Evaluation of micro Evaluation of micro insurance in Indiainsurance in India

IndexIndex

Introduction.Introduction. IRDA’s initiative in micro insurance.IRDA’s initiative in micro insurance. 4P’s of micro insurance.4P’s of micro insurance. 55thth P of micro insurance. P of micro insurance. SWOT Analysis.SWOT Analysis. Niche creation.Niche creation. Critical success factor.Critical success factor.

Introduction.Introduction. Micro-Insurance is a key element in the financial services Micro-Insurance is a key element in the financial services

packages for people at the bottom of the pyramidpackages for people at the bottom of the pyramid..

Micro insurance is…Micro insurance is… “…“…A mechanism to protect low-income people against specific A mechanism to protect low-income people against specific

perils in exchange for regular premium payments perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved”proportionate to the likelihood and cost of the risk involved”

Micro insurance is not…Micro insurance is not…• Small insurance companies.Small insurance companies.

• Just another product offered by MFIs.Just another product offered by MFIs.

• Regular insurance products with smaller sums insured and Regular insurance products with smaller sums insured and premiums.premiums.

• Savings, credit, risk prevention.Savings, credit, risk prevention.

IRDA’s InitativesIRDA’s Initatives Developmental InitiativesDevelopmental Initiatives:-:- Legislature delegated developmental responsibilities – A unique model.Legislature delegated developmental responsibilities – A unique model. Ensuring orderly growth and penetration of insurance are the prime Ensuring orderly growth and penetration of insurance are the prime

objectives.objectives. Introduction of development oriented regulations to Bridge the Demand Introduction of development oriented regulations to Bridge the Demand

Supply gap.Supply gap.

Mandatory Norms Mandatory Norms :-:-Rural Sector - Life InsurersRural Sector - Life Insurers First 5 years - 7% to 16% of total policies underwrittenFirst 5 years - 7% to 16% of total policies underwritten 6th to 10th* year - 18% to 20%6th to 10th* year - 18% to 20%

Non LifeNon Life First 5 years - 2% to 5% of total gross premiumFirst 5 years - 2% to 5% of total gross premium 6th to 10th* year - 5% to 7%.6th to 10th* year - 5% to 7%.

Social Sector - Life & Non LifeSocial Sector - Life & Non Life 5000 to 20000 lives for the first 5 years and 25000 to 55000 lives for 6th to 5000 to 20000 lives for the first 5 years and 25000 to 55000 lives for 6th to

10th year*10th year*

4 P’s4 P’s Product:Product: Credit Life, Endowment & Term Life, Personal, Credit Life, Endowment & Term Life, Personal,

Accidental, Property, Health, Agriculture Insurance. Accidental, Property, Health, Agriculture Insurance. Policies are Policies are simplified according to the market.simplified according to the market.

Price: Price: Very low priced products with lump sum, irregular Very low priced products with lump sum, irregular & frequent options to cover different risk structures.& frequent options to cover different risk structures.

Place: Place: Target audience resides in rural or semi urban Target audience resides in rural or semi urban India.India.

Promotion: Promotion: Sold by unlicensed, non traditional agents, Sold by unlicensed, non traditional agents, Banks (Co-operative, formal, rural), SGH’s, NGO, MFI, Post Banks (Co-operative, formal, rural), SGH’s, NGO, MFI, Post Office, Internet, KIOSKS, Rural Knowledge center.Office, Internet, KIOSKS, Rural Knowledge center.

PEOPLEPEOPLE

WealthyWealthy

MiddleIncomeMiddleIncome

LowIncome

LowIncome

Destitute / Severely PoorDestitute / Severely Poor

AA BB

DD EECC

A Commercial Insurance for wealthy individuals and companies, as well as compulsory products.

B Most of non-motor related commercial insurance.

C Social security and public health services.

D Aggregate market for microfinance providers.

E Potential market for micro insurance.

A Commercial Insurance for wealthy individuals and companies, as well as compulsory products.

B Most of non-motor related commercial insurance.

C Social security and public health services.

D Aggregate market for microfinance providers.

E Potential market for micro insurance.Policyholders (the market):-

People do respond to “good” products.Generally lack understanding of insurance and thus require knowledge and appreciation .Education, marketing, policy documents MUST be simple and appropriate .We need to help people link needs with insurance as an appropriate response

SWOTSWOT SStrengths :trengths :

Huge untapped market shareHuge untapped market share Global push from UN & ILOGlobal push from UN & ILO Caters to CSR of organizationCaters to CSR of organization

WWeakness :eakness : Mind share against savingMind share against saving Lack of infrastructureLack of infrastructure Cost of distribution & low penetration in rural & Cost of distribution & low penetration in rural &

semi urbansemi urban

“ “ Micro insurance has never been a part of Micro insurance has never been a part of thought process, it has always been after thought process, it has always been after thought”thought”

SWOTSWOT OOpportunity :pportunity :

Emerging marketEmerging market Saturated urban marketSaturated urban market Government interventionGovernment intervention

“ “ The pioneer will be the market The pioneer will be the market leaders ”leaders ”

Threats :Threats : Moral hazards & Physical hazardsMoral hazards & Physical hazards Data base research not possibleData base research not possible High investment & low return on High investment & low return on

investmentinvestment

NICHE creationNICHE creation Products : Designed as per the Products : Designed as per the

requirement of requirement of market market Price : Price : Reasonable prices Reasonable prices Place : Place : Establish branches in rural area. Establish branches in rural area.

NeedNeed to tie up with more to tie up with more NGO & Social bodies.NGO & Social bodies.

Promotion : Promotion : Club with Govt. development Club with Govt. development strategiesstrategies

People :People : Give training to local resourses for Give training to local resourses for creating creating awareness and awareness and emlopymentemlopyment

Critical success factorsCritical success factors

Simplification of products and bundling where requires Simplification of products and bundling where requires making them easy to understand, easy to use, sell and making them easy to understand, easy to use, sell and service.service.

Simplifying and making premium payment plans Simplifying and making premium payment plans flexible to suit farmer needs.flexible to suit farmer needs.

Focus on volumes by targeting large groups.Focus on volumes by targeting large groups. Integrating micro finance activities with micro Integrating micro finance activities with micro

insurance for a most beneficial outcome.insurance for a most beneficial outcome. Claim settlement to be timely, simple and transparent.Claim settlement to be timely, simple and transparent. Maximizing the benefit of connectivity revolution in Maximizing the benefit of connectivity revolution in

rural India to reach the unserved markets.rural India to reach the unserved markets. Using additional innovative distribution channels to Using additional innovative distribution channels to

achieve cost-efficiency in agricultural markets.achieve cost-efficiency in agricultural markets.

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