The Insurance Regulatory and Development Authority of India (IRDAI) has taken a significant stride toward achieving its goal of inclusive insurance for all by 2047.
The first Quantitative Impact Study (QIS1) has been launched, marking a crucial milestone in assessing the potential impact on insurers' capital and overall financial strength as the insurance industry transitions to the Indian Risk-Based Capital (Ind-RBC) Framework.
This framework serves as a central mechanism empowering insurers to maintain an appropriate capital level in alignment with the inherent risks associated with their insurance and reinsurance activities.
This orchestrated journey, guided by strategic planning, sets the stage for a symbiotic relationship between risk and capital, thereby shaping the contours of a reimagined insurance landscape.
Inclusive insurance, a specialized form of coverage, aims to extend financial protection to individuals and businesses historically excluded from insurance coverage due to factors such as limited income, social isolation, or remote geographical locations.
The primary objective of inclusive insurance is to make insurance products affordable, accessible, and within reach for individuals and enterprises in the low- to middle-income spectrum.
These insurance products are commonly referred to as micro-insurance products. While governmental initiatives have historically played a pivotal role in inclusive insurance, recent strides have been made through programs like the Employees’ State Insurance (ESI) schemes, and state-sponsored endeavors.
Enhanced success was achieved through initiatives like the Pradhan Mantri Jeevan Jyoti Bima (PMJJBY), Ayushman Bharat, and the Universal Health Insurance Scheme (UHIS), which harnessed technology to streamline all aspects, from enrollment and policy management to efficient claims processing.
Risk-based capital framework
The IRDAI is taking proactive measures to establish and implement the Ind-RBC Framework within India's insurance sector as a foundational element of its developmental agenda. IRDAI assumes the role of a catalyst, encouraging insurers to optimize capital resources while effectively managing risks.
Transitioning from the current factor-based model to an RBC approach, the IRDAI has introduced the inaugural QIS1. This study holds immense importance as it provides a comprehensive assessment of potential impacts on insurers' capital and overall financial strength.
To facilitate this endeavour, a meticulously crafted “Technical Guidance” document has been made available, aiding the insurance sector in precise risk measurement and evaluation within QIS1. Further streamlining the process, a circular has been issued in support of this initiative.
Maintaining a structured progression, insurers are tasked with presenting QIS1 results within a specified timeframe.
Subsequent to the analysis of QIS1 findings, IRDAI plans to initiate a series of progressive QIS. This dynamic sequence holds the potential to refine and evolve the RBC Framework, potentially leading to its ultimate implementation.