An Industry Note - Microinsurance - Taking Risk Management to the Grassroots

Executive Summary

The opening up of the Indian Insurance sector in 1999 has given microfinance institutions (MFIs) a new window of opportunity. Tie ups between insurance companies and MFIs have resulted in a win-win partnership for all the concerned stakeholders. The poor sections of the population face a variety of risks. Risk mitigation becomes important as their meager incomes and livelihoods are dependent on their physical well being and health. As with the case of microcredit, the opportunity for marketing insurance products to the poor (rural and urban) is huge. SEWA (India), BASIX (India), Delta Insurance (Bangladesh), and Madison Insurance Zambia Limited (Zambia) have implemented microinsurance initiatives at the grassroots.

Since microinsurance is a recent phenomenon, regulation is virtually non-existent in many developing countries. However the Insurance Development Regulatory Authority (IRDA), India has suggested a few proposals to develop the market for insurance in rural areas. But there are a few critical issues MFIs have to consider before they embark on the microinsurance path. Successful microcredit ventures need not necessarily translate into microinsurance success. The attitudes of the rural consumers towards insurance and savings and their understanding of the benefits of these products are still at a nascent stage. Insurance companies have to work closely with their target customers to understand their needs and design suitable products. Regulation of this sector is likely to be a key issue in the future.

Keywords

Microinsurance, Microcredit, Financial services, Rural insurance, Microfinance, Microfinance institutions, Regulation, SEWA, BASIX, IRDA, Delta insurance, Madison Insurance Zambia Limited, India, Bangladesh, Zambia, Poor, Urban and NGO, Self help group, Insurance agent, Risk mitigation, Savings and MFI

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