Micro-insurance: a case study of rural postal life insurance

Abstract

Micro-Insurance is a form of health, life or property insurance, which offers limited protection at a low contribution. It is aimed at poor sections of the population and designed to help them cover themselves collectively against risks. 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 of their economic circumstance. Moreover, there are cost-effective ways of extending insurance to them. Thus, insurance is fast emerging as a prepaid financing option for the risks facing the poor. IRDA, after overseeing the life insurance sector for five years had, issued special guidelines called Micro Insurance Regulations-2005 since that was the only way to compel the life and non-life insurers to turn towards the downtrodden and the lowly. In this dissertation, we analyse the current rural postal life micro-insurance distribution pattern among the rural folk, problems associated with it and corrective measure to improve penetration of micro-insurance. To collect primary data for this study, survey was conducted in ten districts of south Karnataka and about 4000 questionnaires were distributed, out of which 2655 respondents were responded and from the data analysis outcome were drawn To understand the current pattern of utilization/distribution of micro insurance: Out of the total respondents responded, 66.3% (1760) are male and 31% (824) female. The major age group of the respondents is between 25 and 34. Among the respondents 74.4 % (1975) are single and 23% (610) are married. 95% respondents are from villages their educational qualification is 50.2% are non HSC and 36.7 % are HSC. The occupational statistics shows that 42.95% respondents are from agricultural sector and 21.96% are daily labourers. Majority of the respondents (60%) are from annual income background of Rs. less than36000 and monthly saving of 101 to 500. The statistics shows that, when income goes up, the monthly saving also increases and the major constraint for saving is unforeseen events in their life and spending habits / decision making power of the husband. The respondents preferred to save in the post office and survey shows that insurance is not seen as saving instrument among the villagers. Among the insurance type, the preference is for life, health and cattle. In the policy type, the preference is for term insurance followed by whole life, money back, endowment and annuity and the preferred policy duration is 10-20 years irrespective for employment sector. The average premium collected is Rs 130 per month. The insurants believe that insurance is essential for the life and it is mainly meant for life security rather than looking for tool for saving option. Specific issues/problems associated with penetration of micro insurance: The survey reveals that the insurants require coverage of three times of their annual income. But the present service provider provides insurance coverage of Moderate to just adequate. 3.05%had some kind of insurance but latter they have discontinued the same and 14.57% not having any insurance at all. Poor affordability, lack of delivery channels and lack of service provider at the village level are the major reason for discontinuation of policy. Major reason for not having insurance by the respondents is due to no money and no information about insurance. Corrective measures to improve penetration and distribution of micro insurance: The insurance experience of the respondents shows that, they were well informed by the agents, but they have to wait long period to receive the money and for after sales services. They were purchasing insurance from their own money because they had heard it was good, even though they did not understand much about the insurance contract. The reason for poor penetration of life insurance in rural area is due to lack of awareness, poor economic condition and lack of delivery channels. The influential parameters for procuring life insurance policies are generating awareness s about insurance, premium rate, affordability, tax benefit, delivery channels and documents required for procuring insurance. The results of the study suggests that in spite of poor economic condition of agricultural workers and daily wage earners in rural areas, by creating awareness and by providing after sales service, insurance penetration in India can be improved. Satisfied and dissatisfied customer: Among the satisfied and dissatisfied insurers there is a significant difference between and within the types of insurance chosen, period of insurance coverage taken, adequacy and preference for insurance coverage, perception about insurance and purpose of life insurance. Hence all are impacted by their satisfaction levels. This helps to design the new insurance policy.