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".

Snapshot of Indian Insurance market

• The Indian Insurance market is expected to reach $200 BN by 2027.
• India is 9th largest Life Insurance Market
• Insurance density in Indiahas increased from $ 11.1 in 2001 to $ 91 in 2021 (Life insurance- $69, Non-life insurance – $22)
• Insurance penetration in Indiahas been steadily increasing (from 2.7% in 2000 to 4.2% in 2021)
• Ayushman Bharat PM-JAYis the largest health assurance scheme in the world and is funded by the Government.

Key-highlights of the Draft (Rural, Social Sector and Motor Third Party Obligations Regulations, 2024)

A new strategy and fresh approach have been devised to boost insurance penetration in the country.  

• Panchayat: The minimum number of lives to be covered by all life insurers in all gram panchayats in the country should 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 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.
• Dwellings: The same formula will be applicable in the case of dwellings under fire insurance, motor (comprehensive and third party) and lives under health and personal accident insurance.
  • Over 40 crore people still don’t have health insurance coverage in India.
  • On motor third party insurance, the obligations are specified for goods carrying and passenger carrying vehicles as nearly 50 per cent of the vehicles in these 2 categories are uninsured.
  • These vehicles are important segments of the motor insurance business and widely exposed to third party claims.
  • Every general insurer is therefore required to underwrite at least 20 per cent increase over total number of goods carrying 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.
• Government social security schemes
  • Insurance business pertaining to Government social security schemes such as Pradhan Mantri Awas Yojana, Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJY) where total or partial premium is paid by the government, with or without any contribution from the members/ beneficiaries covered should be considered for rural and social sector obligations.
  • BPL cardholders, MNREGA cardholders, eShram cardholders, DBT beneficiaries, Ayushman Bharat cardholders, Pradhan Mantri Mudra Yojana beneficiaries, Jan Dhan account holders, beneficiaries of PM Kisan Samman Nidhi Yojana and PM Viswakarma Yojana would qualify for Social Sector Obligation.

Significance of the move

• The aim is to “enhance the ease of doing business and also reduce compliance burden for stakeholders while also ensuring that interests of policyholders continue to be protected”.
• It was viewed that a new strategy is necessary to achieve the objective of ‘Insurance For All’.