SKS Microfinance, the only listed micro lender in the country, plans to offer an endowment life insurance policy to its borrowers once again. The Hyderabad-based micro finance company had exited this business in 2009.
An endowment policy is a life insurance plan where the policyholder is assured a certain sum of money at the end of the policy term or on death. It is different from a term insurance policy, where the insurance company pays the sum insured only when the policyholder dies.
According to SKS officials, the micro finance company will facilitate sale of endowment policies of Life Insurance Corporation of India, SBI Life and ICICI Prudential Life to its borrowers.
“We started this business in July 2008. There was huge demand and we facilitated sale of around 2.8 million insurance policies in 14 months. But our internal systems were not capable of handling these volumes and we discontinued the business,” a senior executive of SKS told Business Standard. “Right now, we are strengthening our back-end processes. We will relaunch this business once we upgrade our systems.”
He did not say when but added it would happen “sooner than later”.
Earlier, the Insurance Regulatory and Development Authority (Irda) had found irregularities in SKS’ micro insurance business. While SKS had responded to the queries, the regulator is yet to close the case. “The matter is not yet resolved,” said J Hari Narayan, chairman of Irda. He clarified that SKS had not been banned from selling insurance products and the micro lender had decided to exit the business on its own.
As no restrictions were imposed, SKS will not have to seek fresh approval from Irda for re-entering the business. Nevertheless, “we will seek Irda’s blessings before selling endowment policies to our borrowers”, said a senior official at SKS.
SKS offers credit insurance products to borrowers. The borrower’s life is insured and in the event of his death, the insurance company will pay the sum insured to SKS. The micro finance company will pay the money to the borrower’s family, after adjusting the loan dues.