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MICRO INSURANCE IS NOW A MACRO BUSINESS Now microinsurance is not a charity moreover it is a macro business for the insurers

and service providers. Now reducing the poverty is not only the social objective of Government. Private sector has taken this as an opportunity as business rather than corporate social responsibility.Insurers now they have to change their mind set in selling a micro insurance product who has never heard of the concept itself. How insurers adjust claims in remote areas and inaccesible parts of the country. When micro insurance is considered as a macro business then how insurers will make money from the micro insurance policy where the isurers are charging very low premium. Insurers now they have taken this as an opportunity to tap the excluded poor people by going back to find the quick, cheap and simple ways to cover for the poor people who have little money. What is microinsurance? Microinsurance defined as protection of low income people against specific perills in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved International Association of Insurance Supervisors Differences between traditional insurance and microinsurance: Traditional Insurance Clients Premium Calculation Microinsurance

- Low risk environment. - High risk exposure. - Established insurance culture. - Weak insurance culture. - Good statistical data. - Pricing based on individual risk - Sold by licensed intermediaries. - Complex policy documentation. - Monthly, quaterly or yearly payments. - Less historical data. - Group pricing, price senstive market and higher premium to cover ratios. - Sold by non traditional intermediaries. - Simple documentation & few exclusions. - Frequent, irregular payments adapted to volatile cash flows of clients. - Often linked with other transactions. - Broad eligibility. - Limited controls. - Risk included in premiums. - Link to other services. - Simple and fast procedures for small sums. - Efficient fraud control.

Distribution Models Policies Premium collection

Risk control

-Limited eligibility. - Significant documentation required. Screenings, such as medical tests, may be required. - Complicated processes. Extensive verification documentation.

Claims handling

It is very difficult to reach the poor people through microinsurance as they don't understand the basic concept of microinsurance. Insurance education is very low among the household heads of the poor. It is very difficult to insurers to market the product to the poor. Poor understand the microinsurance product is like savings and they can get money back if they are not claiming. This is the understanding level of the poor people on the microinsurance product. Insurers now they have to educate and bring awareness among the poor people about the insurance principle, risk management and cost before they rollout the microinsurance products in the market. The definition of microinsurance products according to IRDA is shown in the table below: Type Sum Assured Term (Years) Age (Years) Term Life Endowment Health (Individual) Health (Family) Accident Rider Livestock/Assets Accident(Non-Life) Source: Microsave Sources & References: Lloyd's 360 Risk insight, Insurance in developing countries: Exploring opportunities in microinsurance, Pg. No. 06, Microinsurance Centre, available at David M. Dror, Can we assume that people understand insurance principles, Reaching people through Microinsurance: The case of India & Nepal, Pg. No. 50, MMS Bulletin 120, 2011. Premasis Mukherjee, Trends of Microinsurance in India, Microsave India Focus Note 49, August 2010, available at 5000 50,000 5,000 30,000 5,000 30,000 10,000 30,000 10,000 50,000 5000 30,000 10,000 30,000 5 to 15 5 to 15 1 to 7 1 to 7 5 to 15 1 1 18 - 60 18 60 Insurers Discretion Insurers Discretion 18 - 60 NA 01/05/70