The microfinance industry, especially in India, has been a strong enabler in including the financially underserved and unserved in the formal financial ecosystem. Now the sector has started looking beyond micro credit areas, engaging themselves in promoting and distributing micro insurance products which can be leveraged with their core activity with a view to provide more and more service and products to prospective customers. Designed with the objective of protecting poor people keeping in mind their environment, needs, and possibilities, micro insurance is different from traditional insurance products.
Financial inclusion has always been at the forefront in India but the last decade saw a strategic shift from credit focus to a more holistic approach such as opening bank accounts or getting access to add-on products like insurance. This new approach has initiated a change in the core financial architecture of India’s economy. Today, India has a diversified banking sector that addresses the needs of various sectors. However, traditionally, banks have not focused much on the economically backward class. The term micro-Insurance signifies a low value insurance product designed for low income earners. This is meant to provide the poor with some protection, peace of mind and dignity. Building on the recommendations of the consultative group, IRDA notified Micro-Insurance Regulations on 10th November 2005 to promote and regulate micro-insurance product. The regulation focuses on distribution channels like Partnership model, Agency model, and Micro-agent model. This is where the MFIs play a crucial role. They can provide insurance coverage to the clients through their own products or following the partner agent model, thereby distributing products of insurance companies. To remain competitive insurance companies are joining hands with MFI’s to increase their penetration. MFIs get involved in insurance for a variety of reasons, like offering insurance to protect the poor, to ensure that workers and their family members have access to an affordable social protection, risk prevention and coping mechanisms. Other MFIs primarily want to protect themselves. They want to offer insurance to reduce credit risks stemming from the death or illness of borrowers.
The AMFI-WB 1st Eastern Region Insurance Summit 2017 aims to become a forum for various stakeholders such as the regulator, shareholders, management of insurance companies, investment analysis, distributors, brokers and, consumers giving them an opportunity to liaison about various issues pertaining to the sector. The summit seeks to explore the Micro finance and banking industry at large, debate and discus the appropriate path to delivering the rightful protection to the insurance consumer and fair value to the shareholders.
In India, it is often assumed that a microinsurance policy is simply a low -premium insurance policy. There are a number of other important factors, which is characteristic of low income clients:
The main premise of micro insurance products in India would be to protect the needs of its consumers who more than often come from the lower income strata of the society. So the micro insurance products and services should factor in the socio-economic condition of the policy holder and benefits should be designed accordingly
There are a number of techniques that Indian insurers have used to gain the trust of potential clients. These include:
Technology is the biggest enabler when it comes to making micro insurance available in the remotest part of the country. With improving technological infrastructure (the Internet, cell phone networks), customers are making transactions without any physical contact with an MF credit officer. As a result, transaction costs have fallen and distance from a physical outlet is no longer a reason for exclusion.
In fact is microinsurance is to reach the remotest corner of the country, technology will be key. Falling prices of mobile broadband and the increasing availability of 3G, the new generation of wireless technologies, are expected to improve internet access considerably in coming years. Advancements, such as satellite data, Global Positioning Systems (GPS) and point of sale terminals, have the power to improve micro insurance in a variety of ways. Technology is supposed to drive the development of financial services in two ways: by cutting costs, and bridging physical distance. These two issues – high operating costs and clients that are spread out and difficult to access – represent two of the biggest barriers to micro insurance development.
Health micro insurance also presents unique opportunities for technological innovation to increase client value. The tele‐medicine aspect is another valuable offering, since many poor clients live in areas where physicians are scarce. Technology also plays a key role in health insurance schemes that offer “cashless” benefits and in detecting fraud.
For distribution of micro-insurance products, IRDA has said that regional rural banks, micro-finance institutions, district cooperative banks, non-governmental organizations, self-help groups, urban cooperative banks, banking correspondents and individual owners of kirana stores, public call offices, petrol bunks and fair-price shops in rural areas will be allowed to sell these products. The regulator has proposed that all micro-variable life insurance products shall have a lock-in period of five years from the date of inception of the policy, during which period surrenders are not allowed, but partial withdrawals may be permitted. Micro insurance agents may work with one life insurance Company and one general insurance company. They may also work with Agriculture Insurance Company of India for distributing micro-insurance products of crop insurance and with any one of the stand-alone life insurance companies for distribution of their health insurance products.
India has perhaps the most exciting and dynamic microinsurance sector in the world. The aim of this Summit is to provide an overview of existing knowledge on the demand and supply of microinsurance in India, as a basis for reducing the vulnerability of poor and low-income people while developing new market opportunities.
