‘Life insurance companies would have to begin developing viable micro insurance policies in terms of pricing and risks’

Our Bureau

Chennai, April 28 Distribution is by far the greatest retarding factor in the growth of micro insurance in India as well as most developing countries, says Mr Mosleh Uddin Ahmed, CEO of the UK-based Microinsurance Research Centre.

He was one of participants at the training programme on ‘Scaling up Micro Insurance in Developing Countries’, conducted by IFMR’s Centre for Risk Management and Insurance in collaboration with Wharton School, University of Pennsylvania.

Delivery scale

It has been seen that micro insurance delivery did not achieve substantial scale compared with the worldwide micro finance movement.

One strong argument to corroborate this has been the need for exporting ‘local risk’ to highly capitalised external ‘risk carriers’.

The ability of these risk carriers to operate across mass markets in developing countries is restricted by lack of reliable data and absence of alternate means of risk assessment, said Mr Denis Garand, an actuarial consultant from Canada.

Another crucial issue is that life insurance companies would have to begin developing viable micro insurance policies in terms of pricing and risks, said Mr Garand.

Major challenge

The major challenge in data collection can be overcome by using cost efficient technologies such as ‘biometric smart card’, where the details of each person are stored, said Mr Ahmed.

Ms Joy Kemibaro, CEO, Tanzania-based First Microinsurance Agency, said that it has been seen among rural poor that the acceptance of life micro insurance was better compared with health micro insurance. Creation of awareness for the need of health insurance is important, she said.

Difficult task

Mr Ahmed said that selling health insurance has been a ‘difficult task’ among rural poor as they typically do not want to invest upfront in health insurance but prefer to pay the bill for an expensive healthcare treatment when their health deteriorates.

This is basically because the rural poor place ‘cash in hand’ at a premium over others and therefore education on health insurance becomes crucial, he said.

(This article was published in the Business Line print edition dated April 29, 2009)
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