Rural Insurance

Ashutosh Srivastava
Premnath Residency, ph-
9920196847, 9320482828
Flat- 301, Plot-74,
Sector – 44, Nerul,
Navi-Mumbai- 400706.
 Insurance in India
• Started in 1818(Oriental Life
Insurance Company )
• Life insurance premium accounting t
2.5% of the country’s GDP
• FDI up to 26%
• In the year 1912, the Life Insurance
Companies Act, and the Provident
Fund Act were passed to regulate
the insurance business.
 Insurance Acts
• The insurance Act 1938
• Life Insurance Corporation Act,
1956
• General Insurance Business
(Nationalisation) Act, 1972
• Insurance Regulatory and
Development Authority
(IRDA) Act, 1999
Reported catastrophe losses in India • Insurers bear fractional cost of
during 1965 – 2001 (nominal USD mn disasters
at then exchange rates)
Source: World Bank (2003), based
– Coverage of natural perils in
on data from OFDA-CRED (2003) life, property and vehicle
insurance
• Very low levels of non-life
insurance penetration
– Savings motive
– Erroneous perceptions
• Common approaches
– Informal risk transfer
– Disaster relief
– Crop insurance
– Corporate initiatives
Insurance in rural scenario
 Stagnation in Agricultural
Growth
• Deceleration in the growth
rate of agricultural
production
• Stagnation in yields of
important crops; with
larger intake of modern
inputs
• Disappointing
performance of
commercial crops
• Large fluctuations in the
output prices
 The rural needs and wants
• Farmers
• Craftsmen
• Milkman
• Weaver
• Casual labours
• Construction workers
 Risks
• Comprehensive risk will be
provided to cover yield
losses due to non
preventable risks, viz.:
• a. Natural Fire and Lightning

b. Storm, Hailstorm, Cyclone,

Typhoon, Tempest,
Hurricane, Tornado etc.
c. Flood, Inundation and
Landslide
d. Drought, Dry spells
 Penetration of Insurance
Products
No Insurance
Figures in %
64 %
Any Insurance 36
Life Insurance 27
General Insurance 14
Motor 10
Tractor 3
Cattle 0.5
Accident 0.5
Crop 0.3
Pumpset 0.2

0 10 20 30 40 50 60 70

• Over one-third have insurance, with life

insurance having the maximum penetration.
 Hierarchy of Insurance
Needs
60 Figures in %
Rank 2
10 Rank 1
40

18
20 42 20
11 17 16
16 4
10 10 7 6 4 2 3
0 2 1
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• More than three-quarters (78%) ranked various

combinations of life insurance as the most
important. Insuring assets were not such a
 Insurance schemes
• Government sponsored National
Agricultural Insurance Scheme
(NAIS) in operation since Rabi
1999-2000.
• Farm Income Insurance Scheme
(FIIS) implemented on pilot basis
in Rabi 2003-04 and Kharif 2004.
Discontinued w.e.f. rabi 2004-05.
• Varsha Bima Yojana (Rainfall
Insurance) being implemented by
some insurance companies like
ICICI- Lombard, IFFCO-Tokio,
AIC on Pilot basis.
First Farmer weather insurance policy
 Insurance information
Delivery Systems
Agent Network •As Insurance customers rely on personal interactions and a
high level of service, some degree of rural agent network is a
must
Commercial/ Co- •Banks are viewed as ‘safe’ institutions to invest in and any
operative tie up would enhance the credibility of insurers and their
Grameen/ RRBs agents
Post Office •This institution is very highly trusted by the rural
population with access to the smallest villages
E-Choupal •This is an internet-based co-ordination point for purchase of
agricultural produce and a forum for agricultural
information and interaction, particularly for affluent farmers
 Information network
Delivery Systems
Self Help Groups/ Youth Clubs/ Co-operative Societies These are various
rural forums that meet regularly at the village, block and district levels
and can be used for promoting group insurance
• Once the group leadership approves the insurance company, members
will be more inclined to accept its insurance products
Producers
Co operative Societies
Producers’ co-operative societies are rural forums for interaction/
information and finance for farmers. Regular meetings are held and can
be used as a group platform to sell policies (specifically accident/ crop/
health policies) to members
NGOs NGOs working in micro-finance with grass-root reach, trust and
credibility can be used to access members of Self Help Groups who
would then be more inclined to purchase from the private player
 conclusion
• Agricultural insurance
– Agricultural insurance can only
deal with the remaining part of
production risks that cannot be
managed using cost-effective
mitigation measures
– Underdeveloped agriculture
cannot be developed or
restored purely by the
introduction of an insurance
program
– Agricultural insurance has no
purpose without viable
agriculture and conversely,
viable agriculture could not
exist without adequate
insurance
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. .

Varsha Bima - 2005: Sixty five

percent of Indian agriculture is
Agriculture Insurance Company of India heavily dependent on natural
(AIC) is an exclusive organisation set up factors, particularly rainfall.
for implementing National Agricultural Studies have established that
Insurance Scheme (NAIS) . The company rainfall variations account for
will devise and implement other insurance more than 50% of variability in
schemes relating to Agriculture and allied crop yields...
subjects. more
»
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