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Microinsurance
benefits was initiated by 5 federations, of which only one, again the Kadamalai federation,
continued to offer it, the others having first transferred to the nationalized companies
before withdrawing the product altogether because of the higher percentage of claims and a
higher rejection rate by the companies. "The Kadamalai federation is able to manage successfully
due to its well designed scheme and exclusions followed by close monitoring and community
health support through local village health workers and its own hospital" (DHAN Foundation
2004).
Special regulations for mutual schemes for the poor
SEWA has argued that the regulations need to be amended to differentiate between commercial
organizations that cater to the well-to-do on the one hand, and mutual organizations such as
cooperatives that specialize in catering to the poor on the other hand, as is the case in some
other countries. It feels on the basis of its actuarial experience, claims ratios, benefits package
and business plans that Rs 35 crore would be an adequate initial entry capital requirement to
meet all possible contingencies and prudential concerns, rather than the Rs 100 crore prescribed
for all types of institutions at present.
The role of government
Another issue is the role of the government in the microinsurance sector, apart of course, from
regulation. A National Seminar sponsored by IRDA, SEWA and FWWB in 2003 recommended
that the government and IRDA should assist microinsurance organizations to obtain access to
investment funds rather than give them subsidies (SEWA and FWWB 2003). Even if lower
capital requirements are laid down for microinsurance organizations, or even for mutual
microinsurance organizations, there will be need for equity investments in them from both the
private and public sectors.
The main subsidy in the insurance sector is the contribution made to the Social Security Fund
administered by the LIC, which enables it to pay half of the Rs 200 premium for the flagship
product for the poor, the JSBY, which covers natural and accidental death and disability, and
an education grant for children in the 9 th to 12 th standards. 28 Presumably the recommendation
above implicitly excludes subsidies such as these which make insurance much more widely
affordable. The Seminar also recommended that government assist with capacity building of
microinsurance entities, product development and R&D, technical assistance (e.g. for actuarial
services), risk funds and re-insurance. Assistance should be provided through a one-window
mechanism.
SEWA has
argued that the
regulations
need to be
amended to
differentiate
between
commercial
organizations
that cater to
the well-to-do
on the one
hand, and
mutual
organizations
such as
cooperatives
that specialize
in catering to
the poor on the
other hand
It has been proposed that one way of rendering it would be through a separate authority to
be constituted to regulate microinsurance schemes, with representation of sector representatives
including NGOs, CBOs (including the SHG movement) trade unions, cooperatives etc. Such an
authority would be better informed and more sensitive to the needs of the microinsurance
sector, while ensuring higher transparency and accountability in in-house schemes. Subsidies
to the sector should be routed, it has been suggested, through this authority to the approved
schemes of CBOs and NGOs since it would be in a better position to judge the appropriateness
of products to the needs of the poor (George (Forthcoming)).
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