Page 10 - Life Insurance Today FEBRUARY 2016
P. 10
depending on the appropriateness of the regulatory envi- 3. Linking formal and non-formal insurance institutions
ronment. with banks and self-help groups.
Development Strategy: 4. Establishing new local institutions providing micro-in-
surance services.
To enable micro-insurance to be integral part of a country's
wider insurance system, it is important for every insurer to The first three strategies may be inter-connected:
adjust its costs of serving marginal clients in remote areas,
collecting premiums and installments, and offering door- G Adopting insurance companies to the requirements of
step services. the micro-economy is a first step; then
Today we have a variety of micro finance institutions with G Linking them as wholesale institutions to self-help
national and local outreach. Many of them have already groups as retailers; and finally,
become corporate agents or have entered into arrange-
ments with insurers. G Upgrading self-help groups e.g. to the level of finan-
cial cooperatives, or village banks.
However, semiformal institutions including savings and
credit cooperatives, NGOs and self-help groups which have If insurers are to serve customers who differ widely in terms
immense potential in carrying the message of insurance as of service costs and risks, the only viable inducement for
also solicit insurance business are yet to be utilized in a them is an adequate margin, lest they exclude small farm-
manner where their true potential can be harnessed to ers, micro-entrepreneurs, and people in remote areas. Only
increase the insurance penetration levels. This is due to sound social insurance, which combines a social mandate
restrictions in the existing agency regulations in terms of with profit making, has a chance of sustainability.
minimum eligibility norms in order to become an agent.
Institutional adaptation:
Depending on the existence and vigour of such institutions,
the following alternatives have emerged, for offering stra- The experience so far has been that formal financial insti-
tegic entry points for micro-insurance development: tutions do serve but only a fraction of the population, which
1. Adapting formal insurance arrangements to the needs typically lies within the upper quartile of the social hierar-
chy. Through adaptation to the micro-finance market re-
of the micro-economy. quirements, they may gradually expand into the second-
highest quartile and into segments of the lower quartiles.
2. Upgrading non-formal (comprising semiformal and in- Within the foreseeable future they will normally not be able
formal) insurance arrangements with insurance com- to fully serve that market.
panies.
Non-formal finance mostly rests on local institutions, which
are directly accessible to all segments of the population.
Self-help Groups (SHGs) are member-owned and member-
controlled local institutions. They may either be financial
groups, with financial intermediation as their primary pur-
pose; or non-financial groups, with financial intermediation
as a secondary purpose, such as vendors' associations, fam-
ily planning groups and numerous other types of voluntary
associations.
The functions that need to be focused must include: pro-
viding guidance to members, collecting premium install-
ments from members, insurance services to members, com-
munication, and exchange of experience, providing linkages
with banks, NGOs or donors, health service providers, third
My life is my message.
10 February 2016 Life Insurance Today
Copyright@ The Insurance Times. 09883398055 / 09883380339
