New Delhi, Sept. 15: The government is willing to consider relaxing capital adequacy norms for insurance companies in the co-operative sector provided they come up with a viable model for consumer protection.
IRDA chairman C. S. Rao said here today that the government and the regulator would consider relaxing capital norms, a demand made by the co-operative sector, provided “they come up with a viable policy-holder protection model.”
Rao, who was speaking on the sidelines of a conference on micro-finance organised by Sewa, added that alternatively co-operatives can become corporate agents for established insurance firms and market specially tailored group insurance schemes to the not-so-prosperous section of the society with whom they were working.
Currently, entry barriers such as a minimum capital requirement of Rs 100 crore, reserves with a solvency margin of 150 per cent and investment norms, have kept at bay successful non-profit organisations from running insurance firms.
Sewa, a women’s development initiative which successfully runs a co-operative bank and a pension fund, has made a strong plea to the government to allow it and other development co-operatives to enter the insurance and pensions market.
However, in the aftermath of co-operative sector scams such as the Madhavpura and keeping in mind a pre-independence history of insurance firm bankruptcies, the government is chary of rushing to relax norms for the sector.
Ella Bhatt, chairperson of Sewa, said the organisation has been lobbying with finance minister Jaswant Singh “from last year to get the government to agree to our entering the insurance sector. The insurance products, which the structured formal insurance companies are willing to offer, do not work when you are reaching out to the poor and dispossessed communities.”
The government agrees. Banking secretary . S. Sisodia said today, “Despite the efforts of LIC and other insurers, the insurance cover for rural population is still inadequate. We do need a micro-insurance scheme.” To make things worse most insurers are unwilling to reach out to the rural sections of the population as the administrative costs of taking insurance covers to the interiors are high.