Introduction to insurance

Principles of insurance

Insurance contracts that do not come under the ambit of life insurance are called
general insurance.

Definition: Insurance contracts that do not come under the ambit of life insurance
are called general insurance. The different forms of general insurance are fire,
marine, motor, accident and other miscellaneous non-life insurance.

Description: The tangible assets are susceptible to damages and a need to protect
the economic value of the assets is needed. For this purpose, general insurance
products are bought as they provide protection against unforeseeable contingencies
like damage and loss of the asset. Like life insurance, general insurance products
come at a price in the form of premium.

PERSONAL ACCIDENT INSURANCE

Individual accident insurance is a way to stay ahead of the medical and out-of-
pocket expenses that add up so quickly after an accidental injury - not just for
emergency treatment, hospital stays and medical exams, but for other expenses you
may face, such as transportation and lodging needs.

When you have a covered accident, we'll send cash benefits directly to you (unless
you tell us otherwise) and you decide the best way to spend them. It's as simple as
that.
 You'll receive cash benefits for these and other expenses that may not be fully
covered by your major medical insurance:

Broken teeth Ambulance, ground and air

Concussions Emergency room visits

Intensive care unit confinement Lacerations

We all in our day to day life are exposed to the risks of accidents. Despite all possible precautions
do occur. This may result into disablement or loss of limbs or sometimes even death. To cater to
insurers have devised an insurance cover, known as Personal Accident Insurance. This policy
compensation in the event of insured sustaining injuries, solely and directly from an accident c
violent, visible and external means, resulting into death or disablement be it temporary or permane
are some additional benefits available without payment of additional premium like Cumulativ
Children Education Fund, Reimbursement of expenses for the carriage of the dead body. T
discount for family package over plan.

Now you can buy and renew policies Online. Buy a new Personal Accident Insurance plan, R
existing Oriental's Personal Accident Insurance policy or renew PA policies bought from any oth
insurance company by registering yourself on our Portal and paying online through your debit ca
card or Net-banking. To check out various online facilities available, you may login on the Portal.
Our personal accident insurance covers not only major accident resulting in death
or permanent disablement but also minor injury happening in your daily life such
as getting burnt while cooking or kids getting injured at school or slipping down
from stairs.

Get Personal Accident insurance today available in 3 plans - Rs. 10 lakhs, Rs. 20
lakhs and Rs. 30 lakhs - to protect your family with premium starting as low as Rs.
899.

Background
It is well recognized that the informal sector has a very important role to play in
the economy of the urban areas. Increased migration adds to this phenomenon. In
India, as per National Sample Survey Organisation (NSSO) study of 2004-05 the
workforce employed in the informal sector in India was estimated about 422
million workers representing nearly 92 percent of the total workforce of about 457
million. It was also seen that in the rural areas the share of informal sector workers
in each population segment was more than 90 percent. The share of female workers
(94.50 percent) was more than that of male workers (90.34 percent). It was seen
that between 1999-2000 and 2004-05 because of increased migration, the share of
workers in the informal sector in the urban areas increased in comparison to rural
areas. The National Commission for Enterprises in the Unorganized Sector, India
categorized workers according to the level of income in the informal sector, and
found that around 75 percent self-employed workers belong to poor and vulnerable
group (NCEUS,2006). Street vendors formed a very important segment in the low
income self-employed group of workers.
Across the world, street vendors form an integral section of urban economies. In
India too, street vending has existed for hundreds of years. A street vendor is a
person who offers goods or services for sale to the public without having a
permanent built-up structure. Street vendors could be stationary, peripatetic or
mobile. The stationary vendors occupy space on the pavements or other
public/private areas with or without a temporary static structure. The peripatetic
vendors move from place to place carrying their goods in push carts or baskets on
their heads. The mobile vendors sell their goods or services in moving buses and
trains or with motorized or non-motorized mobile units. These mobile street
vendors are also known as street hawkers or street peddler. Another category of
street vendors are those who carry out vending on an irregular basis without a
specific location such as weekly bazaars. The Government of India has used the
term 'Urban Street Vendor' to include all the local/regional specific terms for
hawkers, pheriwallas, rehri-patriwallas, footpath dukandars, traders and service
providers, both stationary and mobile, and incorporates all area specific terms used
to describe them(Government of India, 2009).
Vulnerability of a street vendor and role of insurance
According to the Ministry of Housing and Urban Poverty Alleviation, Government
of India there are 10 million street vendors in India. About two percent of the
population of metropolis in India is constituted by street vendors and street
hawkers. According to a study conducted during 1999 2000, by the National
Association of Street Vendors of India (NASVI), Mumbai has the largest number
of street vendors numbering around 250,000 (Bhowmik, 2005). Kolkata had more
than 1,50,000 street vendors. Ahmedabad and Patna had around 80,000 each and
Indore, Bangalore and Bhubaneswar had around 30,000 street vendors.
As per the 55th Round of National Sample Survey, workers who describe
themselves as street vendors in urban areas working in all locations was around 17
lakh, while workers engaged in retail trade without a fixed place or working in
urban streets was around 25 lakh(Unni, 2006). It is seen that urban vending is not
only a source of employment but provides affordable services to the majority of
urban population.

The incomes of street vendors are quite meagre and hardly qualify for being
sustainable. It is seen that street vendors conduct their business amidst insecurity.
Many times they face eviction drives when their wares maybe confiscated or
destroyed. They also are forced to deal with corruption, in the form of bribery and
extortion which eats into their earnings and further reduces their income.

It has been well recognized that the social security problems of informal workers
may be divided into two sets of problems. The first one arises out of deficiency or
capability deprivation in terms of inadequate employment, low earnings, low
health and educational status and so on that are related to the generalised
deprivation of poorer sections of the population. The second arises out of adversity
in the sense of absence of adequate fallback mechanisms (safety nets) to meet such
contingencies as ill health, accident, death, and old age (Planning Commission,
2009).

The Central and the State governments have worked towards policies relating to
welfare and protection of the Urban Street vendors. The Government of India
adopted the National Policy on Urban Street Vendors in 2004 with the objective of
bringing in a supportive environment for street vendors. Based on the report and
recommendations of the NCEUS in 2006, the policy was revised in 2009. One of
its objectives was to ensure the health and welfare of the street vendors and stated
that The State Government/Municipal Authorities may take special steps to cover
street vendors and their families with benefits of programmes such as preventive
and curative health care including reproductive and child health care facilities and
health insurance (Government of India, 2009). It recommended that there should
be special insurance schemes to cover their products since street vendors are
vulnerable to loss of goods due to natural as well as manmade disturbances that
hampers their economic situation. However the implementation of the policy was
weak and not uniform across the states. The Supreme Court of India issued a ruling
requiring the Government to pass a law on street vending no later than June 30,
2011.The Union Cabinet of the Government of India also approved the revamped
Street Vendors (Protection of Livelihood and Regulation of Street Vending) Bill on
May 1, 2013. This Bill was passed in both houses of Parliament and became an Act
on March 4, 2014. However the Act does not provide any specific provisions for
ensuring health of the street vendors. Though it touches on the risk of death and
disability of a street vendor, it merely states that one of the family members can
vend in the place allotted by the Town Vending Committee following the
death/disability of the registered vendor.
There is also the Rashtriya Swasthya Bima Yojana (RSBY), literally National
Health Insurance Scheme is a government-run health insurance scheme for the
Indian poor. It provides for cashless insurance for hospitalization in public as well
private hospitals under the Ministry of Labour and Employment, Government of
India. The scheme started enrolling in 2008 and has been implemented in 25 states
of India. The government proposed to cover all registered street vendors under
RSBY by the year 2013-2014 and issued separate guidelines on May 7, 2013.

According to these guidelines, in addition to a cashless health insurance cover for

Rs.30,000/-, maternity benefits and transportation costs would also be provided.
The street vendors have to pay Rs.30/- per annum towards registration and renewal
(Government of India, 2013).

But it is seen that only a few State Governments have given recognition to the
existence of street vendors. The Government of Tamil Nadu set up Tamil Nadu
Petty Shop & Street Vending Workers Board in 2010. This Welfare Board helps
about 10 lakh street vendors in Tamil Nadu. Tamil Nadu is the also the first state in
India to set up a separate Welfare Board for street vendors. Rajasthan State
Assembly passed Urban Street Vendor Bill 2011 (Nagar Path Vikreta Adhiniyam)
in August, 2011. The bill was prepared based on the Model Urban Street Vendor
Bill from the Ministry of Housing and Urban Poverty Alleviation in 2009. The bill
would replace the Rajasthan Street Vendor Policy, Pheriwalo Ka Sansar of 2007
which was considered to be not very effective.

In Tamil Nadu, the Chief Minister Kalaignar Insurance Scheme for life saving
treatments was introduced in 2009. This was followed by the Chief Minister
Comprehensive Health Insurance Scheme(CMCHIS) of 2011 in collaboration with
United India Insurance Company Ltd aimed to provide free medical and surgical
treatment in Government and Private hospitals to the members of any family
whose yearly family earnings is below Rs.72,000/- (Government of Maharashtra,
2011). There is no specific inclusion of street vendors within the scheme as in the
case of RSBY. The National Health Insurance Scheme (RSBY) is not implemented
in Maharashtra. As long as the annual family income of the street vendor is less
than Rs.72000/- he/she could get membership under the CMCHIS. Hence it is of
interest to understand what kind of health insurance is available for special groups
like street vendors within the State of Maharashtra.

Today with the change towards a more competitive open environment there are
more private players. As of 2013, there were 26 General Insurance companies (17
private sector, 4 public sector, 5 stand-alone/ 3 specialised) for covering risks such
as fire, motor, personal accident, health and 24 Life Insurance companies (1 public,
23 private sector) for covering death in India. However it has been observed that
insurance as a pre-payment mechanism to meet sudden catastrophic expenses has
remained elusive for those living in informal sectors. Keeping in mind the concern
about the neglect of the rural and weaker sections of India, the Insurance
Regulatory and Development Authority of India (IRDA) passed the IRDA
(Obligation of Insurers to Rural and Social Sectors) Regulations, 2002 Act.
Accordingly every insurance company, public or private, life or general, was
required to engage with the rural and social sectors by complying with mandatory
obligations. The mandatory requirement to reach the poor has shown to the
companies the vast potential of the rural and social markets. Recently a new line of
business called Micro Insurance has emerged globally and Indian Insurance
companies have also introduced tailor made insurance policies for the rural and
social sectors. The commonly accepted definition of Micro Insurance is 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
(Churchill, 2006). A study by MicroSave in 2012 shows that there are 23 registered
micro insurance products filed by 16 companies and 64 products sold as Rural
Social Obligations (Mukherjee, 2012).

The scope of this paper has specific reference to personal accident policy and how
it is perceived as a provider of cover to the informal sector, especially among the
street vendors. A personal accident policy usually covers accidental death,
accidental permanent total or partial disability, accidental temporary permanent
disability and some companies may add a few more features. All the public
insurance companies and a few private insurance companies have Personal
Accident policies aimed at the rural and socially weaker groups. 6

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11

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Table 1 shows the product boundaries for Accident Insurance as per

Microinsurance Regulation, 2005. Table 2 lists the products available with the
various General Insurance companies selling Personal Accident insurance. How far
these policies have reached the informal economy groups such as street vendors
remains to be seen which is not covered here.
Objectives of the Study
A review of government policies affecting the street vendors point out that though
the welfare of the street vendor is given some importance in them, the actual
emphasis has been on regulating the business activities of the street vendor. Only
one form of insurance, namely health insurance for street vendors has received
some attention. Street vendors are however vulnerable to different form of risks.
Accidents have been identified as a key risk as a result of the nature of their work.
The consequences of an accident could be death, disability (temporary or
permanent) or pause in income, ranging from few weeks, months to even years. It
is seen that a personal accident insurance plan available with almost all general
insurance companies could cover a person from accidental death, accidental
disability and several other features. In contrast, life insurance (term) can only help
when accident results in death. Also health insurance is limited as it helps only for
hospitalization expenses (except where health insurance comes with accidental
riders). It therefore seems life or health insurance cannot be as comprehensive as
standalone personal accident insurance policy. In this context, this study aimed to
look at the risk perception, awareness and uptake of accident insurance among
street vendors.

The specific questions addressed included:

To understand the socio- economic background of the urban street vendors in
Mumbai;

To understand the perception of urban street vendors in Mumbai on the current

risks faced by them including accident and their usual coping strategies;
 To understand the awareness and uptake of available insurance schemes,
specifically Personal Accident insurance, among urban street vendors of Mumbai;

To understand the gaps in awareness and uptake of insurance given the

perceived risks and availability of insurance schemes.
Study Area
This study was extensively carried out in the urban areas of the Mumbai
Metropolitan city. For the study, Street vendors were identified in the city and the
data was collected from them through a structured questionnaire.

Mumbai has witnessed unprecedented growth in recent years, due principally to

the information technology boom. Mumbai City alone accounts for 10.94 percent
of the State income, while the Mumbai Metropolitan Area (CMA) accounts for
16.21 percent of the State income from all sectors. Nearly 90% of the people are
engaged in the tertiary sector. With respect to the informal sector, as per Census
2001, it was estimated that persons in informal sector would be about 10 lakhs in
Mumbai City. These persons are predominantly in low wage paying sectors like
rickshaw pulling, repair of bicycles, personal services, etc. Occupations with better
wage conditions include construction, manufacturing and repair activities. Mumbai
Citys Ghatkopar area was chosen for the purpose of survey. Care was taken to
select respondents purely on random basis from the area.
Methodology
Based on the objectives, a research questionnaire with four sections was prepared.
The four broad sections were Basic Socio-Economic Data, Risk and Coping
Strategies, Awareness of Insurance in General and Awareness and Uptake of
Insurance Schemes.
Pilot testing was done based on which changes were done in the final
questionnaire. Data was collected in two phases. In Phase I, 206 samples were
collected between December- 2014 January 2015. 40 samples were selected.
The current study report has been structured in four sections. Section 1 describes
the socio-economic background of the street vendors. Section 2 discusses the
findings about the perception of the street vendors about the various risks and their
coping strategies. Section 3 lists the various insurance schemes, the understanding
of the schemes and its uptake. Section 4 looks at the implications of the findings,
conclusions and the way forward.
Chapter 4Results and discussion
Section 1: Socio-Economic Background of Street Vendors
Socio-Economic Characteristics
The following table gives a summary of the main socio economic characteristics of
the respondents:

Thus, it can be seen that the average street vendor in Mumbai would be a Hindu
male or female aged around 40 years, belonging to a disadvantaged caste and
educated up to primary level.
Monthly Income
98% of street vendors earned less than Rs.15,000/- per month. Of them, nearly
30% earned less than Rs.5,000/- per month. It was seen that not all the street
vendors owned their businesses. Some of them were employees on fixed wages on
a monthly basis with other vendors who were economically better. A vendor in
such an arrangement could however earn more, if (s)he could sell more number of
items.
It was seen that women street vendors were more likely to be in the lower income
bracket compared to the male vendors. Among those who earned less than
Rs.5,000/- , 58.5% were women whereas among those earning between
Rs.10,001/- to Rs.15000/-, women constituted only 24.5%.
Most of the families (45.9%) of the street vendors were earning in the range of
Rs.5,000/-to Rs.10,000/-. Close to 33% had earnings in the range of Rs.10,001/- to
Rs.15000/-. Cumulatively 83% of the sample had earnings of Rs.15,000/- or less.
Types of Goods Sold
Most street vendors were involved in selling non-durable consumables like
eatables, fruits, vegetables and flowers. Some of them were selling multiple items,
where they sold different items in the mornings and evenings. It seems they tend to
sell those items which need less capital while catering to the needs of the urban
poor who form the market for the street vendors.
It was interesting to note that women vendors were mostly associated with selling
perishable goods like vegetables, fruits and flowers while the men were associated
with durable goods like plastic items, fancy goods, cloth, steel. The reasons could
be that perishable items need little capital as compared to durable items. It is seen
that women usually lack financial resources to generate capital.

Vending Type
Respondents were classified based on their vending profile which fell into two
broad categories:
A- Peripatetic/Mobile:

1. Head load- carrying the wares on the head

2. Cycle- Using a bicycle to carry the wares

3. Push Cart- A non-mechanised cart which is pushed by the seller from street to
street and wares displayed on them

4. Public Transport- Selling in public buses, trains, etc. usually carrying a bag of
wares

B- Stationary

5. Same place with roof - vendor comes to the same spot by the roadside,
sometimes on the pavement and has fixed temporary structures to store and display
the wares. This is different from a formal shop in that it is an illegal occupation of
public place and there is a danger of eviction by the Corporation officials

6. Same place- without roof similar to the above but the vendor does not have
supporting structures as above
Most of the street vendors in this study (72%) were selling goods from the same
place every day. 39.3% had a small place with roof for selling their products. This
was advantageous in terms of catering to regular customers. Following closely
were those street vendors (32.7%) who had a regular place but did not possess a
shelter. A considerable number of Street vendors used Push Cart (17.2%) for
selling their products. Others carried their goods on head and walked or cycled.
More women than men were among those who were selling in same place without
a shelter and using head load.
Section 2: Risk and Coping Strategies
Risk Perceptions
The respondents were asked to rank the risks that they were more likely to face in
their lives and result in financial hardships. Pictures of eight risks were presented
from which the respondents had to pick and rank three risks that would be the first,
second and third most important risk to them. The key risks presented were: (i)
Death; (ii) Disability due to accidents; (iii) Fire; (iv) Theft; (v) Natural disasters;
(vi) Hospitalisation; (vii) Price rise in goods and (viii) Illness not requiring
hospitalisation. 12

Table 4: Ranking of Risks by Street Vendors

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The key risks identified by street vendors are shown in Table 4. It can be seen that
disability due to accidents was ranked as the top most risk followed by death. This
could be related to their occupational hazard where they are most often on the
streets and have to negotiate the heavy city traffic. Natural disasters were ranked as
the third most important risk, probably due to the recent memories of cyclone
Thane which affected their businesses in 2011. Interestingly, hospitalization was
perceived as a risk over price rise, fire and theft. However illnesses which are
recurring and does not require hospitalization was perceived as a risk by only a
few.
Risk Faced in Last Year
It was seen that 11.7% of the respondents say that they have faced any one or other
of the risks in their lives in the last one year. Among them, a majority of those who
faced risk events were referring to hospitalization(36.3%). Deaths (18.8%) of
which some were due to accidents, loss due to price rise(17.5%), disability due to
accidents (12.5%) were some of the other risks faced.
Section 3: Awareness and Uptake of Insurance
Awareness of Insurance
Most of the street vendors (79.2%) had heard of the term insurance or its local
language equivalent kaapedu. There were no significant differences in the
familiarity with the term insurance based on gender or education. Awareness of
different types of insurance is presented in Figure 3 below.

The awareness of Health Insurance was high (76.8%) among the respondents. This
could be because of the popularity of the state government sponsored health
insurance schemes in vogue since 2009. The second type of insurance that the
street vendors were mostly aware was life insurance (71%). This is in line with the
insurance awareness study by IRDA which found that awareness of health
insurance was highest in Tamil Nadu. This is in contrast to India as a whole, where
life insurance awareness was better than health insurance (NCAER, 2011).
The awareness of vehicle insurance among study respondents was mostly limited
to male respondents. The awareness of Personal Accident Insurance was not
spontaneous among the street vendors in the study and was low even after being
prompted. This was a startling finding given that death and disability due to
accidents being perceived as an important risk and being the most common reason
for hospitalization (as seen in Section 2).

Uptake of all types of Insurance among Street Vendors

Among all street vendors, 176 (26.30%) said they currently had some form of
insurance. When probed on the kind of insurance policies they were holding, the
following distribution was found:

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From Table 5 it can be seen that uptake of health insurance was the highest among
the street vendors. However this does not mean they voluntarily purchase health
insurance. Almost all of them had enrolled in the Government sponsored health
insurance schemes. Around 31% of the vendors had term life polices and 19% had
endowment policies. Vehicle insurance uptake was around 17.6% and all of them
were male. Though disability was perceived as a key risk (448/669) only one street
vendor was actually insured against it. Among all those with some form of
insurance, 56% were male and 44% were female.

The awareness of street vendors on micro insurance schemes and other commercial
General Insurance Schemes was very low. Given that most General Insurance
Companies have a micro insurance health policy, this is a surprising finding.
The findings on perception of street vendors on accidents and disability as a key
risk on one hand and their poor awareness of insurance to cover these risks on the
other hand, points to the first gap that emerges from the study. It is possible that
street vendors are not aware of Personal Accident policies that could be the answer
to their insecurity. Even though they were all residing in the heart of the city, their
awareness was limited to life and health insurance, both of which are well
advertised but which are not comprehensive enough to cover disabilities. The
second gap emerges from perceived risks and actual low uptake of insurance. Here
the gap becomes more serious as even though 17% were aware of accident
policies, only one street vendor had taken up a policy to cover accidents. This
implies that awareness alone is not enough and other factors intervene in a street
vendor insuring him/herself against a risk he/she considers important.
Section 4:
Implications of the Study
The study has clearly highlighted that the topmost risk in the minds of the street
vendors was accidental death and disability which also corresponded to the risks
that they actually faced in the year preceding data collection. However during the
study it was seen that Government Sponsored Health Insurance Scheme was
known among Urban Street vendors, in fact better than life insurance. However the
Government scheme has certain limitations with respect to providing a safety net
in case of accident death and disability. It covers only the expenses towards the
diagnostics, treatment and follow-up of medical conditions and does not
compensate for the loss of income arising out of the accident or disability.
It is to be noted that almost all General Insurance companies have Personal
Accident policies with annual premiums ranging between Rs.800/- to Rs.3,300/-
(Chauhan,2012). Thirteen General Insurance companies were doing business with
rural and social segments with their Personal Accident policies and some of them
also have introduced micro insurance policies aimed at the lower income groups
(Tables 1 and 2). In case of Rural Social policies and group policies, the premium
could be even further less. But the study findings show that this information has
not reached the street vendors in a large metropolitan city like Mumbai. However
whether awareness alone will increase the uptake of insurance can only be
speculated. It came out during the personal interviews that the gap wherein the
insecurity felt by the street vendors about accidents and disability were not
addressed by any of the existing insurance schemes leaving them unprotected for
insurable risks.

The lack of protection of street vendors against accidents could be the result of one
or more of the following factors: (i) Poor awareness of insurance in general among
street vendors (ii) Inadequate marketing by the insurance companies (iii) Apathy,
indifference or negative attitudes of street vendors towards taking insurance (iv)
Unaffordable premium and other product features (iv) A lack of recognition from
the Government and other welfare agencies on the vulnerabilities of street vendors.
The study clearly shows a need to understand both the demand and supply sides of
insurance. On one hand findings underline the need for awareness creation and
sensitisation of street vendors on the insurance risks and the importance of
insurance. On the other hand it highlights the market potential for the insurance
companies to tap in this emerging segment. Insurance companies could invest more
in advertising their Personal Accident Insurance products, review the reasons for
poor uptake and try newer distribution 17 channels. The State and Central
Government should take cognizance of the street vendors vulnerabilities and
commit to providing safety nets in the existing National Policy and Law on Urban
Street Vending. Another suggestion would be to make available a free or subsidised
insurance in case of accidents as a rider to the existing health insurance policies
such as Rashtriya Swasthya Bhima Yojna (RSBY) and other state specific schemes.
Conclusions
This study looked at the current awareness level of insurance in general and types
of insurance products among the Urban Street vendors. The study gains in
importance because street vendors cannot be ignored because of the impact they
have on the general population and also on the economy. The study has revealed
the gap between the risk perceptions and the risk management strategies of street
vendors. It has also highlighted the gaps in accessing existing accident insurance
policies which have left the urban street vendors unprotected from high out of
pocket expenditures and loss of income incurred following accidents and disability.
The need for accident insurance products demonstrated by the study provides a
scope for the insurance industry to design suitable products for this market.
However uptake can be effective only if preceded by awareness creation and
effective marketing. An integrated effort from policy makers, private sector and
welfare organisations alone can provide the necessary financial protection for the
street vendor