It not only protects vulnerable populations from financial risks but also contributes to the overall socio-economic development of the country

With the rising awareness around insurance in the country, it is evident that individuals are recognising the pivotal role it plays in safeguarding the financial aspect of our lives. The sector is poised to grow at an unprecedented rate in the coming years. With growing income giving the desired impetus to the sector, it is expected that the Indian insurance industry will reach a US$ 222 billion market by 2026, as per the report by IBEF. 

However, the industry faces the challenge of low insurance penetration, standing at 4%, owing to the major population of underserved communities finding it difficult to avail of insurance plans. Therefore, to bolster the prospects of the industry, it is essential to diversify and expand the insurance offering to the group to ensure the maximum number of people are insured in the country.   

Looking at the insurance gap in low-income households, microinsurance has been introduced to improve the accessibility and affordability of insurance among the group. Specifically tailored to address the risks of underprivileged communities, it focuses on protecting the population from plunging deeper into poverty. Offering affordable insurance products comes with the ability to help the groups cope and recover from difficult financial situations. Consequently, by empowering the communities, microinsurance drives the socio-economic development of the group, which invariably contributes to elevating their living standards. 

1) Boosting crisis recovery

In an attempt to alleviate the poverty of the country, the government has been continuously working towards improving the risk-handling capacity of the group. 

To achieve this purpose, the policies under microinsurance are in alignment with providing insurance cushioning from any unfortunate event. Offering compensation for a wide array of risks entailing health, term life, death, disability, crop insurance, livestock/cattle insurance, accidents, natural disasters, etc. contributes to the resilience of economically marginalised groups. Government Schemes namely Pradhan Mantri Jan Arogya Yojana (PMJAY), enabling free access to health insurance, Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Suraksha Bima Yojana (PMSBY) providing life and accident coverage respectively, further support the cause of boosting crisis recovery in the group. 

2) Fostering financial inclusion: Microinsurance, offering coverage at low premiums, encourages deeper penetration of insurance among marginalised groups. It serves the purpose of promoting the financial inclusion of the community, who otherwise were unable to avail of traditional insurance products due to high costs. Consequently, bringing the marginalised section into the formal financial system can play a crucial role in converting them into valuable assets, thereby contributing to the larger cause of augmenting the economic growth of the country.   

3) Encouraging women's empowerment: In rural India, women play an integral part in managing the household, and along with this, they actively participate in income generation. 

To further drive the empowerment of women, government schemes such as Mahila Kisan Sashaktikaran Pariyojana (MKSP) can invariably contribute to creating agriculture-based livelihoods for women belonging to rural areas. Specifically devised to cater to the unique needs of women, innovating and introducing more ground-breaking microinsurance programmes for women can bolster their financial independence.

Along with this, the awareness created around microinsurance can help women improve the health outcomes of their families by availing healthcare services and timely facilitation of medical treatment. It can immensely assist them in making informed decisions for driving the well-being of their families.

(The writer is a financial advisor, views are personal)