Irdai to develop standardised products for bridging protection gap

Life Insurers must aim to achieve a 13th month persistency of 90% within a year, says Irdai chairman

The Insurance Regulatory and Development Authority of India (Irdai) is looking to come out with a series of standardised products for various sectors so that the protection quotient in each segment can be increased significantly. It is developing a standard term product in the life insurance space, and two offerings in the MSME segment--one for micro enterprises, the other for small industries. Furthermore, A standard product for dwelling units will be rolled out soon.

“The idea is if a standard product is sold by all companies, it becomes much easier for the policyholders to pick up that product,” said Irdai Chairman, Subhash Chandra Khuntia, at a CII Insurance event.

“We are planning to come out with standard products for both micro enterprises and small industries so that coverage improves. It will help these industries immensely in case they suffer losses. We are envisaging that if the product works well, then after natural calamities like flood, cyclones, it will be much easier for the government to handle the situation because the insurance companies will be able to compensate for the loss,” he added.

India is a hugely under-insured country, where only 19 per cent of lives are insured. In the case of vehicles, although third party insurance is mandatory, only 79 per cent of four-wheelers are covered and 66 per cent four-wheelers are insured for own-damage only. For two-wheelers, it is much worse, as only 36 per cent of vehicles are insured under third party and 39 per cent are covered for own damage.

In the health sector, some 36 per cent people are insured but of these, three–fourths are insured by government schemes and the remaining 3.2 per cent have got individual health plans. An additional 5.4 per cent have got group health. So, almost 62 per cent of the total health expenditure is out-of-pocket. Furthermore, only 0.9 per cent of houses are insured whereas in the US, more than 90 per cent of dwelling units enjoy cover.

In the MSME sector, only 5 per cent of the units are insured in the country. This sector needs much higher level of protection. “The regulator is coming out with two standard products in this segment; one for micro enterprises and another for small industries. We should increase protection in this segment from 5 per cent to atleast 25 per cent in the next couple of years”, Khuntia said.

Prior to this, the regulator has rolled out a standard health product – Aarogya Sanjeevani, under which 1.65 lakh lives have been covered. Similarly, on July 10, the regulator launched two standard corona products – Corna Kavach and Corona Rakshak -- which have covered around 32 lakh lives, with a premium collection of Rs 482 crore and with a sum insured of Rs 1.1 trillion.

So far, as many as 2, 38,560 corona related claims have been filed and 1, 48,298 claims have been settled completely. “Hopefully, after the pandemic reaches a peak, we will see reduction in the number of claims. But the health insurers are fully equipped to deal with this”, Chairman said.

On the subject of whether the corona specific products will be in the market for an extended period, given that the virus induced infection is showing no signs of slowing down, Khuntia said, "When we brought it out, we were hoping that it would not be needed for too long. But now it appears that covid will be there for some time more and at the appropriate time we will take a call on this".  

He also asked the life insurers to focus on their 13th month and 61st month persistency, as it is an indicator of the company’s efficiency. Life insurers have to see to it that their thirteenth month persistency should not be below 90 per cent, so not more than 10 per cent people should drop out after the first year and 61st month persistency should not be below 65 per cent.

“Only a handful of insurers are close to this figures. And I would urge all the life insurers to move towards this target at the earliest, particularly the 13th month persistency should be achieved within a period of one year”, Khuntia said.  

The insurance industry suffered a setback due to the spread of the virus and the pandemic induced lockdown. The growth of the industry had dipped by 19 per cent in the month of April. But it has revived and by August end, and insurance industry as a whole has shown positive growth of 2.4 per cent, compared to the same time last year. Life insurers have clocked a positive growth rate of 2 per cent and the non-life insurers has seen 3.6 per cent growth.

“Our effort should be to come back to the older growth rate during this year because there is more need for protection now and we must work in a counter-cyclical manner to provide protection to the general population and to the economy”, Khuntia said.