GAPS ANALYSIS BETWEEN DEMAND AND SUPPLY OF MICROINSURANCE

Transcription

1 GAPS ANALYSIS BETWEEN DEMAND AND SUPPLY OF MICROINSURANCE 50

2 5. GAPS ANALYSIS BETWEEN DEMAND AND SUPPLY OF MICROINSURANCE Microinsurance is a good step for financial inclusion and to tackle out the problems and vulnerabilities of BPL people, but the outreach of microinsurance is not enough to tackle it. This section analyzed the gaps between demand and supply of microinsurance. The gaps are analyzed by considering following aspects. 5.1 Operational gap 5.2 Gap of financial illiteracy 5.3 Low Awareness and Gaps in Understanding Concepts and Procedures 5.4 Gap in risks and vulnerabilities faced by BPL people and covered by insurance companies 5.5 Gap in microinsurance policies demanded by BPL people and provided by insurance companies 5.6 Gap in services provided by insurance companies to BPL people 5.7 Gap in coverage of insurance companies 5.1 OPERATIONAL GAP It is well known that, The plans and planning s of the Government of India are overwhelming, but the outreach of them are not satisfactory due to faulty system. The major gap exists between demand and supply of microinsurance was that the branches of insurance companies were not established in rural areas. This research analyzed that in akola, bichpuri and barauli aheer the branches of insurance companies were established in very little number. The major fact is that the private insurance companies were not established in these areas, only LIC was established and operates. So, the operation of microinsurance is limited only in urban areas but the requirement of microinsurance is more in rural areas not in urban areas. 51

3 5.2 GAP OF FINANCIAL ILLITERACY The literacy level of India increasing year by year. It has gone up to 74.04% in 2011 from 65.38% in 2001, thus showing an increase of 9 percent in the last 10 years. Despite of increasing literacy level in India the financial illiteracy is still very low. This research also shows that 60% respondents were literate (see table 3.1), but still they were not aware about microinsurance. This clearly shows the defective education system in India. Because of financial illiteracy they were not aware about microinsurance, benefits of microinsurance, areas covered in microinsurance and so on. 5.3 LOW AWARENESS AND GAP IN UNDERSTANDING CONCEPTS AND PROCEDURES The major gap exists between demand and supply of microinsurance is that, the BPL people were not aware about microinsurance. This research analyzed that, only 17% respondents were familiar with the term microinsurance, concepts of microinsurance, procedures involved in microinsurance, benefits of microinsurance and so on (see figure 3.1). Poor people were not aware about microinsurance and until they will not aware, they will be unable to enjoy the benefits perceives from microinsurance. 5.4 GAP IN RISKS AND VULNERABILITIES FACED BY BPL PEOPLE AND COVERED BY MICROINSURANCE COMPANIES Microinsurance is the protection of low-income people against specific perils in exchange for regular premium payment proportionate to the likelihood and cost of the risks involved. As definition depicts that the microinsurance specially designed for protecting the poor people from various risks and vulnerabilities they faced. Poor people faced various problems like Death of family member, Expenditure on sickness or illness, Loss of crop, Disease or death of livestock, Loss of business, Natural disaster and Theft/ robbery (see table and figure 3.2). This research analyzed that from these risks and vulnerabilities, insurance companies mainly covered only two risks and they are Death of family member, Expenditure on sickness or illness. So, because of covering only two risks and vulnerability by insurance companies there exists a wide gap between demand and supply of microinsurance in covering the risks of poor people 52

4 because they demanded insurance not only for these two but for all those perils which they faced. The gap between the risks and vulnerabilities faced by poor people and covered by insurance companies is depict below. FIGURE 5.1 GAP BETWEEN RISKS AND VULNERABILITIES FACED BY POOR PEOPLE AND COVERED BY INSURANCE COMPANIES Risks and Vulnerabilities faced by poor people 1. Death of family member 2. Expenditure on sickness or illness 3. Loss of crop 4. Disease or death of livestock 5. Loss of business Risks And Vulnerabilities covered by Insurance Companies 1. Death of family member 2. Expenditure on sickness or illness Gap 6. Natural disaster 7. Theft/ robbery 5.5 GAP IN MICROINSURANCES POLICIES DEMANDED BY BPL PEOPLE AND PROVIDED BY INSURANCE COMPANIES Microinsurnce protects poor people from various risks and vulnerabilities they faced, by providing them claim at the time of need, which is equal to the premium they paid. Microinsurance has various types like- life insurance, health insurance, crop insurance, cattle insurance, property insurance, disability insurance, disaster insurance unemployment and reinsurance. The effective outreach of microinsurance is said to be when, all the insurance policies provided by insurance companies to poor people and all the insurance companies provides all the insurance policies to poor people, but the truth is that, this is not true. This research analyzed that the poor people need all type of insurance policies but insurance companies provides insurance cover only for life and health i.e., life insurance and health 53

5 insurance. The gap between microinsurance policies demanded by poor people and the insurance policies provided by insurance companies is depicting below. FIGURE 5.2 GAP BETWEEN MICROINSURANCE POLICIES DEMANDED BY POOR PEOPLE AND THE INSURANCE POLICIES PROVIDED BY INSURANCE COMPANIES Insurance Policies demanded by BPL people 1. Life Insurance 2. Health Insurance Insurance Policies provided by Insurance Companies 1. Life Insurance 2. Health Insurance 3. Crop Insurance 4. Cattle Insurance 5. Disaster Insurance 6. Disability Insurance Gap 7. Property Insurance 8. Unemployment Insurance 9. Reinsurance 5.6 GAPS IN SERVICES PROVIDED BY INSURANCE COMPANIES TO BPL PEOPLE Microinsurance is good step for financial inclusion and insured BPL people from various risks and vulnerabilities they faced. Microinsurance ultimately designed for, insuring poor people from various perils they faced by providing them good facilities like good claim settlement, effective application process, sufficient amount of premium, the well insurance executive s behavior and so on. This research analyzed that the major gap exists between demand and supply of microinsurance is that poor people were not satisfied with the services and facilities provided by insurance 54

6 companies. They were not satisfied with the claim settlement, application process, and amount of premium they get, the insurance executive s behavior etc. There exists no significant satisfaction level among those BPL people who takes insurance policy (see table 3.5 and 3.6). 5.7 GAPS IN COVERAGE OF INSURANCE COMPANIES We know approximately 29% people are still live below poverty line and they will faced various risks and vulnerabilities like death of family member, sickness or illness etc. (see table and figure 3.2). The condition of poor people in our India is very life-threatening, and when these risks and vulnerabilities occur in their life the condition of poor people became even more vulnerable. Microinsurance, in this case insured BPL people and covered their risks by proving them good claim which satisfactorily cover their risks and perils, but this is not true. This research analyzed that another gap exists between demand and supply of microinsurance is that the BPL people were not satisfied with coverage done by insurance companies to cover their risks. In conclusion, we can say that the microinsurance is a good policy of government of India for financial inclusion and empower BPL people but the outreach of microinsurance is not effective in fact it is very poor. This research analyzed masses of gaps exists between demand and supply of micronsurance. The major gap is that the branches of insurance companies were not established in rural areas, only little branches of LIC is established and operates. Secondary BPL people were not aware of microinsurance because of financial illiteracy. BPL people faced numbers of risks and vulnerabilities but out them they were insured only for two risks i.e., death of family member and sickness or illness of family members by life insurance and health insurance respectively. In this research only 10 people purchased microinsurance policy and only few were satisfied with the services provided by insurance companies and out of 7 BPL people who got the claim, no one was fully satisfied with the coverage done by insurance companies 4 respondents were partially satisfied and 3 respondents were not satisfied. 55