micro insurance awareness in india: a study of

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MICRO INSURANCE AWARENESS IN INDIA:
A STUDY OF ALLAHABAD DISTRICT
FARAH FAROOQUI,
Research Scholar
Department of Commerce and Business Administration
University of Allahabad, Allahabad- India
ABSTRACT
The liberalization of economy has strengthened the argument "to strengthen the people at
micro level i.e. at the grass root level of the society,” the people below poverty line.
Action plans are made to strengthen the un-privileged section of society by providing
micro-Insurance to the people living therein. This particular section needs a conviction
that buying insurance is more worthwhile to them than being without it. Creating
awareness among the poor masses to insure the assets, the lives and the health of their
families has remained an elusive goal, notwithstanding the recent introduction of specialist
insurance regulation that is very insurer - friendly. The task of mobilizing the efforts of
insurance unit to make this goal partly achievable has yet remained a slow starter. In this
context the present research has been undertaken with the objective of analyzing the
awareness of micro insurance among the agriculture labour of rural areas of Allahabad
district and study the role of MFI, SHG's and NGO's in creating awareness and the study
will suggest measures for increasing the awareness of micro insurance schemes. The study
is based on primary and secondary data. The sample size is 125. The road ahead is very
tough but it can be filled with basket of growth opportunity.
Keywords: Below Poverty Line, Micro Insurance, MFI’s, NGO’S
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INTRODUCTION:
Risk is a fact of life that we all have to live with. It is to be seen that how an individual manages these risks
in different prospective. A common form of risk protection is insurance. Insurance provides individuals or
business with a buffer against the adverse outcome of a perceived risk. Insurance however is not always
accessible an affordable to everyone. It is observed that in majority of countries the salaried income
earners, middle class and the wealthy who are insured. The poor, rural dwellers, small businesses and
irregular wage earners often do not get covered by insurance because (1) they have other pressing bread
and butter issues to worry about, (2) they are not aware of the availability of these products. (3) They cannot
final affordable insurance products to suit their needs. The best way to provide insurance to low income
households is through Micro-Insurance. Thus the term micro-Insurance refers to a low value insurance
product designed for low income earners. A usually these from poor households have very limited means as
scare resource base to support them. This makes them more vulnerable to risk. Hence availability of microinsurance would in some ways provide the poor with some protection, peace of mind and dignity.
DEVELOPMENT OF MICRO INSURANCE IN INDIA:
Historically in India, a few Micro - Insurance schemes were initiated either by NGO's or by trust hospital.
These schemes have now gathered momentum partly due to development of micro-finance activity and
partly due to regulation made by IRDA in 2005 made it mandatory for all formal insurance companies to
extend their activities to rural as well as identified social sector in the country. Consequently, the microInsurance Industry in India growing rapidly. Almost all the public and private Insurance Companies
launched their products.
NEED OF THE STUDY:
Insurance education is a valuable and important activity because; the lack of understanding of insurance and
its benefits is a major obstacle to the expansion of micro-insurance. Those who do not understand how
insurance works are unlikely to trust this sector. By creating awareness about the insurance, families are at
least given the option of considering insurance to their financial planning strategies. Insurance awareness is
therefore after considered as an integral part of micro insurance scheme. This study is an attempt to analyze
about the awareness of micro insurance scheme among the agriculture labour and role played by NGO's,
MFI's, SHG's in creating awareness among the untapped market of insurance Industry and to suggest
measures for the same.
LITERATURE REVIEW:
The present study embodies a brief review of the research done in the area of micro insurance.
A study entitled "Trend and Strategies for further extension" by Ahuja Rajiv and Khasnobis Guha Basudeb.
In this article the author analyse the early evidence on Micro-insurance already available. The article
highlights the current initiatives being contemplated to strengthen micro insurance activity in the country
and suggest specific ways that can help in promoting insurance to the target segment.
In the study entitled "An untapped opportunity in emerging market" by Balan Govind. The author has
deliberated upon he meaning and importance of micro insurance. Author suggested insurance companies
that insurer should look at micro - insurance seriously not just to fulfill potential regularity requirement but
as a viable business opportunity.
A study entitled "Innovating at the BOP: Delivering Micro-insurance in Kalahandi and beyond" by Sarthak
Gaurav and Ana Poala Gomez Acosta and Luis flores Ballestone..Author tries to emphasize upon the
effectiveness of formal and informal risk response mechanism and analyse the issue in provision of market
based risk management solution and micro insurance in backward rural communities and resource poor
geographies.
In the study entitled "Financial inclusion, micro insurance and the Indian insurance Sector" by Sinha Pratap
Ram. In this article the author has deliberated on the deregulation of the Insurance Sector in India. The
article throws light on the various studies on the potential market as well as initiatives taken by IRDA
regarding development of micro-insurance.
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Venkata Raman Rao (2008) the study reveals that Micro Insurance is not an opportunity but a responsibility
and to serve this responsibility good awareness campaign is needed. Micro insurance is offering real solution
to the billions of rural people that raise the awareness of Micro Insurance as a key issue in coming future.
RESEARCH METHODOLOGY:
OBJECTIVE:
To study the awareness of micro insurance schemes among agricultural labour.
To study the preference for public and private insurance company.
To study the roe of NGO's, SHG's and MFI's in creating awareness of micro insurance.
To suggest measures for increasing the awareness of micro insurance.
RESEARCH DESIGN:
Universe-finite
Sample technique - Purposive sampling
Sample size - 125
AREA OF STUDY:
The Area selected for the present research comprise of rural areas of Allahabad district. The District
population comprise of more than 30 lacks were 55% of the population live inside poverty line.
DATA COLLECTION:
The present study is based on both Primary and Secondary data. Primary data has been collected through a
well designed questionnaire which contained both close and open ended question related to parameters
selected for testing of awareness of micro insurance schemes of public and private insurance companies.
Secondary data information is explored from referred journals, magazines, books and related websites etc.
ANALYSIS OF DATA:
Data has been analyzed by using simple percentage method.
DEMOGRAPHIC PROFILE OF RESPONDENT:
GENDER:
Female, 32%
Male, 68%
Male
Female
The data speaks that majority of respondents are males. This shows that males are more concern about risk
coverage and future saving than female.
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EDUCATION:
Inter, 4%
6-High School,
16%
Illerate, 42%
Till 5th, 38%
Illerate
Till 5th
6-High School
Inter
The data reveals that majority of respondent are illiterate.
MONTHLY INCOME PROFILE:
5000 & above, 3%
Less than 3000,
19%
4000-5000, 22%
3000-4000, 56%
5000 & above
Less than 3000
3000-4000
4000-5000
56% of the study samples have an average monthly income Rs. 3000 - 4000 while 22% earns Rs. 4000 5000. Only one fifth earns less than Rs. 3,000 per month.
As per the response of respondents regarding the question about awareness of Micro - Insurance schemes it
has been observed that 60% of the respondents are aware about micro - insurance schemes launched by
Insurance Companies, while 40% of the respondents are unaware abut the benefits of micro - insurance
which is basically designed for these people. This surprising figure may be due to illiteracy, lack of proper
awareness tools, lack of access to micro insurance agents like MFI's NGO and SHG's. The illiterate female
respondents are found to more unaware about micro insurance scheme.
Unaware, 40%
Aware, 60%
Aw are
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DEPICTS AWARENESS OF RESPONDENTS TOWARDS MICRO-INSURANCE:
Tools of awareness play an important role in creating awareness about given below shows that out of 75
respondents (i.e. 60% of respondents who are aware above micro insurance schemes) 37% of the
respondents are aware through month to month awareness 22% were aware through friends and relatives,
15% through door to door awareness campaign, 11% through group meeting organized by NGO's SHG's etc.
9% through Audio visuals, 6% through panchayat and chaupals.
Panchayat & Chaupal
Audio Visual
Group Meetings
Door to door awareness compaign
Awareness through friends & relatives
Mouth to Mouth Awareness
0%
5% 10% 15% 20% 25% 30% 35% 40%
Depicts Tools regarding awareness of micro-insurance
On the analysis of information regarding motivation buying micro insurance. The data reveals that about
76% of the aware respondents are ready to buy insurance while 24% of respondents are not willing to buy
insurance policy on about of reason like less income, less saving and less awareness amongst the people.
Not Ready to
Buy Microinsurance,
24%
Ready to Buy
Microinsurance,
76%
Ready to Buy Micro-insurance
Not Ready to Buy Micro-insurance
Depicts respondents attitude towards micro-insurance
Regarding the various types of micro insurance policies 63% of the respondent preferred Life Insurance
Policies as it is an important measure of financial security for low income household. 31% preferred health
insurance policies while 6% preferred crop and live stock insurance. It is glaring to observe that the
respondent heard were not aware of disability, property and disaster micro insurance.
Data regarding the preferences of life insurance companies reveals that out of 60% of the aware respondents
majority i.e. 72% of them knew about micro insurance service provider specially L.I.C. This shows that
public companies are leader of micro insurance market.
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80%
LIC, 72%
70%
60%
50%
40%
30%
ICICI Pru., 15%
20%
TATA AIG, 7%
10%
Bajaj Allianz, 4%
Others, 2%
0%
LIC
LIC
ICICI Pru.
ICICI Pru.
TATA
AIG
TATA AIG
Bajaj
Allianz
Bajaj Allianz
Others
Others
Depicts: Preference towards Micro-insurance companies
ROLE OF SHG’S, MFI’S AND NGO’S IN CREATING AWARENESS OF MICRO INSURANCE:
To reach the poor is still a difficult task for insurance companies due to infrastructure and cost consideration.
The partnership model uses a synergistic approach that involves collaboration with MFI, SHG’s and NGO's.
in present scenario these institutions are regarded as cooperate agents as per regulation of IDRA. As the
illiteracy level being low in the target market various awareness tools are used by these agents viz songs,
slogan, organized meetings, group discussions and street theatre etc. These institutions faced a challenge in
promoting insurance, as poor people generally consider insurance to be non feasible option for them.
Various MFI's NGO's which worked as micro insurance agents are SKS, BASIX, SEWA, SPANDANA,
DHAN FOUNDATION, and Micro Insurance Academy etc. As per the IRDA Annual report of 2012-2013
numbers of micro insurance agents are increasing year by year.
FINDING AND SUGGESTIONS:
Through the analysis of primary and secondary data it was revealed that more than half of the respondents
were aware about micro insurance schemes. About 40% of the respondents are unaware about micro
insurance schemes. Insurance provider should provide these agriculture labour facts, data and specific
knowledge to make them aware of their risk exposure and insurance opportunities and consequences.
Companies should provide proper guidance to rural masses as to make them understand about micro
insurance utility concepts. Advertisement campaign must be made in local languages. Audio/visual
technique should be used as mostly unaware people are illiterate.
Analysis regarding the tools of awareness indicates that majority of them are aware through mouth to mouth
awareness, awareness through relatives and friends and door to door awareness. It is suggested to the insurance
provider that panchayats and choupals should be made more effective in communicating the message regarding
awareness of various schemes as rural population are more closely linked with these social groups.
Since the population are awared about the insurance product nearly about fourth fifth of the respondent are
ready to buy. It is suggested that companies should use more effective promotion techniques in order to
convert awareness into business. The Insurance provider must trained employees in a proper and effective
manner in order to sell the micro insurance products to agriculture labour. The message should relate to the
risk coverage in case of casualty. Insurance provider should blend the message according to local belief,
customs and values of the agriculture labour.
After anlaysing the data it has been revealed that majority of the respondent were aware about life and health
policies. It is suggested to the insurance provider that they should make them aware about the other
products available and also make them understand about its utility. Rallies and enlightment campaign must
be conducted. Along with advertisement certain role plays and street plays must be done in village so that
the rural people may become aware of the programme in much faster way. The insurance companies should
focus on all activities ancillary to agriculture so that this section of rural population can get benefit of micro
insurance schemes.
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Out of all the aware respondents near about three fourth of them shows their preference towards LIC. Other
organisation which the respondent preferred is ICICI Prudential, TATA AIG, and Bajaj Allianz etc. It is
suggested that private players should improve their brand image. The insurer should use sign boards,
billboard, use of tag line etc., they should also maintain public relation and organize prevention campaign.
CONCLUSION:
The result indicates that awareness of micro insurance products available among the agriculture labour is
low. They don't prefer giving a good chunk of their income to the insurance provider to hedge themselves
against the unknown and uncertain future risk. So, insurance companies MFI, SHG's and NGO's should
make more effective effort in increasing the awareness about micro insurance which is a boon for low
income people.
REFERENCES:
1. Annual Report, IRDA 2010-11,2011-12 and 2012-13
2. Allianz AG, GTZ and UNDP (2006), "Micro insurance Demand and Market Perspects - India",
Private Public Partnership.
3. Basanta K. Sahu - "Micro insurance in India: Outreach and Efficiency", Centre for Micro Finance
Research, Lucknow.
4. Chandhok Arun Gunita (2009), "Insurance - A Tool to Eradicate and a vehicle to Economic
Development", International Research Journal of Finance and Economics Issue 24. Page no. 65-69
5. Chandel, Kumar and Rana (2009), "Understanding risk and returns in mutual fund investments",
Apeejay Journal of Management, Jan. 2009 Vol. 4 No. 1. Page no.112-116
6. Rao & Samuel (2009), "The Indian Insurance Industry - inching forward", Insurance Chronicle,
January, 2009. page no.38-43
7. Saha (2010), "Insuring the bottom of the Pyramid", insurance chronicle, January, 2010. Page no.42-49
8. Singh P.P. and Miglani Shweta (2011), "Micro Insurance Schemes: Awareness and future prospects
among labour class", Confeence on Inclusive and Sustainable growth. Role of Industry Government
and Society, Conference procdding, 2011.
9. Thankom Arun and Bendig Mirko (2010),"Micro Financial Services & Risk Management",
Lancashire Business School Working Paper, New Series, Vol. 2, No. 1.
10. Venkata Raman Rao "Life Insurance awareness in rural India: Micro Insurance lesson to learn and
teach, Bimaquest Vol. VIII issue-I.
WEBSITES:
http.//en.wikipedia.org/wiki/Micro Insurance accessed on 1 july 2013
www.iciciprlife.com/microinsurance/microinsurance-plan.htm accessed on 22 sept 2014
www.tataaig.lif.com/pdf/5c-rural-draft%20press/20release.pdf accessed on 12 nov 2014
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