Microinsurance In India Oct 09

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Text of Microinsurance In India Oct 09

  • 1. Micro-insurance in India Practices & Prospects Premasis Mukherjee
  • 2. The Storyline Introduction to micro-insurance Micro-insurance products & challenges Delivery channels in micro-insurance Micro-insurance in India Micro-insurance regulation and its impact Trends in micro-insurance industry Some Experiments by MFIs/ companies Possible engagements of MicroSave
  • 3. Risk Management by the Poor Informal Group Insurance Self Insurance Funeral/burial societies Liquidation of assets Multiple membership Informal /semi-formal borrowing High transaction cost Informal savings (ROSCA/ASCA) Mostly covering specific life risks Micro-insurance Social Security Gap in intent and practice In-efficiency of formal economy Resource stress on developing nations
  • 4. Defining micro-insurance Protection of low-income people. (not having access to commercial insurance or social protection) against specific perils (that causes vulnerability in their livelihood) ..in exchange for regular payment of premiums proportionate to the likelihood and cost of the risk involved. --- Craig Churchill Micro-insurance working group, CGAP Social Finance Programme, ILO
  • 5. Fundamental Principles of Insurance Full material disclosure Clear communication of product Low probability Randomness Utmost Good Faith Independence Uncontrollability Unequivocal Insurable Interest Insurance EventAt the time of inceptionCreditor- Debtor (Loanamount) Life : at inception IndemnityProposer Nominee General: at occurrence
  • 6. Micro-insurance Scenario : World
  • 7. Micro-insurance Product types Loan linked insurance (Credit-life or credit-life +) Health insurance Long term insurance Annuity Pension Endowments Agriculture insurance Rain fall insurance Livestock insurance
  • 8. Loan Linked Insurance Benefit :Credit- life/Accidental disability Added benefits: Illness cover Funeral cover Spouse cover Risk borne by: MFI/Insurance company (as re-insurer) Sum Assured: Outstanding loan / include accrued interest Price: 0.2% to 8% of loan portfolio (group price) Profit-sharing model Term : Renewed only if loan renewed (optional) Nominee : The MFI Subscription : Mostly mandatory with loan
  • 9. Loan Linked Insurance: Focus Physical Evidence Product Group based Process Term : loan schedule Easy claim settlement Flexible Sum Assured Least paper work Group underwriting Price Service agreement Affordable Issuance Competitive Addition/Deletion Annual review of price Claim Promotion Positioning The opportunity benefit Least cost insurance Place People Mandatory Research about options The benefit of insurance is best communicated through claims
  • 10. Health Insurance Relevant Fraud Payment Health Insurer Service RelationshipSpecific benefit package ProviderPremium : frequency &quantumFund management Adverse selectionHigh claim ratio Client Moral hazardHigh cost, low frequency FraudeventsClaim servicing Pre-existing criteria Low cost-high frequency events
  • 11. Long term Insurance Annuities High actuarial expertise Efficient financial management (asset-liability management) Defined contribution & defined benefit pension COMPFED Endowments Horizon issue Stability and brand Financial sector performance
  • 12. Long term Insurance Challenges with clients Migration Matching with transaction patterns Assurance of return Challenges with intermediaries High cost high involvement proposition High admin cost + distribution cost Standalone MI is becoming non-profitable Transfer of actuarial risk and distribution cost to companies Resource intensive Brand / imagery risk Long term tracking of clients
  • 13. The Micro-insurance Supply Chain Re- Policy Covered insurer Insurer Delivery Channel Holder Lives Receives Sells theInsures the premium product Buys the Those who haveinsurer against Carries risk Collects product a premium paidcatastrophic Manage premium Proposer to cover themrisks regulation Aids the client Pays claims in settling claims e.g., family members,e.g. Munich Re e.g. Individuals, Groups group members e.g. Insurance e.g., MFIs, NGOs, companies, CBOs, CBOs, retailers , agents Mutual
  • 14. Partner-Agent Model Selecting partner (Insurer) Benefits Bidding Simple & quick Role clarity No need for specialised Staff training manpower Underwriting No capital requirement Premium collection Additional income source Claim processing Constraints Financial Arrangement Income only from commissions Commission Service in third party hands Profit sharing Limitation on product offering Premium mark-ups Incentive structure for staff
  • 15. Micro-insurance Scenario : World Distribution Channels Un- Product wise Distribution organized Retailors/Fu 1% nerl Parlors 2% Brokers Agents 0% 10% MFIs

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