Insurance Sector In India: Current Status

Context: 

IRDAI recently released its draft Rural, Social Sector and Motor Third Party Obligations Regulations, 2024.

IRDAI Proposes Obligatory Insurance Coverage in Gram Panchayats Across India

• The regulations proposed  to make insurance coverage obligatory in all gram panchayats across India by the insurance companies 
• To achieve the objective of insurance for all.

Insurance Sector in India: Compliance and Obligations 

• Life Insurance coverage

• • In the first year, there should be a minimum life insurance coverage of  30 per cent in at least 25000  gram panchayats by all life insurers in the country.
  • It increases to  40 percent of lives subject to a minimum of 50,000 gram panchayats and 50 percent of lives subject to a minimum of 75,000 gram panchayats in years 2 and 3 respectively.

• Motor 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.
  • Underwriting of claims:  Every general insurer will have to underwrite at least a 20 per cent increase over the total number of goods-carrying and passenger-carrying vehicles compared to last year or 20,000 vehicles under these categories or 10,000 vehicles in each category, whichever is higher.
  • Trade of policies: The insurers can buy/sell the obligations from their surplus till 20 per cent,  however, it will still continue to be the insurer and will be  responsible for servicing the insurance policy and settling claims under it.

• Social Sector Obligation

• • 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) are eligible for rural and social sector obligations.
  • Beneficiaries of government schemes: BPL cardholders, MNREGA card holders, 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 the social sector obligations.

Insurance Sector in India

• About: India is the ninth-largest life insurance market globally with the  Insurance market  expected to reach US$ 200 billion by 2027, growing at a rate of 32-34% each year.
• Licensing Authority: The Insurance Regulatory and Development Authority of India (IRDAI)
• Stakeholders: India has  57 insurance companies (24 are in the life insurance business (LIC being the only public sector company) while 34 are non-life insurers), and a sole national reinsurer, namely General Insurance Corporation of India.
• Insurance statistics: As per IRDAI,
  • Penetration: It  increased from 2.71 per cent in 2001-02 to 4.2 per cent in 2021-22.
  • Density: It  increased from US $ 11.5 in 2001-02 to $ 91 in the year 2021-22. 
• Standing Committee on Finance recommendation: for the growth of the Insurance Sector in India
  • Composite  licensing: Insurance  companies should be allowed to offer both life and non-life insurance products, including health, motor and term policies.
  • GST: The committee has also proposed a reduction in GST rates from the current level of 18 per cent in the case of health insurance and term policies.

News source: The Indian express