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S Ravi

The author is a practising chartered accountant and an independent director on many large public companies whose views and ideas have been instrumental in framing policy

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BW Businessworld

Insurance Schemes, General Public And Covid-19 Pandemic

The PMJJBY scheme has been amended to ensure claims are settled within 7 days of intimation from banks with the lien period reduced to 30 days from 45 days

Photo Credit : PTI


The government has undertaken deep structural and sustained reforms in the last few years. One of the sectors it focused on, is the health and insurance sector. The government introduced the flagship scheme Ayushman Bharat (PM-JAY), one of the most ambitious schemes, to increase awareness and bring more citizens covered under insurance.

The Covid-19 pandemic has also created growth opportunities for the sector. The insurance sector categorised into life, general and health insurance, comprises 54 insurance companies out of which 24 are life insurers. The life insurance policies have increased - approximately 28 million new policyholders in the FY 2020-21. 

A notable reform, ‘the FDI cap for the insurance sector has increased from 49 per cent to 74 per cent. The increase in the limit was primarily focused to get foreign investors, as this sector is highly capital intensive with a long gestation period, takes companies 7-10 years to break even and start becoming profitable.

This reform will enable insurance companies to raise funds to ensure maintaining their solvency in line with growing business needs and also augment foreign inflows and help attract more foreign companies. In order to bring in more clarity on the Indian owned and Controlled aspect announced vide October 2015 guideline, IRDA vide circular dated 30 July 2021, omitted the said concept which was a grey area and open to varied interpretation and disputes.

IRDAI introduced the Aadhar Authentication (e-kyc) and video authentication so as to enable insurance with a simpler process. This move has spurred the ongoing digitalisation initiatives and resulted in dispensing of physical policy documents. The PMJJBY scheme has been amended to ensure claims are settled within 7 days of intimation from banks with the lien period reduced to 30 days from 45 days. Insurance portability guidelines have been issued so as to give freedom to insurers to migrate.

IRDAI introduced the product regulation in 2019 so as to introduce prudent practices, pricing and designing the product. In June 2020, IRDAI published its guidelines for Covid-19 standard (benefit-based and indemnity) health policies. 

Health and General Insurance providers have been mandated to offer the indemnity policy. Arogya Sanjeevani scheme was launched to cover all features of insurance products. All these measures have been taken in the interest of insurers and to make the process simpler.

The motor insurance framework underwent a variety of key developments including withdrawal of comprehensive long-term motor package cover with an aim to stop mis-selling, long-term third-party coverage for new vehicle owners and scrapping of own damage coverage for 3 or 5 years with effect from 1 August 2020. 

The concept of a pay-as-you-use motor insurance plan has been launched that allows policyholders to switch on and off their motor insurance coverage depending on their usage, resulting in reduced premium costs.

In the health insurance space, the standardisation of health products has been a significant development. Health plans have been made comprehensive, these include mental disorders, Covid-19 issues, telemedicine and modern treatments under the scope of indemnity. Health insurers have been allowed to increase or decrease the health insurance premium by 15 per cent after the completion of three years, a major step in their pricing of the product. 

However, the introduction of a change in the method for calculation of unearned premiums has been a setback for the companies established in recent years. The move has given a distinct advantage to players who have been in existence for a long. 

Initiatives taken by the government and IRDAI will aid in creating awareness about the need for insurance amongst the general public as well as policyholders and ensuring a healthy India. All regulations are centred around getting more capital, customer protection and product standardization. Indian insurance companies have withstood the severe Covid-19 impact. 

Growth in the top line is a testimony of the inner resilience of insurance companies and strong regulations. The insurance sector, with increased awareness in the customer base as well as well thought policy changes, is poised to grow in terms of business, top and bottom line and is likely to attract good valuation going forward.