Micro insurance policies protect beneficiaries during a crisis

38 year-old J. Vasuki of Poolangulam in Madurai east taluk is not only the proud owner of seven milch cows but also wise. She has insured her cattle.

When one of her cows died of snakebite, she got Rs.12,000 as compensation after paying out just Rs.212 towards annual premium for a cattle insurance policy.

On the other hand, O. Chinnaponnu (50) of Kallumedu near Sakkimangalam here lost a substantial portion of her investment after purchasing sheep that died of poor health.

The woman had no other go but face the music at the hands of usurious moneylenders because she had not insured the animals.

“It is to safeguard women like Chinnaponnu and encourage people like Vasuki that companies like us have come out with ‘micro insurance policies’ under which people can insure anything and everything for a premium beginning from as low as Rs.12 a year,” says V. Raghunathan, Chief Regional Manager, United India Insurance Company.

He points out that micro insurance policies could be availed for securing investments involving livestock, animal-driven carts, agricultural pump sets, biogas plants, residential huts, petty shops and even beehives.

Medi-claim and accidental death cover policies are also available on payment of a nominal premium.

Since awareness of these policies is low, especially in rural pockets, insurance companies have tied up with nationalised banks to promote them through self-help groups.

“Savings-first, credit-next and insurance is a must, is the message we are disseminating,” says M. Selvanayagam, Manager, Indian Bank, Karuppayurani branch.

According to him, the Union Finance Ministry's aim of establishing over 8,000 bank branches in rural and semi-urban areas by the end of this financial year and the target set during the last two years to open 6,000 bank branches across the country every year have taken banking to the doorsteps of the poor and needy.

First step

“Rural women who have so far been saving money inside clay pots and chilli powder containers to hide it from their husbands, have now started to save it in banks. The first step towards financial inclusion is the opening of a bank account. It is followed by introduction to insurance policies and then to stock market investments,” he says.

Mr. Selvanayagam points out that relaxation of the rule of maintaining a minimum balance of Rs. 500 in a Savings Bank account in case of urban branches and Rs. 250 in rural branches has created wonders in rural areas. “The introduction of the no-frills bank account which could be opened with as low as Rs.5 is a big hit among villagers,” he adds.

Replying to a query on the economic viability of opening up branches in rural localities, K. Santhosham, Assistant General Manager, Indian Bank, says: “The branches will become viable in the long run. At the same time, I must also point out that some of our semi-urban branches are doing well and making business to the tune of Rs. 50 crore a year."

Stressing that nationalised banks cannot be strictly business-minded as they also have a role to play in the inclusive development of society, he points that his bank has taken a policy decision not to withhold even a single rupee paid to it as commission for selling micro insurance policies.

The entire commission is paid to its business correspondents who act as a bridge between the bank and its rural customers. There are no major issues with regard to repayment of bank loans as the credit-deposit ratio in Tamil Nadu is more than 100 per cent as against the national average of around 70 per cent.

The banks have now joined hands with insurance companies to sensitise members of self-help groups to the need to avail micro insurance policies.

“In 2004, we convinced a taxi driver to pay a premium of Rs.80 for a personal accident insurance policy. The insurer died when the tsunami struck the coastal areas of Nagapattinam the same year and we paid Rs.1 lakh to his widow and child. The incident highlights that accidents may happen any time. Therefore, it is up to us to secure ourselves and our family,” Mr. Raghunathan points out.

More In: Madurai