The Centre for Insurance and Risk Management (CIRM) has asked the government and Irda to do away with upfront premium payments and slash service tax rate for micro-insurance.

The micro-insurance regulations provide for an upfront payment of the premium. However, people with low incomes are incapable of paying an upfront amount as premium, Centre for Insurance and Risk Management spokesperson Rupalee Ruchismita told reporters here on the sidelines of a seminar.

“Permission to pay the premium amount in monthly instalments will help in stimulating demand for micro insurance products,” Ruchismita added.

She pointed out that imposition of service tax of 12.3 per cent is pushing up the cost of micro insurance and is not feasible for the low-income households. The service tax should be at a lower rate for the micro-insurance products. India is the only country where regulations are in place for micro-insurance, which means small premium and cover, but much more needs to be done, she said.

Quoting a survey by an international agency, which estimated the potential size of the Indian micro-insurance market at about $ 2 billion, she said what would work for the industry is to have an extensive and cost effective rural agent network for selling insurance products which can play a major role in creating awareness, motivating purchase of and rendering insurance services.

Partnerships with NGOs, co-operatives, micro-finance institutions and extensive use of technology can help spread micro-insurance in the country, she said. According to a note released by the CIRM, large insurance companies like LIC, ICICI Lombard, Iffco-Tokio, Tata AIG, Max New York and Agricultural Insurance Corporation are getting into the sector.