Multiple policies for basic cover affecting insurance spread: Irda

A single comprehensive policy covering basic insurance requirements like life and health will help penetration of insurance products as multiple policies for various covers are cumbersome, Insurance Regulatory and Development Authority (Irda) chief T S Vijayan said on Wednesday.

"Currently we observe that a typical general insurance product covers specific risks of fire, health. Similarly, natural death is covered separately by life insurers," Mr Vijayan said during his address at the seventh Global Insurance Summit organised by industry body Assocham.

"This approach leaves no option but to take multiple policies to obtain basic cover which is very cumbersome and thus appears to be one of the major roadblocks in increasing the insurance penetration," he said.

"It would be more effective to have single policy, with options for customisation, which covers all basic insurance needs."

He also said that lack of awareness is one of the prime reasons for poor performance of micro insurance products. Mr Vijayan said though Irda has allowed a tie-up of life and non-life insurers to offer micro insurance products, there has been no significant progress in that area.

On micro-insurance products he said, "During the last financial year, life insurance companies issued more than 5 million individual micro-insurance products and covered more nearly 14 million people."

One of the principal reasons for low penetration of insurance products could be the inappropriate mechanism being adopted in creating awareness, Mr Vijayan said, adding that effective communications about the protection offered by an insurance product also matters.

Andhra Pradesh Governor ESL Narasimhan was the chief guest at the event.

He said the insurance companies need to be generous when it comes to claim settlement.

He also said there has to be a mechanism to check the credibility of advertisements run by insurance companies so as not to mislead the public.

Two reports - 'Charting New Territory: Indian Insurance Industry' and 'Old Age Security: Doing the Right Thing for our Elders' by Assocham- Ernst and Young and Assocham-KPMG, respectively, were released during the programme.