IRDAI proposes increasing mandatory coverage under Rural, Social Sector & Motor third party norms

The Insurance Regulatory and Development Authority of India (IRDAI) has proposed raising mandatory coverage under Rural, Social Sector and Motor Third Party Obligations' norms to ensure 'insurance for all'

IRDAI in the exposure draft of Rural, Social Sector and Motor Third Party Obligations Regulations, 2024, said that a new strategy and fresh approach have been devised to boost insurance penetration in the country. It further proposed to keep gram panchayat as the unit for measurement of rural sector obligations.

Target for Insurers

For life insurers, number of lives under individual policies and under group policies will be considered while for general insurers, number of individual dwellings under fire segment and number of vehicles under motor insurance segment will be counted

The regulator has proposed all life insurers to cover minimum 30% of lives in each gram panchayat subject to a minimum of 25,000 gram panchayats as driven by the lead insurer in the first year. For the 2nd year it is increased to 40% to a minimum of 75,000 gram panchayats and 50% to a minimum of 75,000 gram panchayats in year 3.

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The same formula is proposed for insurance under health and personal accidents and general insurance for case dewellings under fire insurance, motor (comprehensive and third party).

As per the proposeal, the number of lives covered under social sector have been increased to 20% in year 1 after notification. This as all the insurers have been able to achieve the social sector obligations.

In the Motor Third Party obligations, the regulator has suggested that every general insurance company is required to underwrite at least 20% increase over the total number of goods and passenger-carrying vehicles as compared to what was covered in the last financial year or 20,000 vehicles under both the categories (goods and passenger vehicles) or 10,000 vehicles in each category, whichever is higher.

On motor third party insurance, the obligations are specified for goods carrying and passenger carrying vehicles as nearly 50% of the vehicles in these 2 categories are uninsured.

It further said that Motor TP obligation fulfilment should be contributed by renewal of the existing vehicles and uninsured vehicles that are insured provided the gap in insurance is at least 30 days. Meanwhile, for every new insurer should underwrite a minimum of 10,000 goods carrying and 10,000 passenger carrying vehicles in the first financial year of its operations.