Thursday, November 17, 2011

IRDA: Micro-insurance concerns

Dear Comrades,

Micro-insurance products were introduced in India essentially to benefit the poor in rural areas as part of the financial inclusion programme. However, as CNBC-TV18's Mitra Joshi reports, to make these products sustainable in the long-term, first… many challenges have to be addressed.

Insurance regulator J Hari Narayan seems worried about the low customer base of micro-insurance products. Introduced about 5 years back with the intention of benefiting the rural poor...these products haven't turned out to be very viable.

Sanjiv Bajaj, MD of Bajaj FinServ says, “You need viable distribution channels. Each insurance company if they go physically set up themselves over there, they will not be able to viably distribute. We have to leverage networks across other financial service providers, for example, the insurance industry had started doing this quite well with micro-finance institutions but then over the last couple of years, we had problems with them as an industry.”

Despite the distribution challenges in the country, global insurance entities are trying to enter the Indian insurance market to tap the rural segment with the help of the Government.

Michel Lies, Chairman - Global Partnerships, Swiss Re says, “The Government will take already some initiative foreseeing the insurance companies to set up some micro insurance activities, in order to be active further, micro insurance frame which will reach the poorest part of the population, that's something we are doing with them.”

So what's the solution? The industry itself says conventional methods will not boost the micro-insurance products because there is limited or no financial literacy amongst intermediaries and distributors. Instead

SB Mathur, Secretary General, Life Insurance Council says, “Post offices are a strong distribution network. They are distributing postal life insurance which can be sold only to government and public sector employees. Public cannot buy it. So why can't that strength be leveraged to distribute micro products.”

Further, the Insurance industry believes….to promote micro-insurance products, one needs transparency, simplicity in products and solid semi-urban and rural model in place to make it popular amongst all classes. Published on Wed, Nov 16, 2011 at 21:35 | Source : CNBC-TV18
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