According to IRDA, an insurance company that enters the Indian market must write a minimum percentage of insurance policies in rural sector. To make the insurance companies to reach the gross root level, in its recent concept paper IRDA has come out with a model in which micro finance institutions (MFIs) will work as agents of insurance companies and provide the target market for micro insurance. In return, MFIs will earn commission on business done. It has many benefits to both society and insurance companies.
Over the last few years, there has been growing recognition among Microfinance Institutions (MFIs) that along with credit and savings, the poor need insurance products too. Just as in the case of credit and savings where the formal financial system has failed to reach out to the poor, in the case of insurance too, the mainstream insurance sector has not reached out to them.
But in India, things are looking up in the case of insurance for the poor as far as mainstream insurance companies are concerned. This is mainly due to regulatory intervention-by the Insurance Development and Regulatory Authority (IRDA), the body that regulates insurance business in India. The intervention has been timely; the mainstream insurers, especially the newly incorporated private ones, are encouraged, even if only by regulation, to cover the poor right when the Microinsurance field itself is in its infancy. This augurs well for microinsurance, as the mainstream insurers might see the business potential in covering the poor sooner than banks have in micro credit. |
