Finance minister P. Chidambaram, in his budget speech this year, had said, "The government will extend full support to the efforts of the Insurance Regulatory and Development Authority (IRDA) to promote micro insurance in the country."

Micro insurance refers to protection of assets and lives against insurable risks of target populations such as micro entrepreneurs, small farmers and the landless, women and low-income people through formal, semi-formal and informal institutions.

IRDA’s (micro-insurance) Regulations 2005 allows insurers to issue policies with a maximum cover of Rs 50,000 for general and life insurance. An insurer can collect the premium for both life and general insurance components directly from the consumer or agents.

Recognising the need to involve non-government organisations, self-help groups and micro-finance institutions to distribute such products, the regulator has allowed them to act as micro-insurance agents along side the certified insurance agents and brokers. However, a micro-insurance agent can sell policy of only one life insurer and a general insurer and its commission will not exceed 10 per cent of the premium for single-premium life insurance policies and 20 per cent for other life policies. The commission for non-life insurance policies is capped at 15 per cent.

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