An Evaluation of Investment Determinants from the Perspective of Policyholders’ in Kerala.

Abstract

This study investigates the determinants influencing microinsurance investment in Kerala, from the perspective of policyholders in the state, focusing on understanding the factors shaping individuals' investment to engage with microinsurance products. Microinsurance, a pivotal financial instrument catering to the risk management needs of low-income individuals, holds significance in Kerala's socio-economic landscape. Moreover, the study also highlights the potential contributions of microinsurance business in the state of Kerala to the growth and development of the Microinsurance sector of the Indian economy. Microinsurance policies sold by LIC in Kerala during the 2019-20 financial year contributed less than 1% to the national Microinsurance business in India. Microinsurance is defined as “the protection of low-income people against specific perils in exchange for regular premium payments proportionate to the likelihood and cost of the risk involved”. The definition is the same as one might use for regular insurance except that the target group is low-income people. Low-income people live in unfavourable environments and are vulnerable to many perils like sickness, accident, death and loss of property. They are more vulnerable to these risks than the rest of the population. The emerging opportunity of Microinsurance not only promotes business perspective but also social development and protection for poor people. The rural and social sector obligations and Microinsurance regulations from IRDA are important steps in the direction of ensuring financial inclusion and social protection for the poor. The first Microinsurance Regulations came in 2005 which was amended from time to time. The Insurance Regulatory and Development Authority of India (IRDAI) notified the Microinsurance Regulations in July 2015 with a mission to drive the growth and development of the microinsurance market in India. This regulatory framework aimed to make insurance accessible and affordable for low-income individuals and underserved communities. However, market penetration of Microinsurance is seen to be very low in India as well as Kerala. There is a huge rural market but the protection gap is equally huge. The research methodology relies on ‘Research Onion’, proposed by Saunders et al. (2007), which is a conceptual framework that illustrates the various stages and layers involved in conducting research. By using the Research Onion as a guide, the researcher can systematically navigate through each layer, making informed decisions at each stage of the research process, ensuring a comprehensive and well- structured research design. Employing a mixed-method research approach, the study amalgamates quantitative surveys and qualitative interviews to comprehensivelyexplore the investment determinants in microinsurance. Quantitative data collection involved administering structured interview schedules to a diverse sample of policyholders residing across various regions of Kerala. This quantitative phase aimed to obtain statistical insights into the primary factors influencing policyholders' choices regarding microinsurance investment. The qualitative segment encompassed in-depth interviews with selected participants from life insurance Companies, facilitating a deeper understanding of the nuanced perspectives and motivations surrounding microinsurance investment. Analysis of the data revealed pivotal determinants influencing microinsurance investment in Kerala. The study identified key factors such as financial capability, perceived value and benefits of microinsurance, perceived risk, attitude towards risk, levels of awareness and understanding, informal strategies adopted to mitigate risk, and demographic characteristics influencing policyholders' Microinsurance investment. Furthermore, the study unveiled significant changes in socio-economic status financial capability, Perceived value, and perceived benefits when they are insured. Attitude towards risk had a positive and significant impact on Microinsurance investment decisions whereas Perceived risk was found to have a significant negative impact on Microinsurance investment decisions. Similarly, informal strategies adopted by policyholders have a negative relation to Microinsurance policyholders. Among the determinants financial capability was a major factor influencing policyholders’ investment. More than fifteen years of data were collected from the IRDA report, which provided an accurate picture of Kerala's and India's life microinsurance markets. In the past few years, there hasn't been any significant growth in new business. Kerala's microinsurance market share within LIC of India has remained below 1% in recent years. The microinsurance sector's thirteen-year compound annual growth rate in the state of Kerala showed a negative growth rate of 9.15%. Over time, Kerala's share of India's microinsurance market has decreased. These findings aim to inform the design of targeted strategies, tailored products, and effective communication initiatives that resonate with the preferences and needs of individuals in Kerala, thereby fostering increased participation and engagement with microinsurance. In essence, this study contributes to the existing body of knowledge by shedding light on the specific determinants that influence microinsurance investment among individuals in Kerala. The findings hold relevance for devising more inclusive and effective microinsurance policies and practices, ultimately contributing to the promotion of financial resilience and risk management among the economically vulnerable population in the region.