Date:19/01/2007 URL: http://www.thehindubusinessline.com/2007/01/19/stories/2007011905310600.htm

Back Insurers' rural, social targets may be set higher

Our Bureau

Mumbai , Jan. 18

The Insurance Regulatory and Development Authority of India (IRDA) is considering an increase in the minimum rural and social obligations for insurers. According to an IRDA official, insurers are being consulted about an amendment to the regulation.

The rural and social obligations of insurers are akin to the priority sector lending of banks.

Current rules

Currently, life insurance companies are mandated to sell 7 per cent, 9 per cent, 12 per cent, 14 per cent and 16 per cent of their policies in rural areas in the first, second, third, fourth and fifth financial years, respectively.

Non-life insurers have to rake in 5 per cent of their gross written premium from the rural years after the third year of operation.

Both life and non-life insurers have to insure 20,000 lives from the social sector in the fifth year of operations. The "social sector" includes the informal and unorganised sector, economically vulnerable and backward classes from the rural and urban areas.

Revisions

The regulation on rural and social obligations can be amended once in five years and with private insurers entering the sixth year of operations, a revised prescription would be due, said insurance company officials.

Mr K.N .Bhandari, Secretary General, General Insurance Council, said that an increase in the rural and social obligations would be welcomed by insurers as there is untapped potential in this segment.

He, however, added that there was ambiguity in the definition of a `rural area' for non-life insurers. In August 2004, IRDA altered the definition, aligning it with the census definition of `rural'.