of the insurance industry in India. Formed by the Indian parliament in 1999, the mission of IRDA is “to protect the interests of the policyholders” and “to regulate, promote and ensure orderly growth of the insurance industry.” According to 2013 IRDA data, the Indian insurance industry consists of 24 life insurers, 27 non-life insurers and one re-insurer. Data on the number of microinsurers in the country is unavailable. The Reserve Bank of India, the country’s central bank, oversees IRDA.

Sources and Additional Resources

[1] Business Standard: Micro-insurance Products May Be Overhauled

MicroCapital, June 3, 2013: Insurance Regulatory and Development Authority (IRDA) of India Proposes Microinsurance Firms Provide Maturity benefit Policies to Boost Sales

MicroCapital, April 22, 2013: Insurance Regulatory and Development Authority (IRDA) of India Expands Allowable Microinsurance Agent Entity Types

MicroCapital, August 6, 2012: Insurance Regulatory and Development Authority (IRDA) of India Proposes Shop Owners be Allowed to Sell Microinsurance

MicroCapital Universe Profile: Insurance Regulatory and Development Authority (IRDA)

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