Sustaining Micro Insurance through Innovation

Micro insurance is a developmental tool that is intended to protect low income populations from the risks that they may face in their day to day lives. Of late, technology is being used to spread awareness about micro insurance. Despite this the reach of micro insurance has been limited. Penetration levels are abysmally low. Treating micro insurance as a scaled down version of traditional insurance is not a good idea. This results in marketing products to underprivileged communities that they may not need. This research effort traces the challenges facing micro insurance sector in India and also highlights the limitations. Innovations are a need of the hour – whether it is product innovation or innovations in distribution mechanisms. New micro insurance covers have to consider the unique needs of low income population. Product innovations can be successful only if there is an adequate distribution/ delivery network to ensure that such innovations reach the underprivileged sections of society. Community involvement in new product design can help growth of the sector. Claims payment processes must be simple and build trust among the low income population. The poor need to be treated as customers. They need compelling value propositions so that they can opt for micro insurance cover. Segmentation of micro insurance covers as life, general and health will be a wise move that can further aid the growth of micro insurance. The paper has made recommendations which if considered can lead to sustainable growth of micro insurance in India.