Microinsurance provides affordable insurance policies to low-income and vulnerable populations in India. It is regulated by IRDAI and policies have a maximum sum assured of Rs. 50,000. There are general microinsurance policies that cover health, accidents, and property, as well as life microinsurance policies that are term or endowment plans. Microinsurance gives these populations an opportunity to manage financial risks from events like illness, death, or property damage. It can help safeguard their savings and provide security. However, microinsurance is still nascent in India and faces challenges in reaching rural populations and ensuring proper management of pooled resources and claims processing.

1. MICRO INSURANCE IN INDIA
● A huge segment of the Indian population is underprivileged. Due to this lack
of privilege, they do not have the capacity or access to benefit from various
financial services such as banking, insurance, credit, etc.
● This is where concerned authorities step in and help such sections of society
to empower them and grant access to financial products and services.
● Microinsurance is one such effort to help people belonging to the low-
income group

2. WHAT IS MICROINSURANCE
● Micro insurance is a category of insurance policies designed for the
betterment of the economically vulnerable population of the country. This
category has been created by the Insurance Regulatory and Development
Authority of India (IRDAI). Micro insurance is governed as per the IRDAI
Micro insurance Regulations, 2005. Such a policy can belong to General
Insurance as well as the Life Insurance category. However, the defining
quality of such policies is that the sum assured offered by them is equal to or
less than RS 50,000.
● Micro insurance can enable some sort of insurance cushioning for the
economically vulnerable population. Such plans can provide a sense of
security to low-income people that are unable to afford the popular form of
insurance

3. TYPES OF MICRO INSURANCE
● General
Microinsurance
● A General or regular
Microinsurance product
covers health insurance,
personal accidents, and
assets such as livestock,
hut, etc. This product
can be availed at an
individual or a group
basis
● Life
Microinsurance
● A Life
Microinsurance Plan
can be Term or an
Endowment Plan. It
can be purchased at
an individual or a
group level and with
or without an
accident benefit.
Such plans can also
be related to health
insurance

4. ADVANTAGES
● The biggest advantage concerning Microinsurance is that it offers the
opportunity for the economically vulnerable section of the population to buy
insurance at a low cost. Because of buying Microinsurance Policies, they can
receive financial assistance during challenging times. This will result in the
safeguarding of their savings, which are usually on the lower side. Here are
some top advantages of specific Microinsurance Covers.
1) Endowment/Pension Microinsurance
● It offers survival as well as death benefits as per the terms and conditions
● Pension allowance can also be built-in
2) Term Microinsurance
● Covers life risk with accidental benefits
● Some insurers offer permanent disability benefits
3) Health Microinsurance
● It covers pre-and post-hospitalisation expenses
● Covers medical bills for diagnosis, medical bills, etc.
4) Property Microinsurance
● It offers coverage due to damage/losses of properties due to natural calamities.
● This policy offers compensation due to the theft of assets.

5. IMPORTANCE OF MICRO INSURANCE
POLICIES
● Here’s why such policies are important.
● They are an accessible risk-management tool to reduce financial
vulnerability in times of adversity.
● The affordable premium of such plans is an incentive for better
reach in an organized manner.
● Microinsurance covers the policyholder’s financial liability as
per the chosen plan.
● Microinsurance helps the poor to save money.
● Can bring about a positive change in poor people’s perception
of insurance.

6. How to make micro insurance work?
In the absence of banking facilities, small savings can be collected from the entire population of villagers
or a particular region and such pooled resources can be used to meet the claims of losses when assets
are damaged. Thus, micro insurance can be aligned with micro savings and micro credit to achieve
better results. Micro insurance schemes should be run on no profit & no loss basis. If the pooled
resources generate some income, the same should be ploughed back for the benefit of poor people.
Micro insurance can be designed to meet specific needs/risks arising out of ill health, accident, death,
retirement pension, accidents, etc.
The road blocks ahead
Micro insurance in India is still at the nascent stage. Some micro finance institutions (MFIs) and NGOs
are working in this segment, but there is a risk of pooled resources that is not being managed properly or
risks may not be covered fully—when the entire village suffers. At present, there is a lack of regulated
mechanism to protect the insured from unregistered MFIs or community based organisations. The
savings generated by the organisations are due to insufficient coverage provided to the poor villagers—
when the entire village is affected.
Most underprivileged people being illiterate cannot understand the importance of savings linked
insurance and don’t know how to approach insurance agencies or banks. Due to poor response, huge
initial costs and perceived risks, insurance companies are showing reluctance to enter rural areas. Other
perceived problems are lodging of claims and delay in settlement of claims which is a cumbersome
process due to illiteracy and underdeveloped network of agents. Therefore, designing policies and strong
support service through NGOs are essential for success of the micro insurance in India

7. HOW DOES MICRO INSURANCE
HELP THE LOW INCOME GROUP
● Micro-insurance is specifically designed for the protection of low-
income people, with affordable insurance products to help them
cope with adverse consequences of risks. It is a market-based
mechanism that promises to support sustainable livelihoods
by empowering people to adapt and withstand stress