Microinsurance
Topic: Financial Markets, Instruments, Insurance and Pensions · NCERT: Beyond NCERT
Meaning
Microinsurance is low-premium, low-cover insurance made for poor households. It protects them against shocks such as death, accidents, illness, or crop and livestock loss, which could otherwise push a family deeper into poverty. The premiums are small enough for low-income families to afford, and the products are kept simple. IRDAI set out microinsurance regulations in 2005 and revised them in 2015.
Example
In 2015 the government launched two low-cost schemes for ordinary bank account holders:
- PMJJBY: life cover.
- PMSBY: accident cover.
For a very small yearly premium, a daily-wage worker's family gets a payout if the worker dies or is disabled.
Don't confuse with
- Parametric insurance: pays a fixed sum when a measurable trigger crosses a threshold, such as rainfall below a set level. It is defined by how it pays, not by who it serves. Microinsurance is defined by its target group (the poor) and its small size.
Related concepts
- Insurance penetration
- Bancassurance
- Reinsurance
- Parametric insurance
- Catastrophe bonds
- Surety bond
- Composite insurance licence
- Defined benefit pension
- Defined contribution pension
- National Pension System