“A Critical Study on Micro Insurance in India”

Research Project Report

Submitted to
Dr. A.P.J. Abdul Kalam Technical University, Uttar Pradesh, Lucknow
In partial fulfillment of the requirements of the degree of

Master of Business Administration

Prepared by: Training Supervisor:

Mohammad Abdullah Dr. Neetu Singh
MBA 4th Semester (Head of Department)
Roll Number: 1804070007 Department of Business Administration
Enrollment No.180407008249

2019-20

Department of Business
Administration Technical Education

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& Research Institute Post-Graduate College,
Ghazipur – 233001 (U.P.)

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3
 Declaration

I, Mohammad Abdullah, hereby declare that this research project

Report entitled “ A Critical Study on Micro Insurance in India” has

been prepared by me on the basis of research done during the course of

my fourth semester of MBA programme under the supervision of

Dr. Neetu Singh HOD Department of Business Administration.

This research project report is my bona fide work and has not been

submitted in any form to any University or Institute for the award of any

degree or diploma prior to the under mentioned date. I bear the entire

responsibility of submission of this project report.

Mohammad Abdullah

MBA 4th Semester

Dept. of Business Administration
Technical Education & Research Institute
P. G. College, Ghazipur

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 Index of Contents

Page No.

 Preface [1-2]
 Acknowledgements [3]
PART I

Chapter – 1

 Introduction [4-52]
 Review Literature [53]

PART II

Chapter – 2

 Objectives of the study [54]

 Importance of the study [55]
 Scope of the study [56]

Chapter – 3

 Research Methodology [57-60]

Chapter – 4

 Data analysis & Interpretation [61-89]

Chapter – 5

 Findings [90-91]
Chapter – 6

 Conclusion [92-93]
 Limitations [94]
 Bibliography [95]

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 PREFACE

The first real insight of an organization for management student comes only during his

preparation of project work because student first interacts with real practical work. This is first

introduction to industry and its working. This project work synthesize the theoretical concept

learn in the class room and its practical orientation in organization.

In my project I have studied the “A Critical Study on Micro Insurance in India”.

The First chapter deals with the introduction of the topic, It also describes the profile and

history of Micro Insurance in India.

In first chapter I have mentioned the various Micro Insurance. This chapter also describes

the organizational structure of both the organization. The objective and need of research is also

mentioned in section of project work.

The Second chapter deals with research methodology. The process of carrying out the

whole research problem is defined in it. It contains information about the objectives of the

research, methods of data collection, sampling and sample design.

Third chapter is data analysis and interpretation. This is the most important section of the

project work. This section contains the analysis of all the data collected so far and they are

interpreted to produce the final conclusion. It contains all the tables and charts which depicts the

result.

Chapter four contains the finding and recommendation of the research. This sis based on

the data analyzed and interpreted in the previous chapter. This is the most important section of

the research report for a report is evaluated on the validity ad correctness of findings.

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 Chapter five depicted conclusion which concludes the whole report, that is, gives a brief

description of the process employed so far. And later chapters contain bibliography. Which

describes the list of sources from where the matter and information is collected? It contains the

list of books, authors, web sits use etc.

Mohammad Abdullah

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 ACKNOWLEDGEMENT

A research project report is never the sole product of a person whose name has appeared on the

cover. Even the best effort may not prove successful without proper guidance. For a good project

one needs proper time, energy, efforts, patience, and knowledge. But without any guidance it

remains unsuccessful. I have done this project with the best of my ability and hope that it will

serve its purpose.

I am really a great learning experience and I am really thankful to Dr. Neetu Singh, HOD

Department of Business Administration and training and placement inchargewho not only helped

me in the successful completion of this report but also spread his precious and valuable time in

expanding my knowledge base.

Again, I heartily express my regard to all the above person mentioned and pray to the God ‘May

live them long’.

Mohammad Abdullah

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 CHAPTER – 1

INTRODUCTION

INTRODUCTION

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What happens when a poor family’s breadwinner dies, when a child in a disadvantaged

household is hospitalized, or the home of a vulnerable family is destroyed by fire or natural

disaster? Every serious illness, every accident and every natural disaster threatens the very

existence of poor people and usually leads to deeper poverty. That’s where “microinsurance”

comes in.

Microinsurance is specifically designed for the protection of low -income people, with affordable

insurance products to help them cope with and recover from common ris ks. It is a market-based

mechanism that promises to support sustainable livelihoods by empowering people to adapt and

withstand stress. Two-thirds of human beings suffering in the most extreme poverty are women.

Often living within $1 per day, they are th e most vulnerable.

Insurance may be defined as-

" It is a contract between two parties where by one party undertakes to compensate the another

party for the loss arising due to an uncertain events for which the another party agrees to pay a

certain amount regularly. "

A promise of compensation for specific potential future losses in exchange for a periodic

payment. Insurance is designed to protect the financial well-being of an individual, company or

other entity in the case of unexpected loss. Some forms of insurance are required by law, while

others are optional. Agreeing to the terms of an insurance policy creates a contract between the

insured and the insurer. In exchange for payments from the insured (called premiums), the

insurer agrees to pay the policy holder a sum of money upon the occurrence of a specific event.

In most cases, the policy holder pays part of the loss (called the deductible), and the insurer pays

the rest. Examples include car insurance, health insurance, disability insurance, life insurance,

and business insurance.

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What is Insurance?

Insurance is a contract between the insurer and the insured wherein against receipt of certain

amount, called premium, the insurer agrees to make good any financial loss that may be

suffered by the insured, due to the operation of an insured peril on the subject matter of

insurance.

HISTORY OF INSURANCE INDUSTRY:

The origin of practice of insurance is probably lost forever in the mists of antiquity and till today

remains a mystery. References to practices similar to insurance are found in the ancient Indian

texts of Rig-Veda. Rig-Veda refers to the concept

of "Yogakshema" - loosely meaning 'prosperity, well being and security of people'. Insurance

has a deep-rooted history in India since ancient times and has been mentioned in the writings of

Manu (Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilya‘s Arthashastra that glorified

ancient India. In all these ancient texts, the writings discuss about pooling of resources that

would be re-distributed in times of calamities or unforeseen circumstances such as epidemics,

earthquakes, fire, floods and famine. Such writings depict that it was probably a pre-cursor to

modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the

form of marine trade loans and carriers‘ contracts. In India, Insurance has evolved with the

passage of time heavily drawing inspiration from other countries.

In 1818 the advent of life insurance business descended in India with the establishment of the

Oriental Life Insurance Company at Kolkata. However, this company failed in 1834 as it failed

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to realize its goals and achieve the desired objectives. In 1829, the Madras Equitable had begun

transacting life insurance business in the Madras Presidency. In 1870 the British Insurance Act

was enacted. Moreover, in the last three decades of the nineteenth century, the Bombay Mutual

(1871), Oriental (1874) and Empire of India (1897) commenced their operations in the Bombay

Presidency. However, this era, was dominated and controlled by foreign insurance companies.

Such foreign insurance companies did good business in India such as

Albert Life Assurance, Liverpool, London Globe Insurance and Royal Insurance.

In 1914, the Government of India started publishing returns of Insurance Companies in India.

The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life

business being transacted in India. In 1938, with a view to protect the interests of the Indian

Insurance companies, the earlier legislation was amended with the enactment of the Insurance

Act, 1938 consisting of comprehensive provisions for effective control.

With the enactment of Insurance Amendment Act of 1950, the Principal Agencies were

abolished. However, due to the presence of large number of insurance companies across India,

the intensity level of cut-throat competition amongst such organizations was pretty high. There

were also allegations of unfair trade practices being prevalent to a great extent. The Government

of India, therefore, decided to standardize and nationalize the practice of insurance business.

An ordinance was issued on 19th January, 1956 for nationalization of the Life Insurance sector in

India and Life Insurance Corporation (LIC) came into existence in the same year. The LIC

absorbed 154 Indian, 16 non-Indian insurers as well as 75 provident societies—totally 245 Indian

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and foreign insurers. The LIC had monopoly till the late 90s when the Insurance sector was

reopened to theprivatesector.

The history of general (non-life) insurance dates back

to the Industrial Revolution uprising in the west and the consequent growth of sea trade and

commerce in the 17th century. It came to India as a legacy of British occupation. General

Insurance in India has its roots in the establishment of Triton Insurance Company Ltd. at Kolkata

in the year 1850 by the Britishers. In 1907, the Indian Mercantile Insurance Ltd. was established

and was the first company to transact all classes of general insurance business. In 1957, General

Insurance Council (GIC), a wing of the Insurance Association of India was established The

General Insurance Council framed a code of conduct for ensuring fair conduct and sound

business practices across Non-Life or General insurance sector.

In 1968, the Insurance Act was amended to regulate investments and set minimum solvency

margins. The Tariff Advisory Committee was also established the passing of the General

Insurance Business (Nationalization) Act in 1972, general insurance business was nationalized

which came into effect from 1st January, 1973.

107 insurers were amalgamated and grouped into four companies namely National Insurance

Company Ltd. at Kolkata, the New India Assurance Company Ltd. at Mumbai, and The Oriental

Insurance Company Ltd at New Delhi and the United India Insurance Company Ltd at Chennai.

The General Insurance Corporation (GIC) of India was incorporated as a company in

1971 and commenced its operations with effect from 1st January, 1973.

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This century has seen insurance come a full circle in a journey extending more than 200 years.

The process of liberalization or re-opening of the Insurance sector had begun in the early 1990s

and in the last decade, insurance sector has been substantially opened for participation from

financially sound Indian Private Organizations as well as foreign insurance companies. The

Government set up a committee in 1993 under the chairmanship of R.N. Malhotra, former

Governor of RBI (Reserve Bank of India), to propose recommendations for initiation and

implementation of reforms in the Indian insurance sector. The objective of setting up this

committee was to complement the pace of reforms initiated in the financial sector. The aforesaid

committee submitted its report in 1994 wherein it was recommended that the private sector be

permitted to enter the Indian insurance sector. It also recommended the participation of foreign

companies by allowing them to enter into an MOU (Memorandum of Understanding) by floating

Indian companies, preferably a joint venture with Indian partners.

Following the recommendations of the Malhotra Committee report, the Insurance Regulatory and

Development Authority (IRDA) Act, in 1999 was passed by the Indian Parliament. IRDA

(Insurance Regulatory and Development Authority) was constituted as an autonomous body to

regulate and develop the Indian Insurance Industry with its headquarters

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Hyderabad. The IRDA was incorporated as a statutory body in April, 2000. The key objectives

of the IRDA include promotion of healthy competition amongst the insurance sector players so

as to constantly enhance and exceed customer satisfaction through mind-boggling varieties in

Insurance products and services, enhancement in consumer choice and lower premiums and at

the same time ensuring the financial stability and security

Why People Opt for Insurance?

The Life is full of uncertainties… People opt for insurance purely for the reasons of

uncertainties in life. Insurance gives the insured a kind of peace of mind as he is assured to

making up the loss in the event of such uncertainities in life happen.

How does Insurance work?

Insurance is a technique wherein a number of people, who are exposed to similar risk, participate

in the scheme and contribute in the shape of periodic premiums. Such premiums are received by

the insurer who is able to pay out of the premiums received by him, for the losses of some of

those who have participated in the scheme.

Thus it is wonderful technique of spreading and transfer or risks.

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TYPES OF INSURANCE

The insurance can be divided from two angles: from business point of view and from the risk

point of view. Business Point of View The insurance from business point of view can be

categorized into:

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INTRODUCTION OF MICRO INSURANCE

India is enjoying rapid growth and benefits from a young population. Its middle class is growing

rapidly but 70 percent of 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 others, they

are more vulnerable to such risk 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 study 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 poor‘s family‘s 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. That‘s 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 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 poor’s heavy reliance on informal financial services such as moneylenders, under-

the-mattress savings and assistance societies can be inefficient and expensive, and may even

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exacerbate poverty. An inclusive financial sytem makes insurance available to low- income

persons.

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 typicaly

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.

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Key indicator of Micro Insurance in India

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Insurance Industry Issues & Operations

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Meaning of Micro Insurance

On a daily basis, the poor around the world face a multitude of risks that threaten to derail any

progress they have made to work their way out of poverty. The death of a family member, lossof

property and livestock, illness, and natural disasters each pose unique dangers. Protecting

peopleagainst these losses is an important step to alleviating global poverty.

Micro insurance - the protection of low-income people against specific perils in exchange for

regular monetary payments (premiums) proportionate to the likelihood and cost of the risk

involved – seeks to provide a suitable solution for managing these risks.

Definitions of micro-insurance

Micro-insurance, the term used to refer to insurance to the low-income people, is different from

insurance in general as it is a low value product (involving modest premium and benefit

package) which requires different design and distribution strategies such as premium based on

community risk rating (as opposed to individual risk rating), active involvement of an

intermediate agency representing the target community and so forth. Insurance is fast emerging

as an important strategy even for the low-income people engaged in wide variety of income

generation activities, and who remain exposed to variety of risks mainly because of absence of

cost-effective risk hedging instruments.

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. In the context of health contingency, for example, a World Bank

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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. Indeed,

enhancing the ability of the poor to deal with various risks is increasingly being considered

integral to any poverty reduction strategy (Holzmann and Jorgensen 2000, Siegel et al. 2001).

Of the different risk management strategies, insurance that spreads the loss of the (few) affected

members among all the members who join insurance scheme and also separates time of payment

of premium from time of claims, is particularly beneficial to the poor who have limited ability to

mitigate risk on account of imperfect labour and credit markets.

In the past insurance as a prepaid risk managing instrument was never considered as an option

for the poor. The poor were considered too poor to be able to afford insurance premiums. Often

they were considered uninsurable, given the wide variety of risks they face. However, recent

developments in India, as elsewhere, have shown that not only can the poor make small periodic

contributions that can go towards insuring them against risks but also that the risks they face

(such as those of illness, accident and injury, life, loss of property etc.) are

eminently insurable as these risks are mostly independent ,idiosyncratic. Moreover, there are

cost-effective ways of extending insurance to them. Thus, insurance is fast emerging as a prepaid

financing option for the risks facing the poor.

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Life Micro insurance Product

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India’s insurance penetration (premiums as a percentage of gross domestic product in dollars) in

2003 is low at 2.9 percent and ranks 54th in the world. In premium collection, the record is

better, at 19th position collecting $17 billion in 2003. The 2003 ratio of premiums collected per

capita (insurance density) is 16.4. Compared with a world average of 469.6, India is still at a

very nascent stage. Of the $16.40 pe r capita expenditure on insurance, a mere $3.50 is spent on

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general insurance. This is primarily because in India non -life insurance is not considered

important and people perceive it as an unnecessary expenditure .2

HISTORY

The Micro Insurance Agency has its roots within Opportunity International, a large microfinance

network motivated by Jesus Christ‘s call to serve the poor. With a network of 47 microfinance

institutions, Opportunity International has been serving the entrepreneurial poor since 1971. In

partnership with Opportunity‘s microfinance institutions, we began working in 2002 on the

development of a range of life, property, livestock, crop derivative, disability, unemployment

and health insurance products to cover the risks faced by Opportunity‘s loan clients. Micro

Insurance Agency staff observed that the risks the poor face can often set them back months and

years behind where their loans and savings products offered by Opportunity had taken them. For

instance, a death of a family member from HIV/AIDS a ―pre-condition‖ most insurance

companies would not cover – would often mean expensive funeral costs and the loss of a

breadwinner, resulting in increased economic hardship for the family. In response, Micro

Insurance Agency staff developed an affordable funeralbenefit product that did not exclude any

pre-conditions, including HIV/AIDS. This transformed the mindset of retail insurance providers

in the country, who later developed similar non-exclusive products in light of the competing

environment.

Through the experience of serving Opportunity‘s microfinance institutions and their clients,

Micro Insurance Agency staff observed that the products most demanded by the poor are not

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always the ones available. Health insurance, for example, is a critical need of the poor but the

most limited in terms of supply. In addition, policies that are available are often based on first

world practices and are too complex for the simple coverage demanded. Further, when offered

on an individual, one-off basis, high premium requirements and a need to pay in a single lump

sum preclude a huge sector of the market from access. New distribution models and channels

were needed to increase access and reduce the effective price charged to clients. In 2005, the

Micro Insurance Agency was founded by Opportunity.

Our mission is to empower the materially poor to transform their lives by insuring them against

financial risk and its consequences. Specifically, we seek to serve the economically active poor

who live on $4 per day or less indeveloping countries and provide a safety net to reduce

economic setbacks.

Characteristics/ Features of Micro Insurance

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 general lack of awareness of 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, inhabit 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.

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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 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 non

governmental 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 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

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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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30
Profitability (loss) based on estimated mortality rate.

calculates the pure premium (the amount required to pay losses alone) using a 0.25% mortality

rate, i.e., 1 policyholder out of every 400 dies during the term. This is broadly the mortality rate

experienced by Tata-AIG. This rate will vary from area to area, and in many areas it will be

much higher.

GROWTH OF MICRO INSURANCE

A total of over 600,000 villages reside in India with barely 30,000 bank branches. On an average

the poor can save and can indeed use an estimated demand for credit ranging from wide range of

financial services, $3 to $9 billion annually. The formal sector is barely able to provide $200 to

$300 million. Poor people use not only credit but also saving service, insurance and affordable

remittance systems to manage assets, generate income and improve their finances. For most of

us, microfinance means providing very poor families with various Insurance, Investment and

saving small loans (microcredit) to help them. Products for Poor section engage in productive

activities. Basic financial services remain out of reach. Microfinance is a collective term used for

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financial intermediation services to low income group and poor customers. Services offered are

Credit facility, saving accounts, Money transfers, Remittances, Insurance and even Investment.

Microfinance refers to small-scale financial services including both credits and deposits provided

to people who farm or fish or herd; operate small or microenterprises where goods are produced,

recycled, repaired, or traded; provide services; work for wages or commissions; gain income

from renting out small amounts of land, vehicles, draft animals, or machinery and tools; in both

rural and urban areas. Hence we can sum up Microfinance as the provision of financial services

to low-income clients or solidarity lending groups including consumers and the self-employed,

who traditionally lack access to banking and related services. In a broader sense, it is a

movement whose objective is “a world in which as many poor and near-poor households as

possible have permanent access to an appropriate range of high quality financial services,

including not just credit but also savings, insurance and fund transfers.” Those who promote

microfinance generally believe that such access will help to eradicate poverty.

Lack of lending from Banks due to lack of collateral and exploitation from need for credit by

money lenders has exemplified the potential demand for microfinance. Unprivileged Class

services and the growth prospects of the industry include commercial debt and equity form of

grants and donations. Increase in the Private Equity including Venture Capital funding has

changed the capital structure of this sources of finance industry for better. Innovation in

diversifying lender base, consolidating internal control systems, innovation and strengthened

policies on human resources, disclosure, and organisational processes have also led to the growth

of the microfinance sector.

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Microfinance Bill & proposed regulator NABARD will regulate & promote and support growth

of this sector in line with importance attached by government to this sector. Consolidation in the

increase in the number of partners in the commercial space will enable industry to introduce new

products in insurance, remittance etc. Higher average loan size and greater use of technology

such as smart cards and Urbanization and point-of-sale devices with wireless connectivity in the

urban areas will increase the urban micro-financing. Microfinance is attracting high quality,

talented managers. People with skills, capacities in specialized HR needs such as local

recruitments and cultural and linguistic integration is helping microfinance to reach the higher

leaps. Standardizing the operating process and systems is another reason for the growth in this

sector.

DEVELOPMENT OF MICRO INSURANCE IN INDIA

Historically in India, a few micro-insurance schemes were initiated, either by non-governmental

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.

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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).

The insurance regulatory and development authority (IRDA) defines rural sector as consisting of:

 a population of less than five thousand,

 a density of population of less than four hundred per square kilometer

 More than twenty five per cent of the male working population is engaged in

agricultural pursuits. The categories of workers falling under agricultural pursuits are:

cultivators, agricultural labourers, and workers in livestock, forestry, fishing, hunting

and plantations, orchards and allied activities.

The social sector as defined by the insurance regulator consists of:

 Unorganized sector

 informal sector

 economically vulnerable or backward classes, and

 Other categories of persons, both in rural and urban areas.

The social obligations are in terms of number of individuals to be covered by both life and non-

life insurers in certain identified sections of the society. The rural obligations are in terms of

certain minimum percentage of total polices written by life insurance companies and for general

insurance companies, these obligations are in terms of percentage of total gross premium

collected. Some aspects of these obligations are particularly noteworthy.

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First, the social and rural obligations do not necessarily require (cross) subsidizing insurance.

Second, these obligations are to be fulfilled right from the first year of commencement of

operations by the new insurers. Third, there is no exit option available to insurers who are not

keen on servicing the rural and low-income segment. Finally, non-fulfillment of these obligations

can invite penalties from the regulator.

In order to fulfill these requirements all insurance companies have designed products for the

poorer sections and low-income individuals. Both public and private insurance companies are

adopting similar strategies of developing collaborations with the various civil societies

associations. The presence of these associations as a mediating agency, or what we call a nodal

agency, that represents, and acts on behalf of the target community is essential in extending

insurance cover to the poor. The nodal agency helps the formal insurance providers overcome

both informational disadvantage and high transaction costs in providing insurance to the low-

income people. This way micro insurance combines positive features of formal insurance (pre

paid, scientifically organized scheme) as well as those of informal insurance (by using local

information and resources that helps in designing appropriate schemes delivered in a cost

effective way). In the absence of a nodal agency, the low resource base of the poor, coupled with

high transaction costs (relative to the magnitude of transactions) gives rise to the affordability

issue. Lack of affordability prevents their latent demand from expressing itself in the market.

Hence the nodal agencies that organize the poor, impart training, and work for the welfare of the

low-income people play an important role both in generating both the demand for insurance as

well as the supply of cost-effective insurance.

35
Need For Developing Micro Insurance In India – IRDA perspective

Background

 Micro-insurance refers to protection of assets and lives against insurable risks of

target populations such as micro-entrepreneurs, small farmers and the landless,

women and low-income people through formal, semiformal and informal institutions.

Such products are often bundled with micro-savings and micro-credit, thereby

allocating scarce resources to micro-investments with the highest marginal rates of

return. Microinsurance is the most underdeveloped part of microfinance. Yet various

schemes exist that are viable, benefiting both the institutions and their clients. Such

schemes have generally served two major purposes: (i) they have contributed to loan

security; and (ii) they have served as instruments of resource mobilization. The

greatest challenge for microinsurance lies in the combination of viability and

sustainability with outreach.

Although introduction of sound practices such as appropriate policy sizes and timely

payment of installments of premium or positive incentives to renew on time in order to

avoid policy getting lapsed can be feasible, the ultimate effectiveness of interventions

focusing on institutional transformation and sound insurance practices will vary

considerably, depending on the appropriateness of the regulatory environment.

Development of microinsurance sector in India is recent phenomenon. Micro-insurance portfolio

has made steady progress during last few years after IRDA (Micro-insurance) Regulations 2005

that allow the insurers for composite covers or package products. According to IRDA source,

more life insurers have commenced their micro-Insurance operations and many new products

36
have been launched during the year 2008-09. With expansion of distribution infrastructure and

new business has shown upward trend in microinsurance sector but it is still much smaller than

the desired level.

However, micro-insurance business in India largely constitutes group portfolio. Under the

individual policy category microinsurance though more policies are underwritten but total

premium amount is low. Among the insurers the share of LIC was substantial in microinsurance

business. As regard to infrastructure and manpower expansion there has been increase in the

number of micro-insurance agents. By at end of March 2009 it was 7250; of which 6647 were for

the LIC and the remaining represented the private sector companies. Fifteen life insurers have so

far launched 30 micro-insurance products. Of the 30 products, 16 are for individuals and the

remaining 14 are for groups.

Microinsurance Business (LIFE) during 2008-09 (Premium

Note: New business premium includes first year premium and single premium Source: IRDA

Annual Report 2008-09

37
IRDA Priscribed Range of Micro Insurance:

Source: IRDA Annual Report 2008-09

Regulation of IRDA has defined both general and life microinsurance products. The former

refers to any health insurance contract protecting assets such as a hut; livestock, tools and

instruments; or an accident contract, either for an individual or a group. The latter refers to any

term insurance contract, with or without return of premium; endowment insurance contract; or

health insurance contract, with or without accident rider, either on an individual or group basis.

For each of these policies, the minimum and maximum for amount of cover, term of cover, and

age at entry have been specified.

Companies have to design products under these specifications and get special approval from

IRDA for them to qualify as microinsurance products.

38
Lists of Approved Microinsurance Products in India (as on 05.11.2009)

Source: IRDA website www.irda.org accessed on 15 Jan 2010

39
Development Goals

To enable microinsurance to be an integral part of a country's wider insurance system, it is

important for every insurer to adjust its costs of serving marginal clients in remote areas,

collecting premiums and installments, and offering doorstep services. It is also important to

recognize a wide network of intermediaries in the rural and social sectors and notify regulations

in order to guide and supervise the micro-insurance service providers and their customers.

Today we have a variety of microfinance institutions with national and local outreach. Many of

them have already become corporate agents or have entered into referral arrangements with

insurers. However, semiformal institutions including savings and credit cooperatives, NGOs and

self-help groups which have immense potential in carrying the message of insurance as also

solicit insurance business are yet to be utilized in a manner where their true potential can be

harnessed to increase the insurance penetration levels. This is due to restrictions in the existing

agency regulations in terms of minimum eligibility norms in order to become an agent.

Depending on the existence and vigour of such institutions, the following alternatives have

emerged, for offering strategic entry points for microinsurance development:

 Adapting formal insurance arrangements to the needs of the microeconomy.

 Upgrading non-formal (comprising semiformal and informal) insurance

arrangements with insurance companies.

 Linking formal and non formal insurance institutions with banks and self-help

groups.

 Establishing new local institutions providing microinsurance services.

40
The first three strategies may be inter-connected:

 adapting insurance companies to the requirements of the microeconomy is a first

step; then

 Linking them as wholesale institutions to self-help groups as retailers; and finally,

 Upgrading self-help groups e.g. to the level of financial cooperatives or village

banks.

If insurers are to serve customers who differ widely in terms of service costs and risks, the only

viable inducement for them is an adequate margin, lest they exclude small farmers, - micro-

entrepreneurs and people in remote areas. Only sound social insurance, which combines a social

mandate with profit-making, has a chance of sustainability.

FUTURE & PROSPECTS OF MICRO INSURANCE

Health insurance is a common form of medical protection all over the world and until the

Eleventh Plan, it was available only to government employees, workers in the organised sector;

private health insurance has been in operation for several years, but its coverage has been

limited. The percentage of the total population estimated to be covered under these schemes was

only 16 per cent. The poor did not have any insurance for in-patient care. The ‘Rashtriya

Swasthya Bima Yojana’ (RSBY), introduced in 2007, was designed to meet the health insurance

needs of the poor. RSBY provides for ‘cash-less’, smart card based health insurance cover of

`30,000 per annum to each enrolled family, comprising up to five individuals. The beneficiary

family pays only `30 per annum as registration/renewal fee. The scheme covers hospitalization

expenses (Out-patient expenses are not covered), including maternity benefit, and preexisting

41
diseases. A transportation cost of `100 per visit is also paid. The premium payable to insurance

agencies is funded by Central and State Governments in a 75:25 ratio, which is relaxed to 90:10

for the North-East region and Jammu and Kashmir. The maximum premium by the Central

Government is limited to `750 per insured family per year. RSBY was originally limited to

Below Poverty Line (BPL) families but was later extended to building and other construction

workers, MGNREGA beneficiaries, street vendors, beedi workers, and domestic workers. The

scheme is currently being implemented in 24 States/UTs. About 3.3 crore families have been

covered as on date and 43 lakh persons have availed hospitalisation under the scheme till

November 2012.

Key feature of RSBY is that it provides for private health service providers to be included in the

system, if they meet certain standards and agree to provide cash-less treatment which is

reimbursed by the insurance company. This has the advantage of giving patients a choice

between alternative service providers where such alternatives are available. Several State

Governments (such as those of Andhra Pradesh and Tamil Nadu) have introduced their own

health insurance schemes, which often have a more generous total cover.

A general problem with any ‘fee for service’ payment system financed by an insurance

mechanism is that it creates an incentive for unnecessary treatment, which in due course raises

costs and premiums. There is some evidence that this is happening and it is necessary to devise

corrective steps to minimise it. Some groups oppose insurance schemes per se on these grounds,

but that is not realistic. The beneficiary is able to choose from alternative care givers covered by

a common insurance scheme. Experience with the RSBY, and with the other Statespecific

insurance schemes, needs to be thoroughly studied so that suitable corrective measures can be

42
introduced before integrating these schemes into a framework of Universal Health Coverage

(UHC). The shortcomings of RSBY noted so far include high transaction costs due to insurance

intermediaries, inability to control provider induced demand, and lack of coverage for primary

health and out patient care. Fragmentation of different levels of care can lead to an upward

escalation towards the secondary level of patients who should preferably be handled at the

primary or even preventive stages. The RSBY also does not take into account state specific

variations in disease profiles and health needs.

43
MICRO INSURANCE PRODUCT IN INDIA

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.

44
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.

AVIVA Life’s “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/-

45
  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

 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.

46
  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 insuance’s Grameen Super Suraksha and Grameen Shakti

SBI Life insuance‘s 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.

47
  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

 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.

48
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 policyholder‘s 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

49
 Death Benifit : Sum assured is paid to the policyholder‘s nominee

 Maturity benefit: At the end of the 15 years, all the premiums paid will be returned to the

policyholder.

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 policyholder‘s 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

50
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 member‘s 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,s Grameen Suraksha ensures that their financial

needs are met when something unfortunate happen to you.

 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

51
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 Corporation‘s 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

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).

52
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)

53
CHAPTER – 2

Objective

Scope

Importance

54
 OBJECTIVE

1. To study about history & progress of micro insurance in India.

2. To study about various problems in growth of micro insurance in India.

3. To know the prospects of micro insurance programs.

4. To analyse trends of micro insurance.

55
 IMPORTANCE

1. Research project helps to understanding the micro insurance.

2. Research project helps to knowing trend in micro insurance.

3. Research project helps to knowing the growth of micro insurance.

4. Research project helps to knowing the performance of micro insurance.

56
 SCOPE

1. This project give brief description of micro insurance.

2. It traces the growth of micro insurance in India.

3. It tries to analyse the problem faced by micro insurance.

4. In future customer requirement could be added with the product and services for getting

an edge over competitors.

57
 LIMITATIONS

Micro insurance is very vast subject. It is not possible to provide information regarding all the

different types of policie which provide different benefits. The project would have been much

better if the comprehensive study all the different companies is undertaken.

1. The study based on secondary data, published data represent specific area of our country.

2. Need of consumer are not specific in terms of data.

3. Time & cost constraints were also there.

58
 CHAPTER – 3

RESEARCH METHODOLOGY

59
 RESEARCH METHODOLOGY

A systematic search for an answer to a question or solution to a problem is known as

REAEARCH.

According to KERLINGER defines RESEARCH, '' A Systematic, Controlled, Empirical and

Critical Investigation of Hypothetical Preposition about Presumes Relation among Natural

Phenomenon.

Research is the fountain of knowledge of for the sake of knowledge and an important source of

providing guidelines for solving different business, governmental and social problems.

CHARACTERSTICS OF RESEARCH-

1. Research is more systematic activity directed towards discovery and the development and

organized body of knowledge.

2. Research is based upon observable experience and empirical evidences.

3. Research demands accurate observation and description.

4. Research requires expertise.

5. Research involves gathering new data from primary sources, existing data for a new purposes.

IMPORTANCE OF RESEARCH

60
1. Research includes scientific and inductive thinking and it promotes the develpoment of logical

habits of thinking and organising.

2. The role of research in several field of applied economics, whether related to business or to the

economy as a whole, has greatly increased in modern times.

3. Research provides the basis for nearly all government policies in our economics system.

4. Research has its special significance solving various operational and planning problems.

5. Research is equally important for social scientists in studying social relationship and in

seeking answers to various social problems.

6. Research can also be understood keeping in view the following points -

A. To professional in research methodology, research may mean a source of livelihood.

B. To philosophers and thinkers, research may mean the outlet for new ideas and insight.

C. To literary men and women, research may mean the development of new styles and creative

work.

D. To analyst and intellectual, research may mean the generalisation of new theories.

Research is the fountain of knowledge and an important source of providing guidelines for

solving different business, governmental, and social problems.

61
RESEARCH DESIGN

A research design is defined, as the specification of methods and procedures for acquiring the

Information needed. It is a plant or organizing framework for doing the study and collecting the

data. Designing a research plan requires decisions all the data sources, research approaches,

Research instruments, sampling plan and contact methods.

1. EXPLORATORY RESEARCH- It is known as formulative research design. The major

purposes of exploratory studies are the identification of problems, the more precise Formulation

of problems and the formulations of new alternative courses of action. The design of exploratory

studies is characterized by a great amount of flexibility and ad-hoc veracity. It is based on

secondary sources and it is the nature of preliminary research.

a. Literature research

b. Experinced research

c. Case study

2. DESCRIPTIVE STUDY:

Descriptive research in contrast to exploratory research is marked by the prior

formulation of specific research Questions. The investigator already knows a substantial amount

about the research problem. Perhaps as a Result of an exploratory study, before the project is

initiated. Descriptive research is also characterized by a Preplanned and structured design.

SOURCES OF DATA -

62
DATA are fact, figures and other relevant material, past and present, serving as

basis for study and analysis.

Primary Data: The information obtained through survey serves as the

primary data for the study.

Secondary Data: National and International books in the area of study,

journals, magazines and websites serve as the source of secondary data.

The report is based on secondary data so no primary data has been used in

this report.

SECONDARY DATA -

These are sources containing data which are collected previously and compiled for some

purpose. Secondary data are already available.

These sources gives not only published record but also unpublised records and periodicals.

There are various sources of secondary data. They are as follows-

1. Official Publication : Publications of the banks and insurance policies.

2. Publication Relating To Trade : Publication of the trade associations, stock exchange, trade

union etc.

3. Journal/Newspaper etc. : Some newspapers / Journals collect and publish their own data, e.g.

Indian Journals of economics, economist, Economic Times.

63
4. Internet : It is also a good source of data collection. I had collected my data from many

website -

google.com

ask.com

answer.com

64
 CHAPTER – 4

DATA ANALYSIS AND INTERPRETATIONS

65
1. About history & progress of Micro insurance in India.

Table 1.

YEAR PERCENTAGE HIGH

1971 47% Opportunity of saving for poor entreprenueral through micro
insurance institution.
2009 N/A Began working in partnership with opportunity of financial
institutions.
2014 73% Found opportunity of new distributuin models channels were
increase & reduce price.
2016 92% India has most dynamic insurance sector in the world.
2017 90% Untapped market were insurance which were not covered by
insurance.
2018 75% Progress in enrolment of the poor in the Rashtriya Swasthya
Bima Yojana.
2019 70% Encouraging incoming calls for medecial advice & resolving
the call by saving time & cost.
Source: ALLIANZ AG, GTZ and UNDP Public Private Partnership August 2018.

66
DATA ANALYSIS:

From the above table the researcher has found that the history and progress of microinsurance in

1972 there is 47% of the opportunity of savings for poor entrepreneurial though micro insurance

institutions. In 2009 the data is not available but there are some growth relating to began working

in partnership with opportunity financial institution. In 2014 there is progress of 73% by found

opportunity of new distribution models channels were increase & reduce price. In 2016 there is

progress of 92% where India has most dynamic micro insurance sector in the world. In 2017

there is progress of 90% where untapped market were covered by micro insurance which were

not covered by insurance. In 2018 there is progress of 75% in enrolment of the poor in the

Rashtriya Swathya Bima Yojana. In 2018 progress of 70% by encouraging incoming calls for

medical advice & resolving the call by saving time and cost.

INTERPRETATION:

After the study researcher has found that there is high growth of micro insurance in year 2009 by

92%. In 2018of 70% by encouraging incoming calls for medical advice & resolving the call by

saving time and cost.

67
2. Problems in growth of micro insurance in India.

Table 2.

PROBLEMS PERCENTAGE NO. OF STUDY

Crop Failure 11% 5
Livestock 5% 2
Debt 14% 6
Employment Loss 18% 8
Loss of Assets 5% 2
High expenditure 25% 11
High Education expense 7% 3
Social & Other Problems 16% 7
Source: Bankers Institute of Rural Development (BIRD)

68
DATA ANALYSIS:

From the above table the researcher has found that the major obstacles for growth of micro

insurance in India are high expenditure & low income, expenditure rate is 25% & employment

loss is 18% because of no specific income of consumer public. Some other relevant problems

like Education awerness, Crop failure, live stock, loss of assets, social & other losses & security

of borrowers.

INTERPRETATION:

After the study researcher has found that maximum problem occure due to maximum

expenditure.

69
3. Prospects of micro insurance programs.

1. Eradicate extreme hunger and poverty.

2. Achieve universal primary education.

3. Promote gender equality and empowering women.

4. Reduce child mortality.

5. Improve maternal health.

6. Ensure environmental sustainability.

1. More than 30 per cent of children in developing countries – about 600 million – live on

less than US $1 a day. Every 3.6 seconds one person dies of starvation. Usually it is a

child under the age of 5. Poverty hits children hardest. While a severe lack of goods and

services hurts every human, it is most threatening to children’s rights: survival, health

and nutrition, education, participation, and protection from harm and exploitation. It

creates an environment that is damaging to children’s development in every way –

mental, physical, emotional and spiritual. 

One than 1 billion children are severely deprived of at least one of the essential goods and

services they require to survive, grow and develop. Some regions of the world have more dire

situations than others, but even within one country there can be broad disparities – between city

and rural children, for example, or between boys and girls. An influx or tourism in one area may

improve a country’s poverty statistics overall, while the majority remains poor and

disenfranchised.

70
 1. Eliminate gender disparity in primary and secondary education. While most of the

Millennium Development Goals face a deadline of 2017, the gender parity target was set

to be achieved a full ten years earlier - an acknowledgement that equal access to

education is the foundation for all other development goals. Yet recent statistics show

that for every 100 boys out of school, there are still 117 girls in the same situation. Until

equal numbers of girls and boys are in school, it will be impossible to build the

knowledge necessary to eradicate poverty and hunger, combat disease and ensure

environmental sustainability. And millions of children and women will continue to die

needlessly, placing the rest of the development agenda at risk.

Target by 2019: 

Ensure that all boys and girls complete a full course of primary schooling.

As of 2011 estimates around 115 million children of primary school age, the majority of them

girls, do not attend school.

2. About 72 million primary school age children do not attend school. Over four out of five

of these children live in rural areas. The urban-rural knowledge and education divide is

today’s main barrier to achieving universal primary education by 2015. At the same time

the learning ability of rural children is compromised by hunger and malnutrition. Food

security and education need to be tackled simultaneously to develop the capacity of rural

people to feed themselves and overcome poverty, hunger and illiteracy.

71
FAO is the UN lead agency for Education for Rural People (ERP), a network of about 370

partners including governments, civil society and the private sector. ERP fosters rural

peoples’ capacity to be food secure and to manage natural resources in a sustainable way

through increased access to quality education and skills training for all rural children, youth

and adults. FAO also provides technical assistance to member countries for implementing

school gardens and school-feeding programmes, which can encourage school attendance and

bring direct nutritional benefits to children.

3. . Undernutrition is estimated to be an underlying cause in more than one-third of all

deaths in children under five. Programmes to improve household food security and

nutrition information increase children’s chances of growing to adulthood. FAO

programmes assist poor households and communities to secure access to nutritionally

adequate diets and reduce child undernutrition. Activities include: community-centred

initiatives, training materials, nutrition education programmes, training programmes for

national and local staff, and promotion of a forum on household food security and

community nutrition

4. FAO recognizes the importance of promoting the full and equitable participation of rural

women and men in efforts to improve food security, reduce poverty, and fuel social and

economic development. Without rural women’s economic and social empowerment and

gender equality, food security will not be achieved. FAO promotes the equal participation

of rural women in decision making processes, employment opportunities and access to

and control of resources.

FAO develops tool kits, guidelines and training programmes for the production and

analysis of sex disaggregated data that enable targeted intervention on the vital role rural

72
 men and women play in ensuring food security, especially at the household level. FAO

builds technical capacity among member countries to address gender issues in policy and

programme development; works directly with rural women and men to strengthen their

agricultural and livelihoods skills; assists member countries to identify and remove

obstacles to women’s equal participation and decision-making; supports the formulation

of gender-sensitive national and regional agricultural policies; links rural women and

men through an information and communication network; and shares good practices that

highlight women’s roles.

5. The natural resources base and ecosystems must be managed sustainably to meet people’s

food requirements and other environmental, social and economic needs. Climate change,

increased water scarcity and conflicts over access to resources all pose challenges to

environmental sustainability and food security. In addition, hunger and poverty often

compel the poor to over-exploit the resources on which their own livelihoods depend.

FAO supports sustainable natural resource management including agricultural water use

efficiency; land and soil productivity; sustainable forest management, aquaculture and

inland fisheries; integrated crop and livestock systems; pesticide management and

watershed management. FAO also supports the major environmental conventions,

including the United Nations Framework Convention on Climate Change. FAO provides

technical and policy advice to address the main threats to the natural resource base, which

include land degradation, water scarcity, deforestation, overgrazing, over exploitation of

marine resources, increased green house gas emissions and loss of genetic resources and

biological diversity. FAO carries out significant work on the links between food security

and bioenergy development.

73
INTERPRETATION:

After the study researcher has found that Government has introduce many plans for the future

growth for the betterment of micro insurance Companies.

4. Trends of micro insurance in India.

Table 3.

74
 YEAR PERCENTAGE
1990 45% (SHG)
2013 72% (SHG)
2015 65%
2017 78.21%
2019 88.42%
Source: 132 X INDIAN JOURNAL OF APPLIED RESEARCH

75
DATA ANALYSIS:

Micro finance in India has started to evolve in early 1990’s with an effort of forming informal

Small Help Group (SHG) to provide access of financial services to needy. MFIs are increasing

their share in Indian microfinance supply as of comparison to SHGs where their share has

increase by 72%. In year 2013 the growth of micro insurance is 65%. MFIs are increasing their

share in Indian microfinance supply as of comparison to SHGs where their share has gone down

to 53% in March 2015. In year 2019 the growth of micro insurance is 88.42%. The strength of

microfinance sector lies in the National Bank for Agriculture and Rural Development

(NABARD) and Small Industries Development Bank of India (SIDBI) diversity of models. They

are performing regulatory and promotional role by providing financial resources as credit &

equity and enhancing technology know-how of MFIs.

INTERPRETATION:

After the study researcher has found that in 2013 there is a huge growth in mincro insurance

sector due to adaption of National Bank for Agriculture and Rural Development (NABARD) and

Small Industries Development Bank of India (SIDBI) diversity of models.

76
 CHAPTER – 5

FINDINGS AND RECOMMENDATIONS

FINDINGS

77
 From the above table the researcher has found that the history and progress of

microinsurance in 1972 there is 47% of the opportunity of savings for poor

entrepreneurial though micro insurance institutions. In 2002 the data is not available but

there are some growth relating to began working in partnership with opportunity

financial institution. In 2005 there is progress of 73% by found opportunity of new

distribution models channels were indrease & reduce price. In 2006 there is progress of

92% where India has most dynamic micro insurance sector in the world. In 2007 there is

progress of 90% where untapped market were covered by micro insurance which were

not covered by insurance. In 2010 there is progress of 75% in enrolment of the poor in

the Rashtriya Swathya Bima Yojana. In 2012 progress of 70% of encouraging incoming

calls for medical advice & resolving the call by saving time and cost.

 From the above table the researcher has found that the micro insurance faces various

problem in growth in india due to failure of crops by 11% & no. of study is 5, live stocks

were only 5% & no. of study is 2, Debt were high by 14% and no. of study is 6, there is

employment loss by 18% and no. of study is 8, in past few years ther micro insurance

has face problems of loss of assets by 5% and no. of study is 2, there is high expenditure

of 25% and no. of study is 11, high education expenses is by 7% and no. of study is 3,

social and other problems is by 16% and no. of study is 7.

 More than 30 per cent of children in developing countries – about 600 million – live on

less than US $1 a day. Every 3.6 seconds one person dies of starvation. Usually it is a

child under the age of 5. Poverty hits children hardest. While a severe lack of goods and

services hurts every human, it is most threatening to children’s rights: survival, health

and nutrition, education, participation, and protection from harm and exploitation. It

78
 creates an environment that is damaging to children’s development in every way –

mental, physical, emotional and spiritual. 

One than 1 billion children are severely deprived of at least one of the essential goods and

services they require to survive, grow and develop. Some regions of the world have more dire

situations than others, but even within one country there can be broad disparities – between city

and rural children, for example, or between boys and girls. An influx or tourism in one area may

improve a country’s poverty statistics overall, while the majority remains poor and

disenfranchised.

Eliminate gender disparity in primary and secondary education. While most of the Millennium

Development Goals face a deadline of 2015, the gender parity target was set to be achieved a full

ten years earlier - an acknowledgement that equal access to education is the foundation for all

other development goals. Yet recent statistics show that for every 100 boys out of school, there

are still 117 girls in the same situation. Until equal numbers of girls and boys are in school, it

will be impossible to build the knowledge necessary to eradicate poverty and hunger, combat

disease and ensure environmental sustainability. And millions of children and women will

continue to die needlessly, placing the rest of the development agenda at risk.

Target by 2019: 

Ensure that all boys and girls complete a full course of primary schooling.

As of 2001 estimates around 115 million children of primary school age, the majority of them

girls, do not attend school.

79
About 72 million primary school age children do not attend school. Over four out of five of these

children live in rural areas. The urban-rural knowledge and education divide is today’s main

barrier to achieving universal primary education by 2015. At the same time the learning ability of

rural children is compromised by hunger and malnutrition. Food security and education need to

be tackled simultaneously to develop the capacity of rural people to feed themselves and

overcome poverty, hunger and illiteracy.

FAO is the UN lead agency for Education for Rural People (ERP), a network of about 370

partners including governments, civil society and the private sector. ERP fosters rural peoples’

capacity to be food secure and to manage natural resources in a sustainable way through

increased access to quality education and skills training for all rural children, youth and adults.

FAO also provides technical assistance to member countries for implementing school gardens

and school-feeding programmes, which can encourage school attendance and bring direct

nutritional benefits to children.

Undernutrition is estimated to be an underlying cause in more than one-third of all deaths in

children under five. Programmes to improve household food security and nutrition information

increase children’s chances of growing to adulthood. FAO programmes assist poor households

and communities to secure access to nutritionally adequate diets and reduce child undernutrition.

Activities include: community-centred initiatives, training materials, nutrition education

programmes, training programmes for national and local staff, and promotion of a forum on

household food security and community nutrition.

FAO recognizes the importance of promoting the full and equitable participation of rural women

and men in efforts to improve food security, reduce poverty, and fuel social and economic

80
development. Without rural women’s economic and social empowerment and gender equality,

food security will not be achieved. FAO promotes the equal participation of rural women in

decision making processes, employment opportunities and access to and control of resources.

FAO develops tool kits, guidelines and training programmes for the production and analysis of

sex disaggregated data that enable targeted intervention on the vital role rural men and women

play in ensuring food security, especially at the household level. FAO builds technical capacity

among member countries to address gender issues in policy and programme development; works

directly with rural women and men to strengthen their agricultural and livelihoods skills; assists

member countries to identify and remove obstacles to women’s equal participation and decision-

making; supports the formulation of gender-sensitive national and regional agricultural policies;

links rural women and men through an information and communication network; and shares

good practices that highlight women’s roles.

The natural resources base and ecosystems must be managed sustainably to meet people’s food

requirements and other environmental, social and economic needs. Climate change, increased

water scarcity and conflicts over access to resources all pose challenges to environmental

sustainability and food security. In addition, hunger and poverty often compel the poor to over-

exploit the resources on which their own livelihoods depend.

FAO supports sustainable natural resource management including agricultural water use

efficiency; land and soil productivity; sustainable forest management, aquaculture and inland

fisheries; integrated crop and livestock systems; pesticide management and watershed

management. FAO also supports the major environmental conventions, including the United

Nations Framework Convention on Climate Change. FAO provides technical and policy advice

to address the main threats to the natural resource base, which include land degradation, water

81
scarcity, deforestation, overgrazing, over exploitation of marine resources, increased green house

gas emissions and loss of genetic resources and biological diversity. FAO carries out significant

work on the links between food security and bioenergy development.

 Micro finance in India has started to evolve in early 1980’s with an effort of forming

informal Small Help Group (SHG) to provide access of financial services to needy. MFIs

are increasing their share in Indian microfinance supply as of comparison to SHGs where

their share has increase by 72%. In year 2005 the growth of micro insurance is 65%.

MFIs are increasing their share in Indian microfinance supply as of comparison to SHGs

where their share has gone down to 53% in March 2008. In year 2010 the growthof micro

insurance is 88.42%. The strength of microfinance sector lies in the National Bank for

Agriculture and Rural Development (NABARD) and Small Industries Development

Bank of India (SIDBI) diversity of models. They are performing regulatory and

promotional role by providing financial resources as credit & equity and enhancing

technology know-how of MFIs.

RECOMMENDATIONS

82
 This study can be made more attractive by implementing various scheme regarding

education, health, life etc.

 This study should be mare easier if the terms and condition i.e. procedure of claims

should be much easier.

 Companies providing micro insurance can be expanded more in future.

 The trends in micro insurance can be improved more in future.

 The micro insurance industry can be grew more in different areas in future.

 There should be much flexibility regarding documentation of micro insurance product.

 The performance can be improved in future by which insured can get more benefits.

83
 CHAPTER – 6

CONCLUSION AND LIMITATION

CONCLUSION

84
 After study of this research report it was found that the history & progress of micro

insurance in India has countineously is in progress of 10% to 15% in past feew years.

 After study of this research report it was found that the obstacles in the growth of micro

insurance in India is due to various reasons that are live stock, debt, employment loss,

loss of assets, high expenditure, high education expense, and social & other problems.

 After study of this research report it was found that the future prospects of micro

insurance in India are Eradicate extreme hunger and poverty, Achieve universal primary

education, Promote gender equality and empowering women, Reduce child mortality,

Improve maternal health, Ensure environmental sustainability.

 After study of this reaseach report it was found that the trends of micro insurance in India

is rapidaly growing before 20 years in forming Small Health Group, Micro Insurance

institution, etc.

85
 LIMITATIONS

Micro insurance is very vast subject. It is not possible to provide information regarding all the

different types of policie which provide different benefits. The project would have been much

better if the comprehensive study all the different companies is undertaken.

1. The study based on secondary data, published data represent specific area of our country.

2. Need of consumer are not specific in terms of data.

3. Time & cost constraints were also there.

86
BIBLIOGRAPHY

87
 Bibliography

BOOKS :

 Krishnaswami, O. R. ; Methodology of Research in Social Sciences ; 2007 ; Himalaya

Publishing House

 Kothari, C. R. ; Research Methodology ; 1999 ; Wishwa Prakashan

MAGZINES :

 Business & economics

 Business India

 Business today

 India today

 The Sunday Indian

NEWSPAPERS :

 The Times of India

 Hindustan times

88
JOURNAL :

 Indian National Journal of Finance

WEBSITES :

 www.scribd.com

 en.wikipedia.org

 searchcio.techtarget.in

 www.pppinindia.com

 www.projectsmonitor.com

 www.expresshealthcare.in

 www.indiareport.com

 www.indiaedunews.net

 web.worldbank.org

 www.adb.org

 edcatn-dise.in

 3inetwork.org

 medind.nic.in

89