The insurance industry in India is growing rapidly on the back of burgeoning wealth in the country, expanding middle class and regulatory support. However, with 65% of the
population living in rural areas (World Bank Data 2021), a differentiated approach is needed to provide insurance coverage to this vulnerable section of society. Given this, the Insurance Regulatory & Development Authority of India (IRDAI) has helpfully laid down the IRDAI (Micro Insurance) Regulations, 2015. These regulations, along with growing demand and government efforts, have increased the percentage of people covered under microinsurance from 20% in 2018 to 28% in 2022 (Economic Survey 2022-2023).
However, the sector is still marred with both demand and supply side issues, due to lack of awareness, and poor unit economics hindering the growth of microinsurance in India. Not only has the frequency of natural events gone up in the recent past, but they have also been unforgiving in their financial impact, and very wide in their geographical reach. Therefore, strategic thinking at various stages of design, distribution, and servicing is required, both by the industry and the regulator, to propel the microinsurance industry forward in India, thereby ensuring ‘Insurance for All by 2047’.
The microinsurance market in India, particularly in rural and underserved regions, is rapidly evolving. Insurers are focusing on tier-3 and tier-4 locations, where they are gaining insights into the specific needs of rural communities. A significant portion of our own business comes from non-metropolitan regions, highlighting the growing demand for accessible and affordable insurance products among these population segments. Microinsurance-focused products, such as home insurance and benefit products like Hospicash, cater to the risk needs of rural households while providing adequate coverage at very low premiums—imagine being able to insure your house made of mud walls and coconut tree leaves for just 67 paise per day!
The microinsurance customers need specialized servicing focus considering they are often barely literate and reside in remote areas. At the time of risk occurrence, they need quicker claims settlement due to their financial conditions. Therefore, to be a trusted brand in the microinsurance segment, it is important that the servicing of the policies is dealt with differently. In this endeavour, we have deployed multiple innovative solutions that provide quality servicing & claims experience to the customers. Utilizing the growing internet penetration in rural households, we have launched iClaims to provide video-based settlement for even home insurance. Further, we have the spot liability finalization process in conjunction with the partners and customers. These and other various initiatives help us to better serve the customers during their hour of need.
The recent events of Covid and frequent NAT CAT incidents have raised anxiety and awareness among rural households regarding insurance. What was once viewed as luxury is now considered a necessity. Considering that most rural households will fall into the low to mid-income group, microinsurance products provide them with the opportunity to get covered.
However, this segment is still underpenetrated due to the unfavourable unit economics involved. The companies need to innovate and leverage digital reach to better cater to the distribution and servicing needs of the microinsurance market. On the other hand, regulators can also step in and introduce favourable policies to drive microinsurance growth in India. With the unified approach of the various stakeholders, we can achieve high growth in this segment.
Views expressed by Vikas Mittal, Deputy CEO at Magma HDI General Insurance
