The Insurance Regulatory and Development Authority of India (Irdai) is planning to come out with a discussion paper on premium financing, particularly for the non-life sector.
Officials in the industry believe that this step would increase penetration of general insurance.
Currently, premiums in life insurance can be paid monthly, quarterly, half-yearly or annually. In general insurance, premiums are paid annually, and premium financing can help attract more people into buying insurance.
“All over world, if a person wants to buy insurance and does not have money, the premium is funded by banks and investors can pay back in installments. This is more for non-life insurance products, as they cannot be taken in installments. So, we are planning to come out with a discussion paper and hope to come out with some regulations in one month,” said Nilesh Sathe, member-life, Irdai.
In the last few years, non-life insurance has witnessed growth in the motor segment, but people are not buying health and home insurance products largely owing to a lack of awareness.
“We are still a under-penetrated market in terms of insurance as a large section of people are still under-insured. It came to light after a number of catastrophic events that people as well as many small and medium enterprises do not have proper insurance. We believe premium financing will help the industry grow into semi-urban and rural areas,”said a senior member of a general insurance company.
The general insurance sector registered a growth of 13.8% in premium income for the last previous year. However, at 13.1%, the growth for private sector general insurance companies was higher than that for public sector insurance companies, which stood at 12.1%.
At the end of financial year 2015-16, the general insurance sector saw premium income at Rs 96,402.37 crore, compared with Rs 84,685.69 crore in 2014-15.
According to industry officials, premium financing might help investors take up more health insurance as its premiums here are high compared to other products. “In the last few years, we have seen cost of health cover rising and premium financing can help investors take more health insurance on a monthly or quarterly basis,” said the CEO of a leading insurance company.