The Insurance Regulatory and Development Authority of India (Irda) has increased the obligations of insurance companies towards the priority sector. Speaking on the sidelines of the Micro Insurance Conference organised by the Munich Re Foundation along with the Irda, Irda Chairman C S Rao, "When the regulations were defined, they were for the first five financial years of operations of the insurance companies (post-privatisation). With most companies having now completed five years, the regulations have to be extended for the coming years."
According to the 2002 regulations governing the obligations of insurance companies towards the rural and social sector, a life insurer had to ensure that 7 per cent of the total policies written in the first year of operations were from rural areas.
This would increase to 9 per cent in the second financial year; 12 per cent in the third financial year; 14 per cent in the fourth and 16 per cent in the fifth year.
The new norms specify that life insurers will have to underwrite 18 to 20 per cent of their total policies from rural areas from the sixth to the tenth year.
On the other hand, non-life insurance companies will have to underwrite 2 to 5 per cent of their total gross premia in the first five years from the rural areas. From the sixth to the tenth year, 5 to 7 per cent of the total gross premia would have to be underwritten from the hinterland.
The life and non-life companies should each cover 5,000 to 20,000 lives in the first five years of operations for fulfilling social obligations. This number will now increase from 25,000 to 55,000 lives from the sixth to the tenth year.
'We are qualitatively defining obligations and insurance companies will have to conform to the micro-insurance guidelines. Only those products that conform to the guidelines can be sold by insurers for meeting the social and rural obligations," added an Irda official.
