IRDA Chief proposes single policy covering basic insurance needs

Hyderabad, Jan 8 : A single policy covering all basic insurance needs together with options for customisation would be more effective to increase insurance penetration in India, rather than having multiple policies to obtain basic cover, chairman of the Insurance Regulatory and Development Authority (IRDA) TS Vijayan said at an ASSOCHAM event held here on Wednesday.

“Currently, a typical general insurance product covers specific risks of fire, health, personal accident, loss of belongings etc., under separate policies, this approach is very cumbersome and is a major road block in increasing insurance penetration,” said Vijayan while inaugurating the 7th Global Insurance Summit organised by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“Specific circumstances of low income groups like unstable income, migration for work and others should be considered while designing insurance products to best suit their needs,” said Vijayan. “Cost effective ways of distributing insurance covers would be key to success in increasing insurance coverage among low income groups.”
“Absence of proper mechanisms to create awareness and effectively communicate about protection offered by an insurance product to a policyholder has led to low persistency and low claim ratios in the micro-insurance business,” said Vijayan.

“The policy servicing mechanisms, particularly for claims, adopted by insurers would be critical in delivering necessary protection,” he added. “The claim payment procedure should be simple and transparent to ensure timely payment of all eligible claims.”

Talking about the latest initiatives of IRDA in enhancing the use of technology, Vijayan said that issuance of e-policies through insurance repositories would reduce policy issuance costs significantly. “The penetration observed in other spheres like mobile telephony should be examined to identify its suitable approaches to insurance industry.”

The IRDA chairman emphasised strongly upon the need to improve financial literacy and education amid low income groups to create awareness about basic financial products and necessary insurance protection.

Highlighting that there is a huge scope for improving insurance penetration in India, Vijayan said that the IRDA would give special focus to new risks (lives and assets) which were hitherto not covered. In wake of the growing urbanisation, efforts are needed to address the issue of income inequality which is reducing in rural areas but rising in urban centres, further said the IRDA chief.  INN