Unit 4: Specialized insurance and regulation

• PMFBY: farmer premium — 2% for kharif, 1.5% for rabi food and oilseed crops, 5% for commercial/horticultural crops; balance shared by Centre and states; covers prevented sowing, standing crop losses, post-harvest losses and localised calamities; technology (remote sensing, smartphones, drones) for yield estimation; implemented by AIC and other insurers.
• Restructured Weather Based Crop Insurance Scheme (RWBCIS): payouts based on weather parameters.

• Fidelity guarantee: indemnifies the employer against loss from fraud or dishonesty of employees (embezzlement, forgery); individual, collective, floater and blanket policies; claims require proof and police complaint.
• Property insurance: fire, burglary, householder's package, shopkeeper's policies, engineering covers.
• Motor vehicle insurance: Motor Vehicles Act, 1988 — third-party liability compulsory; own-damage cover optional; IDV basis; no-claim bonus 20–50%; add-ons; standalone OD covers allowed since 2019; Motor Accident Claims Tribunal for third-party claims.

• Determinants of premium: age, family size, sum insured, medical history, lifestyle (smoking), city of residence, policy features (room rent limits, co-payment), add-ons.
• Standalone health insurers: Star Health, Niva Bupa, Care Health, Aditya Birla Health, ManipalCigna; general insurers also sell health products.
• Intermediaries: Third Party Administrators (TPAs) — process claims and cashless approvals; agents, brokers, web aggregators, bancassurance.

Challenges

• Low awareness and penetration; out-of-pocket expenses high.
• Claim rejections — non-disclosure, waiting periods, exclusions, sub-limits.
• Fraud and inflated bills; lack of standard treatment costs.
• Ageing population and rising medical inflation.
• Disputes over room rent proportionate deductions.
• Remedies: standardised products (Arogya Sanjeevani), Insurance Ombudsman, National Health Claims Exchange, portability, mandatory coverage of pre-existing diseases after waiting periods (now max 3 years).
• Public liability insurance: the Public Liability Insurance Act, 1991 requires owners handling hazardous substances to take insurance to provide immediate relief to victims of accidents; contributions to the Environment Relief Fund; voluntary public liability policies for others.

• Enacted on the recommendation of the Malhotra Committee (1994); IRDA constituted in April 2000; headquarters Hyderabad.
• Composition (Section 4): Chairperson, not more than five whole-time members and not more than four part-time members, appointed by the Central Government from persons with ability, integrity and standing in life insurance, general insurance, actuarial science, finance, economics, law, accountancy or administration. Term — 5 years (age limits 65 for chairperson, 62 for members).
• Duty (Section 14): regulate, promote and ensure orderly growth of insurance and reinsurance business.

Rationale for privatisation (Malhotra Committee, 1994)

• Low penetration and poor coverage under public monopoly.
• Need for competition, product innovation and better customer service.
• Mobilise long-term funds for infrastructure.
• Bring technology and global expertise (foreign partners).
• Improve efficiency and claim settlement.
• Outcome: private players, FDI (49% → 74% → 100% proposed), bancassurance, digital distribution, growth in penetration.

Credit and deposit insurance

• Deposit Insurance and Credit Guarantee Corporation (DICGC): a wholly owned subsidiary of RBI (1978 merger of DIC 1962 and CGCI); insures bank deposits up to ₹5 lakh per depositor per bank (raised from ₹1 lakh in 2020); covers commercial, RRB, co-operative and small finance banks; payment within 90 days of a moratorium under the 2021 amendment.
• Credit insurance: protects lenders/sellers against default — ECGC Ltd (export credit insurance), trade credit insurance by general insurers, CGTMSE credit guarantees for MSME loans, Credit Guarantee Fund for Start-ups.

• Size: India is among the top ten insurance markets globally; total premiums over ₹11 lakh crore (2023–24).
• Penetration and density: penetration about 3.7% of GDP (life about 2.8%, non-life about 1%); density about US$ 95 — well below the global average.
• Players: 26 life insurers, about 34 general, health and specialised insurers, reinsurers (GIC Re + foreign branches).
• Reforms: "Insurance for All by 2047" vision; Bima Sugam marketplace; Bima Vistaar (rural cover); composite licences and 100% FDI (proposed); simplified regulations (2024); GST exemption on individual life and health premiums (2025).
• Challenges: low penetration, under-insurance (protection gap), mis-selling, claims disputes, rising health costs, climate risks.