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IRDAI pitches for Model Insurance Villages

Context:

At a time when the Covid pandemic is raging across the country, the Insurance Regulatory and Development Authority of India(Irdai) has come out with the concept of model insurance villages to cover the entire population in those areas, with the financial support of various institutions like Nabard and CSR funds.

Relevance:

GS-III: Indian Economy (Banking Sector & NBFCs, Growth and Development of Indian Economy, Mobilization of Resources)

Dimensions of the Article:

  1. What is Model Insurance Village (MIV)?
  2. Need for Model Insurance Village
  3. Insurance Regulatory and Development Authority of India (IRDAI)

What is Model Insurance Village (MIV)?

  • The concept of Model Insurance Village (MIV) is a development towards the aim to offer comprehensive insurance protection to all the major insurable risks that villagers are exposed to and make available covers at affordable or subsidised cost.
  • In order to make the premium affordable, financial support needs to be explored through NABARD, other institutions, CSR (Corporate Social Responsibility) funds, government support and support from reinsurance companies.
  • It may be implemented in a minimum of 500 villages in different districts of the country in the first year and increased to 1,000 villages in the subsequent two years.
  • Every general insurance company and reinsurance company accepting general insurance business and having offices in India needs to be involved for piloting the concept.

Need for Model Insurance Village

  • According to the Economic Survey for 2020-21, India’s insurance penetration, which was at 2.71% in 2001, has steadily increased to 3.76% in 2019, but stayed much below the global average of 7.23%.
  • Recently, the Parliament has passed the Insurance Amendment Bill 2021 to increase the foreign direct investment (FDI) limit in the insurance sector to 74% from 49%.

There are various challenges that need to be addressed to increase the penetration of the concept of Insurance in villages such as:

  1. Lack of awareness,
  2. Limited choice of insurance products,
  3. Absence of people-friendly and transparent claim settlement mechanisms, and
  4. Weak network of insurance firms.

Insurance Regulatory and Development Authority of India (IRDAI)

  • The Insurance Regulatory and Development Authority of India or the IRDAI is the apex body responsible for regulating and developing the insurance industry in India.
  • It is an autonomous body. It was established by an act of Parliament known as the Insurance Regulatory and Development Authority Act, 1999. Hence, it is a statutory body.
  • The IRDAI is headquartered in Hyderabad in Telangana. Prior to 2001, it was headquartered in New Delhi.

The functions of the IRDA are listed below:

  1. Its primary purpose is to protect the rights of the policyholders in India.
  2. It gives the registration certificate to insurance companies in the country.
  3. It also engages in the renewal, modification, cancellation, etc. of this registration.
  4. It also creates regulations to protect policyholders’ interests in India.

The Section 4 of the Insurance Regulatory Development Authority (IRDA) Act, 1999 specifies the composition of authority which consists of a 10-member team appointed by the government of India which includes.

  1. One chairman
  2. Five whole time members
  3. Four part time members

-Source: Indian Express

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