IRDA has issued guidelines to introduce a new set of products customized for rural market in order to increase penetration of insurance products in the country. These products will be marketed through Common Service Centers (CSC) or Sarva Seva Kendra (in Hindi).
CSCs operate in rural areas where there is no other access to internet. It provides services like e-governance, education, health, issuance of birth certificates, death certificates, utility payments etc. in remote locations. It works on public-private partnership (PPP) model and is established by the Department of Electronics and Information Technology through National e-Governance Plan (NeGP) in 2006.
Initially, IRDA has asked insurance companies to offer only two simple products with low ticket size i.e. savings product called ‘Standard Non-Par Non Linked Variable Insurance Product’ and a pure term plan. These products will have to use ‘Exclusive CSC Products’ in their nomenclature.
Under this model, both products would be issued for a period of 5-15 years. The maximum premium for savings scheme is Rs 20,000 per annum whereas the maximum premium in term policies will depend on sum assured, age and term of policy.
The sum assured also varies for both policies. For savings product, the minimum sum assured for an individual below 45 years would be 10 times annualized premium or 125% of top up premium whereas for an individual of 45 years and above, it would be 7 times annualized premium or 110% of top-up premium. Similarly, the sum assured in pure term product would be up to Rs 2 lakh. Also, the death benefit in pure term policy would be 10 times annualized premium or 105% of total premium paid on the date of death whichever is higher.
In addition, these policies would offer partial withdrawal facility after 5 years. Policyholders can withdraw a maximum of 25% of the individual policy account in any policy year.
Meanwhile, the insurance regulator has capped the commission structure of CSC. These service centers can charge a commission of up to 5% in the first year of premium payment. No commission will be charged thereafter. However, they can charge a fixed amount for post-sale services like printing of policy, endorsement, premium collection, updating information of policyholder etc.
IRDA said that these guidelines are issued to study the entire business sourced through the CSC distribution on a pilot basis for a period of at least one year. It will review the business sourced through this distribution channel on a regular basis.