What are the Key Features of Micro Insurance Companies?

What are the Key Features of Micro Insurance Companies?
Karan Singh
| Updated: Jul 22, 2021 | Category: IRDA Advisory

Micro Insurance is a form of insurance aimed to make essential insurance items more realistically priced. It breaks down insurance from its traditional form into something much lower – including small products such as a one-time event, a one day trip, or even an exact need for health insurance. Ultimately, the idea of Micro Insurance is only about paying for the requirements of insurance. It is primarily meant to help low-income and low-income residents of poor nations have admission to insurance, but it comes in different forms. Micro Insurance plans aid to provide and meet the desires of the rural sector of India. These insurance solutions give an event for every person to safeguard their family a future to live better lives. The low rates of quality make it reasonable & the payment modes are appropriate. Scroll down to check some critical features of Micro Insurance Companies.

Micro Insurance Companies – Meaning

The company expand specified insurance products to the individual who is not capable of paying for conventional insurance. It can be controlled in many ways through licensed insurance agents, community associations or organisations, non-governmental organisations[1], and Micro-Finance Institutions.

Micro insurance has earlier had some achievements in many poor countries in the world as a way for low-income families to pay insurance, mainly covers health insurance. It is a very victorious and well-known option in many segments of the globe including, India, Brazil, South Africa, and China.

Working of Micro Insurance Companies

Micro Insurance Companies can apply themselves to roughly any kind of insurance item. Usage-based auto insurance is a highly appreciated form of Micro Insurance. With this option, an individual shall only pay the insurance on the miles they essentially drive. Those individuals who are driving few kilometres can get benefits by paying for a reduced auto insurance premium.

Following are some instances of Micro Insurance products:

  • Insurance for disability;
  • Insurance for a credit card;
  • Insurance of crops;
  • Insurance for Livestock;
  • Insurance for Burials;
  • Insurance for Natural Disasters.

Some instances of Life Micro Insurance Product:

  • A bond of Health Insurance;
  • They can be with or without an accident benefit rider;
  • A term insurance agreement or bond with or without the premium return;
  • Either on the personal basis or a group basis;
  • The endowment insurance bond.

These policies are intended independently for families and low-income individuals. These individuals can pick it up and decide as per their budget.

Significance of Micro Insurance Companies

Governments, Businesses & households in the 3rd world countries cannot easily afford traditional insurance to cover their menaces or lack the way into such services. Only 2% and 4% of companies & households, and in low-income nations, respectively, have overpowering insurance coverage compared with 30% in higher-income countries. Instead of insurance, the poor individuals rely on their family and public support, which is not always accessible for in their misfortune that influences individuals all through a region or nation at the same time.

Micro Insurance for unexpectedly strict tragedies can deliver low-income farmers, businesses and households with admission to reasonable means to expand their losses, which will improve their creditworthiness and safeguard their livelihoods. For many individuals, an insurance bond is a more noble means of deals with disasters than relying on or begging the open-handedness of donors after a tragedy strikes.

What are the Benefits of Micro Insurance Companies?

Following are some significant benefits of Micro Insurance Companies:

  1. It provides more & more people to have at least some level of insurance to protect some of their essential assets;
  2. It can bring a sense of safety to families of low income who were beforehand not able to afford the insurance;
  3. Ability to handle claims quickly and correctly, and clearly. Research also advises that when small entrepreneurs & farmers feel they are sheltered by insurance, they are eager to take more risks & spend more in new company or business ventures which is completely good for the Indian Economy;
  4. There is also much proof that could rise in reputation beyond just communities of low income. In high demand, millennial-driven Economy, many people are choosing micro-financing.

Difference Between Conventional Insurance and Micro Insurance

Factors Micro Insurance Conventional Insurance
Policies Almost no segregations, terms which are suitable to market may require non-life or life benefits. Documents for compound policy, generally in the annual terms.
Delivery Channels Usually sold by the traditional unlicensed agents to the individual, usually having lower-income groups. Sold by the license agents or entities or brokers that typically understand insurance.
Premium Regular or irregular payment of premium, pricing of groups with associates to other services. Regular, monthly, quarterly, and yearly based on age or any particular risk factors, and moreover collected regularly.
Claims Process of claims for the miniature figures. The claims process of the more significant amounts and insurance may be quite hard.
Control Efficiencies There are very few screening costs in order to reduce costs. A medical examination may be required as a screening necessity or any other tests.


It is evident from the above that it’s an essential part of the Indian Economy. It is facilitating small insurance to the poor individuals so they can remain tension free & further invest in different locations. Micro insurance is a type of insurance aimed to make vital insurance items or products more reasonably priced. It breaks down insurance in its traditional form into something much lesser.

Read our article:What are the Roles of IRDA? – An Overview

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Karan Singh

A legal writing enthusiast, a wanderer, and a zealous reader. After gaining a lot of knowledge about the diverse legal topics and developing research skills, Karan joined the league of legal content writers to deliver quality-rich blogs.


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