Business Bureau :
An Irdai committee has suggested reduction in entry-level capital requirement for standalone micro-insurance companies to Rs 20 crore from the current Rs 100 crore with a view to accelerate expansion of this segment of insurance market in the country. The committee set up by the Insurance Regulatory and Development Authority of India (Irdai) to suggest steps to promote micro-insurance said that like other nations India too will need to attract multiple players if it wants to substantially increase insurance penetration.
“This is all the more urgent in the current context of the COVID-19 pandemic when millions of Indians, especially in the informal sector, have lost their livelihoods, are now leading more insecure lives and are falling back into poverty,” the report of the committee said. It noted that for low-income families, calamities such as illnesses, accidents, death or the loss of assets often have very grave financial consequences. Such events can push these families deeper into poverty as their meagre resources get depleted. Many get drawn into debt traps as they borrow beyond their means, sell productive assets, take children out of school or put them to work, compromise on food, or leave sickness untreated, it said.
A 2013 report, cited by the panel, noted that the Indian micro-insurance sector has only covered 9 per cent of the overall population and 14.7 per cent of the potential micro-insurance market size in the country. India, like other countries, will need to improve access for multiple players if it wants to substantially increase insurance penetration.
After discussions with organisations that have been providing micro-insurance, national and international experts, the committee has made several recommendations. One of them is that “entry-level capital requirement for standalone micro-insurance entities should be reduced to Rs 20 crore maximum from the current Rs 100 crore”. Also, risk-based capital (RBC) approach should be adopted to enable the progressive growth of the micro-insurance business while maintaining the highest prudential standards.