With the emerging markets contributing less than 9% of the world's premiums, these countries have an enormous opportunity to profitably employ microinsurance as a vehicle to bridge this gap. In this article, the common challenges faced and the potential for microinsurance in the emerging markets, especially India and Bangladesh are highlighted. The business channels and the current setting are examined, as also the different approaches in health microinsurance in India and Bangladesh.

The rural population is as much at risk from death, accidents, theft, job-loss, natural and man-made disasters, as is the urban population. The exposure level may be even a notch higher due to the economic situation. It is in this context, that microinsurance gains a lot of importance. Microinsurance is not only a financial arrangement but a way to ensure that there is financial inclusion at all levels. It focuses on the financially disadvantaged sections of society. Individual risk rating is almost impractical. Hence, the thrust is on community/group risk rating.

In countries like India and Bangladesh, microinsurance started as a policy implication, with governments making it mandatory for insurance companies to provide insurance services to the rural and the identified social sector. However, it has been identified as a profitable sector over the years and many insurance companies are foraying into these services. India and Bangladesh have been the front-runners in microfinance and microinsurance initiatives in Southeast Asia and follow a similar business model. They are also member countries in AMIN.

Microinsurance in India and Bangladesh follows a common partner-agent model. This model was necessitated due to the informational disadvantage and high transaction costs involved in providing insurance services to the rural poor. Figure is the schematic representation of how the partner-agent model works.

Insurance Chronicle Magazine, Microinsurance, Indian Experience, Policy Implications, Insurance Services, Social Sector, Financial Inclusion, Insurance Companies, Business Model, Non-Governmental Organizations, NGOs, Insurance Regulatory and Development Authority, IRDA, Social mobilization, Bangladesh Rural Advancement Committee, BRAC, Financial Revolution.