MR Microinsurance_2012_03_29.indd - International Labour ...

428 Insurers and microinsurance
– Active aggregators: Approximately 90 per cent of the labour force is employed
in the informal economy or the “unorganized sector” in India, However, there is
in fact a high degree of organization in the unorganized sector, through non-governmental
organizations (NGOs), microfinance institutions (MFIs), self-help
groups (SHGs 1 ), cooperatives and other aggregators. These potential intermediaries
are often positively disposed to insurance, and some even carry the risk
themselves outside the purview of the insurance supervisor.
– Large low-income market: Out of a total population of 1.3 billion, 42 per cent
of rural and 26 per cent of urban households live below the poverty line (Tendulkar
et al., 2009). These households, as well as economically active rural households
above the poverty line, provide insurers with a huge potential market and
the prospect of achieving economies of scale.
The convergence of these factors, all in one very large country, creates a
dynamic environment for the development of microinsurance. Section 20.1
provides an overview of the general and life insurance industries in India,
particularly with regard to their outreach to the rural and social sectors. The
second section considers specific product innovations that have enabled livestock,
agriculture, life and health insurance to become relevant for low-income
markets. Section 20.3 describes the channels commonly used to distribute insurance
to the poor. The chapter concludes by summarizing key factors that have
contributed to the development of microinsurance in India, which might
provide insights for practitioners and policymakers interested in extending social
protection and enhancing financial inclusion in other countries.
1 A self-help group (SHG) is a village-based group usually composed of 15 to 20 local women. Members
make small regular savings contributions over a few months until they have enough capital to begin
lending among themselves. SHGs are common in India because they have been promoted by the
National Bank for Agriculture and Rural Development (NABARD). Through NABARD’s SHGbank
linkage programme, SHGs with a track record of regular repayments with their own capital can
access additional funding from banks with re-financing from NABARD. NABARD estimates that
there are 2.2 million SHGs in India, representing 33 million members, which have taken loans from
banks under this programme. This figure does not include SHGs that have not borrowed from banks
(Annual Report NABARD, 2011).