IRDA lays down floor rates for rural insurance

Kolkata: The Insurance Regulatory and Development Authority (IRDA) has defined rural and social insurance products in terms of the minimum and maximum sum assured. The regulator also intends to include microinsurance under its definition. With this insurers will no longer be able to get away with selling low-value, low-premium covers to rural folk to meet the rural and social criteria prescribed.

IRDA has written to insurers saying that rural products will have to offer a minimum sum assured of Rs5,000 for general insurance and life insurance policies. However, health insurance for family and personal accident per person will have to be a minimum of Rs10,000. There will be no upper limit on the sum assured.

Both life and non-life insurers are required to insure 20,000 lives from the social sector in the fifth year of operations. The social sector includes the informal and unorganised sectors, economically vulnerable and backward classes from the rural and urban areas.

IRDA''s letter also mentions that microinsurance will now be considered part of the rural/social policies. Irda has also asked insurers to regularly keep it updated with the number of policies insurers have sold.

Currently, life insurance companies are required to sell 7 per cent, 9 per cent, 12 per cent, 14 per cent and 16 per cent of their policies in rural areas in the first, second, third, fourth and fifth financial years, respectively.

Non-life insurers need to earn 5 per cent of their gross written premium from the rural years after the third year of operation.