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Submitted by

In partial fulfillment of the requirements for the award of





I hereby declare that the project report titled “FINANCE IN MICRO INSURANCE”
submitted in partial fulfillment of the requirements for the POST GRADUATION OF
CENTRE, KAKATIYA UNIVERSITY, WARANGAL is my original work and not submitted
for the award of any other Degree, Diploma, Fellowship or prizes.

PLACE: (HT.NO.09007C-1086)

This is to certify that the project report entitled “FINANCE IN MICRO INSURANCE”
carried at SHAREKHAN LIMITED is a bonafide work done by Mr. RAMAKRISHNA
CHERUKU bearing Roll No. 09007C-1086 a student of MBA (Finance) of LAL BAHADUR
COLLEGE OF P.G CENTRE WARANGAL and submitted the same in partial fulfillment for the
award of the degree of “MASTER OF BUSINESS ADMINISTRATION” affiliated to
KAKATIYA University for the scholastic year 2008-10.
We found the work carried out by her to be good. We wish her success in all future


(Internal Project Guide) (Examiner) (Principal)

I take this opportunity to express my sincere gratitude to the staff of LAL BAHADUR


SHAREKHAN LIMITED” for creating out the study and for their guidance and encouragement

that made the project very effective and easy.

I sincerely express my gratitude to MR. SURESH VARMA, – SHAREKHAN

LIMITED, for his guidance and support throughout my project.

I would like to thank Mr. SHANKARAIAH, for guiding and directing me in the process

of making this project report and for all the support and encouragement.

I am grateful to our Internal Faculty Mr. SRINATH for his support and assistance in

Completion of my project work.


Following diagram gives the structure of Indian financial system:

Financial markets are helpful to provide liquidity in the system and for smooth functioning of
the system. These markets are the centers that provide facilities for buying and selling of
financial claims and services. The financial markets match the demands of investment with
the supply of capital from various sources.
According to functional basis financial markets are classified into two types.
They are:
 Money markets (short-term)
 Capital markets (long-term)
According to institutional basis again classified in to two types. They are
 Organized financial market
 Non-organized financial market.

The organized market comprises of official market represented by recognized institutions,

bank and government (SEBI) registered/controlled activities and intermediaries. The
unorganized market is composed of indigenous bankers, moneylenders, individual
professional and non-professionals.

Money market is a place where we can raise short-term capital.
Again the money market is classified in to
 Inter bank call money market
 Bill market and
 Bank loan market Etc.
 E.g.; treasury bills, commercial papers, CD's etc.

Capital market is a place where we can raise long-term capital.
Again the capital market is classified in to two types and they are
 Primary market and
 Secondary market.
E.g.: Shares, Debentures, and Loans etc.

Primary market is generally referred to the market of new issues or market for mobilization
of resources by the companies and government undertakings, for new projects as also for
expansion, modernization, addition, diversification and up gradation. Primary market is also
referred to as New Issue Market. Primary market operations include new issues of shares by
new and existing companies, further and right issues to existing shareholders, public offers,
and issue of debt instruments such as debentures, bonds, etc.
The primary market is regulated by the Securities and Exchange Board of India (SEBI a
government regulated authority).


The main services of the primary market are origination, underwriting, and distribution.
Origination deals with the origin of the new issue. Underwriting contract make the shares
predictable and remove the element of uncertainty in the subscription. Distribution refers to
the sale of securities to the investors.
The following are the market intermediaries associated with the market:
1. Merchant banker/book building lead manager
2. Registrar and transfer agent
3. Underwriter/broker to the issue
4. Adviser to the issue

5. Banker to the issue

6. Depository
7. Depository participant


To ensure healthy growth of primary market, the investing public should be protected. The
term investor protection has a wider meaning in the primary market. The principal
ingredients of investors’ protection are:
 Provision of all the relevant information
 Provision of accurate information and
 Transparent allotment procedures without any bias.


The primary market deals with the new issues of securities. Outstanding securities are traded
in the secondary market, which is commonly known as stock market or stock exchange. “The
secondary market is a market where scrip’s are traded”. It is a market place which provides
liquidity to the scrip’s issued in the primary market. Thus, the growth of secondary market
depends on the primary market. More the number of companies entering the primary market,
the greater are the volume of trade at the secondary market. Trading activities in the
secondary market are done through the recognized stock exchanges which are 23 in number
including Over the Counter Exchange of India (OTCE), National Stock Exchange of India
and Interconnected Stock Exchange of India.
Secondary market operations involve buying and selling of securities on the stock exchange
through its members. The companies hitting the primary market are mandatory to list their
shares on one or more stock exchanges in India.

Listing of scrip’s provides liquidity and offers an opportunity to the investors to buy or sell
the scrip’s.

The following are the intermediaries in the secondary market:

1. Broker/member of stock exchange – buyers broker and sellers broker
2. Portfolio Manager
3. Investment advisor
4. Share transfer agent
5. Depository
6. Depository participants.


Stock exchanges are the perfect type of market for securities whether of government and
semi-govt bodies or other public bodies as also for shares and debentures issued by the joint-
stock companies. In the stock market, purchases and sales of shares are affected in conditions
of free competition. Government securities are traded outside the trading ring in the form of
over the counter sales or purchase. The bargains that are struck in the trading ring by the
members of the stock exchanges are at the fairest prices determined by the basic laws of
supply and demand.

Definition of a stock exchange:

“Stock exchange means any body or individuals whether incorporated or not, constituted for
the purpose of assisting, regulating or controlling the business of buying, selling or dealing in
securities.” The securities include:

 Shares of public company.

 Government securities.
 Bonds

The only stock exchanges operating in the 19th century were those of Mumbai setup in 1875
and Ahmedabad set up in 1894. These were organized as voluntary non-profit-marking
associations of brokers to regulate and protect their interests. Before the control on securities
under the constitution in 1950, it was a state subject and the Bombay securities contracts
(control) act of 1925 used to regulate trading in securities. Under this act, the Mumbai stock
exchange was recognized in 1927 and Ahmedabad in 1937. During the war boom, a number
of stock exchanges were organized. Soon after it became a central subject, central legislation
was proposed and a committee headed by A.D.Gorwala went into the bill for securities
regulation. On the basis of the committee’s recommendations and public discussion, the
securities contract (regulation) act became law in 1956.


Stock exchanges provide liquidity to the listed companies. By giving quotations to the listed
companies, they help trading and raise funds from the market. Over the hundred and twenty
years during which the stock exchanges have existed in this country and through their
medium, the central and state government have raised crores of rupees

by floating public loans. Municipal corporations, trust and local bodies have obtained from
the public their financial requirements, and industry, trade and commerce- the backbone of
the country’s economy-have secured capital of crores or rupees through the issue of stocks,
shares and debentures for financing their day-to-day activities, organizing new ventures and
completing projects of expansion, diversification and modernization. By obtaining the listing
and trading facilities, public investment is increased and companies were able to raise more
funds. The quoted companies with wide public interest have enjoyed some benefits and
assets valuation has become easier for tax and other purposes.


At present there are 23 stock exchanges recognized under the securities contracts
(regulation), Act, 1956. Those are:

Ahmedabad Stock Exchange Association Ltd.

Bangalore Stock Exchange

Bhubaneshwar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchange Ltd.

Coimbatore Stock Exchange

Delhi Stock Exchange Association

Guwahati Stock Exchange Ltd

Hyderabad Stock Exchange Ltd.

Jaipur Stock Exchange Ltd

Kanara Stock Exchange Ltd

Ludhiana Stock Exchange Association Ltd

Madras Stock Exchange

Madhya Pradesh Stock Exchange Ltd.

Magadh Stock Exchange Limited

Meerut Stock Exchange Ltd.

Mumbai Stock Exchange

National Stock Exchange of India

OTC Exchange of India

Pune Stock Exchange Ltd.

Saurashtra Kutch Stock Exchange Ltd.

Uttar Pradesh Stock Exchange Association

Vadodara Stock Exchange Ltd.

Out of these major stock exchanges were:

1. NSE (National Stock Exchange)
2. BSE (Bombay Stock Exchange)

NSE (National Stock Exchange):

The National Stock Exchange of India Limited has genesis in the report of the High Powered
Study Group on Establishment of New Stock Exchanges, which recommended promotion of
a National Stock Exchange by financial institutions (FI’s) to provide access to investors from
all across the country on an equal footing. Based on the recommendations, NSE was
promoted by leading Financial Institutions at the behest of the Government of India and was
incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the
country. On its recognition as a stock exchange under the Securities Contracts (Regulation)
Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM)
segment in June 1994. The Capital Market (Equities) segment commenced operations in
November 1994 and operations in Derivatives segment commenced in June 2000

NSE's mission is setting the agenda for change in the securities markets in India. The NSE
was set-up with the main objectives of:

• Establishing a nation-wide trading facility for equities and debt instruments.

• Ensuring equal access to investors all over the country through an appropriate
communication network.

• Providing a fair, efficient and transparent securities market to investors using electronic
trading systems.
• Enabling shorter settlement cycles and book entry settlements systems, and
• Meeting the current international standards of securities markets.
The standards set by NSE in terms of market practices and technology, have become industry
benchmarks and are being emulated by other market participants. NSE is more than a mere
market facilitator. It's that force which is guiding the industry towards new horizons and
greater opportunities.

BSE (Bombay Stock Exchange):

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The
Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the
Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making
Association of Persons (AOP) and is currently engaged in the process of converting itself
into demutualised and corporate entity. It has evolved over the years into its present status as
the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to
have obtained permanent recognition in 1956 from the Govt. of India under the Securities
Contracts (Regulation) Act 1956.The Exchange, while providing an efficient and transparent
market for trading in securities, debt and derivatives upholds the interests of the investors and
ensures redresses of their grievances whether against the companies or its own member-
brokers. It also strives to educate and enlighten the investors by conducting investor
education programmers and making available to them necessary informative inputs.

A Governing Board having 20 directors is the apex body, which decides the policies and
regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors,
who are from the broking community (one third of them retire ever year by rotation), three
SEBI nominees, six public representatives and an Executive Director & Chief Executive
Officer and a Chief Operating Officer.
The Executive Director as the Chief Executive Officer is responsible for the day-to-day
administration of the Exchange and the Chief Operating Officer and other Heads of
Department assist him.

The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to
constitution of the Executive Committee of the Exchange. Accordingly, an Executive
Committee, consisting of three elected directors, three SEBI nominees or public
representatives, Executive Director & CEO and Chief Operating Officer has been
constituted. The Committee considers judicial & quasi matters in which the Governing Board
has powers as an Appellate Authority, matters regarding annulment of transactions,
admission, continuance and suspension of member-brokers, declaration of a member-broker
as defaulter, norms, procedures and other matters relating to arbitration, fees, deposits,
margins and other monies payable by the member-brokers to the Exchange, etc.


A comprehensive legal framework was provided by the “Securities Contract Regulation Act,
1956” and “Securities Exchange Board of India 1952”. Three tier regulatory structure
 Ministry of finance
 The Securities And Exchange Board of India
 Governing body


The securities contract regulation act 1956 has provided uniform regulation for the admission
of members in the stock exchanges. The qualifications for becoming a member of a
recognized stock exchange are given below:
• The minimum age prescribed for the members is 21 years.
• He should be an Indian citizen.
• He should be neither a bankrupt nor compound with the creditors.
• He should not be convicted for fraud or dishonesty.
• He should not be engaged in any other business connected with a company.
• He should not be a defaulter of any other stock exchange.
• The minimum required education is a pass in 12th standard examination.


The securities and exchange board of India was constituted in 1988 under a resolution of
government of India. It was later made statutory body by the SEBI act 1992.according to this
act, the SEBI shall constitute of a chairman and four other members appointed by the central
With the coming into effect of the securities and exchange board of India act, 1992 some of
the powers and functions exercised by the central government, in respect of the regulation of
stock exchange were transferred to the SEBI.


• To protect the interest of investors in securities.

• Regulating the business in stock exchanges and any other securities market.
• Registering and regulating the working of intermediaries associated with securities
market as well as working of mutual funds.
• Promoting and regulating self-regulatory organizations.

• Prohibiting insider trading in securities.

• Regulating substantial acquisition of shares and take over of companies.
• Performing such functions and exercising such powers under the provisions of capital
issues (control) act, 1947and the securities to it by the central government.


• Board of Directors of Stock Exchange has to be reconstituted so as to include non-
members, public representatives and government representatives to the extent of 50% of
total number of members.
• Capital adequacy norms have been laid down for the members of various stock
exchanges depending upon their turnover of trade and other factors.
• All recognized stock exchanges will have to inform about transactions within 24 hrs.

Buy and sell orders placed with members of the stock exchange by the investors. The orders
are of different types.


Orders are limited by a fixed price. E.g. ‘buy Reliance Petroleum at Rs.50.’Here, the
order has clearly indicated the price at which it has to be bought and the investor is not
willing to give more than Rs.50.
Best rate order: Here, the buyer or seller gives the freedom to the broker to execute the order
at the best possible rate quoted on the particular date for buying. It may be lowest rate for
buying and highest rate for selling.

Discretionary order: The investor gives the range of price for purchase and sale. The broker
can use his discretion to buy within the specified limit. Generally the approximation price is
fixed. The order stands as this “buy BRC 100 shares around Rs.40”.


The orders are given to limit the loss due to unfavorable price movement in the market. A
particular limit is given for waiting. If the price falls below the limit, the broker is authorized
to sell the shares to prevent further loss. E.g. Sell BRC limited at Rs.24, stop loss at Rs.22.

Buying and selling shares: To buy and sell the shares the investor has to locate register
broker or sub broker who render prompt and efficient service to him. The order to buy or sell
specifying the number of shares of the company of investors’ choice is placed with the
broker. The order may be of any type. After receiving the order the broker tries to execute the
order in his computer terminal. Once matching order is found, the order is executed. The
broker then delivers the contract note to the investor. It gives the details regarding the name
of the company, number of shares bought, price, brokerage, and the date of delivery of share.
In this physical trading form, once the broker gets the share certificate through the clearing
houses he delivers the share certificate along with transfer deed to the investor. The investor
has to fill the transfer deed and stamp it. The stamp duty is one of the percentage
considerations, the investor should lodge the share certificate and transfer deed to the register
or transfer agent of the company. If it is bought in the DEMAT form, the broker has to give a
matching instruction to his depository participant to transfer shares bought to the investors
account. The investor should be account holder in any of the depository participant. In the
case of sale of shares on receiving payment from the purchasing broker, the broker effects the
payment to the investor.

Share groups: The scrips traded on the BSE have been classified into
‘A’,’B1’,’B2’,’C’,’F’ and ‘Z’ groups. The ‘A’ group represents those, which are in the carry
forward system. The ‘F’ group represents the debt market segment (fixed income securities).
The Z group scrips are of the blacklisted companies. The ‘C’ group covers the odd lot
securities in ‘A’, ‘B1’&’B2’ groups.

Under rolling settlement system, the settlement takes place in days (usually 1, 2, 3 or
5days) after the trading day. The shares bought and sold are paid in for n days after the
trading day of the particular transaction. Share settlement is likely to be completed much
sooner after the transaction than under the fixed settlement system.

The rolling settlement system is noted by T+N i.e. the settlement period is n days after
the trading day. A rolling period which offers a large number of days negates the advantages
of the system. Generally longer settlement periods are shortened gradually.

SEBI made RS compulsory for trading in 10 securities selected on the basis of the criteria
that they were in compulsory demat list and had daily turnover of about Rs.1 crore or more.
Then it was extended to “A” stocks in Modified Carry Forward Scheme, Automated Lending
and Borrowing Mechanism (ALBM) and Borrowing and lending Securities Scheme (BELSS)
with effect from Dec 31, 2001.

SEBI has introduced T+5 rolling settlement in equity market from July 2001 and
subsequently shortened the cycle to T+3 from April 2002. After the T+3 rolling settlement
experience it was further reduced to T+2 to reduce the risk in the market and to protect the
interest of the investors from 1st April 2003.

Activities on T+1: conformation of the institutional trades by the custodian is sent to the
stock exchange by 11.00 am. A provision of an exception window would be available for late
confirmation. The time limit and the additional changes for the exception window are
dedicated by the exchange.
The exchanges/clearing house/ clearing corporation would process and download the
obligation files to the broker’s terminals late by 1.30 p.m on T+1. Depository participants
accept the instructions for pay in securities by investors in physical form upto 4 p.m and in
electronic form upto 6 p.m. the depositories accept from other DPs till 8p.m for same day

Activities on T+2: The depository permits the download of the paying in files of
securities and funds till 10.30 a.m on T+2 from the brokers’ pool accounts. The depository
processes the pay in requests and transfers the consolidated pay in files to clearing
House/clearing Corporation by 11.00am/on T+2. The exchange/clearing house/clearing
corporation executes the pay-out of securities and funds latest by 1.30 p.m on T+2 to the
depositories and clearing banks. In the demat mode net basis settlement is allowed. The buy
and sale positions in the same scrip can be settled and net quantity has to be settled.


Sharekhan Limited is one of the fastest growing financial services providers with a focus
on equities, derivatives and commodities brokerage execution on the National Stock Exchange of
India Ltd. (NSE), Bombay Stock Exchange Ltd. (BSE), National Commodity and Derivatives
Exchange India (NCDEX) and Multi Commodity Exchange of India Ltd. (MCX). Sharekhan
provides trade execution services through multiple channels - an Internet platform, telephone and
retail outlets and is present in 280 cities through a network of 704 locations. The company was
awarded the 2005 Most Preferred Stock Broking Brand by Awwaz Consumer Vote.


 Sharekhan traces its lineage to SSKI, an organization with more than decades of trust and
credibility in the stock market.
 Pioneers of online trading in India- was launched in 2000 and is now the
second most visited broking site in India.
 Has one of the largest networks of Share shops in the country.


CITI Venture Capital and other Private Equity Firm 81%
Employees 10%


Tarun Shah Chief Executive Officer
Mr. Pathik Gandotra Head Of Research
Mr. Rishi Kohli Vice President Of Equity Derivative
Jaideep Arora Director- Products And Technology
Shankar Vailaya Director- Operation

Sharekhan Limited offers blend of tradition and technology like Share shops, dial-n-trade and
online trading- where there is choice of three trading interfaces which are speed trade exe for
active trader, web based classic interface for investor, web based applet- fast trade for investor.
Sharekhan Limited was formerly known as SSKI Investor Services Private Limited. The
company is based in Mumbai, India and its address is- A-206 Phoenix House, 2nd Floor

Senapati Bapat Marg, Lower Parel

Mumbai, 400 013. India

Phone: 91 22 24982000

Fax: 91 22 24982626

Advanced Technology Used By Sharekhan

Sharekhan selected Aspect® EnsemblePro™ from the Aspect Software Unified IP Contact
Center product line, a unified contact centre solution delivering advanced

multichannel contact capabilities, because it provided the best total value over other solutions
evaluated. It enabled Sharekhan to meet customer service needs for inbound call handling, voice
self service, predictive outbound dialing, call blending, call monitoring and recording, and
creating outbound marketing campaigns, among other capabilities. This helps them to

 Increased agent efficiency and productivity.

 Enabled company to execute proactive customer service calls and expand services
offered to customers.
 Enhanced call monitoring for improved service quality
Financial services are a highly competitive and volume-driven industry which demands high
standards of customer service, effective consultation and quick deliverables. This is something
Sharekhan Limited, a financial services provider based in India, understands. The company
offers several user-friendly services for customers to manage their stock portfolios, including
online capabilities linked to an information database to help customers confidently invest, and
inbound customer services using voice self-service technology and customer service agents
handling telephone orders from clients.
With a customer base of more than 500000, and a employee of 3100 Sharekhan continues to
grow at a fast pace. Customer satisfaction is a top priority in Sharekhan’s agenda.

Its primary objective

 Is to help and support its customers in managing their portfolio in the best possible
manner through quality advice, innovative product and superior service.
Scheme which are provided by Sharekhan cover almost every segment of the customer-

First Step New Comer
Classic Trade Occasionally
Speed Trade Day Trader
Platinum Circle High Net Worth Individuals

Foreword....................................................................................................... i


• Development of Micro-insurance in India........................................3

• Supply and Demand Side Developments ........................................5

3.1 Supply of micro-insurance ..................................................................5

3.2 Demand for micro-insurance...............................................................6

• On Extending Micro-insurance .......................................................10

4.1 Flexibility in Premium........ ................................................................11

4.2 Micro-insurance and micro-finance ...................................................16

• Conclusions.......................................................................................20



Insurance is an essential part of running any business. If you are operating a small business you
need more than just property insurance. Taking out the right insurance will help protect your
business and minimize its exposure to risk.

Your insurance requirements will vary according to the type of business you are operating, but
you should be aware that some forms of insurance are compulsory, such as workers’
compensation and third party car insurance.
When you’re in business you deal with a variety of potential risks each day. Risk is not
something you can avoid, but it is something you can manage. Risk management will increase
the probability of success and reduce the probability of failure of your business.

Types of insurance

• Assets & revenue insurance

• People insurance
• Liability insurance

Assets & revenue insurance

To protect your assets and revenue-generating capacity, here are some of the types of insurance

Building and contents

Covers the building, contents and stock of your business against fire and other perils such as
earthquake, lightning, storms, impact, malicious damage and explosion.


Insures your business assets against burglary, and is most important for retailers or a business
which maintains unattended premises.

Business interruption or loss of profits

Covers you if your business is interrupted through damage to property by fire or other insured
perils. Ensures your ongoing expenses are met and anticipated net profit is maintained through a
provision of cash flow.

Fidelity guarantees

Covers losses resulting from misappropriation by employees who embezzle or steal.

Machinery breakdown

Protects your business when mechanical and electrical plant and machinery at the work site
break down.
Motor vehicle

It is compulsory to insure all company or business vehicles for third party injury liability. Many
different types of policies are available, so make sure you understand the options before making
a decision. There are four basic options:

1. Compulsory third party (injury) – covers you for claims made against you for
personal injuries and legal costs arising from the use of your car. You must obtain this
insurance to register your car.
2. Third party property damage - covers your liability for damage to another person
or to the property of others and your legal costs. It doesn’t include repairs to your own car
if you caused an accident.
3. Third party, fire and theft - covers you against the events covered above, as well
as fire and theft. It also insures against damage caused if your car was stolen.
4. Comprehensive - covers you for all of the above plus damage caused to your own car
by you in an accident. If you're buying a car on an installment basis, financiers will
usually insist on this cover.

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 -
through an approved insurer. Workers compensation is covered by separate state and territory

Personal accident and illness

If you are self employed you won’t be covered by workers compensation, so you need to cover
yourself for accident and sickness insurance through a private insurer. There are several types of
life insurance. Some are investment-type funds where you contribute over a certain time and get
back your investment plus interest earnings at the maturity date. Others are designed to cover
risk - things that could happen to you.

• Income protection or disability insurance - covers part of your normal income

if you are prevented from working through sickness or accident.
• Trauma insurance - provides a lump sum when you are diagnosed with one of
several specified life threatening illnesses.
• Term life insurance or whole of life cover - provides your dependents with a
lump sum if you die.
• Total and permanent disability insurance - provides a lump sum only if you are
totally and permanently disabled before retirement.

If you are running a business or employing people, you are likely to have superannuation
obligations to your employees. If you are self-employed you also need to provide for your
retirement - superannuation is generally used to provide for a retirement plan.

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, loss or damage of property or ‘pure economic’ loss
resulting from your negligence.

Professional Indemnity

Professional indemnity insurance protects you from legal action taken for losses incurred as a
result of your advice. It provides indemnity cover if your client suffers a loss - either material,
financial or physical - directly attributed to negligent acts.

Product Liability

If you sell, supply or deliver goods, even in the form of repair or service, 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

What is Micro Insurance?

On a daily basis, 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. The death of a family member, loss of
property and livestock, illness, and natural disasters each pose unique dangers. Protecting people
against these losses is an important step to alleviating global poverty.
Micro insurance - 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.

The Global Landscape

It is estimated that only eighty million out of the world's 2.5 billion poor are now covered by
some form of micro insurance. Most remain without access to this critical financial service. In
India and China, where organizations are estimated to serve nearly 30 million micro insurance
clients each, the percentage of poor lives insured hovers below 3%. In Africa this figure is much
lower – just 0.3% of the continent’s poor are insured. According to recent data, in 23 of the
poorest 100 countries in the world, there is currently no identified micro insurance activity,
representing an unserved population of 370 million.

History and Vision

The Micro Insurance Agency has its roots within Opportunity International, a large microfinance
network motivated by Jesus Christ’s call to serve the poor. With a network of 47 microfinance
institutions, Opportunity International has been serving the entrepreneurial poor since 1971. In
partnership with Opportunity’s microfinance institutions, we began working in 2002 on the
development of a range of life, property, livestock, crop derivative, disability, unemployment
and health insurance products to cover the risks faced by Opportunity’s loan clients.
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. For instance, 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, resulting in increased economic hardship for the family. In response, Micro
Insurance Agency staff developed an affordable funeral benefit product that did not exclude any
pre-conditions, including HIV/AIDS. This transformed the mindset of retail insurance providers
in the country, who later developed similar non-exclusive products in light of the competing
Through the experience of serving Opportunity’s microfinance institutions and their clients,
Micro Insurance Agency staff observed that the products most demanded by the poor are not
always the ones available. Health insurance, for example, is a critical need of the poor but the
most limited in terms of supply. In addition, policies that are available are often based on first
world practices and are too complex for the simple coverage demanded. Further, when offered
on an individual, one-off basis, high premium requirements and a need to pay in a single lump
sum preclude a huge sector of the market from access. New distribution models and channels
were needed to increase access and reduce the effective price charged to clients.
In 2005, 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. Specifically, 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.

Definitions of micro-insurance
Micro-insurance, the term used to refer to insurance to the low-income people, 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), active involvement of an
intermediate agency representing the target community and so forth. Insurance is fast emerging
as an important strategy even for the low-income people engaged in wide variety of income
generation activities, and who remain exposed to variety of risks mainly because of absence of
cost-effective risk hedging instruments.

Although the type of risks faced by the poor such as that of death, illness, injury and accident,
are no different from those faced by others, they are more vulnerable to such risks because of
their economic circumstance. In the context of health contingency, for example, a World Bank
study (Peters et al. 2002), reports that about one-fourth of hospitalized Indians fall below the
poverty line as a result of their stay in hospitals. The same study reports that more than 40
percent of hospitalized patients take loans or sell assets to pay for hospitalization. Indeed,
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, Siegel et al. 2001).

Of the different risk management strategies2, 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, is particularly beneficial to the poor who have limited ability to
mitigate risk on account of imperfect labour and credit markets.

In the past insurance as a prepaid risk managing instrument was never considered as an option
for the poor. The poor were considered too poor to be able to afford insurance premiums. Often
they were considered uninsurable, given the wide variety of risks they face. However, recent
developments in India, as elsewhere, 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, accident and injury, life, loss of property etc.) are eminently insurable as
these risks are mostly independent ,idiosyncratic. Moreover, there are cost-effective ways of
extending insurance to them. Thus, insurance is fast emerging as a prepaid financing option for
the risks facing the poor.

In this paper, we analyze the early evidence on micro-insurance already available in this regard,
highlight the current initiatives being contemplated to strengthen micro-insurance activity in the
India, and suggest specific ways that can help promote insurance to the target segment.

Development of Micro-insurance in India

Historically in India, a few micro-insurance schemes were initiated, 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. These schemes have now gathered momentum partly due to
the development of micro-finance activity, 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). As a result, increasingly, 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.
Although the reach of such schemes is still very limited anywhere between 5 and 10 million
individuals---their potential is viewed to be considerable. The overall market is estimated to
reach Rs. 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,
• 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. The categories of workers falling under agricultural pursuits are: cultivators,
agricultural labourers, and workers in livestock, forestry, fishing, hunting and plantations,
orchards and allied activities.

The social sector as defined by the insurance regulator consists of:

• Unorganized sector
• informal sector
• economically vulnerable or backward classes, and
• Other categories of persons, both in rural and urban areas.

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 rural obligations are in terms of
certain minimum percentage of total polices written by life insurance companies and for general
insurance companies, these obligations are in terms of percentage of total gross premium
collected. Some aspects of these obligations are particularly noteworthy. First, the social and
rural obligations do not necessarily require (cross) subsidizing insurance. Second, these
obligations are to be fulfilled right from the first year of commencement of operations by the
new insurers. Third, there is no exit option available to insurers who are not keen on servicing
the rural and low-income segment. Finally, non-fulfillment of these obligations can invite
penalties from the regulator.
In order to fulfill these requirements all insurance companies have designed products for the
poorer sections and low-income individuals. Both public and private insurance companies are
adopting similar strategies of developing collaborations with the various civil societies
associations. The presence of these associations as a mediating agency, or what we call a nodal
agency, that represents, 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 transaction costs in providing insurance to the low-
income people. This way micro insurance combines positive features of formal insurance (pre
paid, 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). In the absence of a nodal agency, the low resource base of the poor, coupled with
high transaction costs (relative to the magnitude of transactions) gives rise to the affordability
issue. Lack of affordability prevents their latent demand from expressing itself in the market.
Hence the nodal agencies that organize the poor, impart training, 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.


B Wealthy A
Middle Income


Severely Poor

The market for micro insurance is represented by this pyramid diagram. Formal sector insurance
companies generally focus on the area identified as “A”. In this realm the customers are
corporations and wealthy individuals, and the products are voluntary products such as life
insurance, and obligatory products required either by law (such as motor third party liability) or
by banks (such as property loss and credit life). Also offered are products covering employees
and civil liability. Most of the non-auto related commercial products are being sold within the
area marked “B”. The aggregate market for microfinance providers is generally in the area
identified as “C”. Some MFPs require borrowers to obtain insurance for property, or credit-life
insurance as a means of protecting the institution’s interests. Area “D” indicates the broad range
of products offered by the social security and public health insurance systems of developing
country governments. They include coverage for pensions, disability benefits, primary health
care, and medications. The weakness of this sector is indicated by the dashed line that suggests
incomplete coverage. The potential market for microinsurance is indicated as “E”. This extends
above the MFP range in providing access to individuals and others that cannot obtain appropriate
products from the commercial sector. The microinsurance range also extends below the MFP
range because it addresses agricultural coverage in some cases, and is now being sold through
many delivery channels other than MFPs. 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.

Micro-insurance delivery models

One of the greatest challenges for micro-insurance is the actual delivery to clients. Methods and
models for doing so vary depending on the organization, institution, and provider involved. In
general, there are four main methods for offering micro-insurance the partner-agent model, the
provider-driven model, the full-service model, and the community-based model. Each of these
models has their own advantages and disadvantages.

• Partner agent model: A partnership is formed between the micro-insurance scheme

and an agent (insurance company, microfinance institution, donor, etc.), and in some
cases a third-party healthcare provider. 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. In this model, micro-insurance schemes benefit from limited
risk, but are also disadvantaged in their limited control.
• Full service model: The micro-insurance scheme is in charge of everything; both the
design and delivery of products to the clients, working with external healthcare providers
to provide the services. This model has the advantage of offering micro-insurance
schemes full control, yet the disadvantage of higher risks.

• Provider-driven model: The healthcare provider is the micro-insurance scheme, and

similar to the full-service model, is responsible for all operations, delivery, design, and
service. There is an advantage once more in the amount of control retained, yet
disadvantage in the limitations on products and services.

• Community-based/mutual model: The policyholders or clients are in charge,

managing and owning the operations, and working with external healthcare providers to
offer services. This model is advantageous for its ability to design and market products
more easily and effectively, yet is disadvantaged by its small size and scope of


Much interest over the last few decades has focused on helping communities to establish mutual
or community-based insurance schemes. Professionals typically manage mutual insurance
companies. Community-based schemes, promoted by ILO STEP and CIDR among others, tend
to be run by well meaning local people who give freely of their time, but are not insurance
professionals. Often people who were simply in need of insurance end up being insurance
managers with these schemes. One member of the management committee of a community-
based scheme in Tanzania noted that he “wants insurance, but doesn’t want to be an insurer.” In
community-based schemes, the limited management capacity frequently leads to a range of
difficulties. 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.

• Insurance is subject to cash flow fluctuations and thus requires significant reserves. These
schemes frequently have insufficient reserves or no reserves at all. Also, commercial
reinsurance is rarely available to unregulated insurance schemes thus leaving them with
no ability to manage cash flow deficits.

• Controls on management are weak and temptation is strong. Fraud by management is

frequently a problem.

• These schemes are limited in size to those people within the defined local area. This
reduces their ability to diversify a rather small risk pool, and enhances the potential for
adverse selection, both of which make sustainability a serious challenge for local

• Finally, in many countries there is no legal framework for these schemes. 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. This is the case in
India. Service providers, most typically hospitals and other healthcare providers have
offered pre-financing mechanisms that act somewhat like insurance. These products, it is
argued, will attract more people to the facility and the people who come will be able to
pay for the services. Often this becomes a problem because providers have limited ability
to manage the insurance administration issues. 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. He noted that the hospital administrators “do not
even know how to price their own healthcare services”. Therefore, they mis-price their
premiums based on those prices, which are typically too low. The resulting increase in
patients using the insurance leads to even higher losses, due to higher administrative costs
and incorrect fees that do not cover the actual costs of services. Governments also
provide a form of microinsurance through the programs they provide for low-income
Citizens. Unfortunately, in many countries these programs are simply insufficient to
address the financial risks of the low- income and destitute populations. Certainly there is
a population that will not be covered by commercial or other non-government
microinsurance. However, if a proper balance could be found, it is possible that the
combination of government programs, commercial microinsurance, mutual insurance,
and traditional commercial insurance could make each of these more efficient, and make
the government interventions more effective in addressing those that truly require such

Need for Developing Micro-Insurance in India – IRDA perspective


• Micro-insurance refers to protection of assets and lives against insurable risks of target
populations such as micro-entrepreneurs, small farmers and the landless, women and
low-income people through formal, semiformal and informal institutions. Such products
are often bundled with micro-savings and micro-credit, thereby allocating scarce
resources to micro-investments with the highest marginal rates of return. Microinsurance
is the most underdeveloped part of microfinance. Yet various schemes exist that are
viable, benefiting both the institutions and their clients. Such schemes have generally
served two major purposes: (i) they have contributed to loan security; and (ii) they have
served as instruments of resource mobilization. The greatest challenge for microinsurance
lies in the combination of viability and sustainability with outreach.
• 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, the ultimate effectiveness of interventions
focusing on institutional transformation and sound insurance practices will vary
considerably, depending on the appropriateness of the regulatory environment.

Development Goal
To enable microinsurance to be an integral part of a country's wider insurance system, it is
important for every insurer to adjust its costs of serving marginal clients in remote areas,
collecting premiums and installments, and offering doorstep services. 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.

Today we have a variety of microfinance institutions with national and local outreach. Many of
them have already become corporate agents or have entered into referral

arrangements with insurers. However, semiformal institutions including savings and credit
cooperatives, 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. This is due to restrictions
in the existing agency regulations in terms of minimum eligibility norms in order to become an
Depending on the existence and vigour of such institutions, the following alternatives have
emerged, for offering strategic entry points for microinsurance development:

• Adapting formal insurance arrangements to the needs of the micro-economy.

• Upgrading non-formal (comprising semiformal and informal) insurance arrangements

with insurance companies.

• Linking formal and non formal insurance institutions with banks and self-help groups.

• Establishing new local institutions providing microinsurance services.

The first three strategies may be inter-connected:

• adapting insurance companies to the requirements of the micro-economy is a first step;
• Linking them as wholesale institutions to self-help groups as retailers; and finally,
• Upgrading self-help groups e.g. to the level of financial cooperatives or village banks.

If insurers are to serve customers who differ widely in terms of service costs and risks, the only
viable inducement for them is an adequate margin, lest they exclude small farmers, - micro-
entrepreneurs and people in remote areas. Only sound social insurance, which combines a social
mandate with profit-making, has a chance of sustainability.

Institutional Adaptation
The experience so far has been that formal financial institutions serve but a fraction of the
population, which typically lies within the upper quartile of the social hierarchy. Through
adaptation to the microfinance market requirements, they may gradually expand into the second-
highest quartile and into segments of the lower quartiles. Within the foreseeable future they will
normally not be able to fully serve that market.
Non formal finance mostly rests on local institutions which are directly accessible to all
segments of the population. Self-Help Groups (SHGs) are member-owned and member-
controlled local institutions. They may either be financial groups, with financial intermediation
as their primary purpose; or non financial groups, with financial intermediation as a secondary
purpose, such as vendors' associations, family planning groups and numerous other types of
voluntary associations.

The functions that need to be focused must include: providing guidance to members, collecting
premium installments from members, insurance services to members, communication and
exchange of experience, providing linkages with banks, NGOs or donors, supporting the
proposals of individual members to insurance companies through recommendations.

Linkage to Insurers
On a modest scale, various forms of life and health insurance have been successfully practiced
by different institutions in different countries, particularly as part of loan protection schemes.
Micro-insurance procedures and services should be set by insurers rather than the regulator.
Appropriate procedures and services should be applied to attain:

(1) Sound financial management,

(2) Convenient and safe savings premium collection and deposit facilities,

(3) Appropriate claim appraisal and processing procedures,

(4) Adequate risk management,

(5) Timely collection of premium installments,

(6) Monitoring and

(7) Effective information gathering, all of which may include cooperation between different
formal and non-formal intermediaries in fields where each is most effective.

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,

1. 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, and vice versa.

2. In addition to an insurance agent or corporate agent or insurance broker who are

authorized to solicit and procure insurance business, including micro-insurance business
with an insurer in accordance with the provisions of the Insurance Act, 1938 and the
regulations made there under it is also proposed to introduce the concepts of “micro-
insurance product” and “micro-insurance agent” .

Micro-insurance Product
1. A “life micro-insurance product” means any term insurance contract with or
without return of premium, any endowment insurance contract or health insurance
contract, with or without an accident benefit rider, either on individual or group
basis, as per terms stated in the Table A below, filed with the Authority:
Table A:

Type of Minimum Maximum Term of Term of Minimum Age Maximum age at

Cover Amount of Amount Cover Cover at entry entry
Cover of Cover Min. Max.
Term Rs. 10,000 Rs. 50,000 5 year 7 years 18 60
with or
return of
Endowme Rs. 10,000 Rs. 50,000 5 year 7 years 18 60
Health Rs. 10,000 Rs. 15,000 1 year 7 year 18 60
Accident Rs. 10,000 Rs. 50,000 1 year 5 years 18 60
Benefit as

NOTE: The present average sum insured is around Rs. 5,000. This is highly
inadequate to provide any tangible relief even to an individual below the
poverty line. Therefore, it is suggested that the minimum amount of cover of Rs.
10,000 appear more realistic.

2. A “general micro-insurance product” means any health insurance contract, any

contract covering the belongings such as hut, livestock, any personal accident
contract, or tools or instruments, either on individual or group basis, as per terms
stated in the Table B below, filed with the Authority:
Table B:

Type of Minimum Maximum Term of Term of Minimum Maximum age at

Cover Amount Amount of Cover Cover Age at entry entry
of Cover Cover Min. Max.
Hut or Rs. 10,000 Rs. 20,000 1 year 1 year 18 70
or Tools
s or other
against all
Health Rs. 10,000 Rs. 15,000 1 year 1 year 18 60
Personal Rs. 10,000 Rs. 50,000 1 year 1 year 18 60

Micro-insurance Agent

• A “micro-insurance agent” shall be a Non Government Organization (NGO) or a Self

Help Group (SHG).

• Explanation: For the purposes of this regulation:

• A Non Government Organization (NGO) shall be a registered non-profit organization
under the Society’s Act, 1968 with a proven track record of working with marginalized
groups with clearly stated aims and objectives, transparency, and accountability outlined
in its memorandum, rules and regulations and demonstrates involvement of committed

• Self Help Group (SHG) may be an informal group or registered under Societies Act,
State Co-operative Act or as a partnership firm, consisting of 10 to 20 with a proven track
record of working with marginalized groups with clearly stated aims and objectives,
transparency, and accountability outlined in its memorandum, rules and regulations and
demonstrates involvement of committed people.

• The minimum number of members comprising a group should be atleast ten for insurance
of individuals, and atleast fifty for group insurance.

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, duties and
responsibilities of both the micro-insurance agent and the insurer, and he shall abide by the

• He shall work either for one life insurer or for one general insurer or for one life insurer
and one general insurer;

• 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, age, address, nominees and thumb impression/

b) Collection of proposal forms;

c) Collection of self declaration from the member that he is in good health;

d) Collection of monies for issuance of contract or remittance of premium;

e) distribution of policy documents;

f) Assistance in the settlement of claims;

g) Nomination; and

h) Any policy administration service.

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.

j) All such agreements/ MOU must have the prior approval of the Head office of the
insurance company.

Initiative Taken By Private Sectors

Tata AIG Life - 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, Inc. (AIG)

American International Group, Inc. (AIG), world leaders in insurance and financial services, is
the leading international insurance organization with operations in more than 130 countries and
jurisdictions. AIG companies serve commercial, institutional and individual customers through
the most extensive worldwide property-casualty and life insurance networks of any insurer. In
addition, AIG companies are leading providers of retirement services, financial services and
asset management around the world. AIG's common stock is listed in the U.S. on the New York
Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.
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, where traditionally the far-flung, lower and lower middle-income
segments have had limited access to life insurance services.

Cost of plans:
Tata AIG Life Micro insurance plans are available with or without survival benefits and with
death benefits ranging from Rs.5, 000 to Rs.50, 000. With premiums as low as Rs.5** per
month, there is now an affordable life insurance product for nearly every rural household in

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.

• Navkalyan Yojana
• Ayushman Yojana
• Sampoorn Bima Yojana


A regular premium payment, low cost term plan for the rural adults who seek life insurance
protection without any maturity benefit.

Key features include:

• Policy Term : 5 years

• Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-
Maximum Death Benefit (Sum Assured): Rs.50,000/-
• 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.

Tax Benefits and Age Eligibility

• Premiums paid under this plan are eligible for tax benefits as per the Income Tax Act,
1961 and are subject to any amendments made therein from time to time.*

Anyone between ages 18 and 60 can apply for this policy.


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.

Key features include:

• Policy Term : 10 years

• Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-
Maximum Death Benefit (Sum Assured): Rs.50,000/-
• Death Benifit : Sum assured to the policyholder’s nominee
• Maturity benefit : On survival, 125% of the single premium paid.

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, 1961 and are subject to amendments made therein
from time to time.*

Anyone between ages 18 and 60 can apply for this policy.


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. Premiums are payable for only 10 years,
while the coverage is up to 15 years.

How do we operate?

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. 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. The grassroots level
agents explain the product details in the local language of the customer, thereby enabling the
customer to make a decision. The training programs, brochures, contract documents, 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.5,000/-
Maximum Death Benefit (Sum Assured): Rs.50,000/-
• Premium payment frequency : Monthly, quarterly, half yearly & yearly
• Death Benifit : Sum assured is paid to the policyholder’s nominee
• Maturity benefit : At the end of the 15 years, all the premiums paid will be returned to the

Tax Benefits and Age Eligibility

Premiums paid under this plan are eligible for tax benefits as per the Income Tax Act, 1961 and
are subject to any amendments made therein from time to time.* Anyone between ages 18 and
60 can apply for this policy.


To find out potential depth in society for providing opportunities for further extention for micro

Sub objective:
 Determine need and ability of people segment whose per day income is less than
100 bugs. What really matters to him or her while think about insurance.
 Determine awareness about insurance among them. if aware then source of
 To determine the govt. and private sector proceeding in this area and extent of
their success


Data collection

For data collection, we developed a well defined questionnaire as a research instrument,

consisting questions aimed to measure the people perception about insurance, their need and
problems, bottleneck why hadn’t insured, and target to find out opportunities for further
extention of micro insurance. We conducted unstructured interviews (sample size) of 52 general
people having income even less than 100 bugs per day like vendors, rickshaw wala, coolies etc.
at survey location (Kashmiri gate, old Delhi railway station, prostitutional area etc. 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. The same is being presented
in form of graphs and tables


The following are our findings regarding the survey conducted by us. The following graphs show
the potential depth from different perspectives, as shown below:


Table 1:

Gender of the respondents

S. No. Sex No of Respondents Percentage

1. Male 50 91

2. Female 05 09

Total 55 100
Chart 1:
Gender of the respondents
No of Respondents

9% 0% 1
91% 10


The above reveals the fact that Majority of the respondents, about 91% belong to the category of
male and 9% belong to the category of female.

Table 2: Age of the respondents Chart 2:

17% 12%

38% 4

25 20
20 17

The above reveals the fact that Majority of the respondents, about 38% belong to the category of
2 age and 33% belong to the category of 3 of age, 17% belong to category 2 and 12% belong to
the category 1 of age.

Table 3: Educational Qualification Chart 3:

Educational Qualification Frequency
no.of respondent

30 22
20 1
10 42% 2
1 1
0 3
1 2 3 4 5 6 7 8 9 10 4
catagory of education


The above result reveal that majority of respondents (22+28)% were either uneducated or
educated only upto primary level

Table 4: No. of family members Chart 4:

family size freq

no.of respondent

20 1
f req
45% 2

55% 3
1 2 3 4 5 6 7 8 9 10 4
age catagory

Above result reveals that majority of respondent 55% live with joint family or have big size of

Table 5: No. of earning member Chart 5:

Series1 2% freq
earning member
Series2 4%
no.of respondent

40 33
30 Series4
16 1
20 Series5 31%
10 2 1 Series6
0 Series7
63% 4
freq Series8
earning member/family Series9


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.

Table 6: Income level Chart 6:

Series1 freq
income level 12%
30 Series3
no.of respondent

24 22
Series5 46% 1
10 6
Series6 2
0 Series7 3
freq Series8 42%
incom e catagory Series9

The above result reveals that 46% of respondent have income level 1 while 42% and 12% have
income level 2 and 3 respectively.

Table 7: Account Holder Chart 7:

account map freq
40 33
no.of account


20 11 1
10 2
1 2 3 4 5 6 7 8 9 10 64%
no.of account


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 Chart 8:

background freq

40 36
no.of respondent

20 1
10 12%
10 6 2
0 3
1 2 3 4 5 6 7 8 9 10 69%
background catagory

The above result reveals that majority of respondent belong to the background of type 3(69%),
then type 1 (19%) and type 2(12%).

Table 9: No. of dependent Chart 9:

dependent members freq
12% 8%
20 18
15 16%

15 1
10 8
6 2
5 3
0 4
1 2 3 4 5 6 7 8 9 10
no. of de pendent/family


The above result reveal that majority of respondent (35+29)% have no. of dependent more than
1 and less than 4. 16% have only 1 dependent and 12%have 4 or more than 4 dependent in their

Table 10: Whether has ID proof Chart 10:

ID proof freq 1
27.5 27 0%
27 3
no.of respondent

26.5 4
25.5 25
25 52% 6
24.5 7
1 2 3 4 5 6 7 8 9 10
1-yes ,2-no

Above result reveals that 52% have ID proof but almost there were equal no that hadn’t any id

Table 11: Faced prob with health or asset Chart 11:

health/asset problem faced Freq

20 12 1
1 2 3 4 5 6 7 8 9 10
1-yes, 2-no 77%


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 12: If yes how they managed Chart 12:

monetory management way of monetary management
20 2%
15 21%
15 1

10 40%
10 2
5 1 3
0 6% 4
1 2 3 4 5
w ay of m anage 31%

The above result reveals that majority of the respondent 40% managed their financial problem by
way 1, 31% by way2 and 21% by way4 and rest managed their problem by pattern of ways
shown above in chart12.

Table 13: How many times fell ill Chart 13:

illness illness map

11 1
10 3 2
0 3
1 2 3 4 5 6 7 8 9 10
times fell ill/month


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. 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 Chart 14:

risk on job
risk on job

27 48%

26 1
25 52% 2
1 2 3 4 5 6 7 8 9 10
1-yes, 2-no

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.

Table 15: Risk toward assets Chart 15:

risk toward asset risk toward asset

40 35

0 67%
1 2 3 4 5 6 7 8 9 10
1-ye s, 2-no


Above result reveals that a majority of respondent 67% don’t have any risk toward their asset
while 33% were those who have. Reason might be because of their low income they hadn’t had
any significant asset.

Table 16: Awareness about insurance Chart 16:

awareness about insurance awareness about insurance
60 48


20 1
1 2 3 4 5 6 7 8 9 10
1-yes, 2-no

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.

Table 17: Source of information Chart 17:

source of information source of information
1% 11%
30 25 3%

8 8
10 5
1 0 2 0 1
0 35% 31%
1 2 3 4 5 6 7 8 9 10


The result above reveals that 35% of the respondent got the information about insurance from
source 7, 31% got info. from source 5 and remaining from the source pattern shown above.

Table 18: No. of insurance taken Chart 18:

insurance taken insurance tak en

40 31
30 38%

20 1
10 1 60% 2
0 3

Inference: 1 2 3 4 5 6 7
no.of insurance taken
8 9 10

Above shown result reveals that a majority of respondent 60% were not insured from any
where , 38% had taken life insurance but 2% were also there who were very well awared and had
2 or more than 2 insurance.

Table 19: Why not insured? Chart 19:

reason for no insurance reason for no insurance

20 17 16
41% 44%

10 1
5 2
0 3
1 2 3 4 5 6 7 8 9 10

The result got above reveals that 44% were not insured because of reason1, 41% because of
reason3 and 15% were not insured because of reason 2.

Table 20: Kind of insurance like to purchase Chart 20:

insurance like to have insurance like to have

30 27

18 14%

10 5 46% 2
0 3
1 2 3 4 5 6 7 8 9 10 4
type of ins urance


Above result reveals that 46% of respondent like to have life insurance, 31% like to have health
insurance but there are some 14% who are awared toward their child education and like to have
education insurance, while some 9% want to minimize risk toward their assets and like to have
asset insurance as well.

Table 21: Premium ready to pay Chart 21:

premium map p re miu m map

27% 24%
15 14
15 12

10 1
10 2
5 3
20% 29% 4
1 2 3 4 5 6 7 8 9 10
type of prem ium

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, majority
were aligned toward premium package 2, 20% were ready to pay premium 3, while 27% agreed
to pay premium package 4.

Table 22: How many members like to insured Chart 22:

members like to be insured members like to be insured

40 2%
31 2%
30 2% 1

18 2
10 4
1 1 1
0 59% 5
1 2 3 4 5 6 7 8 9 10


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.

Table 23: From where you like to Chart 23:

Purchase Ins. Policy
facility location facility location

40 36
9% 0% 7% 1

30 2
20 3
10 4 5
0 2 4
64% 5
1 2 3 4 5 6 7 8 9 10
location catagory

The result above reveals that a majority of respondent 64% believes on facility location 3 and
likes to have insurance from there, 16% believe on facility location 4 and rest are shown above.

Table 24: Insurance Duration Chart 24:

insurance duration insurance duration

25 29%
20 1
15 2
10 3
5 12% 4
1 2 3 4 5 6 7 8 9 10


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.


• Study reveals that majority of people whose daily income is less than 100 bugs have big
• Earning member in majority of family is only male.
• 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, 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”.
• Many of respondents were not insured just because of either high premium or lack of
complete information.
• Some complaint about bad approachability of insurance provider company to them as
• Majority of respondent shows keen interest in micro-insurance policy in life and health ,
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.


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, it can penetrate population very well. Many of our target segments have
recommended many other facilities with micro insurance which found to be really concernable.
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, can also get
access through it.