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Micro insurance in odisha

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micro insurance in Orissa: initiatives and Achievements

micro insurance in Orissa: initiatives and Achievements

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    Micro insurance in odisha Micro insurance in odisha Document Transcript

    • Micro insurance in Odisha: Initiatives and Achievements Submitted To: Prof. C.K.Parhi Submitted By: Prabin Kumar Nath (u310036) Mahesh Gupta (u310024) Deepti Das (u310015) XAVIER INSTITUTE OF MANAGEMENT BHUBANESWAR1|Page
    • AcknowledgementApart from the efforts of us, the success of any project depends largely on the encouragementand guidelines of many others. I take this opportunity to express my gratitude to the peoplewho have been instrumental in the successful completion of this project.I would like to show my greatest appreciation to Prof. C.K Parhi. I can’t say thank youenough for his tremendous support and help. I feel motivated and encouraged every time Iattend his meeting. Without his encouragement and guidance this project would not havematerialized.The guidance and support received from all the members who contributed and who arecontributing to this project, was vital for the success of the project. I am grateful for theirconstant support and help. Prabin Kumar Nath Mahesh Gupta Deepti Das2|Page
    • Executive SummaryMicro insurance scene in Orissa acts as a basis for reducing the vulnerability of poor andlow- income people while developing new market opportunities. Orissa has perhaps themost exciting and dynamic micro insurance sector in India.The aim of this report is to provide an overview of existing knowledge on the demand andsupply. The report was compiled using secondary data, much of which was obtainedduring a field trip to certain villages. The breadth of the project and the limited resourcesavailable did not allow for primary research to be conducted.In the first section, the report explores how Micro insurance started in Orissa, andgives reasons for its dynamism. The following sections include an investigation into thesupply and demand of Micro insurance in Orissa, a look at the various channels fordistribution, an examination of social security in Orissa and its relationship to Microinsurance, and a short section on possible partnerships for donors wishing to work on Microinsurance.Also it throws light on the challenges faced by this sector and discusses the opportunities forthe scaling up of this sector.3|Page
    • Table of Contents1. Introducing Micro Insurance ............................................................................................................... 22. Meaning and definition of Micro insurance: ...................................................................................... 23. The Importance of Micro-Insurance .................................................................................................. 3 3.1 Guiding Principles of Micro insurance .......................................................................................... 54. Risk Mitigation Solutions Currently Available in Market ................................................................... 5 4.1 Life Insurance: ..................................................................................................................... 5 4.2 General Insurance: ........................................................................................................................ 65. Potential for Growth of MFIs in Orissa ............................................................................................... 76. Current Scenario of Micro-Insurance.................................................................................................. 8 6.1 RRDC, Fortis to provide micro-insurance in Orissa ....................................................................... 97. Issues and Bottlenecks ....................................................................................................................... 9 7.1 Awareness and Education: ............................................................................................................ 9 7.2 Documents for Certification ....................................................................................................... 10 7.2.1 Age Proof .............................................................................................................................. 10 7.2.2 Death Certificate .................................................................................................................. 10 7.2.3 First Information Report (FIR) .............................................................................................. 10 7.2.4 Product Customization......................................................................................................... 10 7.2.5 Premium Routing ................................................................................................................. 11 7.2.6 Remuneration of Expenses for Distribution and Servicing .................................................. 11 7.2.7 Lack of Focus on Pure Risk Policies by Insurance Companies and High Lapsation of Policies in Rural Areas ................................................................................................................... 11 7.2.8 Minimal Targets for Rural Areas .......................................................................................... 12 7.2.9 Group Approach ................................................................................................................... 12 7.2.10 Health Insurance- A Morphing Product ............................................................................. 12 7.2.11 Separate Regulations for Rural Insurance ......................................................................... 128. Recent Developments ....................................................................................................................... 13 8.1 RRDC, Fortis to Provide Micro-Insurance in Orissa ..................................................................... 139. References....................................................................................................................................... 131|Page
    • 1. Introducing Micro InsuranceWhat happens when a poor family’s breadwinner dies, when a child in a disadvantagedhousehold is hospitalized, or the home of a vulnerable family is destroyed by fire ornatural disaster? Every serious illness, every accident and every natural disaster threatensthe very existence of poor people and usually leads to deeper poverty. That’s where “Microinsurance” comes in.Micro insurance is specifically designed for the protection of low -income people,with affordable insurance products to help them cope with and recover from common risks.It is a market-based mechanism that promises to support sustainable livelihoods byempowering people to adapt and withstand stress. Two-thirds of human beings sufferingin the most extreme poverty are women. Often living within $1 per day, they are the mostvulnerable. But will Micro insurance actually help those living in poverty bycontributing to sustainable livelihoods? The studies clearly indicate that access toMicro insurance by the poor and disadvantaged population can contribute significantly tothe achievement of the Millennium Development Goals, particularly the goals of eradictating extreme poverty and hunger (MDG 1), promoting gender equality andempowering women (MDG 3) and developing a global partnership for development (MDG8).2. Meaning and definition of Micro insurance:Micro insurance, commonly called as insurance for the poor, has recently drawn the attentionof practitioners in developing countries. In common parlance, Micro insurance is theprovision of insurance services to low-income households, which serves as an important toolto reduce risks for the already vulnerable population. There is no unanimously accepteddefinition of Micro insurance despite its profound use and understanding across stakeholdersand others.A simple definition of Micro insurance is offered by Churchill (2006) is that it is an insurancethat (i) operates by risk-pooling (ii) financed through regular premiums and (iii) tailored tothe poor who would otherwise not be able to take out insurance. Micro insurance is definedas insurance that is accessed by the low-income population, provided by a variety of differententities, but run in accordance with generally accepted insurance practices ... Importantly thismeans that the risk insured under a Micro insurance policy is managed based on insuranceprinciples and funded by premiums‖ (International Association of Insurance Supervisors,2007).Micro insurance is different from usual form of insurance. In terms of micro definition, Microinsurance is more complicated as there are different approaches. ―Micro‖ as reference to lowpremium and low benefits may be affordable but it may not be effective enough to managerisks of different types of different categories of clients. Micro insurance is often believed to2|Page
    • be an important component of a broader set of financial services under microfinance –making available financial services for poor households and enterprises to sustain theirlivelihoods. Basically there are two broad categories of Micro insurance often commonlyunderstood – one focused on extending social protection to the poor in the absence ofappropriate government schemes and the other offering a vital financial service to low-income households by developing an appropriate business model that enables the poor to be aprofitable (or sustainable) market segment for commercial or cooperative insurers. Micro insurance is also taken as group insurance that can cover thousands of customersunder one contract. It requires an intermediary between the customer and the insurancecompany. This intermediary role has been played mainly by non-governmental organization(NGO) and microfinance institutions (MFI). The role of intermediaries in growth of Microinsurance in India is well documented.Currently around 135 million, or 5%, of low income people in developing countries are usingMicro insurance products. But the size of insurance market for low income groups is largeand it constitutes about 1.5 to 3 billion potential clients (Micro insurance Centre, 2007).According to a research carried out by Swiss Re in 2007, most growth in the insuranceindustry over the past decade has come from the wealthy and middle income markets inemerging economies.Premiums grew by 3.3% globally and by 11.8% in the emerging markets in that year. Thoughpartly this was due to a growing number of clients moving into the wealthy and middleincome brackets in these countries, it is also attributable to insurance expanding into newmarkets. The number of people covered under Micro insurance is estimated about 78 millionsin 77 countries out of 100 less developed countries (Roth et al 2007).3. The Importance of 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. Providing insurance services to the majority of the rural population, scattered over a wide dissection of geographical, socio-cultural and linguistic landscape will be a major challenge for both public and private institutions concerned with delivering insurance services. The challenge is even more daunting because of low literacy levels, poor infrastructure and a nascent and urban centric insurance industry at this point of time. The importance of having a deep penetration of insurance services in the rural sector need not3|Page
    • be overstated, to highlight its importance for the overall strength of the state.Rural employment is directly influenced by externalities like rainfall, weatherconditions, level of agriculture cultivation, yield etc. Majority of rural poor seek wageemployment, and hence are affected by such adverse external factors. Ability of ruralpoor to earn wages depends on their health condition. Their overall livelihood issubjected to protection of their assets, health and consumption needs. Financial lossarising out of most such external factors can be effectively addressed with insuranceservices.The risks faced by rural households may be broadly classified as those related to life andlivelihoods. Those risks that would fall under the livelihoods are the ones, which wouldbe under the domain of general insurance companies in Indian context. The majorlivelihood risks that are faced by a rural household are: • Risks to Agricultural activity • Risks to Agri-allied activities like risk to livestock • Risks to assets used in non-farm activities • Health risks.While the risk to agricultural activity may be mainly from natural factors likeinadequate rainfall, this activity also faces certain market risks like price risks. Thoseengaged in non- farm activity too are prone to risks affecting the farm activity as therural economy is still dominated b y agrarian activity. Therefore i n order to addressrisks affecting various livelihood activities, a combination of tools like risk mitigation /minimization (through better pest management practices, disease prevention etc) and riskmanagement through financial instruments like insurance and derivatives are required.Health risks faced by rural people is not only debilitating for the rural household becauseof expenses involved for diagnosis and treatment, but also loss of wages to the entirefamily as typically all members of rural household even at very old age are engaged ineconomic activity to eke out a living. This problem is further compounded by thefact that rural places have very poor health infrastructure coupled with low awarenesslevels on health.Micro insurance is essentially a financial service, which uses risk pooling toprovide compensation to low income individuals or groups that are adversely affected bya specified risk or event. One of the critical requirements for poor women to ensureincome and economic security would be micro insurance. Poor women do need insuranceagainst life and also on their assets like house, productive equipment etc. Of late, thisservice has been gaining importance as the social security tool for the poor due to theirvulnerability to a range of risks such as health problems, death of livestock and naturaldisasters.4|Page
    • Vulnerability to risk affects not only poor people, but also MFIs dealing with them through their adverse impact on loan repayment rates and stability of savings deposits for MFIs. MFIs attempt to minimize risk in ways, which necessarily conflict with the interests of needs of clients.3.1 Guiding Principles of Micro insurance4. Risk Mitigation Solutions Currently Available inMarket4.1 Life Insurance:The history of life insurance in India dates from 1818 when this instrument was conceivedmeans to provide risk cover to the families of Englishmen then serving in India. The BombayMutual Life Insurance Society, the first Indian owned life insurance company, wasestablished in 1870. It was the first company to charge the same premium for both Indian andnon-Indian lives. The Oriental Assurance Company (life business) came into being in 1880.Several frauds which occurred during the 1920s and 1930s sullied the image of the insurancebusiness in India. By 1938, 176 insurance companies had been established in India. Theinsurance business grew at a faster pace after independence in 1947. Indian companiesstrengthened their hold on this business but, despite the growth, insurance remained primarilyan urban phenomenon.In 1956, the Government of India brought together over 240 private life insurers and5|Page
    • provident societies under one nationalized monopoly corporation and the Life InsuranceCorporation of India (LIC) was born with the enactment of the Life Insurance CorporationAct, 1956. Nationalization was justified on the grounds that it would generate the muchneeded funds for rapid industrialization. This was in conformity with the Governmentschosen path of state led planning and development.In the area of Life insurance, Life Insurance Corporation (LIC) has had a long history ofselling life insurance policies in rural areas through its vast agent network. But as thesepolicies are sold entirely by the agent force, the focus on commissions to be earned,restricts the profile of products sold to the high valued, savings linked policies,which are not affordable for a majority of rural households. Besides this, from time totime LIC has launched some group life insurance policies under various governmentschemes. But these policies have failed to bring under their coverage significant numberof lives. With the opening up of the insurance sector to the private players, and rural andsocial sector business obligation imposed by IRDA, the rural sector has seen launch ofseveral individual and group insurance products by the private players. These products arecharacterized by low levels of coverage and very low premium rates.4.2 General Insurance:The general insurance business in India, traces its roots to the Triton Insurance CompanyLimited, the first general insurance company established by the British in Calcutta in 1850.The first Indian company, the Indian Mercantile Insurance Ltd was set up in 1907. This wasthe first company to transact all classes of general insurance business.The general insurance business continued to thrive under the private sector till 1972. Thecover provided by the general insurance companies was, however, limited to organized tradeand industry in large cities. The 107 insurers of the general insurance industry werenationalized in 1972 and amalgamated and grouped into four companies – National InsuranceCompany, New India Assurance Company, Oriental Insurance Company and United IndiaInsurance Company. These four companies were structured as subsidiaries of a holdingcompany, the General Insurance Company (GIC).There are two products that are more familiar in the rural context are: • Crop Insurance delivered by public sector insurer (GIC) • Livestock Insurance by the public sector insurers. The delivery of the above products has been mainly restricted to beneficiaries of various government-sponsored schemes and there has been little active participation by the insurers to deliver these products on a larger scale. The public sector companies have also designed health insurance products like the Universal Health Insurance, but these6|Page
    • policies have really not been able to bring under their coverage sufficient number of people. To overcome the shortcomings of the crop insurance product, a couple of private insurance companies in partnership with distribution channels have been piloting rainfall insurance. Similarly most private insurance companies are also coming out with products to cover the risks of Li vest ock . A m ajor dist ri buti on channel t hat i s being explored b y Insurance companies is to tie up with MFIs.5. Potential for Growth of MFIs in OrissaIn spite of massive bank linkage in Orissa, a large chunk of poor still depend upon themoneylenders. A study conducted in Southern Orissa reveals that though commercial banksand RRBs are operating in the areas, the credit gap is still around 60%. The informal creditsource is mostly commission agents, moneylenders and marketers of the product. Theaverage rate of interest in the informal credit sector is in the range of 48%-100%. To freethem from the clutch of the informal sources, a large number of NGOs have startedgraduating to NGO-MFIs in the area to which formal financial institutions do not have anaccess. Further, the qualitative performance of the NGO-MFIs and their outreach hasattracted the private sector banks and MFIs from other places to operate in Orissa.To do micro-finance program through client owned, managed and, controlled institutions,Govt. of Orissa has taken initiatives in Federation Building and so far there are 293955clusters and federations have been formed in the state.In the state when SFMC is aiming to nurture and support 10-15 MFIs, a few NGO-MFIs likeAdhikar in Khurda, Awareness in Cuttack, FARR and Parivartan in Kalahandi are in thepipeline and BMASSs like Sorada, Jagannath Prasad and Hinjlicut, LIPICA and some otherpotential agencies are under active consideration for support from SIDBI.Asmitha microfin Ltd. Plans to increase its outreach to 40 branches with a clientele base of54000. Loan portfolio is estimated to be about 17.56 crores. In the next three years it wouldmove in a dynamic way in reaching out with greater depth to the far remote areas of Orissa. Itplans to increase in clientele base doubling the members every year and offering financialservices with efficiency and at the same time reach the poorest in the villages. It aspired tocomputerize all its branches and establish three regional Training centers, thereby increasingthe efficiency of the staff. Asmitha microfin Ltd. would continue to work with a focus on thepoorest and deliver professional services.In the next three years FWWB would be providing loan assistance to at least 10 neworganizations in the state for partnership and make them sustainable in the micro-financesector through conducting training programmes and exposure visits to the best practices.7|Page
    • 6. Current Scenario of Micro-InsuranceA number of insurance companies such as LIC of India, SBI-Life, AVIVA, RoyalSundaram, Max New York, TATA-AIG, Birla Sun life, ICICI have come forward toserve the SHG clients with quite lucrative micro-insurance products through their corporateagents. When LIC of India is serving the clients directly as well as through Govt. andcorporate agents like BISWA, Royal Sundaram and AVIVA are operating in Orissathrough banking tie-ups, corporate agents like BASIX and direct sales force.In the area of life insurance BASIX has worked with ICICI Prudential to begin with andis currently working with AVIVA Life Insurance Company. BASIX is also currentlyworking with Royal Sundaram General Insurance Company for the delivery of Livestockinsurance product and ICICI Lombard for the delivery of rainfall insurance. BASIX is alsoactively working with the above and couple of more insurers for designing a suitable healthinsurance product for its rural clients. In 2003, BASIX was also given a Corporate Agencylicense by IRDA to distribute retail life insurance products from AVIVA. During the lastfinancial year, BASIX through its 3 field units in Orissa has insured 900 plus clientswith the insured amount of Rs.187 lakhs. Under SBI life, presently “Shakti” a product exclusively designed for the SHGs is available only to the SHGs maintaining account with SBI branches and Samanwita Gramya Unnayan Samiti, the Development Project sponsored by the SBI in the district of Kandhamal. So far 2050 members of Self Help groups have availed insurance cover in the State under “Shakti” Product exclusively designed for Self Help Groups. All the three claims received from the district of Keonjhar & Kandhamal have been settled. Since the end of the 1990s an increasing number of NGO-MFIs like FARR and Parivartan in Kalahandi, Swayanshree in Cuttack have tried to develop insurance products for their clients to reduce this risk. While organisation like Swayanshree in Cuttack incurred loss, FARR in Kalahandi had to redesign its product due to poor response. But the insurance product developed by DMASS in Ganjam has been found successful. However, micro-insurance unlike micro-Finance needs to be provided by specialist entities other than the mFIs as the skills required to run micro insurance program are quite different from those required for a lending and/or deposit taking institution. In CASHE Project area of Kalahandi, Sambalpur and Ganjam district, 21, 930 women members have enrolled under Janashree Bima Yojana by February 2005 including three BMASSs (Jagannath Prasad, Hinjlicut and Sorada). Under Mission Shakti, in different district of Orissa under Janashree Bima Yojana 19,739 nos. of SHG members have been enrolled and 136 nos. of death claims have been settled in 2003-2004 with disbursement of Rs. 28, 40,000. During 2004-05, 44,408 SHG8|Page
    • members have been enrolled under the scheme under which 134 death claims have been settled with a total disbursement of Rs.26, 10,000/- as on 31.10.2004. Further under ICICI Lombard’s “Mahashakti Yojana” 32,000 SHG members have been insured only in Rayagada district. Efforts are on to expand this service in 9 more districts.6.1 RRDC, Fortis to provide micro-insurance in OrissaMicrofinance Focus, Sept. 2, 2009: IDBI Fortis Life Insurance has tied up with RegionalRural Development Centre (RRDC) to offer rural consumers the protection of Terminsurance Grameen Suraksha in Orissa. IDBI Fortis, in association with RRDC, has alreadyinsured 3,440 rural individuals through Term insurance Grameen Suraksha.IDBI Fortis Life Insurance Company Ltd, which started its commercial operations fromMarch 2008, aims to sell 10,000 Term insurance Grameen Suraksha (TGS) policies in Orissaduring the current fiscal.IDBI Fortis Term insurance Grameen Suraksha is designed for rural customers with fourconvenient premium slabs of Rs 50, Rs 100, Rs 150 and Rs 200 with corresponding sumsassured of Rs 5,000, Rs 10,000, Rs 15,000 and Rs 20,000, said a statement..“Term insurance Grameen Surakasha can offer financial inclusion to a large number of ruralconsumers in Orissa that do not have access to extremely essential financial products likeLife Insurance. Not only is this good for the families of the insured but it can also offerpeace of mind to main bread earners of families who can be insured at very low rates withthe help of RRDC” said Mr. Amish Tripathi, National Head – Marketing and ProductManagement, IDBI Fortis Life Insurance Established in 1992, Regional Rural DevelopmentCentre (RRDC), has launched its microfinance initiative, Sambandh, in 2006 and is active incommunity projects in health and hygiene, forest protection, natural resource management,plus agriculture and livestock improvement.7. Issues and Bottlenecks7.1 Awareness and Education:There is major challenge for insurance companies and policy makers to increasethe awareness levels among rural population, so that they may view insurance policies as arisk management tool. Traditionally rural households have addressed their risk protectionin various forms: from the joint family, investing in gold, land and other assets. Mostinsurance policies that rural clients are familiar with have been sponsored orsubsidized by the government, the legacy of this past is that rural people do not fullysee insurance as a risk sharing mechanism through contributions in premium. There is needfor sufficient investment by both private and public institutions to bring about a change inthe perception of Insurance as a risk mitigation instrument and enhance the awarenesslevels on various insurance products and how they work in principle.9|Page
    • 7.2 Documents for CertificationFor effecting and servicing various insurance contracts, variety of documents are expectedto be provided by the client to the insurance company. On account of their low awarenesslevels and also lack of documentation systems in public institutions for issuing variousdocuments, rural people face a peculiar disadvantage of not processing even some verybasic documents required for taking insurance policies. Below are listed a few such cases –7.2.1 Age ProofMost rural people do not have a formal age proof that is demanded by insurancecompanies. A common kind of age proof that may be available with good number ofpeople is the Voter Identity Cards issued by the Government. Unfortunately, the quality ofinformation captured on these Voter IDs is found wanting and therefore is not accepted as astandard age proof by some Insurance Companies. If we are to seriously look at extendingLife Insurance on a large scale in rural areas, it will be necessary to provide a standardage proof to all rural clients which, will be accepted by all insurance companies withoutdiscrimination.7.2.2 Death CertificateCurrently there is no standardized procedure for issuance of a death certificate across thecountry. Some insurance companies have difficulty in accepting death certificates issuedby other than municipal authorities and revenue departments. For rural people the mostfeasible way to get a death certificate is from the Gram Panchayat. The regulator shouldclarify to the industry to give sanctity to the death certificate issued by Gram Panchayat.Sometimes the insurers insist for cause of death, which is possible only if an autopsy isconducted.7.2.3 First Information Report (FIR)In claims that involve an accident, all insurance companies insist on submission of a FIRreport registered with the Police. In the rural context the access to a police station isquite difficult to many places and the perception of a large segment of villagers is that apolice station would bring more problems than solution. In view of this, insurancecompanies should be willing to substitute an FIR with a declaration from communitymembers in cases where it is convenient to get an FIR.7.2.4 Product CustomizationMost products being offered today in the rural market are very often urban products, withsome negligible difference. Very often this may not be the right way to go about sellingrural products, as the requirements of rural clients can be very different from that of the10 | P a g e
    • urban clients. The product needs specific design in terms of pricing, premium paymentoptions and simplicity in product features and process requirements.7.2.5 Premium RoutingClients in rural areas do not have direct access to Insurance companies, in order to remitsmall premiums amounts in cash to the insurer directly. The alternative available for themis to remit cash to the insurer through banking instruments like Cheques or Demand Drafts.But this option is unlikely to be helpful to rural clients as very few have bank accountsto use these instruments and also the banking infrastructure in rural areas is grosslyinadequate. Therefore there is a need for the regulator and the insurance companies to workon a process, which allows rural clients to remit premium to insurance companies in aconvenient and cost effective manner. An alternative would be to route the premium throughdistribution channels like micro-insurance companies, which have the capacity to handlesmall, and multiple cash transactions in villages.7.2.6 Remuneration of Expenses for Distribution and ServicingIt is well known that cost of delivering micro-finance services is very high. This is a resultof the combination of small and multiple transactions, with the clients scattered over awider geography. The current regulations on compensation for insurance distribution have acap on the commissions payable, which does not necessarily cover the cost of selling andservicing policies in rural areas. There is need to de-regulate the commissions payable onvarious kinds of policies, especially for the rural sector. This would allow the insurancecompanies to ensure that at least the transaction costs of selling and servicing of ruralinsurance policies are recovered by the distribution partners. This would be absolutelyessential to ensure that rural policies are sold and serviced actively.7.2.7 Lack of Focus on Pure Risk Policies by Insurance Companies andHigh Lapsation of Policies in Rural AreasTraditionally life insurance business has been seen more as a savings and tax-reductioninstrument rather than as a major risk protection tool. In the rural context it has gottranslated into a mere savings instrument, with very little risk coverage. The time boundcontracts in insurance policies are such that, there is every chance of lapse of thesepolicies if the client cannot pay the premium in a timely manner. This results in, notonly the loss of risk coverage, but the loss of a significant part of the savings made bythe client. The probability of this happening in rural areas is very high as theincomes of rural household are unpredictable and varying. This is on account of theagrarian economy of the rural areas, which is subject to the risks of nature (likeinadequate rainfall) quite frequently. Thus the current life insurance policies, primarilydesigned for the urban market, are to the disadvantage of rural market, where theclients stand to lose both their savings and risk protection.11 | P a g e
    • 7.2.8 Minimal Targets for Rural AreasThe current targets set by the regulator for the insurance companies, to meet the rural/social sector obligations are not representative of the percentage of people residing inrural sector. Further the targets talk about only first 5 years from commencement of thecompany. As a result of this, insurance companies have not made sufficientinvestments in the right direction, to design and deliver products for the ruralmarket. They have by and large preferred to exhaust their efforts on rural market bymeeting the minimum targets set by the regulator. To see a greater investment in ruralproducts by Insurance Companies, it is possibly time for the regulator to consider arevision in the rural targets for the insurance companies to a higher level.7.2.9 Group ApproachWhile the group is very much being explored by many insurance companies tooffer insurance services, it gets restricted to groups where members have taken creditfrom an institution. The down side of this arrangement is that those clients who do nothave credit requirements get left out of insurance coverage. Therefore there is a need forinsurance companies to design products for groups in rural areas where Insurance can beoffered as a stand-alone service without necessary bundling with credit. This would allowgetting a large size of rural population under insurance coverage through the simplicity ofgroup products.7.2.10 Health Insurance- A Morphing ProductHealth insurance product would be more viable to administer for the high impact and lowfrequency health risk events. These would generally fall under the critical illnesscategory. While there is an expressed demand by both clients and grass-root organizations inrural areas to provide insurance coverage for the minor and more frequent ailments, itwould be more advisable to meet these smaller costs through savings (self-insurance).It is also well documented that one of the major requirements for credit in rural areas isto meet health expenses. Thus, it would be useful to design a health finance productwhere the lower cost and higher frequency health risks are addressed by savings and theother end of the spectrum with higher cost and lower frequency health risks can beaddressed by Insurance. Some of the health risk in the middle of the spectrum could beaddressed by credit possibly. Therefore a health finance product is required, whichmorphs from a savings to credit to insurance product based on the scale and frequencyof health risk. Of course the delivery of such product would need the capacities of morethan one institution, which have the capacity to deliver all these services in acomplimentary manner.7.2.11 Separate Regulations for Rural InsuranceToday most of the regulatory activity is directed in general at the whole market, which is12 | P a g e
    • still dominated by the urban and commercial insurance business. Some of theseregulatory directions while addressing the regulatory requirements of the larger marketmay sometimes actually work to the disadvantage of developing the rural market. Therefore,it is essential for the regulator to come out with separate regulations, which would propelthe development of insurance services for the rural sector.8. Recent Developments8.1 RRDC, Fortis to Provide Micro-Insurance in OrissaIDBI Fortis Life Insurance has tied up with Regional Rural Development Centre (RRDC)to offer rural consumers the protection of Term insurance Grameen Suraksha in Orissa.IDBI Fortis, in association with RRDC, has already insured 3,440 rural individualsthrough Term insurance Grameen Suraksha. IDBI Fortis Life Insurance Company Ltd,which started its commercial operations from March 2008, aims to sell 10,000 Terminsurance Grameen Suraksha (TGS) policies in Orissa during the current fiscal.IDBI Fortis Term insurance Grameen Suraksha is designed for rural customers withfour convenient premium slabs of Rs 50, Rs 100, Rs 150 and Rs 200 with correspondingsums assured of Rs 5,000, Rs 10,000, Rs 15,000 and Rs 20,000, said a statement. “Terminsurance Grameen Surakasha can offer financial inclusion to a large number of ruralconsumers in Orissa that do not have access to extremely essential financial products likeLife Insurance. Not only is this good for the families of the insured but it can also offerpeace of mind to main bread earners of families who can be insured at very low rates withthe help of RRDC” said Mr. Amish Tripathi, National Head – Marketing and ProductManagement, IDBI Fortis Life Insurance.Established in 1992, Regional Rural Development Centre (RRDC), has launched itsmicrofinance initiative, Sambandh, in 2006 and is active in community projects in healthand hygiene, forest protection, natural resource management, plus agriculture andlivestock improvement.9. References 1. www.microfinancefocus.com 2. www.Micro insuranceacademy.org 3. www.ilo.org 4. www.ifmr.ac.in 5. www.undp.com 6. www.icrier.org 7. www.nabard.org 8. www.sggwrites.com 9. CMIE EIS Database13 | P a g e