Rural Insurance

Insuring the bottom of the pyramid.

• India has been known as the “land of villages” inspite
of growing rate of urbanisation and migration.
Why INSURANCE is needed?
• As responsible family members who have a
commitment to provide for near and dear ones even if
we are no more. Life insurance is a product one must
think about and take action
The bottom of pyramid – are poor people who live on
an income of less than $1 a day.
No companies has tapped this market to the fullest.
IRDA established a act of parliament in 1999, made a
provision that acquistion of certain amount of rural as
well as urban area is mandatory by every company.
Rural insurance offers a ready opportunity for growth
and increased volumes.
Reaching the underprivileged and the deserving.
IRDA norms on Rural Insurance
AS a part of far reaching reforms ,government took
the decision to involve new pvt players in life as well
as non –life sectors as a goal of increasing penetration
in rural regions.
IRDA implemented compulsory targets for making
insurance coverages to rural and social deprived
sections of the society.
In addition to the coverage to the rural population , the
regulation has required mandatory insurance coverage
for population falling under “social sectors”.
Social sectors are agricultural labours,road
construction workers,fishermen,etc.
 IRDA regulation on mandatory insurance
coverage
minimum basic requirement
FINANCIAL YEAR SOCIAL SECTOR* RURAL SECTOR**

1 5000 7
2 7000 9

3 10000 12

4 15000 14

5 20000 16

6&7 25000 18
*- EXPRESSED in terms of number of lives covered
**- expressed as a percentage of total number of policies written
SOURCE:IRDA
REGULATIONS,2008
• Rural insurance needs
Preference of rural household- viewed as a means to save
money to meet long term goals,
Ex- land and daughter’s marriage.
• View LI as reliable and essential form of saving.
• People prefered endowment products with a policy terms
of 25 yrs and above
• Irda has requested companies to design innovative
products for rural market.
• LIC assured in rural areas is below rs 100000.
Issues
Ability of rural policy holders- to pay premium
payments on regualr basis without interuptions.
Unperdicted Monsoon
For ex- rural areas in AP lapsed in 2000 due to inabilty
due to famine.
Operational issues- lack of proper documentation at
the time of issuing policy.
Issues with collection and remittance of premuims
accurately
Verifying the claims in rural areas are time consuming
and expensive.
Efforts of private players-
Most cos have started their business in metros
TATA AIG- have come up micro insurance schemes for
rural market
Navkalyan yogna- regular premium payment,low cost
term plans
AYUSHAMAN yojana-single premium at a single term.
TATA AIG insurance company has accounted for 11%
growth of life polices in march 2002.
Strategies ...
Tailor made insurance products- low cost term
insurance produts tailored for rural sector.
Creation of new distribution links-
Lic has agents in rural areas
Whereas privated cos has preferred bancassurance such
as RRB
Tie ups- cooperative banks and RRb’s has ready
access to rural population and their homogeneous
nature make them ideal for sale`
Conclusion
The rising of rural purchase power,opening up
economy,govt drives,and rural infrastructure is the key
drivers which would help to capture the untapped and
potential market.
Thus govt policies facilitate the process,key drivers
would lie on NGO’s,SHG’S,BANKS and atlast both
public and private sector banks would help to
safeguard and prevent poor from uncertainity in
future.