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Rural India can fatten insurance cos by Rs 10 bn

Posted Sep 07 2008 8:39pm
Rural investors were still not tapped to its potential by the insurance companies in the country.

Around 200 million such investors can add about Rs 1,000 crore to the net worth of the companies if these come out with innovative schemes at affordable premium, according to the Associated Chambers of Commerce and Industry of India (Assocham).

A Paper on ‘Rural India and Its New Investors' by the Assocham, however, added that insurance companies can lure these investors lot even for agriculture, housing, personal, education and auto loans after these have insured them under its new schemes.

Currently, the rural folk relies more on post offices and various extension counters and branches of commercial banks to save their surpluses in the absence of other suitable savings channels, the Chamber said.

Releasing the paper, the Assocham Chief Sajjan Jindal said that the rural investors are looking for other safer savings channels for higher returns on their investments and insurance companies could prove to be the best and viable option for them.

According to Assocham estimates, over 700 million rural population lived in India's villages out of which approximately 200 million rural populace have reasonable per capita income due to their double income from agriculture and non-agriculture sources.

Currently, only eight per cent to 10 per cent rural households are covered under life insurance schemes and remaining 90 per cent can be targeted for new innovative insurance schemes.

Rural investments is stuck to only post offices and a few limited commercial banks rural extension counters as they have no access to other popular savings instruments.

A good number of rural investors are also aspiring to become self reliant but lack avenues for credit in areas for food processing, better horticultural and agricultural facilities, training for skill development to process their milk etc, the paper said.

According to Assocham, rural India's income has risen due to shifting of its occupation from agriculture to non-farm agricultural income and it has become an important facet of rural India.

This income mainly comes from dairy, food processing and packaging, commodity trading and infrastructure development income.

The non-agriculture base of rural occupation and income has been growing in rural GDP figures that are estimated at 45 per cent.

The paper recommended that disbursement of agri loan would work as a magic and insurance schemes would provide rural youth safety net to protect their investments.

The public and private insurance companies can also introduce affordable insurance schemes with their premium keeping at Rs 500 to Rs 1,000 per month, the Assocham said.

With this premium, the companies can design schemes that can cover rural youth for at least Rs 50,000 to Rs 1 lakh for a period of minimum 10 years.

Assocham felt that this is the opportune time for the public and private insurance companies to enter into rural India in a big way by introducing easy premium schemes in life insurance and for agri insurance and auto insurance

To reach the rural investors, the Assocham suggested that the insurance companies should interact with local government and development agencies, as well as Panchayats and identify various products for the preparation of the Service Area Credit Plans.

The companies should focus on rich farmers, who have benefited from agriculture, farming, dairy processing and other sectors are using tractors, jeeps and tempo for Auto loans.

Nearly 20 per cent of all farmers in rural India own a Kissan Credit cards. The 25-30 million credit cards offer a huge data base and opportunity for insurance companies, the Assocham said.

The paper found that the rural markets are still virgin territories to a great extent and offer exciting opportunities for insurance companies, if these companies can measure the requirements of the people correctly and offer a scheme that they would be able to afford.
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