A new report highlights the potential for growth by standalone microinsurance companies in India, including co-operative and mutual insurers.
The report was published by the Committee on Standalone Microinsurance Company, which was set up by the Insurance Regulatory and Development Authority of India in February. The paper focuses on the potential for new standalone microinsurance companies in India – and says that India’s plans for financial inclusion must include measures to ensure low-income families in India can take out insurance.
The committee was chaired by Mirai Chatterjee, leader of the Self-Employed Women’s Association, SEWA, a network that organises workers for collective rights and helps them to set up co-ops. Its final report also explored the existing regulatory framework for insurers across the country.
Mirai Chatterjee wrote in the report: “Working on this subject during the pandemic has only served to convince us of how crucial microinsurance coverage is for all, especially the most vulnerable – the working poor of our country.”
The committee gathered best practices from across the world, consulting national and international microinsurance practitioners and experts, including the International Co-operative and Mutual Insurance Federation (Icmif). Local co-operative and mutual insurers in India were also involved in the process, sharing reports and recommendations.
SEWA helped to set up the National Insurance VimoSEWA Cooperative, a multi-state insurance co-op owned by 10,000 women in five states and 13 membership-based organisations. In addition to providing affordable insurance products, VimoSEWA also offers training to its members.
Ms Chatterjee added: “We owe a debt of gratitude to all those policyholders who placed their faith in microinsurance and used their hard-earned money to secure their and their families’ future. We hope this report will do justice to their hopes and dreams and will lead to the extension of microinsurance to all, particularly the most vulnerable of this country.
“We also hope that microinsurance will be one more tool for financial inclusion and social protection and will serve to keep families out of poverty. In addition, we firmly believe our report and its recommendations will contribute to help the women of our country achieve their goal of economic empowerment and self-reliance, thereby building a better and healthier India for us all.”
One of the committee’s key findings was that the entry-level capital requirement for floating a standalone microinsurance company is too high. The report recommends reducing the entry-level capital from the current requirement of INR 1bn (£10.5m) to INR 50m (£524.415), 100m (£1.04m) and 200m (£2.1m) to help accelerate the expansion of the microinsurance market. The committee argues the lowering of the minimum capital entry level would enable more microinsurance companies to be set up in India.
Citing the experience of the Philippines, South Africa and China, the report also adds that “supportive regulatory frameworks and technology can go a long way in increasing the penetration levels of insurance.”
It further suggests that microinsurance companies, including co-operatives and mutuals, should be allowed to act as composite insurers to transact both life and non-life business through a single entity.
Implementing the suggested changes is even more imperative in the current context of the Covid-19 pandemic, which resulted in millions of people working in the informal sector losing their jobs, concluded the report.