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A Commentary on Select Recommendations of the Report of the IRDAI Committee on Microinsurance

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The Insurance Regulatory and Development Authority of India (IRDAI) set up a ‘Committee on Microinsurance’ in April 2019 (henceforth the ‘Committee’).  The Committee was tasked with reviewing the existing regulatory framework on microinsurance in India as well as other jurisdictions and suggesting improvements to the Indian framework. Accordingly, the Committee submitted its report in January 2020 and has made several recommendations along four main themes – products, pricing, process and technology, and distribution. In this blog post, drawing from the insights gained from an earlier report we had released, titled ‘A Strategy for Comprehensive Financial Inclusion’, we present our comments on some of the key recommendations put forth by the Committee.

Under the ‘Product’ theme, we review the Committee’s recommendations on simplification of benefits offered to customers of microinsurance products and how they should be conveyed. On making the products more relevant for the customers, we look at the Committee’s recommendation on increasing the maximum risk cover that can be offered through microinsurance products to Rs. 5 lakhs across all categories and extending the use of ‘return of premium’ as a feature for general and health microinsurance products. Additionally, we also review its recommendation on engaging cooperatives and self-help groups as partners on a risk-sharing basis to increase the reach of microinsurance products.

Under ‘Pricing’, we review the Committee’s recommendation on relaxing ‘expense of management’ caps for microinsurance products and allowing customers the option to pay premiums in instalments.

Finally, under the ‘Distribution’ theme, we look at some of the important changes/ recommendations proposed by the Committee. We review the Committee’s recommendations on the need for microinsurance products that can be seamlessly integrated into the core business of multi-product providers, including more entities under the definition of microinsurance agents, and introducing the concept of ‘Master Agent’ and ‘Micro Insurance Agent’ (which is a two-tiered approach, to the distribution of microinsurance products). Additionally, we look at the Committee’s recommendations on harmonising the remuneration payable to microinsurance agents and other insurance intermediaries for the sale of microinsurance products and allowing microinsurance agents to sell microinsurance products from more than one insurer in each category of insurance.

The detailed commentary can be found here.

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