Disclaimer: Copyright infringement not intended.

Context:

• The Insurance Regulatory and Development Authority of India (IRDAI) has proposed to price Bima Vistaar, its ambitious all-in-one affordable mass product aimed at the rural areas of the country, at Rs 1,500 per policy.
• This initiative is part of IRDAI's efforts to extend insurance coverage to underserved rural populations and provide them with a comprehensive social safety net.

Key Points:

Product Overview:

• Bima Vistaar is a comprehensive insurance product that aims to address the insurance needs of rural communities.
• It offers a combination of life, health, personal accident, and property insurances in a single policy, providing a holistic coverage solution.
• By bundling these insurance components together, Bima Vistaar aims to simplify insurance access and enhance affordability for rural households.

Price Breakdown:

• Life cover: Rs 820
• Health cover: Rs 500
• Personal accident cover: Rs 100
• Property cover: Rs 80
• The total premium for the entire package is set at Rs 1,500 per policy, making it an affordable option for rural individuals and families.

Family Coverage:

• Bima Vistaar offers the option of family coverage on a floater basis.
• For the entire family, the policy will cost Rs 2,420, covering the primary policyholder along with their family members.
• An additional Rs 900 is charged for covering the rest of the family members under the same policy, ensuring comprehensive coverage for all family members at an affordable rate.

Additional Details and Insights:

Sum Assured and Coverage:

• The life, personal accident, and property covers under Bima Vistaar offer a sum assured of Rs 2 lakh each, providing significant financial protection against various risks.
• The health cover, known as hospi cash, provides a sum assured of Rs 500 for 10 days, with a maximum amount of Rs 5,000 available without producing bills or documents.
• This feature ensures timely financial assistance during medical emergencies.

Commission Incentives:

• Agents selling Bima Vistaar policies stand to earn a commission of 10 per cent.
• This commission structure incentivizes wider distribution and adoption of the product, potentially increasing insurance penetration in rural areas.

Insurance Penetration and Density:

• In FY23, India's insurance penetration decreased to 4 per cent from 4.2 per cent in FY22, as per a Swiss Re Sigma report. However, insurance density increased slightly from $91 to $92.
• The competitive pricing of Bima Vistaar is expected to benefit many individuals and families by providing them with reliable insurance coverage at a reasonable cost.

Claim Settlement Process:

• For the property part of the combo solution, claim settlement will be on a parametric basis.
• This means that the payout is based on the magnitude of the event rather than the magnitude of the losses, ensuring quicker and more efficient claim processing.

Initiatives by IRDAI:

• IRDAI, along with the General Insurance Council (GIC) and Life Insurance Council (LIC), is working towards creating a UPI-like moment for insurance, termed 'Bima Trinity.' This initiative aims to enhance accessibility and reach of insurance products, particularly in untapped rural areas.
• Bima Sugam, Bima Vistaar, and Bima Vahak are key components of the Bima Trinity, aiming to streamline insurance processes and distribution channels.

Distribution Strategy:

• Bima Vistaar and other products under the Bima Trinity will be distributed by Bima Vahak, leveraging intermediaries to reach rural populations effectively.
• Every gram sabha will have at least one Bima Vahak, tasked with promoting the product and facilitating its adoption at the grassroots level.

Future Outlook:

• Bima Vistaar is positioned as a mass product to increase insurance penetration in India.
• Its competitive pricing and comprehensive coverage are expected to generate significant sales volume.
• A cost-benefit analysis of the product's long-term sustainability will be crucial for evaluating its effectiveness in achieving its objectives and serving the needs of the population effectively.

What is Bima Sugam?

• IRDAI had announced the launch of Bima Sugam - an online portal is a one-stop shop for all insurance related queries, policy purchase, claim settlement and insurance advice. It is envisioned as a trusted platform by the IRDAI.

Key Features:

E-commerce Platform for Insurance:

• Bima Sugam serves as a comprehensive e-commerce platform, aggregating offerings from both life and non-life insurance providers.
• It offers a unified digital marketplace where individuals can explore, compare, and purchase insurance policies hassle-free.

End-to-End Digital Journey:

• With Bima Sugam, the entire insurance journey—from policy purchase to renewals, claim settlements, and grievance redressal—is digitized and streamlined.
• This ensures a seamless and paperless experience for policyholders, eliminating bureaucratic hurdles and enhancing efficiency.

Unified Integration:

• Bima Sugam integrates seamlessly with various government databases, insurers, intermediaries, and insurance repositories.
• By fostering interoperability and data sharing, the platform facilitates swift and transparent insurance transactions, benefiting both consumers and stakeholders.

Benefits of Bima Sugam for Customers:

Streamlined Insurance Processes:

• Bima Sugam eliminates the hassle of paperwork traditionally associated with insurance transactions.
• By digitizing policies and storing them in electronic insurance accounts, the platform offers customers a seamless and paperless insurance experience.

Centralized Policy Management:

• Customers can access all their insurance policies—whether life, health, or non-life—from a single application or window on Bima Sugam.
• This centralized approach enables convenient viewing of policy details, renewal dates, and the ability to raise service requests, all within one unified portal.

Enhanced Affordability and Transparency:

• Bima Sugam aims to make insurance policies more affordable by cutting down intermediaries' commissions.
• Through direct selling on the platform, customers may benefit from lower premiums, thereby enhancing accessibility and affordability of insurance products.
• Additionally, the platform promotes transparency in insurance transactions, empowering customers with clear information and pricing structures.

Bima Vahak:

• Bima Vahak is an initiative by the Insurance Regulatory and Development Authority of India (IRDAI) aimed at extending insurance services to the last mile.
• Each Gram Panchayat is designated to have a 'Bima Vahak' who is responsible for selling and servicing simple parametric bundled insurance products. 

Women-Centric Distribution Channel:

• Bima Vahak seeks to establish a women-centric insurance distribution channel, recognizing the pivotal role women play in rural households.
• This initiative is expected to enhance trust and awareness about insurance products among rural communities in India.

Comparison to Banking Correspondents:

• Industry experts liken the Bima Vahak initiative to the concept of banking correspondents in rural banking.
• Just as banking correspondents have facilitated financial inclusion in remote areas, Bima Vahak is anticipated to significantly boost the insurance industry's reach to underserved populations.

Collaborative Efforts with State Governments:

• Insurance companies are collaborating with state governments to implement Bima Vahak effectively.
• These collaborations aim to develop state-level insurance plans tailored to the specific needs and demographics of each region, similar to initiatives seen in the banking sector.

Expansion of Insurance Coverage:

• Through the adoption of a collaborative model and engagement with state governments, insurers aim to tap into the underinsured and uninsured market segments.
• By adopting a state-wise approach and leveraging local partnerships, insurers intend to expand insurance coverage and promote financial security among rural populations.

How can these initiatives contribute to the 'Insurance for All' goal?

Addressing the Protection Gap:

• A significant portion of the population lacks access to financial aid and insurance coverage, particularly the 'missing middle' comprising around 30% of eligible individuals without health insurance.
• The high percentage of uninsured vehicles and minimal coverage of property insurance further exacerbate the protection gap, especially for MSMEs.

Initiatives as Game Changers:

• Newly introduced initiatives such as Bima Vahak and Bima Vistaar are poised to revolutionize the insurance landscape by ensuring wider coverage.
• These initiatives are expected to bridge the significant protection gap prevalent in the country, thereby enhancing financial security for underserved populations.

Increasing Insurance Penetration:

• Bima Vahak and Bima Vistaar are designed to explore avenues for increasing insurance penetration, particularly in semi-urban, rural, and village areas.
• By leveraging localized distribution channels and tailored insurance solutions, these initiatives aim to extend coverage to previously underserved communities.

Role of Bima Sugam:

• Bima Sugam plays a crucial role in simplifying and digitizing the insurance marketplace, offering a seamless experience from policy purchase to renewals, claim settlements, and agent and policy portability.
• By streamlining processes and reducing intermediaries' commissions, Bima Sugam addresses various barriers individuals face in fulfilling their insurance needs.

Overall Impact:

• These initiatives collectively contribute to the 'Insurance for All' goal by democratizing access to insurance and enhancing affordability and transparency in insurance transactions.
• By bridging the protection gap and expanding insurance coverage to marginalized populations, these initiatives promote financial inclusion and resilience across the country.

Insurance Regulatory and Development Authority of India (IRDAI) The Insurance Regulatory and Development Authority of India (IRDAI) is an independent statutory body established under the IRDA Act, 1999, operating under the Ministry of Finance. Headquartered in Hyderabad, Telangana, IRDAI comprises a 10-member body responsible for regulating both insurance and re-insurance industries in India. Its core mandate includes protecting policyholders' interests, ensuring financial stability in the insurance sector, and formulating clear regulations. IRDAI's functions range from granting licenses to insurers, conducting inspections, audits, and setting industry standards, to regulating premium rates and providing a grievance redressal forum for policyholders. Through its robust oversight, IRDAI upholds industry integrity and safeguards consumer rights in the Indian insurance market.

PRACTICE QUESTION Q. Examine India's efforts towards achieving 'Insurance for All,' evaluating the effectiveness of initiatives, regulatory oversight, and challenges in enhancing insurance accessibility and affordability nationwide.

SOURCE: THE INDIAN EXPRESS