CHAPTER - 1

MIRCOINSURANCE AND RISK MANAGEMENT

The goal of social protection of governments and the discovery of business proposition in marketing insurance products by private players has led to the growth in the insurance business and evolution of various types of insurance covers. The insurance sector acts as a mobiliser of savings, a financial intermediary and a promoter of investment activities.

For some time, insurance was limited to some risks and some groups of society, ignoring the needs of the more vulnerable groups- the poor. Uninsured risk leaves many poor households more vulnerable to the losses arising from negative shocks. State-provided social security measures are inadequate to cover all kinds of household risks.

Microinsurance has been seen as one of the major risk managing tools for the poor and low income groups and a potential market for business. Experiences across countries in the world, show that microinsurance has potential to reduce household risk impacts. In view of this, there is widespread interest in analyzing how microinsurance plays a meaningful role in household risk management and how effective insurers are in reaching and serving the needy poor.

DEFINITION OF MICROINSURANCE

According to Churchill,(2006) microinsurance is about providing insurance coverage to poor households that have been largely excluded from coverage by commercial insurance providers. These include individuals who are ignored by traditional commercial and social insurance schemes, typically from low-income households, who work in the informal economy, have irregular cash flows. It is an insurance that (i) operates by risk-pooling (ii) financed through regular premiums and (iii) tailored to the poor who would otherwise not be able to take out insurance.

Craig Thorburn, (2007) defines microinsurance as the insurance targeting those that are ignored by mainstream commercial insurance and social insurance schemes. That is persons who do not have access to benefits, often because they are not part of

1 the formal sector or have no access to benefits normally provided through formal employment.

According to the Consultative Group to Assist the Poor (CGAP) a working group on microinsurance appointed by Government of India defined the term as “the protection of low income households against specific perils in exchange for premium payments proportionate to the likelihood and cost of the risk involved.” (Roth, et.al 2005)

NEED FOR MICROINSURANCE The need for microinsurance is obvious as there is poverty across the globe and the poor face a variety of risks.

Poverty across Globe The need for paying attention to poor arises owing to the prevalence of poverty across the globe. Despite the efforts put forth by governments and the international organisations, poverty continues to be a formidable problem across the globe. The following descriptions lend support to this view:  How many? The United Nations Food and Agriculture Organization estimates that nearly 870 million people, or one in eight people in the world, were suffering from chronic under nourishment in 2010-2012.  Where are they? Almost all the hungry people, 852 million, live in developing countries, representing 15 percent of the population of developing countries. There are 16 million people undernourished in developed countries (FAO, 2012a).  Are they increasing? Developed regions also saw the number of hungry rise, from 13 million in 2004-2006 to 16 million in 2010-2012, reversing a steady decrease in previous years from 20 million in 1990-1992 (FAO, 2012b). The number of hungry grew in Africa over the period, from 175 million to 239 million, with nearly 20 million added in the last few years. Nearly one in four are hungry. And in sub-Saharan Africa, the modest progress achieved in recent years up to 2007 was reversed, with hunger rising 2 percent per year, since then.  Are they not decreasing with development of nations? The number of undernourished people decreased nearly 30 percent in Asia and the Pacific, from

2 739 million to 563 million, largely due to socio-economic progress in many countries in the region. The prevalence of undernourishment in the region decreased from 23.7 percent to 13.9 percent. Latin America and the Caribbean also made progress, falling from 65 million hungry in 1990-1992 to 49 million in 2010-2012, while the prevalence of undernourishment dipped from 14.6 percent to 8.3 percent. But the rate of progress has slowed recently.

Given that poverty is a significant factor, there is a need to understand the risks faced by the poor and take measures to mitigate them or help poor cope with them.

Risks of Poor Risk is ever present in the lives of the poor because most of them live in insecure conditions. Low-income individuals, households, and businesses are susceptible to the most common risks associated with their well-being, such as death, illness, injury, natural disasters, and economic. We can classify these risks as follows: (World Bank, 2000)  Individual or family related risks, which affect a single person or his or her family.  Mass risks, which affect all the people living in one area. Individual risks can be further classified as follows:  Life cycle risks, which include Risks related to mortality, Risks related to longevity and Risks related to health and disability.  Economic risks, the risks relate to earnings and property

(i) Life cycle risks

There are three major classes of risks associated with the life cycle: the risks associated with a premature death; the risks associated with long life (old age, longevity); and the risks associated with our well-being (health risks, disabilities, loss of earning capacity, and unemployment). Most of these risks are related to physical well-being of individuals. However, the last one may be related to external economic parameters, like unemployment. Due to increase in life expectancy, old-age risks are becoming the dominant focus.

3 These risks may have adverse impact on a family both psychologically and economically. For example, the death of a single bread-winner will leave the middle and lower income families in a miserable state.

Health risks are uncertain. The incidence of life threatening heart attack, cancer etc. will place heavy financial burden on families. Uncertain health risks include accidents occurring at hazardous working places. Longevity of life brings new problems like unemployment and ill health.

Financial risk of a premature death is mainly borne by the dependents of the deceased person because they relied on the income stream generated by the deceased. The risk of old age is mainly borne by the person whose life is being assessed—that is, there is a need to guarantee the livelihood of that person

(ii). Economic risks

Economic risks include those related to earnings and property. This risk includes unemployment, failure of income generating source, price fluctuations and property loss.

 Unemployment - Labour market risks include unemployment, falling wages, and having to take up precarious and low-quality jobs in the informal sector as a result of macroeconomic crises or policy reform.  Failure of income generating source – For example, farmers face crop failure. Weather-related uncertainties (mainly rainfall), plant disease, and pests create harvest risk for all farmers; technologies for reducing such risks (irrigation, pesticides, disease-resistant varieties) are less available in poor areas.  Price fluctuations- Fluctuations in food prices are a related risk. Since poor households spend a large part of their income on food, even small price increases can severely affect food intake. Households that meet their food needs through subsistence agriculture are less vulnerable than households that have to buy all their food.

4 DRIVERS OF MICROINSURANCE

The efficacy of microinsurance in protecting the poor and worldwide concern for development through inclusive goals and commitment to social welfare are considered as the prime movers of microinsurance design and delivery across the globe.

Efficacy of microinsurance

Risk management of low income people often depends on informal means like using savings, selling assets or borrowing at high rates of interest. The concept of insurance is introduced to help them in a more formal way. Risks affecting households can be mitigated by providing insurance suitable for products. Insurance is the ability to transfer risks to another party in a predictable and organized way in order for individuals to live their lives with more certainty. The risks are pooled over a large number of people, for instance, an entire community, by collecting premiums from each household. By the pool, it reduces the cost per person for protection. Also it ensures protection to many against the designated risk.

Development goals One of the main Millennium Development Goals (MDGs) set by the United Nations Development Programme is to eradicate extreme poverty and hunger by the year 2015 as a response to the world's main development challenges (UNDP, 2005). Given this goal, how can it be achieved?

If government, MFIs, insurers and others are serious about combating poverty, their focus area should be the provision of microinsurance. Workers in the informal economy and their families live and work in risky environments, vulnerable to numerous perils, including illness, accidental death and disability, loss of property due to theft or fire, agricultural losses, and disasters, both the natural and man-made (Monique Cohen & Jennefer Sebstad, 2006 ). The poor are more vulnerable to many of these risks than the rest of the population, and yet they are the least able to cope when a crisis does occur, due to financial instability. They need insurance cover to protect their interests.

5 Social Protection goals Social protection, defined by the International Labour Organization, is “the protection which society provides for its members through a series of public measures,” including the compensation of loss of income resulting from unforeseen and unavoidable circumstances, healthcare, and benefits for families.

The World Commission on the Social Dimension of Globalization emphasizes that there must be a minimum amount of social protection integrated into any given society in order to be part of the socio-economic base of the global economy. It has been argued that access to social protection is a fundamental human right. This protection has become recognized in the global debate as “indispensable components of poverty reduction, sustainable economic development, fair globalization and decent work.” By this regard, social protection is viewed as more than a risk management technique.

As social protection is not initiated or widespread throughout in these countries, microinsurance has the ability to fill the void to a certain extent through the private sector. microinsurance is needed because the areas that do not have any social protection mechanisms built into their economies are those with a large poor population. These individuals need insurance on a micro-level, as they are unable to gain insurance through traditional or conventional means.

BENEFITS OF MICROINSURANCE

Microinsurance is important because it can play an important part in risk management, poverty alleviation, and women empowerment (Microinsurance Network).

1. Preparing for loss - First, it gives an opportunity to prepare for facing risk. In the absence of insurance, people will have less confidence in making investments, associated with risk. People don’t invest much in their homes or belongings which may be lost at any time. They diversify their income sources, like investing in agriculture, poultry and home production. But lack of specialization may lead to low incomes. 2. Coping with loss - Second, insurance helps people cope with loss when it occurs. In case of loss, people rely on their own assets. They use their savings

6 and sell their property. All these lead to poverty. Some people may reduce family expenditures, while some others may take their children out of school to earn additional income. 3. Social network help - People use a range of mechanism, from family obligations to mutual schemes, to support each other. But these mechanism break down when hardship affects all members of a network at the same time. For instance, droughts and cyclones affect all the people. Insurance with larger risk pools can provide security in these cases. 4. Avoids Farmer Suicide - In most cases, men run the household and it is mostly the men that commit suicides. In so doing, they leave the family in an even worse condition than what they were in before their suicide. Some psychologists believe that it is this distress of failure to support one’s family economically, that motivates these male farmers, to commit suicide. Microinsurance is a solution to distress problems. 5. Protects from gender related risks - Women face problems arising from poverty as well gender related health problems. In designing health care schemes, micro insurers need to ensure that they cater for women health concerns especially those related to pregnancy, delivery and maternity, gynecological diseases and HIV/AIDS.

BASIC PRINCIPLES OF MICROINSURANCE The principles of microinsurance are (Funds for NGOs, 2009) as follows:

(i) Principles related to participation

1. Risk-sharing and Pooling of Resources: The main principle of any micro- insurance scheme is that a group’s (community) resources are pooled to share risks (such as health, death, pension, accidents etc) in order to organize protection directly for themselves.

2. Large Membership: Microinsurance schemes work by sharing risks across a large population. From a technical point of view, one observes that the greater the number of subscribers to microinsurance scheme, the better will be the functioning. A limited number of subscribers increase the risk of financial burden over the scheme. It the pool of members is too small, the volatility in the number

7 of claims can lead to an unexpected increase in claims, thereby bankrupting the schemes. It is therefore necessary to bring in large number of people into the scheme.

3. Democratic Participation: It promotes democratic participation in the sense that it cannot refuse membership on the grounds of race, sex, ethnicity, religion etc and there should be an active participation of members in decision-making

4. Social Movement and Solidarity: It is a social movement as it binds the people who are kept away from the formal systems of social protection. It promotes solidarity as it pools local resources and serves those in needs.

(ii) Principles related to risks

5. Specified Risks Only: A microinsurance scheme can be designed to protect only against specified risks for which the likelihood of that risk can be calculated. This specifically applies to health risks.

6. Not Covariant: Risks covered by a microinsurance scheme can affect only a relatively small proportion of the total insured population at a given time. If a risk, such as an earthquake or an epidemic for example, is likely to cause a similar damage to a large portion of members at the same time, a single occurrence of the risk would bankrupt the scheme.

7. Control of Major Risks: The ability of members to control major risks will help only those who are in dire need of the benefits.

(iii) Principles relating to surplus

8. Not-for-Profit: Microinsurance schemes are usually non-profit. Only in some cases the scheme is organised by players independently of members, therefore it is difficult to rule out that there may be a certain profit margin. However, as a rule, any surpluses made by the schemes are either reinvested in the organisation or used to improve or add to existing services for all the members. The surplus

8 can also be used to improve the quality of care. Usually the rules of microinsurance scheme stipulates that surpluses should be used to build a reserve fund up to a certain level to withstand times of adversity, to improve current services, to address additional needs of members or eventually reduce the amount of contribution from members.

MICROINSURANCE PRODUCTS

Service providers have to design microinsurance products which have the following features:

 They should be risk based. Microinsurance must respond to their priority needs for risk protection. Depending on the market, they may seek health, car, or life insurance provisions.  They should be easy to understand  They should be affordable. Basically there are two broad categories of microinsurance based on the twin objectives of any welfare society.

1. Social protection - One focused on extending social protection to the poor in the absence of appropriate government schemes. 2. Income protection - Second, other offering a vital financial service to low- income households by developing an appropriate business model that enables the poor to be a profitable (or sustainable) market segment for commercial or cooperative insurers. The range of microinsurance products is almost as varied as that of commercial insurance. Existing insurance product types have been re-engineered to accommodate the needs of low-income households and their specific requirements.

 Life cycle risk protectors – Life , health, and disability  Economic risk protectors – property, and agricultural  Mass risk protectors – catastrophic cover

9 Life microinsurance

The most commonly available microinsurance product is credit life insurance. Typically, it is a mandatory product for which the MFIs or its insurance partner absorbs the risk of default due to death from its clients.

Such products come in different forms.

o Life microinsurance often just covers the loan amount, but also includes funeral benefits for the policyholder, and sometimes for family members as well, especially spouses and children for lower benefit amounts.

o Few insurers offer products that assist in covering the period after the death of a breadwinner.

Credit unions and other micro insurers offer life policies based on a savings account with a multiple of the savings balance as the death benefit. In some cases, life insurance is tied to a long-term savings product such as an endowment. These products help policyholders build for future expenses such as school fees, weddings, and old age investments

Health microinsurance

Health microinsurance provides coverage against the financial consequences of ill health and maternity. The financial consequences are varied.

. Direct medical costs for prevention, care and cure (fees for consultations, laboratory tests, medicines, hospitalization, delivery, etc.);

. Direct non-medical costs such as costs for transportation and food in case of hospitalization;

. Indirect costs (opportunity costs) - Ill health and maternity usually cause a loss of productive time for both patients and caretakers.

Health microinsurance schemes most often cover direct medical costs with a predetermined list of risks (or health services) that are covered. Few provide cash benefits (income replacement) in case of ill health and maternity.

10 In general, coverage is subject to a number of conditions, e.g. exclusion of chronic diseases, the limitation of medication to essential generic drugs and/or the restriction of services to a limited number of defined health care providers.

There may be a contractual arrangement concluded with a health provider detailing all services to be provided. Another version involves no such agreement; services are reimbursed at a pre-set value to the policyholder who can go to the health provider of his or her own choosing.

Disability microinsurance

An individual may face the following two types of disability, reducing his active earning capability.

o Temporary – Loss of earning power for a limited period of time

o Permanent. – Loss of earning power life- long.

Disability microinsurance is often linked with death cover in personal accident products.

Property insurance

The products offered include two types.

 Those which protect lenders – Some insurance products are linked to covering security for loans and/or the asset purchased with a loan. Primarily this is to secure the interest of the lender rather than as a benefit to the policyholder.

 Those which protect owners – They offer cover for personal assets, such as in the case of the Brazilian auto (car physical damage insurance) microinsurance and livestock insurance available in India.

Agricultural microinsurance

The provision of insurance to farmers engaged in farming and animal rearing include the following:

 Crop insurance: Crop insurance covers the loss of crops due to one or more perils, and can be covered in a number of different way: yield loss (a lower-than- anticipated yield), quality loss (crops of a lower quality than anticipated), revenue

11 loss (due to price fluctuations), or a combination of these. The two most common types of crop insurance are Named-peril crop insurance (policies paid out according to the actual damage that results) and, Multi-peril crop insurance (based on shortfalls on expected yield, rather than on the damage caused by a particular loss event.)

 Index-based insurance: It is a way of providing protection against correlated risk such as extreme weather events. It is not strictly insurance, as individual losses are not assessed – instead it pays-out to all policy holders in a geographic area when certain conditions are reached in the proxy, or index.

 Animal insurance: Livestock insurance can cover losses resulting from death, disease and accidental injury to livestock. It can cover an individual animal or a herd.

Catastrophic cover

It is the insurance to protect businesses and residences against natural disasters such as earthquakes, floods and hurricanes, and against man-made disasters such as terrorist attacks. These low-probability, high-cost events are generally excluded from standard hazard insurance policies, and so catastrophe insurance is required.

Composite risk protection

As far as the range of products is concerned, an interesting development is the emergence of composite products that combine life, health and asset protection, perhaps underwritten by different insurers but sold together in a bundled form by one agent. Bundled products seem to have the following merits and demerits as given in Table 1.1 Because of the benefits, there seem to be higher acceptability for the composite products.

12 Table 1.1 Merits and demerits of composite products

Merits Demerits A household can have access to more Complex to understand. Requires more insurance services. Save on transaction consumer education Requires reliable costs Easy to make claims as services agents are linked with one agent.

MICROINSURANCE DELEVERY MODELS

Microinsurance requires an intermediary between the customer and the insurance company. This intermediary role has been played mainly by non- governmental organization (NGO) and microfinance institutions (MFI). Four models of delivery are found in practice as given under.

Partner - Agent Model: Insurers utilize MFI’s delivery mechanism to provide sales and basic services to clients.

 Insurer, Commercial or public, together with MFIs or NGOs collaboratively develop the product. The insurer absorbs the risk.

 Agent (can be MFI/NGO/SHG) markets the product through its established distribution network and provide service to the insured. The agent lowers cost and improves service by his competencies.

Full Service Model: The provider is responsible for all aspects of product design, sales, servicing, and claims assessment. The providers are public or commercial insurers.

Community Based Model: Local communities, MFIs, NGOs and/or cooperatives develop and distribute the product, manage the risk pool and absorb the risk. They negotiate with external health care providers. There is no involvement on the part of commercial insurers.

Provider Model: The service provider and the insurer are the same, i.e., hospitals or doctors offer policies to individuals or groups.

13 NEED FOR MICROINSURANCE IN INDIA Microinsurance is offered in India, evolving from rural insurance which was providing relief to the poor in rural areas. The emergence of microinsurance in India owes to the following factors. Poverty levels Like any developing nation in the world, India needs microinsurance to protect the interests of its poor people. The incidence of poverty and risks faced by low income people from life-cycle and natural disasters are observable. Even after more than 60 years of Independence India still has the world's largest number of poor people in a single country.  Across nation - According to a new Oxford University study (2013), 55 percent of India’s population of 1.1 billion, or 645 million people, are living in poverty. Using the Multidimensional Poverty Index (MPI) the study found half of the world’s poor are in South Asia (51 percent or 844 million people) and one quarter in Africa (28 percent or 458 million). While poverty in Africa is often highlighted, the Oxford research found that there was more acute poverty in India than many African countries combined.  Across states - The study examined poverty across 28 Indian states. Poverty in eight Indian states—Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Orissa, Rajasthan, Uttar Pradesh, and West Bengal—exceeded that of the 26 poorest African countries. Poverty in Bihar and Jharkhand is most intense—poor people are deprived in 60 percent of the MPI’s weighted indicators. It concluded that “81 percent of people are multi dimensionally poor in Bihar—more than any other state. Uttar Pradesh is the home of largest number of poor people—21 percent of India’s poor people live there. West Bengal is home to the third largest number of poor people.”

It is a reported that suicide amongst Indian farmers is at large and one that gets exacerbated in times of devastation—such as wild fires or droughts. From 1997-2008, there have been nearly two hundred thousand farmer suicides in India, 67% of which were in only five states. Take the case of Punjab, the grain bowl of India (Dheer & Gautam, 2014) A state government commissioned study conducted by three prominent universities in Punjab lay bare the magnitude of the crisis.

14  On an average estimate, three persons committed suicide every two days in last one decade in this grain bowl state of Punjab.  More than 5,000 farmers and farm labourers, about 500 each year, committed suicide between 2000 to 2010.  Sixty percent of these suicides took place in the grain producing belts essentially in two districts of Bathinda and Sangrur.  Till a few years ago, the farm debt in Punjab was at nearly Rs 31,000 crore, which is sure to have increased sizably by now.  Each farm household of the state was under a debt of over Rs 3 lakh and the debt per operated acre was Rs 28,947.  For small and marginal farmers, the situation was even more dismal with a debt of over Rs 41,000 per operated acre.  About 38 percent of those who committed suicide in the last decade were in the prime of their life between 20 to 30 years old.  Heavy farm debts, reduced land holding and diminishing farm returns have been among the major escalators to the crisis. These suicides do not occur all year round, but mostly in April-May when farmers search for excess credit to overcome indebtedness due to crop failure and borrowing, in January-February when these farmers try to sell their produce and receive inadequate prices to cover their costs, and September-October when these famers must use pesticides on their crops. Their motive has been attributed to their crippling debt compounded with drought and crop failure.

Priority social risks in India The following social risks emerged as priorities in the report of Allianz A.G and GTZ and UNDP( August 2006). 1. Health and incapacity for work (e.g., illness, disability, accidents –either occupational or non-occupational); 2. Life cycle risks (e.g., death, old age); 3. Economic risks (e.g., unemployment, loss of property, crop failure) ; 4. Natural disasters (e.g., floods, droughts, earthquakes).

15 The risk faced by women include the following  Risks related to sexually transmitted infections (STI), pregnancy and childbirth;  Risks related to economic crisis such as the death of the breadwinner, loss of assets;  Protection at old age (less security for women due to informal working conditions, lesser income, etc.);  Risks related to hazardous working conditions. Although these also affect men, the number of unskilled labourers is higher among women workers. Women more often work under hazardous conditions: the carpet industry, refuse dumps, garbage tips and recycling industries such polythene bags/vinyl recycling.

Inadequacy of social protection There are a wide range of developmental programmes being supported by the Government like Swarna Jayanti Gram Swarojgar Yojana (SGSY), National Rural Employment Guarantee Scheme (NREGS), Rastriya Swasthya Bima Yojana (RSBY), Rastriya Health Mission (RHM), Aam Aadmi Bima Yojana (AABY), Indira Awas Yojana (IAY), Public Distribution (PDS), old age allowances, drought relief etc. which have facilitated the improvement of income levels of poor households. The public package of - Doubling Flow of Agricultural Credit has also enabled greater institutional credit flow for agriculture and allied activities. However, all these policy interventions, though ambitious in stated intent, only incidentally address household risks (Narayana, 2010).

Exclusion from formal insurance High exclusion of poor and vulnerable groups from formal insurance cover in India is also evident in 2005, as per the UNDP study and it has necessitated introduction of microinsurance (UNDP Report, 2007).

16 Table 1. 2 Population excluded from South Asian countries Countries Excluded (%) Population (million) India 90 950 Bangladesh 93 134 Pakistan 97 147 Nepal 95 23 Source: Marc Socquet (2005)

Allianz A.G and GTZ and UNDP (August 2006a) examined the risks and the risk management strategies of poor in India and found that there are four broad categories of coping methods. 1. Informal individual mechanisms and self-help groups 2. Informal and semi-formal cooperative systems 3. Formal private systems 4. State social security schemes Informal individual mechanisms and mutual aid groups: Families, households and other Informal sources of assistance play a key role managing social risks. These mechanisms are very restricted in scope, however, as the financial consequences of a risk are often greater than household assets. Informal and semi-formal cooperative systems. India has a well-developed non-governmental sector that is active in poverty alleviation. The concept of social protection, however, is relatively new to many of them. The following are some of the achievements of this sector:  Ex ante (preventive) strategies that are directed at preventing or minimizing the occurrence of emergencies and also lower exposure to risks: employment diversification.  Income-generating measures, skills training programmes for selected groups (e.g.adolescents, women), promotion of the use of pesticides to reduce the risk of crop failure, promotion of cattle inoculation, and various preventive health measures.  Mitigation strategies to minimize the impact of shocks and emergencies: Microinsurance, savings and credit products offered by microfinance

17 institutions (e.g., savings products for medical expenses, savings products for additional provision for old age, etc.).  Ex post (coping) strategies to help overcome the consequences of catastrophic events: credit products for contingencies, grain banks, agreements with doctors and chemists to improve the quality of treatment and to reduce the cost of medicines, assistance for accessing state schemes (after natural disasters, for example), monitoring of state primary health centers to improve medical services.

Formal private systems (including microinsurance): The liberalization of the insurance market for private insurance companies widened the range of available insurance products. This occurred in tandem with an expansion of MFIs and NGOs in the market in the 1990s. They recommended as follows: . ‘The risk management strategies mentioned above should be offered as complementary services within a multi-pronged approach integrating basic insurance and social assistance by the state, formal private systems and collective systems. They combine preventive and precautionary measures, mitigation and coping strategies’. Table 1.3 indicates how various measures can be used to mitigate or prevent the consequences of risks facing low -income households.

Table 1.3 Comprehensive protection system

Aspect State schemes Formal private Informal collective systems mechanisms Health Social health Health microinsurance. Contingency funds, Insurance. Separate products for special savings Products Subsidized women of productive for medical treatment Microinsurance. age. expense. Accident and Social assistance Accident/disability Emergency loans. disability Programmes. microinsurance Solidarity funds for disabled persons Advocacy for safety at work. Death Extension of ESI Microinsurance Asset building Savings Old age Extension of Micro pension Asset building Savings EPF. Endowment funds Social assistance

18 EVOLUTION OF MICROINSURANCE IN INDIA As in much of the developing world, India has a large number of informal quasi-insurance schemes: for example, households that pool rice. In addition to this, there are small schemes run by cooperatives, churches and NGOs that may pool their members’ incomes to create an insurance fund against a specific peril: for example, funeral costs. Any individual or institution conducting insurance has to comply with the stipulations of, among other regulations, the 1938 Indian Insurance Act as amended. Many unregulated insurance schemes are run by well -intentioned staff and confer positive social benefits in the areas in which they act. Indeed much of the innovation in microinsurance has emerged from unregulated micro insurers. The risk of working with these unregulated organizations is that there is no legal framework that ensures that they meet minimum prudential standards and other professional insurance qualifications. In addition, they do not have a statutory ombudsman or other feasible means of enforcing consumer rights.

In recognition of the plight of the poor, who have occupations that are risky in providing incomes to the families on one side and the emergence of a competitive, open environment that could lead to the neglect of the rural and weaker sections of India, the Insurance Regulatory and Development Authority of India (IRDA) passed the IRDA (Obligation of Insurers to Rural or Social Sectors) Regulations Act in 2002.

As per the act, every insurance company was required to engage with the rural and social sectors by complying with mandatory obligations. The IRDA regulations set rural insurance targets for each company. These require that 7 percent of all life insurance business should be generated from the rural social sector in the first financial year, and this should increase annually to reach 18 percent by the sixth financial year. For general insurance, 2 percent of insured premium in the first financial year should be from rural social business, increasing annually to 5 percent in the sixth year.

Government of India constituted a Consultative Group on Micro-Insurance in 2003, to examine existing insurance schemes for rural and urban poor with specific reference to outreach, pricing, products, servicing and promotion. It also attempted to examine existing regulations with a view to promoting microinsurance organizations

19 with specific reference to capital requirements, licensing, monitoring and review. It was found that:

 Microinsurance is not as viable as a standalone insurance product  It has not penetrated rural markets.  Traditional insurers have not made much headway in bringing micro- insurance products to the poor in rural as well as urban areas In view of this the committee recommended  The partnership between insurer and organisation like NGO would be desirable to promote microinsurance by drawing on their mutual strengths.  The design of microinsurance products must have the features of simplicity, availability, affordability, accessibility and flexibility In 2005. India has become one of the first countries to adopt microinsurance formally through the Microinsurance Regulations Act. The regulation sets boundaries for the cost and coverage of the product and provides clarity about distribution mechanisms.

Types of products /schemes

Two types of products are offered:

 Life microinsurance product to protect from life cycle risks  General microinsurance product to protect from economic risks The minimum number of members comprising a group is at least twenty for group insurance in case of general insurance products. Table 1.4 and 1.5 provide a brief description of the life and non –life products. .

20 Table 1.4 Life products Sum assured, plan and term-Ranges S.No Type of cover Sum assured Term of Age of entry (Rs) Cover

1. Terms insurance with or without return of 5,000 - 50,000 5 -15years 18-60 premium 2. Endowment insurance 5,000 - 30,000 5-15 years 18-60 3. Health insurance (Individual) 5,000 - 30,000 1-7 years Insurer’s Discretion 4. Health insurance (Family) 10,000-30,000 1-7 years Insurer’s Discretion 5. Accident benefit as rider 10,000-50,000 5-15 years 18-60 Note 1: Group Insurance products may be renewable on a yearly basis Note 2: The minimum number of members comprising a group shall be at least twenty for group insurance

Table 1.5 Non-life products: Sum assured, plan and term-Ranges S.No Type of cover Sum assured Term of Age of entry (Rs) Cover

1. Dwelling or contents, or live stock or tools or 5,000 - 30,000 1 year NA other named assets/or crop insurance. 2. Health insurance 1 year (Individual) 5,000 - 30,000 18-60 years 3. Health insurance (family) (option to avail limit – 5,000 - 30,000 1 year Insurer’s for individual/float on Discretion family) 4. Personal accident (per life/ earning member of 10,000-30,000 1 year 5-70 years family)

DELIVERY CHANNELS Microinsurance products are a low-value, high-volume business. The following approaches have emerged in India to provide insurance to low-income populations (only regulated channels are included here, not in-house schemes): . Partner -agent model . Full service model

21 . Community based model . Service provider model

(i) Partner-agent model The model involves a partnership between an insurer and an agent that provides some kind of financial service to large numbers of low income people. This could be a microfinance organization, an NGO, bank or a business that supplies products to large numbers of low income people, such as a fertilizer supplier in exchange for a commission or fee.

The partnership model uses the comparative advantage of each partner so that each can focus on its core business: . The insurance provider is responsible for designing and pricing the product, the final claims management, and the investment of reserves, and absorbs all the insurance risks. . The insurance provider utilizes the established distribution channels of this agent and its financial transactions with low-income groups that would otherwise be too costly to set up. In addition to selling the policies, the agent offers its infrastructure for product servicing such as marketing the product, premium collection, and assists in claims management.

SPANDANA in Andhra Pradesh is a large, professional MFI that runs an in- house life insurance scheme with simple benefits. At the other extreme, SHEPHERD in Tamil Nadu is a relatively small NGO offering a wide-range of insurance products (life, health, asset) in partnership with different insurers with the intention of providing its customers with comprehensive social protection. Box 1-1 presents the case of BASIX, a NGO in Andhra Pradesh.

In India there is an important Linkage Banking programme run by NABARD with the support of GTZ. Under the programme, NABARD provides wholesale finance to banks for loans given to the rural poor, who are formed into savings and credit self - help groups (SHGs). Over the years, NABARD has been able to increase substantially the outreach of banking in rural India. At present, NABARD operates through state - owned banks, and insurance is tied to NABARD -funded loan. The insurance is part

22 of the state-run National Agricultural Insurance Scheme (NAIS) or Rashtriya Krishi Bima Yojana (RKBY), a crop insurance scheme. One private bank, Chitradurga Gramin Bank (sponsored by Canara Bank), has sold microinsurance to SHGs, partnering with LIC and UIIC. The success of SHG Banking depends to a large degree on the staff’s participative role in handling the new ‘SHG window’.

Box 1-1 Case of Partner agent model - BASIX

Bhartiya Samruddhi Finance (Basix) is an NGO, head quartered at Hyderabad, working in livelihood promotion in several arid and backward districts spread over seven states. BASIX offers group and individual health insurance as well as hospital cash products for Royal Sundaram Finance Limited (BSFL) credit customers, non-credit customers, and spouses to insure against hospitalization due to illness or injury. BASIX offers three health products using a partner-agent model. All policies cover the policy holder and spouse. 1. Grameen Arogya Raksha: Group health insurance product that covers all BSFL credit customers and their spouse.

2. Rural Personal Accidents: Retail policy providing coverage for death, permanent total disablement or inpatient hospitalization coverage to the insured arising due to accidental injury.

3. Rural Hospital Cash: Retail product which offers hospital cash benefit to the insured against hospitalized due to illness or accidental injury.

Source: BASIX Microinsurance | The Center for Health Market Innovations healthmarketinnovations.org/program/basix-Microinsurance

Many NGOs and MFIs that partner with insurers are in need of capacity- building to help ensure that (a) they get the best deal from the insurer and (b) manage the relationship efficiently. In order to get the best deal from insurers, NGOs and MFIs need to know exactly how much it will cost them to do the agency work. Very few NGOs and MFIs cost their activities effectively, and this adversely affects their sustainability.

23 Micro-agent model While the partnership model is relatively common, the micro -agent model described below is unique. It is the invention of Tata -AIG, specifically an employee of Tata-AIG, Vijay Artherye. Box 1-2 presents the details of the model.

Box 1-2 Micro –agent model of Tata AIG The central building blocks of the model are Rural Community Insurance Groups (CRIGs) supervised by rural organizations such as churches, NGOs or MFIs. CRIGs are a partnership firm formed of five women from a self-help group (SHG). The leader of the CRIG is licensed as an agent. The CRIG is a de facto brokerage firm (in the technical, not the legal sense of the term). All CRIGs in the same geographic area meet in a single center, usually organized with the assistance of the rural organization, and receive training and assistance from Tata -AIG. This practice reduces training costs. Most CRIGs consist of four to five members. These members are usually women who are part of an SHG. The typical profile of a member would include communication skills, acceptance of insurance, preferably educated up to the 10th standard, with influence in the SHGs, and capable of doing some paperwork. The CRIG has a leader appointed by Tata -AIG on the advice of the rural organization. A typical leader will be educated to the 12th standard or above, have a good track record of past social-sector performance and integrity, be systematic and organized, with leadership qualities, and public speaking and training skills. This leader is trained by Tata -AIG to obtain a corporate agent’s license. The CRIG as a whole is registered as a body under the Andhra Pradesh Societies Act (where the model is currently being used). The CRIG leader and members are involved in promotion, sales and collection of insurance proceeds and maintaining records. The CRIG leader will document all fortnightly CRIG meetings and all weekly meetings with the NGO concerned. Source: Microinsurance India - UNDP www.undp.org/content/.../microinsurance...india/Microinsurance.pdf (ii) Full service model In the in-house or full-service model, an MFI or NGO runs its own insurance scheme for its clients and any profit or loss is absorbed by the MFI. SPANDANA, a

24 large, professional MFI, in Andhra Pradesh that runs an in-house life insurance scheme. The Self-Employed Women’s Association (SEWA) is another example of the Full Service Model of insurance provision. Box 1-3 describes the operations of SPANDANA. Box 1-3 Full service model : SPANDANA Located in Guntur, Andhra Pradesh, SPANDANA was formed in 1992 and started microfinance in 1998. SPANDANA had bitter experience with SHG and Grameen models of micro financing and decided to be on its own in offering insurance. SPANDANA found savings and loan products to have limited potential to respond to uncertainties such as death and disease, especially for the poor. Hence, keeping in mind the welfare of the clients, and as well as its own loan security, SPANDANA moved into the business of microinsurance SPANDANA’s insurance products are the simplest and evolved in the most straightforward way. SPANDANA’s first move in microinsurance was in 1998, with LIC, with whom it partnered for a brief time. Like ASA and SHEPHERD, it found that LIC’s products were unworkable in practice. In particular, SPANDANA found the claims process too onerous and ineffective. SPANDANA’s solution to LIC’s inadequacies was to offer insurance on its own. In addition to believing it could provide a better service without LIC, SPANDANA also believed that insurance was a good source of additional revenue. SPANDANA used its experience with LIC to design its own insurance product. Using its mortality experience from the LIC product, which at the time was 1.5 deaths per thousand, SPANDANA decided to calculate a pure premium based up a more conservative estimate of 4 deaths per thousand—the latter rate being closer to the mortality rate used by most Indian insurers in their work with the poor. SPANDANA is essentially a credit life insurance on the disbursed loan amount, with two additional benefits. SPANDANA added a small amount of hut insurance and then included members’ spouses in the cover, although for a relatively low sum assured. The reason for the addition of these benefits was that management felt that the product was generating too much surplus. Instead of reducing the premium, SPANDANA decided to add benefits. Source: Microinsurance and Microfinance Institutions: Evidence from ... www.microinsurancenetwork.org/.../_Microinsurance_and_MFI_Case_St...

25 (ii) The mutualised and community-based organizations model

UPLIFT Mutual (Pune) and ASKMI (Madurai) are the popular organizations in this category. Box 1- 4 describes the activities of UPLIFT. The defining characteristic of a Mutual is its risk sharing- the risk is not transferred to a third party but pooled and shared by the contributing members. Decision about contribution and benefits are mutually taken and it is the sense of ownership and trust that members have that is the lifeline of this model.

Box 1- 4 Mutual model - UPLIFT UPLIFT Mutuals is the pioneer of community owned and managed risk protection systems in India. UPLIFT’s target population are families in the unorganized sector bracket of India (living in ghettos and villages) -mostly daily wage earners who generally have no access to social protection schemes. If some families are fortunate to have BPL cards from government sponsored health protection scheme they are always treated as end users who have no say in the design or delivery of such a scheme. Access to Health Services especially for Health are the bedrock on which the Health Mutual model of UPLIFT stands. This access to quality health services is not only for curative but also for preventive services. The outpatient network, the health checkup camps, the health talks, the branch referral and guidance facility, the 24X7 helpline all provide the member with options to manage their health under medical guidance. It is serving about 1,28,888 members. UPLIFT partnered with the following organizations to deliver the Mutual product and services to low income families :  Annapurna Parivar (Pune and Mumbai) Partner Since 2003  Parvati SwayamRojgar (Pune) Partner Since 2004  Chaitanya supported Federations (Junnar and Khed in Pune rural) Partner Since 2010  Swabhimaan -Access to Services and Health Financing Facility (Pimpri Chinchwad) Partner Since 2010  Navnirman Samaj Vikas Kendra NSVK (Mumbai) Partner Since 2011  PEDO supported Federations (Dungarpur, Rajasthan) Partner Since 2012 Source: Uplift Mutuals,upliftmutuals.org/

26 Credit and savings cooperatives often offer borrower's insurance contracts that cover the balance of a loan to be paid back. Moreover, they offer savings in the form of life insurance, to stimulate saving habits. These products come in addition to mainstream credit and savings services.

Service provider model

In the health service provider model a hospital plays the dual role of providing health services as well as health insurance Kasturba Hospital, Vaatsalya Healthcare, and Aragonda Apollo Hospital are examples for this type of model. Box 1-5 provides description of Jowar health Assurance scheme of Kasturba Hospital.

Box 1-5 Kasturba Hospital - Jowar Health Assurance

This micro-finance health insurance scheme allowed individual villages to get the benefit of universal health coverage. A mere 10% equity is provided by villages to gain access to additional public health resources from the central and state government through Kasturba Hospital who picked up the additional 90% of the health care expenses.

Each participating village was made responsible to pay a payment with the rest of the health expense being covered by the hospital with financial support from the central and state governments. This co-payment (hardly 10% of total amount spent on them) was in the form of a common fund created by the villagers by collecting Jowar (sorghum) during the annual December harvest time. Each family in the village contribute, based on the size of the individual families land holding. Thus families contributed according to their capacity but received services according to their needs. The collected harvest was then sold to generate a fund. Source: Jowar Health Assurance Scheme - Gandhi's Vision, gandhisvision.com/index.php?option=com_content&view...id...Mar 18, 2014

27 PROGRESS OF MICROINSURANCE Microinsurance in India has evolved from unregulated to regulated business and progressed reasonably well, since 2005.

Increase in the number of companies

. The insurance companies that are legally registered with the government and supervised by the industry regulator, the Insurance Regulatory and Development Authority (IRDA), which dominate the insurance market in India. These are specialist insurers which include commercial insurers, cooperative or mutual insurance and microfinance institutions (MFIs) that are regulated by the insurance regulations

In March 2006, there were 15 companies registered with IRDA for providing life insurance and 12 general insurance companies along with two specialist public sector insurers, the Export Credit Guarantee Corporation and Agricultural Insurance Company. This industry structure has emerged out of a public sector insurance monopoly that consisted of a single life insurance company, the Life Insurance Corporation of India (LIC) and four general insurance subsidiaries of the General Insurance Corporation (GIC). The insurance monopoly was ended in 2000 when the IRDA relaxed the barriers to entry specifically for the purpose of attracting private and foreign companies into the insurance sector

At the end-September 2012, there were fifty-two insurance companies operating in India, of which twenty four are in the life insurance business and twenty- seven are in general insurance business. In addition, GIC is the sole national reinsurer. Of the fifty two companies presently in operation, eight are in the public sector - two are specialised insurers, namely ECGC and AIC, one in life insurance namely LIC, four in general insurance and one in reinsurance. The remaining forty four companies are in the private sector.

28 Innovative products Tables 1.6 and 1.7 illustrates by listing the policies offered by some companies.

Table 1.6 Term insurance policies offered by insurance companies: An illustrative list

S. No Company Term insurance Policies 1. AVIVA Amar Suraksha, Grameen Suraksha, Jana Suraksha 2. Bajaj Saral Suraksha, Swayam Shakti Suraksha 3. Bima Kavach, Bima Suraksha Super, Bima Dhan Birla Sanchay 4. ICICI Sarv Jana Suraksha 5. Gramin Bima, Mitr Yojana ,Bima, Bachat Yojana, HDFC Development Insurance Plan 6. Tata-AIG Navkalyan Yojana Sampoorn Bima Yojana 7. Paraspar Suraksha, Jan Kalyan, Group Savings Linked STAR UNION Insurance policy 8. SBI Life Grameen Shakti, Grameen Super Suraksha 9. LIC Janshree Bima Yojana/ Pannadhay Jeevan Amrit Yojana

Table 1.7 Endowment policies offered by insurance companies: An illustrative list

S.No Company Product Name 1. Kotak Gramin Bima Yojana 2. Bajaj Alp Nivesh Yojana, Jana Vikas Yojana 3. Metlife Met Vishwas , Met Suvidha Rural 4. Tata AIG Ayushman Yojana, Sumangal Bima Yojana 5. LIC Jeevan Madhur 6. Max New Max Vijay Rajat , Max Vijay Swarn, York Max Vijay Heera

Increase in Number of agents The number of agents has risen from 4054 in 2008-09 to 17052 in 2012-13, recording a four fold rise. The credit goes to LIC which has increased its agents from 4166 in 2008-09 to 15228 in 2012-13.

29 Table 1.8 Number of microinsurance agents

S.No Year Number of Agents Total (As at 31st March) LIC Private 1. 2007 - 2008 4166 418 4584

2. 2008 - 2009 6647 603 7250

3. 2009 - 2010 7906 770 8676

4. 2010 - 2011 9724 758 10482

5. 2011 - 2012 11546 1251 12797

6. 2012 - 2013 15228 1824 17052

Source: Compiled from annual reports of IRDA

Raise in number of insured With expansion of distribution infrastructure and new business has shown upward trend in microinsurance sector. Table 1-6 shows the individual policies have steadily risen from about 9.37 lakhs to 50.36 lakhs during 2007-13. The raise in lives insured under group insurance schemes has shown an increase from 122 lakhs to 139 lakhs during the period 2007-13. Table 1.9 Raise in Number of Insured Year Individual policies No. of Lives under group insurance 2007 - 2008 9,37,768 1,22,42,027

2008 - 2009 21,52,069 1,25,51,809

2009 - 2010 29,83,954 1,68,42,070

2010 - 2011 36,50,968 1,52,59,001

2011 - 2012 46,20,443 1,01,94,904

2012 - 2013 50,36,139 1,39,81,322

PERFORRMANCE EVALUATION The performance indicators intended for managers of microinsurance programmes have to track, demonstrate and enhance the social and economic performance of their operations. Table 1.7 shows the indicators along with the rationale.

30 Table 1.10 Performance indicators of Microinsurance Dimensions Principle Indicators Product value Provision of appropriate and Incurred claims ratio - Renewal effective risk coping mechanisms. ratio - Promptness of claims ratio Client protection Protection of privacy (not sharing - Claims rejection ratio data with other agencies for - Complaints ratio personal gain) Protection from fraud (transparency in transactions) Protection of dignity (Fair and respectful treatment of clients) Principle of fair practices (Mechanisms for complaint resolution) Inclusion Principle of equity (removal of Coverage ratio (% insured under physical, financial and educational the poverty line, % female obstacles ) insured, and % insured above retirement age) Management Principle of good governance Social investment ratio

Source: A modified version of Social Performance Indicators for Microinsurance - Microfact www.microfact.org › Homepage › Microinsurance Tools

Incurred Claims Ratio The incurred claims measure how much of the premium income is paid out as claims. In essence, this ratio indicates the proportion of premium that is returned to the insured in the form of benefits. Incurred claims ratio = Incurred claims ÷ Earned premium A higher claims ratio of a viable programme demonstrates to clients that they are getting good value for their premiums and is likely to contribute to client satisfaction and renewal. Renewal ratio The renewal ratio measures the number of insured that renew their policy. . Renewal ratio = Number of renewals ÷ Number of potential renewals The ratio explains whether clients value the product and it responds appropriately to the risks they face. If the client is satisfied with the quality of the product and the services, and the product is well adapted in terms of client capacity to pay, they are more likely to renew.

31 Promptness of claims ratio The promptness of claims indicator measures the time between when an incident occurs to when the client actually receives the payment. Promptness = Number of days taken to settle a claim Some claimants need the benefit proceeds right away in order to deal with an emergency situation otherwise they may be forced to sell off their productive assets or borrow money. This indicator can be used to identify where bottlenecks occurred and where processes can be improved.

Claims Rejection Ratio The claims rejection ratio measures how many claims are denied from a given sample. Claims rejection ratio = Number of claims rejected ÷ Number of claims under a given product Rejected claims can damage the micro insurer’s reputation in case the reasons for rejection are not well communicated to the clients. A claim can be rejected for many different reasons but the important point is how well the insured understood the product and its cover. This is also linked to how well the product is explained by the micro insurer.

Complaints ratio The complaints ratio measures the number of complaints registered over the number of policies. Complaints ratio =Number of complaints registered ÷ Total number of policies This indicator provides a measure of misunderstanding between insurer and insured, and lapses on the side of insurer. It does not give the nature of the complaints. Hence a qualitative analysis is desirable.

Coverage Ratio The coverage ratio is the proportion of the target population participating in the microinsurance programme. Coverage ratio = Number of active insured clients ÷ Target population Outreach depends largely on how well a product is adapted to the target population’s needs and perceived value of the products, thus the indicator reflects the

32 appropriateness of the product and the effectiveness of its implementation and marketing.

Other specific indicators focusing on certain groups can be computed as follows. % of female insured = Number of women clients ÷ Total number of clients % of insured above retirement age = Number of persons above retirement age ÷ Total number of clients

EVALUATION OF PROGRESS IN OUTREACH The last decade has witnessed strong growth in microinsurance, especially in Asia, Africa and, increasingly, Latin America. India and China have been at the forefront: India alone is currently estimated to account for 60 percent of all the individuals covered by microinsurance worldwide. Overall, however, market penetration remains relatively small. As a result, there remains enormous growth potential (Erik Bleekrode et.al 2013).

The reach is lopsided, with south leading the north in sale of insuring the poor.

A high proportion of microinsurance business (for both life as well as non-life companies) comes from the southern region of India – in the states of Andhra Pradesh, Karnataka, Tamil Nadu, and Kerala. The reasons are similar to the growth of the microfinance sector in the southern region – a large number of good quality NGOs, more vibrant local economies in the southern states as compared to the less developed states in the north and east and higher literacy and participation rates of women in the local economy make them suitable clients for MFIs The MFIs in the southern region account for more than 50% of MFIs in India and the clients served by these MFIs are more than 80% of the total MFI outreach in India.( M-CRIL, 2008) This has provided easy access for the insurance companies to the rural client base. Of LIC’s rural business, 67% comes from the southern region and the businesses of other companies are similar. The very poor areas of the states of several East and North-East region remain uncovered by the insurance companies.

REASONS FOR LESS OUTREACH The outreach of microinsurance in India is relatively less for various reasons:

33 Problems based on customer characteristics The characteristics of microinsurance clients in this market are: . Seasonal incomes - Agricultural labour is the main source of income. The implications of this are that much of the income is irregular and seasonal. However, not all income derives from agriculture as households tend to pursue multiple livelihood activities with off-farm income as a component. Premium collection must take into account the particular variances in the seasonal income of this market; . Unhealthy living conditions - The group’s poverty means that they present a higher than average risk profile for many types of insurance, e.g., lack of sanitation, lack of access to clean water, hazardous working conditions and poor nutrition imply higher rates of death and disease; . Community bonds - Small rural communities often have better internal surveillance than large urban sprawls, and so there may be opportunities for controlling fraud and there may be collective resistance to buy an insurance product. . Low literacy levels - Low levels of literacy imply that marketing needs to be done without written media: for example, film, radio and word of mouth . Poor transportation - The rural poor often live in areas with inadequate road and telecommunications infrastructure, which increases the costs of selling and servicing policies.

Lack of motivation to sell Microinsurance in India is largely driven by the obligation of regulation or social responsibility. Many insurers view the microinsurance quota simply as a cost of doing business in India. In the context of a product that does not yield much if any profit, doing demand studies with their high costs are not viewed by commercial insurers as worthwhile. Moreover, in the Indian microinsurance context, pilots are relatively cheap as they principally involve labour.

Product design failures The way Indian insurers typically design microinsurance products is to find existing products and then adjust them to suit the needs of their company and clients.

34 It is seen that the number of microinsurance products registered with IRDA over the last five years also shows a decline from 11 in 2007-08 to just one in 2009-10. No products were registered from 2010-11. Only seven life insurance companies sold microinsurance products in 2010-11.Clearly, the motivation to introduce microinsurance products seems to be decreasing. This also raises the question as to how the companies are meeting their rural social targets. (Rajalakshmi and Indira, 2013) The product design requires an understanding of rural market and innovative abilities.

Lack of clarity in the concept of microinsurance: A study by the C. K. Prahalad Centre for Emerging India (LIBA) showed that firms were inconsistent in using the term microinsurance and reporting its performance.For instance, firms such as ICICI Lombard, HDFC Ergo and Bharti Axa described their products for the poor simply as ‘rural products’. Others such as Bajaj Allianz and Birla Sun Life referred to them as microinsurance. This suggests that the terms are chosen arbitrarily, rather than backed by a sound understanding of what it includes or excludes.

Difficulty in designing products as per IRDA norms: Many insurers find it difficult to fit their products within the parameters set by the IRDA for a microinsurance product. For example, sum assured of Rs 30,000 may be perceived by an insurer as inadequate to make health insurance attractive even to low income consumers. The sum assured of the Chief Ministers Comprehensive Health Insurance of Tamil Nadu is more than three times the IRDA limit. Given the 36 million people covered under this scheme, it would definitely fall within the scope of microinsurance.

Lack of information: Unfortunately, for low-income households, this information is not easily available. In general, the private insurance providers are using the data available with LIC as a basis for their own assessment. Although this is the most comprehensive database, it does not cover detailed information specific to the situation of poor and low income group. Tata-AIG has had to obtain its mortality figures in part through its own experience. Their products have been sold mostly in the rural areas of southern India to clients aged between 18 and 45 years (55 years with a lower sum assured for one term product). In the last three years they estimate a mortality rate of just under 3 per 1,000 (Allianz A.G, GTZ & UNDP, 2006b).

35 Lack of innovative ability and reliability: Pure protection policies, e.g., term-life, were never offered on an individual basis prior to the entry of private players, and group term life coverage of the rural population was never attempted in the past. There are several past instances of third parties bundling insurance and savings together. Sahara and Peerless had bundled insurance benefits (mostly accidental coverage) by purchasing such coverage from state-owned general insurance companies with local chit funds (rotating savings and credit organizations) a type of informal savings scheme. These schemes were marketed through a multilevel/network marketing system, and some of the schemes turned delinquent thus depriving many investors of much of their long term savings. All of the above has meant that large segments of the target market had access to products they could not afford or they had some bitter experience of insurance in the past, which resulted in them being wary of insurance.

Availability of government schemes: Under the new public-private-partnership mantra, many insurers have begun to underwrite government-sponsored mass insurance programmes to help the poor. The Rashtriya Swasthya Bima Yojana (RSBY) is one such Central Government-subsidised programme. In addition, there are five State- sponsored programmes. The United India Insurance Company and ICICI Lombard cover the maximum number of districts in partnership with the Central and State governments. Premiums are subsidised completely or partially by the government. The premium generated from such programmes by general insurance companies is included in the rural social business of the respective insurer.

Skewed preferences of agents and clients

Overall, the target market is somewhat aware of insurance due to the fact that the public sector insurers, in particular the LIC, have been active in their geographical regions for many years. Bad experiences with endowment products: The agents of the LIC, however, have focused on endowment products with annual premiums of Rs. 2,000 and more. Many in the rural, lower, middle-income groups have had bad experiences with such products as they could not afford to pay their premiums when their incomes were not sufficient and so they received small surrender values, often after many years of contributions.

36 Return expectations: The endowment policies may have created difficulties for selling term-life because of the expectation that insurance may involve some return of premium. While increasing familiarity on the one hand, it has somewhat polluted the market on the other. In addition, many rural agents and brokers who were mainly living off commission earnings could also not sustain the services on account of the poor persistency of such policies. Reluctance to collaborate

The microinsurance regulations allow insurers to offer composite life + non-life products provided there is an agreement between the life and non-life insurance companies for this purpose. However, the underwriting of risk for life/non-life has to be done by the respective specialized companies. The agreement would provide a composite product for consumers – enabling better marketing and easier claims processing.

However, composite products have not been offered so far on account of non- regulatory dynamics. The insurance companies are reluctant to get into any contract with each other for offering microinsurance products as this could restrict them in collaborating with other life/non-life agencies in the future if a more remunerative commercial opportunity arises. It is for this reason that even sister concerns like ICICI (Prulife & Lombard) or HDFC (CHUBB & Standard Life) or TATA AIG (Life & General) have not collaborated with each other to offer composite products.

Another reason cited by the insurers is that each company (life or non-life) specialises in covering a certain type of risk and there are regional leaderships as well. Therefore, collaborations with one company will restrict them in collaborations with other companies that are market leaders in certain regions or products. Further, the amount of effort required for negotiating and concluding such agreements is widely thought to be out of proportion with the small amount of benefit that would accrue from the microinsurance market.

Linked with micro credit Sale of microinsurance is often related to microcredit, particularly in developing countries like India. The micro-finance sector in India is broadly characterized by mainly credit and (limited, usually compulsory) deposit services

37 provided to low - income families by (i) government programmes (including the linkage of self help groups (SHGs) to commercial banks) and (ii) by private for-profit or not-for-profit microfinance institutions (MFIs).

The SHG-Bank linkage programme funded by NABARD fell 9 percent in 2011-12 to 4.36 million. The total client outreach of the private/non-government microfinance institutions also declined by 15.7 percent in the same year, as against a rise of 19.1 percent recorded in the previous fiscal. The gross loan portfolio of MFIs also declined 3 percent. However, the total loan portfolio of bank-linked SHGs rose to Rs. 36,341 crore in 2011-12, as compared to Rs. 30,619 crore in the previous fiscal, an increase of 19 percent, while the loan portfolio of microfinance institutions (MFIs) fell about three percent during the same period. (Venugopalan Puhazhendhi, 2012)

POSITIVE DEVELOPMENTS There are of course some factors that facilitate the growth in demand for microinsurance products.

Growing preference for health products Health insurance has a naturally high demand in rural as well as urban markets. According to a World Bank study the economic status of about one-fourth of Indians who are hospitalized falls below the poverty line on account of their hospital stays and similarly, more than 40% of hospitalized patients take loans or sell assets to pay for their hospitalization. In the context of insurance, health was found to be the top priority for 61.6% of respondents as they associate illness with unplanned expenses as well as the loss of income causing a huge impact on their cash-flows. (Predeep Panda et.al 2011)

Health insurance is usually offered through group products offered to the members/clients of MFIs and NGOs and to specific sections of the population (such as all the BPL families in a state) (Ahuja Rajeev, 2005). In the case of collaborations with a formal insurance provider, typically, health insurance cover is provided as a fixed sum in case of the hospitalization of the client. These products are offered as group insurance products and may be bundled with accident benefits.

38 This is evident from the number of health insurance policies) offered by various types of organization across the country. The preference for composite products (which are mainly pure risk based) like those provided by SEWA and its partner NGOs was found to be high particularly if it was bundled with a health product.

Use of technology in microinsurance

The use of technology in microinsurance is at a very nascent stage in India and most of the initiatives are at the pilot stage. TATA - AIG Life is one of the insurance companies which have been proactive in attempting to use technology.

It has introduced a cash collection and receipting system using a hand held machine to address the front-end concerns in remote rural areas. With the present system of equipping NGO partners with handheld devices that can issue receipts seamlessly, TATA - AIG has empowered the NGOs to issue receipts on collection of money and also get real time information, every 24 hours on collection details.

This has helped in reducing the time lag between the collection of premium from customers and the payment to TATA - AIG while the cash receipt system has enhanced the credibility of the NGO staff. This has helped to overcome the customers’ earlier reluctance to pay money to the staff of the NGO SKS – a leading MFI in India – has also been experimenting with the use of technology and has develop an integrated module for an insurance management system, financial accounting, management information and customer information system. The software generates receipts in the vernacular and branch wise reports on insurance products purchased by clients. SKS is now exploring the possibility of mobile banking for premium collection, reminder services, product information/marketing, claims registration, processing and settlement

A lot of agencies in India and East Africa have started to use video in which households themselves talk about their lives and their needs for risk management.. In south Africa, mobile phone are used as a low-cost channel. When a mobile owner tops up with a pre-paid card, an update is sent together with a microinsurance message

39 Innovative approaches to consumer education

The IRDA is tasked with promoting the insurance industry. The IRDA already runs television campaigns aimed at middle-income consumers advocating the safety and security of the insurance firms that it regulates. It would be good if such a campaign could be extended to microinsurance. Other mediums could be explored for this, including radio.

New research from CARE’s work in India shows that microinsurance distribution strategies that prioritize building clients’ financial literacy lead to almost three times as many new enrolments as those that do not. It is proved that the traditional approaches of promoting through advertising does not fit microinsurance. There are a number of substantial challenges in marketing and distributing micro-insurance policies.

A number of strategies are being piloted globally to circumvent these challenges; for example, insurance bundled with the purchase of a SIM card. Several organizations have created movies that use a Bollywood story format to explain the basic features of insurance and their products (e.g., Activists for Social Alternatives and Tata - AIG). This is followed up with personal interaction to provide more details on insurance in general and their products in particular. If insurance is not adequately explained, clients sometimes confuse it with savings. This leads to low renewal rates when clients do not receive any payment at the end of their insurance terms. A major issue for potential customers in buying insurance is having a level of trust with the company selling the required products and services. Tata-AIG claimed that making clients aware of the Tata brand was a major help in engendering trust. Most of the low income clients had used or at least seen Tata’s products so they knew it was not a fly - by-night Company.

There are a number of other techniques that Indian insurers have used to gain the trust of Potential clients. These include: . Public reimbursement of claims, for example at village meetings. This can be used as a marketing opportunity to demonstrate with a real example the advantages of having insurance; . Exposure tours, where village leaders from villages with policyholders are sent to other villages to show the advantages of having insurance;

40 . Regular public interaction of insurance providers and (potential) policyholders to clarify the insurance concepts and explain policies. Some examples that might help in different areas include meetings held after claims submissions, and at annual general meetings ; . Careful, well-managed rejection of claims, where the reasons are made clear to all the villagers; . Monitoring of customer satisfaction, especially with respect to lapses and non renewals, with a mechanism to act on the information that emerges from this monitoring.

RESEARCH FOCUS

The reported successful delivery of the microinsurance products in South Indian states like Tamil Nadu, stimulates interest in making inquiries as follows:

 What is the service delivery model adopted and what is the extent of the outreach of the microinsurance products?  What is the level of awareness and sources of awareness? How are the potential customers educated to buy insurance products?  What factors influenced the purchase of the products and are they satisfied with the purchase?

The findings provide lessons to other states to improve sales of microinsurance in their areas. For insurance providers in the study area, they offer information for further action to enhance the outreach and efficacy of the insurance products with the aim of generating business on one hand and welfare of society on the other.

CHAPTER SCHEME

The first chapter describes the need for microinsurance highlighting the prevalence of poverty and the variety of risks faced by low income groups. Also it discusses how microinsurance has grown in India and presents the role played by some agencies and companies in reaching the poor and delivering microinsurance benefits to them.

41 The second chapter provides a review of literature, identifies research gap and established objectives for the present study. Also it describes in detail the methodology adopted for data collection and analysis of the study.

The third chapter presents a profile of Nagapattinam district, which formed the backdrop for the study. It describes the role played by the selected four NGOs in providing services to the needy and examines their contribution to the reach of the microinsurance, in the district.

The fourth chapter provides the findings obtained from the statistical analysis of the data obtained from the sample of microinsurance policy holders in the district, to understand their level of awareness and satisfaction with microinsurance products.

The fifth chapter summarises the findings and discusses their implications to the policy makers and researchers. It offers suggestions to select NGOs for making the delivery of microinsurance more effective. Also it provides directions for future research.

42 REFERENCES

1. Ahuja Rajeev, (2005). Health insurance for the poor in India - an analytical study. Working paper number 161, June, Indian Council for Research on International Economic Relations, New Delhi. pp. 28

2. Allianz A.G, GTZ and UNDP, (2006). Microinsurance: Demand and Market Prospects. UNDP, August pp 10-10

3. Churchill, C. (Ed). (2006). What is insurance for the poor?’ Protecting the poor. A Microinsurance Compendium, International Labor Organization, Geneva. pp. 12-12

4. Craig Thorburn, (2007).What is Microinsurance? The World Bank IAIS Issue Paper.

5. Dheer & Gautam, (2014). Farmers' suicides reflect the crisis in India's grain bowl. Deccan Herald, February,25.

6. Erik Bleekrode et.al (2013). Microinsurance under the microscope market clarity the key to growth. Frontiers in Finance for decision-makers in financial services KPMG Report , April, pp.No33

7. Funds for NGOs,(2009). The Principles of Microinsurance. Funds for NGOs, December.

8. FAO, (2012a). Undernourishment around the world. The State of Food Security in the World, Food and Agriculture Organization of the United Nations, pp 8- 12 and 15-19.

9. FAO, (2012b).Undernourishment around the world. The State of Food Security in the World, Food and Agriculture Organization of the United Nations, pp 15-19.

10. Mare Socquet, (2005). ILO / STEP, Microinsurance Workshop, October, Hyderabad

11. M-CRIL, (2008). Micro-Insurance regulation in the Indian financial landscape. Micro-Credit Ratings International Limited, March, pp.48.

43 12. Monique Cohen and Jennefer Sebstad, (2006). The Demand for Microinsurance protecting the poor. Microinsurance, pp. 24-44.

13. Narayana, D. (2010). Review of Rastriya Swathya Bima Yojana. Economic & Political Weekly, No 29, July 17.

14. Predeep Panda et.al (2011). Reconciling Research and Implementation in micro health insurance Experience in India. Trials, 12: 224, October

15. Rajalakshmi, P., & Indira. A. (2013). Microinsurance macro problems. The Hindu Business Line, September 26.

16. Roth et.al (2005). Microinsurance and Microfinance Institutions: Evidence from India. CGAP Working Group on Microinsurance Good and Bad Practices, Case Study No. 15, September.

17. UNDP, (2007). Building Security for the Poor: Potential and Prospects for Microinsurance in India. Human Development Report, UNDP Regional Centre for Asia, pp. No.9.

18. UNDP, (2005). Eradicate Extreme and Hunger. The Millennium Development Goals Report, United Nation, New York. Pp. 4 – 9.

19. Venugopalan Puhazhendhi, (2012). Microfinance India. State of the Sector Report, SAGE Publications, New Delhi, pp. No.29.

20. World Bank, (2000) Attacking Poverty. World Development report, August. pp No. 136 – 138.

44 CHAPT ER - 2

REVIEW OF LITERATURE, OBJECTIVES AND METHODOLOGY

Microinsurance, has evolved as a tool for helping the poor in facing a variety of risks they are exposed to in their working and living environments. It has hence caught the attention of development policy makers and researchers. In this chapter, first, the studies on the need and working of microinsurance of different countries are outlined; then the studies in Indian context are discussed. Further, the objectives and methodology of the present study are stated.

STUDIES IN FOREIGN CONTEXT

Several case studies on micro-insurance are conducted in backward nations in Latin America, Asia and Africa.

ILO, ILO STEP, & PAHO, (1999) examined cases from Latin American Countries: Colombia, Honduras, Dominican Republic, Bolivia, Uruguay, Nicaragua, Ecuador, Argentina, Guatemala and Peru. The findings are:

Many of the workers registered in the health insurance schemes are informal workers who, prior to these cases, did not pay premiums and received free care in the public services. As regards financial sustainability, those six cases which did not engage in risk management and are primarily designed to increase access to health care showed that external contributions (subsidies in certain cases) are unrelated to either the number of beneficiaries or members or risk. Colombia and Uruguay have financial sustainability because they have no deficit, or only a marginal deficit. In spite of not managing risk explicitly, they do reveal some coherence and adaptation in terms of the revenues and expenditures associated with the risk of the target populations.

Wright, (1999) emphasized on the preventive measures rather than the responses and draws on a wide variety of qualitative research tools to understand the complexities of poor people's lives. Over 2,500 poor people were interviewed using focus group discussions, in-depth individual interviews and PRA tools including wealth ranking, life-cycle analysis, time series analysis, financial services matrixes, venn/chapatti diagrams and seasonality analysis. He concluded:

45 Vast majority of the insurance mechanisms used by poor people are informal in nature. There is however, a growing interest in, and effort to provide, semi -formal sector insurance mechanisms and, in some cases, efforts are being made to link MFI clients to formal sector insurance companies.

Millinga, (2000) investigated the demand for microinsurance by urban and rural poor households in Tanzania. He did this through literature review, focus group discussions, participatory rapid assessment, and in-depth interviews. The study examined the following:

 Formal / informal insurance services available to poor households,  Financial profile of households for gauging the insurance payments capacity,  Factors that enable poor households to join insurance schemes,  Protection against risks by informal insurance groups, and  The level of satisfaction with formal and informal services currently being offered.

The study found that poor households are exposed to a wide variety of risks. These risks may drive households to absolute poverty and permanent disability. Individuals and households adopt various mechanisms for protection against risks. Vulnerability to risk does not necessarily translate into a demand for insurance coverage. People desire flexibility in premiums and premium collection and the quality of health care and the choice of providers are the key issues in the establishment of health insurance programs.

McCord, (2000a) reported four health insurance programmes in Uganda, Tanzania, India and Cambodia, representing a number of models.

 Partner-agent model - Found that clients sought care earlier with reports of improved health, includes preventative care and administrator for the plan.  Community based model - No prevention and permission from group leader required. This model found that doctors could not tell between insured and uninsured patients and there were incentives to over prescribe.  Full-service model - No incentive to be treated early and cover provided only 24 hours after hospitalization while reimbursement only partially covers costs.

46  Provider model - Door-to-door primary care competed with state and it is becoming a clinic service but incentives work at this level.

Preliminary conclusions indicate that a separate entity should provide the insurance. There should be incentives to obtain and maintain client health.

McCord, (2000b) reviewed the partner-agent (P-A) model supporting the relationship between FINCA Uganda (FU), a Ugandan registered microfinance institute (MFI), and Nnsambya Hospital Healthcare Plan (NHHP), a health financing entity. The study methodology included field visits, interviews, document reviews; use of Participatory Rapid Appraisal (PRA) and focus groups and review of accounts, claims records and other relevant documents. His findings include:

PA model has allowed for new business development in ways that reduce risk to the micro finance institute (MFI) and offered innovative insurance products to MFI clients.

He identified the following lessons:

 Developing and testing a protocol is very essential to the product development process.  Staffs have to be trained well and financial problems do not fall on the MFI.  Premium prices must be structured to cover costs from the start.  Donor funding could prove detrimental to the pricing of the product.  Clients needs to have a savings mechanism available to save for the periodic premium, and  Marketing has to be consistent and an MFI needs a simple information system.

Del Conte, (2000) summarized the experiences of delivering microinsurance products in countries such as Uganda, Malawi, China, Bangladesh and Indonesia. The important issues that need to be addressed in order to facilitate the provision of microinsurance services are:

 Absence of formal risk management tools available to the poor,  Social security mechanisms in the context of globalization and ensuing socio- economic restructuring,

47  Vulnerability of women as they are more prone to suffering during periods of distress, and  Proactive risk management as a catalyst for increasing opportunities to the poor.

The roundtable discussion, which was a follow up to the Social Protection Working Group of the WIEGO Network (Women in the Informal Employment: Globalizing and Organizing), in May 2000, examined approaches on how to reduce the vulnerability of low-income people through social protection.

 One of the approaches, complementary to others, is to deliver and/or facilitate microinsurance services through microfinance institutions.

Ahmed, (2001) examined the case of Delta Life Insurance Company in Bangladesh. His findings are:

(i) Its market penetration of insurance was less than 1%. (ii) The success factors are:  Vision, dedication and able leadership;  Staff commitment and core competence within the company;  Uncomplicated and easy to understand products specially designed for the poor; simple procedures and  Large sales force and branch network. (iii) Strategies that removed problems are:  High ratio of lapsed policies reduced by staff training and strict disciplinary measures.  High ratio of microcredit defaults reduced by suitable changes in waiting period and lending criteria.  High cost and low return situation improved through reduction in overheads and increase of profit margins.  High field-level staff turnover checked through positive change in human resource management.  Defalcation by field staff checked through steps such as: strict vigilance, monitoring and decentralization of records.

48 Mutesasira, (2001) developed insights from the innovations made by micro finance institutions (MFIs) operating in Bangladesh at mobilizing savings, disbursing loans and providing insurance in a sustainable and cost effective manner. His major findings are:

 MFIs have been successful in mobilizing client deposits by offering open access accounts, which provide clients need-based access to savings accounts.  Cost reduction and containment is an important element for achieving sustainability among the MFIs.  MFIs have not been successful in reaching the bottom fifteen percent of the poorest.

Loewe, et.al (2001) conducted a survey of 139 households in Jordan from February to April 2001. The study revealed the following:

 Findings - A high number of urban households would be willing to provide for the future and are able to pay small insurance premiums but lack adequate provisioning offers.  Suggestions - Non-governmental and commercial institutions in Jordan should seek partnership in microinsurance projects. Donors have to support such initiatives.

Mosley, (2001) examined three schemes in India, Uganda and Ethiopia. The new generation of microinsurance schemes that seek financial sustainability are targeted on poor people and contain defences against moral hazard and adverse selection. He found that much has to be done to diversify the range of risks covered and the range of models.

Simba, (2002) found that low-income households in Kenya are prone to several risks that directly affect the level and/or sources of income and their productive assets and are more vulnerable to risks due to small asset base. The study listed the challenges in designing appropriate microinsurance products as intangibility of insurance products for client’s difficulty in understanding the terms, conditions, and limitations of insurance products and lack of good customer service by insurance providers.

49 Poursat, & Le Roy, (2002) highlighted the lessons learned from GRET's pilot health insurance program in Cambodia. To reconcile the difference between what products rural households were attracted to (primary care) and what products could be offered in a financially viable manner (hospital care), GRET developed a two-tiered system that was both linked to primary health care providers and hospitals in the public health system. GRET has moved from a provider model to a partner/agent partnership model to create both affordable and sustainable health insurance services for rural households. Since local existing health care offer was not functioning, GRET decided to provide primary health care at home with its own medical practitioner.

Bargin, Lomboy, & Soriano, (2002) identified that there are three types of organizations currently providing microinsurance in the Philippines.

 MFI-owned insurance companies that offer formal insurance to small and micro entrepreneurs through their co-operative members.  Co-operatives, which sometimes prefer to offer their own insurance products rather than serve as an agent for the MFI-owned insurers.  NGO-MFIs that may offer insurance on their own or as an agent for an insurer.

From the study of their operations, they concluded as follows:

 Microinsurance complements MFIs' other interventions with MSEs because it reduces their vulnerability to business and personal risks.  Microinsurance is a sustainable approach to risk management for the informal sector.  MFIs are currently in the best position to provide microinsurance to the informal sector and should actively experiment and innovate to make the mainstreaming of microinsurance a reality.  Care is necessary product design and delivery, initiatives to improve the quality and availability of insurance are required:

Aliber, & Ido, (2002) conducted a field work in Burkina Faso on life, health and cattle insurance. The study identified and suggested the following

 Types - MFIs in Burkina Faso offer limited types of microinsurance – credit, life and health insurance.

50  Growth potential- They observed that there is enormous scope for increasing the practice of MFI-based microinsurance, not just in terms of overall volume of business, but also in the variety of risks covered. MFIs can provide financial services, which provide insurance-like benefits.  Constraint - One key constraint to the growth of microinsurance was the dearth of available information for MFIs to draw upon.  Suggestions - Simpler forms of insurance can be operated relatively effectively, provided, the pricing is prudent and institutional defences are in place to combat the hazards that affect microinsurance schemes. They suggested that regulatory framework needs amendment to accommodate microinsurance and there is a need for sensitization and education of prospective micro-insurance claimants.

ILO, (2003) presented the results of a study conducted by the International Labor Organization (ILO) under its Strategies and Tools against Social Exclusion and Poverty (STEP) program to create an inventory of microinsurance schemes in Nepal.

The findings are:

 Organizations - Ownership structures of schemes are diverse. Organizations have an average of 10 years operational experience. Majority benefit from external technical assistance and some receive financial assistance.  Area of operation - Majority operates in both urban and rural areas an d some are limited to rural areas alone. Most operate in the Central Development Region and least in the Far-Western Development Region of Nepal.  Services - Five types of services – health care, life, accident, livestock and housing - are covered, health care being predominant.  Coverage - Schemes cover 173,447 people and the average total coverage could double in a few years.  Premium - Schedule of contribution include yearly, monthly, daily and others, yearly being predominant.  Tie ups- Majority of the organizations do not have other micro finance activities and most have no relation to public or private insurance companies.

51 McCord, & Osinde, (2003) found that microinsurance in various forms has been available in East - Africa for many generations. Some hospitals and clinics have developed prepayment schemes. Some non-governmental organizations (NGOs) that work with low - income clients have developed risk management products like emergency credit or micro-insurance products. Micro Save, with The Microinsurance Centre and Microfinance Opportunities, recognized a need to understand both the demand for and supply of microinsurance in the East - Africa region. The researchers identified seven institutions in the region as case studies to help understand supply side products and operations.

McCord, M. (2004a) conducted a study of the feasibility of microinsurance intervention programs in the countries of Uganda, Albania and Georgia.

Objectives -The objectives of the study were:

 to assess the current market potential and demand for microinsurance,  to evaluate the interest and commitment of the banking community in participating in the program and provide an assessment of the feasibility of launching a target-group-oriented microinsurance project in these countries.

Findings - The study found similar situations in the three countries. For example, weak insurers lacking innovation; market distrust and lack of knowledge; a need for expatriates and many insurers interested in the low-income market.

Suggestions -The study suggested a number of interventions, such as; an international custodial company to control possession of pension funds, equity investment in a health micro insurer, introduction of a specialized microinsurance broker or an international brokerage firm, equity investment in a start-up life insurance company, insurance concept marketing, research and development to develop and market three microinsurance products and upgradation of insurance institutes.

McCord, M. (2004b) reviewed the current environment for microinsurance in Albania, and offered a discussion on the potential for increased activities.

Current situation

 In Albania, there was no formal sector microinsurance product available on a voluntary basis to help low-income families manage risk.

52  The insurance industry had mostly relied on mandated insurance purchases.  The insurance market had five insurers, out of which only one offers life insurance.  There was strong demand from both the upper and the low - income people for property protection, health-care, and life insurances, despite distrust of local insurers, and limited information about insurance.  The legal and regulatory environment for microinsurance was improving.

However there were several issues that need to be addressed in order to improve the efficiency of microinsurance processes and improve investment opportunities. He gave the following suggestions

 The staff and management require significant training in understanding insurance.  Insurers needed new strategies to grow, but were plagued by lack of innovation.  The microinsurance market and demonstration products could be developed along with marketing strategies for entering in to the low-income markets.

Morduch, (2004) found from a 1998 survey of areas affected by Hurricane Mitch, the following:

 The victims resorted to drastic reduction in consumption (for 21%, it was main response and for 18%, it was second response).  Most households in the survey (89%) reported receiving no assistance at all after Mitch. Those who reported getting assistance, pointed out that it was NGOs— not the government nor private insurers that provided help. NGOs emerged as the largest single provider.

It points the way to innovations that can provide better access for the poor. The concerns are:

 the need for reinsurance;  need for having data on which to base premiums, and  the ability to cut the costs of dealing with many small transactions.

53 Wiedmaier, & Wohlner, (2004) undertook a study, commissioned by German Technical Cooperation (GTZ),to find entry opportunities in the microinsurance sector in Sri Lanka. The key findings of the study are:

 Microinsurance demand exists in Sri Lanka and a favorable framework exists for micro- insurance development.  Most large commercial insurers are disinterested in serving low-income segments. Social mobilization programs, with heavily subsidized insurance components, are often unsustainable.  Few smaller, private insurers have interest and potential to cater to the microinsurance needs of the low-income segment.  Donors have interest but limited know-how in microinsurance.  GTZ has a strong presence in Sri Lankan rural and financial sector development.

Finally, the study makes a few recommendations for GTZ's role in microinsurance in Sri Lanka, playing a leading role in microinsurance. They are:

 Considering possible future support to microinsurance in areas such as policy, regulation, and linkage with micro - finance;  Analysing potential partners  Strategies for supporting microinsurance development, contributing to the policy dialogue on regulation of micro - finance and microinsurance,  Providing feed-back to government and other institutions to clarify its stance and contribute to the discussion on microinsurance.

Center for Micro Finance, (2004). Discussed a pilot microinsurance product that was introduced in Nepal to reach out to the poorest sections of the society. The findings are:

 Although there were many insurance companies in Nepal, the majority of the poor population had not been covered against life-cycle risks.  A group term life-insurance that insured people against both natural and accidental death was offered.  The delivery system followed the “partner-agent” model.

54 Achampong-Kyei, (2004) discussed the features and implementation of the Life Insurance Policy (ANIDASO) brought out by the Gemini Life Insurance Company (GLICO) in Ghana. He observed the following:

 GLICO provided innovative and flexible insurance products to the low-income population of Ghana.  It was supported by international donor agencies and initiated the ANIDASO Life Insurance Policy.  The pilot test showed that ANIDASO did help alleviate poverty.

According to him the success of the policy was due to three factors:

(i) Intensive marketing efforts (ii) Prompt processing of claims (iii)Media exposure.

However, he observed, formal insurance was still not a trusted area.

Almeyda, & Jaramillo, (2005) examined how the company La Equidad, Columbia in focused on the expansion of its products for specialized microfinance institutions (MFIs) and their clients. Their observations were:

La Equidad developed two group-based life insurance products for lower- income households, called “Amparar” and “Equida”and successfully marketed them through cooperatives. For MFIs specializing in microcredit, like WWF, “Amparar” helped expand the products available to them in a profitable way.

The problems experienced by La Equidad include the following:

 Limitations of management information systems (MIS)  Lack of insurance culture.

However, they opined that three measures can give success:

(i) appropriate training field staff of an MFI or a cooperative, (ii) products should be simple offering a range of benefit options (iii) premiums should be adjusted to the capacity of the target market.

55 Conger, (2005) examined partnerships between insurance companies and Micro finance institutions (MFIs) that allow poor urban and rural workers in Asia, Africa and Latin America to gain access to medical and accidental death insurance plans. He examined group insurance policies in various countries such as Columbia, Guatemala, Uganda and Peru that offer life, health, accident insurance to low-income people.

He identified the key benefits of such partnerships.

 Health care, makes poor healthier and more productive, and helps them overcome catastrophes and poverty.  MFIs expand financial services for their clients, hereby improving client loyalty and retention as well as the solvency of their loan portfolios.

AIDMI, (2005) made a comparative study of three health insurance schemes in Bangladesh, namely those run by BRAC, Grameen Kalyan (GK) and the Society for Social Services (SSS). All three organizations are NGOs registered with the NGO Affairs Bureau under the Foreign Donations (Voluntary Activities) Regulations Ordinance of 1978.

The suggestion is: They have to expand their areas of operation to benefit more number of poor people.

Bayarsai Khan, Kwon, & Ron, (2005) examined how social health insurance scheme was introduced in Mangolia in 1994. The observations were:

 Challenge - Developing such scheme was not very easy in Mangolia because the population had received free medical care for more than seven decades.  Coverage - More than 95% of the population was covered under the scheme within the first two years owing to the economic support provided in the form of subsidy to the health insurance premiums of the low income and vulnerable population.  Problems in maintaining the universal coverage were: o Difficulties in maintaining good-quality services, Limited capacities of the insurance administrative office to process information on the persons insured,

56 o Lack of client-oriented arrangements for the collection of premiums, inability or unwillingness to pay premiums on the part of certain population groups etc.

Cohen, & Sebstad, (2005) examined the need to protect the assets of the poor drawing evidence largely from East Africa and India. They observed:

 Microinsurance is being adopted by many micro-finance institutions (MFIs), but the rates of adoption and usage are often lower than the MFIs’ projections. They made the following suggestions:  Financial education to help microinsurance clients understand the use of different financial products and impact their asset protection and accumulation decisions.  Use of local concepts and local language to describe the products helps bring about change in perceptions and financial behaviour.

McCord, Botero, & McCord, (2005) presented the case of a successful microinsurance product by American International Group (AIG) Uganda. In 1996, the management of FINCA Uganda (FU), a micro-finance institution (MFI), approached the AIG Uganda to develop an insurance product for the MFI’s clients. A basic product was launched in 1997, and an expanded version of the product, including coverage for the spouse and four children, was introduced in 1999. Eight years later AIG Uganda became involved in microinsurance, and created a success story in several ways. For the micro-finance clients, AIG’s group personal accident (GPA) product has been useful and affordable in managing traumatic life cycle events. Ugandan MFIs that participate in the scheme have generated revenues and helped improve loan portfolio quality. AIG Uganda has seen this product become its number one generator of revenue and profits to the extent that it has attracted attention across the region for AIG International. On a macro-level, the success of this programme has benefited both Uganda and the global micro-finance community. The lessons learnt are:

A microinsurance product can be developed and implemented reasonably well without external funding and MFIs must represent their clients in negotiations related to the insurance product.

57 McCord, M. (2005) described the features of microinsurance in Georgia. It was found that formal sector regulated insurers can best manage micro-insurance products. Efforts must be taken to reduce the overall risk and the sum of the interventions should be very large, regardless of geography.

Finally McCord listed some microinsurance interventions and the problem associated and their impact are the introduction of a specialized microinsurance broker, the introduction of a custodial to control possession of pension funds and 3 year Caucuses Centre for microinsurance Georgia and pension insurance.

Matul, M. (2005), explained market development in terms of market projections for all three types of micro-insurance. He examined the present and past insurance uses, including health microinsurance, life microinsurance, and poverty microinsurance based on coverage; benefit; claim processing and price.

 The reasons for people not opting for microinsurance were: lake of trust, knowledge, low income and poor money management.

Manje, L. (2005), documented the experience of Madison Insurance Zambia Limited (Madison) in providing insurance to MFI clients through a partner-agent model.

Lessons for the provision of microinsurance through the partner-agent model were:

 The insurer should expand its role to include client education, marketing and assessing client satisfaction.  MFIs should ensure that clients understand exactly how much they are paying for insurance. Staff responsible for servicing insurance products should receive adequate training to enable them to effectively educate clients.  Insurance should be well marketed and funeral insurance could be made voluntary, especially if it is covering other family members.  The MFI should check whether it has the capacity to act as an agent of insurance.  Profit sharing seems to work better than giving the MFIs a commission for their efforts.

58 Matul, Durmanova, & Tounitsky, (2006) studied the need for microinsurance among low-income households in Ukraine. The study provided the following findings:

 Bigger risks put significant pressure on households in Ukraine and low-stress coping mechanisms are not enough to respond to these risks.  Health, disability and life with long-term savings microinsurance services promise to fill this risk-management gap.  Positive signs such as knowledge of and enthusiasm for insurance exist among the medium and high-income households in Ukraine.  Low-income households exhibit a distrust of insurance companies.  Market development projections identify three zones in the microinsurance market: market enablement zone, market development zone, and market redistribution zone.

The study recommends the strategies to tap the low-income market in the country.

Matul, Iancu, & Scurtescu, (2006) explored the microinsurance needs of low- income households, and the opportunities and challenges that exist in way of effective and efficient delivery of such services in Romania. Their observations were:

 Out of the 5.17 million poor households in Romania, 45% can benefit from private microinsurance services.  Three products that could add a significant value in reducing the vulnerability of the low-income groups include: Life/disability insurance; Crop insurance and Health insurance.

McCord, Ramm, & McGuinness, (2006) presented a studyby Alliance AG, GTZ and the UNDP on the potential for micro-insurance in Indonesia and to become aware of the different delivery channels.

The study found:

 Despite the demand for micro-insurance, very few insurance providers had tapped the market.

The study concluded: In order for micro-insurance interventions to take place in Indonesia, capacity development for agent training and market education is necessary.

59 Enarsson, & Wirén, (2006) examined two microinsurance schemes in Sri Lanka - ALMAO and Yasiru, as well as the separate features of both the insurance companies. The operational details are as follows:

 ALMAO operates through a nationwide network of savings and credit cooperatives and has developed rapidly. Local partners recruit clients, collect premiums and administer claims. It offers coverage for disability, hospitalization, death and maturity; and loan protection, life savings, property and health insurance.  Yasiru partners with local nongovernment organizations (NGOs) and covers death, disability and hospitalization and has a low-income profile.

The measures to improve the schemes were:

 ALMAO needs to build up its client-base and develop new products. It needs to reduce costs; increase annual premium sales; and increase the number of reliable partners.  Yasiru needs to increase its network of partners. Both companies need to build on awareness, marketing and sales.

Ahmed, M. (2006) organized a market research on microinsurance demand in Sri Lanka with special focus on remote rural, as well as tsunami and the war affected areas. The research used both qualitative and quantitative market research techniques. His findings are:

 Only 36% of the working-age population was covered under any social insurance scheme. Usage of microinsurance is quite low amongst the low- income households in spite of high awareness about insurance and the insurers.  The occurrence of risk events, their frequency and severity signal a need for microinsurance for the low-income households.  Samurdhis, the main social security schemes, provide benefits to around 46% of Sri Lankan households.  However, the microinsurance products currently available were not suitable in terms of cost coverage, payment terms and delivery mechanism.

60  The market enablement zone for micro-insurance varies. For example, 5.5% for property; 16.1% for health; 29.1% for life and 41.8% for funeral insurance.

The report recommends designing of microinsurance products that are better suited to low income groups and an insurer agent model of partnership of high reputation players.

Guerin, O. (2006) analyzed the microinsurance scheme of The Association d’Entraide des Femmes, or Women’s Self-help Association (AssEF) which started in 2002, with support from the ILO-STEP program. The operational details are:

 AssEF’s health microinsurance is based on the third-party payment mechanism.  It offers members 70% coverage of health expenses from general practice, maternity, and hospitalization services for women and their children.  It is a network of 112 savings and credit associations and 26 savings and credit funds  The use of computer-based indicators has made it possible to monitor the evolution of enrolments, premiums and benefits and to make necessary adjustments to the scheme.

Nannyonjo, J. (2007) studied the management challenges that impact the effectiveness of insurance policies in Uganda. The challenges included the following:

 Institutional weaknesses, particularly in the areas of management, administration, technical expertise and data systems.  Lack of client knowledge of insurance policy.  Limited coverage and sustainability.

He reviewed the performance of several insurance schemes through documents and interviews with relevant authorities and concluded as follows

 There is a need to improve institutional managerial, administrative and technical capacities; to develop more efficient transactional and informational systems;  To ensure client education and awareness;  Increase market outreach through other approaches and to ensure sustainability.

61 Syed Abdul Hamid, & Roberts and Paul Mosley, (2010) showed that there is a positive impact of micro health insurance in the reduction of poverty among rural households of Bangladesh. Micro health insurance has a significant beneficial effect on food sufficiency of poor and has a dynamic improvement in the health status of poor rural households.

Tadesse et al. (2011) did a study to determine how microinsurance can help Ethiopia’s poor become more resilient to negative financial shocks. Their research focused on the demand components of microinsurance, and investigated two main research questions:

 Do low-income households in Ethiopia need insurance?  If so, would they be willing to buy if it were made widely available?

The study answered these two questions through a literature review and qualitative research in four socio-economic systems of Ethiopia: low-income urban workers in Addis Ababa; agro-pastoralists in Hagere Mariam, Oromia; pastoralists in Yabello, Oromia; and coffee farmers in the Southern Nations, Nationalities and People’s Region (SNNPR). In addition, this study drew upon research from Oxfam America’s weather insurance pilot in Tigray.

The results of this study indicated:

 Low income households needed insurance.  The low income households would buy when supply of insurance products is affordable and truly client-centered.

The study recommended the Ethiopian government to take adequate consumer protection measures to ensure the healthy development of this infant industry.

Hochrainer-Stigler et.al (2012) conducted an empirical cross-country assessment of the impact of disaster microinsurance in the South Asia region. The region had disaster-prone communities, comprising households with and without disaster microinsurance. The results of this study showed:

 There is interest in and willingness to pay for disaster microinsurance programmes.

62  The products are reaching poor clients, many who are below the poverty line, highly in debt, and employ limited and difficult coping mechanisms after disasters.  There were difficulties with the claim process.  There was inadequate total coverage with a number of individuals borrowing additional funds from money lenders, friends, and family.

As such, there seems to be a need to review products and potential clients in communities to ensure that although “the poor” are being served, “poorer than the poor” are not being excluded due to costs and information barriers.

STUDIES IN INDIAN CONTEXT

In India, studies are found on the importance, operational problems and benefits of microinsurance schemes.

McCord, Isern, & Hashemi, (2001) using case studies discussed the provision of insurance products to the poor, and examined issues in the product cycle and four general models (Partner-Agent, Full - Service, Mutual and Provider) of insurance provision used by organizations. They presented the findings of a research on the Self-Employed Women's Association (SEWA) reviewing its activities primarily within its role as a full service insurer.

Findings - SEWA provides Full Service Model of insurance provision to its clients. It offers a broad range of insurance coverage (life, disability, health, and property) under one premium with life coverage provided as an agent and the others provided under a full service model. The services of SEWA have helped them to become more autonomous and self-reliant.

Conclusions: As a stand-alone product, the SEWA insurance is too limited to make a significant impact. However, as a component of an integrated system within the broad SEWA structure, they are able to improve the overall effectiveness of their care for members. Thus linking insurance to the SEWA Bank has produced important benefits.

63 Srinivasan, & Arunachalam, (2002) surveyed micro- and small-entrepreneurs in order to understand and estimate the risks they face, to identify their risk cover needs and to propose actions that MFIs can take to address these needs.

They used personal interviews and focus group discussions with about 120 micro-finance clients; discussions with four MFIs offering insurance as a serious product line; interactions with various stake-holders including insurance companies and the government and analysis of secondary data from available secondary information.

They concluded as follows:

 Insurance companies are capable of drawing-up flexible procedures if they are convinced about the genuineness of the operating organization.  Strong interpersonal relationships result in good customer care from the point of view of the MFI.  Competition in the insurance environment results in the very best product at affordable rates and increased the negotiating power for the MFI  Combination loans mitigate risk.

Ahuja, & Jutting, (2004) using a simple analytical model studied the demand for insurance.

Observations

 Lack of demand for insurance need not necessarily be the result of affordability.  Institutional rigidities, such as (and in particular) credit or borrowing constraints, may prevent low-income households from demanding insurance that they can otherwise afford.

Recommendation

 They argued for public intervention to remove institutional rigidities, for example, in labour, credit and product markets

Ahuja, & Guha-Khasnobis, (2005) studied the developments on the supply and demand sides of microinsurance in India. They made the following observations:

64  Supply – There are 80 listed insurance products and of them 45 cover only a single risk. Private insurance companies have more products than public companies. The available products cover a wide range of risks and most of the health insurance products exclude pregnancy related illness etc.  Demand - 51 schemes are listed, with almost all being in the nascent stages. Nearly all insurance schemes are linked with micro-financial services. Life and health are two most popular risks for which insurance is demanded.

Chatterjee, & Vyas, (2005) described SEWA’s experience with providing microinsurance services to women workers. Based on the experience of SEWA that spans over more than a decade they concluded as follows

 Microinsurance must be integrated with both financial services (savings, credit and pension) and social services (health care, in particular) for effective delivery.  It must be made a component of any poverty reduction programme.  The larger and more diverse the pool of insured, the greater is the spread of risk and, consequently the greater the chances of viability.

Dror, D. (2005) discussed the need for regulation of microinsurance in India and organisational types for delivery of insurance

Reasons for the regulation of insurance:

 to keep insurers solvent,  to establish the rules of this business and the technical standards ensuring compliance and  to establish the rules of this business and the technical standards ensuring compliance

Types of incorporation can be as follows:

1. The “partner-agent model, 2. The “mutual/cooperative” model, 3. The “partner-agent” model and 4. Provider-driven micro-insurers.

65 Dror, & Radermacher, (2005) in their paper brought out the following points.

 In India there is an untapped market due to low penetration of health insurance products.  The most prevalent distribution channel is the partner-agent model.  The arrangement is not viable due to conflict between the divergent objectives of the agent and the insurance company, as a result of which, the client focus is lost.

They concluded as follows:

 There is a need for both public and private sector participation to make health insurance to the poor in India a reality.

They recommended the following initiatives:

 Differentiating between health and general insurance by encouraging single purpose health insurance companies to operate,  Allowing operation of accredited micro health insurance schemes and support them with regulations to protect the insured,  Standardizing data collection for administration, reporting, and product development  Providing reinsurance for micro health units and subsidizing insurance/ reinsurance premiums.

Garand, D. (2005) did a case study on the evolution of Vimo SEWA, an insurance program developed by SEWA, India. It is providing a voluntary integrated insurance product. Vimo SEWA is open to all members, whether or not they have a loan and provides life, accident, health and asset insurance. Vimo SEWA experience provided the insights into management.

Observations

 Realization of the risk of insurance and the need to protect the scheme from major catastrophic events,  Necessity of developing a good management information system,  Importance of the business to set critical benchmarks,

66  Need to cultivate experienced micro-insurance personnel,  Efficacy of the assistance of an external actuarial and management consultant that help recognize problems,  Realization that solutions had to come from within the organization,  Product development must always consider the ability of members to pay for benefits and  Obtaining a high renewal rate might be difficult because of the widely dispersed membership.

Conclusions

 Vimo SEWA’s product and delivery channels represent an alternative that is harder to manage and takes longer to achieve viability.

Radermacher et.al . (2005) undertook a case study on Yeshasvini Trust’s health insurance scheme. The findings are:

Coverage -The trust offers a self-funded microinsurance scheme. It reached 1.6 million (mostly) low-income persons in its first year of operations. After growth in the second year to 2.2 million, membership declined in Year 3 to 1.45 million largely because the premiums were doubled.

Product and premium - The product is affordable to the poor (even with the recently increased premiums) because it focuses on high cost/low frequency events. Instead of providing basic health care, it covers 1600 surgeries.

Partners - The trust partners with cooperatives in Karnataka, which are quite prevalent in the state. Yeshasvini depends on the cooperative structure to provide information to members and to collect premiums. The cooperatives' involvement in the scheme is partly due to the active role of the Karnataka Department for Cooperation, which has encouraged them to participate and to enroll a target number of members. To handle such a large number of members, Yeshasvini has outsourced the administration of the scheme to a third-party administrator (TPA).

Hospital services - The hospitals providing the care are primarily private, which have a good reputation for quality care. They agreed to participate in the scheme, even

67 though they earn approx 30% less from Yeshasvini members than from other patients, because they have excess capacity.

Subsidy - The government has also partly subsidised the scheme during its initial years of operations and the recent premium increase was intended to replace government subsidies.

Kanitkar, A. (2005) concluded his study by stressing the importance of sharing experiences and creating awareness about micro-insurance among SHG members. Some lessons are learned from the study.  Scheme - There is a need to de-link life and health insurance from educational scholarship.  Model - Revenues generated by the project are not covering costs fully and there is a need for a new revenue model.  Expectations and competition - The expectations generated in the minds of the self-help-group (SHG) members are high; these expectations are not matched with appropriate awareness about the benefits and limitations of the insurance product. SHG members are exploring alternate schemes with different insurance companies and are able to benefit from the resultant competition and increased choices.

Shah, J. (2006) reported his findings at a workshop on micro-finance sector in Rajasthan, India.  Regulations in the state has become more favourable and less stringent, making it easier to offer insurance services to the poor  Insufficient data on poor people’s consumption and savings patterns in Rajasthan makes it more difficult to adjust product design and pricing for poor clients.  Health and accident insurance actually represent the greatest demand for insurance services.  Insurance implementation methods are: Partner-agent model: Similar to on- lending credit and Full service insurance model: MFI insurance Company responsible for all aspects of providing the service.

68  The rural poor need to be taught the procedures of filing claims, and general insurance paperwork and documentation.  NGOs cannot link up with banks alone as administrative costs are too high and cannot be covered only by premiums.

Sinha, et.al (2006) did a study on factors that lead to dropout from a CBI scheme targeting poorer self-employed women in Gujarat.

Reasons for dropout:

 Members who exited from the scheme were poorer and less educated; had weaker links with the promoting institution; and used the scheme less in the preceding year.  The members were not contacted by programme staff to re-enrol.

Scheme administrators can reduce dropout rates by taking the following steps:

 Maintaining better contact with scheme members  Systematically seeking them out at the time of enrollment.

Vyas, J. (2006) examined the experience of ‘Self Employed Women’s Association’ (SEWA) in the field of microinsurance. He detailed various kinds of risks at the personal, occupational and family levels and their financial impacts and the membership of SEWA.

 Vimo SEWA, is the insurance package that SEWA offers to its members.  There are two different schemes, each of which covers a package of risks.  Women are the policy-holders – their spouses and children are covered though them.  Poor women and their families get comprehensive life and non-life coverage under one window.

Bhat, & Jain, (2006) analysed the factors affecting insurance purchase decision in their study in the Anand district in Gujarat.

Findings

The following factors determine the insurance purchase decision:

69  The amount of income and health care expenditure are major determinants of health insurance plans  Income of a person has significant effect on the amount of health insurance purchase but there is non- linear relationship between them.  In addition, the influence of number of children in a family, age and perception regarding future health care expenditure have also been found to be significant

Ito, & Kono, (2007) investigated into taking decision – making, using house hold data collected in Karnataka, especially focusing on prospect theory and adverse selection.

 Prospect theory -They have found that some people behave in a risk-loving way when facing the risk of losses, which is consistent with prospect theory. Since insurance covers losses. There is reason to suspect that these people are less likely to take up insurance and they have found some evidence supporting this view.  Adverse selection- They have also found some evidence on the existence of adverse selection – household with a higher ratio of sick members are more likely to purchase insurance. Interestingly they have also found that household with a sick household heads are less likely to purchase the insurance. This may capture the fact that house hold with a sick household head have less income flows and have difficulty in financing the insurance premium.

Anuradha, (2007) made the following observations.

 Yet to take off - Microinsurance is on the edge of floating takeoff in India. The current interest from the different stakeholders, combined with the solid movement provided by the November 2005 directive of IRDA, concrete, complementary catalytic support will enable all the stakeholders to play a more pro-active role.  Not a proven business - However, according to the insurance companies microinsurance is so far to be a proven business offer, so investment from their side is limited and efforts from few NGO‟s and MFI‟s have resulted in the

70 introduction of microinsurance as an add-on to their existing micro credit projects and utilities for the rural poor.

Mark Dror, Radermacher, & Koren, (2007) conducted a study in India in 2005. It provided evidence on Willingness to pay (WTP), gathered through a unidirectional (descending) bidding game among 3024 households (HH) in seven locations where micro health insurance units are in operation.

Findings:

 Insured persons reported slightly higher WTP values than uninsured.  About two-thirds of the sample agreed to pay at least 1%; about half the sample was willing to pay at least 1.35%; 30% was willing to pay about 2.0% of annual house hold income as health insurance premium.  Nominal WTP correlates positively with income but relative WTP (expressed as percent of household income) correlates negatively.  The correlation between WTP and education is secondary to that of WTP with house hold income. Household composition did not affect WTP.  However, households that experienced a high-cost health event and male respondents reported slightly higher WTP.  The observed nominal levels of WTP are higher than has been estimated hitherto.

Venkata Ramana Rao, (2008) revealed that microinsurance is not an opportunity but a responsibility and to serve this responsibility good awareness campaign is needed. Microinsurance is offering real solutions to the billions of rural poor that raises the awareness of microinsurance as a key issue in coming future.

Gunita Arun Chandhok, (2009) indicated that there is a huge untapped market for micro health insurance and majority of population are aware and understand the importance of micro health insurance. Thus, microinsurance will go a long way in eradicating poverty. If the various microinsurance models are implemented effectively by Insurer, MFI‟s, SHG‟s, NGO‟s, Health institutions, Donors and Co-operatives the BPL population will lead a peaceful and secure life.

71 Basant K. Sahu, (2010) Conducted a study in Orissa and Tamilnadu. The study concluded that poor household faces multiple risks. To cope with these risks many households generally used different informal coping tools than uptake and renewal of formal or market based insurance products.

The study found:

 The coping strategy adopted in response to these risks in the study areas were mostly conventional and it includes informal borrowing (42%), saving (18%), off-farm activities (16%) and distress sale of assets (14%).  As regard to access to and use of insurance products many household were first timers with lack of awareness and information. Those who had some information about insurance products and used it were not very satisfactory with the current product design (85%), premium related (65%), claim settlement (60%) and offered insurance cover.

Lalithadevi, & Jerinabi, (2010) did a study in Tirupur District, Tamil Nadu. The major findings of this study are:

 Respondents -The majorities of the respondents belong to the age group of 36- 45, were married, have two children, were casual labour with monthly income of less than Rs.3000.  Insurance holding - 52.32% respondents have taken life insurance policy.  Conclusion - There is need to conduct the insurance awareness campaign and the members who benefited out of insurance can better explain the scheme.

Radhika, & Venkateswara Roa, (2010) in their study found the following:  Most of the people availed insurance policies through SHG’s in order to enjoy the benefit of the SHG’s.  After enjoying the benefits they never continue to pay the premium regularly so that they could not reap the benefits. They suggested:  Awareness need to be conducted covering all types of policies  More emphasis should be given in marketing the policy holders to continue the payment of premium.

72 Sudalaimuthu , & Angamuthu, (2010) found the following from their study.

 Rural policyholders (55.8%) are having high level knowledge of microinsurance scheme provided by insurance companies.  The purchase is based on the perception of the policyholders, and exposure to risk of their dependent persons.

Steps to be taken

 Motivation - Proper motivation influences decision on purchase of microinsurance policy  Innovation - Various new innovative microinsurance schemes create demand for future requirements.  Quality - The rural policy holders require quality of services provided by insurer with additional product features.

Singh, & Shweta Miglani, (2011) indicated that there are two areas in which having explicit provisions would aid the development of microinsurance 1. Flexibility in premium collection - Given irregular and uncertain income stream of the poor, flexibility in premium collection is needed to extend the microinsurance net far and wide. 2. Encouraging microinsurance among micro-finance institutions (MFIs)-MFIs are playing a significant role in improving the lives of poor households. Quite apart from this, linking micro-insurance with micro-finance makes better sense as it helps in bringing down the cost of lending. Given this, there is a case for the following initiatives  Strengthening the link between micro-insurance and micro-credit.  Regulating MFIs - At present microfinance business in the country is unregulated.  Regulation of MFIs is needed not only to promote micro-finance activity in the country but also to promote the linking of micro-insurance with micro-finance.

Kirti Singh, & Vijay Kumar Gangal, (2011) observed that the full prospective of the tough rural base is not fully exploited. They suggested the following measures:  Keeping in sight the well-established role played by the individual agency force for selling insurance products in the rural areas, it is necessary to strengthen

73 this channel with a set of new, up-to-date inputs is fitting the requirements. This would accomplish the aims of both the insurer as well as the nation – of classifying as well as strengthening these new untapped markets while also providing the much needed employment opportunities in rural areas.  It is very essential that the awareness level and the ability of agents are improved. Only when the agents will be able to explain the policies to the potential rural customers, microinsurance will flourish. Sales personnel need new skills and attitudes to explain the concept and benefits of insurance to the rural mass.

Taneja, & Sihare, (2011) evaluated Rashtriya Swasthaya Bima Yojana (RSBY), an innovative mass level micro health insurance initiative of the Indian Government. The results of the study are:

 RSBY has helped to improve health outcomes of the poor population  The behavior of poor families towards the utilization of health care has also changed (a symptom caused by the presence of moral hazards). The changing behavior in the poor is morally and socially good and represents a step towards their attempt to improve their own living standard.

Devadasan, et.al (2011) conducted an observational study to measure the level of satisfaction among insured and uninsured patients in two CHI schemes in India. Patient satisfaction was measured, which is an outcome of good quality care. Two CHI schemes, Action for Community Organisation, Rehabilitation and Development (ACCORD) and Kadamalai KalanjiamVattaraSangam (KKVS), were chosen. Randomly selected, insured and uninsured households were interviewed. The household where a patient was admitted to a hospital was interviewed in detail about the health seeking behaviour, the cost of treatment and the satisfaction levels. Findings:  It was found that at both ACCORD and KKVS, there was no significant difference in the levels of satisfaction between the insured and uninsured patients. The main reasons for satisfaction were the availability of doctors and medicines and the recovery by the patient.

74 Conclusions:  Insured hospitalized patients did not have significantly higher levels of satisfaction compared to uninsured hospitalized patients. If CHI schemes want to improve the quality of care for their clients, so that they adhere to the scheme, the scheme managers need to negotiate actively for better quality of care with empanelled providers.

Tinsy Rose Tome, & Selvam, V. (2012) conducted a study in Vellore District and came up with the following findings:  Low level of awareness - Majority of the low income members are illiterate and as such there is lack of understanding among them regarding various products and benefits offered under the microinsurance by insurance companies.  Less support from government - There is less contribution from Government side for providing services to the rural poor.  Poor reach - There is no proper mechanism or adequate infrastructure to systematically reach the informal group. The Insurance Companies do not want to cover much people in the low income sector as it involves a large number of risks.

Ayandev Saha, (2012) discussed how insurance can be promoted in rural areas.

 Pricing - When pricing, insurers should consider the premium payment ability of the client - small, periodic premiums.  Product - Design products that adapt to client’s unique needs  Partnership- Partner with an institution that has contact with and knowledge of the potential client. The trust and credibility of certain institutions are necessary to access this new market. NGOs and CBOs may be effective distribution channels, as they use personalized approaches to their members or beneficiaries.  Educate clients - The low-income population is not familiar with insurance and intangible products. Educate the client group. The message should be concrete and clear.

Forbes, (2012) organised a case study to evaluate rural India's developing private health insurance, combined with evidence from other micro health insurance effectiveness studies.

75 Findings:  Rural health insurance schemes are financially and culturally precarious. Enthusiastically importing these ventures into rural scenarios fragments vulnerable healthcare systems that have served and survived many other threats. The new services may fail if not subsidised.

Kirti Singh, Vijay, & L. N. Gangal, (2013) conducted a study on the impact of microinsurance on women members of SHGs and came out with the following observations. 1. 73.4% of respondent women are aware of microinsurance. 2. There is significant reduction of poverty in the family. The mean value before taking microinsurance is 1.55 and after taking microinsurance 4.5. It shows that there is quiet improvement in the economic condition. 3. Women were able to vote independently without any direction from their husbands and there is a high level of participation in Gram Sabha meetings. Women have been able to express their views freely in the family and in groups, and were able to discuss issues freely with bankers, govt. officials and NGOs. 4. Women’s role in decision making in children’s education had improved considerably, than their role in savings and expenditure related decision making. 5. There was a moderate increase of income, enhanced savings, undertaking income generating activities, reduced dependency on money lenders, ability to deal with the financial crisis 6. Women moved independently to other places without the support of male members of the family.

SUMMARY OF STUDIES What did these studies in foreign countries say?

Need for insurance- Latin American countries did not manage risk well (ILO, ILO STEP and PAHO). Vast majority of the insurance mechanisms used by poor people are informal in nature (Wright, G. A. N. (1999). Millinga, A. (2000) found that poor households are exposed to a wide variety of risks and adopt various mechanisms for protection against risks.

76 Need for support system - Loewe. M., et.al (2001) found that a high number of urban households in Jordan would be willing to provide for the future and are able to pay small insurance premiums. They need support and for this non-governmental and commercial institutions should seek partnership in microinsurance projects and work with the support of donors. Aliber, M. & Ido, A. (2002) suggested amendments to regulatory framework to accommodate micro-insurance and sensitization and education of prospective micro-insurance claimants. Mosley, P. (2001) found the need to diversify the range of risks covered and the range of models.

Provider and schemes - Bargin E.A., Lomboy, C. & Soriano, E.S (2002) observed that MFIs are currently in the best position to provide microinsurance to the informal sector. Del Conte, A. (2000) suggested delivery of microinsurance services through micro finance institutions to reduce the vulnerability of low-income people. According to ILO (2003) in Nepal, ownership structures of schemes are diverse, and health care, life, accident, livestock and housing are covered, healthcare being predominant. Schedule of contribution include yearly, monthly, daily and others, while yearly being predominant.

Clients and Communication - Vulnerability to risk does not necessarily translate into a demand for insurance coverage, it depends on flexibility in premiums and premium collection, quality of health care and choice of providers. (Millinga, A. 2000).

According to Simba, F. (2002) intangibility of insurance products pose difficulty in understanding the terms, conditions, and limitations of insurance products and lack of good customer service by insurance providers are major challenges in insurance promotion.

Challenges - The challenges faced in maintaining the universal coverage of health insurance were: difficulties in maintaining good-quality services, limited information processing capacities, lack of client-oriented arrangements for the collection of premiums, inability or unwillingness to pay premiums on the part of certain population groups etc. Bayarsai Khan, D., Kwon, S. & Ron, A. (2005)

77 Suggestions - The suggestions made by different researchers are:

 Develop and test a protocol for effective product development process (McCord, M. J. 2000) simple products offering a range of benefit options and premiums suitable to the capacity of the target market (Almeyda, G. & Jaramillo, F. 2005). Design microinsurance products that are better suited to low income groups (Ahmed, M. 2006).  Appropriate Training to field Staffs (McCord, M. J.2000; Almeyda, G. & Jaramillo, F. 2005) Capacity development for agent training and market education is necessary (McCord, M., Ramm, G. & McGuinness, E. 2006)  Structure Premium prices to cover costs from the start and do not go for donor funding (McCord, M. J. 2000)  Encourage clients to have a savings mechanism to save for the periodic premium(McCord, M. J. 2000)  Marketing has to be consistent (McCord, M. J. 2000)  Develop a simple information system(McCord, M. J. 2000).  Improve client loyalty and retention as well as the solvency of their loan portfolios. (Conger, L. 2005).  Use local concepts and local language to describe the products (Cohen, M. and Sebstad, J. 2005)  NGOs, and the health insurance providers had to expand their areas of operation to benefit more number of poor people. (AIDMI, 2005).  Intensive marketing efforts, prompt processing of claims and media exposure (Achampong - Kyei, K. 2004).

What type of data collection tools are made use of? Both qualitative and quantitative survey tools such as (i) document reviews, claims records and other relevant documents (ii) field visits, (iii) interviews and, in-depth individual interviews, (iv) Focus Group Discussions, (v) Participatory Rapid Appraisal (PRA) tools. Analytical tools include: life-cycle analysis, time series analysis, financial services matrixes, venn/chapatti diagrams and seasonality analysis.

78 What did the studies in India say? Growth - Nearly all insurance schemes are linked with micro-financial services. Life and health are two most popular risks for which insurance is demanded (Ahuja, R. and Guha-Khasnobis, B. 2005).

Provider models and schemes - Linking insurance to the SEWA Bank has produced important benefits (McCord, Isern, & Hashemi 2001; Chatterjee and Vyas, 2005, Garand, 2005). Yeshasvini Trust’s health insurance scheme is affordable to the poor (even with the recently increased premiums) because it focuses on high cost/low frequency events. In case of a SHG insurance scheme, a need to de-link life and health insurance from educational scholarship was found. Further, the expectations of SHG members did not match with appropriate awareness about the benefits and limitations of the insurance product (Kanitkar, 2005). Taneja and Sihare (2011) evaluated Rashtriya Swasthaya Bima Yojana (RSBY), an innovative mass level micro health insurance initiative of the Indian Government and found that it provided positive results. Devadasan, et.al (2011) evaluated two health insurance schemes and found that both are satisfactory. They found that uninsured also have same level of satisfaction, they as such suggested that to improve the quality of care for their clients, the scheme managers need to negotiate actively for better quality of care with empanelled providers.

Purchase of insurance - The determinants of health insurance are: amount of income, healthcare expenditure, number of children in a family, age and perception regarding future healthcare expenditure (Bhat and Jain, 2006). Households with a sick household head do not purchase as they have less income flows in financing the insurance premium. Households with a higher ratio of sick members are more likely to purchase insurance. (Ito and Kono 2007). Willingness to pay correlated with income but relative WTP (expressed as percent of HH income) correlated negatively. The correlation between WTP and education is secondary to that of WTP with HH income. Household composition did not affect WTP. (Mark Dror,. Radermacher, and. Koren, (2007)

Challenges - The low-income population is not familiar with insurance and intangible products and therefore there is a need to educate the client group to know

79 what he or she is buying and understand the benefits that one can get from buying an insurance policy (Tinsy Rose Tome and Selvam, V. 2012 and Ayandev Saha , 2012). However, Kirti Singh and Gangal (2013) on the other hand revealed 73.36% of the people are aware of microinsurance. Suggestions

 Strong interpersonal relationships for good customercare, competition in the insurance environment for best product at affordable rates, increased negotiating power for the MFI (Srinivasan, G. & Arunachalam, . 2002).  Rural policy holders require that quality of services provided by insurer with additional product features (Sudalaimuthuand Angamuthu, 2010).  Conduct awareness campaign with the members who benefited out of insurance explaining the scheme (Lalithadevi, and Jerinabi, 2010, Radhika and Venkateswara Rao, 2010).

RESEARCH GAP

Though the studies have examined the different aspects relating to micro- insurance, there is a need for more studies for the following reasons.

(i) Region wise studies to understand the reach and coverage of microinsurance. India is vast country with different languages and different levels of development. As such there is a communication challenge in creating awareness. Since development is not evenly distributed, different regions will have different risk exposures and insurance needs. Hence policy makers and insurance providers require regional studies. (ii) Studies of microinsurance providers like SEWA Bank (McCord, Isern, and Hashemi, 2001; Chatterjee, and Vyas, 2005, Garand,. 2005). Yeshasvini Trust’s health insurance (Kanitkar, 2005) and Rashtriya Swasthaya Bima Yojana (RSBY) (Taneja and Sihare, 2011) are there but limited in number and scope. The study of insurance providers in specific regions is hence considered important. (iii) Studies on purchase decisions of target buyers identifying determinants of insurance buying (Bhat and Jain, 2006, Ito and Kono 2007 and Mark Dror, Radermacher, and Koren,. 2007) are also available. However, such studies give

80 different findings in different regions as can be observed from the studies in India. For instance, many studies (Tinsy Rose Tome and Selvam, V. 2012 and Ayandev Saha , 2012) revealed low awareness of insurance whereas the study of Kirti Singh Vijay L. N. Gangal (2013) revealed 73.36% of the people are aware of microinsurance. In view of this, the present study is an attempt to understand how microinsurance is provided to low income people and how it has impacted the lives of those who purchased insurance.

STATEMENT OF THE PROBLEM

Microinsurance has emerged as an important tool for protecting the low income group people in India. Studies have revealed that the penetration is limited in India, but higher in South Indian states like Tamil Nadu (KPMG Report, 2013 and Raja Lakshmi and Indira, 2013) indicating need for developing penetration strategies. The finding stimulates interest in making inquiries as follows.

 What is the service delivery model adopted and what is the extent of the outreach of the microinsurance products?  What is the level of awareness and sources of awareness? How are the potential customers educated to buy insurance products?  What factors influenced the purchase of the products and are they satisfied with the purchase?

Existing research has no precise answers for the above questions. There are studies on performance evaluation of delivery channels (McCord, Isern, and Hashemi, 2001; Chatterjee, and Vyas, 2005, Garand, . 2005) and insurance purchase determinants (Bhat and Jain, 2006, Ito and Kono 2007 and Mark Dror, Radermacher, and Koren, 2007), but the utility of their findings is limited to Nagapattinam district which is different to other regions. The findings of other regions are also not conclusive.

As such, the findings of the present study are expected to provide useful information to improve sales of microinsurance in other areas. For insurance providers in the study area, it offers information for further action to enhance the outreach and efficacy of the insured.

81 SIGNIFICANCE OF THE STUDY

1. Being a study on microinsurance which has become the lifeline of rural development, it provides important inputs to constuctive policy makers and administrators. 2. It will also help service providers in the field of microinsurance in designing and delivering insurance products to the people at the bottom of pyramid. 3. To field of knowledge (insurance, marketing and buying behaviour), it provides latest information inputs and strengthens the knowledge base.

RESEARCH QUESTIONS The study seeks to find answers to the following questions: (A) Risks and coping strategies  What type of risks the low - income people face and how do they cope with them?  What are their coping strategies? (B) Purchase of microinsurance  What is the awareness of potential customers about insurance provider and the schemes?  What is their interest in microinsurance?  How do poor household combine microinsurance with their existing risk management strategies?  Is insurance linked to credit schemes?  Is insurance premium affordable? Is it subsidized by government?  Are the insured satisfied? Would they like to continue with existing insurance policy? (C) Insurance delivery channel  Who are the intermediaries in the district?  What kind of insurance schemes are made available to people? What are their benefits? What difficulties are associated with them?

 What kind of communication and marketing programs the insurance provider makes use of?  What is the extent of outreach? Is settlement mechanism swift and fair?

82  What are the major problems faced by the insured?  What suggestions the insured have to make microinsurance delivery more effective?

OBJECTIVES OF THE STUDY

The study is undertaken with the following major objectives.

1. To study the process of implementation of micro -insurance in the study area.

2. To identify the risks to which target population is exposed and their coping mechanisms.

3. To study the extent outreach and performance of micro- insurance providers in the select area.

4. To know the level of awareness of and satisfaction with the micro - insurance and reasons for dissatisfaction if any, and

5. To suggest measures to improve the outreach and efficacy of micro- insurance.

HYPOTHESES The following hypotheses are developed for testing in the study. (a) Risks and coping strategies Latin American countries did not manage risk well (ILO, ILO STEP and PAHO). Vast majority of the insurance mechanisms used by poor people are informal in nature (Wright, G. A. N. (1999). Millinga, A. (2000) found that poor households are exposed to a wide variety of risks and adopt various mechanisms for protection against risks.

Basant K.Sahu, (2010) reported his survey findings: About a quarter of the sample households reported had faced some adverse (risk) during last two years (prior to the date of field survey) that severely affected their financial condition and economic situation.

Common risk coping strategies adopted by households were reduction in household expenditure ( on food, education and health), borrowing from informal

83 sources, dis - saving, migrating out, distress sale of produce and other assets, increasing average working hours (observed mainly among females), postponement of social expenditures etc. About 42 percent households resorted to borrowing from informal sources, 18 percent households used dis-saving, 16 percent households undertook supplementary non-farm activity and about 14 percent undertook distress sale of assets as coping mechanism.

H-1 Poor households are exposed to a variety of risks. H-2 Poor households adopt various mechanisms for protection against risk, which are mostly informal.

(b) Fears, Awareness and purchase of microinsurance The search for insurance and preference to purchase insurance to gain protection for health, life, crop, live stock etc. emanates from fear of loss. Are the poor fearing something and looking for ways to get rid of it?

Common risks observed among sample household ranged from major health related expenditure, health problems of females, accidents, crop loss, loss of livestock, market related problems, and other problems such as divorce (Sahu 2010).

H-3 Poor fear most for losses related to family and earnings in that order.

Many studies (Tinsy Rose Tome and Selvam, 2012) and Ayandev Saha , 2012) revealed low awareness of insurance. Kirti Singh Vijay L. N. Gangal (2013) and Basant K.Sahu, (2010) found high awareness of microinsurance. Lalithadevi and Jerinabi (2010) and Radhika and Venkateswara Rao (2010) suggested the conduct of awareness campaign with the members who benefited out of insurance explaining the scheme to provide clarity.

H-4 People are aware of microinsurance but their understanding was inadequate and unclear. Studies revealed that life and health are two most popular risks for which Insurance is demanded (Ahuja, and Guha-Khasnobis, 2005 and Basant K. Sahu, (2010).

84 H- 5 The preference for life and health insurance is high among poor in that order.

(c)Post purchase feelings

Basant K. Sahu, (2010) found a sizeable proportion of households reported having problems related to insurance premium (65 percent) and claim settlement (60 percent). Achampong-Kyei, K. (2004) found the need for intensive marketing efforts, prompt processing of claims and media exposure.

H-6 Majority of insurance holders have problems related to payment of insurance premium, renewals and claim settlement.

(d) Influence of demographics

Demand for insurance found to be dependent on income. Household borrowing, saving, family size, level of education, asset holding etc. did not reflect much association with household participation in insurance or continuance. (Basant K. Sahu, 2010). The determinants of health insurance are: amount of income, healthcare expenditure number of children in a family, age and perception regarding future healthcare expenditure (Bhat and Jain , 2006). Based on the finding the following hypotheses are formulated for testing in the study area.

H-7 The ways of coping with natural disaster and treatment in sickness vary with age, education, occupation and income of respondents.

H-8 Events causing fear or expenditures differ with age, education, occupation and income of respondents

H-9 Types of insurance purchased differ with age, education, occupation and income of respondents

H-10 Problems faced by policyholders differ with age, education, occupation and income of respondents

H-11 Satisfaction with insurance differ with age, education, occupation and income of respondents

85 SCOPE OF THE STUDY

The study seeks to find the steps taken by insurance providers in Nagapattinam District, and examine the outreach and satisfaction level among the clients of microinsurance (Figur2-1).  Insurance providers - organization set up, insurance products, marketing, distribution, measures to enroll and retain clients.  Insurance holders - exposure to variety of risks, need for insurance, preferences and buying intentions, insurance holding, premium payment methods, set and problems, satisfaction and complaints against insurance provider.

Insurer Insured Schemes Risks Delivery methods Coping mechanisms Promotion Awareness, purchase Premium collection of MI and claims Renewal and Complaints complaints Satisfaction Claims and Repurchase settlements intentions

METHODOLOGY

As the study seeks to identify the extent of outreach and level of satisfaction the insured have with the delivery and benefits of microinsurance, descriptive research design is considered. Field survey method was adopted for this study.

Data sources and collection

The study employed both secondary and primary method of research.

Insurance overview and literature review - Secondary research is done based mainly on existing literature in various journals, IRDA reports and online sources. Insurance overview is based on secondary data analysis relating to risks, insurance, credit, poverty and household behavior.

Insurance providers - There are four organizations in Nagapattinam district that are practicing microinsurance among its members. Secondary data is collected from the organizations with regard to products, membership, premium collected, sum

86 assured, claims, claims settlement and other salient matters. Primary data is also collected from the selected NGOs about their experience in micro-selling insurance.

Insurance holders – In this study, both qualitative and quantitative information are used to answer the key research questions raised above. They are grouped in to three main categories:

a) Contextual information on household including information on the household features, loaned activity, income, employment, borrowing, saving, household assets. b) Information about household risks and risk coping mechanism such as formal insurance, informal borrowing, distress sale, intra-household risk management, etc. c) Views and observations about current insurance products, its impacts, major difficulties and suggestions. The required primary data is collected from insurance policyholders employing a structured questionnaire. With the help of the questionnaire, individual perceptions and problems pertaining to insurance are captured. Cases of different insurance clients to identify the range of experiences people have with insurance are collected.

QUESTIONNAIRE

Two questionnaires are developed for collecting data required for the study. One questionnaire for NGOs (Appendix - I). It consisted of 17 questions inquiring organisational details such as establishment, staff, areas covered, target groups, activities, collaborations, insurance products offered, claim settlement, and promotion of insurance.

Another questionnaire is developed for getting information from insured. It is based on the previous studies which inquired the risk, fears, purchase of microinsurance (Sahu, 2010; Millinga, 2000). The questionnaire (Appendix - II) consisted of three sections. Section - I Personnel Profile, Section - II Risk and Vulnerability and section - III Awareness and Benefit of holding Microinsurance. The questionnaire consisted open end and closed end questions. In case of closed end, respondents are require to rank items or select a number in a five point scale.

87 A pilot study was conducted in the sample blocks. A sample of 40 respondents (10 percent of the sample) was selected for this purpose. On the basis of the information and findings, suitable modifications were incorporated in the questionnaire.

The personally administered questionnaire is developed in local language

(Tamil) for the convenience of the respondents. It consisted of questions that inquired the risks faced by low income people in the Nagapattinam district and how they coped with them through various informal means as well as formal means of insurance and credit. It sought to find whether insurance has met the expectations of insurers and is affordable to a large number of people. The researcher has asked policyholder various questions in a friendly manner and recorded the answers. Care is taken to provide privacy while asking and recording questions.

SAMPLING DESIGN

Multistage random sampling method was adopted for designing the sample of respondents from population. The following choices are made to arrive at the final sample.

Choice of district Nagapattinam is one of the coastal districts in Tamil Nadu and is a part of the Cauvery river basin and Delta. Nagapattinam district is selected purposively for the following reasons: 1. Nagapattinam is one of the most vulnerable district in Tamilnadu by natural calamity such as; flood, cyclone tsunami and drought ( Human Development Report of UNDP 2007, Dr. Beulah Thangaraj ( 2011 Risk assessment and vulnerability of Nagapattinam) 2. Nagapattinam is one of the backward districts in Tamilnadu. Choice of NGOs Three blocks are selected for the study from the 11 blocks of the district. The Districtis divided into two Revenue Division namely Nagapattinam and Mayiladuthurai and eight Taluks, namely Sirkali, Mayiladuthurai, Tarangampadi, Nagapattinam, Kilvelur, Thirukuvalai, Vedaranyam and Kuthalam and is further

88 divided in to 11 blocks covering 434 panchayats. It is found that four NGOs are delivering microinsurance products as per the list of District Mahalir Thittam office and NCRC ( NGOs Coordination Resource Centre). They are: 1. Avvai Village Welfare Society, 2. Dhan Foundation 3. Bharati Women Development Center. 4. Puthu Vazhvu. Puthu Vazhvu is a government programme and insurance is a part of it. Choice of blocks

Table 2.1 shows how these four providers have spread coverage of microinsurance in the 11 blocks of the Nagapattinam District. Table 2.1 Block - Wise Coverage by insurance providers in Nagapattinam district S. No Name of the Policies given Block Avvai BWDC Dhan Puthu Total Vazhvu 1. Nagapattinam 2560 - 450 - 3010 2. Keelaiyur - - 1408 - 1408 3. Kilvelur 750 - - 277 1027 4. Thalanayar - 565 565 5. Vadaranyam 450 791 1980 - 3221 6.. Thirumarugal - - - 286 286 7. Sirkali 6000 - 3250 - 9250 8. Kollidam - - 3027 3027 9. Mayiladuthurai 400 - 315 715 10. Kuthalam - - - 298 298 11. Sembanarkoil - - 4800 - 4800 Total 10160 1356 14915 1176 27607

The study seeks to understand how effectively insurance is provided by the agents. The effectiveness can be evaluated based on the responses of the insured. Besides that, if a benchmark performance from a competitor is considered, there will be a chance to know more about the individual comparison. As such, it is decided to take such NGOs to study the performance. Based on this criterion the following are chosen:

89 1. Avvai Village Welfare Society, 2. Dhan Foundation Both the agents are found covering three blocks and individually 5 blocks each. As such, the 3 blocks in which the two are operating are chosen for the study. Table 2.2 shows the selected blocks - Nagapattinam, Vedaranyam and Sirkali and coverage by selected NGOs.

Table 2.2 Selected Blocks covered by selected insurance providers

S. No Name of the Policies given Total Block Avvai Dhan 1 Nagapattinam 2560 450 3010 2. Vadaranyam 450 1980 2430 3. Sirkali 6000 3250 9250 Total 9010 5680 14690

Sample size determination

The sample size is determined using the guidelines provided for selecting sample from a large population, whose characteristics are less known.

Degree of precision – It is the range in which true values of population is estimated to be. It is expressed in percentage points (± 5%)

Confidence level - In a normal distribution, approximately 95% of the sample values are within two standard deviations of the true population value (eg. mean).The confidence level required for usually for social science research is 95%.

Degree of Variability - The population being very large, variability is not known. If population is heterogeneous, variability is high. So variability of 50% is assumed (p

= 0.5). It is the maximum variability that can be assumed.

A formula developed by Yamane (1967) provides a simplified formula to calculate sample sizes. This formula was used to calculate the sample sizes are shown below. A

95% confidence level and P=.5 are assumed for Equation

n = 1 + ( ) 90 Where ‘n’ is the sample size,

‘N’ is the population size,

And ‘e’ is the level of precision. When this formula is applied to the above sample

14,690 n = = 390 1 + 14,690(. 05) There are published tables which give sample sizes. One such table (cited by Glenn. D Israel, of University of Florida) suggests that 390 sample size is appropriate for 10,000 to 15,000 population at the 95% of confidence level. Sample: Block-Wise The total sample is proportionately divided across the blocks. For this listing of villages and the policy holders in each village of the two chosen NGOs is done in Tables 2.3, 2.4 and 2.5.

Table 2.3 Village - Wise outreach of microinsurance by Avvai and Dhan in Nagapattinam block

No. of Total Policyholders S. No Villages Avvai Dhan 1. Sikkal 310 - 310 2. Pappakoil 266 - 266 3. Palaiyur 150 - 150 4. Therkupoigainallur 110 116 226 5. Vadakkupoigainallur 115 134 249 6. Vadugacherry 163 - 163 7. Poravacherry 290 - 290 8. Themangalam 266 80 346 9. Sangamangalam 170 120 290 10. Azhiyur 230 - 230 11. Kuruchi 190 - 190 12. Manjakollai 300 - 300 Total 2560 450 3010

91 Table 2.4 Village - Wise outreach of microinsurance by Avvai and Dhan in Sirkali block

S. No Villages No. of Policyholders Total Avvai Dhan 1. Vanagiri 554 110 664 2. Neithavasal 240 202 442 3. Mangaimadam 220 - 220 4. Annappanpettai 415 - 415 5. Thennampattinam 266 - 266 6. Rasankulam 322 - 322 7. Neppathur 250 170 420 8. Thirunagiri 230 190 420 9. Thiruvali 290 306 596 10. Manigramam 222 195 417 11. Thiruvengadu 436 183 619 12. Melaiyur 310 176 486 13. Keelaiyur 318 212 530 14. Puduthurai - 284 284 15. Vellapallam - 186 186 16. Kathiruppu 310 115 425 17. Sempathanirippu 212 - 212 18. Karaimedu - 224 224 19. Manalmedu 183 - 183 20. Sattanathapuram 245 - 245 21. Kalikavalpuram 238 - 238 22. Annanperumalkoil 225 - 225 23. Nangur 214 - 214 24. Rathanallur 300 - 300 25. Senthankudi - 547 547 26. Allivilagam - 150 150 Total 6000 3250 9250

92 Table 2.5 Village - Wise outreach of microinsurance by Avvai and Dhan in Vedaranyam block

No. of Total Villages Policyholders S. No Avvai Dhan 1. Sembodai 130 288 418 2. Pushpavanam 118 110 228 3. Thethagudi 120 331 451 4. Ayakkaranpulam 82 276 358 5. Kuravakkulam - 290 290 6. Vanduvancherry - 124 124 7. Thanikottagam - 105 105 8. Thennadar - 96 96 9. Thakattur - 74 74 10. Moolakkarai - 106 106 11. Periyakuthagai - 180 180 Total 450 1980 2430

Only the villages in which Avvai and Dhan have policyholders are listed in Table 2.6 and proportionately the policyholders are chosen as respondents for the study. The respondents are selected using lottery method. Table 2.7 shows the total sample block - wise.

93 Table 2.6 Sample of Respondents: village - wise

S. No Villages Policies given Sample Avvai Dhan Total Total Sample Total Sample Nagapattinam Block 1. Therkupoigainallur 110 11 116 3 226 14 2. Vadakkupoigainallur 115 12 134 4 249 16 3. Themangalam 266 27 80 2 346 29 4. Sangamangalam 170 18 120 3 290 21

Total 661 68 450 12 1111 80 Vedaranyam Block 5. Sembodai 130 4 288 15 418 19 6. Pushpavanam 118 3 110 6 228 9 7. Thethagudi 120 3 331 17 451 20 8. Ayakkaranpulam 82 2 276 15 356 17 Total 450 12 1005 53 1455 65 Sirkali Block 9. Vanagiri 554 28 110 5 664 33 10. Neithavasal 240 12 202 9 442 21 11. Neppathur 250 13 170 8 420 21 12. Thirunagiri 230 11 190 9 420 20 13. Thiruvali 290 15 306 15 596 30 14. Manigramam 222 11 195 9 417 20 15. Thiruvengadu 436 22 183 8 619 30 16. Melaiyur 310 16 176 8 486 24 17. Keelaiyur 318 16 212 10 530 26 18. Kathiruppu 310 15 115 5 425 20 Total 3160 159 1859 86 5019 245

94 Table 2.7 Sample of respondents – Block wise summary

S.No Name of the Policies given Sample Block Avvai Dhan Total

Total Sample Total Sample 1. Nagapattinam 2560 68 450 12 3010 80

2. Vadaranyam 450 12 1980 53 2430 65

3. Sirkali 6000 159 3250 86 9250 245

Total 9010 239 5680 151 14690 390

PERIOD OF THE STUDY

Data about the operations of NGOs pertaining to insurance are collected for the period, 2007-2013. The insurance activities commenced from 2007. As such, the data is limited to 6 years. Field survey was conducted during the period, February 2013 to June 2013.

DATA ANALYSIS The collected data was analysed by using statistical package IBM SPSS version 20. The categorized data was tabulated in terms of percentages, averages, and standard deviations. Factor analysis is used to reduce multiple items into factors. Chi- square, t-test ANOVA and Correlation are used to examine the influence of select demographics

LIMITATIONS OF THE STUDY The study has some limitations in its interpretation of the results.  It covers limited number of blocks chosen to draw conclusions. They are not applicable to less covered areas. The suggestion may help present the whole problem of microinsurance delivery in the country as a whole. There are many areas in other parts of the country which may display different risk pattern and risk coping management and have different constraints regarding outreach and efficacy of microinsurance.

95  The subjective nature of analysis, while providing some interesting insights, could also represent some biases of the respondents and / or inadvertent generalizations. However, these limitations are eliminated to some extent by supporting interviews and care taken in drawing conclusions based on findings and making policy suggestions for further actions.

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104 CHAPTER - 3

AREA PROFILE AND PROFILES OF SELECTED NGOs

In this chapter, a brief description of Nagapattinam district is given and then the profiles of selected four NGOs are provided. The selected NGOs are: AVVAI, BWDC, DHAN-Foundation, and PUTHU VAZHVU. Also, the microinsurance delivery by the four NGOs and a brief evaluation of their performance are given.

AREA PROFILE Nagapattinam is one of the coastal districts in Tamil Nadu and is a part of the Cauvery river basin and Delta. Geographic boundaries

Nagapattinam district was carved out bifurcating the erstwhile composite Thanjavur district on 18.10.1991. Located between 10° 15' to 11°13' north and 79° 30' to 79° 55' east, Nagapattinam district is bounded by Cuddalore district in the north, Tiruvarur district in the west, the Palk Straits in the south and Bay of Bengal in the east. The district is geographically not continuous, with Karaikal (UTP) located between Mayiladuthurai division in the north and Nagapattinam division in the south. For administrative purposes the district is divided in 8 taluks namely, Sirkali, Mayiladuthurai, Tarangampadi, Nagapattinam, Kilvelur, Thirukuvalai, Vedaranyam and Kuthalam. It is divided into 11 blocks, namely, Mayiladuthurai, Kuttralam, Sembanarkoil, Sirkali, Kollidam, Vedaranyam, Thalainayar, Nagapattinam, Keelaiyur, Kilvelur and Thirumarugal. The district has a coastline stretching to 190 kms.

Climate and Rainfall The climate is sub-tropical humid, the average maximum temperature is about 32.5°C and minimum is 24.75°C. The annual average rainfall in the delta ranges from 950 mm (Thanjavur) to 1500mm (Nagapattinam). Most of the rainfall is received between October and December under the influence of northeast monsoon. Rainfall is higher in the coastal areas and progressively decreases inland.

Geology and Soils

Clay, clay loamy, salty clay, sandy clay, loamy sandy, loam and sandy are the predominant soil textures in the Cauvery delta. Broadly, the soils in the delta area are

105 characterized by very high clay content, low nitrogen phosphorus and high potassium and lime content.

The major land forms that occur are natural leaves near Mayiladuthurai coastal plain covering almost the entire district with beaches, beach ridges, mud flats, swamps, and backwater along the costal stretch. The deltaic plains are found near the confluence of river Coleroon with sea in the east and also in the south.

Irrigation and water

The major area is irrigated by a well developed canal irrigation system with net irrigated area constituting 84.1% of net sown area as against 52% for the state. However, water supply is dependent upon the availability of water in the river Cauvery which drains into Bay of Bengal through a vast network of canals traversing the district. The Cauvery Delta begins from the Grand Anicut near Thiruchirappalli constructed more than 1800 years ago by King Karikala Cholan. The main direction of the flow of the river Cauvery is east and the delta spreads northwards and southwards from the Grand Anicut. The distributaries originating from the Cauvery finally discharge their water into the Bay of Bengal. Being at the tail end of the Cauvery Delta, Nagapattinam is at the mercy of the water flow from the Mettur dam. The sedimentary formations in the district are represented by Miocene Pliocene and quaternary formations. Ground water occurs in this formation and is extracted through filter points, wells, tube wells, shallow bore wells and infiltration wells, especially from the sandy aquifers

Population In 2011, Nagapattinam had population of 1,616,450 of which male and female were 798,127 and 818,323 respectively. There was change of 8.57 percent in the population compared to population as per 2001. The following details of population are based on 2011 census.

 Density – The district is spread over 2,569 square kilometers of area. The density of population is 629 people per sq. km.

106  Child sex ratio - Child sex ratio is 959 girls per 1000 boys. There is a total of 165,245 children under age of 0-6years.  Urban – rural division – About 77.44 % population lives in rural areas. The total population living in rural areas is 1,251,826 of which males and females are 619,369 and 632,457 respectively. The sex ratio is 1021 females per 1000 males.

Literacy levels Average literacy rate of Nagapattinam district is 83.59. The literacy rate in rural areas is 82.00 %.

Major economic activities

The major activities pursued for livelihood and commerce can be classified as under

 Primary sector - Agriculture, dairying, fishing, goat rearing and shrimp farming etc.

 Cottage and Village Industries Sector- Pottery, cane works, mat weaving, palm products, handicrafts, coir rope making, etc.

 SSI sector - Ready-made garments, furniture works etc.

 Industry sector – Private and public organizations engaged in business

 Tourism sector – It is recently gaining importance in the district.

Agriculture

Nagapattinam is a predominantly agricultural district with the net sown area constituting nearly 54.6% of the total geographical area as against only 39% for the state as a whole.

Paddy, pulses and sugarcane are the major food crops in the district. Cotton, groundnut, gingelly, coconut, vegetables are some of the other principal crops cultivated in this region. The area under food crops constituted 93.37 percent of the total area under cultivation. Paddy alone constituted 68.75 percent of the total area sown followed by pulses (21.58%) coconut and cotton (1.92% each), groundnut (1.42%) and gingelly (0.88%). Coconut is the only major plantation crop accounting for 1.92 percent of the area under cultivation. Cashew, mango, tobacco are also grown

107 in and around Vedaranyam. Cultivation of horticulture and medicinal crops have made a beginning in the district.

The traditional copping pattern of cultivation in the three districts of the Cauvery delta is Kuruvai as the first crop of paddy (June to September), followed by Thalady as the second crop of paddy in the double crop lands (October to January, February). In the single crop land area samba paddy is grown from September to January. The farmers raise a pulse crop after samba or thalady paddy using the residual moisture in the paddy field.

Fisheries

Fisheries is next only to agriculture in terms of its contribution to the economy and livelihood of the people in the district. With a long coastal line of 190 kms, the district offers a very good scope for the development of fisheries. The district contributes 12.4% of marine fish produced in the state. Almost 40% of the potential of the state for coastal shrimp farming is located in the district. Mineral based industries Mineral resources in the form of crude oil and natural gas are available in the district. The important/ major minerals available in the district are crude oil, natural gas, silica sand, lime shell, heavy mineral sand (garnet, iluminite, rutile zircon, monozite). ONGC, GAIL, and CPCL have their establishments in the district. Silica sand available in the Vedaranyam coast is best suited for manufacturing sodium silicate. Annually 20,000 tonnes of silica sand is exploited mainly by 10 sodium silicate units located in the Karaikal region. Salt is one of main mineral resources in the district and salt production is carried on in the coastal area of Vedaranyam. The Vedaranyam Salt Swamp is the longest swamp in Tamil Nadu, running 48 kms along the coast from Point Calimere and 7 to 8 km wide. This swamp is filled by two periodical high tides during the full moon months of May and June, retaining sea water to a depth of two feet over a considerable area enclosed by low earthen banks, which, when closed, prevent water from flowing back into the sea after the tide recedes. It is through this procedure that the well-known Vedaranyam spontaneous salt is formed.

108 Industry

The district is devoid of any major industry but has a flourishing centre for handicrafts and cottage industry. It is well known for its pith articles consisting of beautiful models of Hindu idols, temples, mosques, flower garlands, bouquets, parrots and peacocks. Many musical instruments like the Veena, the Tambura, the Violin, the Mirudangam, the Tabla, and the Kanjara are made of jack wood, which gives a special quality for producing musical sounds.

Trade and finance

The coastline has no less than eleven ports, of which eight are open to foreign traders with a number of harbours such as Nagapattinam, Pazhaiyar, Nagore and Point Calimere and also with significant small ports like Thirumullaivasal, Vellankani, Thopputhurai and Muttupet.

The district has had an age-old maritime relationship with the countries of South East Asia especially Singapore and Malaysia. The port which was damaged during the tsunami, is being renovated. The district has an extensive network of commercial banks and cooperative institutions.

Tourism

Nagapattinam has a large number of temples which are under the management of the Hindu Religious and Charitable Endowment Board.

The district is known for pilgrim centres like Velankanni and Nagore, Navagraha temples besides a large number of temples built during the Chola regime. Temples in Mayuram, Vedaranyam and Sirkali are famous. The Velankanni Church is a famous one in Tamil Nadu. Poompuhar in Sirkali, Tranquebar known as Tarangambadi in Sembanarkoil, Sillapathigaram Art Gallery in Poombuhar, 'Our Lady of Health' Church in Velankanni, Dargha of Hazrat in Nagore, Point Calimere in Kodiakkarai, bird sanctuary in Coromandel coast, and Vedaranyam Bird Sanctuary in Thalainayar village are important tourist places. There is a scope for developing tourism related investments in the district.

109 Natural disaster prone It has vast scope for development of allied sectors, especially inland and coastal aquaculture, dairy and goat rearing. Located on the Bay of Bengal coast, it is also frequently hit by cyclones that bring in large quantity of rain in short spells. Alternative periods of water scarcity and flooding have resulted in frequent crop losses and a steady decline of cropping area under paddy, the main crop of this region. The 2004 tsunami was therefore only another disaster to contend with for the farmers of Nagapattinam. Latest disasters

The Cauvery delta is known for floods, Cyclone and droughts. When the South West monsoon is very weak and as a consequence the rainfall would be low. The inflow into Mettur reservoir would also be minimal, with no outflow and consequently there would be drought from July to October. With the onset of the North East monsoon in October – November there may be flood due to heavy rain or Cyclone.

The disasters that took place during 2007-13, the damages they caused and the compensation announced by government are stated in brief here.

(a) Nisha Cyclone - 2008 (b) Flood and Drought - 2010 (c) Thane Cyclone - 2011 (d) Nilam Cyclone - 2012 (e) Phailin Cyclone - 2013 (a) Nisha cyclone

On, 26 November 2008, a depression formed in the South West over the Bay (between latitude 10.5 N and longitude 80E) near the town of Vedaranyam in Nagapattinam district, resulting in heavy rainfall of over 25 cms, followed by strong gusts of wind at speeds over 45 kmph.

Named Nisha, the cyclone caused damage to life and property. Water inundated paddy fields, streets and houses, damaging the meager belongings of poor families. The strong gusts of wind blew away thatched roofs. Over 78,000 people took shelter in 308 cyclone-relief centres. There were 8 human lives lost, 58 cattle lost, and 99 huts fully damaged. About 94,000 hectares of samba paddy was damaged. State

110 government has announced compensation of Rs. 2, 500 for partly damaged houses and Rs.5, 000 for fylly damaged houses.

(b) Flood in 2010

The persistence of a low pressure in the Bay of Bengal brought heavy rains in Tamil Nadu and Pondicherry which lasted more than two weeks from the mid of November 2010. Schools in eleven districts including Chennai, Cuddalore, Nagapattinam and Trichy were closed. Fishermen were warned not to venture into the sea due to strong onshore winds from northerly to north-easterly direction with speeds occasionally touching 45-55 kmph along and off Tamil Nadu and Pondicherry coasts.

In Nagapattinam district eight persons have been reported dead. More than 45,000 people were staying in 100 relief camps in various parts of the district. Many houses and paddy crop have damaged fully and partly.

The government has announced the following compensation for the flood affected people, based on assessments done by the State Secretariat in the eight worst affected districts:

• Rs. 2 Lakhs for the families who have lost lives • Rs.10,000/- for cattle loss (Rs.30 for each piece of Poultry, Goats- Rs.1000/-, Cow/Ox – Rs.10, 000/-, Calf – Rs.5000/-) • Rs. 2500/- for partially damaged houses and Rs.5000/- for fully damaged houses.

• Rs. 2500/- for boats and nets with minor damages and Rs.7500/- for major damages

• Rs.8000/- per hectare with damages of paddy exceeding 50%. . (c) Thane Cyclone in 2011

Nearly after seven years of the Tsunami in 2004, Thane, a tropical cyclone hit the coastal area of the states of Tamil Nadu and Puducherry on 30th December 2011. With the lashing of heavy rains and the blowing of winds at the speed of 135 kmph (83 mph) it caused tidal waves to go up to 1.5 meters. The cyclone uprooted

111 millions of trees on the coast from Chennai to Nagai and inundated hundreds of low lying villages.

There are 1226 partially damaged huts and 82 fully damaged huts in the areas that were assessed. Nearly 3500 Acres of Paddy crop and 25 livestock were washed away.

The state government of Tamilnadu announced some financial compensation for the losses arising from natural calamities.

 Rs 5000 for fully damaged houses and Rs 2500 is for partly damaged houses  A Compensation of Rs. 1,50,000 for the loss of human lives. (d) Neelam Cyclone in 2012

In the month of October 2012 heavy rains lashed and howling winds blew affecting Nagapattinam district as thecy clone ‘Nilam’ hit the coast between Nellore and Nagapattinam. There was no respite from rains and the public woes only increased by the hour with the upgradation of cyclone warning signals at the port office.

The district witnessed an average rainfall of 90.18 mm, with Kollidam registering the highest of 155 mm and Vedaranyam registering 120mm. The rainfall figures for other areas were as follows: Sirkazhi recorded 105mm; Nagapattinam 82.70; Manalmedu 78.60; Tirupoondi 78mm; Mayiladuthurai 68.50; Tharangambadi 63 mm; and Talainayar 60.40 mm.

In Nagapattinam district, two fishermen went missing at sea, and about 25,000 fishermen have stayed on shore after the administration issued a cyclone alert. About 318 huts were blown away and 616 were partly damaged. Approximately, 360 acres of agricultural land was affected. Compensation for damage caused by Cyclone Nilam was as given under:

 A Compensation of Rs. 1,50,000 for the loss of human lives.  Rs. 20,000 for dead cattle.  Rs. 5,000 for fully destroyed huts and Rs. 2,500 for partly damaged huts

112 (e) Phailin Cyclone in 2013

A deep depression over Bay of Bengal crossed the coast near Nagapattinam on November 2012. Hundreds of trees were uprooted and banana plantation in many parts in Nagapattinam were damaged by the gusty winds Electric posts were damaged in Sirkazhi . At Velipalayam village near Tarangambadi, a fish auction hall building was damaged due to strong winds. At Darkas area in Sirkazhi, the roof of a school building flew off due to squally winds. The sea condition was very rough and high tides were visible in many places. More than 10,000 fishermen did not venture into the sea. State government announced compensation for crop loss at the rate of Rs.15, 000 per acre.

PROFILES OF SELECTED MICROINSURANCE ORGANISATIONS

In Nagapattinam District there are four microinsurance Agent organisations - AVVAI, DHAN-Foundation, BWDC and PUTHU VAZHVU. A brief description of their activities is given here.

AVVAI VILLAGE WELFARE SOCIETY

Ms. Ambujam founded Avvai village welfare society (Avvai) in the year 1976. It was registered under Indian Societies Registration Act XXI of 1860 in the year 1978. Since then, Avvai village welfare society has grown to become a very big people centered organization working on rights based approach in the sectors of Education, Health, Women empowerment, Livelihood, HIV/AIDS, Child rights & protection, micro - finance, microinsurance, advocacy & lobbying and disaster mitigation.

Vision and Mission The vision statement reads : “ Uplift of the marginalized sections of society in India through supportive service”. The mission is ‘Enhancing equitable and self- sustainable opportunities in the areas of education, health, livelihood, gender, challenged and environment through community based organizations to the marginalized sections including disaster affected’.

Programmes It has wide range of programmes for children, women, aged and families.

113 (a) Child welfare The following child welfare programmes are being implemented:  Child Development Project: Supported by Christian Children Fund.the project is implemented in 26 tsunami affected villages of Nagapattinam and Karaikal Region from April 2005. Integrated development of the child is taken care, in the context of family, community and culture.  Child Protection Project: Supported by Save the Children, the project is implemented in 13 Tsunami affected villages of Nagapattinam District from June 2005. It ensures the rights of children by promoting community groups like children groups, balpanchyat adolescent girls & youth groups and child protection committee.  Pre-School Education: With the support of Tamil Nadu State Social Welfare Board, Avvai runs 5 Creche centers from April 2002 and 10 Creche centers from February 2006 with the support of Central Social Welfare Board. The creches are setup to promote quality of pre-school education in rural remote villages of Kilvelur and Kollidam Block of Nagapattinam District  Nagai Children 1098 - Supported by Childline India Foundation, Mumbai, the organisation was setup in January 2005. Nagai Childline 1098 is a 24-hour toll free phone call number to help children in distress.  Community Awareness on Education - Taking support from Care India, the project commenced in October 2006 with focus on capacity building of adolescent groups in the age group of 10 to 15 years. (b) Women welfare

The following women welfare programmes are being implemented.

 Swadhar Home - Supported by Ministry of Women and Child Development, New Delhi, the homes provide primary need of shelter, food, clothing and care to the marginalized women/girls living in difficult circumstances, who are without any economic support. The home is functioning at Sirkali of Nagapattinam District from April 2005.  Family Counseling Centre - With the support of Central Social Welfare Board, New Delhi, the Family Counseling centre extends professional service for resolving family conflicts and providing referral services like short stay homes,

114 free legal aid, police assistance and medical help. The centre was started located at Nagapattinam in 2002.

 Short Stay Home for Women in Distress : Supported by Central Social Welfare Board, New Delhi, the home is set up in 1997 at Nagapattinam to accommodate temporarily socially neglected and deserted women/girls. It assists them by counselling and offering recreational activities, medical assistance, referrals and vocational training.

 Community Micro Project- Supported by Central Social Welfare Board , New Delhi, the project aimed at providing an opportunity for stabilization and restoration of livelihoods to women self-help groups through provision of seed capital and vocational training for value addition to the most vulnerable of the tsunami affected population in Silladi of Nagapattinam District. It began functioning in 2006.

(c) Aged ones

For the aged, the organisation offers day care as well as home for safe and comfortable living.

 Day Care Centre for the Aged - The centre takes care of 50 elders by providing food, shelter, counselling, medical care and recreation for their betterment . The centre functions at Palayanur Melpathi village of Nagapattinam from February 2001. It is supported by: Ministry of Social Justice and Empowerment, New Delhi.  Home for the Aged - . Avvai runs two Homes for the Aged one at Kilvelur and another at Sirkali of Nagapattinam District from 2000. The project is supported by the Department of Social Welfare & Ministry of Social Justice and Environment, New Delhi.

(d) Community welfare

The following community welfare projects were undertaken:

115  Equitable rehabilitation of tsunami victims programme - Supported by the Aide- et-Action the project came into effect since March 2005, to help marginalized communities to plan and implement rehabilitation activities for their own development. A total number of 31 villages have been selected for the project implementation in Sirkali and Kollidam blocks of Nagapattinam district, covering a total population of more than 12,000 families  Water and Sanitation Programme - Supported by Care India the programme promoted awareness on water and sanitation and formed WATSAN committees in 5 tsunami affected villages of Sirkali Block. The programme was implemented from November 2006.

SHGs and Micro finance

Avvai has taken active part in forming Self-help groups, and providing micro finance and microinsurance benefits to them.

Formation of SHGs Supported by NABARD, and Chennai & Tamil Nadu Women Development Corporation Limited, Chennai, Avvai Village Welfare Society has been selected as the Best Organization in Credit Linkage for the fourth consecutive year by NABARD this year. Avvai had formed over 3341 women self- help groups (SHG) under the Mahalir Thittam which has made Avvai as one of premier organization in Tamil Nadu on Women Self- help Group Movement. The programme came into effect from May 1996. The Women SHG members have always been involved in Community development activities like helping in the running of the schools, bringing women in distress for counselling and accommodation. They acted as the Village Level officers of Avvai.

Micro -finance Avvai established a Micro Finance Company incorporated in 2008 under section 25 of companies Act called “Namathu Deepam Micro Finance Services’. In the process of evolution of its microfinance program, to make it context specific, client friendly and sustainable, NDMFS has targeted poorest of the poor as its clientele and

116 adopted the SHG model to build peoples owned and managed cooperatives under Mutual Benefit Trust Act (MBTs).All the SHGs are federated at cluster level and are registered under Mutual Benefit Trust.

CARE INDIA came forward to provide Microfinance Incubation Services. Under this partnership NDMFS has benefited from the initial grant support to meet operational deficit, technical support services and the loan fund provided by CARE.

DHAN FOUNDATION

Development of Humane Action (DHAN) Foundation, a professional development organisation, was initiated on October 2, 1997.

Mission Building people and institutions for development innovations and scaling upto enable the poor communities for poverty reduction and self-reliance. Vision DHAN Foundation will be acknowledged as a leader in institution building for poverty alleviation. It would be trend-setter in grassroots development with people governance and management.

Major goals The broad purposes for which DHAN stands are:  Mothering of Development Innovations: The institution intends to promote and nurture new ideas on development themes such as micro-finance, small scale irrigation, dry land agriculture, and working with Panchayats which can impact on poverty in a significant manner.  Promoting Institutions to reach scale: Exclusive thematic organisations will be promoted to take up development work with a sub-sectoral focus. The primary role will be to promote and ensure that quality benefits reach a large number of poor.  Human Resource Development: The institution would bring young professionals into the development sector and give them an opportunity to practice and develop relevant knowledge, attitudes and skills needed for long term work.

117 Values DHAN has rooted in values, such as Grassroots action, Collaboration, Enabling, Innovation, Excellence, and Self-Regulation. DHAN believes that these values are its core strength needed to realise its Vision and Mission

Netherlands, Sweden, Canada and New Zealand have come together in their own unique way to extend a helping hand to support various activities of DHAN Foundation. They have formed, what is called, Friends of DHAN, with regional chapters in the respective country. Principles The principles guiding DHAN are:

 Engaging high quality human resources to work at the grassroots. The focus would be to enable the poor, not deliver services.  Valuing collaboration with mainstream institutions and Government to demonstrate new and effective intervention to link them with the people.  Promoting people’s organisations to ensure entitlements and to build an effective demand system to promote people’s interest.  Promoting livelihoods to address the issues of poverty directly.  Enriching the themes and retaining sub-sectoral focus as a strategy for growth. Programmes The Friends of DHAN Foundation supports the work of the DHAN Foundation, in the following areas of:  Education of disadvantaged children  Promoting activities for poverty reduction  Improving living conditions and health situation  Promoting understanding of the relationship between sustainable development, health, welfare, education and peace among the poor and marginal communities. The programmes and projects of DHUN Foundation include the following.

118 (a) Homes for orphans

 Karunai Illam Trust, New Zealand-The Karunai Illam Trust-New Zealand is supporting to run a children home at Nilakottai in Dindigul district of Tamil Nadu – now called as DHAN Karunai Illam. (b) Irrigation and drinking water

 Huguenin Rallapalli Foundation-Huguenin Rallapalli Foundation (HRF) a US-based non-profit organization has exchanged a Memorandum of Co- operation with DHAN in working together to solve the drinking water problems of rural India by renovating ooranis.

 ITC Limited -ITC under its Corporate Social Responsibility’s Mission Sunehara kal, meaning ‘the golden tomorrow’. provided financial assistance for the implementation of Tank-based watershed development project at Singampunari block of Sivagangai district, Tamil Nadu

 Hindustan Unilever Limited (HUL) - HUL, in line with its commitment to the United Nations Millennium Development Goals joined hands with DHUN for sharing resources and expertise to enhance the livelihoods of 75,000 poor women. HUL launched a water conservation project in drought prone Gundar Basin covering Madurai, Sivagangai, Virudunagar and Ramanathapuram districts of Tamil Nadu in partnership with DHUN.  Bharat Petroleum Corporation Limited (BPCL) - With the objective of mitigating drought in one of the driest districts of South India, Bharat Petroleum Corporation Limited worked with DHUN to rehabilitate Govarnergiri chain of tanks in Ottapidaram Block of Tuticorin District

(c ) Poverty alleviation The major programmes under this category include the following

 Kalanjiam Foundation livelihood financing - Kalanjiam Foundation is a subsidiary of DHAN Foundation. It strives for creating significant impact in livelihoods of poor families and in women development through its community banking programme. The approach for development has been defined through two decades of fieldwork and conceptualization. Building women self-help groups and their federations at the grassroots and enabling

119 them for community ownership and sustainability are key elements of the approach. So far, 40,618 primary groups at village/slum level covering 609,139 families have been promoted in 12 states of India and the groups have been networked into 209 federations. Livelihood financing founds base for the developmental programmes of Kalanjiam Foundation.  Vayalagam Tankfed Agricultural Development Programme - It was initiated in the year 1992 to work on these small-scale water bodies with the participation of the farmers. The programme believes that the local management of the tank system can be the only solution to the problem in the long run. The programme evolved into a separate people's institution as 'DHAN Vayalagam (Tank) Foundation (DVTF)'. The Foundation aims at upscaling the renovation works with community participation.

 Coastal Conservation and Livelihood Programme - It was taken up after tsunami in 2004.The programme follows an integrated and holistic approach to address the issues in livelihoods and conservation of coastal ecosystem named as, 'Coastal Conservation and Livelihood Programme (CALL)'.  Rainfed Farming Development Programme - The rainfed agriculture plays a crucial role in India, covering 68 percent of the total net sown area in 177 districts. Uncertainty in production due to fluctuations in rainfall and its distribution, decrease in relative productivity in rain fed lands affect the livelihoods of the poor and marginalised farmers. DHAN Foundation launched 'Rain fed Farming Development Programme (RFDP)', to make the rain fed farming viable by improving the total factor productivity through location specific interventions. d) Information and Communication Technology for Poor

DHAN Foundation has taken up 'ICT for the poor' as a new theme to experiment, develop and implement socially-relevant ICT programmes through ICT based people’s organisations built at the grassroots. It has become a cross-cutting theme to complement the micro-finance, water, rainfed farming themes of DHAN. The programme is involved in the following activities:  Promoting Thagavalagam Groups to provide ICT-based livelihoods, Village Information Centres (VICs) in rural areas as well as urban slums, so to provide

120 various e-services such as e-mail, e-Post, computer-aided school education, e- Governance, etc.  Facilitating the rural poor to get connected with the resources and expertise located distantly through online consultations for health, education, agriculture, animal husbandry, fisheries, and on legal issues.  Enabling the aged and illiterate women and men to learn reading and writing through computer-aided adult literacy centres.  Establishing community colleges to offer a number of ICT-related and job oriented courses to the poor youths and helping them to get employed in the nearby towns and cities.  Developing content for educational use and developing software for agriculture and animal husbandry services, which are now being used by farmers in VICs.  Promoting partnership with the other stakeholders such as ICT - based academic, research and business organisations to channelise resources and expertise to the grassroots.

(e) Higher education and capacity building of nation

Tata-Dhan Academy, the Development Management school, is the result of partnership between DHAN Foundation and Sir Ratan Tata Trust (SRTT), Mumbai. The Academy was begun in December 2000 and aims at becoming a Centre of Excellence in Development Management. The core purposes of the Academy are inducting and grooming fresh graduates as Development Professionals through specially designed programmes, and building capacity of the development practitioners.

Micro-finance As a part of programmes of DHAN is Kalanjiyam foundation is more popular and vibrant. In Nagapattinam district, Sirkali Vattara Kalanjiyam, Nagapattinam Vattara Kalanjiyam are functioning for the uplipment of poor household by providing micro-credit to them. Simultaneousley the people are educated towards microinsurance and enrolled with microinsurance scheme. The Micro finance and microinsurance scheme were started from 2006-07 onwards.

121 BHARATHI WOMEN DEVELOPMENT CENTRE (BWDC)

In 1985, Bharathi Women Development Centre” ( BWDC ) was set up to propagate the ideals of the Mahakavi Bharathiyar. It was registered under the Tamil Nadu Societies Registration Act 1975 in the month of 31st December 1987. The legal status facilitated the BWDC to tap resources both from the State and Central Government Departments / agencies, banks and other like-minded International Donor Agencies committed for the development of Third World countries.

Vision and Mission

Its vision is “To develop an empowered and vibrant community with women as the major focus”. It mission statement reads: “Build capacities to promote appropriate institutional arrangements to access resources and opportunities which will enable the community to achieve sustainable socio- development”.

Principles

The principles followed by the organisation are:

 To promote people’s organizations for self -regulation and empowerment.

 To work as a facilitator.

 To promote livelihoods and address poverty directly.

 To work in close collaboration with the community, panchayats, Government agencies, financial institutions and likeminded organizations both within the country and abroad to achieve sustainable development, and to render assistance during natural calamities

Programmes The various programmes and funding partners of BWDC is as under:

 Family Counseling Centre - It was established in the year 1999 at Thiruvarur with the support of Central Social Welfare Board (CSWB). It is functioning effectively in coordination with the District Administration in the identification of clients.

122  Child Fund India - This programme is being implemented in the 12 selected tsunami affected villages of Nagapattinam District. The areas of intervention include child care & development, child rights & protection, basic education, health & nutrition, livelihood support, and HIV/AIDS & emergency response.  Home for the Aged - It is functioning since 1993 in Kattur village of Thiruvarur District. The aim of the programme is to bring overall socio-economic development of women in particular. The major thrust was to create awareness among the beneficiaries on issues like the need for savings, child development, health and hygiene, government programmes meant for development of the poor etc., and also to impart skill to generate additional income for their families by way of promoting household and community enterprises with subsidy linked Bank tie ups.  FINISH ( Financial Inclusion Improves Sanitation and Health) – For promotion of demand based environmental sanitation, it had promoted the construction of UNICEF model twin pit pour flush latrine with people’s participation based on the limited Government grant and side by side motivated the beneficiaries to have the facility on their own to overcome the problem.  Micro - housing Project of Care - Under this programme, BWDC is executing a credit linked pilot project on “Rural Dream Housing related activities” for the benefit of deprived families in the selected villages of Tiruvarur District of Tamil Nadu.

Micro - Finance

Mahasakthi Programme was launched with the generous assistance of Tamil Nadu Women Development Corporation Limited, Government of Tamil Nadu as a part of Mahalir Thittam in the year 1997.

The village level awareness camps were organized under this programme to mobilize women. It empowered them over a period of time through their own savings and group lending out of the money saved for both consumption and productive investments. These efforts were consolidated through the formation of informal groups and later converted into formal 7 Self Help Groups (SHGs) in the year 1996-97 to do systematic work on a sustained basis.

123 Besides this, the programme also helped in building the capacities of women in areas like child rearing, health and nutrition etc. The experience gathered under the Mahalir Thittam helped BWDC to enlarge their area of operation gradually and form as many as 1278 SHGs as on 31st March 2011.

Joint Liability Groups (JLG) is quite common among the MFIs throughout the country and this was adapted to bring the credit worthy individuals under the fold of micro-finance. The number of Joint Liability Groups formed as on 31st March 2011 stands at 1874. The SHGs/JLGs so far formed are spread over 12 blocks falling under Nagapattinam and Thiruvarur and Thanjavur districts.The details of programmes in Nagapattinam District are portrayed in Table 3.1.

Table 3.1 Details of financing under Mahasakthi programme

Particulars Units

No. of Branches 6

No.of Employees 65

No.of Field officers 36

No.of Groups Financed 1,909

No.of active borrowers 11,030

Recovery Percentage 99.77%

PUTHUVAZHVU

Puthu Vaazhvu Project is an empowerment and poverty reduction project implemented by the Rural Development and Panchayat Raj Department of Government of Tamil Nadu with World Bank assistance. Puthu Vazhvu Society was registered under the Tamil Nadu Society Act in Nagapattinam district in the year 2006. The project is implemented in 182 village panchayats of Kilvelur, Mayiladuthurai, Thirumarugal and Kuthalam Blocks of Nagapttinam district. For the administration purpose these 182 Panchayats have been divided into 14 clusters with 12-14 panchayats per cluster.

124 Programmes

The target population of this Project is the poor households, the most vulnerable sections including the differently-abled and the marginalized communities. The project follows the CDD approach wherein village communities identify their own needs, design and plan interventions and implement and monitor them by adopting key non- negotiable principles of the project. There is a strong sense of ownership of the project among the community members.

Mission

To empower the poor by improving their livelihoods and reducing poverty

Vision An agent of socio-economic development by developing, strengthening pro-poor local Institutions at the village level, developing the skills and capacities of the poor and enhancing their livelihoods by financing demand driven sub project investment

Approach - The Project adopts Community Driven Development approach involving village communities at every stage of Project implementation

1. Initial Communication to create awareness about the Project. 2. Identification of target poor by participatory methodology. 3. Grama Sabha approval and release of panchayat initiation fund.

Under the project, the target poor are indentified by the community using participatory methodologies and the list is approved by the Grama Sabha. The Participatory Identification of the Poor (PIP) methodology has proved to be a powerful and transparent tool to identify the poorest and the excluded members of the village.

Organisation- Two important organisations are formed.

1. The Village Poverty Reduction Committee (VPRC) is a community organization formed under the project predominantly with the representatives of the target population. Each hamlet of the Panchayat is represented by a women SHG member from the target population. A Panchayath Level Federation (PLF) office bearer, a representative of the differently-abled, 2 members from youth is also nominated to VPRC by

125 Grama Sabha. The Village Panchayat is the Ex-Officio Chairperson of the VPRC. In Nagapattinam district there are 182 VPRCs functioning at the village level for the implementation of the project. Each VPRC have been provided fund to implement the activities in their village. Amount have distributed to these VPRCs of Rs.1878.059 lakhs.

2. Social Audit Committee - Social Audit Committee (SAC) is constituted by Grama Sabha. The committee is accountable to Grama sabha and reports to grama Sabha on regular basis.

Micro-Finance

Micro-finance is provided by focusing on different groups like SHGs and Common Livelihood groups.

Self -help groups

The left out target poor, and persons with disability are formed into self-help groups with 10-20 in a group or 5-10 in the case of persons with disabilities.

The members in the SHG are given training, for building their capacities and encouraged to save money. They are then linked to banks, government schemes and access to funds to start livelihood activities.

Totally 1397 SHGs are promoted comprising Women, Youth, Tribal and differently-abled SHGs. They are graded after completing 3 months by a team consisting of 3 community members. About 1395 groups are provided seed grant of Rs. 10,000 – Rs. 20,000.

The groups are credit rated and given Revolving Fund (RF) subsidy of Rs.10,000/- under Swarnajayanti Gram Swarozgar Yojana (SGSY) to facilitate credit linkage with the banks. About Rs.487.64 lakhs is distributed to 825 SGHs. In addition to the subsidy given by the government, the banks provide cash credit up to s.60,000/- per group. Under this programme, 692 groups have received Rs. 631.28 lakhs.

Affiliation of other groups - The groups that were existing before the project have been affiliated with the VPRC. Such groups were given training and they are also helped for bank linkages. Totally 4164 SHGs have been affiliated. Among these groups 1953 SHGs received Rs.1087.03 lakhs as Revolving fund, 1503 SHGs received

126 Rs.2170.03 lakhs as Direct linkage, 215 SHGs received Rs.637.4 lakhs as Economic Assistance.

Each PLF is given an incentive fund through Mahalir Thittam. So far 121 PLFs have received Rs.121 lakh as incentive fund (Rs. 1 lakh per PLF).

The PLF that has received 'Amutha Surabi' fund and utilized in their panchayat has applied for bulk loan from bank. The bulk loan is also given for any livelihood activity that will help people to earn. So far 2 PLFs from Kilvelur Block has received Rs.20.00 lakhs and 3 PLFs from Myladuthurai Block has received Rs.184 lakhs.

Financial Assistance to Differently Abled

Apart from assisting disabled SHGs, financial assistance is also provided by the VPRCs to the disabled and vulnerable persons individually for starting livelihood activities. Some of the project interventions are disability assessment, national ID cards, aids and appliances to the Self Help groups for the disabled, medical care, Vocational skill training, individual assistance for livelihoods, economic activity groups, old age pension and insurance Scheme. A total of 6328 differently-abled individuals got assistance.

Skill Training Puthu Vaazhvu Project has taken initiative to impart skill training to youth to improve their employability and link them with reputed corporate and industrial units. A youth data base has been created in every village in each Panchayat. This data base captures those in the age group of 18-35 years who are unemployed and under employed. Based on this database different kind of skill training is being organized. So far 11,509 youth have been benefited through skill training, among them 11,124 are from target families. From which 10,381 youth are employed

Common Livelihood Groups (Poocharam) The programme seeks to aggregate the above small livelihoods for further support services at village level. A group of minimum 10 members doing similar livelihood activities are encouraged to join together to form CLG/Producer group. These CLG members need not form SHGs. Both men and women are allowed to join the group. 70% of the members are target poor. Minimum office bearers/sub committees are to be formed to monitor input, production and marketing arrangements.

127 The Project assist these CLGs based on their business plan for common infra to run their business effectively. Marketing tie-ups are being made with private and public partnerships for pricing the products by quality in all sectors. In Nagapattinam District Puthu Vaazhvu project has formed 202 CLGs.

MICROINSURANCE DELIVERY BY AVVAI

As a response programme of Tsunami disaster 2004, CARE India has facilitated and provides initial financial and technical support to introduce the microinsurance scheme among the group membersof AVVAI in 2007 as ‘Insure Lives and Livelihood’ (ILAL). The insurance partners are BAJAJ Allianz Life insurance Company and General Insurance Company.

Products offered - The life and general insurance policies are offered through the ILAL program. The duration of the products is one year, and premiums are paid up front.

(a) Life Insurance - Life insurance is issued in batches to groups of at least 50 people, but the premiums and coverage amounts below are for per person. The two life insurance policies are identical but for scale: the premium and pay-out limit are both twice as large for LIFE-20 as for LIFE-10. Table 3.2 shows information about policies. Table 3.2 Details of insurance policies (Life)

LIFE-10 LIFE-20 Premium Rs.90 Rs.200 Coverage Rs.20,000 Rs.50,000 Benefits Provides compensation in the event of the death of the insured due to any reason (excluding suicide in year one) Eligibility Available to people 18-59 years old Beneficiary Compensation is paid to the nominee, who is named by the insured at the time of enrolment

(b) Non - Life – Insurance/Accident -The general insurance policies offer eight benefits, and Option B includes a ninth, a per diem allowance for hospitalization

128 up to five days. The general insurance policies also include an option to extend coverage to the insured’s spouse for an additional sum. Table 3.3 shows the details.

Table 3.3 Details of insurance policies (Non-Life)

Product Features Option A Option B Premium for Policyholder only 60 125 (CARE H+) (CARE) Premium for Policyholder and 90 200 (CARE H+ S) (CARE+) Spouse Benefits & Coverage

Death due to accident 50,000 50,000 Permanent total disability due to 50,000 50,000 accident Loss of limb or eyesight due to 25,000 25,000 accident Funeral expenses 5,000 5,000 Educational grant to one child 5,000 5,000 Hospitalization expenses arising 3,000 3,000 out of accident and/or accidental injury Wage loss during hospitalization 200/day for a 200/day for a maximum of 5 days period due to accident maximum of 5 days Per diem health cash NA 300/day for a maximum of 5 days Hospital cash for a children of NA 200/day for a insured maximum of 5 days Hospital cash for 2 children of NA 200/day for a insured maximum of Rs.1000/

129 New policies and renewals

AVVAI has started its microinsurance scheme from 2007 - 08 onwards. The Life insurance policies include LIFE 10 and LIFE20. Non – Life Insurance policies are CARE, CARE+, CARE-HS and CARE-HS+. Policies are sold when micro-credit loan disbursement is done and also by conducting various programmes. The renewal of the policies is done by staff of AVVAI.

Table 3.4 shows the details of policies sold and information about renewals over a period 2007-13. In 2007-08 the microinsurance scheme was introduced with the initial support of CARE India. During the period 2007-08 to 2008-09 the enrolment to both life and non –life policies increased. The total policies increased from 19070 to 22018 policies. From 2009-10 to 2011-12 the enrolment decreased. The decline continued till the number of total policies has fallen from 22018 in 2008-09 to 5137 in 2010-11. The enrolment picked up to rise from 5137 in 2010-11 to 10160 in 2012-13. The picture of renewals is also hazy. There is fall and rise. The rise is recent and it is hoped that it is sustainable.

Table 3.4 New Policies and Renewals

Total No. of Policies Year Enrolled Total No. of Renewal Total Life Non-Life Life Non-Life 2007 - 08 12,714 6,356 19,070 - - -

2008 - 09 14,678 7,340 22,018 10,142 5,071 15,213

2009 - 10 5,662 2,831 8,493 2,275 1,137 3,412

2010 - 11 3,425 1,712 5,137 4,800 2,400 7,200

2011 - 12 4,247 2,123 6,370 3,278 1,639 4,917

2012 - 13 6,774 3,386 10,160 4,124 2,023 6,147

130 Premium Collection

Table 3.5 shows the details of premium collected by AVVAI over a period of 2007 to 13. The total premium collected during the initial period 2007-08 was Rs 38, 14,000 and it has declined to be Rs.32, 61,400 in 2012-13. Table 3.5 Premium Collection

Premium Collected (Rs) Year New Policies Renewal Total (Rs) 2007 - 08 38,14,000 - 38,14,000

2008 - 09 43,10,300 30,42,600 73,52,900

2009 - 10 16,98,600 6,82,400 23,81,000

2010 - 11 9,84,900 14,25,000 24,09,900

2011 - 12 12,55,475 10,12,125 22,67,600

2012 - 13 20,32,000 12,29,400 32,61,400

Claim Settlement

Claims are made when the insured member died or faced risk. After the first information is received from insured or nominee of insured, immediately it is informed to Insurance Company and claims submitted along with the required documents. Claims are given directly to insured on their names.

Table 3.6 shows that the details of claims settled by the AVVAI. In 2007 - 08 totally 132 claims were made out of 141 applied. During 2008 – 09 totally 1,201 claims were made includes 12 life claims and 1189 non-life claims. This is the highest range claims over the period from 2007 to 2013 because there were many poor households affected by ‘NISHA Cyclone’ in 2008. In the year 2010 also many claims were made due to flood in Nagapattinam district. The year of 2012-13 there were 84 claims settled consisting of 16 Life and 68 General insurance. Claim for life insurance in 100 percent over a period however there were some rejection in non-life claim due to not provide proper hospitalisation documents by the claimant.

131 Table 3.6 Claim Settlement

Life Non-Life Total Year Applied Settled Applied Settled Applied Settled 2007 - 08 14 14 127 118 141 132 2008 - 09 12 12 1,213 1189 1,225 1,201 2009 - 10 13 13 23 21 36 34 2010 - 11 16 16 113 102 129 118 2011 - 12 7 7 27 24 34 31 2012 - 13 16 16 70 68 86 84

Promotion programmes

In order to create awareness and to increase the enrolment, AVVAI has been conducting many programmes.

 Village Level Awareness programme - The project conducted 1321 awareness programmes on microinsurance at village level and 16755 members from 1321 Self Help Groups were participated. Street theatre, drama and kollatam were the methodologies utilized to educate the participants on microinsurance.  Mass Awareness Campaign - Conducted 11 Mass awareness campaign on microinsurance and 12800 members participated (Male 414 and Female 12386). Officials from Care India, Banks, Panchayat Raj Institution and Political leaders were presided the events. As a result, 3624 members were enrolled under microinsurance.  SHG Sensitization Programme- Conducted 103 SHG sensitization programme on microinsurance and 12850 woman SHG members were participated. Exhibited charts on benefits of microinsurance and distributed IEC materials to all the participants. As a result, 1013 SHG leaders were selected as peers to educate other members in the villages.

 IEC Materials - Developed innovative awareness tool kit on microinsurance such as flip charts, wall painting, role plays, street theatre and pamphlets and used in 233 villages during village level awareness programme.

132 MICROINSURANCE DELIVERY BY DHAN DHAN Kalanjiyam deal life insurance with LIC and Health insurance with National Insurance Company. Products offered The products undertaken by them Aam Admi Bima Yojana is life insurance and Universal Health Insurance Scheme is general insurance. Aam Admi Bima Yojana scheme – To enrol in the scheme a member should be aged between 18 and 59 years. The member should be the head of the family or one earning member in a family of rural landless household.

The following documents are to be submitted - Ration Card, Extract from Birth Certificate, Extract from School Certificate, Voters list and Identity Card. In case of doubt, a certificate from Primary Health Centre can be accepted as authentic proof of age. In the event of death of a member prior to the terminal date, the sum assured of Rs.30,000/- will become payable to the nominee. In the event of death by accident or Total / Partial Permanent Disability due to accident, the following benefits shall become payable: a) on death due to accident Rs.75,000/- b) Permanent total disability due to accident Rs.75,000/- c) Loss of one eye or one limb in an accident Rs.37,500/-

A free add-on scholarship benefit for the children of the members of AABY is provided under the scheme. A scholarship at the rate of Rs. 100/- per month will be given to maximum two children studying between 9th to 12th Standard. This scholarship, however, is payable half yearly on Ist July and on Ist January, each year.

The premium under the scheme shall be Rs.200/- out of which 50% shall be subsidized from the Fund created for this purpose by the Central Government and the remaining 50% shall be contributed by the State Government. The premium shall be payable in yearly mode and no relaxation of mode of payment will be allowed. Experience rating adjustment will be allowed after 3 years based on claim experience, if the group is of 2,000 or more members. Even if the group size is small and the claim experience is adverse, LIC may review the rates.

133 Universal Health Insurance Scheme (UHIS) – The scheme is designed to help BPL families. The scheme provides for reimbursement of medical expenses upto Rs.30, 000 towards hospitalization, floated among the entire family, death cover due to an accident @ Rs.25,000 to the earning head of the family and compensation due to loss of earning of the earning member @ Rs. 50 per day up to maximum 15 days.

In order to bring more numbers of BPL families under the new scheme, subsidy on premium was increased from Rs. 100 to Rs.200 for an individual, Rs.300 for a family of five and Rs.400 for a family of seven respectively which is being provided by Govt. of India (for APL there is no Government Subsidy). Table 3.7 shows the details of subsidy.

Table 3.7 Subsidy on Premium

Coverage Premium Insured’s share GOI Subsidy Individual Rs.300/- Rs.100/- Rs.200/- Family upto 5 Members Rs.450/- Rs.150/- Rs.300/- Family upto 7 Members Rs.600/- Rs.200/- Rs.400/-

This insurance is available to persons between the 5 to 70 years. Children between the age of 3 months and 5 years of age can also be covered provided one or both parents are covered concurrently.

New policies and renewals

The year wise enrolment and renewal of policies are shown in Table 3.8. The enrolment of life insurance policies has risen from 7100 in 2007 - 08 to 12128. Non- life insurance sales began in 2012 - 13. About 2787 policies are sold during that year. On the whole, the sales show the raise over the years.

134 Table 3.8 New policies and Renewals

Total No. of Year Policies Total No. of Renewal Enrolled Total Life Non-Life Life Non-Life 2007 - 08 7,100 - 7,100 - - - 2008 - 09 8,400 - 8,400 5,020 - 5,020 2009 - 10 9,000 - 9,000 6,860 - 6,860 2010 - 11 10,450 - 10,450 7,010 - 7,010 2011 - 12 11,050 - 11,050 7,945 - 7,945 2012 - 13 12,128 2,787 14,915 8,156 - 8,156

Premium Collection

In 2007-08 the total premium collected was Rs.7, 10,000 and it increased to Rs. 24, 46.450 in the year 2012-13. During 2012-13, DHAN has started to promote Health Insurance. This is another factor contributing to the raise in premium. Table 3.9 presents data relating to premium collection.

Table 3.9 Premium Collection

Premium Collected Year New Policies Renewal Premium Total Premium (Rs) (Rs) (Rs) 2007 - 08 7,10,000 - 7,10,000 2008 - 09 8,40,000 5,02,000 13,42,000 2009 - 10 9,00,000 6,86,000 15,86,000 2010 - 11 10,45,000 7,01,000 17,46,000 2011 - 12 11,05,000 7,94,500 18,99,500 2012 - 13 16,30,850 8,15,600 24,46,450

135 Claim settlement

Table 3.10 shows that claim settlements of life insurance were satisfactory. All the claims are settled. Only one case is found not settled, in 2010-11. Along with the number of policies, the number of claims also increased. They ranged between 42 to 58 during the period 2007-13.

Table 3.10 Claim Settlement

Life No-Life Total Year Applied Settled Applied Settled Applied Settled 2007 - 08 42 42 - - 42 42 2008- 09 56 56 - - 56 56 2009 - 10 39 39 - - 39 39 2010 - 11 58 57 - - 58 57 2011 - 12 51 51 - - 51 51 2012 - 13 47 47 - - 47 47

Promotion programmes

 Film Show – Dhan foundation is promoting microinsurance among the their members and general public through showing short film which is to educate them to understand the importance of microinsurance and induce them to enrol insurance. These short film were screened in their working village.

 SHG Leaders Meeting – The programme officers are conducting SHGs leaders monthly meeting, in that meeting they were educated to manage the groups, to understand the microinsurance and to enrol the members.

 Special Camp – Dhan is conducting special camp when a claim is settled. Usually in these camps officials of LIC are present and they hand-over the cheque to the claimant. In this camp many members participated and they may inspire to join in this.

 Posters – The another method for promote microinsurance is to supply posters and other IEC materials.

136 MICROINSURANCE DELIVERY BY BWDC

In the year 2007 - 08, TATA-AIG was tied up with Bharathi Women Development Centre to propagate their Life microinsurance products

Products offered

Three types of micro life insurance Products are launched. The features of the policies are compared in Table 3.11

1. Navakalyan Yojana - It is a regular premium payment microinsurance protection plan. The term for which the premium is payable is 5 years. This insurance product offers only death benefit. Neither maturity benefits nor bonuses are payable under this policy 2. Ayushman Yojana - It is a single premium policy. The single premium is payable at the beginning of the policy term. The policy term is 10 years. It offers two benefits.

o Maturity benefit - The policyholder gets back his/her premium with a 25% (i.e.,125%) addition on survival to the end of the policy term. o Death benefit – It is payable in case of the unfortunate event of the policyholder.

3. Sumangal Bima Yojana - The policyholders need to pay the premium for the 10 years. It is easily affordable with premium starting at Rs.356 per year. It gives the twin benefits of the life insurance and a long term savings.

o The insurance coverage is for 15 years o There is total guaranteed returns of 120% of the total premium wherein, policyholder can get money back at regular period of time.

137 Table 3.11 Comparison of insurance products of BWDC

Product Navkalyan Yojana Ayushman Yojana Sumangal Bima Features Yojana Policy Term 5 years 10 years 15 years Coverage limits Minimum Rs. 5000 Minimum Rs. 5000 Minimum Rs. 5000 (Sum Assured) Maximum Rs.50000 Maximum Rs.50000 Maximum Rs.50000 Age limits Minimum 18 Years Minimum 18 Years Minimum 18 Years Maximum 60 Years Maximum 60 Years Maximum 60 Years Premium Start from Rs.58 Start from Rs.1438 Start from Rs.365 Mode of Cash / DD / Cheque Cash / DD / Cheque Cash / DD / Cheque Payment Payment Monthly/Quarterly/ To pay single Monthly/Quarterly/ Frequency Semi annually/ premium at the Semi annually/ Annually beginning of policy Annually term. Death Benefit The policy holder’s The policy holder’s The policy holder’s nominee will be paid nominee will be paid nominee will be paid Death Benefit(Sum Death Benefit(Sum Death Benefit(Sum Assured) Assured) Assured) Maturity benefit This insurance On survival to the end Can get maturity product only offers of the policy term, the benefit i.e., 60% of death benefit and policy holder shall be the total policy neither maturity paid 125% of single premium if all due benefits nor bonuses premium paid. premium paid. are payable under this plicy. Rider Benefit Policy Holders can Policy Holders can Benefit add the Accident add the Accident Death Benefit rider to Death Benefit rider to this product; in case of this product; in case he/she chooses a Sum Not available of he/she chooses a Assured at least Sum Assured at least Rs.10000 under the Rs.10000 under the basic plan. basic plan. Policy Loan Policy holders may take a loan from the Company up to certain Not Available Not Available percentage of the cash value accrued on the policy as on date of the loan Grace Period 31 days for all modes No Grace Period 31 days for all modes of payment. of payment

138 New policies and renewals

Bharathi Women Development Centre has been promoting Navkalyn, Ayushman Yojana and Sumangal Bima Yojans policies in two blocks (Vedaraniyam and Thalainayar) of Nagapattinam District. Table 3.12 shows the details of enrolment and renewal of policy for the period from 2007 - 08 to 2012 - 13. The enrolment of insurance has been increased gradually with an exception in 2011 - 12. From 2009-10 renewals began. The number rose steadily to decline in 2012 - 13.

Table 3.12 New Policies and Renewals (2007-13)

Year Number of New Policies Number of Renewals

2007 - 08 456 0 2008 - 09 824 0 2009 - 10 976 511 2010 - 11 1,126 703 2011 - 12 621 855 2012 - 13 1,356 347

Premium Collection As shown in Table 3.13, there were no renewals for the year 2008 - 09 because it has promoted microinsurance with ICICI and later joined hands with TATA – AIG. The new policies’ premium increased to Rs 3.71 lakhs in 2012 - 13 from 3.08 lakhs in 2009-10. The renewal premium also showed a rise from 1.53 lakhs to 2.51 during 2009 - 12. However, it fell to Rs. 99.400 in 2012 - 13. Table 3.13 Premium of New Policies and Renewal Premium

Year New Policies Premium Renewal Premium Total (Rs) (Rs) (Rs) 2007 - 08 1,31,200 0 1,31,200 2008 - 09 2,52,000 0 2,52,000 2009 - 10 3,08,000 1,53,300 4,61,300 2010 - 11 3,25,200 2,10,900 5,36,100 2011 - 12 1,86,300 2,51,000 4,37,300 2012 - 13 3,71,200 99,400 4,70,600

139 Claims Settlement Table 3.14 shows the claim performance of BWDC. It is clear that claims are settled hundred percent only in 2008 - 09. In the remaining years, there are rejections of 1 or 2 claims due to not provide proper documents by the claimant. The number of claims ranged between 7-11. Table 3.14 Claim Settlement by BWDC

Year Claims Applied Claims settled 2007 - 08 0 0 2008 - 09 7 7 2009 -10 9 6 2010 - 11 11 9 2011 - 12 7 6 2012 - 13 8 7

Promotion programmes BWDC is promoting microinsurance schemes among its members by adopting the following programmes.  Meetings of SHGs Members Periodically the SHGs members meeting are held at village level. In the meetings the information about the loans and insurance products are discussed.  Training Staff members Training programme relating to micro-finance and microinsurance are provided to staff members involved in delivery of microinsurance.

MICROINSURANCE DLIVERY BY PUTHU VAZHVU

Nagapattinam Puthu Vazhvu Society has started microinsurance promotion from 2011 as a part of programme among its target population.

Products offered

Aam Admi Bima Yojana is the government subsidised insurance scheme delivered by them to the poor household in tie up with LIC.

140 New policies and renewals

As given in Table 3.15, the organisation has sold 1902 life policies in 2011-12 and 1176 in 2012-13. There were no renewals for 2011-12. Reason for not renewal initially when Puthu Vazhvu projects has started a microinsurance with United India Insurance Company. Later State Government has changed the partnership from United India and a new MOU was signed with LIC.

Table 3.15 New Policies and Renewals

Total No. of Policies Year Sold Total No. of Renewal Life Non-Life Life Non-Life Total 2011 - 12 1,902 - 1,902 - - - 2012 - 13 1,176 - 1,176

Premium Collection

The organisation is a new player and collected premium from new policies to the tune of Rs.1.9 and Rs.1.17 lakhs in the years 2011-12 and 2012-13.

Claims settlement

In 2011-12, 4 claims were applied and all of them were settled

Promotion programmes

The following programmes are conducted to promote microinsurance.

o PLF Meeting – Every month there is a PLF Meeting. In the meeting the all SHG members are present and they are educated in respect of health, culture and insurance.

o Puthu Vazhu People Learning and Training Centre (PLTC) - It aims at educating and training the people.

o Regular Camp Enrolment – microinsurance enrolment camps are conducted periodically. An official of LIC participates and interacts with people in the meeting.

141 COMPARITIVE ANALYSIS - PERFORMANCE OF NGOs

A comparison of the products, sales, renewals, claims and status is made here to give a bird’s eye view of the performance of the NGOs in this regard. The evaluation of performance is done using the ratios listed in Table 3.16.

Table 3.16 Performance Ratio

Areas Indicators Sales (i) Share in total policies (ii) Growth rate in policies during a period (iii) Growth rate in premium amount

Renewals (iv) Renewal ratio = Number of renewals / Number of potential renewals

Claims (v) Number of claims rejected (R) = Applied (A) – Settled (S) (vi) Claim rejection ratio = R/ A

Sale of polices

Table 3.17 shows details of policies sold by the microinsurance agents over a period of 6 years from 2007 to 2013.

(a) Share in total policies - In terms of sales Avvai, has largest share in the first two years of the period (2007-2009) and lost the leadership to Dhan Foundation in the subsequent years (2009-13) (b) Growth rate - BWDC and DHAN have registered positive growth rates of 19.92 percent and 13.17 percent indicating that they have healthy growth in sale of policies during the study period.

142 Table 3.17 Sales of policies (2007-13)

Year Avvai Dhan BWDC Puthu Total Foundation Vazhvu

2007 - 08 19,070 7,100 456 - 26,626 (71.6) (26.6) (1.8) (100.0) 2008 - 09 22,018 8,400 824 - 31,242 (70.4) (26.9) (2.7) (100) 2009 - 10 8,493 9,000 976 - 18,469 (46) (48.7) (5.3) (100) 2010 - 11 5,137 10,450 1,126 - 16,713 (30.7) (62.6) (6.7) (100) 2011 - 12 6,370 11,050 621 1902 19,943 (32) (55.4) (3.1) (9.5) (100) 2012 - 13 10,160 14,915 1,356 1176 27,607 (36.8) (54.0) (4.9) (4.3) (100.0) CAGR* -9.96 % 13.17 % 19.92 % -21.32 % 0.60 % Figures in parentheses are percentages in total. *Compound Annual Growth Rate

Renewals

There were no renewals in the year 2007-08 because it was the commencing period of microinsurance in this district. There are renewals thereafter as shown in Table 3.18.

(c) Ratio of renewals to number of potential renewals - The ratio is shown in Table 3.19. Table 3.17 shows the total policies (potential renewals) and Table 3.18 shows the renewals (Figure 3.1). Avvai has the highest ratio of in the range of 0.84 to 0.9 (increasing). It is followed by Dhan (0.81-0.73 declining). BWDC has chequered figures, latest year showing a decline in the ratio. Table 3.19 shows the ratios.

143 Table 3.18 Renewals of policies

Year Avvai Dhan BWDC Puthu Total Foundation vazhvu 2008 - 09 15213 5020 - - 20233

2009 - 10 3412 6860 511 - 10783 2010 - 11 7200 7010 703 - 14913 2011 - 12 4917 7945 855 - 13717 2012 - 13 6147 8156 347 - 14650 CAGR -16.58% 10.19 % -9.22 % - - 6.25

Table 3.19 Renewals of policies as a ratio of new policies

Year Avvai Dhan BWDC Puthu Total Foundation Vazhvu 2008 - 09 0.79 0.70 - 0.76 2009 - 10 0.15 0.81 0.62 - 0.34 2010 - 11 0.84 0.77 0.72 - 0.80 2011 - 12 0.95 0.76 0.75 - 0.82 2012 - 13 0.96 0.73 0.55 0 0.73

Figure 3.1 No. of Policies and Renewals

35,000 30,000 25,000 20,000 New Policies 15,000 Renewal 10,000 5,000 0 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

144 Premium Collection

The compound growth rates of premium amounts for the four NGOs are computed and presented in Table 3.20.

(d) Growth rate in premium - BWDC and Dhan have recorded positive growth rates of 23.72 percent and 22.9 percent. Avvai has a negative growth rate.

Table 3.20 Premium Collection

Year Avvai Dhan BWDC Puthu Total Foundation Vazhvu 2007 - 08 38,14,000 7,10,000 1,31,200 - 46,55,200

2008 - 09 73,52,900 13,42,000 2,52,000 - 89,46,900

2009 - 10 23,81,000 15,86,000 4,61,300 - 44,28,300

2010 - 11 24,09,900 17,46,000 5,36,100 - 46,92,000

2011 - 12 22,67,600 18,99,500 4,37,300 1,90,200 47,94,600

2012 - 13 32,61,400 24,46,450 4,70,600 1,17,600 62,96,050

CAGR -2.57 % 22.90 % 23.72 % -21.37 % 5.16 %

Claim settlement

The claims made and the claims settled of the four selected organisations are shown in Table 3-21. During 2007-13, Avvai has settled 1600 of 1661 claims, whereas Dhan foundation has settled 292 of 293 claims received. BWDC has settled 35 of 42 claims received.

Two indicators are computed to evaluate the performance of the NGOs in respect of claim settlement.

(a) Number of claims rejected (R) = Applied (A) – Settled (S) (b) Claim rejection ratio = R/ A

Table 3.21 shows the ratios. There is a gap in the number of claims applied and the number of claims settled in case of Avvai. The six year average of rejections is

145 10.2 for Avvai. It is very less in case of other organisations. The reasons for the rejection was inability to produce required documents relating to the event.

Table 3.21 Claims Applied (A) and settled(S) ratio (2007-13) Year Avvai Dhan BWDC Puthu Total Foundation Vazhvu A S A S A S A S A S 2007 - 08 151 132 42 42 - - - - 193 174 2008 - 09 1,225 1,201 56 56 7 7 - - 1288 1264 2009 - 10 36 34 39 39 9 6 - - 84 79 2010 - 11 129 118 58 57 11 9 - - 198 184 2011 - 12 34 31 51 51 7 6 4 4 96 92 2012 - 13 86 84 47 47 8 7 0 0 141 138 Total 1661 1600 293 292 42 35 4 4 2000 1931

Table 3.22 Claims rejection ratio (2007-13) Year Avvai Dhan BWDC Puthu Total Vazhvu R R/A R R/A R R/A R R/A R R/A 2007-08 19 0.13 0 0 - - - - 19 0.1 2008-09 24 0.02 0 0 0 0 - - 24 0.02 2009-10 2 0.05 0 0 3 0.33 - - 5 0.6 2010-11 11 0.09 1 0.02 2 0.18 - - 14 0.7 2011-12 3 0.09 0 0 1 0.14 0 0 4 0.4 2012-13 2 0.001 0 0 1 0.12 0 0 3 0.2 Average 10.2 .038 0.16 0.003 1.4 0.13 0 11.5 0.35

Summary of performance

Table 3.23 presents the performance indicators of the four NGOs. The first four indicators are related to the year 2013 and the last two are averages for the period 2007-13. Dhan foundation is the leader in performance. It is growing positively in respect of policies and premiums.

146 Table 3.23 Comparison of NGOs on performance indicators of 2013.

Indicator Avvai Dhan BWDC Puthu Vazhvu Foundation

Share in total policies (%) 36.8 54.0 4.9 4.3 Growth rate in policies -9.96 13.17 19.92 -21.32 Ratio of renewals to new 0.96 0.73 0.55 0 policies -2.57 22.90 23.72 -21.37 Growth rate in premium(%) Average Number of claims 10.2 0.16 1.4 0 rejected (2007-13) Average Claim rejection 0.038 0.003 0.13 0 ratio. (2007-13)

PROBLEMS AND SUGGESTIONS

The NGOs are asked the following questions in the informal discussions on the problems and ways to improve the promotion of microinsurance.

What kind of problems do you encounter from your own set up, from other agencies or environment and target customers? What kind of measures do you consider to improve the promotion of microinsurance in this region?

Their responses are recorded and presented here.

AVVAI Village Welfare Society

The following points emerged in the interaction with the officials of the NGO. (a) Introduction of endowment policies - Majority of the people are preferring endowment insurance with some extra coverage. Hence, insurance Companies can introduce life insurance Endowment policies with some extra rider coverage (b) Government grants - CARE India has been the donor for our microinsurance promotion program. It has ceased to provide grant. In its absence we have problems in financing the promotion. Government should come forward ad sanction financial grants to promote microinsurance.

147 (c) Consumer education - In promoting microinsurance, major problem is unwillingness to purchase insurance among the people. People buying voluntarily are less. Hence, it is necessary to tie up, microinsurance with other programs like micro finance. Part of our sales are through this kind of tie up. This points out the need for strong consumer education programmes to promote sales of microinsurance. (d) Selling costs and staff training - Avvai has 200 employees. Of them, 185 are field staff and the remaining work in office. Among the field staff, 30 are deputed to do the microinsurance work. Since microinsurance selling is a challenging task- given potential buyers are not interested, they find it hard to achieve the target sales. The costs involved are – repeat visits to rural households and motivation training to sales people. DHAN Foundation

The following points emerged in the interaction with the officials of the NGO.

(a) Grace period - For renewals, grace period is allowed in case of endowment policies. Insurance company (TATA-AIG) may offer grace period for all kinds of products. This practice may be followed by other companies. (b) Documents for claim – The rejection of claims occurs when claimant fails to produce required documents in support of the claim. Three pronged measures are required.  Clients - It is necessary to educate the insured and potential buyers on how claims are to be made.  Government -For educating customers, programs are required and funds are essential to undertake them. Government may come forward by sanctioning funds for promotion programs.  Insurance companies - The companies may consider how the claim procedure can be simplified.

Bharathi Women Development Centre (BWDC)

The interaction with the NGOs has provided the following insights.

(a) Longer time taken for claims – Claims take longer time due to the procedure which is complex for less educated.

148 (b) Lack of interest in insurance - Members are willing to buy microinsurance is only because to enjoy SHG benefit so they need to be educated. Otherwise, they will have no interest in insurance. (c) Training of field staff- Though field staff are aware of the methods of interacting with the villagers, the problem of selling insurance is considered formidable. As such there is need for training field staff on how to sell insurance to the poor.

Puthuvazhvu

Being a new entrant in the field of microinsurance, the NGO has pointed out its own problem in outreach.

(a) Appointing separate staff - There is no separate staff for selling microinsurance. The existing staff has to work for different programmes. They are considering the case of appointing separate field staff for microinsurance selling. (b) Consumer education - Consumers are interested in returns and not on risk protection. The need to set aside a fraction of their savings for protection is to be realised by them. For this, there is need for consumer education.

149 CHAPTER - 4

DATA ANALYSIS AND INTERPRETATION

In this chapter, the data collected with the help of questionnaires are analyzed using appropriate statistical tools. The analyzed data is grouped under the demographic profile of the respondents, income, savings and borrowings, risk and coping methods, awareness and opinion about microinsurance and their level of satisfaction towards the products and service provider.

DEMOGRAPHIC PROFILE OF RESPONDENTS

The microinsurance holders included in the study are 390 women who are also members of self -help groups. Figure 4.1 to 4.6 portray the sample characteristics.

Age

Table 4.1 presents age-wise classification of the respondent women policyholders. Though the sample represents different age groups, it is obvious that the predominant age group is 31-50, who constituted about 74.5 percent of the sample. Almost all the respondents are married, excepting 3 members (0.8 percent of the sample). Among the married, 2.5 percent are widowed and 0.5 percent are divorced. Table 4.2 gives a clear picture that majority of the policyholders are married and their lives are totally insured after their marriage.

Table 4.1 Age-wise Classification of Respondents

S.No Age Groups Frequency Percentage

1. Below 30 68 17.5 2. 31 to 40 178 45.5 3. 41 to 50 113 29.0 4. 51 and above 31 8.0 5. Above 60 12 3.1 Total 390 100

150 Table 4.2 Marital Status of Respondents

S.No Marital Status Frequency Percentage 1. Married 375 96.2 2. Un married 3 0.8 3. Widow 10 2.5 4. Divorcee 2 0.5 Total 390 100

Education

Education, in general is an important asset to all, especially for women, as it helps them to acquire the required knowledge required to understand the financial services especially insurance and perceive the benefits of products and services with reference to the relevant costs. Table 4.3 reveals the education wise classification of the sample policyholders. Among the sample policyholders, majority (60 percent) of the respondents have studied upto primary level, followed by 27 per cent of the respondents who have studied upto secondary level. There are illiterates to the tune of 6.9 percent and highly educated about 6.1 percent. It is hence clear that most of the respondents are educated to understand the aspects of insurance.

Table 4.3 Educational Level of Respondents

S.No Educational Level Frequency Percentage

1. Illiterate 27 6.9 2. Primary level 234 60.0 3. Secondary level 105 27.0 4. Higher Secondary 15 3.8 level 5. Degree level 9 2.3 Total 390 100

151 Occupation

All the respondent policyholders are employed. The type of employment in which the respondents are engaged in and the corresponding percentages are shown in Table 4.4. According to it about 64.6 percent of the respondents are agricultural labourers. The next dominant occupation group represented by 34.9 percent respondents are semi -skilled wage labourers. It is found that only 0.5 percent of the respondents are skilled.

Table 4.4 Occupation of the Respondents

S.No Occupation Frequency Percentage

1. Agricultural labourers 252 64.6 2. Skilled wage labourers 2 0.5 3. Semi-skilled wage 136 34.9 labourers Total 390 100

Family Size

The size of the family denotes the total number of members in a family, including parents, children and others. The size of families of the respondents are provided in below. Table 4.5 indicates that about 93.8 percent of respondent families have 2 to 4 members in their family. The rest have larger family with more than 5 members, but limited to the maximum of 6.

Table 4.5 Size of the Family of the Respondents

S.No Family size Frequency Percentage

1 2 to 4 366 93.8 2 5 to 6 24 6.2 Total 390 100

152 Type of House

From Table 4.6 it can be observed that 0.6 percent of the respondents live in thatched houses which is built and owned by them. About 30.8 percent of the respondents owned group houses which are provided by the government under the I.A.Y (Indhira Avaz Yojana) programme. About 4.3 percent of the respondents are living in tsunami houses provided by NGOs under Tsunami response programme. Only 1.3 percent respondents have owned a Tiled house.

Table 4.6 Type of House of the Respondents

S.No House Type Frequency Percentage

1. Thatched house 248 63.6 2. Tiled house 5 1.3 3. Group house 120 30.8 4. Tsunami House 17 4.3 Total 390 100

INCOME, SAVINGS AND BORROWINGS

The details of family income, savings and borrowings of the respondents are presented in Tables 4.7 to 4.9. According to Table 4.7, the annual family income of 60 percent of respondents is between Rs. 11,000 to Rs. 20, 000. A small segment of the respondent groups has income below Rs.10,000 and 32.1 percent of the respondents have income above Rs. 20,000 per annum.

Table 4.7 Annual Family Income of the Respondents

S.No Income Classification Frequency Percentage

1. Below Rs.10,000 31 7.9 2. Rs.11,000 to 20,000 234 60.0 3. Above Rs. 20,000 125 32.1 Total 390 100

153 Figure 4.1- Age group Figure 4.2 Marital Status

Frequency Frequency 12 113 31 68 10 3 2 Below 30 Married 31 to 40 Un married 41 to 50 Widow 51 and above Divorcee 178 Above 60 375

Figure 4.3 Educational Level Figure 4.4 Occupation

Frequency Frequency 136 15 9 27 Illiterate 105 Agricultural Primary level labour

Secondary level Skilled wage labour Higher Semi-skilled 234 Secondary level wage labour Degree level 252 2

Figure 4.5 Family Size Figure 4.6 Annual Income

Frequency Frequency

24 125 31 Below Rs.10,000 2 to 4 Rs.11,000 to 5 to 6 20,000 Above Rs 366 234 20,000

154 Savings

How much is the savings of the respondents? Table 4.8 shows that 92.3 percent respondents saved below Rs.10000, indicating that the savings potential is less among them. In the remaining small group of 7.7 percent, about 5.6 percent of the respondents, have savings between Rs.10000 and 20,000 and the residual 2.1 have savings above Rs.20,000 per annum.

Table 4.8 Savings of the Respondents

S.No Saving Classification Frequency Percentage

1. Below Rs.10,000 360 92.3 2. Rs.10,001 – 20,000 22 5.6 3. Rs.20,001 – 30,000 5 1.3 4. Rs.30,001 – 40,000 2 0.5 5. Above Rs.40000 1 0.3 Total 390 100

Which savings scheme did they opt? Table 4.9 shows that 92.6 percent of the respondents have saved through the self -help groups. The next source is post office in which 4.4 percent saved money and the last one is Nationalized bank, preferred by 3 Percent of respondents.

Table 4.9 Mode of Savings

S.No Mode of Savings Frequency Percentage

1. SHGs 361 92.6 2. Post Office 17 4.4 3. Nationalized Bank 12 3.0 Total 390 100

155 Borrowings

All the respondents (390) of this study have borrowed money from different sources for different purposes. Table 4.10 shows the purpose for which the money was borrowed. Ceremonies, education and food are the predominant needs for borrowing

Table 4.10 Purpose of the Borrowings

S.No Borrowing Purpose Frequency Percentage

1. For ceremony 134 34.4 2. For education 132 33.8 3. Buy food 98 25.1 4. Replace & repair for 21 5.4 lost asset 5. For Economic activity 2 0.5 6. To buy agri- input 2 0.5 7. For funeral 1 0.3 Total 390 100

About 34.4 percent of the respondents have borrowed for ceremonies. Following this, about 33.8 percent respondents borrowed to pay fees for children’s education and 25. 1 percent to buy food. The other reasons for borrowing are - replace & repair of lost asset (5.4 percent) purchase of agri - input (0.5 percent) and funeral expenditures (0.3 percent).

The majority of the respondents (71.8 percent) have availed loan from informal sources like money-lenders and friends and relatives. 36.2 percent have got loans from money-lenders and 35.6 percent of respondents have got cash credit from their relatives and friends.

In the remaining 29.2 percent of the respondents, 24.6 percent respondents have got credit from SHGs. It is clear that informal sources continue to be the dominant source of leading for the villagers.

156 Table 4.11 Source of Borrowings

S.No Source Frequency Percentage

1. Money lender 141 36.2 2 Friends/relatives 139 35.6 3. SHGs 96 24.6 4. Nationalized Bank 13 3.3 5 MFIs 1 0.3 Total 390 100

RISKS FACED AND COPING METHODS ADOPTED

The study has the following hypotheses relating to risks and coping mechanisms

H-1 Poor households are exposed to a variety of risks.

Table 4.12 shows the kind of risks to which respondents are exposed. The respondents have faced disasters which are common to the residents of Nagapattinam District as well as household risks related to sickness. The findings validate the hypothesis.

Table 4.12 Risks Faced by the Respondents

S.No Types of Risk Frequency Percentage

1. Natural disaster 390 100 2. Sickness in family 384 98.5 3. Death in family 3 0.007 Total 390 100

Natural Disaster

Table 4.13 shows that 52.3 percent of respondents have weathered Cyclone. 47.7 percent respondents have faced flood, It is the evident Nagapattinam district is a risk prone area. Cyclones and floods are the continuous hazards.

157 Table 4.13 Natural Disaster faced by the Respondents

S.No Type of Risk Frequency Percent 1. Flood 186 47.7 2. Cyclone 204 52.3 Total 390 100

Due to the natural disasters the respondents have lost many things from house to life. It is reported that 44.8 percent of respondent suffered from damage of houses. In case of 40 percent of respondents there was damage of household items. There was loss in livestock and loss of crop in case of 10.8 percent and 4.4 percent respectively.

Table 4.14 Type of Loss Incurred

S.No Type of Loss Frequency Percent 1. Loss of Live stock 42 10.8 2. Loss of crap 17 4.4 3. Damage of house 175 44.8 4. Damage of household items 156 40.0 Total 390 100

H-2 Poor households adopt various mechanisms for protection against risk, which are mostly informal.

How did they cope with the loss? Figures 4.7 and 4.8 show the details. Table 4.15 shows the ways to cope with losses arising due to such disaster. Majority of the respondents ie., 51.6 percent cope with the government assistance, it is followed by 14.2 percent have used mortgage of item, 10.5 percent of them followed borrowing from money lenders, 9.6 percent respondents availed loan from SHG to cope the such losses, borrowing from relatives and sale of animal is 5.1 and 5.6 percent respectively. It is reported only 3.5 percent respondents used personal savings.

158 Table 4.15 Coping Methods Used

S.No Strategies Frequency Percentage

1. Government Assistance 201 51.6 2. Mortgage of item 55 14.2 3. Loan from money lenders 41 10.5 4. Loan from SHG 36 9.2 5. Sale of animal 22 5.6 6. Borrowed from relatives 20 5.1 7. Personal Saving 15 3.8 Total 390 100

Figure 4.7 Natural Disaster Risk Figure 4.8 Coping Method Used

Frequency Frequency Personal Saving Borrowed from relatives Sale of animal 204 Loan from SHG Flood Loan from money lenders Cyclone Mortgage of item 186 Government Assistance

0 200 400

Sickness in family

Sickness is common for human beings but sickness of a family member that places stress on finances is a risky one – despite the heavy expenditure for recover of the patient- the patient may not come secure health or stay alive. Table 4.16 shows incident of sickness that posed risk to the respondents. About 96.4 percent of respondent families have one major sickness case.

159 Table 4.16 Incidence of Major Sickness in Family of Respondents

Incidence of major sickness Frequency Percentage Once suffered 376 96.4 Twice suffered 8 2.1 Not suffered 6 1.5 Total 390 100

How the respondent family did face the situation that demanded money beyond the working capital of the family? Table 4.17 reports the ways of funding the treatment. Most of the respondents followed the borrowing route – 40.1 percent mortgaged an item, 27.9 percent borrowed from relatives and 15.6 percent borrowed from money lenders. The choices are clear- first from own resources, then relatives and friends and the last resort money lenders.

Dependence on personal savings is less. About 4.6 percent relied on personal savings and 2.8 percent have taken loan from SHGs. Some having live stock resorted to sale an animal. About 6.4 percent did this. Only 2.6 percent had health insurance to protect them from the risk. Figures 4.9 and 4.10 present the coping methods.

Table 4.17 Sources of Funding the Treatment

S.No Sources Frequency Percentage

1 Mortgage of item 154 40.1 2. Borrowed from relatives 107 27.9 3. From moneylenders 60 15.6 4. Animal sale 24 6.4 5. Personal savings 18 4.6 6. Loan from SHG 11 2.8 7. Health insurance 10 2.6 Total 384 100

160 Figure 4.9 Incidence of Major Sickness Figure 4.10 Sources to Funding the Treatment

Frequency Frequency

8 6 Health insurance

Once Loan from SHG suffered Personal savings Twice Animal sale suffered From moneylenders

Not suffered Borrowed from relatives

Mortgage of item 376 0 100 200

What is the impact of the sickness on the family? Had it had an impact on family incomes? Such a loss can happen when the sickness affects the earning members. Table 4.18 shows the About 94.8 percent have adverse effect on incomes of their families.

Table 4.18 Loss due to Sickness in Family

S.No Loss Frequency Percentage 1. Income was affected 364 94.8 2. Income was not affected 20 5.2 Total 384 100

Death in family

In the sample, only 3 families have suffered from death of a family member. Table 4.19 presents that of the three deaths, two were due to sickness and one was due to accident.

161 Table 4.19 Death in Family of Respondents

Cases of death Frequency Percentage Death due to Sickness 2 0.5 Death by Accident 1 0.3 No deaths 387 99.2 Total 390 100

Insurance purchase is prompted by tragedy in family as in the case of Selvi . Her case is described in Box 4-1

Box 4-1 Tragedy led to purchase of insurance. Selvi aged 45 years is resident of Therkupoigainallur which is located between Nagapattinam and Velankanni. She droped out after 4th standard. She is engaged in dry fish processing work at Akkarapettai. She has two children who are studying in Velankanni. Her husband met with a road accident and died in 2011. This tragic event influenced her decision to take insurance. . When her husband was alive, he used to work as a labourer in agriculture, construction and other fields. They did not have household assets; their only asset was a bicycle. When a SHG was formed by AVVAI in that village in 2003, she joined and started saving Rs 50 monthly. In 2009, the NGO informed the members of SHG in a meeting about life and health insurance that provide cover to both husband and wife. Some of the members in her group were enrolled but she did not take interest as she could not realize its benefit. The death of her husband, and concern for children, prompted her to join life insurance scheme. Source : One to one interview with respondent.

TYPES OF EVENTS CAUSING FEAR

H-3 Poor fear most for losses related to family and earnings in that order. What do the respondents fear most and seek to obtain some security for that? A list of 10 risks is supplied to respondents in the questionnaire and they are asked to

162 rank them from 1 to 10 depending upon the fear they have in their minds in respect of providing funds. Table 4.20 provides the rank order of the risks based on weighted mean values.

Family and members first. The top ranking ones are related to members in the family. Personal accident, Health crisis of family members and death of any household member are given the top three ranks. For this the security comes from Life and Health insurance. Box 4-2 presents a case of a village woman who took microinsurance with this objective. Sources of earnings comes next. Risks associated with the livestock and crop are ranked next to the above three. Death of income generation livestock is placed in fourth rank. Fifth rank is crop failure, it is followed by sudden loss of job. For this security comes from purchase of insurance for crop and livestock. Another approach is augmenting the income by going for endowment policy.

Box 4-2 Insurance protected earnings Manimekalai aged 36 years is presently residing at Manigramam with her husband. They have one daughter and one son; both of them are studying 7th and 5th standard respectively at a local school. They make Bamboo baskets and sell them in nearby villages by going on a bicycle. She was a member of a SHG in same the village. She purchased micro health insurance that covered spouse risk also. One day when going by bicycle both of them were involved in a car accident. Both of them were injured. Both of her husband’s legs were fractured and she lost her one leg. The accident posed a big question of how to earn for family as they could not continue making and selling bamboo baskets. The Agent organization helped them to get claims. Her husband was considered as fully disabled and was paid Rs 50, 000 as compensation. Manimekali got Rs.25,000. Her case was considered as partly disabled. Now they are running a retail shop nearby their house. Source: One to one interview with respondent

163 Table 4.20 Events Causing Fear/expenditures as Perceived by Respondents (N= 390)

S.No Type of Risk Mean rank Score Rank 1. Personal Accident 1.65 1 2. Health crisis in family due to one or more sick 1.85 2 members in family 3. Death of any household member 2.69 3

4. Death of income generation livestock 5.34 4 5. Crop failure 5.79 5 6. Sudden loss of job 6.18 6 7. Raise in price of essential commodities 7.44 7 8. Birth of a child 7.53 8 9. Loss of equipment 8.99 9 10. Unexpected marriage of daughter /son 9.14 10 11. Social function 9.39 11 Scale 1 – Most feared 11- Least feared

VIEWS ABOUT MICROINSURANCE

What are the views of microinsurance holders on insurance benefits? Table 4.21 portrays them. The respondents have given their views on a 5-point scale of agreement. The benefits of insurance which found good agreement of policyholders perceived are those which have mean value of 4 and above. The benefit statement “To provide security to my family” found strong agreement (4.99). The other two benefit statements that found good agreement are: To meet the expenses at the time of serious accident (4.0) and to meet unexpected medical and hospital expenses (4.0). Thus insurance is seen as a provider of security in case of unexpected events like accidents and sickness.

164 Insurance can also be a tension reliever. The other two benefit statements agreeable are: ‘To safeguard from loss of income during unemployment’ (3.78) and ‘To make me feel tension free’ (3.70).

Table 4.21 Views of Respondents about Insurance (N= 390)

S. No View Mean SD 1. To provide security to my family 4.99 .07152 2. To meet the expenses at the time of serious 4.00 .08778 accident 3. To meet un expected medical and hospital 4.00 .07170 expenses 4. To meet the children’s education 3.14 .36039 5. To meet the unforeseen financial emergencies 3.07 .25417 6. To avoid borrowing in future 3.02 .10140 7. To motivate me to create savings 3.00 .11334 8. To make me feel tension free 3.70 .46330 9. To expand the current activity 2.99 .05064 10. To safeguard from loss income during 3.78 .42392 unemployment Scale 5- Strongly agree 1- Strongly disagree

Factor Analysis

Factor analysis is conducted to identify the major themes of fear. Bartlett’s test of sphericity and Kaiser-Meyer Olkin (KMO) measure of sampling adequacy were used to examine the appropriateness of factor analysis. Table 4.22 shows the results. The approximate chi-square statistic is 1979.902 with 45 degrees of freedom which is significant at 0.05 level. The KMO statistic (0.841) is also large (>0.5).

Hence factor analysis is considered as an appropriate technique for further analysis of data. Results of Principal Component Analysis for Product related qualities are tabulated in Table 4.23 and .24.

165 Retaining only the variables with Eigen values greater than one (Kaiser’s criterion), we can infer that 37.201 % of variance is explained by factor 1; 8.957 % of variance is explained by factor 2 and 6.823 % of variance is explained by factor 3 and together, all three factors contributed to 52.982 % of variance.

Table 4.22 KMO and Bartlett's Test

Kaiser-Meyer- Olkin Measure of Sampling Adequacy. 0.841 Approx. Chi-Square 1979.902 Bartlett's Test of Sphericity df 45 Sig. .000

Table 4.23 Communalities

Variable Initial Extraction 1 .334 .397 2 .446 .651 3 .460 .561 4 .447 .553 5 .465 .564 6 .461 .590 7 .326 .329 8 .430 .577 9 .423 .523 10 .432 .553 Extraction Method: Maximum Likelihood.

166 Table 4. 24 Factor Analysis – Total Variance Explained

Factor Initial Eigen values Extraction Sums of Squared Rotation Loadings Sums of Total % of Cumulative Total % of Cumulative Squared Loadings Variance % Variance % 1. 4.184 41.843 41.843 3.720 37.201 37.201 3.038 2. 1.348 13.480 55.323 .896 8.957 46.158 2.593 3. 1.124 11.236 66.559 .682 6.823 52.982 2.770 4. .718 7.183 73.742 5. .588 5.881 79.623 6. .501 5.012 84.635 7. .415 4.145 88.780 8. .404 4.043 92.823 9. .370 3.700 96.524 10. .348 3.476 100.000 Extraction Method: Maximum Likelihood.

Table 4.25 shows the factor loadings of the 10 items. Factor loadings are high in case of factor 1 (4 out of 10 variables have factor loading > 0.5). It reveals that 50% of the variables are clubbed into one factor. But on the basis of theory, we can infer that there must be more than one factor. Therefore, Varimax Rotation was done to obtain factors that can be named and interpreted. Under Varimax Rotation also 4 out of 10 variables have factor loading s >0.5 in case of factor 1.

Items 4, 5, 6 and 7 constituted the first factor. The researcher conceptualized this factor as “ Financial Plan” Items 8,10 and 9 constituted the second factor and this was conceptualized as “Peace of Mind”; Items 1, 2, and 3 constituted the third factor and was conceptualized as “Protection to life ” factor. Table 4-26 presents the factors with the respective items. Figure 4.11 depicts the views of respondents about microinsurance.

167 Table 4.25 Pattern Matrix Factor Loading

S. No View Factor 1 2 3

1. To provide security to my family .390 .268 .627 2. To meet the expenses at the time of serious accident .440 .382 .806 3. To meet un expected medical and hospital expenses .501 .410 .744 4. To meet the children’s education .743 .360 .451 5. To meet the unforeseen financial emergencies .749 .383 .484 6. To avoid borrowing in future .765 .390 .399 7. To motivate me to create savings .553 .378 .433 8. To make me feel tension free .368 .759 .331 9. To expand the current activity .357 .717 .415 10. To safeguard from loss income during unemployment .417 .740 .327

Box 4-3 presents how a respondent has insured and benefited from it.

Box 4 -3 Insurance protected earnings Manimekalai aged 36 years she is presently residing at Manigramam with her husband. They have one daughter and one son; both of them are studying 7th and 5th standard respectively at a local school. They make Bamboo baskets and sell them in nearby villages going by bicycle. She was a member of a SHG in same village. She purchased micro health insurance that covered spouse risk also. One day when going by bicycle both of them were involved in a car accident. Both of them were injured. Both of her husband’s legs were fractured and she lost her one leg. The accident posed a big question of how to earn for family as they could not continue making and selling bamboo baskets. The Agent organization helped them to get claims. Her husband was considered as fully disabled and was paid Rs .50, 000 as compensation. Manimekali got Rs. 25,000. Her case was considered as partly disabled. Now they have are running a retail shop nearby their house. Source: One to one interview with respondent

168 Table 4.26 Views of Respondents about Insurance (N= 390)

S.No View Mean SD

Factor -1 Protection to life 1. To provide security to my family 4.99 0.07 2. To meet the expenses at the time of serious accident 4.00 0.09 3. To meet un expected medical and hospital expenses 4.00 0.07 Factor -2 Financial plan 4. To meet the children’s education 3.14 0.36 5. To meet the unforeseen financial emergencies 3.07 0.25 6. To avoid borrowing in future 3.02 0.10 7. To motivate me to create savings 3.00 0.11 Factor -3 Peace of mind 8. To make me feel tension free 3.70 0.46 9. To expand the current activity 2.99 0.05 10. To safeguard from loss income during unemployment 3.78 0.42 Scale 5- Strongly agree 1- Strongly disagree

Figure 4.11 Views about Microinsurance

To safeguard from loss income during unemployment To expand the current activity To make me feel tension free To motivate me to create savings To avoid borrowing in future To meet the unforeseen financial emergencies To meet the children’s education To meet un expected medical and hospital expenses To meet the expenses at the time of serious accident To provide security to my family

0 1 2 3 4 5 Mean

169 PURCHASE OF MICROINSURANCE

All the respondents are insurance policy holders.

Awareness

However, earlier studies have shown that awareness is limited. Hence the following hypothesis is formulated for testing.

H-4 People are aware of microinsurance but their understanding was inadequate and unclear. Respondents are inquired to know how they have become aware and made the purchase of the insurance policies they hold. They replied that they have come to know from the NGOs who are delivery agents in the area. They were given to understand by the NGO the benefits of having insurance against the perceived risk of life and health and motivated them to buy.

Whether the purchase is a well-informed one? To assess this, respondents are asked about their awareness of different aspects of insurance they are holding. Table 4.27 shows the details. The following interesting findings are observable.

 About 96.4 percent of the respondents are aware of the agent’s name.  There ends awareness and they do not know well about the risk coverage also.

Beyond this, awareness is incomplete in respect of type of insurance policy and risk covered. About 45.1 percent and 38.7 percent told they somewhat know about the type of the policy and the risk it covered.

Unawareness is predominant. 54.9 percent, and 61.3 percent do not know about the type of policy and its risk coverage. About 97 percent do not know the name of scheme and the insurance company. The language used in policies is English. This is one reason for some of the respondents not able to be aware of full details of insurance.

170 Table 4.27 Level of Awareness

S. No Variables Level of Awareness Total Know Somewhat Don’t Know Know 1. Name of the Agent 376 14 - 390 (96.4) (3.6) (100) 2. Type of the Policy 176 214 390 - (45.1) (54.9) (100) 3. Risk Coverage of 151 239 390 - Policy (38.7) (61.3) (100) 3. Name of the Scheme 9 381 390 - (2.3) (97.7) (100) 4. Name of the Insurer 12 378 390 - (3) (97) (100) Figures in parentheses are percentages

Preferred insurance

Essentially respondents are offered life and health insurances. What is the preferred type of insurance?

H- 5. The preference for life and health insurance is high among poor in that order.

Table 4.28 (Figure 4.11) shows the types of insurance considered suitable by the respondents. About 62. 8 percent of the respondents preferred life insurance and the remaining 37.2 percent preferred health insurance to meet their needs. However, the number of people holding insurance policies give a slightly deviated picture. 63.4 percent hold life and 36.6 percent hold health insurance policies respectively. As the deviation is negligible, it can be said that respondents held policies they considered suitable.

171 Table 4.28 Type of Insurance viewed suitable and held

S. No Type of Insurance Suitable Held

1. Life 245(62.8) 247 (63.4) 2. Health 145(37.2) 143(36.6) Total 390(100) 390(100) Figures in parentheses are percentages.

Policy period and coverage

All the policyholders purchased polices for one year. It indicates life insurance is term insurance and naturally the time validity for health risk cover is one year. The next important decision relates to Insurance coverage.

The coverage required varies among clients based on the perceived risk, affordability and motivation. Table 4.29 shows the coverage secured by the respondents. Amount of sum assured in microinsurance varies between Rs 5,000 to Rs 50,000. From the Table, it can be observed that the least amount of sum assured is Rs.10, 000. It was purchased by only one member of the sample group. Majority of the respondents (78.2 percent) had coverage to the tune of Rs.50,000. There is a small segment of 21.5 percent of the respondents who had coverage of Rs.30, 000.

Table 4.29 Amount of Sum Assured

S. No Sum Assured Frequency Percentage

1. Rs.10,000 1 0.3 2. Rs.30,000 84 21.5 3 Rs. 50,000 305 78.2 Total 390 100

Premium decisions

What is the amount of premium and the period preferred for payment of the premium? Since policy purchase decisions are based on the ability to pay the two aspects are investigated.

172 (a) Amount of premium

The amount of premium differs based on the terms of microinsurance. Because the policies are term policies, the premiums are to be paid annually. Generally in microinsurance, annual premiums range between Rs.100 to 500. About 78.2 percent of the respondent policyholders are paying an annual premium of Rs 200. In the remaining, 21.5 percent policyholders are paying Rs 100 and 0.3 percent are paying Rs 300 as annual premium. Table 4.30 (Figure 4.13) shows the particulars.

Table 4. 30 Amount of Annual Premium

S. No Annual premium (Rs) Frequency Percentage

1. 100 84 21.5 2. 200 305 78.2 3. 300 1 0.3 Total 390 100

Figure 4.12 Type of policy Held Figure 4. 13 Premium Amount

Frequancy Frequency

1 84 143 Hundred

Life Two hundred Health Three 247 305 hundred

(b) Preferred time for payment of premium

The time when premium can be paid differs from one person to another. It is based on their income earning period and level of income. Table 4.31 shows that 58.5 percent policyholders prefer to pay between January to March. In the remaining 41.5 percent of the respondents, 21.3 percent respondents prefer to pay during April to June and 20.2 percent respondents prefer to pay during July to September. These periods are of interest to selling insurance policies as they indicate time when the potential

173 buyers will be able to pay premiums. From this survey, the period between October – December seems to be wrong time to make sale of insurance.

Table 4.31 Best Time to pay Premium

S. No Best Time Frequency Percentage

1. January - March 228 58.5 2. April - June 79 20.2 3. July - September 83 21.3 4. October - December 0 0 Total 390 100

Promoter of Purchase

Purchase of microinsurance is promoted in two ways.

 Linked with credit - At the time availing loan from any MFIs, the first premium amount is deducted from the loan by the concerned MFI.  Voluntary method – This is education route. The microinsurance agents organize programs to educate people to buy the policies. Some such programmes are Mass Awareness Programme, Sensitation programmes and setting- up of stalls.

Table 4.32 displays how the sample policyholders have purchased the policies. All the selected respondents purchased policies voluntarily.

Table 4.32 Mode of Purchase of microinsurance

S. No Mode Frequency Percentage

1. Linked with Credit - - 2. Voluntary 390 390 Total 390 100

Receiving Policy Document

Holding insurance policy document is very important. It is issued by the insurers after making first premium and with some time limit. In microinsurance the agent

174 organization is collecting the premiums and the collected amount will be sent to the insurance company. Thereafter the insurance company will issue the policy document.

In case of group insurance, the agent will keep the document and helps client make the claims by providing the necessary information about document. Table 4.33 shows that 37.2 percent of the respondents have got the policy document. The remaining 62.8 percent policyholders have seen the policy document but not received.

Table 4.33 Receiving Policy Document

S. No Policy Document Frequency Percentage Received

1. Yes 143 37.2 2. No - - 3. Showed but not Given 247 62.8 Total 390 100

How much time it took to issue insurance policy document to the client or agent? Table 4.34 shows that the time taken is 3 – 4 weeks. About 64.6 percent received it in 4 weeks whereas 35.6 percent got it in 3 weeks.

Table 4. 34 Time taken for Issuing Policy document

S. No Time Taken Frequency Percentage

1 3 Weeks 138 35.4 2 4 weeks 252 64.6 Total 390 100

Keep active policies

How many of the respondents could keep their policies active by making regular payments of annual premiums? From Table 4.35, it can be found that 94.6 percent policies are kept in force by the respondents. Only 5.4 percent policies are not active. The failure to pay premium was attributed to NGOs for not reminding them to pay in time by about 90 percent of the defaulters (Table 4.36).

175 Table 4.35 Keeping Active Policies

S. No Active Frequency Percentage 1. Yes 369 94.6 2. No 21 5.4 Total 390 100

Table 4.36 Reasons for not keeping policies live

S. No Reason Frequency Percentage

2. Forgot to renew 2 9.5 3. NGO has not reminded 19 90.5 Total 21 100

The failure to renew policy results in problems and failure to realize the goals of insuring. Box 4-4 presents one such case.

Box 4-4 Renewal problem Kanakavalli aged 41 years is living in Pushpavanam. She is now working in a salt pan. Her husband expired six years back. She has only one son. When her husband was alive she joined a SHG and has started saving regularly. In 2010, she subscribed to microinsurance offered by an NGO. It was the health cum disaster coverage scheme offered by BAJAJ Alianz. Unfortunately, in December 2011, Thane Cyclone hit Nagapattinam district. The agent organization has taken initiatives to settle claims of people in the village. Many of the people, in her village and nearby villages got compensation for damage of house and household items. She did not receive any kind of compensation though her thatched house was fully damaged. When she inquired her agent and insurance officials she was informed that her policy was not renewed. She was not informed about renewal and she forgot about it. However, the agent organization has given compensation to her from its own fund. Now she continues to be a policyholder with wisdom gained from experience. Source: One to one interview with respondent

176 Problems and Claim settlement

One of the important expectation of insurance holders is about problems relating to procedures and claim settlement. Earlier studies indicated some problems with agents and claims.

H-6 Majority of insurance holders have problems related to payment of insurance premium, renewals and claim settlement.

Only 14.1 percent policyholders have told they had problems with the agent organization. Very few have problems in respect to premium payment and renewal. Table 4.37 shows details.

Table 4. 37 Problems faced by insurance holding (N=390) S. No Problem During Frequency Percentage 1. Agent organization is not supportive 55 14.0 as expected 2. Premium collection delays 11 2.8 3 Inadequate information on policies 15 3.8 4 Inadequate support for renewal 29 7.4

Among the sample policy holders, 92.8 percent have not made claims. It is only 7.2 percent policyholders that have claim experiences shown in Table 4.38.

Table 4.38 Claim Experience of Respondents

S. No Made claim Frequency Percentage

1. Yes 28 7.2 2. No 362 92.8 Total 390 100

What is the time taken for these claims? How is the settlement made? Table 4.39 provides details of claim settlement. Majority claims were settled in more than 1 month time. Out of 28 claimants, 67.9 percent got settlement in more than 1 month time period whereas. 32.1 percent got settled between 15 days to 1 month. In case of

177 96.4 percent claims, settlement amount was 100 %. Only in case of 3.6 percent claims, the settlement amount was in the range of 50 to 70%. From this, it can be said, majority of the claims were settled with full amount of sum assured. Claim settlement is done through direct payment to the claimant.

Table 4.39 Claim settlement details (N=28) Aspect Response Frequency Percentage Time taken 15 to 30 days 9 32.1 More than 1 month 19 67.9 Amount of claim settled 100% 27 96.4 Less than 100% 1 3.6 Mode of payment Direct to claimant 28 100

Boxes 4-5a and 4.5b describe two cases of problems in claim settlement- one caused by ignorance of the insured and another by the failure of agent.

Box 4-5a Claims became difficult Mistakes costs heavy Selvarani aged 47 is living in Thirunagiri of Sirkali block with her husband and one daughter. Though she passed 12th standard with grade she could not go for higher studies, due to poor financial situation. Recently she got her daughter married. Both husband and wife worked in farms. Whenever, farm work was not available, she used to go for fishing in local backwaters. She was a regular member in her SHG and saved monthly without default. During a meeting of SHG last year, she came to know about insurance through the Animator of the Group. The scheme offered by NGO has spouse coverage. She took interest and enrolled in it. . During enrolment by mistake she gave her father’s name in place of spouse, as nominee and the staff from NGO also did not identify this mistake. On 21st June 2012 her husband met an accident and fractured his leg. When she applied for claim, it was rejected for obvious reasons- mistake in mentioning spouse name. Source: One to one interview with respondents.

178 Box 4-5b Problem with agent Anjammal aged 52 years is living in Neithavasal with her husband. She has two daughters and one son. She is a member of a SHG in her village. Two years back in 2010, she purchased a health microinsurance policy from the NGO to which the SHG was attached. The first premium was collected by the staff of that NGO. Premium for the rest of the year was also collected by the same staff member. In November, 2012, she fell sick and was treated in a hospital for 5 days. After discharge, she came to know from another member of the SHG, she can claim treatment expenses. She met NGO officials for claim but they told her, her premium was not received by them. On her complaint, the NGO inquired and found that the fault was with their staff. The NGO put up her medical expenditure bill from their own fund. Source: One to one interview with respondents.

Continuation and recommendation

All the respondents have expressed desire to continue insurance holding and informed that they are willing to recommend insurance to others

Satisfaction with insurance

Are the policy holders satisfied with the information, risk coverage, size of premium and claim processing. Table 4.40 and Figure 4.14 provide the details. The mean values on the 5 –point scale of agreement, for various aspects like risk covered, size of premium and claim settlement are above 4 indicating satisfaction. Only in respect of information, the satisfaction is relatively less, the mean score being 3.78.

Table 4.40 Satisfaction with insurance provided

S. No Aspect Scale of satisfaction Mean SD 5 4 3 2 1

1 Information about policy 162 114 48 50 16 3.78 1.19 2 Risk covered 264 85 23 10 8 4.51 .877 3 Size of premium 231 118 19 10 12 4.40 .928 4 Claim processing 211 101 66 5 7 4.24 .916 Scale 5- Highly satisfied 1- Highly dissatisfied

179 Figure 4.14 Satisfaction with insurance provided

Claim processing

Size of premium

Risk covered

Information about policy

3 3.5 4 4.5 5 Mean

ANALYSIS ACROSS SELECT DEMOGRAPHICS

For having better understanding of the market for microinsurance, it is proposed to conduct analysis based on select demographic factors – age, education, occupation and family income. The following hypotheses are employed to examine the influence of the selected demographic variables

H-7 The ways of coping with natural disaster and treatment in sickness vary with age, education, occupation and income of respondents.

The hypothesis is tested using rank correlation coefficients and evaluating their significance with the help of t-tests. Tables 4.41, 42, 43 and 44 shows the analysis of coping methods in times of natural disasters across age, education, occupation and income.

Age-wise differences - From Table 4.41 it is evident that loan from SHGs is the second source for above 40 years age group, whereas mortgage an item is the second source for below 40 years age group. The rank correlation coefficient is 0.41 indicating that sources are different for the two groups. As t-value is less than critical value 2.571 for α = 0.05 and 5 degrees of freedom, null hypothesis that the relationship is not significant, is accepted.

180 Education wise differences - The reliance on coping methods is somewhat similar between more and less educated. Table 4.42 shows rank correlations of coping methods across education. Rank correlation coefficient is 0.54 but it is not significant at 0.05 level as computed t - value of 1.43 is lower than table value (2.571). As such, there is less correlation between the two groups. The major differences are : Primary and below educated used mortgage as second source and personal saving as 7th source whereas the high educated used loan from SHG as second source and personal savings as 3rd source.

Occupation wise differences - Agriculture workers made use of mortgage and money lenders as source of financing whereas loan form SHG and mortgage of an item. . Table 4.43 presents the way the sources are used by the two occupation groups. The rank correlation coefficient is 0.36 and is not significant as t-value is 0.86 which is lower than critical value.

Income wise differences - Most of the high income people were dependent on loans form money lenders and personal savings. Most of the less-income group were dependent on mortgage and SHGs. The rank correlation coefficient is low and also not significant as shown in Table 4.44.

Table 4.41 Coping Methods Used –Across age (N=390)

S.No Methods 40 and below (n= 246) Above 40 (n=144) F (%) Rank F(%) Rank 1. Government 104 (42.3) 1 1 97 (67.4) Assistance 2. Personal saving 14 (5.7) 6 1 (0.6) 7 3. From money lenders 37 (15.1) 3 4 (2.8) 4.5 4. Borrowed from 16 (6.5) 4.5 5 4 (2.8) relatives 5. Animal sale 20 (8.1) 4 2 (1.4) 6 6. Loan from SHG 6 (2.4) 7 30 (20.8) 2 7. Mortgage of any item 49 (19.9) 2 6 (4.2) 3 Rank correlation coefficient 0.41 t-value 1.00

181 Table 4.42 Coping Methods Used –Across education (N=390) S.No Methods Primary and below Secondary and above (n= 261) (n=129) F (%) Rank F(%) Rank 1. Government 68 (52.7) 1 133 (51.0) 1 Assistance 2. Personal saving 5 (2.0) 7 10 (7.8) 4 3. From money lenders 28 (10.6) 3 13 (10.1) 3 4. Borrowed from 6 13 (5.0) 6 7 (5.4) relatives 5. Animal sale 17 (6.5) 5 5 (3.9) 7 6. Loan from SHG 18 (6.9) 4 18 (14.0) 2 7. Mortgage of any item 47 (18.0) 2 8 (6.1) 5 Rank correlation coefficient 0.54 t-value 1.43

Table 4.43 Coping Methods Used –Across occupation (N=390) S.No Methods Agriculture Others (n= 252) (n=138) F (%) Rank F(%) Rank 1. Government 1 154 (61.1) 1 47 (34.0) Assistance 2. Personal saving 9 (3.6) 6 6 (4.4) 6 3. From money lenders 28 (11.1) 3 13 (9.4) 4 4. Borrowed from 5 10 (4.0) 5 10 (7.3) relatives 5. Animal sale 17(6.7) 4 5 (3.6) 7 6. Loan from SHG 4 (1.6) 7 32 (23.2) 2 7. Mortgage of any item 30 (11.9) 2 25 (18.1) 3 Rank correlation coefficient 0.36 t-value 0.86

182 Table 4.44 Coping Methods Used –Across Annual Income (N=390) S.No Methods Rs. 20,000 and below Above Rs.20,000 (n=265) (n=125) F (%) Rank F(%) Rank 1. Government 1 128 (48.3) 1 73 (58.4) Assistance 2. Personal saving 5 (1.9) 7 10 (8.0) 3 3. From money lenders 16 (6.1) 5 25 (20.0) 2 4. Borrowed from 5 14 (5.3) 6 6 (4.8) relatives 5. Animal sale 21 (7.9) 4 1 (0.8) 7 6. Loan from SHG 29 (10.9) 3 7 (5.6) 4 7. Mortgage of any item 52 (19.6) 2 3 (2.4) 6 Rank correlation coefficient 0.08 t-value 0.18

Tables 4.45, 46, 47 and 48 examine whether coping methods adopted are similar across age, education, occupation and income. The following observations can be made from the data in tables.

Age-wise differences - Compared to the below 40 years age group, the above 40 year age group resorted to borrowings and health insurance. Many of the younger ones were dependent on mortgage and anima sale. Table 4-45 shows that correlation coefficient is 0.61 but is not significant at 0.05 level.

Education wise differences - The relatively more educated were dependent on borrowings from relatives, personal savings and health insurance whereas the other group relied on mortgage of items and loans from money lenders. Table 4.46 presents weak correlation as the correlation coefficient is 0.30 and is not significant at 0.05 level.

Occupation wise differences - Across occupation analysis presented in Table 4.47, indicates that the sources used differed between the two occupation groups, though there are some similarities. The correlation coefficient is 0.51 and is not significant at 0.05 level.

183 Income wise differences – Analysis across income groups using rank correlations revealed that the coefficient is 0.6. But it is not significant at 0.05 level. Therefore, it is obvious that the two groups differed in utilizing sources. The less that Rs.20000 income earners preferred borrowings whereas the high income group included health insurance as a coping method.

Table 4.45 Coping with sickness needs –Across age (N=384) S.No Methods 40 and below (n= 246) Above 40 (n=138) F (%) Rank F(%) Rank

1. Mortgage of item 81 (33.0) 1 73 (53.0) 1 2. Borrowed from 2 68 (27.6) 2 22 (16.0) relatives 3. From moneylenders 47 (19.2) 3 13 (9.4) 4 4. Animal sale 4 (1.6) 7 20 (14.5) 3 5. Personal savings 11 (4.4) 5 7 (5.0) 5 6. Loan from SHG 10 (4.1) 6 1 (0.7) 7 7. Health insurance 25 (10.1) 4 2 (1.4) 6 Rank correlation coefficient 0.61 t-value 1.71

Table 4.46 Coping with sickness needs –Across education (N=384) S.No Methods Primary and below Secondary and above (n= 261) (n=123) F (%) Rank F(%) Rank

1. Mortgage of item 142 (54.4) 1 12 (9.6) 5 2. Borrowed from 1 33 (12.6) 3 57 (46.3) relatives 3. From moneylenders 45 (17.2) 2 15 (12.2) 2 4. Animal sale 15 (5.7) 4 9 (7.3) 6 5. Personal savings 5 (2.0) 7 13 (10.6) 3.5 6. Loan from SHG 7 ( 2.7) 6 4 (3.4) 7 7. Health insurance 14 (5.4) 5 13 (10.6) 3.5 Rank correlation coefficient 0.30 t-value 0.70

184 Table 4.47 Coping with sickness needs –Across occupation

(N=384)

S.No Methods Agriculture Others (n= 246) (n=138) F (%) Rank F(%) Rank

1. Mortgage of item 98 (39.8) 1 56 (40.6) 1 2. Borrowed from 2.5 71 (28.9) 2 19 (13.8) relatives 3. From moneylenders 43 (17.5) 3 17 (12.3) 4 4. Animal sale 5 (2.0) 6.5 19 (13.8) 2.5 5. Personal savings 5 (2.0) 6.5 13 (9.4) 5 6. Loan from SHG 6 (2.4) 5 5 (3.6) 7 7. Health insurance 18 (7.4) 4 9 (6.5) 6 Rank correlation coefficient 0.51 t-value 1.32

Table 4.48 Coping with sickness needs –Across Annual Income

(N=384)

S.No Methods Rs. 20,000 and below Above Rs.20,000 (n=260) (n=124) F (%) Rank F(%) Rank

1. Mortgage of item 101 (38.8) 1 53 (42.7) 1 2. Borrowed from 2 69 (26.6) 2 21 (17.0) relatives 3. From moneylenders 46 (17.7) 3 14 (11.3) 4 4. Animal sale 12 (4.7) 5 12 (9.7) 5 5. Personal savings 16 (6.1) 4 2 (1.6) 7 6. Loan from SHG 7 (2.7) 7 4 (3.2) 6 7. Health insurance 9 (3.4) 6 18 (14.5) 3 Rank correlation coefficient 0.64 t-value 2.00

185 H-8 Events causing fear or expenditures differ with age, education, occupation and income of respondents.

Tables 4.49, 50, 51 and 52 present analysis of events causing fear among respondents across age, education, occupation and income respectively.

Age wise differences – Table 4.49 shows the rank ordering of events causing fear among two age groups. The correlation coefficient is 0.99 indicating strong correlation between the two groups. Also the computed t –value is 21.0 which is higher than the table value 2.262 with 9 degrees of freedom indicating that the correlation is statistically significant.

Education wise differences - From Table 4.50 it can be observed that the two education groups have perceived the events causing fear alike. The rank correlation coefficient is 0.86 and is significant at 0.05 level. The computed t-value is 5.06. It is higher than the table value 2.262with 9 degrees of freedom.

Occupation wise differences – The rank ordering of events causing fear across the two occupation groups is similar (Table 4.51). The rank correlation coefficient is 0.77. The computed t-value is 3.61 which is higher than table value 2.262 (α = 0.05, dof = 9).

Income wise differences - There is significant correlation in the rank ordering of the events causing fear among respondents categorized into two income groups. As shown in Table 4.52, the correlation coefficient 0.85 is statistically significant at 0.05 level. The computed t- value (4.82) is higher than table value 2.262.

186 Table 4.49 Events Causing Fear – Across age (N=390) S.No Events 40 and below (n= 246) Above 40 (n=144) Mean Rank Mean Rank rank score rank score 1. Personal Accident 1.59 1 1.74 1 2. Health crisis in family due 2 to one or more sick 1.87 2 1.81 members in family 3. Death of any household 3 2.69 3 2.67 member 4. Death of income 4.93 4 5.58 4 generation livestock 5. Crop failure 5.89 5 5.61 5 6. Sudden loss of job, 6.04 6 6.41 6 7. Raise in price of essential 7.22 7 7.57 8 commodities 8. Birth of a child 7.48 7 7.62 8 9. Loss of equipment 8.94 9 9.10 9 10. Unexpected marriage of 9.15 10 9.14 10 daughter /son 11. Social function 9.19 11 9.75 11 Rank correlation coefficient 0.99 t-value 21.0

Table 4.50 Events Causing Fear – Across education (N=390)

S.No Events Primary and below Secondary and above (n= 261) (n=129) Mean Rank Mean Rank rank score rank score 1. Personal Accident 1.55 1 1.85 2 2. Health crisis in family due 1.39 1 to one or more sick 2.07 2 members in family 3. Death of any household 2.78 3 2.64 3 member 4. Death of income 5.52 5 5.25 4 generation livestock 5. Crop failure 6.03 6 5.30 4 6. Sudden loss of job, 5.98 5 6.58 7 7. Raise in price of essential 9.52 9 6.42 7 commodities 8. Birth of a child 8.43 8 5.71 6 9. Loss of equipment 8.71 9 9.58 11 10. Unexpected marriage of 8.53 10 9.44 10 daughter /son 11. Social function 9.48 11 9.23 8 Rank correlation coefficient 0.86 t-value 5.06

187 Table 4.51 Events Causing Fear – Across occupation (N=390)

S.No Events Agriculture Others (n= 252) (n=138) Mean Rank Mean Rank rank score rank score 1. Personal Accident 1.90 2 1.19 1 2. Health crisis in family due 2.79 3 to one or more sick 1.33 1 members in family 3. Death of any household 2.08 2 3.02 3 member 4. Death of income 5.10 5 5.47 4 generation livestock 5. Crop failure 5.71 5 5.93 6 6. Sudden loss of job, 7.17 7 4.37 4 7. Raise in price of essential 7.34 7 7.50 8 commodities 8. Birth of a child 6.01 6 10.29 11 9. Loss of equipment 9.46 10 8.16 8 10. Unexpected marriage of 9.75 10 8.81 9 daughter /son 11. Social function 9.62 11 8.99 9 Rank correlation coefficient 0.77 t-value 3.61

Table 4.52 Events Causing Fear – Across Annual Income (N=390)

S.No Events Rs. 20,000 and below Above Rs.20,000 (n=265) (n=125) Mean Rank Mean Rank rank score rank score 1. Personal Accident 1.58 1 1.79 2 2. Health crisis in family due 1.60 1 to one or more sick 1.96 2 members in family 3. Death of any household 2.71 3 2.68 3 member 4. Death of income 5.74 5 5.15 4 generation livestock 5. Crop failure 5.98 5 5.38 4 6. Sudden loss of job, 6.15 6 6.24 7 7. Raise in price of essential 9.53 11 6.46 7 commodities 8. Birth of a child 8.22 8 6.06 6 9. Loss of equipment 8.81 10 9.40 10 10. Unexpected marriage of 8.55 8 9.42 11 daughter /son 11. Social function 9.58 9 8.99 9 Rank correlation coefficient 0.85 t-value 4.82

188 H-9 Types of insurance purchased differ with age, education, occupation and income of respondents

Table 4.53 portrays the purchase of insurance by respondents across age, education, occupation and income. The critical value of chi-square is 3.841 with 1 degree of freedom at 0.05 level of significance. The computed values of chi-square analysis are greater than the critical values in case of education, occupation and income. As such, they have significant influence on purchase of insurance.

The major differences are: Those having secondary education differ with primary educated. The first group is holding life and health almost equally, whereas most of the secondary educated are holding life only. More number of respondents of agricultural occupation bought life where as others bought health insurance. The Rs. 20,000 and below category held life and health whereas many of others held life.

Table 4. 53 Type of Insurance viewed suitable and held (N=390) Variable Categories Life Health Chi- p-value square Age (Years ) 40 and below (n= 246) 159 87 0.49 0.51 (64.6) (35.4) Above 40 (n=144) 88 56 (61.1) (38.9) Education Primary and below (n=261) 138 123 37.18 0.00 (52.9) (47.1) Secondary and above (n=129) 109 20 (84.5) (15.5) Occupation Agriculture (n=252) 228 24 225.94 0.00 (90.8) (9.2) Others (n=138) 19 119 (13.8) 86.2) Annual income 20,000 and below (n=265) 158 107 4.90 0.03 (Rs) (59.6) (40.4) Above 20,000 (n=125) 89 36 (71.2) (38.8) Figures in parentheses are percentages.

189 H-10 Problems faced by policyholders differ with age, education, occupation and income of respondents

Tables 4.54, 55, 56 and 57, shows the problems faced by the respondents in relation to insurance purchase and settlement across select demographics. The null hypothesis that there is no statistically significant difference in tested using t-test for differences of proportions. The -t- values and corresponding p-values are obtained and recorded against each problem.

When t-values are larger than 1.96, the null hypothesis is to be rejected. Alternatively, a small p-value (typically ≤ 0.05) indicates strong evidence against the null hypothesis. Following this, the following observations can be made.

Age-wise differences - Table 4.54 shows that the p-values are less than 0.05 and t-values are larger than 1.96. Hence the differences are statistically significant at 0.05 level for all problems. Large number of the above 40 year age group have experienced the problems than the other group.

Education-wise differences – Table 4.55 shows that differences in proportions are statistically significant at 0.05 level. Relatively larger number of respondents of Primary and below education have problems with agent, whereas many in the other group, faced problems in respect of premium, information and renewal support.

Occupation-wise differences –. Statistically significant differences are found in case of two items. Many of those with agriculture occupation have problem with agents, where as many in other occupation have problems in respect of renewal. Table 4.56 shows the results.

Income-wise differences–Statistically significant differences are found in case of three problems (Table 4.57). Relatively many in the Rs.20, 000 and below reported problems with agent, information and renewal support, than the other group.

From the above observations, it can be concluded that problems vary with age, education, occupation and annual income of respondents.

190 Table 4.54 Problems faced by insurance holding – Across age (N=390) S. No Problem 40 and Above -t- p-value below 40 value (n=246) (n=144) 1. Agent organization is not 23 32 8.67 .000 supportive as expected (9.34) (22.2) 2. 5 6 Premium collection delays 3.46 .006 (2.0) (4.2) 3. Inadequate information on 7 8 4.00 .001 policies (2.8) (5.5) 4. Inadequate support for 16 13 4.45 .000 renewal (6.5) (9.0) Figures in parentheses are percentages.

Table 4.55 Problems faced by insurance holding – Across education (N=390) S. No Problem Primary Secondary -t- p- & below & above value value (n=261) (n=129) 1. Agent organization is not 41 14 4.29 .000 supportive as expected (15.7) 10.8) 2. 7 4 Premium collection delays 2.39 .038 (2.7) (3.1) 3. Inadequate information on 10 5 2.65 .019 policies (3.8) (3.9) 4. 19 10 Inadequate support for renewal (7.3) (7.8) 3.27 .003

Figures in parentheses are percentages

191 Table 4.56 Problems faced by insurance holding – Across Occupation (N=390) S. No Problem Agricultural Others -t- p- (n=252) (n=138) value value 1. Agent organization is 10 45 not supportive as (7.2) 3.46 .001 (17.9) expected 2. Premium collection 9 2 1.49 .167 delays (3.5) (1.4) 3. Inadequate information 12 3 1.87 .082 on policies (4.8) (2.2) 4. Inadequate support for 18 11 4.14 .000 renewal (7.1)) (7.9) Figures in parentheses are percentages

Table 4.57 Problems faced by insurance holding – Across Annual income (N=390) S. No Problem Rs.20,000 Above -t- p- & below Rs.20,000 value value (n=265) (n=125) 1. Agent organization is 15 40 not supportive as (12.0) 4.50 .000 (15.1) expected 2. Premium collection 9 2 1.49 .167 delays (3.4) (1.6) 3. Inadequate information 11 4 2.26 .041 on policies (4.1) (3.2) 4. Inadequate support for 20 9 3.55 .001 renewal (7.5) (7.2) Figures in parentheses are percentages

192 H-11 Satisfaction with insurance differ with age, education, occupation and income of Respondents.

Satisfaction data with reference to four aspects (Information about policies, Risk covered by policy, size of premium and claim processing) are analyzed to find whether significant differences existed across age, education, occupation and income groups.

When F-values are larger than 3.84, the null hypothesis is to be rejected . Alternatively, a small p-value (typically ≤ 0.05) indicates strong evidence against the null hypothesis. Following this, the following observations can be made.

Age - wise differences – Table 4.58 presents the mean values and 4.59 presents the ANOVA results. Age wise differences are found only in one out of four aspects. The F-value is greater than table value 3.84 only in case of information about policy. The 40 and below age group is more satisfied with information about policy than the elder group.

Table 4.58 Satisfaction with insurance service – Across age (N=390) S. No Aspect 40 and below Above 40 F-value (n=246) (n=144) Mean SD Mean SD 1. Information about 5.49* policy 4.02 1.16 3.73 1.21

2. Risk covered 4.46 0.95 4.58 0.74 1.51 3. Size of premium 4.44 0.94 4.33 0.91 1.18 4. Claim processing 4.36 0.86 4.18 0.99 3.42 *Significant at 0.05 level

193 Table 4.59 Satisfaction across age – ANOVA details (N=390) Variables Source of Sum of df Mean F Sig variation squares square Information about Between 7.700 1 7.700 5.49 .020 the Policies Groups Within Groups 543.336 388 1.400 Total 551.036 389 Risk coverage by Between 1.159 1 1.159 1.51 .220 the policy taken Groups Within Groups 298.330 388 .769 Total 299.490 389 Size of premium Between 1.015 1 1.015 1.18 .279 amount Groups Within Groups 334.585 388 .862 Total 335.600 389 Claim processing Between 2.851 1 2.851 3.42 .065 Groups Within Groups 323.826 388 .835 Total 326.677 389

Education wise differences - Table 4.60 depicts the mean values and 4.61 shows the ANOVA results. Education - wise differences are found only in case of information about policy. The F-value is greater than table value 3.84 indicating statistically significant difference at 0.05 level. The Primary and below educated are more satisfied with information about policy than the more educated group.

Table 4.60 Satisfaction with insurance service - across Education (N=390) S. No Aspect Primary Secondary and F-value and below above Mean SD Mean S D 1. Information about 7.36* policy 4.03 1.18 3.68 1.17

2. Risk covered 4.56 .85 4.39 .92 3.03 3. Size of premium 4.34 .97 4.51 .84 2.79 4. Claim processing 4.31 .93 4.25 .89 0.45 *Significant at 0.05 level

194 Table 4.61 Satisfaction across education – ANOVA details (N=390) Variables Source of Sum of df Mean F Sig. variation squares square Information Between 10.255 1 10.255 7.36 .007 about the Policies Groups Within Groups 540.781 388 1.394 Total 551.036 389 Risk coverage by Between 2.323 1 2.323 3.03 .082 the policy taken Groups Within Groups 297.167 388 .766 Total 299.490 389 Size of premium Between 2.402 1 2.402 2.79 .095 amount Groups Within Groups 333.198 388 .859 Total 335.600 389 Claim processing Between .377 1 .377 .45 .503 Groups Within Groups 326.300 388 .841 Total 326.677 389

Occupation-wise differences - Table 4.62 exhibits the mean values and 4.63 presents the ANOVA results. The F-values are less than the table value 3.84 in all cases indicating that the differences are not significant at 0.05 level. As such, it can be said that occupation wise there are no differences.

Table 4. 62 Satisfaction with insurance service - across Occupation (N=390) S. No Aspect Agricultural Others F- value Labor Mean SD Mean SD 1. Information about policy 0.65 3.88 3.98 1.29 .99 2. Risk covered 4.52 .85 4.49 .92 0.11 3. Size of premium 4.37 .98 4.45 .82 0.60 4. Claim processing 4.28 .94 4.31 .87 0.09

195 Table 4. 63 Satisfaction across occupation – ANOVA details (N = 390) Variables Source of Sum of df Mean F Sig. variation squares square Information Between .915 1 .915 .65 .422 about the Policies Groups Within Groups 550.121 388 1.418 Total 551.036 389 Risk coverage by Between .082 1 .082 .11 .744 the policy taken Groups Within Groups 299.408 388 .772 Total 299.490 389 Size of premium Between .519 1 .519 .60 .439 amount Groups Within Groups 335.081 388 .864 Total 335.600 389 Claim processing Between .079 1 .079 .09 .759 Groups Within Groups 326.597 388 .842 Total 326.677 389

Income-wise differences - Table 4.64 presents the mean values and 4.65 portrays the ANOVA results. The F-values are less than the table value 3.84 in all cases indicating that the differences are not significant at 0.05 level. As such, it can be said that income has no influence on feeling of satisfaction among respondents.

Table 4.64 Satisfaction with insurance service – Across Income (N=390) S. No Aspect Below Rs. 20,000 Above Rs. 20,000 F-values Mean SD Mean SD 1. Information about 0.04 policy 3.92 1.16 3.89 1.24

2. Risk covered 4.54 .85 4.43 .93 1.28 3 Size of premium 4.35 .93 4.49 .93 1.97 4 Claim processing 4.30 .91 4.27 .93 0.09

196 Table 4.65 Satisfaction across Family Income - ANOVA details (N=390) Variables Source of Sum of df Mean F Sig. variation squares square Information Between .052 1 .052 .04 .848 about the Policies Groups Within Groups 550.984 388 1.420 Total 551.036 389 Risk coverage by Between .984 1 .984 1.28 .259 the policy taken Groups Within Groups 298.506 388 .769 Total 299.490 389 Size of premium Between 1.695 1 1.695 1.97 .161 amount Groups Within Groups 333.905 388 .861 Total 335.600 389 Claim processing Between .076 1 .076 .09 .764 Groups Within Groups 326.601 388 .842 Total 326.677 389

197 CHAPTER - 5

FINDINGS, CONCLUSIONS AND SUGGESTIONS

In this chapter, the findings of the study are summarized and discussed with reference to the findings of previous research. Further, based on the findings, conclusions are drawn and suggestions are made. Also directions for future research are provided.

BACKGROUND OF THE STUDY

Experience across countries in the world has shown that microinsurance has potential to reduce household risk. India, like any other nation in the world, needed microinsurance to protect low-income people against risks arising from life-cycle and natural disasters. There are a wide range of developmental programmes like Aam Admi BimaYojana (AABY), Indira AwasYojana (IAY), and Public Distribution (PDS), but they could not cover all household risks. It is reported that 90 percent of Indian population is financially excluded. At the end of September, 2012, there are fifty-two insurance companies operating in India, of which twenty four are in the life insurance business and twenty-seven are in general insurance business.

India alone is currently estimated to account for 60 percent of all the individuals covered by micro-insurance worldwide. Overall, however, market penetration remains relatively small. As a result, there remains enormous growth potential (KPMG Report 2013). Many reasons like lack of interest among potential buyers and less profitability of insurance products are cited as major reasons for the poor outreach and performance of microinsurance.

Research questions, objectives, hypotheses and method

The study is undertaken to find answers to the questions like -  Insurance provider - Who are the insurance providers and how are they delivering microinsurance? What kind of problems are they facing and how can they overcome them?  Insured - What type of risks the low income people face and how do they cope with them? What are their coping strategies? Are people aware of microinsurance provider and the schemes? What is their interest in

198 microinsurance? What factors determine insurance purchase? Are they satisfied with the insurance?

Accordingly, the study has set up the objectives of (i) studying the process of implementation and examining the extent outreach and performance of micro insurance providers in the select area and (ii) identifying the risks to which target population is exposed and their coping mechanisms and know the level of awareness of and satisfaction with the microinsurance. The following hypotheses are formed based on the previous research studies.

H-1 Poor households are exposed to a variety of risks. H-2 Poor households adopt various mechanisms for protection against risk, which are mostly informal. H-3 Poor fear most for losses related to family and earnings in that order. H-4 People are aware of microinsurance but their understanding was inadequate and unclear. H-5 The preference for life and health insurance is high among poor in that order. H-6 Majority of insurance holders have problems related to payment of insurance premium, renewals and claim settlement.

In addition the following hypotheses are set-up to examine the influence of demographics

H-7 The ways of coping with natural disaster and treatment in sickness vary with age, education, occupation and income of respondents H-8 Events causing fear or expenditures differ with age, education, occupation and income of respondents H-9 Types of insurance purchased differ with age, education, occupation and income of respondents H-10 Problems faced by policyholders differ with age, education, occupation and income of respondents H-11 Satisfaction with insurance differ with age, education, occupation and income of respondents

199 Data about the operations of NGOs pertaining to insurance are collected for the period 2007-2013. Data relating to insured are collected with the help of a structured questionnaire from a sample of 390 respondents drawn through multi-stage proportionate sampling from Nagapattinam, Vedaranym and Sirkazhi blocks of Nagapattinam district, which is prone to disasters. The respondents hold insurance provided by two NGOs, Avvai and Dhan. Data were analyzed with the help of Factor analysis, Chi-square, ANOVA, Rank correlation and t –tests.

SAMPLE CHARACTERISTICS

The microinsurance holders included in the study are 390 women who are also member of self -help groups. About 74.5 percent of them belong to 31-50 years age group. Most of them are married and school educated. About 63.6 % of them live in thatched houses. Excepting 7.9% of the respondents, all the respondents have annual income above Rs.11, 000 and annual savings below Rs 10, 000 through SHGs. The respondents have borrowings for ceremonies, education and food. Majority of the respondents (71.8 percent) have availed loan from informal sources like money lenders and friends and relatives.

MAJOR FINDINGS

The findings which provide answers to the research questions raised by the study are given here.

(a) Insurance providers in Nagapattinam district Based on the discussions made in chapter -3 of the study, the following information is provided.

Nagapattinam had population of 1,616,450 of which male and female were 798,127 and 818,323 respectively. The major occupations are agriculture and fishing. They are subjected to natural disasters such as Nisha cyclone - 2008, Flood and drought - 2010, Thane Cyclone- 2011, Nilam Cyclone - 2012, and Phailin Cyclone - 2013.

200 (a) Overall view

In Nagapattinam District there are four microinsurance Agent organizations - AVVAI, DHAN-Foundation, BWDC and PUTHU VAZHVU.

 Products - The products offered are: Aam Admi Bima Yojana (Life insurance - LIC), Universal Health Insurance Scheme (General insurance) and CARE + HS (Health- BAJAJ Allianz)  Sale of policies – The sale of policies has risen from 26,626 policies to 27,607 registering a compound growth rate of 0.6 percent.  Renewals - Renewals have shown a decreasing trend falling from 20,233 policies in 2008 - 09 to 14,650 in 2012 - 13. - 6.25% Renewals of policies as a ratio of new policies has gone down from 0.76 in 2008-09 to 0.73 in 2012-13.  Claims settlement – The number of claims ranged between 79-184, with the exception of one year (2008-09). The number of claims settled in the recent year (2012-13) is 138. (b) Comparative performance of NGOs

 Share in total policies -In terms of sales Avvai has largest share in the first two years of the period (2007-2009) and lost the leadership to Dhan Foundation in the subsequent years (2009-13).  Growth rate in sales - BWDC and DHAN have registered positive growth rates of 19.92 percent and 13.17 percent indicating that they have healthy growth in sales of policies during the study period.  Ratio of renewals to number of potential renewals - Avvai has the highest ratio of in the range of 0.84 to 0.9 (increasing). Dhan has declining trend (0.8 to 0.73 ). BWDC has chequered figures, latest year showing a decline in the ratio.  Growth rate in premium - BWDC and Dhan have recorded positive growth rates of 23.72 percent and 22.9 percent. Avvai has a negative growth rate.  Claims and settlement - During 2007-13, Avvai has settled 1,600 of 1,661 claims, whereas Dhan foundation has settled 292 of 293 claims received. BWDC has settled 35 of 42 complaints received. The claim rejection ratios for Avvai and Dhun are: 0.038 and 0.003 indicating that Dhun has slightly better record for claim settlement.

201 (c)Views of insurance holders The research questions are answered by framing 11 hypotheses Table 5.1 provides a summary view of the hypotheses and the results of testing them. Table 5.1 Summary view of hypotheses and results Number Hypothesis Result 1. Poor households are exposed to a variety of risks. True 2. Poor households adopt various mechanisms for True protection against risk, which are mostly informal. 3. Poor fear most for losses related to family and True earnings in that order. 4. People are aware of microinsurance but their True understanding was inadequate and unclear. 5. The preference for life and health insurance is high True among poor in that order. 6. Majority of insurance holders have problems related Not true to payment of insurance premium, renewals and claim settlement. 7. The ways of coping with natural disaster and True treatment in sickness vary with age, education, occupation and income of respondents. 8. Events causing fear or expenditures differ with age, Not true education, occupation and income of respondents. 9. Types of insurance purchased differ with age, True excepting education, occupation and income of respondents. age 10. Problems faced by policyholders differ with age, True excepting education, occupation and income of respondents. a few cases 11. Satisfaction with insurance differ with age, Not true education, occupation and income of respondents. excepting two cases

H-1 Poor households are exposed to a variety of risks.

The hypothesis is validated. About 52.3 percent of respondents have faced Cyclone and 47.7 percent respondents have faced flood. There was loss in livestock and loss of crop in case of 10.8 percent and 4.4 percent respectively About 96.4 percent of respondent families have faced one major sickness case. In case of 94.8 percent of the respondents, it had adverse effect on their family incomes.

202 H-2 Poor households adopt various mechanisms for protection against risk, which are mostly informal.

The hypothesis has positive evidence. The ways of coping with losses caused by the disasters are: (i) government assistance (ii) borrowing from money lenders, (iii) borrowing from relatives, and (iv) loan from SHGs in that order. In case of health problems, 40.1 percent mortgaged an item, 27.9 percent borrowed from relatives and 15.6 percent borrowed from money lenders.

H-3 Poor fear most, losses related to family and earnings in that order.

The hypotheses is proved. Fears relating to family events ranked first. Personal accident, Health crisis of family member and death of any household member are given the top three ranks. For this the security comes from Life and Health insurance.

Sources of earnings ranked next. Risks associated with the livestock and crop are ranked next to the above three. Death of income generation livestock is placed in fourth rank. Fifth rank is crop failure, it is followed by sudden loss of job. For this security comes from purchase of insurance for crop and live stock. Another approach is augmenting the income by going for endowment policy.

What benefits of insurance are perceived by the insured people?

The benefits of insurance as perceived by respondents are:

1. To provide security to my family (4.99). 2. To meet the expenses at the time of serious accident (4.0). 3. To meet unexpected medical and hospital expenses (4.0). 4. To safeguard from loss income during unemployment’ (3.78) and 5. To make me feel tension free’ (3.70).

Thus insurance is seen as a provider of security in case of unexpected events like accidents and diseases. Also it is viewed as a tension reliever.

203 H-4 People are aware of microinsurance but their understanding was inadequate and unclear.

The hypothesis is validated by the findings. Awareness is incomplete in respect of type of insurance policy and risk covered. About 54.9 percent, and 61.3 percent don not know about the type of policy and risk coverage. However, about 96.4 percent of the respondents are aware of the agent’s name. About 97 percent do not know the name of scheme and the insurance company. The language used in policies is English. Some of the respondents, are not able to be aware of full details of insurance, owing to this reason.

H- 5. The preference for life and health insurance is high among poor in that order.

The hypothesis is found valid. About 62. 8 percent of the respondents preferred life insurance and the remaining 37.2 percent preferred health insurance to meet their needs. When it comes to actual holding, 63.4 percent are holding life insurance and 36.6 percent are holding health insurance policies respectively

What kind of policies people have purchased?

All the policyholders purchased polices for one year. The least amount of sum assured is Rs.10000. It was purchased by only one member of the sample group. Majority of the respondents (78.2 percent) had coverage to the tune of Rs.50,000. There is a small segment of 21.5 percent of the respondents who had coverage of Rs.30,000.

What premiums are they paying and what are their preferences in respect of premium payment?

Because the policies are term policies, the premiums are to be paid annually. About 78.2 percent of the respondent policyholders are paying an annual premium of Rs 200. In the remaining, 21.5 percent policyholders are paying Rs 100 and 0.3 percent are paying Rs. 300 as annual premium. About 58.5 percent policyholders prefer to pay between January to March. In the remaining 41.5 percent of the respondents, 21.3 percent respondents prefer to pay during April to June and 20.2 percent respondents prefer to pay during July to September. These periods are of

204 interest to selling insurance policies as they indicate time when the potential buyers will be able to pay premiums. From this survey, the period between October – December seems to be wrong time to make sales of insurance.

How is insurance policy sold and maintained?

All the selected respondents purchased policies voluntarily. It is not linked to micro credit. About 37.2 percent of the respondents have got the policy document and it took 3-4 weeks for that. The remaining 62.8 percent policyholders have seen the policy document but not received. Around 94.6 percent policies are kept in force by the respondents. Only 5.4 percent policies are not active. The failure to pay premium was attributed to NGO for not reminding them to pay in time by about 90 percent of the defaulters.

Were claims made and settled?

Among the sample policy holders, 92.8 percent have not made claims. It is only 7.2 percent policyholders that have claim experience. Majority of the claims were settled in more than 1 month time. Out of 28 claimants, 67.9 percent got settlement in more than 1 month time period whereas, 32.1 percent got settled between 15 days to 1 month. In the case of 96.4 percent claims, settlement amount was 100 %. Only in the case of 3.6 percent claims, the settlement amount was in the range of 50 to 70%. From this, it can be said, majority of the claims were settled with full amount of sum assured. Claim settlement is done through direct payment to the claimant.

H-6 Majority of insurance holders have problems related to payment of insurance premium, renewals and claim settlement.

This is not true. Only 14.1 percent policyholders have told they had problems with the agent organization. Very few have problems in respect of premium payment and renewal.

Are policyholders satisfied with insurance policy holding?

The mean values on the 5 –point scale of agreement, for various aspects like risk covered, size of premium and claim settlement are above 4 indicating satisfaction. Only in respect of information, the satisfaction is relatively less, the mean score being 3.78.

205 (d) Influence of demographics

As marketing of insurance requires an alysis based on select demographic factors, influence of age, education, occupation and family income are examined.

(i) Age

Loan from SHGs is second source for above 40 year age group, whereas mortgage an item is the second source for below 40 year age group. The above 40 year age group resorted to borrowings and health insurance. Many of the younger ones were dependent on mortgage and anima sale. The above 40 year age group thus indicated inclination to save and insure. Both the age groups have similar holding of life and health.

More numbers of the above 40 year age group have experienced the problems than the other group. The 40 and below age group is more satisfied with information about policy than the elder group.

(ii) Education

Secondary and above educated used loan from SHG, personal savings and health insurance. Primary and below educated used mortgage and loans from money lenders. The better educated showed inclination to save and insure. The primary educated are holding life and health almost equally, whereas most of the secondary educated are holding life only. There is a need to promote health insurance among secondary educated.

Relatively larger number of respondents of Primary and below education have problems with agent, whereas many in the other group, faced problems in respect of premium, information and renewal support. The Primary and below educated are more satisfied with information about policy than the more educated group.

(iii) Occupation

Agriculture workers made use of mortgage and money lenders as source of financing. Also they gave priority to health insurance. Others made use of loan form SHG, mortgage of an item and borrowings. Thus agriculture workers are relatively more inclined to health insurance, whereas others are inclined to save. More number

206 of respondents of agricultural occupation bought life where as others bought health insurance. There is a need to promote life among other workers. Many of those with agriculture occupation have problem with agents, where as many in other occupation have problems in respect of renewal. Occupation has no influence on satisfaction.

(iv) Income wise differences

Most of the high income people were dependent on loans form money lenders, personal savings and health insurance. Most of the less income group were dependent on mortgage SHGs and borrowings whereas the high income group included health insurance as a coping method. Relatively, the high income group exhibited inclination to insure and save. Many of the Rs.20,000 and below category held life and health whereas many of others held life. There is a need to promote health insurance among high income group.

Relatively many in the Rs.20,000 and below reported problems with agent, information and renewal support, than the other group. Income has no influence on satisfaction.

DISCUSSION

Earlier research has indicated that poor people predominantly use informal methods of facing financial crises. (Wright, 1999, Milinga, 2000; and Sahu, 2010 ). The same trend is visible in the study. It means, neither the government programmes nor the insurance, could really be of help to the poor in facing risks of life and disasters.

Sahu, (2010) in his study found the common risks observed among sample household ranged from major health related expenditure, health problems of females, accidents, crop loss, loss of livestock, market related problems, and other problems such as divorce. The present study categorises them into family and income related risks and ranked them in terms of fear. In so doing, it sought to find, whether insurance is seen as a fear reducing mechanism. The study could find support to this view. Among the benefits cited of microinsurance, provider of security topped. It is also viewed as a tension reliever.

207 Many studies (Tome and Selvam, 2012) and Saha, 2012) revealed low awareness of insurance. Kirti Singh and Gangal (2013) and Sahu, (2010) found high awareness of microinsurance, but insufficient knowledge about the details and claims. Lalitha Devi, and Jerinabi, (2010) and Radhika, and Rao, (2010) suggested the conduct of awareness campaign with the members who benefited out of insurance explaining the scheme to provide clarity. The present study also reported lack of complete awareness and need for awareness campaigns and insurance education.

Sahu, (2010) found a sizeable proportion of households reported having problems related to insurance premium (65 percent) and claim settlement (60 percent). The present research identified some problems faced by insured, but they are relatively less serious and claim settlement was satisfactory. Achampong-Kyei, (2004) found the need for intensive marketing efforts, prompt processing of claims and media exposure. Such a need to educate on premium payment, renewals and claims is identified in the study.

COCNLUSIONS

Based on the above findings and discussion the following conclusions can be drawn about microinsurance distribution in Nagapattinam district.

(a) Insurance providers

Avvai and Dhan Foundation are effective in outreach and service of microinsurance. However, Avvai has to make efforts to increase the sale of policies, as it is now experiencing a negative growth trend.

In case of renewals, Dhan Foundation to lay emphasis as it has declining ratio of renewals to number of potential renewals. Avvai has to put effort to improve its ratio.

In case of claims settlement, both the organizations have good record and they have to find ways to improve customer satisfaction by educating them on microinsurance.

In fine, there is a need for strong customer awareness and understanding education to improve awareness and knowledge of microinsurance among people.

208 The survey revealed that time period between October and December seems to be wrong time to make sales of insurance. As such for sales campaigns the right period is January –September.

(b) Insured

By being members of SHGs and holders of insurance, women who took part in survey have secured their lives. However, their problems did not cease. Though government is subsidizing insurance, the renewals are low indicating inability to save for microinsurance purchase. All the respondents (390) of this study have borrowed money from different sources for different purposes.

The members, though are insurance holders, they did not have complete knowledge of microinsurance policies. There is a need for consumer education.

Marketers

 Age - Many of the above 40 year age group have experienced the problems than the other group and less satisfied. Attention is to be paid to the problems faced by the above 40 year group.  Education - The secondary and more educated showed inclination to save and insure. Less number of them are holding health insurance. They faced problems. Marketers have to focus attention on secondary and more educated to sell life and assure support in resolving problems, if any.  Occupation - There is a need to promote life among other workers and health among agricultural workers. Agricultural workers have to be assured that holding insurance can be problem free.  Income - Many of the high income group exhibited inclination to insure and save and are holding life. There is a need to promote health insurance among high-income group. They are assured that holding insurance will be problem free.

SUGGESTIONS

The major challenges as such is ‘How to induce poor women to insure for life, health, and so on?’ It is not merely due to lack of interest or lack of awareness of

209 risks and fear, but owing to lack of sufficient money to secure their life and health, that women are not showing interest to make repeat purchase of insurance.

The following suggestions are made to NGOs to increase outreach of microinsurance.

1. Develop a simple marketing information system and have data base of potential customers. Encourage clients to have a savings mechanism to save for expected and unexpected events of life. 2. Recruit field staff and provide appropriate training. Capacity development of field staff plays a key role in customer education and purchase of microinsurance.

3. Use local concepts and local language to describe the insurance products and procedures.

4. Improve client loyalty and retention. This is possible by customer relationship management. For this, marketing has to be consistent and customer oriented. 5. Marketers have to lay emphasis in promoting micro-insurance, by focusing on benefits of insurance, and hassle free transactions in purchase as well as claim settlement. Promotion should emphasize on education to create full understanding of insurance and schemes.

CONTRIBUTION OF THE STUDY

The study has contributed to the theory of economic development that enunciates inclusive policies and programmes as essential ingredients for promoting wealth and welfare of the people. Microinsurance which has got recognition worldwide has to be promoted among people in India as an inclusive initiative. The study, by examining the factors that promote insurance among rural women has contributed to the marketing of services theory and also women empowerment.

DIRECTIONS FOR FUTURE RESEARCH

There are many areas for research to make microinsurance a viable business proposition and security provider to poor.

(a) Product design – The present study took three products: Aam Admi BimaYojana (Life insurance), Universal Health Insurance Scheme (General

210 insurance) designed by Government and offered with subsidy and CARE + HS (Health-BAJAJ Allianz). A comparative analysis of products to understand the strong and weak features and suggest an innovative product can be made. (b) Promotion of insurance - The present study has identified how insurance is promoted but not discussed the effectiveness in detail. A study of promotion tools and their effectiveness in creating complete customer knowledge can be made. (c) Individual case studies of service providers – The present study has examined the efforts of two NGOs in promoting insurance in a select district. It has not provided a complete view on the working of the NGOs. Individual case studies on the NGOs is one theme that can be explored. Such studies are already made (SEWA for example), but not in Nagapattinam district and about NGOs here. (d) Comparative studies – The present study focused on Agent model. Studies on other delivery models are not yet made. Such studies can be undertaken and comparisons can be made.

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