Micro insurance is the key element in the financial services for people at the bottom of the pyramid. The poor face more risks than the well off, but more importantly they are more vulnerable to the same risk. Usually the poor face different type of risks i.e. Household type, drought and epidemic etc. To combat these risks, the poor do, proactive risk manages meat like grain storage, savings, assets accumulation loans from friends and relatives. Micro insurance provides greater economic and psychological security to the poor as it reduces exposure to multiple risks and disasters. There is an overwhelming demand for social protection among the poor. Micro insurance protect the low income household against specific perils in exchange of premium. Micro insurance has helped the rural population a lot, because it created as awareness of proper risk management and saving instruments. In India 80% of population is still living in rural areas and there is a lot of potential for insurance in this segment. But no major company has though of really entering this market yet.
Although the type of risks faced by poor such as that if death, illness, injury and accident are not different from those faced by others. Poor are more vulnerable to such risks because of their economic circumstances.
In the past insurance as a prepaid risk managing instrument was never considered as an option for the poor. The poor were considered un-insurable, because wide Varity of risk they face. However recent development of India, have shown that the poor can make small periodic contributions and they can be insured for the risk they face, such as illness, injury, loss of life and loss of property.
Thus the micro insurance is emerging as a prepaid financing option for risks facing poor.
Now the micro insurance schemes have gathered the momentum, due to regulations of IRDA agency. As per the new guidelines of IRDA that, it is mandatory for all formal insurance...