Page 23 - Insurance Times August 2021

entrepreneurs who take more risk and invest more in their need for developing ®ulating of the such market /
businesses when they know that they are protected. distribution was felt. The path for the first micro insurance
Insurance can also be a factor to extend or supplement for regulations emerged with the Microinsurance Regulations,
social protection benefits, particularly for the workers in the 2005. This regulation was revised and then replaced in 2015,
informal economy. which is the new Micro insurance Regulations.

Microinsurance also supports in the sustainable development The Micro insurance Regulation then mandated filing of
and contributes towards achieving the Millennium specific products under the "micro insurance" tag. The new
Development Goals (MDGs). Various studies also channels were identified & such products were to be sold
demonstrate that a causal link in between the development by those designated channels only. According to IRDAI's most
of the insurance industry and the national economic recent information, there are 26 micro insurance plans in
development by putting a price on the risk and supporting India which are offered by 16 life insurance companies.
of entrepreneurship. Insurers are also a major source of
long-term investment capital, and also can stimulate the Micro insurance regulations in India: Some of the measures
development of debt and the equity markets. taken by Insurance Regulatory development of India (IRDA)
along with government were as:
Brief history of micro/inclusive insurance
Mandate: Rural areas and the social sector, and obligations
in India: for the private insurance industry During the nationalised
Inclusive insurance has a long history in India. With the insurance the phase approximate 48% of LIC's customers
formal nationalization of the insurance industry in year were from rural and semi-urban areas. After the
1956, extending service to the rural & marginalised people liberalisation, the industry regulator was more concerned
have always been on the high agenda of the Govt & the about inclusive insurance growth and rural exposure for the
Govt owned insurance companies. Life & General Insurance insurance companies. IRDAI, therefore mandated the
companies had in their portfolio many products which was insurance companies through the rural and social sector
specifically designed for rural & marginalised group with a obligation 2002 to safeguard of certain percentage of polices
different set of relaxed under-writing & servicing conditions. to be sold in rural areas and certain number of lives are
But because of the high cost of transaction such policies covered in the social sector.
could never attain the desired result. With its wide
distribution network LIC of India was in a position to do some Permitting self-help groups (SHGs), NGOs, and MFIs as new
justice in a better way compared to its GI counterparts. micro insurance delivery channels.

However, the inclusive insurance got a boost riding on the Entering into various Private Public Partnerships (PPP)
growth & accomplishment of Micro-Finance institutions in agreements between the Indian government and the
the early phase of the opening up. They were in the business insurance Companies.
of extending small credit to the rural / needy people even
in urban locality for some productive purpose & wanted their Microinsurance Regulations, 2005:
credit part to be insured. This gave a launch of many group
based life products. Maybe the first such items to be brought Micro Insurance Regulations 2005 clearly conveys the clarity
into the market was the Credit Plus Policy presented by Aviva on:
Life Insurance in 2002. Such items were designed to address Y Product guidelines for the Distribution, Design and
the necessities of the Micro-Finance Institutions. The Issuance of policy contracts
insurance companies had tie-ups with MFIs &there was Y Guidelines for the Agents Appointment, Remuneration,
insignificant contact between the insurance agency and the Code of conduct, Capacity Building etc.
clients. This brought about low-quality assistance. There was
Y Guidelines for the Life & non -life tie-ups: A life insurer
complaint also about the intention / use of the claim may offer general microinsurance products & vice
payments. The end clients began building up a negative versa
observation about the insurance agencies.
Y Mandate on covering Rural and Social sectors
This issue came in to the notice of the Insurance Regulatory
and Development Authority of India (IRDAI), and then the Insurance companies in India did very well riding on the

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