PROJECT ON

“FINANCE IN MICRO INSURANCE ”

PREPARED BY

HARDIK S. MODI

ROLL NO:-22

T.Y.B.B.I. (BANKING AND INSURANCE)

SEMISTER-VI, YEAR-2010-11

UNDER THE GUIDANCE OF

PROF. SHRADDHA SHUKLA

SUBMITTED TO

SHAILENDRA EDUCATION SOCIETY’S

ARTS, SCIENCE, COMMERCE COLLEGE

DAHISAR (E), MUMBAI-400068

(NAAC ACCREDITATED B+)

(AFFILIATED TO UNIVERSITY OF MUMBAI)

 ACKNOWLEDGEMENT

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

SHAILENDRA COLLEGE. I specially thank “SHRADDHA SHUKLA” for

creating out the study and for their guidance and encouragement that made the

project very effective and easy.

I sincerely express my gratitude to MRS. ANUJA JADHAV, – LIBRARIAN,

for his guidance and support throughout my project.

I would like to thank AMEY AND YASH, for guiding and directing me in the

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

I am grateful to our Internal PRINCIPAL Mr. INGAVALE for his support

and assistance in Completion of my project work.

INDUSTRY PROFILE
Following diagram gives the structure of Indian financial system:
Contents

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

Introduction...................................................................................................1

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

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

3.1Supplyofmicroinsurance..................................................................5

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

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

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

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

• Conclusions.......................................................................................20
FINANCIAL MARKET:
Financial markets are helpful to provide liquidity in the system and for smooth
functioning of the system. These markets are the centers that provide facilities for
buying and selling of financial claims and services. The financial markets match
the demands of investment with the supply of capital from various sources.

According to functional basis financial markets are classified into two types.
They are:
➢ Money markets (short-term)
➢ Capital markets (long-term)
According to institutional basis again classified in to two types. They are
➢ Organized financial market
➢ Non-organized financial market.

The organized market comprises of official market represented by recognized

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

MONEY MARKET:
Money market is a place where we can raise short-term capital.
Again the money market is classified in to
➢ Inter bank call money market
➢ Bill market and
➢ Bank loan market Etc.
➢ E.g.; treasury bills, commercial papers, CD's etc.
CAPITAL MARKET:
Capital market is a place where we can raise long-term capital.
Again the capital market is classified in to two types and they are
➢ Primary market and
➢ Secondary market.
E.g.: Shares, Debentures, and Loans etc.

PRIMARY MARKET:

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

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

5. Banker to the issue

6. Depository
7. Depository participant

INVESTORS’ PROTECTION IN THE PRIMARY MARKET:

To ensure healthy growth of primary market, the investing public should be

protected. The term investor protection has a wider meaning in the primary
market. The principal ingredients of investors’ protection are:
➢ Provision of all the relevant information
➢ Provision of accurate information and
➢ Transparent allotment procedures without any bias.
SECONDARY MARKET

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

Listing of scrip’s provides liquidity and offers an opportunity to the investors to

buy or sell the scrip’s.

The following are the intermediaries in the secondary market:

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

STOCK MARKETS IN INDIA:

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

Definition of a stock exchange:

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

➢ Shares of public company.

➢ Government securities.
➢ Bonds

HISTORY OF STOCK EXCHANGES:

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

FUNCTIONS OF STOCK EXCHANGES:

Stock exchanges provide liquidity to the listed companies. By giving quotations

to the listed companies, they help trading and raise funds from the market. Over
the hundred and twenty years during which the stock exchanges have existed in
this country and through their medium, the central and state government have
raised crores of rupees by floating public loans. Municipal corporations, trust and
local bodies have obtained from the public their financial requirements, and
industry, trade and commerce- the backbone of the country’s economy-have
secured capital of crores or rupees through the issue of stocks, shares and
debentures for financing their day-to-day activities, organizing new ventures and
completing projects of expansion, diversification and modernization. By
obtaining the listing and trading facilities, public investment is increased and
companies were able to raise more funds. The quoted companies with wide
public interest have enjoyed some benefits and assets valuation has become easier
for tax and other purposes.
VARIOUS STOCK EXCHANGES IN INDIA:

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

Ahmedabad Stock Exchange Association Ltd.

Bangalore Stock Exchange

Bhubaneshwar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchange Ltd.

Coimbatore Stock Exchange

Delhi Stock Exchange Association

Guwahati Stock Exchange Ltd

Hyderabad Stock Exchange Ltd.

Jaipur Stock Exchange Ltd

Kanara Stock Exchange Ltd

Ludhiana Stock Exchange Association Ltd

Madras Stock Exchange

Madhya Pradesh Stock Exchange Ltd.

Magadh Stock Exchange Limited

Meerut Stock Exchange Ltd.

Mumbai Stock Exchange

National Stock Exchange of India

OTC Exchange of India

Pune Stock Exchange Ltd.

Saurashtra Kutch Stock Exchange Ltd.

Uttar Pradesh Stock Exchange Association

Vadodara Stock Exchange Ltd.

Out of these major stock exchanges were:

1. NSE (National Stock Exchange)

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

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

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

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

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

• Providing a fair, efficient and transparent securities market to investors using

electronic trading systems.
• Enabling shorter settlement cycles and book entry settlements systems, and

• Meeting the current international standards of securities markets.

The standards set by NSE in terms of market practices and technology, have
become industry benchmarks and are being emulated by other market
participants. NSE is more than a mere market facilitator. It's that force which is
guiding the industry towards new horizons and greater opportunities.

BSE (Bombay Stock Exchange):

The Stock Exchange, Mumbai, popularly known as "BSE" was established in

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

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

The Executive Director as the Chief Executive Officer is responsible for the day-
to-day administration of the Exchange and the Chief Operating Officer and other
Heads of Department assist him.

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

REGULATORY FRAME WORK OF STOCK EXCHANGE

A comprehensive legal framework was provided by the “Securities Contract

Regulation Act, 1956” and “Securities Exchange Board of India 1952”. Three tier
regulatory structure comprising
➢ Ministry of finance
➢ The Securities And Exchange Board of India
➢ Governing body

MEMBERS OF THE STOCK EXCHANGE:

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

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

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

OBJECTIVES AND FUNCTIONS OF SEBI

• To protect the interest of investors in securities.

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

• Prohibiting insider trading in securities.

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

SEBI GUIDELINES TO SECONDARY MARKETS: STOCK EXCHANGES

• Board of Directors of Stock Exchange has to be reconstituted so as to include

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

TYPES OF ORDERS:

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

Orders are limited by a fixed price. E.g. ‘buy Reliance Petroleum at

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

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

STOP LOSS ORDER:

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

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

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

ROLLING SETTLEMENT SYSTEM:

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

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

SEBI made RS compulsory for trading in 10 securities selected on the basis of

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

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

Activities on T+1: conformation of the institutional trades by the custodian is

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

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

ABOUT SHAREKHAN LIMITED

Sharekhan Limited is one of the fastest growing financial services providers

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

ORIGIN

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

SHAREHOLDING PATTERN

SHAREHOLDERS HOLDINGS
CITI Venture Capital and other Private Equity 81%
Firm
IDFC 9%
Employees 10%
MANAGRMENT TEAM CONSISTS OF-

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

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

Senapati Bapat Marg, Lower Parel

 Mumbai, 400 013. India

Phone: 91 22 24982000

Fax: 91 22 24982626

www.sharekhan.com

Advanced Technology Used By Sharekhan

Sharekhan selected Aspect® EnsemblePro™ from the Aspect Software Unified IP

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

➢ Increased agent efficiency and productivity.

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

Its primary objective

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

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

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

Introduction...................................................................................................1

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

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

3.1Supplyofmicroinsurance..................................................................5

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

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

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

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

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

Insurance
Insurance is an essential part of running any business. If you are operating a small
business you need more than just property insurance. Taking out the right insurance
will help protect your business and minimize its exposure to risk.
Your insurance requirements will vary according to the type of business you are
operating, but you should be aware that some forms of insurance are compulsory,
such as workers’ compensation and third party car insurance.
When you’re in business you deal with a variety of potential risks each day. Risk is
not something you can avoid, but it is something you can manage. Risk management
will increase the probability of success and reduce the probability of failure of your
business.
Types of insurance
• Assets & revenue insurance
• People insurance
• Liability insurance
Assets & revenue insurance
To protect your assets and revenue-generating capacity, here are some of the types of
insurance available:
Building and contents

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

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

Covers you if your business is interrupted through damage to property by fire or

other insured perils. Ensures your ongoing expenses are met and anticipated net
profit is maintained through a provision of cash flow.
Fidelity guarantees

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

Machinery breakdown

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

It is compulsory to insure all company or business vehicles for third party injury
liability. Many different types of policies are available, so make sure you
understand the options before making a decision. There are four basic options:
1. Compulsory third party (injury) – covers you for claims made against you
for personal injuries and legal costs arising from the use of your car. You must
obtain this insurance to register your car.
2. Third party property damage - covers your liability for damage to another
person or to the property of others and your legal costs. It doesn’t include
repairs to your own car if you caused an accident.
3. Third party, fire and theft - covers you against the events covered above, as
well as fire and theft. It also insures against damage caused if your car was
stolen.
4. Comprehensive - covers you for all of the above plus damage caused to your
own car by you in an accident. If you're buying a car on an installment basis,
financiers will usually insist on this cover.

People insurance
It includes:
• Superannuation
 • Workers compensation requirements
Insurance cover for you and your employees:
Workers Compensation

You must provide accident and sickness insurance for your employees - workers
compensation - through an approved insurer. Workers compensation is covered by
separate state and territory legislation.
Personal accident and illness

If you are self employed you won’t be covered by workers compensation, so you
need to cover yourself for accident and sickness insurance through a private insurer.
There are several types of life insurance. Some are investment-type funds where you
contribute over a certain time and get back your investment plus interest earnings at
the maturity date. Others are designed to cover risk - things that could happen to
you.
• Income protection or disability insurance - covers part of your normal
income if you are prevented from working through sickness or accident.
• Trauma insurance - provides a lump sum when you are diagnosed with one
of several specified life threatening illnesses.
• Term life insurance or whole of life cover - provides your dependents with a
lump sum if you die.
• Total and permanent disability insurance - provides a lump sum only if you
are totally and permanently disabled before retirement.
Superannuation
If you are running a business or employing people, you are likely to have
superannuation obligations to your employees. If you are self-employed you also
need to provide for your retirement - superannuation is generally used to provide for
a retirement plan.
Liability insurance
Types of liability insurance you need to consider:
Public Liability

Public liability insurance protects you and your business against the financial risk of
being found liable to a third party for death or injury, loss or damage of property or
‘pure economic’ loss resulting from your negligence.
Professional Indemnity

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

If you sell, supply or deliver goods, even in the form of repair or service, you may
need cover against claims of goods causing injury or damage. Product liability
insurance covers damage or injury caused to another business or person by the
failure of your product or the product you are selling.

What is Micro Insurance?

On a daily basis, the poor around the world face a multitude of risks that threaten to
derail any progress they have made to work their way out of poverty. The death of a
family member, loss of property and livestock, illness, and natural disasters each
pose unique dangers. Protecting people against these losses is an important step to
alleviating global poverty.
Micro insurance - the protection of low-income people against specific perils in
exchange for regular monetary payments (premiums) proportionate to the likelihood
and cost of the risk involved – seeks to provide a suitable solution for managing
these risks.

The Global Landscape

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

The Micro Insurance Agency has its roots within Opportunity International, a large
microfinance network motivated by Jesus Christ’s call to serve the poor. With a
network of 47 microfinance institutions, Opportunity International has been serving
the entrepreneurial poor since 1971. In partnership with Opportunity’s microfinance
institutions, we began working in 2002 on the development of a range of life,
property, livestock, crop derivative, disability, unemployment and health insurance
products to cover the risks faced by Opportunity’s loan clients.
Micro Insurance Agency staff observed that the risks the poor face can often set
them back months and years behind where their loans and savings products offered
by Opportunity had taken them. For instance, a death of a family member from
HIV/AIDS – a “pre-condition” most insurance companies would not cover – would
often mean expensive funeral costs and the loss of a breadwinner, resulting in
increased economic hardship for the family. In response, Micro Insurance Agency
staff developed an affordable funeral benefit product that did not exclude any pre-
conditions, including HIV/AIDS. This transformed the mindset of retail insurance
providers in the country, who later developed similar non-exclusive products in light
of the competing environment.
Through the experience of serving Opportunity’s microfinance institutions and their
clients, Micro Insurance Agency staff observed that the products most demanded by
the poor are not always the ones available. Health insurance, for example, is a
critical need of the poor but the most limited in terms of supply. In addition, policies
that are available are often based on first world practices and are too complex for the
simple coverage demanded. Further, when offered on an individual, one-off basis,
high premium requirements and a need to pay in a single lump sum preclude a huge
sector of the market from access. New distribution models and channels were needed
to increase access and reduce the effective price charged to clients.
In 2005, the Micro Insurance Agency was founded by Opportunity International as a
fully-owned subsidiary capable of offering insurance products and services to a wide
range of customers.
Our mission is to empower the materially poor to transform their lives by insuring
them against financial risk and its consequences. Specifically, we seek to serve the
economically active poor who live on $4 per day or less in developing countries and
provide a safety net to reduce economic setbacks.

Definitions of micro-insurance
Micro-insurance, the term used to refer to insurance to the low-income people, is
different from insurance in general as it is a low value product (involving modest
premium and benefit package) which requires different design and distribution
strategies such as premium based on community risk rating (as opposed to individual
risk rating), active involvement of an intermediate agency representing the target
community and so forth. Insurance is fast emerging as an important strategy even for
the low-income people engaged in wide variety of income generation activities, and
who remain exposed to variety of risks mainly because of absence of cost-effective
risk hedging instruments.

Although the type of risks faced by the poor such as that of death, illness, injury and
accident, are no different from those faced by others, they are more vulnerable to
such risks because of their economic circumstance. In the context of health
contingency, for example, a World Bank study (Peters et al. 2002), reports that about
one-fourth of hospitalized Indians fall below the poverty line as a result of their stay
in hospitals. The same study reports that more than 40 percent of hospitalized
patients take loans or sell assets to pay for hospitalization. Indeed, enhancing the
ability of the poor to deal with various risks is increasingly being considered integral
to any poverty reduction strategy (Holzmann and Jorgensen 2000, Siegel et al.
2001).

Of the different risk management strategies2, insurance that spreads the loss of the
(few) affected members among all the members who join insurance scheme and also
separates time of payment of premium from time of claims, is particularly beneficial
to the poor who have limited ability to mitigate risk on account of imperfect labour
and credit markets.

In the past insurance as a prepaid risk managing instrument was never considered as
an option for the poor. The poor were considered too poor to be able to afford
insurance premiums. Often they were considered uninsurable, given the wide variety
of risks they face. However, recent developments in India, as elsewhere, have shown
that not only can the poor make small periodic contributions that can go towards
insuring them against risks but also that the risks they face (such as those of illness,
accident and injury, life, loss of property etc.) are eminently insurable as these risks
are mostly independent ,idiosyncratic. Moreover, there are cost-effective ways of
extending insurance to them. Thus, insurance is fast emerging as a prepaid financing
option for the risks facing the poor.

In this paper, we analyze the early evidence on micro-insurance already available in

this regard, highlight the current initiatives being contemplated to strengthen micro-
insurance activity in the India, and suggest specific ways that can help promote
insurance to the target segment.

Development of Micro-insurance in India

Historically in India, a few micro-insurance schemes were initiated, either by non-

governmental organizations (NGO) due to the felt need in the communities in which
these organizations were involved or by the trust hospitals. These schemes have now
gathered momentum partly due to the development of micro-finance activity, and
partly due to the regulation that makes it mandatory for all formal insurance
companies to extend their activities to rural and well-identified social sector in the
country (IRDA 2000). As a result, increasingly, micro-finance institutions (MFIs)
and NGOs are negotiating with the for-profit insurers for the purchase of customized
group or standardized individual insurance schemes for the low-income people.
Although the reach of such schemes is still very limited anywhere between 5 and 10
million individuals---their potential is viewed to be considerable. The overall market
is estimated to reach Rs. 250 billion by 2008 (ILO 2004).

The insurance regulatory and development authority (IRDA) defines rural sector as
consisting of:

•
• a population of less than five thousand,
• a density of population of less than four hundred per square kilometer
• More than twenty five per cent of the male working population is engaged in
agricultural pursuits. The categories of workers falling under agricultural
pursuits are: cultivators, agricultural labourers, and workers in livestock,
forestry, fishing, hunting and plantations, orchards and allied activities.

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

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

The social obligations are in terms of number of individuals to be covered by both

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

information and resources that helps in designing appropriate schemes delivered in a

cost effective way). In the absence of a nodal agency, the low resource base of the
poor, coupled with high transaction costs (relative to the magnitude of transactions)
gives rise to the affordability issue. Lack of affordability prevents their latent
demand from expressing itself in the market. Hence the nodal agencies that organize
the poor, impart training, and work for the welfare of the low-income people play an
important role both in generating both the demand for insurance as well as the
supply of cost-effective insurance.

AN OVERVIEW OF THE MARKET

B Wealthy A

Middle Income

D
Poor

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

• Low-income focused retailers in South Africa

• Post offices in Indonesia
• On bags of agricultural inputs or through computer kiosks in India.

Micro-insurance delivery models

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

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

• Pricing – Often the process of pricing is focused on what people say they can
pay rather than being linked to the cost structure of benefits that the group
wants to receive.

• Insurance is subject to cash flow fluctuations and thus requires significant

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

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

management is frequently a problem.

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

• Finally, in many countries there is no legal framework for these schemes.

Indeed regulators are often unwilling to allow such schemes for fear that they
will not be able to adequately supervise many small schemes run by non-
professionals. This is the case in India. Service providers, most typically
hospitals and other healthcare providers have offered pre-financing
mechanisms that act somewhat like insurance. These products, it is argued,
will attract more people to the facility and the people who come will be able to
pay for the services. Often this becomes a problem because providers have
limited ability to manage the insurance administration issues. One overseer of
a particular group of hospitals noted that attempting to offer microinsurance
could present a dual threat to the hospital network for which he works. He
noted that the hospital administrators “do not even know how to price their
own healthcare services”. Therefore, they mis-price their premiums based on
those prices, which are typically too low. The resulting increase in patients
using the insurance leads to even higher losses, due to higher administrative
costs and incorrect fees that do not cover the actual costs of services.
Governments also provide a form of microinsurance through the programs
they provide for low-income Citizens. Unfortunately, in many countries these
programs are simply insufficient to address the financial risks of the low-
income and destitute populations. Certainly there is a population that will not
be covered by commercial or other non-government microinsurance.
However, if a proper balance could be found, it is possible that the
combination of government programs, commercial microinsurance, mutual
insurance, and traditional commercial insurance could make each of these
more efficient, and make the government interventions more effective in
addressing those that truly require such services.
Need for Developing Micro-Insurance in India – IRDA perspective

Background

• Micro-insurance refers to protection of assets and lives against insurable risks

of target populations such as micro-entrepreneurs, small farmers and the
landless, women and low-income people through formal, semiformal and
informal institutions. Such products are often bundled with micro-savings and
micro-credit, thereby allocating scarce resources to micro-investments with
the highest marginal rates of return. Microinsurance is the most
underdeveloped part of microfinance. Yet various schemes exist that are
viable, benefiting both the institutions and their clients. Such schemes have
generally served two major purposes: (i) they have contributed to loan
security; and (ii) they have served as instruments of resource mobilization.
The greatest challenge for microinsurance lies in the combination of viability
and sustainability with outreach.
• Although introduction of sound practices such as appropriate policy sizes and
timely payment of installments of premium or positive incentives to renew on
time in order to avoid policy getting lapsed can be feasible, the ultimate
effectiveness of interventions focusing on institutional transformation and
sound insurance practices will vary considerably, depending on the
appropriateness of the regulatory environment.

Development Goal

To enable microinsurance to be an integral part of a country's wider insurance

system, it is important for every insurer to adjust its costs of serving marginal clients
in remote areas, collecting premiums and installments, and offering doorstep
services. It is also important to recognize a wide network of intermediaries in the
rural and social sectors and notify regulations in order to guide and supervise the
micro-insurance service providers and their customers.
Today we have a variety of microfinance institutions with national and local
outreach. Many of them have already become corporate agents or have entered into
referral

arrangements with insurers. However, semiformal institutions including savings and

credit cooperatives, NGOs and self-help groups which have immense potential in
carrying the message of insurance as also solicit insurance business are yet to be
utilized in a manner where their true potential can be harnessed to increase the
insurance penetration levels. This is due to restrictions in the existing agency
regulations in terms of minimum eligibility norms in order to become an agent.
Depending on the existence and vigour of such institutions, the following
alternatives have emerged, for offering strategic entry points for microinsurance
development:

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

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

arrangements with insurance companies.

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

• Establishing new local institutions providing microinsurance services.

The first three strategies may be inter-connected:

• adapting insurance companies to the requirements of the micro-economy is a

first step; then
• Linking them as wholesale institutions to self-help groups as retailers; and
finally,
• Upgrading self-help groups e.g. to the level of financial cooperatives or
village banks.

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

Institutional Adaptation
The experience so far has been that formal financial institutions serve but a fraction
of the population, which typically lies within the upper quartile of the social
hierarchy. Through adaptation to the microfinance market requirements, they may
gradually expand into the second-highest quartile and into segments of the lower
quartiles. Within the foreseeable future they will normally not be able to fully serve
that market.
Non formal finance mostly rests on local institutions which are directly accessible to
all segments of the population. Self-Help Groups (SHGs) are member-owned and
member-controlled local institutions. They may either be financial groups, with
financial intermediation as their primary purpose; or non financial groups, with
financial intermediation as a secondary purpose, such as vendors' associations,
family planning groups and numerous other types of voluntary associations.
The functions that need to be focused must include: providing guidance to members,
collecting premium installments from members, insurance services to members,
communication and exchange of experience, providing linkages with banks, NGOs
or donors, supporting the proposals of individual members to insurance companies
through recommendations.

Linkage to Insurers

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

(1) Sound financial management,

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

(3) Appropriate claim appraisal and processing procedures,

(4) Adequate risk management,

(5) Timely collection of premium installments,

(6) Monitoring and

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

Proposed Micro-insurance Regulations

In order to introduce the concept micro-insurance it is necessary to draft suitable

bring in suitable regulations to enable insurers to design and distribute and service
micro-insurance products and discharge their obligations to the rural and social
sectors as per provisions of the Insurance Act, 1938.

1. It is proposed that an insurer transacting life insurance business shall be

permitted to provide life micro-insurance products as well as general micro-
insurance products provided it ties up with an insurer transacting general
insurance business for the general micro-insurance products, and vice versa.

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

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

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

Type of Cover Minimu Maxim Term Term of Minimum Maximum

m um of Cover Age at age at entry
Amount Amoun Cover Max. entry
of Cover t of Min.
Cover
Term Rs. Rs. 5 year 7 years 18 60
Insurance with 10,000 50,000
or without
return of
premium
 Endowment Rs. Rs. 5 year 7 years 18 60
Insurance 10,000 50,000
Health Rs. Rs. 1 year 7 year 18 60
Insurance 10,000 15,000
Contract
Accident Rs. Rs. 1 year 5 years 18 60
Benefit as rider 10,000 50,000

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

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

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

Type of Cover Minim Maxim Term of Term of Minimu Maximum age

um um Cover Cover m Age at entry
Amoun Amoun Min. Max. at entry
t of t of
Cover Cover
Hut or livestock Rs. Rs. 1 year 1 year 18 70
or Tools or 10,000 20,000
implements or
other assets—
against all perils
Health Insurance Rs. Rs. 1 year 1 year 18 60
Contract 10,000 15,000
Personal Rs. Rs. 1 year 1 year 18 60
Accident 10,000 50,000

Micro-insurance Agent

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

or a Self Help Group (SHG).
 • Explanation: For the purposes of this regulation:

• A Non Government Organization (NGO) shall be a registered non-profit

organization under the Society’s Act, 1968 with a proven track record of
working with marginalized groups with clearly stated aims and objectives,
transparency, and accountability outlined in its memorandum, rules and
regulations and demonstrates involvement of committed people.

• Self Help Group (SHG) may be an informal group or registered under

Societies Act, State Co-operative Act or as a partnership firm, consisting of 10
to 20 with a proven track record of working with marginalized groups with
clearly stated aims and objectives, transparency, and accountability outlined in
its memorandum, rules and regulations and demonstrates involvement of
committed people.

• The minimum number of members comprising a group should be atleast ten

for insurance of individuals, and atleast fifty for group insurance.

Scope and Functions

A micro-insurance agent shall be appointed by an insurer by a deed of agreement or

memorandum of understanding which should clearly specify the terms and
conditions, duties and responsibilities of both the micro-insurance agent and the
insurer, and he shall abide by the following:-

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

• He shall be specifically authorized to perform one or more of the following

functions:--

a) Maintaining a register of all members and their dependants covered under the
insurance scheme alongwith details of name, age, address, nominees and
thumb impression/ signature;

b) Collection of proposal forms;

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

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

 e) distribution of policy documents;

f) Assistance in the settlement of claims;

g) Nomination; and

h) Any policy administration service.

i) The micro-insurance agent or the insurance company shall have the option to
terminate the agreement/ MOU after giving a notice of three months.

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

Initiative Taken By Private Sectors

Tata AIG Life - First insurance company to launch Micro Insurance

• First major Micro Insurance initiatives venture by an Indian insurance
company

• Launches three new Micro Insurance products and five Micro Insurance
branches

• Adopts a tailor made rural communication strategy to reach out to the rural
community

American International Group, Inc. (AIG)

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

Micro Insurance is the process of delivering and servicing relevant and affordable
life insurance products to the low-income socio economic strata. The focus of Tata
AIG Life’s Micro insurance program is rural India, where traditionally the far-flung,
lower and lower middle-income segments have had limited access to life insurance
services.

Cost of plans:

Tata AIG Life Micro insurance plans are available with or without survival benefits
and with death benefits ranging from Rs.5, 000 to Rs.50, 000. With premiums as low
as Rs.5** per month, there is now an affordable life insurance product for nearly
every rural household in India.
Policies Available:
The following special Micro Insurance products from Tata AIG Life are now
available for the rural population at the bottom of the pyramid.
• Navkalyan Yojana
• Ayushman Yojana
• Sampoorn Bima Yojana
NAVKALYAN YOJANA
A regular premium payment, low cost term plan for the rural adults who seek life
insurance protection without any maturity benefit.

Key features include:

• Policy Term : 5 years
• Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-
Maximum Death Benefit (Sum Assured): Rs.50,000/-
• Premium payment frequency : Monthly, quarterly, half yearly & yearly
• Death Benifit : Sum assured to the policyholder’s nominee
• Maturity benefit : None
• Rider : Option to attach Accident Death Benefit Rider for issue ages 18 to 55
years at a nominal extra charge.
Tax Benefits and Age Eligibility
• Premiums paid under this plan are eligible for tax benefits as per the Income
Tax Act, 1961 and are subject to any amendments made therein from time to
time.*

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

AYUSHMAN YOJANA

A single premium plan where the policyholder pays the premium at the beginning of
the policy term. This is especially useful for those rural people who have a seasonal
income.

Key features include:

 • Policy Term : 10 years
• Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-
Maximum Death Benefit (Sum Assured): Rs.50,000/-
• Death Benifit : Sum assured to the policyholder’s nominee
• Maturity benefit : On survival, 125% of the single premium paid.
Tax Benefits and Age Eligibility
• Premiums paid under this plan are eligible for tax benefits to the extent of
20% of Sum Assured as per the Income Tax Act, 1961 and are subject to
amendments made therein from time to time.*
Anyone between ages 18 and 60 can apply for this policy.

SAMPOORNA BIMA YOJANA

A low cost insurance plan where the policyholder receives all the premiums paid
during the policy term upon survival until the term of the policy. Premiums are
payable for only 10 years, while the coverage is up to 15 years.

How do we operate?

We operate in 11 states with a specific relationship management team for each state.
A dedicated & trained sales and marketing team manages the front end of the Micro
insurance program. Our micro insurance distribution model collaborates with NGO’s
(Non-governmental organizations) and Rural organizations with community level
SHG (Self Help Group) women advisors who provide insurance advisory services to
the rural customers at their doorstep. The grassroots level agents explain the product
details in the local language of the customer, thereby enabling the customer to make
a decision. The training programs, brochures, contract documents, and application
forms are available in 8 different languages other than English and Hindi

Key features include:

• Policy Term : 15 years
 • Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-
Maximum Death Benefit (Sum Assured): Rs.50,000/-
• Premium payment frequency : Monthly, quarterly, half yearly & yearly
• Death Benifit : Sum assured is paid to the policyholder’s nominee
• Maturity benefit : At the end of the 15 years, all the premiums paid will be
returned to the policyholder.

Tax Benefits and Age Eligibility

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

RESEARCH OBJECTIVE

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

Sub objective:
✔ Determine need and ability of people segment whose per day income is
less than 100 bugs. What really matters to him or her while think about
insurance.
✔ Determine awareness about insurance among them. if aware then source
of information
✔ To determine the govt. and private sector proceeding in this area and
extent of their success
RESEARCH METHODOLGY
Data collection
For data collection, we developed a well defined questionnaire as a research
instrument, consisting questions aimed to measure the people perception about
insurance, their need and problems, bottleneck why hadn’t insured, and target to find
out opportunities for further extention of micro insurance. We conducted
unstructured interviews (sample size) of 52 general people having income even less
than 100 bugs per day like vendors, rickshaw wala, coolies etc. at survey location
(Kashmiri gate, old Delhi railway station, prostitutional area etc. All the data
generated was primary data that was generated directly from face to face
communication

Data analysis

The data collected based on structured questionnaire is recorded on an excel sheet

and with the help of SPSS software a pie chart analysis along with pillar data
analysis is generated and based on this findings a qualitative inferences are made for
each analysis. The same is being presented in form of graphs and tables

SURVEY RESULTS

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

ANALYSIS AND INTERPRETATION

Table 1:

Gender of the respondents

S. No. Sex No of Respondents Percentage

1. Male 50 91
 2. Female 05 09
Total 55 100

Chart 1:
Gender of the respondents

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

Table 2: Age of the respondents Chart 2:

AGE

25 20
20 17
Inference:

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

Table 3: Educational Qualification Chart 3:

Educational Qualification
28
no.of respondent

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

Inference:

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

Table 4: No. of family members Chart 4:

Inference:

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

Table 5: No. of earning member Chart 5:

Inference:

From the above result it can be clearly seen that about 63% of the respondent were
the only earning member of their family, 31% have 2 earning member because of
size of family.

Table 6: Income level Chart 6:

Inference:

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

Table 7: Account Holder Chart 7:

Inference:

The above result reveals that 64% of respondent don’t have any account any where
while 36% have their own bank or post office account.

Table 8: Background Chart 8:

Inference:

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

Table 9: No. of dependent Chart 9:

Inference:

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

Table 10: Whether has ID proof Chart 10:

Inference:

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

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

Inference:

Above result shows that 23% of respondent didn’t face any problem related with
health or asset but 77% faced a serious health of asset loss in past of their life.

Table 12: If yes how they managed Chart 12:

Inference:

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

Table 13: How many times fell ill Chart 13:

Inference:

The result above reveals that 67% of the respondent don’t have serious health
problem and they hardly use to fell ill once in a month. But beside of this some
sector 26% and 7% respectively are those who use to fall twice or thrice in month.

Table 14: Risk on job Chart 14:

Inference:

The above result reveals that 52% of the respondent didn’t had any risk on job but
almost equal proportion 48% who had serious job risk.

Table 15: Risk toward assets Chart 15:

Inference:

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

Table 16: Awareness about insurance Chart 16:

Inference:

Above result reveals that majority of respondent 92% were awared of insurance but
8% were also there who even didn’t know what the insurance is.

Table 17: Source of information Chart 17:

Inference:

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

Table 18: No. of insurance taken Chart 18:

Inference:

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

Table 19: Why not insured? Chart 19:

Inference:

The result got above reveals that 44% were not insured because of reason1, 41%
because of reason3 and 15% were not insured because of reason 2.
Table 20: Kind of insurance like to purchase Chart 20:

Inference:

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

Table 21: Premium ready to pay Chart 21:

Inference:

Above result reveals that in this particular sector all the respondent were almost have
equally distributed opinion about premium package. 24% were ready to pay a sound
premium, majority were aligned toward premium package 2, 20% were ready to pay
premium 3, while 27% agreed to pay premium package 4.
Table 22: How many members like to insured Chart 22:

Inference:

The above shown result reveals that majority of respondent 59% like to insured two
members of their family apart from self but 35% were those who can’t bear even so
less premium of micro insurance product and like to insure only one member apart
from self rest are distributed as shown above.

Table 23: From where you like to Chart 23:

Purchase Ins. Policy

Inference:

The result above reveals that a majority of respondent 64% believes on facility
location 3 and likes to have insurance from there, 16% believe on facility location 4
and rest are shown above.
Table 24: Insurance Duration Chart 24:

Inference:

The result found above reveals that a majority of respondent 38% like the insurance
for the duration of 5-10 years, 29% upto 15-20 years, 12% upto 10-15 years but
some were also those 21% who can’t bear even so less premium and want to have
insurance policy upto duration of 0-5 years.
FINDINGS

• Study reveals that majority of people whose daily income is less than 100
bugs have big family
• Earning member in majority of family is only male.
• Income level lies between 100-200 bugs per day
• Majority of respondent didn’t had any saving account because of no ID proof
• Majority of respondent have more spending on travel & rent, after that on
food & cloth and Medicare & entertainment
• Majority of respondent are the only earning member in family size of 5-8.
• Majority of respondent hadn’t significant asset
• Majority of them managed critical financial problem from some lender like
master of their service
• They hadn’t any significant job risk but yes they had asset loss risk
• Many of them awared about insurance but not of micro insurance and best
source of information medium found to be “Radio” and “advertisement
banners”.
• Many of respondents were not insured just because of either high premium or
lack of complete information.
• Some complaint about bad approachability of insurance provider company to
them as well.
• Majority of respondent shows keen interest in micro-insurance policy in life
and health , some were very sensitive toward education and like to have
education insurance as well
• Because of low income they are ready to pay 150-200 bugs per year for
insurance and like to have atleast one more member of their family to be
insured
• They are ready to pay premium 15-20 years.
CONCLUSION:

From the above statistical interpretation it could be concluded that potential lies in
the society. There is a large segment of the population whose income level lies under
the boundary line of poverty and since micro insurance target to those people whose
income level is even less than 100 bugs per day, it can penetrate population very
well. Many of our target segments have recommended many other facilities with
micro insurance which found to be really concernable. Micro insurance product
should be manufactured in such a way that those respondents who had denied for
having insurance for all family members only just because of premium, can also get
access through it.