Microfinance

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Introduction

The microfinance sector suffers from having a precise definition and disaggregated data to stand the pace of performance and arrive at a definite number which will signify the penetration of insurance products in the rural space in India.

In addition, this industry suffers several hostilities in the form of high costs of selling, finding efficient distribution channels, low insurance awareness among the targeted segment, rural social obligations, and so on.

It is recommended for Svatantra to launch innovative and standardized micro-insurance product in congruence with the Insurance Regulatory and Development Authority (IRDA) to prevent miss-selling and prelude transparency in the process. The product thus designed will be addressing the BPL families with the objectives to reduce Out of Pocket (OOP) expenditure on health and increase access to health care.

The Micro Insurance Regulations Act in 2005 have set boundaries for the cost and coverage of the product and specifies lucidity about distribution mechanisms. The private sector insurers in compliance with the obligations are looking forward to bringing in substantial modernization in products and processes to serve the impoverished population of India through –

• Effective Mobile Enrolments in aid with Aadhaar
• Co-payment models
• Offering value proposition in the form of periodic health screening, no claim discounts, telemedicine, etc
• Exploring advanced distribution channels such as internet kiosks, etc.

Since the provision, the private microfinance companies have been facing hurdles in various forms, be it regulations or process, and, hence, a robust and congregated execution circuit can help mitigate risks and bring the profitability lining at bay. The stringent parameters set by IRDA has promoted lack of motivation among the insurers for launching and retaining a microinsurance product.

Proposed Target Group for the Product

As the existing portfolio of Svatantra is in these 6 states (Maharashtra, Madhya Pradesh, Uttar Pradesh, Chhattisgarh, Rajasthan, and Orissa), so our pilot healthcare insurance product will have to be launched first among these six states. Now looking at the PAR value as per MFIN Q1 FY 17 – 18, we see that all the PAR 30, PAR 90 and PAR 180 values for Orissa are less than 1%. Hence, this makes Orissa the ideal state to launch the healthcare insurance product. So, our target group are the existing JLG members in Orissa.

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Table: PAR for different states in India

Proposed Insurance Product

We have designed a customised insurance product to meet the requirements of every family as per their monthly income and number of family members. The three products designed are as follows –

A JLG member can choose a plan of her liking and the net premiums can be calculated by multiplying the Premium per person by the number of family members. The different plans have been proposed keeping in mind that the earnings per family will not be the same throughout Orissa and secondly by having a premium per person structure the JLG member will be motivated to take out the insurance. Additionally, the JLG member will require to take out the plan for entire family e.g. if there are 4 members in the family the insurance will be taken on all four. Partial insurance on a limited number of family members is not allowed. This is done keeping in mind that is the uninsured member falls sick there will be cashflow problems in the household which will impede payment on the exiting microfinance loan.