IRDA (Micro Insurance) Regulations, 2005 :
A micro insurance product is designed to meet the needs of persons, especially residing in rural areas, whose primary requirement is basic insurance coverages in life, such as payment of insurance benefit upon death of the bread winner, to the family or Health insurance etc. The intention is provide a low cost product to such persons.
A life micro insurance product is therefore a pure term insurance product, or an endowment assurance product or a health insurance product with or without accident benefit. A general micro insurance product includes health insurance, insurance coverage on huts, livestock, tools or instruments or any personal accident contract.
Minimum and maximum amount of sum assured have been prescribed for each product category under Schedule I and Schedule II to the Regulations. For any of the product categories the sum assured cannot be less than `5,000 or more than `50,000.
A Non Governmental Organisation or a Self Help Group or a Micro Finance Institution or a Non-profit organisation (Companies registered under Section 25 of the Companies Act, 1956) can be appointed by an insurer to act as a Micro Insurance Agent.
The Regulations provide for a tie up between a Life insurance company and a General insurance company for offering both life and general micro insurance products together to a customer.
A micro insurance product may be distributed by a licensed agent or an insurance broker, but a Micro insurance agent is prohibited from distributing any insurance product other than micro insurance products. A micro insurance agent is allowed to act as an agent for micro insurance products of one life insurance company and one general insurance company at a time by entering into an agreement with them. The insurers concerned shall impart 25 hours training on micro insurance products, customer service, claims etc. to the Micro insurance agents.
A micro insurance agent shall appoint Specified persons who are authorised to sell on behalf of the Micro insurance agent (who can be a NGO or SHG or MFI as above)
All insurance companies are expected to issue polices in vernacular language to facilitate customer understanding of the policy terms and conditions. Where it is not possible a write up in vernacular language must be attached with the policy document.
A micro insurance agent may be paid a remuneration not exceeding 10% for single premiums received, 20% (15% for general insurance companies) for the premiums received during all policy years.
All micro insurance products sold shall be reckoned for the purpose of social sector obligations of an insurance company. Where the micro insurance product is also sold in a rural area, it shall be counted both for rural and social sector obligations separately.