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SYDENHAM COLLEGE OF COMMERCE & ECONOMICS
Practices Of General Insurance
By: Arvind Sankaran B.B.A. (Insurance &Banking) Third Year
6. 4.INDEX Sr. 1. 3. 2. INTRODUCTION MEANING TOPIC Pg. 5. Remarks 3 3 5 6 6 8 INTRESTING FINDINGS VIBRANT MARKET BUILDING INFRASTRUCTURE COMPANIES PROVIDING RURAL INSURANCE 7. No. SCHEMES OF TATA AIG INSURANCE 9 INTODUCTION 2 . No.
health. and –more than twenty five per cent of the male working population is engaged in agricultural pursuits Social sector” includes unorganised sector. 3 .RURAL INSURANCE: Rural India is often faced with risks linked to lifestyle of people living there. access to informed and empowered decision makers.The core business principles that guide Rural Insurance are exclusivity. • Rural Insurance is an underwriting company dedicated to providing insurance solutions to meet the needs of agricultural and rurally based businesses. both in rural and urban areas. service and quality. property or livestock. informal sector. contributing to 70% of the total population in India. is a largely untapped market. There is a growing need for the Rural mass to be educated on insurance solutions that will help them take care of the risks be it their automobiles. economically vulnerable or backward classes and other categories of persons. The report also gives a 360-degree view of the rural Indian market. reports highlights the opportunities for insurance products in rural India as well as the current challenges. –a density of population of less than four hundred per square kilometer. we create a fundamentally better option for your business. Definition “Rural sector shall mean any place as per the latest census which meets the following criteria-• –a population of less than five thousand. which could be explicitly helpful to companies planning to tap this market. Rural India. Rural Insurance believes that by combining these core values and adhering to the business ethos of ‘Putting You First’.
The investment influx propelled economic growth in the Indian urban regions leading to its rapid growth and subsequent saturation as well. also did not make much headway in the rural sector. Amongst the sectors that have commenced their foray in the rural regions insurance reveals a huge potential. with high awareness levels and low penetration of insurance. There exists a vast potential in the rural areas where more than 70% of our population lives. Most companies are focusing only on meeting regulatory requirements from rural areas and don’t see them as commercially viable rural business opportunities. waiting to be exploited. poor infrastructure. The insurance sector. is gradually moving to the urban markets counterpart. employment guarantee schemes and better housing facilities. is by far the largest potential market in the world. too have gained from the changes in the economy with the overall per capita income. This growth in the Indian markets . per se. liberalised in 2000 with the advent of private insurance companies in November 2000 has not expanded in real terms beyond the urban domain. The rural markets. The insurance market in India. However. the Indian rural market.630 (as per NCAER. inadequate data on rural markets. Other triggers to the rural regions economic development include the Indian government policies of loan waivers. some of the issues that seem to be hindering large-scale advent in the rural markets are lack of understanding of rural customer. The penetration of insurance in India is pitifully low and if we aim for the modest target of insurance premium becoming 5% of GDP. The focus of companies across sectors. The annual rural household income of Rs 56. IMDR 2002) coupled with changing rural aspirations in consumption patterns and lifestyles unfolds tremendous opportunities for rural marketing. But it is common perception and belief amongst the insurance companies that it is expensive to do business in rural areas. low levels of literacy and poor reach of mass media. insurance companies need to look at newer market segments rather than fight for a share in the same pie. 4 . The rural market in India.broadly divided as urban and rural-have attracted high levels of foreign investments. literacy levels and the introduction of new products and services having increased over the decade. thus.During the past decade India has registered consistent economic growth which has catapulted prosperity in the country. constituting 742 million people.
Gather inputs for the development of a broad distribution strategy for each potential customer segment and identification of delivery systems relevant to rural markets. specifically savings. Training & Education in Insurance (FORTE) thought it would be a great help to the industry if these issues were addressed. Almost 93% of the respondents were aware of life insurance. Challenges & Opportunities’ had the following objectives: Understand rural customers’ current knowledge. loans. Determine the potential rural customers’ perceived need for acceptance of and willingness to purchase insurance policies.Some of the questions tormenting the insurance marketers particularly the ones in the private sector are: Is the Indian rural market for insurance—a great promise or a great challenge? A potential miracle or a mirage? A mere regulatory obligation or a great opportunity? How is the rural market defined? Are rural operations cost-effective? Is it commercially wise to make huge investments to create a rural distribution and delivery system? We at the Foundation of Research. titled ‘Rural Insurance: Issues. were quite conversant with insurance. while 61% were aware of motor and accident insurance. The study. The Indian rural market for insurance is not entirely an uninformed market. even those residing in backward areas. What was stunning was that the respondents. So we decided to commission a research study to Marketing and Research Team (MART). bank deposits as well as insurance itself. attitude and practice regarding finance. Gather inputs for the development of a broad marketing approach for each potential customer segment in terms of products/pricing of insurance policies. The rural folks have a strong saving habit —they save about one-third of their income annually across the three income segments studied. Interesting findings The study brought forth revealing data. promotion and development of communications relevant to the rural markets. A little over half 5 . Around 36% of them had bought some insurance or the other and another 38% of these policyholders had intention to buy more.
(51%) of all the respondents had intentions of buying insurance products. Insurance companies would be saving on huge potential investments that may be required to build up dedicated distribution and delivery systems and leverage the existing network at marginal costs. This indeed is a ‘win-win’ situation. rural population being 742 million. the real challenge for them would still be the distribution and delivery systems. The state governments have also done their bit by inducting technology in their interface with them. The rural folks are reasonably technologyliterate and are not averse to its use in their day-to-day activities. particularly because of the strong saving habit. Building infrastructure These institutions. While the industry would certainly be much heartened by the promising prospects in the rural sector. titled ‘Developing a Rural Distribution Strategy for Insurers’ focused and looked threadbare at various distribution and delivery channels available in the district to reach out to the rural markets in a cost-effective manner. Here again research has come up with valuable data about the extensive network built by the rural development agencies. the potential market could be of mind-boggling proportions. In order to further validate these findings. Vibrant market Our research clearly indicates that the rural market is a vibrant market and holds tremendous potential for growth of insurance business. the cooperative institutions. FORTE commissioned another research study to develop a rural distribution strategy as a case study in district Muzaffarnagar. UP. Insurance companies would therefore be well advised to work out collaborative arrangements with these institutions to mutual advantage. having spent huge amounts for creating the infrastructure. 6 . If these numbers are extrapolated over the macro level. the NGOs and some industrial houses in the rural sector. Another important observation is that the ongoing IT and telecom revolution in India has not bypassed the rural sector. The study. the banks. will be happy to collaborate and recover some of the costs. Out of the non-policy holder respondents 62% intended to buy. This would certainly help in integrating the rural-urban markets.
agriculture & dairy cooperatives and the agents. Currently. personal. This income mainly comes from dairy. food processing and packaging. according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM). in tandem with its considerable economic growth. The non-agriculture base of rural occupation and income have been growing in rural GDP figures that are estimated at 45%. commodity trading and infrastructure development income. there exists an immense opportunity to explore the rural potential with all its complexities and variables and meet the challenge of developing the insurance business in this sector. as well as Panchayats and identify various products for the preparation of the Service Area Credit Plans in the rural areas. To reach the rural investors. ASSOCHAM has therefore felt that this is the opportune time for the public and private insurance companies to enter into rural India in a big way by introducing easy premium schemes in life insurance and for agri insurance. education and auto loans after these have insured them under its new schemes. Assocham paper on `Rural India and Its New Investors’ adds that insurance companies can lure this investors lot even for agri. Insurance companies can add about Rs. rural India’s income has risen due to shifting of its occupation from agriculture to non-farm agricultural income and it has become an important facet of rural India. only 8-10% rural households are covered under life insurance schemes and remaining 90% can be targeted for new innovative insurance schemes.The channels finally identified for distribution of insurance products were the panchayats. auto insurance etc. district cooperative banks. The rural market offers tremendous growth opportunities for insurance companies and insurers should develop viable and cost-effective distribution channels. build 7 . Therefore. The study detailed operationalisation of these channels along with a comprehensive cost analysis to clearly highlight the viability of going to the rural markets. the ASSOCHAM has suggested that the insurance companies should interact with local government/development agencies. According to ASSOCHAM. 1000 crore to their networth from nearly 200 million rural folk that are looking for alternate savings channels for their surpluses provided these come out with innovative schemes at affordable premium. housing.
Being an agrarian economy again there are immense opportunities for the insurance companies to provide the liability and risks associated in this sector. The 25-30 million credit cards offer a huge data base and opportunity for insurance companies. The agent can play a major role in creating awareness. The surest path to success is to judge and measure the requirements of the people correctly and offer a scheme that they would be able to afford. Nearly 20% of all farmers in rural India own a Kissan Credit cards. The Assocham Paper found that the rural markets are still virgin territories to a great extent and offer exciting opportunities for insurance companies.consumer awareness and confidence. An extensive rural agent network for sale of insurance products could be established. motivating purchase and rendering insurance services. Companies Providing Rural InsuranceICICI TATA AIG National Insurance LIC HDFC ERGO 8 .
Some of the scheme provided by TATA AIGMotor Insurance Tractors: All makes & models of Agricultural tractors / Trailers/ Trolleys/ Implements • Two Wheelers: All makes & models of Scooters & Motorcycles • Private Care: Vehicles privately owned. for captive use • Commercial Vehicles: Coverage for o Goods Carrying vehicles – various makes and models of vehicles upto 25 tonnes o Passenger Carrying vehicles .Vehicles privately owned. for captive use o 3-Wheelers : Passenger vehicles and goods carrying vehicles Property Insurance • Home • Shops & Outlets 9 .
overflowing of Water Tank and Pipes Missile Testing operations Leakage from Automatic Sprinkler Installations Bush Fire Flood. Storm. vehicle or animal Subsidence and landslide including rockslide Bursting. Strike and Malicious damage Impact damage by Rail.• Schools • Machinery (Pump sets) Covers Loss or damage to building & contents against: • • • • • • • • • • • • • Fire Lightning Explosion/Implosion Aircraft Damage Riot. Road. Inundation etc Earthquake Livestock (Cattle) Insurance • Diseases • Accidents • Natural calamities 10 .
• Riots. Malicious damage. loss of sight & hearing) Disappearance (where body cannot be located) Emergency Accident Medical Expense Repatriation of Remains / dead body Permanent Partial Disability Accident Hospital Cash Permanent Total Disability Tuition Benefit (Education Benefit) 11 . terrorism • Permanent loss of milk yielding capacity due to disease Personal Accident Insurance • • • • • • • • • Accidental Death (10% of Sum Insured for < 17 year old) Accidental Dismemberment (incl.
Rahul. under whose benevolent care and guidance.B. we have been able to complete our work. (Insurance & Banking) hereby declare that. College: Sydenham College of Commerce and Economics University: YCMOU Date: 12th January 2011 Place: Mumbai 12 .DECLARATION: I/We. we have completed Project on “Rural Insurance” during the academic year 2010-11. It is our prime duty to extend our thanks and express our deep sense of gratitude towards Prof. Arvind Sankaran of Sydenham College studying in 3rd year B.A. The information submitted is true and to the best of our knowledge.
to us which has given us a lot of knowledge in the field of General Insurance . for assigning project work on “Rural Insurance”. Arvind Sankaran of Sydenham College studying in 3rd year BBA (Banking and Insurance) thank Prof.GRATITUDE: We. and for helping. which would help us in our future. 13 . Rahul. guiding and supporting us in times of difficulty.
CERTIFICATE I. during the academic year 2010-11. The information submitted is true and original to the best of my knowledge. of Sydenham College in 3rd year BBA (Insurance & Banking) have completed Project on “Rural Insurance”. hereby declare that Arvind Sankaran. Prof. Signature 14 . Rahul.