Micro-insurance refers to those products which give protection to assets and lives against insurable risks of micro-entrepreneurs, small and landless farmers, women and low income people through formal, semi-formal and informal institutions. A few insurance companies are already offering such products in association with local administration or non-governmental organisations (NGOs). According to the concept paper, Irda has proposed micro-insurance regulations, which will enable insurers to design and distribute micro-insurance products to rural areas and also to service them.
The paper has suggested that the insurer who is already in the life insurance business shall be permitted to provide life micro-insurance products, while a non-life (general) insurance company will be allowed to offer non-life micro-insurance products.
The micro-insurance products shall be distributed through individual insurance agents, corporate insurance agents besides insurance brokers and micro insurance agents.
Micro finance agents could be NGOs or self help groups (SHGs) . They will be entitled to a fee of not more than 20 per cent of the premium of life insurance contracts and 7.5 per cent in case of general insurance contracts from the insurer.
On the other hand, according to the concept paper, the insurer should file micro-finance products with the IRDA before it is distributed. The product should be issued to the individual micro-insurance policy holder in the local language for easy understanding.
Besides, they should also ensure that all transactions in connection with micro-insurance business are in accordance with the provisions of Insurance Act 1938 and rules and regulations of Irda. The concept paper also suggests that every insurer should impart at least 25 hours of training to all micro insurance agents and other specified persons on subjects like insurance selling, policy holder servicing and claims administration. By regulating the micro-insurance business, Irda aims to make it an integral part of the insurance industry.