Micro insurance companies: Key features

Rajdeep Saini

16 Nov, 2020

Micro insurance is a type of insurance intended to make crucial insurance products more reasonably priced. It breaks down insurance from its conventional form into something much lesser—covering small items such as a one-time event, a one day trip, or even a specific need for health insurance.

Eventually, the concept of micro insurance is only about paying for the needs of insurance. It is predominantly meant to assist people of lower income and the residents of poor countries have admission to insurance, but it comes in various forms.

Micro insurance plans help cater to and meet the wants of India’s rural sector. These solutions of insurance provide an occasion for every individual to protect their family a future to live better lives. The low rates of the premium make it reasonable and the payment modes are suitable.

What are the micro-insurance companies?

The corporate extend specified insurance products to the people who are unable to pay for traditional insurance. It can be managed in many numbers of ways—through community organizations, licensed insurance agents, non-governmental organizations, and micro-finance institutions.

Micro insurance has previously had some achievement in many poor countries as a way for low-income families to pay for insurance, mainly health coverage. It’s a very successful and popular option in many sections of the world including India, South Africa, Brazil and China.

Working of the micro-insurance

Companies can apply themselves to approximately any kind of insurance product. Usage-based auto insurance is a well-liked form of micro-insurance. With this option, a person shall only pay the insurance on the miles they actually drive. Those people who are driving fewer kilometers can obtain benefits by paying for a lower auto insurance premium.

Some examples of micro insurance products include:

• Insurance of crops
• Insurance for disability
• Insurance for natural disaster
• Insurance for Livestock
• Insurance for Credit card
• Insurance for Burials

Some examples of life micro-insurance product are:

• A term insurance contract without or with the return of premium
• The endowment insurance contract
• A contract of Health Insurance^[1]
• They can be without or with an accident advantage rider
• Either on the individual basis or a group basis.

These policies are designed independently for the families and low income individuals. These individuals can easily pick it up and decide according to their budget.

Micro insurance and Conventional insurance

Importance of Micro insurance

Businesses, Governments, and households in third world countries cannot simply afford commercial insurance to cover their menaces, or they lack the way into such services. Only 2% and 4% of households and companies and in low-income countries, respectively, have overwhelming insurance coverage, as compared with 30% in higher-income nations. Instead of insurance, the poor people rely on their public and family support, which is not always approachable for in their tragedy that influences people all through a country or region at the same time.

Micro insurance for surprisingly severe tragedies can provide low-income farmers, households, and businesses with admission to reasonable means to spread their losses, which will improve their credit worthiness and protect their livelihoods. For many people, a contract of insurance is a more noble means of deal with disasters than relying on (or begging) the open-handedness of donors after a tragedy strikes.

Benefits of Micro insurance

It facilitates more and more people to have at least some level of insurance to guard some of their most important assets. It can bring a sense of safety to families of low income who were beforehand not capable to afford the insurance.

Some other benefits include the ability to handle claims quickly and accurately and transparency. Research also suggests that when small entrepreneurs and farmers feel they are sheltered by insurance, they are eager to take more risks and spend more in new business ventures which is overall good for the Indian economy.

There is also much evidence that could grow in reputation beyond just communities of low income. In high demand, millennial driven economy, many people are opting for micro-financing.

Conclusion

Read our article:Benefits of Micro Finance Business in India