Micro Insurance:
Micro insurance is specifically intended for the protection of low -income people, with affordable insurance products to help them cope with and recover from financial losses. The need of insurance for underprivileged section cannot be avoided as this section of society is more prone to many risks which ultimately leads to incapacity to face such uncertain situations. Hence, the role that micro insurance plays thus becomes inevitable.
A huge segment of the Indian population is underprivileged. Due to this lack of privilege, they do not have the capacity or access to benefit from various financial services such as banking, insurance, credit, etc. This is where concerned authorities step in and help such sections of society to empower them and grant access to financial products and services. Microinsurance is one such effort to help people belonging to the low-income group.
The major challenges in microinsurance distribution are: –
- Small ticket size coupled with high transaction and service delivery costs.
- Absence of a business model that can attract good intermediaries.
- Capacity building of intermediaries.
- Lack of basic awareness and knowledge on how insurance works
Microinsurance Delivery Methods
Partner-agent model: This model is based on a partnership between the microinsurance scheme and an agent. In some cases a third-party healthcare provider
Full-service model: In this model, the microinsurance scheme is in charge of everything; both the design and delivery of products to the clients, working in conjunction with external healthcare providers.
Provider-driven model: In this model, the healthcare provider is the microinsurance scheme, and full-service model, operations, delivery and service
Community-based/mutual model: In this method, policyholders or clients are run everything, working with external healthcare providers to offer services.
Types of Microinsurance Plans
1) General Microinsurance
A General or regular Microinsurance product covers health insurance, personal accidents, and assets such as livestock, hut, etc
2) Life Microinsurance
A Life Microinsurance Plan can be Term or an Endowment Plan
Importance of Microinsurance Policies:
Here’s why such policies are important.
- They are an accessible risk-management tool to reduce financial vulnerability in times of adversity.
- The affordable premium of such plans is an incentive for better reach in an organized manner.
- Microinsurance covers the policyholder’s financial liability as per the chosen plan.