Irdai proposes revising coverage across sectors to secure insurance for all

The Insurance Regulatory and Development Authority of India (Irdai) has proposed raising mandatory coverage under Rural, Social Sector and Motor Third Party Obligations' norms in an effort to achieve the objective of "insurance for all".

In the exposure draft of Rural, Social Sector and Motor Third Party Obligations Regulations, 2024, the Irdai said that a new strategy and fresh approach have been devised to boost insurance penetration in the country.  

The minimum number of lives to be covered by all life insurers, in all gram panchayats and India will be 30 per cent in each gram panchayat subject to a minimum of 25,000 gram panchayats as driven by the lead insurer in the first year. This increases to 40 per cent lives subject to a minimum 50,000 gram panchayats and 50 per cent lives subject to a minimum of 75,000 gram panchayats in year 2 and 3 respectively.

 

In the case of general insurers, the minimum number of dwellings under fire insurance and vehicles under motor (comprehensive and TP) insurance to be covered by all general insurers in all gram panchayats in the country has to be 30 per cent in each gram panchayat subject to a minimum of 25,000 gram panchayats as driven by lead insurer in the first year.

This increases to 40 per cent of dwellings under fire insurance and vehicles under motor (comprehensive and TP) insurance subject to a minimum 50,000 gram panchayats and 50 per cent lives subject to a minimum of 75,000 gram panchayats in year 2 and 3 respectively.

The minimum number of lives under health and personal accident insurance to be covered by all general and SAHI insurers in all gram panchayats in the country has to be 30 per cent in each gram panchayat subject to a minimum of 25,000 gram panchayats as driven by lead insurer in the first year.

This increases to 40 per cent lives under health and personal accident insurance subject to a minimum 50,000 gram panchayats and 50 per cent lives under health and personal accident insurance subject to a minimum of 75,000 gram panchayats in year 2 and 3 respectively.

The number of lives to be covered under social sector have been increased to 20 per cent in year 1 after notification since all insurers have been able to achieve the social sector obligations.

Insurance business pertaining to government social security schemes such as Pradhan Mantri Awas Yojana, Pradhan Mantri Suraksha Bima Yojana (PMSBY), Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJY), etc, where total/ partial premium is paid by the government, with/without any contribution from the members/beneficiaries covered will be considered for rural and social sector obligations.

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Insurance policies covering lives issued to BPL cardholders, MNREGA card holders, eShram cardholders, DBT beneficiaries, Ayushman Bharat cardholders, Pradhan Mantri Mudra Yojana beneficiaries, Jan Dhan account holders, beneficiaries of PM Kisan Samman Nidhi Yojana, PM Viswakarma Yojana, Pradhan Mantri Jan Arogya Yojana, etc would qualify for social sector obligation.

Micro insurance policies issued are eligible to be reckoned for social sector obligations and insurance policies sold through Bima Vahaks will be counted towards rural and social sector obligations.

Motor third-party obligations

The insurance regulator said that every general insurance company is required to underwrite at least 20 per cent increase over the total number of goods and passenger-carrying vehicles as compared to what was covered in the last financial year or 20,000 vehicles under these categories or 10,000 vehicles in each category, whichever is higher as nearly 50 per cent of the vehicles in these two categories are uninsured.

They are important segments of the motor insurance business and are exposed to third-party claims. Coverage of new goods-carrying and passenger-carrying vehicles will not be counted towards motor TP obligations.

Motor TP obligation fulfilment shall be contributed by renewal of the existing vehicles and uninsured vehicles that are insured provided the gap in insurance is at least 30 days.

Every new insurer will have to underwrite a minimum of 10,000 goods-carrying and 10,000 passenger-carrying vehicles in the first financial year of its operations.

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Option to fulfill the obligations, the insurers are allowed to buy and sell the obligations from out of the surplus to the extent of 20 per cent. The insurer who has sold the obligations will continue to be the insurer and will be responsible for servicing the insurance policy and settling claims under it.

The comments from the stakeholders and general public on the exposure draft is expected by February 27, 2024.