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Micro Insurance India

Micro Insurance India

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Published by Mahesh Kumar

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Published by: Mahesh Kumar on Sep 20, 2010
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Micro insurance India Allianz Micro Insurance Report

By mid-century, India will be the world¶s most populated nation, but also home to more poor people than any other country. A crucial asset in the fight against poverty could be micro insurance that covers the poor against disease, accidents and natural disasters. Micro insurance Profile India ± Protecting the Poor

A boy sells Indian national flags in Mumbai. The majorities of Indians work informally and enjoy no social protection (Photo Reuters) Despite its rapid growth, India remains a poor country. Only one in ten Indian workers are formally employed, according to the OECD. The vast majority of Indians work informally, pay no taxes, and enjoy no social protection whatsoever. They must look after themselves, because no one else will. Some are rich enough to buy mainstream insurance, but more than 850 million Indians earn less than 2 dollars a day, according to the International Labor Organization (ILO)²not enough to afford traditional coverage. Micro insurance, however, can cost only a few euros per year and could help those with a low income to overcome the financial shocks that come along with natural disasters, accidents, or disease. According to a study conducted by Strengthening Micro Health Care Units for the Poor in India, an Indian-European think tank, more than half of India¶s poorest households spend about 2,400 Rupees (54 Euros) or more per year on health care. If only a fraction of this went into micro insurance, millions of people would enjoy better and cheaper health care. The Indian government has realized the benefits of low-premium coverage. Insurance companies now operating in India have to do a certain amount of business in rural areas or face hefty fees. Given the low income of most Indian farmers this almost always means underwriting micro insurance policies. Micro insurance industry

The poorer and more conflict-prone north is slowly catching up. says Radermacher. a growth closely linked to the overall growth of insurance in the country. A number of micro insurance schemes are state-led. Most micro insurance providers in India. who coordinates social security for India¶s Self-Employed Women¶s Association (SEWA). According to Mirai Chatterjee. Graphic (click on the image to enlarge) This helps the insurance company to reach difficult markets cheaply. Billions of poor people have no access to micro insurance coverage. including coverage against bad weather or health insurance against disease. from the Micro insurance Academy in New Delhi.Consequently. there were 31 insurance companies± including 24 private and 7 public insurers²selling life and general policies in India. owing mainly to the growth of microfinance in the area. the micro insurance industry in India is growing rapidly. focus on life insurance. Communities can choose from more than 150 products with different terms and conditions. who are interested in setting up micro insurance schemes. ³What I find very encouraging is that we now get more requests from institutions in the North. which is easier to administer and less . she writes. The number of policies issued in 2006 to 2007 by private insurers registered a 100 percent increase over those issued in 2005 to 2006. In 2007.´ explains Ralf Radermacher. The insurance company also benefits from the trust relationship the local microfinance institution has established with the target populations. an important precondition for low premiums. the choice is still limited. because you pay now but your benefit is in the future. Growing South Micro insurance growth is concentrated in South India. the MFI assumes the role of an agent and distributes the product of the insurance company to its clients. ³Trust of the prospective client to the insurer is one of the main hindrances. In such a partnership.´ A wide range of products is being offered. Many others are partnerships between private insurance companies and microfinance institutions (MFIs).

´ he says. as well as products offered by central and state governments.or climate-related risks. microfinance institutions. co-operatives. which makes it difficult for many insurers to develop adequate products. At the same time. ³The regulator is not touching the community-based insurance movement. which is a good initiative. ³There is a severe scarcity of data. many micro insurance innovations stem from India. ³Many of these potential policyholders have little understanding and experience of. the classic partner-agent model is becoming popular. On the other hand. insurance. For distribution. Existing products rarely ever cover income uncertainty. there will be more diversity of products and business models and a huge increase in the number of the insured. ³In essence. market risks. or trust in. While most Indians will remain in the informal sector. and credit unions exist. these micro insurance policies provide them with a new level of social protection. and weather. because it is currently difficult to find the effective regulation for that sector. Under the Micro insurance Act. the scope of this regulation is still limited.´ Another challenge faced by the sector is the lack of customer education. Editor: Thilo Kunzemann Publishing date: January 16. Policy and Regulation India is one of the few developing countries in the world that has a special micro insurance act that regulates the suppliers through its special agency for insurance regulation ± the Insurance Regulatory and Development Authority. microfinance institutions. as it is preferred by suppliers and provides an economic incentive to Indian agents. insurers are trying desperately to get a better idea of the Indian market and its needs. However. Ralf Radermacher says that while India was the first country to introduce regulation for micro insurance. 2008 Allianz Micro insurance . an intermediary between insurers. Radermacher predicts a rapid increase in numbers and outreach for both community-based schemes and big commercial insurers.´ says Radermacher. and charities. insurers have started to provide new models. Because of these obligations and the prospect of a very large market. large numbers of informal models run by NGOs.prone to fraud. insurance companies are obliged to conduct a certain percentage of their business in rural areas or with marginalized groups.´ says Richard Leftley of Micro Insurance Agency.

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