Financial security, rather than savings goal, is the main driver for micro-insurance products in rural India, according to finance companies. Typically, micro-insurance products cater to rural population living below the poverty line.

Muthoot Housing Finance Company, which provides housing loans in rural sector, feels that below poverty line (BPL) population need to take micro-insurance to secure loans taken by them.

Speaking to Financial Chronicle on the sidelines of Microfinance India Summit, Maneesh Srivastava, CEO of Muthoot Housing Finance Company, said, “To secure the future of the family, borrowers need to insure themselves. In the event of borrower’s death, the family does not need to go through the distress of vacating their property and the insurance takes care of their liability.”

Insurance companies and microfinance institutions (MFIs) feel that pure life policies are more suitable in their micro-insurance portfolio. “Products intended to be sold in this segment should be straight forward and easy to understand,” Suresh Agarwal, executive vice-president and head of distribution and strategic initiatives at Kotak Mahindra Old Mutual Life Insurance, said.

The Insurance Regulatory and Development Authority (Irda) has made it mandatory for all insurance companies to get a certain percentage of their total business from micro-insurance policies, in order to increase insurance penetration and help rural population.

Insurers generally tie-up with local microfinance institutes, non-governmental organisations (NGO) and regional banks to sell their micro-insurance products. These institutions also help in increasing the financial products awareness.

“Distribution cost is a major factor, since opening branches in each area is not viable. MFIs and regional partnerships are helpful,” added Agarwal.

Non-life insurance companies offer health, personal accident and natural calamity products. “Considering that the death of the bread-earner severely impacts the family, life insurance products have been doing well in this segment. However, non-life insurance products, such as health and personal accident policies, are also catching up,” said Arun Mehrotra, head of retail underwriting and product development at Iffco-Tokio General Insurance.

sagarsen@mydigitalfc.com