Thanks to its near million agency force and range of products to fit all wallets, LIC has reached rural India, says Dr. K C Mishra, Director, NIA, Pune.

Of the vast number of poor people in India, very few have access to basic social services. They are also more vulnerable to losses arising out of a natural or man-made calamity. Traditionally, insurers have been hesitant to provide risk cover to the low-income communities. In India, cattle insurance is the major insurance requirement related to micro finance activity. Most financial institutions and banks involved in rural financing under various government and non-government schemes advance money for purchase of cattle, sheep and goat. Many micro finance institutions also offer loans for purchase of cattle/sheep and goats, since this is the major home-based activity, which sometimes is also a part of dairy cooperative network. Cattle insurance offers protection to the borrower in the event of death of animal following accident or disease. In addition to this, hut insurance policy is also available for protecting the house and contents against risk of fire and natural hazards. In India, quite a few banks offer health and accident insurance linked to savings deposits or loans. Many cooperative banks have also issued group Janata Personal Accident policies to its shareholders many of whom are also the borrowers. In these cases the benefit amount is first utilized to repay the outstanding loan and balance amount is handed over to the beneficiary. Life insurance policies are considered expensive since the insurance company has to load premium to take care of survival benefits. Theoretically, loans against policies can act as an additional channel of credit to low-income households. But the efficacy of this channel as against the other alternatives has been low. Combined effect of all these perceptual realities has resulted in low life insurance penetration.

Insurance is based on the principle of spread of risk. Only if an insurance provider is able to have a well spread out portfolio of risk in terms of the risk profile of insured units, unfavorable experience in one risk segment will be balanced by favorable experience in other segments keeping the overall claims ratio down to a reasonable figure. The spread of risk can be achieved through insuring units in different geographical areas or those exposed to different kinds of perils. Achieving this spread could be difficult for a micro-insurance provider due to limited geographical spread or identical risk profile of its members.

Indian Insurance, Rural roadblocks, agency, force, range of products, wallets, LIC, rural India, Director, NIA, Pune, social services, man-made calamity, low-income communities, cattle insurance, financial institutions, micro finance activity, government and non-government schemes, Personal Accident policies, life insurance penetration, insurance provider, geographical areas.