khan micro insurance project 1

8/8/2019 KHAN Micro Insurance Project 1

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A

PROJECT REPORT

ON

FINANCE IN MICRO INSURANCE

AT

SHAREKHAN LIMITD

Hyderabad

Submitted by

RAMAKRISHNA.CHERUKU

(H.No.09007C-1086)

KAKATIYA UNIVERSITY

In partial fulfillment of the requirements for the award of

MASTERS OF BUSINESS ADMINISTRATION

(2008-2010)

LAL BAHADUR COLLEGE OF P.G CENTRE

MULUGU ROAD, WARANGAL.


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DECLARATION

I hereby declare that the project report titled FINANCE IN MICRO INSURANCE

submitted in partial fulfillment of the requirements for the POST GRADUATION OF

MASTERS IN BUSINESS ADMINISTRATION, from LAL BAHADUR COLLEGE OF P.G

CENTRE, KAKATIYA UNIVERSITY, WARANGAL is my original work and not submitted

for the award of any other Degree, Diploma, Fellowship or prizes.

DATE: RAMAKRISHNA.CHERUKU

PLACE: (HT.NO.09007C-1086)


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CERTIFICATE

This is to certify that the project report entitled FINANCE IN MICRO INSURANCE

carried at SHAREKHAN LIMITED is a bonafide work done by Mr. RAMAKRISHNA

CHERUKU bearing Roll No. 09007C-1086 a student of MBA (Finance) of LAL BAHADUR

COLLEGE OF P.G CENTRE WARANGAL and submitted the same in partial fulfillment for the

award of the degree of MASTER OF BUSINESS ADMINISTRATION affiliated to

KAKATIYA University for the scholastic year 2008-10.

We found the work carried out by her to be good. We wish her success in all future

endeavors.

MR.SUDHARSHAN EXTERNAL (Mr.SHANKARAIAH)(Internal Project Guide) (Examiner) (Principal)LECTURE IN FINANCE

LB P.G CENTREWARANGAL.


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ACKNOWLEDGEMENT

I take this opportunity to express my sincere gratitude to the staff ofLAL BAHADUR

COLLEGE OF P.G CENTRE. I specially thank THE MANAGEMENT AND STAFF OF

SHAREKHAN LIMITED for creating out the study and for their guidance and encouragement

that made the project very effective and easy.

I sincerely express my gratitude to MR. SURESH VARMA, SHAREKHAN

LIMITED, for his guidance and support throughout my project.

I would like to thankMr. SHANKARAIAH, for guiding and directing me in the process

of making this project report and for all the support and encouragement.

I am grateful to our Internal Faculty Mr. SRINATH for his support and assistance in

Completion of my project work.


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INDUSTRY PROFILE


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INDUSTRY PROFILE

Following diagram gives the structure of Indian financial system:


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FINANCIAL MARKET:

Financial markets are helpful to provide liquidity in the system and for smooth functioning of

the system. These markets are the centers that provide facilities for buying and selling of

financial claims and services. The financial markets match the demands of investment with

the supply of capital from various sources.


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According to functional basis financial markets are classified into two types.

They are:

Money markets (short-term)

Capital markets (long-term)

According to institutional basis again classified in to two types. They are

Organized financial market

Non-organized financial market.

The organized market comprises of official market represented by recognized institutions,

bank and government (SEBI) registered/controlled activities and intermediaries. The

unorganized market is composed of indigenous bankers, moneylenders, individual

professional and non-professionals.

MONEY MARKET:

Money market is a place where we can raise short-term capital.

Again the money market is classified in to

Inter bank call money market

Bill market and

Bank loan market Etc.

E.g.; treasury bills, commercial papers, CD's etc.

CAPITAL MARKET:

Capital market is a place where we can raise long-term capital.

Again the capital market is classified in to two types and they are Primary market and

Secondary market.

E.g.: Shares, Debentures, and Loans etc.


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PRIMARY MARKET:

Primary market is generally referred to the market of new issues or market for mobilization

of resources by the companies and government undertakings, for new projects as also for

expansion, modernization, addition, diversification and up gradation. Primary market is alsoreferred to as New Issue Market. Primary market operations include new issues of shares by

new and existing companies, further and right issues to existing shareholders, public offers,

and issue of debt instruments such as debentures, bonds, etc.

The primary market is regulated by the Securities and Exchange Board of India (SEBI a

government regulated authority).

FUNCTION:

The main services of the primary market are origination, underwriting, and distribution.

Origination deals with the origin of the new issue. Underwriting contract make the shares

predictable and remove the element of uncertainty in the subscription. Distribution refers to

the sale of securities to the investors.

The following are the market intermediaries associated with the market:

1. Merchant banker/book building lead manager

2. Registrar and transfer agent

3. Underwriter/broker to the issue

4. Adviser to the issue

5. Banker to the issue

6. Depository

7. Depository participant

INVESTORS PROTECTION IN THE PRIMARY MARKET:


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To ensure healthy growth of primary market, the investing public should be protected. The

term investor protection has a wider meaning in the primary market. The principal

ingredients of investors protection are:

Provision of all the relevant information

Provision of accurate information and

Transparent allotment procedures without any bias.

SECONDARY MARKET

The primary market deals with the new issues of securities. Outstanding securities are traded

in the secondary market, which is commonly known as stock market or stock exchange. The

secondary market is a market where scrips are traded. It is a market place which provides

liquidity to the scrips issued in the primary market. Thus, the growth of secondary market

depends on the primary market. More the number of companies entering the primary market,

the greater are the volume of trade at the secondary market. Trading activities in the

secondary market are done through the recognized stock exchanges which are 23 in number

including Over the Counter Exchange of India (OTCE), National Stock Exchange of India

and Interconnected Stock Exchange of India.

Secondary market operations involve buying and selling of securities on the stock exchange

through its members. The companies hitting the primary market are mandatory to list their

shares on one or more stock exchanges in India.

Listing of scrips provides liquidity and offers an opportunity to the investors to buy or sell

the scrips.

The following are the intermediaries in the secondary market:

1. Broker/member of stock exchange buyers broker and sellers broker


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2. Portfolio Manager

3. Investment advisor

4. Share transfer agent

5. Depository

6. Depository participants.

STOCK MARKETS IN INDIA:

Stock exchanges are the perfect type of market for securities whether of government and

semi-govt bodies or other public bodies as also for shares and debentures issued by the joint-

stock companies. In the stock market, purchases and sales of shares are affected in conditions

of free competition. Government securities are traded outside the trading ring in the form of

over the counter sales or purchase. The bargains that are struck in the trading ring by the

members of the stock exchanges are at the fairest prices determined by the basic laws of

supply and demand.

Definition of a stock exchange:

Stock exchange means any body or individuals whether incorporated or not, constituted for

the purpose of assisting, regulating or controlling the business of buying, selling or dealing in

securities. The securities include:

Shares of public company.


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Government securities.

Bonds

HISTORY OF STOCK EXCHANGES:

The only stock exchanges operating in the 19th century were those of Mumbai setup in 1875

and Ahmedabad set up in 1894. These were organized as voluntary non-profit-marking

associations of brokers to regulate and protect their interests. Before the control on securities

under the constitution in 1950, it was a state subject and the Bombay securities contracts

(control) act of 1925 used to regulate trading in securities. Under this act, the Mumbai stock

exchange was recognized in 1927 and Ahmedabad in 1937. During the war boom, a number

of stock exchanges were organized. Soon after it became a central subject, central legislation

was proposed and a committee headed by A.D.Gorwala went into the bill for securities

regulation. On the basis of the committees recommendations and public discussion, the

securities contract (regulation) act became law in 1956.

FUNCTIONS OF STOCK EXCHANGES:

Stock exchanges provide liquidity to the listed companies. By giving quotations to the listed

companies, they help trading and raise funds from the market. Over the hundred and twenty

years during which the stock exchanges have existed in this country and through their

medium, the central and state government have raised crores of rupees

by floating public loans. Municipal corporations, trust and local bodies have obtained from

the public their financial requirements, and industry, trade and commerce- the backbone of

the countrys economy-have secured capital of crores or rupees through the issue of stocks,

shares and debentures for financing their day-to-day activities, organizing new ventures and

completing projects of expansion, diversification and modernization. By obtaining the listing

and trading facilities, public investment is increased and companies were able to raise more


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funds. The quoted companies with wide public interest have enjoyed some benefits and

assets valuation has become easier for tax and other purposes.

VARIOUS STOCK EXCHANGES IN INDIA:

At present there are 23 stock exchanges recognized under the securities contracts

(regulation), Act, 1956. Those are:

Ahmedabad Stock Exchange Association Ltd.

Bangalore Stock Exchange

Bhubaneshwar Stock Exchange Association

Calcutta Stock Exchange

Cochin Stock Exchange Ltd.

Coimbatore Stock Exchange

Delhi Stock Exchange Association

Guwahati Stock Exchange Ltd

Hyderabad Stock Exchange Ltd.

Jaipur Stock Exchange Ltd


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Kanara Stock Exchange Ltd

Ludhiana Stock Exchange Association Ltd

Madras Stock Exchange

Madhya Pradesh Stock Exchange Ltd.

Magadh Stock Exchange Limited

Meerut Stock Exchange Ltd.

Mumbai Stock Exchange

National Stock Exchange of India

OTC Exchange of India

Pune Stock Exchange Ltd.

Saurashtra Kutch Stock Exchange Ltd.

Uttar Pradesh Stock Exchange Association

Vadodara Stock Exchange Ltd.

Out of these major stock exchanges were:


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1. NSE (National Stock Exchange)

2. BSE (Bombay Stock Exchange)

NSE (National Stock Exchange):

The National Stock Exchange of India Limited has genesis in the report of the High Powered

Study Group on Establishment of New Stock Exchanges, which recommended promotion of

a National Stock Exchange by financial institutions (FIs) to provide access to investors from

all across the country on an equal footing. Based on the recommendations, NSE was

promoted by leading Financial Institutions at the behest of the Government of India and was

incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the

country. On its recognition as a stock exchange under the Securities Contracts (Regulation)

Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM)

segment in June 1994. The Capital Market (Equities) segment commenced operations in

November 1994 and operations in Derivatives segment commenced in June 2000

NSE's mission is setting the agenda for change in the securities markets in India. The NSE

was set-up with the main objectives of:

Establishing a nation-wide trading facility for equities and debt instruments.

Ensuring equal access to investors all over the country through an appropriate

communication network.

Providing a fair, efficient and transparent securities market to investors using electronictrading systems.

Enabling shorter settlement cycles and book entry settlements systems, and

Meeting the current international standards of securities markets.


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The standards set by NSE in terms of market practices and technology, have become industry

benchmarks and are being emulated by other market participants. NSE is more than a mere

market facilitator. It's that force which is guiding the industry towards new horizons and

greater opportunities.

BSE (Bombay Stock Exchange):

The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The

Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the

Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making

Association of Persons (AOP) and is currently engaged in the process of converting itself

into demutualised and corporate entity. It has evolved over the years into its present status as

the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to

have obtained permanent recognition in 1956 from the Govt. of India under the Securities

Contracts (Regulation) Act 1956.The Exchange, while providing an efficient and transparent

market for trading in securities, debt and derivatives upholds the interests of the investors and

ensures redresses of their grievances whether against the companies or its own member-

brokers. It also strives to educate and enlighten the investors by conducting investor

education programmers and making available to them necessary informative inputs.

A Governing Board having 20 directors is the apex body, which decides the policies and

regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors,

who are from the broking community (one third of them retire ever year by rotation), three

SEBI nominees, six public representatives and an Executive Director & Chief Executive

Officer and a Chief Operating Officer.


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The Executive Director as the Chief Executive Officer is responsible for the day-to-day

administration of the Exchange and the Chief Operating Officer and other Heads of

Department assist him.

The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to

constitution of the Executive Committee of the Exchange. Accordingly, an Executive

Committee, consisting of three elected directors, three SEBI nominees or public

representatives, Executive Director & CEO and Chief Operating Officer has been

constituted. The Committee considers judicial & quasi matters in which the Governing Board

has powers as an Appellate Authority, matters regarding annulment of transactions,

admission, continuance and suspension of member-brokers, declaration of a member-brokeras defaulter, norms, procedures and other matters relating to arbitration, fees, deposits,

margins and other monies payable by the member-brokers to the Exchange, etc.

REGULATORY FRAME WORK OF STOCK EXCHANGE

A comprehensive legal framework was provided by the Securities Contract Regulation Act,

1956 and Securities Exchange Board of India 1952. Three tier regulatory structure

comprising

Ministry of finance

The Securities And Exchange Board of India

Governing body

MEMBERS OF THE STOCK EXCHANGE:

The securities contract regulation act 1956 has provided uniform regulation for the admissionof members in the stock exchanges. The qualifications for becoming a member of a

recognized stock exchange are given below:

The minimum age prescribed for the members is 21 years.

He should be an Indian citizen.


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He should be neither a bankrupt nor compound with the creditors.

He should not be convicted for fraud or dishonesty.

He should not be engaged in any other business connected with a company.

He should not be a defaulter of any other stock exchange.

The minimum required education is a pass in 12th standard examination.

SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)

The securities and exchange board of India was constituted in 1988 under a resolution of

government of India. It was later made statutory body by the SEBI act 1992.according to this

act, the SEBI shall constitute of a chairman and four other members appointed by the central

government.

With the coming into effect of the securities and exchange board of India act, 1992 some of

the powers and functions exercised by the central government, in respect of the regulation of

stock exchange were transferred to the SEBI.

OBJECTIVES AND FUNCTIONS OF SEBI

To protect the interest of investors in securities.

Regulating the business in stock exchanges and any other securities market.

Registering and regulating the working of intermediaries associated with securities

market as well as working of mutual funds.

Promoting and regulating self-regulatory organizations.

Prohibiting insider trading in securities.

Regulating substantial acquisition of shares and take over of companies.

Performing such functions and exercising such powers under the provisions of capital

issues (control) act, 1947and the securities to it by the central government.

SEBI GUIDELINES TO SECONDARY MARKETS: STOCK EXCHANGES


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Board of Directors of Stock Exchange has to be reconstituted so as to include non-

members, public representatives and government representatives to the extent of 50% of

total number of members.

Capital adequacy norms have been laid down for the members of various stock

exchanges depending upon their turnover of trade and other factors.

All recognized stock exchanges will have to inform about transactions within 24 hrs.

TYPES OF ORDERS:

Buy and sell orders placed with members of the stock exchange by the investors. The orders

are of different types.

LIMIT ORDERS:

Orders are limited by a fixed price. E.g. buy Reliance Petroleum at Rs.50.Here, the

order has clearly indicated the price at which it has to be bought and the investor is not

willing to give more than Rs.50.

Best rate order: Here, the buyer or seller gives the freedom to the broker to execute the order

at the best possible rate quoted on the particular date for buying. It may be lowest rate forbuying and highest rate for selling.

Discretionary order: The investor gives the range of price for purchase and sale. The broker

can use his discretion to buy within the specified limit. Generally the approximation price is

fixed. The order stands as this buy BRC 100 shares around Rs.40.

STOP LOSS ORDER:


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The orders are given to limit the loss due to unfavorable price movement in the market. A

particular limit is given for waiting. If the price falls below the limit, the broker is authorized

to sell the shares to prevent further loss. E.g. Sell BRC limited at Rs.24, stop loss at Rs.22.

Buying and selling shares: To buy and sell the shares the investor has to locate register

broker or sub broker who render prompt and efficient service to him. The order to buy or sell

specifying the number of shares of the company of investors choice is placed with the

broker. The order may be of any type. After receiving the order the broker tries to execute the

order in his computer terminal. Once matching order is found, the order is executed. The

broker then delivers the contract note to the investor. It gives the details regarding the name

of the company, number of shares bought, price, brokerage, and the date of delivery of share.

In this physical trading form, once the broker gets the share certificate through the clearing

houses he delivers the share certificate along with transfer deed to the investor. The investor

has to fill the transfer deed and stamp it. The stamp duty is one of the percentage

considerations, the investor should lodge the share certificate and transfer deed to the register

or transfer agent of the company. If it is bought in the DEMAT form, the broker has to give a

matching instruction to his depository participant to transfer shares bought to the investors

account. The investor should be account holder in any of the depository participant. In the

case of sale of shares on receiving payment from the purchasing broker, the broker effects thepayment to the investor.

Share groups: The scrips traded on the BSE have been classified into

A,B1,B2,C,F and Z groups. The A group represents those, which are in the carry

forward system. The F group represents the debt market segment (fixed income securities).

The Z group scrips are of the blacklisted companies. The C group covers the odd lot

securities in A, B1&B2 groups.


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ROLLING SETTLEMENT SYSTEM:

Under rolling settlement system, the settlement takes place in days (usually 1, 2, 3 or

5days) after the trading day. The shares bought and sold are paid in for n days after the

trading day of the particular transaction. Share settlement is likely to be completed much

sooner after the transaction than under the fixed settlement system.

The rolling settlement system is noted by T+N i.e. the settlement period is n days after

the trading day. A rolling period which offers a large number of days negates the advantages

of the system. Generally longer settlement periods are shortened gradually.

SEBI made RS compulsory for trading in 10 securities selected on the basis of the criteria

that they were in compulsory demat list and had daily turnover of about Rs.1 crore or more.

Then it was extended to A stocks in Modified Carry Forward Scheme, Automated Lending

and Borrowing Mechanism (ALBM) and Borrowing and lending Securities Scheme (BELSS)

with effect from Dec 31, 2001.

SEBI has introduced T+5 rolling settlement in equity market from July 2001 and

subsequently shortened the cycle to T+3 from April 2002. After the T+3 rolling settlementexperience it was further reduced to T+2 to reduce the risk in the market and to protect the

interest of the investors from 1st April 2003.

Activities on T+1: conformation of the institutional trades by the custodian is sent to the

stock exchange by 11.00 am. A provision of an exception window would be available for late

confirmation. The time limit and the additional changes for the exception window are

dedicated by the exchange.


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The exchanges/clearing house/ clearing corporation would process and download the

obligation files to the brokers terminals late by 1.30 p.m on T+1. Depository participants

accept the instructions for pay in securities by investors in physical form upto 4 p.m and in

electronic form upto 6 p.m. the depositories accept from other DPs till 8p.m for same day

processing.

Activities on T+2: The depository permits the download of the paying in files of

securities and funds till 10.30 a.m on T+2 from the brokers pool accounts. The depository

processes the pay in requests and transfers the consolidated pay in files to clearing

House/clearing Corporation by 11.00am/on T+2. The exchange/clearing house/clearing

corporation executes the pay-out of securities and funds latest by 1.30 p.m on T+2 to the

depositories and clearing banks. In the demat mode net basis settlement is allowed. The buy

and sale positions in the same scrip can be settled and net quantity has to be settled.


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COMPANY PROFILE

ABOUT SHAREKHAN LIMITED


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Sharekhan Limited is one of the fastest growing financial services providers with a focus

on equities, derivatives and commodities brokerage execution on the National Stock Exchange of

India Ltd. (NSE), Bombay Stock Exchange Ltd. (BSE), National Commodity and Derivatives

Exchange India (NCDEX) and Multi Commodity Exchange of India Ltd. (MCX). Sharekhan

provides trade execution services through multiple channels - an Internet platform, telephone and

retail outlets and is present in 280 cities through a network of 704 locations. The company was

awarded the 2005 Most Preferred Stock Broking Brand by Awwaz Consumer Vote.

ORIGIN

Sharekhan traces its lineage to SSKI, an organization with more than decades of trust and

credibility in the stock market.

Pioneers of online trading in India- Sharekhan.com was launched in 2000 and is now the

second most visited broking site in India.

Has one of the largest networks of Share shops in the country.

SHAREHOLDING PATTERN

SHAREHOLDERS HOLDINGS

CITI Venture Capital and other Private Equity Firm 81%IDFC 9%Employees 10%

MANAGRMENT TEAM CONSISTS OF-

NAME POST

Tarun Shah Chief Executive Officer Mr. Pathik Gandotra Head Of ResearchMr. Rishi Kohli Vice President Of Equity DerivativeJaideep Arora Director- Products And Technology


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Shankar Vailaya Director- Operation

Sharekhan Limited offers blend of tradition and technology like Share shops, dial-n-trade and

online trading- where there is choice of three trading interfaces which are speed trade exe for

active trader, web based classic interface for investor, web based applet- fast trade for investor.

Sharekhan Limited was formerly known as SSKI Investor Services Private Limited. The

company is based in Mumbai, India and its address is- A-206 Phoenix House, 2nd Floor

Senapati Bapat Marg, Lower Parel

Mumbai, 400 013. India

Phone: 91 22 24982000

Fax: 91 22 24982626

www.sharekhan.com

Advanced Technology Used By Sharekhan

Sharekhan selected Aspect EnsemblePro from the Aspect Software Unified IP Contact

Center product line, a unified contact centre solution delivering advanced

multichannel contact capabilities, because it provided the best total value over other solutions

evaluated. It enabled Sharekhan to meet customer service needs for inbound call handling, voice

self service, predictive outbound dialing, call blending, call monitoring and recording, and

creating outbound marketing campaigns, among other capabilities. This helps them to

Increased agent efficiency and productivity.
http://www.sharekhan.com/http://www.sharekhan.com/


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Enabled company to execute proactive customer service calls and expand services

offered to customers.

Enhanced call monitoring for improved service quality

Financial services are a highly competitive and volume-driven industry which demands highstandards of customer service, effective consultation and quick deliverables. This is something

Sharekhan Limited, a financial services provider based in India, understands. The company

offers several user-friendly services for customers to manage their stock portfolios, including

online capabilities linked to an information database to help customers confidently invest, and

inbound customer services using voice self-service technology and customer service agents

handling telephone orders from clients.

With a customer base of more than 500000, and a employee of 3100 Sharekhan continues to

grow at a fast pace. Customer satisfaction is a top priority in Sharekhans agenda.

Its primary objective

Is to help and support its customers in managing their portfolio in the best possible

manner through quality advice, innovative product and superior service.

Scheme which are provided by Sharekhan cover almost every segment of the customer-

SCHEME INVESTOR

First Step New Comer Classic Trade OccasionallySpeed Trade Day Trader Platinum Circle High Net Worth Individuals


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Contents

Foreword....................................................................................................... i

Introduction...................................................................................................1

Development of Micro-insurance in India........................................3


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Supply and Demand Side Developments ........................................5

3.1 Supply of micro-insurance ..................................................................53.2 Demand for micro-insurance...............................................................6

On Extending Micro-insurance .......................................................10

4.1 Flexibility in Premium........ ................................................................114.2 Micro-insurance and micro-finance ...................................................16

Conclusions.......................................................................................20

Introduction

Insurance

Insurance is an essential part of running any business. If you are operating a small business you

need more than just property insurance. Taking out the right insurance will help protect yourbusiness and minimize its exposure to risk.

Your insurance requirements will vary according to the type of business you are operating, butyou should be aware that some forms of insurance are compulsory, such as workerscompensation and third party car insurance.


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When youre in business you deal with a variety of potential risks each day. Risk is notsomething you can avoid, but it is something you can manage. Risk management will increasethe probability of success and reduce the probability of failure of your business.

Types of insurance

Assets & revenue insurance

People insurance

Liability insurance

Assets & revenue insurance

To protect your assets and revenue-generating capacity, here are some of the types of insuranceavailable:

Building and contents

Covers the building, contents and stock of your business against fire and other perils such asearthquake, lightning, storms, impact, malicious damage and explosion.

Burglary

Insures your business assets against burglary, and is most important for retailers or a businesswhich maintains unattended premises.

Business interruption or loss of profits

Covers you if your business is interrupted through damage to property by fire or other insuredperils. Ensures your ongoing expenses are met and anticipated net profit is maintained through aprovision of cash flow.

Fidelity guarantees

Covers losses resulting from misappropriation by employees who embezzle or steal.

Machinery breakdown

Protects your business when mechanical and electrical plant and machinery at the work sitebreak down.


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Motor vehicle

It is compulsory to insure all company or business vehicles for third party injury liability. Manydifferent types of policies are available, so make sure you understand the options before making

a decision. There are four basic options:

1. Compulsory third party (injury) covers you for claims made against you forpersonal injuries and legal costs arising from the use of your car. You must obtain thisinsurance to register your car.

2. Third party property damage - covers your liability for damage to another personor to the property of others and your legal costs. It doesnt include repairs to your own carif you caused an accident.

3. Third party, fire and theft - covers you against the events covered above, as wellas fire and theft. It also insures against damage caused if your car was stolen.

4. Comprehensive- covers you for all of the above plus damage caused to your own carby you in an accident. If you're buying a car on an installment basis, financiers willusually insist on this cover.

People insurance

It includes:

Superannuation

Workers compensation requirements

Insurance cover for you and your employees:

Workers Compensation

You must provide accident and sickness insurance for your employees - workers compensation -

through an approved insurer. Workers compensation is covered by separate state and territorylegislation.

Personal accident and illness


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If you are self employed you wont be covered by workers compensation, so you need to coveryourself for accident and sickness insurance through a private insurer. There are several types oflife insurance. Some are investment-type funds where you contribute over a certain time and getback your investment plus interest earnings at the maturity date. Others are designed to coverrisk - things that could happen to you.

Income protection or disability insurance- covers part of your normal incomeif you are prevented from working through sickness or accident.

Trauma insurance -provides a lump sum when you are diagnosed with one ofseveral specified life threatening illnesses.

Term life insurance or whole of life cover -provides your dependents with alump sum if you die.

Total and permanent disability insurance -provides a lump sum only if you aretotally and permanently disabled before retirement.

SuperannuationIf you are running a business or employing people, you are likely to have superannuationobligations to your employees. If you are self-employed you also need to provide for yourretirement - superannuation is generally used to provide for a retirement plan.

Liability insurance

Types of liability insurance you need to consider:

Public Liability

Public liability insurance protects you and your business against the financial risk of being foundliable to a third party for death or injury, loss or damage of property or pure economic lossresulting from your negligence.

Professional Indemnity

Professional indemnity insurance protects you from legal action taken for losses incurred as aresult of your advice. It provides indemnity cover if your client suffers a loss - either material,financial or physical - directly attributed to negligent acts.

Product Liability

If you sell, supply or deliver goods, even in the form of repair or service, you may need coveragainst claims of goods causing injury or damage. Product liability insurance covers damage or


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injury caused to another business or person by the failure of your product or the product you areselling.

What is Micro Insurance?

On a daily basis, the poor around the world face a multitude of risks that threaten to derail anyprogress they have made to work their way out of poverty. The death of a family member, loss ofproperty 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 forregular monetary payments (premiums) proportionate to the likelihood and cost of the riskinvolved seeks to provide a suitable solution for managing these risks.

The Global Landscape

It is estimated that only eighty million out of the world's 2.5 billion poor are now covered bysome form of micro insurance. Most remain without access to this critical financial service. InIndia and China, where organizations are estimated to serve nearly 30 million micro insuranceclients each, the percentage of poor lives insured hovers below 3%. In Africa this figure is muchlower just 0.3% of the continents poor are insured. According to recent data, in 23 of thepoorest 100 countries in the world, there is currently no identified micro insurance activity,representing an unserved population of 370 million.

History and Vision

The Micro Insurance Agency has its roots within Opportunity International, a large microfinancenetwork motivated by Jesus Christs call to serve the poor. With a network of 47 microfinanceinstitutions, Opportunity International has been serving the entrepreneurial poor since 1971. In partnership with Opportunitys microfinance institutions, we began working in 2002 on thedevelopment of a range of life, property, livestock, crop derivative, disability, unemploymentand health insurance products to cover the risks faced by Opportunitys loan clients.Micro Insurance Agency staff observed that the risks the poor face can often set them backmonths and years behind where their loans and savings products offered by Opportunity hadtaken 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 ofa breadwinner, resulting in increased economic hardship for the family. In response, MicroInsurance Agency staff developed an affordable funeral benefit product that did not exclude anypre-conditions, including HIV/AIDS. This transformed the mindset of retail insurance providersin the country, who later developed similar non-exclusive products in light of the competingenvironment.


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Through the experience of serving Opportunitys microfinance institutions and their clients,Micro Insurance Agency staff observed that the products most demanded by the poor are notalways the ones available. Health insurance, for example, is a critical need of the poor but themost limited in terms of supply. In addition, policies that are available are often based on firstworld 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 lumpsum preclude a huge sector of the market from access. New distribution models and channelswere needed to increase access and reduce the effective price charged to clients.In 2005, the Micro Insurance Agency was founded by Opportunity International as a fully-ownedsubsidiary capable of offering insurance products and services to a wide range of customers.Our mission is to empower the materially poor to transform their lives by insuring them againstfinancial risk and its consequences. Specifically, we seek to serve the economically active poorwho live on $4 per day or less in developing countries and provide a safety net to reduceeconomic setbacks.

Definitions of micro-insurance

Micro-insurance, the term used to refer to insurance to the low-income people, is different frominsurance in general as it is a low value product (involving modest premium and benefitpackage) which requires different design and distribution strategies such as premium based oncommunity risk rating (as opposed to individual risk rating), active involvement of anintermediate agency representing the target community and so forth. Insurance is fast emergingas an important strategy even for the low-income people engaged in wide variety of incomegeneration activities, and who remain exposed to variety of risks mainly because of absence ofcost-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 oftheir economic circumstance. In the context of health contingency, for example, a World Bankstudy (Peters et al. 2002), reports that about one-fourth of hospitalized Indians fall below thepoverty line as a result of their stay in hospitals. The same study reports that more than 40percent 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 consideredintegral to any poverty reduction strategy (Holzmann and Jorgensen 2000, Siegel et al. 2001).

Of the different risk management strategies2, insurance that spreads the loss of the (few) affectedmembers 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 tomitigate risk on account of imperfect labour and credit markets.

In the past insurance as a prepaid risk managing instrument was never considered as an optionfor the poor. The poor were considered too poor to be able to afford insurance premiums. Oftenthey were considered uninsurable, given the wide variety of risks they face. However, recent


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developments in India, as elsewhere, have shown that not only can the poor make small periodiccontributions 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 asthese risks are mostly independent ,idiosyncratic. Moreover, there are cost-effective ways ofextending insurance to them. Thus, insurance is fast emerging as a prepaid financing option for

the risks facing the poor.

In this paper, we analyze the early evidence on micro-insurance already available in this regard,highlight the current initiatives being contemplated to strengthen micro-insurance activity in theIndia, and suggest specific ways that can help promote insurance to the target segment.

Development of Micro-insurance in India

Historically in India, a few micro-insurance schemes were initiated, either by non-governmentalorganizations (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 tothe development of micro-finance activity, and partly due to the regulation that makes itmandatory 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-financeinstitutions (MFIs) and NGOs are negotiating with the for-profit insurers for the purchase ofcustomized group or standardized individual insurance schemes for the low-income people.Although the reach of such schemes is still very limited anywhere between 5 and 10 millionindividuals---their potential is viewed to be considerable. The overall market is estimated toreach 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 agriculturalpursuits. 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


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certain minimum percentage of total polices written by life insurance companies and for generalinsurance companies, these obligations are in terms of percentage of total gross premiumcollected. Some aspects of these obligations are particularly noteworthy. First, the social andrural obligations do not necessarily require (cross) subsidizing insurance. Second, theseobligations 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 servicingthe rural and low-income segment. Finally, non-fulfillment of these obligations can invitepenalties from the regulator.In order to fulfill these requirements all insurance companies have designed products for thepoorer sections and low-income individuals. Both public and private insurance companies areadopting similar strategies of developing collaborations with the various civil societiesassociations. The presence of these associations as a mediating agency, or what we call a nodalagency, that represents, and acts on behalf of the target community is essential in extendinginsurance cover to the poor. The nodal agency helps the formal insurance providers overcomeboth 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 localinformation and resources that helps in designing appropriate schemes delivered in a costeffective way). In the absence of a nodal agency, the low resource base of the poor, coupled withhigh transaction costs (relative to the magnitude of transactions) gives rise to the affordabilityissue. 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 thelow-income people play an important role both in generating both the demand for insurance aswell as the supply of cost-effective insurance.

AN OVERVIEW OF THE MARKET

B Wealthy A

Middle Income

D C

Poor

E


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Severely Poor

The market for micro insurance is represented by this pyramid diagram. Formal sector insurance

companies generally focus on the area identified as A. In this realm the customers arecorporations and wealthy individuals, and the products are voluntary products such as lifeinsurance, and obligatory products required either by law (such as motor third party liability) orby banks (such as property loss and credit life). Also offered are products covering employeesand civil liability. Most of the non-auto related commercial products are being sold within thearea marked B. The aggregate market for microfinance providers is generally in the areaidentified as C. Some MFPs require borrowers to obtain insurance for property, or credit-lifeinsurance as a means of protecting the institutions interests. Area D indicates the broad rangeof products offered by the social security and public health insurance systems of developingcountry governments. They include coverage for pensions, disability benefits, primary healthcare, and medications. The weakness of this sector is indicated by the dashed line that suggests

incomplete coverage. The potential market for microinsurance is indicated as E. This extendsabove the MFP range in providing access to individuals and others that cannot obtain appropriateproducts from the commercial sector. The microinsurance range also extends below the MFPrange because it addresses agricultural coverage in some cases, and is now being sold throughmany delivery channels other than MFPs. Just a few of these delivery channels include:

Low-income focused retailers in South Africa

Post offices in Indonesia

On bags of agricultural inputs or through computer kiosks in India.

Micro-insurance delivery models

One of the greatest challenges for micro-insurance is the actual delivery to clients. Methods andmodels for doing so vary depending on the organization, institution, and provider involved. Ingeneral, there are four main methods for offering micro-insurance the partner-agent model, theprovider-driven model, the full-service model, and the community-based model. Each of thesemodels has their own advantages and disadvantages.

Partner agent model: A partnership is formed between the micro-insurance scheme

and an agent (insurance company, microfinance institution, donor, etc.), and in somecases a third-party healthcare provider. The micro-insurance scheme is responsible for thedelivery and marketing of products to the clients, while the agent retains all responsibilityfor design and development. In this model, micro-insurance schemes benefit from limitedrisk, but are also disadvantaged in their limited control.


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Full service model: The micro-insurance scheme is in charge of everything; both thedesign and delivery of products to the clients, working with external healthcare providersto provide the services. This model has the advantage of offering micro-insuranceschemes full control, yet the disadvantage of higher risks.

Provider-driven model: The healthcare provider is the micro-insurance scheme, andsimilar to the full-service model, is responsible for all operations, delivery, design, andservice. There is an advantage once more in the amount of control retained, yetdisadvantage in the limitations on products and services.

Community-based/mutual model: The policyholders or clients are in charge,managing and owning the operations, and working with external healthcare providers tooffer services. This model is advantageous for its ability to design and market productsmore easily and effectively, yet is disadvantaged by its small size and scope ofoperations.

NEW MODELS FOR POOR COMMUNITIES

Much interest over the last few decades has focused on helping communities to establish mutualor community-based insurance schemes. Professionals typically manage mutual insurancecompanies. Community-based schemes, promoted by ILO STEP and CIDR among others, tendto be run by well meaning local people who give freely of their time, but are not insuranceprofessionals. Often people who were simply in need of insurance end up being insurancemanagers with these schemes. One member of the management committee of a community-

based scheme in Tanzania noted that he wants insurance, but doesnt want to be an insurer. Incommunity-based schemes, the limited management capacity frequently leads to a range ofdifficulties. The key issues of concern for community-based schemes include:

Pricing Often the process of pricing is focused on what people say they can pay ratherthan being linked to the cost structure of benefits that the group wants to receive.

Insurance is subject to cash flow fluctuations and thus requires significant reserves. Theseschemes frequently have insufficient reserves or no reserves at all. Also, commercialreinsurance is rarely available to unregulated insurance schemes thus leaving them with

no ability to manage cash flow deficits.

Controls on management are weak and temptation is strong. Fraud by management isfrequently a problem.

These schemes are limited in size to those people within the defined local area. Thisreduces their ability to diversify a rather small risk pool, and enhances the potential for


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adverse selection, both of which make sustainability a serious challenge for localmanagement.

Finally, in many countries there is no legal framework for these schemes. Indeedregulators are often unwilling to allow such schemes for fear that they will not be able to

adequately supervise many small schemes run by non-professionals. This is the case inIndia. Service providers, most typically hospitals and other healthcare providers haveoffered pre-financing mechanisms that act somewhat like insurance. These products, it isargued, will attract more people to the facility and the people who come will be able topay for the services. Often this becomes a problem because providers have limited abilityto manage the insurance administration issues. One overseer of a particular group ofhospitals noted that attempting to offer microinsurance could present a dual threat to thehospital network for which he works. He noted that the hospital administrators do noteven know how to price their own healthcare services. Therefore, they mis-price theirpremiums based on those prices, which are typically too low. The resulting increase inpatients using the insurance leads to even higher losses, due to higher administrative costs

and incorrect fees that do not cover the actual costs of services. Governments alsoprovide a form of microinsurance through the programs they provide for low-incomeCitizens. Unfortunately, in many countries these programs are simply insufficient toaddress the financial risks of the low- income and destitute populations. Certainly there isa population that will not be covered by commercial or other non-governmentmicroinsurance. However, if a proper balance could be found, it is possible that thecombination of government programs, commercial microinsurance, mutual insurance,and traditional commercial insurance could make each of these more efficient, and makethe government interventions more effective in addressing those that truly require suchservices.

Need for Developing Micro-Insurance in India IRDA perspective

Background

Micro-insurance refers to protection of assets and lives against insurable risks of targetpopulations such as micro-entrepreneurs, small farmers and the landless, women andlow-income people through formal, semiformal and informal institutions. Such products


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are often bundled with micro-savings and micro-credit, thereby allocating scarceresources to micro-investments with the highest marginal rates of return. Microinsuranceis the most underdeveloped part of microfinance. Yet various schemes exist that areviable, benefiting both the institutions and their clients. Such schemes have generallyserved two major purposes: (i) they have contributed to loan security; and (ii) they have

served as instruments of resource mobilization. The greatest challenge for microinsurancelies in the combination of viability and sustainability with outreach.

Although introduction of sound practices such as appropriate policy sizes and timelypayment of installments of premium or positive incentives to renew on time in order toavoid policy getting lapsed can be feasible, the ultimate effectiveness of interventionsfocusing on institutional transformation and sound insurance practices will varyconsiderably, depending on the appropriateness of the regulatory environment.

Development Goal

To enable microinsurance to be an integral part of a country's wider insurance system, it isimportant 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 torecognize a wide network of intermediaries in the rural and social sectors and notify regulationsin 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 ofthem have already become corporate agents or have entered into referral

arrangements with insurers. However, semiformal institutions including savings and creditcooperatives, 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 truepotential can be harnessed to increase the insurance penetration levels. This is due to restrictionsin the existing agency regulations in terms of minimum eligibility norms in order to become anagent.Depending on the existence and vigour of such institutions, the following alternatives haveemerged, for offering strategic entry points for microinsurance development:

Adapting formal insurance arrangements to the needs of the micro-economy.

Upgrading non-formal (comprising semiformal and informal) insurance arrangementswith insurance companies.

Linking formal and non formal insurance institutions with banks and self-help groups.

Establishing new local institutions providing microinsurance services.

The first three strategies may be inter-connected:


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adapting insurance companies to the requirements of the micro-economy 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 onlyviable 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 socialmandate with profit-making, has a chance of sustainability.

Institutional Adaptation

The experience so far has been that formal financial institutions serve but a fraction of thepopulation, which typically lies within the upper quartile of the social hierarchy. Throughadaptation to the microfinance market requirements, they may gradually expand into the second-

highest quartile and into segments of the lower quartiles. Within the foreseeable future they willnormally not be able to fully serve that market. Non formal finance mostly rests on local institutions which are directly accessible to allsegments of the population. Self-Help Groups (SHGs) are member-owned and member-controlled local institutions. They may either be financial groups, with financial intermediationas their primary purpose; or non financial groups, with financial intermediation as a secondarypurpose, such as vendors' associations, family planning groups and numerous other types ofvoluntary associations.

The functions that need to be focused must include: providing guidance to members, collecting premium installments from members, insurance services to members, communication and

exchange of experience, providing linkages with banks, NGOs or donors, supporting theproposals of individual members to insurance companies through recommendations.

Linkage to Insurers

On a modest scale, various forms of life and health insurance have been successfully practicedby different institutions in different countries, particularly as part of loan protection schemes.Micro-insurance procedures and services should be set by insurers rather than the regulator.Appropriate procedures and services should be applied to attain:

(1) Sound financial management,

(2) Convenient and safe savings premium collection and deposit facilities,

(3) Appropriate claim appraisal and processing procedures,


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(4) Adequate risk management,

(5) Timely collection of premium installments,

(6) Monitoring and

(7) Effective information gathering, all of which may include cooperation between differentformal and non-formal intermediaries in fields where each is most effective.

Proposed Micro-insurance Regulations

In order to introduce the concept micro-insurance it is necessary to draft suitable bring in suitableregulations to enable insurers to design and distribute and service micro-insurance products anddischarge their obligations to the rural and social sectors as per provisions of the Insurance Act,

1938.

1. It is proposed that an insurer transacting life insurance business shall be permitted to provide life micro-insurance products as well as general micro-insurance productsprovided it ties up with an insurer transacting general insurance business for the generalmicro-insurance products, and vice versa.

2. In addition to an insurance agent or corporate agent or insurance broker who areauthorized to solicit and procure insurance business, including micro-insurance businesswith an insurer in accordance with the provisions of the Insurance Act, 1938 and theregulations made there under it is also proposed to introduce the concepts of micro-

insurance product and micro-insurance agent .

Micro-insurance Product1. A life micro-insurance product means any term insurance contract with or

without return of premium, any endowment insurance contract or health insurancecontract, with or without an accident benefit rider, either on individual or groupbasis, as per terms stated in the Table A below, filed with the Authority:

Table A:

Type of Cover

MinimumAmount ofCover

MaximumAmountof Cover

Term ofCoverMin.

Term ofCoverMax.

Minimum Ageat entry

Maximum age atentry

TermInsurancewith or withoutreturn ofpremium

Rs. 10,000 Rs. 50,000 5 year 7 years 18 60


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EndowmentInsurance

Rs. 10,000 Rs. 50,000 5 year 7 years 18 60

HealthInsuranceContract

Rs. 10,000 Rs. 15,000 1 year 7 year 18 60

AccidentBenefit asrider

Rs. 10,000 Rs. 50,000 1 year 5 years 18 60

NOTE: The present average sum insured is around Rs. 5,000. This is highlyinadequate to provide any tangible relief even to an individual below thepoverty line. Therefore, it is suggested that the minimum amount of cover of Rs.10,000 appear more realistic.

2. A general micro-insurance product means any health insurance contract, any

contract covering the belongings such as hut, livestock, any personal accidentcontract, or tools or instruments, either on individual or group basis, as per termsstated in the Table B below, filed with the Authority:

Table B:

Type of Cover

MinimumAmountof Cover

MaximumAmount ofCover

Term of CoverMin.

Term of CoverMax.

MinimumAge at entry

Maximum age atentry

Hut orlivestockor Toolsor

implements or otherassetsagainst allperils

Rs. 10,000 Rs. 20,000 1 year 1 year 18 70

HealthInsuranceContract

Rs. 10,000 Rs. 15,000 1 year 1 year 18 60

PersonalAccident

Rs. 10,000 Rs. 50,000 1 year 1 year 18 60

Micro-insurance Agent

A micro-insurance agent shall be a Non Government Organization (NGO) or a SelfHelp Group (SHG).

Explanation: For the purposes of this regulation:


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A Non Government Organization (NGO) shall be a registered non-profit organizationunder the Societys Act, 1968 with a proven track record of working with marginalizedgroups with clearly stated aims and objectives, transparency, and accountability outlinedin its memorandum, rules and regulations and demonstrates involvement of committedpeople.

Self Help Group (SHG) may be an informal group or registered under Societies Act,State Co-operative Act or as a partnership firm, consisting of 10 to 20 with a proven trackrecord of working with marginalized groups with clearly stated aims and objectives,transparency, and accountability outlined in its memorandum, rules and regulations anddemonstrates involvement of committed people.

The minimum number of members comprising a group should be atleast ten for insuranceof individuals, and atleast fifty for group insurance.

Scope and Functions

A micro-insurance agent shall be appointed by an insurer by a deed of agreement ormemorandum of understanding which should clearly specify the terms and conditions, duties andresponsibilities of both the micro-insurance agent and the insurer, and he shall abide by thefollowing:-

He shall work either for one life insurer or for one general insurer or for one life insurerand one general insurer;

He shall be specifically authorized to perform one or more of the following functions:--

a) Maintaining a register of all members and their dependants covered under the insurancescheme alongwith details of name, age, address, nominees and thumb impression/signature;

b) Collection of proposal forms;

c) Collection of self declaration from the member that he is in good health;

d) Collection of monies for issuance of contract or remittance of premium;

e) distribution of policy documents;

f) Assistance in the settlement of claims;

g) Nomination; and

h) Any policy administration service.


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i) The micro-insurance agent or the insurance company shall have the option to terminatethe agreement/ MOU after giving a notice of three months.

j) All such agreements/ MOU must have the prior approval of the Head office of theinsurance company.

Initiative Taken By Private Sectors

Tata AIG Life - First insurance company to launch Micro Insurance

First major Micro Insurance initiatives venture by an Indian insurance company

Launches three new Micro Insurance products and five Micro Insurance branches

Adopts a tailor made rural communication strategy to reach out to the rural community

American International Group, Inc. (AIG)

American International Group, Inc. (AIG), world leaders in insurance and financial services, is

the leading international insurance organization with operations in more than 130 countries andjurisdictions. AIG companies serve commercial, institutional and individual customers throughthe most extensive worldwide property-casualty and life insurance networks of any insurer. Inaddition, AIG companies are leading providers of retirement services, financial services andasset management around the world. AIG's common stock is listed in the U.S. on the New YorkStock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.


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Micro Insurance is the process of delivering and servicing relevant and affordable life insuranceproducts to the low-income socio economic strata. The focus of Tata AIG Lifes Micro insurance program is rural India, where traditionally the far-flung, lower and lower middle-income

segments have had limited access to life insurance services.

Cost of plans:

Tata AIG Life Micro insurance plans are available with or without survival benefits and withdeath benefits ranging from Rs.5, 000 to Rs.50, 000. With premiums as low as Rs.5** permonth, there is now an affordable life insurance product for nearly every rural household inIndia.

Policies Available:

The following special Micro Insurance products from Tata AIG Life are now available for therural population at the bottom of the pyramid.

Navkalyan Yojana

Ayushman Yojana

Sampoorn Bima Yojana

NAVKALYAN YOJANA

A regular premium payment, low cost term plan for the rural adults who seek life insurance

protection without any maturity benefit.

Key features include:

Policy Term : 5 years
http://www.tata-aig-life.com/MicroInsurance/AyushmanYojana/solutionAyushmanYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/SampoornBimaYojana/solutionSampoornBimaYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/AyushmanYojana/solutionAyushmanYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/SampoornBimaYojana/solutionSampoornBimaYojana.htm


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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 policyholders nominee

Maturity benefit : None

Rider : Option to attach Accident Death Benefit Rider for issue ages 18 to 55 years at anominal extra charge.

Tax Benefits and Age Eligibility

Premiums paid under this plan are eligible for tax benefits as per the Income Tax Act,1961 and are subject to any amendments made therein from time to time.*

Anyone between ages 18 and 60 can apply for this policy.

AYUSHMAN YOJANA

A single premium plan where the policyholder pays the premium at the beginning of the policyterm. This is especially useful for those rural people who have a seasonal income.




Death Benifit : Sum assured to the policyholders nominee

Maturity benefit : On survival, 125% of the single premium paid.


Premiums paid under this plan are eligible for tax benefits to the extent of 20% of SumAssured as per the Income Tax Act, 1961 and are subject to amendments made thereinfrom time to time.*

Anyone between ages 18 and 60 can apply for this policy.


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SAMPOORNA BIMA YOJANA

A low cost insurance plan where the policyholder receives all the premiums paid during thepolicy term upon survival until the term of the policy. Premiums are payable for only 10 years,while the coverage is up to 15 years.

How do we operate?

We operate in 11 states with a specific relationship management team for each state. A dedicated& trained sales and marketing team manages the front end of the Micro insurance program. Ourmicro insurance distribution model collaborates with NGOs (Non-governmental organizations)and Rural organizations with community level SHG (Self Help Group) women advisors whoprovide insurance advisory services to the rural customers at their doorstep. The grassroots levelagents explain the product details in the local language of the customer, thereby enabling thecustomer to make a decision. The training programs, brochures, contract documents, and

application forms are available in 8 different languages other than English and Hindi




Premium payment frequency : Monthly, quarterly, half yearly & yearly

Death Benifit : Sum assured is paid to the policyholders nominee

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



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Premiums paid under this plan are eligible for tax benefits as per the Income Tax Act, 1961 andare subject to any amendments made therein from time to time.* Anyone between ages 18 and60 can apply for this policy.

RESEARCH OBJECTIVE

To find out potential depth in society for providing opportunities for further extention for micro

insurance

Sub objective:

Determine need and ability of people segment whose per day income is less than

100 bugs. What really matters to him or her while think about insurance.

Determine awareness about insurance among them. if aware then source of

information

To determine the govt. and private sector proceeding in this area and extent of

their success

RESEARCH METHODOLGY

Data collection

For data collection, we developed a well defined questionnaire as a research instrument,

consisting questions aimed to measure the people perception about insurance, their need and problems, bottleneck why hadnt insured, and target to find out opportunities for further

extention of micro insurance. We conducted unstructured interviews (sample size) of 52 general

people having income even less than 100 bugs per day like vendors, rickshaw wala, coolies etc.

at survey location (Kashmiri gate, old Delhi railway station, prostitutional area etc. All the data


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generated was primary data that was generated directly from face to face communication

Data analysis

The data collected based on structured questionnaire is recorded on an excel sheet and with the

help of SPSS software a pie chart analysis along with pillar data analysis is generated and based

on this findings a qualitative inferences are made for each analysis. The same is being presented

in form of graphs and tables

SURVEY RESULTS

The following are our findings regarding the survey conducted by us. The following graphs show

the potential depth from different perspectives, as shown below:

ANALYSIS AND INTERPRETATION

Table 1:

Gender of the respondents

S. No. Sex No of Respondents Percentage

1. Male 50 91

2. Female 05 09

Total 55 100


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Chart 1:

Gender of the respondents

Inference:

The above reveals the fact that Majority of the respondents, about 91% belong to the category of

male and 9% belong to the category of female.

Table 2: Age of the respondents Chart 2:

No of Respondents

91%

9% 0%0%0%0%0%0%0%0% 1

2

3

4

5

6

7

8

9

10

frequency12%

38%

33%

17%

1

2

3

4

AGE

9

25


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Inference:

The above reveals the fact that Majority of the respondents, about 38% belong to the category of2 age and 33% belong to the category of 3 of age, 17% belong to category 2 and 12% belong to

the category 1 of age.

Table 3: Educational Qualification Chart 3:

Inference:

The above result reveal that majority of respondents (22+28)% were either uneducated oreducated only upto primary level

Table 4: No. of family members Chart 4:

Frequency2%

54%

42%

2%

1

2

3

4

freq

45%

55%

0%0%

1

2

3

4

Educational Qualification

1

2822

1

0

10

20

30

1 2 3 4 5 6 7 8 9 10

catagory of education

no.o

frespondent

family size

0

10

20

30

1 2 3 4 5 6 7 8 9 10

age catagory

no.o

frespondent

freq


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Inference:

Above result reveals that majority of respondent 55% live with joint family or have big size offamily

Table 5: No. of earning member Chart 5:

Inference:

From the above result it can be clearly seen that about 63% of the respondent were the onlyearning member of their family, 31% have 2 earning member because of size of family.

Table 6: Income level Chart 6:

freq

63%

31%

4%

2%

1

2

3

4

freq

46%

42%

12%

1

2

3

earning member

33

16

2 1

0

10

20

30

40

freq

earning member/family

no.o

frespondent

Series1

Series2

Series3

Series4

Series5

Series6

Series7

Series8

Series9

Series10

income lev el

24 22

6

0

10

20

30

freq

income catagory

no.o

frespondent

Series1

Series2

Series3

Series4

Series5

Series6

Series7

Series8

Series9

Series10


53/62

Inference:

The above result reveals that 46% of respondent have income level 1 while 42% and 12% haveincome level 2 and 3 respectively.

Table 7: Account Holder Chart 7:

Inference:

The above result reveals that 64% of respondent dont have any account any where while 36%have their own bank or post office account.

Table 8: Background Chart 8:

Inference:

freq

64%

21%

15%

1

2

3

freq19%

12%

69%

1

2

3

account map

33

11 8

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

no.of account

no.o

faccount

holder

background

106

36

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

background catagory

no.o

frespondent


54/62

The above result reveals that majority of respondent belong to the background of type 3(69%),then type 1 (19%) and type 2(12%).

Table 9: No. of dependent Chart 9:

Inference:

The above result reveal that majority of respondent (35+29)% have no. of dependent more than1 and less than 4. 16% have only 1 dependent and 12%have 4 or more than 4 dependent in theirfamily.

Table 10: Whether has ID proof Chart 10:

freq8%

16%

35%

29%

12%

1

2

3

4

5

freq

48%

52%

0%0%0%0%0%0%0%0%

1

2

3

4

5

6

7

8

910

dependent members

4

8

1815

6

0

5

10

15

20

1 2 3 4 5 6 7 8 9 10

no. of dependent/family

respondent

ID proof

27

25

24

24.5

25

25.5

26

26.5

27

27.5

1 2 3 4 5 6 7 8 9 10

1-yes,2-no

no.o

frespondent


55/62

Inference:

Above result reveals that 52% have ID proof but almost there were equal no that hadnt any idproof.

Table 11: Faced prob with health or asset Chart 11:

Inference:

Above result shows that 23% of respondent didnt face any problem related with health or assetbut 77% faced a serious health of asset loss in past of their life.

Table 12: If yes how they managed Chart 12:

Inference:

Freq

77%

23%

1

2

health/asset problem faced

40

12

0

20

40

60

1 2 3 4 5 6 7 8 9 10

1-yes, 2-no

responses

way of monetary management

40%

31%

6%

21%2%

1

2

3

4

5

monetory management

19

15

3

10

1

0

5

10

15

20

1 2 3 4 5

way of m anage

response


56/62

The above result reveals that majority of the respondent 40% managed their financial problem byway 1, 31% by way2 and 21% by way4 and rest managed their problem by pattern of waysshown above in chart12.

Table 13: How many times fell ill Chart 13:

Inference:

The result above reveals that 67% of the respondent dont have serious health problem and theyhardly use to fell ill once in a month. But beside of this some sector 26% and 7% respectively arethose who use to fall twice or thrice in month.

Table 14: Risk on job Chart 14:

illness map

67%

26%

7%

1

2

3

risk on job

48%

52%1

2

illness

28

11

3

0

10

20

30

1 2 3 4 5 6 7 8 9 10

times fell ill/month

response

risk on job

25

27

24

25

26

27

28

1 2 3 4 5 6 7 8 9 10

1-yes, 2-no

response


57/62

Inference:

The above result reveals that 52% of the respondent didnt had any risk on job but almost equalproportion 48% who had serious job risk.

Table 15: Risk toward assets Chart 15:

Inference:

Above result reveals that a majority of respondent 67% dont have any risk toward their assetwhile 33% were those who have. Reason might be because of their low income they hadnt hadany significant asset.

Table 16: Awareness about insurance Chart 16:

risk toward asset

33%

67%

1

2

awa reness about insurance

92%

8%

1

2

risk toward asset

17

35

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

1-yes, 2-no

response

awareness about insurance

48

4

0

20

40

60

1 2 3 4 5 6 7 8 9 10

1-yes, 2-no

response


58/62

Inference:

Above result reveals that majority of respondent 92% were awared of insurance but 8% werealso there who even didnt know what the insurance is.

Table 17: Source of information Chart 17:

Inference:

The result above reveals that 35% of the respondent got the information about insurance fromsource 7, 31% got info. from source 5 and remaining from the source pattern shown above.

Table 18: No. of insurance taken Chart 18:

Inference:

Above shown result reveals that a majority of respondent 60% were not insured from anywhere , 38% had taken life insurance but 2% were also there who were very well awared and had2 or more than 2 insurance.

Table 19: Why not insured? Chart 19:

source of information11%

1%0%3%

31%

7%

35%

11%0%1%

insurance take n

60%

38%

2%

1

2

3

reason for no insurance

44%

15%

41%

1

2

3

source of information

8

1 0 2

22

5

25

8

0 1

0

10

20

30

1 2 3 4 5 6 7 8 9 10

source

responses

insurance taken

31

20

1

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

no.of insurance taken

responses

reason for no insurance

17

6

16

0

5

10

15

20

1 2 3 4 5 6 7 8 9 10

reason

responses


59/62

Inference:

The result got above reveals that 44% were not insured because of reason1, 41% because ofreason3 and 15% were not insured because of reason 2.

Table 20: Kind of insurance like to purchase Chart 20:

Inference:

Above result reveals that 46% of respondent like to have life insurance, 31% like to have healthinsurance but there are some 14% who are awared toward their child education and like to haveeducation insurance, while some 9% want to minimize risk toward their assets and like to haveasset insurance as well.

Table 21: Premium ready to pay Chart 21:

insurance like to have

46%

31%

14%

9%

1

2

3

4

premium ma

24%

29%20%

27%

1

2

3

4

insurance like to have

27

18

85

0

10

20

30

1 2 3 4 5 6 7 8 9 10

type of insurance

responses

premium map

1215

10

14

0

5

10

15

20

1 2 3 4 5 6 7 8 9 10

type of premium

resp

onses


60/62

Inference:

Above result reveals that in this particular sector all the respondent were almost have equallydistributed opinion about premium package. 24% were ready to pay a sound premium, majoritywere aligned toward premium package 2, 20% were ready to pay premium 3, while 27% agreedto pay premium package 4.

Table 22: How many members like to insured Chart 22:

Inference:

The above shown result reveals that majority of respondent 59% like to insured two members oftheir family apart from self but 35% were those who cant bear even so less premium of microinsurance product and like to insure only one member apart from self rest are distributed asshown above.

Table 23: From where you like to Chart 23:

Purchase Ins. Policy

members like to be insured

2%

35%

59%

2%

2%

1

2

3

4

5

facility location

0% 7%

64%

16%

4% 9%1

2

34

5

6

members like to be insured

1

18

31

1 1

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

members/family

re

sponses

facility location

04

36

92

5

0

10

20

30

40

1 2 3 4 5 6 7 8 9 10

location catagory

resp

onses


61/62

Inference:

The result above reveals that a majority of respondent 64% believes on facility location 3 andlikes to have insurance from there, 16% believe on facility location 4 and rest are shown above.

Table 24: Insurance Duration Chart 24:

Inference:

The result found above reveals that a majority of respondent 38% like the insurance for theduration of 5-10 years, 29% upto 15-20 years, 12% upto 10-15 years but some were also those

21% who cant bear even so less premium and want to have insurance policy upto duration of 0-5 years.

FINDINGS

Study reveals that majority of people whose daily income is less than 100 bugs have bigfamily

Earning member in majority of family is only male.

Income level lies between 100-200 bugs per day

Majority of respondent didnt had any saving account because of no ID proof Majority of respondent have more spending on travel & rent, after that on food & cloth

and Medicare & entertainment

Majority of respondent are the only earning member in family size of 5-8.

Majority of respondent hadnt significant asset

Majority of them managed critical financial problem from some lender lik

khan micro insurance project 1

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