distribution of micro insurance products in india
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Distribution of Micro Insurance Products In India
K. Muralidhara RaoGeneral Manager, micro Credit Innovations
Department, NABARD, Mumbai
Presentation Outline…
Introduction IRDA’s Initiatives in Micro Insurance Micro Insurance Models Challenges in Micro Insurance
Penetration Distribution Channels Conclusion
IRDA’s Initiatives…
Definition of micro insurance Introduce the concept of “micro insurance
product” and “micro insurance agent Recognition of wide network of
intermediaries in rural and social sectors Offer alternative strategic entry points for
intermediaries
IRDA’s Initatives (contd)
Recognition that procedures and services should be set by the insurers rather than
the regulator 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
Direct Marketing by the insurance company
Partner-agent model De-linked model Service Provider Model
Direct Marketing by the insurance company
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
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 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 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 Agents Formal Banks Regional Rural Banks Cooperative Banks SHGs & their Federations NGOs & MFIs Post Offices Internet & Rural Kiosks & Rural
Knowledge Centers
Agents 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
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 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 GTZ-Project- introduced a new deposit scheme for SHGs called “Rakshith” Savings Bank Scheme in tie up with LIC and UIICo. Ltd
Cooperative Banks 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 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 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
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
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 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
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
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
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