MICRO-INSURANCE

OBJECTIVES  To understand what Micro-Insurance is.  To recognize the Potential Market for Micro-Insurance in India.  To identify the Key Characteristics of Micro Insurance.  To have a look at the micro-insurance products. METHODOLOGY Data has been collected for the following sources:  Primary data  Secondary data All the data has been collected by doing library research, magazines, articles, visiting bank’s official websites and various other web pages. SCOPE OF THE STUDY  Meaning and concept of Micro-Insurance.  Need for developing micro-insurance in India.  Conducted unstructured interviews sample size of 30 general people having income less than Rs. 350 per day.  The area which was selected for the survey is bounded by central suburbs of Maharashtra State.  All the data generated for primary data that was generated directly from face to face communication.

LIMITATIONS  Data collection was very time consuming.  Since it is a new concept, untouched and unaware, the information was not easily available.  All the primary information included in the project is completely based on the data offered by the applicants through survey analysis. There is no alternate source for confirmation of this information and data.

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MICRO-INSURANCE

WHAT IS MICRO INSURANCE?

On a daily basis, the poor around the world face a multitude (huge amount) 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 institutions or set of institutions implementing microinsurance are commonly referred to as a micro insurance scheme.

DEFINITIONS

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MICRO-INSURANCE
Micro-insurance is insurance with low premiums and low caps / coverage. In this definition, “micro” refers to the small financial transaction that each insurance policy generates. The Microinsurance Regulations, issued in 2005 by the Indian Insurance Regulatory and Development Authority (IRDA), for example, adopted this definition in explaining “micro-insurance products” as those within defined (low) minimum and maximum caps. The IRDA’s characterization of micro-insurance by the product features is further complemented by their definition for micro-insurance agents, those appointed by and acting for an insurer, for distribution of micro-insurance products (and only those products).  Micro-insurance is a financial arrangement to protect lowincome people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved. The author of this definition adds that microinsurance does not refer to: (i) the size of the risk-carrier (some are small and even informal, others very large companies); (ii) the scope of the risk (the risks themselves are by no means “micro” to the households that experience them); (iii) the delivery channel: it can be delivered through a variety of different channels, including small communitybased schemes, credit unions or other types of microfinance institutions, but also by enormous multinational insurance companies, etc.  Micro-insurance is synonymous to community-based financing arrangements, including community health funds, mutual health organizations, rural health insurance, revolving drugs funds, and community involvement in user-fee management. Most community financing schemes have evolved in the context of severe economic constraints, political instability, and lack of good governance. The common feature within all,

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injury and accident. at the level of governments. etc. Insurance is fast emerging as an important strategy even for the low-income people engaged in wide variety of income generation activities. In the context of health contingency.). This definition integrates the above approaches into one comprehensive conceptual framework. resource allocation and. pre-dating the other three approaches. (rather than far away. smaller than national) level of society. decisions in microinsurance are made within each unit. illness. pooling. It was first published in 1999.e. 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 cost-effective risk hedging instruments. companies. NGOs that offer support in operations. Under this definition. the term used to refer to insurance to the lowincome 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). service provision. INTRODUCTION Micro-insurance. and has been noted to be the first recorded use of the term “micro-insurance”.MICRO-INSURANCE is the active involvement of the community in revenue collection. they are more vulnerable to such risks because of their economic circumstance.  Micro-insurance is the use of insurance as an economic instrument at the “micro” (i. Although the type of risks faced by the poor such as that of death. frequently. are no different from those faced by others. for 4|Page .

The same study reports that more than 40 percent of hospitalized patients take loans or sell assets to pay for hospitalization.) are eminently insurable as these risks are mostly independent or idiosyncratic. 2002). there are cost-effective ways of extending insurance to them. given the wide variety of risks they face. reports that about one-fourth of hospitalized Indians fall below the poverty line as a result of their stay in hospitals. 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. is particularly beneficial to the poor who have limited ability to mitigate risk on account of imperfect labour and credit markets. Of the different risk management strategies. 2001). insurance is fast emerging as a prepaid financing option for the risks facing the poor. loss of property etc. Indeed. Thus. Moreover. as elsewhere. Often they were considered uninsurable. The poor were considered too poor to be able to afford insurance premiums. accident and injury. In the past insurance as a prepaid risk managing instrument was never considered as an option for the poor. HISTORY & VISION 5|Page . 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. a World Bank study (Peters et al. However. Siegel et al. 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.MICRO-INSURANCE example. life. recent developments in India.

including HIV/AIDS. policies that are available are often based on first world practices and are too complex for the simple coverage demanded. who later developed similar non-exclusive products in light of the competing environment. disability. livestock. This transformed the mindset of retail insurance providers in the country. For instance. resulting in increased economic hardship for the family. With a network of 47 microfinance institutions. Through the experience of serving Opportunity’s microfinance institutions and their clients. property. Micro Insurance Agency staff developed an affordable funeral benefit product that did not exclude any pre-conditions. In addition. for example. New distribution models and channels were 6|Page .MICRO-INSURANCE The Micro Insurance Agency has its roots within Opportunity International. Further. a large microfinance network motivated by Jesus Christ’s call to serve the poor. 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. unemployment and health insurance products to cover the risks faced by Opportunity’s loan clients. Health insurance. is a critical need of the poor but the most limited in terms of supply. when offered on an individual. Micro Insurance Agency staff observed that the products most demanded by the poor are not always the ones available. crop derivative. we began working in 2002 on the development of a range of life. In partnership with Opportunity’s microfinance institutions. In response. a death of a family member from HIV/AIDS –“precondition” most insurance companies would not cover – would often mean expensive funeral costs and the loss of a breadwinner. high premium requirements and a need to pay in a single lump sum preclude a huge sector of the market from access. one-off basis. Opportunity International has been serving the entrepreneurial poor since 1971.

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. In 2005.MICRO-INSURANCE needed to increase access and reduce the effective price charged to clients. duties and responsibilities of both the micro-insurance agent and the insurer. Our mission is to empower the materially poor to transform their lives by insuring them against financial risk and its consequences. Specifically.  He shall be specifically authorized to perform one or more of the following functions:- Maintaining a register of all members and their dependants covered under the insurance scheme along with details of 7|Page . 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. 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.

 Collection of proposal forms.  Nomination.  Collection of monies for issuance of contract or remittance of premium.  Collection of self declaration from the member that he is in good health.MICRO-INSURANCE name. whole-life. and endowment. There are three broad types of life insurance coverage: term. age.  All such agreements/ MOU must have the prior approval of the Head office of the insurance company. Term life insurance 8|Page . address.  The micro-insurance agent or the insurance company shall have the option to terminate the agreement/ MOU after giving a notice of three months. and  Any policy administration service. nominees and thumb impression/ signature. TYPES OF MICROINSURANCE IN INDIA Life Insurance Life insurance pays benefits to designated beneficiaries upon the death of the insured.  distribution of policy documents.  Assistance in the settlement of claims.

either started their own health insurance programs or have linked their clients to existing programs. It is difficult for most MFIs to guard against such 9|Page . ten. Some insurance providers also make available primary health care services such as immunization and contraceptives. Whole life insurance is a cash-value policy that provides lifetime protection. many health insurance providers cover for limited hospitalization benefits for certain illnesses. Compared with other life insurance policies this is not very complicated for the provider to offer. This is also not offered widely in developing countries. Providing such insurance is difficult because of the need to verify the extent of damage and determine whether loss has actually occurred. This is the most widely used life insurance policy in low-income communities in developing countries. While actual coverage varies. Health Insurance Health insurance provides coverage against illness and accidents resulting in physical injuries. five. MFIs have realized that expenditures related to health problems have been a significant cause of defaults and people's inability to continue improving their economic conditions. This insurance is appropriate when the policyholder's need for coverage is temporary. such as one. It thus has a longer time horizon that the term life insurance. or twenty years.MICRO-INSURANCE policies provide a set amount of insurance coverage over a specified period of time. Property Insurance Property insurance provides coverage against loss or damage of assets. Several MFIs have therefore. and for costs of physician visits and medicine. This is hardly offered in low-income markets in the developing countries Endowment life insurance pays the face value of insurance if the policyholder dies within a specified period.

Crop Insurance Crop insurance typically provides policy holders protection in the event their crops are destroyed by natural calamities such as floods or droughts. Similar programs were developed in countries as diverse as Brazil. Grameen Bank in Bangladesh offers its clients insurance against the death of livestock and COLUMNA in Guatemala provides insurance against fire damage. SEWA in India. Reasons for the failure of crop insurance have included: bad program design (such as failure to bring into account the incentives faced by the policy holders).MICRO-INSURANCE moral hazard. India. provides insurance against damage to home and productive assets. Disability Insurance Disability insurance in most cases is tied to life insurance products. A few. do provide such coverage. This is not very widely offered by Micro insurance providers. To improve the ability of rural farmers to repay loans from agricultural development banks (ADBs). should she or some of her family suffers from a disability. many governments developed crop insurance programs in the 1970s and 1980s. It provides protection to the policy holder and her family. FINCA. the Philippines and the USA. for example. Uganda and CARD in Philippines are examples of MFIs providing clients with disability insurance. however. The experience with crop insurance in developing countries and even in the developed economies has had mixed results. In each country the results were disastrous. with expenses (administrative and claims) far outstripping revenues. These programs typically provided loan repayment and occasionally income supplements to farmers suffering crop yields below an established minimum. covariant risks typical of rain-fed agriculture systems dependent on 10 | P a g e .

Uganda which has entered a partnership with American International Group (AIG) to provide its clients life and disability insurance. Despite its obvious benefits reinsurance is largely unavailable for micro-insurers. Private insurance companies are usually not involved in it. It allows smaller insurers to share risk with other insurers in different regions or countries. An example of an MFI using reinsurance is that of FINCA International. This is a central feature of the operations of all commercial insurers. This insurance provides It cash relief to individuals who become jobs. effectively developing sufficient large risk pools by combining the risks of many insurers. Unemployment Insurance Unemployment insurance is typically offered by the public sector. Reinsurance can be used to stabilize profits. unemployed requirements. Access to reinsurance can spur both the development of new micro-insurers and the growth of existing ones. MICRO-INSURANCE DELIVERY MODELS 11 | P a g e . Reinsurance reduces an insurer's risk exposure and acts as an effective source of financing and a valuable source of actuarial expertise. instead of having large fluctuations in financial outcomes year to year.MICRO-INSURANCE only one or two crops. Reinsurance Reinsurance is the shifting of part or all of the insurance originally written by one insurer to another. and in some cases / unanticipated catastrophic natural calamities. involuntarily also and who meet certain government workers find helps unemployed Unemployment insurance attempts to stabilize the economy by enabling people to maintain their purchasing power.

working with external healthcare providers to provide the services. In this model. donor. 12 | P a g e .  Full service model: The micro-insurance scheme is in charge of everything. institution. There is an advantage once more in the amount of control retained. In general. but are also disadvantaged in their limited control. while the agent retains all responsibility for design and development. and similar to the full-service model. managing and owning the operations. micro-insurance schemes benefit from limited risk. and the community-based model.  Provider-driven model: The healthcare provider is the micro-insurance scheme. there are four main methods for offering micro-insurance the partner-agent model. Methods and models for doing so vary depending on the organization. design. the full-service model.MICRO-INSURANCE One of the greatest challenges for micro-insurance is the actual delivery to clients. and in some cases a third-party healthcare provider.  Partner agent model: A partnership is formed between the micro-insurance scheme and an agent (insurance company. the provider-driven model. and service. This model has the advantage of offering microinsurance schemes full control.). both the design and delivery of products to the clients. Each of these models has their own advantages and disadvantages. delivery. The micro-insurance scheme is responsible for the delivery and marketing of products to the clients. yet the disadvantage of higher risks. and provider involved. microfinance institution. etc. is responsible for all operations.  Community-based/mutual model: The policyholders or clients are in charge. yet disadvantage in the limitations on products and services.

 Group Coverage: Group insurance is more inclusive and cost effective than individual coverage. yet is disadvantaged by its small size and scope of operations. such as women's associations. Even though the informal economy is frequently seen as disorganized. small business associations and the like. THE KEY CHARACTERISTICS The IAIS-CGAP Joint Working Group on Micro Insurance document on the -regulation and supervision of Micro Insurance identified the following key characteristics of Micro Insurance:  Inclusiveness: While formal channels of insurance business tend to exclude low-income households.  Simple Processes.MICRO-INSURANCE and working with external healthcare providers to offer services. These groups effectively by enlisting their support in member selection and reduces insurance risks such as fraud. there are groupings available. cooperatives. over-usage and moral hazard. Rules and Restrictions: Insurance contracts are generally full of complex conditions and 13 | P a g e . informal savings and credit groups. Micro Insurance schemes generally tend to be inclusive. This model is advantageous for its ability to design and market products more easily and effectively.

research facilities. resource allocation and.). The principal objective of Micro Insurance is to pool both risks and resources of whole groups for the purpose of providing financial protection to all members against the financial consequences of mutually determined risks. frequently. Historically. data banks.MICRO-INSURANCE conditional benefits. training. pooling. 14 | P a g e .e. access to reinsurance etc. service provision. Micro Insurance contracts have to be in plain language (preferably local language) and kept as simple as possible so that everyone has a clear understanding of what is covered and what is excluded. Micro Insurance products have evolved out of community-based financing arrangements with active involvement of the community in revenue collection. This insurance mechanism is independent of permanent external financial support. THE MICRO INSURANCE MECHANISM Micro Insurance operates by connecting multiple small units with larger structures and thereby creates networks which enhance both insurance functions (through risk pooling) and support structures for improved governance (i.

The insurance regulatory and development authority (IRDA) defines rural sector as consisting of:  a population of less than five thousand. These schemes have now gathered momentum partly due to the development of micro-finance activity. As a result. agricultural laborers. The categories of workers falling under agricultural pursuits are: cultivators.  a density of population of less than four hundred per square kilometer  More than 25% of the male working population is engaged in agricultural pursuits. forestry. Although the reach of such schemes is still very limited anywhere between 5 and 10 million individuals---their potential is viewed to be considerable. and workers in livestock. a few micro-insurance schemes were initiated. hunting and plantations. orchards and allied activities. fishing. The social sector as defined by the insurance regulator consists of:  Unorganized sector  informal sector 15 | P a g e . 250 billion by 2008 (ILO 2004). The overall market is estimated to reach Rs. increasingly. negotiating micro-finance with the institutions insurers (MFIs) for and the NGOs purchase are of for-profit customized group or standardized individual insurance schemes for the low-income people. 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). 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.MICRO-INSURANCE INTRODUCTION Historically in India.

these obligations are in terms of percentage of total gross premium collected.MICRO-INSURANCE  economically vulnerable or backward classes. these obligations are to be fulfilled right from the first year of commencement of operations by the new insurers. 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. and acts on behalf of the target community is essential in extending insurance cover to the poor. In order to fulfill these requirements all insurance companies have designed products for the poorer sections and low-income individuals. 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). there is no exit option available to insurers who are not keen on servicing the rural and low-income segment. and  Other categories of persons. Finally. Second. In 16 | P a g e . The nodal agency helps the formal insurance providers overcome both informational disadvantage and high transaction costs in providing insurance to the low-income people. Both public and private insurance companies are adopting similar strategies of developing collaborations with the various civil societies associations. Some aspects of these obligations are particularly noteworthy. both in rural and urban areas. or what we call a nodal agency. The presence of these associations as a mediating agency. The rural obligations are in terms of certain minimum percentage of total polices written by life insurance companies and for general insurance companies. non-fulfillment of these obligations can invite penalties from the regulator. Third. First. the social and rural obligations do not necessarily require (cross) subsidizing insurance. This way micro insurance combines positive features of formal insurance (pre paid. that represents.

the Human Development Report Unit of UNDP conducted a study of the potential Micro Insurance market in India on the basis of field surveys conducted in the States of Orissa. Lack of affordability prevents their latent demand from expressing itself in the market. The UNDP report commented that the potential utility of Micro Insurance may be even broader than that of micro-credit and may be closer to the potential market for micro-savings. POTENTIAL MARKET FOR MICRO-INSURANCE IN INDIA : The UNDP Study During 2005-06. Some 52. 17 | P a g e . 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. the low resource base of the poor. Hence the nodal agencies that organize the poor. coupled with high transaction costs (relative to the magnitude of transactions) gives rise to the affordability issue. balanced by affordability considerations in the early stages.MICRO-INSURANCE the absence of a nodal agency. Micro Insurance can play an important role in protecting the income of these people.4 per cent of India's population of 1.08 billion earns less than US $ 2 a day (in terms of Purchasing Power Parity). Tamil Nadu and Rajasthan.

The estimates corresponding to the life and non-life segments are provided in Table 3.267.55 SOURCE: UNDP (2007). Colombo. The nonlife estimation included four types of coverage . Millions) 15393-20141 46911.55 62304. Building Capacity for the Poor Potential and Prospect for Micro-Insurance in India. 18 | P a g e . health and crop insurance.2 a day.milch animals.126.70-84.70-64. livestock. The population used for the estimation is 40-50 percent of those earning less than US$ 1 a day and 50-70 per cent of those earning between US$ 1 .MICRO-INSURANCE The UNDP report also tried to estimate the potential size of the Micro Insurance market in India. The Potential Market for Micro-Insurance in India Insurance Segment Life Segment Non-Life Segment TOTAL (Life and Non-Life) Market Size (Potential)(Rs. UNDP Regional Centre.

DEVELOPMENT GOAL 19 | P a g e . Yet various schemes exist that are viable. the ultimate effectiveness of interventions focusing on institutional transformation and sound insurance practices will vary considerably. The greatest challenge for micro insurance lies in the combination of viability and sustainability with outreach. depending on the appropriateness of the regulatory environment. Micro insurance is the most underdeveloped part of microfinance. 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. semiformal and informal institutions. benefiting both the institutions and their clients. women and low-income people through formal.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. and (ii) they have served as instruments of resource mobilization. thereby allocating scarce resources to micro-investments with the highest marginal rates of return. Such products are often bundled with micro-savings and micro-credit.

semiformal institutions including savings and credit cooperatives. collecting premiums and installments. 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. it is important for every insurer to adjust its costs of serving marginal clients in remote areas.  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. 20 | P a g e . and offering doorstep services. for offering strategic entry points for micro insurance development:  Adapting formal insurance arrangements to the needs of the micro-economy. This is due to restrictions in the existing agency regulations in terms of minimum eligibility norms in order to become an agent. However.  Upgrading non-formal (comprising semiformal and informal) insurance arrangements with insurance companies. Many of them have already become corporate agents or have entered into referral arrangements with insurers. the following alternatives have emerged. Depending on the existence and vigor of such institutions.MICRO-INSURANCE To enable micro insurance to be an integral part of a country's wider insurance system.

which typically lies within the upper quartile of the social hierarchy. such as 21 | P a g e . Only sound social insurance.MICRO-INSURANCE  Establishing new local institutions providing micro insurance services. Self-Help Groups (SHGs) are member-owned and member-controlled local institutions. INSTITUTIONAL ADAPTATION The experience so far has been that formal financial institutions serve but a fraction of the population.microentrepreneurs and people in remote areas. lest they exclude small farmers.  Upgrading self-help groups e. . The first three strategies may be inter-connected:  adapting insurance companies to the requirements of the micro-economy is a first step. If insurers are to serve customers who differ widely in terms of service costs and risks. Within the foreseeable future they will normally not be able to fully serve that market. then  Linking them as wholesale institutions to self-help groups as retailers. has a chance of sustainability. with financial intermediation as a secondary purpose. Non formal finance mostly rests on local institutions which are directly accessible to all segments of the population. they may gradually expand into the second-highest quartile and into segments of the lower quartiles. the only viable inducement for them is an adequate margin. Through adaptation to the microfinance market requirements. to the level of financial cooperatives or village banks. which combines a social mandate with profit-making. and finally. or non financial groups. They may either be financial groups.g. with financial intermediation as their primary purpose.

 Timely collection of premium installments. The functions that need to be focused must include: providing guidance to members.  Appropriate claim appraisal and processing procedures. collecting premium installments from members. NGOs or donors. all of which may include cooperation between different formal and non-formal intermediaries in fields where each is most effective. providing linkages with banks.MICRO-INSURANCE vendors' associations.  Convenient and safe savings premium collection and deposit facilities. supporting the proposals of individual members to insurance companies through recommendations. communication and exchange of experience. various forms of life and health insurance have been successfully practiced by different institutions in different countries. Appropriate procedures and services should be applied to attain:  Sound financial management. particularly as part of loan protection schemes. PROPOSED MICRO-INSURANCE REGULATIONS 22 | P a g e .  Adequate risk management. insurance services to members. Microinsurance procedures and services should be set by insurers rather than the regulator.  Monitoring and  Effective information gathering. family planning groups and numerous other types of voluntary associations. LINKAGE TO INSURERS On a modest scale.

he shall have a tie-up With an insurer carrying on general insurance business tor this purpose. the premium 23 | P a g e .  In addition to an insurance agent or corporate agent or insurance broker who are authorized to solicit and procure insurance business. and subject to the provisions of section 64VB of the.MICRO-INSURANCE 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. 1938 and the regulations made there under it is also proposed to introduce the concepts of “micro-insurance product” and “micro-insurance agent” .  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. 1938. TIE-UP BETWEEN LIFE INSURER AND NON-LIFE INSURER  An insurer carrying on insurance business may offer life micro-insurance products as also general micro-insurance products. Provided that where an insurer carrying on life insurance business offers any general micro-insurance product. Act. as provided herein. including micro-insurance business with an insurer in accordance with the provisions of the Insurance Act.

as may be specified in the tieup referred to in the first proviso. either directly or through any of the distributing entities of micro-insurance products as specified in regulation 4.MICRO-INSURANCE attributable to the general micro insurance product may be collected from the prospect (proposer) by the insurer carrying on life insurance business. he shall have a tie-up with an insurer carrying on life insurance business for this purpose. and made over to the insurer carrying on life insurance business. either directly Or through any of the distributing entities of micro-insurance products as specified in regulation 4.insurance product. Provided that where an insurer carrying on general insurance business offers any life micro. shall forward the claim to the insurer carrying on general insurance business and offer all assistance for the expeditious disposal of the claim. the insurer carrying on 24 | P a g e .  An insurer carrying on general insurance business may offer general micro-insurance products as also life microinsurance products. the premium attributable to the life micro insurance product may he collected from the prospect (proposer) by the insurer carrying on general insurance business. Provided further that in the event of any claim in regard to life micro-insurance products. as provided herein. as the case may be. and subject to the provisions of section 64VB of the Act. the insurer carving on life insurance business or the distributing entities of micro-insurance products. and made over to the insurer on general insurance business. Provided further that in the event of any claim in regard to general microinsurance products.

advertisements and disclosure norms by every micro-insurance agent.  Any violation by a micro-insurance agent of the code of conduct and/or advertisement or disclosure norms as aforesaid shall lead to termination of his appointment. as may be specified in the tie-up referred to in the first proviso. MICRO-INSURANCE AGENT 25 | P a g e . CODE OF CONDUCT OF MICRO INSURANCE AGENTS  Every micro-insurance agent and specified person employed by him shall abide by the code of conduct as laid down in Regulation 8 of the Insurance Regulatory and Development Authority (Licensing of Insurance Agents) Regulations. 2000. Provided that the insurer shall ensure compliance of the code of conduct.MICRO-INSURANCE general insurance business or the distributing entities of micro.insurance products. as the case may be. in addition to penal consequences for breach of code of conduct and/or advertisement or disclosure norms pursuant to the provisions of sub-regulation (1). and the relevant provisions of Insurance Regulatory and Development Authority (Insurance Advertisements and Disclosure) Regulations. shall forward the claim to the insurer carrying on life insurance business and offer all assistance for the expeditious disposal of the claim. 2000.

its transparency. transparency. and at least fifty for group insurance. outlined memorandum.  Self Help Group (SHG) may be an informal group or registered under Societies Act. and accountability outlined in its memorandum. consisting of 10 to 20 with a proven track record of working with marginalized groups with clearly stated aims and objectives.  The minimum number of members comprising a group should be at least ten for insurance of individuals. rules and and accountability people.MICRO-INSURANCE  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. regulations and demonstrates involvement of committed 26 | P a g e . State Co-operative Act or as a partnership firm. rules and regulations and demonstrates involvement of committed people. 1968 with a proven track record of working with marginalized groups with clearly stated aims and in objectives.

or tools or instruments.MICRO-INSURANCE GENERAL MICRO-INSURANCE PRODUCT A “general micro-insurance product” means any health insurance contract. filed with the Authority: 27 | P a g e . as per terms stated in the Table below. any personal accident contract. either on individual or group basis. any contract covering the belongings such as hut. livestock.

5. of r Max.000 Per asset/co ver 1 year 1 year NA NA Term Term Minimu of r Min. 30.000 Rs. 30. or livestock or Tools or implements or other named assets/or Crop insurance against all perils Health Insurance Contract (Ind.000 Rs. m Cove Cove at entry Maximu entry Age m age at 28 | P a g e .000 Rs. 5.000 1 year 1 year 5 70 Rs. 10.000 Per asset/co ver Rs. 10.MICRO-INSURANCE Type Cover of Minimum Maximu Amount of Cover m Amount of Cover Dwelling & content. 50.) Health Insurance Contract (family) (Option to avail limit for Individual/Flo at on family) Personal Accident (per life/earning member of family) Rs.000 1 year 1 year Insurers’ discretion Rs. 30.000 1 year 1 year Insurers’ discretion Rs.

irdaindia.MICRO-INSURANCE SOURCE: IRDA Micro-Insurance Regulations. filed with the Authority: 29 | P a g e . either on individual or group basis.com NOTE: The minimum number of member comprising a group shall be at least twenty for group insurance. LIFE MICRO-INSURANCE PRODUCT 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. www. 2005. as per terms stated in the Table A below.

5. 5. Group insurance products may be renewable on a yearly 30 | P a g e . 50. 1.MICRO-INSURANCE Type of Cover Minimu m Amount of Cover Term Insurance with or without return of premium Endowmen t Insurance Health Insurance Contract (Individual) Health Insurance Contract (Family) Accident Benefit as rider Rs. 10.000 5 year 15 year s 15 year s 18 60 18 60 Maximu m Amount of Cover Term of Cove r Min. 2. 50. 10. www.000 1 year 7 year Insurers’ discretion Rs.000 1 year 7 year Insurers’ discretion Rs. Minimu m Age at entry Maximu m age at entry SOURCE: IRDA Micro-Insurance Regulations.000 Rs.000 5 year 15 year s 18 60 Rs. Term of Cove r Max.000 Rs.com NOTE: basis. 30.000 Rs.000 Rs. 30.000 5 year Rs. The minimum number of members comprising a group shall be at least twenty for group insurance. 30. 2005.000 Rs. 5.irdaindia.

we developed a well defined questionnaire as a research instrument. as shown below: 31 | P a g e . milkman. consisting questions aimed to measure the people perception about insurance. 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 Survey Results The following are my findings regarding the survey conducted. their need and problems. All the data generated was primary data that was generated directly from face to face communication. The following graphs show the potential depth from different perspectives. cobbler etc. We conducted unstructured interviews sample size of 30 general people having income less than 350 bugs per day like vendors.MICRO-INSURANCE RESEARCH METHODOLOGY Data collection For data collection. rickshawwala. Survey location was Thane and Mulund etc.

Chart 5: No. 21% & 25%. 32% have 2 earning member because of size of family. 32% have their Bank a/c and only 14% have both the accounts. Chart 3: Account Holder Inference: The above result reveals that 11% of respondent don’t have any account any where while majority of the applicants [43%] have post office account. of family members Inference: Above result reveals that majority of respondents 50% have 4 members in a family which is ideal whereas only 7% live with joint family or have big size of family. 18% belong to category 30-34 and 14% belong to the category 20-25 of age.MICRO-INSURANCE ANALYSIS AND INTERPRETATION Chart 1: Age of the respondents Inference: The above reveals the fact that Majority of the respondents. Chart 2: Educational Qualification Inference: The above result reveals that majority of respondents i. 54% were educated till higher secondary and the percentage of primary and graduation is very close i. about 47% belong to the category of 35-40 ages and 21% belong to the category of 25-35 of age. of earning member Inference: From the above result it can be clearly seen that about 68% of the respondent were the only earning member of their family.e. 32 | P a g e . Chart 4: No.e.

MICRO-INSURANCE Chart 6: Income level Inference: The above result reveals that 68% of respondent have income level between 7000-10000 while 32% have income level between 5000-7000 and no one below it. Chart 8: Expense Pattern Inference: From the above result we can see that out of the three clothing expense is more. Chart 7: No. Inference: From the graph we can say that out of the three. Chart 9: Faced problem with health or asset 33 | P a g e . of dependent where as only 4% have 5 dependents. of dependent Inference: The above result reveal that majority of respondent 39% have 3 no. least expense is health and expense in travelling is nil but travelling is the highest at number 6th place. Least expense is on Drinks & Entertainment but it is highest at 5th place. Rent & Electricity is the highest expense and then comes Education.

V. Chart 10: Awareness about insurance Inference: Above result reveals that each and every applicant is aware about what the insurance is.  Income level lies between 150-350 bugs per day.  Earning members in majority of family are two so that they are able to survive and meet their daily requirements. 34 | P a g e .  Majority of respondent had post office account and very less had both bank as well as bank account. 20% got info from T. Chart 11: Source of information Inference: The result above reveals that 30% of the respondent got the information about insurance from newspaper. least from Banners & Hoardings and remaining from the source pattern shown above. FINDINGS  Study reveals that majority of people whose daily income is less than 350 bugs have ideal family.MICRO-INSURANCE Inference: Above result shows that 36% of respondent didn’t face any problem related with health or asset but 64% faced a serious or minor health or asset loss in past of their life.  Majority of respondent have more spending on rent & Education. after that on food & cloth and Medicare & entertainment.  Majority of respondent are the only earning member in family size of 4-5.

35 | P a g e . the poor people face a variety of risks such as risk of death. Micro Insurance is designed keeping in mind to poor people. disability. they also need to be protected from these risks.MICRO-INSURANCE  Majority of them managed critical financial problem from their savings and even borrowed some money. income & property & so on.  Majority of respondent shows keen interest in micro-insurance policy in life and health. When we talk about poor people a question comes in mind Do poor people have any security? What if they face any risk? Who is going to look after them? Their family members? Do they have any insurance policy? Are they capable to pay the premium? The answer for this is Micro Insurance. But the demand for insurance was increased from a decade. television and from friends & relatives. accident. Like everybody else.  All of them are aware about insurance but not about micro insurance and best source of information medium found to be newspaper. illness. CONCLUSION We all know insurance is a very old concept. some were very sensitive toward education and like to have education insurance as well. Middle class people take insurance policy according to their ability & capacity to pay premium to secure their life. Only few had insurance or taken loan.  Many of respondents were not insured just because of either high premium or lack of complete information. Like all other.

easy to use. the early trend in this respect suggests that the insurance companies. Some of the recommendations could be:  Simplification of products and bundling where requires making them easy to understand.  Simplifying and making premium payment plans flexible to suit the needs. At present microfinance business in the country is unregulated. can insure a significant percentage of the poor. Serving low-income people who can pay the premium certainly makes a sound commercial sense to insurance providers.  Innovations are required at all stages for products. both public and private. sill and service. Regulation of MFIs is needed not only to promote micro-finance activity in the country but also to promote the linking of microinsurance with micro-finance. It is becoming increasingly clear that micro-insurance needs a further push and guidance from the regulator as well as the government. in pricing policy and in delivery channels  Success population of marketing micro insurance depends on understanding the social and cultural needs of the target 36 | P a g e . operating with commercial considerations.  Focus on volumes by targeting large groups.MICRO-INSURANCE Policy-induced and institutional innovations are promoting insurance among the low-income people who form a sizable sector of the population and who are mostly without any social security cover. To that extent imposing social and rural obligations by insurance regulator (IRDA) is helping all insurance companies appreciate the vast untapped potential in serving the lower end of the market. Although the current reach of ‘micro-insurance’ is limited.

37 | P a g e . simple and transparent.  Claim settlement to be timely.  Using additional innovative distribution channels to achieve cost-efficiency in agricultural markets.MICRO-INSURANCE  Integrating micro finance activities with micro insurance for a most beneficial outcome.  Maximizing the benefit of connectivity revolution in rural India to reach the un-served markets.