Micro Insurance[1]

8/3/2019 Micro Insurance[1]

1/23

Group MemberAmol

Gaurav Arora

Kartik


2/23

Session

Introduction about Micro InsuranceCategories

Types of risks and crises

Micro-insurance delivery models

Legislation

Insurance products

Micro insurance Facts

Micro Finance Case

Challenges

Conclusion


3/23

What happens when a poor family breadwinner dies, when a child

in a disadvantaged household is hospitalized, or the home of a

vulnerable family is destroyed by fire or natural disaster?

Every serious illness, every accident and every natural disaster

threatens the very existence of poor people and usually leads to

deeper poverty. Thats where micro insurance comes in.

Micro insurance is specifically designed for the protection of low

-income people, with affordable insurance products to help them

cope with and recover from common risks.


4/23

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, semi-formal and informal institutions . -IRDA


5/23

Category Examples

Natural Risks Heavy rainfall, landslides, earthquakes, floods,drought

Health Risks Illness, injury, accidents, disability, epidemics

Life-cycle risks Birth, maternity, old age, family break, death

Economic Risks Unemployment, business failure, technological ortrade related shocks

Social Risks Crime, domestic violence, riots

Environmental Risks Pollution, deforestation, land degradation


6/23

Types of risks and crises

Idiosyncratic Risks

-Risky events that are individual or Household specific

- Narrow geographical or social spread

Covariate Risks

- Risky events that affect many households


7/23

Micro-insurance delivery models

Partner agent model

Full service model

Provider-driven model

Community-based/mutual model


8/23

LEGISLATION

Regulated by Insurance Regulatory and DevelopmentAuthority (IRDA) India

A quota system, which compels insurers to sell a

percentage of their policies to low income and rural clients.

With general insurance, 2 % of gross premium income

must come from rural areas in the first year, 3 % in year 2,

and 5 % thereafter.

Life insurers must sell 7 % of totalpolicies by number (not value) in the first

year with increasing amounts upto 16 %

in year 5.

\


9/23

Insurance products

Jana vikas yojana

Saral suraksha yojana

Alp nivesh jivana

Grameen suraksha

Bima suraksha super

Sarv jan suraksha

Saral suraksha

Jeevan madhur

Jeevan mangal

Met vishwas

Grameen sakthi


10/23


An Innovative Tool for Risk and Disaster Management

The world's poor face a myriad of risks on a daily basis and micro

insurance has emerged as a valuable tool which can provide a safety

net which stops those affected by disasters from slipping further intopoverty.

About 70 percent of Indias 1.2

billion people live in rural areas

At present, all insurance companies,

both life and non-life, are mandated to do

20 per cent of their business from micro

and rural insurance policies.


11/23

In 2009-10, life insurers earned new business premium of Rs401.641 crore from micro-insurance policies.

The Insurance Board (IB) is soon coming up with a directive

that will oblige all non-government organizations (NGOs) and

other firms operating micro insurance businesses to work asagents of government-authorized insurance companies.



12/23

Micro insurance program has a successful payout to over

1,800 Ethiopian farmers after drought

More than 1,800 farmers in seven villages experienced

drought conditions that triggered payouts. Each will get a shareof the total $17,392 in payouts.



13/23

Since 2007, the MIA has successfully run 3 editions of theReinsurance School for Micro insurance schemes.

The School is the only training event globally to explain the

technical and practical aspects of how micro insurance schemes

can be linked to reinsurance to strengthen their sustainability inthe long term and cover high-cost risks by linking community

structures to private reinsurance providers.



14/23

Spandana Micro finance

Kursheed Begum

She was nineteen when she moved to Shamirpet, a semi-urban

community outside of Hyderabad, and for eighteen years she raised

four children while doing tailoring work for some of her neighbors.

Her husband was a construction worker.

In 2004, Kursheed decided that with a

small amount of credit, she could help

her husband increase their household

income and raise their familys standardof living. With a Spandana loan of Rs.

10,000, she began her first business, a

small kirana shop nearby that sold

bottled drinks and food items.


15/23

In 2005 she fully paid off her outstanding loan and moved to take

a second loan, this time to establish a small copy store next door to

her kirana shop.

In 2006, after taking her second Spandana loan of Rs. 15,000,

Kurhseed bought a Photocopy machine and a small coin-operated

telephone to open up the photocopy store. This business, along with

her kirana shop, has added Rs. 80,000 to her familys annual income.

She has been able to send all her children to school, and they have

bought a house of their own near her businesses.


16/23

Recently, Kursheed took another loan from Spandana of Rs.20,000 to start a tailoring business in her neighborhood. Her

businesses now employ three people in her community, and her

tailoring shop serves clients in the surrounding communities.


17/23

CHALLENGES


18/23

CHALLENGES

Limited and inappropriate services

Challenges in product design: There are challenges

in product design, which has resulted in a mismatch between

needs and standard products on offer. Efforts at productdevelopment / diversification have been limited.

Pricing influence the market:

Pricing, including willingness to pay and the availability of

subsidies, influence the market.


19/23

Difficulty in distribution :It is one of the most cited reasons for

absence of rural insurance. The high costs of penetrating rural

markets, combined with underutilization of available distribution

channels, hinder the growth of rural insurance services. This adds

to costs, both, managerial and financial.

Contrasting perspectives: Contrasting perspectives ofThe insured and the insurers, lead to low customization of

Products and low demand for what is available.


20/23

The Issue ofTrust Between the Micro Insurer and Client :

Unlike the case in credit, where the micro-entrepreneur borrows

the money and takes up the responsibility of returning it,

insurance reverses the responsibility of risk.

Highly Personalized Products Needed : Each village and

each community face different kinds of risks that need to be

insured (crop insurance, life insurance, health insurance, homeinsurance, etc.) . An insurer cant just offer what they always do

but at a reduced priceA product really has to be redesigned after

assessing what the local needs are, and it has to be accessible.


21/23

ALack of UnderstandingAbout Insurance :

Insurance isnt a very popular financial service in rural India. This is

may be because of high illiteracy level. Peoples fail to appreciate the

importance of transferring risk. While the upper and middle class

would venture only so far as to sign up for car insurance, the idea of

a steady cash outflow to recover from something that may or may

not occur, simply evades the poor, who are already hard up on cash.


22/23

CONCLUSION

Micro insurance sector in India is in evolving phase

Innovations are required at all stages for products in pricing policy

delivery channels

Success of marketing micro-insurance depends on understanding

the social and cultural needs of the target population

Clients should also receive price differentials for using differentchannels

Groups & their promoters can provide ideal platform to kick start

the micro insurance


23/23

Documents

Micro Insurance[1]