The Insurance Regulatory and Development Authority of India (IRDAI) released a report of the Committee on the Standalone Microinsurance Company in August 2020. The Committee, chaired by Mirai Chatterjee, Director SEWA Social Security, was set up by the IRDAI in February 2020 to study the feasibility of standalone microinsurance through cooperatives, mutual or companies, and with reduced capital requirement and appropriate legal and regulatory changes.
The press statement said – “After studying both national and international models of microinsurance, the Committee has concluded that significant changes in regulatory framework and especially in reducing the capital requirement are essential for the spread of microinsurance in India.” The key recommendations are:
- Reduction in entry-level capital requirement to Rs 20 Crore from the current Rs 100 Crore.
- A risk-based capital approach while maintaining the highest prudential standards.
- Cooperatives, mutual and companies be allowed to act as composite microinsurers, transacting both life and non-life business through a single entity.
- Amending the Insurance Act 1938 to bring standalone microinsurance under its purview, including defining microinsurance, microinsurers, and reducing the capital requirement and/or vesting the powers to do so with the IRDAI.
- End-to-end digital technology for transparency, accountability and monitoring.
- Reinsurance by existing reinsurance or insurance companies, facilitated by the IRDAI.
The Committee was careful to note that the highest prudential standards should be maintained when developing regulations and has recommended that these be done in consultation with those already undertaking microinsurance to ensure that they are appropriate and practical.
The detailed report is available for public view and can be read here.
