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A
PROJECT REPORT
ON
FINANCE IN MICRO INSURANCE
AT
SHAREKHAN LIMITD
Hyderabad
Submitted by
RAMAKRISHNA.CHERUKU
(H.No.09007C-1086)
KAKATIYA UNIVERSITY
In partial fulfillment of the requirements for the award of
MASTERS OF BUSINESS ADMINISTRATION
(2008-2010)
LAL BAHADUR COLLEGE OF P.G CENTRE
MULUGU ROAD, WARANGAL.
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DECLARATION
I hereby declare that the project report titled FINANCE IN MICRO INSURANCE
submitted in partial fulfillment of the requirements for the POST GRADUATION OF
MASTERS IN BUSINESS ADMINISTRATION, from LAL BAHADUR COLLEGE OF P.G
CENTRE, KAKATIYA UNIVERSITY, WARANGAL is my original work and not submitted
for the award of any other Degree, Diploma, Fellowship or prizes.
DATE: RAMAKRISHNA.CHERUKU
PLACE: (HT.NO.09007C-1086)
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CERTIFICATE
This is to certify that the project report entitled FINANCE IN MICRO INSURANCE
carried at SHAREKHAN LIMITED is a bonafide work done by Mr. RAMAKRISHNA
CHERUKU bearing Roll No. 09007C-1086 a student of MBA (Finance) of LAL BAHADUR
COLLEGE OF P.G CENTRE WARANGAL and submitted the same in partial fulfillment for the
award of the degree of MASTER OF BUSINESS ADMINISTRATION affiliated to
KAKATIYA University for the scholastic year 2008-10.
We found the work carried out by her to be good. We wish her success in all future
endeavors.
MR.SUDHARSHAN EXTERNAL (Mr.SHANKARAIAH)(Internal Project Guide) (Examiner) (Principal)LECTURE IN FINANCE
LB P.G CENTREWARANGAL.
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ACKNOWLEDGEMENT
I take this opportunity to express my sincere gratitude to the staff ofLAL BAHADUR
COLLEGE OF P.G CENTRE. I specially thank THE MANAGEMENT AND STAFF OF
SHAREKHAN LIMITED for creating out the study and for their guidance and encouragement
that made the project very effective and easy.
I sincerely express my gratitude to MR. SURESH VARMA, SHAREKHAN
LIMITED, for his guidance and support throughout my project.
I would like to thankMr. SHANKARAIAH, for guiding and directing me in the process
of making this project report and for all the support and encouragement.
I am grateful to our Internal Faculty Mr. SRINATH for his support and assistance in
Completion of my project work.
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INDUSTRY PROFILE
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INDUSTRY PROFILE
Following diagram gives the structure of Indian financial system:
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FINANCIAL MARKET:
Financial markets are helpful to provide liquidity in the system and for smooth functioning of
the system. These markets are the centers that provide facilities for buying and selling of
financial claims and services. The financial markets match the demands of investment with
the supply of capital from various sources.
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According to functional basis financial markets are classified into two types.
They are:
Money markets (short-term)
Capital markets (long-term)
According to institutional basis again classified in to two types. They are
Organized financial market
Non-organized financial market.
The organized market comprises of official market represented by recognized institutions,
bank and government (SEBI) registered/controlled activities and intermediaries. The
unorganized market is composed of indigenous bankers, moneylenders, individual
professional and non-professionals.
MONEY MARKET:
Money market is a place where we can raise short-term capital.
Again the money market is classified in to
Inter bank call money market
Bill market and
Bank loan market Etc.
E.g.; treasury bills, commercial papers, CD's etc.
CAPITAL MARKET:
Capital market is a place where we can raise long-term capital.
Again the capital market is classified in to two types and they are Primary market and
Secondary market.
E.g.: Shares, Debentures, and Loans etc.
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PRIMARY MARKET:
Primary market is generally referred to the market of new issues or market for mobilization
of resources by the companies and government undertakings, for new projects as also for
expansion, modernization, addition, diversification and up gradation. Primary market is alsoreferred to as New Issue Market. Primary market operations include new issues of shares by
new and existing companies, further and right issues to existing shareholders, public offers,
and issue of debt instruments such as debentures, bonds, etc.
The primary market is regulated by the Securities and Exchange Board of India (SEBI a
government regulated authority).
FUNCTION:
The main services of the primary market are origination, underwriting, and distribution.
Origination deals with the origin of the new issue. Underwriting contract make the shares
predictable and remove the element of uncertainty in the subscription. Distribution refers to
the sale of securities to the investors.
The following are the market intermediaries associated with the market:
1. Merchant banker/book building lead manager
2. Registrar and transfer agent
3. Underwriter/broker to the issue
4. Adviser to the issue
5. Banker to the issue
6. Depository
7. Depository participant
INVESTORS PROTECTION IN THE PRIMARY MARKET:
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To ensure healthy growth of primary market, the investing public should be protected. The
term investor protection has a wider meaning in the primary market. The principal
ingredients of investors protection are:
Provision of all the relevant information
Provision of accurate information and
Transparent allotment procedures without any bias.
SECONDARY MARKET
The primary market deals with the new issues of securities. Outstanding securities are traded
in the secondary market, which is commonly known as stock market or stock exchange. The
secondary market is a market where scrips are traded. It is a market place which provides
liquidity to the scrips issued in the primary market. Thus, the growth of secondary market
depends on the primary market. More the number of companies entering the primary market,
the greater are the volume of trade at the secondary market. Trading activities in the
secondary market are done through the recognized stock exchanges which are 23 in number
including Over the Counter Exchange of India (OTCE), National Stock Exchange of India
and Interconnected Stock Exchange of India.
Secondary market operations involve buying and selling of securities on the stock exchange
through its members. The companies hitting the primary market are mandatory to list their
shares on one or more stock exchanges in India.
Listing of scrips provides liquidity and offers an opportunity to the investors to buy or sell
the scrips.
The following are the intermediaries in the secondary market:
1. Broker/member of stock exchange buyers broker and sellers broker
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2. Portfolio Manager
3. Investment advisor
4. Share transfer agent
5. Depository
6. Depository participants.
STOCK MARKETS IN INDIA:
Stock exchanges are the perfect type of market for securities whether of government and
semi-govt bodies or other public bodies as also for shares and debentures issued by the joint-
stock companies. In the stock market, purchases and sales of shares are affected in conditions
of free competition. Government securities are traded outside the trading ring in the form of
over the counter sales or purchase. The bargains that are struck in the trading ring by the
members of the stock exchanges are at the fairest prices determined by the basic laws of
supply and demand.
Definition of a stock exchange:
Stock exchange means any body or individuals whether incorporated or not, constituted for
the purpose of assisting, regulating or controlling the business of buying, selling or dealing in
securities. The securities include:
Shares of public company.
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Government securities.
Bonds
HISTORY OF STOCK EXCHANGES:
The only stock exchanges operating in the 19th century were those of Mumbai setup in 1875
and Ahmedabad set up in 1894. These were organized as voluntary non-profit-marking
associations of brokers to regulate and protect their interests. Before the control on securities
under the constitution in 1950, it was a state subject and the Bombay securities contracts
(control) act of 1925 used to regulate trading in securities. Under this act, the Mumbai stock
exchange was recognized in 1927 and Ahmedabad in 1937. During the war boom, a number
of stock exchanges were organized. Soon after it became a central subject, central legislation
was proposed and a committee headed by A.D.Gorwala went into the bill for securities
regulation. On the basis of the committees recommendations and public discussion, the
securities contract (regulation) act became law in 1956.
FUNCTIONS OF STOCK EXCHANGES:
Stock exchanges provide liquidity to the listed companies. By giving quotations to the listed
companies, they help trading and raise funds from the market. Over the hundred and twenty
years during which the stock exchanges have existed in this country and through their
medium, the central and state government have raised crores of rupees
by floating public loans. Municipal corporations, trust and local bodies have obtained from
the public their financial requirements, and industry, trade and commerce- the backbone of
the countrys economy-have secured capital of crores or rupees through the issue of stocks,
shares and debentures for financing their day-to-day activities, organizing new ventures and
completing projects of expansion, diversification and modernization. By obtaining the listing
and trading facilities, public investment is increased and companies were able to raise more
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funds. The quoted companies with wide public interest have enjoyed some benefits and
assets valuation has become easier for tax and other purposes.
VARIOUS STOCK EXCHANGES IN INDIA:
At present there are 23 stock exchanges recognized under the securities contracts
(regulation), Act, 1956. Those are:
Ahmedabad Stock Exchange Association Ltd.
Bangalore Stock Exchange
Bhubaneshwar Stock Exchange Association
Calcutta Stock Exchange
Cochin Stock Exchange Ltd.
Coimbatore Stock Exchange
Delhi Stock Exchange Association
Guwahati Stock Exchange Ltd
Hyderabad Stock Exchange Ltd.
Jaipur Stock Exchange Ltd
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Kanara Stock Exchange Ltd
Ludhiana Stock Exchange Association Ltd
Madras Stock Exchange
Madhya Pradesh Stock Exchange Ltd.
Magadh Stock Exchange Limited
Meerut Stock Exchange Ltd.
Mumbai Stock Exchange
National Stock Exchange of India
OTC Exchange of India
Pune Stock Exchange Ltd.
Saurashtra Kutch Stock Exchange Ltd.
Uttar Pradesh Stock Exchange Association
Vadodara Stock Exchange Ltd.
Out of these major stock exchanges were:
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1. NSE (National Stock Exchange)
2. BSE (Bombay Stock Exchange)
NSE (National Stock Exchange):
The National Stock Exchange of India Limited has genesis in the report of the High Powered
Study Group on Establishment of New Stock Exchanges, which recommended promotion of
a National Stock Exchange by financial institutions (FIs) to provide access to investors from
all across the country on an equal footing. Based on the recommendations, NSE was
promoted by leading Financial Institutions at the behest of the Government of India and was
incorporated in November 1992 as a tax-paying company unlike other stock exchanges in the
country. On its recognition as a stock exchange under the Securities Contracts (Regulation)
Act, 1956 in April 1993, NSE commenced operations in the Wholesale Debt Market (WDM)
segment in June 1994. The Capital Market (Equities) segment commenced operations in
November 1994 and operations in Derivatives segment commenced in June 2000
NSE's mission is setting the agenda for change in the securities markets in India. The NSE
was set-up with the main objectives of:
Establishing a nation-wide trading facility for equities and debt instruments.
Ensuring equal access to investors all over the country through an appropriate
communication network.
Providing a fair, efficient and transparent securities market to investors using electronictrading systems.
Enabling shorter settlement cycles and book entry settlements systems, and
Meeting the current international standards of securities markets.
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The standards set by NSE in terms of market practices and technology, have become industry
benchmarks and are being emulated by other market participants. NSE is more than a mere
market facilitator. It's that force which is guiding the industry towards new horizons and
greater opportunities.
BSE (Bombay Stock Exchange):
The Stock Exchange, Mumbai, popularly known as "BSE" was established in 1875 as "The
Native Share and Stock Brokers Association". It is the oldest one in Asia, even older than the
Tokyo Stock Exchange, which was established in 1878. It is a voluntary non-profit making
Association of Persons (AOP) and is currently engaged in the process of converting itself
into demutualised and corporate entity. It has evolved over the years into its present status as
the premier Stock Exchange in the country. It is the first Stock Exchange in the Country to
have obtained permanent recognition in 1956 from the Govt. of India under the Securities
Contracts (Regulation) Act 1956.The Exchange, while providing an efficient and transparent
market for trading in securities, debt and derivatives upholds the interests of the investors and
ensures redresses of their grievances whether against the companies or its own member-
brokers. It also strives to educate and enlighten the investors by conducting investor
education programmers and making available to them necessary informative inputs.
A Governing Board having 20 directors is the apex body, which decides the policies and
regulates the affairs of the Exchange. The Governing Board consists of 9 elected directors,
who are from the broking community (one third of them retire ever year by rotation), three
SEBI nominees, six public representatives and an Executive Director & Chief Executive
Officer and a Chief Operating Officer.
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The Executive Director as the Chief Executive Officer is responsible for the day-to-day
administration of the Exchange and the Chief Operating Officer and other Heads of
Department assist him.
The Exchange has inserted new Rule No.126 A in its Rules, Byelaws pertaining to
constitution of the Executive Committee of the Exchange. Accordingly, an Executive
Committee, consisting of three elected directors, three SEBI nominees or public
representatives, Executive Director & CEO and Chief Operating Officer has been
constituted. The Committee considers judicial & quasi matters in which the Governing Board
has powers as an Appellate Authority, matters regarding annulment of transactions,
admission, continuance and suspension of member-brokers, declaration of a member-brokeras defaulter, norms, procedures and other matters relating to arbitration, fees, deposits,
margins and other monies payable by the member-brokers to the Exchange, etc.
REGULATORY FRAME WORK OF STOCK EXCHANGE
A comprehensive legal framework was provided by the Securities Contract Regulation Act,
1956 and Securities Exchange Board of India 1952. Three tier regulatory structure
comprising
Ministry of finance
The Securities And Exchange Board of India
Governing body
MEMBERS OF THE STOCK EXCHANGE:
The securities contract regulation act 1956 has provided uniform regulation for the admissionof members in the stock exchanges. The qualifications for becoming a member of a
recognized stock exchange are given below:
The minimum age prescribed for the members is 21 years.
He should be an Indian citizen.
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He should be neither a bankrupt nor compound with the creditors.
He should not be convicted for fraud or dishonesty.
He should not be engaged in any other business connected with a company.
He should not be a defaulter of any other stock exchange.
The minimum required education is a pass in 12th standard examination.
SECURITIES AND EXCHANGE BOARD OF INDIA (SEBI)
The securities and exchange board of India was constituted in 1988 under a resolution of
government of India. It was later made statutory body by the SEBI act 1992.according to this
act, the SEBI shall constitute of a chairman and four other members appointed by the central
government.
With the coming into effect of the securities and exchange board of India act, 1992 some of
the powers and functions exercised by the central government, in respect of the regulation of
stock exchange were transferred to the SEBI.
OBJECTIVES AND FUNCTIONS OF SEBI
To protect the interest of investors in securities.
Regulating the business in stock exchanges and any other securities market.
Registering and regulating the working of intermediaries associated with securities
market as well as working of mutual funds.
Promoting and regulating self-regulatory organizations.
Prohibiting insider trading in securities.
Regulating substantial acquisition of shares and take over of companies.
Performing such functions and exercising such powers under the provisions of capital
issues (control) act, 1947and the securities to it by the central government.
SEBI GUIDELINES TO SECONDARY MARKETS: STOCK EXCHANGES
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Board of Directors of Stock Exchange has to be reconstituted so as to include non-
members, public representatives and government representatives to the extent of 50% of
total number of members.
Capital adequacy norms have been laid down for the members of various stock
exchanges depending upon their turnover of trade and other factors.
All recognized stock exchanges will have to inform about transactions within 24 hrs.
TYPES OF ORDERS:
Buy and sell orders placed with members of the stock exchange by the investors. The orders
are of different types.
LIMIT ORDERS:
Orders are limited by a fixed price. E.g. buy Reliance Petroleum at Rs.50.Here, the
order has clearly indicated the price at which it has to be bought and the investor is not
willing to give more than Rs.50.
Best rate order: Here, the buyer or seller gives the freedom to the broker to execute the order
at the best possible rate quoted on the particular date for buying. It may be lowest rate forbuying and highest rate for selling.
Discretionary order: The investor gives the range of price for purchase and sale. The broker
can use his discretion to buy within the specified limit. Generally the approximation price is
fixed. The order stands as this buy BRC 100 shares around Rs.40.
STOP LOSS ORDER:
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The orders are given to limit the loss due to unfavorable price movement in the market. A
particular limit is given for waiting. If the price falls below the limit, the broker is authorized
to sell the shares to prevent further loss. E.g. Sell BRC limited at Rs.24, stop loss at Rs.22.
Buying and selling shares: To buy and sell the shares the investor has to locate register
broker or sub broker who render prompt and efficient service to him. The order to buy or sell
specifying the number of shares of the company of investors choice is placed with the
broker. The order may be of any type. After receiving the order the broker tries to execute the
order in his computer terminal. Once matching order is found, the order is executed. The
broker then delivers the contract note to the investor. It gives the details regarding the name
of the company, number of shares bought, price, brokerage, and the date of delivery of share.
In this physical trading form, once the broker gets the share certificate through the clearing
houses he delivers the share certificate along with transfer deed to the investor. The investor
has to fill the transfer deed and stamp it. The stamp duty is one of the percentage
considerations, the investor should lodge the share certificate and transfer deed to the register
or transfer agent of the company. If it is bought in the DEMAT form, the broker has to give a
matching instruction to his depository participant to transfer shares bought to the investors
account. The investor should be account holder in any of the depository participant. In the
case of sale of shares on receiving payment from the purchasing broker, the broker effects thepayment to the investor.
Share groups: The scrips traded on the BSE have been classified into
A,B1,B2,C,F and Z groups. The A group represents those, which are in the carry
forward system. The F group represents the debt market segment (fixed income securities).
The Z group scrips are of the blacklisted companies. The C group covers the odd lot
securities in A, B1&B2 groups.
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ROLLING SETTLEMENT SYSTEM:
Under rolling settlement system, the settlement takes place in days (usually 1, 2, 3 or
5days) after the trading day. The shares bought and sold are paid in for n days after the
trading day of the particular transaction. Share settlement is likely to be completed much
sooner after the transaction than under the fixed settlement system.
The rolling settlement system is noted by T+N i.e. the settlement period is n days after
the trading day. A rolling period which offers a large number of days negates the advantages
of the system. Generally longer settlement periods are shortened gradually.
SEBI made RS compulsory for trading in 10 securities selected on the basis of the criteria
that they were in compulsory demat list and had daily turnover of about Rs.1 crore or more.
Then it was extended to A stocks in Modified Carry Forward Scheme, Automated Lending
and Borrowing Mechanism (ALBM) and Borrowing and lending Securities Scheme (BELSS)
with effect from Dec 31, 2001.
SEBI has introduced T+5 rolling settlement in equity market from July 2001 and
subsequently shortened the cycle to T+3 from April 2002. After the T+3 rolling settlementexperience it was further reduced to T+2 to reduce the risk in the market and to protect the
interest of the investors from 1st April 2003.
Activities on T+1: conformation of the institutional trades by the custodian is sent to the
stock exchange by 11.00 am. A provision of an exception window would be available for late
confirmation. The time limit and the additional changes for the exception window are
dedicated by the exchange.
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The exchanges/clearing house/ clearing corporation would process and download the
obligation files to the brokers terminals late by 1.30 p.m on T+1. Depository participants
accept the instructions for pay in securities by investors in physical form upto 4 p.m and in
electronic form upto 6 p.m. the depositories accept from other DPs till 8p.m for same day
processing.
Activities on T+2: The depository permits the download of the paying in files of
securities and funds till 10.30 a.m on T+2 from the brokers pool accounts. The depository
processes the pay in requests and transfers the consolidated pay in files to clearing
House/clearing Corporation by 11.00am/on T+2. The exchange/clearing house/clearing
corporation executes the pay-out of securities and funds latest by 1.30 p.m on T+2 to the
depositories and clearing banks. In the demat mode net basis settlement is allowed. The buy
and sale positions in the same scrip can be settled and net quantity has to be settled.
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COMPANY PROFILE
ABOUT SHAREKHAN LIMITED
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Sharekhan Limited is one of the fastest growing financial services providers with a focus
on equities, derivatives and commodities brokerage execution on the National Stock Exchange of
India Ltd. (NSE), Bombay Stock Exchange Ltd. (BSE), National Commodity and Derivatives
Exchange India (NCDEX) and Multi Commodity Exchange of India Ltd. (MCX). Sharekhan
provides trade execution services through multiple channels - an Internet platform, telephone and
retail outlets and is present in 280 cities through a network of 704 locations. The company was
awarded the 2005 Most Preferred Stock Broking Brand by Awwaz Consumer Vote.
ORIGIN
Sharekhan traces its lineage to SSKI, an organization with more than decades of trust and
credibility in the stock market.
Pioneers of online trading in India- Sharekhan.com was launched in 2000 and is now the
second most visited broking site in India.
Has one of the largest networks of Share shops in the country.
SHAREHOLDING PATTERN
SHAREHOLDERS HOLDINGS
CITI Venture Capital and other Private Equity Firm 81%IDFC 9%Employees 10%
MANAGRMENT TEAM CONSISTS OF-
NAME POST
Tarun Shah Chief Executive Officer Mr. Pathik Gandotra Head Of ResearchMr. Rishi Kohli Vice President Of Equity DerivativeJaideep Arora Director- Products And Technology
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Shankar Vailaya Director- Operation
Sharekhan Limited offers blend of tradition and technology like Share shops, dial-n-trade and
online trading- where there is choice of three trading interfaces which are speed trade exe for
active trader, web based classic interface for investor, web based applet- fast trade for investor.
Sharekhan Limited was formerly known as SSKI Investor Services Private Limited. The
company is based in Mumbai, India and its address is- A-206 Phoenix House, 2nd Floor
Senapati Bapat Marg, Lower Parel
Mumbai, 400 013. India
Phone: 91 22 24982000
Fax: 91 22 24982626
www.sharekhan.com
Advanced Technology Used By Sharekhan
Sharekhan selected Aspect EnsemblePro from the Aspect Software Unified IP Contact
Center product line, a unified contact centre solution delivering advanced
multichannel contact capabilities, because it provided the best total value over other solutions
evaluated. It enabled Sharekhan to meet customer service needs for inbound call handling, voice
self service, predictive outbound dialing, call blending, call monitoring and recording, and
creating outbound marketing campaigns, among other capabilities. This helps them to
Increased agent efficiency and productivity.
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Enabled company to execute proactive customer service calls and expand services
offered to customers.
Enhanced call monitoring for improved service quality
Financial services are a highly competitive and volume-driven industry which demands highstandards of customer service, effective consultation and quick deliverables. This is something
Sharekhan Limited, a financial services provider based in India, understands. The company
offers several user-friendly services for customers to manage their stock portfolios, including
online capabilities linked to an information database to help customers confidently invest, and
inbound customer services using voice self-service technology and customer service agents
handling telephone orders from clients.
With a customer base of more than 500000, and a employee of 3100 Sharekhan continues to
grow at a fast pace. Customer satisfaction is a top priority in Sharekhans agenda.
Its primary objective
Is to help and support its customers in managing their portfolio in the best possible
manner through quality advice, innovative product and superior service.
Scheme which are provided by Sharekhan cover almost every segment of the customer-
SCHEME INVESTOR
First Step New Comer Classic Trade OccasionallySpeed Trade Day Trader Platinum Circle High Net Worth Individuals
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Contents
Foreword....................................................................................................... i
Introduction...................................................................................................1
Development of Micro-insurance in India........................................3
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Supply and Demand Side Developments ........................................5
3.1 Supply of micro-insurance ..................................................................53.2 Demand for micro-insurance...............................................................6
On Extending Micro-insurance .......................................................10
4.1 Flexibility in Premium........ ................................................................114.2 Micro-insurance and micro-finance ...................................................16
Conclusions.......................................................................................20
Introduction
Insurance
Insurance is an essential part of running any business. If you are operating a small business you
need more than just property insurance. Taking out the right insurance will help protect yourbusiness and minimize its exposure to risk.
Your insurance requirements will vary according to the type of business you are operating, butyou should be aware that some forms of insurance are compulsory, such as workerscompensation and third party car insurance.
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When youre in business you deal with a variety of potential risks each day. Risk is notsomething you can avoid, but it is something you can manage. Risk management will increasethe probability of success and reduce the probability of failure of your business.
Types of insurance
Assets & revenue insurance
People insurance
Liability insurance
Assets & revenue insurance
To protect your assets and revenue-generating capacity, here are some of the types of insuranceavailable:
Building and contents
Covers the building, contents and stock of your business against fire and other perils such asearthquake, lightning, storms, impact, malicious damage and explosion.
Burglary
Insures your business assets against burglary, and is most important for retailers or a businesswhich maintains unattended premises.
Business interruption or loss of profits
Covers you if your business is interrupted through damage to property by fire or other insuredperils. Ensures your ongoing expenses are met and anticipated net profit is maintained through aprovision of cash flow.
Fidelity guarantees
Covers losses resulting from misappropriation by employees who embezzle or steal.
Machinery breakdown
Protects your business when mechanical and electrical plant and machinery at the work sitebreak down.
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Motor vehicle
It is compulsory to insure all company or business vehicles for third party injury liability. Manydifferent types of policies are available, so make sure you understand the options before making
a decision. There are four basic options:
1. Compulsory third party (injury) covers you for claims made against you forpersonal injuries and legal costs arising from the use of your car. You must obtain thisinsurance to register your car.
2. Third party property damage - covers your liability for damage to another personor to the property of others and your legal costs. It doesnt include repairs to your own carif you caused an accident.
3. Third party, fire and theft - covers you against the events covered above, as wellas fire and theft. It also insures against damage caused if your car was stolen.
4. Comprehensive- covers you for all of the above plus damage caused to your own carby you in an accident. If you're buying a car on an installment basis, financiers willusually insist on this cover.
People insurance
It includes:
Superannuation
Workers compensation requirements
Insurance cover for you and your employees:
Workers Compensation
You must provide accident and sickness insurance for your employees - workers compensation -
through an approved insurer. Workers compensation is covered by separate state and territorylegislation.
Personal accident and illness
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If you are self employed you wont be covered by workers compensation, so you need to coveryourself for accident and sickness insurance through a private insurer. There are several types oflife insurance. Some are investment-type funds where you contribute over a certain time and getback your investment plus interest earnings at the maturity date. Others are designed to coverrisk - things that could happen to you.
Income protection or disability insurance- covers part of your normal incomeif you are prevented from working through sickness or accident.
Trauma insurance -provides a lump sum when you are diagnosed with one ofseveral specified life threatening illnesses.
Term life insurance or whole of life cover -provides your dependents with alump sum if you die.
Total and permanent disability insurance -provides a lump sum only if you aretotally and permanently disabled before retirement.
SuperannuationIf you are running a business or employing people, you are likely to have superannuationobligations to your employees. If you are self-employed you also need to provide for yourretirement - superannuation is generally used to provide for a retirement plan.
Liability insurance
Types of liability insurance you need to consider:
Public Liability
Public liability insurance protects you and your business against the financial risk of being foundliable to a third party for death or injury, loss or damage of property or pure economic lossresulting from your negligence.
Professional Indemnity
Professional indemnity insurance protects you from legal action taken for losses incurred as aresult of your advice. It provides indemnity cover if your client suffers a loss - either material,financial or physical - directly attributed to negligent acts.
Product Liability
If you sell, supply or deliver goods, even in the form of repair or service, you may need coveragainst claims of goods causing injury or damage. Product liability insurance covers damage or
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injury caused to another business or person by the failure of your product or the product you areselling.
What is Micro Insurance?
On a daily basis, the poor around the world face a multitude of risks that threaten to derail anyprogress they have made to work their way out of poverty. The death of a family member, loss ofproperty and livestock, illness, and natural disasters each pose unique dangers. Protecting peopleagainst these losses is an important step to alleviating global poverty.Micro insurance - the protection of low-income people against specific perils in exchange forregular monetary payments (premiums) proportionate to the likelihood and cost of the riskinvolved seeks to provide a suitable solution for managing these risks.
The Global Landscape
It is estimated that only eighty million out of the world's 2.5 billion poor are now covered bysome form of micro insurance. Most remain without access to this critical financial service. InIndia and China, where organizations are estimated to serve nearly 30 million micro insuranceclients each, the percentage of poor lives insured hovers below 3%. In Africa this figure is muchlower just 0.3% of the continents poor are insured. According to recent data, in 23 of thepoorest 100 countries in the world, there is currently no identified micro insurance activity,representing an unserved population of 370 million.
History and Vision
The Micro Insurance Agency has its roots within Opportunity International, a large microfinancenetwork motivated by Jesus Christs call to serve the poor. With a network of 47 microfinanceinstitutions, Opportunity International has been serving the entrepreneurial poor since 1971. In partnership with Opportunitys microfinance institutions, we began working in 2002 on thedevelopment of a range of life, property, livestock, crop derivative, disability, unemploymentand health insurance products to cover the risks faced by Opportunitys loan clients.Micro Insurance Agency staff observed that the risks the poor face can often set them backmonths and years behind where their loans and savings products offered by Opportunity hadtaken them. For instance, a death of a family member from HIV/AIDS a pre-condition most
insurance companies would not cover would often mean expensive funeral costs and the loss ofa breadwinner, resulting in increased economic hardship for the family. In response, MicroInsurance Agency staff developed an affordable funeral benefit product that did not exclude anypre-conditions, including HIV/AIDS. This transformed the mindset of retail insurance providersin the country, who later developed similar non-exclusive products in light of the competingenvironment.
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Through the experience of serving Opportunitys microfinance institutions and their clients,Micro Insurance Agency staff observed that the products most demanded by the poor are notalways the ones available. Health insurance, for example, is a critical need of the poor but themost limited in terms of supply. In addition, policies that are available are often based on firstworld practices and are too complex for the simple coverage demanded. Further, when offered
on an individual, one-off basis, high premium requirements and a need to pay in a single lumpsum preclude a huge sector of the market from access. New distribution models and channelswere needed to increase access and reduce the effective price charged to clients.In 2005, the Micro Insurance Agency was founded by Opportunity International as a fully-ownedsubsidiary capable of offering insurance products and services to a wide range of customers.Our mission is to empower the materially poor to transform their lives by insuring them againstfinancial risk and its consequences. Specifically, we seek to serve the economically active poorwho live on $4 per day or less in developing countries and provide a safety net to reduceeconomic setbacks.
Definitions of micro-insurance
Micro-insurance, the term used to refer to insurance to the low-income people, is different frominsurance in general as it is a low value product (involving modest premium and benefitpackage) which requires different design and distribution strategies such as premium based oncommunity risk rating (as opposed to individual risk rating), active involvement of anintermediate agency representing the target community and so forth. Insurance is fast emergingas an important strategy even for the low-income people engaged in wide variety of incomegeneration activities, and who remain exposed to variety of risks mainly because of absence ofcost-effective risk hedging instruments.
Although the type of risks faced by the poor such as that of death, illness, injury and accident,are no different from those faced by others, they are more vulnerable to such risks because oftheir economic circumstance. In the context of health contingency, for example, a World Bankstudy (Peters et al. 2002), reports that about one-fourth of hospitalized Indians fall below thepoverty line as a result of their stay in hospitals. The same study reports that more than 40percent of hospitalized patients take loans or sell assets to pay for hospitalization. Indeed,enhancing the ability of the poor to deal with various risks is increasingly being consideredintegral to any poverty reduction strategy (Holzmann and Jorgensen 2000, Siegel et al. 2001).
Of the different risk management strategies2, insurance that spreads the loss of the (few) affectedmembers among all the members who join insurance scheme and also separates time of payment
of premium from time of claims, is particularly beneficial to the poor who have limited ability tomitigate risk on account of imperfect labour and credit markets.
In the past insurance as a prepaid risk managing instrument was never considered as an optionfor the poor. The poor were considered too poor to be able to afford insurance premiums. Oftenthey were considered uninsurable, given the wide variety of risks they face. However, recent
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developments in India, as elsewhere, have shown that not only can the poor make small periodiccontributions that can go towards insuring them against risks but also that the risks they face(such as those of illness, accident and injury, life, loss of property etc.) are eminently insurable asthese risks are mostly independent ,idiosyncratic. Moreover, there are cost-effective ways ofextending insurance to them. Thus, insurance is fast emerging as a prepaid financing option for
the risks facing the poor.
In this paper, we analyze the early evidence on micro-insurance already available in this regard,highlight the current initiatives being contemplated to strengthen micro-insurance activity in theIndia, and suggest specific ways that can help promote insurance to the target segment.
Development of Micro-insurance in India
Historically in India, a few micro-insurance schemes were initiated, either by non-governmentalorganizations (NGO) due to the felt need in the communities in which these organizations were
involved or by the trust hospitals. These schemes have now gathered momentum partly due tothe development of micro-finance activity, and partly due to the regulation that makes itmandatory for all formal insurance companies to extend their activities to rural and well-identified social sector in the country (IRDA 2000). As a result, increasingly, micro-financeinstitutions (MFIs) and NGOs are negotiating with the for-profit insurers for the purchase ofcustomized group or standardized individual insurance schemes for the low-income people.Although the reach of such schemes is still very limited anywhere between 5 and 10 millionindividuals---their potential is viewed to be considerable. The overall market is estimated toreach Rs. 250 billion by 2008 (ILO 2004).
The insurance regulatory and development authority (IRDA) defines rural sector as consisting of:
a population of less than five thousand,
a density of population of less than four hundred per square kilometer
More than twenty five per cent of the male working population is engaged in agriculturalpursuits. The categories of workers falling under agricultural pursuits are: cultivators,agricultural labourers, and workers in livestock, forestry, fishing, hunting and plantations,orchards and allied activities.
The social sector as defined by the insurance regulator consists of:
Unorganized sector
informal sector
economically vulnerable or backward classes, and
Other categories of persons, both in rural and urban areas.
The social obligations are in terms of number of individuals to be covered by both life and non-life insurers in certain identified sections of the society. The rural obligations are in terms of
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certain minimum percentage of total polices written by life insurance companies and for generalinsurance companies, these obligations are in terms of percentage of total gross premiumcollected. Some aspects of these obligations are particularly noteworthy. First, the social andrural obligations do not necessarily require (cross) subsidizing insurance. Second, theseobligations are to be fulfilled right from the first year of commencement of operations by the
new insurers. Third, there is no exit option available to insurers who are not keen on servicingthe rural and low-income segment. Finally, non-fulfillment of these obligations can invitepenalties from the regulator.In order to fulfill these requirements all insurance companies have designed products for thepoorer sections and low-income individuals. Both public and private insurance companies areadopting similar strategies of developing collaborations with the various civil societiesassociations. The presence of these associations as a mediating agency, or what we call a nodalagency, that represents, and acts on behalf of the target community is essential in extendinginsurance cover to the poor. The nodal agency helps the formal insurance providers overcomeboth informational disadvantage and high transaction costs in providing insurance to the low-income people. This way micro insurance combines positive features of formal insurance (pre
paid, scientifically organized scheme) as well as those of informal insurance (by using localinformation and resources that helps in designing appropriate schemes delivered in a costeffective way). In the absence of a nodal agency, the low resource base of the poor, coupled withhigh transaction costs (relative to the magnitude of transactions) gives rise to the affordabilityissue. Lack of affordability prevents their latent demand from expressing itself in the market.Hence the nodal agencies that organize the poor, impart training, and work for the welfare of thelow-income people play an important role both in generating both the demand for insurance aswell as the supply of cost-effective insurance.
AN OVERVIEW OF THE MARKET
B Wealthy A
Middle Income
D C
Poor
E
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Severely Poor
The market for micro insurance is represented by this pyramid diagram. Formal sector insurance
companies generally focus on the area identified as A. In this realm the customers arecorporations and wealthy individuals, and the products are voluntary products such as lifeinsurance, and obligatory products required either by law (such as motor third party liability) orby banks (such as property loss and credit life). Also offered are products covering employeesand civil liability. Most of the non-auto related commercial products are being sold within thearea marked B. The aggregate market for microfinance providers is generally in the areaidentified as C. Some MFPs require borrowers to obtain insurance for property, or credit-lifeinsurance as a means of protecting the institutions interests. Area D indicates the broad rangeof products offered by the social security and public health insurance systems of developingcountry governments. They include coverage for pensions, disability benefits, primary healthcare, and medications. The weakness of this sector is indicated by the dashed line that suggests
incomplete coverage. The potential market for microinsurance is indicated as E. This extendsabove the MFP range in providing access to individuals and others that cannot obtain appropriateproducts from the commercial sector. The microinsurance range also extends below the MFPrange because it addresses agricultural coverage in some cases, and is now being sold throughmany delivery channels other than MFPs. Just a few of these delivery channels include:
Low-income focused retailers in South Africa
Post offices in Indonesia
On bags of agricultural inputs or through computer kiosks in India.
Micro-insurance delivery models
One of the greatest challenges for micro-insurance is the actual delivery to clients. Methods andmodels for doing so vary depending on the organization, institution, and provider involved. Ingeneral, there are four main methods for offering micro-insurance the partner-agent model, theprovider-driven model, the full-service model, and the community-based model. Each of thesemodels has their own advantages and disadvantages.
Partner agent model: A partnership is formed between the micro-insurance scheme
and an agent (insurance company, microfinance institution, donor, etc.), and in somecases a third-party healthcare provider. The micro-insurance scheme is responsible for thedelivery and marketing of products to the clients, while the agent retains all responsibilityfor design and development. In this model, micro-insurance schemes benefit from limitedrisk, but are also disadvantaged in their limited control.
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Full service model: The micro-insurance scheme is in charge of everything; both thedesign and delivery of products to the clients, working with external healthcare providersto provide the services. This model has the advantage of offering micro-insuranceschemes full control, yet the disadvantage of higher risks.
Provider-driven model: The healthcare provider is the micro-insurance scheme, andsimilar to the full-service model, is responsible for all operations, delivery, design, andservice. There is an advantage once more in the amount of control retained, yetdisadvantage in the limitations on products and services.
Community-based/mutual model: The policyholders or clients are in charge,managing and owning the operations, and working with external healthcare providers tooffer services. This model is advantageous for its ability to design and market productsmore easily and effectively, yet is disadvantaged by its small size and scope ofoperations.
NEW MODELS FOR POOR COMMUNITIES
Much interest over the last few decades has focused on helping communities to establish mutualor community-based insurance schemes. Professionals typically manage mutual insurancecompanies. Community-based schemes, promoted by ILO STEP and CIDR among others, tendto be run by well meaning local people who give freely of their time, but are not insuranceprofessionals. Often people who were simply in need of insurance end up being insurancemanagers with these schemes. One member of the management committee of a community-
based scheme in Tanzania noted that he wants insurance, but doesnt want to be an insurer. Incommunity-based schemes, the limited management capacity frequently leads to a range ofdifficulties. The key issues of concern for community-based schemes include:
Pricing Often the process of pricing is focused on what people say they can pay ratherthan being linked to the cost structure of benefits that the group wants to receive.
Insurance is subject to cash flow fluctuations and thus requires significant reserves. Theseschemes frequently have insufficient reserves or no reserves at all. Also, commercialreinsurance is rarely available to unregulated insurance schemes thus leaving them with
no ability to manage cash flow deficits.
Controls on management are weak and temptation is strong. Fraud by management isfrequently a problem.
These schemes are limited in size to those people within the defined local area. Thisreduces their ability to diversify a rather small risk pool, and enhances the potential for
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adverse selection, both of which make sustainability a serious challenge for localmanagement.
Finally, in many countries there is no legal framework for these schemes. Indeedregulators are often unwilling to allow such schemes for fear that they will not be able to
adequately supervise many small schemes run by non-professionals. This is the case inIndia. Service providers, most typically hospitals and other healthcare providers haveoffered pre-financing mechanisms that act somewhat like insurance. These products, it isargued, will attract more people to the facility and the people who come will be able topay for the services. Often this becomes a problem because providers have limited abilityto manage the insurance administration issues. One overseer of a particular group ofhospitals noted that attempting to offer microinsurance could present a dual threat to thehospital network for which he works. He noted that the hospital administrators do noteven know how to price their own healthcare services. Therefore, they mis-price theirpremiums based on those prices, which are typically too low. The resulting increase inpatients using the insurance leads to even higher losses, due to higher administrative costs
and incorrect fees that do not cover the actual costs of services. Governments alsoprovide a form of microinsurance through the programs they provide for low-incomeCitizens. Unfortunately, in many countries these programs are simply insufficient toaddress the financial risks of the low- income and destitute populations. Certainly there isa population that will not be covered by commercial or other non-governmentmicroinsurance. However, if a proper balance could be found, it is possible that thecombination of government programs, commercial microinsurance, mutual insurance,and traditional commercial insurance could make each of these more efficient, and makethe government interventions more effective in addressing those that truly require suchservices.
Need for Developing Micro-Insurance in India IRDA perspective
Background
Micro-insurance refers to protection of assets and lives against insurable risks of targetpopulations such as micro-entrepreneurs, small farmers and the landless, women andlow-income people through formal, semiformal and informal institutions. Such products
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are often bundled with micro-savings and micro-credit, thereby allocating scarceresources to micro-investments with the highest marginal rates of return. Microinsuranceis the most underdeveloped part of microfinance. Yet various schemes exist that areviable, benefiting both the institutions and their clients. Such schemes have generallyserved two major purposes: (i) they have contributed to loan security; and (ii) they have
served as instruments of resource mobilization. The greatest challenge for microinsurancelies in the combination of viability and sustainability with outreach.
Although introduction of sound practices such as appropriate policy sizes and timelypayment of installments of premium or positive incentives to renew on time in order toavoid policy getting lapsed can be feasible, the ultimate effectiveness of interventionsfocusing on institutional transformation and sound insurance practices will varyconsiderably, depending on the appropriateness of the regulatory environment.
Development Goal
To enable microinsurance to be an integral part of a country's wider insurance system, it isimportant for every insurer to adjust its costs of serving marginal clients in remote areas,collecting premiums and installments, and offering doorstep services. It is also important torecognize a wide network of intermediaries in the rural and social sectors and notify regulationsin order to guide and supervise the micro-insurance service providers and their customers.
Today we have a variety of microfinance institutions with national and local outreach. Many ofthem have already become corporate agents or have entered into referral
arrangements with insurers. However, semiformal institutions including savings and creditcooperatives, NGOs and self-help groups which have immense potential in carrying the message
of insurance as also solicit insurance business are yet to be utilized in a manner where their truepotential can be harnessed to increase the insurance penetration levels. This is due to restrictionsin the existing agency regulations in terms of minimum eligibility norms in order to become anagent.Depending on the existence and vigour of such institutions, the following alternatives haveemerged, for offering strategic entry points for microinsurance development:
Adapting formal insurance arrangements to the needs of the micro-economy.
Upgrading non-formal (comprising semiformal and informal) insurance arrangementswith insurance companies.
Linking formal and non formal insurance institutions with banks and self-help groups.
Establishing new local institutions providing microinsurance services.
The first three strategies may be inter-connected:
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adapting insurance companies to the requirements of the micro-economy is a first step;then
Linking them as wholesale institutions to self-help groups as retailers; and finally,
Upgrading self-help groups e.g. to the level of financial cooperatives or village banks.
If insurers are to serve customers who differ widely in terms of service costs and risks, the onlyviable inducement for them is an adequate margin, lest they exclude small farmers, - micro-entrepreneurs and people in remote areas. Only sound social insurance, which combines a socialmandate with profit-making, has a chance of sustainability.
Institutional Adaptation
The experience so far has been that formal financial institutions serve but a fraction of thepopulation, which typically lies within the upper quartile of the social hierarchy. Throughadaptation to the microfinance market requirements, they may gradually expand into the second-
highest quartile and into segments of the lower quartiles. Within the foreseeable future they willnormally not be able to fully serve that market. Non formal finance mostly rests on local institutions which are directly accessible to allsegments of the population. Self-Help Groups (SHGs) are member-owned and member-controlled local institutions. They may either be financial groups, with financial intermediationas their primary purpose; or non financial groups, with financial intermediation as a secondarypurpose, such as vendors' associations, family planning groups and numerous other types ofvoluntary associations.
The functions that need to be focused must include: providing guidance to members, collecting premium installments from members, insurance services to members, communication and
exchange of experience, providing linkages with banks, NGOs or donors, supporting theproposals of individual members to insurance companies through recommendations.
Linkage to Insurers
On a modest scale, various forms of life and health insurance have been successfully practicedby different institutions in different countries, particularly as part of loan protection schemes.Micro-insurance procedures and services should be set by insurers rather than the regulator.Appropriate procedures and services should be applied to attain:
(1) Sound financial management,
(2) Convenient and safe savings premium collection and deposit facilities,
(3) Appropriate claim appraisal and processing procedures,
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(4) Adequate risk management,
(5) Timely collection of premium installments,
(6) Monitoring and
(7) Effective information gathering, all of which may include cooperation between differentformal and non-formal intermediaries in fields where each is most effective.
Proposed Micro-insurance Regulations
In order to introduce the concept micro-insurance it is necessary to draft suitable bring in suitableregulations to enable insurers to design and distribute and service micro-insurance products anddischarge their obligations to the rural and social sectors as per provisions of the Insurance Act,
1938.
1. It is proposed that an insurer transacting life insurance business shall be permitted to provide life micro-insurance products as well as general micro-insurance productsprovided it ties up with an insurer transacting general insurance business for the generalmicro-insurance products, and vice versa.
2. In addition to an insurance agent or corporate agent or insurance broker who areauthorized to solicit and procure insurance business, including micro-insurance businesswith an insurer in accordance with the provisions of the Insurance Act, 1938 and theregulations made there under it is also proposed to introduce the concepts of micro-
insurance product and micro-insurance agent .
Micro-insurance Product1. A life micro-insurance product means any term insurance contract with or
without return of premium, any endowment insurance contract or health insurancecontract, with or without an accident benefit rider, either on individual or groupbasis, as per terms stated in the Table A below, filed with the Authority:
Table A:
Type of Cover
MinimumAmount ofCover
MaximumAmountof Cover
Term ofCoverMin.
Term ofCoverMax.
Minimum Ageat entry
Maximum age atentry
TermInsurancewith or withoutreturn ofpremium
Rs. 10,000 Rs. 50,000 5 year 7 years 18 60
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EndowmentInsurance
Rs. 10,000 Rs. 50,000 5 year 7 years 18 60
HealthInsuranceContract
Rs. 10,000 Rs. 15,000 1 year 7 year 18 60
AccidentBenefit asrider
Rs. 10,000 Rs. 50,000 1 year 5 years 18 60
NOTE: The present average sum insured is around Rs. 5,000. This is highlyinadequate to provide any tangible relief even to an individual below thepoverty line. Therefore, it is suggested that the minimum amount of cover of Rs.10,000 appear more realistic.
2. A general micro-insurance product means any health insurance contract, any
contract covering the belongings such as hut, livestock, any personal accidentcontract, or tools or instruments, either on individual or group basis, as per termsstated in the Table B below, filed with the Authority:
Table B:
Type of Cover
MinimumAmountof Cover
MaximumAmount ofCover
Term of CoverMin.
Term of CoverMax.
MinimumAge at entry
Maximum age atentry
Hut orlivestockor Toolsor
implements or otherassetsagainst allperils
Rs. 10,000 Rs. 20,000 1 year 1 year 18 70
HealthInsuranceContract
Rs. 10,000 Rs. 15,000 1 year 1 year 18 60
PersonalAccident
Rs. 10,000 Rs. 50,000 1 year 1 year 18 60
Micro-insurance Agent
A micro-insurance agent shall be a Non Government Organization (NGO) or a SelfHelp Group (SHG).
Explanation: For the purposes of this regulation:
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A Non Government Organization (NGO) shall be a registered non-profit organizationunder the Societys Act, 1968 with a proven track record of working with marginalizedgroups with clearly stated aims and objectives, transparency, and accountability outlinedin its memorandum, rules and regulations and demonstrates involvement of committedpeople.
Self Help Group (SHG) may be an informal group or registered under Societies Act,State Co-operative Act or as a partnership firm, consisting of 10 to 20 with a proven trackrecord of working with marginalized groups with clearly stated aims and objectives,transparency, and accountability outlined in its memorandum, rules and regulations anddemonstrates involvement of committed people.
The minimum number of members comprising a group should be atleast ten for insuranceof individuals, and atleast fifty for group insurance.
Scope and Functions
A micro-insurance agent shall be appointed by an insurer by a deed of agreement ormemorandum of understanding which should clearly specify the terms and conditions, duties andresponsibilities of both the micro-insurance agent and the insurer, and he shall abide by thefollowing:-
He shall work either for one life insurer or for one general insurer or for one life insurerand one general insurer;
He shall be specifically authorized to perform one or more of the following functions:--
a) Maintaining a register of all members and their dependants covered under the insurancescheme alongwith details of name, age, address, nominees and thumb impression/signature;
b) Collection of proposal forms;
c) Collection of self declaration from the member that he is in good health;
d) Collection of monies for issuance of contract or remittance of premium;
e) distribution of policy documents;
f) Assistance in the settlement of claims;
g) Nomination; and
h) Any policy administration service.
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i) The micro-insurance agent or the insurance company shall have the option to terminatethe agreement/ MOU after giving a notice of three months.
j) All such agreements/ MOU must have the prior approval of the Head office of theinsurance company.
Initiative Taken By Private Sectors
Tata AIG Life - First insurance company to launch Micro Insurance
First major Micro Insurance initiatives venture by an Indian insurance company
Launches three new Micro Insurance products and five Micro Insurance branches
Adopts a tailor made rural communication strategy to reach out to the rural community
American International Group, Inc. (AIG)
American International Group, Inc. (AIG), world leaders in insurance and financial services, is
the leading international insurance organization with operations in more than 130 countries andjurisdictions. AIG companies serve commercial, institutional and individual customers throughthe most extensive worldwide property-casualty and life insurance networks of any insurer. Inaddition, AIG companies are leading providers of retirement services, financial services andasset management around the world. AIG's common stock is listed in the U.S. on the New YorkStock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo.
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Micro Insurance is the process of delivering and servicing relevant and affordable life insuranceproducts to the low-income socio economic strata. The focus of Tata AIG Lifes Micro insurance program is rural India, where traditionally the far-flung, lower and lower middle-income
segments have had limited access to life insurance services.
Cost of plans:
Tata AIG Life Micro insurance plans are available with or without survival benefits and withdeath benefits ranging from Rs.5, 000 to Rs.50, 000. With premiums as low as Rs.5** permonth, there is now an affordable life insurance product for nearly every rural household inIndia.
Policies Available:
The following special Micro Insurance products from Tata AIG Life are now available for therural population at the bottom of the pyramid.
Navkalyan Yojana
Ayushman Yojana
Sampoorn Bima Yojana
NAVKALYAN YOJANA
A regular premium payment, low cost term plan for the rural adults who seek life insurance
protection without any maturity benefit.
Key features include:
Policy Term : 5 years
http://www.tata-aig-life.com/MicroInsurance/AyushmanYojana/solutionAyushmanYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/SampoornBimaYojana/solutionSampoornBimaYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/AyushmanYojana/solutionAyushmanYojana.htmhttp://www.tata-aig-life.com/MicroInsurance/SampoornBimaYojana/solutionSampoornBimaYojana.htm8/8/2019 KHAN Micro Insurance Project 1
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Coverage Limits : Minimum Death Benefit (Sum Assured): Rs.5,000/-Maximum Death Benefit (Sum Assured): Rs.50,000/-
Premium payment frequency : Monthly, quarterly, half yearly & yearly
Death Benifit : Sum assured to the policyholders nominee
Maturity benefit : None
Rider : Option to attach Accident Death Benefit Rider for issue ages 18 to 55 years at anominal extra charge.
Tax Benefits and Age Eligibility
Premiums paid under this plan are eligible for tax benefits as per the Income Tax Act,1961 and are subject to any amendments made therein from time to time.*
Anyone between ages 18 and 60 can apply for this policy.
AYUSHMAN YOJANA
A single premium plan where the policyholder pays the premium at the beginning of the policyterm. This is especially useful for those rural people who have a seasonal income.
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
Premiums paid under this plan are eligible for tax benefits to the extent of 20% of SumAssured as per the Income Tax Act, 1961 and are subject to amendments made thereinfrom time to time.*
Anyone between ages 18 and 60 can apply for this policy.
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SAMPOORNA BIMA YOJANA
A low cost insurance plan where the policyholder receives all the premiums paid during thepolicy term upon survival until the term of the policy. Premiums are payable for only 10 years,while the coverage is up to 15 years.
How do we operate?
We operate in 11 states with a specific relationship management team for each state. A dedicated& trained sales and marketing team manages the front end of the Micro insurance program. Ourmicro insurance distribution model collaborates with NGOs (Non-governmental organizations)and Rural organizations with community level SHG (Self Help Group) women advisors whoprovide insurance advisory services to the rural customers at their doorstep. The grassroots levelagents explain the product details in the local language of the customer, thereby enabling thecustomer to make a decision. The training programs, brochures, contract documents, and
application forms are available in 8 different languages other than English and Hindi
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 thepolicyholder.
Tax Benefits and Age Eligibility
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Premiums paid under this plan are eligible for tax benefits as per the Income Tax Act, 1961 andare subject to any amendments made therein from time to time.* Anyone between ages 18 and60 can apply for this policy.
RESEARCH OBJECTIVE
To find out potential depth in society for providing opportunities for further extention for micro
insurance
Sub objective:
Determine need and ability of people segment whose per day income is less than
100 bugs. What really matters to him or her while think about insurance.
Determine awareness about insurance among them. if aware then source of
information
To determine the govt. and private sector proceeding in this area and extent of
their success
RESEARCH METHODOLGY
Data collection
For data collection, we developed a well defined questionnaire as a research instrument,
consisting questions aimed to measure the people perception about insurance, their need and problems, bottleneck why hadnt insured, and target to find out opportunities for further
extention of micro insurance. We conducted unstructured interviews (sample size) of 52 general
people having income even less than 100 bugs per day like vendors, rickshaw wala, coolies etc.
at survey location (Kashmiri gate, old Delhi railway station, prostitutional area etc. All the data
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generated was primary data that was generated directly from face to face communication
Data analysis
The data collected based on structured questionnaire is recorded on an excel sheet and with the
help of SPSS software a pie chart analysis along with pillar data analysis is generated and based
on this findings a qualitative inferences are made for each analysis. The same is being presented
in form of graphs and tables
SURVEY RESULTS
The following are our findings regarding the survey conducted by us. The following graphs show
the potential depth from different perspectives, as shown below:
ANALYSIS AND INTERPRETATION
Table 1:
Gender of the respondents
S. No. Sex No of Respondents Percentage
1. Male 50 91
2. Female 05 09
Total 55 100
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Chart 1:
Gender of the respondents
Inference:
The above reveals the fact that Majority of the respondents, about 91% belong to the category of
male and 9% belong to the category of female.
Table 2: Age of the respondents Chart 2:
No of Respondents
91%
9% 0%0%0%0%0%0%0%0% 1
2
3
4
5
6
7
8
9
10
frequency12%
38%
33%
17%
1
2
3
4
AGE
9
25
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Inference:
The above reveals the fact that Majority of the respondents, about 38% belong to the category of2 age and 33% belong to the category of 3 of age, 17% belong to category 2 and 12% belong to
the category 1 of age.
Table 3: Educational Qualification Chart 3:
Inference:
The above result reveal that majority of respondents (22+28)% were either uneducated oreducated only upto primary level
Table 4: No. of family members Chart 4:
Frequency2%
54%
42%
2%
1
2
3
4
freq
45%
55%
0%0%
1
2
3
4
Educational Qualification
1
2822
1
0
10
20
30
1 2 3 4 5 6 7 8 9 10
catagory of education
no.o
frespondent
family size
0
10
20
30
1 2 3 4 5 6 7 8 9 10
age catagory
no.o
frespondent
freq
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Inference:
Above result reveals that majority of respondent 55% live with joint family or have big size offamily
Table 5: No. of earning member Chart 5:
Inference:
From the above result it can be clearly seen that about 63% of the respondent were the onlyearning member of their family, 31% have 2 earning member because of size of family.
Table 6: Income level Chart 6:
freq
63%
31%
4%
2%
1
2
3
4
freq
46%
42%
12%
1
2
3
earning member
33
16
2 1
0
10
20
30
40
freq
earning member/family
no.o
frespondent
Series1
Series2
Series3
Series4
Series5
Series6
Series7
Series8
Series9
Series10
income lev el
24 22
6
0
10
20
30
freq
income catagory
no.o
frespondent
Series1
Series2
Series3
Series4
Series5
Series6
Series7
Series8
Series9
Series10
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Inference:
The above result reveals that 46% of respondent have income level 1 while 42% and 12% haveincome level 2 and 3 respectively.
Table 7: Account Holder Chart 7:
Inference:
The above result reveals that 64% of respondent dont have any account any where while 36%have their own bank or post office account.
Table 8: Background Chart 8:
Inference:
freq
64%
21%
15%
1
2
3
freq19%
12%
69%
1
2
3
account map
33
11 8
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
no.of account
no.o
faccount
holder
background
106
36
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
background catagory
no.o
frespondent
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The above result reveals that majority of respondent belong to the background of type 3(69%),then type 1 (19%) and type 2(12%).
Table 9: No. of dependent Chart 9:
Inference:
The above result reveal that majority of respondent (35+29)% have no. of dependent more than1 and less than 4. 16% have only 1 dependent and 12%have 4 or more than 4 dependent in theirfamily.
Table 10: Whether has ID proof Chart 10:
freq8%
16%
35%
29%
12%
1
2
3
4
5
freq
48%
52%
0%0%0%0%0%0%0%0%
1
2
3
4
5
6
7
8
910
dependent members
4
8
1815
6
0
5
10
15
20
1 2 3 4 5 6 7 8 9 10
no. of dependent/family
respondent
ID proof
27
25
24
24.5
25
25.5
26
26.5
27
27.5
1 2 3 4 5 6 7 8 9 10
1-yes,2-no
no.o
frespondent
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Inference:
Above result reveals that 52% have ID proof but almost there were equal no that hadnt any idproof.
Table 11: Faced prob with health or asset Chart 11:
Inference:
Above result shows that 23% of respondent didnt face any problem related with health or assetbut 77% faced a serious health of asset loss in past of their life.
Table 12: If yes how they managed Chart 12:
Inference:
Freq
77%
23%
1
2
health/asset problem faced
40
12
0
20
40
60
1 2 3 4 5 6 7 8 9 10
1-yes, 2-no
responses
way of monetary management
40%
31%
6%
21%2%
1
2
3
4
5
monetory management
19
15
3
10
1
0
5
10
15
20
1 2 3 4 5
way of m anage
response
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The above result reveals that majority of the respondent 40% managed their financial problem byway 1, 31% by way2 and 21% by way4 and rest managed their problem by pattern of waysshown above in chart12.
Table 13: How many times fell ill Chart 13:
Inference:
The result above reveals that 67% of the respondent dont have serious health problem and theyhardly use to fell ill once in a month. But beside of this some sector 26% and 7% respectively arethose who use to fall twice or thrice in month.
Table 14: Risk on job Chart 14:
illness map
67%
26%
7%
1
2
3
risk on job
48%
52%1
2
illness
28
11
3
0
10
20
30
1 2 3 4 5 6 7 8 9 10
times fell ill/month
response
risk on job
25
27
24
25
26
27
28
1 2 3 4 5 6 7 8 9 10
1-yes, 2-no
response
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Inference:
The above result reveals that 52% of the respondent didnt had any risk on job but almost equalproportion 48% who had serious job risk.
Table 15: Risk toward assets Chart 15:
Inference:
Above result reveals that a majority of respondent 67% dont have any risk toward their assetwhile 33% were those who have. Reason might be because of their low income they hadnt hadany significant asset.
Table 16: Awareness about insurance Chart 16:
risk toward asset
33%
67%
1
2
awa reness about insurance
92%
8%
1
2
risk toward asset
17
35
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
1-yes, 2-no
response
awareness about insurance
48
4
0
20
40
60
1 2 3 4 5 6 7 8 9 10
1-yes, 2-no
response
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Inference:
Above result reveals that majority of respondent 92% were awared of insurance but 8% werealso there who even didnt know what the insurance is.
Table 17: Source of information Chart 17:
Inference:
The result above reveals that 35% of the respondent got the information about insurance fromsource 7, 31% got info. from source 5 and remaining from the source pattern shown above.
Table 18: No. of insurance taken Chart 18:
Inference:
Above shown result reveals that a majority of respondent 60% were not insured from anywhere , 38% had taken life insurance but 2% were also there who were very well awared and had2 or more than 2 insurance.
Table 19: Why not insured? Chart 19:
source of information11%
1%0%3%
31%
7%
35%
11%0%1%
insurance take n
60%
38%
2%
1
2
3
reason for no insurance
44%
15%
41%
1
2
3
source of information
8
1 0 2
22
5
25
8
0 1
0
10
20
30
1 2 3 4 5 6 7 8 9 10
source
responses
insurance taken
31
20
1
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
no.of insurance taken
responses
reason for no insurance
17
6
16
0
5
10
15
20
1 2 3 4 5 6 7 8 9 10
reason
responses
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Inference:
The result got above reveals that 44% were not insured because of reason1, 41% because ofreason3 and 15% were not insured because of reason 2.
Table 20: Kind of insurance like to purchase Chart 20:
Inference:
Above result reveals that 46% of respondent like to have life insurance, 31% like to have healthinsurance but there are some 14% who are awared toward their child education and like to haveeducation insurance, while some 9% want to minimize risk toward their assets and like to haveasset insurance as well.
Table 21: Premium ready to pay Chart 21:
insurance like to have
46%
31%
14%
9%
1
2
3
4
premium ma
24%
29%20%
27%
1
2
3
4
insurance like to have
27
18
85
0
10
20
30
1 2 3 4 5 6 7 8 9 10
type of insurance
responses
premium map
1215
10
14
0
5
10
15
20
1 2 3 4 5 6 7 8 9 10
type of premium
resp
onses
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Inference:
Above result reveals that in this particular sector all the respondent were almost have equallydistributed opinion about premium package. 24% were ready to pay a sound premium, majoritywere aligned toward premium package 2, 20% were ready to pay premium 3, while 27% agreedto pay premium package 4.
Table 22: How many members like to insured Chart 22:
Inference:
The above shown result reveals that majority of respondent 59% like to insured two members oftheir family apart from self but 35% were those who cant bear even so less premium of microinsurance product and like to insure only one member apart from self rest are distributed asshown above.
Table 23: From where you like to Chart 23:
Purchase Ins. Policy
members like to be insured
2%
35%
59%
2%
2%
1
2
3
4
5
facility location
0% 7%
64%
16%
4% 9%1
2
34
5
6
members like to be insured
1
18
31
1 1
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
members/family
re
sponses
facility location
04
36
92
5
0
10
20
30
40
1 2 3 4 5 6 7 8 9 10
location catagory
resp
onses
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Inference:
The result above reveals that a majority of respondent 64% believes on facility location 3 andlikes to have insurance from there, 16% believe on facility location 4 and rest are shown above.
Table 24: Insurance Duration Chart 24:
Inference:
The result found above reveals that a majority of respondent 38% like the insurance for theduration of 5-10 years, 29% upto 15-20 years, 12% upto 10-15 years but some were also those
21% who cant bear even so less premium and want to have insurance policy upto duration of 0-5 years.
FINDINGS
Study reveals that majority of people whose daily income is less than 100 bugs have bigfamily
Earning member in majority of family is only male.
Income level lies between 100-200 bugs per day
Majority of respondent didnt had any saving account because of no ID proof Majority of respondent have more spending on travel & rent, after that on food & cloth
and Medicare & entertainment
Majority of respondent are the only earning member in family size of 5-8.
Majority of respondent hadnt significant asset
Majority of them managed critical financial problem from some lender lik
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