Micro Insurance for Rural India's Upliftment

EXCEL International Journal of Multidisciplinary Management Studies
Vol.1 Issue 3, December 2011, ISSN 2249 8834
Online available at http://zenithresearch.org.in/
www.zenithresearch.org.in
131
MICRO INSURANCE- A TOOL FOR UPLIFTMENT OF RURAL INDIA
MS. KIRTI SINGH*; DR. VIJAY KUMAR GANGAL**
*Research Scholar, Department of Applied Business Economics,
Faculty of Commerce, Dayalbagh Educational Institute (Deemed University)
Dayalbagh, Agra-282110, Uttar Pradesh, India.
**Director, Ashoka Centre for Business & Computer Studies,
Nashik&Ashoka Business School, Nashik, (Maharashtra) India.
ABSTRACT
Micro insurance is of supreme importance for protecting poor lives against accidents, threats and
other types of risks. Micro insurance has been dominated by non-government organizations
(NGOs) and by Insurance development regulatory authority (IRDA) in India; however, with the
liberalization of Indian economy, private sector entreand Microinsurance has got momentum.
The public sector Insurance Companies has emphasized on exploiting the potential of rural India
as it provides immense opportunityin the globalization era. This paper highlights the importance
of micro insurance for the upliftment of rural poor‟sand also focuses on the initiatives taken by
private and public insurance companies in the growth of rural India and also helps to understand
how micro insurance is helpful in alleviation of poverty.
INTRODUCTION
Micro-insurance is considered by low premium and low coverage limits and sold as typical risk-
pooling and marketing arrangements and designed for low income people and businesses not
served by typical social or commercial insurance.
“Micro-insurance is the protection for the low -income population against specific dangers in
exchange for regular payments of proportional premiums to the probability and costs of the
involved risks”. - Churchill
Micro-insurance is thus designed with the objective of protecting poor people and also designed
with the environment that surrounds them, their needs, and possibilities. It is necessary that the
product is developed for people ignored by traditional insurance markets.
DEVELOPMENT OF MICRO-INSURANCE IN INDIA
Traditionally in India, rare micro-insurance schemes were introduced, either by non-
governmental organizations (NGO) due to the felt need in the communities in which these
organizations were involved or by the trust hospitals. These schemes have now gathered
momentum partly due to the development of micro-finance activity, and partly due to the
regulation that makes it mandatory for all formal insurance companies to extend their activities
to rural and well-identified social sector in the country (IRDA 2000). As a result, increasingly,
micro-finance institutions (MFIs) and NGOs are negotiating with the for-profit insurers for the
purchase of customized group or standardized individual insurance schemes for the low-income

132
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 in by 2008 (ILO 2004).
The insurance regulatory and development authority (IRDA) defines rural sector as consisting of:
 A population of less than five thousand,
 A density of population of less than four hundred per square kilometer
 More than twenty five per cent of the male working population is engaged in
agricultural pursuits. The categories of workers falling under agricultural
pursuits are: cultivators, agricultural laborers, and workers in livestock,
forestry, fishing, hunting and plantations, orchards and allied activities.
The social sector as defined by the insurance regulator consists of:
 Unorganized sector
 Informal sector
 Economically vulnerable or backward classes, and
 Other categories of persons, both in rural and urban areas.
The social obligations are in terms of number of individuals to be covered by both life and non-
life insurers in certain identified sections of the society. The rural obligations are in terms of
certain minimum percentage of total polices written by life insurance companies and for general
insurance companies, these obligations are in terms of percentage of total gross premium
collected. Some aspects of these obligations are particularly noteworthy. First, the social and
rural obligations do not necessarily require (cross) subsidizing insurance. Second, these
obligations are to be fulfilled right from the first year of commencement of operations by the
new insurers. Third, there is no exit option available to insurers who are not keen on servicing
the rural and low-income segment. Finally, non-fulfillment of these obligations can invite
penalties from the regulator.
In order to fulfill these requirements all insurance companies have designed products for the
poorer sections and low-income individuals. Both public and private insurance companies are
adopting similar strategies of developing collaborations with the various civil societies
associations. The presence of these associations as a mediating agency, or what we call a nodal
agency, that represents, and acts on behalf of the target community is essential in extending
insurance cover to the poor. The nodal agency helps the formal insurance providers overcome
both informational disadvantage and high transaction costs in providing insurance to the low-
income people. This way micro insurance combines positive features of formal insurance (pre-
paid, scientifically organized scheme) as well as those of informal insurance (by using local
information and resources that helps in designing appropriate schemes delivered in a cost
effective way). In the absence of a nodal agency, the low resource base of the poor, coupled with
high transaction costs (relative to the magnitude of transactions) gives rise to the affordability

133
issue. Lack of affordability prevents their latent demand from expressing itself in the market.
Hence the nodal agencies that organize the poor, impart training, and work for the welfare of the
low-income people play an important role both in generating both the demand for insurance as
well as the supply of cost-effective insurance.
REVIEW OF EARLIER STUDIES
The present study embodies a brief review of the research done in the area of micro insurance.
The purpose of reviewing the earlier studies is to economize the historical and present
prospective of the present work and the related studies which have been taken cognizance of one
or more variables includes in the study.
Syed Abdul Hamid& Roberts & Paul Mosley (2010)1
in the study shows that there is a positive
impact of micro health insurance in the reduction of poverty among rural households of
Bangladesh. Micro health insurance has a significant beneficial effect on food sufficiency of
poor‟s and has a dynamic improvement in the health status of poor rural households.
GunitaArunChandhok (2009)2
The result of study indicates that there is a huge untapped market
for micro health insurance and majority of population are aware and understand the importance
of micro health insurance. Thus, micro insurance will go a long way in eradicating poverty. If the
various micro insurance models are implemented effectively by Insurer, MFI‟s, SHG‟s, NGO‟s,
Health institutions, Donors and Co-operatives the BPL population will lead a peaceful and secure
life.
Lena Giesbert (2008)3
The results show that the potential demand for insurance in the survey area
seems to be very high within 95% of the non-insured households showing a general interest to
buy insurance. Most of the potential clients are interested in health, death, or old age insurance.
So survey study says that micro insurance providers reach a high number of clients in the survey
area but mostly to the richer people. The group of poor segments in society seems to be rather
limited by micro insurance.
VenkataRamanaRao (2008)4
the study reveals that micro insurance is not an opportunity but a
responsibility and to serve this responsibility good awareness campaign is needed. Micro
insurance is offering real solutions to the billions of rural poor that raises the awareness of micro
insurance as a key issue in coming future.
Prof. M. ZiaulhaqMamun (2007)5
the study concluded that there are three basic models of micro
insurance this is Provider model, Insurer model and Linked model. As per the study, linked
model is the best suitable model for the improvement of poor‟s conditions in Bangladesh, but
presently they are using Insurer model, which is less productive for poor‟s social security.
Anuradha K. Rajivan (2007)6
the study reveals that planned actual steps to address constraints
like poverty will help express the insurability of the poor in the future and study also shows that
micro insurance is on the edge of floating take off in India. The current interest from the different
stakeholders, combined with the solid movement provided by the November 2005 directive of
IRDA, concrete, complementary catalytic support will enable all the stakeholders to play a more
pro-active role. However, according to the insurance companies micro insurance is so far to be a

134
proven business offer, so investment from their side is limited and efforts from few NGO‟s and
MFI‟s have resulted in the introduction of micro insurance as an add-on to their existing micro
credit projects & utilities for the rural poor‟s.
SarthakGaurav,Ana Paola Gomez & Acosta and Luis Flores Ballesteros (2007)7
According to the
research, study concludes that rural households need a dependable, useful, transparent and
affordable solution for effectively deal with risk and shocks they face and micro insurance is one
of the effective risk management tools for the development and addressing critical risk of the
rural poor.
NEED OF THE STUDY
2.4 billion People around the world live on $2 a day or less. They face daily hardships like poor
nutrition, short life expectancy, poor education, and substandard housing.
In therural there is a death in the family, the cost of a funeral can amount to several months'
wages. In rural areas, drought can cause crop failure that brings starvation and even death.
It is estimated that only eighty million of the poor are now covered by some form of micro
insurance. Most remain without access to this critical financial service. In India and China,
where organisations are estimated to serve nearly 30 million micro insurance clients each, the
percentage of poor lives insured hovers below 3%. It comes as a surprise to many people, but
microinsurance is an important tool in the alleviation of poverty.
With microinsurance, the rural poor can mitigate those risks that would otherwise cause them to
slide back into the poverty they seek to escape. Thus this paper tries to study the importance of
Microinsurance for the lowest income group with the insurance products they need and demand.
OBJECTIVES OF THE STUDY
In the study following objectives have been tried to achieve:
To study the importance of Micro Insurance for the upliftment of rural
poor‟s and alleviation of poverty in India.
To study the initiatives taken by private and public insurance companies for
the growth of rural India.
MICRO INSURANCE IN INDIA
For a long time a need has been felt for insurance product that can be afforded by rural and urban
poor in India. Since the coverage of insurance in lower stratawas too poor, Government of India
constituted a Consultative Group on Micro Insurance in2003 to examine existing insurance
schemes for poor, especially rural population with specificreference to pricing, products,
outreach, servicing and promotion8
. The report of the consultativegroup has brought out certain
key issues relating to micro-insurance in India, such as,

135
Micro-insurance has not penetrated the rural market;
Micro-insurance is not viable as a standalone insurance product;
The design of micro-insurance should be simple and flexible;
Partnership between insurers and the social organizations NGO would
be desirable topromote the benefit of micro-insurance at grass root
level.
Building on the recommendations of the consultative group, the newly formed regulatorybodyof
insurance, IRDA as part of its developmental role, put across the concept of microinsurancein
August, 2004 for comments from the prospective players. A large number ofcomments and
suggestions were received and the draft regulations were discussed in the InsuranceAdvisory
committee and also in the IRDA board before it were notified on 10th November,2005. The main
focus of the micro-insurance regulations was to provide a platform and rules toprovide life
insurance to the targeted segment of the population9
. The main features of theIRDA (Micro-
Insurance) Regulations10
, 2005, are as follows:
Tie up between one life and one non-life insurance company to make
micro-insurance products;
NGOs/MFIs and SHGs are allowed to distribute micro-insurance
products as micro insurance agents. Normal distribution channels such
as agents, corporate agents andbrokers can also distribute micro
insurance products;
All life insurance products are available for a maximum term of
fifteen years;
Some restriction are prescribed in the minimum and maximum sum
assured for endowment, term and health insurance;
The minimum qualification for appointment as an micro-insurance
agent is removed;
All the products sold as micro-insurance products have to be cleared
by the IRDA;
The insurance contracts are to be delivered in local languages to
prospective policyholders and
All micro insurance products will necessarily be underwritten by
insurance companies only.
The flexibility in the regulation made it easy for the insurers to design micro-insuranceproducts
to cater the services to the rural and urban poor. A modest beginning has been made inthe first

136
year of micro-insurance notification by the IRDA. But the passage of Rural and Social Sectors‟
Obligation changed the landscape of the micro-insurance market dramatically in India when it is
clarified by the IRDA that micro-insurance would form the part of the Rural andSocial Sectors‟
Obligation under the provision of the Insurance Act, 1938. This requirementhas motivated life
insurers to seek partnerships with MFIs and NGOs to act as agents, selling and servicing the
insurers‟ policies. This model of collaboration, the partner-agent model, hasbecome the dominate
approach to microinsurance in India and has encouraged many MFIs toswitch from a full-service
to a partner-agent approach. For example, SEWA, a microinsurancepioneer, is now offering its
life, health and asset coverage in partnership with various insurers11
.
The growth of micro-insurance (life) is decent though the volume is still too small. A
majorpercentage of micro-insurance business in 2007-08 was procured under group business
whichamounted to Rs. 201.27 crore under 1.22 crore lives, while individual business accounted
forRs. 18.23 crore under 9.38 lakh life policies. The bulk of the micro-insurance business
contributed by the state run life insurer LICI which has managed to acquire Rs.16.13 crore from
8.54 lakhindividual lives and Rs.192.56 crore group premium from 1.14 crore lives.
MICRO-INSURANCE AGENTS: LIFE INSURERS
Insurers Agents(1-04-2009) Agents(31-03-2010)
Pvt. Life insurance
companies
603 770
LIC 6647 7906
Industry Total 7250 8676
(Source: IRDA annual report, 2009-10)
(Source: IRDA annual Report 2009-2010)
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
2009 2010
NumberofAgents
Years
MIcro Insurance Agents (LIfe Insurance)
LIC
Private

137
The number of micro-insurance agents has increasing financialyears. Once again state run
insurance company, LIC has beaten the private life insurancecompanies convincingly in
providing the micro-insurance to the poor section of the society.The performance of the private
life insurance companies are under scanner as they need tocomply with the Rural and Social
Sectors‟ Obligation under the new guidelines issued by IRDAevery year. This quota of number
of lives to be cover in one financial year creates a pressure on the life insurers operating in the
market. If the insurers fail to comply with the prescribed numbers of lives under the Rural and
Social Sectors‟ Obligation; there are some instances that IRDA hasfined some insurers12
.
GROWTH OF INSURANCE IN RURAL AREAS OF INDIA
Growth rate in the rural and social sector has definitely been picking up as a result of the IRDA‟s
focus on this sector. India‟s insurance firms have exceeded expectations in terms of growing
their business in rural India, and most firms in the business are actually ahead of targets laid
down by Insurance Regulatory and Development Authority. An analysis of data from seven life
insurers for 2008-09 which accounted for more than 80% of the life insurance market, reveals
that all of them achieved their individual targets laid down by IRDA (see Table: 1). The targets
vary according to the number of years of operation of the individual insurer. The seven firms are
Aviva Life Insurance Co. India Ltd, Birla Sun Life Insurance Co. Ltd, ICICI Prudential Life
Insurance Co. Ltd, Life Insurance Corporation of India (LICI), Max New York Life Insurance
Co. Ltd. Reliance Life Insurance Co. Ltd and SBI Life Insurance Co. Ltd.
TABLE 1: GROWTH OF BUSINESS IN RURAL & SOCIAL SECTOR IN 2007-2008
Companies Target Achieved Target Achieved
Rural sector (% of policies) Social Sector (No. of lives)
Aviva 18 19 25,000 464,918
Birla 19 21.6 35,000 86,138
ICICI 18 22 25,000 117,000
LIC 16 21.67 20,00,000 90,43,413
Max New York 19 22 35,000 81,961
Reliance 18 19.24 25,000 54,394
SBI 18 22 25,000 280,000
(Source: Individual Company Reports; (2008-09))

138
The statutory target in the rural sector for the Aviva Life Insurance Co. India Ltd was 18%andthe
company achieved to sell 19% of its total new policies in the rural area. In the case ofSBI Life,
the firm was expected to sell 18% of all its policies in the rural areas, it ended upselling 22%.
ICICI Prudential Life Insurance Co. Ltd achieved 22% of its total new policiesfrom the rural
sector where the obligation was pegged at 18%. Similarly, Birla Sun Life InsuranceCo. Ltd and
Max New York Life Insurance Co. Ltd managed to sell 21.6 % and 22 % of its newpolicies
respectively in the rural sector when statutory obligation for the firms was at 19%.
“Social business” includes only the number of policies sold to poor and economically
backwardpeople where insurance penetration has been much lower than that in the rural sector.
Significantly,in the post liberalized era, insurance firms did even better in terms of their social
sector obligationsare concern. Aviva Life Insurance Company sold 464,918 policies in the social
sector where thestipulated target was only 25,000 policies in 2007-08 financial years. Similarly,
ICICI PrudentialLife covered 117,000 customers in rural areas as against its target of 25,000 in
the same financialyear. LIC has done an impressive job in this area by selling 90,42,413policies
in the social sectorand the leading insurer in India in terms of volume and spread.
In June 2007, IRDA changed its insurance norms to ensure benefits of insurance to reach
thesocially and economically backward section of the population. Under the new guidelines,
policiessold to the social sector need to have a minimum sum assured of Rs. 5,000 or a
maximum of Rs.50,000. It is being noticed that the all the insurers adhered to the task of meeting
the mandatoryrural and social obligations determined by the life insurance regulator, IRDA13. In
spite of thisdevelopment the rural life insurance penetration is still below any standard.
According to a report,„Insurance in Next 2 Years‟, by ASSOCHAM, (www.assocham.org), May
2008, out of 78 percent households having awareness about life insurance in rural India, only 24
per cent was policyowners. Rural India may offer a business opportunity worth US$ 23 billion
for the insurancecompanies if the segment can be wooed with innovative saving schemes at
affordable premiums.
INITIATIVES TAKEN BY PUBLIC AND PRIVATE COMPANIES
In India there are many insurance companies introduce micro insurance policies some of them
are given below:-
Company Policy Sum Assured Term of
policy
Amount of
premium
Paying
method
Min Max Min Max Min Max
Life
Insurance
Corporatio
n
JeevanMadhur 5000 3000
0
5
year
10
year
25 250 M,Q,H.
Y
JeevanMangal 5000 3000
0
5
year
10
year
15 250 M,Q,H.
Y

139
JeevanAmritYojana 3000
0
3000
0
1
year
1
year
200 200 Single
Premiu
m
Bajaj
SaralSuraksha 1000
0
5000
0
10
Yea
r
10
year
306 5324 Q,H. Y
Alp NiveshYojana 5000 3000
0
10
year
15
year
Varie
s
Varie
s
Q,H. Y
Jana VikashYojana 1000
0
5000
0
10
year
15
year
Varie
s
Varie
s
Single
premium
Birla Sun
Life
Bimakavach 5000 2000
0
3
year
3
year
50 200 Single
premium
BimaSuraksha super 5000 5000
0
5
year
15
year
Varie
s
Varie
s
M,Q,H.
Y
BimaDhanSancahy 5000 5000
0
5
year
10
year
435 2550 M,Q,H.
Y
ICICI
Prudential
Sarv Jana Suraksha 5000 5000
0
5
year
5
year
50 500 Yearly
IDBI
federal life
insurance
IDBI federal group
micro insurance plan
5000 5000
0
5
year
5
year
450 5000 M,Q,H.
Y
Tata AIG
Life
NavkalyanYojana 5000 5000
0
5
year
5
year
58 2440 M,Q,H.
Y,Y
SampoornBimaYojan
a
5000 5000
0
15
year
15
year
129 4955 M,Q,H.
Y,Y
AyushmanYojana 5000 5000 10 10 Varie Varie M,Q,H.

140
0 year year s s Y,Y
SumangalBimaYojan
a
5000 3000
0
10
year
15
Yea
r
Varie
s
Varie
s
M,Q,H.
Y,Y
SBI Life Grameen Shakti 5000 5000
0
5
year
10
year
Varie
s
Varie
s
Yearly
Aviva Life Jan Shuraksha 2000
0
5000
0
5
Yea
r
10
Yea
r
140 480 M,Q,H.
Y
RURAL UPLIFTMENT BY MICRO INSURANCE
70% of Indian population resides in the rural area but they have small insurance coverage.
Therefore it opens an enormous opportunity for insurance marketers of micro-insurance
products.
BUNDING OF INSURANCE WITH CREADIT IN RURAL INSURANCE IS EFFECTED
AS UNDER
(Source: IRDA Journal 2006)
NG
O
One time
premium
payment
Insurer
Enrolment & claim
documentation
Payment of
Installment
Micro credit
Micro client
Bank
Offer of insurance
protection

141
Micro-insurance is a form of finance designed to suit the needs of rural people who do not have
access to conventional forms of insurance. It consists of small premium policies on life, weather,
accident, household, fire, cattle and motor insurance. The insurance needs of rural India are
different from their urban counterpart and cannot be met by formal insurance products.
All insurance products in India attract a 10.36% service tax, but to increase penetration in rural
sector and to make insurance within reach of the villagers, it is important that this tax is done
away with.
“Up to 90 percent of the Indian population, or 950 million people, are excluded from the
insurance market and represent a powerful missing market.
The rural poor not only want insurance to be affordable, but also to protect against high-
frequency risks such as serious ill health, accidents, harvest failure and fire. But insurance
companies mostly offer standardized products for a clientele that is relatively better off, urban
and male, with few products for women. Many potential insurance risks are specific to women,
such as coverage for delivery expenses, female infertility treatment and injuries from domestic
violence.
Other challenges for insurers are the high costs of covering the needs of the rural poor and that
micro insurance is difficult to distribute. Without appropriate insurance services, the vast
majority of the poor “do without,” turn to patrons, the extended family or village moneylenders,
or temporarily migrate for work.
“Development of the micro insurance sector needs a longer-term perspective that combines
responsiveness to client priorities with market development and financial viability,” The use of
ICTs (information and communications technology) in this process could also help to cut down
on costs to rural micro insurance clients. Current coverage tends to be far more common for life
insurance rather than non-life insurance for livestock, health and crops, confirming that most
non-life products need to be “sold.”
The 2005 IRDA regulations legally recognized non-Government organizations, self-help groups
and microfinance institutions as “micro insurance agents,” substantially increasing the pool of
permissible agents. The regulations also allow companies to provide both live and livelihood
coverage, fix coverage limits and reduce procedural bottlenecks.
The factors contributing to emerging opportunities for micro insurance in India include robust
economic growth, which is increasing income among rural households; a “silent revolution” of
rapidly expanding self-help groups comprised mostly of poor women, which has led to more
entrepreneurial activity in rural areas; and increased media exposure, which can boost marketing
practices.
Conservative estimates place the potential market size for micro insurance in India, both life and
non-life, at INR62, 300 million to 84,300 million, or US$1.4 billion to $1.9 billion, the study
said. This figure is expected to grow as micro insurance becomes better understood and demand

142
increases”.13
POVERTY ALLEVIATION BY MICRO INSURANCE
Government efforts through the provisions of micro-finance opportunities to rural population is a
step in the right track in addressing poverty between its growing population though not sufficient,
hence, adequate insurance is needed to protect these credit lines offered by micro-finance
institutions and banks otherwise beneficiaries of such facilities may possibly go back to poverty.
Rural population is exposed to such risks as health, fire, burglary, death and family
responsibilities which are capable of eroding assets acquired over time.
Every society has dangers that should be avoided and low income people are always vulnerable to
them. Low income people are more uncovered to such risks than the rest of the population and
most times cannot deal well with the calamities.
These classifications of citizens therefore need insurance more than anyone else because they lack
fallback positions whenever there is a loss. Rural people take loans from micro-finance
institutions and whenever there is sickness or accident and they are hospitalized the next thing
will be to use such loans collected to pay for hospital bills and return to poverty once again.
Poverty and vulnerability reinforce one another forming an ever-growing downward spiral, not
only the exposure to risks results in substantial financial losses but vulnerable families suffer the
continued uncertainties about when and how loss may occur. Due to this long-lasting concern,
poor people are less likely to take advantage of income generation opportunities which may
reduce poverty. The majority try to manage their risks and deal with the consequences. Saving
money, working extra time on other activities and asking for loans from friends or relations
constitute some of the strategies used to avoid financial loss which is inefficient and exacerbates
poverty.
Such informal safety procedures do not resist unexpected serial cases before they are able to rise
again from an adverse situation, a new unforeseen event may occur with more power throwing
them back to stage one again.
Micro-insurance therefore provides cushion against such vulnerability by offering micro-health,
life, and property insurances.
It is a usually accepted significant strategy therefore to improve sustainable economic
development and alleviate poverty by making financial systems more comprehensive by
improving access to savings, credit and insurance.
It is important to observe that some insurers like AIG, Allianz, Lombard And standard life have
all entered in Indian insurance industry venture with promising results. Yet, some commercial
insures and Policy makers still tend to believe that providing insurance cover to the poor is the
responsibilities of the state and in practical terms it is difficult to insure poor people on a cost
covering basis. They suspect that poor households either cannot pay for their insurances or the
informality of their living situation makes them unattractive as clients because they do not have
formal employment, have ID cards and are illiterate.

143
It should however be listed that many state run schemes of social protection in developing
countries have failed as they are poorly run, for those targeted do not benefit while those who can
afford them are the ones who access these benefits. Also, public social security schemes where
available are delivered through formal sector employer which does not reach the unorganized
workers both employed and self-employed in the informal economy.
On the other hand however, insurers are beginning to notice the vast markets of low-income
households but many problems need to be overcome if micro-insurance is to be offered
efficiently and effectively in terms of distribution system, products development and capacities.
CONCLUSION
Micro insurance has the potential to be a game changer, as it can help address many of the across
the world. Microinsurance can result in a „win-win‟ situation, joining the double bottom line of
commercial profit with social benefits of fighting poverty through systematic risk management
among the rural poor.
Themainly underserved rural sector holds great potential for both life and non-life insurers. To
unleash this potential, insurance companies will need to display long-term obligation to the
sector, design products that are appropriate for the rural population and employ appropriate
distribution mechanisms. Insurers will have to pay special attention to the characteristics of the
rural labour force, like the prevalence of irregular income streams and liking for simple products,
before they can successfully penetrate this sector.
Insurance in General and Life Insurance in particular is truly an industry for social well-being.
But still the full prospective of the tough rural base has perhaps not been fully realized or
exploited. Keeping in sight the well established role played by the individual agency force for
selling insurance products in the rural areas, it is necessary to strengthen this channel with a set
of new, up-to-date inputs isfitting the requirements. This would accomplish the aims of both the
insurer as well as the nation – of classifying as well as strengthening these new untapped markets
while also providing the much needed employment opportunities in rural areas. Though, it is
very essential that the awareness level and the ability of agents are improved.
One when the agents will be able to explain the policies to the potential rural customers, micro-
insurance will flourish. Sales personnel need new skills and attitudes to explain the concept and
benefits of insurance to the rural mass.
If we take into account the increasing rural-urban connectivity, we find the basic nature of rural
economy and the rural market has go throughessentialchange. To quote NCAER “The mobility
towards higher income group has, in fact, been much higher in the rural areas than urban.”6
This
provides greater opportunity for marketing in rural areas. The shifting behaviors and attitudes of
the rural income groups regarding savings and financial institutions indicate tremendous growth
in opportunity. There is lot of institutionalization of savings. Opportunities in the rural market
are huge. The village-folk are rotating to more safe institutions like LIC, Post Offices, and
Nationalized Banks. Obviously the lead will have to be maintained by the public sector insurers
because of their geographical spread and market share, it is equally important that the private
players increase their efforts to cover this section of the vast population.

144
The rural areas of India during the 21st Century are not what they used to be at the time of
independence. Continuous investments in irrigation & power and modern methods of
connectivity & communication have brought success and comfortable circumstances to a good-
sized population. It makes sound business sense to study these markets and fully hit the
massivepotential that exists today. Furthermore, phase two of detariffingprocedure would help
the insurers to develop products more suitable for the rural folk, farmers, and agro-based
industries.
Many insurance schemes for the poor are being tested with across the country covering crop,
property, assets and health hazards for the under privileged population, and the time has come to
scale up the pilot schemes to much larger populations with the active support of the
governmental and non-governmental infrastructure that is existing.
SUGGESTIONS
IRDA should look into the matter that all the insurers develop their own micro insurance
products and fulfill the rural obligations. This will encourage all the existing and
upcoming insurers to develop and design more customized micro insurance products for
the market which will eventually improve rural poor‟s conditions and increases the
overall insurance penetration in India.
There is an urgent need to improve the awareness among the low income people about
the micro insurance and the functioning of IRDA which will improve the confidence
level of the common investors. To do so, it is highly recommended that the IRDA along
with the existing insurers should take the responsibility to educate the people through
print advertisement, TV advertisement, hoardings, campaigning and through the oral
communication of the life insurance agents.
It is highly recommended to induct more and more trained rural life insurance agents,
especially micro insurance agents, for the micro insurance products only. For this reason
IRDA should monitor the quality of trainings imparted to the life agents/advisors. More
quality training institutes are required for this purpose.
The development of the distribution channel into the rural areas is very important for the
overall development of insurance in India. Therefore, a proper distribution channel is
required to develop.
REFERENCES
1. Syed Abdul Hamid & Roberts & Paul Mosley “Can micro health insurance reduce
poverty: Evidence from Bangladesh” Sheffield economic research paper series
no.2010001, 2010
2. GunitaArunChandhok “Insurance- A tool to eradicate and a vehicle to economic
development” NBER Working paper no. 15396, 2009
3. Lena Giesbert “Demand for micro insurance in rural Ghana – Household survey report on
the Anidaso policy of the Gemini life insurance company (GLICO)” GIGA) German

145
Institute of Global and Area Studies, Leibniz-institute for global and regional studied
http://www.microinsurancecentre.org/UI/..%5CUploadDocuments%5CGhana%20microi
nsurance%20survey%20report%20dec2008.pdf, 2008
4. VenkataRamanaRao “Life insurance awareness in rural India: Micro insurance lessons to
learn and teach”Bimaquest- Volume VIII issue I, 2008
5. Prof. M. ZiaulhaqMamun “Contribution of micro insurance augmenting the poverty
alleviation role of micro-finance: A case study of Bangladesh” Institute of business
administration, University of Dhaka, Bangladesh,
www.rmi.nccu.edu.tw/apria/4607apria2007miclns.doc., 2007
6. Anuradha K. Rajivan “Building security for poor- Potential and prospects for micro
insurance in India” Human development report unit, UNDP Regional Centre in Colombo,
Serving Asia and the Pacific, 2007
7. SarthakGaurav, Ana Paola Gomez & Acosta and Luis Flores Ballesteros “Innovating at
the BOP: Delivering micro insurance in Kalahadi, and beyond” Institute for financial
management and research, http://cpe.ucsd.edu/assets/002/6934.pdf, 2007
8. www.nabard.org/pdf/report_financial/chap_XI/pdf
9. Annual Reports of IRDA, (2004-2005). IRDA, (www.irdaindia.gov.in)
10. IRDA (Micro-Insurance) Regulations (2005), the Gazette of India: Extraordinary (Part-
III, Sec. 4), Annual Reports of IRDA, (2004-2005). IRDA, (www.irdaindia.gov.in)
11. Fola Daniel “Micro insurance as bedrock for social economic development of West
Africa”paper presented at Waica educational conference, Lagos- 10th
and 11th
November,
2008
12. Roth, J., C. Churchill, G. Ramm and Nametra (2005), “Micro Insurance and
Microfinance Institutions: Evidence from India”, Case Study No. 15, CGAP Working
Group on Micro-Insurance, SDA-DFID- DFIDGTZ & ILO.
13. UNDP reported the study, Building Security for the Poor: Potential and Prospects for
Microinsurance in India.
www.thinkchangeindia.org
www.microcapital.org
www.avivaindia.com
www.birlasunlife.com
www.iciciprulife.com

146
www.licindia.in
www.maxnewyorklife.com
www.reliancelife.com
www.sbilife.co.in
www.bajajallianz.com
www.idbifederal.com
www.tata-aig-life.com
IRDA Annual repots
Journal of IRDA, 2006

Micro Insurance for Rural India's Upliftment

Recommended

Recommended

More Related Content

Similar to Micro Insurance for Rural India's Upliftment

Similar to Micro Insurance for Rural India's Upliftment (20)

Recently uploaded

Recently uploaded (20)

Micro Insurance for Rural India's Upliftment