Contents

1.

Introduction...... Salient features of Microinsurance .. Industry Profile...... Major players in Microinsurance.. IRDA (Microinsurance) Regulations, 2005...... Microinsurance products in India...

2. 3. 4. 5.

Marketing Of Microinsurance.. Premium Collection Claim Processing Micro Insurance Agents.

6. Organisational Development In Microinsurance..

7. 8. 9.

Literature Review Objective of study. Research Methodology.

10.Data Analysis.
11.

Finding

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12.

Conclusion.

INTRODUCTION
India is enjoying rapid growth and benefits from a young population. Its middle class is growing rapidly but 70 percent of the population is still rural, often very poor, and handicapped by poor health and health services, and low literacy rates. Although the type of risks faced by the poor such as that of death, illness, injury and accident, are no different from those faced by others, they are more vulnerable to such risks because of their economic circumstance. According to World Bank study (Peters et al. 2002), reports that about one-fourth of hospitalized Indians fall below the poverty line as a result of their stay in hospitals. The same study reports that more than 40 percent of hospitalized patients take loans or sell assets to pay for hospitalization. When a poors familys income generator dies, when a child of a poor family is hospitalized, or home of a poor family is destroys by flood, earthquake or fire. Every illness every accident or every natural disaster leads to deeper poverty to a poor family. Thats where micro insurance comes in. Microinsurance is the protection of low income households against specific perils in exchange for premium payments proportionate to the likelihood and cost of the risk involved. It is specifically designed for the protection of low income people with affordable insurance products to help them cope with and recover from common risk. A key strategy for enhancing economic development and alleviating poverty is to make financial systems more inclusive, for example by improving access to savings and credit services for un- and under-served markets. In part, Poverty stems from the fact that low-income households and markets do not have the same opportunities to finance investments, accumulate capital or protect assets (including human assets). The poors heavy reliance on informal financial services such as moneylenders, under-the-mattress savings and mutual assistance societies can be inefficient and expensive, and may even exacerbate poverty. An inclusive financial system makes insurance available to low-income persons.
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However, many commercial insurers and policymakers believe that providing insurance to the poor is the responsibility of the state. Although many governments have social protection programmes, the targeting of these schemes is often ineffective. The poorest segments do not always benefit from the subsidy, while people who can afford insurance often find ways to access these benefits. In general, governments have made little effort to shift the burden of risk-pooling to market-led schemes; and the private sector (commercial insurers) seems to have little incentive to seek out this market segment. In principle, micro-insurance works like any typical insurance business. But there are several things that differentiate it from normal insurance. First, it is group insurance that can cover thousands of customers under one contract. Second, micro-insurance requires an intermediary between the customer and the insurance company. Preferably, this intermediary is a non-governmental organization (NGO) or microfinance institution, for example a rural bank that can handle the whole distribution and most of the administration process. The few differences between traditional insurance and microinsurance are as follows: Traditional Insurance Microinsurance Clients Low risk environment High risk exposure/ high vulnerability Established insurance Weak insurance culture culture Distribution Sold by non traditional Sold by licensed model intermediaries to clients intermediaries or by with little experience of insurance companies insurance directly to wealthy clients or companies that understand insurance Policies Complex policy Simple language documents with many Few ,if any exclusion exclusions Group policies Premium Good statistical data Little historical data calculation Pricing based on Group pricing Individual risk Very price sensitive market Premium Monthly/quarterly/semi or Frequent or irregular

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collection

annually collection

Control of insurance risk (adverse selection, moral hazards, frauds)

Limited eligibility Significant documentation required Screening such as medical test is required

Claims handling Complicated process Extensive verification documentation

payment adapted to volatile cash flow of clients Often linked with other transaction (e.g. loan repayment Broad eligibility Limited but effective control Insurance risk included in premium rather than exclusion Linked to other service (like credit) Simple and fast procedure of small firms Efficient fraud control

Historically in India, a few micro-insurance schemes were initiated, either by nongovernmental organizations (NGO) due to the felt need in the communities in which these organizations were involved or by the trust hospitals. These schemes have now gathered momentum partly due to the development of micro-finance activity, and partly due to the regulation that makes it mandatory for all formal insurance companies to extend their activities to rural and well-identified social sector in the country (IRDA 2000). As a result, increasingly, micro-finance institutions (MFIs) and NGOs are negotiating with the for-profit insurers for the purchase of customized group or standardized individual insurance schemes for the low-income people. Although the reach of such schemes is still very limited, anywhere between 5 and 10 million individuals. The UNDP report has analyzed six key issues pertinent to the growth of the microinsurance industry in India, capturing the concerns of different stakeholders as indicated below:

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(i) There are specific reasons for low demand for insurance in spite of intense need. Suppliers have their own concerns which help to explain why there have been so little efforts at market development. Consequently, the rural market is characterized by limited and inappropriate services, inadequate information and capacity gaps. (ii) There are challenges in product design, which has resulted in a mismatch between needs and standard products on offer. Efforts at product development / diversification have been limited. (iii) Pricing, including willingness to pay and the availability of subsidies, influence the market. In the absence of a historical data base on claims, premium calculations are based on remote macro aggregates and overcautious margins. Building and sharing claims histories can help in aligning pricing decisions with actuarial calculations, thereby reducing prices. (iv) Difficulty in distribution is one of the most cited reasons for absence of rural insurance. The high costs of penetrating rural markets, combined with underutilization of available distribution channels, hinder the growth of rural insurance services. This adds to costs, both, managerial and financial. Like Inclusive credit, inclusive insurance is expected to be a low ticket business, requiring volumes for viability. (v) Cumbersome and inappropriate procedures inhibit the development of this sector. (vi)Contrasting perspectives of the insured and the insurers, lead to low customization of products and low demand for what is available. Salient features of Microinsurance: 1) USAGE: Though no figures are available on the exact size of the microinsurance market in India, a rough estimate would place it at around 14m individuals, or approximately 2% of the adult population. The low take-up can be ascribed to a general lack of awareness of insurance as a financial product, even in the high to middle-income market (a factor that emerged strongly from the focus group findings). In addition a lack of rural financial services infrastructure for distribution purposes, as well as a lack of actuarial data, inhibit the development of the microinsurance market.

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2) PLAYERS: Though the state-owned insurers still have the largest market share, there are now a total of 32 licensed insurers. A feature that sets India apart from other countries is the fact that microinsurance is mostly provided by large, corporate insurers. This is due to a cautious regulatory approach in response to the fact that small and cooperative financial institutions have not performed well historically that limits the players in the non-bank field to large cap institutions. The cooperative/mutual sector therefore does not feature as a provider of microinsurance, though corporate insurers use it as a distribution channel. Informal insurance is virtually exclusively the domain of formal entities such as health insurance schemes not registered for insurance purposes, rather than community risk-pooling groups, and is estimated to only comprise 20% of the market. 3) PRODUCTS: Microinsurance in India is for the most part driven by compulsory credit life insurance on the back of microfinance. Due to the limited reach of the public health system, there is also a high natural demand for health insurance. Many MFIs therefore provide a package of compulsory insurance cover to their clients that are credit-linked this includes life, asset as well as health insurance. The cover is for the term of credit (usually 1 year). Health cover provided in such packages is not comprehensive and it covers only certain listed diseases for which hospitalization is required. Accident cover is a rider on life insurance and is a fixed payout. India is therefore fairly unique in that compulsory insurance cover extends beyond life cover. It is estimated that only 10% of microinsurance policies are sold on a voluntary basis. Of these, up to 90% are endowment products rather than pure risk products, indicating a preference among the lowincome population for financial products that provide some payout regardless of whether a risk event has occurred. 4) DISTRIBUTION: Distribution is an important part of the microinsurance landscape in India. Regulations were issued in 2005 to create a microinsurance agent category for the dedicated distribution of microinsurance. Currently such agents however only distribute about 20% of all microinsurance. Instead, distribution mainly takes place through MFIs who either do not qualify as microinsurance agents under the regulations or who find the regulations too restrictive, as partners or agents of formal insurers. we can distinguish four institutional models for providing microinsurance which help us to understand how
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corporate insurers, government bodies as well as other institutions, such as

microfinance institutions (MFIs) can play a role. i) Partner Agent Model: Commercial or public insurers together with MFIs
or nongovernmental organizations (NGOs) collaboratively develop the product. The insurer absorbs the risk, and the MFI/NGO markets the product through its established distribution network. This lowers the cost of distribution and thus promotes affordability. This model of collaboration has become the dominant approach to microinsurance in India and has encouraged many microfinance institutions to switch from a full-service model to the partner-agent model. Examples of this scheme are AIDMI's Afat Vimo as well as SEWA, a microinsurance pioneer, who offers its life, health and asset coverage in partnership with various insurers. ii) Community based Model: A group of people or local communities, MFIs, NGOs and/ or cooperatives develop and distribute their own product, manage the risk pool and absorb the risk. The Swayamkrushi Youth Charitable Organisation (YCO) in Andhra Pradesh is an example of a community-based model. It is primarily a savings and credit association with added insurance features. The cooperative's 8,100 members pay a yearly premium of Rs. 100 into a pool managed by the cooperative and receive cover for death and property loss. The life insurance benefit is Rs. 15,000 for a natural death, and Rs. 30,000 in the event of an accidental death. iii) In the in-house or full-service model: A MFI or NGO runs its own insurance scheme for its clients and any profit or loss is absorbed by the MFI. The system is not very common anymore but it still exists in some organizations such as SPANDANA, located in Guntur, Andhra Pradesh. This scheme started in urban areas and then moved to rural ones and has expanded enormously in recent years. iv) Provider model: Banks and other providers of microfinance can directly offer or require insurance contracts. These are usually coupled with credit, for example, to insure against default risk. This model is used widely in the general insurance market but high transaction costs and low ability to pay premiums inhibit its extensive use in the field of disaster insurance for the poor.

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INDUSTRY PROFILE
Life Insurance In India, Insurance is a national matter, in which life and general insurance is yet a booming sector with huge possibilities for different global companies, as life insurance premiums account to 2.5% and general insurance premiums account to 0.65% of India's GDP. The Indian Insurance sector has gone through several phases and changes, especially after 1999, when the Govt. of India opened up the insurance sector for private companies to solicit insurance, allowing FDI up to 26%. Since then, the Insurance sector in India is considered as a flourishing market amongst global insurance companies. However, the largest life insurance company in India is still owned by the government. The history of Insurance in India dates back to 1818, when Oriental Life Insurance Company was established by Europeans in Kolkata to cater to their requirements. Nevertheless, there was discrimination among the life of foreigners and Indians, as higher premiums were charged from the latter. In 1870, Indians took a sigh of relief when Bombay Mutual Life Assurance Society, the first Indian insurance company covered Indian lives at normal rates. Onset of the 20th century brought a drastic change in the Insurance sector. In 1912, the Govt. of India passed two acts - the Life Insurance Companies Act, and the Provident Fund Act - to regulate the insurance business. National Insurance Company Ltd, founded in 1906, is the oldest existing insurance company in India. Earlier, the Insurance sector had only two state insurers - Life Insurers i.e. Life Insurance Corporation of India (LIC), and General Insurers i.e. General Insurance Corporation of India (GIC). In December 2000, these subsidiaries were de-linked from parent company and were declared independent insurance companies: Oriental Insurance Company Limited, New India Assurance Company Limited, National Insurance Company Limited and United India Insurance Company Limited.

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General Insurance The General Insurance industry in India dates back to the Industrial Revolution and the subsequent increase in trade across the oceans in the 17th century. As for Life Insurance, the British brought General Insurance to India, and a similar path was followed in the development of this industry. A number of private companies were in existence for years and years until, in 1971, the Indian Government decided that the public interest would be served by nationalizing the industry, merging all the 107 companies into four companies, depending on the sort of business transacted (Marine, Fire, Miscellaneous). These were the National Insurance Company Ltd., the Oriental Insurance Company Ltd., the New India Assurance Company Ltd., and the United India Insurance Company Ltd. located in Calcutta, New Delhi, Bombay and Madras respectively. The General Insurance Corporation (GIC) was set up in 1972 as a holding company, having these four companies as its subsidiaries.

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MAJOR PLAYERS IN MICROINSURANCE

Life Insurance Corporation of India (LIC) Life Insurance Corporation of India (LIC) was established on 1 September 1956 to spread the message of life insurance in the country and mobilise peoples savings for nation-building activities. LIC with its central office in Mumbai and seven zonal offices at Mumbai, Calcutta, Delhi, Chennai, Hyderabad, Kanpur and Bhopal, operates through 100 divisional offices in important cities and 2,048 branch offices. LIC has 5.59 lakh active agents spread over the country. The Corporation also transacts business abroad and has offices in Fiji, Mauritius and United Kingdom. LIC is associated with joint ventures abroad in the field of insurance, namely, Ken-India Assurance Company Limited, Nairobi; United Oriental Assurance Company Limited, Kuala Lumpur; and Life Insurance Corporation (International), E.C. Bahrain. It has also entered into an agreement

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with the Sun Life (UK) for marketing unit linked life insurance and pension policies in U.K. In 1995-96, LIC had a total income from premium and investments of $ 5 Billion while GIC recorded a net premium of $ 1.3 Billion. During the last 15 years, LIC's income grew at a healthy average of 10 per cent as against the industry's 6.7 per cent growth in the rest of Asia (3.4 per cent in Europe, 1.4 per cent in the US). LIC has even provided insurance cover to five million people living below the poverty line, with 50 per cent subsidy in the premium rates. LIC's claims settlement ratio at 95 per cent and GIC's at 74 per cent are higher than that of global average of 40 per cent. Compounded annual growth rate for Life insurance business has been 19.22 per cent per annum.

The introduction of private players in the industry has added to the colors in the dull industry. The initiatives taken by the private players are very competitive and have given immense competition to the on time monopoly of the market LIC. Since the advent of the private players in the market the industry has seen new and innovative steps taken by the players in this sector. The new players have improved the service quality of the insurance. As a result LIC down the years have seen the declining phase in its career. The market share was distributed among the private players. Though LIC still holds the 75% of the insurance sector but the upcoming natures of these private players are enough to give more competition to LIC in the near future. LIC market share has decreased from 95% (2002-03) to 82 %( 2004-05). ICICI Prudential Life Insurance Company Ltd. ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and prudential plc, a leading international financial

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services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). The company has a network of about 56,000 advisors; as well as 7 banc assurance and 150 corporate agent tie-ups. Birla Sun Life Insurance Company Ltd. Established in 2000, Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between the Aditya Birla Group, a well known and trusted name globally amongst Indian conglomerates and Sun Life Financial Inc, leading international financial services organization from Canada. The local knowledge of the Aditya Birla Group combined with the domain expertise of Sun Life Financial Inc., offers a formidable protection for its customers future.

Tata AIG Life Insurance Company Ltd. Tata AIG Life Insurance Company Ltd. "Tata AIG Life" offers a broad array of life insurance products to individuals, associations and businesses of all sizes, with a wide variety of additional coverage to ensure our customers can find an insurance product to meet their needs. Tata AIG Life is a joint venture of the Tata Group and American International Group, Inc. (AIG). They operate in 11 states with a specific relationship management team for each state. A dedicated & trained sales and marketing team manages the front end of the Micro insurance program. Our micro insurance distribution model collaborates with NGOs (Non-governmental organisations) and Rural organizations with community level SHG (Self Help Group) women advisors who provide insurance advisory services to the rural customers at their doorstep. SBI Life Insurance Company Limited

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SBI Life Insurance Company Limited is a joint venture between the State Bank of India and BNP Paribas Assurance. SBI Life Insurance is registered with an authorized capital of Rs 2000 crores and a Paid-up capital of Rs 1000 Crores. SBI owns 74% of the total capital and BNP Paribas Assurance the remaining 26%. State Bank of India enjoys the largest banking franchise in India. Along with its 6 Associate Banks, SBI Group has the unrivalled strength of over 16,000 branches across the country, arguably the largest in the world. SBI Life has a unique multi-distribution model encompassing vibrant Bancassurance, Retail Agency, Institutional Alliances and Corporate Solutions distribution channels. SBI Life extensively leverages the SBI Group as a platform for cross-selling insurance products along with its numerous banking product packages such as housing loans and personal loans. SBIs access to over 100 million accounts across the country provides a vibrant base for insurance penetration across every region and economic strata in the country ensuring true financial inclusion.

ING Vysya Life Insurance Company Private Limited ING Vysya Life Insurance (ING Life), a part of the ING Group the worlds largest financial services corporation entered the private life insurance industry in India in September 2001. Headquartered at Bangalore, ING Life India is staffed by over 6,000 employees and services more than 10 lakhs customers. ING Life India is a joint venture between ING Group (ING Insurance International B.V.) & Exide Industries. ING Life has a pan India network, and distributes its products through two channels, the Tied Agency Force and the Alternate Channel. The Tied Agency force comprises of over 60,000 ING Life Advisors, spread across the country. The channel has branches in 234 cities, and 366 sales teams across the country. The Alternate Channels business within ING Life is one of the fastest growing distribution channels. The company currently has tie ups with over 200 cooperative bank across the country. The Alternate Channels division has Bancassurance (ING Vysya Bank), Referral Banks, Corporate Agents, Brokers and SMINCE.

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 Allianz Bajaj Life Insurance Company Ltd. Bajaj Allianz Life Insurance is a union between Allianz SE, one of the largest Insurance Company and Bajaj Finserv. Allianz SE is a leading insurance conglomerate globally and one of the largest asset managers in the world, managing assets worth over a Trillion (Over INR. 55, 00,000 Crores). Allianz SE has over 115 years of financial experience and is present in over 70 countries around the world. Metlife India Insurance Company Pvt. Ltd. MetLife India Insurance Company Limited (MetLife) is an affiliate of MetLife, Inc. and was incorporated as a joint venture between MetLife International Holdings, Inc., The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and other private investors. MetLife is one of the fastest growing life insurance companies in the country. It serves its customers by offering a range of innovative products to individuals and group customers at more than 600 locations through its bank partners and company-owned offices. MetLife has more than 50,000 Financial Advisors, who help customers achieve peace of mind across the length and breadth of the country.

Aviva Life Insurance Company India Limited

Aviva India is a joint venture between one of the countrys oldest and largest groups, Dabur, and Aviva plc, the UK's largest insurance group, whose association with India dates back to 1834. With a strong sales force of over 30,000 Financial Planning Advisers (FPAs), we have initiated and pioneered many innovative sales approaches, including the concept of Bancassurance and Financial Health Check services. We are among the first companies to introduce the contemporary unitlinked products With a wide distribution network of 195 branches and close to 40 Bancassurance partnerships, we are spread across nearly 3,000 towns and cities in India.

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Sahara India life insurance

The Sahara Pariwars latest foray is in the field of Life Insurance. The Pariwars life insurance company Sahara India Life Insurance Company Ltd.- has been granted licence by the insurance regulator the IRDA on 6th February 2004. With this approval Sahara India Life Insurance Company Ltd. becomes the first wholly and purely Indian company, without any foreign collaboration to enter the Indian Life insurance market. The launch is with an initial paid up capital of 157 crores. The Chairman of the company is Shri Subrata Roy Sahara who is also the Chairman of Sahara Pariwar.

Shriram life insurance company

Shriram Life Insurance Company is the joint venture between the Shriram Group and the Sanlam Group. The Shriram Group is one of the largest and well-respected financial services conglomerates in India. The Group's main line of activities in financial services include chit fund, truck financing, consumer durable financing, stock broking, insurance broking and life insurance. The Group has a customer base of 30 lacs chit subscribers and investors and operates through a network of 630 offices all over the country. The Group has the largest agency force in the private sector consisting of more than 75,000 loyal and dedicated agents.

IDBI Fortis Life Insurance Company Ltd.

IDBI Fortis Life Insurance Co Ltd is a joint-venture of IDBI Bank, Indias premier development and commercial bank, Federal Bank, one of Indias leading private sector banks and Fortis Insurance International, a multinational insurance giant based out of Europe. In this venture, IDBI owns 48% equity while Federal Bank and Fortis own 26% equity each. Having started in March 2008, in just five months of inception we became one of the fastest growing new insurance companies to garner Rs 100 Cr in premiums. The company offers its services through a vast nationwide network across the branches of IDBI Bank and Federal Bank in addition to a sizeable network of advisors and partners.

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DLF Pramerica Life Insurance Co. Ltd.

DLF Pramerica Life Insurance Company Ltd. (DPLI) is a joint venture between DLF Limited and Prudential International Insurance Holdings, Ltd. (referred to hereafter as "PIIH"). PIIH is a fully owned subsidiary of Prudential Financial, Inc. (referred to hereafter as "PFI"). The combination of the strength of the DLF brand and PFI's insurance expertise provide the strongest possible foundations for DPLI to succeed in the rapidly growing Indian life insurance market.

Star Union Dai-ichi Life Insurance Co. Ltd.,

Bank of India and Union Bank of India, two leading Public Sector Banks in India and the Dai-ichi Mutual Life Insurance Company, a leading Japanese Company in the Life Insurance market, have floated a Joint Venture Company, "Star Union Dai-ichi Life Insurance Co. Ltd." for undertaking Life Insurance Business in India. The Company has a capital stake of 51% by BOI, 26% by Dai-ichi Life and 23% by Union Bank. The Company has authorized capital of Rs. 250.00 Crores. Star Union Dai-ichi Life, with the strength of the domestic partners in the Indian Financial Sector coupled with the Dai-ichi Lifes strong domain expertise is expected, to be a strong player in the Indian Life Insurance market in a short time. The Company offers various products to serve all strata of the society.

IRDA (Microinsurance) Regulations,2005

Regulations on micro-insurance were officially gazette by the IRDA on 30 November 2005. The salient features of the regulation are presented below The regulation defines micro-insurance products The regulation provides definitions of micro-insurance products covering life and general insurance General micro insurance product means any health insurance contract, any contract covering the belongings, such as, hut, livestock or tools or instruments or any personal accident contract, either on individual or group basis, as per terms stated in Schedule-I appended to these regulations. Life micro
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insurance product means any term insurance contract with or without return of premium, and endowment insurance contract or health insurance contract, with our without an accident benefit rider, either on individual or group basis, as per terms stated in Schedule-II appended to these regulations. (a) micro-insurance policy means an insurance policy sold under a plan which has been specifically approved by the Authority as a micro insurance Product. (b) micro-insurance product includes a general micro-insurance product or life insurance product, proposal form and all marketing materials in respect thereof. (c) Every insurer shall be subject to the file and use procedure with the IRDA. (d) No one other than insurer be it a micro-insurance agent or anyone else can underwrite a micro-insurance proposal. (e) Rural business transacted under micro-insurance by an insurer will be counted for quota fulfillment both for rural as well as social sector obligations. It promotes the extensive use of intermediaries The micro-insurance regulations promote extensive use of intermediaries by the insurers for selling and servicing various micro-insurance products. The regulation also creates a new intermediary called the micro-insurance agent. The regulation clearly defines MI agents and has imposed minima in terms of the number of years of experience (at least 3) of working with low income groups. It also emphasises the need for such agents to have appropriate aims and objectives, a good track record, transparency and accountability stated in the bye-laws with demonstrated involvement of committed people. This has been done in order to prevent the engagement of unscrupulous operators in the activity. However, the onus for the selection of appropriate MI agents and their capacity building lies with the insurance company. Intermediary: The micro insurance agent, can be a Non-Governmental Organization (NGO), MFI or other community organization such as Self Help Groups (SHG) appointed by an insurer to distribute micro-insurance through specified persons. Micro-insurance agents enter into a deed of agreement with the insurer. They abide by the code of conduct defined by the IRDA and attend 25 hours of training (down from 100 hours originally required for conventional insurance agents but now reduced to 50 hours) in the local language at the expense of the insurer. There is no qualifying examination, unlike the case of ordinary insurance agents.

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According to the regulation, (a) Non-Government Organization (NGO) means a non-profit organization registered as a society under any law, and has been working at least for three years with marginalized groups, with proven track record, clearly stated aims and objectives, transparency and accountability as outlined in its memorandum, rule, by-laws or regulations as the case may be, and demonstrates involvement of committed people. (b) Self Help Groups (SHG) means any informal group consisting of ten to twenty or more persons and has been working at least for three years with marginalized groups, with proven track record, clearly stated aims and objectives, transparency and accountability as outlined in its memorandum, rules, by-laws or regulations, as the case may be, and demonstrates involvement of committed people. (c) Micro-Finance Institutions (MFI) means any institution or entity or association registered under any law for the registration of societies or co-operative societies, as the case may be, inter alia, for sanctioning loan/finance to its members. IRDA has recognized four categories of intermediaries: brokers, agents, corporate agents, and Micro-insurance (MI) agents. Categories other than MI agents may sell micro-insurance but they do not benefit from the concessions allowed for the MI agents. However, a micro-insurance agent shall not distribute any product other than a micro insurance product. The regulation provides for MI agents to perform the following functions (a) Collection of proposal forms (b) Collection of self declaration from the proposer that he/she is in good health. (c) Collection and remittance of premium (d) Distribution of policy documents (e) Maintenance of registers of all those insured and their dependants covered under the micro insurance scheme, together with details of name, sex, age, address, nominees and thumb impression/signature of the policyholder. (f) Assistance in the settlement of claims (g) Ensuring nomination to be made by the insured (h) Any policy administration service The regulations attempt to manage the cost of intermediation A cap has been put on commission, between 10 and 20% of premiums per year according to type and mode of insurance payment, which is in excess of what
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conventional agents would normally earn. The rates of commission applicable to MI agents are Life insurance business General insurance business Single Premium policies 15% of the 15% of the premium single premium Non-single premium policies 20% of the premium for all the years of the premium paying term The commission rates prescribed above are more liberal than the 60% (of a single years premium) payable under ordinary business in the case of life insurance and 10% in the case of general insurance. This is based on the logic that an MI agent has to perform a number of functions which mainstream agents do not have to undertake. MI agents may thus receive commission at different rates from those applicable to other intermediaries. The commission structure is, however, changed to remove up-front payments in favour of payments upon the performance of certain functions. For group insurance products, the insurer may decide the commission subject to the overall limits specified by IRDA. MI agents may route premiums and claims payments through their books (such as receive individual premiums and pay it over as one amount). This is not allowed for other intermediaries and is considered important in managing the cost of intermediation.

Collaborations between life insurers and non-life insurers The regulations allow for the bundling of life and non-life elements in one single product provided there is clear separation of premium and risk at the insurers level. Where an insurer carrying on life insurance business offers any general micro-insurance product, he shall have a tie-up with the insurer carrying on general insurance business for this purpose, and subject to the provisions of section 64 VB of the Insurance Act (governing the remittance of the premium amount to the insurance company), the premium attributable to the general micro-insurance product may be collected from the prospect (proposer) by the insurer carrying on life insurance business, either directly or through any of the distributing entities of micro-insurance products. In the event of any claim in regard to general micro-

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insurance, the insurer carrying on life business or the agent shall forward the claim to the insurer carrying on general insurance business. The same arrangement holds true for life claims faced by non-life vendors of a micro-insurance product. In both cases, the respective primary first insurer would render all assistance in claim settlement by coordinating with his opposite number. The limitations of the micro-insurance regulations The impact of the MI regulations is likely to be limited for a number of reasons Definition of MI agents: The regulations define MI agents to include NGOs SHGs and MFIs. The definition of MFI is, however, limited to societies, trusts and cooperatives societies and thus excludes a large proportion of MFIs operating through other legal forms (like for-profit and not-forprofit companies). The result is that all profit-driven corporate intermediaries as well as some of the largest aggregators in micro-insurance are currently excluded from benefiting from the MI regulations. Though the formalisation of MI agents as a type has been welcomed by the insurance companies as a positive beginning, the exclusion of MFIs registered under the Companies Act10 is viewed with concern Limitation on the number of insurance companies an MFI can work with: The MI Regulations restrict a MI agent to working with one life and/or one general insurer respectively. This is problematic and does not accommodate models currently used in the MI market. Most insurers do not want to underwrite all risks and tend to specialize in particular types of risk. For example if a MI agent is tied to specialized health insurer, they cannot work with another general insurer to sell other asset insurance products. Know Your Customer (KYC) / Anti Money Laundering (AML) Norms: Micro insurance agents have expressed their concern at the difficulties faced by them in accessing KYC documents from proposers in rural areas, such as electoral identity card or ration card or electricity bill which are generally accepted as proves of residence. Commission capping: MI commissions are capped at 20% per annum for life across the term of the policy. Non-MI products typically pay commission on a front-loaded basis with 30-35% in year one with 7% in year 2. The up-front structure provides little incentive for renewals, particularly as premiums have to be collected in cash/ cheque. At the same time 20% may not be enough to incentivize sales. It is a common (but illegal under Section 48 of the Insurance Act) practice
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for agents to use the higher first year commission to give a discount to policyholders in the first year. Some thought would need to be given to the minimum absolute cost to sell a policy and the commission structures needed to ensure that this could be covered. Lapse rates of 30-40% are much higher for MI than traditional policies. This is because the cost/effort of premium collection/renewal exceeds the commission. Besides, the incidence of the service tax of 12.36% payable by the agents is a further point of dissatisfaction for the MI agents, especially considering the long distance travel they have to make in rural areas to procure and service business. Conflicting regulations: Enabling provisions introduced in the MI regulations are undermined by restrictions in RBI regulations. For example, the insurance regulation allows receipt of premiums in the form of money instruments (not cash), which must be remitted within 24 hours. RBI in 2002, however, issued regulations stating that certain types of NBFCs (including most MFIs) may not route any premiums through their books. The implication is that the NBFC intermediary must make out demand drafts for individual transactions and send them to the insurer. Significant efficiencies can be gained if these intermediaries were to be allowed to process all the payments through their systems and make a single payment to insurers. Rural Regional Banks (RRB) and Cooperative Banks: It is worth further examination as to whether RRB who have been given the status of corporate agents and the cooperative banks can be brought into the ambit of MI agents in view of their outreach in rural areas. However the micro-insurance regulation has been facilitative in Reducing the mandatory training requirements for insurance agents from 50 hours to just 25 hours in the case of MI. Most insurance companies have welcomed this move but feel that the technological innovations in developing better systems at the level of the MI agent and real awareness creation amongst potential clients/policy holders are a much larger challenge that would go a long way in developing the micro-insurance market. Allowing MI agents to take greater responsibilities: The regulator has allowed MI agents to take up greater responsibilities than are permitted to mainstream agents, for example, the collection of premiums on behalf of the insurance companies and the servicing of claims. IRDA believes that if the MI agents are able to carry out
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these functions effectively, it will help in minimizing the transaction costs that the insurance companies have to incur, thereby leading to lower premiums for the clients in the long run. Treating benignly apparent infringements of the regulations by community-based organisations: There are restrictive entry norms for organizations that are explicitly licensed to provide insurance to the general public. Insurance companies need a large amount of start-up capital of Rs100 crore to get a license from the IRDA. This entry norm is applicable for community based insurance as well if they want to underwrite risk. IRDA has treated the existing cases of in-house insurance with benign neglect. Essentially, this approach is dictated by the relatively limited experience and low supervisory capacity of the IRDA. Compared to the vast numbers of people in need of social protection in India, the coverage provided by both formal and, even more so, by community insurance programmes is so low that the role of regulation seems fairly limited. The creation of a two-tier space where the insurance companies are regulated and supervised and community insurance is not is de facto recognition of this fact. The IRDAs approach is that it is pointless to have regulations that are not properly enforced as long as community insurance agencies provide cover to a limited population that is clearly defined (either geographically or socially or through other forms of association), they can be allowed to function without being regulated. It is here that the regulations are not very clear for MFIs or NGOs, where the membership cannot be clearly defined. Although generally limited within a geographical territory, the scale of some MFIs or NGOs is significant and spans across several states. Taxation issues By a notification of 16 July 2001, the Government of India brought insurance auxiliary services under the ambit of Service Tax. The following important definitions and references are relevant in this context. As per section 65(31), insurance auxiliary service means any service provided by an actuary, an intermediary or insurance intermediary or an insurance agent in relation to general insurance business and includes risk assessment, claim settlement, survey and loss assessment. Taxable event and scope of service means any service provided to a policyholder or insurer by an actuary or intermediary or insurance intermediary or insurance agent, in relation to the insurance auxiliary service.
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The service providers are insurance agents, insurance surveyors and loss adjusters, actuaries and insurance consultants. In the case of insurance surveyors and loss adjusters, actuaries and insurance consultants, the service is provided mainly to the insurance companies (insurer) while in the case of insurance agents, the service is provided to both the insurer and the policy holder. Service Tax is liable to be paid by the insurance auxiliary service provider except in case of insurance agents. Insurance agents normally do not charge the policyholder. However, the insurance company pays the agent a commission (usually as a percentage of the insurance premium) on a periodic basis. In the case of an insurance agent, it has been provided in the Service Tax Rules that the person liable to pay Service Tax will be the concerned insurance company who has appointed the agent However as practised by the companies, no service tax is paid by the agents. The service tax is payable by the person whose life is assured and the current rate is 12.36 % on the premium paid to the life insurance companies. If an agents accumulated commission for the year reaches Rs 20,000 tax is deducted (at source) by the company at the rate of 11.33% (as prescribed by the income tax rules) from the commission of the agent. The service tax on premiums adds to the price of insurance. An assessment of the impact of this tax on the cost of micro-insurance is needed. From the perspective of inclusion, enabling the penetration of insurance services to low income people and in rural areas, there could be a case for exempting micro-insurance from the payment of service tax.

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MARKETING OF MICROINSURANCE
Marketing of micro insurance is a little more difficult than selling of conventional plans to middle class and rich people. Here, micro insurance agents who are either non-government organizations or micro finance institutions or self-help group have to sell product to a target group which is poor and does not have much knowledge about insurance. Hence properly designed micro insurance can be a valuable tool for low income clients. For this, an effective campaign is a must for its success through 1. Main marketing messages 2. Technique used for conveying these messages 3. Important marketing role of after-sales services 4. Marketing implications of mandatory insurance. 1. MAIN MARKETING MESSAGES The first step in designing a marketing strategy is to determine whom the micro insurance is trying to reach including their literacy and income level. After identifying the target market, the next step is to determine the main message that
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micro insurance wants to convey. Micro insurers have to anticipate some antiinsurance arguments and objections of the target market. Then they have to design messages to counter those objections. From the available case studies, four main marketing messages emerge. a. Protection b. Solidarity c. Optimism d. Trust
a. Protection

Insurers through their agents have to remind low income households that they are more vulnerable to risks all the time which if not proactively and effectively managed will make them worse off.

b. Solidarity

While the protection message is essentially the same for insurance and micro insurance, some micro insurers also emphasize solidarity as key marketing message. This message builds on informal selfhelp mechanism with which people are familiar, to make insurance and risk pooling more comprehensible to a market that is uneducated and unaware of its benefits. The message of Yeshaswini India is Each for all and all for each. Insurance requires solidarity and that even though they might not benefit this year, they might in future and they have made it possible for many others to do so.
c. Optimism

Several micro insurers recognize that they need to put a positive spin on their marketing messages. The insurer has to approach and emphasise Insure and Be Secure approach. This optimistic approach is probably easiest with endowment or accumulating value life insurance policies. The message can focus on the amount of savings that one might have at the end of the term, which can be used for building a house, educating children, wedding of family members etc.
d. Trust

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Insurers need to be perceived as trustworthy by micro insurance low income households. Insurers have to convey the impression that they are large and stable company. Branding an organization as trustworthy is very vital; take for example L. I. CS slogan : Trust Thy Name Is L.I.C.

2. MARKETING TECHNIQUE
To get customers to the point of signing their contract and paying their premiums, marketing personnel have to go through three phases. a. First, they have to raise awareness about micro insurance and micro insurance providers. b. Second, they have to help the market understand the products including costs and benefits. C. Lastly, they have to activate the market by turning the increased awareness and understanding into sale.

First phase of marketing process

Raising the customers awareness of insurance has two aspects. a. a general knowledge of insurance, and b. Specific familiarity with an insurance provider.
a. General awareness

educate their clients more broadly about insurance . describe how it fits into a broader array of risk management mechanism, and Illustrate the advantages and disadvantages of insurance relative to other ways of managing risk (e.g. saving or credit). One example of creating awareness that emerged from case studies was Tata-AIG, which produced brochures explaining insurance without actually mentioning the insurer or product. u Govt. or NGO can undertake general awareness campaigns. (I) Creating general awareness about Insurance

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Generally, knowledge of micro insurance is provided along with main stream insurance plans. Awareness about insurance can be created through Television, Print, radio advertisement and fair or melas in villages. (II) Raising Awareness about specific micro insurance providers The three most common approaches are (i) Branding (ii) Public relation (iii) Prevention campaign (i) Branding Branding is an effective way of acquainting a market with an organization. To promote their brand, micro insurers tend to use sign boards, billboards for distinct identity. Another component of the brand is the tag line used in marketing material to convey a general message about the organizations to clients and prospective clients. E.g. LICS Zindagi ke saath bhi, Zindagi ke baad bhi, and TataAIG sky line A new look at life Use of illustrations/pictures to convey marketing messages to both literate and illiterate marketing segments. (ii) Public Relations Generally, in India life insurers hold claim award ceremonies where a beneficiary receives an insurance claim at a public event from the hands of dignitaries. This has a powerful demonstration effect. Large micro insurance companies are also engaged in corporate sponsorships. Some insurers organize painting and drawing competition or debate competition. Spandan India uses some of the surplus generated from its insurance scheme to finance education campaign. (iii) Prevention campaign Prevention campaign can also raise awareness about a micro insurer. For example, shepherd (India) run cattle care camps, partly funded through a surcharge or each insurance policy to promote the proper maintenance, free immunization and deworming. Some Micro Insurance providers have mobile medical units that visit cooperatives and other affinity groups to provide free medial consultations

III Raising the awareness and understanding of the specific micro insurance products available.
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When the market has a general awareness about insurance and Marketing of Micro Insurance is familiar with the insurance provider, the next step in the marketing process is to increase its understanding of the specific products available including product features and the costs and benefits of insurance relative to other risk management strategies. Some use street theatres to educate target groups on the benefit of health micro insurance. Among micro finance institution clients, some participants are selected and are provided with intensive training in rural theatre for 7 days. Then for 3 days they visit different villages to collect real life stories reflecting critical social issues. Some use PICTORIAL PRESENTATION to illustrate how insurance works. Even semi-educated and illiterate persons can also understand pictorial presentation.

Activite the Customer to buy the Micro Insurance Product Third Phase of Marketing Process
Once the market is aware of insurance and the insurer and it has an understanding of the product, the third phase in the market process is to arrange for the customers to sign their contracts and pay their premiums. One way to activate the customer is through annual subscription. Period or enrolment campaign such as used by VIMOSEWA micro insurance requires a different sales culture from that of conventional insurance. Instead of highlighting products, the micro agent needs to guide prospective clients towards the conclusion that emergencies are expensive and that they are vulnerable to emergencies: Micro insurance agents must be hands on personally involved, therefore, target meets have lower literacy levels and lack of confidence in formal insurance. To activate the customer, micro insurance marketing has to activate the seller. Micro insurance wants to reward and encourage sales, without tempting micro insurance agents to push insurance on to people who do not really want it. i.e. unwilling prospects. Finding this balance is tricky. Some strategies to find this balance include: a. Setting moderate sales target that can be achieved without aggressive measures and without violating the spirit of micro insurance b. Balancing sales commission with re-enrolment incentives to ensure that the service gets the same attention as sales. For example, LIC can offer incentive for lower lapsation, for renewals etc.

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c. Encouraging the sales people to buy insurance as well so that they can speak from experience. For example, LIC must ensure that every MI agent has first insured his own life.
After Sales Service

One way that micro insurance demonstrates its uniqueness in relation to conventional insurance is by providing best services. Services in insurance parlance are largely limited to claims, making sure clients know how to make claims, assisting them in meeting the documentation requirements and ensuring that claims are paid quickly with a bare minimum of rejections/repudiations. Continuous reminders about the micro insurance product are necessary. Poor services can lead to loss of micro insurance customers acquired with so much effort. Excellent services create a demonstration effect whereby, the noninsured begin to see that the insurer means business and he is trustworthy. Excellent service is an effective marketing strategy as well. It stimulates positive word of mouth advertising which is often one of the most powerful marketing channels. Policy documents explaining the benefits, exclusions and claim procedure must be given to clients.

PREMIUM COLLECTION
When extending insurance to the low income market, the process of collecting premium is a major challenge. The target market largely consists of self- employed people and workers, most of the premiums are paid in cash in the informal market. These people are less likely to have a savings account with a bank. Micro insurance market comprises people with low and often irregular and unpredictable incomes, so that premium payment must be scheduled to match with time when policyholders have funds available. For micro insurance to succeed, the premium payment mechanism needs to find a balance between being efficient and being sensitive to the needs and capacities of clients. Higher transaction costs for frequent small premium payments can drive up the premium rates. In this chapter we will discuss the following four topics. 1. Modes of premium collection 2. Premium collection and timing 3. Client considerations 4. Premium collection and controls

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1. MODES OF PREMIUM COLLECTION

The way in which premiums are collected has a direct bearing on per unit transaction costs. To make micro insurance viable it is necessary to minimize transaction costs. However, the key factor in deciding on the mode of premium collection is still the client circumstances and access to other financial services. Here, we will discuss four modes of premium collection.

(i) Premium linked to loans

Many micro insurance products are linked to other final products especially credit/loan. Premium collection at the point of loan disbursement or repayment is attractive since the transaction is piggyback on the top of another financial product. Consequently, the marginal cost of premium collection is kept to a minimum. Loan linked insurance method is used by many micro financial institutions because the insured do not feel the pinch. But this has some disadvantages like lack of transparency, lack of awareness about insurance cover and benefits and protection, risk cover is limited to loan term.

(ii) Automatic account

premium

deduction

from

savings

Where possible, automatic premium collection is advantageous in reducing transaction cost. Central union can easily deduct the premium from the members accounts and forward them to the insurer with hundreds of small premiums batched into one electronic transfer.

(iii) Premium paid from savings account interest

Perhaps the simplest mode of collection is to allow premium to be paid from the interest on savings account. One NGO, VIMA SEWA used a fixed deposit payment approach. Here policyholder can make a deposit into special SEWA insurance coverage until they reach the age of 60 without any additional transactions. Consequently, the depositor never pays any premiums and still has access to and ownership of the money on the savings account. This is like prefunding of whole life policy. This fixed deposit payment approach undoubtedly minimizes transaction cost.

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(iv) Physical/door-to-door premium collection

The fourth approach is to physically collect the premiums either by going door to door to collect individual payments or through group mechanism where many payments can be collected at once. In some cases, the policyholder can visit a central location (like branch or designated bank etc.), to pay their premiums. A key distinction between this method and those discussed above is that it is an insurance only transaction, whereas the other modes are all linked to either savings or a credit product. The cost-effectiveness of the premium payment mechanism has to be seen in relation to the value that is provided to policyholders e.g. ease of access, understanding of product, premium rate etc. However door-to-door premium collection is expensive.

Preventing lapses and non-renewals

Lapses and non-renewals are an important indicator of the appropriateness of premium collection mechanism. The idea of completely eliminating non-renewals, however, needs to be balanced with the realities of servicing poor people. Rather than relying solely on penalties, such as terminating cover for late payers, innovations are required to help people who need leniency. For example, with TATA-AIG Endowment Policy, if the client misses premium, the insurer deducts missing amount from the accumulated value of the policy to keep the cover in force. Incentive can also play a role in encouraging payment discipline. For example, policyholders who regularly pay on future could be eligible to pay a lower premium. Insurers realized that in a scheme with frequent premium collection, more promotional and marketing work was needed to encourage clients to keep their policy in force. Another strategy to reduce lapses is to help policyholders to boost their income. If they are given access to a micro enterprise loan that enabled them to increase household income, then it would be easier for them to pay the premium as well. The link between micro insurance and micro finance is even more important than just the efficiencies that can be generated through integrated financial services. For, access to micro finance may also make it possible for poor policy holders to afford their premium payment more easily.

2. PREMIUM COLLECTION AND TIMING

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As discussed earlier, insurers generally prefer premium to be paid in advance of policy activation, so that they can generate additional income by investing the money, which in turn, should lead to lower premium rates. However, for low income market it may not be possible to pay full premium up front, it may be necessary to collect in smaller instalments over time. Periodic payments- weekly, fortnightly, monthly, quarterly or annually are popular mode of premium collections because clients have limited purchasing power, and liquidity. But more frequent payments result in additional transaction costs and can lead to the likelihood of non-renewal or premium default. Hence there is lower return. However, some clients do not like to pay insurance premium at short intervals (weekly). Client generally prefers premium payments to coincide with their cash flows. It is also necessary to consider not just when the target market will have money, but where are they getting the money from. If source is common, the premium can be paid in masse for many policy holders and therefore enhance efficiency e.g. loan-linked mechanism. Flexibility in the timing of premium payments is an important component to access micro insurance.

3. CLIENT CONSIDERATION
Appropriate and suitable financing mechanisms are essential. Self help groups, saving and credit associations encourage members to make small increases in their regular savings deposits so that when an annual premium becomes due, the members already have the money with them to pay it. Working with cooperatives also helps in customized options for financing premiums. Because of cooperative financial relationship some micro financial institutions offer loans specifically to pay premiums rather than integrating the premiums into a micro enterprise or housing loan. This way the cost of insurance becomes much more apparent to the client, but premium becomes costlier.

Balancing efficiency and affordability

The balance between efficiency for the organizations and affordability for clients is a classic trade off. There are no onesize- fits-all answers and the balance has to be appropriate for the business environment. Premium should be affordable for the poorest clients. To define the affordable, work out what cash a client will have to spare on an average day. Since clients are unlikely to always save for a premium payment, a monthly premium needs to be equal to the cost of a non-essential item (such as bottle of beer/packet of bidis etc). lf policy holders have to travel to pay their premium, the transportation and opportunity costs of missing work can be even higher than premium costs.

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Hence to create a balance between efficiency and affordability, some organizations add a small fee to the premium for convenience of collection e.g. premiums are reduced for people who pay by standing order or in fewer instalments. This arrangement increases efficiency and enhances the products affordability

3. PREMIUM COLLECTION AND CONTROLS

Fraud and mistakes in premium collection are significant concerns for micro insurers as their small margins do not allow finance mismanagement, fraud and mistakes. Effective hierarchical and horizontal controls should be combined and put in place. Hierarchical controls require that insurers set up at least a rudimentary structure within the organization to maintain the quality of the premium collection process. These controls generally work better for insurers that use their own structures to manage the process than for those that outsource them. If the insurer selects that process be outsourced it is advisable for the insurer to create horizontal controls. To prevent fraud, some Micro finance institutions make the micro insurance product mandatory and premiums are paid through cashless transactions in the back office. Some have implemented an audit of collected amount to try to avoid fraud as well as mistakes.

CLAIM PROCESSING
Micro Insurance claim processing differs from that of traditional mainstream insurance keeping in view the realities of low income; for example: Claims need to be settled quickly because low income people have insufficient access to funds to manage the financial costs of risks. As far as possible Health Claim should be paid directly to provider since low income people frequently do not have available funds to obtain treatment and then wait for reimbursement The process must be as simple as possible. There must be enough checks and balance to ensure that fraudulent claims are not paid but the process must also be user-friendly and cost effective for all parties. Claim application must be simple

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for beneficiaries to complete requiring only documents sufficient to confirm the occurrence of the insured events. Many Micro insurers have their management deliver the claim settlements to the beneficiaries. This activity enhances their public image and promotes the Scheme and its benefits to their members. To reduce claim rejections, improvements are needed. 1. Policyholders must have all the knowledge about the product they are buying. Besides, providing client education, micro insurers should give a simple policy document that states the date of coverage, the benefit and the claim process. 2. Micro insurers must deal with the root cause of nonrenewals and lapses. It is sometimes necessary to develop alterate payment options to address the problem.

Control over claims

Insurers have to ensure that the claims are legitimate and comply with policy requirement. For example, they do not just need a document from the police confirming death but they must also ensure that The document is legal. The death was an accident. The person who died was actually covered by the policy and The policyholder was up to date with premium payments when the death occurred.

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For preventing fraud in micro insurance sector, control must be strong. However, it makes little sense to implement expensive controls that the market cannot comply with, or that cost more to implement than the likely cost of aggregate loss. As margins are smaller with micro insurers, the cost benefit analysisis particularly critical.

MICRO-INSURANCE AGENTS
Insurance is a subject matter of solicitation and insurance including microinsurance product cannot be sold over the counter because insurance literacy is very low in India and policyholder cannot take decision on their own. An insurance company appoints market intermediary either as agent or broker to canvas business on its behalf. MICRO INSURANCE AGENTS The insurer identifies NGO/Self Help Group/MFI that have good relationship with the community and appoints them as Micro insurance agents. These agents are called tied agents and can work only for one life insurance company and one nonlife insurance company.

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Micro insurance agent shall not distribute any product other than a micro insurance product. A micro insurance agent shall be appointed by an insurer by entering into agreement which shall clearly specify the terms and conditions of such appointment including the duties and responsibilities of both the micro insurance agent and the insurer. The appointment of micro insurance agent has to be approved by the head office of the insurer. The deed of agreement shall specifically authorize the micro insurance agent to perform one or more additional function in addition to sale of business like: a. Collection of proposal forms. b. Collection of self declaration from the proposer that he/ she is in good health. c. Collection and remittance of premium. d. Distribution of policy documents. e. Maintenance of register of all those insured and their dependents covered under the micro insurance scheme, together with details of name, sex, age, address, nominees and thumb impression/signature of the policyholder. f. Assistance in settlement of claims. g. Ensuring nomination to be made by the insured. h. Any policy administration service. As discussed above, the agent works on behalf of a single insurance company (either life / non-life), while a broker works for multiple insurers. To reach to the low income market, the broker seeks to service large groups of clients through aggregators. In India, terms of appointment and service conditions are regulated by IRDA (Micro insurance) Regulations 2005.

Micro insurance intermediary has the following benefits:

(i) Product Development

Since micro insurance intermediary remains in touch with both policyholders and insurers, an intermediary understands the needs of clients and insurer both which helps the insurer to develop a new product which is more suitable for all parties. (ii)Transaction Costs An intermediary with a wider client base benefits from economies of scale. Investment in systems reduces transaction costs and increases operating efficiencies by serving a much larger client base.
(iii) Administration

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An intermediary is well placed to handle administrative matters relating to claim processing as well as reporting to the insurance company as to who is covered and when the premium is due.
(iv) Staff Training

An intermediary is well placed to provide organization staff with the required training. This increases financial literacy and ultimate client satisfaction.

Business Leads for Micro Insurance Agents

a. Contact MFIs who give small loans to the poor and offer to cover the loanees with insurance priced modestly and collected along with the loan amount e.g. rural credit societies, co-operative credit societies, co-operative credit banks, etc. b. Contact any institution which has registered members who pay membership fees so that centralized collections are possible through the piggyback arrangement along with the fees. c. Contact the Charities Commissioner of the State for a list of all unorganized workers groups and their trade association heads for offering them micro insurance products. d. Contact the Director-General of the Publicity Dept. of the State Mantralaya to get the contacts for Mahila Bachat Sanghatana, womens Associations, etc. e. Contact the Share-Autodrivers associations, rickshaw pullers associations, potters associations, domestic servants associations, etc. f. You can obtain a CD from the State Government departments for the names and contact details of all cooperatives and also of all the Sarpanches, and Panchayat members who can then be contacted and with their help our insurance products can be sold in villages. g. Hold claimcheque distribution gatherings to encourage those present to get themselves insured as well.
.

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Criteria in the Selection of Micro Agents at Tata-AIG

(i) Must be resident of the community in which he will sell and service policies. (ii) Should preferably have passed 12th or at least 10th to be eligible to be licenced (IRDA Requirement). (iii) Married: Since micro insurance is a long term commitment to policyholders, an unmarried CRIG leader may migrate to her future husbands village, leaving the CRIG and the policyholders in the lurch. (iv) Ability to write in English: since underwriting in the Head Office is in English, it is imperative that the proposal forms are filled in English. (v) Good track record of integrity:Handling money is an Integral part of her duty as a leader. (vi) Effective Leadership Qualities: She has to manage a group of four other women. (vii) Public Speaking Ability: She will be required to address gatherings to promote the products. (viii) Training Skills: Since she is the only one trained in insurance, she has to train the other four. (ix) Must have a positive influence among the target market: each leader should be admired for her integrity and have a forward-looking and progressive nature, and must be able to use her influence to enable her CRIG members to achieve their targets. (x) She should preferably have some previous work experience in the social sector.

ORGANISATION DEVELOPMENT IN MICRO INSURANCE

A well planned organized structure is required for micro insurance. Since micro insurance is comparatively a new concept in the insurance sector, even people working within this sector are not much aware about of micro insurance. Moreover, it is a market where, insurers have to deal with a marketing segment which is not much aware of insurance even. The lack of control over frontline staff, coupled with a reluctant and uninformed market, necessitates some creativity in deploying training and regarding staff for delivering micro insurance. Hence, we will discuss five aspects of organizational development. (i) Organizational structure

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(ii) Recruitment (iii) Training (iv) Compensation (v) Institutional Culture

(i) Organizational Structure

Micro insurance is often just a small part of a large organizations business activities. In an insurance company, it may be a product line or even a matter of just a few policies. For organizations involved in distribution of such as microfinance institutions, microfinance tends to be treated as an additional financial product but one that has less importance than the organizations core savings and credit service. However, insurers are now creating separate micro insurance departments and giving utmost importance to micro insurance because insurers are aware that 70% of population is still near poverty line. Hence, their focused effort will enable them to get a better understanding of the micro market and find creative ways to respond. Life Insurance Corporation of India has created a separate department for micro insurance and appointed senior officers at various levels of structure who are sensitive to the needs of poor people and have the required expertise to deliver the goods. Similarly, TATA-AIG created a special department for the rural and social sector with a budget and flexibility to act creatively and a mandate from senior management. It may be due to the statutory requirement of meeting their social and rural obligation. The definition of social and rural obligation is given elsewhere.

(ii) Recruitment
Recruitment of the right kind of people with proper attitude is very critical for the success of micro insurance. As far as field staff is concerned, only those NGOs/SHG/MFI which are deeply committed to the social cause of communities should be recruited. As for management and back office staff, given that micro insurance is a new field, insurers may not find too many existing micro insurance specialists. So, organizations can act in either of two ways; either they can recruit intelligent and experienced people and teach them about insurance or they can outsource major back office work to insurance specialists. Some insurance companies outsource their investment management also to experts but ultimately, the institution has to create a dedicated staff of its own.

(iii) Training

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Training for frontline personnel should include-(i) Basis of insurance providing staff with the ability to answer difficult questions Specific of products policies and procedures.(ii) Familiarity with the operations manual. (iii) Demonstrations on how to use marketing materials such as pamphlets and posters. (iv) Role-play exercises letting staff make mistakes in the classroom rather than in front of clients. (v) Customer service training. (vi) An Examination to ensure that a level of understanding has been achieved and to identify those that require re-training. Training is not one off phenomenon. Micro insurance should regularly upgrade staff skills with the intention of creating a career path that will enhance staff retention. Trained people should be able to guide their subordinates on duty properly.

(iv) Compensation
For micro insurance to be affordable for the lower income market, costs have to be low. However, the insurer has to be careful about incentive payments to sales staff and administrative staff as both are specialists and their turnover may affect micro insurance business. Compensation can be given either as a fixed sum or it could be variable. However, sometimes, variable pay, incentive for field staf, will be more appropriate as they will be motivated to earn more and hence will contact a larger number of people. There can be provision of special incentive for those who achieve the target.

(v) Institutional Culture

The culture of a micro insurer aims to marry a social concern with an appreciation for the bottom line. Any organization that strives to serve both the poor and the mainstream marketing will need to take positive action to ensure that its field staff are actively serving the poor segments. Other manifestations of an institutional culture include: (1) Relationship building: Micro insurance requires field staff to focus more on building a relationship than making a sale. Delta and Vimasewa have structured their activities so that agents are responsible for sale as well as service. This emphasis can be reinforced through retention-based incentives.

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(2) After Sale Service: Vimasewa emphasizes after-sale service ensuring that members know what is covered and receive any assistance they require in preparing claim documents. The higher costs of these activities are expected to be offset by enhanced customer retention. 3) Trust about a Brand name is also very important. For example, LIC is still considered the best insurer in rural area where even for micro Insurance, LIC is trusted for providing good services.

MICROINSURANCE PRODUCTS IN INDIA

As from above we can see there are 23 life insurance companies are present in India but only 14 companies are providing microinsurance products this clearly give an idea of low attraction of majority of companies towards these products. Below is the list of microinsurance products along with the name of companies:

Name of Insurer

Name of the Product

Product UIN No. 122N039V01 116N047V01

AVIVA Life Ins. Co. India Pvt. Grameen Suraksha Ltd. Bajaj Allianz Life Insurance Co. Bajaj Allianz Jana Vikas Yojana

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Ltd

Bajaj Allianz Saral Suraksha Yojana Bajaj Allianz Alp Nivesh Yojana 116N048V01 116N049V01

Birla Sun Life Insurance Co. Ltd.

Birla Sun Life Insurance Bima 109N032V01 Suraksha Super 109N033V01 Birla Sun Life Insurance Bima Dhan Sanchay 140N007V01 105N081V01

DLF Pramerica Life Insurance DLF Pramerica Sarv Suraksha Co. Ltd ICICI Prudential Life Insurance ICICI Pru Sarv Jana Suraksha Co. Ltd

IDBI Fortis Life Insurance Co. IDBI Fortis Group Microsurance Plan 135N004V01 Ltd. ING Vysya Life Insurance Co. ING Vysya Saral Suraksha Ltd. Life Insurance Corporation of LIC's Jeevan Madhur India LIC's Jeevan Mangal Met Life India Met Vishwas 114N032V01 512N240V01 512N257V01 117N042V01

Sahara India Life Insurance Co. Sahara Sahayog (Micro Endowment 127N010V01 Ltd. Insurance without profit plan) SBI Life Insurance Co. Ltd. SBI Life Grameen Shakti SBI Life Grameen Super Suraksha Shriram Life Insurance Co. Ltd. Shri Sahay Sri Sahay (AP) Star Union Insurance Co Dai-ichi Life SUD Life Paraspar Suraksha Plan 111N038V01 111N039V01 128N011V01 128N012V01 142N009V01 110N042V01 110N043V01

TATA AIG Life Insurance Co. Ayushman Yojana Ltd. Navkalyan Yojana

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Sampoorn Bima Yojana Tata AIG Sumangal Bima Yojana

110N044V01 110N061V01

Bajaj Allianz Alp Nivesh Yojana An endowment plan with Life cover and Maturity benefit equal to sum assured + vested bonus.

Life cover and Maturity benefit equal to sum assured + vested bonus Guaranteed Surrender Value. Avail additional benefits including Accidental Death Benefit & Accidental Permanent Total / Partial Disability Benefit.

Bajaj Allianz Jana Vikas Yojana A single premium plan with maturity benefit of 125% of the single premium payable on survival till the end of the policy term.

Life Cover. Maturity Benefit of 125%of the single premium payable on survival till the end of the policy term. Guaranteed Surrender Value.

Bajaj Allianz Saral Suraksha Yojana The Most economical term insurance policy with return of premium on maturity.

Return of premium on maturity Guaranteed Surrender Value Avail additional benefits including Accidental Death Benefit & Accidental Permanent Total / Partial Disability Benefit

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AVIVA Lifes Grameen Suraksha A micro-insurance rural term insurance plan for BASIX customers. This traditional term plan has been developed with the objective of giving the rural policyholder maximum benefits. the policyholder pays premium for a period of just two years and then avails the term benefit for 5 or 10 years

The minimum sum assured is Rs 5,000 and the maximum is Rs 50,000. In addition, tax benefits can be availed as per Section 80C of the Income Tax Act, 1961.

. BSLI Bima Dhan Sanchay

A Win-Win Situation Security plus Guarantee. The refund of premiums paid by you is guaranteed with 3 maturity options.

Sum Assured Rs.5,000/- to Rs.50,000/ Maximum Maturity age 65 years A grace period of 180 days from the premium due date will be available to you An option for additional Sum Assured is available provided the base sum assured is minimum Rs 10,000/- and the sum assured under the rider should not exceed the sum assured under the base product if the death occurs due to accident

BSLI Bima Suraksha Super

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BSLI Bima Suraksha Super provides you life insurance cover for which you have to pay regular premium. The nominee gets the sum assured in the unfortunate event of death.

BSLI Bima Suraksha Super provides you life insurance cover for which you have to pay regular premium. The nominee gets the sum assured in the unfortunate event of death. Your premium depends on your age, gender, Sum Assured and benefit period chosen. At maturity, there is no benefit payable. An option for additional Sum Assured is available provided the base sum assured is greater than or equal to 10,000/- if the death occurs due to accident.

ICICI Pru Sarv Jana Suraksha ICICI Prudential Life Insurance presents its first Micro Insurance Plan - Sarv Jana Suraksha especially designed for rural population which provides total security to you and your family, at very affordable cost. Min / Max entry age-18 years - 55 years Min/Max Sum Assured- Rs. 5,000 -Rs. 50,000 Policy Term -5 years Cover ceasing age -60 years

SBI Life insuances Grameen Super Suraksha and Grameen Shakti

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SBI Life insuances Grameen Super Suraksha and Grameen Shakti products have been designed to meet the requirements of the weaker sections of the rural population. Grameen Super Suraksha is a micro insurance pure term product and Grameen Shakti is micro insurance product with ROP. Grameen Shakti is a dual benefit life insurance product to safe guard the group member which provides Protection with maturity benefit at affordable rates. It offers to the Family of the group member Protection & it offers to the Group member survival Benefit. Duration of plan: 5 years or 10 years as per the Group Master policyholders choice. Age at entry: Minimum 18 years age last birthday. Maximum 50 years age last birthday. Sum assured: Rs.5, 000/- to Rs.50, 000/- (in multiples of 5,000) as per choice of Master Policyholder. Premium frequency: Yearly. Requirement from the Group member: Automatic acceptance linked to signature of Membership form that includes Good health declaration and nomination clause. Death Benefits: First 45 days after the cover start date or after the revival date No death claim will be accepted (inclusive of accidental death) Form 46th day from cover start date / revival date Sum assured is payable

Tata AIG Life Sumangal Bima Yojana In this plan you have to pay premium for 10 years and you get insurance protection for 15 years. Enjoy total guaranteed returns of 120% of the *total policy premium at specified intervals during term of the policy.

Policy Term : 15 years Premium Paying term : 10 years

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Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/Maximum Death Benefit (Sum Assured): Rs.30,000/Premium payment frequency : Monthly, quarterly, half yearly & yearly Survival Benefit: We shall pay you the survival benefits as below, if you have paid all due premiums.

Tata AIG Life Sampoorn Bima Yojana A low cost insurance plan where the policyholder receives all the premiums paid during the policy term upon survival until the term of the policy. Premiums are payable for only 10 years, while the coverage is up to 15 years.

Policy Term : 15 years Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/Maximum Death Benefit (Sum Assured): Rs.50,000/Premium payment frequency : Monthly, quarterly, half yearly & yearly Death Benifit : Sum assured is paid to the policyholders nominee Maturity benefit: At the end of the 15 years, all the premiums paid will be returned to the policyholder.

Tata AIG Life Sampoorn Bima Yojana A low cost insurance plan where the policyholder receives all the premiums paid during the policy term upon survival until the term of the policy. Premiums are payable for only 10 years, while the coverage is up to 15 years. Policy Term: 15 years

Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/Maximum Death Benefit (Sum Assured): Rs.50,000/Premium payment frequency : Monthly, quarterly, half yearly & yearly Death Benifit : Sum assured is paid to the policyholders nominee Maturity benefit: At the end of the 15 years, all the premiums paid will be returned to the policyholder.

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Tata AIG Life Navkalyan Yojana A regular premium payment, low cost term plan for the rural adults who seek life insurance protection without any maturity benefit.

Policy Term : 5 years Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/Maximum Death Benefit (Sum Assured): Rs.50,000/Premium payment frequency : Monthly, quarterly, half yearly & yearly Death Benifit : Sum assured to the policyholders nominee Maturity benefit : None Rider: Option to attach Accident Death Benefit Rider for issue ages 18 to 55 years at a nominal extra charge.

IDBI Fortis Group Microsurance Plan The first of its kind group that will be benefited by this unique plan is Samhita Community Development Services, announced officially by IDBI Fortis Life Insurance Co Ltd at a press conference held at Bhopal today. This tie-up will insure 13,356 poor members for a Sum Assured of over Rs. 7cr in the rural and urban areas of Madhya Pradesh. The plan provides affordable life insurance cover to groups offering great value to Micro Finance Institutions, Self-Help Groups and NGOs. Not only does the plan insure the lives of their group members and thus provide security to the group members families, it can also be used for providing protection from loan liabilities in the unfortunate event of the death of the main bread-winner.

Aviva Grameen Suraksha Grameen Suraksha is a life insurance plan that helps you protect your family's future. While there can be no compensation for the loss of life, Grameen Suraksha ensures that their financial needs are met when something unfortunate happen to you.

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 Entry Age: 18 to 45 years Policy Term: 5 and 10 years Premium Paying Term: 2 years (payable in yearly mode only) Sum Assured: Rs. 5,000 to Rs.50,000 (in multiples of Rs. 5,000 only) A grace period of one month is allowed for payment of premium. LIC's Jeevan Madhur Jeevan Madhur, is available to both male & female without any medical examination and is a simple saving related life insurance plan covering individuals in the age group of 18 to 60 years. Minimum sum assured under the plan is Rs. 5000 and maximum sum assured is Rs. 30000. Mode of payment of premium can be even weekly/fortnightly in addition to other regular modes to suit the needs of people with low income. Minimum premium is Rs. 25/- per week, Rs. 50/- per fortnight, Rs. 100/- per month which is expected to be well within reach of the targeted group. The term of policy ranges between 5 to 15 years. The policy, if kept in full force, is entitled to the simple reversionary bonuses depending upon Corporations experience. Accident benefit is also applicable as per terms and conditions of the policy. After premiums are paid for 2 years, Auto Cover facility i.e., continuance of cover even in case of inability to pay premium up to 2 years from the date of First Unpaid premium is available to take care of contingencies and uncertainties of income.

LIC's Jeevan Mangal Aterm assurance plan with return of premiums paid on maturity. The Micro Insurance Plan Jeevan Mangal launched today is a term assurance plan with return of premium on maturity providing for a sum assured (risk cover) ranging from minimum of Rs.10, 000/- to maximum of Rs.50, 000/- with an optional accident benefit rider, together providing for total death benefit equal to double the sum assured, on death due to accident

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Met Vishwas
It is a life insurance plan that protects you in case of death at a nominal cost when you survive the term of the policy you get back up to 125% of premium(in case of coverage term 10 years) Maturity benefit: 110% of the single premium paid for a 5 year coverage term 125% of the single premium paid for a 5 year coverage term Entry Age: 18 to 60years Policy Term: 5 or 10 years Premium Paying Term: 2 years (payable in yearly mode only) Sum Assured: Rs. 5,000 to Rs.50,000 (in multiples of Rs. 5,000 only) A grace period of one month is allowed for payment of premium.

SUD Life Paraspar Suraksha Plan The scheme has been specifically designed for the weaker sections of the society and those from the rural areas. The scheme covers the groups of 200 and or members. The scheme is to provide life cover at low cost to groups of persons engaged in a common economic activity like those financed by an NGO, MFI or Banks in rural or urban areas. Entry Age: 18 to 50years Group size : minimum-100, maximum no limit Premium Paying Term: Minimum premium- single premium-162.50, annual premium-33.50 Maximum premium- single premium-1625.0, annual premium-335.0 Sum Assured: Rs. 5,000 to Rs.50,000 (in multiples of Rs. 5,000 only)

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LITERATURE REVIEW
It is estimated that India has 300 million BPL population or 60 million BPL families, without any kind of social protection. The spread of health insurance is only negligible in this segment and that too because of the NGOs operating in this arena. Although the reach of such schemes is still very limited---anywhere between 5 and 10 million individuals---their potential is viewed to be considerable. The overall market is estimated to reach Rs. 250 billion by 2008 (ILO 2004). But unless the people from this segment develop confidence over the infrastructure facilities and the assurity of the supply chain management of insurance services, this will not be practically possible. Martina Wiedmaier-Pfister (2004) revealed that a number of clarifications are important for the insurers. The first point relates to the delineation of social protection schemes (government driven and provided to the poorest), and privately, market-led insurance services (provided by a private insurer or informally organized and bought by those who can afford them). The second point relates to the role of reinsurance, which is definitively a crucial area for microinsurance. Third, the history and experiences of the regulation and supervision of microinsurance in industrialized countries could also not be considered. Ramesh Bhat and Nishant Jain (2006) examines the factor affecting insurance purchase decision his study at Anand district in Gujarat in his study he found that amount of income and healthcare expenditure are major determinant of health insurance plans and income of person have significant effect on amount of health insurance purchase but there is nonlinear relationship between them in addition number of children in family, age, and perception regarding future health care expenditure were also found to be significant. Dr. S. Ganesan and Dr. S. Jayaprakash in Eleventh Annual APRIA Conference (2007) about Micro Banc assurance Models for India suggest that the growth of micro insurance in India does not lies only in the hands of the product design, distribution network but also in creating the proper infrastructure that can support the servicing of insurance policies. India is a very big country with villages as its

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backbones. Enormous involvement of various stakeholders is required to create proper infrastructure for the growth of insurance/micro insurance in the rural areas. He stresses the need for viewing the banks not as a mere distribution channel for insurance but to convert the same into a strategic business unit wherein the banks will be the epicenter of operations for the growth of the infrastructure in the rural. Jim roth, Michael J. MacCord and Dominic Liber (2007) presented a report which gives a description about the functioning of Microinsurance and detailed quantitive overview of microinsurance in worlds 100 poorest countriesin which he explains about distribution channels, types of microinsurers and various microinsurance products , regulation and social security schemes in 100 countries including India. Seiro Ito and Hisaki Kono (2007) investigate take-up decisions using household data collected in Karnataka, India, especially focusing on prospect theory, hyperbolic preference, and adverse selection. There they found some evidence that people behave in a risk-loving way when facing the risk of losses, which is consistent with prospect theory. Since insurance covers losses, we suspect that these people are less likely to take up insurance and they found some evidence supporting this view. They also find that hyperbolic discounters are more likely to purchase insurance, a fact which can be explained by the demand for commitment among sophisticated hyperbolic discounters have. Also find some evidence on the existence for adverse selection: households with a higher ratio of sick members are more likely to purchase insurance. Interestingly, they also find that households with a sick household head are less likely to purchase the insurance. This may capture the fact that households with a sick household head have less income flow and have difficulty in financing the insurance premium. Koli N Rao (July 2008) said that in India, agricultural risks are exacerbated by a variety of factors, ranging from weather variability, frequent natural disasters, uncertainties in yields and prices, weak rural infrastructure, imperfect markets and inadequate and sub-optimal financial services including the limited span and design of risk mitigation instruments such as credit and insurance and farmers use a variety of formal and informal techniques to manage and mitigate risk, ranging from the use of drought resistant crop varieties to reduced consumption and sale of assets. The Government is also implementing a large number of schemes to

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provide succor to farmers facing adversity, the Comprehensive Agriculture risk management framework can be presented in three main categories: The first covers direct initiatives on the part of the Government, such as agricultural credit, input subsidies and calamity relief. The second covers indirect initiatives on the part of the Government to mitigate production risks through insurance mechanisms covering crops, weather and livestock and including micro insurance. Thirdly, Government and market-based approaches to mitigate price or income risks, which include minimum support prices, farm income insurance, a price stabilization fund, commodity markets, contract farming, etc. he also told about different stages of development of microinsurance in India: There are three distinct phases of micro-insurance (MI) development in India. The first phase coincided with the introduction of target- oriented poverty alleviation programs such as the Integrated Rural Development Program (IRDP). The second phase of MI growth can be seen in conjunction with the growth of credit disbursement to the poorer segments of society through the Self Help Groups (SHGs). This saw an increase in the role of Non-Governmental Organizations (NGOs) for the purposes of intermediation and the proliferation of Microfinance Institutions (MFIs). The third phase of MI development was borne out of the increasing realization of the need for an increased coverage of poorer households through some form of social security measure.

Mark malika and Anet T. Kuriakose (2008) discussed the role of microinsurance in mitigating external shocks on poor household. He also stressed on careful attention and expert technical input is required in designing microinsurance products and programs as they are significantly more complex than and credit programs offered by different organizations. Use of different risk layering using different form of reinsurance to cover the insurer is crucial from a financial sustainability standpoint, and the use of various outreach mechanism to reach poor household is necessary from an equity point of view. Michael J MacCord (March 2008) suggested many inputs required to reach microinsurance to billions of poor peoples some of these inputs are - Coordination of knowledge of activities to allow all parties- mutuals, commercial insurers, intermediaries and delivery channels, governments, donors, and othersto maximize effectiveness, Improving products and processes that recognize the
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needs of low-income families and satisfy their needs with value, Innovation in processes that can be replaced or augmented by technology. This requires financial and regulatory facilitation, and an openness to offer such technology on a public platform, Careful development of regulation that effectively balances the need for consumer protection with the flexibility needed to develop and service a massive market. Rachele Pierro(2008) gives an overview of Christian Aid interest in crop/ weather micro-insurance (MI) as well as partners involvement in micro-insurance related products and services in his research he found that majority of people interviewed (85%) believe crop/weather insurance would help poor farmers in managing weather risks and this percentage rises to 100 % for interviewees based in field. For most respondents conditions for successful MI would be the presence of empowered communities and the absence of conflict, while protection to different categories of poor (not only farmers but also landless and marginalized pastoralist communities) makes weather insurance more appealing than traditional crop insurance. Wendy J. Werner (August 2009) analyses micro-insurance schemes in Bangladesh with contrasting examples from India and found that these schemes improves the health status of poor and also it reduces poverty, these microisurance schemes had reduced the barriers of health services for poor and encouraged them to avail of clinics and trained medical care i.e. the micro-insurance schemes for health in Bangladeshi have increased access to basic healthcare , However, there is both demand and necessity for surgeries and more expensive medical procedures among the poor that remains unaddressed by basic microinsurance for health. Microinsurance can serve the interests of poor populations with risk-pooling to manage unpredictable employment, flows of income, and catastrophic events. To ensure that micro-insurance safeguards the assets and interests of the poor, microinsurance initiatives must exercise professional management, product development, management information systems, and re-insurance.

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OBJECTIVE OF STUDY

To find the awareness of microinsurance among the poorest group of people in Indore.

To find the client need of Microinsurance in Indore. To find the preference of various products in Microinsurance of clients. To explain the various difficulties of insurers to produce, market and distribute different microinsurance products.

RESEARCH METHODOLOGY

Research refers to a search for knowledge. It is a systematic method of collecting and recording the facts in the form of numerical data relevant to the formulated problem and arriving at certain conclusions over the problem based on collected data. Thus formulation of the problem is the first and foremost step in the research process followed by the collection, recording, tabulation and analysis and drawing the conclusions. The problem formulation starts with defining the problem or

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number of problems in the functional area. To detect the functional area and locate the exact problem is most important part of any research as the whole research is based on the problem. In short, the search for knowledge through objective and systematic method of finding solution to a problem is research. The research type will be the descriptive research about the needs and preferences about the microinsurance to the potential target people in Indore. DRAFTING QUESTIONNAIRE The questionnaire is considered as the most important thing in a survey operation. Hence it should be carefully constructed. Structured questionnaire consist of only fixed alternative questions. Such type of questionnaire is inexpensive to analysis and easy to administer. All questions are closed ended. In this research the questionnaire is structured and close ended questionnaire. DATA COLLECTION The task of data collection begins after the research problem has been defined and research design chalked out. While deciding the method of data collection to be used for the study, the researcher should keep in mind two types of data viz. Primary and secondary data. Primary Data: - The primary data are those, which are collected afresh and for the first time and thus happen to be original in character. The primary data were collected through well-designed and structured questionnaires based on the objectives. Secondary Data: The secondary data are those, which have already been collected by someone else and passed through statistical process. The secondary data required of the research was collected through various newspapers, and Internet etc. SAMPLING

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It was divided into following parts: Sampling universe All the low income groups of Indore are the sampling universe for the research. Sampling technique Judgmental sampling Sample was taken on judgmental basis. The advantage of sampling are that it is much less costly, quicker and analysis will become easier. Sample size taken was 100 residents of Indore. LIMITATION OF STUDY
As only INDORE dealt in survey so it does not represent the view of the

total Indian market. Size of the research may not be substantial as sample size is only 100 and it does not represent whole population of Indore. There was lack of time on the part of respondents. The survey was carried through questionnaire and the questions were based on perception. There may be biasness in information by respondents.

DATA ANALYSIS
In this section of the research all the primary data are analysed with the help of pie charts and bar graphs. Respondents Profile All of the respondents are daily earners, chosen randomly and all of them are male, with age more than 25 years. What is annual income of Family? Option

Number of respondents
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Less than 30000 30000-60000 60000-90000 more than 90000

0 54 35 11

Major portion of respondents belongs to income group 30000-90000, only 11 respondents family income is more than ninety thousands as there is more than Number of family member in their house? Option Number of respondents 2 0 3 5 4 27 5 34 6 28 More than 6 6 one earner in their family.

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Most of respondents are married having one or two children. 34% of respondents have family of size 5, 27% and 28% of respondents live in a family of 4 and six respectively

Do you understand microinsurance? Option Yes No Number of respondents 0 100

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As we can see from above pie chart 100% respondents are totally un aware of the Microinsurance.

Have you ever invested in any Insurance policy? Option Number of respondents Yes 7 No 93

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Only seven respondents have invested in Insurance policy and rest of 93% of respondents have not invested in any insurance policy.

Do you think insurance is / will helpful to you? Option Yes No Number of respondents 56 12

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May be

32

After explaining them about benefits of insurance 56% of respondents says insurance will be helpful for them and 32 % were in dilemma .
Are you interested in investing in Microinsurance? Option Number of respondents Yes 74 No 26

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As from above figure we can see that 74% of respondents are interested in investing in Microinsurance but 26% were not interested in Microinsurance. Does any insurance agent have come to you for your insurance? Option Number of respondents Yes 43 No 57

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In spite of only 7 had invested in insurance but 43 respondents were approached by insurance agents maximum of agents are of LIC. It shows the wide network of agents of LIC among the lowest class of the people. Rest of 57% of respondents are not approached by any insurance agents

If an opportunity comes in front of you to invest in Insurance which type of organization you will choose? Option Government insurance company Private sector insurance company Number of respondents 94 6

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About 94% of respondents choose government owned insurance companies rather than private insurance companies

Do you have any account in? Option Bank and Post office Bank and Cooperative society Bank and Others Number of respondents 22 42 24

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All of respondents have a bank account generally all of them have bank account is PSBs, 42% have recurring account local co-operative society banks which daily takes some amount for depositing same like former some of them have in account in SAHARA and other NBFCs where they daily or weekly deposit money ranging from 100-200 weekly. 22% of the respondents have deposit account in Post-office.

In which type of Insurance policy you will invest/ have invested? Options Term Insurance Policy Endowment Policy Ulip Policy Health Insurance Policy Number of respondents 14 53 9 24

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More than half of respondents choose endowment policies, health insurance of their children comes at second preference and term insurance comes next to them.

How much premium you are paying/will prefer annually for insurance? Option Less than 1000 1000-3000 3000-5000 More than 5000 Number of respondents 5 35 56 3

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As we can see 56% of respondents are ready to invest daily 10-20 Rs. for investment in insurance, 35 % of respondents wants to pay 1000 to 3000 Rs for premium, premium amount more than 5000 is chosen by only 3 respondents. Which mode of payment will you prefer for premium? Option Number of respondents Annual 2 Quarterly 12 Semi annually 6 Monthly 30 Weekly 17

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Daily

33

As from above graph we can see that 33% of respondents want to pay daily and 30% wants to pay monthly premium, 17 % of respondents choose to pay weekly premium for the insurance as majority of these respondents are daily earners.

Where will you prefer to give your premium? Option Number of respondents At your door step 96 At Bank 4 At Post office 0 Other place 0
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96% of respondents prefer to give premium at their home or at their shop, only 4 respondents prefers bank and none of them prefer post office or any other place.

FINDINGS
Below are the findings of the research, all the options were tick by respondents the findings are summarized in the table where first column represents questions in the questionnaire ,second column represents options of the questions and third column represents number of respondents ticks every options.

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Maximum of respondents were daily earners their income varies from season to season, in their peak seasons the earns 200-300 per day but in off season their earning decreases significantly, those respondents who were salaried people get monthly salary ranging from 3000-5000 per months. 2. Most of respondents are married having one or two children. 34% of respondents have family of size 5, 27% and 28% of respondents live in a family of 4 and six respectively. Those families which have five or more than five members; they generally live in combined family and these families have income level more than five thousand per month. 34% of the respondents have 5 family member, 28% and 27% respondents have 6 and 4 family members respectively. 3. Most of the respondents have heard about insurance but they are totally unaware of Microinsurance, they believe depositing their money in bank or post-office is more profitable than putting money in insurance, also ease of withdrawing money from bank and post-office makes their investment more liquid. 4. Only 7 respondents have invested in insurance policy, all of them belongs to income level of more than 90000 Rs. Per annum out of which 2 have invested their money only for one and 3 years only and they stopped giving premium for their insurance due to some problems and all of them invested in LICs policy. 5. After explaining those about need and benefits of insurance 56% of respondents want to invest in insurance policy but lack of knowledge and awareness about insurance stop them for investing. Many of them told that they dont need insurance as there is very low chance miss happening to them. In spite of they are more vulnerable to risks; negligence and ignorance of risk for their health or life also prevent them for investing in insurance. 6. As majority of respondents are daily earners and 74% are ready to invest in microinsurance policy, they are ready to give daily 10-20 Rs for their insurance if someone collects premium from their shops. 7. In spite of only 7 had invested in insurance but 43 respondents were approached by insurance agents maximum of agents are of LIC. It shows the
1.

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wide network of agents of LIC among the lowest class of the people. Rest of 57% of respondents are not approached by any insurance agents 8. Maximum of respondents choose government companies rather than private insurance firms as they think they are cheaper, reliable and ease in claiming insurance money. 9. All of respondents have a bank account generally all of them have bank account is PSBs as minimum deposit required in these banks are generally lower than private banks, second highest number, 42% have recurring account local co-operative society banks which daily takes some amount for depositing same like former some of them have in account in SAHARA and other NBFCs where they daily or weekly deposit money ranging from 100200 weekly. 22% of the respondents have deposit account in Post-office. 10. After explaining them about different types of insurance policies 53% of respondents opted endowment policy as after maturity period they get back invested amount. 24% of respondents opt for health insurance as Health insurance reimburse all the hospitalization expenses of insured, maximum of respondents was curious about ULIP policies but lack of document like Pan Card, risk of losing money and high cost of insurance prevents them to opt Ulip policy, low cost of term insurance is very good for them but no reimbursement after maturity if nothing mis -happen with them stop them to opt for Term insurance. 11. 56% of respondents are ready to invest daily 10-20 Rs. for investment in insurance. Also they want some flexibility in payment of premium like if they cant pay premium of the day they can give on next day. Some of them also suggest that in the business season they can give double of the premium amount and when business is off they will not pay premium, 35 % of respondents wants to pay 1000 to 3000 Rs for premium. 12. About three-fourth of the respondents opts to pay premium at very short duration as they are mainly daily earner, so they want to pay premium as soon as they earn it gives ease to them to pay premium daily or weekly, maximum of them have a recurring account and bank personal daily come to collect money for their deposits in the same way they want pay premium for their insurance. 33% of respondents want to pay daily and 30% wants to pay monthly premium.

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13.Approximately all of the respondents want to pay premium at their door step they want insurance agents to come at their shop or their home to collect premium of the insurance.

CONCLUSION

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The results indicate that there is a huge untapped market for microinsurance in Indore District. With appropriate delivery channels, types of coverage, product simplicity and easy premium collection this huge untouched market can be catered by insurers. Although the current reach of micro-insurance is limited, the trend in this respect suggests that the insurance companies, both public and private, operating with commercial considerations, can insure a significant percentage of the poor. Serving low-income people who can pay the premium certainly makes a sound commercial sense to insurance providers. To that extent imposing social and rural obligations by insurance regulator (IRDA) is helping all insurance companies appreciate the vast untapped potential in serving the lower end of the market. Most of respondents are completely unaware of microinsurance products but many of them are aware of insurance products. Given irregular and uncertain income stream of the poor, flexibility in premium collection is needed to extend the microinsurance net far and wide. MFIs are playing a significant role in improving the lives of poor households. Quite apart from this, linking micro-insurance with micro-finance makes better sense as it helps in bringing down the cost of lending. Income of the family has been found an important factor, higher income increases probability of purchasing Insurance product. Maximum or respondents wants to insure their children as they believe insurance will help them in saving money as well as protection for their future. Endowment policies are most liked by respondents because it gives death benefits as well as survival benefits. Maximum of the respondents believes in government banks and insurance companies as they think that private companies charges more than government owned companies and their hard earned money will be more safe in government firms than private companies. Many of them want to pay Rs. 10-20 for premium on daily or weekly basis at their shops or at home.

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