According to a World Bank report, India was home to the largest number of poor people in 2012. A large base of underprivileged and low income segment of the country had no access to financial services. A large part of this population, are below the poverty line. They have zero access to credits, insurance and other financial services. Over the last few years many finance institutions have been attempting to fill this gap. This is where micro insurance comes into the picture.
Micro insurance is a fairly new concept. The term “micro insurance” was first published around 1999 and has different approaches about how the term ‘micro’ in micro insurance can be understood. The term “micro insurance” first appeared as a new financial service within microfinance and then developed into a sector of its own.
Micro insurance caters to the need for protection against the risks in life among low-income people.
Let’s look at the importance of micro insurance;
Micro insurance is potentially an important new risk management tool for low-income people in developing countries for several reasons. Vulnerability tremendously affects poor people and makes their living worse.
To address these challenges within the segment, micro insurance serves two purposes. On one hand it covers the customers’ impending liability, and on the other provides an opportunity to save systematically.
Micro insurance is aimed to reach the remote rural areas in an organized & comprehensive manner.
The sum assured provided under micro Insurance is not very high, this is because the premiums are kept low so that it is affordable for the poor. Micro insurance may also include health and savings plan depending on the needs of the people and individual company products.
Protection plan is a necessity that should be provided to every Indian. Micro Insurance caters to the needs of even the low income and rural India, thus bringing in awareness and change in most people’s mind-set.