IRDAI panel suggests lower capital requirement for microinsurance firms
<p id="content">A committee constituted by the Insurance Regulatory and Development Authority of India (IRDAI) has suggested that the capital requirement for entities entering into the microinsurance segment should be lowered to Rs 20 crore.</p>
Currently the entry-level capital requirement is at Rs 100 crore under the Insurance Act.
The 'Report of the Committee on the Standalone Microinsurance Companies' noted that the penetration of insurance is "all the more urgent" now in the context of the pandemic when millions of Indians, especially in the informal sector, have lost their livelihoods.
It said that dedicated standalone microinsurance institutions can play a major role in such situations by making insurance affordable and available to low-income families, thereby providing a measure of risk mitigation and security.
"The committee therefore recommends that the government and the Insurance Regulatory and Development Authority of India (IRDAI) license such businesses which can cater to the low-income segment," it said.
Recommending a cut in the capital requirement, the report said that the minimum capital requirement of Rs 100 crore stipulated under the Insurance Act has acted as the biggest impediment to the expansion of the microinsurance market.
It also recommended that the risk-based capital (RBC) approach should be adopted to enable the progressive growth of the microinsurance business while maintaining the highest prudential standards.
Further, microinsurance companies should be allowed to act as composite insurers to transact both life and non-life business through a single entity. Their portfolios should have a balance of both life and non-life business, as per the committee.
It also said that regulations for oversight should be developed with the highest prudential standards. These should be developed in consultation with those already undertaking microinsurance as intermediaries — cooperatives, mutuals and NGOs — as well as other stake-holders.
In addition, microinsurance companies and organisations should also focus on developing self-regulatory mechanisms, it added.
 
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