IRDA proposes to allow Regional Rural Banks (RRB) or Gramin Banks, Rural and Urban Cooperative Banks, District Cooperative Banks, Primary Agriculture Societies and Cooperative Societies to act as micro insurance agents in rural areas in an effort to increase insurance penetration, particularly in remote areas.
Through a draft regulation on micro insurance, the insurance regulator has also proposed to allow self-help groups (SHG) and non-government organizations (NGOs) to carry out distribution of micro insurance products in rural areas.
Earlier in 2013, IRDA had allowed owners of kirana shops, medical stores, petrol pumps, PCOs and fair price shops to sell micro-insurance products in such areas.
Micro insurance schemes are designed for the lower income population. These policies aim to cover risk of poor families from illness, injury or death. As the coverage value is lower than a normal insurance plan, the insured people pay smaller premiums.
Proposed guidelines for micro insurance agents:
A micro insurance agent can tie-up with only one life insurance and general insurance company. In addition, micro insurance agent can work with an agriculture insurance company and a standalone health insurance company to distribute crop insurance and health insurance products respectively.
Micro insurance agents can tie-up with other insurance companies only after three months from the date of resignation from previous company.
These agents have to undergo training of at least 50 hours. IRDA has said that non-life insurers will have to train these agents in local vernacular language. The cost will be borne by the companies. Also, these agents have been instructed to undergo refresher training of 25 hours every three years.
Proposed structure of micro insurance products:
Insurers can offer partial withdrawal facility to policyholders after second policy year. However, insurers have to maintain a minimum balance of at least one annual premium.
Premium of health insurance policies would remain unchanged for three years. Standalone health insurers can issue policies for a minimum tenure of one year.
All health insurance policies, except those with tenure of less than one year, shall have a free look period. Insurers can offer a maximum cover of Rs. 2 lakh under health insurance policies. The minimum or maximum age at entry could vary as it would be based on company’s discretion. Group health insurance policies would be issued for tenure of one year.
Non-life and standalone health insurers can offer personal accident cover to a maximum of Rs 1 lakh with term of one year to provide coverage to any untoward events.
Under crop insurance or insurance for peril against livestock, tools etc. insurance company can offer a maximum cover of Rs 1 lakh for the term of one year.
All micro insurance policies will have a lock-in- period of five years.
Besides, IRDA has proposed to exempt micro insurance agents from complying with standard proposal form norms.
The regulator has sought comments on the draft regulation by February 14.