09-09-2016, 11:28 AM
A study for the promotion of rural growth
through micro insurance with reference to IDBI Federal Life Insurance Company
Limited, Coimbatore
1454042711-ruralgrowth.PDF (Size: 553.9 KB / Downloads: 5)
. INTRODUCTION TO THE STUDY
The situation will be more difficult when poor family’s breadwinner dies, when a
child in a disadvantaged household is hospitalized, or the home of a vulnerable family
is destroyed by fire or natural disaster. Every serious illness, every accident and every
natural disaster threatens the very existence of poor people and usually leads to
deeper poverty. That’s where “micro-insurance” comes in.
Micro-insurance is specifically designed for the protection of low -income people,
with affordable insurance products to help them cope with and recover from common
risks. It is a market-based mechanism that promises to support sustainable livelihoods
by empowering people to adapt and withstand stress. Two-thirds of human beings
suffering in the most extreme poverty are women. Often living within $1 per day, they
are the most vulnerable.
India has perhaps the most exciting and dynamic micro-insurance sector in the
world. The aim of this report is to provide an overview of existing knowledge on
services being provided, awareness among low income group people, client needs,
difficulties in distribution and benefit of micro-insurance in society. Addition to this
company’s as well as industry’s history, present scenario and future outlook also
described in this paper.
Micro-Insurance
The draft paper prepared by the Consultative Group to Assist the Poor (CGAP)
working group on micro-insurance defines micro-insurance as “the protection of low
income households against specific perils in exchange for premium payments
proportionate to the likelihood and cost of the risk involved.” The paper deliberates on
the key roles to be played by all stakeholders – insurers, regulator and the
Government. The working group also agrees that the cost of such cover should be
affordable.
There are a wide range of developmental programmes being supported by the
Government like the SGSY, the NREGP, etc., which have facilitated the
improvement of income levels of many rural households. The GoI-package of
“Doubling Flow of Agricultural Credit” has also enabled greater institutional
credit flow for agriculture and allied activities. However, what is of concern is
that all these interventions, though ambitious in stated intent, only incidentally
address risk, if at all. The most vulnerable rural population - in particular,
women - are largely excluded from the insurance market. This only amplifies
the felt need of this segment for protection of their lives / income-generating
assets against various perils. At present, the Personal Accident Insurance
Scheme (PAIS) which is being provided as a bundled offering along with the
Kisan Credit Card (KCC) Scheme and the Rashtriya Krishi Bima Yojana
(RKBY) for insuring crops are, probably, the only borrowal-linked riskmitigation
mechanisms available to rural households. Further, many State Governments
are offering health insurance facilities to the rural poor (eg., Yeshaswini
Scheme of the Government of Karnataka) which have also generated
considerable acceptance and awareness about insurance products in the rural
areas.
In October 2004, the RBI permitted RRBs to undertake insurance business as
a “corporate agent” without risk participation. As RRBs have a network of
branches in rural areas, they could play an important role in increasing
outreach.
Though the 2005 IRDA regulations on micro-insurance have some restrictive
aspects, they have also a number of positive features. Its most innovative
feature is legally recognizing NGOs, MFIs and SHGs as “micro-insurance
agents.” This has the potential of significantly increasing rural insurance
penetration.
Many commercial banks have partnered foreign insurance companies for
providing life insurance policies. Thus, banking outlets (which number close to
70,000) and more than 1 lakh cooperative societies could provide the needed
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