Life Microinsurance in India: Potential and Pitfalls

by Anshuman Jaswal, PhD, May 2, 2011
Industry Trends
Asia-Pacific

Abstract

Financial inclusion has become a buzzword in India. Insurance firms have woken up to the possibility of profitably addressing the needs of the lower income segment of the market. As a result, after the interest in microfinance, we are now seeing a microinsurance wave.

 In a new report, Life Microinsurance in India: Potential and Pitfalls, Celent analyzes the progress of the life microinsurance sector in India. In the last two to three years, the industry has made rapid strides, and both public and private sector firms are catering to it.

The number of new policies has risen from 13.2 million in FY2008 to 19.8 million in FY2010. Of this group, insurance forms a large segment, as a many of these policies are sold through cooperatives, non-profit organizations and microfinance institutions to their members. Also, we can see below that the Life Insurance Corporation (LIC), a public sector entity, sells the majority of such policies. Its long established network and wider reach are important factors in this.

 

 

“India has a large population below and marginally above the poverty line,” says Anshuman Jaswal, Celent Senior Analyst and author of the report. “Microinsurance can be a crucial medium to provide risk coverage to these people, and innovative channels should ensure that it remains a viable proposition for insurance firms.”

The Indian microinsurance environment presents some interesting challenges. In a country as vast as India, reaching the target consumer is easier said than done. Even technology has its limitations, especially due to low literacy rates in rural areas. With this report, Celent hopes to inform readers about the development of this market, as well as some of the interesting lessons that can be drawn from the Indian experience.

 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

3

Introduction

5

Market Overview

6

 

Indian Insurance Landscape

6

 

Penetration and Density

7

 

Microinsurance Regulation

8

Microinsurance Models

9

 

Distribution Channels

10

 

Examples of Distribution Models

12

Pricing and Regulation

15

 

Pricing of Microinsurance Schemes

15

 

Regulatory Issues

15

Life Insurance Sector

17

IT Initiatives

23

Conclusion

25

Appendix A: Micro Individual Life Insurance Products

27

 

TATA AIG

27

 

Life Insurance Corporation of India

28

 

Bajaj Allianz Life Insurance

28

 

Birla Sun Life

29

 

Aviva Life Insurance

30

 

Sahara India Life Insurance

30

 

MetLife

30

 

ICICI Prudential

31

Appendix B: Micro Group Life Insurance Products

32

 

SBI Life Insurance

32

 

Sahara India Life Insurance

32

 

Aviva Life

32

 

Canara HSBC Life Insurance

32

 

DLF Pramerica

33

 

IDBI Federal Life Insurance

33

Leveraging Celent’s Expertise

34

 

Support for Financial Institutions

34

 

Support for Vendors

34

Related Celent Research

35

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