REGULATING MICRO INSURANCE FOR FINANCIAL INCLUSION: AN ANALYSIS OF LEGAL AND REGULATORY BARRIERS IN INDIA
AUTHOR – DIYA MITTAL* & DR. RENU MAHAJAN**
* STUDENT AT AMITY UNIVERSITY, NOIDA
** PROFESSOR AT AMITY UNIVERSITY, NOIDA
BEST CITATION – DIYA MITTAL & DR. RENU MAHAJAN, REGULATING MICRO INSURANCE FOR FINANCIAL INCLUSION: AN ANALYSIS OF LEGAL AND REGULATORY BARRIERS IN INDIA, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (4) OF 2026, PG. 401-419, APIS – 3920 – 0001 & ISSN – 2583-2344.
Abstract
Micro-insurance has emerged as an important instrument of financial inclusion in India, particularly for low-income households, informal workers, small farmers, migrant labourers and other economically vulnerable groups who remain largely outside formal social security systems. It provides affordable risk protection against contingencies such as death, disability, illness, accidents and livelihood shocks, thereby reducing the possibility that sudden financial crises push vulnerable households deeper into poverty. This paper examines the legal and regulatory framework governing micro-insurance in India and critically analyses the barriers that hinder its effectiveness as a tool of inclusive development.
The study explores the statutory foundation of micro-insurance through the Insurance Act, 1938 and the Insurance Regulatory and Development Authority Act, 1999, and evaluates the role of the Insurance Regulatory and Development Authority of India (IRDAI) in shaping inclusive insurance governance. Particular attention is given to the IRDAI (Micro Insurance) Regulations, 2005 and 2015, including issues relating to product design, eligibility, distribution channels, disclosure norms and claims settlement procedures. The paper also analyses the contribution of government-supported schemes such as Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojana[1], Ayushman Bharat and the wider financial inclusion framework created through Pradhan Mantri Jan Dhan Yojana.
The paper argues that despite the existence of an extensive legal and policy framework, micro-insurance in India continues to face significant structural and regulatory challenges. These include low awareness, weak consumer protection, mis-selling, infrastructural constraints, overlapping regulatory jurisdictions, claims-related difficulties and digital exclusion. It concludes that for micro-insurance to function as a meaningful instrument of financial inclusion, the legal regime must move beyond formal access and focus on substantive accessibility, accountability and equity. The paper ultimately positions micro-insurance not merely as a financial product, but as a critical mechanism of social protection and distributive justice in India.
Keywords: Micro-Insurance; Financial Inclusion; Insurance Regulation; IRDAI; Low-Income Policyholders; Consumer Protection; Social Security; Insurance Law; Inclusive Development; India
[1] Pradhan Mantri Suraksha Bima Yojana, Ministry of Finance, Government of India, Operational Guidelines (2015).