Insurance companies are developing a greater number of options for rural Indian and low-income customers. Leveraging grassroots representatives such as a milk procurement supervisor for a milk union to double as a part-time insurance agent, insurance companies are customizing various insurance products to make them more attractive to poor customers. Micro-insurance has typically been delivered through partnerships between life insurance companies and microfinance institutions; partnerships include those between Aviva Life Insurance and BASIX, Arohan and Anjali Microfinance, and Bajaja Allianz and SKS Microfinance. Fifty two-year-old Madanpal is a milk procurement supervisor at Ludhiana Milk Union. He maintains checks and balances at the local collection centre and settles accounts. But he also doubles as a part-time insurance agent, educating colleagues on the benefits of having a life cover.

Like Madanpal, many grassroot representatives are being roped in by insurers to shore up presence in India’s hinterland. And micro insurance is gradually becoming big business.

Bajaj Allianz Life Insurance, a JV between Allianz and Bajaj FinServ, is betting on dairy co-operatives. The insurer has a customized life insurance product with a savings component. Called Sarva Shakti Suraksha (SSS), the 5-year endowment plan charges a monthly premium of Rs 45 for a policy value of Rs 25,000. The policy is simple, and even if a premium is delayed, the policy does not lapse.

The milk co-operatives have a sizable base of 13 million members who collect 110 million tonnes of milk valued at Rs 1,80,000 crore. SSS has been a success with cooperatives like the Punjab State Cooperative Milk Producers’ Federation that has four lakh members. “We are now looking to replicate the dairy model in the south. We’ve come a long way from merely looking at microinsurance as a regulatory requirement that we need to fulfil. Since 2008, we have sold 40 lakh SSS policies with Rs 450 crore of assets under management,” said Yogesh Gupta, the head of micro insurance and business procurement at Bajaj Allianz.

Buoyed by the response, the company has set a target of selling another 20 lakh policies by the end of the current fiscal, taking the tally to 60 lakh policies. The company has also joined hands with SKS Microfinance to market the SSS policy.

MFIs (micro finance institutions) are the most popular distribution channel for micro covers. Aviva Life Insurance has tied up with BASIX, Arohan and Anjali Microfinance to distribute policies. “We have sold 2 million policies so far. Around 55% of our business comes from MFIs,” said T R Ramachandran, chief executive of Aviva Life Insurance India.

Insurance regulator IRDA estimates that life insurance companies sold 14.7 million micro-insurance policies in the fiscal 2009, representing new premium collection of $53 million.