Insurers fight over dear life cover

MUMBAI: A social initiative by the Madhya Pradesh government has caused a rift between life and non-life insurance companies. A policy bought by the state may redraw the fine line separating the scope of cover provided by the two set of players.

The policy, Vijaya Raje Janani Kalyan Bima Yojana — the first of its kind in the country — aims at protecting expectant mothers and providing for their treatment. The policy was sold by United India Insurance — a general insurance company.

Life insurance companies, claim that United India is intruding on their turf, since a general company, under the law, cannot sell a life cover. The policy covers all families with an income low enough to be qualified as below poverty line (BPL). The benefits include a payment of Rs 1,000 to every expectant mother.

It also includes a death benefit of Rs 50,000 if the mother passes away during delivery. The benefit will be provided through government and private hospitals. The public health and family welfare department of the state government has started providing the cover and has come out with brochures providing details.

Some life insurance players are planning to move the Insurance Regulatory and Development Authority (Irda) in this connection. Industry circles said it would be interesting to see how the debate pans out. The first part of the policy can be covered by insurance companies under their health plan.

However, life companies contend that the second part of the policy covers death by natural causes, which a non-life company is barred from. Accident insurance and health insurance are the only two areas where there is an overlap of business interests of a life and a non-life company.

The regulator has also disallowed bundling of a life insurance cover with a non-life policy or vice-versa. The only instance where such bundling can take place is for micro-insurance policies, which are subject to separate regulation. Irda has, however, been clear on non-life companies providing any other form of life protection.

In April ’06, Irda had asked ICICI Lombard to withdraw a life cover provided under its loan-shield policy. According to guidelines, the only way a non-life company can provide life cover is by providing an accidental insurance cover.

PSUs including United India and New India Assurance have been selling cover for unborn children for years. These policies — ‘unborn child insurance’ and ‘cradle care’ — formed a part of the wide product portfolio of state-insurers, which had limited appeal.