Micro--Insurance

A PROJECT REPORT ON
MICRO-INSURANCE
SUBMITTED TO
UNIVERSITY OF MUMBAI
IN THE PARTIAL FULLFILMENT OF B.B.I. DEGREE
SUBMITTED BY
YOGITA BANGERA
T.Y.BCOM (B&I) SEMESTER- V
ROLLNO- A-01
SEAT NO- 5!
STUDYING AT
RI"VI EDUCATION SOCIETY#S
RI"VI COLLEGE OF ARTS$ SCIENCE & COMMERCE
BANDRA (%)$ MUMBAI-50
ACADEMIC YEAR
(&00'-&010)
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Micro--Insurance
DECLARATION
I, M()) Y*+(,- B-.+/0-, a student of T.Y.B.com (Banking & Insurance) 1
,2
SEM of Rizvi
College of Arts, cience and Commerce !ere"# declare t!at I !ave com$leted t!is $ro%ect
titled M(30*-I.)40-.3/5 for t!e academic #ear &''()&'*'. It is an original and true +ork
to t!e "est of m# kno+ledge.

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Micro--Insurance
CERTIFICATE
I, P0*6 P4)2--.:-;( S-24 !ere"# verif# t!at M()) Y*+(,- B-.+/0- !ave com$leted t!is
$ro%ect titled M(30*-I.)40-.3/5 for t!e academic #ear &''()&'*'. It is an original and
true +ork to t!e "est of m# kno+ledge.
,,,,,,,,,,,,,,,,,,,, ,,,,,,,,,,,,,,,,,,,
S(+.-,40/ *6 ,2/ P0(.3(<-; S(+.-,40/ *6 ,2/ BBI C*-*07(.-,/0
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8M0) P4)2--.:-;( S-249
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Acknowledgement
First and foremost, I would like to thank
Almighty god for energy, strength, guidance
and hel that has always !een with me
throughout
My work
-!ile $resenting t!is $ro%ect at t!is $ro%ect at t!is %uncture, I feel dee$l# o"liged to our
.um"ai /niversit# for $roviding me +it! an o$$ortunit# to do t!is $ro%ect. I also e0tend
m# sincere t!anks to our P0(.3(<-; D0.S.G.A."-(7( and ,2/ A(3/ P0(.3(<-; B//.- <-., for
t!eir moral su$$ort and encouragement
I am !ig!l# grateful and e0$ress m# sincere gratitude to m# P0*6 P4)2--.:-;( S-24, +!o
guided me so +ell "efore t!e "eginning of t!e $ro%ect. To sum u$ I +ould like to t!ank m#
P0*6 F40=4-. S2-(>2 (BBI C*-*07(.-,/0)$ +!o !ave !el$ed me in some or ot!er +a# in
successfull# com$leting t!is $ro%ect. It !as "een a +arming e0$erience for me, +!ic! +ill
surel# !el$ me in t!e future.
1ast "ut not least I +ould like to t!ank m# friends and famil# mem"ers for t!eir
continuous, $atience, encouragement, su$$ort and "lessings t!at ena"led me to make t!is
$ro%ect a success.
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Micro--Insurance

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Micro--Insurance
EXECUTIVE SUMMARY
T!is $ro%ect is $re$ared +it! an intention to met!odicall# stud# t!e develo$ments in micro)
insurance +itnessed in India. I !ave tried m# level "est to understand t!e to$ics covered in
t!is $ro%ect. To understand t!e $ractical as$ects of micro)insurance sector !as c!anged t!e
outlook of t!e $oor and t!eir contri"ution to socio)economic +elfare of t!e $oor.
T!e $otential market for insurance in develo$ing economies is estimated to "e
"et+een *.2 and 3"illion $olicies. T!ere is significant demand for a range of
insurance $roducts from !ealt! and life, agricultural and $ro$ert# insurance, to
catastro$!e cover.
Besides $rofits, t!ere are several ot!er "enefits for commercial insurers $roviding
micro)insurance4 a larger and diversified risk $ool, "enefits to re$utation, and market
intelligence and innovation t!at can "e a$$lied to ot!er "usiness activities. In t!e
longer term, t!e com"ination of first mover advantages and sustained gro+t! in
develo$ing markets can lead to strong future "usiness $ros$ects.
T!e success of microcredit +orld+ide !as s!o+n t!at $eo$le +it! lo+ incomes are
a $roven market for financial services and are effective consumers if given
a$$ro$riate $roducts, $rocesses, and kno+ledge. In t!e insurance field, micro
insurance can $rovide t!e s$ecialised insurance $roducts demanded "# under)served
lo+ income markets.
.icro insurance alread# covers around *32 million $eo$le, or around 25 of t!e
$otential market. In man# countries, annual gro+t! rates are *'5 or !ig!er.
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Micro--Insurance
T!e trends t!at +ill s!a$e t!e future of micro insurance include4 economic gro+t!,
ur"anization, financial sector develo$ment, climate c!ange including more e0treme
+eat!er events and structural ada$tation, t!e ra$id $ace of $roduct and logistics
innovation, and innovative use of communication and information tec!nolog#
(mo"ile $!ones, internet).
.icro insurance is effective even in markets +it! little e0$erience of insurance, as
long as $roducts, $rocedures and $olicies are sim$le, t!e $remiums are lo+, t!e
administration is efficient, and distri"ution c!annels are innovative.
T!e main su$$liers of micro insurance are commercial insurers. .ost international
insurers and reinsurers are involved in micro insurance initiatives or offer $roducts
directl#. At t!e same time, International organisations, donors, non)governmental
organisations (678s) and governments are im$ortant facilitators.
Communit#)"ased and informal insurance sc!emes +ill $rove valua"le sources of
innovation, "ut it is likel# t!at, as communities develo$, o$$ortunities for regulated
insurers +it! a$$ro$riate 9roducts and $rocesses +ill increase and t!ese insurers +ill
"ecome market leaders.
S0.N* T-B;/ *6 C*.,/., P+. N*
1.
DESIGN OF STUDY
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&.
%HAT IS MICRO-INSURANCE
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E.
DEVELOPMENT OF MICRO-INSURANCE
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NEED FOR DEVELOPING MICRO-INSURANCE IN INDIA
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5.
MICRO-INSURANCE PRODUCT
E5-EH
1.
RESEARCH METHODOLOGY
E'
.
DATA ANALYSIS & INTERPRETATION 8G(,2 <(/ 32-0,)9
!0-!5
H.
FINDINGS
!1
'.
RECOMMENDATION
!
10.
CONCLUSIONS
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11.
BILIBOGRAPY
50
ANNUREIF-S40A/C J4/),(*..-(0/ 8,* 34),*@/09
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Micro--Insurance
1' ()*I+, -F *./(0
TITLE FOR THE STUDY
K#MICRO-INSURANCE##
OBJECTIVES
To understand +!at .icro)Insurance is.
To recognize t!e 9otential .arket for .icro)Insurance in India.
To identif# t!e :e# C!aracteristics of .icro Insurance.
To !ave a look at t!e micro)insurance $roducts.
SCOPE OF THE STUDY
.eaning and conce$t of .icro)Insurance.
6eed for develo$ing micro)insurance in India.
ince it is a ne+ conce$t, untouc!ed and una+are, t!e information +as not easil#
availa"le.
METHODOLOGY
;ata !as "een collected for t!e follo+ing sources4
9rimar# data
econdar# data
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All t!e data !as "een collected "# doing li"rar# researc!, magazines, articles,
visiting "ank<s official +e"sites and various ot!er +e" $ages.
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LIMITATIONS
;ata collection +as ver# time consuming.
ince it is a ne+ conce$t, untouc!ed and una+are, t!e information +as not easil#
availa"le.
All t!e $rimar# information included in t!e $ro%ect is com$letel# "ased on t!e data
offered "# t!e a$$licants t!roug! surve# anal#sis. T!ere is no alternate source for
confirmation of t!is information and data.
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2. 34A. I* MI56- I,*/6A,5)L
8n a dail# "asis, t!e $oor around t!e +orld face a multitude (!uge amount) of risks t!at
t!reaten to derail an# $rogress t!e# !ave made to +ork t!eir +a# out of $overt#. T!e deat!
of a famil# mem"er, loss of $ro$ert# and livestock, illness, and natural disasters eac! $ose
uni=ue dangers. 9rotecting $eo$le against t!ese losses is an im$ortant ste$ to alleviating
glo"al $overt#.
.icro insurance ) t!e $rotection of lo+)income $eo$le against s$ecific $erils in e0c!ange
for regular monetar# $a#ments ($remiums) $ro$ortionate to t!e likeli!ood and cost of t!e
risk involved > seeks to $rovide a suita"le solution for managing t!ese risks.
T!e institutions or set of institutions im$lementing micro)insurance are commonl# referred
to as a micro insurance sc!eme.
DEFINITIONS
.icro)insurance is insurance +it! lo+ $remiums and lo+ ca$s ? coverage. In t!is
definition, @microA refers to t!e small financial transaction t!at eac! insurance $olic#
generates. T!e .icro)insurance Regulations, issued in &''2 "# t!e Indian Insurance
Regulator# and ;evelo$ment Aut!orit# (IR;A), for e0am$le, ado$ted t!is definition in
e0$laining @micro)insurance $roductsA as t!ose +it!in defined (lo+) minimum and
ma0imum ca$s. T!e IR;A<s c!aracterization of micro)insurance "# t!e $roduct features is
furt!er com$lemented "# t!eir definition for micro)insurance agents, t!ose a$$ointed "#
and acting for an insurer, for distri"ution of micro)insurance $roducts (and onl# t!ose
$roducts).
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.icro)insurance is a financial arrangement to $rotect lo+)income $eo$le against
s$ecific $erils in e0c!ange for regular $remium $a#ments $ro$ortionate to t!e
likeli!ood and cost of t!e risk involved. T!e aut!or of t!is definition adds t!at
micro)insurance does not refer to4
(. t!e size of t!e risk)carrier (some are small and even informal, ot!ers ver#
large com$anies)B
((. t!e sco$e of t!e risk (t!e risks t!emselves are "# no means @microA to t!e
!ouse!olds t!at e0$erience t!em)B
(((. T!e deliver# c!annel4 it can "e delivered t!roug! a variet# of different
c!annels, including small communit#)"ased sc!emes, credit unions or ot!er
t#$es of microfinance institutions, "ut also "# enormous multinational
insurance com$anies, etc.
.icro)insurance is s#non#mous to communit#)"ased financing arrangements,
including communit# !ealt! funds, mutual !ealt! organizations, rural !ealt!
insurance, revolving drugs funds, and communit# involvement in user)fee
management. .ost communit# financing sc!emes !ave evolved in t!e conte0t of
severe economic constraints, $olitical insta"ilit#, and lack of good governance. T!e
common feature +it!in all, is t!e active involvement of t!e communit# in revenue
collection, $ooling, resource allocation and, fre=uentl#, service $rovision.
.icro)insurance is t!e use of insurance as an economic instrument at t!e @microA
(i.e. smaller t!an national) level of societ#. T!is definition integrates t!e a"ove
a$$roac!es into one com$re!ensive conce$tual frame+ork. It +as first $u"lis!ed in
*(((, $re)dating t!e ot!er t!ree a$$roac!es, and !as "een noted to "e t!e first
recorded use of t!e term @micro)insuranceA. /nder t!is definition, decisions in
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micro)insurance are made +it!in eac! unit, (rat!er t!an far a+a#, at t!e level of
governments, com$anies, 678s t!at offer su$$ort in o$erations, etc.).
INTRODUCTION
.icro)insurance, t!e term used to refer to insurance to t!e lo+)income $eo$le, is different
from insurance in general as it is a lo+ value $roduct (involving modest $remium and
"enefit $ackage) +!ic! re=uires different design and distri"ution strategies suc! as
$remium "ased on communit# risk rating (as o$$osed to individual risk rating), active
involvement of an intermediate agenc# re$resenting t!e target communit# and so fort!.
Insurance is fast emerging as an im$ortant strateg# even for t!e lo+)income $eo$le
engaged in +ide variet# of income generation activities, and +!o remain e0$osed to variet#
of risks mainl# "ecause of a"sence of cost)effective risk !edging instruments.
Alt!oug! t!e t#$e of risks faced "# t!e $oor suc! as t!at of deat!, illness, in%ur# and
accident, are no different from t!ose faced "# ot!ers, t!e# are more vulnera"le to suc! risks
"ecause of t!eir economic circumstance. In t!e conte0t of !ealt! contingenc#, for e0am$le,
a -orld Bank stud# (9eters et al. &''&), re$orts t!at a"out one)fourt! of !os$italized
Indians fall "elo+ t!e $overt# line as a result of t!eir sta# in !os$itals. T!e same stud#
re$orts t!at more t!an C' $ercent of !os$italized $atients take loans or sell assets to $a# for
!os$italization. Indeed, en!ancing t!e a"ilit# of t!e $oor to deal +it! various risks is
increasingl# "eing considered integral to an# $overt# reduction strateg# (Dolzmann and
Eorgensen &''', iegel et al. &''*).8f t!e different risk management strategies, insurance
t!at s$reads t!e loss of t!e (fe+) affected mem"ers among all t!e mem"ers +!o %oin
insurance sc!eme and also se$arates time of $a#ment of $remium from time of claims, is
$articularl# "eneficial to t!e $oor +!o !ave limited a"ilit# to mitigate risk on account of
im$erfect la"our and credit markets.
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In t!e $ast insurance as a $re$aid risk managing instrument +as never considered as an
o$tion for t!e $oor. T!e $oor +ere considered too $oor to "e a"le to afford insurance
$remiums. 8ften t!e# +ere considered uninsura"le, given t!e +ide variet# of risks t!e#
face. Do+ever, recent develo$ments in India, as else+!ere, !ave s!o+n t!at not onl# can
t!e $oor make small $eriodic contri"utions t!at can go to+ards insuring t!em against risks
"ut also t!at t!e risks t!e# face (suc! as t!ose of illness, accident and in%ur#, life, loss of
$ro$ert# etc.) are eminentl# insura"le as t!ese risks are mostl# inde$endent or
idios#ncratic. .oreover, t!ere are cost)effective +a#s of e0tending insurance to t!em.
T!us, insurance is fast emerging as a $re$aid financing o$tion for t!e risks facing t!e $oor.
HISTORY & VISION
T!e .icro Insurance Agenc# !as its roots +it!in 8$$ortunit# International, a large
microfinance net+ork motivated "# Eesus C!rist<s call to serve t!e $oor. -it! a net+ork of
CF microfinance institutions, 8$$ortunit# International !as "een serving t!e entre$reneurial
$oor since *(F*. In $artners!i$ +it! 8$$ortunit#<s microfinance institutions, +e "egan
+orking in &''& on t!e develo$ment of a range of life, $ro$ert#, livestock, cro$ derivative,
disa"ilit#, unem$lo#ment and !ealt! insurance $roducts to cover t!e risks faced "#
8$$ortunit#<s loan clients.
.icro Insurance Agenc# staff o"served t!at t!e risks t!e $oor face can often set t!em "ack
mont!s and #ears "e!ind +!ere t!eir loans and savings $roducts offered "# 8$$ortunit#
!ad taken t!em. Gor instance, a deat! of a famil# mem"er from DIH?AI; >@$re)
conditionA most insurance com$anies +ould not cover > +ould often mean e0$ensive
funeral costs and t!e loss of a "read+inner, resulting in increased economic !ards!i$ for
t!e famil#. In res$onse, .icro Insurance Agenc# staff develo$ed an afforda"le funeral
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"enefit $roduct t!at did not e0clude an# $re)conditions, including DIH?AI;. T!is
transformed t!e mindset of retail insurance $roviders in t!e countr#, +!o later develo$ed
similar non)e0clusive $roducts in lig!t of t!e com$eting environment.
T!roug! t!e e0$erience of serving 8$$ortunit#<s microfinance institutions and t!eir clients,
.icro Insurance Agenc# staff o"served t!at t!e $roducts most demanded "# t!e $oor are
not al+a#s t!e ones availa"le. Dealt! insurance, for e0am$le, is a critical need of t!e $oor
"ut t!e most limited in terms of su$$l#. In addition, $olicies t!at are availa"le are often
"ased on first +orld $ractices and are too com$le0 for t!e sim$le coverage demanded.
Gurt!er, +!en offered on an individual, one)off "asis, !ig! $remium re=uirements and a
need to $a# in a single lum$ sum $reclude a !uge sector of t!e market from access. 6e+
distri"ution models and c!annels +ere needed to increase access and reduce t!e effective
$rice c!arged to clients.
In &''2, t!e .icro Insurance Agenc# +as founded "# 8$$ortunit# International as a full#)
o+ned su"sidiar# ca$a"le of offering insurance $roducts and services to a +ide range of
customers. 8ur mission is to em$o+er t!e materiall# $oor to transform t!eir lives "#
insuring t!em against financial risk and its conse=uences. $ecificall#, +e seek to serve t!e
economicall# active $oor +!o live on IC $er da# or less in develo$ing countries and
$rovide a safet# net to reduce economic set"acks.
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SCOE AND FUNCTIONS
A micro)insurance agent s!all "e a$$ointed "# an insurer "# a deed of agreement or
memorandum of understanding +!ic! s!ould clearl# s$ecif# t!e terms and conditions,
duties and res$onsi"ilities of "ot! t!e micro)insurance agent and t!e insurer, and !e s!all
a"ide "# t!e follo+ing4)
De s!all +ork eit!er for one life insurer or for one general insurer or for one life
insurer and one general insurerB
De s!all "e s$ecificall# aut!orized to $erform one or more of t!e follo+ing
functions4))
.aintaining a register of all mem"ers and t!eir de$endants covered under t!e
insurance sc!eme along +it! details of name, age, address, nominees and t!um"
im$ression? signatureB
Collection of $ro$osal formsB
Collection of self declaration from t!e mem"er t!at !e is in good !ealt!B
Collection of monies for issuance of contract or remittance of $remiumB
distri"ution of $olic# documentsB
Assistance in t!e settlement of claimsB
6ominationB and
An# $olic# administration service.
T!e micro)insurance agent or t!e insurance com$an# s!all !ave t!e o$tion to
terminate t!e agreement? .8/ after giving a notice of t!ree mont!s.
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All suc! agreements? .8/ must !ave t!e $rior a$$roval of t!e Dead office of t!e
insurance com$an#.
TYES OF MICROINSURANCE IN INDIA
(. L(6/ I.)40-.3/
1ife insurance $a#s "enefits to designated "eneficiaries u$on t!e deat! of t!e
insured. T!ere are t!ree "road t#$es of life insurance coverage4 term, +!ole)life,
and endo+ment. Term life insurance $olicies $rovide a set amount of insurance
coverage over a s$ecified $eriod of time, suc! as one, five, ten, or t+ent# #ears.
T!is insurance is a$$ro$riate +!en t!e $olic#!olderJs need for coverage is
tem$orar#. Com$ared +it! ot!er life insurance $olicies t!is is not ver# com$licated
for t!e $rovider to offer. T!is is t!e most +idel# used life insurance $olic# in lo+)
income communities in develo$ing countries. -!ole life insurance is a cas!)value
$olic# t!at $rovides lifetime $rotection. T!is is !ardl# offered in lo+)income
markets in t!e develo$ing countries.Kndo+ment life insurance $a#s t!e face value
of insurance if t!e $olic#!older dies +it!in a s$ecified $eriod. It t!us !as a longer
time !orizon t!at t!e term life insurance. T!is is also not offered +idel# in
develo$ing countries.
((. H/-;,2 I.)40-.3/
Dealt! insurance $rovides coverage against illness and accidents resulting in
$!#sical in%uries. .GIs !ave realized t!at e0$enditures related to !ealt! $ro"lems
!ave "een a significant cause of defaults and $eo$leJs ina"ilit# to continue
im$roving t!eir economic conditions. everal .GIs !ave t!erefore, eit!er started
t!eir o+n !ealt! insurance $rograms or !ave linked t!eir clients to e0isting
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$rograms. -!ile actual coverage varies, man# !ealt! insurance $roviders cover for
limited !os$italization "enefits for certain illnesses, and for costs of $!#sician visits
and medicine. ome insurance $roviders also make availa"le $rimar# !ealt! care
services suc! as immunization and contrace$tives.
(((. P0*</0,C I.)40-.3/
9ro$ert# insurance $rovides coverage against loss or damage of assets. 9roviding
suc! insurance is difficult "ecause of t!e need to verif# t!e e0tent of damage and
determine +!et!er loss !as actuall# occurred. It is difficult for most .GIs to guard
against suc! moral !azard. A fe+, !o+ever, do $rovide suc! coverage. K-A in
India, for e0am$le, $rovides insurance against damage to !ome and $roductive
assets. 7rameen Bank in Banglades! offers its clients insurance against t!e deat! of
livestock and C81/.6A in 7uatemala $rovides insurance against fire damage.
(A. D()-B(;(,C I.)40-.3/
;isa"ilit# insurance in most cases is tied to life insurance $roducts. It $rovides
$rotection to t!e $olic# !older and !er famil#, s!ould s!e or some of !er famil#
suffers from a disa"ilit#. T!is is not ver# +idel# offered "# .icro insurance
$roviders. GI6CA, /ganda and CAR; in 9!ili$$ines are e0am$les of .GIs
$roviding clients +it! disa"ilit# insurance.
A. C0*< I.)40-.3/
Cro$ insurance t#$icall# $rovides $olic# !olders $rotection in t!e event t!eir cro$s
are destro#ed "# natural calamities suc! as floods or droug!ts. T!e e0$erience +it!
cro$ insurance in develo$ing countries and even in t!e develo$ed economies !as
!ad mi0ed results. To im$rove t!e a"ilit# of rural farmers to re$a# loans from
agricultural develo$ment "anks (A;Bs), man# governments develo$ed cro$
insurance $rograms in t!e *(F's and *(L's. T!ese $rograms t#$icall# $rovided loan
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re$a#ment and occasionall# income su$$lements to farmers suffering cro$ #ields
"elo+ an esta"lis!ed minimum. imilar $rograms +ere develo$ed in countries as
diverse as Brazil, India, t!e 9!ili$$ines and t!e /A. In eac! countr# t!e results
+ere disastrous, +it! e0$enses (administrative and claims) far outstri$$ing
revenues. Reasons for t!e failure of cro$ insurance !ave included4 "ad $rogram
design (suc! as failure to "ring into account t!e incentives faced "# t!e $olic#
!olders), covariant risks t#$ical of rain)fed agriculture s#stems de$endent on onl#
one or t+o cro$s, and in some cases ? unantici$ated catastro$!ic natural calamities.
A(. U./@<;*C@/., I.)40-.3/
/nem$lo#ment insurance is t#$icall# offered "# t!e $u"lic sector. 9rivate insurance
com$anies are usuall# not involved in it. T!is insurance $rovides cas! relief to
individuals +!o "ecome unem$lo#ed involuntaril# and +!o meet certain
government re=uirements. It also !el$s unem$lo#ed +orkers find %o"s.
/nem$lo#ment insurance attem$ts to sta"ilize t!e econom# "# ena"ling $eo$le to
maintain t!eir $urc!asing $o+er.
A((. R/(.)40-.3/
Reinsurance is t!e s!ifting of $art or all of t!e insurance originall# +ritten "# one
insurer to anot!er. T!is is a central feature of t!e o$erations of all commercial
insurers. Reinsurance reduces an insurerJs risk e0$osure and acts as an effective
source of financing and a valua"le source of actuarial e0$ertise. Reinsurance can "e
used to sta"ilize $rofits, instead of !aving large fluctuations in financial outcomes
#ear to #ear. It allo+s smaller insurers to s!are risk +it! ot!er insurers in different
regions or countries, effectivel# develo$ing sufficient large risk $ools "# com"ining
t!e risks of man# insurers. ;es$ite its o"vious "enefits reinsurance is largel#
unavaila"le for micro)insurers. Access to reinsurance can s$ur "ot! t!e
22 | Pa g e
Micro--Insurance
develo$ment of ne+ micro)insurers and t!e gro+t! of e0isting ones. An e0am$le of
an .GI using reinsurance is t!at of GI6CA International, /ganda +!ic! !as entered
a $artners!i$ +it! American International 7rou$ (AI7) to $rovide its clients life
and disa"ilit# insurance.
MICRO!INSURANCE DELIVERY MODELS
8ne of t!e greatest c!allenges for micro)insurance is t!e actual deliver# to clients. .et!ods
and models for doing so var# de$ending on t!e organization, institution, and $rovider
involved. In general, t!ere are four main met!ods for offering micro)insurance t!e $artner)
agent model, t!e $rovider)driven model, t!e full)service model, and t!e communit#)"ased
model. Kac! of t!ese models !as t!eir o+n advantages and disadvantages.
(. P-0,./0 -+/., @*7/; 4 A $artners!i$ is formed "et+een t!e micro)insurance
sc!eme and an agent (insurance com$an#, microfinance institution, donor, etc.), and
in some cases a t!ird)$art# !ealt!care $rovider. T!e micro)insurance sc!eme is
res$onsi"le for t!e deliver# and marketing of $roducts to t!e clients, +!ile t!e agent
retains all res$onsi"ilit# for design and develo$ment. In t!is model, micro)
insurance sc!emes "enefit from limited risk, "ut are also disadvantaged in t!eir
limited control.
((. F4;; )/0A(3/ @*7/; 4 T!e micro)insurance sc!eme is in c!arge of ever#t!ingB "ot!
t!e design and deliver# of $roducts to t!e clients, +orking +it! e0ternal !ealt!care
$roviders to $rovide t!e services. T!is model !as t!e advantage of offering micro)
insurance sc!emes full control, #et t!e disadvantage of !ig!er risks.
21 | Pa g e
Micro--Insurance
(((. P0*A(7/0-70(A/. @*7/; 4 T!e !ealt!care $rovider is t!e micro)insurance sc!eme,
and similar to t!e full)service model, is res$onsi"le for all o$erations, deliver#,
design, and service. T!ere is an advantage once more in t!e amount of control
retained, #et disadvantage in t!e limitations on $roducts and services.
(A. C*@@4.(,C-B-)/7M@4,4-; @*7/; 4 T!e $olic#!olders or clients are in c!arge,
managing and o+ning t!e o$erations, and +orking +it! e0ternal !ealt!care
$roviders to offer services. T!is model is advantageous for its a"ilit# to design and
market $roducts more easil# and effectivel#, #et is disadvantaged "# its small size
and sco$e of o$eration
THE "EY CHARACTERISTICS
T!e IAI)C7A9 Eoint -orking 7rou$ on .icro Insurance document on t!e )regulation and
su$ervision of .icro Insurance identified t!e follo+ing ke# c!aracteristics of .icro Insur)
ance4
(. I.3;4)(A/./))F
-!ile formal c!annels of insurance "usiness tend to e0clude lo+)income
!ouse!olds, .icro Insurance sc!emes generall# tend to "e inclusive.
((. G0*4< C*A/0-+/F
7rou$ insurance is more inclusive and cost effective t!an individual coverage. Kven
t!oug! t!e informal econom# is fre=uentl# seen as disorganized, t!ere are
grou$ings availa"le, suc! as +omenJs associations, informal savings and credit
grou$s, coo$eratives, small "usiness associations and t!e like. T!ese grou$s
effectivel# "# enlisting t!eir su$$ort in mem"er selection and reduces insurance
risks suc! as fraud, over)usage and moral !azard.
22 | Pa g e
Micro--Insurance
(((. S(@<;/ P0*3/))/)$ R4;/) -.7 R/),0(3 ,(*.)F
Insurance contracts are generall# full of com$le0 conditions and conditional
"enefits. .icro Insurance contracts !ave to "e in $lain language ($refera"l# local
language) and ke$t as sim$le as $ossi"le so t!at ever#one !as a clear understanding
of +!at is covered and +!at is e0cluded.
THE MICRO INSURANCE MECHANISM
.icro Insurance o$erates "# connecting multi$le small units +it! larger structures and
t!ere"# creates net+orks +!ic! en!ance "ot! insurance functions (t!roug! risk $ooling)
and su$$ort structures for im$roved governance (i.e. training, data "anks, researc!
facilities, access to reinsurance etc.). T!is insurance mec!anism is inde$endent of
$ermanent e0ternal financial su$$ort. T!e $rinci$al o"%ective of .icro Insurance is to $ool
"ot! risks and resources of +!ole grou$s for t!e $ur$ose of $roviding financial $rotection
to all mem"ers against t!e financial conse=uences of mutuall# determined risks.
Distoricall#, .icro Insurance $roducts !ave evolved out of communit#)"ased financing
arrangements +it! active involvement of t!e communit# in revenue collection, $ooling,
resource allocation and, fre=uentl#, service $rovision.
23 | Pa g e
Micro--Insurance
3. ()7)8-PM),. -F MI56--I,*/6A,5)
INTRODUCTION
Distoricall# in India, a fe+ micro)insurance sc!emes +ere initiated, eit!er "# non)
governmental organizations (678) due to t!e felt need in t!e communities in +!ic! t!ese
organizations +ere involved or "# t!e trust !os$itals. T!ese sc!emes !ave no+ gat!ered
momentum $artl# due to t!e develo$ment of micro)finance activit#, and $artl# due to t!e
regulation t!at makes it mandator# for all formal insurance com$anies to e0tend t!eir
activities to rural and +ell)identified social sector in t!e countr# (IR;A &'''). As a result,
increasingl#, micro)finance institutions (.GIs) and 678s are negotiating +it! t!e for)
$rofit insurers for t!e $urc!ase of customized grou$ or standardized individual insurance
sc!emes for t!e lo+)income $eo$le. Alt!oug! t!e reac! of suc! sc!emes is still ver#
limited an#+!ere "et+een 2 and *' million individuals)))t!eir $otential is vie+ed to "e
considera"le. T!e overall market is estimated to reac! Rs. &2' "illion "# &''L (I18 &''C).
T!e insurance regulator# and develo$ment aut!orit# (IR;A) defines rural sector as
consisting of4
a $o$ulation of less t!an five t!ousand,
a densit# of $o$ulation of less t!an four !undred $er s=uare kilometer
.ore t!an &25 of t!e male +orking $o$ulation is engaged in agricultural $ursuits.
T!e categories of +orkers falling under agricultural $ursuits are4 cultivators,
agricultural la"orers, and +orkers in livestock, forestr#, fis!ing, !unting and
$lantations, orc!ards and allied activities.
2" | Pa g e
Micro--Insurance
T!e social sector as defined "# t!e insurance regulator consists of4
/norganized sector
informal sector
economicall# vulnera"le or "ack+ard classes, and
8t!er categories of $ersons, "ot! in rural and ur"an areas.
T!e social o"ligations are in terms of num"er of individuals to "e covered "# "ot! life and
non)life insurers in certain identified sections of t!e societ#. T!e rural o"ligations are in
terms of certain minimum $ercentage of total $olices +ritten "# life insurance com$anies
and for general insurance com$anies, t!ese o"ligations are in terms of $ercentage of total
gross $remium collected. ome as$ects of t!ese o"ligations are $articularl# note+ort!#.
Girst, t!e social and rural o"ligations do not necessaril# re=uire (cross) su"sidizing
insurance. econd, t!ese o"ligations are to "e fulfilled rig!t from t!e first #ear of
commencement of o$erations "# t!e ne+ insurers. T!ird, t!ere is no e0it o$tion availa"le to
insurers +!o are not keen on servicing t!e rural and lo+)income segment. Ginall#, non)
fulfillment of t!ese o"ligations can invite $enalties from t!e regulator.
In order to fulfill t!ese re=uirements all insurance com$anies !ave designed $roducts for
t!e $oorer sections and lo+)income individuals. Bot! $u"lic and $rivate insurance
com$anies are ado$ting similar strategies of develo$ing colla"orations +it! t!e various
civil societies associations. T!e $resence of t!ese associations as a mediating agenc#, or
+!at +e call a nodal agenc#, t!at re$resents, and acts on "e!alf of t!e target communit# is
essential in e0tending insurance cover to t!e $oor. T!e nodal agenc# !el$s t!e formal
2# | Pa g e
Micro--Insurance
insurance $roviders overcome "ot! informational disadvantage and !ig! transaction costs
in $roviding insurance to t!e lo+)income $eo$le. T!is +a# micro insurance com"ines
$ositive features of formal insurance ($re $aid, scientificall# organized sc!eme) as +ell as
t!ose of informal insurance ("# using local information and resources t!at !el$s in
designing a$$ro$riate sc!emes delivered in a cost effective +a#). In t!e a"sence of a nodal
agenc#, t!e lo+ resource "ase of t!e $oor, cou$led +it! !ig! transaction costs (relative to
t!e magnitude of transactions) gives rise to t!e afforda"ilit# issue. 1ack of afforda"ilit#
$revents t!eir latent demand from e0$ressing itself in t!e market. Dence t!e nodal agencies
t!at organize t!e $oor, im$art training, and +ork for t!e +elfare of t!e lo+)income $eo$le
$la# an im$ortant role "ot! in generating "ot! t!e demand for insurance as +ell as t!e
su$$l# of cost)effective insurance.
OTENTIAL MAR"ET FOR MICRO!INSURANCE IN INDIA#
$T%e UND St&d'(
;uring &''2)'M, t!e Duman ;evelo$ment Re$ort /nit of /6;9 conducted a stud# of t!e
$otential .icro Insurance market in India on t!e "asis of field surve#s conducted in t!e
tates of 8rissa, Tamil 6adu and Ra%ast!an.
T!e /6;9 re$ort commented t!at t!e $otential utilit# of .icro Insurance ma# "e even
"roader t!an t!at of micro)credit and ma# "e closer to t!e $otential market for micro)
savings, "alanced "# afforda"ilit# considerations in t!e earl# stages. ome 2&.C $er cent of
IndiaJs $o$ulation of *.'L "illion earns less t!an / I & a da# (in terms of 9urc!asing
9o+er 9arit#). .icro Insurance can $la# an im$ortant role in $rotecting t!e income of t!ese
$eo$le.
2$ | Pa g e
Micro--Insurance
T!e /6;9 re$ort also tried to estimate t!e $otential size of t!e .icro Insurance market in
India. T!e estimates corres$onding to t!e life and non)life segments are $rovided in Ta"le
3. T!e $o$ulation used for t!e estimation is C')2' $ercent of t!ose earning less t!an /I *
a da# and 2')F' $er cent of t!ose earning "et+een /I * ) & a da#. T!e nonlife estimation
included four t#$es of coverage ) milc! animals, livestock, !ealt! and cro$ insurance
T2/ P*,/.,(-; M-0>/, 6*0 M(30*-I.)40-.3/ (. I.7(-
I.)40-.3/ S/+@/., M-0>/, S(N/ (P*,/.,(-;)(R). M(;;(*.))
L(6/ S/+@/., *23(3)&'*C*
N*.-L(6/ S/+@/., CM(**.F')MC,*&M.22
TOTAL (L(6/ -.7 N*.-L(6/) M&3'C.F')LC,&MF.22
2% | Pa g e
Micro--Insurance
". ,))( F-6 ()7)8-PI,+ MI56--
I,*/6A,5) I, I,(IA
)AC"*ROUND
.icro)insurance refers to $rotection of assets and lives against insura"le risks of target
$o$ulations suc! as micro)entre$reneurs, small farmers and t!e landless, +omen and lo+)
income $eo$le t!roug! formal, semiformal and informal institutions. uc! $roducts are
often "undled +it! micro)savings and micro)credit, t!ere"# allocating scarce resources to
micro)investments +it! t!e !ig!est marginal rates of return. .icro insurance is t!e most
underdevelo$ed $art of microfinance. Yet various sc!emes e0ist t!at are via"le, "enefiting
"ot! t!e institutions and t!eir clients.
uc! sc!emes !ave generall# served t+o ma%or $ur$oses4
(. T!e# !ave contri"uted to loan securit#B and
((. T!e# !ave served as instruments of resource mo"ilization.
(((. T!e greatest c!allenge for micro insurance lies in t!e com"ination of via"ilit# and
sustaina"ilit# +it! outreac!.
Alt!oug! introduction of sound $ractices suc! as a$$ro$riate $olic# sizes and timel#
$a#ment of installments of $remium or $ositive incentives to rene+ on time in order to
avoid $olic# getting la$sed can "e feasi"le, t!e ultimate effectiveness of interventions
focusing on institutional transformation and sound insurance $ractices +ill var#
considera"l#, de$ending on t!e a$$ro$riateness of t!e regulator# environment.
2& | Pa g e
Micro--Insurance
DEVELOMENT *OAL
To ena"le micro insurance to "e an integral $art of a countr#Js +ider insurance s#stem, it is
im$ortant for ever# insurer to ad%ust its costs of serving marginal clients in remote areas,
collecting $remiums and installments, and offering doorste$ services. It is also im$ortant to
recognize a +ide net+ork of intermediaries in t!e rural and social sectors and notif#
regulations in order to guide and su$ervise t!e micro)insurance service $roviders and t!eir
customers.
Toda# +e !ave a variet# of microfinance institutions +it! national and local outreac!.
.an# of t!em !ave alread# "ecome cor$orate agents or !ave entered into referral
arrangements +it! insurers. Do+ever, semiformal institutions including savings and credit
coo$eratives, 678s and self)!el$ grou$s +!ic! !ave immense $otential in carr#ing t!e
message of insurance as also solicit insurance "usiness are #et to "e utilized in a manner
+!ere t!eir true $otential can "e !arnessed to increase t!e insurance $enetration levels.
T!is is due to restrictions in t!e e0isting agenc# regulations in terms of minimum eligi"ilit#
norms in order to "ecome an agent.
;e$ending on t!e e0istence and vigor of suc! institutions, t!e follo+ing alternatives !ave
emerged, for offering strategic entr# $oints for micro insurance develo$ment4
Ada$ting formal insurance arrangements to t!e needs of t!e micro)econom#.
/$grading non)formal (com$rising semiformal and informal) insurance
arrangements +it! insurance com$anies.
1inking formal and non formal insurance institutions +it! "anks and self)!el$
grou$s.
Ksta"lis!ing ne+ local institutions $roviding micro insurance services.
21 | Pa g e
Micro--Insurance
T!e first t!ree strategies ma# "e inter)connected4
ada$ting insurance com$anies to t!e re=uirements of t!e micro)econom# is a first
ste$B t!en
1inking t!em as +!olesale institutions to self)!el$ grou$s as retailersB and finall#,
/$grading self)!el$ grou$s e.g. to t!e level of financial coo$eratives or village
"anks.
If insurers are to serve customers +!o differ +idel# in terms of service costs and risks, t!e
onl# via"le inducement for t!em is an ade=uate margin, lest t!e# e0clude small farmers, )
micro)entre$reneurs and $eo$le in remote areas. 8nl# sound social insurance, +!ic!
com"ines a social mandate +it! $rofit)making, !as a c!ance of sustaina"ilit#.
INSTITUTIONAL ADATATION
T!e e0$erience so far !as "een t!at formal financial institutions serve "ut a fraction of t!e
$o$ulation, +!ic! t#$icall# lies +it!in t!e u$$er =uartile of t!e social !ierarc!#. T!roug!
ada$tation to t!e microfinance market re=uirements, t!e# ma# graduall# e0$and into t!e
second)!ig!est =uartile and into segments of t!e lo+er =uartiles. -it!in t!e foreseea"le
future t!e# +ill normall# not "e a"le to full# serve t!at market.
6on formal finance mostl# rests on local institutions +!ic! are directl# accessi"le to all
segments of t!e $o$ulation. elf)Del$ 7rou$s (D7s) are mem"er)o+ned and mem"er)
controlled local institutions. T!e# ma# eit!er "e financial grou$s, +it! financial
intermediation as t!eir $rimar# $ur$oseB or non financial grou$s, +it! financial
intermediation as a secondar# $ur$ose, suc! as vendorsJ associations, famil# $lanning
grou$s and numerous ot!er t#$es of voluntar# associations.
32 | Pa g e
Micro--Insurance
T!e functions t!at need to "e focused must include4 $roviding guidance to mem"ers,
collecting $remium installments from mem"ers, insurance services to mem"ers,
communication and e0c!ange of e0$erience, $roviding linkages +it! "anks, 678s or
donors, su$$orting t!e $ro$osals of individual mem"ers to insurance com$anies t!roug!
recommendations.
LIN"A*E TO INSURERS
8n a modest scale, various forms of life and !ealt! insurance !ave "een successfull#
$racticed "# different institutions in different countries, $articularl# as $art of loan
$rotection sc!emes. .icro)insurance $rocedures and services s!ould "e set "# insurers
rat!er t!an t!e regulator.
A$$ro$riate $rocedures and services s!ould "e a$$lied to attain4
ound financial management,
Convenient and safe savings $remium collection and de$osit facilities,
A$$ro$riate claim a$$raisal and $rocessing $rocedure
Ade=uate risk management,
Timel# collection of $remium installments,
.onitoring and
Kffective information gat!ering, all of +!ic! ma# include coo$eration "et+een
different formal and non)formal intermediaries in fields +!ere eac! is most
effective.
31 | Pa g e
Micro--Insurance
32 | Pa g e
Micro--Insurance
ROOSED MICRO!INSURANCE RE*ULATIONS
In order to introduce t!e conce$t micro)insurance it is necessar# to draft suita"le "ring in
suita"le regulations to ena"le insurers to design and distri"ute and service micro)insurance
$roducts and disc!arge t!eir o"ligations to t!e rural and social sectors as $er $rovisions of
t!e Insurance Act, *(3L.
It is $ro$osed t!at an insurer transacting life insurance "usiness s!all "e $ermitted
to $rovide life micro)insurance $roducts as +ell as general micro)insurance
$roducts $rovided it ties u$ +it! an insurer transacting general insurance "usiness
for t!e general micro)insurance $roducts, and vice versa.
In addition to an insurance agent or cor$orate agent or insurance "roker +!o are
aut!orized to solicit and $rocure insurance "usiness, including micro)insurance
"usiness +it! an insurer in accordance +it! t!e $rovisions of t!e Insurance Act,
*(3L and t!e regulations made t!ere under it is also $ro$osed to introduce t!e
conce$ts of @micro)insurance $roductA and @micro)insurance agentA .
33 | Pa g e
Micro--Insurance
TIE!U )ET+EEN LIFE INSURER AND NON!LIFE
INSURER
(. An insurer carr#ing on insurance "usiness ma# offer life micro)insurance $roducts
as also general micro)insurance $roducts, as $rovided !erein.
9rovided t!at +!ere an insurer carr#ing on life insurance "usiness offers an#
general micro)insurance $roduct, !e s!all !ave a tie)u$ -it! an insurer
carr#ing on general insurance "usiness tor t!is $ur$ose, and su"%ect to t!e
$rovisions of section MCHB of t!e. Act, t!e $remium attri"uta"le to t!e
general micro insurance $roduct ma# "e collected from t!e $ros$ect
($ro$oser) "# t!e insurer carr#ing on life insurance "usiness, eit!er directl#
8r t!roug! an# of t!e distri"uting entities of micro)insurance $roducts as
s$ecified in regulation C, and made over to t!e insurer on general
insurance "usiness.
9rovided furt!er t!at in t!e event of an# claim in regard to general micro)
insurance $roducts, t!e insurer carving on life insurance "usiness or t!e
distri"uting entities of micro)insurance $roducts, as t!e case ma# "e, as ma#
"e s$ecified in t!e tie)u$ referred to in t!e first $roviso, s!all for+ard t!e
claim to t!e insurer carr#ing on general insurance "usiness and offer all
assistance for t!e e0$editious dis$osal of t!e claim.
((. An insurer carr#ing on general insurance "usiness ma# offer general micro)
insurance $roducts as also life micro)insurance $roducts, as $rovided !erein.
9rovided t!at +!ere an insurer carr#ing on general insurance "usiness offers
an# life micro) insurance $roduct, !e s!all !ave a tie)u$ +it! an insurer
carr#ing on life insurance "usiness for t!is $ur$ose, and su"%ect to t!e
3" | Pa g e
Micro--Insurance
$rovisions of section MCHB of t!e Act, t!e $remium attri"uta"le to t!e life
micro insurance $roduct ma# !e collected from t!e $ros$ect ($ro$oser) "#
t!e insurer carr#ing on general insurance "usiness, eit!er directl# or t!roug!
an# of t!e distri"uting entities of micro)insurance $roducts as s$ecified in
regulation C, and made over to t!e insurer carr#ing on life insurance
"usiness
9rovided furt!er t!at in t!e event of an# claim in regard to life micro)
insurance $roducts, t!e insurer carr#ing on general insurance "usiness or t!e
distri"uting entities of micro) insurance $roducts, as t!e case ma# "e, as
ma# "e s$ecified in t!e tie)u$ referred to in t!e first $roviso, s!all for+ard
t!e claim to t!e insurer carr#ing on life insurance "usiness and offer all
assistance for t!e e0$editious dis$osal of t!e claim.
CODE OF CONDUCT OF MICRO INSURANCE
A*ENTS
Kver# micro)insurance agent and s$ecified $erson em$lo#ed "# !im s!all a"ide "#
t!e code of conduct as laid do+n in Regulation L of t!e Insurance Regulator# and
;evelo$ment Aut!orit# (1icensing of Insurance Agents) Regulations, &''', and t!e
relevant $rovisions of Insurance Regulator# and ;evelo$ment Aut!orit# (Insurance
Advertisements and ;isclosure) Regulations, &'''.9rovided t!at !e insurer s!all
ensure com$liance of t!e code of conduct, advertisements and disclosure norms "#
ever# micro)insurance agent.
An# violation "# a micro)insurance agent of t!e code of conduct and?or
advertisement or disclosure norms as aforesaid s!all lead to termination of !is
3# | Pa g e
Micro--Insurance
a$$ointment. In addition to $enal conse=uences for "reac! of code of conduct
and?or advertisement or disclosure norms $ursuant to t!e $rovisions of su")
regulation (*).
MICRO!INSURANCE A*ENT
A @micro)insurance agentA s!all "e a 6on 7overnment 8rganization (678) or a
elf Del$ 7rou$ (D7).
K0$lanation4 Gor t!e $ur$oses of t!is regulation4
A 6on 7overnment 8rganization (678) s!all "e a registered non)$rofit
organization under t!e ociet#<s Act, *(ML +it! a $roven track record of +orking
+it! marginalized grou$s +it! clearl# stated aims and o"%ectives, trans$arenc#, and
accounta"ilit# outlined in its memorandum, rules and regulations and demonstrates
involvement of committed $eo$le.
elf Del$ 7rou$ (D7) ma# "e an informal grou$ or registered under ocieties Act,
tate Co)o$erative Act or as a $artners!i$ firm, consisting of *' to &' +it! a $roven
track record of +orking +it! marginalized grou$s +it! clearl# stated aims and
o"%ectives, trans$arenc#, and accounta"ilit# outlined in its memorandum, rules and
regulations and demonstrates involvement of committed $eo$le.
3$ | Pa g e
Micro--Insurance
T!e minimum num"er of mem"ers com$rising a grou$ s!ould "e at least ten for
insurance of individuals, and at least fift# for grou$ insurance.
3% | Pa g e
Micro--Insurance
#' MI56--I,*/6A,5)P6-(/5.
*ENERAL MICRO!INSURANCE RODUCT
A @+/./0-; @(30*-(.)40-.3/ <0*743,A means an# !ealt! insurance contract, an# contract
covering t!e "elongings suc! as !ut, livestock, an# $ersonal accident contract, or tools or
instruments, eit!er on individual or grou$ "asis, as $er terms stated in t!e Ta"le "elo+, filed
+it! t!e Aut!orit#4
TC</ *6 C*A/0 M(. A@,
*6 C*A/0
M-? A@,
*6 C*A/0
T/0@
*6
C*A/0
M(..
T/0@
*6
C*A/0
M-?.
M(.
A+/ -,
/.,0C
M-?
-+/ -,
/.,0C
DG/;;(.+ & 3*.,/.,$ *0
;(A/),*3> *0 T**;) *0
(@<;/@/.,) *0 *,2/0
.-@/7 -))/,)M*0 C0*<
(.)40-.3/ -+-(.), -;;
</0(;)
R). 5$000
P/0
-))/,M3*A/0
R). E0$000
P/0
-))/,M3*A/0
1 C/-0 1 C/-0 NA NA
H/-;,2 I.)40-.3/
C*.,0-3, (I.7.) R). 5$000 R). E0$000 1 C/-0 1 C/-0 I.)40/0)#
7()30/,(*.
H/-;,2 I.)40-.3/
C*.,0-3, (6-@(;C)
(O<,(*. ,* -A-(; ;(@(, 6*0
I.7(A(74-;MF;*-, *.
6-@(;C)
R). 10$000 R). E0$000 1 C/-0 1 C/-0 I.)40/0)#
7()30/,(*.
P/0)*.-; A33(7/., (</0
;(6/M/-0.(.+ @/@B/0 *6
6-@(;C)
R). 10$000 R). 50$000 1 C/-0 1 C/-0 5
0
SOURCEF IRDA Micro-Insurance Regulations, 2005, www.irdaindia.com
NOTEF
i. T!e minimum num"er of mem"er com$rising a grou$ s!all "e at least t+ent# for
grou$ insurance.
3& | Pa g e
Micro--Insurance
LIFE MICRO!INSURANCE RODUCT
A @;(6/ @(30*-(.)40-.3/ <0*743,A means an# term insurance contract +it! or +it!out
return of $remium, an# endo+ment insurance contract or !ealt! insurance contract, +it! or
+it!out an accident "enefit rider, eit!er on individual or grou$ "asis, as $er terms stated in
t!e Ta"le A "elo+, filed +it! t!e Aut!orit#4
TC</ *6 C*A/0 M(.(@4@
A@*4., *6
C*A/0
M-?(@4@
A@*4., *6
C*A/0
T/0@ *6
C*A/0
M(..
T/0@
*6
C*A/0
M-?.
M(.(@4@
A+/ -,
/.,0C
M-?(@4@
-+/ -,
/.,0C
T/0@
I.)40-.3/ G(,2
*0 G(,2*4,
0/,40. *6
<0/@(4@
Rs. 2,''' Rs. 2',''' 2 #ear *2
#ears
*L M'
E.7*G@/.,
I.)40-.3/ Rs. 2,''' Rs. 3','''
*2
#ears *L M'
H/-;,2
I.)40-.3/
C*.,0-3,
(I.7(A(74-;)
Rs. 2,''' Rs. 3',''' * #ear F #ear Insurers< discretion
H/-;,2
I.)40-.3/
C*.,0-3,
(F-@(;C)
Rs. *',''' Rs. 3',''' * #ear F #ear Insurers< discretion
A33(7/.,
B/./6(, -)
R(7/0
Rs. *',''' Rs. 2',''' 2 #ear *2
#ears
*L M'
SOURCEF IRDA Micro-Insurance Regulations, 2005, www.irdaindia.com
NOTEF
i. 7rou$ insurance $roducts ma# "e rene+a"le on a #earl# "asis.
ii. T!e minimum num"er of mem"ers com$rising a grou$ s!all "e at least t+ent#
for grou$ insurance
LIST OF MICRO-INSURANCE PRODUCT
Ginancial 6ame of t!e 9roduct 9roduct /I6 In o$eration Remarks,
31 | Pa g e
Micro--Insurance
Year 6o. if an#, "#
IR;A
Grom
(o$ening date)

&''F)'L Ba%a% Allianz Eana
Hikas Yo%ana
**M6'CFH'* C)A$r)'F
&''F)'L Ba%a% Allianz aral
uraks!a Yo%ana
**M6'CLH'* C)A$r)'F
&''F)'L Ba%a% Allianz Al$
6ives! Yo%ana
**M6'C(H'* C)A$r)'F
&''F)'L 7rameen uraks!a *&&6'3(H'* *M).ar)'F
&''F)'L Birla un 1ife
Insurance Bima
uraks!a u$er
*'(6'3&H'* *3)Aug)'F
&''F)'L Birla un 1ife
Insurance Bima ;!an
anc!a#
*'(6'33H'* *3)Aug)'F
&''L)'( ICICI 9ru arv Eana
uraks!a
*'26'L*H'* &)Eun)'L
&''F)'L I67 H#s#a aral
uraks!a
**C6'3&H'* 3)e$)'F

&''M)'F 1ICJs Eeevan .ad!ur 2*&6&C'H'* *C)e$)'M
&''()*' 1ICJs Eeevan .angal 2*&6&2FH'* C).a#)'(
&''L)'( .et His!+as **F6'C&H'* &)Eun)'L

&''F)'L BI 1ife 7rameen
!akti
***6'3LH'* M)e$)'F
&''F)'L BI 1ife 7rameen
u$er uraks!a
***6'3(H'* M)e$)'F
&''M)'F A#us!man Yo%ana **'6'C&H'* 3').a#)'M
&''M)'F 6avkal#an Yo%ana **'6'C3H'* 3').a#)'M
&''M)'F am$oorn Bima
Yo%ana
**'6'CCH'* &)Eun)'M
&''L)'( Tata AI7 umangal
Bima Yo%ana
**'6'M*H'* 3)Eun)'L
&''M)'F
a!ara a!a#og
(.icro Kndo+ment
Insurance +it!out
$rofit $lan)
*&F6'*'H'* &*)A$r)&''M

&''F)'L !ri a!a# *&L6'**H'* F)Ge")'F
&''F)'L ri a!a# (A9) *&L6'*&H'* &C)A$r)'F
&''L)'( I;BI Gortis 7rou$
.icrosurance 9lan
*326''CH'* 2)6ov)'L
&''L)'( ;1G 9ramerica arv
uraks!a
*C'6''FH'* *M).ar)'(
&''L)'( /; 1ife 9aras$ar
uraks!a 9lan
*C&6''(H'* *F).ar)'(
"2 | Pa g e
Micro--Insurance

"1 | Pa g e
Micro--Insurance
$' 6)*)A654 M).4-(-8-+0
D-,- 3*;;/3,(*.
Gor data collection, +e develo$ed a +ell defined =uestionnaire as a researc! instrument,
consisting =uestions aimed to measure t!e $eo$le $erce$tion a"out insurance, t!eir need and
$ro"lems. -e conducted unstructured intervie+s sam$le size of 3' general $eo$le !aving
income less t!an 32' "ugs $er da# like vendors, ricks!a+)+ala, milkman, co""ler etc.
urve# location +as .um"ai etc. All t!e data generated +as $rimar# data t!at +as
generated directl# from face to face communication.
D-,- -.-;C)()
T!e data collected "ased on structured =uestionnaire is recorded on an e0cel s!eet and +it!
t!e !el$ of $ie c!art anal#sis along +it! $illar data anal#sis is generated and "ased on t!is
findings a =ualitative inferences are made for eac! anal#sis. T!e same is "eing $resented in
form of gra$!s and ta"les
S40A/C R/)4;,)
T!e follo+ing are m# findings regarding t!e surve# conducted. T!e follo+ing gra$!s s!o+
t!e $otential de$t! from different $ers$ectives, as s!o+n "elo+4
"2 | Pa g e
Micro--Insurance
%' (A.A A,A80*I* A,( I,.)6P6).A.I-,
C2-0, 1F A+/ *6 ,2/ 0/)<*.7/.,)
I.6/0/.3/F T!e a"ove reveals t!e fact t!at .a%orit# of t!e res$ondents, a"out CF5 "elong
to t!e categor# of 32)C' ages and &*5 "elong to t!e categor# of &2)32 of age, *L5 "elong
to categor# 3')3C and *C5 "elong to t!e categor# &')&2 of age.
C2-0, &F E743-,(*.-; J4-;(6(3-,(*.
I.6/0/.3/F T!e a"ove result reveals t!at ma%orit# of res$ondents i.e. 2C5 +ere educated
till !ig!er secondar# and t!e $ercentage of $rimar# and graduation is ver# close i.e. &*5 &
&25.
"3 | Pa g e
Micro--Insurance
C2-0, EF A33*4., H*;7/0
I.6/0/.3/F T!e a"ove result reveals t!at **5 of res$ondent don<t !ave an# account an#
+!ere +!ile ma%orit# of t!e a$$licants NC35O !ave $ost office account, 3&5 !ave t!eir
Bank a?c and onl# *C5 !ave "ot! t!e accounts.
C2-0, !F N*. *6 6-@(;C @/@B/0)
I.6/0/.3/ F A"ove result reveals t!at ma%orit# of res$ondents 2'5 !ave C mem"ers in a
famil# +!ic! is ideal +!ereas onl# F5 live +it! %oint famil# or !ave "ig size of famil#.
"" | Pa g e
Micro--Insurance
C2-0, 5F N*. *6 /-0.(.+ @/@B/0
I.6/0/.3/F Grom t!e a"ove result it can "e clearl# seen t!at a"out ML5 of t!e res$ondent
+ere t!e onl# earning mem"er of t!eir famil#, 3&5 !ave & earning mem"er "ecause of size
of famil#.
C2-0, 1F I.3*@/ ;/A/;
I.6/0/.3/F T!e a"ove result reveals t!at ML5 of res$ondent !ave income level "et+een
F''')*'''' +!ile 3&5 !ave income level "et+een 2''')F''' and no one "elo+ it.
"# | Pa g e
Micro--Insurance
C2-0, F N*. *6 7/</.7/.,
I.6/0/.3/F T!e a"ove result reveal t!at ma%orit# of res$ondent 3(5 !ave 3 no. of
de$endent +!ere as onl# C5 !ave 2 de$endents.
C2-0, HF E?</.)/ P-,,/0.
I.6/0/.3/F Grom t!e a"ove result +e can see t!at out of t!e t!ree clot!ing e0$ense is
moreB least e0$ense is !ealt! and e0$ense in travelling is nil "ut travelling is t!e !ig!est at
num"er M
t!
$lace
"$ | Pa g e
Micro--Insurance
I.6/0/.3/F Grom t!e gra$! +e can sa# t!at out of t!e t!reeB Rent & Klectricit# is t!e
!ig!est e0$ense and t!en comes Kducation. 1east e0$ense is on ;rinks & Kntertainment
"ut it is !ig!est at 2
t!
$lace.
C2-0, 'F F-3/7 <0*B;/@ G(,2 2/-;,2 *0 -))/,
I.6/0/.3/F A"ove result s!o+s t!at 3M5 of res$ondent didn<t face an# $ro"lem related
+it! !ealt! or asset "ut MC5 faced a serious or minor !ealt! or asset loss in $ast of t!eir
life.
C2-0, 10F AG-0/./)) -B*4, (.)40-.3/
"% | Pa g e
Micro--Insurance
I.6/0/.3/F A"ove result reveals t!at eac! and ever# a$$licant is a+are a"out +!at t!e
insurance is.
C2-0, 11F S*403/ *6 (.6*0@-,(*.
I.6/0/.3/F T!e result a"ove reveals t!at 3'5 of t!e res$ondent got t!e information a"out
insurance from ne+s$a$er, &'5 got info from T.H, least from Banners & Doardings and
remaining from t!e source $attern s!o+n a"ove.
"& | Pa g e
Micro--Insurance
&' FI,(I,+*
tud# reveals t!at ma%orit# of $eo$le +!ose dail# income is less t!an 32' "ugs
!ave ideal famil#.
Karning mem"ers in ma%orit# of famil# are t+o so t!at t!e# are a"le to survive
and meet t!eir dail# re=uirements.
Income level lies "et+een *2')32' "ugs $er da#.
.a%orit# of res$ondent !ad $ost office account and ver# less !ad "ot! "ank as
+ell as "ank account.
.a%orit# of res$ondent !ave more s$ending on rent & Kducation, after t!at on
food & clot! and .edicare & entertainment.
.a%orit# of res$ondent are t!e onl# earning mem"er in famil# size of C)2.
.a%orit# of t!em managed critical financial $ro"lem from t!eir savings and even
"orro+ed some mone#. 8nl# fe+ !ad insurance or taken loan.
All of t!em are a+are a"out insurance "ut not a"out micro insurance and "est
source of information medium found to "e ne+s$a$er, television and from friends
& relatives.
.an# of res$ondents +ere not insured %ust "ecause of eit!er !ig! $remium or lack
of com$lete information.
.a%orit# of res$ondent s!o+s keen interest in micro)insurance $olic# in life and
!ealt!, some +ere ver# sensitive to+ard education and like to !ave education
insurance as +ell.
"1 | Pa g e
Micro--Insurance
#2 | Pa g e
Micro--Insurance
1' 6)5-MM),(A.I-,*
S*@/ *6 ,2/ 0/3*@@/.7-,(*.) 3*4;7 B/F
im$lification of $roducts and "undling +!ere re=uires making t!em eas# to
understand, eas# to use, sill and service.
im$lif#ing and making $remium $a#ment $lans fle0i"le to suit t!e needs.
Gocus on volumes "# targeting large grou$s.
Innovations are re=uired at all stages for $roducts, in $ricing $olic# and in
deliver# c!annels
uccess of marketing micro insurance de$ends on understanding t!e social and
cultural needs of t!e target $o$ulation
Integrating micro finance activities +it! micro insurance for a most "eneficial
outcome.
Claim settlement to "e timel#, sim$le and trans$arent.
.a0imizing t!e "enefit of connectivit# revolution in rural India to reac! t!e un)
served markets.
/sing additional innovative distri"ution c!annels to ac!ieve cost)efficienc# in
agricultural markets.
#1 | Pa g e
Micro--Insurance
12' 5-,58/*I-,
-e all kno+ insurance is a ver# old conce$t. But t!e demand for insurance +as increased
from a decade. .iddle class $eo$le take insurance $olic# according to t!eir a"ilit# &
ca$acit# to $a# $remium to secure t!eir life.
-!en +e talk a"out $oor $eo$le a =uestion comes in mind
;o $oor $eo$le !ave an# securit#L
-!at if t!e# face an# riskL
-!o is going to look after t!emL
T!eir famil# mem"ersL
;o t!e# !ave an# insurance $olic#L
Are t!e# ca$a"le to $a# t!e $remiumL
T!e ans+er for t!is is .icro Insurance.
THE MICRO INSURANCE IS BECOMES MICRO ENSURE
K#A ./G .-@/ -.7 ,-+;(./ ,* 0/6;/3, *40 <*)(,(*.(.+ -.7 @())(*. ,* ,2/ <**0##
.icro Insurance is designed kee$ing in mind to $oor $eo$le. 1ike ever#"od# else, t!e $oor
$eo$le face a variet# of risks suc! as risk of deat!, illness, disa"ilit#, accident, income &
$ro$ert# & so on. 1ike all ot!er, t!e# also need to "e $rotected from t!ese risks.
9olic#)induced and institutional innovations are $romoting insurance among t!e lo+)
income $eo$le +!o form a siza"le sector of t!e $o$ulation and +!o are mostl# +it!out an#
social securit# cover. Alt!oug! t!e current reac! of Pmicro)insurance< is limited, t!e earl#
trend in t!is res$ect suggests t!at t!e insurance com$anies, "ot! $u"lic and $rivate,
o$erating +it! commercial considerations, can insure a significant $ercentage of t!e $oor.
erving lo+)income $eo$le +!o can $a# t!e $remium certainl# makes a sound commercial
sense to insurance $roviders. To t!at e0tent im$osing social and rural o"ligations "#
insurance regulator (IR;A) is !el$ing all insurance com$anies a$$reciate t!e vast unta$$ed
$otential in serving t!e lo+er end of t!e market.
#2 | Pa g e
Micro--Insurance
Alt!oug! micro insurance is unlikel# to ever "e t!e ma%or focus of more t!an a fe+
insurers, man# insurers !ave found micro insurance to "e $rofita"le if t!e# o$erate sim$l#
and efficientl# on all levels, res$ond to market needs, and access large num"ers of lo+
income $eo$le.
Investments in micro insurance !ave diverse returns t!at evolve over time4 re$utational
gains in t!e s!ort term, kno+ledge in t!e medium term and gro+t! in t!e long term. If +e
vie+ insurance as a sector in +!ic! kno+ledge is a decisive resource, t!en micro insurance
can "e vie+ed as a driver of local learning and ultimatel# economic gro+t!. It is "ecoming
increasingl# clear t!at micro)insurance needs a furt!er $us! and guidance from t!e
regulator as +ell as t!e government.
#3 | Pa g e
Micro--Insurance
11' 9I8I9-+6AP0
T!e follo+ing com$anies and association<s +e" sites +ere referred +!ile collecting
information used in t!e researc!.
INTERNET SOURCE
GGG.(07-(.7(-.3*@
GGG.(07-(.7(-.*0+
GGG.B-.>./,(.7(-.3*@
GGG.@(30*(.)40-.3/3/.,0/.*0+
GGG./3*.*@(),.3*@
GGG.B4)(./))G*0;7.(.
BOODSMMAGA"INES REFFERD
-, .4) 9A*I5* -F MI56--I,*/6A,5)
P0*,/3,(.+ ,2/ <**0F A @(30* (.)40-.3/ 3*@</.7(4@ ---Authors C0-(+ F.
C24032(;;
-, MI56--I,*/6A,5) 6)+/8A.I-,
M->(.+ (.)40-.3/ @-0>/,) G*0> 6*0 ,2/ <**0F @(30*-(.)40-.3/ <*;(3C$
0/+4;-,(*. -.7 )4</0A()(*. ---CGAP %*0>(.+ G0*4< *. M(30*-(.)40-.3/$ &00'
#" | Pa g e
Micro--Insurance
*/67)0 :/)*.I-,,AI6)
Personal Pro;le
1) N-@/F OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
&) A+/F A) &0-&5 B) &5-E0 C) E0-E5 D) E5-!0
E) E743-,(*.-; =4-;(6(3-,(*.F A) U< ,* <0(@-0C B) H(+2/0 )/3 C) G0-74-,(*.
!) D* C*4 2-A/F A) B-.> -M3 B) P*), *66(3/ -M3 C) B*,2
5) N*. *6 @/@B/0) (. 6-@(;C OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
1) N*. *6 /-0.(.+ @/@B/0) OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
) M*.,2;C I.3*@/F A) 0-E000 B) E000-5000 C) 5000-000 D) 000-10000
H) N*. *6 7/</.7/.,) A) 1-& B) &-E C) !-5 D) 1--B*A/
') E?</.)/ <-,,/0. (<;/-)/ @/.,(*. .*.) (1-2(+2/), & 1-;*G/),)
A) T0-A/;;(.+ OOO B) C;*,2(.+ OOO C) H/-;,2 OOO D) E743-,(*. OOO
E) R/., & /;/3,0(3(,C OOO F) D0(.> & /.,/0,-(.@/.,OOO
10) D(7 C*4 6-3/7 -.C <0*B;/@ (. 6-@(;C 2/-;,2 *0 -))/,
A) Y/) B) N*
I6 C/)$ ,2/. 2*G 7(7 C*4 @-.-+/7 (, OOOOOOOOOOOOOOOOOOOOOOOOOO
OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
11) D* C*4 >.*G -B*4, (.)40-.3/L
A) Y/) B) N*
I6 C/)$ ,2/. -.C >.*G. (.)40-.3/ 3*@<-.C OOOOOOOOOOOOOOOOOOOOOOOOOO
OOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO
1&) I6 C/) )*403/ *6 (.6*0@-,(*. *6 ,2/ (.)40-.3/ 3*@<-.C
A) TV B) H*-07(.+) C) C(./@- 2-;;) D) B-../0) E) R-7(*
F) C*@<-.C -+/.,) G) F0(/.7) H) R/;-,(A/) I) M-+-N(./ J) N/G)<-</0
## | Pa g e