Key features of the micro-insurance market in India
Product characteristics:
Micro-insurance products in the market have short policy contract terms and are overwhelmingly (but no longer exclusively) underwritten on a group basis. A number of the new products offered by formal insurers may be individually underwritten but the numbers of such policies is still minuscule even relative to the low overall outreach of micro-insurance.
Demarcation:
Formal insurers are required either to provide life or non-life insurance exclusively though health insurance may be provided by either category of insurer. Community-based insurance systems are largely limited to health cover.
Health prominence:
Health insurance is important in community-based systems because health risk is generally seen as potentially the most overwhelming type of systemic risk likely to upset the lives and economic livelihoods of the low-income population. Formal micro Insurance schemes are yet to cover health in any significant way on account of the difficulties of ensuring service delivery and the dangers of moral hazard in a highly informal health service provision network.
Low outreach of community-based insurance:
Community-based health insurance systems managed by NGOs are available but, except in a couple of cases, has minute outreach.
Dominance of loan linked products:
This is the largest product in the market driven by the compulsion of borrowers to purchase insurance schemes mainly to provide protective cover to the MFIs.
Micro-insurance category:
The beginning of separate micro-insurance guidelines provided by the Insurance regulator has seen the launch of new micro-insurance products in the formal market.
New distribution models:
Rural and social sector obligations imposed on formal insurers by the market regulator have compelled insurance companies to Experiment with new distribution models through NGOs, MFIs and the rural banking network.
Advice less selling:
Micro-insurance is sold overwhelmingly without advice while the higher end of the insurance market is served by brokers providing advice. Micro-insurance agents are specifically restricted to working with a single life and single non-life insurer.
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