Stock Market

Why insurance is a hard sell for govt’s service delivery centres

Common Services Centres (CSCs) which were set up to act as a one-stop shop for delivering all electronic services to rural India are yet to take off as a large channel of insurance distribution. While insurance companies have developed specific products for CSCs, the sales numbers have been low.

Insurance companies shall develop insurance products to be marketed exclusively through the CSC model and file such products with the insurance regulator for approval.

According to the Insurance Regulatory and Development Authority of India (IRDAI) norms for sales through CSC, the sum assured for these products cannot exceed Rs 2 lakh, except for motor insurance. Products approved for the CSC model can be marketed only through the CSC Model.

However, for government sponsored schemes, IRDAI has clarified that the CSC special purpose vehicle can sell products even if the sum insured in the scheme is above Rs 2 lakh.

CSC-SPV is the Special Purpose Vehicle (SPV) incorporated to facilitate delivery of government, private and social sector services to citizens of India through the Common Services Centers (CSCs) network. 

Insurance officials said that there are not too many product choices available for the rural market. “We have seen rural policyholders looking for a higher sum assured which is not available under the current scheme,” said the chief executive of a bank-promoted private life insurer.

These CSCs were set up under the National e-Governance Plan, seeking to facilitate a platform for government and private-sector organisations to pass on benefits of information and communication tools to rural India.

In 2013, IRDAI had allowed CSCs to become an insurance intermediary and sell or market specifically-approved insurance products and services.

As per these regulations, CSCs which want to sell insurance products should appoint rural authorised persons (RAPs), who have undergone 20 hours of theoretical training from a recognised institution and, subsequently, cleared an examination. The licences to CSCs are valid for three years, after which these can be renewed for another three years.

Some privacy issues have also been raised since the same CSC will be used for multiple transactions like bill payment, Aadhaar Card application, among others.

According to private insurers, while basic general insurance products such as simple health plans and simple motor third-party plans can be offered through this channel, health top-up plans, riders and investment products like unit-linked insurance plans will be difficult to sell.

The Centre plans to roll out about 100,000 CSCs across the country, with a focus on rural areas. The CSCs will offer web-enabled e-governance services in rural areas. These can offer application forms, certificates, and utility payments such as electricity, telephone and water bills.

Limits on the expenses will also make it difficult for CSC model to work. The head of distribution at a large private sector insurer explained that since there is a fixed cap on the expenses, investments for this channel will be curtailed.

“The collection of premium and its remittance to the insurer itself costs more money than allowed by the regulator,” he said.

The government is planning to have around 150,000 CSCs across the country. It aims to develop CSCs as a dependable, IT-enabled network of Citizen Service Points connecting local population with the government departments, business establishments, banks and insurance companies and educational institutions, with an impact on primary, secondary and tertiary sectors of the country’s economy.