RURAL INSURANCE-GOVERNMENT INITIATIVES Ms. Pooja Tagra 1, Dr. Pawan Kumar Dhiman 2 1 Research Scholar, Sant Longowal Institute of Engineering& Technology Longowal, Punjab (India) 2 Professor, Sant Longowal Institute of Engineering& Technology Longowal, Punjab (India) ABSTRACT Insurance sector in India was liberalised and Insurance Regulatory Development Authority was established to increase the insurance penetration and density. The aim of government to increase the insurance coverage cannot be achieved until insurance benefit reaches in rural and social areas. To achieve this objective the government and IRDA has framed certain regulations to stipulate obligations of insurance companies to provide insurance coverage to rural and social sector. The government of India has also launched certain scheme to provide insurance and social security. The paper studies the schemes of government and initiatives of IRDA in promoting life insurance in rural and social sectors. Keywords: Government, Life Insurance, IRDA, Rural, Social I. INTRODUCTION Life insurance is a contract where the insured pay certain amount called premium and the insurer pay specific sum of money on happening of an event. It provides protection against the risk of death and full sum assured is payable. In India insurance sector was nationalised in 1956 and Life Insurance Corporation of India was the sole life insurance company. On the recommendation of Malhotra Committee the insurance sector was liberalised and private companies were permitted to operate in India to increase the insurance penetration and density. Insurance Regulatory Development Authority was enacted to regulate insurance business and since its establishment IRDA has played a vital role in orderly and speedy growth of insurance industry in India. After liberalisation at present about 24 life insurance players are operating in Indian insurance market but still the penetration is low as compared to other countries. India is a developing nation and about 70% of population in India resides in rural areas. The needs, income, awareness level of rural people are different from urban markets. [1] After the liberalisation the focus of life insurance companies was on urban customers to increase their market share. Later the government and IRDA framed certain regulations and insurance schemes to cover the rural and social sector. Under the regulations all the insurers have to cover the prescribed policies in rural and social sector. The government of India also emphasized on designing and promoting insurance products for rural and social sectors. The postal life insurance was also encouraged to bring more people of weaker sections under insurance coverage at the cost of very nominal premium. II. REVIEW OF LITERATURE Gupta (2014) analysed the status of rural insurance penetration and reasons behind the poor performance of insurance companies. He emphasized that life insurance sector have developed in Indian but still the penetration is low in rural sectors. The reasons behind the less popularity of life insurance products are lack of 279 P a g e
awareness, motivation and timely settlement of claims. To increase the insurance coverage insurance companies must design new products and they should explore more alternative distribution channels. [2] Periyasamy&Rao (2014) stated that rural insurance market is dominated by Life Insurance Corporation of India. The paper explores the reasons for low penetration of private companies in rural market. The study revealed that insurance products are not designed for rural people and promotional activities are also inadequate. [1] Jyothi (2010) discussed that insurance is mainly concentrated around urban and rural areas are ignored. The insurance companies had adopted various marketing strategies but still their penetration is less in rural sector. [3] Ramalakshmi & Ramalingam (2014) conducted a study to analyse the awareness of policyholders about micro insurance products. They concluded that there is awareness of about micro insurance among urban and rural population. The agents played a major role in creating awareness among policyholders. [4] Rewadikar & Soni (2013) studied the impact of IRDA on various aspects of insurance sector like regulation, customer education, development of insurance products, distribution channels etc. The study revealed that the establishment of IRDA has brought revolutionary changes in insurance sector. IRDA has been successful in dealing any kind of discrepancy in insurance sector. [5] Ghosal (2012) examines the role of insurance in economic development and revealed that life insurance sector play a major role in national growth.life insurance industry has tremendous growth potential as it offers large scope for generating huge sum of money for long period. [6] III. OBJECTIVES AND RESEARCH METHODOLOGY The paper examines the insurance and social security schemes being implemented by the government of India and initiatives taken by IRDA to increase life insurance coverage in rural and social sectors. The study is based on secondary data collected from various journals, articles, annual reports and websites. IV. SCHEMES OF GOVERNMENT The Government of India has introduced number of insurance and social security schemes for the people of vulnerable sector. These schemes provide insurance cover at cost of a nominal premium. 4.1 Aam Admi Bima Yojana The Ministry of Finance had introduced Aam Admi Bima Yojana (AABY) on 01.01.2013 and Janashree Bima Yojana (JBY) earlier run by government was merged in this scheme. The aim of scheme is to provide life insurance cover to persons who are living below poverty line or marginally above poverty line in rural & urban areas. Under the scheme individuals between age 18 years and 59 years and who are the members of the identified 48 occupational groups are covered. This scheme provides benefit of Rs 30,000/- on natural death and Rs 75,000 on death/ total permanent disability due to accident. On partial permanent disability due to accident the benefit provided under scheme is Rs 37,500/-. The premium of Rs 200/- is contributed by the member and/ or State Govt. and/or Nodal Agency and remaining 50% is drawn as subsidy from the Social Security Fund constituted by Government of India & maintained by LIC of India. At end of financial year 2015 about 4.32 crore people have been covered under this scheme. 280 P a g e
4.2 Pradhan Mantri Jan Dhan Yojana (Pmjdy) Under this scheme launched by government bank accounts of individuals were opened and benefit of Rs 30,000 were provided to account holders in case of natural death through LIC. In addition to it an accident insurance cover of Rs 1 lakh is provided by Government through General Insurance Companies. To avail the benefit of scheme the person should be between 18 to 59 years of age and he/ she should have been enrolled under PMJDY between 15.08.2014 to 31.01.2015 & should be holder of a valid and in force RuPay Card. Under the scheme about 60 lakh individuals were covered at end of 2015 and an amount of Rs 21 lakh has been paid towards total number of 70 claims. 4.3 Pradhan Mantri Jeevan Jyoti Bima Yojana The scheme introduced by government to provide insurance cover for death due to any reason for one year which can be renewed from year to year and would be administered through LIC. For availing the scheme the individual should be in age 18 to 50 years and should be saving account holder in participating banks. The other private life insurers can also offer this scheme after taking necessary approvals and tie ups with banks. The premium amount of Rs 330 per annum will be deducted from account of the holder through auto debit facility for insurance coverage.the participating banks can engage any life insurance company for implementing the scheme for their subscribers. The individual would be eligible to join the scheme through one savings bank account only if he has multiple accounts in one or different banks. 4.4 Pradhan Mantri Suraksha Bima Yojana The scheme offers one year insurance coverage for accidental death and disability on account of accident. The scheme would be offered / administered through Public Sector General Insurance Companies (PSGICs) and other General Insurance companies willing to offer the product on similar terms with necessary approvals and tie up with banks for this purpose. Participating banks will be free to engage any such insurance company for implementing the scheme for their subscribers. [7] 4.5 Rural Postal Life Insurance Rural Postal Life Insurance (RPLI) scheme was introduced by the government on the recommendation of Malhotra Committee.The main aim of this scheme was to extend the insurance coverage to rural and weaker sections through post offices. In this competitive market RPLI are providing life insurance cover at a very low cost than the other insurance companies and are managed by the employees of Department of Posts. This scheme is administered at low cost operation and its benefit is passed to insured in form of bonus. RPLI offers Grama Suraksha, Grama Suvidha, Grama Santosh, Grama Sumangal, Gram Priya and scheme for physically handicapped persons. The minimum sum assured in these schemes is Rs 10,000 and Maximum is Rs 3 lakh. In case of whole life and endowment assurance the maximum age limit is 55 years and 45 years in other plans. These schemes have compulsory medical examination and for non -medical policies the maximum age is 35 years. [8] 281 P a g e
4.6 Micro Insurance Products The government had launched Jeevan Madhur a saving related life insurance plan for persons having low income in 2006. On death of policy holder benefit equal to total premium payable during the entire term of policy will be paid and on survival sum assured along with vested bonus will be paid. Another micro insurance product Jeevan Mangal was launched in 2009 which is a term insurance plan.the premium will be paid on maturity of policy and in case of death the sum assured will be paid provided the policy is in force. [9] V. ROLE OF IRDA IRDA had framed certain regulations under which the insurers have to fulfil the prescribed targets towards the social and rural sector annually. The insurers have to cover the year wise targets in terms of number of lives under social obligations and year wise prescribed targets in terms of percentage of policies to be underwritten and percentage of total gross premium income. According to the regulations the insurers have to underwrite business in rural and social sectors based on the year of commencement of their operations and the applicable targets are linked to the year of operations of each insurer. For meeting these obligations, the regulations further provide that, if an insurance company commences operations in the second half of the financial year and is in operations for less than six months as at 31 st March of the relevant financial year (i) no rural or social sector obligations shall be applicable for the said period; and (ii) the annual obligations as indicated in the Regulations shall be reckoned from the next financial year which shall be considered as the first year of operations for the purpose of compliance. In cases where an insurance company commences operations in the first half of the financial year, the applicable obligations for the first year shall be 50 per cent of the obligations as specified in these regulations. During the financial year 2014-15, all the twenty three private sector life insurance companies had fulfilled their rural and social sector obligations applicable to them. Among the life insurers the Life Insurance Corporation of India had contributed a higher percentage of policies in rural and social sector. During 2014-2015 the life insurance companies underwrote 65.34 lakh policies in the rural sector and in social sector. In 2015-16 life insurers underwrote 68.99 lakh policies in the rural sector. LIC underwrote 25.70 per cent of the new policies and private insurers underwrote 26.3 per cent of their new individual policies in the rural sector. All the 23 private life insurers had fulfilled their social sector obligations during 2015-16. The number of lives covered by them in the Social Sector was above stipulations in the IRDA Regulations. LIC had covered more number of lives (226.04 lakhs) than the prescribed number as obligations for 2015-16 and the private life insurers had covered 111.13 lakh social lives. 5.1 Micro Insurance Regulations In order to increase the insurance coverage among low income segments micro insurance regulation were introduced by IRDA in 2005. These regulations aimed to provide protection to low income groups against common risks. Initially IRDA allowed Non- Government Organizations (NGOs) and Self Help Groups (SHGs) to act as agents to insurance companies in marketing of the micro insurance products. Afterwards IRDA has revised the regulations and permitted Business Correspondents of Scheduled commercial banks, District Cooperative banks, Regional Rural Banks, Urban Co-operative banks, Primary agricultural co-operative societies, 282 P a g e
other co-operative societies, RBI regulated NBFC-MFI s to increase micro insurance penetration. In financial year 2014-15 under micro insurance the new business premium was Rs 28.89 crore and 8.16 lakh new policies were issued. While the group business covered 2.31 crore lives and the premium contributed was R315.60 crore. LIC contributed significantly by covering 4 lakh lives covering 2.06 crore lives in group. It has also contributed R16.40 crore of individual new business premium under and Rs281.93 crore of group premium. As per IRDA annual report the number of micro insurance agents at the end of March 2015 was at 20855 of which 19379 agents pertained to the LIC and the remaining represented the private sector companies. [10] VI. CONCLUSION Human life has become uncertain in this changing world where various kinds of accidents take place. These risks results in the death of the breadwinner or his capacity to earn his living. In absence of social security system the life insurance covers the risk of death and provides inancial security. The government and Insurance Regulatory authority of India have been taking initiatives to promote life insurance in weaker sections of society but still lot has to be done. The life insurance companies must develop products which should meet the needs of rural people. To capture the rural market the innovation distribution channels should be used and the agents should be trained to make people aware about significance of life insurance. REFERENCES [1.] Periyasamy Satyapriya & Rao Nagaraja,Life Insurance penetration in Rural areas Indian perspective, International Journal of Banking Risk and Insurance,Volume2,Issue 2,September 2014. [2.] 2 Gupta Aditya, Life insurance market :The rural India connect www.inflibnet [3.] 3 Jyothi Sri, Rural Insurance In India, Insurance Chronicle, March 2010. [4.] 4 Ramalakshmi & Ramalingam, A study on awareness about micro insurance with special reference to LIC of India, International Journal of Advance research in Computer Science and Management Studies, Volume 2, Issue 9, September 2014, ISSN 2321-7782. [5.] 5 Rewadikar Bhawana & Soni Sumit, The impact of insurance regulatory and Development authority, International Journal of Advance research in Computer Science and Management Studies,Volume 1, Issue 3, August 2013, ISSN2321-7782. [6.] 6 Ghosal Monalisa, Role of insurance in economic development of India, Zenith International Journal of Business and Management Research,Volume 2,Issue 7,July 2012, ISSN 2249 8826. [7.] 7 Annual Reports of Life Insurance Corporation of India. [8.] 8 www.postallife insurance.gov.in [9.] 9 www.financial services.gov.in 10 Annual reports of IRDA 283 P a g e