Page 42 - Life Insurance Today FEBRUARY 2016
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dia Ltd. (AICIL) and other general In- Earlier, they were allowed to sell poli- policy offered by private insurance
surance Companies. cies of only one life insurance and one companies and governmental export
non-life insurance company. It was credit agencies to business entities
IRDAI has concluded a series of discus- expected that the new norms will drive wishing to protect their accounts re-
sion with stakeholders and a number up sales through tie-ups between ceivable from loss due to credit risks
of research studies and experiments banks and insurers. such as protracted default, insolvency
are also being undertaken by institu- or bankruptcy.
tions associated with agriculture and "However, there has not been much
rural development throughout the traction. A possible reason could be IRDAI said it proposes to allow issu-
country. Sources said that the use of standardization of insurance products ance of trade credit insurance policy
this technology / should mark a move of various companies and the long pro- to RBI registered entities, for conduct-
towards speedy assessment and cedure involved in forging new tie-ups. ing factoring business in line with The
settlement of crop losses. We have to wait and see", Chirag Jain, Factoring Act, 2011. "This cover shall
Chief Operating Officer, Canara HSBC be restricted to short-term financing
The south-west monsoon season of Oriental Bank of Commerce Life Insur- against receivables, representing sup-
2015 had registered an overall rainfall ance Company, told. ply of goods, materials and services,"
deficit of 14.3 per cent relative to the said the exposure draft.
'normal' long period average for June- Interestingly, even before the new
September, making it a deficient mon- norms were introduced, the insurance As against the existing policy of net
soon. industry was virtually divided on the retention of the insurer for trade-
need for and impact of the increase in credit insurance of up to 2 per cent of
One of the main reasons for low levels number of tie-ups. Almost all insurers the net worth, IRDAI is proposing the
of insurance penetration in crop insur- promoted by banks and dependent on same to be increased to up to 5 per
ance is the lack of awareness about the bancassurance channel argued cent.
the insurance products and the ben- that there might not be much impact
efits of various policies. AICIL at while non-bank-led insurance saw As per existing rules, no trade credit
present transacts only in crop insur- some sense in it. insurance policy is allowed to cover
ance business while other policies cov- factoring, reverse factoring and bill
ering various risks pertaining to farm- It now seems that the divide contin- discounting.
ers such as agriculture implements ues as bank-led insurers are not jump-
personal accident and livestock are ex- ing to sell insurance policies of compa- India needs to improve;
tended by other general insurance nies other than those promoted by expend Rs 60K crore:
companies. them. Currently, there are about 250 IRDAI
corporate agents, including banks.
Indifferent response to- The IRDAI has acknowledged that the
wards the Corporate Trade credit insurance insurance industry will require
Agents framework policy to get refined Rs.50,000 - 60,000 crore to improve
insurance penetration in the country
The Insurance Regulatory and Develop- IRDAI has recently proposed changes from around 3% of gross domestic prod-
ment Authority of India had notified the in guidelines on trade credit insurance uct to 6%, the world average. The in-
new framework for Corporate Agents in an exposure draft on 'Amendment surance regulator has said that no new
in September 2015. However, the re- to Guidelines on Trade Credit Insur- foreign insurer has come to India after
sponse to the new corporate agency ance'. The sectoral regulator said liberalization of foreign direct invest-
norms in insurance has been lukewarm, changes in the economy, especially in ment (FDI) limit to 49% from 26%.
according to some insurers. micro, small, medium enterprise
(MSME) sector, has increased the need Meanwhile, in a bid to grow the insur-
The new framework allows corporate for trade credit and has enhanced the ance market, IRDAI will allow the de-
agents, such as banks, to tie up with scope for the credit insurance sector velopment and sale of extremely
up to three insurers each in life, non- diversely. simple over-the-counter products that
life and health insurance segments. can be sold without counseling
Trade credit insurance is an insurance through non-agents.
Life Insurance Today February 2016 41
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