The Insurance Regulatory and Development Authority of India (IRDAI) has introduced a series of reforms to enhance the ease of doing business in the insurance sector. These changes have been implemented to increase insurance penetration and offer more innovative products to customers.
Microfinance Organisations
Insurtech companies are using microfinance organisations as a platform to sell small-scale insurance products in rural India. This approach has improved insurance penetration and made insurance more accessible to people in rural areas.
Consultations with the Finance Ministry
The finance ministry has started consultations with IRDAI to improve the ease of doing business in the insurance sector. The “use and file” method, which allows insurance companies to launch new products without prior approval from the regulator, may be considered to make the process simpler.
Key Developments in the Insurance Sector
LIC IPO:
The initial public offering (IPO) of Life Insurance Corporation of India (LIC), valued at Rs 21,000 crore, was the most talked-about market news in 2021. The IPO reserved up to 10 percent of its offer size for policyholders.
Focus on Guaranteed Return Policies :
Life insurance companies have launched traditional endowment policies, offering policyholders an opportunity to take advantage of higher interest rates set by the Reserve Bank of India (RBI).
Higher Health Premiums and Newer Products :
The health insurance premiums for individuals rose by 8-15 percent due to a sharp rise in claims during 2020 and 2021. To meet the increasing demand for health insurance, insurance companies are introducing new products.
Newer Motor Insurance Riders :
The IRDAI allows insurers to offer ‘innovative’ motor insurance riders, such as pay-as-you-use, pay-as-you-drive, and motor floater policies.
Use-and-File Procedure for Quicker Product Launches :
Use-and-file norms allow insurance companies to launch new products without prior approval from the regulator. This procedure helps insurance companies to offer more flexibility and higher governance in the sector, leading to higher penetration.
Way Forward
Policyholders and insurers have quickly adapted to the digital mode for purchasing policies, receiving medical evaluations, maintaining policies, and resolving claims during the Covid-19 pandemic. To promote further digitalisation, the regulator has introduced an online store, where policyholders can purchase goods directly from insurers or through distributors on the network.
Why In News
The Insurance Regulatory and Development Authority of India (IRDAI) has announced several reforms to simplify the regulatory framework and promote the ease of doing business in the insurance sector. These reforms are aimed at enhancing customer experience, encouraging innovation, and promoting growth in the insurance industry.
MCQs on Impact of IRDAI’s Reforms on the Indian Insurance Industry
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Which of the following is a key development in the insurance sector in India?
A. LIC IPO
B. Launch of new mobile phones
C. Increase in petrol prices
D. Decrease in GDP
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What is the purpose of the “use-and-file” method in the insurance sector?
A. To make doing business easier
B. To increase claims during 2020 and 2021
C. To reduce the number of new products launched
D. To increase government control over insurance companies
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What is the reason for the rise in health insurance premiums in India?
A. A sharp rise in claims during 2020 and 2021
B. Decrease in the number of policyholders
C. Increase in the number of insurance companies
D. None of the above
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What is the way forward for insurers and policyholders in India?
A. Adjustment to the digital mode for purchasing policies
B. Increase in manual paperwork
C. Decrease in the use of technology
D. None of the above
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