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Business News/ Insurance / Premium should reflect individual risk, not average group risk: IRDAI Chief

Premium should reflect individual risk, not average group risk: IRDAI Chief

At the Mint’s 16th Annual BFSI Summit and Awards 2024, the Insurance Regulatory and Development Authority of India chairman Debasish Panda said an expert committee will look into simplifying the language of the policy document

Insurance Regulatory and Development Authority of India chairman Debasish Panda addressing the Mint’s 16th Annual BFSI Summit and Awards 2024. Premium
Insurance Regulatory and Development Authority of India chairman Debasish Panda addressing the Mint’s 16th Annual BFSI Summit and Awards 2024.

Rising insurance premiums is a major concern. Highlighting the need for the individual risk profiling, IRDAI Chief Debasish Panda said data analytics should ensure that premiums take into account the individual risk and not the average risk of the group. "There is need to build an ecosystem where premiums are no longer one-size-fits all but are customised to individual risk profiling," he said.

The IRDAI Chief also said that the regulator is nudging insurers to adopt the account aggregator framework, a consent-based architecture for seamless exchange of information. "So far 28 insurers have onboarded as financial information providers and another 32 as financial information users while 27 have been onboarded as both," he said.

In order to maintain an open dialogue with the industry, the regulator has been conducting quarterly meetings, called Bima Manthan, with executives to take their feedback on different issues. "Bima manthan is an excellent feedback mechanism to understand how the regulatory architecture is getting translated on the ground. For example, the feedback led to the introduction of a simple customer information sheet in health insurance," he said. IRDAI has mandated insurers to create the revised CIS from January 1 onwards.

CIS will include material details of health insurance policies such as sum assured, exclusions, sub-limits, etc in a simplified language. “Same would be introduced in other lines of business," he added.

To promote further innovation, the regulator conducts an insuretech open house where it interacts with tech companies on a monthly basis to understand and implement innovative solutions that give a fillip to the insurance sector.

Panda also said that they are considering a provision that would require laws to be reviewed every three years to keep pace with changing times in the insurance industry.

“We are considering a sunset clause of three years on regulations for policy dynamism," said Panda. “From 100 odd policy regulations, we are hoping to have 15-odd regulations to streamline industry growth. This is what will provide ease of doing business and the operational freedom and flexibility" he said.

Panda also added that they have appointed an expert committee that will look into simplifying the language of the insurance so that it becomes more comprehensible for the citizens who buy insurance policies. He said that a report on this matter will come out soon.

“The insurance industry is categorized for using jargon. We are looking into simplifying the policy document," said Panda on the topic ‘Insurance’s innovation agenda’.

The IRDAI chief also talked about the Bima trinity which is being conceptualised. He said that the trinity includes Bima Vistar,a simple benefit based product based on pragmatic triggers, Bima Vahak, which is a localised women centric insurance scheme by the community and Bema Sugam, an electronic platform which would universalise and democratise insurance products.

“I believe this will a game chnager in the insurance landscape," said Panda. “This protocal would be connected to the India Stack to utilise the unique national digital infrastructure enabling seamless delivery of insurance“

Panda also highlighted the growth of affordable insurance schemes by the government like the like Pradhan Mantri Jeevan Joti Bima Yojana (PMJJBY) and the Pradhan Mantri Suraksha Bima Yojana (PMSBY).

He said that 50 crore people have been cumulatively enrolled in the PMJJBY schemes and SBY. They are receiving life and personal accident covers at premiums as low as Rs.436 and Rs.20 respectively for an individual coverage of Rs.2 lakh each. Claims amounting to Rs. 15,000 crores have been paid till Financial Year 23 in these schemes.

“The growth in Pradhan Mantri Mudra Yojana (a lagghsip govt scheme to disburse small credit to micro and small enterprises) is protected by highly affordable insurance schemes like pradhan mantri jeevan joti bima yojana and the pradhan mantri suraksha bema yojana.

IRDAI Chief said the insurance sector ranks 10th globally and several reports indicate that it will rise to the 6th position by 2032 outpacing its peer economies.

The insurance industry has maintained a CAGR of 11% achieving 14% in FY24 with a premium income of more than 10 lakh crore. Aggregate AUM of insurance industry stands at 60 lakh crore. Meanwhile, 5 new insurance companies have entered the industry over the last 13-14 months, he said.

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Published: 11 Jan 2024, 09:39 PM IST
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