MICRO (LIFE) INSURANCE AN OVERVIEW: POLICIES, PROVIDERS AND PERFORMANCE

ISSN 232-73 MICRO (LIFE) INSURANCE AN OVERVIEW: POLICIES, PROVIDERS AND PERFORMANCE Dr. D. Geetha and S.Vijayalakshmi 2 Associate Professor, Department of Commerce, Avinashiligam institute for home science and higher education for women, Coimbatore, India Email: indusel@yahoo.com 2 Assistant Professor, PSGR Krishnammal College for women, Coimbatore, India Email: viji_srinivas23@yahoo.com ABSTRACT Micro insurance policies are specifically designed for the low income people in terms of low premiums, terms, coverage, and delivery to manage their risks. In case of micro (life) insurance products, the cover amount for term insurance ranges between Rs. 5,-5, for a minimum term of five years and maximum of 5 years. The entry age for this policy is kept between 8-6 years.. The objectives of the study are to examine the various micro (life) insurance providers and their policies and to study about the growth and performance of micro (life) insurance market in India. A descriptive research study was conducted in detail about the micro (life) insurance market. The secondary data was collected from IRDA website and other insurance journals. The study covers the data of six financial years from 26-7 to 2-2. This research paper discuss about development of micro-insurance in India, methods of delivering micro (life) insurance policies, and micro (life) insurance products, insurers and claims. The micro insurance providers are around fourteen in number. The numbers of micro insurance agents are in growing trend both in LIC of India and in private insurers too. LIC of India performs best in settlement of individual and group death claims than private operators. The study concludes that the micro (life) insurance sector will soon capture the low income segment of our economy. Keywords: Low-Income; Micro-Insurance Policy; Providers; INTRODUCTION Micro insurance, like regular insurance, may be offered for a wide variety of risks. These include both health risks (illness, injury, or death) and property risks (damage or loss). A wide variety of micro insurance products exist to address these risks, including crop insurance, livestock/cattle insurance, insurance for theft or fire, health insurance, term life insurance, death insurance, disability insurance, insurance for natural disasters, etc. Micro insurance is recognized as a useful tool in our economic development. Churchill (26) defines micro insurance as that, operates by risk-pooling, financed through regular premiums and tailored to the poor who would otherwise not be able to take out insurance. Micro insurance is accessed by the low-income population, provided by a variety of different entities, but run in accordance with generally accepted insurance practices. The 56

ISSN 232-73 risk insured under a micro insurance policy is managed based on insurance principles and funded by premium. Micro insurance is the protection of low income people against specific risks in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved. Micro insurance policies are specifically designed for this market in terms of low premiums, terms, coverage, and delivery to manage their risks. In case of micro (life) insurance products, the cover amount for term insurance ranges between Rs. 5,-5, for a minimum term of five years and maximum of 5 years. The entry age for this policy is kept between 8-6 years. Endowment insurance policy provides cover for Rs. 5,-3, for a minimum five years and maximum 5 years for people, aged between 8 and 6 years. OBJECTIVES OF THE STUDY To examine the various micro (life) insurance providers and their policies. To study about the growth and performance of micro (life) insurance market in India. RESEARCH METHODOLOGY A descriptive study was conducted in detail about the micro (life) insurance market. Sources of data: secondary data was collected from IRDA website and other insurance journals and books. Period of the study: The study covers the data of six financial years from 26-7 to 2-2 Importance of Micro Insurance Low income peoples often live in remote rural areas, requiring a different distribution channel to market insurance products. They are often illiterate and unfamiliar with the concept of insurance, requiring new approaches to both marketing and contracting, tend to face more risks than wealthier people. The most commonly available micro insurance product is credit life insurance. Typically, it is a mandatory product for which the MFIs (Micro Finance Institutions) or its insurance partner absorbs the risk of default due to death from its clients. Life micro insurance often just covers the loan amount, but can also include funeral benefits for the policyholder, and sometimes for family members as well, especially spouses and children for lower benefit amounts. Few insurers offer products that assist in covering the period after the death of a breadwinner. There are also numerous informal funeral societies and other local efforts to assist people financially and socially in their time of loss. Development of Micro-Insurance in India Historically in India, a few micro insurance schemes were initiated, either by nongovernmental organizations (NGO) due to the felt need in the communities in which these organizations were involved or by the trust hospitals. These schemes have now gathered momentum partly due to the development of micro-finance activity, and partly due to the regulation that makes it mandatory for all formal insurance companies to extend their activities to rural and well-identified social sector in the country. As a result, increasingly, micro-finance institutions (MFIs) and NGOs are negotiating with the for-profit insurers for 57

ISSN 232-73 the purchase of customized group or standardized individual insurance schemes for the low income people. Methods of Delivering Micro (Life) Insurance Policies The micro (life) insurance policies are sold through cooperatives, non-profit organizations, self help groups and microfinance institutions to their members. Life Insurance Corporation (LIC), a public sector entity, sells the majority of such policies. The private insurers are also playing a role in selling their products. Micro (Life) Insurance Products, Insurers and Micro (life) insurance products: terms and coverage Micro (life) Insurance Product means any term insurance contract with or without return of premium, any endowment insurance contract or health insurance contract, with or without an accident benefit rider, either on individual or group basis, as per terms stated : Type of cover Term of insurance with or without of premium Endowment Insurance Health Insurance Contract Accident benefit as rider Minimum amount of cover Source: IRDA report Table. Micro (Life) Insurance Policies Maximum amount of cover Term of cover minimum Term of cover maximum Minimum age at entry Rs. Rs.5 5year 7 years 8 6 Rs. Rs.5 5year 7 years 8 6 Rs. Rs.5 year 7 years insurer s discretion Rs. Rs.5 year 5 years 8 6 Table 2. List of Micro Insurance Policies of Life Insurers (Category Wise) Maximum age at entry insurer s discretion INDIVIDUAL CATEGORY GROUP CATEGORY INSURER Name of the Name of product the product Aviva Gramin 6 th March 27 Credit plus 6 th August,22 Bajaj Allianz Jana Vikash 7 th March,27 Bajaj Allianz Bajaj Saral Suraksh Allianz 7 th March,27 Bajaj Allianz Alp Nivesh 7 th March,27 58

ISSN 232-73 Table 2. List of Micro Insurance Policies of Life Insurers (Category Wise){ Contd } INSURER Birla Sunlife DLF Parmerica HDFC Standard ICICI Prudential ING Vysya INDIVIDUAL CATEGORY Name of the product Bima Dhan Sanchay 3 st August, 27 Bima Super 3 st August, 27 Gramin Bima Kalyan Sarvagrameen Bachat Sarva Jana 24 th Jan,2 24 th Jan,2 5 th July,28 Met Vishwas 5 th July,28 Met Life Met Grameen Ashray 3 rd May,2 Sahara Sahara Sahyog 26 th June, 26 SBI Life Shriram Star Union Tata AIA Tata AIG Life Ayushman Tata AIG Life Navkalyan Tata AIG Life Sampoorn Bima 8 th Aug, 26 8 th Aug, 26 8 th Aug, 26 GROUP CATEGORY Name of the product Sarv Generic Group Term Insurance for social sector ING Saral 3 th March,29 27 th March, 22 3 th Nov, 27 Grameen st Dec, 27 Shakthi Grameen Super st Dec, 27 Shri Sahay 9 th March, 27 Shri Sahay 5 th May,27 SUD Life Paraspar 7 th May, 29 plan 59

ISSN 232-73 Table 2. List of Micro Insurance Policies of Life Insurers (Category Wise){ Contd } INSURER LIC Source: IRDA report INDIVIDUAL CATEGORY Name of the product Tata AIG Life Sumangal 2 th Sep, 28 Bima Jeevan Madhur 28 th Sep, 26 Jeevan Mangal 3 rd Sep, 29 Jeevan deep 2 nd sep,22 GROUP CATEGORY Name of the product Janashree bima yojana Aam aadmi bima yojana Private insurers have introduced more micro-insurance products than LIC. Table 3. Microinsurance Agents th aug, 2 2 nd oct,27 Year Micro-insurance agents Insurer Private LIC Total 26-7 As on march 3, 27 79 232 3 27-8 As on April,27 79 232 3 Additions 34 2934 3275 Deletions 2-2 As on March 3, 28 48 466 4584 28-9 As on April, 28 48 466 4584 Additions 28 2482 2763 Deletions 96 97 As on March 3, 29 63 6647 725 29- As on April, 29 63 6647 725 As on March 3, 2 77 796 8676 2- As on April, 2 77 796 8676 Additions 39 27 23 Deletions 5 353 54 As on March 3, 2 758 9724 482 2-2 As on April, 2 758 9724 482 Additions 54 29 345 Deletions 48 88 36 As on March 3, 22 25 546 2797 Source: IRDA annual report In 27-8 the private insurance agent increased from 79 to 48 there were an additions of 34 agent and the LIC agents were increased form 232 to 466 there were an additions of 2934 agents. In 28-9 the private insurance agent increased from 48 to 63 there were an additions of 28 agent and the LIC agents were increased form 466-6647 there were an additions of 2482 agents. The number of micro-insurance agents at end March 29 was 725; of which 6647 were for the LIC and the remaining represented the private sector companies. Fifteen life insurers have so far launched 3 micro-insurance products. Of the 3 6

ISSN 232-73 products, 6 are for individuals and the remaining 4 are for groups. The number of microinsurance agents at end March 2 was 8676; of which 796 were for the LIC and the remaining represented the private sector companies. The number of micro-insurance agents at end March 2 was 482; of which 9724 were for the LIC and the remaining represented the private sector companies. The number of micro-insurance agents at end March 22 was 2797; of which 546 were for the LIC and the remaining represented the private sector companies. The micro-insurance agents of LIC are increasing tremendously than the private life insurers. Year Insurer Total Clai ms 26-7 27-8 28-9 29-2- 2-2 Clai ms Paid Table 4. Individual Death Figures in percent of policies Repudi ated Claim s Writte n Back Pendin g At the End of the year Break up of claims pending duration wise (Policies ) <3 3-6 Mon Mon 6-2 mon >2 Mon Private 72.69 3.98 -- 3.32 67.4 5.53 8.49 8.59 LIC 96.94.43 --.63 3.85 28. 23.79 6.36 Total 96.36.73 --.9 37.79 25.92 2.23 5.6 Private 78.93.7..88 64.84 6.7 8.94 9.5 LIC 96.7.3.6 2. 43.76 25.2 8.93 2. Total 95.86.56.6 2.52 48. 23.45 6.87.58 Private 82.26 9.97.2 7.75 68.72 4.7 9.4 8.8 LIC 95.48.33.98 2.2 4.76 2.63 9.33 7.28 Total 94.46 2..9 2.64 47.87 9.9 7. 5.22 Private 84.88 7.6.4 7.48 68.66 4.47 7.7 9.8 LIC 96.54.2.84.4 36.75 23.95 22.55 6.75 Total 95.24.93.75 2.8 49.53 2.5 6.6 3.72 Private 86.4 8.9.5 5. 77.3 9.57 4.54 8.59 LIC 97.3..5.46 36.3 25.4 24.85 3.4 Total 95.58 2.4.45.93 5.5 9.82 7.9.76 Private 89.34 7.82.3 2.82 8.85 8.27 4.45 5.43 LIC 97.42.3.6.2 37.36 23.57 22. 6.97 Total 96.26 2.24.6.44 49.86 9.27 7.4 3.73 Source: IRDA annual report 27-8 The claim settlement ratio of LIC was better than that of the private life insurers. While LIC settled 96.7 per cent of claims intimated to them, the private life insurers settled 78.93 per cent of claims. The percentage of repudiations for LIC was quite low at.3 per cent as against.7 per cent for the private life insurers. 28-9 The claim settlement ratio of LIC was better than that of the private life insurers. While LIC settled 95.48 per cent of claims intimated to them during the year, the private life 6

ISSN 232-73 insurers settled 82.26 per cent of their claims. The percentage of repudiations for LIC was quite low at.33 per cent as against 9.97 per cent for the private life insurers. 29- In the year 29- the life insurance companies settled 7.29 lakhs (6.5 lakh in 28-9 ) on individual policies, with a total payout of Rs. 5,958 crores. The number of claims repudiated stood at 4,693 for an amount of Rs. 245 crore. The number of claims pending at the year involved were Rs, 286 crore. Of these claims 2,8 were pending for more than a year. 2- In the year 2- the life insurance companies settled 8.3 lakhs on individual policies, with a total payout of Rs. 7595 crores. The number of claims repudiated stood at 7,35 for an amount of Rs. 336 crore. The number of claims pending at the year involved were Rs, 36 crore. Of these claims 93 were pending for more than a year and 4,485 claims were pending for less than and upto one year. 2-2 In the year 2-2 the life insurance companies settled 8.22 lakhs on individual policies, with a total payout of Rs. 849 crores. The number of claims repudiated stood at 9,33 for an amount of Rs. 45 crore. The number of claims pending at the year involved were Rs, 293 crore. Of these claims 69 were pending for more than a year and,625 claims were pending for less than and upto one year. Table 5 : Duration-Wise Settlement Of Death In Individual Category NO. of Policies Year 28-9 29-2- Life insurer Within 3 days of intimation Private 2338 (57.2) LIC 338629 (6.) Total 36937 (59.8) Private 3324 (97.56) LIC 497 (99.88) Total 742 (98.83) Private 3972 (98.34) LIC 7242 (99.97) Total 24 (99.39) 3 to 9 days 9 to 8 days 47 (.8) 69544 (2.32) 7365 (2.7) 7 (.5) 679 (28.67) 874 (9.82) 23553 (2.42) 49 (.44) 5 (.2) 49 22 (.65) (.29) 53 3 (.) (.32) 2 (.3) 55 3 (.49) (.2) Duration 8 to days to year 29 (3.7) 3952 (7.) 4792 (6.74) 6 (.5) More than year 355 (.87) 484 (.86) 595 (.86) Total claims settled 4739 564389 6528 346 42 6 (.23) (.2) (.) 758 439 7244 283 62

ISSN 232-73 Table 5. Duration-Wise Settlement Of Death In Individual Category (Contd.) NO. of Policies Year 2-2 Life insurer Within 3 days of intimation Private 4633 (92.4) LIC 9499 () Total 432 (97.37) 3 to 9 days 369 (7.36) 369 (2.54) 9 to 8 days (.22) (.8) Duration 8 to days to year (.2) (.) Source: IRDA annual report 26 to 28 data are not available 28-9 More than year Total claims settled 54 9499 453 Of the total individual death claims settled in micro-insurance individual category. LIC has settled 6 percent of total claims within thirty days whereas private insurers have settled 57.2 percent of the total claims in the same period. 29- LIC has settled 99.88 percent of total claims within thirty days whereas private insurers have settled 98.83 percent of the total claims in the same period. 2- LIC has settled 99.97 percent of total claims within thirty days whereas private insurers have settled 98.34 percent of the total claims in the same period. 2-2 LIC has settled percent of total claims within thirty days whereas private insurers have settled 92.4 percent of the total claims in the same period. Year Insurer Tota l Clai ms 27-8 28-9 29- Claim s Paid Table 6. Group Death Repudia ted Claim s Writte n Back Pending At the End of the year Break up of claims pending duration wise (Policies ) <3 3-6 6-2 >2 Mon Mon mon Mon Private 84.43 5.75.6 9.66 4.83 8.9 4.4 24.85 LIC 99.88. -. 8.7 62. 22.98 6.2 Total 97.85.76.2.37 39.43 22.3 5.3 23.5 Private 92.5 3.39.7 3.93 6.26 9.98 6.8 3.68 LIC 99.76...24 78.29 3.7 6.48.52 Total 98.63.53.3.8 64.66.89 3.73.7 Private 96.8.6.2.58 7..6 9.94 7.9 LIC 99.8...9 47.89 2.6 6.3 5.38 Total 98.9.49..6 66.3 3.9.27 9.5 63

ISSN 232-73 Year Insurer Tota l Clai ms 2-2- 2 Table 6. Group Death (Contd.) Claim s Paid Repudia ted Claim s Writte n Back Pending At the End of the year Break up of claims pending duration wise (Policies ) <3 3-6 6-2 >2 Mon Mon mon Mon Private 93.33.8.3 5.36 4.7 57.6.38.76 LIC 99.66...33 75.39 3.9 9.69.83 Total 96.73.55.55 2.66 43.93 54.25.99.83 Private 9.3.88.2 8.8 2.45 3.57 8.9 75.8 LIC 99.64. -.36 24.74 37.34 2.99 5.92 Total 95.86.74. 3.39 3.88 5.73 9. 7.29 Source: IRDA annual report 26 to 27 data are not available 27-8 The claim settlement ratio of LIC was better than that of the private life insurers. While LIC settled 99.88 per cent of claims intimated to them, the private life insurers settled 84.43 per cent of claims. The percentage of repudiations for LIC was quite low at. per cent as against 5.75 per cent for the private life insurers. 28-9 The claim settlement ratio of LIC was better than that of the private life insurers. While LIC settled 99.76 per cent of claims intimated to them during the year, the private life insurers settled 92.5 per cent of their claims. The percentage of repudiations for LIC was quite low at. per cent as against 3.39 per cent for the private life insurers. 29- LIC settled 99.8per cent of claims intimated to them during the year, the private life insurers settled 96.8 per cent of their claims. The percentage of repudiations for LIC was quite low at. per cent as against.6 per cent for the private life insurers. 2- LIC settled 99.66 per cent of claims intimated to them during the year, the private life insurers settled 93.33 per cent of their claims. The percentage of repudiations for LIC was quite low at. per cent as against.8 per cent for the private life insurers. 2-2 LIC settled 99.64 per cent of claims intimated to them during the year, the private life insurers settled 9.3 per cent of their claims. The percentage of repudiations for LIC was quite low at. per cent as against.88 per cent for the private life insurers. 64

ISSN 232-73 Table 7. Duration-Wise Settlement Of Death In Group Category No. of Policies Year 28-9 29-2- 2-2 Life insurer Within 3 days of intimation Private 32 (84.6) LIC 29726 (98.84) Total 25837 (96.67) Private 276 (95.) LIC 459 (99.72) Total 43235 (99.48) Private 48 (95.22) LIC 45366 (98.7) Total 49446 (98.4) Private 5295 (9.67) LIC 8687 (95.39) Total 23982 (95.8) 3 to 9 days 3892 (.9) 769 (.8) 566 (2.7) 83 (3.63) 6 (.28) 99 (.46) 72 (4.) 599 (.3) 77 (.53) 538 (9.2) 5734 (4.6) 6272 (4.8) Duration 9 to 8 days 7 (3.6) 8 (.36) 97 (.76) 22 (.96) 8 to days to year 525 (.37) 5 (.2) 53 (.2) 5 (.22) More than year 52 (.3) 6 (.3) 58 (.2) 2 (.9) Total claims settled 382 22237 2657 2288 475 22 (.5) 3 (.72) 3 (.6) 5 (.9) 5 5 (.) 2 (.5) 2 (.2) (.2) Source: IRDA annual report 26 to 28 data are not available 28-9 2() 43463 (.2) (.2) 4285 45965 525 584 2442 326 LIC has settled 98.84 claims within thirty days, private insurers have settled 84.6 percent in the same period. 29- LIC has settled 99.72 claims within thirty days, private insurers have settled 95. percent in the same period. 2- LIC has settled 98.7 claims within thirty days, private insurers have settled 95.22 percent in the same period. 2-2 LIC has settled 95.39 claims within thirty days, private insurers have settled 9.67 percent in the same period. 65

ISSN 232-73 FINDINGS In individual category, three micro (life) policies are offered by LIC of India, and sixteen policies are offered by private life insurers. In the Group category, nearly nine policies are offered by private life insurers. The numbers of micro insurance agents are in growing trend both in LIC of India and in private insurers too. The micro-insurance agents of LIC are increasing tremendously than the private life insurers. LIC performs best in settlement of individual and group death claims than private operators. CONCLUSION Micro (life) insurance is just one of the several risk management tools available to low income people. It is evident that the micro (life) insurance sector will soon capture the low income segment of our economy. Micro insurance providers should begin by training and educating key intermediaries in the idea of promoting insurance and private insurers should also begin developing relationships with existing delivery channels. These steps will lay the groundwork for the effective functioning of micro (life) insurance market. It is fortunate that the insurers have innovated products and distribution beyond the regulatory requirement to conduct business in the low income segment. REFERENCES. Craig Churchill and Michal Matul Protecting the Poor: A micro insurance compendium. Vol. II 2. Micro insurance demand and prospects- India, Allianz AG, GTZ and UNDP public private partnershi p, August 26 3. Micro insurance in India: A safety net for the poor, by D. Srijanani, International Journal for Migration and Border Studies, Vol. 3, Issue, Jan - March 23. 4. Ahuja, R. & Guha-Khasnobis, B, Micro-Insurance In India: Trends And Strategies For Further Extension,25 5. IRDA.gov.in 6. Life insurance in India reforms and impacts by Dr. Debabrata Mitra and Dr.Amlan Ghosh, abhijeet publications 2. 7. Prathima Rajan,"Micro insurance to the Last, the Least and the Lost a case study of Rural India", Report published by Celent, a division of Oliver Wyman, Inc., 2 8. Micro-Insurance regulation in the Indian financial landscape - Case study, by M-CRIL, Micro Credit Ratings International Limited, 28. 66