Chapter- 4

Rural & Social Sector

Insurance

Obligations of Insurers to the

Rural & Social Sectors
Under the provisions of Sec 32B & 32C of
Insurance Act, 1938, insurers are obliged to
provide such percentages of business as may
be specified by the IRDA, for persons from the
rural & social sectors.
IRDA issued, the obligations of insurers to
Rural & Social sectors Regulations, 2000,
every insurer transacting general insurance
business must underwrite in rural sectors:
2% of total gross premium in 1st financial year.
3% of total gross premium in 2nd financial year.
5% of total gross premium from 3rd financial year

 Rural sector is any place that as per last

census has a population of not more than
5,000, with density of not more than 400/sq.
km & atleast 25% of male population are
engaged in agriculture.
Insurers have to evolve appropriate strategies
to meet these obligations.
Rural Insurance covers short-term crops (max
1 year) such as food grains, oil seeds, pulses,
sugarcane, banana etc.
Long-term crops like coconut, mango, coffee,
tea etc, coverage is restricted.
Cattle, sheep, poultry, fisheries, bullock carts,
moors, tractors etc are also covered.

Rural Insurance
Following categories are covered:
Agriculture Crop Insurance
Cattle/Live
Stock/
Other
animal
Insurance
Sericulture, Honeybee, birds etc.
Insurance
Personal Property Insurance designed
mainly
to
cater
the
needs
of
rural/semi-urban/economically
backward section of society.

Agriculture Insurance
Can be sub-divided as; Crop Insurance,
Plantation & Horticulture Insurance
Crop Insurance (i.e. cereals, millets,
pulses etc.) is handled by Agriculture
Insurance Company of India Ltd.
Plantation
Insurance/Horticulture
Insurance (such as sugarcane, banana,
citrus fruits etc) is done by general
insurance company.

Cattle Insurance
Purpose is to compensate the insured owner of
cattle in the event of death due to
disease/accident/cyclone/flood etc.
Applicable for:
Milch cows & buffaloes
Female claves/heifers
Stud bulls
Bullocks
Sum Insured: Market value based on
certificates given by local Veterinary Doctor.
Period of Insurance: Usually one year but
long-term policies can also be issued.

Main Exclusions
Intentional negligence, use for other purpose
than specified in the policy.
Pre-existing disease/disabilities
Slaughter without consent from company
Transportation beyond 80 km. by sea/air
Theft or clandestine sale
Partial/total permanent/temporary
disablement
Death during first 15 days from date of
insurance

Claim Procedure
Immediate
written
intimation
to
the
insurance company giving policy no. details
of cattle, time, date & cause of death.
Inspection by the company official/surveyor
Death certificate in Companys pro-forma
from a veterinary doctor.
Post-mortem report
FIR in case of accidental Death
Ear tag to be intact without being detached
from the ear

Poultry Insurance
Includes domesticated species of birds reared
for eggs, meat or feathers & include chicken,
duck, geese, turkey etc.
Provides indemnity against death of birds due
to accidents or diseases.
Covers death due to fire, lightning, flood,
cyclone, earthquake etc.
Policy benefits farmers who depend on
poultry income for their sustenance.

Pumpset Insurance
Scheme is applicable to pump sets.
Cover is given to only those sets which are used for
agriculture purposes and are made by approved
manufacturers.
Risks covered are:
Fire & Lightning
Electrical or mechanical breakdown
Riots, strikes & malicious damage
Act of terrorism
Theft or burglary, if pump set is kept in a safe
place
Damage due to floods (but not in flood prone
areas)

Policy Exclusions
Any willful act of negligence on the part of
insured
Wear & tear
Any defects of the pumps set which the
insured or his representatives were aware
of at the time of commencement of the
insurance contract
Fault of manufacturers or supplier
Dismantling, re-installation

Obligations of Insurers to the

Social Sectors
Under the provisions of Sec 32B & 32C of
Insurance Act, 1938 and the IRDA (Rural &
Social sectors Regulations, 2000), insurers
are obliged to provide insurance to:
at least 5000 lives in the social sectors in 1 st
financial year
7500 lives in the social sectors in 2 nd financial year
10000 lives in the social sectors in 3 rd financial year
15000 lives in the social sectors in 4 th financial year
20000 lives in the social sectors in 5 th & subsequent
financial years

Social Sector
Includes unorganized sector, informal sector,
economically vulnerable or backward classes &
other categories both in urban and rural sectors.
Unorganized sector includes self-employed
persons, workers, fisherman, handicraft artisans,
lady tailors, papad makers etc.
Economically vulnerable or backward classes
who belong to below poverty line.
Other categories include persons with disability
and guardians who need insurance to protect
spastic persons or persons with disability.

Crop Insurance
Insurance coverage & financial support to farmers
in the event of failure of any of the notified crops in
the notified area as a result of natural calamities,
pests & diseases & also to encourage the farmers
to adopt progressive farming practices & use
modern technology in agriculture.
Crops covered: Food crops are covered. Crops have
to be spelt before the close of preceding year.
Area covered: Extends to all states of Indian Union.
Farmers to be covered:
On compulsory basis- All farmers growing notified crops
& availing loans from financial institutions.
On voluntary basis- All farmers growing notified crops &
have not availed any loans

Risk Covered &

Exclusions
Risk Covered
Natural fire & lightning storms
Hailstorms cyclones
Typhoons
Hurricanes
Tornado floods
Landslides
Drought
Dry spells pest/disease etc.

 Exclusions
Losses out of war, nuclear risk & malicious
damage

Sum assured/Scope of coverage

Based on value of the threshold yield of
the insured crops
At the option of the farmers, an amount
beyond threshold yield level up to 150%
can be insured on payment of additional
premium.
Sharing of Risk
Claims are shared between insurance
company & government in an agreed