TATA-AIGs Innovative Distribution Model Extending Micro-insuranceto Rural India

Submitted by Sumit Tembhare MBA-RM A401310002 AMITY UNIVERSITY

Micro-Insurance An Overview Social protection systems for vulnerable people. As a tool that would help to fill community protection gap. Protection of low-income people against specific perils. Low premium that suits the affordability. New business model that provide sustainable development. Specifically designed to cater to the needs of the poor

Micro-Insurance Distribution Models Market based mechanism that promises to support sustainable livelihoods. Poor reach because of lack of infrastructure and cost consideration. Involvement of Public sector bank, MFIs and community including SHGs. Partners helps to promote marketing, premium collection & claims and provide required infrastructure.

TATA-AIG First insurance company to introduce the concept of micro-insurance in India. Initially worked with MFIs using Partner-Agent Model. Due to lack of godo MFIs TATA-AIG developed unique Micro-Agent Model This model features special Rural Community Insurance Groups (CRIGs). CRIGs are a partnership firm formed of five women from a SHG.

TATA-AIGs Micro-Agent Model

Micro-agent model works as follows:
TATA-AIG obtains recommendations from NGOs that have good relationships with the local community in an area targeted by TATA AIG. NGO provides suggestions on members of the community who could be good agents for micro-insurance policies - the micro-agents. If these micro-agents accept, they are then asked to form into groupsof peers. The group, referred to in the TATA-AIG model as a CRIG (Community Rural Insurance Group), operates in a similar fashion to an insurance agents firm. The agents are trained by TATA-AIG, which help for the CRIG leader to obtain an agents licence. The NGO may play additional roles such as aggregating the premiums, allowing the agents to use their offices to conduct business, paying the benefits in public ceremonies and training the micro-agents.

Stakeholderss in Micro-Agent Model

NGOS

TATA-AIG

COMMUNITY

CRIG

Target Community Socio-Economic & Geographic Profile of the Target Clients 74% of Indian households from rural sector. The annual household income of nearly 80% of these is less than US$1800 (Rs 81,000). A typical rural household consisting of 5 or more sharing income and access to financial services.

Target Community

Impact of TATA-AIGs Model

The rural poor not only want insurance to be affordable, but also to protect against high-frequency risks such as serious ill health, accidents, harvest failure and fire. The capacity of households to cope with a shock depends in part on risk source, correlation, frequency and intensity.
The risks which are insurable are as follows:
Death: Most household members contribute to household income, except those too old, young or infirm to work and their loss of life would drastically affect the household earnings.

Critical illness: This affects the household earnings, labour and also increases the expenses incurred due to the treatment of the illness.
Sickness: Decreases the number of productive hours and hence results in decrease in income. Old age: The elderly have very few income options. In addition to this, there is a decreasing trend of the younger generation taking care of the older one. Risk of lowered agricultural productivity or returns because of failed monsoons and natural disasters such as drought, floods, etc.

KEY INSIGHTS Problems & Threats to Sustainability

A major problem that TATA-AIG faces is in its expansionary plans in the new rural markets in India. Even today there are largely two types of people in rural India which pose a serious challenge to the providers of micro-insurance:

Those who have little or no knowledge about insurance. Those who have had a negative exposure to insurance which has lead to a kind of prejudice amongst their minds.

All possible efforts should be directed towards improving upon the efficiency and effectiveness of the model so as to strengthen the distribution channel which forms the heart and soul of the model and is responsible for the huge success of the micro-agent model.

Recommendations Following practices should be made in micro insurance Developing New Policies. Marketing micro-insurance . Supporting Micro-Insurance Innovation . Gender and Micro-Insurance. Micro-Insurance Awareness . Establishment of a Micro-Insurance Council.

Submitted To Dr. Ritesh Dwivedi Lec. Amity School Of Rural Management

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