IRDAI’s ‘Bima Sugam’ Initiative: Transforming India’s Insurance Landscape

IRDAI’s ‘Bima Sugam’ Initiative: Transforming India’s Insurance Landscape

Subject: Economy

Section: Monetary Policy

India is the 10th largest insurance market in the world, and it’s poised to be 6^th largest insurance market in the world by 2032, ahead of Germany, Canada, Italy and South Korea.

When we think of Indian market we think of its population and covering entire population requires a lot of efforts, use of technology, major initiative by the intermediaries and distributors and therefore from the current 1% of penetration the global average of over 3.9% appears to be a challenging task.

The recent initiative by IRDAI Bima Sugam is perceived to be a big game changer in the general insurance market development. It is a revolutionary step with ambitions of becoming the largest online market for insurance products and services which has not been practiced anywhere in the world.

• IRDAI’s Women-Centric Initiative: The Insurance Regulatory and Development Authority of India (IRDAI) has introduced guidelines for Bima Vahaks, a dedicated distribution channel with a focus on women to enhance insurance inclusion, especially in rural areas.
• Part of ‘Insurance for All’ Goal: Bima Vahaks are a crucial component of IRDAI’s strategy to achieve its ‘Insurance for All’ objective. This initiative aims to make insurance more accessible and affordable, particularly for women in rural India.
• Bima Vistaar – Comprehensive Insurance Product: Bima Vahaks are expected to play a significant role in promoting ‘Bima Vistaar,’ a comprehensive insurance product envisioned by IRDAI. Bima Vistaar seeks to provide comprehensive coverage to a broad audience.
• Effective Date and Deployment Deadline: The guidelines will come into effect upon the launch of Bima Vistaar, with the exact launch date to be separately notified. IRDAI has set a deadline for deploying Bima Vahaks in all Gram Panchayats by December 2024.
• Roles and Responsibilities: Bima Vahaks will be equipped with handheld devices integrated with insurers’ electronic platforms. Their primary responsibilities include selling and servicing Bima Vistaar and other specified insurance products. They act as intermediaries connecting insurers with underserved communities.
• Training and Onboarding: The guidelines enable insurers to arrange for the onboarding and training of Bima Vahaks, ensuring they possess the necessary knowledge and skills to effectively serve their communities.
• Empowering Women in Insurance: Bima Vahaks represents an empowering initiative, encouraging women to actively participate in the insurance sector. By involving women as agents, IRDAI aims to bridge the insurance gap, especially in rural areas.
• Contributing to Greater Inclusion: IRDAI’s focus on Bima Vahaks and Bima Vistaar is a significant step towards achieving greater insurance inclusion. This initiative targets rural areas and underserved communities, making insurance more accessible to those who need it most.

IRDAI’s ‘Bima Trinity’ of policies comprises three elements:

1. Bima Sugam: This online platform is a central component of IRDAI’s initiatives to modernize the insurance sector.
2. Bima Vistaar: Bima Vistaar is a bundled risk cover product designed to offer defined benefits for various risks. Its aim is to expedite claim payouts without the need for surveyors.
3. Bima Vaahaks: The third element involves deploying a women-centric workforce known as Bima Vaahaks in each Gram Sabha (village council). Their mission is to promote the advantages of insurance products, particularly in rural areas.

‘Bima Sugam’ online platform –

The Insurance Regulatory and Development Authority of India (IRDAI) is in the process of establishing the ‘Bima Sugam’ online platform, a transformative development in the insurance sector often likened to a ‘UPI moment.’ This platform is set to revolutionize the insurance landscape in India, offering several key benefits:

1. One-Stop Destination: Bima Sugam will serve as a comprehensive platform catering to various insurance-related needs. This includes policy purchase, portability, agent changes, and claims processing.
2. Direct Policy Purchase: Buyers will have the convenience of directly purchasing life, motor, or health insurance policies through various channels, such as web aggregators, brokers, banks, and insurance agents. Insurance companies will be significant stakeholders in this platform, which will operate through an ‘e-insurance account’ (E-IA).
3. Centralized Data: The platform aims to centralize insurance data, simplifying the process of policy porting and providing a wide array of policy options to consumers. It also seeks to reduce intermediary commissions and facilitate the introduction of new insurance products.
4. Launch Date: Bima Sugam is scheduled for launch in June 2024.
5. Ownership: Ownership of the platform will be divided among key stakeholders. Life insurance and general insurance companies will each hold a 47.5% stake, while brokers and agent bodies will own 2.5% each.

Additionally, IRDAI has outlined several other plans to advance the insurance sector:

1. State-Level Insurance Committees: To achieve the goal of providing insurance coverage for all citizens by 2047, IRDAI intends to establish State-level insurance committees on the lines of State-level Banker’s Committee. These committees will involve State governments in crafting district-level insurance plans.
2. Amendment to Insurance Laws: IRDAI is considering amendments to the Insurance Act of 1938. These changes aim to enable differentiated capital requirements for niche insurers, attract more investments, and allow the addition of value-added services to insurance policies.

About IRDAI:

The Insurance Regulatory and Development Authority of India (IRDAI) is a statutory body founded in 1999, headquartered in Hyderabad. It operates under the IRDAI Act of 1999 and is under the jurisdiction of the Ministry of Finance. IRDAI is responsible for regulating and licensing the insurance and reinsurance industries in India, ensuring the sector’s smooth functioning and protecting the interests of policyholders.

What is insurance penetration?

Insurance penetration is measured as a percentage of total premiums collected to the country’s Gross Domestic Product (GDP). It is one of the parameters used to assess the level of development of the insurance sector in a country. In 2021-22, insurance penetration in India stood at 4.2 percent (life insurance penetration at 3.2 percent and general insurance, including health, at 1 percent). This is quite low when compared to other developed economies such as the US and Canada (11.4 percent) and advanced Europe, Middle-east and African regions (8 percent).