MICRO-INSURANCE

OBJECTIVES
 To understand what Micro-Insurance is.

 To recognize the Potential Market for Micro-Insurance in India.

 To identify the Key Characteristics of Micro Insurance.

 To have a look at the micro-insurance products.

METHODOLOGY
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Data has been collected for the following sources:

 Primary data

 Secondary data
All the data has been collected by doing library research, magazines,
articles, visiting bank’s official websites and various other web pages.

SCOPE OF THE STUDY

 Meaning and concept of Micro-Insurance.

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 Need for developing micro-insurance in India.

 Conducted unstructured interviews sample size of 30 general

people having income less than Rs. 350 per day.
 The area which was selected for the survey is bounded by central
suburbs of Maharashtra State.
 All the data generated for primary data that was generated
directly from face to face communication.

LIMITATIONS
 Data collection was very time consuming.

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 Since it is a new concept, untouched and unaware, the

information was not easily available.
 All the primary information included in the project is completely
based on the data offered by the applicants through survey analysis. There
is no alternate source for confirmation of this information and data.

Introduction

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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.

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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

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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.

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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 (huge
amount) of risks that threaten to derail any progress they have made to
work their way out of poverty. The death of a family member, loss of
property and livestock, illness, and natural disasters each pose unique
dangers. Protecting people against these losses is an important step to
alleviating global poverty.
Micro insurance - the protection of low-income people against
specific perils in exchange for regular monetary payments (premiums)

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proportionate to the likelihood and cost of the risk involved – seeks to

provide a suitable solution for managing these risks.
The institutions or set of institutions implementing micro-
insurance are commonly referred to as a micro insurance scheme.

DEFINITIONS
Micro-insurance is insurance with low premiums and low caps / coverage.
In this definition, “micro” refers to the small financial transaction that
each insurance policy generates. The Micro-insurance Regulations, issued
in 2005 by the Indian Insurance Regulatory and Development Authority
(IRDA), for example, adopted this definition in explaining “micro-
insurance products” as those within defined (low) minimum and
maximum caps. The IRDA’s characterization of micro-insurance by the
product features is further complemented by their definition for micro-
insurance agents, those appointed by and acting for an insurer, for
distribution of micro-insurance products (and only those products).

 Micro-insurance is a financial arrangement to protect low-

income people against specific perils in exchange for regular premium
payments proportionate to the likelihood and cost of the risk involved.
The author of this definition adds that micro-insurance does not refer to:
(i) the size of the risk-carrier (some are small and even informal, others
very large companies); (ii) the scope of the risk (the risks themselves are
by no means “micro” to the households that experience them); (iii) the
delivery channel: it can be delivered through a variety of different
channels, including small community-based schemes, credit unions or
other types of microfinance institutions, but also by enormous
multinational insurance companies, etc.

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 Micro-insurance is synonymous to community-based financing

arrangements, including community health funds, mutual health
organizations, rural health insurance, revolving drugs funds, and
community involvement in user-fee management. Most community
financing schemes have evolved in the context of severe economic
constraints, political instability, and lack of good governance. The
common feature within all, is the active involvement of the community in
revenue collection, pooling, resource allocation and, frequently, service
provision.

 Micro-insurance is the use of insurance as an economic

instrument at the “micro” (i.e. smaller than national) level of society. This
definition integrates the above approaches into one comprehensive
conceptual framework. It was first published in 1999, pre-dating the other
three approaches, and has been noted to be the first recorded use of the
term “micro-insurance”. Under this definition, decisions in micro-
insurance are made within each unit, (rather than far away, at the level of
governments, companies, NGOs that offer support in operations, etc.).

INTRODUCTION

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.

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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 strategies, 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 or 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.

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HISTORY & 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 –“pre-condition” most
insurance companies would not cover – would often mean expensive

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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.

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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:--

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 Maintaining a register of all members and their dependants

covered under the insurance scheme along with details of name, age,
address, nominees and thumb impression/ signature;

 Collection of proposal forms;

 Collection of self declaration from the member that he is in good

health;

 Collection of monies for issuance of contract or remittance of

premium;

 distribution of policy documents;

 Assistance in the settlement of claims;

 Nomination; and

 Any policy administration service.

 The micro-insurance agent or the insurance company shall have

the option to terminate the agreement/ MOU after giving a notice of three
months.

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

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TYPES OF MICROINSURANCE IN INDIA

Life Insurance
Life insurance pays benefits to designated beneficiaries upon the death of
the insured. There are three broad types of life insurance coverage: term,
whole-life, and endowment. Term life insurance policies provide a set
amount of insurance coverage over a specified period of time, such as
one, five, ten, or twenty years. This insurance is appropriate when the
policyholder's need for coverage is temporary. Compared with other life
insurance policies this is not very complicated for the provider to offer.
This is the most widely used life insurance policy in low-income
communities in developing countries.

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Whole life insurance is a cash-value policy that provides lifetime

protection. This is hardly offered in low-income markets in the
developing countries
Endowment life insurance pays the face value of insurance if the
policyholder dies within a specified period. It thus has a longer time
horizon that the term life insurance. This is also not offered widely in
developing countries.

Health Insurance
Health insurance provides coverage against illness and accidents resulting
in physical injuries. MFIs have realized that expenditures related to health
problems have been a significant cause of defaults and people's inability
to continue improving their economic conditions. Several MFIs have
therefore, either started their own health insurance programs or have
linked their clients to existing programs. While actual coverage varies,
many health insurance providers cover for limited hospitalization benefits
for certain illnesses, and for costs of physician visits and medicine. Some
insurance providers also make available primary health care services such
as immunization and contraceptives.

Property Insurance
Property insurance provides coverage against loss or damage of assets.
Providing such insurance is difficult because of the need to verify the
extent of damage and determine whether loss has actually occurred. It is
difficult for most MFIs to guard against such moral hazard. A few,
however, do provide such coverage. SEWA in India, for example,
provides insurance against damage to home and productive assets.
Grameen Bank in Bangladesh offers its clients insurance against the death
of livestock and COLUMNA in Guatemala provides insurance against fire
damage.

Disability Insurance
Disability insurance in most cases is tied to life insurance products. It
provides protection to the policy holder and her family, should she or

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some of her family suffers from a disability. This is not very widely
offered by Micro insurance providers. FINCA, Uganda and CARD in
Philippines are examples of MFIs providing clients with disability
insurance.

Crop Insurance
Crop insurance typically provides policy holders protection in the event
their crops are destroyed by natural calamities such as floods or droughts.
The experience with crop insurance in developing countries and even in
the developed economies has had mixed results.
To improve the ability of rural farmers to repay loans from agricultural
development banks (ADBs), many governments developed crop insurance
programs in the 1970s and 1980s. These programs typically provided loan
repayment and occasionally income supplements to farmers suffering crop
yields below an established minimum. Similar programs were developed
in countries as diverse as Brazil, India, the Philippines and the USA. In
each country the results were disastrous, with expenses (administrative
and claims) far outstripping revenues. Reasons for the failure of crop
insurance have included: bad program design (such as failure to bring into
account the incentives faced by the policy holders), covariant risks typical
of rain-fed agriculture systems dependent on only one or two crops, and in
some cases / unanticipated catastrophic natural calamities.

Unemployment Insurance
Unemployment insurance is typically offered by the public sector. Private
insurance companies are usually not involved in it. This insurance
provides cash relief to individuals who become unemployed involuntarily
and who meet certain government requirements. It also helps unemployed
workers find jobs. Unemployment insurance attempts to stabilize the
economy by enabling people to maintain their purchasing power.

Reinsurance

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Reinsurance is the shifting of part or all of the insurance originally written

by one insurer to another. This is a central feature of the operations of all
commercial insurers.
Reinsurance reduces an insurer's risk exposure and acts as an effective
source of financing and a valuable source of actuarial expertise.
Reinsurance can be used to stabilize profits, instead of having large
fluctuations in financial outcomes year to year. It allows smaller insurers
to share risk with other insurers in different regions or countries,
effectively developing sufficient large risk pools by combining the risks
of many insurers.
Despite its obvious benefits reinsurance is largely unavailable for micro-
insurers. Access to reinsurance can spur both the development of new
micro-insurers and the growth of existing ones. An example of an MFI
using reinsurance is that of FINCA International, Uganda which has
entered a partnership with American International Group (AIG) to provide
its clients life and disability insurance.

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

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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.

THE KEY CHARACTERISTICS

The IAIS-CGAP Joint Working Group on Micro Insurance document on

the -regulation and supervision of Micro Insurance identified the
following key characteristics of Micro Insurance:

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 Inclusiveness: While formal channels of insurance business tend

to exclude low-income households, Micro Insurance schemes generally
tend to be inclusive.

 Group Coverage: Group insurance is more inclusive and cost

effective than individual coverage. Even though the informal economy is
frequently seen as disorganized, there are groupings available, such as
women's associations, informal savings and credit groups, cooperatives,
small business associations and the like. These groups effectively by
enlisting their support in member selection and reduces insurance risks
such as fraud, over-usage and moral hazard.

 Simple Processes, Rules and Restrictions: Insurance contracts

are generally full of complex conditions and conditional benefits. Micro
Insurance contracts have to be in plain language (preferably local
language) and kept as simple as possible so that everyone has a clear
understanding of what is covered and what is excluded.

THE MICRO INSURANCE MECHANISM

Micro Insurance operates by connecting multiple small units with larger

structures and thereby creates networks which enhance both insurance
functions (through risk pooling) and support structures for improved
governance (i.e. training, data banks, research facilities, access to
reinsurance etc.). This insurance mechanism is independent of permanent

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external financial support. The principal objective of Micro Insurance is

to pool both risks and resources of whole groups for the purpose of
providing financial protection to all members against the financial
consequences of mutually determined risks. Historically, Micro Insurance
products have evolved out of community-based financing arrangements
with active involvement of the community in revenue collection, pooling,
resource allocation and, frequently, service provision.

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)
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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

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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
C
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

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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

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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

26
 MICRO-INSURANCE

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.
11

Flexibility in Premium
In the IRDA’s concept note on micro-insurance there is no provision that
explicitly calls for allowing flexibility in premium collection which is necessary for
extending the reach of micro-insurance. Although some micro-insurance products
allow for half-yearly, quarterly and even monthly payment of premium, most
products whether life or non-life require single, yearly payment of premium upon
subscription. This can be a serious drawback in extending the reach of insurance to
the low-income people, especially in rural areas. Often nodal agencies adopt several
methods to facilitate premium collection. These methods may take the form of soft
loans for paying premium, collecting premium in kind, collecting smaller amounts but
more frequently, having insurance contract of shorter durations and so forth. Where a
nodal agency collects annual premium in one go, there is not much involvement of
the agency.
Rural incomes display seasonality. Moreover, for the low income people premium
constitutes a significant proportion of their income. Therefore, flexibility in premium
collection has a bearing on their joining or not joining an insurance scheme, and
hence, on the membership size. The literature on micro-insurance cites the importance
of appropriate ‘timings’ for premium collection. In particular, premium collection
schedule should match with the cash flows. The cash flow varies for different
categories of workers. For example, the cash flows in case of farmers would depend
on the number of crop cycles in a year as well as on the timings of harvest whereas a
self-employed household worker may have a more stable income stream. Therefore,
synchronizing premium collection with the harvest time is necessary for farmers
whereas for self- employed household workers paying premium in small but regular
installments may be easier. Also, cash flows for the rural poor may be different from
those of the urban poor.13
The ‘type’ of flexibility needed in premium collection would depend very much on (i)
the pattern of income stream of the target population, and (ii) the spread of risk for
13Rural poor get lump sums in the agricultural seasons whereas urban poor get small
amounts frequently

27
 MICRO-INSURANCE

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.

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 MICRO-INSURANCE

POTENTIAL MARKET FOR MICRO-INSURANCE IN INDIA

: The UNDP Study

During 2005-06, the Human Development Report Unit of UNDP

conducted a study of the potential Micro Insurance market in India on the
basis of field surveys conducted in the States of Orissa, Tamil Nadu and
Rajasthan.
The UNDP report commented that the potential utility of Micro Insurance
may be even broader than that of micro-credit and may be closer to the
potential market for micro-savings, balanced by affordability
considerations in the early stages. Some 52.4 per cent of India's
population of 1.08 billion earns less than US $ 2 a day (in terms of
Purchasing Power Parity). Micro Insurance can play an important role in
protecting the income of these people.

The UNDP report also tried to estimate the potential size of the Micro
Insurance market in India. The estimates corresponding to the life and
non-life segments are provided in Table 3. The population used for the
estimation is 40-50 percent of those earning less than US$ 1 a day and 50-
70 per cent of those earning between US$ 1 - 2 a day. The nonlife
estimation included four types of coverage - milch animals, livestock,
health and crop insurance.

The Potential Market for Micro-Insurance in India

Insurance Segment Market Size (Potential)(Rs.

Millions)
Life Segment 15393-20141
Non-Life Segment 46911.70-64,126.55
TOTAL (Life and Non-Life) 62304.70-84,267.55

29
 MICRO-INSURANCE

SOURCE: UNDP (2007). Building Capacity for the Poor Potential and
Prospect for Micro-Insurance in India. UNDP Regional Centre,
Colombo.

DEVELOPMENT GOAL

To enable micro insurance 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 vigor of such institutions, the following
alternatives have emerged, for offering strategic entry points for micro
insurance development:

30
 MICRO-INSURANCE

 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 micro insurance

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.

31
 MICRO-INSURANCE

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:
32
 MICRO-INSURANCE

 Sound financial management,

 Convenient and safe savings premium collection and deposit

facilities,
 Appropriate claim appraisal and processing procedures,

 Adequate risk management,

 Timely collection of premium installments,

 Monitoring and

 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.

 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.

 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” .

33
 MICRO-INSURANCE

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

34
 MICRO-INSURANCE

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

35
 MICRO-INSURANCE

• 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

36
 MICRO-INSURANCE

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.

TIE-UP BETWEEN LIFE INSURER AND NON-LIFE INSURER

 An insurer carrying on insurance business may offer life micro-

insurance products as also general micro-insurance products, as provided
herein.

Provided that where an insurer carrying on life insurance business offers

any general micro-insurance product, he shall have a tie-up With an
insurer carrying on general insurance business tor this purpose, and
subject to the provisions of section 64VB of the. Act, the premium
attributable to the general micro insurance product may be collected from
the prospect (proposer) by the insurer carrying on life insurance business,
either directly Or through any of the distributing entities of micro-
insurance products as specified in regulation 4, and made over to the
insurer on general insurance business. Provided further that in the event
of any claim in regard to general micro-insurance products, the insurer
carving on life insurance business or the distributing entities of micro-
insurance products, as the case may be, as may be specified in the tie-up
referred to in the first proviso, shall forward the claim to the insurer

37
 MICRO-INSURANCE

carrying on general insurance business and offer all assistance for the
expeditious disposal of the claim.

 An insurer carrying on general insurance business may offer

general micro-insurance products as also life micro-insurance products, as
provided herein.

Provided that where an insurer carrying on general insurance business

offers any life micro- insurance product, he shall have a tie-up with an
insurer carrying on life insurance business for this purpose, and subject to
the provisions of section 64VB of the Act, the premium attributable to the
life micro insurance product may he collected from the prospect
(proposer) by the insurer carrying on general insurance business, either
directly or through any of the distributing entities of micro-insurance
products as specified in regulation 4, and made over to the insurer
carrying on life insurance business.

Provided further that in the event of any claim in regard to life micro-
insurance products, the insurer carrying on general insurance business or
the distributing entities of micro- insurance products, as the case may be,
as may be specified in the tie-up referred to in the first proviso, shall
forward the claim to the insurer carrying on life insurance business and
offer all assistance for the expeditious disposal of the claim.

CODE OF CONDUCT OF MICRO INSURANCE AGENTS

 Every micro-insurance agent and specified person employed by

him shall abide by the code of conduct as laid down in Regulation 8 of the
Insurance Regulatory and Development Authority (Licensing of Insurance
Agents) Regulations, 2000, and the relevant provisions of Insurance
Regulatory and Development Authority (Insurance Advertisements and

38
 MICRO-INSURANCE

Disclosure) Regulations, 2000.

Provided that the insurer shall ensure compliance of the code of conduct,
advertisements and disclosure norms by every micro-insurance agent.

 Any violation by a micro-insurance agent of the code of conduct

and/or advertisement or disclosure norms as aforesaid shall lead to
termination of his appointment. in addition to penal consequences for
breach of code of conduct and/or advertisement or disclosure norms
pursuant to the provisions of sub-regulation (1).

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,

39
 MICRO-INSURANCE

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

at least ten for insurance of individuals, and at least fifty for group
insurance.

GENERAL MICRO-INSURANCE PRODUCT

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 below, filed with the
Authority:

40
Type of Mi Ma T T Mi Ma
Cover ni xi e e ni xim
MICRO-INSURANCE
mu mu r r mu um
m m m m m age
Am Am Ag at
ou ou o o e ent
nt nt f f at ry
of of ent
Co Co C C ry
ver ver o o
v v
e e
r r
M
i M
n a
. x
.
Dwellin
g&
content Rs. Rs.
, or 5,0 30, 1 1 NA NA
livestoc 00 000
k or Per Per y y
Tools ass ass e e
or et/c et/c a a
implem ove ove r r
ents or r r
other
named
assets/o
r Crop
insuran
ce
against
all
perils
Health
Insura Rs. Rs. 1 1 Insurers’ discretion
41
nce 5,0 30,
Contra 00 000 y y
 MICRO-INSURANCE

SOURCE: IRDA Micro-Insurance Regulations, 2005,

www.irdaindia.com
NOTE: The minimum number of member comprising a group shall be at
least twenty for group insurance.

LIFE MICRO-INSURANCE PRODUCT

A “life micro-insurance product” means any term insurance contract

with or without return of premium, any endowment insurance contract or
health insurance contract, with or without an accident benefit rider, either
on individual or group basis, as per terms stated in the Table A below,
filed with the Authority:

42
Type Mi Ma T T Mi Ma
of nim xim e e nim xim
MICRO-INSURANCE
Cove um um r r um um
r Am Am m m Age age
oun oun at at
t of t of o o ent entr
Co Cov f f ry y
ver er C C
o o
v v
e e
r r
M M
i a
n x
. .
Ter
m
Insu Rs. Rs. 5 1 18 60
ranc 5,0 50,0 5
e 00 00 y
with e y
or a e
with r a
out r
retur s
n of
prem
ium
Endo 1
wme Rs. Rs. 5 5 18 60
nt 5,0 30,0
Insu 00 00 y y
ranc e e
e a a
r r
s
Heal
th Rs. Rs. 1 7 Insurers’ discretion
43
Insu 5,0 30,0
ranc 00 00 y y
 MICRO-INSURANCE

SOURCE: IRDA Micro-Insurance Regulations, 2005,

www.irdaindia.com
NOTE: 1. Group insurance products may be renewable on a yearly
basis.
2. The minimum number of members comprising a group shall be at
least twenty for group insurance.

RESEARCH METHODOLOGY

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. We conducted
unstructured interviews sample size of 30 general people having income
less than 350 bugs per day like vendors, rickshaw-wala, milkman, cobbler
etc. Survey location was Thane and Mulund 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
44
 MICRO-INSURANCE

presented in form of graphs and tables

Survey Results
The following are my findings regarding the survey conducted. The

AgeGroup

14% 20-25

25-30
47%
21%
30-35

35-40
18%

following graphs show the potential depth from different perspectives, as

shown below:

ANALYSIS AND INTERPRETATION

Chart 1: Age of the respondents

45
 MICRO-INSURANCE

Inference: The above reveals the fact that Majority of the respondents,
about 47% belong to the category of 35-40 ages and 21% belong to the
category of 25-35 of age, 18% belong to category 30-34 and 14% belong
to the category 20-25 of age.

Chart 2: Educational Qualification

Inference: The above result reveals that majority of respondents i.e. 54%
were educated till higher secondary and the percentage of primary and
graduation is very close i.e. 21% & 25%.

Chart 3: Account Holder

Inference: The above result reveals that 11% of respondent don’t have

Educational Qualification

21% 25%
Upto Primary

Higher Sec

Graduation
54%

any account any where while majority of the applicants [43%] have post

46
 MICRO-INSURANCE

office account, 32% have their Bank a/c and only 14% have both the
accounts.

Chart 4: No. of family members

Inference: Above result reveals that majority of respondents 50% have 4

members in a family which is ideal whereas only 7% live with joint
family or have big size of family.

Chart 5: No. of earning member

47
 MICRO-INSURANCE

Inference: From the above result it can be clearly seen that about 68% of
the respondent were the only earning member of their family, 32% have 2
earning member because of size of family.

Chart 6: Income level

Inference: The above result reveals that 68% of respondent have income
level between 7000-10000 while 32% have income level between 5000-
7000 and no one below it.
Chart 7: No. of dependent

Incomelevel
0% 0%

0-3000
32%
3000-5000

5000-7000
68%
7000-1000

48
 MICRO-INSURANCE

14

12
s
t
n
a 10
c
li 8
p
p
A 6 Education
f
o
. 4
o Rent & Electricity
N
2 Drink &
Entertainment
0
1st Place 2nd 3rd Place4th Place 5th Place 6th Place
Place

Inference: The above result reveal that majority of respondent 39% have
3 no. of dependent where as only 4% have 5 dependents.

Chart 8: Expense Pattern

18
16
s
t14
n
a 12
c
il
p10
p Travelling
A8
f
o
. 6 Clothing
o4
N Health
2
0
1st Place 2nd Place 3rd Place 4th Place 5th Place 6th Place

Inference: From the above result we can see that out of the three clothing
expense is more; least expense is health and expense in travelling is nil
but travelling is the highest at number 6th place.

49
 MICRO-INSURANCE

Inference: From the graph we can say that out of the three; Rent &
Electricity is the highest expense and then comes Education. Least
expense is on Drinks & Entertainment but it is highest at 5th place.

Chart 9: Faced problem with health or asset

Inference: Above result shows that 36% of respondent didn’t face any
problem related with health or asset but 64% faced a serious or minor
health or asset loss in past of their life.

Chart 10: Awareness about insurance

50
 MICRO-INSURANCE

Inference: Above result reveals that each and every applicant is aware
about what the insurance is.

Chart 11: Source of information

Inference: The result above reveals that 30% of the respondent got the
information about insurance from newspaper, 20% got info from T.V,
least from Banners & Hoardings and remaining from the source pattern
shown above.

51
 MICRO-INSURANCE

Articles

Case study

FINDINGS
 Study reveals that majority of people whose daily income is less
than 350 bugs have ideal family.
 Earning members in majority of family are two so that they are
able to survive and meet their daily requirements.
 Income level lies between 150-350 bugs per day.

52
 MICRO-INSURANCE

 Majority of respondent had post office account and very less had
both bank as well as bank account.
 Majority of respondent have more spending on rent & Education,
after that on food & cloth and Medicare & entertainment.
 Majority of respondent are the only earning member in family
size of 4-5.
 Majority of them managed critical financial problem from their
savings and even borrowed some money. Only few had insurance or taken
loan.
 All of them are aware about insurance but not about micro
insurance and best source of information medium found to be newspaper,
television and from friends & relatives.
 Many of respondents were not insured just because of either high
premium or lack of complete information.
 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.

CONCLUSION
We all know insurance is a very old concept. But the demand for
insurance was increased from a decade. Middle class people take

53
 MICRO-INSURANCE

insurance policy according to their ability & capacity to pay premium to

secure their life.
When we talk about poor people a question comes in mind

54