Page 141 - DCOM309_INSURANCE_LAWS_AND_PRACTICES

Insurance Laws and Practices

Notes collected for an sum assured and the risk is covered for a longer period that is 10/20/30 years
and so on. The type and amount of health care costs that will be covered by the health plan are
specified in advance, in the member contract or evidence of coverage booklet.
Health insurance works by estimating the overall risk of health care expenses and developing a
routine finance structure (such as a monthly premium or annual tax) that will ensure that money
is available to pay for the health care benefits specified in the insurance agreement. The benefit
is administered by a central organization, most often either a Government agency or a private
or not for profit entity operating a health plan. There are various types of health coverage in
India. Based on ownership the existing health insurance schemes can be broadly divided into
categories such as:
1. Government or state-based systems - Products like Central Government Health Scheme
(CGHS), Employees State Insurance Scheme (ESIS).
2. Market-based systems (voluntary and private) - Mediclaim schemes.
3. Employer provided insurance schemes - Reimbursement facilities.
4. Member organization (NGO or cooperative) - based systems: Self Employed Women’s
Association (SEWA), Jan Arogya Bima, Aga Khan Health Services India (AKHSI), Nav-
sarjan in Gujarat, ACCORD in Karnataka works with tribal population in forest areas.

Micro Insurance

The micro insurance system, a new concept in India, is capable of penetrating all sections of the
masses to provide the needed social and financial security to the people. This has an upper edge
over the formal insurance system, which did not possess the products suiting the people,
particularly the high-risk clients. Further, it could even play a positive role when incorporated
with disaster management measures.

Micro insurance is a term increasingly used to insurance characterized by low premium and low
caps/coverage. Micro refers to small financial transaction that each insurance policy generates.
Micro insurance is a financial arrangement to protect low income people against specific perils
in exchange for regular premium payments proportionate to the likelihood and cost of the risk
involved. Micro insurance is synonymous to community-based financing arrangements including
community health funds, mutual health organizations, rural health insurance, revolving drug
funds and community financing schemes evolved in the context of severe economic constraints,
political instability and lack of good governance.
The products offered under micro insurance are categorized both under health risks (illness,
injury or death) and property risks (damage or loss). A few micro insurance products offered to
cover the above mentioned risks are:

1. Crop insurance.
2. Livestock/cattle insurance.
3. Insurance for theft or fire.
4. Health insurance.

5. Term life insurance.
6. Death insurance.
7. Disability insurance.
8. Insurance for natural disasters.

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