Micro Insurance: An Efficient Financial Tool to Economically Weaker Section

Micro- insurance policy is low protection coverage with low premium rates, designed to cater the insurance needs of the most vulnerable sections of the society. In order to reach the access of insurance benefits to economically weaker section (EWS), the insurance regulator, the Insurance Regulatory and Development Authority (IRDA) has created a special category of insurance product named micro insurance policy. It protects people of low-income groups against any mishappenings, in exchange of regular payment of a modest premium. The target people, usually, are unable to buy regular commercial insurance products because of high premium rates; hence micro-insurance policy proved to be an efficient financial tool for them to tackle with such problems.

Insurers, however, do not show too much interest promoting these products because of its small ticket size; the regulator, at regulator intervals issues guidelines asking them to draft at least one micro insurance policy each.

Sum assured under any micro-insurance policy, either life or general, can be maximum up to Rs. 50,000.

Who can be covered under a micro-insurance policy?

Any individual with low-income group such as small farmer, rickshaw puller, daily wage worker, domestic help, labourer or micro-entrepreneur etc. can protect their assets and lives under micro-insurance policy.

Micro-insurance products in India

Like regular insurance, it may offer a wide variety of risks be it general insurance or life insurance cover. Micro-insurance products come in variety to address the risks including, health insurance, term insurance, endowment plans, cattle insurance, crop insurance, shop insurance, home insurance, personal accident, permanent total disability and many more.

Some insurers have also designed products with composite coverage or package products that provide coverage against both general and life insurance.

Where to buy micro-insurance from?

Although, almost all insurance players in India have launched micro-insurance products, and still launching every year, following the strict instructions from IRDA; but they don’t promote such products as it’s less profitable segment. Making people aware of micro-insurance policy and delivering them to actual clients, is one of the biggest challenge in the growth-path of micro-insurance.

Micro- insurance policies is being distributed through these organisations:

  • Micro-Finance Institutions
  • NGOs and
  • Self-Help Groups

Harjot Singh Narula

Harjot Narula is founder and CEO of ComparePolicy.com, an IRDAI approved insurance web aggregator focussed on selling online insurance for companies. Harjot has more than a decade of experience in software development and has also spent 5 years in US working for the mortgage and risk management industry.

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