m What risks do poor people face and how do they protect themselves?

m What is micro-insurance?
m Basic insurance principles
m What are the difficulties in providing insurance to poor people?
m Microinsurance legislation in India
m What can be Recommended?

Shishadri Shekhar Dutta

Roll no -09
MBA In Finance
Calcutta University
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j Idiosyncratic Risks
- Risky events that are individual or household
specific
- Narrow geographical or social spread
j Covariate Risks
- Risky events that affect many households
simultaneously
- larger geographical or social spread
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j ¢insuranceµ refers to a financial service that uses Õ
  to
provide compensation to individuals or groups that are adversely
affected by a specified risk or event.
j u
  involves collecting large groups (or pools) of
individuals or groups to share the losses resulting from the
occurrence of a risky event.
j Persons affected by a negative event benefit from the
contributions of the many others that are not affected and, as a
result, they receive compensation that is greater than the amount
they have invested in the insurance policy.
j Thus, products that allow an affected individual to receive only
up to the amount they have contributed are considered as savings
products, not insuranceÄ
j The ¢micro-µ portion of the definition refers to
the subset of insurance products that are
j designed to be beneficial to and affordable for
low-income individuals or groups
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j Regulated by Insurance Regulatory and
Development Authority (IRDA) India
j Obligations of Insurers to Rural Social Sectors ²
2002
- A quota system, which compels insurers to
sell a percentage of their policies to low income
and rural clients
j uota for Rural clients:
- Life insurers must sell 7 % of total policies by
number (not value) in the first year with
increasing amounts up to 16 % in year 5.
- With general insurance, 2 % of gross premium
income must come from rural areas in the first
year, 3 % in year 2, and 5 % thereafter.
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j Simplification of products and bundling where
requires making them easy to understand, easy to use,
sell and service.
j Simplifying and making premium payment plans
flexible to suit farmer needs.
j Focus on volumes by targeting large groups.
j Integrating micro finance activities with micro
insurance for a most beneficial outcome.
j Claim settlement to be timely, simple and transparent.
j Maximizing the benefit of connectivity revolution in
rural India to reach the unserved markets.
j Using additional innovative distribution channels to
achieve cost-efficiency in agricultural markets.