A working committee appointed by the IRDAI has recommended that holders of microinsurance policies be allowed to pay the premium on such policies in daily, fortnightly, monthly or quarterly instalments, to deepen insurance penetration among low-income groups.
The microinsurance panel also says that product benefits need to be simple so that they can be easily understood by customers, reported Press Trust of India. The maximum cover for a microinsurance is proposed at INR500,000 ($6,985). In addition, the products can have a term of up to five years in order to deal with the prospect of policyholders failing to renew annual policies.
The panel has also made a case for goal-based savings products like those for child education or higher education and insurance schemes for chit funds
It says that a reduction in reserve requirements for microinsurance policies, even for a short duration, can lead to better pricing. It recommends waiving stamp duty on microinsurance plans, especially life insurance policies.
The panel, headed by Mr Suresh Mathur, also says an e-KYC process is required to reduce costs and ensure smooth onboarding and claim settlement processes. Also, digital signatures should be encouraged for microinsurance business.
The committee’s recommendations for microinsurance and the related regulatory framework deal with a range of matters including product design, underwriting, distribution, awareness creation, easy premium payment system, simple claims processing and use of technology.