Download Distribution of Micro Insurance Products in India

Distribution of Micro
Insurance Products In India
K. Muralidhara Rao
General Manager, micro Credit Innovations
Department, NABARD, Mumbai
Presentation Outline…
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Introduction
IRDA’s Initiatives in Micro Insurance
Micro Insurance Models
Challenges in Micro Insurance
Penetration
Distribution Channels
Conclusion
IRDA’s Initiatives…
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Definition of micro insurance
Introduce the concept of “micro insurance
product” and “micro insurance agent
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Recognition
of
wide
network
of
intermediaries in rural and social sectors
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Offer alternative strategic entry points for
intermediaries
IRDA’s Initatives
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(contd)
Recognition that procedures and services
should be set by the insurers rather than
the regulator
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Permitting an insurer to workout
mechanism to provide life as well as
general insurance products
Review of existing definition of rural area
Micro Insurance Models
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Direct Marketing by the
insurance company
Partner-agent model
De-linked model
Service Provider Model
Direct Marketing by the
insurance company
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Identification of clients, selling of
policies, collection of premium,
receipts of claims and settlement
of claims etc., all are done by the
insurance companies
Outreach to provide micro
insurance to poor through this
model has been very limited
Partner-agent model
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Approved intermediary organisations act as
insurance agents.
Identify the customers, negotiate with
insurance companies about the adequacy of
products and premium rates to be paid,
collect the premium
Assist in clients in claim processing and
settlement
Dominant model
De-linked model
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Community based insurance facility
where NGO/MFI or federation of the
groups act as insurer
Coverage of risk remains with the insurer
Sum insured, design and pricing of
products, adverse selection, collection,
claim verification and settlement data
collection and maintenance, assessing
client satisfaction etc are undertaken
internally by the insurer
Service Provider Model
NGOs generally provide basic health
care facilities to the rural population
since necessary amenities were simply
not present in their area of operation.
Instead of premium, the service
providers charge a membership fees to
partly cover their costs
Challenges in Micro Insurance
Penetration
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Designing of products suiting the
rural market
Using the right distribution channel
mix to reach the potential
customer
Intermediaries being able to build
personal credibility with the clients
Distribution Channels
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Agents
Formal Banks
Regional Rural Banks
Cooperative Banks
SHGs & their Federations
NGOs & MFIs
Post Offices
Internet & Rural Kiosks & Rural Knowledge
Centers
Agents
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Prime channel for insurance distribution
in urban areas
Trust of the company & customer must
Knowledge of different products
Postman,School teacher, shopkeeper,
gram sevikas, gram sahayaks
Training & educating poses a challenge
Not an optimum channel as 42 % of
600,000 villages have population of less
than 500
Formal Banks
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27 PSBs have19, 104 rural branches and
30 Pvt.SBs 1,111
Private banks are constrained by their
lack of reach and meager branch strength
Banking sector has shown propensity towards
the larger size accounts
Within the foreseeable future they will
normally not be able to fully serve that
market
Regional Rural Banks
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177 RRBs together with14,150 branches
cover 516 districts and serve a client base
of close to 62.70 million
RBI has permitted RRBs to undertake
insurance business as corporate agent
without risk participation
Chitradurga Gramin Bank has -in close
cooperation with the NABARD GTZProject- introduced a new deposit scheme
for SHGs called “Rakshith” Savings Bank
Scheme in tie up with LIC and UIICo. Ltd
Cooperative Banks
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ST structure comprises of 30 SCBs, 367 DCCBs
and over 112,309 PACS
RBI has allowed scheduled licensed SCBs and
licensed DCCBs having a networth of Rs. 500
million to undertake insurance business as
corporate agents without risk participation
Given their poor governance structures it
is unlikely that they would emerge as
efficient distribution channels
SHGs & their Federations
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1.6 million SHGs comprising 24.1 million
families are linked to banks
Rapidly growing year after year
Many SHG promoters have formed federations
Federations provide both financial and non
financial services
Federations promoted by DHAN Foundation
are participating in Mutual Insurance Scheme
as well as intermediary
NGOs and MFIs
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Large number of NGOs and MFIs are involved
in social as well as financial services
intermediation
Out of 61 sample MFIs studied by Sa-Dhan 34
were providing insurance services
While all 34 MFIs provided life insurance
products, only 9 facilitated non life insurance
products
The most significant range in amount of cover
was in the category of Rs.10,000 and above
Challenges faced by NGO & MFIs
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Many of them are working as pure service provider
particularly in health insurance, private insurer,
intermediary
Poor live for the present and do not plan for the
future. Given their fatalistic attitude, it is difficult to
explain the concept of insurance to poor
Given this mindset, premium is seen as additional
expenditure rather than risk cover
Without the availability of basic health
infrastructure in rural areas, health insurance is
difficult to sell
Challenges faced by NGO & MFIs
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Cooperation with the insurance company has not
proved successful. Limited motivation on both
sides to improve the cooperation
Delays in settling claims and complicated
formalities
Challenge to pick up the necessary
insurance techniques and adjust them to the
needs of their members
No legal status as a private insurer. This
complicates the matter further when it
comes to reinsurance
Post Offices
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There are about 129,000 rural post
offices.
Post Office itself is offering insurance
products to the poor
Its efficacy as an intermediary channel
needs to be explored
Internet, Rural kiosks & Knowledge Centers
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Using net for transactions has been catching up in
urban areas. Many banks provide online banking
Most of the insurance companies have product
information and/or illustrative tools on the web
In rural areas too rural knowledge centers are
being set up to bring information close to the
people. The insurance companies can use these
centers to create awareness about insurance
Can only be enablers for the human channels
Conclusion
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micro Finance sector is in evolving phase
Innovations are required at all stages for products,
in pricing policy and in delivery channels
Success of marketing micro insurance depends on
understanding the social and cultural needs of the
target population
Clients should also receive price differentials for
using different channels
Groups & their promoters can provide ideal
platform to kick start the micro insurance
Thank you