The Hindu Business Line : ‘Market micro insurance via post offices’

Mumbai, Nov 14 Insurers need to look at other distribution channels such as post-offices for marketing micro-insurance, said Mr P Chidambaram, Union Finance Minister. Micro-insurance implies small ticket policies customised for the lower-income groups.

Most insurers have been selling micro-insurance through non-governmental organisations and micro-finance institutions. “ There are 50,000 offices of different banks. Our post office-network is even more impressive and micro-insurance products can be delivered through them,” Mr Chidambaram said at a micro-insurance conference here today.

Trickle-down must

Citing the example of self-help groups, he said that 99 per cent of the accounts of Self Help Groups are performing accounts. “The poor can be trusted and recognise what financial obligations are,” he added.

Mr Chidambaram said ,“While growth is an antidote to poverty, governments, regulators and administrators need to turn their attention to the bottom of the pyramid. Growth does not always trickle down the to the bottom of the pyramid.”

He observed that the strategy for micro-insurance should take into account challenges like distribution, the ability to distinguish between good and bad risk and the reduction of transaction costs.

Intermediation factor

Also speaking at the conference, Mr C.S. Rao, Chairman, Insurance Regulatory and Development Authority, expressed concern about the coverage of micro-insurance.

The Chairman said that insurers do not neglect the low income groups because they are “poor risks” but because the intermediaries on whom the insurers depend to procure business do not consider it worth their while to deal with small premiums flowing at infrequent intervals. “The intermediaries are more concerned with corporate clients and high net worth individuals whose business brings attractive commissions. Intermediation thus becomes the key,” he said.

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