A PROJECT REPORT ON

MICRO INSURANCE IN INDIA

Submitted in partial fulfillment of the requirements For BACHELOR OF COMMERCE (BANKING AND INSURANCE) (2012-2013) By PRATIKSHA S. MHATRE Under the guidance of Prof. MRS KANCHANA SATTUR

University of Mumbai Sheth T.J Education Societys, SHETH N.K.T.T COLLEGE OF COMMERCE & SHETH J.T.T COLLEGE OF ARTS, THENE (W)

Sheth T.J. Education Societys, SHETH N.K.T.T. COLLEGE OF COMMERCE & SHETH J.T.T. COLLEGE OF ARTS, THANE (W)

CERTIFICATE
OF PROJECT WORK

This is certify that

Mrs. PRATIKSHA S. MHATRE of B&I. Semester V. Roll No:15 has undertaken & completed the project work titledMICRO INSURANCE IN INDIAduring the academic year 2012-13 under the guidance of Prof.Mrs. KANCHANA SATTURsubmitted on
th

, 2013 to this

college in fulfillment of the curriculum of BACHELOR OF BANIKNG & INSURANCE , UNIVERSITY OF MUMBAI.

This is bonafide project work & the information presented is True & original to the best of our knowledge & belief
GUIDE PROJECT COURSE EXTERNAL PRINCIPAL COORDINATOR EXAMINAR

Declaration

I, MISS .PRATIKSHA S MHATRE hereby declare that the project report entitled MICRO INSURANCE IN INDIA. Under guidance of Prof.MRS KANCHANA SATTUR submitted in partial fulfillment of the requirements for the award of the degree of BACHELOR OF COMMERCE (B&I) TO MUMBAI UNIVERCITY is my original work.

ACKNOWLWDEGEMENT
I take this Company to express and record my thanks and gratitude to Sheth N.K.T.T College of Commerce Thane, and the entire Faculty of Semester V of B&I Course, in the College. Further, I also acknowledge my sincere and special thanks and gratitude to my Project Guide Prof.MRS KANCHANA SATTUR , and Project Co-coordinator, Voice Principal & Professor Anil Khadse without whose continuous guidance and encouragement it would not have been possible for me to complete this project Work.

I express my thanks to all my colleagues with whom I have debates and discussions on the subject, which also helped to have better understanding and clarity on the subject.

Course name:-B&I (Semester-V)

College name: Commerce

- Sheth & arts

N.K.T.T

College

of

University: - Mumbai University

Preface: Decision-making is a fundamental part of the research process. Decisions regarding that what you want to do, how you want to do, what tools and techniques must be used for the successful completion of the project. In fact it is the researchers efficiency as a decision maker that makes project fruitful for those who concern to the area of study. Basically when we are playing with data & computer in every part of life, I used it in my project not for the ease of my but for the ease of result explanation to those who will read this project. The project presents the role of financial system in life of persons. I had toiled to achieve the goals desired. Being a neophyte in this highly competitive world of business, I had come across several difficulties to make the objectives a reality. I am presenting this hand carved efforts in black and white. If anywhere something is found not in tandem to the theme then you are welcome with your valuable suggestions.

Executive Summary: Insurance Industry, which is basically my concern industry around which my project has to be revolved, is really a very complex industry. And to work for this was really a complex and hectic task and few times I felt so frustrated that I thought to left the project and go for any new industry and new project. Challenges, which I faced while doing this project, were following Insurance sector was quite similar in offering and products and because of that it was very difficult to discriminate between our product and products of the competitors.

 Target customers and respondents were too busy persons that to get their time and view for specific questions was very difficult. Sensitivity of the industry was also a very frequent factor, which was very important to measure correctly. During the research time I was analysis so many product and scheme of rural insurance with other insurance scheme, which is located in Thane district. Area covered for the project was very large and it was very difficult to correlate two different customers/respondents views in a one. Every financial customer has his/her own need and according to the requirements of the customer product

customization was not possible. So above challenges some time forced me to leave the project but anyhow I did my project in all circumstances.

Objectives of the Project: Project study, which is being conducted by me for the last two month, is not only a formality for the fulfillment of the three year full time bachelors in business Administration. But being a management student and a good Researcher I tried my best to extract best of the information available in the market for the use of society and people. I have classified the objectives in this project form personal to

professional, but here I am not disclosing my personal objectives, which have been achieved by me while doing the project. Only professional objectives, which are being covered by me in this project, are as following To know about the meaning and objective of rural insurance in India. To look into the role of government in implementing various Rural Insurance Schemes. To suggest effective rural insurance progrmme in India. To discuss and explore the problems and prospects of rural insurance in the country.

To examine the prformance of the existing and earlier national Rural Insurance Schemes implimented in India.

Scope of the Study: Each and every project study along with its certain objectives also has scope for future. And this scope in future gives new researches a new need to research a new project with a new scope. Scope of the study not only consist one or two future business plan but sometime it also gives idea about a new business which becomes much more profitable for the researches than the older one. Scope of the study could give the projected scenario for a new successful strategy with a proper implementation plan.

Whatever scope I observed in my project are not exactly having all the features of the scope, which I described above, but also not lacking all the features. 1. Research study could give an idea of network

expansion for capturing more market and customer with better services and lower cost, with out compromising with quality. 2. In future customer requirements could be added

with the product and services for getting an edge over competitors. 3. Consumer behavior could also be used for the

purpose of launching a new product with extra benefits which are required by customers for their account (saving or current) and/or for their investments. 4. Factors which are responsible for the performance

for bank can also be used for the modification of the strategy and product for being more profitable. 5. Factors which I observed while doing project study

are followingCompetitors Customer Behavior Advertisement/promotional activities Attitude of manpower and Economic conditions These all could also be interchanged with each other for each other in banks strategies for making a final business plan to

effecton the market with a positive way without disturbing a lot to market, customers and competitors with disturbance in market shares.

RESEREACH METHOLOGH Data Collection: Data collection has been done from both sources primary as well as secondary data & also by questionnaire.

Primary data: Primary data has been collected by visit to the organization interview.

Secondary Data: Secondary data was gathered through books, journals, articles, web sites of banks, finance & various banking web sites of different insurance sector.

ABBREVIATION IRDA: LIC: NBFC: NGOs: SHG: AIG: DPLI: PIIH: IDBI: SBI: BSLI: MFI: YCO: FPA: Insurance Regulatory Development Authority Life Insurance Corporation of India Non Banking Finance Company Non Governmental Organizations Self Help Group American International Group DLF Pramerica Life Insurance Company Ltd. Prudential International Insurance Holding Ltd. Industrial Development Bank of India State Bank of India Birla Sun Life Insurance Company Ltd. Micro Finance Insttitutions Youth Charitable Organization Financial Planning Advisors

Chapter No. 1

INTRODUCTION OF INSURANCE
1.1 INTRODUCTION:
Today, only one business, which affects all walks of life, is insurance business. Thats why insurance industry occupies a very important place among financial services operative in the world. Owing to growing complexity of life, trade and commerce, individuals as well as business firms are turning to insurance to manage various risks. Therefore a proper knowledge of what insurance is and what purpose does it serve to individual or an organization is therefore necessary. Insurance is a mechanism that ensures an individual to thrive on adverse consequences by compensating the individual his/her loss financially. Every individual in this world is subject to unforeseen and uncalled for hazards or dangers, which may make him and his family vulnerable. At this place, only insurance helps him not only to survive but also recover his loss and continue his life in a normal manner, which would otherwise be unthinkable.

1.2 MEANING OF INSURANCE

Insurance means a promise of compensation for any potential future losses. It facilates financial protection against by

reimbursing losses during crisis. There are different insurance companies that offer wide range of insurance option and an insurance purchaser can select as per own convenience and preference. Insurance is financial service. It is pooling of risks. In a contract of insurance, the insurer undertakes in consideration of a sum of money to make good the loss suffered by the insured against a specified risk or any other contingency. There are two parties to an insurance contract, insurance company and insured party. The document laying down the terms of the contract is called insurance policy. The property, which is insured, is the subject matter of insurance. It may be insured against loss arising from uncertain events in a form of destruction or damage to property or death or disablement of a person. The interest, which the insured has in the subject matter of insurance, is known as insurable interest. Several insurance provide comprehensive coverage with affordable premiums. Premiums are periodical payment and different insurers offer diverse premium options. The periodical insurance premiums are calculated according to total insurance amount. Mainly insurance is used as an effective tool of risk management as qualified risks of different volumes can be insured.

1.3 DEFINITION OF INSURANCE

Insurance is a contract between two parties whereby one party agrees to undertake the risk of another in exchange for consideration known as premium and promises to pay a fixed sum of money to the other party on happening of an uncertain event (death) or after the expiry of a certain period in case of life insurance or to indemnify the other party on happening of an uncertain event in case of general insurance. The party bearing the risk is known as the 'insurer' or 'assurer' and the party whose risk is covered is known as the 'insured' or 'assured'. In the words of D. S. Hansell Insurance may be defined as a social device providing financial compensation for the effects of misfortune, the payment being made from the accumulated contributions of all parties participating in the scheme. In the words of Riegel and Miller, Insurance is a social device where by the uncertain risks of individuals may be combined in a group and thus made more certain, small periodic

contributions by the individuals providing a fund, out of which, those who suffer losses may be reimbursed. In the words of Justice Tindall, Insurance is a contract in which a sum of money is paid to the assured as consideration of insurers incurring the risk of paying a large sum upon a given contingency. In the words of E. W. Patterson, Insurance is a contract by which one party, for a compensation called the premium, assumes particularly risks of the other party and promises to pay him or his nominee a certain or ascertainable sum of money on a specified contingency. In the words of Justice Channel, Insurance is a contract where by one person, called the insurer, undertakes in return for the agreed insurer, undertakes in return for the agreed consideration called premium, to pay to another person called insured, a sum of money or its equivalent on specified event.

1.4 HISTORY OF INSURANCE INDUSTRY: The origin of practice of insurance is probably lost forever in the mists of antiquity and till today remains a mystery. References to practices similar to insurance are found in the ancient Indian texts of Rig-Veda. Rig-Veda refers to the concept

of "Yogakshema" - loosely meaning 'prosperity, well being and security of people'. Insurance has a deep-rooted history in India since ancient times and has been mentioned in the writings of Manu (Manusmrithi), Yagnavalkya (Dharmasastra) and Kautilyas Arthashastra that glorified ancient India. In all these ancient texts, the writings discuss about pooling of resources that would be re-distributed in times of calamities or unforeseen circumstances such as epidemics, earthquakes, fire, floods and famine. Such writings depict that it was probably a pre-cursor to modern day insurance. Ancient Indian history has preserved the earliest traces of insurance in the form of marine trade loans and carriers contracts. In India, Insurance has evolved with the passage of time heavily drawing inspiration from other countries, England in particular. In 1818 the advent of life insurance business descended in India with the establishment of the Oriental Life Insurance Company at Kolkata. However, this company failed in 1834 as it failed to realize its goals and achieve the desired objectives. In 1829, the Madras Equitable had begun transacting life insurance business in the Madras Presidency. In 1870 the British Insurance Act was enacted. Moreover, in the last three decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) commenced their operations in the Bombay Presidency. However, this era, was dominated and controlled by foreign insurance companies. Such foreign insurance companies did good business in India such as

Albert Life Assurance, Liverpool, London Globe Insurance and Royal Insurance. In 1914, the Government of India started publishing returns of Insurance Companies in India. The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life business being transacted in India. In 1938, with a view to protect the interests of the Indian Insurance companies, the earlier legislation was amended with the enactment of the Insurance Act, 1938 consisting of comprehensive provisions for effective control. With the enactment of Insurance Amendment Act of 1950, the Principal Agencies were abolished. However, due to the presence of large number of insurance companies across India, the intensity level of cut-throat competition amongst such organizations was pretty high. There were also allegations of unfair trade practices being prevalent to a great extent. The Government of India, therefore, decided to standardize and nationalize the practice of insurance business. An ordinance was issued on 19th January, 1956 for nationalization of the Life Insurance sector in India and Life Insurance Corporation (LIC) came into existence in the same year. The LIC absorbed 154 Indian, 16 non-Indian insurers as well as 75 provident societiestotally 245 Indian and foreign insurers. The LIC had monopoly till the late 90s when the Insurance sector was reopened to theprivatesector.

The history of general (non-life) insurance dates back

to the Industrial Revolution uprising in the west and the consequent growth of sea trade and commerce in the 17th century. It came to India as a legacy of British occupation. General Insurance in India has its roots in the establishment of Triton Insurance Company Ltd. at Kolkata in the year 1850 by the Britishers. In 1907, the Indian Mercantile Insurance Ltd. was established and was the first company to transact all classes of general insurance business. In 1957, General Insurance Council (GIC), a wing of the Insurance Association of India was established The General Insurance Council framed a code of conduct for ensuring fair conduct and sound business practices across Non-Life or General insurance sector.

In 1968, the Insurance Act was amended to regulate investments and set minimum solvency margins. The Tariff Advisory Committee was also established the passing of the General Insurance Business (Nationalization) Act in 1972, general insurance business was nationalized which came into effect from 1st January, 1973. 107 insurers were amalgamated and grouped into four companies namely National Insurance Company Ltd. at Kolkata, the New India Assurance Company Ltd. at Mumbai, and The Oriental Insurance Company Ltd at New Delhi and the United India Insurance Company Ltd at Chennai. The General Insurance Corporation (GIC) of India was incorporated as a company in

1971 and commenced its operations with effect from 1st January, 1973. This century has seen insurance come a full circle in a journey extending more than 200 years. The process of liberalization or re-opening of the Insurance sector had begun in the early 1990s and in the last decade, insurance sector has been substantially opened for participation from financially sound Indian Private Organizations as well as foreign insurance companies. The Government set up a committee in 1993 under the chairmanship of R.N. Malhotra, former Governor of RBI (Reserve Bank of India), to propose recommendations for initiation and implementation of reforms in the Indian insurance sector. The objective of setting up this committee was to complement the pace of reforms initiated in the financial sector. The aforesaid committee submitted its report in 1994 wherein it was recommended that the private sector be permitted to enter the Indian insurance sector. It also recommended the participation of foreign companies by allowing them to enter into an MOU (Memorandum of Understanding) by floating Indian companies, preferably a joint venture with Indian partners. Following the recommendations of the Malhotra

Committee report, the Insurance Regulatory and Development Authority (IRDA) Act, in 1999 was passed by the Indian Parliament. IRDA (Insurance Regulatory and Development Authority) was constituted as an autonomous body to regulate and develop the Indian Insurance Industry with its headquarters at

Hyderabad. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of healthy competition amongst the insurance sector players so as to constantly enhance and exceed customer satisfaction through mind-boggling varieties in Insurance products and services, enhancement in consumer choice and lower premiums and at the same time ensuring the financial stability and security.

1.5 CHARACTRISTICs OF INSURANCE:

Insurance follows important characteristics These are follows:

1) SHARING OF RISK Insurance is a co-operative device to share the burden of risk, which may fall on happening of some unforeseen events, such as the death of head of family or on happening of marine perils or loss of by fire.

2) CO-OPERATIVE DEVICE Insurance is a co-operative form of distributing a certain risk over a group of persons who are exposed to it). A large number of persons share the losses arising from a particular risk.

3) LARGE NUMBER OF INSURED PERSONS The success of insurance business depends on the large number of persons insured against similar risk. This will enable

the insurer to spread the losses of risk among large number of persons, thus keeping the premium rate at the minimum.

4) EVALUATION OF RISK For the purpose of ascertaining the insurance premium, the volume of risk is evaluated, which forms the basis of insurance contract.

5) AMOUNT OF PAYMENT The amount of payment in indemnity insurance depends on the nature of losses occurred, subject to a maximum of the sum insured. In life insurance, however, a fixed amount is paid on the happening of some uncertain event or on the maturity of the policy.

6) PAYMENT OF HAPPENING OF SPECIFIED EVENT On happening of specified event, the insurance company is bound to make payment to the insured. Happening of specified event is certain in life insurance, but in the case of fire, marine of accidental insurance, it is not necessary. In such cases, the insurer is not liable for payment of indemnity.

7) TRANSFER OF RISK Insurance is a plan in which the insured transfers his risk on the insurer. This may be the reason that may erson

observes, that insurance is a device to transfer some economic losses would have been borne by the insured themselves.

8) SPEADING OF RISK Insurance is a plan which spread the risk & losses of few people among a large number of people. John Magee writes, Insurance is a plan by which large number of people associates themselves and transfers to the shoulders of all, risk attached to individuals.

9) PROTECTION AGAINST RISKS Insurance provides protection against risk involved in life, materials and property. It is a device to avoid or reduce risks.

10) INSURANCE IS NOT CHARITY Charity pays without consideration but in the case of insurance, premium is paid by the insured to the insurer in consideration of future payment.

11) INSURANCE IS NOT A GAMBLING Insurance is not a gambling. Gambling is illegal, which gives gain to one party and loss to other. Insurance is a valid contact to indemnity against losses. Moreover, insurable interest is present in insurance contracts it has the element of investment also.

12) A CONTRACT

Insurance is a legal contract between the insurer and insured under which the insurer promises to compensate the insured financially within the scope of insurance policy, the insured promises to pay a fixed rate of premium to the insurer.

13) SOCIAL DEVICE Insurance is a plan of social welfare and protection of interest of the people. Rieged and Miller observe Insurance is of social nature.

14) BASED UPON CERTAIN PRINCIPLE Insurance is a contract based upon certain fundamental principles of insurance, which includes utmost good faith, insurable interest, contribution, indemnity, cause proxima, subrogation etc, which are operating in the various fields of insurance.

15) REGULATION UNDER THE LAW The government of every country enacts the law governing insurance business so as to regulate, and control its activities for the interest of the people. In India General Insurance Act 1972 and the Life Insurance Act 1956 are the major enactment in this direction.

16) WIDE SCOPE

The scope insurance is much wider and extensive various types of policies have been developed in the country against risk of fire, marine, accident, theft, burglary, life, etc.

17) INSTITUTIONAL SETUP After nationalization, the insurance business in the country is operation under statutory organization setup. In India, the General Insurance Companies and the Life Insurance Corporation and subsidiary companies of General Insurance Corporation are operating the various fields of insurance.

18) INSURANCE FOR PURE RISK ONLY Pure risks give only losses to the insured, and no profits. Examples of pure risks are accident, misfortune, death, fire, injury, etc., which are all the sided risks and the ultimate results in loss. Insurance Companies issue policies against pure risk only, not against speculative risks. Speculative risk has chances of profit of losses.

19) BASED ON MUTUAL GOODWILL Insurance is a contract based on good faith between the parties. Therefore, both the parties are bound to disclose the important facts affecting to the contract before each other. Utmost good faith is one of the important principles of insurance.

1.6 PRINCIPLES OF INSURANCE

(1) Indemnity A contract of insurance is a contract of indemnity. Indemnity means that the insured in case of loss against which the policy has been insured, shall be paid the actual amount of loss not exceeding the amount of the policy i.e. he shall be fully indemnified. The purpose of contract of insurance is to place the insured in the same financial position, as he was before the loss. Suppose, a person insured his factory for Rs.20 lacks against fire, the factory is partially burnt and it is estimated that a sum of Rs.10lakhs will be required to restore it to the original condition. The insurer is liable to pay Rs.10 lakhs only. The exceptions to the rule are found in Personal Accident policies, Agreed Value policies in marine insurance and Valuables and reinstatement policies in Engineering insurance. These are also contracts of indemnity but by a special application of the principle, the amount of indemnity is decided at the time of entering into the contract itself. In certain forms of insurance, the principle of indemnity is modified to apply. For example, in marine or fire insurance, sometimes, certain profit margin that would have earned in the absence of the event, is also included in the loss. Under life insurance, the insurer is required to pay the fixed amount in the event of death or on the expiry of the period of the policy. Thus the contract of life insurance is not insurance as such but it is an assurance. This is due to the reason that life

cannot be indemnified i.e. the life of a person cannot be valued in terms of money and therefore the question of compensation of actual loss does not arise. Thus a contract of life insurance is a contract of guarantee. (2) Utmost good faith The doctrine of utmost good faith applies to all forms of insurance. Both parties of the insurance contract must be of the same mind at the time of contract. There should not be any fraud, non-disclosure or misrepresentation concerning the material facts. An insurance contract is a contract of absolute good faith where both parties of the contract must disclose all the material facts truly and fully as insurance shifts risk from one party to another. As in insurance insured knows more about the risks than the insurer, so there must be utmost good faith and mutual confidence between insured and insurer. For instance, if a person suffers from a serious invisible disease but does not disclose this fact while getting his life insured, the insurance company can avoid the contract. Similarly the insurer must exercise the same good faith in disclosing the scope of the insurance, which he is prepared to grant. Breach of good faith renders the contract voidable an initio at the discretion of the aggrieved party. A material fact is a fact which would influence the mind of an insurer in deciding whether he should accept the risk, on what terms and what premium he should charge. The utmost good faith says that all material facts should

be disclosed in true and full form. It means that the facts should be disclosed in that form in which they really exist. There should no false statement and no half-truth nor any silence on the material facts. What is a material fact depends upon the circumstances of the particular case. (3) Insurable interest For an insurance contract to be valid, the insured must have an insurable interest in the subject matter of insurance. It means that the insured must have an actual pecuniary interest. The insured must be so situated with regard to the thing insured that he would have benefit by its existence and loss from its destruction. For instance, a person has insurable interest in his life or in the life of the spouse but he has no insurable interest in the life of a stranger. The owner of a building has absolute insurance interest. If this building is financed by banks then financiers too have their interest in the property but is limited to the extent of their financial commitment only. The insurable interest must exist both at the time of the proposal and at the time of claims but in case of life insurance, insurable interest must exist only when the policy is taken. The essentials of a valid insurable interest are the following: (a) There must be a subject matter to be insured.

(b) The insured should have monetary relationship with the subject matter. (c) The relationship between the insured and the subject matter should be recognized by law i.e. there should not be any illegal relationship between the insured and the subject matter. (d) The financial relationship between the insured and the subject matter should be such that the insured is financially benefited by its existence or survival and will suffer economic loss at the destruction or death of the subject matter. (4) Proximate cause The rule of proximate cause says that the cause of the loss must be proximate or immediate and not remote. If the proximate cause of the loss is a risk insured against, the insured can recover. If the risk insured is the outcome of a remote cause, which is not insured against, then the insurer is not bound to pay compensation. Proximate cause means the active efficient cause that sets in motion a chain of events, which brings about a result, without intervention of any force started and working actively from a new and independent source. That means proximate cause is the cause which in a natural and unbroken series of events is responsible for a loss or damage. If there is a single cause of the loss, the cause will be proximate cause and if the cause of loss was insured, insurer will have to indemnify the loss. When a loss has been brought about by two or more causes, the question arise as to which is the

proximate cause. If the causes occurred in form of chain, they have to be observed seriously. For the policy to cover the loss must have an insured peril must occur in the chain of causation that links the proximate cause with the loss. The proximate cause is not necessarily, the cause that was nearest to the damage either in time or in place, but is rather the cause that was actually responsible for loss. (5) Subrogation The doctrine of subrogation is a corollary to the principle of indemnity and applies only to fire and marine insurance. According to it, when an insured has received full indemnity in respect of his loss, all rights and remedies which he has against third person will pass on to the insurer. The insurers right of subrogation arises only when he has paid for the loss and this right extends only to the rights and remedies available to the insured in respect of the thing to which the contract of insurance relates. If the insured is in a position to recover the loss in full or in part from a third party due to whose negligence the loss may have been occurred, his right of recovery is subrogated (substituted) to the insurer on settlement of the claim. The insurers, thereafter, can recover the claim from the third party or in case the lost property is recovered or the damaged property fetches any value, the insurer will be its owner.

Suppose, a house is insured for Rs.2 lakhs against fire, the house is damaged by fire and the insurer pays the full value of Rs.2 lakhs to the insured. Later on the damaged house is sold for Rs.20, 000. The insurer is entitled to receive the sum of Rs.20, 000. (6) Contribution When an insured obtains more than one policy on one risk, the principle of contribution comes into play. The aim of contribution is to distribute the actual amount of loss among the different insurers who are liable for the same risk under different policies in respect of the same subject matter. That means the insured may affect more than policy to cover the same risk, he/she cannot recover in total more than a full indemnity (sum insured). In other words, the right of contribution arises when (a) There are different policies which relate to the same subject matter (b) The policies cover the same peril which caused the loss (c) All the policies are in force at the time of the loss and (d) One of the insurers has paid to the insured more than his share of the loss. However, the principle of contribution does not apply to life insurance. (7) Mitigation of loss

In the event of a mishap, the insured must take all possible steps to mitigate or minimize the loss to the subject matter of insurance. He should act in the same manner in which he would have acted in the absence of the insurance cover. This means that it is the duty of the insured to make a reasonable effort and take all available precautions to save the insured property. (8) Warranties There are certain conditions and promises in the insurance contract which are called warranties. Warranties which are mentioned in the policy are called express warranties. There are certain warranties which are not mentioned in the policy. These warranties are called implied warranties. Warranties, which are answers to the question, are called affirmative warranties. The warranties fulfilling certain conditions or promises are called promissory warranties. Warranty is the very important condition in the insurance contract which is to be fulfilled by the insured. On breach of warranty the insurer becomes free from his liability. Therefore insured must have to fulfill the condition and promises during the insurance contract whether it is important or not in connection with the risk. If warranties are not followed, the other party may cancel the contract whether risk has occurred or not. However, when the warranty is declared illegal and there is no reverse effect on the contract, the warranty can be waived.

Chapter No. 2

INSURANCE STRUCTURE OF INDIA

2.1 Concept of Insurance/ How Insurance Works: The concept behind insurance is that a group of people
exposed to similar risk come together and make contributions towards formation of a pool of funds. In case a person actually suffers a loss on account of such risk, he is compensated out of the same pool of funds. Contribution to the pool is made by a group of people sharing common risks and collected by the insurance companies in the form of premiums.

Lets take some examples to understand how insurance actually works:

Example 1

Example 2

SUPPOSE

SUPPOSE

Physical condition = 50 years & Healthy

2,00,000/-

a yr = 50

Rs. 300/-

suffered by family of each dying person = Rs.

1,00,000/-

deaths = Rs. 50,00,000/-

Rs. 1,200/UNDERLYING ASSUMPTION UNDERLYING ASSUMPTION All 5000 persons are

All 1000 house owners are exposed to a common risk, i.e. fire

exposed to common risk, i.e. death

PROCEDURE All owners contribute Rs. 300/- each as

PROCEDURE Everybody contributes Rs.

premium to the pool of funds

1200/- each as premium to the pool of funds

Total value of the fund = Rs. 3,00,000 (i.e. 1000 houses * Rs. 300) Total value of the fund = Rs. 60,00,000 5 houses get burnt during the year (i.e. 5000

persons * Rs. 1,200)

Insurance company pays Rs. 40,000/- out of the pool to all 5 house owners whose house got burnt

50 persons die in a year on an average

Insurance company pays Rs. 1,00,000/- out of the pool to the of family all 50

members

persons dying in a year EFFECT OF INSURANCE EFFECT OF INSURANCE Risk of 50 persons is spread over 5000

Risk of 5 house owners is spread over 1000 house owners in the village, thus reducing the burden on any one of the owners.

people, thus reducing the burden on any one person.

2.2FUNCTION OF INSURANCE:

Insurance becomes very useful in todays life. It plays significant role in this competitive era. One should know the functions of insurance According to Sir William Beveridge the functions of insurance can be divided into three categories. 1) Primary Functions 2) Secondary Functions 3) Indirect Functions

PRIMARY FUNCTION

To provide protection To provide certainity Distribution of risk Helps in economic growth It prevent losses A forced saving Promote foreign trade Others

SECONDARY FUNCTION

INDIRECRT FUNCTION

1.

PRIMARY FUNCTIONS

(A) TO PROVIDE PROTECTIONS The most important function of insurance is to provide protection against risk of loss. It is one cheak the reality of the misfortune happening, and pays the cost of damages of losses.

(B) TO PROVIDE CERTANITY

We know future is totally uncertain. Any misfortune happening may occur at any stage of life. The amount of loss and time of losses both are uncertain. No doubt better planning and administration can reduce the chances of happening these types of accidents but it requires lots of attention towards strengths and weaknesses, special knowledge of the field after all these precautions, the uncertainty remains steady. Insurance provides certainly towards the losses. The policy holders pay the premium to by certainty.

(C) DISTRIBUTION OF RISK It is a co-operative effort where the risk is distributed among the group of people. Thus, no one have to bear the losses occurred due to uncertainty.

2. SECONDARY FUNCTIONS

(A) HELPS IN ECONOMIC PROGRESS Insurance plays an important role in economic progress. It gives fully certainty to the industrialists towards the risks. The entrepreneurs can more concentrate on innovative and profitable techniques of the production. They should not require thinking over the risks. The industrialists can establish new industries in environment. Thus, industries have got development in economic and commerce of the nation.

(B) IT PREVENTS LOSSES

Insurance plays vital role in preventing the losses. The amount of premium is minimized by using such appliances like the fire extinguisher. If one uses interior machinery which may be caused for misfortune, the amount of premium will be high. Thus, indirectly, insurance provides help to minimize the chances of risks. It will be useful for the agencies which are directly related with the same function like, a) Loss prevention association of India. b) The salvage crops of loss prevention association of India. c) Survey and inspection of risks, etc.

3. INDIRECT FUNCTIONS

(A) A FORCED SAVINGS Life Insurance is also a method of savings in India. Income Tax Act gives relief in payment of income tax because government wants to habituate general public to save money. It encourages the habit of thrift and savings among the people. Thus, it becomes compulsory savings to people of nation.

(B) POMOTE FOREIGN TRADE It is compulsory to take marine insurance policy in foreign trade in India. Foreigners cant issue the foreign trade bill unless the cargo is fully insured. Thus foreign trade is totally depends upon the insurance sector of the nation. It gives relief to entrepreneurs from the uncertainty of foreign trade.

(C) OTHERS Insurance provides certainties towards risks in

entrepreneurship. It gives confidence in general public. It is one of the important source of investment which develops the trade and commerce of the nation. 26

2.3 Types of Insurance

The insurance can be divided from two angles: from business point of view and from the risk point of view. Business Point of View The insurance from business point of view can be categorized into:

LIFE INSURANCE

OTHER

SOCIAL INSURANCE

OTHER . (1) Life Insurance

GENERAL INSURANCE

Life Insurance is different from other insurance in the sense that the subject matter of insurance is life of human being. The insurer will pay the fixed amount of insurance at the death or at the expiry of certain period. At present, life insurance enjoys maximum scope because each and every person requires the insurance. This insurance provides protection to the family at the premature death or gives adequate amount at the old age when earning capacities are reduced. Types of insurance plans offered in our country: - Term assurance plans - Whole life plans

- Endowment assurance plans - Assurances for children - Family income policy - Life annuity Joint life assurance - Pension plans - Unit linked plan - Policy for maintenance of handicapped dependent - Endowment policies with health insurance benefits

(2) General Insurance The general insurance includes property insurance, liability insurance and other forms of insurance. Fire and marine insurance comes under property insurance. Liability insurance includes motor, theft, fidelity and machine insurances to a certain extent. The strictest form of liability insurance is fidelity insurance whereby the insurer compensates the loss to the insured when he is under the liability of payment to the third party. Types of insurance policies available are: - Health insurance - Medi-claim policy - Personal accident policy

- Group insurance policy - Automobile insurance - Workers compensation - Liability insurance - Aviation insurance - Business insurance - Fire insurance policy - Travel insurance policy

(3) Social Insurance The social insurance is to provide protection to the weaker sections of the society who is unable to pay the premium for adequate insurance. Pension plan, disability benefits,

unemployment benefits, sickness insurance and industrial insurance are the various forms of social insurance. (4)OTHERS Risk point of view Insurance can be divided into property, liability and other forms of insurance. Property Insurance Under the property insurance property of a person is insured against a certain specified risks. The risk may be fire or marine

perils, theft of property or goods, damage to property at accident. Examples of this are: - Home insurance - Business insurance - Commercial insurance

Marine Insurance Marine insurance provides protection against loss of marine perils. The marine perils are collision with rock, or ship attacks by enemies, fire and capture by pirates etc. These perils cause damage, destruction or disappearance of the ship and cargo and non-payment of freight. So, marine insurance insures ship (Hull), cargo and freight. Types of policies are: - Voyage policies - Time policies - Valued policies - Hull insurance - Cargo insurance - Freight insurance

Fire Insurance

Fire insurance covers risks of fire. In the absence of fire insurance, the fire waste will increase not only to the individual but to the society as well. With the help of fire insurance, the losses, arising due to fire are compensated and the society is not losing much. The individual is protected from such losses and his property or business or industry will remain in the same position in which it was before the loss. The fire insurance does not protect only losses but it provides certain consequential losses also. Policies available in this insurance are: - Consequential loss policy - Comprehensive policy - Valued policy - Valuable policy - Floating policy - Average policy

Miscellaneous Insurance The property, goods, machine, furniture, automobile, valuable goods etc., can be insured against the damage or destruction due to accident or disappearance due to theft. There are different forms of insurances for each type of the said property whereby not only property insurance exists but liability

insurance and personal injuries are also insured. Miscellaneous insurance covers: - Motor - Disability - Engineering and aviation risks - Credit insurance - Construction risks - Money insurance - Burglary and theft insurance - All risks insurance

Liability Insurance The general insurance also includes liability insurance whereby the insurer is liable to pay the damage of property or to compensate the loss of personal injury or death. The examples of this type of insurance are fidelity insurance, automobile insurance and machine insurance. Examples are: - Third party insurance - Employees insurance - Reinsurance

Other Forms Besides the property and liability insurances, there are certain other insurances, which are included under general insurance. The examples of such insures are export credit insurances, state employees insurance, etc. whereby the insurer guarantees to pay certain amount at the happening of certain events. Examples are: - Fiduciary insurance - Credit insurance - Privilege insurance

2.4 NEW INSURANCE PRODUCTS

Some of the new policies are: (1) Policies under LIC Mutual Fund LIC launched its Mutual Fund with promise to the investors to provide high returns along with safety and security of investments. LIC Mutual Fund came up with 5 schemes which provide distinct benefits to various cross sections of investors. The names of scheme are: - Dhanashree 1989 - Dhan 80 cc(1)

- Dhanavarsha - Dhanaraksha 1989 - Dhanavridhi 1989

(2) Jeevan Akshay In return for purchase price paid by the purchaser a monthly pension will be paid during the lifetime of the purchaser of the pension. On the death of the pensioner, the original amount invested by the employee along with an additional bonus will be returned to the nominee or his legal heirs. (3)Jeevan Dhara The payment of annuities in respect of policies under Jeevan Dhara has to start one month after the completion of the deferment period. (4) Jeevan Kishor Children between the ages of 1(last birthday) and 12(last birthday) are eligible to be proposed for insurance under this plan.

(5) Jeevan Chhaya

Couples having a child of age less than one year can avail of this plan, in order to ensure that an adequate financial provision is made for the higher education of the child. The child should not have completed one year of age on the date of the registration. Either father or mother or each one of them individually can take policies under this plan. (6) Jeevan Suraksha This policy enables individuals to provide for retirement income from a chosen date. The policy is with life cover but can be taken without life cover under certain conditions. (7)Rural insurance The policies offered under this scheme are: Personal Insurance (a) Janta Personal Accident (Individual) (b) Janta Personal Accident (Group) (c)Gramin Personal Accident Property Insurance (a) Agricultural Pumpset (b) Animal Driven Carts Insurance (c) Hut Insurance (d) Gober Gas Insurance

(e) New Well Insurance Cattle and Livestock Insurance (a) Cattle Insurance (b) Sheep and Goat Insurance (c) Camel Insurance (d) Horse Insurance Poultry Insurance (a) Duck Insurance (b) Poultry Insurance Master Policy (8) (9) Insurance of Species Package Insurance

(10) Crop Insurance (11) Medi-claim Hospitalisation and Domiciliary Hospitalisation Insurance (12) Overseas Medi-claim Policy (13) Students Safety Insurance (14) Unborn Child Welfare Insurance (15) Cancer Medical Expenses Policy (16) Boiler and Pressure Plant Insurance

(17) Machinery Insurance (18) Cold Storage Insurance (19) Baggage Insurance (20) Shopkeepers Insurance (21) All Risks Cover Insurance (22) Social Security Scheme (23) Wedding Insurance (24) Kidnap and ransom Insurance (25) Travel Insurance

2.5 ADVANTAGES OF INSURANCE:

1. INVESTMENT OF FUNDS In the cource of their business, insurance by the way of premiums collect vast sums. Especially in life business much of it can be invested profitably over long periods. This benefits the nation as a whole because insurers are required by law to invest the major portion in government securities and other approved investment, undertaken. out of which nation-building activities are

2. REDUCTION OF COST INSURANCE

Income earned by investment of accumulated funds further increases the fund and goes to reduce the cost of insurance for otherwise the premiums would have to be higher to next extent.

3. EFFECT ON PRICES Manufacturers pass on the consumer, the cost of insurance along with other production cost. Still it is beneficial to the consumers because without insurance the cost would have been much more.

4. INVISIBLE EXPORT Providing insurance service overseas is our invisible export, like export of material goods and the profit brought in is contribution to the favorable balance of trade.

5. REDUCING COST OF SOCIAL SERVICES No victim or heirs of a deceased victim of motor accidents now a days goes without compensation from insurance funds built out of compulsory insurance of motor vehicles and this is no small benefit social relief.

2.6 LIMITATIONS OF INSURANCE:

In spite of number of advantages of insurance, it has certain limitations. On account of such limitations, the benefits of insurance could not be availed in full. These limitations are: 1) All the risks cannot be insured. Only pure risks can be insured and speculative risks are not insurable. 2) Insurable interest (financial interest) en the subject matter of insurance either at the time of insurance or at the time of loss, or at both the times must be present, in the absence of which the contract of insurance becomes void. 3) In case the loss arises from the happening of the event cannot be valued in terms of money, such risks are not insurable. 4) Insurance against the risk of a single individual or a small group of persons are not advisable, since it is not practicable due to higher cost involved. 5) Another important limitation is that the premium rates are higher in our country & as such, certain category of people cannot avail the advantage of insurance. The main reason for the higher rate of premiums is the higher operating cost. 6) It becomes difficult to control moral hazards in insurance. There are certain people who my stifies the insurance plans for their self-interest by claiming false claims from insurance companies. 43 7) Insurance is not a profitable investment. Its main object is to provide security against risks; insurance business cannot be a source to acquire profits.

Certain specified risks can be insured with co-operation of the government only; such as, unemployment insurance, insolvency of banks, food insurance, etc.

Chapter no. 3

MICRO INSURANCE IN INDIA

3.1 Introduction
India is enjoying rapid growth and benefits from a young population. Its middle class is growing rapidly but 70

percent of the population is still rural, often very poor, and handicapped by poor health and health services, and low literacy rates. 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 of their economic circumstance. According to World Bank study (Peters et al. 2002), reports that about one-fourth of hospitalized Indians fall below the poverty line as a result of their stay in hospitals. The same study reports that more than 40 percent of hospitalized patients take loans or sell assets to pay for hospitalization. When a poors familys income generator dies, when a child of a poor family is hospitalized, or home of a poor family is destroys by flood, earthquake or fire. Every illness every accident or every natural disaster leads to deeper poverty to a poor family. Thats where micro insurance comes in. Microinsurance is the protection of low income households against specific perils in exchange for premium payments proportionate to the likelihood and cost of the risk involved. It is specifically designed for the protection of low income people with affordable insurance products to help them cope with and recover from common risk. A key strategy for enhancing economic development and alleviating poverty is to make financial systems more inclusive, for example by improving access to savings and credit services for under-served markets. In part, Poverty stems from the fact that low-income households and markets do not have the same opportunities to finance, investments, accumulate capital or

protect assets (including human assets). The poors heavy reliance on informal financial services such as moneylenders, under-themattress savings and mutual assistance societies can be

inefficient and expensive, and may even exacerbate poverty. An inclusive financial system makes insurance available to lowincome persons. However, many commercial insurers and

policymakers believe that providing insurance to the poor is the responsibility of the state. Although many governments have social protection programmes, the targeting of these schemes is often ineffective. The poorest segments do not always benefit from the subsidy, while people who can afford insurance often find ways to access these benefits. In general, governments have made little effort to shift the burden of risk-pooling to market-led schemes; and the private sector (commercial insurers) seems to have little incentive to seek out this market segment. In principle, micro-insurance works like any typicaly insurance business. But there are several things that differentiate it from normal insurance. First, it is group insurance that can cover thousands of customers under one contract. Second, micro-insurance requires an intermediary between the customer and the insurance company. Preferably, this intermediary is a non governmental organization (NGO) or microfinance institution, for example a rural bank that can handle the whole distribution and most of the administration process.

3.2 Meaning of Micro Insurance

On a daily basis, the poor around the world face a multitude of risks that threaten to derail any progress they have made to work their way out of poverty. The death of a family member, lossof property 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 for regular monetary payments (premiums) proportionate to the likelihood and cost of the risk involved seeks to provide a suitable solution for managing these risks.

3.3 Definitions of micro-insurance

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

insurance that spreads the loss of the (few) affected members 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 to mitigate risk on account of imperfect labour and credit markets. In the past insurance as a prepaid risk managing instrument was never considered as an option for the poor. The poor were considered too poor to be able to afford insurance premiums. Often they were considered uninsurable, given the wide variety of risks they face. However, recent developments in India, as elsewhere, have shown that not only can the poor make small periodic contributions 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 as these risks are mostly independent ,idiosyncratic. Moreover, there are cost-effective ways of extending insurance to them. Thus, insurance is fast emerging as a prepaid financing option for the risks facing the poor.

3.4 History and Vision

The Micro Insurance Agency has its roots within Opportunity International, a large microfinance network motivated by Jesus Christs call to serve the poor. With a network of 47 microfinance institutions, Opportunity International has been serving the entrepreneurial poor since 1971. In partnership with Opportunitys microfinance institutions, we began working in 2002 on the development of a range of life, property, livestock, crop derivative, disability, unemployment and 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 back months and years behind where their loans and savings products offered by Opportunity had taken 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 of a breadwinner, resulting in increased economic hardship for the family. In response, Micro Insurance Agency staff developed an affordable funeralbenefit product that did not exclude any preconditions, including HIV/AIDS. This transformed the mindset of retail insurance providers in the country, who later developed

similar non-exclusive products in light of the competing environment. 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 not always the ones available. Health insurance, for example, is a critical need of the poor but the most limited in terms of supply. In addition, policies that are available are often based on first world practices and are too complex for the simple coverage demanded. Further, when offered on an individual, oneoff basis, high premium requirements and a need to pay in a single lump sum preclude a huge sector of the market from access. New distribution models and channels were needed to increase access and reduce the effective price charged to clients. In 2005, the Micro Insurance Agency was founded by Opportunity. Our mission is to empower the materially poor to transform their lives by insuring them against financial risk and its consequences. Specifically, we seek to serve the economically active poor who live on $4 per day or less indeveloping countries and provide a safety net to reduce economic setbacks.

3.5 Characteristics/ Features of Micro Insurance

1) USAGE: Though no figures are available on the exact size of the microinsurance market in India, a rough estimate would place it at

around 14m individuals, or approximately 2% of the adult population. The low take-up can be ascribed to a general lack of awareness of insurance as a financial product, even in the high to middle-income market (a factor that emerged strongly from the focus group findings). In addition a lack of rural financial services infrastructure for distribution purposes, as well as a lack of actuarial data, inhibit the development of the microinsurance market.

2) PLAYERS: Though the state-owned insurers still have the largest market share, there are now a total of 32 licensed insurers. A feature that sets India apart from other countries is the fact that microinsurance is mostly provided by large, corporate insurers. This is due to a cautious regulatory approach in response to the fact that small and cooperative financial institutions have not performed well historically that limits the players in the nonbank field to large cap institutions.The cooperative/mutual sector therefore does not feature as a provider of microinsurance, though corporate insurers use it as a distribution channel. Informal insurance is virtually exclusively the domain of formal entities such as health insurance schemes not registered for insurance purposes, rather than community risk-pooling groups, and is estimated to only comprise 20% of the market.

3) PRODUCTS:

Microinsurance in India is for the most part driven by compulsory credit life insurance on the back of microfinance. Due to the limited reach of the public health system, there is also a high natural demand for health insurance. Many MFIs therefore provide a package of compulsory insurance cover to their clients that are credit-linked this includes life, asset as well as health insurance. The cover is for the term of credit (usually 1 year). Health cover provided in such packages is not comprehensive and it covers only certain listed diseases for which hospitalization is required. Accident cover is a rider on life insurance and is a fixed payout. India is therefore fairly unique in that compulsory insurance cover extends beyond life cover. It is estimated that only 10% of microinsurance policies are sold on a voluntary basis. Of these, up to 90% are endowment products rather than pure risk products, indicating a preference among the lowincome population for financial products that provide some payout regardless of whether a risk event has occurred.

4) DISTRIBUTION: Distribution is an important part of the microinsurance landscape in India. Regulations were issued in 2005 to create a microinsurance agent category for the dedicated distribution of microinsurance. Currently such agents however only distribute about 20% of all microinsurance. Instead, distribution mainly takes place through MFIs who either do not qualify as microinsurance agents under the regulations or who find the regulations too restrictive, as partners or agents of formal

insurers. We can distinguish four institutional models for providing microinsurance which help us to understand how corporate insurers, government bodies as well as other institutions, such as microfinance institutions (MFIs) can play a role: i) Partner Agent Model: Commercial or public insurers together with MFIs or nongovernmental organizations (NGOs) collaboratively develop the product. The insurer absorbs the risk, and the MFI/NGO markets the product through its established distribution network. This lowers the cost of distribution and thus promotes affordability. This model of collaboration has become the dominant approach to microinsurance in India and has encouraged many microfinance institutions to switch from a fullservice model to the partner-agent model. Examples of this scheme are AIDMI's Afat Vimo as well as SEWA, a microinsurance pioneer, who offers its life, health and asset coverage in partnership with various insurers.

ii)

Community based Model: A group of people or local communities, MFIs, NGOs and/ or cooperatives develop and distribute their own product, manage the risk pool and absorb the risk. The Swayamkrushi Youth Charitable Organisation (YCO) in Andhra Pradesh is an example of a community-based model. It is primarily a savings and credit association with added insurance features. The cooperative's 8,100 members pay a yearly premium of Rs. 100

into a pool managed by the cooperative and receive cover for death and property loss. The life insurance benefit is Rs. 15,000 for a natural death, and Rs. 30,000 in the event of an accidental death.

iii)

In the in-house or full-service model: A MFI or NGO runs its own insurance scheme for its clients and any profit or loss is absorbed by the MFI. The system is not very common anymore but it still exists in some organizations such as SPANDANA, located in Guntur, Andhra Pradesh. This scheme started in urban areas and then moved to rural ones and has expanded enormously in recent years.

iv)

Provider model: Banks and other providers of microfinance can directly offer or require insurance contracts. These are usually coupled with credit, for example, to insure against default risk. This model is used widely in the general insurance market but high transaction costs and low ability to pay premiums inhibit its extensive use in the field of disaster insurance for the poor.

3.6 Micro Insurance Products in India

Bajaj Allianz Alp Nivesh Yojana An endowment plan with Life cover and Maturity benefit equal to sum assured +vested bonus.

Life cover and Maturity benefit equal to sum assured + vested bonus Guaranteed Surrender Value. Avail additional benefits including Accidental Death Benefit & Accidental Permanent Total / Partial Disability Benefit.

Bajaj Allianz Jana Vikas Yojana A single premium plan with maturity benefit of 125% of the single premium payable on survival till the end of the policy term. Life Cover. Maturity Benefit of 125%of the single premium payable on survival till the end of the policy term. Guaranteed Surrender Value.

Bajaj Allianz Saral Suraksha Yojana The Most economical term insurance policy with return of premium on maturity. Return of premium on maturity. Guaranteed Surrender Value. Avail additional benefits including Accidental Death Benefit & Accidental Permanent Total / Partial Disability Benefit. AVIVA Lifes Grameen Suraksha A micro-insurance rural term insurance plan for BASIX customers. This traditional term plan has been developed with the objective of giving the rural policyholder maximum benefits.

The policyholder pays premium for a period of just two years and then avails the term benefit for 5 or 10 years The minimum sum assured is Rs 5,000 and the maximum is Rs 50,000. In addition, tax benefits can be availed as per Section 80C of the Income Tax Act, 1961.

BSLI Bima Dhan Sanchay A Win-Win Situation Security plus Guarantee. The refund of premiums paid by you is guaranteed with 3 maturity options. Sum Assured Rs.5,000/- to Rs.50,000/Maximum Maturity age 65 years. A grace period of 180 days from the premium due date will be available to you. An option for additional Sum Assured is available provided the base sum assured is minimum Rs 10,000/- and the sum assured under the rider should not exceed the sum assured under the base product if the death occurs due to accident.

BSLI Bima Suraksha Super BSLI Bima Suraksha Super provides you life insurance cover for which you have to pay regular premium. The nominee gets the sum assured in the unfortunate event of death. BSLI Bima Suraksha Super provides you life insurance cover for which you have to pay regular premium. The nominee gets the sum assured in the unfortunate event of death.

Your premium depends on your age, gender, Sum Assured and benefit period chosen. At maturity, there is no benefit payable. An option for additional Sum Assured is available provided the base sum assured is greater than or equal to 10,000/- if the death occurs due to accident.

ICICI Pru Sarv Jana Suraksha ICICI Prudential Life Insurance presents its first Micro Insurance Plan - Sarv Jana Suraksha especially designed for rural population which provides total security to you and your family, at very affordable cost. Min / Max entry age-18 years - 55 years. Min/Max Sum Assured- Rs. 5,000 -Rs. 50,000. Policy Term -5 years. Cover ceasing age -60 years.

SBI Life insuances Grameen Super Suraksha and Grameen Shakti SBI Life insuances Grameen Super Suraksha and Grameen Shakti products have been designed to meet the requirements of the weaker sections of the rural population. Grameen Super Suraksha is a micro insurance pure term product and Grameen Shakti is micro insurance product with ROP.Grameen Shakti is a dual benefit life insurance product to safe guard the group member which provides Protection with maturity benefit at

affordable rates. It offers to the Family of the group member Protection & it offers to the Group member survival Benefit. Duration of plan: 5 years or 10 years as per the Group Master policyholders choice. Age at entry: Minimum 18 years age last birthday. Maximum 50 years age last birthday. Sum assured: Rs.5, 000/- to Rs.50, 000/- (in multiples of 5,000) as per choice of Master Policyholder. Premium frequency: Yearly. Requirement from the Group member: Automatic acceptance linked to signature of Membership form that includes Good health declaration and nomination clause. Death Benefits: First 45 days after the cover start date or after the revival date No death claim will be accepted (inclusive of accidental death) Form 46th day from cover start date / revival date Sum assured is payable

Tata AIG Life Sumangal Bima Yojana In this plan you have to pay premium for 10 years and you get insurance protection for 15 years. Enjoy total guaranteed returns of 120% of the total policy premium at specified intervals during term of the policy. Policy Term : 15 years Premium Paying term : 10 years Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-

Maximum Death Benefit (Sum Assured): Rs.30,000/Premium payment frequency : Monthly, quarterly, half yearly & yearly Survival Benefit: We shall pay you the survival benefits as below, if you have paid all due premiums.

Tata AIG Life Sampoorn Bima Yojana A low cost insurance plan where the policyholder receives all the premiums paid during the policy term upon survival until the term of the policy. Premiums are payable for only 10 years, while the coverage is up to 15 years. Policy Term : 15 years 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 is paid to the policyholders nominee Maturity benefit: At the end of the 15 years, all the premiums paid will be returned to the policyholder.

Tata AIG Life Sampoorn Bima Yojana A low cost insurance plan where the policyholder receives all the premiums paid during the policy term upon survival until the term of the policy. Premiums are payable for only 10 years, while the coverage is up to 15 years. Policy Term: 15 years

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 is paid to the policyholders nominee Maturity benefit: At the end of the 15 years, all the premiums paid will be returned to the policyholder.

Tata AIG Life Navkalyan Yojana A regular premium payment, low cost term plan for the rural adults who seek life insurance protection without any maturity benefit. Policy Term : 5 years 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 a nominal extra charge.

IDBI Fortis Group Microsurance Plan The first of its kind group that will be benefited by this unique plan is Samhita Community Development Services, announced officially by IDBI Fortis Life Insurance Co Ltd at a

press conference held at Bhopal today. This tie-up will insure 13,356 poor members for a Sum Assured of over Rs. 7cr. in the rural and urban areas of Madhya Pradesh. The plan provides affordable life insurance cover to groups offering great value to Micro Finance Institutions, Self-Help Groups and NGOs. Not only does the plan insure the lives of their group members and thus provide security to the group members families, it can also be used for providing protection from loan liabilities in the unfortunate event of the death of the main breadwinner.

Aviva Grameen Suraksha Grameen Suraksha is a life insurance plan that helps you protect your family's future. While there can be no compensation for the loss of life, Grameen Suraksha ensures that their financial needs are met when something unfortunate happen to you. Entry Age: 18 to 45 years Policy Term: 5 and 10 years Premium Paying Term: 2 years (payable in yearly mode only) Sum Assured: Rs. 5,000 to Rs.50,000 (in multiples of Rs. 5,000 only). A grace period of one month is allowed for payment of premium.

LIC's Jeevan Madhur Jeevan Madhur, is available to both male & female without any medical examination and is a simple saving related

life insurance plan covering individuals in the age group of 18 to 60 years. Minimum sum assured under the plan is Rs. 5000 and maximum sum assured is Rs. 30000. Mode of payment of premium can be even weekly/fortnightly in addition to other regular modes to suit the needs of people with low income. Minimum premium is Rs. 25/- per week, Rs. 50/- per fortnight, Rs. 100/- per month which is expected to be well within reach of the targeted group. The term of policy ranges between 5 to 15 years. The policy, if kept in full force, is entitled to the simple reversionary bonuses depending upon Corporations experience. Accident benefit is also applicable as per terms and conditions of the policy. After premiums are paid for 2 years, Auto Cover facility i.e., continuance of cover even in case of inability to pay premium up to 2 years from the date of First Unpaid premium is available to take care of contingencies and uncertainties of income.

LIC's Jeevan Mangal Aterm assurance plan with return of premiums paid on maturity. The Micro Insurance Plan Jeevan Mangal launched today is a term assurance plan with return of premium on maturity providing for a sum assured (risk cover) ranging from minimum of Rs.10, 000/- to maximum of Rs.50, 000/- with an optional accident benefit rider, together providing for total death benefit equal to double the sum assured, on death due to accident

Met Vishwas

It is a life insurance plan that protects you in case of death at a nominal cost when you survive the term of the policy you get back up to 125% of premium(in case of coverage term 10 years). Maturity benefit: 110% of the single premium paid for a 5 year coverage term 125% of the single premium paid for a 5 year coverage term Entry Age: 18 to 60years Policy Term: 5 or 10 years Premium Paying Term: 2 years (payable in yearly mode only) Sum Assured: Rs. 5,000 to Rs.50,000 (in multiples of Rs. 5,000 only). A grace period of one month is allowed for payment of premium.

SUD Life Paraspar Suraksha Plan The scheme has been specifically designed for the weaker sections of the society and those from the rural areas. The scheme covers the groups of 200 and or members. The scheme is to provide life cover at low cost to groups of persons engaged in a

common economic activity like those financed by an NGO, MFI or Banks in rural or urban areas. Entry Age: 18 to 50years Group size : minimum-100, maximum no limit Premium Paying Term:

Minimum premium- single premium-162.50, annual premium-33.50 Maximum premium- single premium-1625.0, annual premium-335.0 Sum Assured: Rs. 5,000 to Rs.50,000 (in multiples of Rs. 5,000 only)

3.7 Development of Micro-insurance in India

Historically in India, a few micro-insurance schemes were initiated, either by non-governmental organizations (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 to the development of microfinance activity, and partly due to the regulation that makes it mandatory 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-finance institutions (MFIs) and NGOs are negotiating with the for-profit insurers for the purchase of customized 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 million individuals---their potential is viewed to be considerable. The overall market is estimated to reach Rs. 250 billion by 2008 (ILO 2004). The insurance regulatory and development authority (IRDA) defines rural sector as consisting of: kilometer

ore than 25% of the male working population is engaged in agricultural pursuits. 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: 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 certain minimum percentage of total polices written by life insurance companies and for general insurance companies, these obligations are in terms of percentage of total gross premium collected. Some aspects of these obligations are particularly noteworthy. First, the social and rural obligations do not necessarily require (cross) subsidizing insurance. Second, these obligations 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 servicing the rural and low-income segment. Finally, non-fulfillment of these obligations can invite penalties from the regulator. Unorganized sector

In order to fulfill these requirements all insurance companies have designed products for the poorer sections and low-income individuals. Both public and private insurance companies are adopting similar strategies of developing collaborations with the various civil societies associations. The presence of these associations as a mediating agency, or what we call a nodal agency, that represents, and acts on behalf of the target community is essential in extending insurance cover to the poor. The nodal agency helps the formal insurance providers overcome both 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 local information and resources that helps in designing appropriate schemes delievered in cost effective way). In the absence of nodal agency, the low resource base of the poored coupled with high transaction costs (relative to the magnitude of transactions) given rise to affordability issue. Lack of affordability prevents their latent demand from expressing itself in the market. Hence the nodal agencies that organise the poor impart trainiing, and work for the welfare of the low income people play an important role both in generating both the demand for insurance as well as the supply of cost effective insurance.

3.8 Micro-insurance delivery models

One of the greatest challenges for micro-insurance is the actual delivery 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 microinsurance the partner-agent model, the provider-driven model, the full-service model, and the community-based model. Each of these models has their own advantages and disadvantages.

Partner agent model: A partnership is formed between the micro-insurance scheme and an agent (insurance company,micro finance institution, donor, etc.), and in some cases a third-party healthcare provider. The micro-insurance scheme is responsible for the delivery and marketing of products to the clients, while the agent retains all responsibility for design and development. In this model, micro-insurance schemes benefit from limited risk, but are also disadvantaged in their limited control.

Full service model: The micro-insurance scheme is in charge of

everything; both the design and delivery of products to the clients, working with external healthcare providers to provide the services. This model has the advantage of offering microinsurance schemes full control, yet the disadvantage of higher risks.

Provider-driven model: The healthcare provider is the microinsurance scheme, and similar to the full-service model, is responsible for all 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.

Community-based/mutual model: The policyholders or clients are in charge, managing and owning the operations, and working with external healthcare providers 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.

3.9 Major Players in Micro Insurance

Life Insurance Corporation of India (LIC) Life Insurance Corporation of India (LIC) was established on 1 September 1956 to spread the message of life insurance in the country and mobilise peoples savings for nationbuilding activities. LIC with its central office in Mumbai and seven zonal offices at Mumbai, Calcutta, Delhi, Chennai, Hyderabad, Kanpur and Bhopal, operates through 100 divisional offices in important cities and 2,048 branch offices. LIC has 5.59 lakh active agents spread over the country. The Corporation also

transacts business abroad and has offices in Fiji, Mauritius and United Kingdom. LIC is associated with joint ventures abroad in the field of insurance, namely, Ken-India Assurance Company Limited, Nairobi; United Oriental Assurance Company Limited, Kuala Lumpur; and Life Insurance Corporation (International), E.C. Bahrain. It has also entered into an agreement with the Sun Life (UK) for marketing unit linked life insurance and pension policies in U.K. The introduction of private players in the industry has added to the colors in the dull industry. The initiatives taken by the private players are very competitive and have given immense competition to the on time monopoly of the market LIC. Since the advent of the private players in the market the industry has seen new and innovative steps taken by the players in this sector. The new players have improved the service quality of the insurance. As a result LIC down the years have seen the declining phase in its career. The market share was distributed among the private players. Though LIC still holds the 75% of the insurance sector but the upcoming natures of these private players are enough to give more competition to LIC in thenear future. LIC market share has decreased from 95% (2002-03) to 82 %( 2004-05).

ICICI Prudential Life Insurance Company Ltd . ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and

prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). The company has a network of about 56,000 advisors; as well as banc assurance and 150 corporate agent tie-ups.

Birla Sun Life Insurance Company Ltd . Established in 2000, Birla Sun Life Insurance Company Limited (BSLI) is a jointventure between the Aditya Birla Group, a well known and trusted name globally amongst Indian conglomerates and Sun Life Financial Inc, leading international financial services organization from Canada. The local knowledge of the Aditya Birla Group combined with the domain expertise of Sun Life Financial Inc., offers a formidable protection for its customers future.

Tata AIG Life Insurance Company Ltd . Tata AIG Life Insurance Company Ltd. "Tata AIG Life" offers a broad array of life insurance products to individuals, associations and businesses of all sizes, with a wide variety of additional coverage to ensure our customers can find an insurance product to meet their needs. Tata AIG Life is a joint venture of the Tata Group and American International Group, Inc. (AIG). They 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. Our micro insurance distribution model collaborates with NGOs (Nongovernmental organisations) and rural organizations with community level SHG (Self Help Group) women advisors who provide insurance advisory services to the rural customers at their doorstep.

SBI Life I nsurance Company Limited SBI Life Insurance Company Limited is a joint venture between the State Bank of India and BNP Paribas Assurance. SBI Life Insurance is registered with an authorized capital of Rs 2000 crores and a Paid-up capital of Rs 1000 Crores. SBI owns 74% of the total capital and BNP Paribas Assurance the remaining 26%.

State Bank of India enjoys the largest banking franchise in India. Along with its Associate Banks, SBI Group has the unrivalled strength of over 16,000 branches across the country, arguably the largest in the world. SBI Life has a unique multi-distribution model encompassing vibrant Bancassurance, Retail Agency, Institutional Alliances and Corporate Solutions distribution channels. SBI Life extensively leverages the SBI Group as a platform for cross-selling insurance products along with its numerous banking product packages such as housing loans and personal loans. SBIs access to over 100 million accounts across the country provides a vibrant base for insurance

penetration across every region and economic strata in the country ensuring true financial inclusion.

ING Vysya Life Insurance Company Private Limited ING Vysya Life Insurance (ING Life), a part of the ING Group the worlds largest financial services corporation entered the private life insurance industry in India in September 2001. Headquartered at Bangalore, ING Life India is staffed by over 6,000 employees and services more than 10 lakhs customers. ING Life India is a joint venture between ING Group (ING Insurance International B.V.) & Exide Industries. ING Life has a pan India network, and distributes its products through two channels, the Tied Agency Force and the Alternate Channel. The Tied Agency force comprises of over 60,000 ING Life Advisors, spread across the country. The channel has branches in 234 cities, and 366 sales teams across the country. The Alternate Channels business within ING Life is one of the fastest growing distribution channels. The company currently has tie ups with over 200 cooperative bank across the country. The Alternate Channels division has Bancassurance (ING Vysya Bank), Referral Banks, Corporate Agents, Brokers and SMINCE.

Allianz Bajaj Life Insurance Company Ltd .

Bajaj Allianz Life Insurance is a union between Allianz SE, one of the largest Insurance Company and Bajaj Finserv. Allianz SE is a leading insurance conglomerate globally and one of the largest asset managers in the world, managing assets worth over a Trillion (Over INR. 55, 00,000 Crores). Allianz SE has over 115 years of financial experience and is present in over 70 countries around the world.

Metlife India Insurance Company Pvt. Ltd . MetLife India Insurance Company Limited (MetLife) is an affiliate of MetLife, Inc. and was incorporated as a joint venture between MetLife International Holdings, Inc. The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and other private investors. MetLife is one of the fastest growing life insurance companies in the country. It serves its customers by offering a range of innovative products to individuals and group customers at more than 600 locations through its bank partners and company-owned offices. MetLife has more than 50,000 Financial Advisors, who help customers achieve peace of mind across the length and breadth of the country.

Aviva Life Insurance Company India Limited Aviva India is a joint venture between one of the countrys oldest and largest groups, Dabur, and Aviva plc, the UK's largest insurance group, whose association with India dates back to 1834. With a strong sales force of over 30,000 Financial

Planning Advisers (FPAs), we have initiated and pioneered many innovative sales approaches, including the concept of Bancassurance and Financial Health Check services. We are among the first companies to introduce the contemporary unitlinked products with a wide distribution network of 195 branches and close to 40 Bancassurance partnerships, we are spread across nearly 3,000 towns and cities in India.

Sahara India life insurance The Sahara Pariwars latest foray is in the field of Life Insurance. The Pariwars life insurance company Sahara India Life Insurance Company Ltd.- has been granted licence by the insurance regulator the IRDA on 6th February 2004. With this approval Sahara India Life Insurance Company Ltd. becomes the first wholly and purely Indian company, without any foreign collaboration to enter the Indian Life insurance market. The launch is with an initial paid up capital of 157 crores. The Chairman of the company is Shri Subrata Roy Sahara who is also the Chairman of Sahara Pariwar.

Shriram life insurance company Shriram Life Insurance Company is the joint venture between the Shriram Group and the Sanlam Group. The Shriram Group is one of the largest and well-respected financial services conglomerates in India. The Group's main line of activities in financial services include chit fund, truck financing, consumer durable financing, stock broking, insurance broking and life

insurance. The Group has a customer base of 30 lacs chit subscribers and investors and operates through a network of 630 offices all over the country. The Group has the largest agency force in the private sector consisting of more than 75,000 loyal and dedicated agents.

IDBI Fortis Life Insurance Company Ltd . IDBI Fortis Life Insurance Co Ltd is a joint-venture of IDBI Bank, Indias premier development and commercial bank, Federal Bank, one of Indias leading private sector banks and Fortis Insurance International, a multinational insurance giant based out of Europe. In this venture, IDBI owns 48% equity while Federal Bank and Fortis own 26% equity each. Having started in March 2008, in just five months of inception we became one of the fastest growing new insurance companies to garner Rs 100 Cr in premiums. The company offers its services through a vast nationwide network across the branches of IDBI Bank and Federal Bank in addition to a sizeable network of advisors and partners.

DLF Pramerica Life Insurance Co. Ltd . DLF Pramerica Life Insurance Company Ltd. (DPLI) is a joint venture between DLF Limited and Prudential International Insurance Holdings, Ltd. (referred to hereafter as "PIIH"). PIIH is a fully owned subsidiary of Prudential Financial, Inc. (referred to hereafter as "PFI"). The combination of the strength of the DLF

brand and PFI's insurance expertise provide the strongest possible foundations for DPLI to succeed in the rapidly growing Indian life insurance market.

Star Union Dai- ichi Life Insurance Co. Ltd. , Bank of India and Union Bank of India, two leading Public Sector Banks in India and the Dai-ichi Mutual Life Insurance Company, a leading Japanese Company in the Life Insurance market, have floated a Joint Venture Company, "Star Union Dai-ichi Life Insurance Co. Ltd." for undertaking Life Insurance Business in India. The Company has a capital stake of 51% by BOI, 26% by Dai-ichi Life and 23% by Union Bank. The Company has authorized capital of Rs. 250.00 Crores. Star Union Dai-ichi Life, with the strength of the domestic partners in the Indian Financial Sector coupled with the Dai-ichi Lifes strong domain expertise is expected, to be a strong player in the Indian Life Insurance market in a short time. The Company offers various products to serve all strata of the society.

3.10 Initiative Taken By Private Sectors

1. TATA AIG LIFE Tata AIG Life - First insurance company to launch Micro Insurance.

insurance company insurance branches to the rural community

an Indian

2. 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 and jurisdictions. AIG companies serve

commercial, institutional and individual customers through the most extensive worldwide property-casualty and life insurance networks of any insurer. In addition, AIG companies are leading providers of retirement services, financial services and asset management around the world.

AIG's common stock is listed in the U.S. on the New York Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo. Micro Insurance is the process of delivering and servicing relevant and affordable life insurance products 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 with death benefits ranging from Rs.5, 000 to Rs.50, 000. With premiums as low as Rs.5** per month, there is now an affordable life insurance product for nearly every rural household in India.

Policies Available: The following special Micro Insurance products from Tata AIG Life are now available for the rural population at the bottom of the pyramid. Navkalyan Yojana Ayushman Yojana Sampoorn Bima Yojana

3. 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 Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/Maximum Death Benefit (Sum Assured): Rs.50,000/ Rider : Option to attach Accident Death Benefit Rider for issue ages 18 to 55 years at a nominal extra charge. Premium payment frequency : Monthly, quarterly, half yearly & yearly Death Benifit : Sum assured to the policyholders nominee

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.

4. AYUSHMAN YOJANA

A single premium plan where the policyholder pays the premium at the beginning of the policy term. This is especially useful for those rural people who have a seasonal income. Key features include: Policy Term : 10 years Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/Maximum Death Benefit (Sum Assured): Rs.50,000/ Death Benifit : Sum assured to the policyholders nominee Maturity benefit : On survival, 125% of the single premium paid.

Tax Benefits and Age Eligibility ble for tax benefits to the extent of 20% of Sum Assured as per the Income Tax Act, 1961 and are subject to amendments made therein from time to time. Anyone between ages 18 and 60 can apply for this policy.

5. SAMPOORNA BIMA YOJANA

A low cost insurance plan where the policyholder receives all the premiums paid during the policy 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. Our micro insurance distribution model collaborates with NGOs (Non-governmental organizations) and rural organizations with community level SHG (Self Help Group) women advisors who provide insurance advisory services to the rural customers at their doorstep. The grassroots level agents explain the product details in the local language of the customer, thereby enabling the customer to make a decision. The training programs, brochures, contract documents, and application forms are available in 8 different languages other than English and Hindi Key features include: Policy Term : 15 years

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 is paid to the policyholders nominee Maturity benefit : At the end of the 15 years, all the premiums paid will be returned to the policyholder.

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.

Chapter No. 4 DATA ANALYSIS

In this section of the research all the primary data are analysed with the help of pie charts and bar graphs. Respondents Profile All of the respondents are daily earners, chosen randomly and all of them are male, with age more than 25 years.

1)

What is annual income of Family? Number of respondents 0 54 35 11

Option Less than 3000 30000-60000 60000-90000 more than 90000

Major portion of respondents belongs to income group 3000090000, only 11 respondents family income is more than ninety thousands as there is more than one earner in their family.

2)

Number of family member in their house? Number of respondents 0 5 27 34 28 6

Option 2 3 4 5 6 More than

Most of respondents are married having one or two children. 34% of respondents have family of size 5, 27% and 28% of respondents live in a family of 4 and six respectively.

3)

Do you understand microinsurance? Number of respondents 0 100

Option Yes No

As we can see from above pie chart 100% respondents are totally unaware of the Microinsurance.

4)

Have you ever invested in any Insurance policy? Number of respondents 7 93

Option Yes No

Only seven respondents have invested in Insurance policy and rest of 93% of respondents have not invested in any insurance policy.

5)

Do you think insurance is / will helpful to you? Number of respondents 56 12 32

Option Yes No May be

After explaining them about benefits of insurance 56% of respondents says insurance will be helpful for them and 32 % were in dilemma .

6)

Are you interested in investing in Microinsurance? Number of respondents

Option

Yes
No

74
26

As from above figure we can see that 74% of respondents are interested in investing in Microinsurance but 26% were not interested in Microinsurance.

7)

Does any insurance agent have come to you for your insurance?

Option
Yes

Number of respondents
43

No

57

In spite of only 7 had invested in insurance but 43 respondents were approached by insurance agents maximum of agents are of LIC. It shows the wide network of agents of LIC among the lowest class of the people. Rest of 57% of respondents are not approached by any insurance agents.

8)

If an opportunity comes in front of you to invest in Insurance which type of organization you will choose?

Option Government insurance company Private sector insurance company

Number of respondents 94 6

About 94% of respondents choose government owned insurance companies rather than private insurance companies.

9)

Do you have any account in? Number of respondents 22 42 24

Option Bank and Post office Bank and Cooperative society Bank and Others

All of respondents have a bank account generally all of them have bank account is PSBs, 42% have recurring account local co-operative society banks which daily takes some amount for depositing same like former some of them have in account in SAHARA and other NBFCs where they daily or weekly deposit

money ranging from 100-200 weekly. 22% of the respondents have deposit account in Post-office.

10)

In which type of Insurance policy you will invest/ have invested?

Options Term Insurance Policy Endowment Policy Ulip Policy Health Insurance Policy

Number of respondents 14 53 9 24

More than half of respondents choose endowment policies, health insurance of their children comes at second preference and term insurance comes next to them.

11)

How much premium you are paying/will prefer annually for insurance?

Option Less than 1000 1000-3000 3000-5000 More than 5000

Number of respondents 5 35 56 3

As we can see 56% of respondents are ready to invest daily 10-20 Rs. For investment in insurance, 35% of respondents wants to pay 1000 to 3000 Rs for premium, premium amount more than 5000 is chosen by only 3 respondents.

12)

Which mode of payment will you prefer for premium? Number of respondents 2 12 6 30 17 33

Option Annual Quarter Semi annually Monthly Weekly Daily

As from above graph we can see that 33% of respondents want to pay daily and 30% wants to pay monthly premium, 17 % of respondents choose to pay weekly premium for the insurance as majority of these respondents are daily earners.

13) Where will you prefer to give your premium? Option

At your door step At Bank At Post office Other place

Number of respondents
96 4 0 0

96% of respondents prefer to give premium at their home or at their shop, only 4 respondents prefers bank and none of them prefer post office or any other place.

FINDINGS
Below are the findings of the research, all the options were tick by respondents the findings are summarized in the table where first column represents questions in the questionnaire ,second column represents options of the questions and third column represents number of respondents ticks every options.

1.

Maximum of respondents were daily earners their income varies from season to season, in their peak seasons the earns 200-300 per day but in off season their earning decreases significantly, those respondents who were salaried people get monthly salary ranging from 3000-5000 per months.

2.

Most of respondents are married having one or two children. 34% of respondents have family of size 5, 27% and 28% of respondents live in a family of 4 and six respectively. Those families which have five or more than five members; they generally live in combined family and these families have income level more than five thousand per month. 34% of the respondents have 5 family member, 28% and 27% respondents have 6 and 4 family members respectively.

3.

Most of the respondents have heard about insurance but they are totally unaware of Microinsurance, they believe depositing their

money in bank or post-office is more profitable than putting money in insurance, also ease of withdrawing money from bank and post-office makes their investment more liquid.

4.

Only 7 respondents have invested in insurance policy, all of them belongs to income level of more than 90000 Rs. Per annum out of which 2 have invested their money only for one and 3 years only and they stopped giving premium for their insurance due to some problems and all of them invested in LICs policy.

5.

After explaining those about need and benefits of insurance 56% of respondents want to invest in insurance policy but lack of knowledge and awareness about insurance stop them for investing. Many of them told that they dont need insurance as there is very low chance miss happening to them. In spite of they are more vulnerable to risks; negligence and ignorance of risk for their health or life also prevent them for investing in insurance.

6.

As majority of respondents are daily earners and 74% are ready to invest in microinsurance policy, they are ready to give daily 1020 Rs for their insurance if someone collects premium from their shops.

7.

In spite of only 7 had invested in insurance but 43 respondents were approached by insurance agents maximum of agents are of LIC. It

shows the wide network of agents of LIC among the lowest class of the people. Rest of 57% of respondents are not approached by any insurance agents
8.

Maximum of respondents choose government companies rather than private insurance firms as they think they are cheaper, reliable and ease in claiming insurance money.

9.

All of respondents have a bank account generally all of them have bank account is PSBs as minimum deposit required in these banks are generally lower than private banks, second highest number, 42% have recurring account local co-operative society banks which daily takes some amount for depositing same like former some of them have in account in SAHARA and other NBFCs where they daily or weekly deposit money ranging from 100- 200 weekly. 22% of the respondents have deposit account in Postoffice.

10.

After explaining them about different types of insurance policies 53% of respondents opted endowment policy as after maturity period they get back invested amount. 24% of respondents opt for health insurance as Health insurance reimburse all the hospitalization expenses of insured, maximum of respondents was curious about ULIP policies but lack of document like Pan Card, risk of losing money and high cost of insurance prevents them to opt Ulip policy, low cost of term insurance is very good for them but no reimbursement after maturity if nothing mis -happen with them stop them to opt for Term insurance.

11.

56% of respondents are ready to invest daily 10-20 Rs. for investment in insurance. Also they want some flexibility in payment of premium like if they cant pay premium of the day they can give on next day. Some of them also suggest that in the business season they can give double of the premium

amount and when business is off they will not pay premium, 35 % of respondents wants to pay 1000 to 3000 Rs for premium.
12.About

three-fourth of the respondents opts to pay premium at very

short duration as they are mainly daily earner, so they want to pay premium as soon as they earn it gives ease to them to pay premium daily or weekly, maximum of them have a recurring account and bank personal daily come to collect money for their deposits in the same way they want pay premium for their insurance. 33% of respondents want to pay daily and 30% wants to pay monthly premium.

13.Approximately all of the respondents want to pay premium at their door step they want insurance agents to come at their shop or their home to collect premium of the insurance.

SUGGESTIONS
The results indicate that there is a huge untapped market for microinsurance in Indore District. With appropriate delivery channels, types of coverage, product simplicity and easy premium collection this huge untouched market can be catered by insurers. Although the current reach of micro-insurance is limited, the trend in this respect suggests that the insurance companies, both public and private, operating with commercial considerations, can insure a significant percentage of the poor. Serving low-income people who can pay the premium certainly makes a sound commercial sense to insurance providers. To that extent imposing social and rural obligations by insurance regulator (IRDA) is helping all insurance companies appreciate the vast untapped potential in serving the lower end of the market. Most of respondents are completely unaware of

microinsurance products but many of them are aware of insurance products. Given irregular and uncertain income stream of the poor, flexibility in premium collection is needed to extend the microinsurance net far and wide. MFIs are playing a significant role in improving the lives of poor households. Quite apart from this, linking micro-insurance with micro-finance makes better sense as it helps in bringing down the cost of lending. Income of the family has been found an important factor, higher income increases probability of purchasing Insurance product. Maximum or respondents wants to insure their children as they believe insurance will help them in saving money as well as protection

for their future. Endowment policies are most liked by respondents because it gives death benefits as well as survival benefits. Maximum of the respondents believes in government banks and insurance companies as they think that private companies charges more than government owned companies and their hard earned money will be more safe in government firms than private companies. Many of them want to pay Rs. 10-20 for premium on daily or weekly basis at their shops or at home.

Questionnaire 1) Do you understand microinsurance? a) YES [ ] b) NO [ ]

2) Have you ever invested in any Insurance Policy? a) YES [ ] b) NO [ ] 3) Do you think Insurance is/ will helpful to you? a) YES [ ] b) NO [ ] c) May be [ ]

4) Are you interested in investing microinsurance Policy? a) YES [ ]

b) NO [ ]

5) Does any insurance agent have come to you for your insurance? a) YES [ ] b) NO [ ]

6) If an opportunity comes in front of you to invest in Insurance which type of organization you will choose? a) Public sector insurance company [ ] b) Private sector insurance company [ ]

7) Do you have any account in ? a) Bank [ ] b) Post office [ ] c) Cooperative society [ ] d) Others [ ]

8) In which type of insurance policy you will/ have invest/ invested? a) Term Insurance Policy [ ] b) Endowment Policy [ ] c) Ulip Policy [ ] d) Health Insurance Policy [ ]

9) How much premium you are paying/will pay annually for your insurancepolicy? a) Less than 1000 [ ] b) 1000-3000 [ ] c) 3000-5000 [ ] d) More than 5000 [ ]

10) Which mode of payment will you prefer for premium? a) Annual [ ] b) Quarterly [ ] c) Semi annually [ ] d) Monthly [ ] e) Weekly [ ] f) Daily [ ]

11) Where will you prefer to give your premium? a) At your door step [ ] b) At Bank [ ] c) At Post office [ ]
a) Other

place [ ]