Micro insurance schemes are designed for the lower income population.
IRDAI has come out with Micro Insurance regulations in which it has allowed Regional Rural Banks (RRB) or Gramin Banks, Rural and Urban Cooperative Banks, District Cooperative Banks, Primary Agriculture Societies, Cooperative Societies, NGOs, Self Help Groups and Business Correspondents to act as micro insurance agents in rural areas in an effort to increase insurance penetration, particularly in remote areas.
Earlier in 2013, IRDAI had proposed to allow owners of kirana shops, medical stores, petrol pumps, PCOs and fair price shops to sell micro-insurance products in such areas. However, the proposal has found no mention in the Micro Insurance Regulation.
Micro insurance schemes are designed for the lower income population. These policies aim to cover risk of rural population from illness, injury or death. As the coverage value is lower than a normal insurance plan, the insured people pay smaller premiums.
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. That means, the insurance regulators has allowed micro insurance agents to have four tie ups.
These agents have to undergo training of at least 25 hours. IRDA has said that 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.
Remuneration:
The insurance regulator has put a cap of 10% on the commission paid to micro insurance agents under single premium polices of life insurance products. However, a life insurance company can pay 20% commission for issuance of non-single premium policies.
Similarly, general insurers will have to shell out 15% of the premium amount towards commission.
Structure of micro insurance products
All micro insurance policies will have a lock-in period of five years.
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.
The maximum sum assured under life insurance and health insurance policies has to be Rs. 2 lakh. However, the maximum coverage can be increased to Rs. 2.5 lakh under family floater or group insurance schemes. Under non-life insurance, the maximum sum assured is Rs. 1lakh. The annual premium should not exceed Rs. 6,000 per annum in micro variable insurance schemes.
Insurers cannot offer ULIPs under micro insurance regulations.