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Coverage of Insurance in Rural India

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 uick 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.


Coverage of Insurance in Rural India

Coverage of Insurance in Rural India

An Introductory view on Rural Scenario & Rural Insurance
Rural India #efore 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. T e Rural Sector: The rural sector is any place, which has ". & population not e'ceeding ())). *. & density of population of not more than +)) per s uare kilometer & ,. &t least -(. of the male working population is engaged in agriculture. T e Social Sector: The social sector includes unorgani/ed sector, informal sector, economically vulnerable or backward classes 0i.e. persons below the poverty line1 & 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 unorgani/ed sector includes self employed workers such as agricultural labors, bidi workers, brick2kiln 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 e'aggeration to say that the soul of India lives in villages & the village is a backbone of our country. There are about - 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. 3ven after the 4) yrs of independence, they have not progressed or tested the fruit of life progress. 5ue to

Coverage of Insurance in Rural India

ignorancy, they are not aware of other benefits provided by government from time to time. 6ence they live poor & their lives are miserable. 5ue to being uneducated, the rich people & moneylenders are sucking their blood. They fall deep in ditch of poverty day by day. 6ence villages in India are totally backward financially as well as socially. &fter 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 debit2hit farmers all over India as they are harassed by moneylenders & are not helped by the government. The recent news shows that ,))) farmers have killed themselves only in 7aharashtra state during the last ") yrs for which government should be blamed & is responsible for their suicides due to withdrawal of bank guarantee in "884. The link between farmers9 suicides in the state & the li uidation process of the 7aharashtra :tate Co2operative &gricultural & 7ultipurpose Rural 5evelopment 07&:C&R51 has caught the centre9s attention. The newspapers had high lightened how politicians9 efforts to wrest control of 7&:C&R5 & the subse uent withdrawal of its ;ational #ank for &griculture & Rural 5evelopment 0;&#&R51 guarantee had spell down for small farmers. <ith nowhere else to go farmers turned to moneylenders, & finally to suicide. &t a public meeting in 7arathwada over the weekend, =nion &griculture 7inister :harad >awar said that the government planned to revive 7&:C&R5. In fact sources said, the central government is taking the issue forward. The move has found support from chief minister ?ilasrao 5eshmukh. It would be happy to go along with the central decision. 3arlier, we were unable to revive 7&:C&R5 due to cash crunch. The revival will help to end farmers suicide because 7&:C&R5 will provide long2term loans that are vital to farmers. This is sweet music to the ears of the *) lakh farming families that used to depend on 7&:C&R5 for credit. In fact farmers suicides began in "88-, a year after the state

Coverage of Insurance in Rural India

government withdrew its guarantee covering the ;&#&R5 functioning of 7&:C&R5. #ut it may be too early to celebrate because the government is always speaking in * voices. In contrast to >awar9s & 5eshmukh9s stand, state finance minister @ayant >atil told the newspapers $the state was not looking to reverse the "884 decision 0to withdraw the ;&#&R5 guarantee1%. It was the withdrawal of guaranteeAand the subse uent stoppage of ;&#&R5 findingAthat had laid to the collapse of 7&:C&R5. The government e'plained its action by saying that 7&:C&R5 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 e'act number of moneylenders & e'press his helplessness at controlling the e'orbitant interest rates they charge. The interest moneylenders charge ranges from ,)2(). & there is no effective government control over this. The state recogni/es the business of private money lending under the moneylenders act "8+-. #ut officials admit that the system is completely failed. The act has not been amended & bureaucrats point out that it is woefully inade uate to handle the present crisis. 7ost moneylenders are unlicensed & authorities blame this for their failure to keep a check on them. &ccording to the act, moneylenders must get licenses at the district level for operating within a specified area. $;o one wants to register, because then they are bound by the law & have to limit their interest rates%. It admitted by :unil >orwal, secretary of co2 operative department, who issues private money lending licenses. In the past few months9 +)) 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.

Coverage of Insurance in Rural India

The problem is serious in ?idharba since only B2"). of farmers get credit from financial institutions. It is little wonder that a large number of suicides are reported from this region. Coans are taken at high interest rates & farmers often fail to repay them. They are caught in debt trap & they are ultimately commit suicide. Darmers9 organi/ations in ?idarba allege a ne'us between moneylenders & the police. There have been several instances of cops pressuring farmers behest of moneylenders. Eajanan <ankhede, a farmer in :avargoan in Favatmal district, committed suicide in a police station at <adki a few months back when he was pressuri/ed by the police to repay his loans. It was a keen desire of 7ahatma Eandhi to uplift the villages & to make them ideal. 6e was always dreaming to make the villages as a green land on the lap of nature, where every one finds his peace, happiness, e uality, progress, co2operation, sympathy etc. #ut it remained as his dream only & it could not be as a real. !rofile of Rural Consu"er #u"$er of %ouse %olds in "illions Class Very Ric Consu"ing Class Cli"$ers As&irants ())*+)( ).B *4.B (+.*( ()),+)".4 +"., 4,., "+.'estitutes *).8 "*.*

Rural Values and Custo"er Satisfaction .Rural /utual Insurance Co"&any0 <e9re proud of the fact that the way we do business hasn9t changed much since those early days. #ack then, a promise and a handshake meant something. In today9s world, with a growing reliance on advanced communication technology, that kind of personal service is becoming increasingly rare. &t Rural 7utual Insurance, we utili/e all the latest technology, but we still feel we9re at our best when we9re face2to2face with our customers and we take great pride in the personal, local service we provide. <e believe that establishing a comprehensive policy that protects who you are and the life you9ve made re uires more than the latest interactive softwareG it takes real people with e'perience and commitment who will sit down with you and go over the details. That9s why we have more than one2

Coverage of Insurance in Rural India

hundred2fifty rural agents statewide, living and working in the same communities you do. Today at Rural 7utual Insurance, we understand that the distinction between <isconsin9s rural and urban environments has blurred. &ccordingly, we have e'panded our service capabilities and developed innovative products to meet the needs of <isconsinites from all walks of life. <hether you re uire auto, home, farm or businesss insurance, your rural agent can provide you with a policy to protect the things that matter most. <e9re proud of our rural <isconsin heritage and our growth to meet the needs of so many in our state. #ut we9re prouder still that we9ve never outgrown our rural values. Rural is also committed to the privacy and confidentiality of our clients. #eed & &otential of Rural Insurance: The insurance sector has been mostly confined to cities. 6owever, 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 () yrs from the privileges of insurance cover, through a silent economic revolution can be seen know in the villages. <ith 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. <hile it is true that access to insurance cover depends on the literacy!awareness levels & assured income, well2planned & organi/ed efforts by committed private sector companies can yield rich dividends from the rural areas. This is becauseH & large number of rural districts have witnessed significant growth & prosperity. &ccess to reliable & authentic data & information has improved considerably, which can enable uick & correct decision2making. There are specific functionaries & agencies in the rural areas, which can help, e'plore & e'ploit insurance business in the untapped rural market.

Coverage of Insurance in Rural India

T e Rural Scenario .t eir needs & wants0 To understand the prospects for insurance companies in rural India, it is very important to understand the re uirements of IndiaIs villagers. Therefore, we need to study their daily lives, their peculiar needs and their occupational structures. Jur villagers are farmers, craftsmen, milkmen, weavers, casual labourers, construction workers and shopkeepers and so on. 7ore often than not, they are into more than professionK they have side2businesses or au'iliary sources of income 2 the man in the family might work in the field while his wife may rear poultry at home. Cet us take a peep into the life of one of themK 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. 6is source of livelihood 0i.e. farming1 will be totally at the mercy of the elements. <hat would happen if there were to be floods or droughtL <hat would he do if there were to be pestilenceL &nd what about a crop failure or a crash in pricesL Dor a marginal farmer subsisting on a small piece of land, the conse uences of these factors would be catastrophic. 6ow would the farmer repay his loansL <ith the <TJ regulations all set to be enforced, what would be the fate of a small farmer left to the mercy of global market forcesL The situation is compounded by the absence of civic amenities and proper guidance by the concerned authorities. There e'ists, thus, a great deal of uncertainty in his profession. This translates to an immense amount of risk. The loss is always majorly financial. &nd 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

Coverage of Insurance in Rural India

Rural Insurance in India:

The EIC & the + subsidiaries i.e. ;ational Insurance Company Cimited, the ;ew India &ssurance Company Cimited, the Jriental Insurance Company Cimited, & =nited India Insurance Company Cimited, here by known as ;ational ;ew India, Jriental & =nited 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 e'isting opportunities in rural areas. *1 !ersonal Insurance: The personal insurance company to rural people is granted in the form of @anata >ersonal &ccidentAIndividual & Eroup & Eramin >ersonal &ccidentAIndividual & Eroup. I1 Janata !ersonal Accident .individual0: >ersons between age group of ")24( yrs are covered under janata personal accident 0individual1 policy where by rupees "())) is paid at the death or permanent total disablement due to accident rupees -()) is paid at the loss of one eye or one limb due to accident. :terili/ation 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 "* per annum. The nominee should submit death certificate, original policy & claim form at the death of the assured due to accident. II1 Janata !ersonal Accident .grou&0: >ersona between the age groups of ")24( yrs is entitled for janata personal accident 0group1. The benefits are Rs. "())) at the time of the death or permanent disablement due to accident. &t the loss of one eye or one limb in an accident is paid Rs. -()). The premium is Rs. "* per annum.

Coverage of Insurance in Rural India

The @anata >ersonal &ccident Insurance has increased from Rs. "*8.)) lacs in "8B* to Rs. ++).*+ lacs in the form of direct insurance premium. 5uring the period of ( yrs, it became just double. In the form of number of persons coveredG it has increased from *)."4 lacs in "8B* to +*.*4 lacs in "8B-. It shows that the non2traditional 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 ++.B. in "8B, but there was also decline by 8.(. in "8B4. The persons covered have declined in "8B4 by 4.B.. III1 2ra"in !ersonal Accident .Individual0: This policy is applicable to persons between the age group of ")24( yrs living in rural areas. The benefits are Rs.4))) at death or permanent disablement due to accident or Rs. ,))) at the loss of * eyes or * limbs or "eye & " limb due to accident. :terili/ation risks - claims arising out of racing on wheels, big geme hunting, mountaineering engaged in winter spots, skiing or ice hockey, the premium amount is Rs. 4 p.a. The nominee is re uired to submit death certificate, original policy & claim form at the death claims & medical certificate & bills in other cases. IV1 2ra"in !ersonal Accident .2rou&0: This policy is issued to large number of persons insured under one policy. The benefits are the same as discussed earlier in the Eramin >ersonal &ccident 0Individual1. #asic premium for "yr is Rs. ()) for ")) persons in * installments. The discount is available if the numbers of persons have been higher. The premium income under Eramin >ersonal &ccident policy increased from Rs. 4.+- lacs in "8B* to Rs. +).84 lacs in "8B-. The persons covered have also increased from "., lacs to -.4* 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 non2traditional policies are becoming more popular in India.

Coverage of Insurance in Rural India


!ro&erty Insurance:
&gricultural 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. () for electric pumpset & Rs. -) for diesel pumpset. Cong2term discount is also available at the rate of "(. if taken for *yrs & *(. if taken for ,yrs. Eroup discount is also applicable if a number of pumpset are insured together. &nnual 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 " 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.

I1 Agricultural &u"&set:

II1 Ani"al 'riven Carts Insurance: The animal driven carts insurance cover risks against death or permanent total disablement of the animals driven the cart. Eramin accident cover for driver while driving the cart at no e'tra premium. 5amage to the cart!Tonga & its accessories by accident, e'ternal means like fire, lightning, flood, cyclone & other allied perils while in transist by road, rail & inland waterways. Third party liability upto Rs.())) per accident & ma'imum Rs.")))) for all accidents in a policy year. Insured will bear first Rs. ")) of each cart & Rs. *))!2 of each tonga claim. The age group of animals covered is ,2"*yrs for bullocks, male buffaloes, *24yrs for horses & mules, "2(yrs for donkey & (2"(yrs for camels. The sum assured will be the market value of cart or tonga & animal. >remium rate is *. 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 re uired, 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.


Coverage of Insurance in Rural India

III1 %ut Insurance: 6ut insurance policy indemnifies the insured against all accidental losses or damages due to fire, earth uake, inundation, storm, tempest, impact damage, riot, strike, malicious damage & air craft damage subject to the e'clusion of war, in invasion, act of foreign enemy hostilities, usurped power. The ma'imum sum insured is Rs. 4)))!2. 7a'imum *)) huts situated in on contiguous area. In case the number of huts is more than () in contiguous area the insurer will accept the risk after inspection. The premium rate is Rs.,!2 per mille per annum. (). of the premium is shared by government. In practice, government pays the premium in full in advance & recovers (). 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. "))))!2 however, where the amount of loss involved is more than Rs. "))))!2 or number of huts is more than ( 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. & 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 )"2)(2"8BB which was in operation in +)4 districts of the country as on ,"2),"8B8. The scheme provides compensation not e'ceeding Rs."))) for a hut & Rs. ())!2 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. &bout ""))) claims amounting to Rs ".*+ crores have been settled upto end of 7arch "8B8. ;ational Insurance settled "B+(( hut insurance claims, ;ew India settled +(( claims, amounting to Rs. 4.B( lakhsG Rs.(*.)" lakhs settled by Jriental & Rs. *(*.(4 lakhs by =nited India during "88+28(. IV1 2o$ar 2as Insurance: The gobar gas insurance is applicable to all khadi & village industries workers!artisans, IR5> beneficiaries, schedule castes, schedule tribes & such other identifiable groups. The risks covered are fire, lightening, e'plosion, riot, strike malicious damage, impact by rail! road vehicles or animals, aircraft & other


Coverage of Insurance in Rural India

aerial!devices, storm, cyclone, typhoon, tempest, hurricane, tornado, flood, land slide, earth uake & shock. The sum assured is inclusive of digester, gasholder & cost of construction depending on type & cubic capacity. 7aster policy agreement is preferable in respect of this insurance in view of the concessional rate of premium & to reduce overall administrative e'penses. The rate of premium is Rs. )" per mille for widest cover subject to minimum premium of Rs. "(. V1 #ew 3ell Insurance: The new well insurance is applicable to dug wells or bore wells, which are being newly installed. It does not apply to e'isting well. The cover is given to financing banks or individuals. The sum insured shall be limited to a ma'imum of Rs. "*))) per well. The -(. of sum insured is settled for complete failure & (). is paid for partial failure. ()) imperial gallons of water per hour pumped intermittently for 4 hrs by *2, horsepower submersible pump & yield measured in contained of known capacity of atleast *)) litres. If yield is between ,))2()) gallons, the well shall be derived partially failed & compensation will be paid at () . of sum insured. ;atural calamities like flood, earth uake, riot & strike are e'cluded from this insurance.

41 Cattle & 5ivestoc6:

The cattle & livestock insurance was demanded since independent. ;o worth mentioning progress was made till "8-* when the general insurance was nationali/ed. Recently some progress has been made & figure of the progress is available since "8B*. Cattle & livestock insurance have included cattle, sheep & goat, horse!pony!mule, pig, camel, duck, rabbit, elephant & dog. I1 Cattle Insurance Sc e"e: 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.


Coverage of Insurance in Rural India

The age group of animals to be covered is *2") yrs for milch cows, ,2"* yrs for milch buffaloes, ,2B yrs for stud bulls, ,2"* 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 -(. of sum insured. The premium rates are governed by market agreement varying from *.-(. 2 +.. The premium rate is ,. for milch cattle. The premium for cattle owned by individuals! institutions & bank financed cattle, which do not provide regular & efficient veterinary attention is +.. Cattle owned by well organi/ed government, co2operative!private dairies!ape' bodies providing regular & efficient veterinary attention are charged premium at the rate of +. if there are less than () animals, ,.8(. of number of animals insured is ()2*() & ,.8. if number of animals insured is over *(). Cattle insurance schemes are available under IR5> project for cattle subsidi/ed under :>5&!7D&C!5>&>!IR5>!T&5>, &ntyodaya projects. 7ilch cows, milch buffaloes & stud bulls of indigenous or cross2bred variety between age group of *2 "*yrs are insurable for the sum assured agreed upon provided it does not e'ceed market value. The permanent total disability shall be covered at e'tra premium of ).B(.. The premium rate is *.*(. of sum insured p.a. to be subsidi/ed by the project authorities & financing bank. The risks covered are as mentioned in market agreement plan. II1 S ee& & 2oat Insurance: :heep & 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 +months to -yrs of sheep. Rams used for breeding & aged more than -(. of its market value. Eoats are covered between age group of 4months to (yrs the sum assured will be restricted to B). of market value as certified by veterinary surgeon or ")). bank advance whichever is higher. The premium rates are B. of sum assured in case of sheep & "). in case of goat of indigenous breed for private insured9s. This premium is "). for e'otic breed. The premium for bank financed & IR5> project is *.-(. in both the cases of sheep & goat. The policy shall provide indemnity against death of sheep & goat due to accident


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. III1 %orse7!ony7/ule Insurance: The policy for horse!pony!mule insurance draught horses, half draught horses, pony9s, mule9s against death due to accident &!or specified diseases contracted during the period of insurance & subject to usual terms, conditions & e'clusions of the policy. The age groups for such animals to be insured are *2Byrs. Indigenous, cross2bred & e'otic are insured. The sum assured is ")). market value or bank loan, which is higher. The non2scheme animals are charged premium at the rate of +. of sum assured where as the scheme animals are charged at *.-(. p.a. IV1 !ig Insurance: This policy covers death risk due to accident or diseases. The minimum number of animals covered is "). :evere fever diseases are e'cluded. The age group insurable is "month to (yrs. &ll indigenous cross2bred & e'otic pigs are insured. The ma'imum sum insured for pig is Rs.())!2. The premium rate is 4. per annum but pigs under :D5&!IR5> scheme are charged at ,.(. p.a. The sum assured will be linked to ")). of market value for organi/ed breeding farms whereas in other cases it is B). of market value. V1 Ca"el Insurance: Camel insurance policy is applicable to all male & female camels in India including camels subsidi/ed by :D5&!5>&>!7D&C between age group of ,2 ")yrs. The sum assured will be B). of market value or bank financed. The ma'imum sum insured is R:.,)))!2 in case of bank finance :D5&!5>&>!7D&C. In case of >T5 claim, -(. of sum assured is payable. The premium rate is +. p.a. for non IR5> scheme camels & *.*(. for IR5> scheme camels. M:urra9 disease is e'cluded. The minimum premium is Rs.*( p.a. per animal. The policy provides indemnity only for death due to accident inclusive of flood, cyclone, famine or disease inclusive of Rinderpest, #lack uarter, 6emorrhagic :epticemia!&nthra' contracted or occurring during the period of policy or strike,


Coverage of Insurance in Rural India

riot & civil common risks. The e'clusions are common e'clusions & specific e'clusions. VI1 Ra$$it Insurance: This policy is applicable to all breeds of rabbits in India, in the age group of "day2 +yrs, but death of rabbits due to diseases till day complete the age of ,)days is not covered. The risks covered are death of rabbits due to accident &!or disease contracted during the period of insurance. The e'clusions have common e'clusions as described in camel insurance & specific e'clusions of transport by air & sea, permanent & partial disablement of any nature pasteurellosis, culling, cannibalism, & intentional slaughter, undergrowth. The insured is compensated only -). of the sum assured, the rate of premium is -. of sum assured. VII1 Ele& ant Insurance: This policy indemnifies the owner for death due to accident or disease contracted or occurring during the period of insurance subject to certain e'clusions stipulated. The insurable age group is "24)yrs. The policies applicable to the elephants including those owned by temple, circus companies & individuals. The sum assured is B). of market value. The value of sum assured does not e'ceed Rs. ()))). The premium rate is (. p.a. The common e'clusions clause as mentioned under cattle market agreement is also applicable in this case. :pecific e'clusions are surgical operations, disability, breeding & calving & certain specific diseases such as tuberculosis, foot & mouth diseases etc. VIII1 'og 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 Bweeks to Byrs. 5ogs of indigenous cross2bred & e'otic breeds are insured under this policy. The minimum value of any breed should not be less than Rs. *)) & ma'imum value of any dog should not e'ceed Rs.*))) each dog. The premium rate is (. p.a. In the event of death of insured dog, any amount received or receivable by insured from ,rd parties & the value of salvage recovered if any would be deducted from the claim amount.


Coverage of Insurance in Rural India

I81 5ivestoc6 Insurance /aster !olicy: &n open policy is issued without specifying the sum insured. This will be stamped document stating the type of cover grantee, perils covered, condition e'clusions etc. <hen 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 "yr. The insurance company supplies the declaration forms to bank9s branches. &s & 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. =nder the live stock insurance scheme livestock as milch cows, buffaloes, calves, stud bulls & bullocks castrated bulls & male buffaloes whether indigenous cross2bred or e'otic, sheep, goats & pigs are insured. This policy covers death of livestock due to any accident inclusive of fire, lightning, flood, inundation, storm, hurricane, earth uake, cyclone tornado, tempest, famine snakebite etc, diseases inclusive of foot & mouth diseases, surgical operation strike, riot & civil commotion.

91 !oultry Insurance:
The general insurance companies have taken another big step to insurance poultry, duck & other birds. I1 !oultry Insurance: This policy covers poultry farms consisting of ")) or more pure & hybrid chicks, hens & cocks. &ll 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 e'clusions. #irds are covered from "2-* weeks. The cover is for epidemics diseases i.e. ranikhet diseases, fowl po' & gamhoro. The sum assured is as per poultry market agreement. The sum inured is as per valuation table. The premium rate is Rs. ".*) per bird where :D5& & other subsides is applied, the premium is Rs. ).8) per bird. 3'tra premium will be charged in case of addition of fresh birds. 3ach proposal is rated according to flock strength, mortality & management of farm. The compulsory inspection of


Coverage of Insurance in Rural India

the risks by company9s veterinary surgeon before assumption of risk, besides periodical routine inspection at intervals. II1 !oultry Insurance /aster !olicy .IR'!0: This policy as cattle master policy issued to benefit the benefactors of IR5>. III1 'uc6 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 e'clusions. This policy is applicable to all types of migratory & non2migratory birds in India, ducks farms consisting of minimum ")) ducks for non IR5> & () ducks for IR5> & other subsidi/ed schemes. The insurable age is "2(* weeks the premium is Rs. " per bird & Rs.).8 per bird for IR5> & other scheme birds. Common e'clusions are as mentioned under cattle market agreement. :pecific e'clusions are improper management cannibalism, sunstroke virus, and transit diseases such as Coli &spirgillosis.

,1 Insurance of S&ecies:
Eeneral insurance industry has started insuring other species such as #rackish water prawn, inland fish, silkworms & honey bees. I1 Brac6is 3ater !rawn Insurance: This policy cover risks against total loss of prawn, nursed seeds in hatcheries owned by state governmentG DD5&:, :tate fisheries Corporation, 7>35& or such other organi/ations. It is issued to provide insurance cover to those engaged in #rackish <ater >rawn 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 fi'ed 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


Coverage of Insurance in Rural India

or post larvae to the brackish water till actual harvesting. The premium rate is +. 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 , rd parties, earth uakes, e'plosion, storms, tempest, cyclone, typhoon, flood, volcanic eruption & other comulsions of nature. <illful destruction losses due to natural mortality, over crowding, loss due to negligence & error, theft, dacoity, war invasion etc. II1 :is Insurance !olicy: 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 ,rd parties, pollution, summer kill, riot & strike e'plosion, fire, air craft damage & serial devices, impact by any vehicle, storm, tempest, flood. The e'clusions 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. B). of fish as per valuation is indemnified. The premium rate is *.( . p.a. on a average value of fish. III1 Sil6 3or"s Insurance: This policy is applicable to mulberry silk worms only of =nivoltine, #ivoltine or 7ultivoltine breed. The disease free layings purchased from licensed seed prepareers!Eraineurs or government Erainages are covered. :ilk 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!workerG theft, clandestine sale, missing of the worms & non supply of ade uate uality, suitable uality 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 (. p.a. of the sum assured on the market value of cocoon at the (th stage.


Coverage of Insurance in Rural India

IV1 %oney Bee Insurance: This policy indemnifies the insured against all accidental losses or damages to the 6ive &!or bee colony subject to the e'clusion of loss of production, malicious or willful act or neglect or improper managementG 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 conse uences thereof or attempt there atG 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 ,. of total insured value. Risk of theft can be covered on payment of additional premium of *.. The farm subsidiary companies have underwritten small volume of business under pond fish insurance, silkworm insurance, agriculture insurance & animal driven cart insurance.

-1 !ac6age Insurance:
The EIC & its + subsidiaries have evolved insurance policy known as package insurance with a view to offer complete, all2round protection to the weaker sections of societies in respect of their dwelling premises & belongings from various ha/ards. They are composite package & farmers9 package. I1 Co"&osite !ac6age 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 & hospitali/ation. 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. *)))!2 & premium rate is ,. p.a. the contents are for Rs."))) at ,. premium. >ersonal accident covers Rs. ")))) at the premium of Rs.")!2. 6ospitali/ation for accidents & major diseases are for Rs.+)))!2 at the premium of Rs.+)!2. Thus, the total premium of Rs.(8!2 for covering all the above risks under " policy.


Coverage of Insurance in Rural India

II1 :ar"ers !ac6age Insurance: This policy has been issued to provide insurance coverage to the farmers for dwelling hut!houses, agricultural implements, seeds, fertili/ers, pesticides against the risk of fire, lightning, cyclone, earth uake, flood upto Rs.()))!2G cattle insurance against death due to accident & diseases, permanent total disablement & breeding & calving risks upto Rs. +)))G agricultural pump sets against fire, theft & machinery breakdown upto their market priceG bullock cart against death permanent disabilities to animals due to accident upto Rs.*)))!2, loss!damage to cart due to accident upto Rs."))), , rd party liability personal accident to cart driver & Eramin >ersonal &ccident against death!permanent total disablement upto Rs. 4)))!2 under single policy known as Darmers >ackage Insurance. The premium is decided as per separate insurance policy.


Coverage of Insurance in Rural India

#ational Agricultural Cro& Insurance Sc e"e:

In India crop insurance cover is not very wide spread. <e will look into the reasons for such a condition but before that it is necessary to have an idea of the crop insurance policyH O$;ectives: 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 stabili/e farm incomes, particularly in disaster years. Salient features of t e sc e"e: *1 Cro&s covered: The crops in the following broad groups in respect of which I1 the past yield data based on crop cutting e'periments is available for ade uate number of years. II1 Re uisite number of CC39s is conducted for estimating the yield during the proposed season. :ood Cro&s .Cereals & !ulses0 Oil Seeds Sugarcane< Cotton & !otato .annual co""ercial7annual orticultural cro&s0 Jther annual commercial!horticultural crops subject to availability of past yield data will be covered in a period of ,yrs. 6owever the crops which are covered ne't year will have to be specified before the close of preceding year. (1 :ar"ers to $e covered: &ll 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 co"&ulsory $asis: &ll farmers growing notified crops & availing seasonal agricultural operations loans from financial institutions i.e. loanee farmers.


Coverage of Insurance in Rural India

On a voluntary $asis: &ll non2loanee farmers growing notified crops who opt for the scheme. 41 Ris6 Covered & E=clusions: Comprehensive risk insurance will be provided to cover yield losses due to non2 preventable risks 0natural perils1 like fire & lightning, storms, cyclones, typhoon, hurricanes, as also floods, land slides, drafts, pests!diseases etc. Cosses arising out of war & nuclear risks, malicious damage & other preventable risks shall be e'cluded. 91 Su" Insured75i"it of Coverage: The sum insured may e'tend to the value of threshold yield of the insured crop at the option of the insured farmers. 6owever a farmer may also insure his crop beyond the value of threshold yield level upto "(). of average yield of notified area on payment of premium at commercial rates. In case of loanee farmers the sum insured would be atleast e ual to the amount of crop loan advanced. Durther the insurance charges shall be additional to the scale of finance for the purpose of obtaining loan. In matters of crop loans disbursement procedures, the guidelines of R#I! ;&#&R5 shall be binding. ,1 !re"iu" Su$sidy: &t (). subsidy in premium is allowed in respect of small farmers 0a cultivator with a land holding of * hectares i.e. ( acres or less1 & marginal farmers 0a cultivator with a land holding of " hectare or less1 to be shared e ually by the government of India & state government. The premium subsidy will be phased out on sunset basis within a period of ,2( yrs subject to review of financial results & the response of farmers at the end of "st yr of the implementation of the scheme. -1 !rocedure for A&&roval & Settle"ent of Clai"s: Jnce the yield data is received from the state government!=T as per the prescribed cut off dates, claims are worked out & settled by implementing agency.


Coverage of Insurance in Rural India

The claim che ues 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. >1 Cor&us :und: To meet the catastrophic losses, a corpus fund shall be created with contributions from the government & state!=T on a ()H() basis. & portion of calamity relief fund 0CRD1 shall be used for contribution to the corpus fund.

Sector 3ise !re"iu" Earned:

Agripum p Cattle & Crop Poultry Others

&s can be seen from the diagram, the cattle insurance holds a major chunk of the entire revenues. B,. to be precise. &gri2>ump follows ne't with )4.. This is to be e'pected giving the nature of professions that people have & it actually gives us big hint of where the priorities of the people lie. Jf course, there should be nothing to stop insurance companies from trying to pursue their own uni ue policies & targets.


Coverage of Insurance in Rural India

Rural de"and for droug t insurance

7any 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 many different risk management strategies 2 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. >ast research has paid much more attention to the supply2 side reasons for this market failure than to the demand side uestion of whether there e'ist financial instruments that farmers want and would be willing to pay for. &n attractive feature of the method is that it e'ploits actual production 0input2output1 data and does not deal with the usually unreliable data on household consumption and leisure activities. The model is applied to a two2year panel of data on households from five villages in Tamil ;adu 0:outh India1. 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 e'hibit significant risk2avoidance 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 appro'imately the pure risk cost 0the probability of drought1 plus ( percent administration costs. The findings confirm the inade uacies of traditional strategies of coping with droughts in poor rural areas. #ecause 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. 3ither households must increase their savings significantly 0a problem with low average incomes and an absence of safe and convenient savings instruments1, or more effective risk management aids are needed that can overcome the co variation problem. Improved financial markets 0with both credit and savings facilities1 could be helpful, particularly if they intermediate over a larger and more diverse economic base than the local economy. &lternatively, formal drought insurance in the form of a drought 0or rainfall1 lottery might be feasible, and the results suggest that it could be sold on a full2cost basis.


Coverage of Insurance in Rural India

!o&ulari?ing %ealt Insurance In Rural Areas

&round -) per cent of India9s population, live in villages. Jf these, less than * per cent are insured. Though the rural health insurance market is huge, it has so far remained untapped. Recently, IR5& has constituted a committee to chalk out a plan for spreading health insurance in rural areas. ?arious 7icro26ealth insurance schemes are to be studied. &round *( such schemes are run in rural India, most of them attached to 7icro2Dinance Institutions. :ala6naa? Syed briefs you about the issues that the IR5& committee will address and some prominent rural health insurance schemes running in the country IR'A A&&oints Co""ittee to &o&ulari?e ealt insurance <ith an aim to populari/e health insurance in rural areas and address the hurdles impinging its growth, The Insurance Regulatory 5evelopment &uthority of India 0IR5&1 has recently constituted a ",2member 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 public2 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, micro2 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.% NIR5& feels that insurance companies now need to focus on health as the business that comes from the health portfolio from rural areas is negligible. ?arious schemes such as Feshaswini, and 6ealing Dields 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


Coverage of Insurance in Rural India

people take loans. :o, 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 runL% %ealing fields %ealt Insurance Sc e"e: 7embers pay Rs *B( 0just "4 paise per day per person1 to cover health insurance 0Rs *),)))1 for a family of five and Rs ,( for >ersonal &ccident #enefit 0Rs *(,))) each on member and spouse1 to 65DC Chubb, the insurance company for the scheme. The policy is low2cost, which includes pregnancy and covers +, listed common illnesses governed by M5iagnostic Related Eroup 05RE1 7odel9. In case of a hospitali/ation, up to *( percent is paid by the patient as co2payment. The stakeholders, insurer, ;EJ partner and the hospital together work out a customi/ed process, map and goals, for the success of the scheme. >rices are pre2negotiated with the hospital for common illnesses. :ince 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. 5uring this process, we collect a lot of data on the insured both J>5 as well as hospitali/ation, history, treatment procedures etc. Jur processes are in place starting from training the facilitator about the 5RE 7odel to surveying, to claims settlement. Today, the need of the hour is a robust, uality service delivery mechanism that is easily approachable and understandable. & great product with a poor delivery mechanism is as good as not having a product at all. The claims rate for the scheme is +, per cent while the incident rate is just "., per cent. S ortco"ings of t e Sc e"e: &t 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 >ersonal &ccident #enefit 0>&#1 or critical illness schemes.

@es aswini Co+o&erative %ealt Insurance Sc e"e:

The :cheme covers the farmer co2operator, his spouse and children. The premium contributed per person was Rs ( per month with Rs *.( subsidy from the government


Coverage of Insurance in Rural India

of Oarnataka in the first year. The Feshaswini beneficiary is entitled to the following benefitsH free outpatient services at a network hospital including consultation fee and registration fee, investigation at special discounted rates, over "4)) listed surgeries done free of cost at network hospitals. The following charges are covered for any of the surgeries included in the policyH &dmission, bed, nursing, anesthesia, JT, surgeons, cost of consumables and medicines during the surgery and post operative period, surgery2related post and pre2 operative investigations. The surgical cover is ")) per cent cashless. "4 lakh farmers had enrolled as members in the first year, ,())) members availed of free consultation at network hospitals, 8),8 surgeries were done cashless amounting to Rs ").(, croresG of these 4(- were cardiac surgeries. In the second year, ** lakh farmers became members of the :cheme of which B*4(* members have availed of free outpatient consultation. 7ore than *,))) surgeries have been conducted free of cost. %ow t e Sc e"e Runs: & trust was constituted under Chairmanship of the >rincipal :ecretary, 5ept of Cooperation with &dditional Registrar, 5r 5evi :hetty, and other representatives from the government and healthcare sector. >ackage rates were negotiated and fi'ed for over "4)) surgeries. =sing Feshaswini 6ealth cards, members can go to any of the "+- hospitals selected by the trust. 6owever, hospitalisation not leading to the surgery including common cold and fever are not covered.

Arogya Ra6s a @o;ana: Residents of the &nekal Taluk and Oanakapura Taluk of Oarnataka from ) to -) years of age are eligible to be insured under the scheme. 7embers pay the premium to ICICI Combard Eeneral Insurance Company for the scheme and can avail treatment at *) hospitals registered under the scheme. The :cheme has just completed " st yr with a surplus of *( lakh & enrollment for *nd yr has been started. The premium for MIndividual :cheme9 is Rs "B) per year, as part of the Mfamily scheme,9 the premium is upto Rs "B) per member per year for two members, Rs "()


Coverage of Insurance in Rural India

per member per year for three members, and Rs "*) per member per year for four or more members. Offers of t e sc e"e: &rogya Raksha Fojana offersH Dree out patient consultation, generic medicines at special rates from network hospital pharmacies and #iocare pharmacies, diagnostic tests at discounted rates at network hospitals and approved diagnostic centres, hospitali/ation not leading to surgery, surgical treatment for over "4)) types of surgeries, ")) per cent cashless facility for surgical treatment and medical admissions up to the covered amount. :uture !lans: The company is looking to take the scheme to other areas and groups. They have a project in &methi in =ttar >radesh, where they are making "4 primary health centres 0>6Cs1 to provide free basic medical treatment to the people. This will be followed by the launch of a micro2insurance scheme at ,)2+) >6Cs, which will take care of the cost of the scheme. Suggestions to $oost t e %ealt Insurance: 6ealth insurance needs to be looked at differently from >&# or life insurance as this is in an e'tremely nascent stage. &lso IR5& needs to separate health from other insurances for the simple reason that claims incidences are e'tremely high and need health management e'pertise to manage it. &lso, it needs to find a mechanism where J>5 and day surgeries could be included as the rural poor find it e'pensive to stay in a hospital for more than a day as they loose wages for the day. #esides, a premium financing mechanism needs to be evolved so that it becomes easier for the people to pay the premiums. &wareness 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. &dding preventive and promotive activity as part of the programme to be sponsored by either the government, ;EJ9s and insurance companies will go a long way in promoting insurance in the rural areas.


Coverage of Insurance in Rural India

Recent #ews on Rural Insurance in India:

*1 #ew national ealt insurance &lan on t e anvil: & new national health program is e'pected to be announced shortly where local panchayats 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 >anchayats will be e'pected to collect the necessary premium in the form of cess. :hould 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.4())!2 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 #@> government had introduced a universal insurance plan at Rs." per day. 6owever 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 ade uate health care. Jver *))) community healthy centres will be upgraded in keeping with the standards laid down by the Indian >ublic 6ealth :tandards. 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.


Coverage of Insurance in Rural India

(1 /a= #@ life $egins ta&&ing rural "ar6et: >rivate insurance player 7a' ;ew Fork Cife Insurance Company Ctd 07;FC1 has started tapping the rural insurance market. Its "st initiative commenced in >unjab. Their idea is to penetrate into rural >unjab first, before e'panding their 0rural1 presence in other states told by 7r. Rajesh :ud 05irector P &gency #ancassurance1 & 5irect :ales 5istribution. This addition takes the company9s countrywide branch network to +B offices across ,+ cities. They had been able to sell good value propositions P both individual & group life cover solution. The sum assured range is above Rs. ())))!2 & they even had a 7illion 5ollar Round Table &gent, justifying the company9s rural presence. 41 ICICI 5o"$ard in interland t rust: ICICI Combard has firmed up a Rs. () crore investment plan for enhancing its rural network & has also entered into talks with the <est #engal government for insuring farmers holding cultivable land in the state through an accidental death benefit policy. $<e are in the process of signing up an agreement with the <est #engal Eovernment for insuring all farmers possessing cultivable land. This would be a group insurance policy where premium for the package would be around Rs. "*cr, while farmers would get Rs. "lac in case of death% e'plained :andeep #akshi 7anaging 5irector & C3J, ICICI Combard. &t ICICI Combard, they spent around Rs.,)cr in *))+2)( 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 Mtouch points9 in every district. In <est #engal they planned to setup


Coverage of Insurance in Rural India

around "- touch points which would act as links between the rural folk & ICICI Combard. 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. & 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. Jfficials from the company said that ICICI Combard 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 #engal government & service the claims also through the state machinery hierarchy. 91 /icro 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. Eovernment would like to see these benefits percolate to rural India & to the vulnerable sections of the population. 7icro insurance is a distinct product. Its design & delivery are speciali/ed functions. The insurance regulatory development authority 0IR5&1 has published draft regulations for macro insurance. ;EJ9s, :6E9s, co2operatives & 7DI9s will be invited to become macro insurance agents. Eovernment will e'tent full support to the effort of IR5& to promote macro insurance. In insurance sector the Dinance 7inister has stamped the distinct product of M7icro Insurance9, which has been specially designed for poor sections of the society. The 7icro Insurance has been drafted & 5raft Regulation is being prepared by IR5& for life as well as non life insurance for the poorer of the poorest. 6ealth insurance for poorer has also been addressed by the Dinance 7inister.


Coverage of Insurance in Rural India

(. Tata AI2 E=ceeds Rural Insurance Target .our Ban6ing Bueareo0 on (+),+ ())(1 /u"$ai: Tata &IE Cife Insurance Company9s rural programme has accounted for around "" per cent of all life policies sold by the company for the year ended 7arch *))*, as against the stipulated minimum of ( per cent. The company has undertaken a pilot programme for rural insurance in Tamil ;adu, which has also been e'tended to rural markets in Oerala and Oarnataka. >lans are also under way to cover &ndhra >radesh and the entire region of four southern states in the months ahead. $Jur 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 &IE Cife managing director Ian <atts. The rural programme of Tata &IE 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.


Coverage of Insurance in Rural India

:ailure of !rivate Insurance !layers in Rural Areas A An Analysis

Current Scenario: In India, insurance is generally considered as a ta' 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. (24.. 3ven to this day, Cife Insurance Corporation 0CIC1 of India dominates Indian insurance sector. <ith the entry of private sector players backed by foreign e'pertise, Indian insurance market has become more vibrant. & major milestone during the post liberali/ation era is the opening of the insurance business to Indian private sector, breaking up of monopoly of CIC & EIC. The Insurance Regulatory & 5evelopment &uthority &ct "888 0IR5& &ct1 was passed by the parliament. IR5& consists of a chairman, five whole2time members & four part time members. &s per the IR5& &ct, an insurance company is one in which the majority stake is owned by Indians & is managed by Indians & registered in India. Thus, the e uity structure of newly set up insurance companies will comprise 4). Indian, *4. foreign partner & "+. ;RIs, overseas corporate bodies & DIIs. 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 e'perience 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. Eiven the fact that only a minuscule minority of the population today has access to insurance services, the potential for growth is clearly tremendous. Jn the contrary, private sector globally has shown the ability to innovate & offer a diverse range of products that matches the re uirements of wide variety of groups. It is more likely that the ushering in of competition in this sector will not merely e'pand the coverage, but also customi/e it in a manner that was far less evident in the days of the CIC2EIC monopoly. &ccording to industry observers, the biggest potential lies in the rural insurance market where the penetration of the insurance players has been low. Jften in the rural areas, insurance is perceived as an additional burden rather than a means to combat


Coverage of Insurance in Rural India

risk. &ccording to an independent survey conducted by a big private insurer, "*. of the rural population has an insurance cover. Considering the fact that more than 4(. of the Indian population lives in rural area, the potential is highly attractive. <hile 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. <ith the entry of new players in the sectors, the competition has increased manifold. Eiants like :tate #ank of India, 65DC, ICICI, #ajaj & Reliance have all forayed into the market. Recently the Indian car giant 7aruti =dyog Cimited 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. >resently most of the companies are busy setting up of their offices & establishing agent network & a market is yet to witnessed a full2 fledged competitive environment. 6owever the entry of big private players & multinational companies has created ripples in both CIC & EIC. #oth of them are forced to act immediately to sustain the market initially & than to e'pand 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. &nd the new insurers are finding new ways to reach their prospects. 5ife insurance &layers: Cife Insurance Corporation of India. :#I Cife Insurance Company Ctd. #ajaj &llian/ Cife Insurance Company Ctd. Jm Ootak 7ahindra Cife Insurance Company Ctd. ICICI >rudential Cife Insurance Company Ctd. 65DC :tandard Cife Insurance Company Ctd. #irla :un Cife Insurance Company Ctd. I;E ?ysya Cife Insurance Company Ctd.


Coverage of Insurance in Rural India

Tata &IE Cife Insurance Company Ctd. 7etCife India Insurance Co. >vt. Ctd. &7> :anmar &ssurance Co. Ctd. 5abur CE= Cife Insurance Co. >vt. Ctd. 0&?I?&1 7a' ;ew Fork Cife Insurance Company Ctd.

Br$an vs Rural /ar6et 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. & wide disparity e'ists between the per capita income & literacy rate, among other things, in these * sectors. Drom insurance perspective, statistics shows that rural population has lower reach. The agent per "))) persons is around ).*(, which is far low in comparison to that of the urban market. Insurers may use this knowledge in designing innovative products, need2based selling of insurance, better penetration, development of new channels etc. 7ost new insurance companies started operating from metros & urban areas. &s 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. 6ence, e'ploring the rural markets poses to be 6erculean task to the insurers.

Rural Urban

3'perts are on the opinion that the urban markets are rapidly getting saturated, & the future growth lies in the rural areas. 6owever, it does not signal that the whole of the


Coverage of Insurance in Rural India

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. &lso, most of this population are a part of the organi/ed 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. #ut the situation with the rural populace is the different. & majority of them are left uncovered although they are also e'posed to risks similar to or even higher than their urban counterparts. The ratio of rural Indian population is very high & it has growing insurance needsG therefore, it is a fact that the potential growth of insurance industry lies in rural market, both for life & general 0non life1 insurance. & lot of study & research was & is being carried out in this direction to develop new strategies to e'plore the untapped area in the Indian insurance market. !rivate insurers reac out to rural custo"ers The Cife Insurance Corporation of India sells about *, per cent 04* lakh policies1 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 companies are mandated to sell - per cent, 8 per cent, "* per cent, "+ per cent and "4 per cent of their policies in rural areas in the first, second, third, fourth and fifth financial years, respectively. & change in the definition of what constitutes QruralI has given some leeway for insurance companies to get in the mandatory percentage. In &ugust *))+, Insurance Regulatory and 5evelopment &uthority altered the definition, aligning it with the census definition of QruralI. The census does not define rural area. It defines only an urban area. &nd by inference, what is not urban is a rural area.


Coverage of Insurance in Rural India

The erstwhile IR5& definition of rural areas included all areas with a population of less than (,))), with a density of population less than +)) s km and where at least -( per cent of the male working population was engaged in agricultural pursuits. The IR5& had amended the definitions earlier in *))* to bring down the re uirement stipulating that at least *( per cent of the population had to be engaged in agricultural pursuits. The revised definition has widened the market. 7r ?ivek Ohanna, 5irector, 7arketing, &viva Cife Insurance Company, said, N& couple of thousand villages would now be brought under the fold. The earlier definition meant that only some remote villages could be tapped. &nd there is no ambiguity now.N 7s &njana Erewal, ?ice2>resident of 7arketing at #irla :un Cife Insurance Company, said, NThe revised definition brings a larger part of the population under QruralI 2 almost -* per cent compared to +* per cent under the earlier definition. <hat this would do is make it possible for insurance companies to introduce different products with higher premiums.N &ccording to analysts, B) per cent of the rural population earn less than Rs 4,))) a month and a high premium may not suit them. 5esigning customised products and developing infrastructure and distribution systems is the way towards tapping this segment, they said. 7s :hikha :harma, 75, ICICI >rudential, said, N<e have been able to hit the rural pockets through ;EJs and direct marketing.N ICICI >rudentialIs rural distribution model involves agents, brokers as well as referral arrangements with ;EJs, micro2finance institutions and corporates. There is a presence in "( :tates through partnership arrangements with =ttaranchal Co2operative 7arketing Dederation, nCog Communications, ICICI #ank and ITCIs e2Choupal . &s of *)),2)+, 4+,-4+ policies were sold.


Coverage of Insurance in Rural India

&ccording to 7r :am Ehosh, 7anaging 5irector, #ajaj &llian/ Cife Insurance Company, NRural policies are not an issue for usG we are present in more than ,)) towns across the country and our offices and agents find it easy to reach and sell in rural areas.N Tata &IE has also been working with brokers, corporate agents and ;EJs. It offers products with premium ranging from Rs "*) to Rs -*) per annum with coverage ranging from Rs "(,))) to Rs 4),))). Dor *))+2)(, "8 per cent of their business came from rural and social insurance. 7r ?ijay &tre, ;ational 6ead, Rural Insurance, Tata &IE, said, N<e have created rural community insurance groups. This "*)2strong self2help group consists mainly of women. It has been very successful in &ndhra >radesh. In areas like Catur and Jsmanabad, we work with womenIs federations where there is the concept of cluster leaders.N <hile these tie2ups seem to be achieving the twin objectives of social rehabilitation and distribution, there is still a long way to go. 7ost private players admit that the rural areas can never be their target audience. Insurance will continue to be urban2 centric. &s 7r &tre said, N<hen one talks about rural insurance, there is confusion about whether it is a product, a distribution channel or a market. ItIs about time it is considered a market.N


Coverage of Insurance in Rural India

O&&ortunities & T reats in Rural Insurance /ar6et:

Jpportunities & threats go hand in hand in every industry & insurance industry is no e'ception. Identification of opportunities & threats help in better analysis of the market. &n attempt is made to e'amine the opportunities & threats related to rural insurance market & how insurers can get the most out of them. O&&ortunities: 2igantic !o&ulation: India has higher population growth rates. The rural population amongst to nearly -*. of the total population & as discussed earlier, majority of them are left uncovered. This can be 7ajor &venue for the players in the insurance market. Agriculture Insurance: &griculture is the major vocation & source of income for the rural India. This segment has vast potential, which cannot be overlooked. 2rowt in Inco"e 5evel of t e Rural !o&ulation: 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 ((. of the national E5>. It points out to the tremendous amount of potential available in rural areas. %ig Saving %a$it: Indians & in particular, rural people have high saving habit. This may be due to uncertainties & perils they are e'posed to in the rural areas. 6itherto, they had only a few investment avenues like post office saving or bank deposits, & insurance could be made as alternate investment opportunity with the benefit of life cover. :alling Interest Rates: Insurance has become an alternative investment product. <ith the fall in the interest rates, insurance products can be made investment avenues, which give good returns with insurance protection.


Coverage of Insurance in Rural India

T reats: Bneven 'istri$ution of !o&ulation: Indian population is not evenly distributed. The percentage of villages with population below *)) is *)., & the percentage of villages with population between *))2()) is +).. The total village e'ceeds 4 lakhs in numbers. The uneven population distribution could be a hurdle for the insurers to reach out the ultimate customer. Jn the other hand, insurance as a product is uni ue in itself. =nlike other products, insurance selling is effective through personal selling, which involves high costs. The agents may not find it worthwhile to interact & procure business, when prospective customers are scattered. It will take a long time for the alternative channels of distribution to reap results in our country especially in the rural areas. 5ow 5iteracy 5evels & Insurance Awareness: :tatistics suggest that literacy rate is as low as 4( . & much has to be done in this area. Cow literacy stands out as another major threat for insurers because communicating the benefits & mechanism of insurance products to the illiterate or semi literate masses may not be easy. Rural E"&loy"ent Condition: The major employment source for rural populace e'ists only in agriculture & allied activities. These professions need much muscle work, which affects the longevity of a person. The earning power of person is a crucial point for life insurance underwriting & insurers cannot ignore this fact. 5ow Earnings: &s much as ,). of the Indian population lives below the poverty line. 7ajority of them are landless agricultural laborers & wage earners. :o it is uite essential to design low rate products that are affordable by these people. Dor them to be able to meet their basic needsAfood, clothing & shelter is the primary object & purchasing insurance is not a top priority. ;evertheless, they too have insurance needs, & selling insurance to them would be a major challenge. The uantum of insurance is another aspect to be looked into while designing the products. Jn the


Coverage of Insurance in Rural India

other hand, insurance as a means of ta' saving device wont help due to their low levels of income & also because agriculture income being their major source of income. 6ence covering this large segment would be a daunting yet challenging task. Traditional Saving %a$its: If we give a close look at the saving habit of the rural population, we find that they prefer to invest in real assets than in intangible assets like bank accounts, insurance, post2office schemes etc. the most favorable avenues for them are purchase of land both agricultural & non agricultural, gold & silver etc. %ealt Conditions: <ith the efforts of government & non2governmental organi/ations there is some improvement in the health conditions of Indian population, especially in the urban areas. #ut much has to be done in the rural areas. 7any of the villages still do not have minimum basic amenities like proper sanitation, drinking water facilities, good hygienic environment, and health facilities etc, which have direct & indirect impact on their health conditions. Risk of contracting deadly diseases is also very high. Though they have higher need for health insurance, their affordability is a major uestion. Jne can only wait & watch as to how insurers would conduct themselves in this regard. !eo&les !syc ology: The majority of the Indian, especially rural population, believe in Eod & are superstitious to some e'tent. They tend to either retain the risk or avoid the risk, instead of managing or hedging the risk. This tendency should also be considered as a potential threat in selling insurance. Credi$ility: The research studies conducted by DICCI in association with I;E insurance reveal that, one of the major factors influencing the marketing of insurance in rural areas is the credibility of the insurers. In the past, there were cases of financial frauds, which affected the faith of rural population adversely.


Coverage of Insurance in Rural India

Confidence building e'ercises need to be carried out, & government & the IR5& need to join hands with the insurers in this regard.

Role of 2overn"ent:
&cross the globe, government has been playing a major & important role in the social welfare of their citi/ens. In India, the central government along with state governments has been active on this front. #ut on the whole, it is lagging behind, when compared with other developed countries. The workers group can be divided into * categories vi/, organi/ed sector & un2 organi/ed sector. The organi/ed sector is relatively a small portion of total working group. The unorgani/ed sector that constitutes a major section in population includes cultivators, agricultural labors & workers who work in the unorgani/ed manufacturing & service industries & it includes the self2employed. !overty alleviation activities: &round ,). of our population is living below poverty line. Ironically, the risk e'posure of this population is higher due to the kinds of perils they are e'posed to & due to the absence of ade uate protection compared to the population with higher income. 7ost of the people would not be able to afford insurance premiums to cover the perils they are e'posed to. Taking these factors & facts into consideration the :ocial :ecurity Dund with a corpus of Rs.")) cr was set up in the union budget of "8BB2B8. This fund was setup e'clusively for funding the group schemes for weaker sections. The main aim was to provide them economic security. In order to meet the aim the central government along with public sector insurance companies started schemes that are briefed below. Eroup Insurance :cheme for the landless agricultural labors 0C&CEI1 Eroup Insurance :cheme for the beneficiaries of integrated rural development programme. 0IR5>1 Eroup Insurance :chemes for certain sections of the society where (). of the premiums are financed out of the social security fund.


Coverage of Insurance in Rural India

Rural Eroup Insurance :cheme "88(.

Sc e"es Introduced in Association wit 5IC of India:

Janas ri Bi"a @o;ana: This scheme was floated to provide insurance cover to rural & urban poor population below & marginally above the poverty line. The age group covered is from "B2(8 yrs. Dor this, a person needs to be a member of approved vocation group. Jut of the premium of Rs.*)), half is borne by the member & the balance is adjusted from :ocial :ecurity Dund. Cris i S ra"i6 Sa"a;i6 Sura6s a @o;ana .())*0: This scheme was started to provide life insurance protection periodical lump sum survival benefit & pension to agricultural workers. :urvival benefits will accrue at the end of ") yrs upto the age of 4) yrs. The scheme also includes pension payment after the beneficiary attends 4) yrs of age. S i6s a Sa ayog @o;ana: It is a scholarship scheme to benefit the children of the members of @anashree #ima Fojana. The child in 8th or ")th standard, whose parents are covered under @#F, is provided scholarship. &n amount of Rs.,)) per charged. Sc e"es Introduced in Association wit Co"&anies1 Jan Arogya Bi"a @o;ana: This scheme provides low cost & economical medical insurance to poorer sections of the society in the country. The age group of the population covered is between (2-) yrs. The sum assured is Rs.()))!2. Ra; Ra;es wari /a ila6alyan @o;ana: This scheme was started to provide economic security to the women population in our country.

uarter is paid as

scholarship for a ma'imum period of +yrs & only for * children. ;o premium is

!u$lic Sector 2eneral Insurance


Coverage of Insurance in Rural India

3'perience shows that the sum covered is very low in these schemes & the claim amount may not be sufficient for the funeral e'penses of the deceased. & lot of bureaucracy!red2tapism & involvement of middlemen is also a major negative factor in this regard. India9s economy has been an agrarian economy & it stands + th in the world in terms of output & income generated from agriculture activities. &griculture contributes *(. of E5>. & major portion of population is dependent on agriculture & allied activities. Indian agriculture is labor intensive unlike in developed countries, where more scientific methods are adopted & modern tools are used in agriculture & farming activities. &griculture has been providing employment to major portion of our population. Indian agriculture is highly dependent on the monsoons & crops are e'posed to several risks. Traditionally, the risks are borne to a large e'tent by the farmers themselves & to some e'tent by government. Crop insurance was almost negligible in early years. 6ence, the importance of agriculture insurance need not be overemphasi/ed. Crop insurance was taken up as group schemes for farmers availing loans from the banks. The direct advantage from this was that the premium was low i.e. between "2*.. In this direction, the ;ational &griculture Insurance :cheme 0;&I:1 was introduced in the year *))) which replaced the e'isting comprehensive crop insurance scheme 0operating since "8B(1. ;&I: was primarily aimed at covering all food crops, oil seeds & an annual commercial!horticultural crop in respect of which the past yields data is available for ade uate numbers of years. The &gricultural Insurance Corporation of India Ctd is a new initiative in this direction the public sector general insurance companies & ;&#&R5 promoted this company, & it was registered under the companies act, "8(4. This body was setup with the objective of intensifying the agriculture insurance in our country. The new corporation will take care f insuring farms, agricultural properties, cattle, poultry etc.


Coverage of Insurance in Rural India

The estimated si/e of the agricultural insurance business is around Rs. ")))cr & is e'pected to grow over Rs. ")))) cr in the years to come. Jf late, government has been in acting legislations, which made insurance compulsory. They are H2 >ublic Ciability &ct, 7otor ?ehicle &ct & <orkmen9s Compensation &ct etc. :uitable legislations may also be brought out in the areas of personal lines of insurance, which would help in improving the economic security of the people. To begin with, health & pension sector could be considered. Role of IR'A: The role of Insurance Regulatory 5evelopment &uthority 0IR5&1 is prominent in the development of the insurance sector in our country. IR5& has covered as a strong regulator in our country. Ereater independence & more powers could be the obvious reasons for this. In order to avoid the possible negligence by the insurers towards rural markets 0particularly the new players1, IR5& formulated the $obligations of insurers to rural social sectors%. &nd it was found that all the insurers both life & general, complied on these counts, & that their performances were much above the re uired levels. Cooking at the performances the pertinent benchmarks. &nother area where initiatives are to be taken by both IR5& & insurers is the health sector. There is scope for much work in this domain. Role of Insurers: Insurers have a major role to develop insurance business. They should orient themselves towards market development to increase the penetration levels. &s discussed earlier, the penetration level has increased to ,.(4. from *.(*. in the last couple of years. There has been overall growth in the insurance market. The entry of new players has not resulted in the division of the e'isting market, but the market itself is on the growth path. 6owever, there is much scope & room for developing insurance particularly in the rural conte't & work in this direction has just begun. The insurers should focus on the following areasH

uestion would be on the need to revise such


Coverage of Insurance in Rural India

'evelo&"ent of alternate c annels of distri$ution: The insurers should work towards development of alternate channels for distribution in insurance in order to increase the e'isting levels of penetration. #ancassurance is one such distribution, which is yet to be adopted in a complete manner. The e'perience in the countries where it is working in a full2fledged manner is e'tra ordinary. It has emerged as a cost effective tool for distribution of insurance products. In India, where the number of villages is above 4 lacs, selling insurance could be a challenging job. <ith the spread of bank branches in majority of the villages, tie2ups with them should help increase in penetration. Tie-ups with NGOs/SHGs The non2governmental organi/ations & the :elf 6elp Eroups could play a major role in increasing the penetration levels. These are informal groups, which provide avenue for insurance selling through the mechanism of group insurance schemes. Eroup insurance provides greater reach with low operation costs & fewer rates. !roduct 'evelo&"ent & Innovations: In insurance market, product development & innovation e'ercises are a continuous process. ;ew products should be developed keeping in view the rural market conditions vi/2low average income, seasonal income etc. Reduction in O&erating Costs: Costs reduction cannot be ignored especially when it becomes part of premium to be charged. #usiness process outsourcing, third party administrators, & bancassurance can be considered in this direction. This effort would lead to low rates, which will have more acceptability in rural markets. #eed Based Selling: :ome products, which are popular in the urban areas, may not be suitable to the rural areas, as they might not cater to their needs. 6ence, insurers should adopt need based selling.


Coverage of Insurance in Rural India

%ealt Insurance: 6ealth insurance is a segment, which is neglected by both public insurers & private insurers. :tatistics suggest that only ,. of our population has voluntary health insurance cover. The rural population is more in need of health insurance, because of its inaccessibility to high medical costs & due to non2availability of proper health infrastructure facilities. The health insurance segment needs greater attention keeping these facts in view. !ension & Annuity /ar6et: :tatistics reveal that only "". of our population has the privilege of the pension. & major segment is left without old age income. This market needs to be e'ploited to the full e'tent. &nd nobody can afford to ignore the rural segment. >roducts with in built life cover & old age income should be developed.

Role of !u$lic Sector Bnderta6ings to I"&rove t e Insurance Business in Rural The rural insurance business of + public sector general insurance companies is e'pected to be transferred to the proposed &gricultural Insurance Corporation of India. :ources said that this would include all the crop insurance business operated by the Eeneral Insurance Corporation of India. The premiums for crop insurance is subsidi/ed by the =nion & :tate Eovernment. :imilarly the state government on the proportionate basis also meets the claim payments. The subsidies on the crop premium payments are however in the process of being phased out & are likely to be linked to the minimum support price & the claims ratios prevailing in the sector. This would not lead to steep escalation in the premiums. Instead the component paid by the farmers would increase over a period of time.


Coverage of Insurance in Rural India

The premiums on crop insurance range anywhere between ".-(. & ,.(. of the sum insured & also on the region. Insurance premiums are likely to be high in regions where the risks of natural calamities are high. #ut the sources added that a mechanism of cross subsidi/ation would be worked out eventually. This is e'pected since the fundamental purpose of the &gricultural Insurance Corporation is to enlarge the insurance coverage in the country. &n agricultural insurance coverage is barely ").. &ccordingly as the volumes in the business increase, income from the investment would help to keep the premium low. #ut if crop insurance has a history of high claims ratios, other farm insurance sectors like livestock & farm e uipment have low claims ratios. This tends to make rural business fairly attractive. Conse uently if the livestock business is e'panded, then it would help keeping the premium low in other high claim sectors like crop insurance. 6owever, the + insurance companies already do some livestock business & also insure agricultural e uipment in the rural areas as part of their social sector obligations. Infact companies like =nited India Insurance Company Ctd have proposed e'panding this business in view of the low ratios & conse uently the high retention income. The major problem though is that the volumes in this business are very low. The entry of ;&#&R5 into the &gricultural Insurance Corporation would address the issue & allow for e'pansion in the coverage of the sector from the current low levels. ;&#&R5 is e'pected to be the largest stakeholder in the venture. The + general insurance companies & the Cife Insurance Corporation would remain as minority stakeholder in the company. The + general insurance companies would however be allowed to compete in the livestock business with the proposed &gricultural Insurance Corporation.


Coverage of Insurance in Rural India

Agriculture Insurance Co"&any of India 5td

BBSI#ESS STATISTICS O: *( SEASO#S :RO/ RABI *DDD+())) TO C%ARI: ()), #ote: Su" Insured & !re"iu" are in Rs1lacs #ort ern Eone: #ort Eone :ar"ers covered Area .in %ec0 Su" Insured !re"iu" Su$sidy Total Clai"s Clai"s !aid Clai"s !aya$le :ar"ers Benefited 250000 200000 150000 100000 50000 0 !armers "o#ere$ !armers bene!ite$ %aryana %i"ac al !rades *""(** "+-*+) *--"-8 "+*8((8 "" ",, ",, )) "4-88 88-+) 4*+( "-) *4 +8* +8* )) 4(,+" J&C B+,) ")4") ("8 ") )" )) )) )) )) Bttranc al *4,-4 *B-4* **+8 ,4 )( ,B ,B )) 4+(4 Total 4D4,-F 9*-(D) (44)D >>, 94 --4 --4 )) FF,D-





6aryana stands "st in farmers covered, area & sum insured but stands *nd in subsidies, total claims, claims paid & farmers benefited.


Coverage of Insurance in Rural India

6imachal >radesh stands *nd in farmers covered & sum insured but ranks "st in subsidy, total claims, claims paid & farmers benefited. =ttranchal stands ,rd in all categories. @ & O stands +th in farmers covered, area, sum insured, premium & subsidy but its total claims, claims paid & farmers benefited is nil. Claims payable is nil for all the + states. Central Eone: Central Eone :ar"ers covered Area .in %ec0 Su" Insured !re"iu" Su$sidy Total Clai"s Clai"s !aid Clai"s !aya$le :ar"ers Benefited
10000000 '000000 &000000 !armers "o#ere$ %000000 2000000 0 Chattisgar Jhar(han$ ).P. U.P. !armers bene!ite$

C attisgar ,+-B-B+ -(8)B,4 "84)44 ()-8 +", "488* "4B)) "8" 84",),

J ar6 and 8(+()) (,*++,4-+, 8)B -" ",(4 ",)* (+ -*B)+

/1!1 84"+,,, *(,)84B* -*,-,+ *,,(B "+4* ++,)8 ++,)8 )) *,4)B,"

B1!1 (8)BB)B8++-"8 (",B4B 8B-) "+8* *)))8 "84+( ,4+ ",48+B4

Total *DD,-9(9 9(4>>-F9 *9>)9** 4D(*, 494F F(--F(),-)D 9>-99(9

7adhya >radesh stood "st in all categories & =.>. *nd, Chattisgarh stood at ,rd & @harkhand is +th in all categories.


Coverage of Insurance in Rural India

3estern Eone 3estern Eone :ar"ers covered Area .in %ec0 Su" Insured !re"iu" Su$sidy Total Clai"s Clai"s !aid Clai"s !aya$le :ar"ers Benefited 1&000000 1%000000 12000000 10000000 '000000 &000000 %000000 2000000 0 2oa (*"+ B+-B *)" )+ )" )* )* )) 482u;rat 44*-)"* "4*)"+8 8 ""44-"8 ("B") ,4B) "4-"*+ "4-"*+ )) ,+,,B4+ ) /a aras tra Ra;ast an "("+4(*8 ,4-""8) "(884*-, B848*4 ,*-"8 ,4-) -4+-) -,B4( *4)( +(+,8)" 8),"44) ,+8B8+ ")*(* *,( ,-"+8 "((*B *"4*" "),844" Total (,99DD9, 9*(4>D*) (9*4>9) D9>F, >,F(F)>9, (,-,*D (9((D)((FDD

!armers "o#ere$ !armers bene!ite$





7aharashtra is "st in farmers covered & farmers benefited while it is * nd in another categories. #ut Eujarat stands *nd in farmers covered & farmers benefited & "st in all other categories. Claims payable in Eujarat is nil but it is high in 7aharashtra. It is seemed that 7aharashtra Eovernment is not keen interested in solving claims of farmers resulting high figures of claims payable. Rajasthan stand ,rd in all categories. #ut number of claims paid is very less. :o ratio of claims payable is high. 6ence Rajasthan government should take more focus on clearing the claims. Eoa being small state stands +th but all claims are clear. 6ence claim payable is nil.


Coverage of Insurance in Rural India

Eastern Eone: Eastern Eone :ar"ers covered %ec0 Su" Insured !re"iu" Su$sidy Total Clai"s Clai"s !aid Clai"s !aya$le :ar"ers $enefited
,000000 &000000 5000000 %000000 +000000 2000000 1000000 0 Assam -ihar )eghalay Orissa .i((im /.-engal !armers "o#ere$ !armers bene!ite$

Assa" (4"B) +,B() +4*4 ")8 *" "*" (* 48 B""8

Bi ar ""-+448 "*8B,4) "*-B,) *84" ("4 *B8B) *4"-*B), +()(8+

/eg alaya 8"-+ """() -8) (* "4 *8 "" "B ""48



31Bengal ,(8+4"8 "B4BB-8 **+8"4 (B"4 "*-B -,,+ -,,+ )) ++B4,)

Total *)FF>*D9 D94>(-) FF*4F, (((>) 99*4 >,49>(9,(FD) ((-((*4

4)(",-( ""-4*"+*(( -(4 (*,")8 ",,," *(B" ,BBB" ,BBB" )) ""+ )" )" )" )" ))

",(,4"( B4

Jrrisa stands top in all categories. <est #engal is *nd in farmers covered, area, sum insured, premium & subsidy but it ranks ,rd in claims & farmers benefited. #ihar stands ,rd in "st ( categories & *nd in claims & farmers benefited i.e. farmers in #ihar have claimed more & benefited more in compare with Jrrisa. &ssam has +th rank e'cept claims payable. It stands *nd in claims payable. 7eghalaya stands (th in all categories e'cept claims payable in which it ranked , rd as claim payable to Jrissa, :ikkim & <. #engal is nil.


Coverage of Insurance in Rural India

:ikkim being small state stands last in 3astern Rone in all categories. Sout ern Eone Sout ern Eone :ar"ers covered Area .In %ec0 Su" Insured !re"iu" Su$sidy Total Clai"s Clai"s !aid Clai"s !aya$le :ar"ers Benefited 12000000 10000000 '000000 &000000 %000000 2000000 0 A.P. ar er Pon 0.1. 0ri A&1 !armers "o#ere$ !armers bene!ite$ And ra !rades ""8)"-4 ) "B","-) , "(4*(*+ +,+4" 44*8 8B,B, 48*B) *8"), *)()+-) Carna ta6a (-"+-) ( 8**",, B 4),**( "844+ "+B4 8-B4, 8+*), ,44) *4B-B* * Cerala !ondi *)-B4 + "-(48 , **8*B +B* "*( "*8* "*8* )) ,-(8" Ta"il Tri&ura +B(8 ,)(* +8", )* "" "" )) 8-) A&# Total c erry #adu ",B"8 (B4,+*"8** *(B) (" )B "+, "+* )" ,+)) "))"B" * B8*)"B(, **B 88+( 8BB* 4+ "88-*8 Islands --* *F94)*(""8B B8 )* )" )" )" )) (4 (F,,->*F ((F*),) -,,((4D,D ()>-4F *>9F** 4(F(F 9DF))4F

&ndhra >radesh stands "st in first 4 categories. #ut the claims paid are less resulting more claims payable & less in farmers benefited in comparison with Oarnataka.


Coverage of Insurance in Rural India

Oarnataka stands *nd in first 4 categories but claims paid are more than &ndhra >radesh, which results less claims payable & more in farmers benefited in comparison with &ndhra >radesh. 6ence, &ndhra >radesh government should be more careful in clearing claims for the interests of farmer9s benefits so that claims payable should be nil. Tamil ;adu & Oerala stands ,rd & +th in all series. Tripura & & & ; islands are very small states. :o figures are very less in all series & stands 4th & -th ranks. Claim payable is nil for both the states.

/y Own E=&erience in a S"all Village .Aangoan0:

&s I have to prepare a project on $Coverage of Insurance in Rural India% I along with my colleagues, re uested college authorities to have a visit to small village. Jur re uest was complied with & we went to &angoan a small village located near #hiwandi in 7aharashtra by bus on )(2),2*))4. :mall assignment Mcoverage of insurance9 was given to us. :o we visited some "B2*) houses & met the members of those houses to have an informal chat on insurance. In that village we found only one bank named M=nion #ank of India9 in which almost all the villagers were having their deposits & savings. It seems their only source of saving available in the village. &s we went into the houses of their villagers, we found that their standard of living was very simple & systematic. <hat I found there that most people were living in the


Coverage of Insurance in Rural India

houses where there was no electricity. #ut still they were satisfied with themselves in such atmosphere. &s the assignment was given to us we asked them some simple uestions on insurance likeH <hat do you know about insuranceL 6ave you ever heard the word insuranceL &re you or any of your family member in the house are insuredL 6ow many members are thereL <hat is the source of your earningsL <hat is your monthly incomeL &re you having any account in the bankL &s soon as we were asking the uestions, the villagers were firstly astonished & were not able to give any reply of our uestions. They were deeply thinking on our uestions. &fterwards we e'plained them the basic idea or purpose behind insurance. <e told them some insurance policies, beneficial for villagers such as Mfire, marine & other risks insurance policy in Rural India. &s it was noontime, hence mostly ladies were available in their houses. Jn the en uiry we came to know that there earnings were so less that they were not able to save anything for their future. Their conditions were miserable & pitiable. They were striving hard to manage their day2to2day life. The average income was found roughly around *())2,))). &s the most house wives were illiterate, they were totally ignorant regarding insurance. 6ence, they were interacting with us as they could not understand & were unable to follow the insurance policy. :o it was our hard task to make them understand. &lthough in some houses we found some members of their families at an educated level. ?ery few people, who were the sole earners for their families, were insured. #ut the level of insurance coverage was very low i.e. around (24..


Coverage of Insurance in Rural India

&s we visited all kinds of families living in the village i.e. rich, medium & poor, we noticed that only few rich people whose income above B))) & who were sole family earners, were having insurance policies. There main business was that they were engaged in farming. !articulars of Survey: ". ;ame of the villageH *. CocationH ,. 5ate of :urveyH +. ;umber of houses coveredH (. Time spent on surveyH 4. . Jf coverage of Cife InsuranceH -. . Jf coverage of Eeneral InsuranceH B. &verage earning of familyH 8. &verage Damily 7embersH "). 7ain business for their bread & butterH "". #ank CocatedH "*. >opulation in the villageH Aangoan #ear B iwandi in T ane 'istrict1 )4+),+())-1 *F+()1 9+, rs1 -+FG1 9+,G (,))+4)))1 ,+-1 :ar"ing1 Bnion Ban6 of India A$out 4)<)))1

It was my very pleasant & charming e'perience as I had seen the rural life for the " st time. The rural people were very simple. They were very innocent. They do not know any sought of tricks like urban people. There were no noises of transport vehicles. There was totally calmness & I was really fascinated with their simplicity, courtesy & kind behavior. It was my unforgettable e'perience.

T e :uture
The rural markets are still virgin territories to a great e'tent and offer e'citing opportunities for insurance companies. The surest path to success is to judge and measure the re uirements of the people correctly and offer a scheme that they would be able to afford. The limitations posed by the purchasing power of the subjects have to be taken into consideration.


Coverage of Insurance in Rural India

There is also an urgent need to enter into tie2ups or understandings with government agencies to ensure the success of the schemes. The need of the hour is to have innovative policies that have e'plicit benefits for the people to observe, understand and measure 6owever, all of these have to be supported by appropriate policy measures at the ground level. &lso, the entry of foreign companies should ideally lead to enhanced competition and result in better days for the customer. The present level of risk is accentuated by the inade uacies in the system of rural credit prevalent in India. The element of unpredictability the farmers suffer from can be eliminated to a large e'tent by prudent agri2credit policies that are easy on the farmer. The farmers then, would not only enjoy more comfortable policies but would also be free from the clutches of unscrupulous elements. It would provide them the badly needed buffer or comfort /one to give them more security and assurance in life. Insurance needs to be packaged in such a form that it appears as an acceptable investment to the rural people. In the near future, when we9ll see more innovations in agriculture in the form of corporatisation or a more professional approach from the farmers9 side, insurance will definitely be one option that the rural Indian is going to accept.


Coverage of Insurance in Rural India