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Micro insurance, can be defined as' the protection of low-income
people against specific perils in exchange for regular premium
payments proportionate to the likelihood and cost of the risk
involved'. It is one of several risk-management tools available to
low-income households.
MICROINSURANCE
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KEY FEATURS OF MI
Risk-pooling instruments for the protection for
low-income households
Insurance with small benefits
Insurance involving low levels of premium
Insurance for persons working in the informaleconomy, etc.
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TWO DIRECTION OF MI
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MI FOR ECONOMIC DEVELOPMENT
There is a huge potential at the bottom of the pyramid as
described by C.K.Prahlad.Around 4 billion people are
unbanked worldwide. MI can create a potential market
with a huge mass.
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LARGE
ENTERPRISES
Middle Class
Low-Income Entrepreneurs
and Households
Wealthy
Building Enterprise Systems that Treat thePoor as the Top Priority
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MI FROM SOCIAL PERSPECTIVE
Microinsurance is likely to complement, rather than
displace, existing ways of coping with risk. It gives a
protection to low-income people according to their risk
coverage.
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WHAT RISKS DO POOR PEOPLE FACE?
KEY RISKS
DEATHILLNESS OR INJURY
LOSS OF PROPERTY (THEFT, FIRE)
NATURAL DISASTER (EARTHQUAKE, DROUGHT)
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1.Retaining risk (self-insurance)
2.Sharing risk (informal group-based mechanisms)
3.Transferring risk (social protection).
HOW POOR COPE WITH RISK
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90% Indian population does not enjoy Social protection.
26% population is bellow poverty, earning
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WHO ALL INVOLVED IN MI
GOVERNMENT
REGULATORS/ SUPERVISORS
SUPPORT INSTITUTIONS
CATEGORIES OF INSURERS PROVIDING MICROINSURANCE
INSURERS REGULATED UNDER THE INSURANCE LAW
INSURERS REGULATED UNDER OTHER LAWS AND INFORMAL INSURERS
INTERMEDIARIES
POLICYHOLDERS
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TYPES OF MICRO INSURERS
COMMERCIAL INSURERS
NGOs
MICRO FINANCE INSTITUTIONS
CBOs
HEALTH PROVIDERS
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MICRO INSURANCE PRODUCTS&SERVICES
LIFEHEALTH CARE
DISSABLITY
EMERGENCY
FUNERAL
CROPS
LIVESTOCK
LOANS
HOUSING
FEES
ASSETS
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KEY CHALLENGES
INSURANCE COVERAGE
INFORMATION ASYMMETRY
TRANSACTION COSTS
DISTRIBUTION SYSTEMS
CUSTOMER EDUCATION AND AWARENESS
CONSUMER PROTECTION
INFRASTRUCTURE
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STRATEGY FOR GROWTH IN MI
ORGANISATIONAL DEVELOPMENT
PRODUCT DESIGN
MARKETINGDECIDING THE MODEL
PREMIUM COLLECTION
SUSTAINIBILITY
ROLE OF GOVERNMENT
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ORGANIZATIONAL DEVELOPMENT
1) ORGANIZATIONAL STRUCTURE2) RECRUITMENT
3) TRAINING
4) COMPENSATION
5) INSTITUTIONAL CULTURE
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PRODUCT DESIGN
Product design starts with four basic steps:
DEFINE THE TARGET GROUP
IDENTIFY INSURABLE RISKS
DETERMINE KEY PRODUCT FEATURES
ESTABLISH PAYMENT CAPABILITIES
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MARKETING
1. PROMOTING INSURANCE TO THE POOR2. TURNING PROMOTIONS INTO SALES
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PROMOTING INSURANCE TO THE POOR
The poor often lack familiarity with insurance and do not
understand how it works.They need greater awareness.
To persuade poor regarding insurance benefits with their limited
resources to meet any perils.
To make sure the safety return of their sum with additional
benefits even if they dont claim.
Creating trust among low income people for insurance providers.
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TURNING PROMOTIONS INTO SALES
To market insurance to the poor, microinsurance providers use
a three phase process to turn promotions into sales, which
includes:
1) Raising awareness
2)Helping potential clients understand the products
3) Activating the market.
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MICRO-INSURANCE DELIVERY MODELS
One of the greatest challenge for micro-insurance is the actualdelivery to clients. Methods and models for doing so vary
depending on the organization, institution, and provider involved.
In general, there are four main methods for offering micro-
insurance
1. THE PARTNER-AGENT MODE
2. THE FULL-SERVICE MODEL
3. THE MUTUAL MODEL
4. THE PROVIDER MODEL
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PARTNER AGENT MODEL
Under this model the relationship between the policyholder and an
insurance company (the partner) is facilitated by an intermediary
(the agent) such as an NGO, a microfinance institution or any
other organization with close contacts to the target group. partner-
agent health microinsurance model are common in India,
including:
VimoSEWA and ICICI Lombard Shepherd and United India Insurance Company (UIIC)
Karuna Trust and National Insurance Company (NIC)
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PROVIDER-DRIVEN MODEL
The healthcare provider is the micro-insurance scheme,
and similar to the full-service model, is responsible forall operations, delivery, design, and service. There is an
advantage once more in the amount of control retained,
yet disadvantage in the limitations on products and
services.
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COMMUNITY-BASED/MUTUAL MODEL
The policyholders or clients are in charge, managing and
owning the operations, and working with external healthcareproviders to offer services. This model is advantageous for its
ability to design and market products more easily and
effectively, yet is disadvantaged by its small size and scope of
operations.
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MODES OF PREMIUM COLLECTIONThe way premiums are collected has a direct
bearing
on per unit transaction costs. The five most
common
ways are:
a) Loan linked,
b) Debit order,
c) Fixed deposit,
d) Link with another financial transaction
e) Door to door collection.
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PREMIUM COLLECTION CONTROLSTo minimize fraud and mistakes in premium collection, both
hierarchical and horizontal controls need to be put in place.
Hierarchical controls require at least a rudimentary structure within
the organization to monitor the quality of the premium collection
process. If insurers choose to outsource the process to
other organizations, horizontal controls should be created. For
example, by demanding some sort of collective security from the
organization or structure to which the process is outsourced.
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PREMIUM COLLECTIONPREMIUM COLLECTION
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SELF EMPLOYED WOMENS ASSOCIATION
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STRATEGIES FOR SUSTAINABILITY
The main strategies to achieve sustainability, divided into three
categories:
A) LIMIT BENEFITS
B) FOCUS ON EFFICIENCY
C) DIVERSIFY INCOME SOURCES
Many microinsurers use group insurance to maximize
efficiency. For example, the member benefit approach is one
of the most effective ways of minimizing operating costs for
the insurer and transaction costs for the insured.
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ROLE OF GOVERNMENTSGovernments can promote the development of supply and demand
for micro insurance through a variety of other mechanisms.
A)CREATING AN ENABLING LEGAL ENVIRONMENT
B) EDUCATION AND SOCIAL MARKETING
C) STRENGTHENING INSTITUTIONS
D) PROVIDING FINANCIAL ASSISTANCE.
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PRESENTED BYSURESH KUMAR NAYAK
M.COM(FINANC E),BHU,VARANASI
MBA(FINANCE &OPERATION) DOMS NIT TRICHY
THANKYOU