Microinsurance is a type of insurance designed to cater to the needs of low-income individuals and households, who often face financial insecurity due to a lack of access to formal financial services. It provides a safety net against unexpected events such as illness, accidents, and natural disasters, which can cause significant financial strain for those living in poverty. For low-income groups, micro-insurance can be crucial in providing financial stability and protection against risks that could lead to financial ruin. Many individuals in this group have little to no savings and live pay check to pay check, making them particularly vulnerable to financial shocks. Microinsurance plays a critical role in promoting financial inclusion and economic empowerment for low-income households. By providing access to insurance, these individuals can begin to build assets and investments, which can help break the cycle of poverty. In addition, it also promotes social welfare by reducing the burden on public services and resources, particularly in developing countries where government resources may be limited. By providing access to affordable insurance, the need for government assistance in the event of a crisis can be reduced, freeing up resources for other needs. Healthcare is a basic yet expensive necessity and microinsurance allows individuals from the poorer section of society to access it. Currently, individuals limit themselves to only government healthcare offerings, therefore, barring them from better healthcare facilities. Microinsurance cannot offer them the best of the facilities however, it has the capacity to elevate them from the basic healthcare offerings. This also reduces the government’s assistance and allows them to use resources for other needs. Last but not the least, a very significant aspect of microinsurance is its ability to build creditworthiness among the individuals who avail of it. It gets them introduced to the financial database thereby helping them to avail of larger financial services in the future that otherwise could be unavailable to them. Overall, microinsurance can help low-income groups build financial security, protect against unexpected events, and improve their access to healthcare and other essential services. This can help them break the cycle of poverty and achieve greater economic empowerment. How can Microinsurance be offered to low-income groups? A number of methods have been set up to reach the underserved segment to offer them microinsurance and bring them to the base of financial products. As stated in the figure above, commonly used methods to offer microinsurance are Microfinance institutions, Community-based organizations, Mobile network operators, Public-Private Partnerships, Innovative Business models, etc. Community-based organizations find it easier to tap this segment as there’s a trust factor already imbibed between them. Nonetheless, all methods to reach the said segment have proven to be effective and slowly yet steadily, the financial domain is getting to the low-income group.
Tag: microinsurance
iServeU; Serving the Rural
India’s Rural segment amounts to approximately 900 million individuals and massive scope of work. The Government of India (GOI) and financial institutions are working tirelessly to bring the said underserved market on a symmetrical platform of inclusivity. In recent years, financial institutions have been able to reach deep rural areas of India by leveraging the rails set by the government, for instance, UPI Lite and 123UPI. The said improvement can be noted in the growth of the Financial Inclusion Index which grew from 53.9 in 2021 to 56.4 in 2022. Fintechs or upstarts have been active participants in this master plan. By combining technology with finance, Fintechs are making their way through various obstacles. By designing products and literacy programs apt for the target audience, they are promoting financial inclusion, freedom and empowerment. iServeU, a Niyogin subsidy, aims to power the rural segment through its Rural Tech platform. By implementing its distinguished idea of leveraging existing infrastructure and physical distribution channels, iServeU partners with business correspondents who onboard local retail stores or Kirana stores. This approach makes the intention of financial inclusion achievable as penetration into the market through trusted sources of the said community is easier. At present, iServeU has successfully impanelled more than 3,00,000 kirana stores spreading across 25,000 villages! The intention of embracing such a distinctive method of reaching out to the rural population is the need to reduce costs. By leveraging the existing base, iServeU sizeably reduces its operational, customer acquisition and go-to-market costs. By collaborating with partners, business correspondents and agents while equipping the impaneled retail stores with frictionless and easily accessible banking, financial and payment services, iServeU opens a world of financial services to the rural population. As the diagram projects, iServeU’s product stack comprises of Aadhaar Enabled Payment System (AePS), Micro-ATM, Bharat Bill Payment System (BBPS), Domestic Money Transfer, Transaction-led credit and Microinsurance. These products are offered to the rural population through impaneled retail stores and facilitated by allied banks. In this entire process, third party or business correspondents play a major role. iServeU empowering stakeholders The Rural Tech platform empowers its stakeholders by offering – Income augmentation to Retailers Network monetization for Partners Optimize market access and product delivery for Banks Customer-centric approach that enables a tech-driven environment for the Customers Impact on the Rural areas as a whole Empowering Micro-businesses through micro-credit iServeU’s entire product service activity is digitally driven. Range of Products Aadhaar Enabled Payment System (AePS) Considering a significant chunk of individuals residing in rural areas have limited access to education and therefore find it difficult to adapt to the concept of digital transactions, iServeU presents them with an opportunity called AePS. Through fingerprints or an Aadhaar card, individuals can now make quick cash withdrawals, make balance inquiries and much more. Micro-ATM (m-ATM) An equivalent of AePS, m-ATM allows individuals to withdraw cash and enquire about their bank balance. However, in this case, they require a debit card. iServeU equips its impaneled Kirana stores with an android app that has a card reader embedded within to make these transactions possible. Bharat Bill Payment System (BBPS) By onboarding over 100 recharge and bill operators, iServeU ensures the rural population can go digital while making payments. It lets them digitally make instant mobile, landline, electricity, broadband, water and gas bill payments. The interconnected bill operators ensure that these services are automated and uninterrupted. Direct Money Transfer India has about 450 million internal migrants and Domestic Money Transfer is an intrinsic part of them. Migrants often rely on unmonitored methods of money transfer and therefore are often scammed by intermediaries. iServeU offers a regulated method, i.e., Domestic Money Transfer service to migrants where their money is transferred to their family members securely. Furthermore, the elimination of an intermediary has played a big role in limiting fraudulent activities. Micro-credit In terms of micro-credit or loans, rural areas are severely underserved. Owing to the lack of accessibility coupled with the risks associated with rural lending, financial institutions are apprehensive to venture. However, 52.3% of the total MSMEs are hosted in rural areas making the said audience a potential target audience. Taking this as an opportunity, iServeU now offers micro-loans to businesses in rural areas with limited access to financial services. Micro-insurance The rural population majorly falls in the low-capita income threshold along with having limited financial literacy. This makes it impossible to weigh them at par with services offered to the urban market. iServeU offers the rural market micro-insurance where they can insure their assets at affordable prices from trusted sources near them. iServeU’s growth chart Partners iServeU has developed manifolds in the past years and currently holds a retailer network of 2,46,853 individuals. The Gross Transaction Value (GTV) of the Rural Tech platform was C 87.2 billion in FY22, up 51% YoY from C 57.6 billion in FY21. The overall growth in iServeU’s model planning, partners, retailers, etc., indicates a positive trajectory further toward complete financial inclusion!