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8/13/2019 Final Project on Rural Insurance1.5,1
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INDEX
Sr. No. Subjects Covered Pages
1. INTRODUCTION 1-17
2 Review of Rural Insurance 18-25
3 Issues Relate to Rural Insurance 2!-2"
# $%& 'ou Nee ( Rural Insurance 3)-31
5 RUR(* IN+UR(NC, +C,,+ 32-#2
! /ro0ress an /erforance of Rural Insurance #3-51
7 Oortunities an t%reats in rural insurance aret 52-55
8 C%allen0es to 4e overcoe for roviin0 universal
access to insurance services in rural areas
5!-!!
Conclusions an +u00estions
!7-!"
i4lio0ra%& 7)
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1. Introduction
Functions of insurance:
Provide protection: T%e riar& function of insurance is to rovie
rotection a0ainst future ris6 accients an uncertaint&. Insurance cannot
c%ec t%e %aenin0 of t%e ris6 4ut can certainl& rovie for t%e losses of
ris. Insurance is actuall& a rotection a0ainst econoic loss6 4& s%arin0 t%e
ris wit% ot%ers.
Collective bearing of ris: Insurance is an instruent to s%are t%e
financial loss of few aon0 an& ot%ers. Insurance is a ean 4& w%ic% few
losses are s%are aon0 lar0er nu4er of eole. (ll t%e insure contri4ute
t%e reius towars a fun an out of w%ic% t%e ersons eose to a
articular ris is ai.
!ssess"ent of ris: Insurance eterines t%e ro4a4le volue of ris 4&
evaluatin0 various factors t%at 0ive rise to ris. Ris is t%e 4asis for
eterinin0 t%e reiu rate also.
Provide certaint#: Insurance is a evice6 w%ic% %els to c%an0e fro
uncertaint& to certaint&. Insurance is evice w%ere4& t%e uncertain riss
a& 4e ae ore certain.
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S"all capital to cover larger ris: Insurance relieves t%e 4usinessen
fro securit& investents6 4& a&in0 sall aount of reiu a0ainst
lar0er riss an uncertaint&.
Contributes to$ards t%e develop"ent of industries: Insurance rovies
eveloent oortunit& to t%ose lar0er inustries %avin0 ore riss in
t%eir settin0 u. ,ven t%e financial institutions a& 4e reare to 0ive
creit to sic inustrial units w%ic% %ave insure t%eir assets incluin0 lant
an ac%iner&.
&eans of savings and invest"ent: Insurance serves as savin0s an
investent6 insurance is a coulsor& wa& of savin0s an it restricts t%e
unnecessar& eenses 4& t%e insures 9or t%e urose of availin0 incoe-
ta eetions also6 eole invest in insurance.
Source of earning foreign e'c%ange: Insurance is an international
4usiness. T%e countr& can earn forei0n ec%an0e 4& wa& of issue of arine
insurance olicies an various ot%er wa&s.
(is free trade: Insurance rootes eorts insurance6 w%ic% aes t%e
forei0n trae ris free wit% t%e %el of ifferent t&es of olicies uner
arine insurance cover.
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1.). (ural Insurance
Rural rouction an far incoes in Inia are fre:uentl& affecte 4& natural
isasters suc% as rou0%ts6 floos6 c&clones6 stors6 lanslies an eart%:uaes.
+usceti4ilit& of rural to t%ese isasters is cooune 4& t%e out4rea of
eieics an an-ae isasters suc% as fire6 sale of surious sees6 fertili;ers
an esticies6 rice cras%es etc. (ll t%ese events severel& affect farers t%rou0%
loss in rouction an far incoe6 an t%e& are 4e&on t%e control of t%e
farers. $it% t%e 0rowin0 coerciali;ation of rural6 t%e a0nitue of loss ue
to unfavora4le eventualities is increasin0. T%e :uestion is %ow to rotect farers
4& inii;in0 suc% losses. 9or a section of farin0 counit&6 t%e iniu
suort rices for certain cros rovie a easure of incoe sta4ilit&. ut ost oft%e cros an in ost of t%e state
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?Desite tec%nolo0ical an econoic avanceents6 t%e conition of farers
continues to 4e unsta4le ue to natural calaities an rice fluctuations@. In soe
etree cases6 t%ese unfavora4le events 4ecoe one of t%e factors leain0 to
farers
suicies w%ic% are now assuin0 serious roortions =RaAu an C%an62))7>. Rural insurance is one et%o 4& w%ic% farers can sta4ili;e far incoe
an investent an 0uar a0ainst isastrous effect of losses ue to natural %a;ars
or low aret rices. Cro insurance not onl& sta4ili;es t%e far incoe 4ut also
%els t%e farers to initiate rouction activit& after a 4a rural &ear. It cus%ions
t%e s%oc of cro losses 4& roviin0 farers wit% a iniu aount of
rotection. It sreas t%e cro losses over sace an tie an %els farers ae
ore investents in rural. It fors an iortant coonent of safet&-net
ro0raes as is 4ein0 eerience in an& eveloe countries lie U+( an
Canaa as well as in t%e ,uroean Union. owever6 one nee to ee in in t%at
cro insurance s%oul 4e art of overall ris ana0eent strate0&. Insurance
coes towars t%e en of ris ana0eent rocess. Insurance is reistri4ution of
cost of losses of few aon0 an&6 an cannot revent econoic loss.
T%ere are two aAor cate0ories of Rural insuranceB sin0le an ulti-eril
covera0e.
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1.* .+,-ECI/ES +F 0E SD2
To estiate rice 3 &iel ris involve in ifferent cros at national level
an at isa00re0ate level
To eaine t%e erforance of t%e eistin0 an earlier national Rural
insurance sc%ees ileente in Inia
To iscuss an elore t%e ro4les an rosects of rural insurance in
t%e countr&
To loo into t%e role of 0overnent in ileentin0 various Rural
insurance sc%ees
To su00est effective rural insurance ro0rae in Inia
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1.4. +bligation 5(ural Sector
,ver& insurer6 w%o 4e0ins to carr& on insurance 4usiness after t%e
coenceent of t%e Insurance Re0ulator& an Develoent (ut%orit&
(ct6 1""" =#1 of 1""">6 s%all6 for t%e uroses of sections 32 an 32C oft%e (ct6 ensure t%at %e unertaes t%e followin0 o4li0ations6 urin0 t%e first
five financial &ears6 ertainin0 to t%e ersons in rural sector6
=i> In resect of a life insurer6 --
sevener cent in t%e first financial &earE
nineer cent in t%e secon financial &earE
Twelve er cent in t%e t%ir financial &earE
Fourteen er cent in t%e fourt% financial &earE
Sixteen er cent in t%e fift% &earE
Of total olicies written irect in t%at &earE
=ii> In resect of a general insurer6--
two er cent in t%e first financial &earE
t%ree er cent in t%e secon financial &earE
five er cent t%ere after6
Of total 0ross reiu incoe written irect in t%at &ear.
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1.6 .Definition
Rural sectorshall mean any place as per the latest census which meets the
following criteria--
a population of less than five thousand;
a ensit& of oulation of less t%an four %unre er s:uare
iloeterE an
ore t%an twentyfive er cent of t%e ale worin0 oulation is
en0a0e in Rural ursuits
Rural Insuranceis an unerwritin0 coan& eicate to roviin0 insurance
solutions to eet t%e nees of Rural an rurall& 4ase 4usinesses.
T%e core 4usiness rinciles t%at 0uie Rural Insurance are eclusivit&6
access to infore an eowere ecision aers6 service an :ualit&.
Rural Insurance 4elieves t%at 4& co4inin0 t%ese core values an a%erin0 to
t%e 4usiness et%os of F/uttin0 'ou 9irst
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1.7 ((!8 INS(!NCE 9 9 ,ENEFIS 9 !D/!N!ES 9 FE!(ES
; E8II,I8I2
Inia is reoinantl& an Rural countr& so it 4ecoes iortant to insure its
Rural %erita0e. 9arers are t%e cultivators of %ealt%& Inia. Rural Insurance is t%e
answer to all t%e nees of Rural an rurall& 4ase usinesses.
None of us can 4e sure w%at toorrow will 4rin0. +%iel &our failies a0ainst t%e
unnown. et*ife is a articiatin0 flei4le ,nowent /lan t%at co4ines
savin0s an securit&. In aition to roviin0 &ou rotection u to aturit&6 it
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%els &ou save for &our secific lon0 ter financial o4Aectives. T%is lon0 ter
savin0s-cu-rotection lan coes to &ou at affora4le reius.
,ENEFIS
Deat% ,enefit
In t%e event of eat% urin0 t%e ter of t%e olic&6 t%e 4eneficiar& will receive t%e
4ase +u (ssure6 t%e accrue reversionar& 4onus an terinal 4onus if an&.
&aturit# ,enefit
On aturit& of t%e olic&6 &ou will receive t%e 4ase +u (ssure6 t%e accrue
reversionar& 4onus an terinal 4onus if an&.
,onuses
onuses are availa4le onl& on articiatin0 olicies. T%e 4onuses are not
0uarantee as t%e& are 4ase on t%e Coan&
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FE!(ES ; E8II,I8I2
&ini"u" Entr# !ge 16 #ears 5 7< #earsiniu +u (ssure Rs. 56)))
aiu +u (ssure Rs. 7#6)))
Ter 15 &ears 3) &ears
/reiu /a&in0 Ters +in0le /a&6 *iite /a& =5 or
1)> G Re0ular /a&
iniu (nnual
/reiu (ount
Rs. 173
(IDE(S
et*ife6 wants t%eir custoers to 0et t%e aiu out of t%eir lives. e it in
ters of ain0 t%eir reas coe true or 0ettin0 t%e 4est out of t%eir insurance
lan. $it% t%is in in6 we create etore w%ic% allows &ou to custoi;e &our
life insurance lan. +o t%at it can 4e tailore to eet t%e uni:ue nees of &ou an
&our fail& e4ers. etore offers &ou a c%oice of riers w%ic% are otional
contracts t%at allow &ou to enAo& aitional 4enefits. T%e& are alwa&s attac%e to
t%e 4asic olic& at t%e tie of urc%asin0 it6 an cannot 4e 4ou0%t searatel& or
ineenentl&. ,ac% rier coes wit% its own reiu rates an searate olic&
conitions. T%e reiu6 nature an c%aracteristics of t%e rier are 4ase on t%e
4ase olic& to w%ic% t%e rier is attac%e.
+o 0o on6 0et ore out of life.
!ccidental Deat% ,enefit Deat% cause ue to an accient is one of t%e ost
uneecte an ainful of all causes of eat%s. Due to t%e %i0% unreicta4ilit& of
t%is for of is%a6 t%e 4enefits offere 4& t%e (cciental Deat% enefit Rier
4ecoe all t%e ore iortant an relievin0.
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T%is Rier rovies for t%e a&ent of an aitional aount s%oul eat% occur as
a result of an accient 4& outwar violent an visi4le eans 4efore a0e !) &ears.
Deat% of t%e *ife Insure ust occur wit%in 18) a&s fro t%e ate of t%e
accient.
&ini"u" Entr# 16 #ears
aiu ,ntr& 55 &ears
aiu a0e at aturit& !) &ears
iniu +u (ssure Rs. 5)6)))
aiu +u (ssure Rs. 1)6 ))6))) or 4ase +u
(ssure w%ic%ever is lower.
Deat% ,enefit- In t%e unfortunate event of eat% ue to an accient t%e Rier
+u (ssure is ai an t%e olic& is terinate.
Critical Illness (ider No one lies to t%in a4out t%e ossi4ilit& of sufferin0 a
critical illnesslie cancer6 %eart attac an stroe etc. It is soet%in0 t%at an& of
us assue will not %aen to us. In t%e ail& 0rin of activities6 one ens u never
4ein0 reare for suc% an eventualit&. etlife offers a FCritical Illness Rier an 4u& aitional insurance at a low cost.
T%e Ter Rier $ill 4e terinate on t%e earlier ofB
1. T%e en of t%e 0race erio of t%e first unai reiu.
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2. T%e olic& anniversar& on w%ic% t%e life assure is a0e !) &ears =as on last
4irt%a&> or t%e aturit& ate of t%e 4ase olic& w%ic% ever is earlier.
3. Deat% of t%e life assure.
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).(evie$ of (ural Insurance
).(evie$ of (ural Insurance
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In t%e a4sence of foral ris s%arin0 H iffusion ec%aniss6 farers rel& on
traitional oes an et%os to eal wit% rouction ris in rural. an&
croin0 strate0ies an farin0 ractices %ave 4een aote in t%e a4sence of cro
insurance for sta4ili;in0 cro revenue. (vaila4ilit& an effectiveness of t%ese risana0eent strate0ies or insurance surro0ates een on u4lic olicies an
ean for cro insurance =$aler an o%a 1"8!>. T%e ris 4earin0 caacit& of
an avera0e farer in t%e sei-ari troics is ver& liite. ( lar0e far %ouse%ol
or a wealt%& farer is a4le to srea ris over tie an sace in several wa&sE %e
can use store 0rains or savin0s urin0 4a &ears6 %e can iversif& %is cro
rouction across ifferent lots. (t a %i0%er level of incoe an sta&in0 ower6
t%e farer woul ot for %i0%er avera0e &iels or rofits over a erio of tie
even if it is ac%ieve at t%e cost of %i0% annual varia4ilit& on outut =Rao et al.,
1"88>. inswan0er =1"8)>6 after stu&in0 t%e ris in Rural investents6 ris
avertin0 tenencies of t%e farers an availa4le strate0ies for s%iftin0 ris6
conclues t%at farersown ec%aniss for loss ana0eent or ris iffusion
are ver& eensive in ari an sei-ari re0ions. T%e aAor role la&e 4&
insurance ro0raes is t%e inenification of ris-averse iniviuals w%o i0%t
4e aversel& affecte 4& natural ro4a4ilistic %enoenon. T%e %iloso%& of
insurance aret is 4ase on lar0e nu4ers w%ere t%e incience of ris is
istri4ute over iniviual. Insurance6 4& offerin0 t%e ossi4ilit& of s%iftin0 riss6
ena4les iniviuals to en0a0e in ris& activities w%ic% t%e& woul not unertae
ot%erwise =(%san et al., 1"82>. Iniviuals cannot influence t%e nature an
occurrence of t%e ris& event. T%e insurance a0enc& %as fairl& 0oo 4ut
0enerali;e inforation a4out t%e insurer. owever6 t%is oes not %ol true in t%e
case of rural or cro insurance. Unlie ost ot%er insurance situations6 t%e
incience of cro ris is not ineenentl& or ranol& istri4ute aon0 t%e
insure. Joo or 4a weat%er a& affect t%e entire oulation in t%e area.
*ac of ata on &iel levels as well as ris osition of t%e iniviual farer uts
t%e insurance coan& in ti0%t sot. (s in t%e case of 0eneral insurance6 Rural
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insurance aret also faces t%e ro4le of averse selection an oral %a;ar.
T%e %i0%er reiu rates iscoura0e aAorit& articiation an onl& %i0% ris
clients articiate leain0 to averse selection. oreover6 in cro insurance t%e
iniviuals o not %ave control over t%e event6 4ut eenin0 on ters of contract6t%e iniviuals can affect t%e aount of inenit&. Tenenc& of oral %a;ar
tets an insure iniviual to tae less care in reventin0 t%e loss t%an an
uninsure counterart w%en eecte # inenit& a&ents ecee t%e value of
efforts. T%e ierfect inforation =0at%erin0 inforation is costl&> iscoura0es
articiation of rivate a0encies in cro insurance aret. +iilarl&6 incience of
rano events a& not 4e ineenent. Natural isasters a& severel& aa0e
cros over a ver& lar0e area an t%e oain of insurance on w%ic% it is 4ase
cru4les own i.e.6 worin0 of t%e law of lar0e nu4er on w%ic% reiu an
inenit& calculations are 4ase 4reas own. T%e rivate insurance coanies of
re0ional nature will 0o 4anrut w%ile a&in0 inenit& clais unless it srea
ris over sace. 9arin0 or cro rouction 4ein0 a 4iolo0ical rocess6 convertin0
inut into outut carries t%e 0reatest ris in farin0. T%is6 coule wit% aret
ris6 iin0es on t%e rofits eecte fro farin0. ,fficient ris reucin0 an
loss ana0eent strate0ies suc% as cro insurance woul ena4le t%e farers to
tae su4stantial riss wit%out 4ein0 eose to %ars%i. T%e farer oes not %ave
to 0o for istress sale of %is rouce to rea& rivate e4ts. Creit insurance
ensures rea&ent of creit6 w%ic% %els in aintainin0 t%e via4ilit& of foral
creit institutions. T%e 0overnent is relieve fro lar0e eenitures incurre
for writin0-off Rural loans6 roviin0 relief an istress loans etc.6 in t%e case of
cro failure. ( roerl& esi0ne an ileente cro insurance ro0rae
will rotect t%e nuerous vulnera4le sall an ar0inal farers fro %ars%i6
4rin0 in sta4ilit& in t%e far incoes an increase t%e far rouction =%ene
2))2>. T%e farer is liel& to allocate resources in rofit aii;in0 wa& if %e is
sure t%at %e will 4e coensate w%en %is incoe is catastro%icall& low for
reasons 4e&on %is control. ( farer a& 0row ore rofita4le cros even t%ou0%
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t%e& are ris&. +iilarl&6 farer a& aot irove 4ut uncertain tec%nolo0&
w%en %e is assure of coensation in case of failure =a;ell 1""2>. T%is will
increase value ae fro rural6 an incoe of t%e far fail&. (ccess an
availa4ilit& of insurance6 c%an0es t%e attitue of t%e farer an inuces %i totae ecisions w%ic%6 ot%erwise6 woul not %ave taen ue to aversion to ris. 9or
eale6 rain-fe a& was cultivate in one of t%e risiest istricts i.e .6
(nura%aur istrict6 of +ri *ana6 for t%e first tie in 1"!26 as insurance facilit&
was availa4le to t%e farers =Ra& 1"71>. %ene =2))5> foun t%at incoe of t%e
far %ouse%ols fro sei-ari troics en0a0e reoinantl& in rain-fe
farin0 was ositivel& associate wit% t%e level of ris. ence6 t%e availa4ilit& of
foral instruent for iffusion of ris lie cro insurance will facilitate farers to
aot ris& 4ut reunerative tec%nolo0& an far activities6 resultin0 in increase
incoe. +oe of t%e stuies confir t%e conventional view t%at oral %a;ar
incentive lea insure farers to use fewer c%eical inuts =+it% an Joowin
1""!>. a4coc an enness& =1""!>6 fin t%at at reasona4le levels of ris
aversion6 nitro0en fertili;er an insurance are su4stitutes6 su00estin0 t%at t%ose
w%o urc%ase insurance are liel& to ecrease nitro0en fertili;er alications. (
stu& 4& orowit; an *ic%ten4er0 =1""3> fin t%at in t%e U+ iwest6 cro
insurance eerts consiera4le influence on ai;e farers c%eical use ecisions.
T%ose urc%asin0 insurance alies si0nificantl& ore nitro0en er acre =1" K>6
sen ore on esticies =21 K>6 an treats ore acrea0e wit% 4ot% %er4icies an
insecticies =7 K an !3 K> t%an t%ose not urc%asin0 insurance. T%ese results
su00est t%at 4ot% fertili;er an esticies a& 4e ris-increasin0 inuts.
(n anal&sis of ata fro U+ rural inicates t%at t%e roucers first resonse to
ris is to restrict t%e use of e4t. /rice suort ro0raes an cro insurance are
su4stitutes in reucin0 roucer ris. T%e availa4ilit& of cro insurance in a settin0
wit% rice suorts allows roucers to service %i0%er levels of e4t wit% no !
increase in ris =(twoo et al.6 1""!>. is%ra =1""#> anal&;e t%e iact of a
creit-line Core%ensive Cro Insurance +c%ee =CCI+> on cro loans6
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eseciall& to sall farers in JuAarat. It is o4serve t%at CCI+ %a a collateral
effect as reflecte t%rou0% t%e increase loan aount er 4orrower an reuction
in t%e roortion of non-4orrowers aon0 sall farers.
(ural insurance: Need and potential
(. R. /atel
IN+UR(NC, %as t%us far 4een ostl& cit&-oriente. ut t%in0s are %aenin0
in t%e rural areas w%ere %uan life an incoe-0eneratin0 rural assets nee
rotection6 an t%ere is treenous scoe for eveloin0 insurance 4usiness.
T%is s%ows u t%e 0ross ne 0lect of t%e rural areas vis-a-vis insurance cover6
t%ou0% since t%e late-1"!)s6 a silent econoic revolution %as 4een on in t%e
villa0es.
Now t%at t%e insurance sector is oen to t%e rivate sector an forei0n
coanies6 t%e Jovernent s%oul a& serious attention to coverin0 t%e rural
areas.
$%ile it is true t%at access to insurance cover eens on t%e
literac&Hawareness levels an assure incoe6 well-lanne an or0anise
efforts 4& coitte rivate sector coanies can &iel ric% iviens fro
t%e rural areas. T%is is 4ecauseB
( lar0e nu4er of rural istricts %ave witnesse si0nificant 0rowt% an
roserit&E
(ccess to relia4le an aut%entic ata an inforation %as irove
consiera4l&6 w%ic% can ena4le :uic an correct ecision-ain0E
T%ere are secific functionaries an a0encies in t%e rural areas w%ic% can %el
elore an eloit insurance 4usiness in t%e untae rural aret.
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T%e nu4er of failies livin0 4elow t%e overt& line %as consiera4l& ecline
in /unAa4 =11.7 er cent>6 Joa =1#." er cent>6 (n%ra /raes% =22.2 er cent>6
iac%al /raes% =23.# er cent>6 JuAarat =2#.2 er cent>6 ar&ana =25.) er
cent>6 GL =25.2 er cent>6 Lerala =25.# er cent> an RaAast%an =27.# ercent> -- uc% 4elow t%e national avera0e of 35."7 er cent in 1""3.
Rural 4anin0 as catal&st
$%ile u4lic investent in a0riculture %as ecline to 1!.2 er cent6 t%e rural
4anin0 s&ste %as 4een encoura0in0 far eveloent t%rou0% rovision of
creit facilities for rouction of cros incluin0 %orticulture6 lantation6
forestr&E urc%ase of far e:uientE livestoc an fis% farin0E irri0ation
facilities an installation of iesel en0ines6 an so on.
an creit is also rovie for esta4lis%in0 villa0eHcotta0e inustries6
stocin0Hsul&in0 far inuts an cattle-fee6 an 4usiness an trae
uroses. 9ro 1"!"-7) to 1"""-2)))6 u to Rs 3.1 crores %as 4een rovie
to t%e far sector.
$it% en%ance incoes6 an furt%er suleente 4& 4an creit6 t%e rural
oulation is ac:uirin0 consuer ura4les6 constructin0 %ouses6 urc%asin0
ve%icles6 couters6 an so on.
(ll t%ese assets nee to 4e rotecte fro aa0eHloss6 natural or anae.
T%us6 t%e rural areas offer enorous oortunities for coitte rivate
insurance coanies in 4ot% life an non-life insurance sc%ees.
T%is will6 in turn6 %el create ore t%at woul %ave irect iact on rural
eveloent an t%e countr&s econoic 0rowt%6 in 0eneral. In fact6 insurance
in t%e far sector s%oul 4enefit fro t%e avances of science an tec%nolo0&
as well.
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*IC in t%e last ecae %as evolve a nu4er of roucts w%ic%6 %owever6 o
not suit t%e nees of t%e rural areas. +iilarl&6 t%e four JIC su4siiaries %ave
also 4een roviin0 insurance cover for secific ins of assets owne 4& rural
%ouse%ols t%rou0% 4an creit. ut ore %as reall& ut in t%e re:uirearetin0 effort in t%e villa0es. T%e clai lo0ent an settleent roceure
is tie-consuin0 an cu4ersoe. Cattle insurance uner t%e 0overnent-
sonsore Inte0rate Rural Develoent /ro0rae an cro insurance =till
now coverin0 4ans loanee> %ave not et wit% t%e eecte results.
Malua4le ata an inforation on rural areas %as 4een availa4le on t%e rural
areas t%rou0% t%e u4licationsHsurve&s of t%e Central +tatistical Or0ani;ation6
National +ale +urve&s6 National Council of (lie ,conoic Researc%6
an so on. 9ro 1"8"6 t%e National an for (0riculture an Rural
Develoent %as 4een forulatin0 /otential *ine Creit /lan6 an t%e *ea
an %as 4een t%e (nnual District Creit /lan t%at 0ive consiera4le insi0%ts
into t%e Jovernents lans for far an rural sector eveloent.
esies6 t%e villa0e rofile availa4le wit% eac% of t%e 4ranc%es of
nationali;eHu4lic sector 4ans contain e%austive ata on t%e oulation6
cultivatin0 %ouse%ols6 cate0ories of farers6 classification of worers6
livestoc6 croin0 attern6 far e:uient an ac%iner& an so on.
T%ere are ore t%an 16756))) rural creit outlets in aition to t%e offices of
t%e District Rural Develoent (0enc&6 t%e District Inustries Centre6 t%e
District Develoent ana0er of nationali;e 4ans an *ea District
ana0er of t%e *ea an. (ll t%ese institutions an a0encies can offer
consiera4le inforation to insurance coanies.
9irs intereste in eveloin0 rural insurance canB Ientif& insurance
roucts 4est suite to rural eliteHric% as well an rural %ouse%ols.
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,volve area- an client-secific roucts.
Desi0n a et%o an s&ste for fiin0 an collectin0 reiu6 an clai
settleent roceure to ensure custoer-frienl& services.
,ucate unelo&e &out%s of t%e villa0es can 4e traine an 4ecoe
valua4le assets for t%e coanies. $%ile insurance coanies are ea0er to
4uil t%eir 4usiness in t%e ur4an areas6 t%ere is a %it%erto untae otential for
4usiness in t%e rural areas w%ic% can 4e eloite.
T%e Centre an t%e +tate 0overnents ust encoura0e rivate an forei0n
insurance coanies to enter t%e rural areas6 an rovie rotection to ruralassets fro aa0e an loss ue to natural an an-ae calaities. 9or t%is
urose6 reasona4le an nee -4ase concessionsHreliefs in taations an
su4siies re:uire infrastructural facilities an ainistrative suort ust 4e
etene6 at least for ten &ears. T%e 0overnent a& consier aointin0 an
,ert Coittee on Rural Insurance to wor out t%e oalities for rivate
an forei0n coanies intereste in enterin0 t%e rural areas.
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3.Issues (elated to (ural Insurance
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insurance sc%ee at t%e iniviual far unit level is 4eset wit% ro4les6 suc%
asB
Non-availa4ilit& of t%e ast recors of lan surve&s6 owners%is6 tenanc&
an &iels at iniviual far level
+all si;e of far %olin0s
Reoteness of %alets an inaccessi4ilit& of soe far-%olin0s
( lar0e variet& of cros6 varie a0ro-cliatic conitions an aca0e of
ractices6 an
Inae:uate infrastructure.
$e feel t%at lowerin0 of t%e insurance unit to t%e Jra /anc%a&at =J/> level6 is a
welcoe ove6 as it woul reflect &iel losses at a reasona4le level. owever6
ata 4ein0 t%e lifeline of insurance6 t%e actuarial ratin0 of t%e rouct at J/ level
woul 4e ossi4le onl& if t%e %istorical &iel ata at t%at level =J/> is availa4le for
a reasona4l& lon0 erio. In real #!
ENE(!8 ISSES
,ven several &ears after t%e initiation of first rural insurance roAect in 1"726 t%e
covera0e an scoe of rural insurance reains far fro ae:uate6 even-t%ou0% t%e
nee for various fors of insurance for rural sector %as 4een wiel& eresse.
+oe of t%e issues relate to eansion of rural insurance an irovin0 its
effectiveness are iscusse 4elow (ole of overn"ent as entione 4eforeE cro
insurance to 4e successful re:uires u4lic suort. T%is coul 4e in ters of
su4si& on reiu6 eetin0 art of ainistrative eeniture6 an reinsurance
etc. Jlo4al eerience s%ows t%at ue to secial nature of rural rouction6 in
several countries6 reius a&a4le 4& farers is su4sii;e 4& 0overnent.
Rural in Inia is not Aust eenent on weat%er conitions6 4ut also suffers t%e
4runt of natural isasters. It will 4e :uite in orer for cro insurance to 4e re0are
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as a suort easure in w%ic% 0overnent la&s an iortant role6 4ecause of t%e
4enefit it rovies not erel& to t%e insure farers6 4ut to t%e entire national
econo& ue to t%e forwar an 4acwar lina0es wit% t%e rest of t%e econo&.
+ociet& can si0nificantl& 0ain fro ore efficient s%arin0 of cro an naturalisaster riss. T%e rinciles 4e%in t%e evaluation of cro insurance sc%ees all
over t%e worl are alon0 t%ese lines for receivin0 t%e active suort an finance of
t%e Jovernent. Inte0ratin0 t%e various ris iti0ation et%os an strealinin0
t%e funs not onl& inAects accounta4ilit& an rofessionalis into t%e s&ste6 4ut
also increase econoic efficienc&. T%e suort ec%anis of aAor countries is
0iven in t%e Ta4le 7.1. Jovernent can facilitate rural insurance in several wa&s.
In case farers are ase to a& full reiu t%eselves t%en c%ances of aotion
of insurance are 4lea. T%ere is a nee for soe su4siisation 4& 0overnent. It
can rovie inforation6 on weat%er atterns6 locations of fars an cros6
incience an %istor& of erils an cro &iels. It can %el to eet t%e costs of t%e
researc% to 4e unertaen 4efore startin0 an Rural insurance ro0ra. It can also
rovie reinsurance.
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4.=%# 2ou Need ! (ural Insurance
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4.1=%# 2ou Need ! (ural Insurance >
Its alwa&s 4est to 4e reare for unfortunate circustances an t%is is w%& &ou
s%oul consier 0ettin0 a rural insurance olic&. ( rural insurance olic& will
s%iel &ou fro financial ruin in case accients %aen. Jettin0 rural insurance
will also 0ive &ou ae securit&
1. uaranteed Surrender /alue
2. &aturit# ,enefit
3. Deat% ,enifit
=%# 2ou Need a (ural Insurance Polic#
Its alwa&s 4est to 4e reare for unfortunate circustances an t%is is w%& &ou
s%oul consier 0ettin0 a rural insurance olic&. ( rural insurance olic& will
s%iel &ou fro financial ruin in case accients %aen. Jettin0 rural insurance
will also 0ive &ou ae securit&
o Increase in creit finance in t%e rural areas
o
Increase in incoe an assets of rural oor
o (vaila4ilit& of inforation for ecision ain0
o Desi0n tailore roucts
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o ,sta4lis% efficient et%os of reiu collections an clais
settleents.
6.((!8 INS(!NCE SC0E&ES
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6. ((!8 INS(!NCE SC0E&ES
C!8E INS(!NCE
Cattle Insurance was 0overne uner aret (0reeent as evise 4& JIC an
t%e rates6 ters6 conitions etc. all were alica4le to all t%e four Insurance
Coanies. owever6 w.e.f a& 2))36 it is no lon0er uner aret (0reeent.
T%is olic& covers ini0enous cross 4re an eotic cattle owne 4& rivate
owners6 various financial institutions6 air& fars6 cooeratives6 cororate airies
etc. T%e wor cattle inclue ilc%6 Cows an uffaloes calves an %eifers6 stu
4ulls6 4ullocs an %e-4uffaloes an istunes. (0e 0rou is secifie for all t%e
anials.
S0EEP !ND +! INS(!NCE
T%is sc%ee is also 0overne uner aret (0reeent. /olic& rovies inenit&
to ini0enous cross-4re an eotic s%ee an 0oat a0ainst eat% ue to accient
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=incluin0 fire6 li0%tenin06 floo6 c&clone6 faine6 strie6 riot an civil
cootion> an isease. ,art%:uae an lanslie
Covers are also rovie. +tanar an coon eclusions al& as er Cattle
/olic&. (nials are ientifie 4& eans of sall 4rass 4uttons ear ta0s. (nialsuner sc%ee cate0or& enAo& certain 4enefits in reiu rate an clai
C!&E8 INS(!NCE
T%e caels are covere a0ainst eat% ue to accient or isease as er +tanar
Cattle Insurance /olic&. T%e aiu +.I. is restricte to Rs.3)))H-.
PI INS(!NCE
(ll ini0enous6 cross-4re an eotic i0s are covere %owever uner sc%ee
cate0or& eotic anials are not covere. T%e a0e 0rou is fro # ont%s to 3
&ears. T%e covera0e is a0ainst eat% ue to accient or isease.,clusions as er
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Cattle /olic& al& %ere also. /eranent total isa4leent6 4reein0 an
furrowin0 riss are not covere. Maccination in alica4le iseases is coulsor&.
,valuation eens uon t%e a0e of t%e anial. (nials are ientifie 4& eans
of sall 4rass 4uttons ear ta0s.
0+(SE? &8E? D+N@E2? P+N2? 2!@
INS(!NCE
T%e Covera0e is as er +tanar Cattle /olic&. owever t%e a0e 0rou is restricte
to 2 &ears to 8 &ears.
!(IC8(!8 INS(!NCE SC0E&ES
Different fors of eerients on a0ricultural insurance on a liite6 a-
%oc an scattere scale starte fro 1"72-73 w%en t%e Jeneral Insurance
Cororation =JIC> of Inia introuce a Cro Insurance +c%ee on -#
cotton. In t%e sae &ear6 0eneral insurance 4usiness was nationali;e an6
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Jeneral Insurance Cororation of Inia was set resect of -# cotton. T%is
sc%ee was 4ase on ?Iniviual (roac%@ an later u 4& an (ct of /arliaent.
T%e new cororation too over t%e eeriental sc%ee in inclue 0rounnut6
w%eat an otato. T%e sc%ee was ileente in t%e states of (n%ra/raes%6 JuAarat6 Larnataa6 a%aras%tra6 Tail Nau an $est en0al. It
continue u to 1"78-7" an covere onl& 311) farers for a reiu of Rs.#.5#
la% a0ainst clais of Rs.37.88 la%.
P+8(2 INS(!NCE
T%is is also 0overne 4& aret (0reeent6 aon0st all t%e four su4siiar&
coanies. T%e olic& s%all rovie inenit& a0ainst eat% of 4irs ue to
accient =incluin0 fire6 li0%tnin06 floo6 c&clone6 strie6 riot an civil cootion
an terroris> or iseases contracte or occurrin0 urin0 t%e erio of insurance.
T%e wor /oultr& inclues la&ers6 4roilers an %atc%er& 4irs6 w%ic% are eotic
an cross-4re.
Ini0enous an non-escrit 4irs will not 4e insure
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DC@ INS(!NCE !PP8IC!,I8I2
i. (ll t&es of i0rator& an Non-i0rator& 4irs in Inia.
ii. Duc fars consistin0 of iniu of 1)) ucs for non-
IRD/ an 5) ucs for IRD/ an ot%er Jovernent
su4sii;e sc%ees.
NoteB (ll 4irs in Ducer& 9ar s%oul 4e insure Duc Insurance +c%ee s%all
rovie inenit& a0ainst eat% of ucs ue to accient incluin0 li0%tnin06
floo6 c&clone6 faine6 riot an strie6 civil cootion or iseases contracte or
occurrin0 urin0 t%e erio of insurance.
E8EP0!N INS(!NCE
T%is sc%ee is alica4le to ele%ants use for coercial an reli0ious
uroses. T%is olic& covers eat% ue to isease or accient an t%e covera0e is
0iven fro 5 to !) &ears of a0e. Ientification is one fro t%e recors of forest
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eartent of t%e +tate Jovt. an also 4& easurin0 t%e trun of eac% ele%ant.
Maluation of t%e ele%ant varies fro 4ree to 4ree6 area to area an tie to tie.
,clusions are as er Cattle aret a0reeent an soe secific eclusion are as
er olic& sc%eule. Coan& inenifies t%e insure onl& 8)K of aret valueor su insure w%ic%ever is less.
F!I8ED =E88 INS(!NCE
T%e sc%ee is alica4le onl& to t%ose wells finance 4& 4ans w%ere re-financin0
4& N((RD is involve an in ot%er case w%ere wells are finance 4& a
nationali;e 4an 4ut not re-finance 4& N((RD6 aroval of ea Office is
ust .+u Insure6 reiu6 erils covere an eclusions are ifferent in 4ot%
t%e sc%ees an as er olic& sc%eule
0+NE2,EE INS(!NCE SC0E&E
T%is olic& is to cover 4ee%ives anHor colonies 4elon0in0 to iniviual6
cooerative societies an t%ose sonsore an su4sii;e uner various roAects of
resective +tate an Central Jovernent a0ainst total loss aa0e to 4ee%ives
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anHor 4ee colonies as a result of an accient cause 4& fire6 floo6 inunation6
stor6 teest6 c&clone6 %urricane an tornao. T%is cover is onl& for Inian
one&4ee an Italian one&4ee. +u insure eens uon t%e cost of ee%ives
as 0iven 4& t%e resective state LMIC oar
Crop insurance
Cro insurance is urc%ase 4& Rural roucers6 incluin0 farers6 ranc%ers6 an
ot%ers to rotect t%eselves a0ainst eit%er t%e loss of t%eir cros ue to natural
isasters6 suc% as %ail6 rou0%t6 an floos6or t%e loss of revenue ue to eclines
in t%e rices of Rural cooities. T%e two 0eneral cate0ories of cro insurance
are calle cro-&iel insurance an cro-revenue insurance.
Cro-%ail insurance is 0enerall& availa4le fro rivate insurers =in
countries wit% rivate sectors> 4ecause %ail is a narrow eril t%at occurs in a
liite lace an its accuulate losses ten not to overw%el t%e caital
reserves of rivate insurers. T%e earliest cro-%ail ro0ras were 4e0un 4&
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ulti-eril cro insurance =/CI>B covers t%e 4roa erils of rou0%t6
floo6 insects6 isease6 etc.6 w%ic% a& affect an& insures at t%e sae
tie an resent t%e insurer wit% ecessive losses. To ae t%is class of
insurance6 t%e erils are often 4unle to0et%er in a sin0le olic&6 calle aulti-eril cro insurance =/CI> olic&. /CI covera0e is usuall&
offere 4& a 0overnent insurer an reius are usuall&
artiall&su4sii;e4& t%e 0overnent. T%e earliest /CI ro0ra was
first ileente 4& t%e 9eeral Cro Insurance Cororation =9CIC>6 an
a0enc& of t%e U.+. Deartent of Rural6 in 1"38. T%e 9CIC ro0ra %as
4een ana0e 4& t%e Ris ana0eent (0enc& =R(>6 also a U.+.
Deartent of Rural a0enc&6 since 1""!.
o Cro-revenue insuranceB is a co4ination of cro-&iel insurance
an rice insurance. 9or eale6 R( esta4lis%es cro-revenue
insurance 0uarantees on corn 4& ultil&in0 eac% farers corn-
&iel 0uarantee6 w%ic% is 4ase on t%e farers own rouction
%istor&6 ties t%e %arvest-tie futures rice iscovere at a
cooit& ec%an0e 4efore t%e olic& is sol an t%e cro lante.
T%ere is a sin0le 0uarantee for a certain nu4er of ollars. T%e
olic& a&s an inenit& if t%e co4ination of t%e actual &iel an
t%e cas% settleent rice in t%e futures aret is less t%an t%e
0uarantee. In t%e Unite +tates6 t%e ro0ra is calleCro Revenue
Covera0e.
o Cro-revenue insurance covers t%e ecline in rice t%at occurs
urin0 t%e cros 0rowin0 season. It oes not cover eclines t%at a&
occur fro one 0rowin0 season to anot%er. T%at woul 4e calle
rice suort6 an woul raise a series of cole Rural-olic&
an international-trae issues.
38
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0ealt% insurance for t%e rural poor >
9or ost eole livin0 in eveloin0 countries ?%ealt% insurance@ is an unnown
wor. It is 0enerall& assue t%at6 wit% t%e ecetion of t%e uer classes6 eole
cannot affor suc% t&e of social rotection. T%is is a it& as also oor eole
ean rotection a0ainst t%e financial conse:uences of illnesses. 9or ost
eole livin0 in oor eveloin0 countries illness still reresents a eranent
t%reat to t%eir incoe earnin0 caacit&. esie t%e irect costs for treatent an
ru0s6 inirect costs for t%e issin0 la4or force of t%e ill an t%e occu&in0 erson
%ave to 4e s%oulere 4& t%e %ouse%ol. ealt% insurance sc%ees are an
increasin0l& reco0ni;e factor as a tool to finance %ealt% care rovision in low
incoe countries. Jiven t%e %i0% latent ean fro eole for %ealt%care
services of a 0oo :ualit& an t%e etree uner-utili;ation of %ealt% services in
several countries6 it %as 4een ar0ue t%at social %ealt% insurance a& irove t%e
access to %ealt% care of acceta4le :ualit&. $%ereas alternative fors of %ealt%
care financin0 an cost recover& strate0ies lie user fees %ave 4een %eavil&
critici;e6 t%e otion of insurance sees to 4e a roisin0 alternative as it is a
ossi4ilit& to ool ris transferrin06 unforeseea4le %ealt% care costs to fie
reius. Recentl&6 ainl& in +u4-+a%aran (frica 4ut also in a variet& of ot%er
countries6 non-rofit6 utual6 counit&-4ase %ealt% insurance sc%ees %ave
eer0e. T%ese sc%ees are c%aracteri;e 4& an et%ic of utual ai6 soliarit& an
t%e collective oolin0 of %ealt% riss. In several countries t%ese sc%ees oerate in
conAunction wit% %ealt% care roviers6 ainl& %ositals in t%e area.
(0ainst t%is 4ac0roun t%e Center for Develoent Researc% =Q,9-onn>
anal&ses wit%in %is researc% ro0ra on social securit& s&stes in rural areas t%e
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rosects an liitations of innovative %ealt% insurance sc%ees. In close
colla4oration wit% national researc% institutes eirical stuies are currentl& 4ein0
carrie out in ,t%ioia6 C%ina6 J%ana6 Inia6 +ene0al an
Tan;ania. T%e ai of t%ese roAects is to estiate ean for %ealt% care an%ealt% insurance6 :uantif& econoic an social iacts6 as well as ientif&in0
factors of success an failure. T%e stuies focus on rural areas 4ecause %ere t%e
nee for insurance is eseciall&6 4ut rivate insurance arets o not eist an
u4lic easures often fail to reac% t%eir tar0et oulation.
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7. Progress and Perfor"ance of (ural Insurance
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&iel or t%res%ol &iel6 all t%e insure farers 0rowin0 t%at cro in t%e area are
entitle for clais. T%e clais are calculate usin0 t%e forulaB =Juarantee 'iel
- (ctual 'iel> +u Insure of t%e farer =Juarantee 'iel>
T%e clais are ai to t%e creit institutions in t%e case of loanee farers an tot%e iniviuals w%o insure t%eir cros in t%e ot%er cases. T%e creit institution
woul aAust t%e aount a0ainst t%e cro loan an a& t%e resiual aount6 if an&6
to t%e farer. (rea &iel insurance is racticall& an all-ris insurance. T%is is ver&
iortant for 2# developing countries with a large number of small farms.
However, there are delays in compensation payments. In the case of
individual approach, assessment of loss is made separately for each
insured farmer. It could be for each plot or for the farm as a whole
(consisting of more than one plot at different locations). Individual farm-
based insurance is suitable for high-value crops grown under standard
practices. Liability is limited to cost of cultivation. This type of insurance
provides for accurate and timely compensation. However, it involves high
administrative costs. eather inde! insurance has similar advantages to
those of area yield insurance. This programme provides timely
compensation made on the basis of weather inde!, which is usually
accurate. "ll communities whose incomes are dependent on the weather
can buy this insurance. " basic disadvantage could arise due to changing
weather patterns and poor density of weather stations. eather insurance
helps ill-e#uipped economies deal with adverse weather conditions ($%&
of Indian rural is dependent on natural factors, especially rainfall. 'rought
is another maor problem that farmers face). It is a solution to financial
problems brought on by adverse weather conditions. This insurance
covers a wide section of people and a variety of crops its operational costs
are low transparent and obective calculation of weather inde! and #uic*
settlement of claims.
7.) lobal Picture of (ural Insurance
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researc% fro ifferent fars confire t%e 4elief t%at iniviual aroac% to cro
insurance is 4etter for reucin0 ris6 4ut it also ilies t%e use of %i0%er
reius. T%e area aroac% in Canaa rove to 4e ine:uita4le6 as it i not
ensure a fair istri4ution of 4enefits aon0 t%e farers. 9arers wit% &ielsclosest to t%e avera0e woul 4e t%e ones to 0et t%e ost 4enefits.
In /%iliines6 cro insurance ro0rae is ileente t%rou0% /%iliines
Cro Insurance Cororation =/CIC> w%ic% was esta4lis%e in 1"78. aAor cros
covere are rice an corn. i0% value cros suc% as vi;. toato6 otato6 0arlic6 an
ot%er root 52 cros are also covere uner interi insurance covera0e. T%e
covera0e is liite to cost of inuts lus an aitional aount u to 2) er cent6
t%ereof on an otional 4asis. ulti riss cover roviin0 core%ensive covera0e.
Covera0e is availa4le uner =a> ulti ris cover6 w%ic% is a core%ensive
covera0e a0ainst cro losses cause 4& natural isasters as well as ests an
iseases an =4> natural isasters cover6 w%ic% is liite to covera0e a0ainst cro
losses cause 4& natural isasters onl&. /reiu rates are c%ar0e on actuarial
4asis.
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T%e Jovernent su4si& in reiu 0oes u to 5) er cent. In case of 4orrowin0
farers6 lenin0 institutions will also s%are art of t%e reiu. In aan6 t%e rural
insurance sc%ee was esta4lis%e in 1"#7. (t resent6 t%e sc%ee is coose of
! ro0raesB Rice6 $%eat an arle& insurance6 +ericulture insurance6*ivestoc insurance6 9ruit G 9ruit tree insurance6 9iel cro insurance an Jreen
ouse insurance. T%e ain features of t%e sc%ee are as followsB
1. T%e Central 0overnent reinsures t%e ro0raes.
2. In rincile6 ileentation of t%ree ro0raes6 vi;.6 Rice6 $%eat an arle&
insurance6 *ivestoc insurance6 is coulsor&.
3. (s for Rice6 $%eat an arle& insurance6 +ericulture insurance6 t%e
articiation of farers w%o 0row t%ese cros over a certain si;e of cultivate area
or a certain scale of oeration is coulsor&.
#. T%e Central 0overnent su4sii;es farers wit% art of t%eir reius6 an
5. T%e Central 0overnent su4sii;es t%e insurers wit% art of t%eir office
eenses.
In +ri *ana t%e first eeriental cro insurance sc%ee was esta4lis%e in 1"58
as a ilot roAect coverin0 rice cultivation onl&. T%e eerience urin0 t%e first 15
&ears erio was :uite favora4le. T%e cro insurance 4oar was esta4lis%e in
1"73 uner a arliaentar& act to oerate a core%ensive rural insurance
sc%ee6 coverin0 all aAor cros an livestoc. Incase of rice an ot%er cros6
insurance rotection was rovie a0ainst lac of water6 rou0%t6 ecessive water6
floos6 iseases6 insect infestation6 aa0e 4& wil anials an losses ue to non-
a%erence to arove et%os of farin0. ( lar0e ercenta0e =85K> of t%e total
acrea0e insure is a& an ot%er cros t%at receive rural creit. Due to
increase cost of inuts6 ore farers are eecte to see rural creit. ( lenin0
institution will not is4urse an& rural creit wit%out roer insurance covera0e.
T%e covera0e of insurance sc%ee is 4ase on t%e cost of rouction. T%e sc%ee
covers a&ent of inenities of colete an artial losses as well as losses at
various sta0es of rouction.
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In U+(6 t%e 0overnent suorte cro insurance ro0ra is ileente 4&
a4out 15 rivate insurers6 4esies 9eeral Cro Insurance Cororation =9CIC>6 a
0overnent coan&. T%e ro0ra is ainistere 4& t%e Ris ana0eent
(0enc& =R(>6 on 4e%alf of t%e U+ Deartent of Rural =U+D(>. Once a croinsurance ro0ra is arove 4& t%e 0overnent6 t%e R( 0ets t%e reiu
rates calculate for ifferent cros H states H counties 4& utili;in0 t%e services of t%e
National Cro Insurance +ervice =NCI+>. (n& arove insurer6 can sell t%ese
insurance roucts6 at t%e rates certifie 4& t%e R(. (ll insurers ileentin0
t%e ro0ra are eli0i4le for t%e sae level of reiu su4si&6 an t%e
ainistrative an oeratin0 eenses of t%e insurer 53 towars ileentin0
cro insurance ro0ra6 are entirel& rei4urse 4& t%e 0overnent. +ince t%e
insurance coanies are ileentin0 t%e cro insurance ro0ra at a reiu
rate set 4& R(6 t%e 0overnent also rovies a reasona4le level of reinsurance
suort =a;el6 /eter et al.6 1"8!> . T%e reinsurance suort woul 4e %i0%est for
eveloental lines =new an unsta4le cros> an lowest for coercial lines
=esta4lis%e an sta4le cros>. In +ain6 t%e Jovernent su4si& in reiu
ran0es fro 2) er cent to 5) er cent6 of w%ic% nearl& "5 er cent coes fro
Central Jovernent an t%e 4alance fro t%e autonoous re0ions.
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Cro Insurance in +ain is a well eveloe rouct wit% s&steatic eveloent
of actuarial science an ricin0 an stanar loss assessent roceures.
Insurance covera0e is availa4le for aAorit& of t%e cros a0ainst ost of t%e
natural an non-reventa4le riss. +ain %as a uni:ue oel of cro insurance inters of 4ot% t%e ro0ra an t%e or0ani;ational set-u. +ain %as6 w%ats nown
as t%e Co4ine Rural Insurance +&ste. T%e s&ste starte in 1"8)6 %as
recentl& cele4rate its +ilver u4ilee. T%e 4asic feature of t%e s&ste is t%at all
insura4le rural riss are covere 4& t%e rivate sector an all t&es of olicies are
su4sii;e 4& t%e state. ost olicies are of t%e ultile riss t&e. T%e custoers
of t%e s&ste are farers w%o can tae out rural insurance iniviuall&6 or o4tain
covera0e t%rou0% co-oeratives an rofessional or0ani;ations. /articiation in t%e
s&ste is voluntar&. It is a s&ste in w%ic% (JRO+,JURO oerates6 4ot% in its
own ri0%t an on 4e%alf of t%e insurers6 w%o ae u t%e co-insurance ool. T%e
s&ste is 4ase on an intricate artners%i 4etween t%e rivate an t%e u4lic
sector. T%e e& la&ers of t%e s&ste 4esies farers6 are ,N,+( =,ntia ,state
e +e0uros (0rarios>6 attac%e to t%e inistr& of RuralE (JRO+,JURO
=(0ruacion ,sanola e ,ntiaes (se0uraoras e los +e0uros (0rarios
Co4inaos> a ool of fort& rivate insurance coanies w%ic% articiate in a
s&ste of co-insuranceE CC+ =Consorcio e Coensacion e +e0uros>6 a u4lic
enterrise wit% its own resources6 oeratin0 re-insurer =uner t%e control of t%e
inistr& of ,cono&>6 etc. ( e& feature of t%e +anis% s&ste is t%e
articiator& aroac%. (ll stae%olers are reresente in ,N,+(6 w%ic% ena4les
tain0 strate0ic ecisions an fiin0 t%e fraewor for t%e +&ste =annual lans>
in line wit% t%eir nees. 9or an& 0iven &ear6 ,N,+( taes t%e lea in u4lis%in0
t%e annual lan. On t%e 4asis of t%e fraewor set out in t%e lan6
(JRO+,JURO fies t%e etaile conitions for all insurance roucts6 in
articular t%e re0ionall& ifferentiate reiu rates w%ic% var& accorin0 to ris
eosure an also inclue ainistrative an reinsurance costs. +u4siies fro t%e
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+tate an t%e autonoous re0ions are ai out 4& ,N,+( an c%annele t%rou0%
(JRO+,JURO to t%e insurance coanies.
ase on eerience fro 1"8) to 2))56 of t%e total rural insurance incoe of
!.7" illion U+6 t%e contri4ution of farers towars reiu was 3.)85#
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A.+pportunities and t%reats in rural insurance "aret
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office savin0s or 4an eosits6 an insurance coul 4e ae an alternate
investent oortunit& wit% t%e 4enefit of life cover.
9allin0 interest ratesB insurance %ave 4ecoe an alternative investentrouct. $it% t%e fall in t%e interest rates6 insurance roucts can 4e ae
an investent avenue6 w%ic% 0ives 0oo returns wit% insurance rotection.
%reats
o Uneven istri4ution of oulationB Inian oulation is not evenl&
istri4ute. T%e ercenta0e of villa0e wit% oulation 4elow 2)) is
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eet t%eir 4asic nees foo6 clot%in0 an s%elter is t%e riar&
o4Aect an urc%asin0 insurance is not a to riorit&.
o Traitional savin0 %a4itB if we 0ive a close loo at t%e savin0 %a4it
of rural oulation we fin t%e t%e& refer to invest in real assett%an in intan0i4le assets lie 4an accounts6 insurance6 ost office
sc%ees etc. t%e ost favora4le avenues for t%e are urc%ase of
lan6 4ot% a0riculture an non a0riculture6 0ol an silver etc.to s%ift
t%eir savin0 %a4it fro tan0i4le to in tan0i4le assets woul 4e 4i0
c%allen0e for t%e financial institutions.
o ealt% conitionsB wit% efforts of t%e 0overnent an no-
0overnental or0ani;ations t%ere is soe iroveent in t%e %ealt%
conitions of Inian oulation6 eseciall& in t%e ur4an areas. ut
uc% %as to 4e one rural area. an& of t%e villa0es o not %ave
iniu 4asic aenities lie roer sanitation6 rinin0 water
facilities6 0oo %&0ienic environent6 %ealt% facilities etc.6 w%ic%
%ave irect an inirect iact on t%eir %ealt% conitions.
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B. C%allenges to be overco"e for providing universal
access to insurance services in rural areas
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A.1 C%allenges
1. !$areness and EducationB
T%ere is aAor c%allen0e for insurance coanies an olic& aers to increase
t%e awareness levels aon0 rural oulation6 so t%at t%e& a& view insurance
olicies as a ris ana0eent tool. Traitionall& rural %ouse%ols %ave aresse
t%eir ris rotection in various forsB for t%e Aoint fail&6 investin0 in 0ol6 lan
an ot%er assets. ost insurance olices t%at rural custoers are failiar wit%
%ave 4een sonsore or su4sii;e 4& t%e 0overnent6 t%e le0ac& of t%is ast is
t%at rural eole o not full& see insurance as a ris s%arin0 ec%anis t%rou0%
contri4utions in reiu. T%ere is nee for sufficient investent 4& 4ot% rivate
an u4lic institutions to 4rin0 a4out a c%an0e in t%e ercetion of insurance as a
ris iti0ation instruent an en%ance t%e awareness levels on various insurance
roucts an %ow t%e& wor in rincile.
2. Docu"ents for certification:
9or effectin0 an servicin0 various insurance contracts a variet& of ocuent are
eecte to 4e rovie 4& t%e custoer to t%e insurance coan&. On account of
t%eir low awareness levels an also lac of ocuentation s&stes in u4lic
institution for issuin0 various ocuents6 rural eole face a eculiar isavanta0e
of not rocessin0 even soe ver& 4asic ocuents re:uire for tain0 insurance
olicies. elow are liste a few suc% cases
a. (0e roofsB
ost rural eole o not %ave a foral a0e roofs t%at are eane 4& insurance
coanies. ( coon in of a0e roof t%at a& 4e availa4le wit% 0oo nu4er
of eole is t%e voter ientit& issue 4& t%e 0overnent. Unfortunatel&6 t%e :ualit&
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of inforation cature on t%ese voter IDs is foun wantin0 an t%erefore is not
accete as a stanar a0e roof 4& soe insurance coanies. If we are to
seriousl& loo at etenin0 life insurance on lar0e scale in rural areas6 it will 4e
necessar& to rovie a stanar a0e roof to all rural custoers w%ic% will 4eaccete 4& all insurance coanies
4. Deat% certificateB
Currentl& t%ere is no stanari;ation of %ow a eat% certificate is issue
uniforl& across t%e countr&. +oe insurance coanies %ave ifficult& in
accetin0 eat% certificate issue 4& ot%er t%an unicial aut%orities an revenue
eartents. 9or rural eole t%e ost feasi4le wa& to 0et a eat% certificate is
for t%e 0ra anc%a&at. T%e re0ulator s%oul clarif& to t%e inustr& to 0ive
sanctit& to t%e eat% certificate issue 4& 0ra anc%a&at. +oe ties t%e insurers
insist for cause of eat%6 w%ic% is ossi4le onl& if an autos& is conucte.
c. 9irst Inforation Reort =9IR>B
In clais t%at involve an accient6 all insurance coanies insist on su4ission of
a fir reort re0istere wit% t%e olice. In t%e rural contet t%e access to a olice
station is :uite reote to an& laces an ercetion an eerience of rural
eole is suc% t%at accessin0 a olice station onl& invites ore %assles to t%e. In
view of t%is6 insurance coanies s%oul 4e willin0 to su4stitute an fir wit% a
eclaration fro counit& e4ers in cases w%ere it is convenient to 0et an fir.
*. Product custo"iation:
ost roucts 4ein0 offere toa& to rural aret are ver& often ur4an roucts6
offere to t%e rural aret wit% soe tweain0 in features. Mer& often t%is a&
not 4e t%e ri0%t wa& to 0o a4out sellin0 rural roucts6 as t%e re:uireents of rural
custoers can 4e ver& ifferent fro t%at of t%e ur4an custoer. T%e rouct
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7. &oving fro" $illingness to pa# approac% to $illingness to c%arge
approac%B
Traitionall& all researc% an esi0n of rural roucts %as 4een wei0%e own 4&
t%inin0 on w%at will 4e iniu reiu aount t%at rural custoers will 4ewillin0 to a& for various olicies. T%e result of t%is %as 4een t%at ost roucts
%ave 4een esi0ne wit% ver& low reius t%at o not ae:uatel& cover t%e
actual cost of coverin0 t%e ris6 lease alone t%e cost of eliver& an servicin0 of
t%e rouct. T%is %as onl& %ele to eet in t%e s%ort ter t%e re0ulator&
re:uireent iose on t%e insurance coanies to o a certain iniu nu4er
of ricin0E t%ere is little incentive for eit%er t%e insurance coan& or t%e
istri4utor to sell t%ese olicies in lar0e nu4ers an o t%e neeful servicin0.
T%erefore t%ere is a nee to esi0n roucts t%at are rice in suc% wa& t%at t%ere
is enou0% interest for custoers an also for t%e insurance coanies an
istri4utors to sell t%e roucts on a lar0e scale.
A. 8ac of focus on pure ris policies b# insurance co"panies and %ig%
lapsation of policies in rural areas.
In Inia6 traitionall& life insurance 4usiness %as 4een seen ore as a savin0 an
ta-reuction instruent rat%er t%an as a aAor ris rotection tool. in t%e rural
contet it %as 0ot translate into a ere savin0s instruent6 wit% ver& little ris
covera0e. T%e tie 4oun contracts in insurance olicies are suc% t%at6 t%ere is
ever& c%ance of lasation of t%ese olicies if t%e custoer cannot a& t%e reiu
in a tiel& anner. T%is result in6 not onl& t%e loss of ris covera0e6 4ut t%e loss of
a si0nificant art of t%e savin0s ae 4& t%e custoer. T%e ro4a4ilit& of t%is
%aenin0 in rural areas is ver& %i0% as t%e incoes of rural %ouse%ol are
unreicta4le an var&in0. T%is is on account of t%e a0rarian econo& of t%e rural
areas6 w%ic% is su4Aect to t%e riss of nature =lie inae:uate rainfall> :uite
fre:uentl&. T%us t%e current life insurance olicies6 riaril& esi0ne for t%e
ur4an aret6 are to t%e isavanta0e of rural aret6 w%ere t%e custoers stan
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to loose 4ot% t%eir savin0s an ris rotection. T%ere are reorts =t%e %inu6 )8-
se-2))#>w%ic% inicate t%at *IC itself %as oe u a4out 1)) crores in lase
olices fro rural (n%ra /raes% alone in t%e ast two &ears. ence t%ere is nee
to otivate life insurance coanies it sell ure ris roucts activel& an alsoae t%e savin0s line roucts ore flei4le an fair to rural custoers eein0
in view t%eir fluctuatin0 t%is situation6 4& ensurin0 t%at life insurance coanies
o a certain iniu nu4er or ercenta0e of ure ris olicies in t%eir overall
ortfolio.
B.&ini"al targets for rural areas:
T%e current tar0ets set 4& t%e re0ulator for t%e insurance coanies6 to eet t%e
ruralHsocial sector o4li0ation are not reresentative of t%e ercenta0e of eole
resiin0 in rural sector. 9urt%er t%e tar0et tal a4out onl& first 5 &ears fro
coenceent of t%e coan&. (s a result of t%is6 insurance coanies %ave not
ae sufficient investent in t%e ri0%t irection6 to esi0n an eliver roucts
for t%e rural aret. T%e& %ave 4& an lar0e referre to e%aust t%eir efforts on
rural aret 4& eetin0 t%e inialist tar0ets 4& t%e re0ulator. To see a 0reater
investent in rural roucts 4& insurance coanies6 it is ossi4l& tie for t%e
re0ulator to consier a revision in t%e rural tar0ets for t%e insurance coanies to
%i0%er level.
.roup approac%:
$%ile t%e 0rou is ver& uc% 4ein0 elore 4& an& insurance coanies to
offer insurance services6 it ver& 0ets restricte to 0rous w%ere e4ers %ave
taen creit fro an institution. T%e own sie of t%is arran0eent is t%at t%ose
custoers w%o o not %ave creit re:uireents 0et left of insurance covera0e.
T%erefore t%ere t%ere is a nee for insurance coanies to esi0n roucts for
0rous in rural areas w%ere insurance can offere as a stan alone service wit%out
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necessar& 4unlin0 wit% creit. T%is woul 0ettin0 a lar0e si;e of rural oulation
uner insurance covera0e t%rou0% t%e silicit& of 0rou roucts.
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A.) P(+SPECS +F ((!8 INS(!NCE
T%e farin0 counit& in Inia consists of a4out 121 illion farers of
w%ic% onl& a4out 2) er cent avail cro loans fro financial institutions an
onl& t%ree fourt% of t%ose are insure. T%e reainin0 8) er cent ="! illions>are eit%er self-financin0 or een uon inforal sources for t%eir financial
re:uireents. ost of t%e farers are illiterate an o not unerstan t%e
roceural an ot%er re:uireents of foral financial institutions an6
t%erefore6 s%& awa& fro t%e. T%erefore6 w%ile t%e institutional loaners are
insure coulsoril& uner t%e N(I+6 onl& a4out 15 er cent of t%e non-loanee
farers avail insurance cover voluntaril&. T%is is :uite inicative of t%e
enorous insurance otential t%at eists for aressin0 t%e nees of t%e
farin0 counit& an en%ancin0 t%e overall efficiencies as also t%e
coetitiveness of t%e a0riculture sector. T%is also si0nifies t%e treenous
otential of a0riculture insurance in t%e countr& as a concet6 w%ic% can
iti0ate t%e averse iacts t%at suc% uncertainties woul %ave on t%e
iniviual farers.
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Conclusions and Polic# Suggestions
Rural Insurance aret is on t%e t%res%ol of a sectacular 0rowt%. T%e suort
easures roose 4& t%e 0overnent in t%e %orticulture sectorE otential of
or0anic farin0E 0rowin0 clout of aroatic an eicinal lantsE io-iesel
lantsE contract farin0E cororate farin0 an inte0rate insurance =sul& c%ain
an ware %ousin0> etc are liel& to ut rural insurance on %i0% eestal. T%e
0overnent unerline its riorities for a0riculture in 2))# 4& settin0 a tar0et of
ou4lin0 rural creit in net t%ree &ears. ( lar0e c%un of creit for a0riculture
woul 4e suorte 4& insurance collateral. Consierin0 consuers reference
for 4rane rural rouctsE 4i0 cororate %ouses too %ave taen u cororate
farin06 increasin0 t%e ean for insurance. Rural insurance in future t%ou0% is
liel& to 4e lar0el& ean riven6 t%e efforts of t%e 0overnent to suort an
finance insurance roucts an H or facilitate con0enial environent as eanin0ful
ris ana0eent tool woul furt%er en%ance t%e otential an crei4ilit& of rural
insurance
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incoe. Joo 0overnance is as iortant for various eveloental ro0raes
as for successful oeration of an a0riculture insurance sc%ee. /oor 0overnance
aversel& affects eveloent activities. $it% t%e iroveent in 0overnance6 it
is feasi4le to effectivel& oerate an irove uon t%e erforance of variousro0raes incluin0 a0ricultureinsurance /O*IC'
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SESI+NS
Cro insurance ro0ra wors as collateral securit&6 t%erefore also 4enefit 4ans.
$%en clais are ai6 4ans first aAust t%e clai a0ainst t%eir outstanin0 ues6
an 4alance if an& is creite to t%e farers. T%erefore6 t%e Cro Insurance+c%ee also 4enefits t%e 4ans. In /%iliines6 4ans are ae to s%are a art of
t%e reiu 4uren. 9or rice w%ere t%e reiu is 1).81 er cent6 4orrowin0
farer a&s onl& 2."1 er cent6 w%ile t%e 0overnent a&s is 5.") er cent an t%e
lenin0 institution6 2.)) er cent. ( siilar arran0eent can 4e recoene for
articiatin0 4ans in Inia. +uc% arran0eent woul also 4rin0 non-loanee
farers into t%e fol of 4anin0 networ6 t%us institutional lenin0 of cro loans.
Reote sensin0 is t%e eer0in0 tec%nolo0& wit% otential to offer lent& of
suleentar&6 colientar& an value ae functions for rural insurance. T%e
resent tec%nolo0& availa4le s%all not onl& rovie t%e insurers wit% tools lie
cro %ealt% conition6 area-sown confiration6 &iel oelin0 w%ic% are ver&
iortant6 4ut also stren0t%en t%e osition of insurers vis-S-vis re-insurance
aret. +oe of t%e ossi4le alications of for rural insurance coul 4e as
followsB 1. ,stiatin0 actual acrea0e sown at insurance unit level to c%ec t%e
iscreanc& of Pover-insurance =area insure 4ein0 ore t%an area sown>. 2.
onitorin0 cro %ealt% t%rou0% t%e cro season6 an investi0ation on 0roun for
avance intiation of &iel reuction. 3. To c%ec ae:uac& an relia4ilit& of
CC, ata. #. Develoin0 satellite 4ase cro rouctivit& oels for cereals an
ot%er cros. T%ere is a nee to roote rivate sector articiation in a0riculture
insurance. 9irst license for t%e rivate sector was issue in Octo4er 2))). (s of
toa&6 t%ere are ten rivate sector insurers in t%e 0eneral insurance 4usinessB
Reliance6 Tata-(IJ6 Ro&al +unara6 I99CO-To&o6 aAaA-(llian;e6 ICICI-
*o4ar6 D9C- C%u446 C%olaanala6 ,CJC an +tar ealt%. T%e latter two6
are liite to onl& a few lines of 0eneral insurance. T%e fact reains t%at t%ese
insurers %ave not &et unertaen rural insurance to a si0nificant etent. Onl& two
coanies in t%e rivate sector %ave initiate cro insurance6 al4eit on a sall
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scale. ICICI-*o4ar was t%e first coan& to eerient wit% rainfall insurance
in 2))3. T%e concet is furt%er etene 57 to weat%er insurance since 2))#.
I99CO-Toio Jeneral Insurance =ITJI>6 t%e secon coan& in rivate sector6
starte ilotin0 rainfall insurance6 since 2))#. T%e Insurance Re0ulator& anDeveloent (ut%orit& =IRD(> %as stiulate t%at ever& new insurer unertain0
0eneral insurance 4usiness6 %as to unerwrite 4usiness in t%e rural sector to t%e
etent of at least 2 er cent of t%e 0ross reiu urin0 t%e first financial &ear6
w%ic% is to 4e increase to 5 er cent urin0 t%e t%ir financial &ear of its
oeration. Cro insurance is inclue in t%e rural sector insurance for t%is urose.
T%e 4usiness tar0ets stiulate in rural insurance aarentl& are ver& sall. T%ose
w%o o not eet even t%ese sall tar0ets6 are 0ettin0 awa& 4& a&in0 enalties of
noinal aounts. If rivate insurers are to 4e surre to enter t%e rural insurance
aret in a si0nificant anner6 t%e 4usiness tar0ets %ave to 4e raise su4stantiall&
4& IRD(. T%e eerience of 0overnent suorte an su4sii;e cro insurance
an t%e recent entr& of rivate insurers6 raise :uestions a4out t%e co-eistence of
0overnent an rivate a0riculture insurance. One view is t%at t%e rivate sector
will 4e una4le to coete wit% 0overnent insurance6 0iven t%e su4siies an
access to t%e ainistrative ac%iner& for eliverin0 insurance. (n alternative
view is t%at 0iven onl& 15 er cent covera0e 4& 0overnent insurance6 t%e rivate
sector can carve out a reasona4le aret for itself 4ase on irove efficienc&6
4etter esi0n an suerior services. ere one can even t%in of u4lic-rivate
artners%i in roviin0 a0riculture insurance as a0ainst u4lic-rivate
coetition. owever6 it is ossi4le onl& w%en cro insurance can 4e run in a
ore rofessional anner wit% clear o4Aectives. /roviin0 Jovernent %el to
rivate sector insurers woul %el in increasin0 insurance covera0e an in
irovin0 via4ilit& of t%e insurance sc%ees over tie. T%ere s%oul also 4e
insurance rovie 4& see coanies so t%at farers w%o ai %i0% rices for
sees suc% as J cros i not suffer in case of cro failure. In orer to roote
u4lic rivate articiation in a0riculture insurance JOI s%oul follow t%e U+(
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oel to wor out reiu rate t%rou0% an eclusive tec%nical a0enc&6 an offer
t%e rouct to all insurers. Insurers can ileent t%e rouct6 enAo&in0 t%e sae
level of suort an su4si&. (s a variation fro t%e U+( et%o6 t%e
0overnent woul not rovie reinsurance suort an rei4urseent ofainistrative an oeratin0 eenses6 as t%ese costs woul 4e loae in t%e
actuarial rates. T%e 0overnent can ecie w%et%er or not ifferent insurers
coete in t%e sae area6 or allocate secific cros an areas to a articular
insurer =/lannin0 Coission6 2))7>.
$it% increase coerciali;ation of a0riculture rice fluctuations %ave 4ecoe
%i0%l& si0nificant in affectin0 farersincoe. (ccorin0l&6 aret ris is now
:uite iortant in affectin0 farers
incoe. $e feel t%at ileentation of
aret insurance to cover rice ris is uc% easier t%an &iel insurance. T%is can
4e one 4& re:uirin0 intereste farers to re0ister t%eir areta4le surlus wit%
insurance a0enc& or aret coittee at t%e tie of sowin0 of cro. T%e
insurance a0enc& s%oul offer insurance cover to inclue rice 0uarantee w%ic%
coul 4e iniu suort rice in soe cases or aret 4ase rice fro t%e
ast. 9arers s%oul a& reiu for t%is in of rice insurance an initiall&
0overnent s%oul s%are soe 4uren of t%e reiu.
,ibliograp%#
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1. =ebsites:G
www.scri4.co
www.0oo0le.co
www.wiieia.co
www.oenf.co
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