THE Insurance Regulatory and Development Authority (Irda) is in the final stages of drafting guidelines for the microinsurance sector, which will mandate both life and general insurers to offer a suite of products to the poor at a lower commission and a lower premium.

“The minimum cover of Rs 5,000 did not serve the real purpose and was abnormally low.

The proposed guidelines will ask it to be enhanced to at least Rs 50,000-Rs 75,000,” a senior Irda official told Financial Chronicle on condition of anonymity.

The regulator is likely to release the draft guidelines in a fortnight.

“The market has evolved since then and the experi ence shows the insurance cover was inadequate,” the official added. The new guidelines will ask insurers not to limit the maximum cover to Rs 50,000. “The

idea is to have maximum cover for minimum premium,” the official said.

Irda is yet to finalise the pricing of the product.

According to the official, all term (life) insurance and health insurance will have a minimum cover of Rs 50,000. “There will be four slabs based on the risk profile of the customer, such as Rs 50,000, Rs 75,000, Rs 1 lakh and above,” the official said.

Microinsurance products have become moneyspinners for agents and distributors because of high commission. “Currently the commission outgo on such small-ticket products is huge to ensure the distributors sell these products and we are looking at capping these charges too,” the official said. The new guidelines will propose that a single insurer should sell a suite of products such as life insurance, health insuran ce, pension, crop insurance and property insurance to rural people. The regulator

wants insurers to offer property insurance cover of at least Rs 10,000-Rs 30,000 and above based on the type of property insured. “Crop insurance too should have a minimum cover of Rs 10,000,” the official said.

The new guidelines being drafted in consultation with

Ela Bhatt of Gujarat-based Self Employed Women’s Association (Sewa) and other self-help groups will also propose a pension cover with a monthly annuity payout of at least Rs 1,0001,500 for rural masses.

The guidelines will also look into the modes of

payment. "The group administrator for all insurance companies can be given a handheld device to transfer money digitally.

Mobile payment solutions like MChek can also be used.

We are proposing digital transfer of money through IPads too, to bring down the premium collection and transfer cost for insurers," the Irda official said.

As per a presentation by R Kannan, member-actuary, Irda, in March this year, the total premium collected for microinsurance products was Rs 36.57 crore in 200809, a growth of 101 per cent over the previous year. But only 4.79 per cent of the potential market is covered by microinsurance.

According to the Irda official, only a few insurers meet the rural social business obligation to sell microinsurance. Today, life and general insurers offer 23 microinsurance products.