By Premasis Mukherjee, Rosalind Piggot and Sunil Bhat; published by MicroSave; December 2012; 63 pages; available at: http://www.microsave.org/sites/default/files/research_papers/Securing_the_Silent_MI_Report.pdf
This paper examines the microinsurance industry in India, specifically the industry for life and health microinsurance. The authors begin by examining the conventional life insurance industry and trends within it before offering guidance regarding how microinsurance can best be implemented and structured to protect low-income households. The authors argue that the future of microinsurance lies in innovation. They believe that the adoption of group insurance services are essential to the future growth of the industry. Groups might include members of the same extended family or neighborhood.
The authors state that the regulation of the microinsurance sector by the Insurance Regulatory and Development Authority (IRDA) has successfully promoted rapid growth. Since the life insurance industry in India was liberalized in 1999 and 2000, the industry has grown at a rate of 15 percent to 20 percent per year. However, the total of life insurance premiums collected as a percentage of gross domestic product is below that which is observed in more developed countries. 90 percent of the overall population of India and 88 percent of the Indian workforce lack any form of insurance or pension coverage. Of the lowest 40 percent of wage earners in the Indian workforce, 27 percent have some form of account with a formal financial institution.
The authors note that due to the high cost of developing new relationships with potential microinsurance policyholders, non-governmental organizations (NGOs) and microfinance institutions (MFIs) are the ideal conduit to promote and supply microinsurance services, as they are able to use their previously established networks for disseminating these services. An estimated 96 percent of all microinsurance agencies are NGOs or MFIs.
The report concludes that the future of the microinsurance industry lies in innovation, with the microinsurance industry moving from offering individual policies to group insurance policies. The authors also predict that savings-linked products will grow in popularity as microinsurance companies look to provide clients with a comprehensive range of products and services, which they have begun to realize can enhance client loyalty. The authors believe that such loyalty is crucial for microinsurance providers to become financially sustainable because the cost of offering microinsurance and microcredit services is high enough without microinsurance providers having to constantly recruit to replace non-renewing clients.
By Makai McClintock, Research Associate
Established in Uganda with United Nations funding in 1998, MicroSave is a for-profit technical assistance, training and resource center that relocated its headquarters to Lucknow, India, in 2006 with support from India’s ICICI Bank. In 2008, MicroSave was transformed into a consulting company, which has since completed projects in India and eleven African countries.
The Insurance Regulatory and Development Authority (IRDA) is the regulator of the insurance industry in India. Formed by the Indian parliament in 1999, the mission of IRDA is “to protect the interests of the policyholders” and “to regulate, promote and ensure orderly growth of the insurance industry.” According to IRDA’s 2011 annual report, the Indian insurance industry consists of a total of 49 insurance companies in the public and private sectors.
Sources and Additional Resources
“Securing the Silent: Microinsurance in India – The Story So Far”; MicroSave; December 2012; http://www.microsave.org/sites/default/files/research_papers/Securing_the_Silent_MI_Report.pdf
MicroCapital.org story: “MICROFINANCE PUBLICATION ROUND-UP: Microinsurance for Microfinance Institutions; Trends in Microfinance Investments; Inclusive Insurance Markets”; Published December 18, 2012; http://www.microcapital.org/microfinance-publication-round-up-microinsurance-for-microfinance-institutions-trends-in-microfinance-investments-inclusive-insurance-markets/
MicroCapital.org story: “MICROFINANCE PUBLICATION ROUND-UP: Trends in Cross-Border Funding for Microfinance; Microinsurance Among Microcredit Groups in Tanzania; Asian Development Bank Interventions Fail to Reach Enough Poor People”; Published December 12, 2012; http://www.microcapital.org/microfinance-publication-round-up-trends-in-cross-border-funding-for-microfinance-microinsurance-among-microcredit-groups-in-tanzania-asian-development-bank-interventions-fail-to-reach-enough-poor/
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