The Insurance Regulatory and Development Authority of India’s (IRDAI) ambitious plan to roll out an industry-wide, tech-enabled distribution and servicing platform – Bima Sugam – could be a UPI-like (united payment interface) moment for the industry, IRDAI chairman Debasish Panda said.
“We are working with insurance councils to create a UPI-like moment for the insurance industry. The conceptual framework is in place. The execution will start soon,” he said. The other two components of the ambitious plan include Bima Vistaar and Bima Vaahak.
“Bima Sugam will be the protocol of the platform. It will enable people to access insurance through this portal. Through Vistaar, we are trying to design a bundled life, health, casualty (accident) and property product. It will be priced in a manner that it is affordable,” said Panda at the Confederation of Indian Industries (CII) plenary session in New Delhi on May 25.
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A wider platform
Bima Sugam will initially enable buying and selling of insurance policies but going forward, will facilitate servicing of policyholder requests and also settlement of claims. “It will enable efficient policy and claim servicing,” he said.
Insurance repositories will also be connected to the platform. If digitised death registries (maintained by states) are connected to this platform, death certificates could be accessed at the time of life insurance claim settlement, making the process simpler and faster.
“Policyholders (or their families) can give their consent to pull insurance policies from the repository and death certificates from registries. The claims can be processed swiftly – money could be in the bank account within, say six-eight hours,” he said.
Distributors, too, can use this platform to sell policies. “There will be no job losses, instead more jobs will be created. This will lead to efficient distribution models,” Panda said.
The IRDAI has also recommended an amendment to the Insurance Act which will enable insurance companies to offer value-added services along with their policies.
“Currently, the statute does not permit this. For example, if yoga or gym memberships are offered, it could appeal to millennial customers…or, nursing services for their parents. They would be keen to go for such policies rather than plain vanilla policies. If they do so now, a huge capital charge will be levied on insurers, so it is not attractive,” Panda said.
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The IRDAI is also working on moving from a factor-based solvency capital regime to a risk-based capital (RBC) regime. “We are looking at experiences of other jurisdictions, trying to evolve an India RBC model. In the next 2-3 years, we will get it down to insurance companies to adopt the RBC regime, which will lead to more efficient use of capital. In the short term, some companies could need more capital, while some will also free up capital that can be used for growth. In the long term, it will lead to more efficient use of capital,” he said.
The insurance regulator has sent proposals to the government to amend the Insurance Act to allow composite licences for insurance companies and also enable the entry of newer players. “These could be micro, regional, small, captive and specialised players. By allowing this kind of differentiation, we will be able to cater to different geographies and strata of the population. Different capital requirements will be recommended (for such players) through regulations,” Panda said.