New Delhi: India’s insurance regulator
Insurance Regulatory and Development Authority (IRDAI) is looking into a proposal for
premium financing, a structure that is not available in the country at present. This would let both retail and corporate customers take loans to purchase insurance and spread premium payment over longer duration.
The proposal is being examined so to as to broaden the insurance penetration, retention, reducing protection gap while also creating new avenues of consumer and corporate financing. “It is being looked at. Necessary amendments will be required in the
Insurance Act, for which the government also needs to be on board,” said a senior executive in the know of the matter.
Premium financing uses borrowed money to pay for life insurance premiums. Under this type of lending, the retail customer will be offered by the broker or insurer an option to spread the cost of insurance over a period of instalments rather than to pay a single premium in one lump sum.
“The finance provider will pay the loan amount to the insurer to enable them to issue the insurance. Repayments are then collected directly from retail customer by monthly instalments through direct debit payments,” Economic Times quoted another executive as explaining.
This will help in renewal retention as the policy holder will not be faced with the challenge of paying a full year premium in a single payment.
In case of default, the balance of the loan is refunded to the financier by the insurance company on a pro-rata basis. Sharing that premium financing makes insurance products affordable for the insured and also increases the insurance penetration,
Tim Mathews, chief executive officer,
Finsall Resources, said, “An unsecured personal loan for a push product has a lot of limitations.”
