The liberalization of Indian insurance sector has brought about a sea change in the urban insurance scenario. The insurers now are taking special interest in rural India which is being received well by the rural populace.
Though
rural India represents around 74% of the country's population,
it leaves a lot to desire when it comes to insurance
coverage. The mindsets of the rural Indians, the lack
of awareness, problems related to logistics are some
of the issues that prevent development of insurance
market in rural sector. Another crucial factor that
drives the majority of urban population for insurance,
is the tax benefit. This factor fails to work in rural
India, as the major income source of rural population
is from agricultural produce, most of which is exempted
from tax.
Other
factors that prevent rural India's active participation
in insurance are paying capacity, spread of risk etc.
Dr. K C Mishra, Director, NIA, Pune, says, "Probably
the most important aspect for a micro-insurance scheme
is the paying capacity of its members. Affordability
of premiums is a prerequisite in any insurance scheme,
but it assumes more significance due to the economic
status of the target group. At the same time, the scheme
has to provide a reasonable level of benefit to its
members. Balancing these two aspects together is a delicate
task." Lack of historical data is another crucial
factor that contributes to the less presence of insurance
in rural India. Dr. Mishra opines, "an insurance
operation will be viable in the long run only if the
premium income is sufficient to pay out all the claims.
In order to be able to do this, insurers need to develop
reliable estimates of the expected claims to premium
ratios. Such an estimate can only be based on fairly
long-term historical data on claims experience. Further
analysis of this data on the basis of geographical location
of the risk, occupation of the insured population, the
living conditions etc., would also pinpoint segments,
which are exposed to a high level of risk. Lack of this
kind of historical data on claims experience of the
micro-insurance scheme could be a handicap for a micro-insurer
while setting the correct price." Thus, insurers
have a Herculean task ahead to bring rural Indian in
contact with the insurance by means of various channels
like marketing, distribution etc. |
