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UNIVERSITY SCHOOL OF MANAGEMENT STUDIES G.G.S. INDRAPRASTHA UNIVERSITY
MICRO -INSURANCE IN INDIA:
T R E N D S A N D S T RAT E G I E S F O R F U RT H E R EXTENSION
Submitte d by: Govind Kumar Jha Gaurav Asthana Shiva Jangid Indu Bhushan Rakesh
BY University School Of Management Studies
Project Report On MICRO-INSURANCE
Deepak Himanshu Nirwan Manish Lucky Talwar
I herby offer my sincere and profound thanks to M/s Divya – our financial management teacher, who gave us such a challenging project and guided us through out our project including analysis and presentation of the same. Without her we would not been able to complete our project successfully.
I would also like to thank Mr. SHALENDRA GUPTA, Genaral Manager, TATA AIG Life Insurance, for his valuable support.
BY University School Of Management Studies
Project Report On MICRO-INSURANCE
I hereby declare that this project report is the result of hard core study done by Micro insurance team – Govind Kumar Jha, Gaurav Asthana, Shiva Jangid, Indu Bhushan, Rakesh, Himanshu Nirwan, Deepak, Manish and Lucky Talwar. This is to further declare that this project report is authentic and not being submitted by any other student previously.
BY University School Of Management Studies
Project Report On MICRO-INSURANCE
Foreword........................................................................................ ............... i Introduction.................................................................................... ...............1 • • Development of India........................................3 Micro-insurance in Side
Supply and Demand Developments ........................................5
3.1 Supply of micro-insurance ..................................................................5 3.2 Demand for micro-insurance...............................................................6
On Extending insurance .......................................................10
4.1 Flexibility in Premium........ ................................................................11 4.2 Micro-insurance and micro-finance ...................................................16
BY University School Of Management Studies
Risk management will increase the probability of success and reduce the probability of failure of your business. such as workers’ compensation and third party car insurance.Project Report On MICRO-INSURANCE Introduction Insurance Insurance is an essential part of running any business. When you’re in business you deal with a variety of potential risks each day. but it is something you can manage. If you are operating a small business you need more than just property insurance. Types of insurance • • • Assets & revenue insurance People insurance Liability insurance BY University School Of Management Studies Page 5 . Taking out the right insurance will help protect your business and minimize its exposure to risk. but you should be aware that some forms of insurance are compulsory. Risk is not something you can avoid. Your insurance requirements will vary according to the type of business you are operating.
Project Report On MICRO-INSURANCE Assets & revenue insurance To protect your assets and revenue-generating capacity. Many different types of policies are available. so make sure BY University School Of Management Studies Page 6 . storms. Ensures your ongoing expenses are met and anticipated net profit is maintained through a provision of cash flow. lightning. Business interruption or loss of profits Covers you if your business is interrupted through damage to property by fire or other insured perils. Motor vehicle It is compulsory to insure all company or business vehicles for third party injury liability. and is most important for retailers or a business which maintains unattended premises. Fidelity guarantees Covers losses resulting from misappropriation by employees who embezzle or steal. contents and stock of your business against fire and other perils such as earthquake. malicious damage and explosion. Burglary Insures your business assets against burglary. impact. Machinery breakdown Protects your business when mechanical and electrical plant and machinery at the work site break down. here are some of the types of insurance available: Building and contents Covers the building.
Comprehensive . Personal accident and illness If you are self employed you won’t be covered by workers compensation.Project Report On MICRO-INSURANCE you understand the options before making a decision. Third party property damage .covers you against the events covered above.covers you for all of the above plus damage caused to your own car by you in an accident. so you need to cover yourself for accident and sickness insurance through a private insurer. Compulsory third party (injury) – covers you for claims made against you for personal injuries and legal costs arising from the use of your car. There are four basic options: 1. You must obtain this insurance to register your car. financiers will usually insist on this cover. 2.through an approved insurer. Some are BY University School Of Management Studies Page 7 . Workers compensation is covered by separate state and territory legislation. It doesn’t include repairs to your own car if you caused an accident. Third party. There are several types of life insurance. People insurance It includes: • • Superannuation Workers compensation requirements Insurance cover for you and your employees: Workers Compensation You must provide accident and sickness insurance for your employees workers compensation . as well as fire and theft. fire and theft .covers your liability for damage to another person or to the property of others and your legal costs. 3. If you're buying a car on an installment basis. It also insures against damage caused if your car was stolen. 4.
things that could happen to you. Professional Indemnity Professional indemnity insurance protects you from legal action taken for losses incurred as a result of your advice. loss or damage of property or ‘pure economic’ loss resulting from your negligence. • Income protection or disability insurance . It provides indemnity cover if your client suffers a loss .Project Report On MICRO-INSURANCE investment-type funds where you contribute over a certain time and get back your investment plus interest earnings at the maturity date.covers part of your normal income if you are prevented from working through sickness or accident. Liability insurance Types of liability insurance you need to consider: Public Liability Public liability insurance protects you and your business against the financial risk of being found liable to a third party for death or injury.provides a lump sum when you are diagnosed with one of several specified life threatening illnesses. you are likely to have superannuation obligations to your employees. Total and permanent disability insurance .either material.provides a lump sum only if you are totally and permanently disabled before retirement.provides your dependents with a lump sum if you die. Others are designed to cover risk .superannuation is generally used to provide for a retirement plan. Term life insurance or whole of life cover .directly attributed to negligent acts. • • • Superannuation If you are running a business or employing people. financial or physical . Product Liability BY University School Of Management Studies Page 8 . Trauma insurance . If you are self-employed you also need to provide for your retirement .
a large microfinance network motivated by Jesus Christ’s call to serve the poor.3% of the continent’s poor are insured. the poor around the world face a multitude of risks that threaten to derail any progress they have made to work their way out of poverty. In India and China. What is Micro Insurance? On a daily basis. Micro insurance . The death of a family member. illness. supply or deliver goods. BY University School Of Management Studies Page 9 . we began working in 2002 on the development of a range of life. History and Vision The Micro Insurance Agency has its roots within Opportunity International. even in the form of repair or service.the protection of low-income people against specific perils in exchange for regular monetary payments (premiums) proportionate to the likelihood and cost of the risk involved – seeks to provide a suitable solution for managing these risks. In Africa this figure is much lower – just 0. disability. The Global Landscape It is estimated that only eighty million out of the world's 2. the percentage of poor lives insured hovers below 3%. loss of property and livestock.5 billion poor are now covered by some form of micro insurance. representing an unserved population of 370 million. in 23 of the poorest 100 countries in the world. Protecting people against these losses is an important step to alleviating global poverty. In partnership with Opportunity’s microfinance institutions. According to recent data. where organizations are estimated to serve nearly 30 million micro insurance clients each. you may need cover against claims of goods causing injury or damage. Product liability insurance covers damage or injury caused to another business or person by the failure of your product or the product you are selling. livestock. Opportunity International has been serving the entrepreneurial poor since 1971. crop derivative. Most remain without access to this critical financial service.Project Report On MICRO-INSURANCE If you sell. there is currently no identified micro insurance activity. With a network of 47 microfinance institutions. property. unemployment and health insurance products to cover the risks faced by Opportunity’s loan clients. and natural disasters each pose unique dangers.
when offered on an individual. we seek to serve the economically active poor who live on $4 per day or less in developing countries and provide a safety net to reduce economic setbacks. Micro Insurance Agency staff observed that the products most demanded by the poor are not always the ones available. is a critical need of the poor but the most limited in terms of supply. a death of a family member from HIV/AIDS – a “pre-condition” most insurance companies would not cover – would often mean expensive funeral costs and the loss of a breadwinner. is different from insurance in general as it is a low value product (involving modest premium and benefit package) which requires different design and distribution strategies such as premium based on community risk rating (as opposed to individual risk rating). BY University School Of Management Studies Page 10 . the term used to refer to insurance to the low-income people. one-off basis. New distribution models and channels were needed to increase access and reduce the effective price charged to clients. Through the experience of serving Opportunity’s microfinance institutions and their clients. For instance. policies that are available are often based on first world practices and are too complex for the simple coverage demanded. In response. Insurance is fast emerging as an important strategy even for the low-income people engaged in wide variety of income generation activities. including HIV/AIDS. In 2005.Project Report On MICRO-INSURANCE Micro Insurance Agency staff observed that the risks the poor face can often set them back months and years behind where their loans and savings products offered by Opportunity had taken them. the Micro Insurance Agency was founded by Opportunity International as a fully-owned subsidiary capable of offering insurance products and services to a wide range of customers. Our mission is to empower the materially poor to transform their lives by insuring them against financial risk and its consequences. Definitions of micro-insurance Micro-insurance. In addition. Micro Insurance Agency staff developed an affordable funeral benefit product that did not exclude any pre-conditions. for example. Specifically. active involvement of an intermediate agency representing the target community and so forth. and who remain exposed to variety of risks mainly because of absence of costeffective risk hedging instruments. high premium requirements and a need to pay in a single lump sum preclude a huge sector of the market from access. This transformed the mindset of retail insurance providers in the country. Health insurance. resulting in increased economic hardship for the family. Further. who later developed similar non-exclusive products in light of the competing environment.
) are eminently insurable as these risks are mostly independent . The same study reports that more than 40 percent of hospitalized patients take loans or sell assets to pay for hospitalization. and suggest specific ways that can help promote insurance to the target segment. as elsewhere. and partly due to the regulation that makes it mandatory for all formal insurance companies to extend their activities to rural and well-identified social sector in the country (IRDA 2000). 2001). Thus. reports that about one-fourth of hospitalized Indians fall below the poverty line as a result of their stay in hospitals. either by non-governmental organizations (NGO) due to the felt need in the communities in which these organizations were involved or by the trust hospitals.Project Report On MICRO-INSURANCE Although the type of risks faced by the poor such as that of death. given the wide variety of risks they face. life. Often they were considered uninsurable. BY University School Of Management Studies Page 11 . a few micro-insurance schemes were initiated. have shown that not only can the poor make small periodic contributions that can go towards insuring them against risks but also that the risks they face (such as those of illness. insurance is fast emerging as a prepaid financing option for the risks facing the poor. Development of Micro-insurance in India Historically in India. illness. highlight the current initiatives being contemplated to strengthen micro-insurance activity in the India.idiosyncratic. a World Bank study (Peters et al. recent developments in India. insurance that spreads the loss of the (few) affected members among all the members who join insurance scheme and also separates time of payment of premium from time of claims. they are more vulnerable to such risks because of their economic circumstance. Moreover. In the context of health contingency. are no different from those faced by others. for example. The poor were considered too poor to be able to afford insurance premiums. Of the different risk management strategies2. we analyze the early evidence on micro-insurance already available in this regard. Indeed. accident and injury. These schemes have now gathered momentum partly due to the development of micro-finance activity. Siegel et al. there are cost-effective ways of extending insurance to them. loss of property etc. In this paper. In the past insurance as a prepaid risk managing instrument was never considered as an option for the poor. enhancing the ability of the poor to deal with various risks is increasingly being considered integral to any poverty reduction strategy (Holzmann and Jorgensen 2000. injury and accident. is particularly beneficial to the poor who have limited ability to mitigate risk on account of imperfect labour and credit markets. However. 2002).
micro-finance institutions (MFIs) and NGOs are negotiating with the for-profit insurers for the purchase of customized group or standardized individual insurance schemes for the low-income people.Project Report On MICRO-INSURANCE As a result. Second. orchards and allied activities. The presence of these associations as a mediating agency. The social obligations are in terms of number of individuals to be covered by both life and non-life insurers in certain identified sections of the society. The categories of workers falling under agricultural pursuits are: cultivators. The social sector as defined by the insurance regulator consists of: • Unorganized sector • informal sector • economically vulnerable or backward classes. Finally. both in rural and urban areas. First. or what we call a nodal agency. these obligations are in terms of percentage of total gross premium collected. agricultural labourers. there is no exit option available to insurers who are not keen on servicing the rural and low-income segment. a density of population of less than four hundred per square kilometer More than twenty five per cent of the male working population is engaged in agricultural pursuits. increasingly. these obligations are to be fulfilled right from the first year of commencement of operations by the new insurers. that represents. 250 billion by 2008 (ILO 2004). The insurance regulatory and development authority (IRDA) defines rural sector as consisting of: • • • a population of less than five thousand. Third. the social and rural obligations do not necessarily require (cross) subsidizing insurance. and • Other categories of persons. Although the reach of such schemes is still very limited anywhere between 5 and 10 million individuals---their potential is viewed to be considerable. fishing. The rural obligations are in terms of certain minimum percentage of total polices written by life insurance companies and for general insurance companies. forestry. hunting and plantations. and workers in livestock. and acts on behalf of the target community is essential in extending insurance cover to the poor. The nodal agency helps the formal insurance providers overcome both informational disadvantage and high BY University School Of Management Studies Page 12 . Some aspects of these obligations are particularly noteworthy. Both public and private insurance companies are adopting similar strategies of developing collaborations with the various civil societies associations. The overall market is estimated to reach Rs. In order to fulfill these requirements all insurance companies have designed products for the poorer sections and low-income individuals. non-fulfillment of these obligations can invite penalties from the regulator.
and the products are voluntary products such as life insurance. In this realm the customers are corporations and wealthy individuals. AN OVERVIEW OF THE MARKET B Wealthy Middle Income A C Poor E Severely Poor D The market for micro insurance is represented by this pyramid diagram. Formal sector insurance companies generally focus on the area identified as “A”. scientifically organized scheme) as well as those of informal insurance (by using local information and resources that helps in designing appropriate schemes delivered in a cost effective way). Lack of affordability prevents their latent demand from expressing itself in the market. Hence the nodal agencies that organize the poor. Most of the non-auto related commercial products are being sold within the area marked “B”. The BY University School Of Management Studies Page 13 . the low resource base of the poor. impart training. This way micro insurance combines positive features of formal insurance (pre paid. coupled with high transaction costs (relative to the magnitude of transactions) gives rise to the affordability issue. and obligatory products required either by law (such as motor third party liability) or by banks (such as property loss and credit life). In the absence of a nodal agency. and work for the welfare of the low-income people play an important role both in generating both the demand for insurance as well as the supply of cost-effective insurance.Project Report On MICRO-INSURANCE transaction costs in providing insurance to the low-income people. Also offered are products covering employees and civil liability.
Micro-insurance delivery models One of the greatest challenges for micro-insurance is the actual delivery to clients. The microinsurance range also extends below the MFP range because it addresses agricultural coverage in some cases. The potential market for microinsurance is indicated as “E”. there are four main methods for offering micro-insurance the partner-agent model. The weakness of this sector is indicated by the dashed line that suggests incomplete coverage. In general. and provider involved. but are also disadvantaged in their limited control. and the community-based model.Project Report On MICRO-INSURANCE aggregate market for microfinance providers is generally in the area identified as “C”. institution. the full-service model. disability benefits. etc. micro-insurance schemes benefit from limited risk. • Partner agent model: A partnership is formed between the micro-insurance scheme and an agent (insurance company. microfinance institution. In this model. BY University School Of Management Studies Page 14 . and in some cases a third-party healthcare provider. Each of these models has their own advantages and disadvantages. and medications. Methods and models for doing so vary depending on the organization. or credit-life insurance as a means of protecting the institution’s interests. primary health care. They include coverage for pensions. • Full service model: The micro-insurance scheme is in charge of everything. donor. Some MFPs require borrowers to obtain insurance for property. Area “D” indicates the broad range of products offered by the social security and public health insurance systems of developing country governments. Just a few of these delivery channels include: • • • Low-income focused retailers in South Africa Post offices in Indonesia On bags of agricultural inputs or through computer kiosks in India. This extends above the MFP range in providing access to individuals and others that cannot obtain appropriate products from the commercial sector. the provider-driven model. and is now being sold through many delivery channels other than MFPs. The micro-insurance scheme is responsible for the delivery and marketing of products to the clients. while the agent retains all responsibility for design and development. working with external healthcare providers to provide the services. both the design and delivery of products to the clients.).
the limited management capacity frequently leads to a range of difficulties. Professionals typically manage mutual insurance companies. The key issues of concern for community-based schemes include: • Pricing – Often the process of pricing is focused on what people say they can pay rather than being linked to the cost structure of benefits that the group wants to receive. delivery. yet the disadvantage of higher risks. managing and owning the operations. and working with external healthcare providers to offer services. promoted by ILO STEP and CIDR among others. NEW MODELS FOR POOR COMMUNITIES Much interest over the last few decades has focused on helping communities to establish mutual or community-based insurance schemes. Often people who were simply in need of insurance end up being insurance managers with these schemes. There is an advantage once more in the amount of control retained. • Community-based/mutual model: The policyholders or clients are in charge. but doesn’t want to be an insurer.based scheme in Tanzania noted that he “wants insurance. Insurance is subject to cash flow fluctuations and thus requires significant reserves.Project Report On MICRO-INSURANCE This model has the advantage of offering micro-insurance schemes full control. is responsible for all operations. design. Also. tend to be run by well meaning local people who give freely of their time. and similar to the full-service model. This model is advantageous for its ability to design and market products more easily and effectively. • Provider-driven model: The healthcare provider is the microinsurance scheme.” In communitybased schemes. but are not insurance professionals. yet disadvantage in the limitations on products and services. These schemes frequently have insufficient reserves or no reserves at all. and service. One member of the management committee of a community. Community-based schemes. commercial reinsurance is rarely • BY University School Of Management Studies Page 15 . yet is disadvantaged by its small size and scope of operations.
Fraud by management is frequently a problem. and make the government interventions more effective in addressing those that truly require such services. Often this becomes a problem because providers have limited ability to manage the insurance administration issues. These products. He noted that the hospital administrators “do not even know how to price their own healthcare services”. These schemes are limited in size to those people within the defined local area. due to higher administrative costs and incorrect fees that do not cover the actual costs of services. Certainly there is a population that will not be covered by commercial or other non-government microinsurance. Therefore. in many countries these programs are simply insufficient to address the financial risks of the low. which are typically too low.Project Report On MICRO-INSURANCE available to unregulated insurance schemes thus leaving them with no ability to manage cash flow deficits. will attract more people to the facility and the people who come will be able to pay for the services. mutual insurance. both of which make sustainability a serious challenge for local management. they mis-price their premiums based on those prices. Indeed regulators are often unwilling to allow such schemes for fear that they will not be able to adequately supervise many small schemes run by non-professionals.income and destitute populations. commercial microinsurance. in many countries there is no legal framework for these schemes. if a proper balance could be found. it is argued. • Need for Developing Micro-Insurance in India – IRDA perspective BY University School Of Management Studies Page 16 . This reduces their ability to diversify a rather small risk pool. However. and enhances the potential for adverse selection. This is the case in India. Unfortunately. Governments also provide a form of microinsurance through the programs they provide for lowincome Citizens. One overseer of a particular group of hospitals noted that attempting to offer microinsurance could present a dual threat to the hospital network for which he works. it is possible that the combination of government programs. and traditional commercial insurance could make each of these more efficient. Service providers. Finally. most typically hospitals and other healthcare providers have offered pre-financing mechanisms that act somewhat like insurance. The resulting increase in patients using the insurance leads to even higher losses. • • Controls on management are weak and temptation is strong.
Yet various schemes exist that are viable. and offering doorstep services. Such products are often bundled with micro-savings and micro-credit. collecting premiums and installments. • Development Goal To enable microinsurance to be an integral part of a country's wider insurance system. women and low-income people through formal. It is also important to recognize a wide network of intermediaries in the rural and social sectors and notify regulations in order to guide and supervise the micro-insurance service providers and their customers. semiformal and informal institutions. depending on the appropriateness of the regulatory environment. benefiting both the institutions and their clients. BY University School Of Management Studies Page 17 . The greatest challenge for microinsurance lies in the combination of viability and sustainability with outreach.Project Report On MICRO-INSURANCE Background • Micro-insurance refers to protection of assets and lives against insurable risks of target populations such as micro-entrepreneurs. Such schemes have generally served two major purposes: (i) they have contributed to loan security. the ultimate effectiveness of interventions focusing on institutional transformation and sound insurance practices will vary considerably. small farmers and the landless. Although introduction of sound practices such as appropriate policy sizes and timely payment of installments of premium or positive incentives to renew on time in order to avoid policy getting lapsed can be feasible. and (ii) they have served as instruments of resource mobilization. Microinsurance is the most underdeveloped part of microfinance. thereby allocating scarce resources to micro-investments with the highest marginal rates of return. it is important for every insurer to adjust its costs of serving marginal clients in remote areas.
then Linking them as wholesale institutions to self-help groups as retailers. Establishing new local institutions providing microinsurance services. and finally. the following alternatives have emerged. which combines a social mandate with profit-making. lest they exclude small farmers. Upgrading self-help groups e.Project Report On MICRO-INSURANCE Today we have a variety of microfinance institutions with national and local outreach. This is due to restrictions in the existing agency regulations in terms of minimum eligibility norms in order to become an agent. Many of them have already become corporate agents or have entered into referral arrangements with insurers. Upgrading non-formal (comprising semiformal and informal) insurance arrangements with insurance companies.g.micro-entrepreneurs and people in remote areas. the only viable inducement for them is an adequate margin. semiformal institutions including savings and credit cooperatives. Linking formal and non formal insurance institutions with banks and self-help groups. NGOs and self-help groups which have immense potential in carrying the message of insurance as also solicit insurance business are yet to be utilized in a manner where their true potential can be harnessed to increase the insurance penetration levels. Depending on the existence and vigour of such institutions. for offering strategic entry points for microinsurance development: • • • • Adapting formal insurance arrangements to the needs of the microeconomy. Institutional Adaptation BY University School Of Management Studies Page 18 . If insurers are to serve customers who differ widely in terms of service costs and risks. However. Only sound social insurance. . has a chance of sustainability. to the level of financial cooperatives or village banks. The first three strategies may be inter-connected: • • • adapting insurance companies to the requirements of the microeconomy is a first step.
(3) Appropriate claim appraisal and processing procedures. Through adaptation to the microfinance market requirements. Linkage to Insurers On a modest scale. They may either be financial groups. communication and exchange of experience. Micro-insurance procedures and services should be set by insurers rather than the regulator. or non financial groups. supporting the proposals of individual members to insurance companies through recommendations. providing linkages with banks. Self-Help Groups (SHGs) are member-owned and member-controlled local institutions. (4) Adequate risk management. (6) Monitoring and BY University School Of Management Studies Page 19 . with financial intermediation as a secondary purpose. various forms of life and health insurance have been successfully practiced by different institutions in different countries. particularly as part of loan protection schemes. The functions that need to be focused must include: providing guidance to members. Non formal finance mostly rests on local institutions which are directly accessible to all segments of the population. such as vendors' associations. (2) Convenient and safe savings premium collection and deposit facilities. NGOs or donors. which typically lies within the upper quartile of the social hierarchy. insurance services to members. (5) Timely collection of premium installments. Appropriate procedures and services should be applied to attain: (1) Sound financial management. they may gradually expand into the second-highest quartile and into segments of the lower quartiles. collecting premium installments from members. Within the foreseeable future they will normally not be able to fully serve that market. family planning groups and numerous other types of voluntary associations.Project Report On MICRO-INSURANCE The experience so far has been that formal financial institutions serve but a fraction of the population. with financial intermediation as their primary purpose.
filed with the Authority: Table A: of Minimum Amount of Cover Rs.000 Rs. Proposed Micro-insurance Regulations In order to introduce the concept micro-insurance it is necessary to draft suitable bring in suitable regulations to enable insurers to design and distribute and service micro-insurance products and discharge their obligations to the rural and social sectors as per provisions of the Insurance Act. In addition to an insurance agent or corporate agent or insurance broker who are authorized to solicit and procure insurance business. 50. any endowment insurance contract or health insurance contract. either on individual or group basis. and vice versa. 5 year Term of Cover Max. A “life micro-insurance product” means any term insurance contract with or without return of premium. with or without an accident benefit rider. 10.000 5 year 7 years 18 60 BY University School Of Management Studies Page 20 . Micro-insurance Product 1. 50. 2. including micro-insurance business with an insurer in accordance with the provisions of the Insurance Act. 1. all of which may include cooperation between different formal and non-formal intermediaries in fields where each is most effective. 10. 1938.000 Maximum Amount of Cover Rs. It is proposed that an insurer transacting life insurance business shall be permitted to provide life micro-insurance products as well as general micro-insurance products provided it ties up with an insurer transacting general insurance business for the general micro-insurance products. 7 years Minimum Age at entry 18 Maximum age at entry 60 Type Cover Term Insurance with or without return of premium Endowme nt Rs. 1938 and the regulations made there under it is also proposed to introduce the concepts of “microinsurance product” and “micro-insurance agent” .Project Report On MICRO-INSURANCE (7) Effective information gathering. as per terms stated in the Table A below.000 Term of Cover Min.
000.000 Rs.000 Rs.000 1 year 1 year 7 year 5 years 18 18 60 60 NOTE: The present average sum insured is around Rs. as per terms stated in the Table B below.000 Rs. 10. 50.000 Rs.000 Rs. it is suggested that the minimum amount of cover of Rs. 10. 50. Page 21 BY University School Of Management Studies . 15. 20. Therefore. 1 year of Term Cover Max. or tools or instruments. This is highly inadequate to provide any tangible relief even to an individual below the poverty line.000 1 year 1 year 1 year 1 year 18 18 60 60 Micro-insurance Agent • A “micro-insurance agent” shall be a Non Government Organization (NGO) or a Self Help Group (SHG). 10. filed with the Authority: Table B: Type Cover of Minimum Amount of Cover Rs.Project Report On MICRO-INSURANCE Insurance Health Insurance Contract Accident Benefit as rider Rs. any contract covering the belongings such as hut. 15. 2.000 Maximum Amount of Cover Rs. 1 year of Minimum Age at entry 18 Maximum entry 70 age at Hut or livestock or Tools or implement s or other assets— against all perils Health Insurance Contract Personal Accident Rs.000 Rs. 10. A “general micro-insurance product” means any health insurance contract. 5. 10. 10. any personal accident contract.000 appear more realistic. either on individual or group basis.000 Term Cover Min. livestock.
age. transparency. He shall be specifically authorized to perform one or more of the following functions:-- a) Maintaining a register of all members and their dependants covered under the insurance scheme alongwith details of name. and accountability outlined in its memorandum. d) Collection of monies for issuance of contract or remittance of premium. • • Scope and Functions A micro-insurance agent shall be appointed by an insurer by a deed of agreement or memorandum of understanding which should clearly specify the terms and conditions. and he shall abide by the following:• • He shall work either for one life insurer or for one general insurer or for one life insurer and one general insurer. rules and regulations and demonstrates involvement of committed people. nominees and thumb impression/ signature. b) Collection of proposal forms. State Co-operative Act or as a partnership firm. duties and responsibilities of both the microinsurance agent and the insurer. consisting of 10 to 20 with a proven track record of working with marginalized groups with clearly stated aims and objectives. address. 1968 with a proven track record of working with marginalized groups with clearly stated aims and objectives. rules and regulations and demonstrates involvement of committed people. and accountability outlined in its memorandum. Self Help Group (SHG) may be an informal group or registered under Societies Act. transparency. c) Collection of self declaration from the member that he is in good health.Project Report On MICRO-INSURANCE • • Explanation: For the purposes of this regulation: A Non Government Organization (NGO) shall be a registered non-profit organization under the Society’s Act. BY University School Of Management Studies Page 22 . and atleast fifty for group insurance. The minimum number of members comprising a group should be atleast ten for insurance of individuals.
First insurance company to launch Micro Insurance • • • First major Micro Insurance initiatives venture by an Indian insurance company Launches three new Micro Insurance products and five Micro Insurance branches Adopts a tailor made rural communication strategy to reach out to the rural community American International Group. Initiative Taken By Private Sectors Tata AIG Life .Project Report On MICRO-INSURANCE e) distribution of policy documents. and h) Any policy administration service. (AIG). i) The micro-insurance agent or the insurance company shall have the option to terminate the agreement/ MOU after giving a notice of three months. Inc. f) Assistance in the settlement of claims. Inc. j) All such agreements/ MOU must have the prior approval of the Head office of the insurance company. g) Nomination. (AIG) American International Group. world leaders in insurance and BY University School Of Management Studies Page 23 .
Switzerland and Tokyo.5** per month. In addition.Project Report On MICRO-INSURANCE financial services. With premiums as low as Rs. 000. where traditionally the far-flung. on the New York Stock Exchange. is the leading international insurance organization with operations in more than 130 countries and jurisdictions. institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. Paris. AIG's common stock is listed in the U. AIG companies are leading providers of retirement services. as well as the stock exchanges in London. AIG companies serve commercial.5. there is now an affordable life insurance product for nearly every rural household in India. Cost of plans: Tata AIG Life Micro insurance plans are available with or without survival benefits and with death benefits ranging from Rs. financial services and asset management around the world. lower and lower middle-income segments have had limited access to life insurance services. • • • Navkalyan Yojana Ayushman Yojana Sampoorn Bima Yojana BY University School Of Management Studies Page 24 . Policies Available: The following special Micro Insurance products from Tata AIG Life are now available for the rural population at the bottom of the pyramid. Micro Insurance is the process of delivering and servicing relevant and affordable life insurance products to the low-income socio economic strata. The focus of Tata AIG Life’s Micro insurance program is rural India.S.50. 000 to Rs.
000/Maximum Death Benefit (Sum Assured): Rs. AYUSHMAN YOJANA BY University School Of Management Studies Page 25 . Tax Benefits and Age Eligibility • Premiums paid under this plan are eligible for tax benefits as per the Income Tax Act.* Anyone between ages 18 and 60 can apply for this policy.50. low cost term plan for the rural adults who seek life insurance protection without any maturity benefit.5.Project Report On MICRO-INSURANCE NAVKALYAN YOJANA A regular premium payment. 1961 and are subject to any amendments made therein from time to time. Key features include: • • • • • • Policy Term : 5 years Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.000/Premium payment frequency : Monthly. quarterly. half yearly & yearly Death Benifit : Sum assured to the policyholder’s nominee Maturity benefit : None Rider : Option to attach Accident Death Benefit Rider for issue ages 18 to 55 years at a nominal extra charge.
50. Key features include: • • • • Policy Term : 10 years Coverage Limits : Minimum Death Benefit (Sum Assured): Rs. Premiums are payable for only 10 years. 1961 and are subject to amendments made therein from time to time. How do we operate? BY University School Of Management Studies Page 26 .5.000/Death Benifit : Sum assured to the policyholder’s nominee Maturity benefit : On survival.000/Maximum Death Benefit (Sum Assured): Rs. Tax Benefits and Age Eligibility • Premiums paid under this plan are eligible for tax benefits to the extent of 20% of Sum Assured as per the Income Tax Act. 125% of the single premium paid. while the coverage is up to 15 years.* Anyone between ages 18 and 60 can apply for this policy. SAMPOORNA BIMA YOJANA A low cost insurance plan where the policyholder receives all the premiums paid during the policy term upon survival until the term of the policy.Project Report On MICRO-INSURANCE A single premium plan where the policyholder pays the premium at the beginning of the policy term. This is especially useful for those rural people who have a seasonal income.
The grassroots level agents explain the product details in the local language of the customer.000/Maximum Death Benefit (Sum Assured): Rs. 1961 and are subject to any amendments made therein from time to time. contract documents.000/Premium payment frequency : Monthly. all the premiums paid will be returned to the policyholder.* Anyone between ages 18 and 60 can apply for this policy. thereby enabling the customer to make a decision.Project Report On MICRO-INSURANCE We operate in 11 states with a specific relationship management team for each state. A dedicated & trained sales and marketing team manages the front end of the Micro insurance program. and application forms are available in 8 different languages other than English and Hindi Key features include: • • • • • Policy Term : 15 years Coverage Limits : Minimum Death Benefit (Sum Assured): Rs. brochures.50. Our micro insurance distribution model collaborates with NGO’s (Non-governmental organizations) and Rural organizations with community level SHG (Self Help Group) women advisors who provide insurance advisory services to the rural customers at their doorstep. half yearly & yearly Death Benifit : Sum assured is paid to the policyholder’s nominee Maturity benefit : At the end of the 15 years. RESEARCH OBJECTIVE To find out potential depth in society for providing opportunities for further extention for micro insurance BY University School Of Management Studies Page 27 . Tax Benefits and Age Eligibility Premiums paid under this plan are eligible for tax benefits as per the Income Tax Act. The training programs.5. quarterly.
coolies etc. consisting questions aimed to measure the people perception about insurance. rickshaw wala. old Delhi railway station. All the data generated was primary data that was generated directly from face to face communication Data analysis The data collected based on structured questionnaire is recorded on an excel sheet and with the help of SPSS software a pie chart analysis along with pillar data analysis is generated and based on this findings a qualitative inferences are made for each analysis. at survey location (Kashmiri gate.Project Report On MICRO-INSURANCE Sub objective: Determine need and ability of people segment whose per day income is less than 100 bugs. and target to find out opportunities for further extention of micro insurance. their need and problems. bottleneck why hadn’t insured. prostitutional area etc. Determine awareness about insurance among them. We conducted unstructured interviews (sample size) of 52 general people having income even less than 100 bugs per day like vendors. we developed a well defined questionnaire as a research instrument. and private sector proceeding in this area and extent of their success RESEARCH METHODOLGY Data collection For data collection. if aware then source of information To determine the govt. The same is being presented in form BY University School Of Management Studies Page 28 . What really matters to him or her while think about insurance.
as shown below: ANALYSIS AND INTERPRETATION Table 1: Gender of the respondents BY University School Of Management Studies Page 29 . The following graphs show the potential depth from different perspectives.Project Report On MICRO-INSURANCE of graphs and tables SURVEY RESULTS The following are our findings regarding the survey conducted by us.
Project Report On MICRO-INSURANCE S. Table 2: Age of the respondents frequency 17% 12% Chart 2: AGE 1 2 3 4 38% 33% BY University School Of Management Studies Page 30 25 20 . Sex Male Female Total No of Respondents 50 05 55 Percentage 91 09 100 Chart 1: Gender of the respondents No of Respondents 9% 0% 1 2 3 4 5 6 7 8 9 91% 10 Inference: The above reveals the fact that Majority of the respondents. 1. 2. about 91% belong to the category of male and 9% belong to the category of female. No.
17% belong to category 2 and 12% belong to the category 1 of age. Table 3: Educational Qualification Educational Qualification no.of respondent 30 20 10 0 1 2 3 4 5 6 7 8 9 10 catagory of education 1 1 42% Chart 3: Frequency 2% 2% 28 22 1 2 54% 3 4 Inference: The above result reveal that majority of respondents (22+28)% were either uneducated or educated only upto primary level Table 4: No. about 38% belong to the category of 2 age and 33% belong to the category of 3 of age.of respondent 30 20 10 0 1 2 3 4 5 6 7 8 9 10 age catagory f req 55% 0% Chart 4: freq 1 45% 2 3 4 BY University School Of Management Studies Page 31 . of family members family size no.Project Report On MICRO-INSURANCE Inference: The above reveals the fact that Majority of the respondents.
of respondent 40 30 20 10 0 freq earning member/family 16 2 1 33 Series1 Series2 Series3 Series4 Series5 Series6 Series7 Series8 Series9 Series10 31% 2% 4% Chart 5: freq 1 2 3 63% 4 Inference: From the above result it can be clearly seen that about 63% of the respondent were the only earning member of their family. 31% have 2 earning member because of size of family.of respondent 30 20 10 0 freq incom e catagory 6 24 22 Series1 Series2 Series3 Series4 Series5 Series6 Series7 Series8 Series9 Series10 Chart 6: 12% freq 46% 1 2 3 42% BY University School Of Management Studies Page 32 . of earning member earning member no. Table 6: Income level income level no.Project Report On MICRO-INSURANCE Inference: Above result reveals that majority of respondent 55% live with joint family or have big size of family Table 5: No.
of account holder 33 11 15% freq Chart 7: 8 21% 1 2 64% 3 1 2 3 4 5 6 7 8 9 10 no. Table 7: Account Holder account map 40 30 20 10 0 no.of account Inference: The above result reveals that 64% of respondent don’t have any account any where while 36% have their own bank or post office account. Table 8: Background background no.Project Report On MICRO-INSURANCE Inference: The above result reveals that 46% of respondent have income level 1 while 42% and 12% have income level 2 and 3 respectively.of respondent 40 30 20 10 0 1 2 3 4 5 6 7 8 9 10 10 6 36 Chart 8: freq 19% 12% 1 2 3 69% background catagory BY University School Of Management Studies Page 33 .
of dependent more than 1 and less than 4. Table 10: Whether has ID proof ID proof 27.5 25 24.5 26 25.5 27 26.2-no BY University School Of Management Studies Page 34 .5 24 27 Chart 10: freq 1 2 3 0% 48% 25 no. Table 9: No. of de pendent/family 8 4 6 18 15 Chart 9: freq 8% 16% 1 2 3 4 5 29% 35% Inference: The above result reveal that majority of respondent (35+29)% have no.Project Report On MICRO-INSURANCE Inference: The above result reveals that majority of respondent belong to the background of type 3(69%).of respondent 4 5 6 7 8 9 10 52% 3 4 5 6 7 8 9 10 1 2 1-yes . of dependent dependent members 12% 20 respondent 15 10 5 0 1 2 3 4 5 6 7 8 9 10 no. then type 1 (19%) and type 2(12%). 16% have only 1 dependent and 12%have 4 or more than 4 dependent in their family.
Table 12: If yes how they managed monetory management 20 response 15 10 5 0 1 2 3 w ay of m anage 4 5 3 1 19 15 10 Chart 12: way of monetary management 21% 2% 40% 6% 31% 1 2 3 4 5 BY University School Of Management Studies Page 35 . 2-no Inference: Above result shows that 23% of respondent didn’t face any problem related with health or asset but 77% faced a serious health of asset loss in past of their life. Table 11: Faced prob with health or asset health/asset problem faced 23% Freq Chart 11: responses 60 40 20 0 40 12 1 2 1 2 3 4 5 6 7 8 9 10 77% 1-yes.Project Report On MICRO-INSURANCE Inference: Above result reveals that 52% have ID proof but almost there were equal no that hadn’t any id proof.
But beside of this some sector 26% and 7% respectively are those who use to fall twice or thrice in month. Table 14: Risk on job risk on job 28 response 27 26 25 24 1 2 3 4 5 6 7 8 9 10 1-yes. 31% by way2 and 21% by way4 and rest managed their problem by pattern of ways shown above in chart12. 2-no 25 27 Chart 14: risk on job 48% 52% 1 2 BY University School Of Management Studies Page 36 .Project Report On MICRO-INSURANCE Inference: The above result reveals that majority of the respondent 40% managed their financial problem by way 1. Table 13: How many times fell ill illness 30 response 20 10 0 1 2 3 4 5 6 7 8 9 10 times fell ill/month 28 Chart 13: illness map 7% 26% 11 3 1 2 3 67% Inference: The result above reveals that 67% of the respondent don’t have serious health problem and they hardly use to fell ill once in a month.
Table 15: Risk toward assets risk toward asset 40 response 30 20 10 0 1 2 3 4 5 6 7 8 9 10 1-ye s. Reason might be because of their low income they hadn’t had any significant asset. Table 16: Awareness about insurance awareness about insurance 48 Chart 16: awareness about insurance 8% 60 response 40 20 0 4 1 2 3 4 5 6 7 8 9 10 1 2 1-ye s. 2-no BY University School Of Management Studies 92% Page 37 .Project Report On MICRO-INSURANCE Inference: The above result reveals that 52% of the respondent didn’t had any risk on job but almost equal proportion 48% who had serious job risk. 2-no 17 35 Chart 15: risk toward asset 33% 1 2 67% Inference: Above result reveals that a majority of respondent 67% don’t have any risk toward their asset while 33% were those who have.
Table 17: Source of information source of information 30 responses 20 10 0 1 2 8 1 0 3 2 4 5 5 8 0 7 8 9 1 35% 11% 0% 1% Chart 17: source of information 11% 1% 0% 3% 22 25 31% 6 10 7% source Inference: The result above reveals that 35% of the respondent got the information about insurance from source 7. of insurance taken insurance taken 40 responses 30 20 10 0 1 2 3 4 5 6 7 8 9 10 no. Table 18: No.of insurance taken 1 31 20 Chart 18: insurance tak en 2% 38% 1 60% 2 3 BY University School Of Management Studies Page 38 . from source 5 and remaining from the source pattern shown above.Project Report On MICRO-INSURANCE Inference: Above result reveals that majority of respondent 92% were awared of insurance but 8% were also there who even didn’t know what the insurance is. 31% got info.
Project Report On MICRO-INSURANCE Inference: Above shown result reveals that a majority of respondent 60% were not insured from any where . 41% because of reason3 and 15% were not insured because of reason 2. 38% had taken life insurance but 2% were also there who were very well awared and had 2 or more than 2 insurance. Table 20: Kind of insurance like to purchase insurance like to have 30 responses 20 10 0 1 2 3 4 5 6 7 8 9 10 type of ins urance 27 18 8 5 Chart 20: insurance like to have 9% 14% 1 46% 2 3 4 31% BY University School Of Management Studies Page 39 . Table 19: Why not insured? reason for no insurance 20 responses 15 10 5 0 1 2 3 4 5 6 7 8 9 10 reason 6 17 16 Chart 19: reason for no insurance 41% 44% 1 2 3 15% Inference: The result got above reveals that 44% were not insured because of reason1.
while some 9% want to minimize risk toward their assets and like to have asset insurance as well.Project Report On MICRO-INSURANCE Inference: Above result reveals that 46% of respondent like to have life insurance. majority were aligned toward premium package 2. 31% like to have health insurance but there are some 14% who are awared toward their child education and like to have education insurance. 20% were ready to pay premium 3. Table 21: Premium ready to pay premium map 20 responses 15 10 5 0 1 2 3 4 5 6 7 8 9 10 type of prem ium 12 15 10 14 Chart 21: p re miu m map 27% 24% 1 2 3 20% 29% 4 Inference: Above result reveals that in this particular sector all the respondent were almost have equally distributed opinion about premium package. 24% were ready to pay a sound premium. while 27% agreed to pay premium package 4. Table 22: How many members like to insured members like to be insured 40 responses 30 20 10 0 1 2 3 4 5 6 7 8 9 10 members/family 1 18 1 1 31 Chart 22: members like to be insured 2% 2% 2% 35% 1 2 3 4 59% 5 BY University School Of Management Studies Page 40 .
Policy facility location 40 responses 30 20 10 0 0 1 4 2 3 9 2 4 5 5 6 7 8 9 10 36 Chart 23: facility location 4% 16% 9% 0% 7% 1 2 3 4 64% 5 6 location catagory Inference: The result above reveals that a majority of respondent 64% believes on facility location 3 and likes to have insurance from there. Table 24: Insurance Duration insurance duration 25 20 15 10 5 0 1 2 3 4 5 6 7 8 9 10 11 6 20 15 insurance duration Chart 24: 21% 1 2 3 29% 12% 38% 4 BY University School Of Management Studies Page 41 .Project Report On MICRO-INSURANCE Inference: The above shown result reveals that majority of respondent 59% like to insured two members of their family apart from self but 35% were those who can’t bear even so less premium of micro insurance product and like to insure only one member apart from self rest are distributed as shown above. 16% believe on facility location 4 and rest are shown above. Table 23: From where you like to Purchase Ins.
• Some complaint about bad approachability of insurance provider company to them as well. • Many of respondents were not insured just because of either high premium or lack of complete information. BY University School Of Management Studies Page 42 .Project Report On MICRO-INSURANCE Inference: The result found above reveals that a majority of respondent 38% like the insurance for the duration of 5-10 years. 29% upto 15-20 years. 12% upto 10-15 years but some were also those 21% who can’t bear even so less premium and want to have insurance policy upto duration of 0-5 years. after that on food & cloth and Medicare & entertainment • Majority of respondent are the only earning member in family size of 5-8. • Majority of respondent hadn’t significant asset • Majority of them managed critical financial problem from some lender like master of their service • They hadn’t any significant job risk but yes they had asset loss risk • Many of them awared about insurance but not of micro insurance and best source of information medium found to be “Radio” and “advertisement banners”. • Income level lies between 100-200 bugs per day • Majority of respondent didn’t had any saving account because of no ID proof • Majority of respondent have more spending on travel & rent. FINDINGS • Study reveals that majority of people whose daily income is less than 100 bugs have big family • Earning member in majority of family is only male.
BY University School Of Management Studies Page 43 . some were very sensitive toward education and like to have education insurance as well • Because of low income they are ready to pay 150-200 bugs per year for insurance and like to have atleast one more member of their family to be insured • They are ready to pay premium 15-20 years. it can penetrate population very well. CONCLUSION: From the above statistical interpretation it could be concluded that potential lies in the society. There is a large segment of the population whose income level lies under the boundary line of poverty and since micro insurance target to those people whose income level is even less than 100 bugs per day. Many of our target segments have recommended many other facilities with micro insurance which found to be really concernable.Project Report On MICRO-INSURANCE • Majority of respondent shows keen interest in micro-insurance policy in life and health . can also get access through it. Micro insurance product should be manufactured in such a way that those respondents who had denied for having insurance for all family members only just because of premium.
Project Report On MICRO-INSURANCE BY University School Of Management Studies Page 44 .
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