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Regulation of Micro-insurance Regulation of Micro-insurance T. K. Banerjee T. K. Banerjee Member Member 1 1 Outline Outline -Supply” gap - response Bridging the “Demand Bridging the “Demand-Supply” gap - response of IRDA. of IRDA. -insurance regulation - idea Proposed Micro Proposed Micro-insurance regulation - idea and objective. and objective. Proposed mechanism of Supervision. Proposed mechanism of Supervision. -insurance Development role of IRDA in Micro Development role of IRDA in Micro-insurance area. area. ges envisaged in implementing the new Challen Challenges envisaged in implementing the new Micro-insurance regulation. Micro-insurance regulation. 2 2 Bridging the “Demand-Supply” Gap Bridging the “Demand-Supply” Gap Despite its teeming one billion population, Despite its teeming one billion population, India still has a low insurance penetration of 2.88 per India still has a low insurance penetration of 2.88 per cent (premium as percentage to GDP) cent (premium as percentage to GDP) st 51st in the world. 51 in the world. Around 300 million people or about 60 million Around 300 million people or about 60 million households, are living below the poverty line. households, are living below the poverty line. Only about 20 percent have access to credit Only about 20 percent have access to credit from the formal sector. from the formal sector. 3 3 Bridging the “Demand-Supply” Gap Bridging the “Demand-Supply” Gap The segment of the rural population above the poverty The segment of the rural population above the poverty line but not rich enough to be of interest to the formal line but not rich enough to be of interest to the formal financial institutions does not have proper access to the financial institutions does not have proper access to the formal financial intermediary services, including savings formal financial intermediary services, including savings services. services. A group of micro-finance practitioners have estimated A group of micro-finance practitioners have estimated annualised credit usage of all poor families (rural and annualised credit usage of all poor families (rural and urban) at over Rs.45,000 crores, of which some 80 urban) at over Rs.45,000 crores, of which some 80 percent is met by informal sources. This figure has been This figure has been percent is met by informal sources. extrapolated using the numbers of rural and urban poor households extrapolated using the numbers of rural and urban poor households and their average annual credit usage (Rs 6000 and Rs 9000 pa and their average annual credit usage (Rs 6000 and Rs 9000 pa respectively) assessed through various micro studies. (source respectively) assessed through various micro studies. (source SIDBI) SIDBI) 4 4
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