Govt Must Chip In To Make Insurance Viable For Masses

New Delhi, September 16: | Updated: Sep 17 2003, 05:30am hrs
Making a case for government support at the grassroot level, Life Insurance Corpora-tion (LIC) chairman SB Mathur said insurance can be delivered at the micro level effectively only if transaction costs are reduced.

He was speaking at the valedictory function of a two-day workshop on micro-insurance organised here by the Insurance Regulatory and Development Authority (Irda) and Self-Employed Womens Association (Sewa) here on Tuesday. Mr Mathur pointed that there had been over 18 lakh beneficiaries of the social insurance schemes being run by LIC. However, experience had thrown up the need for a nodal agency to collect premia and ensure claims go to the right beneficiaries. The cost of distribution and efficient delivery of products is the critical factor, he emphasised.

While the costs of developing a product and systems and distribution were not as high as overseas, they were still very high and need to be made more viable.

If the government chipped in with support, the long-term generation of sheer volumes could make the schemes viable ultimately, he felt.

Banking and insurance secretary NS Sisodia said there were two possible approaches towards micro-insurance. The government could either change laws and the policy framework, or use partnerships between micro-finance institutions, non-government organisations and insurers.

He underscored the fact that MFIs offered services ordinarily not available to the poor and deprived sections of society. The emergence of over seven lakh self-help groups showed the change being wrought in this direction. Another two lakh would be set up by the end of this fiscal, he expected. These were already covering the credit and social needs of millions of families. The advantage of participative and collective responsibility under which these programmes operate was a powerful instrument for delivery of micro-insurance to the masses, he felt.