The stringent norms of Insurance Regulatory & Development Authority (Irda) on rural business has put the state-owned Life Insurance Corporation (LIC) on the back foot in expanding its rural business .
Irda norms make it mandatory for the life insurers to generate at least 25% of total business from the rural regions. The norms alternatively say that the life insurers have to each year improve their rural business by 2%. The life insurers who fail to comply with the regulations have to pay a penalty of Rs 5 lakh. LIC which has already achieved the mandatory 25% target in rural business sometime back and has crossed 31% in the current year is reluctant to grow the business further as it has to set a new bench mark for the next year. ?Doing rural business is not easy. It would be difficult to grow the business 2% more than the earlier year each time. This rule rather puts a restriction in expanding our rural business,?? said a senior LIC official In fact LIC had earlier paid a penalty of Rs 5 lakh as it had failed to comply with the rural business norms.
LIC has already done 31% business from the rural areas in the current fiscal. Last year, the corporation had done 27% business in the remote parts of the country. However, with the stringent IRDA norms, the corporation will have no option but to shelve its rural business plans. ?We have got a bigger base and we have been increasing our base in the rural areas each year too. But, if Irda wants us to increase our rural base by 2% as compared to our earlier achievement, then it will be quite difficult for us,?? said the official.
