Finmin cracks the whip on insurersforignoringmsmes
After insurance companies ignored the government’s specially designed insurance policies for micro, medium and small enterprises (MSMES), the finance ministry has enquired with the insurers to check whether they are providing such covers.
The ministry’s department of financial services (DFS) has curated product prototypes, following the recommendations of the UK Sinha panel on MSMES, which the insurance companies — both life and non-life —ignored.
Insurance industry sources said while there are generic products available but there is hardly one which is in accordance with the finance ministry-drafted prototypes, especially meant for MSMES.
Among the prototypes are personal accident cover for the owner of the MSME and employees; life cover for keyman, partners; a specially designed insurance prototype for MSMES to cover their assets and income caused by catastrophic events; individual term plan for keyman, partner with an option to augment cover through additional coverage accidental death benefit, accidental and total and permanent disability and child support benefit.
“You are requested to furnish your comments on whether the above recommended covers are available in the industry,” the finance ministry said in a letter to insurance industry bodies.
“If not, then it is requested that the above mentioned covers may be made available in the market to meet the requirements of MSMES,” said the letter, reviewed by Business Standard. The finance ministry specifically referred to the Sinha panel’s recommendations on mitigating risk and impact of calamities for the design of the insurance products to address the special needs of the MSMES.
“Keyman or partner insurance of MSME, including the covers relating to term insurance, as well as accidental death benefit, etc, are offered as a product. But it is not specific to MSMES and could be for any companies,” said a top official of a private life insurance firm.
The Sinha-led committee, formed by the Reserve Bank of India (RBI) to address the issues regarding the sustainability of MSMES, had observed that the stress in 30-35 per cent of the accounts is due to payment delays and calamities. The panel also highlighted that these units are overwhelmingly run as proprietorships and as a result death or illness of the sole owner inevitably results in closure of the unit, loss of jobs and misery for families.
“Insurance products that address the special needs of MSMES after a catastrophic event should be encouraged. This would include solutions for maintenance of income in the case of business interruption, cost of re-education, partner insurance, keyman insurance and capital for accessing loans. This insurance solution should be made available at an affordable price,” the panel had recommended.