Authors: Mirai Chatterjee & Ruchi Agarwal
This blog delineates the Microinsurance industry of India in the global context and VimoSEWA’s contribution to women led model of microinsurance cooperative providing financial protection and livelihood to women from the informal sector.
Insurance is a contract in which an individual or entity pays an insurance entity in exchange of financial protection or reimbursement of losses resulting from a covered risk. In other words, insurance offers financial protection to individuals and organizations against various kinds of risks such as life, illness, wage loss, asset loss, accident and so on.
The Insurance Industry – Global Landscape
The global insurance market grew from $5,376.92 billion in 2021 to $5,838.43 billion in 2022 at a compound annual growth rate (CAGR) of 8.6%. The insurance market is expected to grow to $8603.8 billion in 2027 at a CAGR of 7.4%.
North America was the largest region for insurance industry growth whereas Asia-Pacific was the second largest region in the insurance market in the year 2022. Countries such as Philippines, India, Thailand Vietnam, Indonesia are front runners in APAC.
Insurance Industry – Indian Landscape
Indian Insurance market stands at $131 billion of the global insurance market as of FY 2022. The Indian insurance industry grew at a CAGR of 17% over the last two decades and is expected to continue its commendable growth trajectory in the year ahead.
India is ranked 11th in global insurance business and its share is only 1.9% of the global insurance market which is far less than its potential. As of now, India has few insurance companies as compared to the US has 5,965 and Germany has 528. Thus, incumbent insurers have to go a long way to meet the insurance needs of the people.
There is another noticeable difference between life and non-life insurance products in India. Most of the insurance business is skewed towards life (74%) with non-life insurance (including motor, health, assets etc.) accounting for only 26% of the business.
What is Microinsurance?
Microinsurance is a special category of insurance designed for the low income segment of the country. Microinsurance products are affordable as the premium is usually kept nominal to widen its reach among informal women workers and others who constitute the working poor and low income families. The global microinsurance market reached a value of US$ 78.4 billion in 2021. Looking forward, the market is expected to reach US$ 111.84 billion by 2027, exhibiting at a CAGR of 6.1% during 2022-2027.
Need for Microinsurance – Indian context
India has a population of 1.39 billion and is one of the fastest growing economies today. According to the World Bank, it is a middle-income country and yet has a large informal economy with over 90% of its population in this segment. The informal economy accounts for about 93 percent of total employment in the country, which includes both informal sector workers and workers in informal employment in the formal sector. Informal workers lack regular income, and have Iow access to any kind of social protection. According to 2011-12 estimates, approximately 435 million people constituted the informal or unorganized sector in India or more than 90 per cent of the workforce. It can be safely estimated that in the last decade, this figure has increased to at least 500 million.
For low-income families, calamities such as illnesses, accidents, death or the loss of assets often have very grave financial consequences. Such events can push these families deeper into poverty as their meagre resources get depleted. Many get drawn into debt traps as they borrow beyond their means, sell productive assets, withdraw children from schools or put them to work, compromise on food, or leave sickness untreated. The need for low-income families to take insurance, therefore, cannot be emphasized enough.
IRDAI (Insurance Regulatory Development Authority of India) formulated regulations for microinsurance in 2005 to boost the penetration of microinsurance among the informal workers and poor population of the country. Even though the measures provide a broad framework to promote microinsurance, the share of the microinsurance business in the total insurance business continues to remain extremely low in India. This is partly due to several reasons such as lack of insurance awareness at the grassroots level and among citizens in general, challenge of logistical reach to far flung villages, growing migratory population in urban slums, difficulty in sustaining and renewing premiums for both individuals and enterprises, and lack of appropriate products and services as per the need of low income families, and informal workers in particular.
The Indian microinsurance sector has only covered 9 per cent of the overall population and 14.7 per cent of the potential microinsurance market size in the country. In comparison, other Asian countries, like the Philippines and Thailand, had coverage ratios of 20.6 per cent and 13.9 per cent of their populations respectively. The data highlights the gap in providing insurance to a population of 500 million in India’s bottom of the pyramid.
Microinsurance distribution channels
The agents/ intermediary driven model is largely used to sell microinsurance in India which is home to 92,000 registered voluntary organizations and NGOs, 6.5 million Self Help Groups (SHGs) and 223 microfinance institutions (MFIs). Of these, only 72,857 are registered as microinsurance agents, of which 9% are NGOs, 0.5% are SHGs and 0.4% are MFIs.
Microinsurance plans are generally divided into two broad categories – general insurance and life insurance. A general microinsurance product covers health insurance, personal accidents, and assets such as livestock, habitats, etc, and can be availed at an individual or a group level. On the other hand, a life microinsurance product can be a term or endowment plan. Again, this can be purchased at an individual or a group level.
VimoSEWA: an introduction
National Insurance VimoSEWA Cooperative Ltd. is a full service multi-state cooperative promoted by SEWA (Self Employed Women’s Association) working to provide social protection to informal sector women workers and their families. Established in 1992 as a unit in SEWA Bank, VimoSEWA developed into a full-fledged cooperative in 2009, with women as share-holders, policy-holders and insurance promoters. Currently, around 526 women from 5 states–Bihar, Delhi, Gujarat, Madhya Pradesh and Rajasthan are the individual shareholders and 11 membership-based organizations of the SEWA movement are institutional shareholders. VimoSEWA markets its products through dual channels both as insurance mutual and as an intermediary. More recently, VimoSEWA has increased its footprint by initiating work in a few aspirational districts of Assam. VimoSEWA is a pioneering micro-insurance entity focusing on the risks of informal women workers and their families. VimoSEWA accomplished several milestones in the last three decades and made its mark in India and globally as a unique model which was replicated in a few African countries by support from the Govt of India.
Overview of VimoSEWA’s Journey
VimoSEWA’s journey from the late 1970s has been driven by the needs of SEWA’s women members. According to reports, a higher proportion of women (96 percent) than men (91 percent) work in the informal sector of our country. Women tend to be in the lower-paid and less skilled jobs, and also tend to be less organized. They are farmers, agricultural laborers, vegetable vendors, garment workers, and construction workers among others, and are dependent on daily wages or income. To cater to the needs of the women in the informal economy, VimoSEWA has experimented with various types of insurance products, distribution channels, client servicing strategies, and changes in management systems. The journey has had many successes and challenges, and several proofs of concepts along the way. Building capacities of Aagewans or insurance promoters and facilitating their livelihoods has been a key aspect of its operations.
In the early years, it was not envisaged that VimoSEWA would be able to reach thousands of women across the country with financial and social protection. “It has been a journey rich with lessons of how to reach the poor, and especially the hard-working women of our country. We have not only learned that informal women workers are insurable, but also that such risk coverage is essential for women’s economic empowerment and self-reliance,” says Mirai Chatterjee, Director, SEWA Social Security and Founding Board Member, VimoSEWA.
During the past 3 decades, VimoSEWA has issued 10 lakh policies to women workers and paid claims of Rs 26 crores to women and their family members.
In 1992, VimoSEWA had a single bundled product for women. By paying a single premium, a woman could be covered against her own death (natural or accidental), her husband’s accidental death, her hospitalization, and the Ioss of livelihood-related assets. This bundled product was a major innovation – while the client paid a single premium for a basket of coverage, VimoSEWA segregated the premium amount which was to go to different insurance companies. In the year 2000, based on demand from the members, VimoSEWA introduced life and health insurance for the husbands of its insured members. In 2001, two additional bundled schemes with higher levels of premiums and benefits were also added. In January 2003, once again in response to its members’ demand, VimoSEWA introduced children’s health insurance. As a result, by 2003 VimoSEWA was providing insurance protection to the entire family, as long as the primary member was a woman. VimoSEWA worked with insurance companies to develop their products to serve women’s needs. It organized small workshops with women and actuaries from insurance companies to actually develop microinsurance products.
Customization of products to meet the needs of women has been a forte of VimoSEWA. For instance, the initial health insurance product offered by the insurance company did not cover gynecological ailments, which were important for SEWA members. To remedy this, VimoSEWA succeeded in persuading the insurance companies to expand the coverage to include gynecological illnesses. Similarly, insurance companies initially refused to honor hospitalization or death resulting from work-related hazards, such as falling off a tree while picking tendu leaves or being bitten by a snake while working in the fields. Over the years, the insurance products have become more varied and now they have higher risk coverage. VimoSEWA has a few insurance partners who collaborate in developing customized products. The organization also works as a mutual by curating its own products such as the wage loss compensation insurance product mapped to MGNREGA and the floater hospicare policies.
The distribution and servicing of VimoSEWA’s insurance products is carried out by local women leaders called Aagewans, who are supported by a team of full-time staff. It has been found that a women-led sales force is better able to understand the risk protection needs of the entire family as they are from the same communities—they are also informal women workers. In addition, women clients are more comfortable engaging in discussion with women agents. VimoSEWA Aagewans go through orientation and training covering the concept of insurance, and covering techniques for effective communication. The aagewans’ strong linkages with the communities in which they work position them strategically to effectively distribute and service VimoSEWA members.
VimoSEWA also distributes insurance through SEWA Shakti Kendras (SSK). SSKs are convergence and coordination centers located in the areas where members reside. They aim to empower communities by strengthening members’ capacities to access entitlements through mobilization, building awareness, initial hand-holding, and nurturing grassroots leadership. At the SSKs, community members can get information on SEWA initiatives like VimoSEWA, government departments and schemes, and application support.
Contemporary and futuristic adaptations through digitization
Since its inception, VimoSEWA’s mission is not one of simply ‘selling insurance’, but also of helping its women members to become promoters in developing social protection mechanisms for themselves and their families and earning their livelihood. Ever since the Covid-19 pandemic struck and movement of people got restricted, VimoSEWA has been trying to expand its reach and services with the help of digital technology. It has developed a mobile app to modernize its operations and provide its services to customers. This digital adaptation has also engendered capacities of the VimoSaathis as they have started end-to-end process of member enrolment and claims on the mobile app. Covid proved to be a challenge in some ways but was conducive in catalyzing change in terms of women adapting to digital technology and this is substantiated by a report on its website Leveraging digital technologies to enable women’s co-operatives: experience of national insurance (sewainsurance.org).
The overarching objective of VimoSEWA continues to be empowering the women of the informal economy, and their needs will continue to provide impetus to the organic growth of the organization. VimoSEWA is fully aligned to the global UN SDGs 1, 2, 3, 4,8,10,11 and 17 and continues to create impact at the grassroots through its work.
- Insurance Global Market Report 2022 (globenewswire.com)
- Insurance Industry in India – Insurance Sector Market Analysis (investindia.gov.in)
- Insurance: Definition, How It Works, and Main Types of Policies (investopedia.com)
- Insurance Market Size, Trends and Global Forecast To 2032 (thebusinessresearchcompany.com)
- Microinsurance Market: Global Industry Trends, Share, Size, Growth, Opportunity and Forecast 2022-2027 (marketresearch.com)
- Insurance Global Market Report 2022 (globenewswire.com)
Disclaimer: The data cited in the blog content is subject to change periodically for the industry and the organization. VimoSEWA is not responsible for the accuracy of secondary data cited from various sources for reference in the blog.