Rural InsuranceAshutosh SrivastavaPremnath Residency,

ph-9920196847, 9320482828

Flat- 301, Plot-74, Sector – 44, Nerul,

Navi-Mumbai- 400706.

Insurance in India• Started in 1818(Oriental Life

Insurance Company )• Life insurance premium accounting

t 2.5% of the country’s GDP• FDI up to 26%• In the year 1912, the Life

Insurance Companies Act, and the Provident Fund Act were passed to regulate the insurance business.

Insurance Acts

• The insurance Act 1938• Life Insurance Corporation

Act, 1956• General Insurance Business

(Nationalisation) Act, 1972• Insurance Regulatory and

Development Authority (IRDA) Act, 1999

Reported catastrophe losses in India during 1965 – 2001 (nominal USD mn at then exchange rates) Source: World Bank (2003), based on data from OFDA-CRED (2003)

• Insurers bear fractional cost of disasters

– Coverage of natural perils in life, property and vehicle insurance

• Very low levels of non-life insurance penetration

– Savings motive– Erroneous perceptions

• Common approaches– Informal risk transfer – Disaster relief– Crop insurance– Corporate initiatives

Insurance in rural scenario

Stagnation in Agricultural Growth

• Deceleration in the growth rate of agricultural production

• Stagnation in yields of important crops; with larger intake of modern inputs

• Disappointing performance of commercial crops

• Large fluctuations in the output prices

The rural needs and wants

• Farmers• Craftsmen• Milkman• Weaver• Casual labours• Construction workers

Risks • Comprehensive risk will be

provided to cover yield losses due to non preventable risks, viz.:

• a. Natural Fire and Lightning b. Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado etc. c. Flood, Inundation and Landslide d. Drought, Dry spells e. Pests/ Diseases etc.

Penetration of Insurance Products

%

0.2

0.3

0.5

0.5

3

10

14

27

36

64

0 10 20 30 40 50 60 70

Pumpset

Crop

Accident

Cattle

Tractor

Motor

General Insurance

Life Insurance

Any Insurance

No Insurance

• Over one-third have insurance, with life insurance having the maximum penetration.

Figures in %

Hierarchy of Insurance Needs

42

16 10 10 7 6 1

10

1820

11 17 164 2 3 12240

20

40

60

Rank 2

Rank 1

• More than three-quarters (78%) ranked various combinations of life insurance as the most important. Insuring assets were not such a priority

Figures in %

Insurance schemes• Government sponsored

National Agricultural Insurance Scheme (NAIS) in operation since Rabi 1999-2000.

• Farm Income Insurance Scheme (FIIS) implemented on pilot basis in Rabi 2003-04 and Kharif 2004. Discontinued w.e.f. rabi 2004-05.

• Varsha Bima Yojana (Rainfall Insurance) being implemented by some insurance companies like ICICI- Lombard, IFFCO-Tokio, AIC on Pilot basis.

First Farmer weather insurance policy

Insurance informationDelivery Systems

Agent Network

•As Insurance customers rely on personal interactions and a high level of service, some degree of rural agent network is a must

Commercial/ Co-operative Grameen/ RRBs

•Banks are viewed as ‘safe’ institutions to invest in and any tie up would enhance the credibility of insurers and their agents

Post Office •This institution is very highly trusted by the rural population with access to the smallest villages

E-Choupal •This is an internet-based co-ordination point for purchase of agricultural produce and a forum for agricultural information and interaction, particularly for affluent farmers

Information networkDelivery SystemsSelf Help Groups/ Youth Clubs/ Co-operative Societies These are

various rural forums that meet regularly at the village, block and district levels and can be used for promoting group insurance

• Once the group leadership approves the insurance company, members will be more inclined to accept its insurance products

Producers Co operative Societies

Producers’ co-operative societies are rural forums for interaction/ information and finance for farmers. Regular meetings are held and can be used as a group platform to sell policies (specifically accident/ crop/ health policies) to members

NGOs NGOs working in micro-finance with grass-root reach, trust and credibility can be used to access members of Self Help Groups who would then be more inclined to purchase from the private player

conclusion• Agricultural insurance

– Agricultural insurance can only deal with the remaining part of production risks that cannot be managed using cost-effective mitigation measures

– Underdeveloped agriculture cannot be developed or restored purely by the introduction of an insurance program

– Agricultural insurance has no purpose without viable agriculture and conversely, viable agriculture could not exist without adequate insurance

                                                                                                                                                                                                   

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Agriculture Insurance Company of India (AIC) is an exclusive organisation set up for implementing National Agricultural Insurance Scheme (NAIS) . The company will devise and implement other insurance schemes relating to Agriculture and allied subjects.

                               Varsha Bima - 2005: Sixty five percent of Indian agriculture is heavily dependent on natural factors, particularly rainfall. Studies have established that rainfall variations account for more than 50% of variability in crop yields...more »

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