Insurance regulator reviews premium financing proposal

The insurance regulator is examining a proposal that could allow customers, individuals and businesses, to take out loans to buy insurance and spread the payment of premiums over a longer period. Known as premium financing in insurance jargon, this structure is currently not available in the country.

A senior executive familiar with the developments said the move was aimed at increasing insurance penetration and retention, closing the coverage gap and creating new avenues for consumer and business financing.

“It is under study. Necessary changes will be required in the Insurance Act, which the government must also agree to,” he added.

Under premium financing, the broker or insurer will offer the retail customer the option of spreading the cost of insurance over a period of payments rather than paying a single premium in a single payment before the start of the police.

“The finance provider will pay the loan amount to the insurer to enable them to issue the insurance. Reimbursements are then collected directly from the retail customer in monthly installments by direct debit,” another executive said, adding that this would help in renewal retention as the insured does not face the challenge of paying a full year’s premium in one installment.

In the event of default, the insurance company reimburses the balance of the loan to the financier on a pro rata basis.

“An unsecured personal loan for a push product has many limitations,” said Tim Mathews, CEO of Finsall Resources, adding that premium financing makes insurance products affordable for the insured and also increases market penetration. ‘insurance.

Under the Insurance Regulatory and Development Authority of India (Regulatory Sandbox) Regulations 2019, Finsall had trialled the product in partnership with Oriental Insurance.

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