Challenges of microinsurance in India are more systemic than institution specific. This Note tries to identify and analyse the challenges faced by the stakeholders of microinsurance in India.
The challenges are identified to be of four different types, viz.,
Strategic Positioning Issue: The insurers and their distributors are still struggling to figure out whether microinsurance can be an independent revenue generator or a value addition over their existing services.
Product Issue: High risk allocation and lack of interest of the stakeholders has restricted product innovation in microinsurance. Regulatory bias also promotes short term single benefit product as compared to long term comprehensive insurance.
Distribution and Process Issue: Marginal difference in premium has become the differentiator in Indian microinsurance; and optimum service quality is neither negotiated, nor ensured by the microinsurance players.
Latent Demand and Financial Literacy Issue: The latent demand, which could be overcome by insurance awareness, is still a limiting factor for the growth of voluntary microinsurance in India.
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