In rural areas, poor micro-insurance policyholders lag behind in making claims compared with others.“We found that the proportion of claims in rural areas is lesser when compared to other areas or product segments,” Mr J. Hari Narayan, Chairman, Insurance Regulatory and Development Authority (IRDA), told Business Line on the sidelines of a conference on financial inclusion and insurance.

The reason could be poor post-sales service by the insurers and lack of a contact between the agent and the policyholder after selling the micro-insurance polices, the IRDA chief said.

Micro-insurance, in which benefit is less than Rs 50,000, is covered under the rural and social obligation norms prescribed by the regulator. It is largely sold bundled with loans by microfinance firms.

Distrust

Earlier, while participating in a round table with industry experts, he said: “There is a fundamental distrust among the people and they are not unrealistic. We need to take a relook at what we are marketing and delivering.” In most cases, there is no certainty that the insurance contract would actually deliver (by way of honouring claims).

This should not happen if insurance is to spread in the rural areas, Mr Hari Narayan said.

The insurance industry, though consistent in fulfilling rural and social obligations, was treating micro-insurance only as target-bound sale but not as a business. “I think we should adopt a different method. The problem is in the mechanism of sales,” he said.

Innovative ideas such as a centralised distribution system for micro-insurance products or feasibility of technology-based methods such as prepaid cards for buying insurance and payment of premiums should be thought over.

There was also a need for product innovation based on the needs. “In South Africa, most popular micro-insurance plan was funeral insurance which accounts for 70 to 80 per cent of total product portfolio,” he said.

>nagsridhu@thehindu.co.in

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