NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, January 20, 2014

Micro-insurance or micro agent was a channel in the insurance industry that was developed for deeper penetration of insurance into India. However, with smaller ticket size coupled with low commissions, this channel has seen low participation from distributors.

Micro-insurance products, which offer coverage to low income households is a mechanism to penetrate rural areas. It is a general or life insurance policy with a sum assured of Rs 50,000 or less, however the average ticket size ranges from Rs 2000-4000 per policy.

The main reason behind few sellers of micro-insurance policies could be low commissions. As per the Insurance Regulatory and Development Authority (Irda)’s micro-insurance regulations, the commission for these agents is capped at 15 per cent of the premium in non-life segment and in life segment it is 20 per cent of the premium for the years of premium paying years (10 per cent for single premium policies).