Date post: | 14-Apr-2018 |
Category: |
Documents |
Upload: | sunil-rawat |
View: | 218 times |
Download: | 0 times |
of 63
7/30/2019 Coverage of Insurance in Rural India
1/63
Coverage of Insurance in Rural India
OBJECTIVES:
The present project has been prepared with the following objectives.
To understand the importance of insurance in rural areas.
To study the needs of villagers & farmers.
To know the involvement of the private insurances in the rural areas.
To know the types of insurance policies in rural areas.
To know regarding the latest new schemes.
To understand fully regarding the premium, subsidy & claims in regard with
insurance policies.
To come across the opportunities & threats present in rural areas.
To understand the role of public sector undertakings to improve the insurance
business in rural areas.
To have full knowledge regarding the quick settle of claims in case of death/loss
in uncertain situations.
To know the steps taken by government to save the rural areas people from
committing suicides.
1
7/30/2019 Coverage of Insurance in Rural India
2/63
Coverage of Insurance in Rural India
Coverage of Insurance in Rural India
An Introductory view on Rural Scenario & Rural Insurance
Rural India
Before commencing the project on coverage of insurance in rural India, it is
necessary to put the highlight on rural sector, social sector & the lives of rural people
in India because the people, living in villages are totally ignorant of Insurance. They
are unaware of various insurance policies.
The Rural Sector: The rural sector is any place, which has 1. A population not
exceeding 5000. 2. A density of population of not more than 400 per square kilometer
& 3. At least 75% of the male working population is engaged in agriculture.
The Social Sector: The social sector includes unorganized sector, informal sector,
economically vulnerable or backward classes (i.e. persons below the poverty line) &
other categories with disability not gain fully employed & also guardians who need
insurance to protect spastic persons/persons with disability both in rural & urban
areas.
The unorganized sector includes self employed workers such as agricultural labors,
bidi workers, brick-kiln workers, carpenters, cobblers, construction workers,
fisherman, hamals, handicraft artisians, handloom & khadi workers, women tailors,
leather & tannery workers, papad makers, power loom workers physically disabled &
self employed persons, primary milk producers, rickshaw pullers, safai karamcharis,
salt collectors, sericulturists, sugarcane cutters, tendu leaf cutters, toddy tappers
vegetable vendors, washerwomen, working women in hills or such other categories.
India is a land of villages. It is a land of farm. It will be not an exaggeration to say that
the soul of India lives in villages & the village is a backbone of our country. There are
about 7 lakh villages in our country.
In comparison of urban machinery life, rural life is very simple & natural. The people,
living in villages are mostly poor & uneducated. Even after the 60 yrs of
independence, they have not progressed or tested the fruit of life progress. Due to
2
7/30/2019 Coverage of Insurance in Rural India
3/63
Coverage of Insurance in Rural India
ignorancy, they are not aware of other benefits provided by government from time to
time. Hence they live poor & their lives are miserable. Due to being uneducated, the
rich people & moneylenders are sucking their blood. They fall deep in ditch of
poverty day by day. Hence villages in India are totally backward financially as well as
socially.
After the independence the government has tried to improve the rural people lives
through his plans & policies, but all in vein. They are not still uplifted due to poverty,
ignorancy & lack of education. There are series of suicides committed by debit-hit
farmers all over India as they are harassed by moneylenders & are not helped by the
government. The recent news shows that 3000 farmers have killed themselves only in
Maharashtra state during the last 10 yrs for which government should be blamed & is
responsible for their suicides due to withdrawal of bank guarantee in 1996.
The link between farmers suicides in the state & the liquidation process of the
Maharashtra State Co-operative Agricultural & Multipurpose Rural Development
(MASCARD) has caught the centres attention. The newspapers had high lightened
how politicians efforts to wrest control of MASCARD & the subsequent withdrawal
of its National Bank for Agriculture & Rural Development (NABARD) guarantee had
spell down for small farmers.
With nowhere else to go farmers turned to moneylenders, & finally to suicide. At a
public meeting in Marathwada over the weekend, Union Agriculture Minister Sharad
Pawar said that the government planned to revive MASCARD. In fact sources said,
the central government is taking the issue forward.
The move has found support from chief minister Vilasrao Deshmukh. It would be
happy to go along with the central decision. Earlier, we were unable to revive
MASCARD due to cash crunch. The revival will help to end farmers suicide because
MASCARD will provide long-term loans that are vital to farmers.
This is sweet music to the ears of the 20 lakh farming families that used to depend on
MASCARD for credit. In fact farmers suicides began in 1997, a year after the state
3
7/30/2019 Coverage of Insurance in Rural India
4/63
Coverage of Insurance in Rural India
government withdrew its guarantee covering the NABARD functioning of
MASCARD.
But it may be too early to celebrate because the government is always speaking in 2
voices. In contrast to Pawars & Deshmukhs stand, state finance minister Jayant Patil
told the newspapers the state was not looking to reverse the 1996 decision (to
withdraw the NABARD guarantee).
It was the withdrawal of guaranteeand the subsequent stoppage of NABARD
findingthat had laid to the collapse of MASCARD. The government explained its
action by saying that MASCARD was collecting dues properly from defaulting
farmers.
The politicians may go hoarse blaming moneylenders for the farmers suicides, but the
fact is that our rulers have done little to understand the problem. The state is unaware
of even the exact number of moneylenders & express his helplessness at controlling
the exorbitant interest rates they charge.
The interest moneylenders charge ranges from 30-50% & there is no effective
government control over this. The state recognizes the business of private money
lending under the moneylenders act 1947. But officials admit that the system is
completely failed. The act has not been amended & bureaucrats point out that it is
woefully inadequate to handle the present crisis. Most moneylenders are unlicensed &
authorities blame this for their failure to keep a check on them.
According to the act, moneylenders must get licenses at the district level for operating
within a specified area. No one wants to register, because then they are bound by the
law & have to limit their interest rates. It admitted by Sunil Porwal, secretary of co-
operative department, who issues private money lending licenses. In the past few
months 400 cases against moneylenders have been registered. In many cases police
failed to get evidence as borrowers are not given any documentary proof by the
lenders.
4
7/30/2019 Coverage of Insurance in Rural India
5/63
Coverage of Insurance in Rural India
The problem is serious in Vidharba since only 8-10% of farmers get credit from
financial institutions. It is little wonder that a large number of suicides are reported
from this region. Loans are taken at high interest rates & farmers often fail to repay
them. They are caught in debt trap & they are ultimately commit suicide.
Farmers organizations in Vidarba allege a nexus between moneylenders & the police.
There have been several instances of cops pressuring farmers behest of moneylenders.
Gajanan Wankhede, a farmer in Savargoan in Yavatmal district, committed suicide in
a police station at Wadki a few months back when he was pressurized by the police to
repay his loans.
It was a keen desire of Mahatma Gandhi to uplift the villages & to make them ideal.
He was always dreaming to make the villages as a green land on the lap of nature,
where every one finds his peace, happiness, equality, progress, co-operation,
sympathy etc. But it remained as his dream only & it could not be as a real.
Profile of Rural Consumer
Number of House Holds in millions
Class Very Rich Consuming Class Climbers Aspirants Destitutes2001-02 0.8 26.8 54.7 25 20.9
2005-06 1.6 41.3 63.3 14.7 12.2
Rural Values and Customer Satisfaction (Rural Mutual Insurance Company)
Were proud of the fact that the way we do business hasnt changed much since those
early days. Back then, a promise and a handshake meant something. In todays world,
with a growing reliance on advanced communication technology, that kind of
personal service is becoming increasingly rare.
At Rural Mutual Insurance, we utilize all the latest technology, but we still feel were
at our best when were face-to-face with our customers and we take great pride in the
personal, local service we provide. We believe that establishing a comprehensive
policy that protects who you are and the life youve made requires more than the
latest interactive software; it takes real people with experience and commitment whowill sit down with you and go over the details. Thats why we have more than one-
5
7/30/2019 Coverage of Insurance in Rural India
6/63
Coverage of Insurance in Rural India
hundred-fifty rural agents statewide, living and working in the same communities you
do.
Today at Rural Mutual Insurance, we understand that the distinction between
Wisconsins rural and urban environments has blurred. Accordingly, we have
expanded our service capabilities and developed innovative products to meet the
needs of Wisconsinites from all walks of life. Whether you require auto, home, farm
or businesss insurance, your rural agent can provide you with a policy to protect the
things that matter most.
Were proud of our rural Wisconsin heritage and our growth to meet the needs of so
many in our state. But were prouder still that weve never outgrown our rural values.
Rural is also committed to the privacy and confidentiality of our clients.
Need & potential of Rural Insurance:
The insurance sector has been mostly confined to cities. However, in the rural areas
where human life & income generating rural assets need more protection, there is
tremendous scope for developing insurance business. The rural sector so far has been
grossly neglected since last 50 yrs from the privileges of insurance cover, through a
silent economic revolution can be seen know in the villages.
With the opening of insurance sector to the private sector & foreign companies, the
time has come when the government should pay serious attention to covering the rural
areas. While it is true that access to insurance cover depends on the literacy/awareness
levels & assured income, well-planned & organized efforts by committed private
sector companies can yield rich dividends from the rural areas. This is because:
A large number of rural districts have witnessed significant growth & prosperity.
Access to reliable & authentic data & information has improved considerably,
which can enable quick & correct decision-making.
There are specific functionaries & agencies in the rural areas, which can help,
explore & exploit insurance business in the untapped rural market.
6
7/30/2019 Coverage of Insurance in Rural India
7/63
Coverage of Insurance in Rural India
The Rural Scenario (their needs & wants)
To understand the prospects for insurance companies in rural India, it is very
important to understand the requirements of India's villagers. Therefore, we need to
study their daily lives, their peculiar needs and their occupational structures.
Our villagers are farmers, craftsmen, milkmen, weavers, casual labourers,
construction workers and shopkeepers and so on. More often than not, they are into
more than profession they have side-businesses or auxiliary sources of income - the
man in the family might work in the field while his wife may rear poultry at home.
Let us take a peep into the life of one of them say, a typical farmer. Though many
of his brethren in other parts of India will have access to an assured and regular source
of water, he will be totally at the mercy of the monsoons. His source of livelihood (i.e.
farming) will be totally at the mercy of the elements. What would happen if there
were to be floods or drought? What would he do if there were to be pestilence? And
what about a crop failure or a crash in prices? For a marginal farmer subsisting on a
small piece of land, the consequences of these factors would be catastrophic. How
would the farmer repay his loans? With the WTO regulations all set to be enforced,
what would be the fate of a small farmer left to the mercy of global market forces?
The situation is compounded by the absence of civic amenities and proper guidance
by the concerned authorities.
There exists, thus, a great deal of uncertainty in his profession. This translates to an
immense amount of risk. The loss is always majorly financial. And this is present in
every profession that we can think of. Think about what a cattle rearer would do if
there were to be an epidemic or death or theft of the animals
7
7/30/2019 Coverage of Insurance in Rural India
8/63
Coverage of Insurance in Rural India
Rural Insurance in India:
The GIC & the 4 subsidiaries i.e. National Insurance Company Limited, the New
India Assurance Company Limited, the Oriental Insurance Company Limited, &
United India Insurance Company Limited, here by known as National New India,
Oriental & United India have taken the responsibilities of insuring the rural masses
against the growing risk in the areas of personnel, property, livestock & packages.
Their brief description will highlight how far the general insurance industry has been
successful to harness the existing opportunities in rural areas.
1. Personal Insurance:
The personal insurance company to rural people is granted in the form of Janata
Personal AccidentIndividual & Group & Gramin Personal AccidentIndividual &
Group.
I. Janata Personal Accident (individual):
Persons between age group of 10-65 yrs are covered under janata personal
accident (individual) policy where by rupees 15000 is paid at the death or
permanent total disablement due to accident rupees 7500 is paid at the loss of oneeye or one limb due to accident.
Sterilization risks & claims arising out of racing on wheels, big game hunting,
mountaineering whilst engaged in winter sports skiing or ice hockey are also
covered. The premium is rupees 12 per annum. The nominee should submit death
certificate, original policy & claim form at the death of the assured due to
accident.
II. Janata Personal Accident (group):
Persona between the age groups of 10-65 yrs is entitled for janata personal
accident (group). The benefits are Rs. 15000 at the time of the death or
permanent disablement due to accident. At the loss of one eye or one limb in an
accident is paid Rs. 7500. The premium is Rs. 12 per annum.
8
7/30/2019 Coverage of Insurance in Rural India
9/63
Coverage of Insurance in Rural India
The Janata Personal Accident Insurance has increased from Rs. 129.00 lacs in
1982 to Rs. 440.24 lacs in the form of direct insurance premium. During the
period of 5 yrs, it became just double. In the form of number of persons covered;
it has increased from 20.16 lacs in 1982 to 42.26 lacs in 1987. It shows that the
non-traditional policies can be more popular if efforts are made systematically to
increase the business. The growth rate has been not satisfactory as the premium
income increased at faster rate in the beginning the growth rate was 44.8% in
1983 but there was also decline by 9.5% in 1986. The persons covered have
declined in 1986 by 6.8%.
III. Gramin Personal Accident (Individual):
This policy is applicable to persons between the age group of 10-65 yrs living in
rural areas. The benefits are Rs.6000 at death or permanent disablement due to
accident or Rs. 3000 at the loss of 2 eyes or 2 limbs or 1eye & 1 limb due to
accident. Sterilization risks 7 claims arising out of racing on wheels, big geme
hunting, mountaineering engaged in winter spots, skiing or ice hockey, the
premium amount is Rs. 6 p.a. The nominee is required to submit death certificate,
original policy & claim form at the death claims & medical certificate & bills in
other cases.
IV. Gramin Personal Accident (Group):
This policy is issued to large number of persons insured under one policy. The
benefits are the same as discussed earlier in the Gramin Personal Accident
(Individual). Basic premium for 1yr is Rs. 500 for 100 persons in 2 installments.
The discount is available if the numbers of persons have been higher.
The premium income under Gramin Personal Accident policy increased from Rs.
6.47 lacs in 1982 to Rs. 40.96 lacs in 1987. The persons covered have also
increased from 1.3 lacs to 7.62 lacs in the respected yrs. The number of persons
covered increased by more than four times. The premium income has increased
by the same fold. The traditional policies during this period have increased by not
more than twofold. It reveals that the non-traditional policies are becoming more
popular in India.
9
7/30/2019 Coverage of Insurance in Rural India
10/63
Coverage of Insurance in Rural India
2. Property Insurance:
I. Agricultural pumpset:
Agricultural pumpset insurance policy indemnifies the insured against unforeseen
&sudden physical damage to the pumpset caused by or solely due to mechanical/electrical breakdown, fire & lightning, theft & burglary. The minimum premium is
Rs. 50 for electric pumpset & Rs. 70 for diesel pumpset. Long-term discount is
also available at the rate of 15% if taken for 2yrs & 25% if taken for 3yrs. Group
discount is also applicable if a number of pumpset are insured together. Annual
premium depends on horsepower types of pumpset & deductible franchise. The
deductible franchise will be first borne by the insured, out of each & every
machinery breakdown claim where more than 1 item is lost or damage in one &
the same occurrence. The insured shall not be called upon to bear more than the
highest deductible franchise applicable to any one such item.
II. Animal Driven Carts Insurance:
The animal driven carts insurance cover risks against death or permanent total
disablement of the animals driven the cart. Gramin accident cover for driver while
driving the cart at no extra premium. Damage to the cart/Tonga & its accessories
by accident, external means like fire, lightning, flood, cyclone & other allied perils
while in transist by road, rail & inland waterways. Third party liability upto
Rs.5000 per accident & maximum Rs.10000 for all accidents in a policy year.
Insured will bear first Rs. 100 of each cart & Rs. 200/- of each tonga claim. The
age group of animals covered is 3-12yrs for bullocks, male buffaloes, 2-6yrs for
horses & mules, 1-5yrs for donkey & 5-15yrs for camels. The sum assured will be
the market value of cart or tonga & animal. Premium rate is 2% of the insured
value. The insured value is decided on the basis of the market value after
deducting reasonable amount of depreciation for the number of years for which
the cart has been in use. If diseases cover required, the premium applicable in
respect of the animal covered will be charged. The scope of cover is loss or
damage to the animal driven cart, death or permanent disablement of animal,
liability to third parties & passengers & personal accident cover to person driving
the cart.
10
7/30/2019 Coverage of Insurance in Rural India
11/63
Coverage of Insurance in Rural India
III. Hut Insurance:
Hut insurance policy indemnifies the insured against all accidental losses or
damages due to fire, earthquake, inundation, storm, tempest, impact damage, riot,
strike, malicious damage & air craft damage subject to the exclusion of war, in
invasion, act of foreign enemy hostilities, usurped power. The maximum sum
insured is Rs. 6000/-. Maximum 200 huts situated in on contiguous area. In case
the number of huts is more than 50 in contiguous area the insurer will accept the
risk after inspection. The premium rate is Rs.3/- per mille per annum. 50% of the
premium is shared by government. In practice, government pays the premium in
full in advance & recovers 50% of the premium from hut owner. Insurer shall pay
compensation on the basis of a certificate issued by the Tehsildar regarding
occurrence of the fire loss where compensation is less than Rs. 10000/- however,
where the amount of loss involved is more than Rs. 10000/- or number of huts is
more than 5 the Tehsildar shall report the occurrence to the company immediately
who will depute their officer for inspection & assessment of the loss. The payment
of compensation is made with in a month of the occurrence.
A scheme to provide fire insurance cover for huts & belongings of land less
laborers, small farmers, artisians & other poor families in rural areas which was
introduced from 01-05-1988 which was in operation in 406 districts of the country
as on 31-031989. The scheme provides compensation not exceeding Rs.1000 for a
hut & Rs. 500/- for belongings there in the entire premium cost is being borne by
the central government. Continuous efforts are on to propagate the benefits of the
scheme among the poor families in rural areas. About 11000 claims amounting to
Rs 1.24 crores have been settled upto end of March 1989. National Insurance
settled 18455 hut insurance claims, New India settled 455 claims, amounting to
Rs. 6.85 lakhs; Rs.52.01 lakhs settled by Oriental & Rs. 252.56 lakhs by United
India during 1994-95.
IV. Gobar Gas Insurance:
The gobar gas insurance is applicable to all khadi & village industries
workers/artisans, IRDP beneficiaries, schedule castes, schedule tribes & such
other identifiable groups. The risks covered are fire, lightening, explosion, riot,
strike malicious damage, impact by rail/ road vehicles or animals, aircraft & other
11
7/30/2019 Coverage of Insurance in Rural India
12/63
Coverage of Insurance in Rural India
aerial/devices, storm, cyclone, typhoon, tempest, hurricane, tornado, flood, land
slide, earthquake & shock. The sum assured is inclusive of digester, gasholder &
cost of construction depending on type & cubic capacity. Master policy agreement
is preferable in respect of this insurance in view of the concessional rate of
premium & to reduce overall administrative expenses. The rate of premium is Rs.
01 per mille for widest cover subject to minimum premium of Rs. 15.
V. New Well Insurance:
The new well insurance is applicable to dug wells or bore wells, which are being
newly installed. It does not apply to existing well. The cover is given to financing
banks or individuals. The sum insured shall be limited to a maximum of Rs. 12000
per well. The 75% of sum insured is settled for complete failure & 50% is paid for
partial failure. 500 imperial gallons of water per hour pumped intermittently for 6
hrs by 2-3 horsepower submersible pump & yield measured in contained of
known capacity of atleast 200 litres. If yield is between 300-500 gallons, the well
shall be derived partially failed & compensation will be paid at 50 % of sum
insured. Natural calamities like flood, earthquake, riot & strike are excluded from
this insurance.
3. Cattle & Livestock:
The cattle & livestock insurance was demanded since independent. No worth
mentioning progress was made till 1972 when the general insurance was
nationalized. Recently some progress has been made & figure of the progress is
available since 1982. Cattle & livestock insurance have included cattle, sheep &
goat, horse/pony/mule, pig, camel, duck, rabbit, elephant & dog.
I. Cattle Insurance Scheme:
The cattle insurance policy under market agreement covers milch cows &
buffaloes, calves/heifers, stud bulls, bullocks & castrated male buffaloes. This
policy provides indemnity in event of death of insured cattle due to accident
inclusive of fire/lightening, flood, cyclone, famine, surgical operation, strike, riot,
civil commotion, and diseases.
12
7/30/2019 Coverage of Insurance in Rural India
13/63
Coverage of Insurance in Rural India
The age group of animals to be covered is 2-10 yrs for milch cows, 3-12 yrs for
milch buffaloes, 3-8 yrs for stud bulls, 3-12 yrs for bullocks. The market value of
the cattle will be the amount of sum insured that varies from breed to breed, from
area to area & from time to time. In the case of permanent total disablement,
insurers, liability is limited to 75% of sum insured. The premium rates are
governed by market agreement varying from 2.75% - 4%. The premium rate is 3%
for milch cattle. The premium for cattle owned by individuals/ institutions & bank
financed cattle, which do not provide regular & efficient veterinary attention is
4%. Cattle owned by well organized government, co-operative/private
dairies/apex bodies providing regular & efficient veterinary attention are charged
premium at the rate of 4% if there are less than 50 animals, 3.95% of number of
animals insured is 50-250 & 3.9% if number of animals insured is over 250.
Cattle insurance schemes are available under IRDP project for cattle subsidized
under SPDA/MFAL/DPAP/IRDP/TADP, Antyodaya projects. Milch cows, milch
buffaloes & stud bulls of indigenous or cross-bred variety between age group of 2-
12yrs are insurable for the sum assured agreed upon provided it does not exceed
market value. The permanent total disability shall be covered at extra premium of
0.85%. The premium rate is 2.25% of sum insured p.a. to be subsidized by the
project authorities & financing bank. The risks covered are as mentioned in
market agreement plan.
II. Sheep & Goat Insurance:
Sheep & goat insurance provides indemnity in the event of death of insured
animals due to diseases or accident contracted during the period of risk in age
group of 4months to 7yrs of sheep. Rams used for breeding & aged more than
75% of its market value. Goats are covered between age group of 6months to 5yrs
the sum assured will be restricted to 80% of market value as certified by
veterinary surgeon or 100% bank advance whichever is higher. The premium rates
are 8% of sum assured in case of sheep & 10% in case of goat of indigenous breed
for private insureds. This premium is 10% for exotic breed. The premium for
bank financed & IRDP project is 2.75% in both the cases of sheep & goat. The
policy shall provide indemnity against death of sheep & goat due to accident
13
7/30/2019 Coverage of Insurance in Rural India
14/63
Coverage of Insurance in Rural India
including fire, lightning, flood, cyclone, famine, strike, riot & civil commotion or
diseases contracted or occurring during the period of insurance.
III. Horse/Pony/Mule Insurance:
The policy for horse/pony/mule insurance draught horses, half draught horses,
ponys, mules against death due to accident &/or specified diseases contracted
during the period of insurance & subject to usual terms, conditions & exclusions
of the policy. The age groups for such animals to be insured are 2-8yrs.
Indigenous, cross-bred & exotic are insured. The sum assured is 100% market
value or bank loan, which is higher. The non-scheme animals are charged
premium at the rate of 4% of sum assured where as the scheme animals are
charged at 2.75% p.a.
IV. Pig Insurance:
This policy covers death risk due to accident or diseases. The minimum number of
animals covered is 10. Severe fever diseases are excluded. The age group
insurable is 1month to 5yrs. All indigenous cross-bred & exotic pigs are insured.
The maximum sum insured for pig is Rs.500/-. The premium rate is 6% per
annum but pigs under SFDA/IRDP scheme are charged at 3.5% p.a. The sum
assured will be linked to 100% of market value for organized breeding farms
whereas in other cases it is 80% of market value.
V. Camel Insurance:
Camel insurance policy is applicable to all male & female camels in India
including camels subsidized by SFDA/DPAP/MFAL between age group of 3-
10yrs. The sum assured will be 80% of market value or bank financed. The
maximum sum insured is RS.3000/- in case of bank finance SFDA/DPAP/MFAL.
In case of PTD claim, 75% of sum assured is payable. The premium rate is 4%
p.a. for non IRDP scheme camels & 2.25% for IRDP scheme camels. Surra
disease is excluded. The minimum premium is Rs.25 p.a. per animal. The policy
provides indemnity only for death due to accident inclusive of flood, cyclone,
famine or disease inclusive of Rinderpest, Black quarter, Hemorrhagic
Septicemia/Anthrax contracted or occurring during the period of policy or strike,
14
7/30/2019 Coverage of Insurance in Rural India
15/63
Coverage of Insurance in Rural India
riot & civil common risks. The exclusions are common exclusions & specific
exclusions.
VI. Rabbit Insurance:
This policy is applicable to all breeds of rabbits in India, in the age group of 1day-
4yrs, but death of rabbits due to diseases till day complete the age of 30days is not
covered. The risks covered are death of rabbits due to accident &/or disease
contracted during the period of insurance. The exclusions have common
exclusions as described in camel insurance & specific exclusions of transport by
air & sea, permanent & partial disablement of any nature pasteurellosis, culling,
cannibalism, & intentional slaughter, undergrowth. The insured is compensated
only 70% of the sum assured, the rate of premium is 7% of sum assured.
VII. Elephant Insurance:
This policy indemnifies the owner for death due to accident or disease contracted
or occurring during the period of insurance subject to certain exclusions
stipulated. The insurable age group is 1-60yrs. The policies applicable to the
elephants including those owned by temple, circus companies & individuals. The
sum assured is 80% of market value. The value of sum assured does not exceed
Rs. 50000. The premium rate is 5% p.a. The common exclusions clause as
mentioned under cattle market agreement is also applicable in this case. Specific
exclusions are surgical operations, disability, breeding & calving & certain
specific diseases such as tuberculosis, foot & mouth diseases etc.
VIII. Dog Insurance:
This policy insures the risks against death due to accident &/or diseases contracted
during the period of insurance subject to usual theory & conditions. The insurable
age group is 8weeks to 8yrs. Dogs of indigenous cross-bred & exotic breeds are
insured under this policy. The minimum value of any breed should not be less
than Rs. 200 & maximum value of any dog should not exceed Rs.2000 each dog.
The premium rate is 5% p.a. In the event of death of insured dog, any amount
received or receivable by insured from 3rd parties & the value of salvage recovered
if any would be deducted from the claim amount.
15
7/30/2019 Coverage of Insurance in Rural India
16/63
Coverage of Insurance in Rural India
IX. Livestock Insurance Master Policy:
An open policy is issued without specifying the sum insured. This will be stamped
document stating the type of cover grantee, perils covered, condition exclusions
etc. When the branch of the bank grants loans, the animals purchased will be
covered under the insurance scheme. The insurance cover will commence from
the time the animals are purchased by the beneficiaries & will be valid for 1yr.
The insurance company supplies the declaration forms to banks branches. As &
when animals are financed, the branch will send to the insurance company the
declaration given details of the borrowers financed along with the certificate of
veterinary doctor. Under the live stock insurance scheme livestock as milch cows,
buffaloes, calves, stud bulls & bullocks castrated bulls & male buffaloes whether
indigenous cross-bred or exotic, sheep, goats & pigs are insured. This policy
covers death of livestock due to any accident inclusive of fire, lightning, flood,
inundation, storm, hurricane, earthquake, cyclone tornado, tempest, famine
snakebite etc, diseases inclusive of foot & mouth diseases, surgical operation
strike, riot & civil commotion.
4. Poultry Insurance:
The general insurance companies have taken another big step to insurance poultry,
duck & other birds.
I. Poultry Insurance:
This policy covers poultry farms consisting of 100 or more pure & hybrid chicks,
hens & cocks. All birds in a farm should be covered. The policy covers death of
birds due to accident or diseases contracted or occurring during the period of
insurance subject to certain exclusions. Birds are covered from 1-72 weeks. The
cover is for epidemics diseases i.e. ranikhet diseases, fowl pox & gamhoro. The
sum assured is as per poultry market agreement. The sum inured is as per
valuation table. The premium rate is Rs. 1.20 per bird where SFDA & other
subsides is applied, the premium is Rs. 0.90 per bird. Extra premium will be
charged in case of addition of fresh birds. Each proposal is rated according to
flock strength, mortality & management of farm. The compulsory inspection of
16
7/30/2019 Coverage of Insurance in Rural India
17/63
Coverage of Insurance in Rural India
the risks by companys veterinary surgeon before assumption of risk, besides
periodical routine inspection at intervals.
II. Poultry Insurance Master Policy (IRDP):
This policy as cattle master policy issued to benefit the benefactors of IRDP.
III. Duck Insurance:
The duck insurance policy provides indemnity against death of ducks due to
accident including fire, lightning, flood, cyclone, famine, strike, riot, civil
commotion or diseases contracted or occurring during the period of insurance
subject to specific exclusions. This policy is applicable to all types of migratory &
non-migratory birds in India, ducks farms consisting of minimum 100 ducks for
non IRDP & 50 ducks for IRDP & other subsidized schemes. The insurable age is
1-52 weeks the premium is Rs. 1 per bird & Rs.0.9 per bird for IRDP & other
scheme birds. Common exclusions are as mentioned under cattle market
agreement. Specific exclusions are improper management cannibalism, sunstroke
virus, and transit diseases such as Coli Aspirgillosis.
5. Insurance of Species:
General insurance industry has started insuring other species such as Brackish
water prawn, inland fish, silkworms & honey bees.
I. Brackish Water Prawn Insurance:
This policy cover risks against total loss of prawn, nursed seeds in hatcheries
owned by state government; FFDAS, State fisheries Corporation, MPEDA or such
other organizations. It is issued to provide insurance cover to those engaged in
Brackish Water Prawn faming against total loss of seedlings/prawns of all species
raised in brackish water after being transferred to the farm. It also provides cover
to financial institutions to protect their interests & recover loans advanced for such
brackish water prawn farming in the event of loss. The policy covers either the
input cost or fixed value of the produce. The period of the cover is from the stage
prawn seeds being sown in the hatcheries for rearing till the post larvae/removed
from the hatcheries. The period of cover for farms is from the stage of transferring
17
7/30/2019 Coverage of Insurance in Rural India
18/63
Coverage of Insurance in Rural India
or post larvae to the brackish water till actual harvesting. The premium rate is 4%
of mean value declared for insurance for each crop period. The insurance covers
total loss or destruction of prawns due to accident & disease such as summer kill,
pollution, poisoning, riot & strikes, malicious acts of 3rd parties, earthquakes,
explosion, storms, tempest, cyclone, typhoon, flood, volcanic eruption & other
comulsions of nature. Willful destruction losses due to natural mortality, over
crowding, loss due to negligence & error, theft, dacoity, war invasion etc.
II. Fish Insurance Policy:
This policy indemnifies the insured against total loss due to accident or disease of
fry/fingerlings/fish in ponds/lakes & other still fresh water. This policy covers
death or loss of fish due to disease of any kind, epidemic, poisoning, malicious act
by 3rd parties, pollution, summer kill, riot & strike explosion, fire, air craft damage
& serial devices, impact by any vehicle, storm, tempest, flood. The exclusions or
loss due to improper management & rough handling, loss due to neglect &
carelessness, loss due to malicious act, willful injury, error or omission, partial
loss of any kind, losses due to dangerous insects etc. 80% of fish as per valuation
is indemnified. The premium rate is 2.5 % p.a. on a average value of fish.
III. Silk Worms Insurance:
This policy is applicable to mulberry silk worms only of Univoltine, Bivoltine or
Multivoltine breed. The disease free layings purchased from licensed seed
prepareers/Graineurs or government Grainages are covered. Silk worms from egg
stage to cocoon stage are insured. This policy covered death of silkworm due to
accident of diseases contracted during the period of insurance subject to the usual
terms & conditions. The cover is in respect of total loss only. The malicious
willful act of insures his family member/person/worker; theft, clandestine sale,
missing of the worms & non supply of adequate quality, suitable quality of
mulberry leaves. The valuation is done by sericulture officer. The insured will
send a monthly declaration statement to the insurer based upon which premium is
collected or adjusted. The premium is 5% p.a. of the sum assured on the market
value of cocoon at the 5th stage.
18
7/30/2019 Coverage of Insurance in Rural India
19/63
Coverage of Insurance in Rural India
IV. Honey Bee Insurance:
This policy indemnifies the insured against all accidental losses or damages to the
Hive &/or bee colony subject to the exclusion of loss of production, malicious or
willful act or neglect or improper management; theft clandestine sale or missing of
worms, war invasion, act of foreign enemy, hostilities, civil war, rebellion,
revolution, insurrection, mutiny, military or usurped power or any consequences
thereof or attempt there at; accident loss, destruction, damage or legal liability
directly or indirectly, caused by or contributed to by or arising from nuclear weaks
material. The rate or premium is 3% of total insured value. Risk of theft can be
covered on payment of additional premium of 2%.
The farm subsidiary companies have underwritten small volume of business under
pond fish insurance, silkworm insurance, agriculture insurance & animal driven
cart insurance.
6. Package Insurance:
The GIC & its 4 subsidiaries have evolved insurance policy known as package
insurance with a view to offer complete, all-round protection to the weaker
sections of societies in respect of their dwelling premises & belongings from
various hazards. They are composite package & farmers package.
I. Composite Package Insurance:
This insurance has been evolved to protect the weaker sections & tribes. The
properties covered under this scheme are huts, dwelling, cottage industry shades,
and contents including belongings, personal accident & hospitalization. The risk
covered under this policy is fire, lightning, riot & strikes, malicious damage,
aircraft damage flood, cyclone, storm, tempest, typhoon, tornado, hurricane. The
sum assured under coverage is Rs. 2000/- & premium rate is 3% p.a. the contents
are for Rs.1000 at 3% premium. Personal accident covers Rs. 10000 at the
premium of Rs.10/-. Hospitalization for accidents & major diseases are for
Rs.4000/- at the premium of Rs.40/-. Thus, the total premium of Rs.59/- for
covering all the above risks under 1 policy.
19
7/30/2019 Coverage of Insurance in Rural India
20/63
Coverage of Insurance in Rural India
II. Farmers Package Insurance:
This policy has been issued to provide insurance coverage to the farmers for
dwelling hut/houses, agricultural implements, seeds, fertilizers, pesticides against
the risk of fire, lightning, cyclone, earthquake, flood upto Rs.5000/-; cattle
insurance against death due to accident & diseases, permanent total disablement &
breeding & calving risks upto Rs. 4000; agricultural pump sets against fire, theft
& machinery breakdown upto their market price; bullock cart against death
permanent disabilities to animals due to accident upto Rs.2000/-, loss/damage to
cart due to accident upto Rs.1000, 3 rd party liability personal accident to cart
driver & Gramin Personal Accident against death/permanent total disablement
upto Rs. 6000/- under single policy known as Farmers Package Insurance.
The premium is decided as per separate insurance policy.
20
7/30/2019 Coverage of Insurance in Rural India
21/63
Coverage of Insurance in Rural India
National Agricultural Crop Insurance Scheme:
In India crop insurance cover is not very wide spread. We will look into the reasons
for such a condition but before that it is necessary to have an idea of the crop
insurance policy:
Objectives:
To provide insurance coverage & financial support to farmers in the event of
natural calamities, pests & diseases.
To encourage the farmers to adopt progressive farming practices, high value
inputs & higher technology in agriculture.
To help stabilize farm incomes, particularly in disaster years.
Salient features of the scheme:
1. Crops covered:
The crops in the following broad groups in respect of which I) the past yield data
based on crop cutting experiments is available for adequate number of years. II)
Requisite number of CCEs is conducted for estimating the yield during the
proposed season.
Food Crops (Cereals & Pulses)
Oil Seeds
Sugarcane, Cotton & Potato (annual commercial/annual horticultural crops)
Other annual commercial/horticultural crops subject to availability of past yield
data will be covered in a period of 3yrs. However the crops which are covered
next year will have to be specified before the close of preceding year.
2. Farmers to be covered:
All farmers including share croppers, tenant farmers growing notified crops in
notified areas are eligible for coverage.
The scheme covers the following groups of farmers
On a compulsory basis:
All farmers growing notified crops & availing seasonal agricultural operations
loans from financial institutions i.e. loanee farmers.
21
7/30/2019 Coverage of Insurance in Rural India
22/63
Coverage of Insurance in Rural India
On a voluntary basis:
All non-loanee farmers growing notified crops who opt for the scheme.
3. Risk Covered & Exclusions:Comprehensive risk insurance will be provided to cover yield losses due to non-
preventable risks (natural perils) like fire & lightning, storms, cyclones, typhoon,
hurricanes, as also floods, land slides, drafts, pests/diseases etc.
Losses arising out of war & nuclear risks, malicious damage & other preventable
risks shall be excluded.
4. Sum Insured/Limit of Coverage:
The sum insured may extend to the value of threshold yield of the insured crop at
the option of the insured farmers. However a farmer may also insure his crop
beyond the value of threshold yield level upto 150% of average yield of notified
area on payment of premium at commercial rates.
In case of loanee farmers the sum insured would be atleast equal to the amount of
crop loan advanced.
Further the insurance charges shall be additional to the scale of finance for the
purpose of obtaining loan.
In matters of crop loans disbursement procedures, the guidelines of RBI/
NABARD shall be binding.
5. Premium Subsidy:
At 50% subsidy in premium is allowed in respect of small farmers (a cultivator
with a land holding of 2 hectares i.e. 5 acres or less) & marginal farmers (a
cultivator with a land holding of 1 hectare or less) to be shared equally by the
government of India & state government. The premium subsidy will be phased out
on sunset basis within a period of 3-5 yrs subject to review of financial results &
the response of farmers at the end of 1st yr of the implementation of the scheme.
6. Procedure for Approval & Settlement of Claims:
Once the yield data is received from the state government/UT as per the
prescribed cut off dates, claims are worked out & settled by implementing agency.
22
7/30/2019 Coverage of Insurance in Rural India
23/63
Coverage of Insurance in Rural India
The claim cheques along with claim particulars will be released to the individual
nodal banks. The bank in turn, shall credit the accounts of the individual farmers
& display the particulars of beneficiaries on their notice board.
7. Corpus Fund:
To meet the catastrophic losses, a corpus fund shall be created with contributions
from the government & state/UT on a 50:50 basis. A portion of calamity relief
fund (CRF) shall be used for contribution to the corpus fund.
Sector Wise Premium Earned:
Agripump
Cattle & Crop
Poultry
Others
As can be seen from the diagram, the cattle insurance holds a major chunk of the
entire revenues. 83% to be precise. Agri-Pump follows next with 06%. This is to be
expected giving the nature of professions that people have & it actually gives us big
hint of where the priorities of the people lie. Of course, there should be nothing to
stop insurance companies from trying to pursue their own unique policies & targets.
23
7/30/2019 Coverage of Insurance in Rural India
24/63
Coverage of Insurance in Rural India
Rural demand for drought insurance
Many agricultural regions in the developing world are subject to severe droughts,
which can have devastating effects on household incomes and consumption,
especially for the poor. To protect consumption, rural households engage in manydifferent risk management strategies - some mainly risk reducing and some simply
coping devices to protect consumption once income has been lost. The absence of
formal credit and insurance institutions, which offer an efficient alternative by
overcoming regional covariance problems and reducing the cost of risk management,
amounts to a market failure. Past research has paid much more attention to the supply-
side reasons for this market failure than to the demand side question of whether there
exist financial instruments that farmers want and would be willing to pay for. An
attractive feature of the method is that it exploits actual production (input-output) data
and does not deal with the usually unreliable data on household consumption and
leisure activities. The model is applied to a two-year panel of data on households from
five villages in Tamil Nadu (South India). The sample is small, but the data are
special, as one of the two years was a severe drought year. The results indicate that
agricultural households exhibit significant risk-avoidance bahavior, and that even
though they may use a range of risk management strategies, there still remains an
unmet demand for insurance against drought risks. The study did not estimate the
likely costs of supplying drought insurance, but the latent demand in the study region
is strong enough to more than cover the breakeven rate of approximately the pure risk
cost (the probability of drought) plus 5 percent administration costs. The findings
confirm the inadequacies of traditional strategies of coping with droughts in poor rural
areas. Because of the catastrophic and simultaneous effects of droughts on all
households over large areas, there is limited scope for spreading risks effectively at
the local level. Either households must increase their savings significantly (a problem
with low average incomes and an absence of safe and convenient savings
instruments), or more effective risk management aids are needed that can overcome
the co variation problem. Improved financial markets (with both credit and savings
facilities) could be helpful, particularly if they intermediate over a larger and more
diverse economic base than the local economy. Alternatively, formal drought
insurance in the form of a drought (or rainfall) lottery might be feasible, and the
results suggest that it could be sold on a full-cost basis.
24
7/30/2019 Coverage of Insurance in Rural India
25/63
Coverage of Insurance in Rural India
Popularizing Health Insurance In Rural Areas
Around 70 per cent of Indias population, live in villages. Of these, less than 2 per
cent are insured. Though the rural health insurance market is huge, it has so far
remained untapped. Recently, IRDA has constituted a committee to chalk out a planfor spreading health insurance in rural areas. Various Micro-Health insurance
schemes are to be studied. Around 25 such schemes are run in rural India, most of
them attached to Micro-Finance Institutions. Falaknaaz Syed briefs you about the
issues that the IRDA committee will address and some prominent rural health
insurance schemes running in the country
IRDA Appoints Committee to popularize health insurance
With an aim to popularize health insurance in rural areas and address the hurdles
impinging its growth, The Insurance Regulatory Development Authority of India
(IRDA) has recently constituted a 13-member committee to chalk out a roadmap to
spread health insurance in rural India.
Says a member of the committee, The aim of this committee will be to look at public-
private partnership of micro health insurance, designing products specifically for rural
areas, ways to collect premium at low cost and settle claims at low cost, micro-
financing for health, strategies for encouraging large scale enrollment of rural
population for health insurance and address the various hurdles in providing efficient
service delivery.
"IRDA feels that insurance companies now need to focus on health as the business
that comes from the health portfolio from rural areas is negligible. Various schemes
such as Yeshaswini, and Healing Fields will be studied. These schemes are very
different from each other. Their positive aspects will be taken while caution will be
taken to ensure that their shortcomings are not repeated while replicating them on a
larger scale.
If the government wishes to cover the population for lessening debt burden and to
reduce poverty, then the insurance policy should cover common illnesses for which
25
7/30/2019 Coverage of Insurance in Rural India
26/63
Coverage of Insurance in Rural India
people take loans. So, a major issue to be addressed by the panel is what aspects of
health should be insured under the policy and how will it be run?
Healing fields Health Insurance Scheme:
Members pay Rs 285 (just 16 paise per day per person) to cover health insurance (Rs
20,000) for a family of five and Rs 35 for Personal Accident Benefit (Rs 25,000 each
on member and spouse) to HDFC Chubb, the insurance company for the scheme. The
policy is low-cost, which includes pregnancy and covers 43 listed common illnesses
governed by Diagnostic Related Group (DRG) Model. In case of a hospitalization,
up to 25 percent is paid by the patient as co-payment. The stakeholders, insurer, NGO
partner and the hospital together work out a customized process, map and goals, for
the success of the scheme.
Prices are pre-negotiated with the hospital for common illnesses. Since the rural client
in most cases is illiterate and poor, we have a facilitator stationed at each hospital to
help the patient in securing admission in the hospital, getting his medical history,
documentation and claims management. During this process, we collect a lot of data
on the insured both OPD as well as hospitalization, history, treatment procedures etc.
Our processes are in place starting from training the facilitator about the DRG Model
to surveying, to claims settlement. Today, the need of the hour is a
robust, quality service delivery mechanism that is easily approachable and
understandable. A great product with a poor delivery mechanism is as good as not
having a product at all. The claims rate for the scheme is 43 per cent while the
incident rate is just 1.3 per cent.
Shortcomings of the Scheme:At present, the scheme have not been able to scale it as envisaged because there are
too many schemes around and most of the schemes claim they are health insurance at
low cost but when we look deeper they turn out to be Personal Accident Benefit
(PAB) or critical illness schemes.
Yeshaswini Co-operative Health Insurance Scheme:
The Scheme covers the farmer co-operator, his spouse and children. The premiumcontributed per person was Rs 5 per month with Rs 2.5 subsidy from the government
26
7/30/2019 Coverage of Insurance in Rural India
27/63
Coverage of Insurance in Rural India
of Karnataka in the first year. The Yeshaswini beneficiary is entitled to the following
benefits: free outpatient services at a network hospital including consultation fee and
registration fee, investigation at special discounted rates, over 1600 listed surgeries
done free of cost at network hospitals.
The following charges are covered for any of the surgeries included in the policy:
Admission, bed, nursing, anesthesia, OT, surgeons, cost of consumables and
medicines during the surgery and post operative period, surgery-related post and pre-
operative investigations. The surgical cover is 100 per cent cashless. 16 lakh farmers
had enrolled as members in the first year, 35000 members availed of free consultation
at network hospitals, 9039 surgeries were done cashless amounting to Rs 10.53
crores; of these 657 were cardiac surgeries. In the second year, 22 lakh farmers
became members of the Scheme of which 82652 members have availed of free
outpatient consultation. More than 23000 surgeries have been conducted free of cost.
How the Scheme Runs:
A trust was constituted under Chairmanship of the Principal Secretary, Dept of
Cooperation with Additional Registrar, Dr Devi Shetty, and other representatives
from the government and healthcare sector. Package rates were negotiated and fixed
for over 1600 surgeries. Using Yeshaswini Health cards, members can go to any of
the 147 hospitals selected by the trust.
However, hospitalisation not leading to the surgery including common cold and fever
are not covered.
Arogya Raksha Yojana:
Residents of the Anekal Taluk and Kanakapura Taluk of Karnataka from 0 to 70 years
of age are eligible to be insured under the scheme. Members pay the premium to
ICICI Lombard General Insurance Company for the scheme and can avail treatment at
20 hospitals registered under the scheme. The Scheme has just completed 1 st yr with a
surplus of 25 lakh & enrollment for 2nd yr has been started.
The premium for Individual Scheme is Rs 180 per year, as part of the family
scheme, the premium is upto Rs 180 per member per year for two members, Rs 150
27
7/30/2019 Coverage of Insurance in Rural India
28/63
Coverage of Insurance in Rural India
per member per year for three members, and Rs 120 per member per year for four or
more members.
Offers of the scheme:
Arogya Raksha Yojana offers: Free out patient consultation, generic medicines at
special rates from network hospital pharmacies and Biocare pharmacies, diagnostic
tests at discounted rates at network hospitals and approved diagnostic centres,
hospitalization not leading to surgery, surgical treatment for over 1600 types of
surgeries, 100 per cent cashless facility for surgical treatment and medical admissions
up to the covered amount.
Future Plans:
The company is looking to take the scheme to other areas and groups. They have a
project in Amethi in Uttar Pradesh, where they are making 16 primary health centres
(PHCs) to provide free basic medical treatment to the people. This will be followed
by the launch of a micro-insurance scheme at 30-40 PHCs, which will take care of the
cost of the scheme.
Suggestions to boost the Health Insurance:
Health insurance needs to be looked at differently from PAB or life insurance as this
is in an extremely nascent stage. Also IRDA needs to separate health from other
insurances for the simple reason that claims incidences are extremely high and need
health management expertise to manage it. Also, it needs to find a mechanism where
OPD and day surgeries could be included as the rural poor find it expensive to stay in
a hospital for more than a day as they loose wages for the day. Besides, a premium
financing mechanism needs to be evolved so that it becomes easier for the people topay the premiums. Awareness campaigns need to be developed, as not knowing that a
person has a health insurance cover because it has been deducted from the loan taken
from the bank etc is as good as not having insurance. Adding preventive and
promotive activity as part of the programme to be sponsored by either the
government, NGOs and insurance companies will go a long way in promoting
insurance in the rural areas.
28
7/30/2019 Coverage of Insurance in Rural India
29/63
Coverage of Insurance in Rural India
Recent News on Rural Insurance in India:
1. New national health insurance plan on the anvil:
A new national health program is expected to be announced shortly where localpanchayats will be the nodal agencies in marketing health insurance to the Rural
poor.
The government wishes to bring then rural sector under a single health umbrella,
where by the entire population of a village or district is covered. This will be
possible through panchayats
Panchayats will be expected to collect the necessary premium in the form of cess.
Should there be a fund shortage, the government will make good the short form in
the form of a subsidy. It is estimated that the government will make an allocation
of over Rs.6500/- crores in the coming financial yrs towards the new health care
scheme. The program is aimed to provide health care in the under served villages.
The former BJP government had introduced a universal insurance plan at Rs.1 per
day. However the scheme fail to take off in most states for want of workable
machinery for the collection of premium income. There is no company today able
to serve or deliver the program, let alone market the same.
The proposed health care plan will commence in select districts. In addition to
collecting the cess, the centre will also need to create proper public health services
& improve rural hospitals to provide adequate health care.
Over 2000 community healthy centres will be upgraded in keeping with the
standards laid down by the Indian Public Health Standards. It is also understood
that the government proposes to promote multiple insurance models, where in
private insurance players will also play a role. The centre will develop a viable
risk pooling mechanism & create necessary institutional support for public health
care management.
29
7/30/2019 Coverage of Insurance in Rural India
30/63
Coverage of Insurance in Rural India
2. Max NY life begins tapping rural market:
Private insurance player Max New York Life Insurance Company Ltd (MNYL)
has started tapping the rural insurance market. Its 1st initiative commenced in
Punjab.
Their idea is to penetrate into rural Punjab first, before expanding their (rural)
presence in other states told by Mr. Rajesh Sud (Director Agency
Bancassurance) & Direct Sales Distribution. This addition takes the companys
countrywide branch network to 48 offices across 34 cities.
They had been able to sell good value propositions both individual & group life
cover solution. The sum assured range is above Rs. 50000/- & they even had a
Million Dollar Round Table Agent, justifying the companys rural presence.
3. ICICI Lombard in hinterland thrust:
ICICI Lombard has firmed up a Rs. 50 crore investment plan for enhancing its
rural network & has also entered into talks with the West Bengal government for
insuring farmers holding cultivable land in the state through an accidental death
benefit policy.
We are in the process of signing up an agreement with the West Bengal
Government for insuring all farmers possessing cultivable land. This would be a
group insurance policy where premium for the package would be around Rs. 12cr,
while farmers would get Rs. 1lac in case of death explained Sandeep Bakshi
Managing Director & CEO, ICICI Lombard.
At ICICI Lombard, they spent around Rs.30cr in 2004-05 for rural network. The
focus is on rural insurance & customer service. The idea is to provide health &
accident insurance to the rural population in India for which they were also
enhancing their network.
The bulk of the fund allocated for developing rural network would go into
creation of touch points in every district. In West Bengal they planned to setup
30
7/30/2019 Coverage of Insurance in Rural India
31/63
Coverage of Insurance in Rural India
around 17 touch points which would act as links between the rural folk & ICICI
Lombard.
The ultimate plan was to setup touch points in every district in India where they
had made considerable inroads in providing rural insurance through state
governments.
A portion of the fund would also go into creating awareness among the villagers
through various means of mass communication & also through the state
machinery like the panchayats.
Officials from the company said that ICICI Lombard would as of now use the
governments network to service the policies & farmers owning lands would be
selected from the land record department. The idea was to collect the total
premium from the west Bengal government & service the claims also through the
state machinery hierarchy.
4. Micro Insurance:
The benefits of opening the insurance sector are visible by way of vast
improvement in insurance penetration & insurance density, & the availability of a
wide variety of products. Government would like to see these benefits percolate to
rural India & to the vulnerable sections of the population. Micro insurance is a
distinct product. Its design & delivery are specialized functions. The insurance
regulatory development authority (IRDA) has published draft regulations for
macro insurance. NGOs, SHGs, co-operatives & MFIs will be invited to
become macro insurance agents. Government will extent full support to the effort
of IRDA to promote macro insurance.
In insurance sector the Finance Minister has stamped the distinct product of
Micro Insurance, which has been specially designed for poor sections of the
society. The Micro Insurance has been drafted & Draft Regulation is being
prepared by IRDA for life as well as non life insurance for the poorer of the
poorest. Health insurance for poorer has also been addressed by the Finance
Minister.
31
7/30/2019 Coverage of Insurance in Rural India
32/63
Coverage of Insurance in Rural India
5. Tata AIG Exceeds Rural Insurance Target (our Banking Bueareo) on 2-05-
2002.
Mumbai: Tata AIG Life Insurance Companys rural programme has accounted
for around 11 per cent of all life policies sold by the company for the year ended
March 2002, as against the stipulated minimum of 5 per cent.
The company has undertaken a pilot programme for rural insurance in Tamil
Nadu, which has also been extended to rural markets in Kerala and Karnataka.
Plans are also under way to cover Andhra Pradesh and the entire region of four
southern states in the months ahead.
Our rural life insurance programme is targeted at all income levels in the rural
sector. The myth that the rural poor are not insurable is being challenged with the
introduction of affordable products specifically designed to meet the needs of the
target market, says Tata AIG Life managing director Ian Watts.
The rural programme of Tata AIG was targeted to create an asset for the rural
poor in the form of hedging their economic loss in the event of an untimely loss of
an earning member.
32
7/30/2019 Coverage of Insurance in Rural India
33/63
Coverage of Insurance in Rural India
Failure of Private Insurance Players in Rural Areas An Analysis
Current Scenario:
In India, insurance is generally considered as a tax saving device instead of its other
implied long term financial benefits. Indian people are prone to investing in properties& gold followed by bank deposits. They selectively invest in shares also, but
percentage is very small i.e. 5-6%. Even to this day, Life Insurance Corporation (LIC)
of India dominates Indian insurance sector. With the entry of private sector players
backed by foreign expertise, Indian insurance market has become more vibrant.
A major milestone during the post liberalization era is the opening of the insurance
business to Indian private sector, breaking up of monopoly of LIC & GIC. The
Insurance Regulatory & Development Authority Act 1999 (IRDA Act) was passed by
the parliament. IRDA consists of a chairman, five whole-time members & four part
time members. As per the IRDA Act, an insurance company is one in which the
majority stake is owned by Indians & is managed by Indians & registered in India.
Thus, the equity structure of newly set up insurance companies will comprise 60%
Indian, 26% foreign partner & 14% NRIs, overseas corporate bodies & FIIs.
The basic idea underlying the opening of the insurance business has been to infuse
competitiveness in insurance sector, which will in turn benefit the public at large.
There is a wealth of historical experience from across the globe that bears out the
correctness of the premise. Countries has witnessed the rapid growth of insurance
services once the field has been thrown open. Given the fact that only a minuscule
minority of the population today has access to insurance services, the potential for
growth is clearly tremendous. On the contrary, private sector globally has shown the
ability to innovate & offer a diverse range of products that matches the requirements
of wide variety of groups. It is more likely that the ushering in of competition in this
sector will not merely expand the coverage, but also customize it in a manner that was
far less evident in the days of the LIC-GIC monopoly.
According to industry observers, the biggest potential lies in the rural insurance
market where the penetration of the insurance players has been low. Often in the rural
areas, insurance is perceived as an additional burden rather than a means to combat
33
7/30/2019 Coverage of Insurance in Rural India
34/63
Coverage of Insurance in Rural India
risk. According to an independent survey conducted by a big private insurer, 12% of
the rural population has an insurance cover. Considering the fact that more than 65%
of the Indian population lives in rural area, the potential is highly attractive. While
most of the insurers may find it unattractive to tap the rural insurance, it should be
understood that the relatively smaller amount of policies would be compensated by a
large number of policies. Rural insurance should be looked upon as a opportunity &
not an obligation. It is important to take advantage of the immense potential that
resides in the rural sector.
With the entry of new players in the sectors, the competition has increased manifold.
Giants like State Bank of India, HDFC, ICICI, Bajaj & Reliance have all forayed into
the market. Recently the Indian car giant Maruti Udyog Limited also announced its
plans to enter into insurance. Though the companies are competing with the
government monopolies, in way or the other, they are also competing with each other
to create a niche for themselves. Presently most of the companies are busy setting up
of their offices & establishing agent network & a market is yet to witnessed a full-
fledged competitive environment. However the entry of big private players &
multinational companies has created ripples in both LIC & GIC. Both of them are
forced to act immediately to sustain the market initially & than to expand to survive.
To compete & survive in this highly competitive environment, insurers are choosing
different strategies. In the insurance sector distribution strength is the key to success.
And the new insurers are finding new ways to reach their prospects.
Life insurance players:
Life Insurance Corporation of India.
SBI Life Insurance Company Ltd.
Bajaj Allianz Life Insurance Company Ltd.
Om Kotak Mahindra Life Insurance Company Ltd.
ICICI Prudential Life Insurance Company Ltd.
HDFC Standard Life Insurance Company Ltd.
Birla Sun Life Insurance Company Ltd.
ING Vysya Life Insurance Company Ltd.
34
7/30/2019 Coverage of Insurance in Rural India
35/63
Coverage of Insurance in Rural India
Tata AIG Life Insurance Company Ltd.
MetLife India Insurance Co. Pvt. Ltd.
AMP Sanmar Assurance Co. Ltd.
Dabur CGU Life Insurance Co. Pvt. Ltd. (AVIVA)
Max New York Life Insurance Company Ltd.
Research Methodology:
For doing the analysis, existing product profile & players were studied through
secondary sources, & for determining the current scenario & location problem &
shortcomings, primary data was collected with the help of questionnaire having
mostly open-ended questions & also interacting with the respondents to get the actual
feel of the pulse. Survey was conducted in Lucknow city as well as its adjoining rural
areas. The total sample size was 200 out of which 80 belonged to urban areas & 120
to rural areas.
Findings:
The stark finding reveals that there is a major difference in the objectives & the
expectations between rural & urban policyholders. Rural population showed high biastowards low premium & maximum risk coverage. Also, they prefer compensation
upto actual amount of loss, which should be provided under any circumstances i.e.
there should be no restriction on the reasons responsible for the loss where as in urban
areas, preferences are been given to the objective of maximizing the compensation &
for that they are ready to pay high premiums.
In rural areas, private players have still not achieved much success & have failed to
catch the pulse of rural India as compared to the public sector players. Also, in rural
areas, private players have not been able to provide successfully the policies preferred
by consumers having agriculture as their means of livelihood.
In urban areas, the conservative consumers took insurance as a tax saving device as
they have a feeling that they have already or would be able to save enough to
compensate the expected losses, whereas the consumers belonging to new generation
working in corporate sector take insurance policy in real sense.
35
7/30/2019 Coverage of Insurance in Rural India
36/63
Coverage of Insurance in Rural India
In urban areas the persons belonging to middle income group prefer policies of public
sector players & only high-income group preferred private sector players.
The study also reveals that in urban areas, services provided at doorstep & efficient
customer service were the two major reasons, which helped in market penetration by
the private players. Red tapism & cold shoulder attitude of public insurance providers
were largely responsible for the fall in their market share.
But, if we look at the rural sector the major reasons for the failure & shortcomings in
their products & services can be summarized as follows:
Lack of popular or mass appeal in marketing strategy.
High variation between services provided & consumers expectations.
Expensive policies & high premiums.
Product differentiation & innovations are not in conformity with the requirements
of rural population for whom agriculture is a major source of livelihood.
In non life insurance, the consideration of recognizing livestock & crop yield as
assets, is missing.
Professional style of working has failed to generate confidence & goodwill, as
rural population prefers personalized approach & that too in accordance with the
regional culture.
Conclusion:
After analyzing the existing facts & relevant inferences, we can conclude that there is
significant requirement of change in products & services & marketing strategy of
private players of insurance sector.
In my opinion following steps may provide for a significant increase in the market
share of private players.
Policies must be designed in such a manner so as to have low premiums &
payment schedule must watch the earning season of the agriculturists.
36
7/30/2019 Coverage of Insurance in Rural India
37/63
Coverage of Insurance in Rural India
Policies that may have risk coverage upto actual/estimated losses as high assured
sums are not much preferred by rural consumers & also result in high premium
payments.
Risk coverage must be designed in conformity with the incidents experienced inrural areas & in agriculture, which cause losses.
Consideration must be given to specific items of rural areas & agriculture
considered as assets while formulating the insurance policies.
Loans against policies feature must be present & procedure for credit granting
must be kept simple.
Simple policies without any riders must be provided for rural consumers as they
give more weightage to low premiums rather than extra benefits.
Urban vs Rural Market
Indian insurance market can be divided into urban & rural markets. These two
segments are diverse in nature & have distinguished characteristics. The economic
growth of the two has not been the same. A wide disparity exists between the per
capita income & literacy rate, among other things, in these 2 sectors. From insurance
perspective, statistics shows that rural population has lower reach. The agent per 1000
persons is around 0.25, which is far low in comparison to that of the urban market.
Insurers may use this knowledge in designing innovative products, need-based selling
of insurance, better penetration, development of new channels etc.
Most new insurance companies started operating from metros & urban areas. As a
result the urban population got the more attention & let to more penetration in urban
than in rural markets. The urban segment in India is small as compared to the rural
segment. Hence, exploring the rural markets poses to be Herculean task to the
insurers.
37
7/30/2019 Coverage of Insurance in Rural India
38/63
Coverage of Insurance in Rural India
Rural
Urban
Experts are on the opinion that the urban markets are rapidly getting saturated, & the
future growth lies in the rural areas. However, it does not signal that the whole of the
urban insurable population is roofed, but the percentage of the first time buyers would
be on decline. It is the fact that the urban population has greater accessibility & reach
to the insurance products. Also, most of this population are a part of the organized
sector & have insurance cover either directly or indirectly. Their higher education
status has let to better awareness about financial & insurance products. They are more
informed about the market conditions, & demand product innovations to suit their
growing needs.
But the situation with the rural populace is the different. A majority of them are left
uncovered although they are also exposed to risks similar to or even higher than their
urban counterparts. The ratio of rural Indian population is very high & it has growing
insurance needs; therefore, it is a fact that the potential growth of insurance industry
lies in rural market, both for life & general (non life) insurance. A lot of study &
research was & is being carried out in this direction to develop new strategies to
explore the untapped area in the Indian insurance market.
Private insurers reach out to rural customers
The Life Insurance Corporation of India sells about 23 per cent (62 lakh policies) of
its total number of policies in the rural areas, a segment that is integral to its social
security objectives.
Rural insurance, much like priority sector lending in banking, is seen as some kind of
a poison pill by the private sector players in the insurance industry. Insurance
38
7/30/2019 Coverage of Insurance in Rural India
39/63
Coverage of Insurance in Rural India
companies are mandated to sell 7 per cent, 9 per cent, 12 per cent, 14 per cent and 16
per cent of their policies in rural areas in the first, second, third, fourth and fifth
financial years, respectively.
A change in the definition of what constitutes `rural' has given some leeway for
insurance companies to get in the mandatory percentage. In August 2004, Insurance
Regulatory and Development Authority altered the definition, aligning it with the
census definition of `rural'.
The census does not define rural area. It defines only an urban area. And by inference,
what is not urban is a rural area.
The erstwhile IRDA definition of rural areas included all areas with a population of
less than 5,000, with a density of population less than 400 sq km and where at least 75
per cent of the male working population was engaged in agricultural pursuits. The
IRDA had amended the definitions earlier in 2002 to bring down the requirement
stipulating that at least 25 per cent of the population had to be engaged in agricultural
pursuits.
The revised definition has widened the market.
Mr Vivek Khanna, Director, Marketing, Aviva Life Insurance Company, said, "A
couple of thousand villages would now be brought under the fold. The earlier
definition meant that only some remote villages could be tapped. And there is no
ambiguity now."
Ms Anjana Grewal, Vice-President of Marketing at Birla Sun Life Insurance
Company, said, "The revised definition brings a larger part of the population under
`rural' - almost 72 per cent compared to 42 per cent under the earlier definition. What
this would do is make it possible for insurance companies to introduce different
products with higher premiums."
According to analysts, 80 per cent of the rural population earn less than Rs 6,000 a
month and a high premium may not suit them. Designing customised products and
developing infrastructure and distribution systems is the way towards tapping this
segment, they said.
39
7/30/2019 Coverage of Insurance in Rural India
40/63
Coverage of Insurance in Rural India
Ms Shikha Sharma, MD, ICICI Prudential, said, "We have been able to hit the rural
pockets through NGOs and direct marketing."
ICICI Prudential's rural distribution model involves agents, brokers as well as referral
arrangements with NGOs, micro-finance institutions and corporates. There is a
presence in 15 States through partnership arrangements with Uttaranchal Co-operative
Marketing Federation, nLog Communications, ICICI Bank and ITC's e-Choupal . As
of 2003-04, 64,764 policies were sold.
According to Mr Sam Ghosh, Managing Director, Bajaj Allianz Life Insurance
Company, "Rural policies are not an issue for us; we are present in more than 300
towns across the country and our offices and agents find it easy to reach and sell in
rural areas."
Tata AIG has also been working with brokers, corporate agents and NGOs. It offers
products with premium ranging from Rs 120 to Rs 720 per annum with coverage
ranging from Rs 15,000 to Rs 60,000. For 2004-05, 19 per cent of their business came
from rural and social insurance.
Mr Vijay Atre, National Head, Rural Insurance, Tata AIG, said, "We have created
rural community insurance groups. This 120-strong self-help group consists mainly of
women. It has been very successful in Andhra Pradesh. In areas like Latur and
Osmanabad, we work with women's federations where there is the concept of cluster
leaders."
While these tie-ups seem to be achieving the twin objectives of social rehabilitation
and distribution, there is still a long way to go. Most private players admit that the
rural areas can never be their target audience. Insurance will continue to be urban-
centric.
As Mr Atre said, "When one talks about rural insurance, there is confusion about
whether it is a product, a distribution channel or a market. It's about time it is
considered a market."
40
7/30/2019 Coverage of Insurance in Rural India
41/63
Coverage of Insurance in Rural India
Opportunities & Threats in Rural Insurance Market:
Opportunities & threats go hand in hand in every industry & insurance industry is no
exception. Identification of opportunities & threats help in better analysis of the
market. An attempt is made to examine the opportunities & threats related to rural
insurance market & how insurers can get the most out of them.
Opportunities:
Gigantic Population:
India has higher population growth rates. The rural population amongst to nearly
72% of the total population & as discussed earlier, majority of them are left
uncovered. This can be Major Avenue for the players in the insurance market.
Agriculture Insurance:
Agriculture is the major vocation & source of income for the rural India. This
segment has vast potential, which cannot be overlooked.
Growth in Income Level of the Rural Population:
The national income of the country as well as the individual income level is on the
rise. The agriculture & allied sectors are showing steady growth rate. The rural
market contributes upto 55% of the national GDP. It points out to the tremendous
amount of potential available in rural areas.
High Saving Habit:
41
7/30/2019 Coverage of Insurance in Rural India
42/63
Coverage of Insurance in Rural India
Indians & in par