YASHWANTRAO CHAVAN MAHARASHTRA OPEN UNIVERSITY

IHTM

SYDENHAM COLLEGE OF COMMERCE & ECONOMICS

Practices Of General Insurance

Rural Insurance

Prof. Rahul

By: Arvind Sankaran B.B.A. (Insurance &Banking) Third Year

INDEX

Sr. No. 1. 2. 3. 4. 5. 6. INTRODUCTION MEANING

TOPIC

Pg. No. Remarks 3 3 5 6 6 8

INTRESTING FINDINGS VIBRANT MARKET BUILDING INFRASTRUCTURE COMPANIES PROVIDING RURAL INSURANCE

7.

SCHEMES OF TATA AIG INSURANCE

INTODUCTION

RURAL INSURANCE:
Rural India is often faced with risks linked to lifestyle of people living there. There is a growing need for the Rural mass to be educated on insurance solutions that will help them take care of the risks be it their automobiles, health, property or livestock.

Definition
Rural sector shall mean any place as per the latest census which meets the following criteria-

a population of less than five thousand; a density of population of less than four hundred per square kilometer; and more than twenty five per cent of the male working population is engaged in agricultural pursuits Social sector includes unorganised sector, informal sector, economically vulnerable or backward classes and other categories of persons, both in rural and urban areas;

Rural Insurance is an underwriting company dedicated to providing insurance solutions to meet the needs of agricultural and rurally based businesses.The core business principles that guide Rural Insurance are exclusivity, access to informed and empowered decision makers, service and quality. Rural Insurance believes that by combining these core values and adhering to the business ethos of Putting You First, we create a fundamentally better option for your business. Rural India, contributing to 70% of the total population in India, is a largely untapped market. reports highlights the opportunities for insurance products in rural India as well as the current challenges. The report also gives a 360-degree view of the rural Indian market, which could be explicitly helpful to companies planning to tap this market.
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During the past decade India has registered consistent economic growth which has catapulted prosperity in the country. This growth in the Indian markets - broadly divided as urban and rural-have attracted high levels of foreign investments. The investment influx propelled economic growth in the Indian urban regions leading to its rapid growth and subsequent saturation as well. The focus of companies across sectors, thus, is gradually moving to the urban markets counterpart, the Indian rural market. The rural markets, too have gained from the changes in the economy with the overall per capita income, literacy levels and the introduction of new products and services having increased over the decade. Other triggers to the rural regions economic development include the Indian government policies of loan waivers, employment guarantee schemes and better housing facilities. Amongst the sectors that have commenced their foray in the rural regions insurance reveals a huge potential, with high awareness levels and low penetration of insurance.

The rural market in India, constituting 742 million people, is by far the largest potential market in the world. The annual rural household income of Rs 56,630 (as per NCAER, IMDR 2002) coupled with changing rural aspirations in consumption patterns and lifestyles unfolds tremendous opportunities for rural marketing. However, some of the issues that seem to be hindering large-scale advent in the rural markets are lack of understanding of rural customer, inadequate data on rural markets, poor infrastructure, low levels of literacy and poor reach of mass media. The insurance sector, per se, also did not make much headway in the rural sector. The insurance market in India, liberalised in 2000 with the advent of private insurance companies in November 2000 has not expanded in real terms beyond the urban domain. The penetration of insurance in India is pitifully low and if we aim for the modest target of insurance premium becoming 5% of GDP, insurance companies need to look at newer market segments rather than fight for a share in the same pie. There exists a vast potential in the rural areas where more than 70% of our population lives. But it is common perception and belief amongst the insurance companies that it is expensive to do business in rural areas. Most companies are focusing only on meeting regulatory requirements from rural areas and dont see them as commercially viable rural business opportunities, waiting to be exploited.

Some of the questions tormenting the insurance marketers particularly the ones in the private sector are: Is the Indian rural market for insurancea great promise or a great challenge? A potential miracle or a mirage? A mere regulatory obligation or a great opportunity? How is the rural market defined? Are rural operations cost-effective? Is it commercially wise to make huge investments to create a rural distribution and delivery system? We at the Foundation of Research, Training & Education in Insurance (FORTE) thought it would be a great help to the industry if these issues were addressed. So we decided to commission a research study to Marketing and Research Team (MART). The study, titled Rural Insurance: Issues, Challenges & Opportunities had the following objectives: Understand rural customers current knowledge, attitude and practice regarding finance, specifically savings, loans, bank deposits as well as insurance itself. Determine the potential rural customers perceived need for acceptance of and willingness to purchase insurance policies. Gather inputs for the development of a broad marketing approach for each potential customer segment in terms of products/pricing of insurance policies, promotion and development of communications relevant to the rural markets. Gather inputs for the development of a broad distribution strategy for each potential customer segment and identification of delivery systems relevant to rural markets.

Interesting findings
The study brought forth revealing data. The rural folks have a strong saving habit they save about one-third of their income annually across the three income segments studied. What was stunning was that the respondents, even those residing in backward areas, were quite conversant with insurance. The Indian rural market for insurance is not entirely an uninformed market. Almost 93% of the respondents were aware of life insurance; while 61% were aware of motor and accident insurance. Around 36% of them had bought some insurance or the other and another 38% of these policyholders had intention to buy more. A little over half
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(51%) of all the respondents had intentions of buying insurance products. Out of the non-policy holder respondents 62% intended to buy. If these numbers are extrapolated over the macro level, rural population being 742 million, the potential market could be of mind-boggling proportions.

Vibrant market
Our research clearly indicates that the rural market is a vibrant market and holds tremendous potential for growth of insurance business, particularly because of the strong saving habit. While the industry would certainly be much heartened by the promising prospects in the rural sector, the real challenge for them would still be the distribution and delivery systems. Here again research has come up with valuable data about the extensive network built by the rural development agencies, the banks, the cooperative institutions, the NGOs and some industrial houses in the rural sector. Insurance companies would therefore be well advised to work out collaborative arrangements with these institutions to mutual advantage.

Building infrastructure
These institutions, having spent huge amounts for creating the infrastructure, will be happy to collaborate and recover some of the costs. Insurance companies would be saving on huge potential investments that may be required to build up dedicated distribution and delivery systems and leverage the existing network at marginal costs. This indeed is a win-win situation. Another important observation is that the ongoing IT and telecom revolution in India has not bypassed the rural sector. The rural folks are reasonably technologyliterate and are not averse to its use in their day-to-day activities. The state governments have also done their bit by inducting technology in their interface with them. This would certainly help in integrating the rural-urban markets. In order to further validate these findings, FORTE commissioned another research study to develop a rural distribution strategy as a case study in district Muzaffarnagar, UP. The study, titled Developing a Rural Distribution Strategy for Insurers focused and looked threadbare at various distribution and delivery channels available in the district to reach out to the rural markets in a cost-effective manner.

The channels finally identified for distribution of insurance products were the panchayats, district cooperative banks, agriculture & dairy cooperatives and the agents. The study detailed operationalisation of these channels along with a comprehensive cost analysis to clearly highlight the viability of going to the rural markets. Therefore, there exists an immense opportunity to explore the rural potential with all its complexities and variables and meet the challenge of developing the insurance business in this sector, in tandem with its considerable economic growth. Insurance companies can add about Rs. 1000 crore to their networth from nearly 200 million rural folk that are looking for alternate savings channels for their surpluses provided these come out with innovative schemes at affordable premium, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM). Assocham paper on `Rural India and Its New Investors adds that insurance companies can lure this investors lot even for agri, housing, personal, education and auto loans after these have insured them under its new schemes. Currently, only 8-10% rural households are covered under life insurance schemes and remaining 90% can be targeted for new innovative insurance schemes. According to ASSOCHAM, rural Indias income has risen due to shifting of its occupation from agriculture to non-farm agricultural income and it has 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%. 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. To reach the rural investors, the ASSOCHAM has suggested that the 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. The rural market offers tremendous growth opportunities for insurance companies and insurers should develop viable and cost-effective distribution channels; build
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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 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 Assocham 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.

Companies Providing Rural InsuranceICICI TATA AIG National Insurance LIC HDFC ERGO

Some of the scheme provided by TATA AIGMotor Insurance

Tractors: All makes & models of Agricultural tractors / Trailers/ Trolleys/ Implements

Two Wheelers: All makes & models of Scooters & Motorcycles

Private Care: Vehicles privately owned, for captive use

Commercial Vehicles: Coverage for o Goods Carrying vehicles various makes and models of vehicles upto 25 tonnes o Passenger Carrying vehicles - Vehicles privately owned, for captive use o 3-Wheelers : Passenger vehicles and goods carrying vehicles

Property Insurance

Home

Shops & Outlets

Schools

Machinery (Pump sets)

Covers Loss or damage to building & contents against:

Fire Lightning Explosion/Implosion Aircraft Damage Riot, Strike and Malicious damage Impact damage by Rail, Road, vehicle or animal Subsidence and landslide including rockslide Bursting, overflowing of Water Tank and Pipes Missile Testing operations Leakage from Automatic Sprinkler Installations Bush Fire Flood, Storm, Inundation etc Earthquake

Livestock (Cattle) Insurance

Diseases

Accidents

Natural calamities

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Riots, Malicious damage, terrorism

Permanent loss of milk yielding capacity due to disease

Personal Accident Insurance

Accidental Death (10% of Sum Insured for < 17 year old) Accidental Dismemberment (incl. loss of sight & hearing) Disappearance (where body cannot be located) Emergency Accident Medical Expense Repatriation of Remains / dead body Permanent Partial Disability Accident Hospital Cash Permanent Total Disability Tuition Benefit (Education Benefit)

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DECLARATION:

I/We, Arvind Sankaran of Sydenham College studying in 3rd year B.B.A. (Insurance & Banking) hereby declare that, we have completed Project on Rural Insurance during the academic year 2010-11. The information submitted is true and to the best of our knowledge. It is our prime duty to extend our thanks and express our deep sense of gratitude towards Prof. Rahul, under whose benevolent care and guidance, we have been able to complete our work.

College: Sydenham College of Commerce and Economics University: YCMOU Date: 12th January 2011 Place: Mumbai

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GRATITUDE:

We, Arvind Sankaran of Sydenham College studying in 3rd year BBA (Banking and Insurance) thank Prof. Rahul, for assigning project work on Rural Insurance, to us which has given us a lot of knowledge in the field of General Insurance , which would help us in our future, and for helping, guiding and supporting us in times of difficulty.

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CERTIFICATE
I, Prof. Rahul, hereby declare that Arvind Sankaran, of Sydenham College in 3rd year BBA (Insurance & Banking) have completed Project on Rural Insurance, during the academic year 2010-11. The information submitted is true and original to the best of my knowledge.

Signature

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