RURAL INSURANCE

1. INTRODUCTION
1.2 RURAL INSURANCE
DEFINITION :
Rural areas (also referred to as "the country," and/or "the
countryside") are settled places outside towns and cities. Such areas are
distinct from more intensively settled urban and suburban areas; Inhabitants
live in villages, hamlets, on farms and in other isolated houses.
In modern usage, rural areas can have an agricultural character, though
many rural areas are characterized by an economy based on logging, mining,
petroleum and natural gas exploration, wind or solar power or tourism.
The report Rural Texas in Transition states that factors used to determine the
"rural" or "urban" status of an area include population, population density,
"occupational opportunities," "relative presence of agriculture," sizes of
nearby cities and towns, and "quality of life."
The IRDA guidelines define a Rural sector as a place which as per the latest
census has:
The total population of not more than 5000.
The density of population of not more than 400/sq.km. and at least 25 %
of the male population is dependant on agriculture as source of livelihood.
A change in the definition of what constitutes `rural' has given some leeway
for insurance companies to get in the mandatory percentage. In August 2004,
Insurance Regulatory and Development Authority altered the definition,
aligning it with the census definition of `rural'.

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The census does not define rural area. It defines only an urban area. And by
inference, what is not urban is a rural area.
The erstwhile IRDA definition of rural areas included all areas with a
population of less than 5,000, with a density of population less than 400 sq
km and where at least 75 per cent of the male working population was
engaged in agricultural pursuits. The IRDA had amended the definitions
earlier in 2002 to bring down the requirement stipulating that at least 25 per
cent of the population had to be engaged in agricultural pursuits.The revised
definition has widened the market.Mr. Vivek Khanna, Director, Marketing,
Aviva Life Insurance Company, said, "A couple of thousand villages would
now be brought under the fold. The earlier definition meant that only some
remote villages could be tapped. And there is no ambiguity now."
RURAL SECTOR.
India lives in villages. There are more than 5 lakh villages, with population of
5000 or less, with a total population of nearly 75 crores. But nearly 25% of
the rural population is below the poverty line. The people in these areas are
scattered far and wide. Hence, to contact these people, one has to travel long
distances along roads that are very well constructed. There may not be any
convenient places for visitors to stay or to eat food in these areas. It would,
therefore, probably be more profitable for insurance companies to
concentrate their efforts on the urban areas.
To combat this tendency, the Insurance Regulatory and Development
Authority has made it mandatory for every insurance company in India to
undertake a specific percentage of life insurance business and general
insurance business in rural and social sector, as specified in the official

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gazette by the Authority.

Providing insurance to the majority of the Indian population, which
lies in the rural areas, scattered over a wide geographical, socio-cultural and
linguistic landscape, is a major challenge for both the public and the private
insurers.
There is a great difference in the rural and urban peoples mindset,
their level of education, professions and incomes. Rural people may prefer
low premium and maximum risk coverage and may prefer compensation upto
the actual amount of loss. In urban areas people may demand maximum
compensation and for that they might be willing to pay high premium.
There lies a great potential in the rural insurance market where the
penetration of the insurance players has been low. In rural areas insurance is
often perceived as an additional burden rather than a means to combat risk.
There is great potential for expanding business in rural areas as most of the
Indian population lives in rural areas. While most of the insurers may find it
unattractive to tap the rural business, it should be understood that relatively
smaller amount of policies will be compensated by a larger number of
policies. Rural insurance business should be looked upon as an opportunity
and not an obligation.
Opportunities for rural business can be considered in terms of the
gigantic population of India of which 72 per cent resides in the rural areas
and majority of them are uncovered. With the current declining trend in
interest rates, insurance products can become good investment avenues,
which give good returns and can cover lives and assets. However, low
literacy levels, lack of insurance awareness, uncertainty of agricultural
incomes, low incomes of landless laborers and wage earners, their poor
health conditions, traditional savings habits where there is more preference
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for real assets, superstitions, low earnings and credibility can really be the
threats to the insurers trying to capture rural business. Hence some special
products need to be designed for them.
Compared to the organized sector, the unorganized sector constitutes
major section in the Indian population, which includes cultivators,
agricultural laborers and workers who work in the unorganized
manufacturing and service industries and also includes self-employed.
Around 30 percent of the Indian population still lives below the poverty line
and cannot afford even their basic necessities. The Government of India and
the LIC have launched group insurance schemes for these downtrodden
sections of society such as landless agricultural laborers, beneficiaries of the
IRDP program, etc. One such scheme is the Rural Group Insurance Scheme
1995.
There are some other schemes introduced by the government in association
with LIC of India such as Janashree Bima Yojana, Krishi Shramik Samajik
Suraksha Yojana 2001, Shiksha Sahayog Yojana. Under these schemes the
sum covered was very low and the claim amount was very meager.
Involvement of middlemen, bureaucracy and red-tapism were the major
negative factors in this regard.
Indian agriculture is highly dependent on monsoon, and crops are
exposed to several risks. In this direction the NAIS National Agricultural
Insurance Scheme was introduced in year 2000 which replaced the existing
comprehensive Crop Insurance Scheme (operating since 1985). NAIS was
primarily aimed at covering all food crops, oilseeds and annual
commercial /horticultural crops. 11 crops are covered under NAIS. For Small
and Marginal Farmers, 50% subsidy was given (which was equally shared by
the Center and respective State governments). On these lines, a Pilot Seed
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Crop Insurance Scheme was introduced in the same year to protect the seed
breeders. All public sector general insurance companies also provided
livestock insurance. NABARD and the public sector general insurance
companies have set up the Agricultural Insurance Corporation of India Ltd.,
which will take care of insuring farms, agricultural properties, cattle, poultry,
etc. The estimated size of the agricultural insurance business is around
Rs.1000 crores and it is expected to grow 10 times in the years to come. In
order to avoid possible negligence by the insurers towards rural markets (the
new players in particular), IRDA formulated the Obligations of Insurers to
Rural Social Sectors and it is worth mentioning that the performance of both
life and the general insurers has been much above the required level.
RURAL INSURANCE.
No doubt the vast potential of the rural market in insurance remains
untapped.
Only the Life Insurance Corporation of India with its large number of branch
offices and network of agents throughout the country is able to do a
reasonable percentage of business in rural areas.
However, to tap the full potential the insurance companies will have to
introduce new products to suit the needs of the people, combining it with
facilities to meet their short-term requirements and so on.
OBJECTIVES
1 To study the insurance provided to rural areas by insurance sector.
2 To compare the urban and rural insurance services provided by
insurance sector.

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3 To analyze the problems and challenges faced by the insurance

companies in providing the rural insurance to the rural population.

2. NEED FOR RURAL INSURANCE.

There is a great need of rural insurance in a country like India. This need
arises because many villagers are unaware about insurance. Many villagers simply
blame it on their destiny when they are faced with sudden, unexpected losses.
Insurance is not a priority requirement for them, today. Many others who have
acquired assets through bank loans are not aware that assets have been insured. The
very few who may have some knowledge about insurance may know something
about life insurance. Villagers who may know something about general insurance
may be just about a handful. Thankfully this situation, of late, has slowly been
changing for the better. Thanks to the MFIs, NGOs and SHGs. But the fact still
remains that it would be a long time before the situation changes to appreciable
levels and much remains to be done.
There is an emerging sensitivity to the need to offer insurance services
to Rural and socially marginalized populations in addition to the services of
credit and savings for their socio-economic emancipation. The vulnerability
of poor due to low and irregular incomes is exacerbated by unexpected crises
such as illness, disability, death, or physical catastrophes such as flood, fire
etc. leading to loss of assets and livelihood. These unexpected events can
wipe out their savings or lead them into greater indebtedness, thus worsening
their already weak position.
INSURANCE has thus far been mostly city-oriented. But things are

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happening in the rural areas where human life and income-generating rural
assets need protection, and there is tremendous scope for developing
insurance business. This shows up the gross neglect of the rural areas vis-avis insurance cover, though since the late-1960s, a silent economic revolution
has been on in the villages.
Now that the insurance sector is open to the private sector and foreign
companies, the Government should pay serious attention to covering the rural
areas.While it is true that access to insurance cover depends on the
literacy/awareness levels and assured income, well-planned and organised
efforts by committed private sector companies can yield rich dividends from
the rural areas. This is because:
(1) A large number of rural districts have witnessed significant growth and
prosperity;
(2) Access to reliable and authentic data and information has improved
considerably, which can enable quick and correct decision-making;
(3) There are specific functionaries and agencies in the rural areas which can
help explore and exploit insurance business in the untapped rural market.

3. RURAL INSURANCE PRODUCTS

When we talk of Rural Insurance all that comes to our mind are insurance
products relating to life, sickness and livestock. Not many are aware that
apart from these, there is an array of excellent insurance products, which are
ruralfriendly, and of much significance to our rural folk. To mention a few,
policies specially designed for women, farmers package policies, policies to

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protect children, personal accident policies, mediclaim and hospitalization

policies, road safety policy, student safety insurance, householders policy,
etc. Some of the rural insurance products are as follows1. AGRICULTURE PUMPSET INSURANCE
SUITABILITY
This policy is suitable for insuring pump sets used for agricultural purposes.
Same policy is issued to cover pumpsets used for domestic purposes.
SALIENT FEATURES
The policy covers centrifugal pump sets which are either electrical or
diesel driven and submersible pumpsets upto 25 HP capacity.
The policy covers loss or damage to the pumpsets at the premises it is
installed caused by:
1. Fire & or lightening
2. Theft / Burglary (when the pumpset is in locked enclosure)
3. Mechanical breakdown and or electrical breakdown.
4. Riot, strike, Malicious and terrorism damage
Additional covers: Flood risk can be covered at additional premium
provided the pumpset is installed in enclosure in flood prone areas.
However, losses due to normal wear & tear willful or gross negligence, pre
existing faults, manufacturing defects covered by guarantee, transportation
and re-erection charges are not covered.

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BENEFITS: Losses are paid on receipt of repairers bill. The maximum

amount payable for rewinding of motors is net of salvage value & excess and
is enclosed to the policy. All claims are subject to a depreciation of 10 % per
year. Maximum depreciation of 75 % of the erected value of the pump set
shall be applied for pumpsets above 8 years age.
PREMIUM
Premium is charged depending on the type of pumpset whether
centrifugal or submersible; its rated capacity (HP) and the sum insured.
Sum insured shall be the new replacement value of the pumpset.
Discounts on premium are offered if there are no claims during the
previous years and in the case of long term policy.
Group discount is allowed if more than 250 pumpsets are covered
under single policy. Premium is loaded by 50 % for submersible
pumpsets over 10 years old.
REQUIREMENTS: Pumpset should be serviced frequently, checked and
overhauled each year. Notice shall be given to police in case of theft claim.
RECOMMENDATIONS:Agricultural pump sets are prone to losses due to
burn-out because of power fluctuations, theft and damage by natural
calamities. This policy is devised to cope up with the demand from the
financers and agriculturists. As the policy is subsidised and further discounts
are offered, it suits the budget of the agriculturist whose produce is dependant
on the pumpset.
AGRICULTURAL STATISTICS
It rightly points out that agricultural statistics more often mislead, rather than
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inform. There is no doubt that official published information should be

authentic and accurate. The timely collection and dissemination of correct
data on acreage, input supplies, pest attacks, rainfall, agricultural production,
quality of markets, etc., are essential for clearing uncertainties related to
demand, supply and prices, as they affect the producers, consumers and
speculators. Decisions on sourcing, inventory, processing and marketing,
cash-flow management, etc., are critically dependent on reliable information.
Cotton, groundnut and sugarcane are found in Kerala, for instance, only in
certain areas of particular talukas in a few districts.
But, in the estimates of the agricultural department, hundreds of tonnes of the
crops were said to be stocked in certain talukas, where no such crops actually
existed at all. The Department of Agriculture and the Department of
Economics and Statistics should jointly ensure that the data provided to
farmers is accurate and dependable.The quality of data collection,
compilation and dissemination should not be sacrificed to save on costs of
management, men and material.
1 Rural sector offers a huge business opportunity for insurance
companies
2 Savings ratio is a healthy 30% of income across all socio economic
segments
3 Awareness about Life Insurance is near universal
4 27% of Cows already have a life policy
5 51% of all respondents have expressed intention to purchase a life
policy
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6 There are a total of 124 million rural households

7 Nearly 20% of all farmers in rural India own a Kissan Credit Cards.
The 23 million credit cards issued till date offer a huge data base and
opportunity for insurance.
8 Delivery infrastructure in the form of District Cooperative Banks,
Cooperative Societies, NGOs and Self Help Groups already exists in
most villages.
9 Rural connectivity through IT.
10 E-choupal of ITC and other similar initiatives are available as
additional delivery channels of insurance
11 An extensive rural agent network for sale of Life insurance products
exists
12 The agent plays a major role in creating awareness, motivating
purchase and rendering other insurance services
13 78% of respondents prefer various combinations of life insurance like
life + accident, life + loan, life + health + accident.
14 Flexibility in Premium payments is important.
15 Security of income and bulk returns, especially for daughters marriage
and childrens education are major persuasions for taking life policy.
16 While individuals are undecided about purchasing insurance from
private players, members of different groups are favorably disposed to
purchasing group insurance through private players vetted by the
group.
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2. CATTLE INSURANCE
Cattle Insurance was governed under Market Agreement as devised by
GIC and the rates, terms, conditions etc. all were applicable to all the four
Insurance Companies. However, w.e.f May 2003, it is no longer under
Market Agreement.
This policy covers indigenous cross bred and exotic cattle owned by
private owners, various financial institutions, dairy farms, cooperatives,
corporate dairies etc. The word cattle include Milch, Cows and Buffaloes
calves and heifers, stud bulls, bullocks and he-buffaloes and mithuns. Age
group is specified for all the animals. The evaluation of the animal is done by
a veterinary surgeon.
SCOPE OF COVER/INSURANCE COVERAGE
The policy shall give indemnity only for death of cattle due to:
i. Accident (Inclusive of flood, cyclone, famine) or any other fortuitous
circumstances (fortuitous means accidental in origin)
ii. Diseases (Inclusive of Rinder-pest, Block Quarter, Hemorrhagic
Septicemia, Foot and Mouth disease subject to vaccination against this
disease).
iii. Surgical operations
iv. Strike riot and civil commotion and terrorism.
v. Earthquake.
Policy is subject to certain standard and general exclusions. Animals
are identified by way of ear tagging. The policy covers both scheme and nonscheme animals. Scheme animals are those animals, which are sponsored by
the Government agencies and are financed by some financial institutions,
which may or may not involve any subsidy. Master Policy arrangements are
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usually done with DRDA, Bank, Co-operative Societies etc. There is a

provision of Long Term Policies also.
3.FOETUS(UNBORN CALF) INSURANCE SCHEME
This scheme covers the risk of death of embryo/ foetus due to:
a. Accident (Inclusive of flood, cyclone, and famine) or any other fortuitous
circumstances (fortuitous means accidental in origin)
b. Diseases (Inclusive of Ringer Pest, Block Quarter, Hemorrhagic
Septicemia, Foot and Mouth disease subject to vaccination against this
disease).
c. Surgical operations
d. Strike riot and civil commotion and terrorism.
e. Earthquake.
The scheme is applicable to both the embryo transferred from a selected
donor to the synchronized recipient or frozen embryo transferred to the
recipient and also the embryo/fetus developed by artificial insemination
technique.
This can be covered as a separate policy in addition to Cattle Insurance
Policy covering the recipient mother cow/buffalo.
The cover operates from the 60th day of the transfer of live quality
embryo/successful insemination and terminates from 220 +/- 5 days for cow
from the date of confirmation of pregnancy or from the date of calving
whichever is earlier. It is not an annual policy. The perils covered are still
birth, abortion of all kinds except malafied or induced once. Accidental risk,
include abortion under veterinary advice to save the mother in conditions like
downer cow syndrome, prolapse of uterus, portion of uterus, fracture of limb
etc. The sum insured is fixed and depends on the age of the embryo.
4. POULTRY INSURANCE
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SUITABILITY:
This policy is suitable for the poultry farmers, the beneficiaries of schemes
sponsored by DRDA, DPAP, IRDP and financial institutions providing
assistance to poultry units.
SALIENT FEATURES:
This comprehensive policy is issued to cover poultry consisting of Broiler
chick / Layer chickens /Cocks and hens in the poultry farms. A minimum
number of 100 broilers / 500 layers or 200 birds per batch in the hatchery can
be covered under this policy.The policy provides compensation for loss to
birds dead due to accident (including fire, lightning, flood, cyclone,
earthquake, riot, strike, terrorist act); diseases contacted or occurring during
the period of insurance.
BENEFITS:
Policy provides compensation when the mortality rate of the birds exceeds
the following limits.
Birds

Age

Mortality Rate

Broilers

1 day to 6 weeks More than 5 % of the batch size.

Layers

1 day to 8 weeks More than 5 % of the batch size.

9th week to 20th More than 3 % of numbers at
week
21st

beginning of 9th week.

week

72nd week

to

More than 1 % of numbers at the

beginning of 21st week

In the event of death of birds 80 % of the bird value or as decided by the

veterinary surgeon whichever is less is paid. There is an additional deductible
of 20 % in case of Gumbore disease.
PREMIUM:
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Premium rates depend on the age of the bird; whether or not they are
financed under IRDP scheme as follows:
Birds

Broilers

Age

1 day to 8 weeks

Premium Rate
For
IRDP Non
scheme
0.25

IRDP

scheme
%per 1.5 % (6 %p.a.)

bird/batch

Layers

1 day to 6 weeks

1 % per bird p.a.

1 day to 20 weeks

21 weeks to 72 weeks

0.8 % per bird 3.5 %

1 day to 72 weeks

Parent stock(hatchery)
REQUIREMENTS:

1.2 % (4.8 %p.a.)

- 3.2 %
5.5 %
5.00 %

A Certificate from a qualified veterinarian is required. In case of layer farms

having more than 5000 birds, insurance companys veterinary officer or panel
doctor shall carry out inspection. All the birds in the farm should be insured.
Standard practices of poultry rearing, record keeping shall have to be
practiced.
RECOMMENDATIONS:
Out break of epidemics / natural calamities such as cyclone result in
widespread loss to the poultry affecting the financial position of the poultry
owner. The policy comes handy in such a situation and benefits the farmer.
This is also governed by Market Agreement, amongst all the four subsidiary
companies. The policy shall provide indemnity against death of birds due to
accident (including fire, lightning, flood, cyclone, strike, riot and civil
commotion and terrorism) or diseases contracted or occurring during the
period of insurance. The word Poultry includes layers, broilers and hatchery
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birds, which are exotic and cross-bred. Indigenous and non-descript birds will
not be insured. All birds in a farm should be covered. The scheme is
applicable to poultry farms consisting of minimum 100 birds under scheme
category and 500 birds under non-scheme category. In general, it is 100
broilers per batch, 500 layers per batch and 2000 hatchery birds per batch.
For layers, the cover is provided from 1 day to 20 weeks, 21 weeks to 72
weeks or 1 day to 72 weeks. Broilers are covered from 1 day to 6 weeks or 8
weeks. Hatchery birds are covered from 1 day to 72 weeks. The value of the
bird is fixed according to the age. The cover is provided against death of the
birds due to accident or disease. All applicable cases, vaccination are a must.
The valuation of the birds is arrived by a multiplying factor with the age in
weeks. The multiplier is applied to the prevailing feed cost and the day old
chick cost is added to arrive at week wise valuation. Certain common and
standard exclusions applied. Since all the birds are covered, there is no need
for identification. The poultry farmer is expected to maintain all the relevant
records like feed register, flock record on day to day basis, daily stock
register, mortality, culling, vaccination, feed consumption, production, debreaking, and incidents of diseases, sales and purchase.
5. AQUA CULTURE INSURANCE:
SUITABILITY:
This policy is suitable for licensed farms or farms provided in accordance
with the Government Notification for growing brackish water shrimp / Fresh
water prawns by adopting extensive / modified extensive / semi intensive
systems.
SALIENT FEATURES:
1 The policy grants cover two sections.
Section I: Basic cover which covers only losses due to natural
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calamities
Section II: Comprehensive cover granting Cover for disease also. Policy is
usually given for a period of 4 months.
2 The basic cover provides compensation for total loss of shrimp /
Prawns due to :
3

Summer kill, Pollution from external source, poisoning, riot, strike and
malicious acts of third parties, Terrorism, Explosion / Implosion, Air
craft & aerial devices or articles dropped there from, impact damage,
earthquake, storm, tempest, cyclone, flood and inundation, volcanic
eruption and other convulsions of nature. Comprehensive cover in
addition to basic cover encompasses death due to diseases except those
caused by bad management and nutritional deficiencies.

BENEFITS:
1 In the event of a fortuitous event resulting in a loss, the basis of loss
settlement will be the sum insured fixed as follows:Sum insured = Number of seeds released X expected survival rate (%)
X expected average body weight in grams X input cost per Kg.
2 For losses upto 4th fortnight stage, maximum liability shall be restricted
to 80% of the input cost only. From 5 th fortnight onwards claims are
admitted as a percentage of biomass.
3 Deductions towards salvage are made.
4 When the percentage of loss at any stage equals or exceeds 80% of the
total shrimps / Prawns insured, it will be treated as total loss.
PREMIUM:
Premium rates have been fixed as follows:-

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Section I (Basic)

Section

II

(Comprehensive)
a) For highly cyclone prone 3%

7 %

zones
b)Others

2%

6%

REQUIREMENTS:
1 The farm should obtain statutory license for setting up conducting
aqua culture operations in the area as per Government legislation.
2 The ponds should be prepared as per prescribed, recommended and
established standards. The seed should be healthy, of good quality,
selected as per prescribed norms and obtained from well known
source.

The source should be of high quality and procured from

reputed firms.

Holiday periods as recommended by Government

agency should be observed.

3 All matters concerning farming practices, norms, stipulations;
guidelines recommended by competent Government agency, fisheries
department research institutes, Fisheries College etc should be
complied with.
RECOMMENDATIONS:
Even though the aqua farming is lucrative, offers high yields and profits, the
experience during the recent years has been especially bad both for the
farmers as well as for the insurance companies.

Insurance companies

therefore enforce strict warranties for mitigation of losses and also extend
their technical assistance, which explains why it makes good sense in taking
this insurance.

6. RAJRAJESHWARI MAHILA KALYAN BIMA YOJNA

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This new scheme is being introduced to scheme covers all crosssections of women in the age group of 10 to 75 years irrespective of their
income, occupation or vocation. The scheme would benefit housewives,
students, domestic labor, skilled or unskilled labor and other women engaged
themselves in similar or other types of activities in rural, semi-urban areas.
Since this is a low cost insurance cover, it is hoped that the Central
Governments would come forward and extend all support for the
implementation of the scheme.
The scheme would cover death and/or disablement to women arising
out of accidents all types of accidents as defined further.
a. Permanent Total Disablement Rs.25, 000/b. Loss of one limb and one eye or loss of both eyes and/or loss of both limbs
Rs.25, 000/c. Loss of one limb/sight in one eye Rs.12, 500/It is further understood and agreed as under:
i. In case of unmarried women, the policy will be extended to cover death
due to accident as defined in the policy in which even the compensation will
be payable to the nominee or legal heir. The compensation shall be Rs.25,
000/-.
ii. In case of married women, the policy is extended to cover the death of the
insureds husband arising out of accidental death caused by external violent
and visible means and the compensation is payable to wife only.
The compensation shall be Rs.25, 000/-. It is clarified for avoidance of doubt
that in the event of wife predeceasing the husband or in the event of
simultaneous death of husband and insured wife no compensation shall arise
under this extension.

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7. BHAGYASHREE CHILD WELFARE POLICY

This scheme is a novel scheme for girls and provides insurance cover to one
orphaned girl child in a family who loses either the father or the mother only
due to accident.
The scheme provides that such an orphaned girl child below the age of
6 a fixed amount will be given for looking after the needs of child to the alive
parent/guardian till the child attains the complete age of 6. Thereafter, from
the age of 6 to 12 years the girl will get a fixed amount as scholarship
provided that she is admitted in a school and expenditure is incurred on her
education. From 12 to 18 years the girl child gets double the scholarship
amount and after attaining the age of 15 she will get a fixed lumpsum amount
either to pursue her own chosen profession or carrying on her higher
education or to settle down if she gets married. The stipend payable till 6
years is Rs.1200/- per annum to meet the requirements of the child. From 6
years to 12 years a stipend of 1200/- is paid as scholarship and from 12 years
to 18 years the stipend is doubled to Rs.2400/-. The sum insured of Rs.25,
000/- which accrues to the child on accidental death of one or both the
parents is credited into a special fund called orphans girl child fund, which
was managed and multiplied by GIC ASSET MANAGEMENT COMPANY.
The present arrangement is with Bank of India. All designated branches of
Bank of India will extend the services.
8. ANIMAL DRIVEN CART/TONGA
This cover is divided into four sections:
Section 1 Loss or damage to the cart/Tonga/coach whilst in transit by road
rail or inland waterways by accidental external means, fire, explosion,
lightning, storm, tempest, flood, inundation, earthquake, burglary or theft,
malicious damage, riot and strike.
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Section 2 This section provides indemnity against death or permanent total

disablement of the animal used for pulling or driving the carriage due to
accident caused whilst attached to the cart/tonga/coach.
Section 3 Third party liability caused by cart/tonga/coach insured including
passengers liability upto Rs.5000/- per accident and Rs.10, 000/- for all
accidents in a year with certain standard exclusions.
Section 4 This section indemnifies the driver against death or loss of sight
of two eyes or loss of use of two hands or loss of use of two feet or loss of
sight of one eye and loss of use of one hand/foot or permanent total
disablement Rs.10, 000/- and loss of use of one hand/foot or loss of sight of
one eye Rs.5, 000/- Sum insured depends on the market value of
cart/tonga/animal and animals to be used for driving are Male buffalo,
bullock, castrated bullock, horse, mule donkey, camel, and yak.
9. PLANTATION/HORTICULTURE INSURANCE
SUITABILITY:
This policy is suitable for individual farmer owner or tenant engaged in
cultivation of horticultural trees or plantations or an association / organized
and registered body of farmers engaged in cultivation of specified crops. Also
bodies procuring inputs, processing / marketing of the produce can take this
policy.
SAILENT FEATURES:
1 This policy can be issued to cover Horticultural trees/Orchards such
as citrus fruits (orange, lime and sweet lime),Grapes, Chickoo,
2 Pomegranate, Banana, Mangium, Vanilla, Areca nut and Cocoa,
3

Plantation such as

Rubber, Eucalyptus, Poplar, Teakwood,

Strawberry, Betel vine, Cardamom, Sweet lime, Oil Palm, Tea, Apple,
Coconut, Sugarcane and Safed Musli.
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RURAL INSURANCE

4 Subject matter of coverage is fruits in respect of crops listed in

horticultural crops and trees in respect of plantation crops and shoot in
case of sugar cane.
5 The indemnities are provided only on input cost basis. The period of
insurance is crop duration or 12 months whichever is shorter however
period of insurance in respect of sugar cane is extendable by such
period beyond 12 months upto a maximum of 18 months as may be
necessitated by the varieties.
6 In respect of rubber, eucalyptus, poplar and teak wood where plants are
first required to be raised in nurseries and then fields the period of
insurance shall commence after expiry of 12 months from
transplanting (nurseries are not covered).
1 The perils covered are Fire and allied perils including Lighting, Storm,
Hail storm, Cyclone, riot strike and terrorism. This is standard cover.
ADDITIONAL COVER:
2

Unseasonable rains and frost in case of Grape vines& tea, loss or

damage by wild animals in case of Sugarcane, banana; drought &
disease in case of Banana, flood & inundation in case of tea
plantations; disease &pests in case of tea plantations and betel vine are
the additional covers available.

BENEFITS:
Claims are paid to the extent of 80% of the assessed loss subject to the over
all limit of the sum insured. Sum insured shall be based on the cost of
cultivation i.e. input cost or cost of rising / development of trees. Only such
claims exceeding 10% of sum insured per acre or minimum of Rs. 1000/shall be admitted.

Input costs on account of loss or damage to the

horticultural crop / plantations are covered. Loss of yield is not covered.

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RURAL INSURANCE

PREMIUM:Premium shall be covered for different crops as follows:

TYPE OF CROP

RATE

1. Horticultural Crops-*Citrus fruits, Chikoo, Pomegranate, 5.0 %

Banana, Grapes
2. Plantations-*Rubber, Eucalyptus, Poplar, Teak Wood, Tea, 1.25 %
Mango
3. Sugarcane

1.25 %

4. Betel vine

6.0 %

5. Sweet Chili (Capsicum)

4.4 %

6. Coconut 3 months to 3 years

0.60 %

4 years to 7 years

0.50 %

8 years and upto 50 years

1.50 %

REQUIREMENTS:
Inter cropping may be done only if it does not interfere with normal
growth and health of the trees.
No smoking or cooking shall be allowed in the open fields and within
30m of the property insured. Dry vegetation & leaves should be removed
periodically.
RECOMMENDATIONS:
Plantations are exposed to a variety of perils ranging from pests to forest
fires. It becomes very difficult for the farmer to come out of loss in the
absence of comprehensive insurance cover. It is for this reason, this
insurance policy is devised which is very popular and hence
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RURAL INSURANCE

recommended.
10. FLORICULTURE INSURANCE:
SUITABILITY:
Growers of commercial flowering plants such as rose, chrysanthemum and
jasmine having adequate agricultural expertise in the subject may take out
his policy.
SALIENT FEATURES:
This policy covers only plants whilst growing in the farm / green house / Poly
house against total loss or damage due to
1. Fire including forest fire and bush fire.
2. Lightning.
3. Acts of terrorism, Riot & strike.
4. Strom, hailstorm, cyclone, flood & inundation.
5. Earthquake.
6. Impact damage by rail / road / air vehicle & animals
ADDITIONAL COVERS: Policy may be extended to cover risks of loss
due to drought, Pests, & diseases specific to flowering plants.
BENEFITS: The Policy covers the input costs incurred till the time of loss.
These are the recurring expenses incurred to raise / maintain the plants
such as soil preparation, fertilizer, manure, cost of plants / seeds/
saplings/ cost of planting /sowing & Pruning, pesticides, insecticides,

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RURAL INSURANCE

irrigation, Labour charges and other costs specifically covered. Claims

exceeding 50 % of the total sum insured per hectare or Rs.1000/- which
ever is less only shall be admitted. Each and every claim is subject to an
excess of 20 %.
PREMIUM:
Premium is charged on the sum insured opted as follows.
RISK COVER

RATE

Basic

cover

Under glass house / Green House

1.25

%
2.5 %

In

open

field

Additional Cover (Pests / diseases & drought)

Under glass house /Green house

In

0.75 %
open

field

1.5 %

REQUIREMENTS:
At the time of taking out insurance, the Plants should be at least one month
old after plantation / transportation i.e.; the plants should be well
established in the soil.
Insurance cover will be granted subject to pre-acceptance inspection by
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RURAL INSURANCE

insurers and feasibility report from state Agricultural directorate /

Experts opinion being received.
RECOMMENDATIONS:
Floriculture requires constant supervision and maintenance. Despite all the
preparations, the plants are exposed to risks from pests & unknown
diseases or action of natural calamities. It is for this reason, coverage of
the plantation under this policy is strongly recommended.
11. LIFT IRRIGATION / SPRINKLER INSURANCE
SUITABILITY: This policy is suitable for the agriculturist using the lift
irrigation or sprinkler installation for cultivation.
SALIENT FEATURES: This policy covers loss or damage to intake wells,
delivery chambers, jack well, pump-house, water storage tank, pipe lines,
cables, starters and motors of the lift irrigation system or sprinkler
installation arising out of
1. Fire and allied perils
2. Flood, earthquake and land slide
3. Accidental damage to machinery & pipe line.
4. Bursting of pipe lines.
5. Theft.
BENEFITS: On the occurrence of a loss, claims will be paid for the cost of
restoration to the extent of sum insured set against each item.
An excess of 1 % the machinery value subject to a minimum of Rs.1000/- per
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RURAL INSURANCE

claim is applicable. Theft claims are paid on receipt of non traceable

certificate from the police.
PREMIUM: A rate of 1 % on the cost of the entire system is applicable for
insurance under this policy. The sum insured shall be the new
replacement cost including freight, customs duty & erection costs.
Terrorist risk can be included in the cover at a premium.
REQUIREMENTS: Duly filled in proposal giving the details of the
machinery & their individual replacement cost should be submitted.
RECOMMENDATIONS: Loss due to breakdown, theft or accidental
reasons to the machinery not only is a loss in itself, but also has
consequent effect that the crop is affected. It is necessary that the system
is repaired / reinstated to mitigate the losses. This policy comes to aid in
such situations and is therefore recommended.
12. CALF HEIFER REARING INSURANCE SCHEME
The coverage under this policy is meant for calves/heifers from one day to 32
months. The valuation depends upon the age of the cow and is fixed
according the age of the calf.All terms and conditions applicable to cattle are
applicable here also. Minimum coverage is taken from 12 months however
this is not an annual policy.
13. SHEEP AND GOAT INSURANCE
This scheme is also governed under Market Agreement. Policy provides
indemnity to indigenous cross-bred and exotic sheep and goat against death
due to accident (including fire, lightening, flood, cyclone, famine, strike, riot
and civil commotion) and disease. Earthquake and landslide covers are also
provided. Standard and common exclusions apply as per Cattle Policy.

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Animals are identified by means of small brass buttons ear tags. Animals
under scheme category enjoy certain benefits in premium rate and claim
procedure.
14. CAMEL INSURANCE
The camels are covered against death due to accident or disease as per
Standard Cattle Insurance Policy. The max. S.I. is restricted to Rs.3000/-.
15. PIG INSURANCE
All indigenous, cross-bred and exotic pigs are covered however under
scheme category exotic animals are not covered. The age group is from 4
months to 3 years. The coverage is against death due to accident or disease.
Exclusions as per Cattle Policy apply here also. Permanent total disablement,
breeding and furrowing risks are not covered. Vaccination in applicable
diseases is compulsory.
Evaluation depends upon the age of the animal. Animals are identified by
means of small brass buttons ear tags.
16. HORSE, MULE, DONKEY, PONY, YAK INSURANCE
The Coverage is as per Standard Cattle Policy. However the age group
is restricted to 2 yrs to 8 yrs.

17. MICRO INSURANCE

Micro insurance is one of the biggest and advance innovations in the
insurance sector of India. As the majority of the population living in the
rural areas and the majority of the population below poverty lines. The
insurance company with a view to target this section of the society, has
designed the product which the poor people will be capable to purchase.
In micro insurance the face value of the policy will be very low i.e. is
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RURAL INSURANCE

Rs25000 and the premium will be payable on weekly basis instead of

monthly, quaterly,or yearly basis .the premium of the 25,000 on weekly
will be Rs150 only which the poor people can afford. In this way the
insurance will be able to cover this section of the section which consists of
the biggest part of the market. The LIC has already introduce micro
insurance in the market before 2 months
4. GROWTH OF RURAL INSURANCE BUSINESS IN
INDIA
There has been a tremendous growth of rural insurance business. These are
the outcomes of the efforts taken by the insurance companies and obviously
by IRDA. There are certain norms prepared by the IRDA as per their census
population. These norms include certain number of policies which an
insurance company has to meet in a year.
The best example of growth of rural business can be seen from the below
statistical data showing LICs growth performance.
LICS RURAL BUSINESS

(INDIVIDUAL ASSURANCE FOR 2000-2001)

The above table clearly reflects LICs efforts in spreading rural insurance
business in villages across the country. LIC had not only covered the number
of policies as per IRDA definition but also sold more policies doing a surplus
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RURAL INSURANCE

business of around 38%. Due to this increase there has been a rapid growth in
number of policies taken by rural customers thereby increasing the business.
This can be shown with the help of the chart given below.

GROWTH OF RURAL BUSINESS

(NO. OF POLICIES) CENSUS DEFINITION

Subsequently LIC experienced a rise in the sum assured i.e claim settlement.
This can be shown with the help of the diagram.

The sum assured (number of policies) are in lacs.

Thus by the above graphs it is evident that rural insurance has wide scope of
growth and development.

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IS INDIAN AGRICULTURE UNPRODUCTIVE?

Poor returns on rich harvest.
If agriculture is not productive enough, should farmers be given subsidies or
use the money to import grains?Again, the problem is not coming up with
the correct answer but asking the right question. What does one mean by
productive, for instance?
If it means that farmers here are unable to keep their prices as low as huge
multinational agricultural conglomerates do, there are reasons for that that
has nothing to do with farmers not being productive: one is, the
conglomerates usually end up exerting a quasi-monopolistic hold on the
market; another is, foreign agriculture is heavily subsidised. Then theres the
semantic question. What does productive mean? Productive for whom? By
what standard? If we are a capital-poor, labor-rich country, using more
people in agriculture is not unproductive; its the best use of your resources.
Using high-tech equipment which does away with people is, in those terms,
a highly unproductive use of your resources.

Farm issues
Though less than 25 per cent of GDP is contributed by the farm sector, it
employs more than 70 per cent of the workforce.
India is in a paradoxical situation where it is reaping the benefits of being
the largest producer of several commodities while, at the same time, not
experiencing any material enhancement. The country requires customized
solutions for its problems.

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6. PRIVATE COMPANIES IN THE RACE

AP PLANS CROP INSURANCE IN ALL DISTRICTS
The Andhra Pradesh Government will extend crop insurance scheme to all
districts in the State, besides ensuring the availability of Rs 26,000 crore as
loans to the farmers in the next financial year.Instead of taking mandal as a
unit for crop insurance, a village would now be taken as a unit to ensure
proper implementation. The scheme, which is being implemented in 10
districts currently, will be extended to all districts in the State. Under the
crop insurance programme, over Rs 376 crore has been paid to the farmers
in Anantapuram district alone.
Referring to the agricultural productivity in the State, Dr Reddy said there
has been on a steady rise. High yields have been reported from Adilabad,
Karimnagar, Kurnool, Anantapur, Krishna, Guntur and West Godavari
districts.
Compared to last year, the average rice production per hectare has gone up
to 3,000 kilos from 2,631 kilos, while maize has improved to 4,247 kilos
from 2,398 kilos, he said.
LIVESTOCK INSURANCE MAKES FARMERS TO GO IN FOR
CROSS-BREEDING
Livestock insurance, particularly cattle, is catching up in rural India. A
general insurance firm such as ICICI Lombard sees this to be as big as the
health insurance portfolio.
But more than that, it is encouraging cross-breeding of cattle, says Mr.
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RURAL INSURANCE

Pranav Prasad, Head Rural and Agriculture Business Group, ICICI

Lombard. Cattle farmers are bringing good breeds from other regions to
their places and are also cross breeding, now that they are aware of livestock
insurance, he says.
Dairies and cooperatives are seeing livestock insurance as one way of
protecting their bottom lines. Dairy farmers are realizing that cattle is
insurable and financially includable, this has brought about an awareness of
prevention of health problems in cattle.
ICICI Lombard, which has insured nearly one lakh cattle in the three years
since it began this venture, sees its livestock business expanding, including
extending group insurance for cattle.Currently, the firm extends livestock
insurance to Andhra Pradesh, Chhattisgarh, Orissa and Haryana covering 70
districts. The insurance firm makes use of veterinarians for settling claims
and feels it has control over fraud claims.
ICICI Lombard has a tie-up with Livestock Development Authority and it is
one of the contracted insurance firms with the latter. The advantage of this is
that the authority subsidizes 50% of the insurance premium for the cattle.
Premium for the cattle is 3 to 5 per cent of the insured sum.

WEATHER INSURANCE
Overall, the company realizes Rs 200 crore as livestock insurance currently.
Mr. Prasad says ICICI Lombard aims to insure one million cattle by 200910. Before that, it plans to have at least 2.5 lakh cattle insured during the
next fiscal.
Meanwhile, index-based weather insurance is also drawing the farmers

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RURAL INSURANCE

interest. From a meager enrolment of a little over 200 farmers in 2004, ICICI
Lombard now has enlisted 2.5 lakh farmers for this policy. About three lakh
hectares have been covered by this, Mr. Prasad says.
The weather insurance ensures that farmers are compensated through the
policy in case weather plays truant with the crop or its output. Different
parameters have been set up and the weather index is drawn up district-wise
through a tie-up with National Collateral Management Services, an arm of
NCDEX. The index monitors rainfall during sowing and temperature during
harvest.

AVIVA LIFE INTRODUCES RURAL MICRO INSURANCE

Aviva Life Insurance, the 74:26 joint venture between between Dabur and
UK's largest insurance group, Aviva Plc, today introduced Grameen
Suraksha, a micro-insurance rural term insurance plan for BASIX customers.
This traditional term plan has been developed with the objective of giving
the rural policyholder maximum benefits.
Grameen Suraksha is designed such that it reduces the burden of the
policyholder to pay premium yr after yr. Instead, under this plan, the
policyholder pays premium for a period of just two years and then avails the
term benefit for either 5 or 10 yrs.
In case the policyholder is unable to pay the 2nd annual premium, the plan
will still offer a full cover for 18 months or 48 months from the due date of
unpaid premium for the five-year or the 10-year policy plan respectively. In
addition, tax benefits can be availed as per Section 80C of the Income Tax
Act, 1961.

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RURAL INSURANCE

Bert Patterson, managing director, Aviva Life Insurance, India said, "Aviva
has been a serious player in the micro insurance arena. We have been
associated with BASIX since 2002 and together we have insured lives of
many in the social sector. With the launch of Grameen Suraksha for BASIX
customers, we hope to increase our reach and provide the benefits of life
insurance to maximum number of people in rural and social sector. Aviva
India has covered close to 900,000 lives in the social sector in association
with BASIX and other micro insurance organizations."
Under the new plan, the premium is calculated based on the sum assured
and age (18 to 45 yrs) of the policyholder. The minimum sum assured is Rs
5,000 and the maximum is Rs 50,000. The policyholder also has the option
of surrendering the policy in which case the surrender value is then paid.
ING VYSYA PLANS TIE-UPS TO TAP RURAL INSURANCE
ING Vysya Life Insurance Company is eyeing collaborations to tap what
they consider a vast potential market in rural India where most people
remain uncovered by insurance.
"The challenge is to reach out to nearly 90 percent of the Indians who are
uncovered by any type of insurance. As almost 60 percent of Indians live in
rural areas, we are looking at partnering with institutions and NGOs that will
help us to spread awareness about insurance and reach out to the potential
customers," said Yvo R. Metzelaar, managing director of ING Vysya, which
also has GMR Technologies and Industries as a third partner.
A joint venture between Dutch financial major ING and southern Indiabased Vysya Bank, ING Vysya Life Insurance Company is among 12 private
players competing for a bigger slice of the Indian market that opened to
private sector participation only 2 yrs ago.

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With around 25,000 policyholders paying an average premium of Rs.9,000

per year, ING Vysya is working out new strategies to reach its target of
having two million customers by 2010, Metzelaar said.
"We are looking at more banking and other types of financial institutions
like cooperatives and well-entrenched NGOs to reach out to more people to
make our services more attractive, efficient and affordable, particularly in
the rural areas," Metzelaar told IANS here.
As Vysya Bank has more of a retail presence in southern India, particularly
Karnataka and Andhra Pradesh, the insurance venture is scouting for a
possible partner that would help it broaden the market reach to other regions.
A study by the Foundation of Research, Training and Education in Insurance
(FORTE), a collaboration of the Federation of Indian Chambers of
Commerce and Industry (FICCI) and ING Insurance, has revealed that there
is

tremendous

potential

for

growth

in

the

rural

areas.

With only 11% of Indians covered by old age pension or provident fund
schemes and the lack of any social security or medical cover for an
overwhelming majority in the unorganized sectors, insurance is slowly
becoming need-based instead of a tax-saving measure, the FORTE study
observed.
Unlike their urban counterparts, the rural folks still have low awareness
about advantages of insurance cover for life and property, said sources in the
insurance industry.
"The challenge in the rural areas is to win more trust than in urban areas. For
this we need to have alliances with cooperatives, local banks and NGOs that
have the local expertise and reach," said Metzelaar.
In the last 2 yrs, ING Vysya Life Insurance's main concentration has been on
creating new markets in a country where a decades-old establishment like
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the Life Insurance Corporation (LIC) enjoyed a monopoly as the sole

provider of life insurance cover.
Dictated by the market demand, ING Vysya has been gradually introducing
fresh features in its product packages.
With customers having a wider choice due to privatization, the company has
been wooing the market with more affordable premium options.
"We have 6 products, some with money back features. We have just
introduced 4 riders for our products giving the customer more choice in the
term offer and an add-on provision for critical illnesses," said Metzelaar.
ING Vysya also sees tremendous growth potential in the pension sector. It is
currently formulating pension schemes that would be launched as soon as it
gets the clearance of the insurance regulatory authority and has trained
personnel to roll out the products.

TAP 200 MILLION RURAL YOUTH POTENTIAL TO MULTIPLY

FIS, INSUR. CORP. TURNOVER: ASSOCHAM
Financial Institutions (FIs) and Insurance Companies can rope in about 200
million Rural Investors in their fold provided they design innovative
savings and loan schemes on lines of commercial banks and even post
offices and multiply their annual turnovers by disbursing agri, housing,
personal and education loans and easy insurance schemes at affordable rates
to potential aspirants, according to Associated Chambers of Commerce and
Industry of India (ASSOCHAM).
In a Paper on `Investment Potential Prospects of Rural India brought
out by ASSOCHAM, it has been stated that of 700 million rural population,

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about 200 million rural youth with reasonable per capita income, investment
opportunities are virtually non-existent.
This is because, these have no access to popular savings instruments of
various commercial banks, insurance companies and post offices branches
in ulteriors of countryside and are disparately looking to channelise their
finances for suitable returns. A good number of rural investors are also
aspiring to become self reliant but lack avenues for credit in areas for food
processing, better horticultural and agricultural facilities, training for skill
development to process their milk etc., says the Paper.
It recommends that in aforesaid areas, disbursement of agri loan would work
as a magic and insurance schemes would provide rural youth safety net to
protect their investments, suggesting that financial institutions and insurance
companies should come forward to adequately harness this hitherto
unexplored areas, says ASSOCHAM President, Mr. Venugopal N. Dhoot
while releasing the Paper.
Apart from agri loans, FIs can lure rural investors for housing, personal, auto
and education loan. The public and private insurance companies can also
introduce affordable insurance schemes with their premium keeping at Rs.
500 to Rs.1000 per month. With this premium, the companies can design
schemes that can cover rural youth for at least Rs.50, 000-Rs.1 lakh for a
period of minimum 10 years.
Currently, only 8-10% rural households are covered under life insurance
schemes and remaining 90% can be targeted for these insurance schemes.
According to ASSOCHAM, rural youths, income has risen due to shifting of
its occupation from agriculture to non-farm agricultural income and it has

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become an important facet of rural India. This income mainly comes from
dairy, food processing and packaging, commodity trading and infrastructure
development income. The non-agriculture base of rural occupation and
income have been growing in rural GDP figures that are estimated at 45%.
In view of rural investors rising income, they have now more buying
capacity than before.

The FIs can lure them for renovation and

modernization of their housing at 6-7% rate compared to 10-12% rate in

urban India. Rural masses are in need large sums for the marriages in their
families and other close relations and personal loan at affordable rate will be
an ideal choice for them.
Rich farmers who have benefited from agriculture, farming, dairy processing
& other sectors are using tractors, jeeps, tempo etc. for loading and
unloading their crops and other products to traders. These farmers should be
targeted for Auto Loans and the repayment of these loans should be between
6-7 years with easy interest rates.
According to ASSOCHAM, rural Life Insurance business could rise to US$
20 billion and the non-life insurance to US$ 15 billion by 2010. The
Chamber has also holds that a 500% increase in the size of current Indian
insurance business of US$ 10 billion to US$ 60 billion by 2010 is quite
likely in view of demand factor.
The rural market offers tremendous growth opportunities for insurance
companies and insurers should develop viable and cost-effective distribution
channels; build consumer awareness and confidence. Nearly 20% of all
farmers in rural India own a Kissan Credit cards. The 25-30 million credit
cards offer a huge data base and opportunity for insurance companies. An

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RURAL INSURANCE

extensive rural agent network for sale of insurance products could be

established. The agent can play a major role in creating awareness,
motivating purchase and rendering insurance services
Being an agrarian economy again there are immense opportunities for the
insurance companies to provide the liability and risks associated in this
sector. The Paper found that the rural markets are still virgin territories to a
great extent and offer exciting opportunities for insurance companies. 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.
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,
auto insurance etc.
According to ASSOCHAM, the big challenge for FIs and insurance
companies is to design rural saving products which will cater to seasonal and
unpredictable inflows of money. However, personal cash flows are getting
more predictable with increased services share in the rural economy.
To reach the rural investors, ASSOCHAM has suggested that the FIs and
insurance companies should interact with local government/development
agencies, as well as Panchayats and identify various products for the
preparation of the Service Area Credit Plans in the rural areas.
They can also organize local groups like Village Development Councils and
Farmers Club and these bodies should act as a bridge between them and the
rural investors and ensure that the products developed match the demand of
local clients. These bodies should have rural educated workforce which will
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be used for better delivery and distribution of small products by adequate

awareness. Rural women could also be included into distribution network
and they would be ready to work in minimum monthly income of Rs.10001200 with efficiently and sincerity. If distribution network can be built
around this theory then wider distribution of small savings products can be
enhanced in a low cost manner and unserved markets can be addressed by
formal institutions.
RURAL BANKING AS CATALYST
While public investment in agriculture has declined to 16.2 per cent, the
rural banking system has been encouraging farm development through
provision of credit facilities for production of crops including horticulture,
plantation, forestry; purchase of farm equipment; livestock and fish farming;
irrigation facilities and installation of diesel engines, and so on.
Bank credit is also provided for establishing village/cottage industries,
stocking/supplying farm inputs and cattle-feed, and business and trade
purposes. From 1969-70 to 1999-2000, up to Rs 3.1 crore has been provided
to the farm sector.
With enhanced incomes, and further supplemented by bank credit, the rural
population is acquiring consumer durables, constructing houses, purchasing
vehicles, computers, and so on.
All these assets need to be protected from damage/loss, natural or manmade.
Thus, the rural areas offer enormous opportunities for committed private
insurance companies in both life and non-life insurance schemes.
This will, in turn, help create more that would have direct impact on rural

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development and the country's economic growth, in general. In fact,

insurance in the farm sector should benefit from the advances of science and
technology as well.
LIC in the last decade has evolved a number of products which, however, do
not suit the needs of the rural areas. Similarly, the four GIC subsidiaries have
also been providing insurance cover for specific kinds of assets owned by
rural households through bank credit. But more has really put in the required
marketing effort in the villages. The claim lodgement and settlement
procedure is time-consuming and cumbersome. Cattle insurance under the
government-sponsored Integrated Rural Development Programme and crop
insurance (till now covering banks' loans) have not met with the expected
results.
Valuable data and information on rural areas has been available on the rural
areas

through

the

publications/surveys

of

the

Central

Statistical

Organization, National Sample Surveys, National Council of Applied

Economic Research, and so on. From 1989, the National Bank for
Agriculture and Rural Development has been formulating Potential Linked
Credit Plan, and the Lead Bank has been the Annual District Credit Plan that
give considerable insights into the Government's plans for farm and rural
sector development.
Besides, the village profile available with each of the branches of
nationalized / public sector banks contain exhaustive data on the population,
cultivating households, categories of farmers, and classification of workers,
livestock, cropping pattern, farm Equipment and machinery and so on.
There are more than 1,75,000 rural credit outlets in addition to the offices of

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the District Rural Development Agency, the District Industries Centre, the
District Development Manager of nationalised banks and Lead District
Manager of the Lead Bank. All these institutions and agencies can offer
considerable information to insurance companies.
Educated unemployed youths of the villages can be trained and become
valuable assets for the companies. While insurance companies are eager
to build their business in the urban areas, there is a hitherto untapped
potential for business in the rural areas which can be exploited.
The Centre and the State governments must encourage private and
foreign insurance companies to enter the rural areas, and provide protection
to rural assets from damage and loss due to natural and man-made
calamities. For this purpose, reasonable and need-based concessions/reliefs
in

taxations

and

subsidies

required

infrastructural

facilities

and

administrative support must be extended, at least for ten years. The

government may consider appointing an Expert Committee on Rural
Insurance to work out the modalities for private and foreign companies
interested in entering the rural areas.

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8. BIBLIOGRAPHY
Books:
INDIAN INSURANCE INDUSTRY TRANSACTION AND
PROSPECTUS, D.C. SRIVASTAV & SHASHANK SRIVASTAV
INSURANCE THEORY AND PRACTICE, NALINI PRAVA TRIPATHY
& PRABIR PAL
INSURANCE MANAGEMENT, SURENDER MANOLA.
News Papers:
1 Economic Times
2 Times Of India
WEBSITES:
1.

www.rediff.com

2.

www.khoj.com

3.

www.google.com

4.

www.yahoo.com

T.Y.BBI

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