IRDA to allow cross-selling of micro-insurance

By Abhishek Anand
THE INSURANCE Regulatory and Development Authority (IRDA) is considering a proposal to allow cross-selling of micro-insurance products by insurance companies. Cross-selling means one firm can sell the policies of another — a relaxation the industry has sought for long. Micro-insurance products are policies that are priced low enough for the poorer sections to avail of.
“We may allow crossselling of micro-insurance products, but we haven’t set a timeframe for effecting it,” IRDA Chairman J Hari Narayan told TEHELKA at a health insurance meet held by the Confederation of Indian Industry in Delhi.
The proposed move will open up rural areas to firms that do not have a presence there. Currently, insurers have tie-ups with banks that have large rural networks, mainly public sector ones, to sell micro-insurance products. But the drawback is that the bank can sell products of only that particular company.
According to Narayan, the IRDA is considering allowing banks to tie up with more than one insurer. But if the new proposal comes through, insurance firms — largely private sector ones — will be able to piggyback on the extensive networks of their public sector counterparts. On their part, the public sector players will be able to enlarge their portfolio of products; for instance, a general insurance company offering health insurance will be able to offer life insurance after tying up with a life insurer.
Micro-insurance products with affordable premiums are tailor-made for low-income groups. Insurance firms, both life and non-life, have in total 23 such products. Narayan was categorical that crossselling, when it happens, will be confined to these.
In separate guidelines, the IRDA has also capped the maximum amount of commission an agent can charge for these micro-insurance products.
Meanwhile, firms are planning to start offering combi-products, or policies offering both life and health covers. For this, general insurance firms are looking at tie-ups with life insurance firms. “We are negotiating with a life insurance firm to launch a combi-scheme and hope to finalise it before year-end,” says Antony Jacob, CEO, Apollo Munich Health Insurance Company Ltd. Jacob, who did not reveal the name of his company’s partner, said the two negotiating companies need to come to an understanding on several issues, including the premium to be charged and the break-up between life and health cover. “It may require three to four months before we can roll out such a product,” he said.

Firms plan to offer combi-products, or policies offering both life and health covers

Last year the IRDA issued comprehensive guidelines on combi-products. According to these, only pure term life insurance cover could become part of such a policy.
Despite measures taken by the IRDA and aggressive marketing by insurance firms, India is under-penetrated. According to a Swiss report, quoted by IRDA in its annual report, insurance penetration in India stood at a paltry 4.6 percent by 2008 end. Of this, the lion’s share, or 4 percent, went to life insurance, with non-life left with only 0.6 percent. The total business in India was worth $47 billion ( Rs. 2,20,900 crore) by 2008.
Illustration: Naorem Ashish