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What Is Rural Insurance?

By Ronald Kimmons, eHow Contributor | updated March 07, 2011

Insurance companies protect people from financial catastrophe by spreading the risk of financially crippling events over a large number of people. In doing this, insurance companies often sell specific types of insurance to specific demographic groups based on such things as occupation, education, group affiliations and geographic location. Rural insurance can be insurance of any type that companies market specifically to people and organizations located in rural areas or with certain lifestyles and practices.

1. Property Insurance
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Someone who lives in a rural area has different needs when it comes to insuring property. For this reason, property insurance for rural areas can be very different from what insurance companies offer in urban or suburban areas. Rural property insurance can be especially beneficial for farmers and ranchers, who have needs different from what a normal homeowner might have. Such property insurance may cover farmers' and ranchers' homes, barns, sheds, lawn property, fences, machinery and agricultural equipment. Property insurance can protect all of these things from fire, flood, high winds, theft, vandalism, earthquake and other causes of loss.

Crop and Livestock Insurance


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Farmers often have their entire financial future dependent upon their ability to successfully plant, grow and gather their crops. A flood that destroys an entire crop of corn or a disease that kills large numbers of cattle can be financially devastating for a farmer or rancher. For this reason, insurance companies provide protection for people in the agricultural industry by offering them crop and livestock insurance. If such a disaster occurs, insurance companies will help policy holders to recover by compensating them for their losses. However, in order to obtain such insurance, farmers and ranchers may have to take certain measures to decrease risk such as constructing flood walls or regularly vaccinating their livestock against disease.
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Farm Liability Insurance


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If someone comes onto a farmer's land and suffers from an accident that results in injury or death, the law may hold the farmer financially liable -- even if the injured individual was not supposed to be there at all. For this reason, insurance companies offer farm liability insurance to protect farmers and other people in rural areas from the crippling financial damages that can come from a lawsuit. Insurance companies help in these cases by providing funds to pay the plaintiff as well as by paying for legal counsel to defend the property owner's interest and present evidence that he was not at fault.

Workers' Compensation Insurance


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It is very common for farmers and ranchers to require the help of laborers to work livestock or gather crops. However, this can sometimes be dangerous work. For this reason, insurance companies offer workers' compensation insurance to cover injuries that occur on the job. Companies that provide rural insurance may offer rates specific to workers for agricultural industries. Some states actually require farmers and ranchers to obtain such insurance for their employees.

Importance of insurance for all seasons


2. As Indian banks plan to march into rural India disbursing commercial loans and housing finance, they need insurance companies to keep in step in order to derisk their borrowers and make their lending safer. 3. The challenge and opportunity lies in moving to the bottom of the pyramid by providing flexible, affordable and easily available insurance to rural and semiurban people, preferably through the involvement of state governments or through large companies (especially public sector undertakings), industry associations or NGOs and Self Help Groups (SHGs). 4. NGO sources say that there are two main causes of rural indebtednessfirst, borrowing to fund marriages and second, losses caused by the vagaries of the temperamental Indian monsoon. There is no easy way to stop people from spending far beyond their means on weddings, but almost all insurers are working overtime to sell and design weather insurance products to make agribusiness less risky. 5. In fact the World Bank and IFC Washington supported a pilot project with ICICI Lombard in 2003, which showed that weather insurance is far better suited to small farmers in rainfall-dependent countries such as India. They even found reinsurance for these weather policies. 6. BASIX, a large microfinance institution with nearly 10,000 borrowers in nine states, sold around 250 policies to groundnut and castor farmers in Andhra Pradesh through its Krishna Bhima Samruddi Local Area Bank as a part of this pilot. The first time the company settled these claims, it paid out cheques to the farmers and only then realised that most of them did not have a bank account. It than collected the cheques bank and settled claims through a bank, says Sandeep Bakshi, COO of ICICI Lombard.

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. Whilst Rural Insurance has a wealth of expertise and industry experience, we maintain an innovative approach to rural and agricultural insurance and risk management.

Rural insurance: Need and potential A. R. Patel INSURANCE has thus far been mostly city-oriented. But things are 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 ne glect of the rural areas vis-a-vis 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. The number of families living below the poverty line has considerably declined in Punjab (11.7 per cent), Goa (14.9 per cent), Andhra Pradesh (22.2 per cent), Himachal Pradesh (23.4 per cent), Gujarat (24.2 per cent), Haryana (25.0 per cent),

J&K (25.2 p er cent), Kerala (25.4 per cent) and Rajasthan (27.4 per cent) -- much below the national average of 35.97 per cent in 1993. 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 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' loanees) 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 Organisation, 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 devel opment. Besides, the village profile available with each of the branches of nationalised/public sector banks contain exhaustive data on the population, cultivating households, categories of farmers, classification of workers, livestock, cropping pattern, farm eq uipment and machinery and so on. There are more than 1,75,000 rural credit outlets in addition to the offices of 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. Firms interested in developing rural insurance can: *Identify insurance products best suited to rural elite/rich as well and rural households. *Evolve area- and client-specific products. *Design a method and system for fixing and collecting premium, and claim settlement procedure to ensure customer-friendly services. 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 nee d-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.

Rural & Social Sector opportunity key to improve Insurance Penetration Need to raise FDI cap in Insurance to 49% to tap this potential: CII
CII: Jan 17, 2011

Rural and Social Sectors offer huge potential for improving Insurance penetration for the uninsured sections of the population and this calls for better risk management, innovations on product design and distribution, infusing technology and greater investments. This clearly justifies greater engagement of Foreign partners in bringing in better risk management practices, innovation in production & distribution, technology, specialized skills and hence there is a strong need to raise FDI Cap in Insurance sector from the current 26 % to 49%, said CII in its comments on the Insurance Laws (Amendment) Bill, 2008. Insurance Penetration to rural and social sectors is marked by high risk and hence more dynamic and efficient risk management systems are crucial while innovation is needed not just in terms of insurance products but also in ways of distributing them. In addition, use of better technologies right from issuance to servicing of Insurance services is also crucial for long term growth of Insurance sector in India. Insurance industry is witnessing the transformation of insurance agents from mere intermediaries to financial advisors. Greater foreign investments would help in training and skills upgradation of the agents. Well trained agents would be better equipped to convince the customers about the benefits of insurance besides contributing to simplifying the procedure. Moreover, there is a shortage of expertise (skills) in the Indian insurance industry (e.g. underwriting, actuarial, claims management, data standardization etc.) Raising the FDI cap will enable expertise (skills) and know how transfer that are generally not available under the current regime. While the rural and social sector obligations set by IRDA have been met by the Insurance companies, the untapped potential of these sectors also calls for changes in regulations to facilitate movement towards an era of electronic policy issuance and dematerialization. This will reduce the cost of operations and would facilitate

address logistical difficulties through use of electronic distribution channels via mobile phone and broadband technologies. While broadly, welcoming the Insurance Laws (amendment) Bill, 2008, CII said that a few amendments need to be re examined such as the value of penalties proposed in case of failure to comply with Section 32B, 32C and 32D may be reduced to Rs 2 lakhs as the upper limit and the higher limit on penalty for contravention of provisions relating to investment of controlled fund or assets may be brought down to Rs. 5 Crs instead of Rs. 25 crores. CII has also suggested that non-executive Directors of a Corporate Agent may be permitted to be the Director/s of Life Insurance Company. This would help regularize many cases where the promoter companies of the Insurance companies have their own Corporate Agency like banks and finance companies. On the insertion of a new definition of 'health insurance business' in the proposed bill to include long term health policies, Personal Accident and Travel Policies etc., CII has pointed out that the term "Health Insurance" has not been included in the definition of General Insurance and Life Insurance. Under this circumstance, CII has sought for a clarification in the Bill whether the Insurance companies registered with IRDA for conducting General and Life Insurance business shall be able to do "Health Insurance" under their existing license.