The Hindu : Business : Priority sector concept in insurance mooted

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Thursday, Nov 02, 2006
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Priority sector concept in insurance mooted

Special Correspondent

IRDA likely to issue directive to companies

— PHOTO: KAMAL NARANG

INSURING HEALTH: P. K. Bansal (extreme right), Minister of State for Finance, shaking hands with C. S. Rao, Chairman, IRDA, as Amit Mitra (partly seen), Secretary General, FICCI, and Prof. David Dror (second from left), Erasums University, Rotterdam, look on at a conference in New Delhi on Wednesday.

NEW DELHI: Taking the cue from priority sector lending by banks, the Minister of State for Finance, Pawan Kumar Bansal, on Wednesday mooted similar exposure voluntarily by insurance companies to help the rural poor.

Speaking at a micro health insurance seminar here, Mr. Bansal said: "Insurance companies should come forward for setting targets for this priority sector and they should start with health insurance.''

Just as banks have to extend 40 per cent of their total net credit to the priority sector in a bid to reach out to the rural poor and other sections so as to achieve financial inclusion, insurance companies should be similarly motivated to ensure that a certain portion of their insurance cover goes to the rural and other social sectors to achieve insurance inclusiveness.

Invites suggestions

The Minister invited suggestions with regard to the Government's role in providing some kind of subvention or any other assistance to render health insurance affordable to the poorer sections of the society.

The Insurance Regulatory and Development Authority (IRDA), he said, also favoured such a mechanism and would soon ask insurance companies to provide insurance to the priority sector on the basis of their years of operation and market share.

The IRDA Chairman, C. S. Rao, who was also present at the seminar, pointed out that even though the scheme would not be mandatory, the companies not providing priority sector insurance coverage might be penalised.

On the issue of foreign direct investment (FDI) in the insurance sector, Mr Bansal reiterated that the investment ceiling still remained at 26 per cent until the enactment of a legislation to hike it to 49 per cent.

Speaking on the insurance industry, Mr. Rao disclosed that while the life insurance segment was growing at the rate of 35 per cent on an average, the non-life segment was witnessing a growth of 15 per cent. In particular, motor and health insurance were growing fast, he said.

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