‘Sector needs access to tech funds on micro-credit model’
Mumbai, June 10 LIC has set a target of selling 40 lakh micro-insurance policies this year, said Mr T.S. Vijayan, Chairman, LIC.
With the establishment of a technology platform and tie-ups with NGOs, micro-finance organisations, co-operative societies and rural banks, the corporation expected to sell 40 lakh micro-insurance policies this year, against 8 lakh policies in the previous year, Mr Vijayan said, speaking at the SKOCH Banking Financial Services and Insurance summit.
LIC’s micro-insurance policy, “Jeevan Madhur” was launched in 2006 and, offers the option of a minimum weekly premium payment of Rs 25.
He said the corporation had devised new products, both in terms of payment schedule and delivery, for the rural areas keeping affordability of the rural people in mind.
Mr Vijayan said that distribution costs in the case of micro-insurance policies were high.
“It has been estimated that, if the cost of a policy is Rs 300-400, the cost of distribution is double that,” he said.
He suggested that as in the case of micro-credit, the insurance sector should also have access to technology funds for micro-insurance,
“There is a technology infusion fund available with the Reserve Bank of India for micro-credit and another one with Nabard for giving micro-credit.
These or some such additional measures should be made available to the insurance sector,” he said
The Chairman also called for all-round pooling of resources of insurance companies to evolve an integrated insurance product covering life, health as well as other areas.
“For this, insurance companies will need to come together as a “virtual corporation” offering a combined micro-insurance face while the technology handles the back-end break-up of who gets to service what part.
A business structuring for a settlement and servicing mechanism can also be worked out,” he said.
In the last fiscal, the insurance industry sold over 5 crore policies of which 1.1 crore were sold in rural areas. However, in terms of penetration, urban India remains ahead.
Penetration in urban India is 47 per cent, while it is only 27 per cent in rural areas.