The insurance industry, one of the important sectors in India, is crucial to the Government of India’s financial inclusion plan. Despite being an important factor towards overall financial well-being of any population, the insurance penetration (premiums as % of GDP) in India stands at 3.69% in 2017 from 2.71% in 2001 (Source: IBEF). A substantial percentage of the population is still under the below poverty line with no access to credit, banking, and financial services. Thus, having insurance is a distant dream. Acknowledging India’s massive population, most insurance companies usually focus on the higher income group with little to none on lower-income groups, especially the rural market. According to the World Bank, collection of development indicators, Rural population in India was 65.97 % in 2018. There is a social need to provide insurance to the rural sector, given the financial vulnerability, as death of the provider of the family is always a financial disaster.
WHAT IS MICRO-INSURANCE?
The IRDA micro-insurance Regulations 2005 defines microinsurance as a general or life insurance policy with a sum assured of Rs 50,000 or less. It intends to provide financial protection to low-income families against the risks in life. The sum assured provided under this is not very high because of the low premiums, which makes it affordable for the poor. It may also include health and savings plans depending on the needs of the people and individual company products. Microinsurance products can be a boon for the low-income strata of society.
Over the last few years, many financial institutions are actively working towards filling the last-mile gap. This is where microinsurance plays an important role in the overall financial well-being of the people residing in rural areas. Companies like Bharat Financial Inclusion Ltd. and IndusInd Bank through their innovative banking and financial platform Bharat Money Store are helping people in rural areas by providing access to banking services digitally in their neighbourhood. The platform is built on Aadhaar architecture using AePS for transactions and leverages the network of 15,000 merchants across 5000 villages in 74 districts. Customers do not have to walk long distances to visit bank branches to withdraw deposit money. They can simply walk into a Bharat Money Store and make transactions using their Aadhaar and fingerprint.
Leveraging Bharat Money Store
Insurance companies can leverage this already established network to offer microinsurance bundled with health, crop, or livestock insurance policies and provide digitally to a large customer base of Bharat Money Store. The Digital approach may benefit the provider in terms of keeping the service cost low eliminating physical documentation requirements, as customers can open a savings bank account at a Bharat Money Store. These details can be utilized for claim settlement purposes minimizing issues with data mismatch. The engagement allows the insurer to target mass audiences making it cost-effective compared to the traditional approach by offering paper-less transactions throughout the process.
As mentioned earlier, the rural population comprises 65% of the total population, the base of Bharat Money Store, is a high growth potential market. With state-of-the-art customer services, the collaboration can establish effective real-time communication with the customer to resolve issues and queries. Insurers get direct access to a large customer base spread across over 5000 villages without any customer acquisition cost, a win-win situation for both the parties.