Extending Formal Insurance to the Informal Economy Workers in India

This paper examines the developments taking place in the field of micro insurance in India, and suggests ways of promoting insurance among the poor. In particular, it examines:

• Why is flexibility in premium collection essential for the success of microinsurance?
• Why embedding micro insurance into microfinance, which is gaining momentum in the country, makes good sense?
• What are the policy issues that revolve around extending economic security to the workers?

The paper deals with the following issues:

• The factors leading to the development of micro-insurance in India;
• The institutional innovation that is making sale of insurance to low-income people possible;
• The developments on the supply and demand side of micro insurance.

The authors present some of the activities being undertaken in the country to reach informal economy workers:

• A policy induced intervention for all formal insurance providers to service the low-income and disadvantaged segments of the society;
• Introduction by formal insurance providers of a range of products for the informal economy workers and their families;
• At the institutional level, the active role of numerous civil society associations/organizations in extending the reach of insurance products designed for the low-income people.

Finally, the paper concludes with certain recommendations for the future:

• A significant percentage of informal economy workers can be insured by the insurance companies;
• Given the benefits of linking micro-insurance with microcredit, there may be a case of subsidizing insurance premium for people who take loan;
• Micro-insurance should, at best, be considered only one of the strategies of extending protection to the people, there ought to be a multi-pronged approach.