Pawan.docx

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MICRO INSURANCE

A Project Submitted to University of Mumbai for partial completion of the degree of Bachelor in Commerce (Banking and Insurance) Under the Faculty of Commerce By

PAWAN VISHWAKARMA Under the Guidance of MRS.BARKHA SHAMNANI

VPM’S R.Z. SHAHA OF ARTS, SCIENCE, & COMMERCE, MITHAGAR ROAD, MULUND EAST, MUMBAI-400-081

YEAR-2018-19

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Declaration I the undersigned Mr. PAWAN RAMASHANKAR VISHWAKARMA Name of the learner here by, Declare that the work embodied in this project work titled “MICRO

INSURANCE”, Title of the Project forms my own contribution to the research work carried out under the guidance of MRS. BARKHA SHAMNANI is a result of my own Research work and has not been previously submitted to any other University for any other Degree to this or any other University. Wherever reference has been made to previous works of others, it has been clearly indicated as such and included in the bibliography. I, here by further declare that all information of this document has been obtained and presented in accordance with academic rules and ethical conduct.

Name and Signature of the learner

Certified by Name and signature of the Guiding Teacher

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Acknowledgment To list who all have helped me is difficult because they are so numerous and the depth is so enormous. I would like to acknowledge the following as being idealistic channels and fresh dimensions in the completion of this project. I take this opportunity to thank the University of Mumbai for giving me chance to do this project. I would like to thank my Principal, Dr.M.S Raje, for providing the necessary facilities required for completion of this project. I take this opportunity to thank our Coordinator Mr. Om Dewani, for her moral support and guidance. I would also like to express my sincere gratitude towards my project guide Mrs.

Barkha Shamnani, whose guidance and care made the project successful. I would like to thank my College Library, for having provided various reference books and magazines related to my project. Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion of the project especially my Parents and Peers who supported me throughout my project.

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INDEX S.NO

NAME

PAGE NO

1.0

INTRODUCTION

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1.1

WHAT IS MICRO INSURANCE

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1.2

OBJECTIVES

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1.3

SCOPE

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1.4

FEATURE OF MICRO INSURANCE

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1.5

HISTORY

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2.0

TYPES OF MICRO INSURANCE

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3.0

THE IMPORTANCE OF MICRO INSURANCE

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3.1

MAJOR PLAYERS IN MICRO INSURANCE

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4.0

THE TERMINOLOGY

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5.0

PRICING

AND

IMPACTS

OF

MICRO

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INSURANCE 6.0

INDIANVIEW OF MICRO INSURANCE

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7.0

GLOBAL VIEW OF MICRO INSURANCE

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8.0

RESEARCH METHODOLOGY

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9.0

CONCLUSION

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MICRO INSURANCE

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MICRO INSURANCE 1.0 INTRODUCTION: Micro-insurance is the protection of low income households against specific perils in exchange for premium payments proportionate to the likelihood and cost of the risk involved. It is specifically designed for the protection of low income people with affordable insurance products to help them cope with and recover from common risk. A key strategy for enhancing economic development and alleviating poverty is to make financial systems more inclusive, for example by improving access to savings and credit services for up and under-served markets. In part, Poverty stems from the fact that low-income households and markets do not have the same opportunities to finance investments accumulate capital or protect assets (including human assets). India is enjoying rapid growth and benefits from a young population. Its middle class is growing rapidly but 70 percent of the population is still rural, often very poor, and handicapped by poor health and health services, and low literacy rates. 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. According to World Bank study 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.

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When a poor’s family’s income generator dies, when a child of a poor family is hospitalized, or home of a poor family is destroys by flood, earthquake or fire. Every illness every accident or every natural disaster leads to deeper poverty to a poor family. That’s where micro insurance comes in. Historically in India, a few micro-insurance schemes were initiated, either by nongovernmental 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 2017). The poorest segments do not always benefit from the subsidy, while people who can afford insurance often find ways to access these benefits. In general, governments have made little effort to shift the burden of risk-pooling to market-led schemes; and the private sector (commercial insurers) seems to have little incentive to seek out this market segment. In principle, micro-insurance works like any typical insurance business. But there are several things that differentiate it from normal insurance. First, it is group insurance that can cover thousands of customers under one contract. Second, micro-insurance requires an intermediary between the customer and the insurance company. Preferably, this intermediary is a nongovernmental organization (NGO) or microfinance institution, for example a rural bank that can handle the whole distribution and most of the administration process. 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.

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The UNDP report has analysed six key issues pertinent to the growth of the micro-insurance industry in India, capturing the concerns of different stakeholders as indicated below:  There are challenges in product design, which has resulted in a mismatch between needs and standard products on offer. Efforts at product development / diversification have been limited.  Contrasting perspectives of the insured and the insurers, lead to low customization of products and low demand for what is available.  Difficulty in distribution 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. Like Inclusive credit, inclusive insurance is expected to be a “low ticket” business, requiring volumes for viability.  Pricing, including willingness to pay and the availability of subsidies, influence the market. In the absence of a historical data base on claims, premium calculations are based on remote macro aggregates and overcautious margins. Building and sharing claims histories can help in aligning pricing decisions with actuarial calculations, thereby reducing prices.  There are specific reasons for low demand for insurance in spite of intense need. Suppliers have their own concerns which help to explain why there have been so little efforts at market development. Consequently, the rural market is characterized by limited and inappropriate services, inadequate information and capacity gaps.

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1.1 What is micro insurance? Definition: Micro insurance is the protection of low -income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved. Low-income people can use micro insurance, where it is available, as one of several tools (specifically designed for this market in terms of premiums, terms, coverage, and delivery) to manage their risks.

In India, it is often assumed that a micro insurance policy is simply a low -premium insurance policy. This is not so. There are a number of other important factors. Lowincome clients often:

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1.2 OBJECTIVES  To find out benefits of insurance products the customer.  To study the distribution models for micro-insurance.  To study the diversity of micro-insurance.  To study the benefits and challenges faced by micro insurance.  To analysis the current scenario of micro insurance in india.  To know awareness about Micro-Insurance.  To recognize the Potential Market for Micro-Insurance in India to identify the Key Characteristics of Micro Insurance.  To explain the various difficulties of insurers to produce, market and distribute different micro insurance products.  To find out level of satisfaction among customer.  To provide guidance to members.  To find out benefits of insurance products the customer.  To find the awareness of micro insurance among rural group of people.  To find the preference of various products in Micro insurance of clients.  To study the issues and challenges in micro-insurance.  To study about the project in detail and majors applied in the current scenario.

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1.3 Scope 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:  To study higher disposal income of insurer.  To study the scheme & benefit of micro insurance.  He shall work either for one life insurer or for one general insurer or for one life insurer and one general insurer.  Collection of self-declaration from the member that he is in good health.  Distribution of policy documents.  To Study increase awareness among the society about micro-insurance.  To study investment with the help of micro insurance.  To study increasing rate of micro insurance in society.  Collection of proposal forms.  Collection of monies for issuance of contract or remittance of premium.

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1.4 FEATURES: Micro insurance refers to the dealing of company with individual customer, both the liabilities and the asset side of the balance sheet. The important products offered by micro insurance are fixed, current/ savings account on liabilities side; and personal insurance, household. Today’s micro insurance sector is characterised by the following features: 1. Micro insurance industry is diverse and competitive. There are a large number of micro insurance products that are extremely customer-friendly and are offered by many banks. 2. Micro insurance is based on the maxim “do not keep all the eggs in one micro insurance industry is diverse and competitive. There are a large number of micro insurance products that are extremely customer-friendly and are offered by much company. 3. It provides an opportunity to diversify their asset portfolio. Since loans are given to a large number of consumers and transactions have very low value, the risk is reduced because all the consumers do not make default in making loan repayment at a time. 4. Micro insurance business is an attractive market segment with opportunities for growth and profits. 5. The micro insurance portfolio includes deposits and assets linked products as well as other financial services provided to individuals for personal consumption. 6. Micro insurance aims at doing business in large volume of transactions involving low value.

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1.5 History: The insurance industry in India, private and public, has its roots in the 19th century. The British Government set up state-run social protection schemes for its colonial officials, many of which evolved into the schemes that operate to this day. The first private insurance company was the Oriental Life Insurance Company, which started in Calcutta in 1818. The 1 9th century saw the development of a number of Indian insurance companies including the Bombay Mutual (1871), Oriental (1874) and the Empire of India (1897). Under British rule there were large numbers of insurance companies operating in India. In 1938 the British passed the Insurance Act, a comprehensive piece of legislation governing the insurance industry. The Act remains the legislative cornerstone of the insurance industry to this day. Regulated Indian insurers are divided into two core categories: life and general insurance. Life insurance includes products like endowment policies and retirement annuities. General insurance covers all other types of insurance. In 1956 the Indian Government nationalized the life insurance industry. The reasons given at the time were high levels of fraud in the industry

And a desire to spread insurance more widely. As Prime Minister Nehru noted at one time in Parliament, “We require life insurance to spread rapidly all over the country and to bring a measure of security y to our people.” The Government combined 154 insurance providers and

Formed the Life Insurance Corporation of India. General insurance remained in private hands until 1973 when it was nationalized.

The impact of nationalization was to create a small number of state-owned insurance companies. Just prior to nationalization, 68 Indian (including the Life

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Insurance Corporation, LIC) and 45 non-Indian entities sold insurance. All these organizations were absorbed into one giant corporation, the General Insured nce Corporation (GIC) with its four subsidiaries: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited, and United India Insurance Company Limited.

When the ideological winds of change blew in the early 1990s, the Indian Government set about liberalizing its insurance markets. It set up a commission of enquiry under the chairmanship of R.N. Malhotra. The central outcome of the commission was the establishment of the Insurance Regulatory and Development Authority (IRDA) that in turn laid the framework for the entry of private (including foreign) insurance companies.

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 –“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-

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conditions, including. This transformed the mindset of retail insurance providers in the country, who later developed similar non-exclusive products in light of the competing environment.

In 2017, 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. As in much of the developing world, India has a large number of informal quasiinsurance Schemes: for example, households that pool rice. In addition to this, there are small schemes run by cooperatives, churches and NGOs that may pool their members’ incomes to create an

In spite of Nehru’s desires in the decades following nationalization, insurance products were designed primarily for those with regular incomes, i.e., those in formal employment. These were overwhelmingly men in urban areas. The poor, living mostly by agriculture, were for the most part overlooked by these new companies. Insurance fund against a specific peril: for example, funeral costs. In a few countries, there is specific legislation to regulate these schemes, e.g., the South African Friendly Societies Act. In India no such law exists, and any individual or institution conducting insurance has to comply with the stipulations of, among other regulations, the 1938 Indian Insurance Act as amended.

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2.0 TYPES OF MICRO INSURANCE

Life Insurance Crop Insurance

Reinsurance

Property Insurance

Micro Insurance

Unemployment Insurance

Disability Insurance

Health Insurance Disaster insurance

1. 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. 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.

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2. 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. Graeme Bank in Bangladesh offers its clients insurance against the death of livestock and COLUMNA in Guatemala provides insurance against fire damage.

3. 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 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.

4. 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

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medicine. Some insurance providers also make available primary health care services such as immunization and contraceptives. 5. Disaster insurance: Disaster insurance is through a reinsurance arrangement that broadens the risk pool across countries and regions, and protects insurers against catastrophic losses.

6. 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.

7. Reinsurance 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 microinsurers. 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

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FINCA International, Uganda which has entered a partnership with American International Group (AIG) to provide its clients life and disability insurance. 8. 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.

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3.0 THE IMPORTANCE OF MICRO INSURANCE

The term “insurance”, in common parlance is the protection of the economic value of an asset. The key term here is protection, but the questions is, for how long the economic value of an asset is to be protected? There would hardly be any debate to this question, since it is a natural instinct of every human being to protect the financial loss the near and dear ones might have to undergo due to any unfortunate or unforeseen event. This protection, or compensation of financial loss, can be done through life insurance.

To be precise, life insurance should be purchased keeping in view the longterm perspective. Buying a life insurance policy or inducing someone to buy life insurance for a shorter period of time defeats the very purpose of life insurance, which, as the name suggests, is a long-term objective. However, what constitutes short-term and long-term?

The IRDA (Non-Linked Insurance Products) Regulations, 2013, and IRDA (Linked Insurance Products) Regulations, 2013, clearly stipulate that the minimum term of such a policy should be for five years for individual product.

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So, does a five-year policy term fulfill the long-term objective of a life insurance? Prudence dictates that the answer would perhaps not be in the affirmative. One may, however, question whether it would be convenient for older persons to go for life insurance for a five-year term—say, those between the 55-60 years age bracket? Then again, for this age group, are life insurance products more suitable or do pension products make more sense? Moreover, has proper pitching been done to customers before selling a product?

In January 2017, the IRDA constituted a committee to make recommendations on the amendments to be carried out on the regulations of 2013 pertaining to NonLinked and Linked Insurance Products. Accordingly, the committee submitted its detailed report, dated December 7, 2017, with a review of the regulatory provisions and its recommendations. Surprisingly, the committee has recommended that the minimum coverage term restriction of five years should be removed for life insurers to match different customer needs and emerging channels. This implies that insurers can design life insurance products for a term less than five years once the new regulations are framed. However, will this not defeat the long-term objective of life insurance?

Offering life insurance products with lower policy term may help customers having low and unsteady income. However, this group of customers primarily consists of the informal sector workers, for which micro insurance appears to be a better fit. According to the International Labor Organization, micro insurance is a mechanism to protect the poor people against multiple risks (accident, illness, death in the family, natural disasters, etc) in exchange for insurance premium payments tailored to their needs, income and the level of risk. Micro insurance is aimed primarily at the developing world’s low-income workers, especially those in the informal economy who tend to be under-reserved by the mainstream commercial

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and social insurance schemes. In fact, the report on “Unorganized Sector Statistics” by the National Statistical Commission (2012) states that, in India, more than 90% of the workforce and about 50% of the national product are accounted for by the informal economy. The report further adds that a high proportion of socially and economically underprivileged sections of the society are concentrated in informal economic activities, and that the high levels of growth of the Indian economy during the past two decades are accompanied by increasing information.

This huge workforce in the informal sector remains untapped and, hence, the importance of micro insurance is undeniable. The regulator may play a pivotal role by regulating the minimum term of a life insurance policy taking into consideration the long-term perspective. Further, the maximum age at entry may also be regulated, which would be suitable for a customer to enter into a life insurance contract for the overall benefit of the life insurance industry.

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3.1 Major Players in Micro Insurance 3.2 Micro Insurance Products in India There

are

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life

insurance companies are present in India but only 14 companies are providing

micro

insurance products this clearly give an idea of low attraction of majority of companies towards these products. 3.3 Development of Micro-insurance in India: Historically in India, a few micro-insurance schemes were initiated, either by nongovernmental 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.

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The insurance regulatory and development authority (IRDA) defines rural sector as consisting of following: I) a population of less than five thousand, (ii) a density of population of less than four hundred per square kilometre, and (iii) 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. 4 The social sector as defined by the insurance regulator consists of (I) unorganized sector (ii) informal sector (iii) economically vulnerable or backward classes, and (iv) other categories of persons, both in rural and urban areas.5 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.6 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-fulfilment of these obligations can invite penalties from the regulator.

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4.0 THE TERMINOLOGY The following terminologies were adopted for the study. Most of the definitions were taken from Insurance Regulatory Development Authority (IRDA) as it is the pioneering institution in the field of providing, regulating and controlling the business of insurance in India.

MICRO INSURANCE: “Protection from specific risks, payoff by regular premiums, specifically designed for low-income individuals”, Churchill (2006)2. For this study micro insurance is insurance with a premium of less than Rs.500 per annum with an insured benefit of Rs.50, 000 or less, targeted at low-income households

MICRO FINANCE INSTITUTION: Any institution or entity or association registered under any law for the registration of societies or cooperative societies, as the case may be, inter alia, for sanctioning loan/finance to its members.

MICRO INSURANCE AGENT: A micro-insurance agent may be a non-government organization (NGO); or a self-help group (SHG); or a micro-finance institution (MFI), who is appointed by an insurer to act as a micro insurance agent for distribution of micro-insurance products (IRDA) Regulations.

MICRO INSURANCE POLICY: An insurance policy, sold under a plan, which has been specifically approved by the authority as a micro insurance product.

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NON GOVERNMENT ORGANISATION (NGO): Non-government Organization means a non-profit organization registered as a society under any law, and has been working at least for three years with marginalized groups, with proven track record, clearly stated aims and objectives, transparency, and accountability as outlined in its memorandum, rules, by-laws or regulations, as the case may be, and demonstrates involvement of committed people

SELF-HELP GROUP: A group with an average size of about 15 people from a homogenous class. They come together for addressing their common problems. They are encouraged to make voluntary thrift on a regular basis. They use this pooled resource to make small interest bearing loans to their members. The process helps them imbibe the essentials of financial intermediation including prioritisation of needs, setting terms and conditions and accounts keeping.

LIFE MICRO INSURANCE PRODUCT: A term insurance contract with or without return of premium, and endowment insurance contract or health insurance contract, with or without an accident benefit rider, either on individual or group basis.

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4.1 INSURANCE FOR RURAL AND SOCIAL SECTOR One of the key features of insurance sector in India is insurers have to fulfil the social and rural sector obligation on an annual basis as defined by the regulator. The rural and social obligations as stipulated in the IRDA Regulations, 2002 lay down the Requirements to be complied with by the insurers during the first five years of their operations. In case of public sector insurers, these obligations have been linked to their performance in the year 2001-02. However, with the amendments notified in 2007-08, the obligation of the private insurers up to the tenth year of operations has been laid down. Simultaneously, the obligations of the public sector insurers were also revisited. The obligations of the private insurers are as under:

Rural sector:  Life insurer: commencing from seven per cent of the total policies write  Direct in the first financial year to twenty per cent in the tenth financial  Year.  Non-life insurer: commencing from two per cent of total gross premium  Income written direct in the first financial year to seven per cent from the  Ninth financial year onwards.  Social sector: (all insurers commencing from five thousand lives in the first financial year to fifty five thousand lives in the tenth financial year.

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 Though rural and social sector obligations have helped to expand outreach of micro insurance the poor are not adequately perceived as a potential business op-opportunity.

Micro insurance in India:

Development of micro insurance sector in India is recent phenomenon. Microinsurance portfolio has made steady progress during last few years after IRDA (Micro-insurance) Regulations 2005 that allow the insurers for composite covers or package products. According to IRDA source, more life insurers have commenced their micro-Insurance operations and many new products have been launched during the year 2008-09. With expansion of distribution infrastructure and new business has shown upward trend in micro insurance sector but it is still much smaller than the desired level.

However, micro-insurance business in India largely constitutes group portfolio. Under the individual policy category micro insurance though more policies are underwritten But total premium amount is low. Among the insurers the share of LIC was substantial in micro insurance business. As regard to infrastructure and manpower expansion there has been increase in the number of micro-insurance agents. By at end of March 2009 it was 7250; of which 6647 were for the LIC and the remaining represented the private sector companies. Fifteen life insurers have so far launched 30 micro-insurance products. Of the 30 products, 16 are for individuals and the remaining 14 are for groups.

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4.2 Observations & Suggestion on Micro Insurance (Biswa)

BISWA believes that poor households are especially vulnerable to risk, in both the form of natural calamities as well as more regular occurrences of illnesses and accidents. Micro-Finance Institutions (MFIs) have played an active role in reducing and protecting them against such situations by providing credit for increasing income-earning opportunities; and by providing savings services to build up resources that can be utilized in case of emergencies. As one of its development interventions and as a social security measure, BISWA cover its clients in three major micro-insurance schemes. To BISWA Micro Insurance means the insurance which their SHG members can easily afford. It is the SHG members particularly the BPL members suffered the most due to absence of micro insurance. As a social security measure it has paid great dividend. Many BISWA SHG members have been benefited from three different micro insurance products as given below available to the group members along with group loan.

* Life insurance ( from LIC and TATA-AIG),

II. Health insurance (from ICICI-Lombard and Oriental Insurance Company Ltd.), III. Assets insurance (from Oriental Insurance Company Ltd.). Name of the insurance products are Janashree Bima Yojana (life) of LIC, Nabakalyan and Sampoorna Bima Yojana with TATA-AIG (life), Health insurance from ICICI Lombard and Oriental Insurance Company and Asset insurance from Oriental Insurance Company. The target clients are mainly SHG members promoted by BISWA both loaned and non-loaned groups spread across BISWA‘s operational area and about 40% of total members are already covered.

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Health Insurance: BISWA in collaboration with Oriental Insurance Company Limited has launched health insurance scheme in October 2007. Premium is Rs.325/- per annum and coverage is Rs. 15,000/ for a maximum of 4 persons (member & 3 specified nominees). Besides, there is provision of Rs.300/- maximum per year as transportation allowance and a maximum of Rs.800/- per year as subsistence allowance for the insured member in case of hospitalization only. Since beginning, leaflets in Oriya have been Prepared and widely circulated among the members for better awareness and proper data collection.

Assets Insurance: It has become very common that poor people are badly affected by natural calamities every year. Hence, it is very much important to cover their assets under insurance in order to meet financial loss. Hence BISWA is also covering them under its various asset insurance policies such as Live Stock Insurance, Kishan Package Policy, and Janata Personal Accident Policy.

Claim Settlement: As a micro insurance partner, BISWA has given priority for the settlement of claims in all Insurance Schemes. In the case of death claims, LIC has settled 149 claims and TATA AIG has settled 55 claims till December 2009. In health insurance claims ICICI Lombard has settled 524 claims and Oriental Insurance settled 668 claims. In asset insurance Oriental Insurance has settled 163 claims. Usually the insurance claims are processed by BISWA and negotiated with the respective Insurance Companies for settlement. As per the norms of the Insurance Companies, the claim amount is either directly given to the client‘s nominee or upon receipt, BISWA hands over the amount to the respective nominee.

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Other Programmes on Micro Insurance: Under Janashree Bima Yojana (JBY) of LIC 455 students are been awarded scholarship of Rs. 240500.

Bima Village: In another effort to provide Insurance to the poor at the doorstep four villages have been declared as Bima Villages. Every household of these villages has been covered with a Life Insurance Policy. The names of the villages are: Matikhai, Kankudipali and Balaranga of Sambalpur District and Rangamatia of Bargarh District. To make insurance popular campaign for insurance products among poor are conducted on monthly basis in different district offices of BISWA.

Loan for Insurance Premium: All members who avails a loan from BISWA got insurance cover as applicable. At the time of loan disbursement the premium amount of the selected Insurance for one year is usually collected and deposited with BISWA for onward transfer to the respective Insurance Companies. Any member unable to pay premium can avail credit for premium with same terms and conditions as the group loan.

Training: BISWA staff are given training on the Insurance products which is conducted by the concerned Insurance Companies and the trained staff in

4.3 Micro insurance, Household Risks and Coping Strategy in Study Areas For the poor and low income groups protecting their incomes and assets could be more effective way out of poverty and vulnerability. In other words protecting their economic and financial losses through affordable and effective risk management is as important as to generate additional employment and income and provision of social safety measures for these sections. Although pro-poor income-employment generation schemes are wide spread across the country, less

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attention has been given to protect incomes of the target groups in a systematic way. In this context, micro insurance is believed to play an important role and can be a part of broader poverty reduction and social security policy strategy. Recently, it has drawn attention of policy makers, development practitioners, donors, insurers and others to discuss and debate on status, efficacy and outreach of micro insurance. While the timing of the debate is strategic there is not enough study on micro insurance available at micro level, especially among different groups and regions. The present study is a modest attempt to fulfil this gap. Households with low assets and incomes can have disproportionately large and multiple adverse impacts with occurrence of smaller risk event. While some sections may overcome such negative impacts with better risk management tools, many less prepared households fail to do so. The situation can be worse for some specific groups such as asset-poor, low-income groups and women due to their low capacity to manage risks. This is possible, particularly, in absence of adequate formal insurance cover. However, use of formal insurance and institutionalization of household risk management, is abysmally low among these groups due to several factors. One of the key factors is the nature of credit access and occupation/enterprises of household.

Though access to financial services - credit, saving and insurance and its effects on their risk coping behaviour have been debated in development literature it vary widely across groups and regions. Part of this debate has focused on the potential role of financial services in helping the affected groups to manage common risks and prepare. Micro insurance is an important component of financial services mainly available to the low income groups under different supply channels involved in microcredit. In this chapter we have analyzed participation of some select women microcredit clients in micro insurance and discussed other related issues to understand the outreach and efficacy of micro insurance. In this regard, the relationship between household‘s major activity, differential access to

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financial services and their risks and risk coping behaviour are highlighted. To begin with, sample households are categorized into some broad groups on the basis of their major occupations, most of which are financed by microcredit programme. The categorization was made keeping in mind distortions in household income and employment due to their uninsured risks and their likely risk coping strategy for income and consumption smothering. It will also depict a broad idea about their risk, needs for insurance and other financial services. Analysis is made at the level of seven groups, three regions (three study areas) and total sample.

Households encounter different types of risks with different severity impact. At household level, risks mitigation can take place at two different stages. The first stage refers to ex-ante arrangements for exposure to risk which aims to maintain income flows or income and expenditure smoothening in case there is income shortfalls. Measures for lowering the ex-ante risks generally consist of conservative production decisions and diversifying household activities (traditional farming, mixed cropping, non-farm activity, multiple occupations, increasing working members and hours). These arrangements by the households to cope with risks lead however, mostly to losses in the profitability of the respective economic activities.

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.

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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 - 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 damager’s injury caused to another business or person by the failure of your product or the product you are selling.

The second stage refers to ex-post mechanism of dealing with the loss or damage. It consists of borrowing, receiving remittance, adjustment in major consumption and other expenditure (on education, health, and food, festival), diversifying household resources (putting women and child on work, and increasing working hours) and other measures.

These risk coping mechanisms can have wide and lasting adverse socio-economic impact on poor and low-income households. Adequate and effective financial and insurance arrangements such as saving, insurance and borrowing could be important options to deal with such situation and damages. But formal insurance products and process are hardly known too many poor people. Insurance is an exante risk management tool through which household hedge potential financial losses in exchange for fixed premium payments. As access to and use of financial services including insurance is low and irregular among low income groups,

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Their self-insurance arrangements determine their risk managing capability. In this situation, the nature and quantum of social security measures do matter in managing risks and augmenting capability of the households to cope with adverse events. In the context of limited coverage of social safety measures and absence of household access to adequate formal insurance, role of micro insurance could be encouraging.

Risks can be classified as idiosyncratic and covariant risks. At household level, there are two types of risks we focus in this study that affect household income and expenditure smoothening. One, risks related to life and life cycle events such as death, disability and illness. Two, risks related to livelihoods such as loss of crop, livestock, fisheries etc. Rosenzweig and Binswanger (1993) investigated the effects of risk on the allocation of production resources among farmers, differentiated by wealth. Using the panel data set from the ICRISAT villages in India and its information on investment, wealth and rainfall, they examined how the composition of productive and non-productive asset holdings varies across farmers with different levels of total wealth and across farmers facing different degrees of weather risk. The results show that farmers in riskier environments select portfolios of assets that are less sensitive to rainfall variation and less profitable. Vulnerable households are more likely to diversify their plots. In agriculture dominated economy like India, poorer households tend to choose less risky production strategies and the tendency to shift to a less risky portfolio is greater among.

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4.4 HOUSEHOLD FEATURES Household features such as family size, literacy, working members, type of house, asset holding, occupation and other socio-economic characteristics are crucial in determining household need for finance. It is believed that there is strong relationship between household composition, family size and asset holding pattern and demand for different financial products. For example, households having bigger family may be less likely to opt for formal insurance. More educated and better-off people may go for insurance as they can afford and are able to understand the concept and principle of insurance and its technical procedures. On the other hand, lower level of education associated with less productive jobs and lower income can reduce possibility of having market based insurance. Ownership of productive assets, land, consumer durables and house can induce demand for insurance and other financial products. In sum, better asset-endowed households have positive effect on taking up more and more financial products. Since most of the sample households do not possess land, their non-land asset holding may act as an important determinant for household participation in insurance products. Above analysis on major household features provides a background for better understanding of household risk and risk coping strategy, including participation in insurance market, in the study area. As discussed in the literature review, it is expected that households which are more exposed to risks are more likely to opt for insurance products. It is also expected that household risks has a positive effect on use of financial products such as credit and saving. Uninsured households may seek loans or use their saving to maintain consumption smoothing during post risk period. However, households may also employ variety of indigenous non-market ‘methods to cope with risk, particularly, where credit and insurance markets are not complemented. Keeping in mind the diverse nature of household risks and characteristics of household

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activity or enterprise we discuss different household risks and risk management strategies across activity groups in the study areas in the perspective of micro insurance. In particular, we study household‘s participation in microcredit programme that facilitate and expose to insurance product and subsequent household decision making. We look at this question at ex-ante perspective, particularly when household decides to Households are already covered under some insurance scheme through their access to microcredit (MFI), it is expected that household may demand for more insurance cover and variety of products, especially with increase in their income. Though the literature on demand for insurance focuses on the income effect, the theoretical analysis reveals that the effect of income on demand for insurance depends on the absolute risk aversion (Gravelled and Rees 2004). However, there are several other factors related to the availability, awareness, access, product design, claims settlement records, premium and product delivery which determine the demand for insurance and which vary across groups and regions.

4.5 PERFORMANCE OF INSURANCE SECTOR IN INDIA DURING POSTREFORM PERIOD Performance of Indian insurance sector has been not satisfactory in comparison to other countries in the world. It continued to lag behind the overall performance of the economy. India accounts for less than two percent of the world‘s insurance market (1.34) while it accommodates more than 16 percent of total world population and sizeable portion of total world poor. Though India ranked second, after China among emerging markets, insurance is viewed as a tax saving instrument and risk cover in life insurance is almost incidental in the country. Some unit-linked instruments are becoming popular but pure risk insurance product has taken a back seat (IRDA 2009).

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Major challenges for insurance industry in India are low insurance intake, low renewal, and lack of awareness and delivery channels, particularly for lower segments and in rural areas. During last few years reduced demand particularly in non-life segment, low interest rates and the need for additional capital by many insurance companies accentuated the performance of the sector.

As recent global economic downturn has affected the performance of insurance sector worldwide, it is also reflected in terms of two important insurance performance indicators such as insurance penetration and insurance density. Insurance penetration measures the level of insurance activity relative to the size of the economy. As GDP per capita rises, it is expected that individuals will purchase more insurance. The latest Swiss Re report reveals that insurance penetration in India was 4.6 per cent in 2008 with 4.0 per cent in life business and 0.6 per cent in nonlife business

5.0 PRICING AND IMPACTS OF MICRO INSURANCE As discussed in earlier sections, the current demand and supply gap in low segment insurance market is a result of several factors.  Though micro insurance is believed to be a low cost product for lowincome groups, its premium and impact can influence household insurance uptake and renewal. An attempt has been made to discuss on the views of the respondents on pricing and impact of current insurance products.

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 To pay insurance premium a dependable income flow is essential. Though it is often related to household borrowing and saving activities some missing links were also found in the study locations.

 Though households having micro insurance product was new and not completely voluntary in the study areas very few of them got the benefits or used it. Many of them were not much aware of the existing insurance products and its utility as they automatically get subscribed to it once availed credit from the MFI.

 This perhaps has not supported the overall performance of micro insurance. It is also reflected in terms of the wider gap between needs, demand and supply of insurance product in study areas.

 Those who understood it had their own perspective about the product. In sum, both supply and demand side bottlenecks found more active than pricing of insurance product. Of course, respondents had different views regarding premium of these products but it was found less important than the insurance cover, product design and claim settlements which directly link with the efficacy of such products, from insured point of view.

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 Demand for micro-insurance on the demand side too, the ILO has recently prepared an inventory of micro-insurance schemes operational in India. Based on this list some of the observations are made below • The inventory lists 51 schemes that are operational in India. • Most schemes are still very young, having started their operations during the last few years. Of the 39 schemes for which this information is available, around 24 schemes came up during the last 4 years, and about 7 schemes have operated for more than a decade. • As regards the beneficiaries, the 43 schemes for which the information is available cover 5.2 million people. • Most insurance schemes (66%) are linked with micro finance services provided by specialized institutions (17 schemes) or nonspecialized organizations (17 schemes). Twenty two percent of the schemes are implemented by community based organizations, and 12% by health care providers. • Life and health are the two most popular risks for which insurance is demanded: 59% of schemes provide life insurance and 57% of them provide health insurance.8 In SEWA’s9 experience health insurance tops the list of risks for which the poor need insurance. • Twenty-five out of 37 schemes received some external funds to initiate their schemes. Twenty out of 32 schemes received external technical assistance in the form of advisory services, technical services, training or even referral services for their schemes. • In the majority of the schemes special staff had been recruited to manage the insurance activities. The other schemes kept relying

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on their regular staff while recognizing them the additional responsibilities linked to the management of the scheme.

5.1 MICRO FINANCE AND MICRO INSURANCE

Micro insurance has linkages to microfinance. The linkages prospects safeguarding the poor from negative shocks and their consequences. In India, since insurers are obliged to cover the rural and social sector, they (insurers) are increasingly interested in partnership with the microfinance institutions. Links between MFIs and MI provides extent to institutional and regulatory issues, issues of

Financial and economic sustainability and potential for social inclusion and exclusion embodied in MF/MI design.

Since insurers in India are required to sell a certain percentage of their policies in the rural areas, the demand for co - operating MFIs was too strong and there were too few reliable MFIs to work with.

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Demand for weather insurance perhaps

The most significant innovation in India is the introduction of weather insurance by ICICI Lombard in collaboration with BASIX, a Hyderabad -based MFI. This is also known as index-based insurance, in this case using rainfall levels as a claims trigger. Because clients cannot affect rainfall levels there is no moral hazard problem. There could be fraud problems, however, if clients can affect the reported levels of rainfall. Claims are processed as soon as the rainfall levels are known, and clients do not need to send in claims forms. HDFC-Chubb is now also experimenting with weather insurance. Although this is an interesting innovation, and worthy of further investigation, national roll -out of weather based insurance would not be immediately possible because only part of India has reliable weather stations.

1. Demand for life and disability insurance Life insurance is the most obvious choice for micro insurance. The consequences of dead they are always significant for poor households so there is a constant demand. The exclusion of suicide reduces moral hazard problems. By selling to groups that are involved in some activity adverse selection can be reduced. Mortality rates are often easier to obtain than, for example, rates of different types of illnesses. A death certificate or identification of corpse makes claims verification easy. With a one-time payout the system is relatively easy to administrate. For this reason, the vast majority of all micro insurance products, in India and worldwide, are life products. Because poor people are frequently involved in hazardous jobs, there is a significant demand in India for disability insurance.

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5.2 DELIVERY MODELS OF MICRO INSURANCE

COMMUNITY BASE MODEL

PARTNER AGENT MODEL

Micro Insurance

POLICYHOLDE R MODEL

Models

FULL SERVICE MODEL

FULL - SERVICE MODEL In this model, an NGO or other organization operates the insurance scheme and fully absorbs risks, profit, and losses arising from the same (Sinha and Suitor, 2010)30. The micro insurance scheme is in charge of everything: both the design and delivery of products to the clients and working with external healthcare providers to provide services to the clients. This model is the most demanding in an organization in terms of capacity, expertise, and investment required to make it work, which entails the financial risk for the organization at its maximum and are wholly responsible for all insurance related costs and losses. PARTNER - AGENT MODEL In “partner - agent” or “linked” model, an NGO or MFI act as the intermediary between the end population and an insurance company. It is supreme that agents caught up in insurance schemes have very close contact with the poor. The advantages are that it eliminates agent risk and allows the institutions involved

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in focusing on their particular strengths and the insurers utilize MFIs delivery mechanism to provide sales and basic services to clients (Anne and Mallika. SERVICE - PROVIDER MODEL In service provider model, microfinance institutions or commercial banks directly market their micro insurance products to their clients. The model needs a well established distribution network and are mostly used in the case of general insurance. The disadvantage of this model is high transaction costs as it targets lowIncome groups, which is a low margin market because of the geographical spread of the client population.

GROUP POLICYHOLDER MODEL Under this model MFI purchases a group life insurance policy from a local insurer, markets them and sell them individually. As a group policyholder, MFI is not responsible for any sales or product servicing activities; it simply pays premiums and forwards applications for claims to insurer just as any policyholder would do.

COMMUNITY - BASED MODEL (MUTUAL INSURANCE)

As per this model, the community members are the sole owners and managers of the insurance. It is not-for-profit model and is characterized by its participatory processes and the role of social cohesion. The policyholders or clients are in charge of managing and owning the operations, and working with external healthcare providers to offer services.

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5.3 DISTRIBUTION CHANNELS How can micro insurance products be sold and serviced cheaply? It is a lowvalue, high-volume business. The following approaches have emerged in India to provide insurance to low-income populations (only regulated channels are included here, not in-house schemes): Partnership model  Agency model  Micro-agent model  Partnership model

The partner-agent model: How does it work? As the name implies this model involves a partnership between an insurer and an agent that provides some kind of financial service to large numbers of low -income people. This could be a microfinance organization, an NGO, or a business that supplies pre-cuts to large numbers of low - income people, such as a fertilizer supplier. This party is an agent, selling insurance policies to the clients on behalf of the insurance provider (usually) in exchange for a commission or fee. The insurance provider utilizes the established distribution channels of this agent and its financial transactions with low-income groups that would otherwise be too costly to set up. The partnership model uses the comparative adman tag of each partner so that each can focus on its core business: the insurance provider is responsible for designing and pricing the product, the final claims management, and the investment of reserves, and absorbs all the insurance risks. In addition to selling the policies, the agent offers its infrastructure for product servicing such as marketing the product, premium collection, and assists in claims management. Pros and cons of the partnership model Pros the system works better than in -house because the synergies are maximized, enabling

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 Both organizations to focus on their core business and expertise; with a single partnership agreement it is possible to sell micro insurance to over a quarter  Of a million low-income people; requires fewer skills for the agent than an in-house model;  Uses legally recognized insurance companies that have adequate reserves, adhere to  Capital requirements, employ certified insurance professionals, and operate under the insurance law; Insurer has access to reinsurance;

5.4 COMMON FEATURES OF MICRO INSURANCE PRODUCTS Micro insurance product features are distinct from the general insurance products with respect to the following points:

PRODUCT SIMPLICITY

A simple product with less coverage is easier to describe and has less circumstances to explain to staff and clients than a more complex product. If the client understands the product easily, then they are more probable to be pleased. The micro insurance regulations specify that contracts for products demarcated as micro insurance have to be issued in vernacular language that is simple and easily understood by policyholders, separate certificates have to be provided to each member in case of a group policy and the same may be distributed through micro insurance agents, these agents can perform additional functions like collection of forms, remittances of premium, distribution of policy documents,

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assistance in the settlement of claims, and other policy administration services, which warrant the products to be simple and easy for the clients.

CORRECT DISTRIBUTION MECHANISM

The distribution mechanism should reduce transaction costs to a level that permit sale of very low cost insurance to the individuals. The margin involved in selling a micro insurance policy is very low. Hence MFIs have proved to be an important link in the provision of insurance to the poor as they group together a large number of the poor people and have an existing infrastructure that can be leverage.

PRICING The pricing of the product should be done in a way to meet the required premium by the insurer and the administrative expenses also should be affordable by the target group. A range of products are available for the low income segment ranging from comparatively expensive health insurance to low-priced groupbased credit/life/asset insurance. The regulation has set limits for micro insurance products, which cannot increase more than Rs.50,000 and the policy term not exceeding 15 years for non-life and for life, the term is annual.

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PRICING

RESERVING

YOUR ACTUARY

REINSURANCE

PRODUCT DESIGN

5.5 ADVANTAGES OF LIFE MICRO INSURANCE

Life micro insurance is a key element in the economic services package for people at the bottom of the social pyramid. Life micro insurance offers pioneering ways to combat poverty by helping the rural poor systematically manage financial risks to their livelihoods and lives. The poor face more risks than the well-off, but they are more vulnerable to the same risk. Without suitable insurance services, a vast majority of the poor turns to moneylenders or temporarily migrates for work. The overall size of the Indian micro insurance market is restricted by general lack of awareness about the benefits of insurance amongst the low income segments of population. Without access to life micro insurance, many poor people are trapped in the vicious cycle of poverty, wherein shocks and debt thwart them to raise on the steps of economic affluence states in his study that bundled product delivers a more comprehensive risk protection package with reduced expenses since marginal costs of additional benefits are minimum in this case.

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5.6 STATUS OF LIFE MICRO INSURANCE IN INDIA

When the Life Insurance Corporation was formed on September 1, 1956 the then Union Finance Minister CD Deshmukh gave a call to take life insurance to every nook and corner of the country. However when the insurance industry was denationalised in 1999-2000 after 44 years and opened to the private sector, the Insurance Regulatory and Development authority was formed. The situation of reaching every nook and corner was a far cry and it was one of the reasons for the government to take this crucial decision. IRDA after overseeing the life insurance sector for five years issued Micro insurance Regulations – 2005 since that was the only option to compel the life and non life insurers to turn towards the downtrodden and the lowly or in the words of the management Guru C K Prahlad – “The People at the Bottom of the Pyramid”.

There are 60 million poor households and another 60 million rural households in India. A majority of them are not covered by any sort of protection. The market is so large but still no insurer has plans to reach them although a few of them have some products to cater this population. Even if 50 per cent of these people are insured with a premium of Rs.500 per head, the potential is Rs.125 billion as a premium income.

IRDA permitted for the first time composite products in the sense that one life insurer and one non – life insurer can join hands and bring out a plan with life coverage and health cover. The Central Government as well as the state government are also eager to do something in this regard. Many NGOs, MFOs and SHGs are ready to join in bandwagon but still little progress has been made in the right direction.

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6.0 INDIANVIEW In India development of micro insurance sector and related policy discussions has started few years back. Within very short period, the sector has drawn attention of policy makers due to its importance both at household level and the economy as a whole. Two major and recent studies by the ILO. Depict broad picture of micro insurance sector in India. As regard to the micro insurance products the study highlights that out of 80 listed insurance products 45 cover only a single risk and only two or three products cover multiple risks. Majority of the insurance products cover life (52%) or accident-related risks and addressed to individuals. Out of the 12 currently available health insurance products seven products have been designed and restricted to groups and five products have chosen to coverage to some critical illness at individual level but not the reimbursement of hospitalization expenses. Most of the products require a single payment of premium (i.e., a one-time payment) upon subscription. Private insurers had three times more products than their public counterparts. Some important observations about the demand for micro insurance in India are made in a recent study by ILO. The study provides details of micro-insurance schemes operational in India. Out of 51 schemes that are operational in India most schemes have started operations during the last few years. As regards to beneficiaries, about 43 schemes, for which the information is available, cover 5.2 million people. About 66% of the micro insurance schemes are linked with micro finance services provided by specialized institutions (17 schemes) or non-specialized organizations (17 schemes). Twenty two percent of the schemes are implemented by community based organizations, and 12% by health care providers.

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Life and health are the two most popular risks for which insurance is demanded. Twenty-five out of 37 schemes received some external funds to initiate their schemes. Twenty out of 32 schemes received external technical assistance in the form of advisory services, technical services, training or even referral services for their schemes. As regard, to the regional distribution of micro insurance outreach about 74 % of total schemes operate in 4 southern states constituting Andhra Pradesh (27%), Tamil Nadu (23%), Karnataka (17%) and Kerala (8%). Two western states Maharashtra (12%) and Gujarat (6%) account for 18% of the schemes. About 56% of schemes deal with one single risk. This shows low outreach and unequal distribution of micro insurance in the country. The study also reflects the linkage between micro-insurance and micro-finance.

Development of micro insurance is often related to microcredit, particularly in developing countries like India. Though microcredit has dominated in microfinance market the entry of micro insurance is only in recent past. In India micro insurance is a relatively new financial service and its outreach is rather limited and unevenly distributed across states. The overall performance of micro insurance in India is not very encouraging. According to a recent study by UNDP, the outreach of micro insurance is around 5 million people covering only 2 percent of the poor in the country. It shows there is huge potential for micro insurance market in the country. A conservative estimation of size of micro insurance market (both life and non life) in India Historically, a few micro-insurance schemes were initiated in India, either by non-governmental organizations (NGO) or by the charitable trust hospitals. It 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).

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One recent study by UNDP, GTZ and Allianz AG finds that India has the most dynamic micro insurance sector in the world. Liberalization of the economy and the insurance sector has created new opportunities for insurance to reach the vast majority of the poor, including those working in informal sector. However, the insurance market penetration is largely driven by supply and not by demand. Available micro insurance products tend to be supply driven or compulsory in nature and more recently, driven by the quota system imposed on insurers under rural and social sector obligations (UNDP, 2007). Micro insurance in India has valuable lessons for rest of the world, particularly in the regulation of the industry. The study suggests some key determinants of micro insurance development in India which is different from commonly assumed that a micro insurance policy is simply a low-premium insurance policy. Some of the key factors that hinder growth of micro insurance are remote location of clients, illiteracy and unfamiliar with the insurance products, illness due to poor food consumption pattern, work conditions and lack of regular medical check-ups and lack of access to formal financial services. Higher transaction costs on the part of policyholders in terms of premium deposit, claim settlement and other matters is often considered as major factor preventing growth of micro insurance in the country.

In a pioneering study by UNDP, pro-poor insurance sector growth in India was discussed with some key issues and constraints, pertinent to the growth of the micro insurance sector.  There are specific reasons for low demand for insurance in spite of intense need. Suppliers have their own concerns, which help to explain why there has been slow development in micro insurance market. The rural financial markets characterized by limited and inappropriate

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services, inadequate information and capacity gaps also hinder growth of rural insurance market.  There are challenges in insurance product design, which result in a mismatch between client‘s needs and standard products on offer. Inadequate effort in product development could be due to different perspective of stakeholders.  Absence of adequate and suitable insurance data is a major concern. In the absence of a suitable insurance database calculation of premium, costs, benefits, willingness to pay, based on macro aggregates may not give actual insights. Building and sharing claims histories can help in aligning pricing decisions with actuarial calculations, thereby reducing price.  Difficulty in distribution is one of the most cited reasons for absence of rural insurance. The high costs of penetrating rural markets, combined with under utilization of available distribution channels, hinder the growth of rural insurance services.  Cumbersome and inappropriate procedures inhibit the development of this sector. Contrasting perspectives of the insured and the insurers, lead to low customization of products and low demand for what is available 6.1 Micro insurance & Social Security

Social protection measure is often related with micro insurance for the poor and low income groups. Micro insurance can play a crucial role as a comprehensive tool to reduce poverty, inequality and vulnerability,

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particularly where public social protection measures are inadequate and unevenly distributed. Unfortunately, more than half of the world‘s total poor do not benefit from any form of social protection measures. Since micro insurance is designed for the protection of low-income people to cope with common risks, it can also strive to cover the excluded such as poor, women and workers in informal sector. In many developing countries like India, the proportion of informal workforce in total workforce is substantial and there is increasing tendency towards casual nature of labour. Under this situation, it becomes daunting task on the part of the government to provide social security to all. About 90 percent of the working population of India is employed in the informal sector and about thirty percent of the unorganized workers are very poor who needs public social security supports. Although current social protection measures consist of health, disability, death, old age and economic risks are prioritized, its funding and implementation remain challenging. In India social protection being a concurrent subject, it has its own political economy. So in the absence of a dependable social protection, the importance of micro insurance becomes interminable. With inherent limitations of the existing social protection measures in the country, there is also a high demand to combat the adverse impacts of natural disasters such as drought, floods, cyclone etc. Unfortunately, the ex-post coping mechanisms primarily supported by the Government are not sufficient and do not cover all groups in all sectors. Though India has exhibited with series of pro-poor anti-poverty measures oriented towards reduction of risks and vulnerability, micro insurance can contribute indirectly as it often exclude covariant risks from their portfolio.

Employment Guarantee Scheme (NREGS), Astray Swarthy Bema Yolanda (RSBY), Astray Health Mission (RHM), Aim Adam Bema Yojana (AABY), India Awas Yojana (IAY), Public Distribution (PDS), old age allowances,

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drought relief etc. which have facilitated the improvement of income levels of poor households. The public-package of ―Doubling Flow of Agricultural Credit‖ has also enabled greater institutional credit flow for agriculture and allied activities. However, all these policy interventions, though ambitious in stated intent, only incidentally address household risks. The most vulnerable rural population, particularly women, older people and rural people are mostly excluded from the insurance market. It implies the need of this segment of population for protection of their lives / income-generating assets against various perils. At present, Personal Accident Insurance Scheme (PAIS) which is being provided as a bundled offering along with the Kisan Credit Card (KCC) Scheme and the Rashtriya Krishi Bima Yojana (RKBY) for insuring crops are, probably, the only borrowed-linked risk mitigation mechanisms available to rural households. Similarly, the progress in enrolment of the poor in the Rashtriya Swarthy Bima Yojana (RSBY) in its third year of operation does not seem to meet the target to cover all poor.

Under this situation, prospect of micro insurance is expected to be much wider and challenging, especially with huge network of financial infrastructure in the country. For instance, many commercial banks have partnered foreign insurance companies for providing life insurance policies. Thus, banking outlets (which number close to 70,000) and more than 1 lakh cooperative societies could provide the needed outreach to purvey micro-insurance facilities without much addition to transaction costs. Unfortunately, the desired outreach and efficacy of micro insurance sector in India has not been achieved.

In this section, we have summarized findings and major issues of some important studies and reports on micro insurance in general and in India in particular with focus on Household risks and risk managing strategy outreach of micro insurance products, major policy regulation and constraints. It helps

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us to develop a framework for analysis of the present study which is presented in subsequent chapters. Available literature evaluating the impact of insurance in low-income countries is limited. There is also unbalance between different types of insurance products. Overall, the emphasis is concentrated on different health insurance schemes, and their impact on health care-utilization, out-ofpockets expenditure or social inclusion. Very few studies evaluate the impact of insurance on household income, nutrition, or other dimensions of welfare than those directly related to the insurance. Study on other insurance products are also limited and hindered by the lack of systematic baseline data on individual beneficiaries and groups.

Cohen and Sestet highlighted the need to carefully study of clients ‘insurance needs before introducing a new product, where market research can include studying (I) clients ‘needs, (ii) specific products, or (iii) the size of the potential market. Analysing insurance demand from Uganda, Malawi, Philippines, Vietnam, Indonesia, Lao P.D.R., Georgia, Ukraine and Bolivia they found that the most prevalent risks relate to health and loss of wage earners. In a recent study by Ito and Kono on health micro insurance in Karnataka, India found that take-up rates of micro insurance have been low despite its perceived need and the enthusiasm of microfinance practitioners. They found some evidence that people behave in a risk-loving way when facing the risk of losses. However, despite these patterns, households ‘priorities regarding demand for insuring risks are nevertheless context specific. More research is essential to understand and identify the means for increasing insurance takeup rates and decreasing dropout rates. A general understanding about attributes of micro insurance products from a client perspective is awareness, easy to understand, simple, affordable, and valuable and trust.

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These factors are determinants of uptake and therefore, determine the impact of micro insurance at household level. LOW RISK

LOW INCOME

MIDDEL INCOME

MICRO INSURANCE UNIT

MIDDEL RISK

HIGH RISK HIGH INCOME

6.2 THE OPPORTUNITIES AND CHALLENGES OF MICRO

INSURANCE Micro insurance is a term increasingly used to refer to insurance characterized by low premium and low caps or low coverage limits, sold as part of typical risk-pooling and marketing arrangements, and designed to service low-income people and businesses not served by typical social or commercial insurance schemes.

As a relatively new field, few studies evaluating the impact of micro insurance projects exist. Of these, even fewer have a rigorous methodology leading to reliable results. Our research aimed to:

- examine the viability of micro insurance as a mechanism of risk transfer and tool for risk management in developing countries;

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- provide a state of the art analysis of micro insurance for a better understanding of currently operational micro insurance schemes;

- reflect on the opportunities and challenges of micro insurance in developing countries, highlighting both the potential benefits and limitations of micro insurance as an instrument for transferring risk;

- consider the interests and perspectives of different stakeholders and the incentives and disincentives for participating and investing in a micro-insurance scheme;

- enhance dialogue and collaboration on this topic between and within the commercial insurance sector and the disaster risk reduction communities;

- Assess the opportunity of introducing micro insurance in Romania.

Reflecting on the opportunities and challenges of introducing micro insurance in Romania, there is absolutely necessary to understand both the supply side (current insurance market) and the demand side (risks faced by low-income persons and the coping strategies used to manage these risks). The majority of the primary research was conducted on-site in Romania, in Oradea and its environs, during the month of December. Qualitative research techniques were utilized, including focus group discussions (FGD) and guided individual interviews with members of both the public and private sector, as well as with international non-governmental organizations, such as the World Bank, and IMF.

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6.3 Insurance Sector in India and Outreach of Micro insurance

Insurance sector in India started in the nineteenth century and it progressed in the early twentieth century with incorporation of National Insurance Company Ltd. in 1906 and New India Assurance Company Ltd. in 1919. Later other insurance players joined the industry. The formal insurance industry started in 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. General insurance business (non-life) came into existence in 1850 with the commencement of the Triton Insurance Company. The first Insurance Act was formulated in the pre-independence period in 1938. After merging of 240 private insurance companies, the first public sector insurance company called Life Insurance Corporation of India (LIC) was set up in 1956. Non-life insurance companies were nationalized in 1972 and were taken over by General Insurance Corporation (GIC) and its four subsidiaries - United India Insurance Company Limited, Oriental Insurance Company Limited, National Insurance Company Limited and New India Assurance Company Limited.

The insurance sector has undergone some notable changes during last few decades with more policy emphasis on growth and efficiency. The broad objective of these policy changes is to achieve inclusive financial development by enhancing risk managing capability of people with rural and pro-poor focus.

A special committee (The Malhotra Committee) was appointed in 1993 to look into the insurance industry to make recommendations for the expansion of this sector. The recommendations of The Malhotra committee were focused on efficiency and growth of insurance sector. One of the most

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important outcomes of the committee recommendations was the Insurance Regulatory and Development Authority (IRDA) legislation passed in 1999 and the Insurance Regulatory and Development Authority was established in 2000. Since then continuous efforts have been made to bring about changes in policy regulations and promotion of insurance sector. The IRDA has enacted 27 regulations on a number of issues such as registration of insurers, regulation of Agents, solvency margins, re-insurance, obligation of insurers to rural and social sectors, investment and accounting procedures, and protection of client interests till

In 2003, Govt. of India constituted a Consultative Group on Micro-Insurance to examine existing insurance schemes for rural and urban poor with specific reference to outreach, pricing, products, servicing and promotion. It also attempted to examine existing regulations with a view to promoting microlicensing, monitoring and review. One of the key issues featured in the consultative group report was that microinsurance is not as viable as a standalone insurance product and it has not penetrated rural markets. Traditional insurers have not made much headway in bringing micro-insurance products to the poor in rural as well as urban areas. However, the committee viewed that the partnership between insurer and organisation like NGO would be desirable to promote micro-insurance by drawing on their mutual strengths. It re-emphasized on the design of microinsurance products that must have the features of simplicity, availability, affordability, accessibility and flexibility. Unfortunately, overall insurance industry in India has been dismal despite the fact that the country has a large population base and insurable risks (UNDP, 2007). While it shows an enormous potential for growth of insurance sector, much is not known about lower segment insurance market across regions and groups.

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7.0 GLOBALVIEW:

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 “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, 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.

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 unnerved population of 370 million.

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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 single lump sum preclude a huge sector of the market from access. In 2005, the Micro Insurance Agency was founded by Opportunity International as a fullyowned 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

The origin of micro insurance is similar to that of micro-credit. According to Churchill, micro insurance has existed since at least the 1800s, when mutual protection schemes co-insured the poor workers. In several countries microinsurance schemes were already a part of the process of designing and implementing increasingly more consistent and incorporated social protection systems. In Senegal micro insurance schemes were mentioned in the national social protection strategy as

Key mechanism. In Rwanda and Ghana, the state implemented nation-wide social protection schemes on health that are built on direct and community based mutual organizations. In Bangladesh, Grameen bank had established a separate wing called Grameen Kalyan (village welfare) which implemented micro insurance schemes through women groups in the villages. Micro insurance Centre had estimated that around 135 million of the low-income people in developing countries have used micro insurance products. The insurance penetration level in some of the Asian countries is presented.

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Health insurance is common in many developing countries, but it is generally offered by community based organizations. Formal social security systems do not touch workers in the system. In developing countries, only 5 to 10% benefit from any kind of social protection. The informal sector is not covered at all. Therefore, there are grassroots organizations are organized to respond to the needs of the community. Generally there is no regulation of these community-based organizations, but health ministries in most countries are supportive and cooperate with institutions and agencies who wish to promote such initiatives. ILO conducted some studies at the end on innovative Micro-insurance products. Various examples were identified, and there is considerable scope for follow-up. About 30 examples of community based insurance schemes were identified, but subsidy factor has not been addressed. Towards the disadvantaged, low-income population especially in rural areas.

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8.0 RESEARCH MERTHODOLOGY “A Study on Micro insurance with special reference to LIFE INSURANCE CORPORATION OF INDIA (LIC)” STATEMENT OF THE PROBLEM As there are immense opportunities of the micro insurance in India. This Dissertation is on the issues and challenges in the micro insurance because of the competition of the various banks and the customer satisfaction of the services which the banks are providing and at the same time to solve the complaints of the customer and maintaining the sound relationship for the future and by this way to estimate the future growth of the micro insurance. OBJECTIVES  To study the issues and challenges in micro insurance.  To study the recent trends in micro insurance.  To ensure high satisfaction level and reduce percentage of complaints of customers in micro insurance.  To estimate the future growth of Indian micro insurance.  To understand Optimization of micro insurance channels.  To suggest strategies for improvement in Customer Service.

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DATA COLLECTION Data was collected from two sources-primary and secondary sources. 1. Primary data collection- The primary data was collected by means of survey. It was collected from different customers through questionnaire. And by visited in LIC office of thane. 2. Secondary data collection-This data was collected from Internet, Company’s websites & Magazines. SAMPLE SIZE Sample size was restricted to 50 respondents, since it was not possible to cover the whole universe in the available time period.

SAMPLING METHOD

For this research Non- Probability Convenience Sampling has been used because time limit for the completion of the work is limited and also managers and employees were not available all the time. 3. Area of Study-

THANE

4. Duration-

2 months

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8.1 DATA ANALYSIS AND INTERPRETATION Majority of the respondent was belongs to 64% male and 36% Female

Gender

36% Male Female

64%

Majority of the respondent was belongs to age group of 25-35 years say 41. Only 18 respondents are more than age 45

Age Group 50

41

40 30

22

20

19

18

35-45

More Than 45

10 0

Below 25

25-35 Respondant

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Majority of the respondents were educated till S.S.C. Higher secondary and the percentage of graduation and post-graduation is about to 30%, 21%, 7%

Education 45

42

40 35 30 30 25

21

20 15 10

7

5 0 Up To S.S.C

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H.S.C

Graduate

Post Graduate

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39% of the respondent got the information about insurance from Watching TV, 31% got from Newspaper, and 17% respondents got it from the company agent least from Banners & Hoardings, friends, relatives and other from 13%.

Sources of Information

13 39 17 Television

Newspaper

31

Company Agent

Other

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55% respondents are not aware about the micro insurance and 45% respondent

Awarness of Micro Insurance

45% Yes No

55%

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47% of respondents are ready to invest monthly more than 5000 Rs. for investment in insurance, 37 % of respondents wants to pay 3000 to 5000 Rs for premium, premium amount between 1000-3000 is chosen by only 9 respondents.

Premium Of Respondant

50

47

45 40

35

35 30 25 20 15 10

12 6

5 0 Less than 1000

1000-2000

2000-3000

More than 3000

.

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Only 17% respondents have the micro insurance policy and others do not hold policy

Holder Of Policy 90

83 80 70 60 50 40 30 20

17

10 0

Yes

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No

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Major respondent have choose micro-insurance policy for death benefit say 35%, 19% have for retirement benefit and 21% for their children’s future

Respondent's View

16 35 7

19

21

Death Benefit

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Children’s Future

Retirement Planning

Tax Planning

other

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Maximum respondents have the ULIP policy and 27% have included both type of policy. They also hold separate Unit Linked and Traditional also

Type of Policy

27

53

20

Only Unit Linked

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Only Traditional

Both

74

Most of the respondent has to pay Premium amount 59% is semi-annually. 23% respondents have pay by annually

Payment Method

9 23

9

59

Annual

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Semi annually

Quartely

Monthly

75

Major respondent have investing their amount in order like Bank deposit (46%), Insurance (25%) and in the mutual Fund Investment (9%).

Investment View

9 17

Mutual Fund 25

Insurance Post Office Bank Deposit Other

3 46

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While purchasing the policy majority respondent have expected for the higher return, it is 42%, second factor affected is its premium amount

Factor affecting while taking policy

8 23

11

16

42

Premium

.

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Return

Safety

Liquidity

Market Condition

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78% respondent having satisfied with its current micro-insurance policy and rest are not much satisfied

No. of Respondents are Satisfy 90 80

78

70

60 50 40 30 22 20 10 0 Yes

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No

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Recommendation & Suggestion The micro insurance frame work in India needs a deeper reach so that it can help the most needed people, following suggestion can make the regulation more effective. Leveraging Existing Network for Micro-Insurance It would be difficult for the insurers to establish a vast network for distribution of micro-insurance products. They need to utilize existing Government organizations, banks, MFIs, NGOs and SHGs to increase the outreach of micro insurance to the poor. The advantages of these entities are that they find greater acceptability among the financially excluded, and with a better understanding of their needs are well equipped to advise them on the choice of products. In India with a vast rural population characterized by challenges and complexities, it makes sense to latch on to an existing mechanism operating in these segments to lower costs and to help the insurer to leverage on the faith already generated by the entity. Hence it would be prudent to choose a partner-agent model for delivery where the insurer underwrites The risk and the distribution are handled by an existing intermediary. This model keeps the cost of insurance attractive enough for the poor to enter and remain in its fold even while addressing the concern of the insurers about the low returns of micro-insurance.

8.2 Linking Micro-credit with Micro-insurance It is becoming increasingly clear that micro-insurance needs a further push and guidance from the Regulator as well as the Government. The Committee concurs with the view that offering microcredit without micro-insurance is bad financial behaviour, as it is the poor who suffer on account of such bad product design. There is, therefore, a need to emphasise linking of microcredit with micro-insurance. Linking micro-insurance with micro-finance makes good business sense. Further, as it helps in bringing down the inherent risk cost of lending, the Committee feels that Page 78 of 84

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NABARD should be regularly involved in issues relating to rural and micro insurance to leverage on its experience of being a catalyst in the field of micro-credit. IRDA’s Regulations on Micro-Insurance Building on the recommendations of the consultative group, IRDA notified MicroInsurance Regulations on 10th November 2005 with the following key features to promote and regulate micro-insurance products. The regulations focus on the direction, design and delivery of the products:

a.

A tie-up between life and non-life insurance players for integration of product to address risks to the individual, his family, his assets and habitat,

b.

Monitoring product design through “file and use”,

c.

Breakthrough in distribution channels with inclusion of NGOs, SHGs, MFIs and PACS to provide micro-insurance, with appropriate compensation for their services,

d.

Enlarged servicing activities entrusted to micro-insurance agents,

e.

Issue of policy documents in simple vernacular language.

Currently the IRDA regulations do not favour composite insurance (i.e., life and non-life insurances by the same company) and also limit the agency tie-up to one life and one non-life insurer. However, in recognition of the uniqueness of micro102 insurance, these regulations enable life and non-life companies to tie-up for offering a combined policy in rural areas. Further, the IRDA has allowed insurers to issue policies with a maximum cover of Rs. 50,000 for general and life insurance under Page 79 of 84

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these regulations. The regulations have also eased the norms for entry of agents relating to training and pre-recruitment examination. As an attraction, remuneration to agents has also been levelled across the term of the policy.

Some of the recommendations could be:  Simplification of products and bundling where requires making them easy to understand, easy to use, sill and service.  Simplifying and making premium payment plans flexible to suit the needs.  Focus on volumes by targeting large groups.  Innovations are required at all stages for products, in pricing policy and in delivery channels  Success of marketing micro insurance depends on understanding the social and cultural needs of the target population  Integrating micro finance activities with micro insurance for a most beneficial outcome.  Claim settlement to be timely, simple and transparent.  Maximizing the benefit of connectivity revolution in rural India to reach the un-served markets.  Using additional innovative distribution channels to achieve cost-efficiency in agricultural markets.

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Field Visit: The first place I was visited in life insurance corporation of India thane west The first field visit was in early November 2018 for a week. Lasted for three weeks during late November to December 2018. The objective was to gather primary data and interaction with different stakeholders according to the systematic methods presented above. For field data collection a team of research investigators was selected and trained by the researcher prior to household survey in the study areas.

9.0 CONCLUSION: We all know insurance is a very old concept. But the demand for insurance was increased from a decade. Middle class people take insurance policy according to their ability & capacity to pay premium to secure their life. When we talk about low income people a question comes in mind *

Do poor people have any security?

*

What if they face any risk?

*

Who is going to look after them?

*

Their family members?

*

Do they have any insurance policy?

*

Are they capable to pay the premium?

The answer for this is Micro Insurance. Micro Insurance is designed keeping in mind to poor people. Like everybody else, the poor people face a variety of risks such as Page 81 of 84

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risk of death, illness, disability, accident, income & property & so on. Like all other, they also need to be protected from these risks.

Policy-induced and institutional innovations are promoting insurance among the low-income people who form a sizable sector of the population and who are mostly without any social security cover. Although the current reach of ‘microinsurance’ is limited, the early trend in this respect suggests that the insurance companies, both public and private, operating with commercial considerations, can insure a significant percentage of the poor. Serving low-income people who can pay the premium certainly makes a sound commercial sense to insurance providers.

QUESTIONNAIRES  Name-------------------------------------------------------- Which gender are you?  male  female  Which age group are you in?  18-25  26-30  31-45  46 and above  Are you aware of "micro insurance"?  yes  no

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 If yes, how do you know?  family or friends  social circle  internet  What are your estimated expenses on medical (monthly)? >  100  200  500  1000  2000  other  Do you think that micro health insurance is beneficial?  yes  no  Do you trust on micro insurance provider?  yes  no  Number of family members (if married)?  2  3  4  5  6  more than 6  Do you think that Insurance is a way to protect in hard times?  yes  no

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9.1 A} BIBLIOGRAPHY:  Micro Insurance in India Social Finance.  Micro Finance Concepts’, System, Etc.  Insurance Principles and Practice.  Fundamentals of Risks and Insurance.

B} WEBLOGRAPHY:

o WWW.GOOGLE.CO.IN( micro insurance in India ) o WWW.WIKIPEDIA.COM ( micro insurance ) o WWW.MICROINSURANCENETWORK.ORG

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