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Insurance penetration in India below 4%, need to expand beyond cities: IRDAI chairman Khuntia


India’s insurance penetration is well below the global average and insurers should expand beyond bigger cities to address this issue, said Subhash Chandra Khuntia, chairman of the Insurance Regulatory and Development Authority of India (IRDAI).

“The total premium that we collect is only 3.76% of GDP (gross domestic product). The world average insurance penetration is a little higher than 7%,” Khuntia said on Thursday, addressing a conference hosted by the Federation of Indian Chambers of Commerce and Industry.

To improve this figure, Khuntia urged insurers to design micro insurance products to cater to rural and tier two, three and four cities, anticipating demand as Covid-19 spreads through the hinterland.

The IRDAI also suggested that insurers consider job and income loss policies and focus on group insurance policies for small and medium enterprises keeping in mind the migrant workers who would be returning to work.

“These opportunities we are losing because we are too conservative,” said Khuntia.

Covid-19 policies

About 1.5 million lives had been insured within a month under the two Covid-19 specific insurance policies, Corona Kavach and Corona Rakshak, according to Khuntia.

“More than 15 lakh lives have already been covered under these two products within a month. That shows what is the demand and it is important that we cater to this demand,” he said.

The regulator was compelled to come out with the standardised Covid-19 policies after seeing no such initiative from the industry, Khuntia said, adding that some insurers felt these products were competing with their own policies.

“Why is it important that your other products should sell more than the standard product? After all, you have to do business,” he said.

Solvency Ratio

MR Kumar, chairman, Life Insurance Corporation of India, who was part of the online panel, called for leniency in adherence to the solvency ratio for insurers during the Covid crisis.

“I believe this calls for a fresh and flexible approach to solvency levels in testing times to let insurers leverage their precious and scarce capital to the best advantage of business and customers,” said Kumar.

Insurers are required to maintain a solvency ratio of 150% at all times. It is the amount of available solvency margin (ASM) in relation to the amount of required solvency margin (RSM).

The ASM is the value of the company’s assets over liabilities, and RSM is based on net premiums and defined as per IRDAI guidelines.

Customers’ trust is dependent on how financially sound the insurer is, said Khuntia. The regulator had advised insurers to conserve capital and maintain adequate liquidity while reducing costs.

“I think if it is handled efficiently, all of this will be possible,” said Khuntia.


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