INSURANCE & PENSIONS
Nearly one third of India’s population lives below the poverty line (Planning Commission of India 2012). Most of these households work in the unorganized sector and lack access to basic financial services such as savings and insurance. Without insurance or pension plans, low-income individuals working in the unorganized sector struggle to smooth consumption in the face of financial shocks such as disease, injury, death, or drought. The inability to counter these risks leads to underinvestment, lower productivity, and other sub-optimal household-level outcomes. The Government of India (GOI) has promoted the introduction of financial products to help vulnerable families stabilize consumption during financial shocks due to risks. Unfortunately, uptake of these products has been suboptimal. While the exact cause of low uptake rates is unknown, it is theorized that low numeracy and financial literacy on the demand side, and sub-optimal product design and poor understanding and application of products on the supply side, have led to a low take-up of these products Researchers at IFMR LEAD’s Centre for Microfinance (CMF) have conducted a variety of studies to address the knowledge gaps in the domain of insurance and long-term savings for the poor. Studies undertaken have assessed the poor’s willingness to pay for insurance, and whether liquidity constraints, product complexity, or lack of trust in insurance are reasons for low take-up rates. Researchers have worked closely with policymakers to provide a clear set of recommendations and guidelines on design and implementation of comprehensive social security schemes.
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