The Hindu Business Line : Insurance cos told to raise rural, urban poor coverage

Mumbai June 5 Much like RBI telling banks to be inclusive, the IRDA is now pushing insurance companies to scale up their exposure to the rural and urban poor, by increasing their "rural and social obligations."

When the insurance sector was liberalised, insurance companies were required to sell 7 per cent, 9 per cent, 12 per cent, 14 per cent, 16 per cent and 16 per cent of their policies in rural areas in the first, second, third, fourth and fifth and sixth financial years, respectively as per the IRDA regulations, 2002. This has now been increased to 18 per cent, 19 per cent, 19 per cent, and 20 per cent in the seventh, eighth, ninth and tenth financial years, respectively.

Significantly, in August 2004, IRDA re-defined `rural' to bring it in line with the census definition. Since the census does not define rural, what is not urban qualifies as rural freeing up more areas for insurers to access, say analysts.

Social sector

The "social sector" includes the unorganised and informal sectors roping in the economically vulnerable or backward classes in rural and urban areas. The social obligations which were 5,000, 7,000, 10,000, 15,000, 20,000 and 20,000 for the first, second, third, fourth, fifth and sixth financial years, respectively have now gone up to 32,500, 40,000, 47,500 and 55,000 lives from the seventh to the tenth financial years.

Mr S.V. Mony, Secretary General, Life Insurance Council, said micro-insurance policies issued by insurers would now qualify under rural and social obligations.

Stiff targets

The targets are slightly stiffer for the public sector insurer, Life Insurance Corporation of India. "The Corporation has to write 24 per cent of its policies in rural areas in 2007-08 and 25 per cent in 2008-09 and 2009-10, respectively. Under the social sector, LIC has to cover 20 lakh lives between 2006 to 2010," Mr Mony said.

For private insurance companies, garnering policies from rural areas has been particularly tough.

"In the case of `rural', the regulation talks about the number of policies while with `social' it is the number of lives. So, for social obligations, you can do group policies and easily meet the requirement but with rural obligations, you can write one policy which may affect 50,000 people but it will count as only one policy," said Mr Deepak Satwalekar, MD and CEO, HDFC Standard Life Insurance.

"One does not have to do micro-management to get to rural areas. Leave it to the companies to decide on the most appropriate solution," he adds.

Most insurers have tie-ups with NGOs, micro-finance institutions, self-help groups and brokers for marketing in the rural areas.

"It's difficult (meeting the obligations) but it is part of the challenge of being in a diversified country like India. We are trying to work on more creative ways of reaching the rural market," said Mr Gary R. Bennet, Managing Director and CEO, Max New York Life.

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