IRDA issued the obligations of insurers to rural or social sectors regulations in the year 2000.
These regulations specify that a portion of the entire new business of a life insurance company has to belong to the rural and social sector.5 As per the latest census the regulations define the rural sector as a place that has a population of not more than five thousand; a density of population of not more than four hundred per square kilometre; and at least 75% of the male working population is engaged in agriculture. The social sector is defined as an unorganized sector, informal sector, economically vulnerable or backward classes and other categories of persons, both in rural and urban areas.
It includes self-employed workers such as agricultural labourers, workers working in bidi factory, brick kiln workers, carpenters, cobblers, construction workers, fishermen, hamals, handicraft artisans, handloom and khadi workers, ladies tailors, leather and tannery workers, papad makers, powerloom workers, physically handicapped self-employed persons, primary milk producers, rickshaw pullers, safai karmacharis, salt growers, seri culture workers, sugarcane cutters, tendu leaf collectors, toddy tappers, vegetable vendors, washerwomen, working women in hills, and such other categories of persons. The economically vulnerable or backward classes refer to people who live below the poverty line while other categories of persons include persons with disability as defined in the Persons with Disabilities Act, 1995 and who may not be gainfully employed. It also includes guardians who need insurance to protect spastic persons or persons with disability. The life insurance companies have to undertake the following percentage of total policies written in that year during the first five financial years of its operations: For the rural sector,
(i) five per cent in the first financial year
(ii) seven per cent in the second financial year
(iii) ten per cent in the third financial year
(iv) twelve per cent in the fourth financial year
(v) fifteen per cent in the fifth year The percentage increases to twenty per cent in the tenth year of its operation. For the social sector, the following obligations need to be undertaken by the insurers:
(i) five thousand lives in the first financial year
(ii) seven thousand five hundred lives in the second financial year
(iii) ten thousand lives in the third financial year
(iv) fifteen thousand lives in the fourth financial year
(v) twenty thousand lives in the fifth financial year The obligation increases to fifty five thousand lives in the tenth financial year of its operation. Taking further steps to develop the micro-economic requirements of the country’s poor population, IRDA issued the regulations on micro-insurance, in 2005. These regulations define the micro-insurance product and streamline many other issues related to the product and servicing of this sector. According to IRDA, a life micro-insurance product is defined as any term insurance contract with or without return of premium, any endowment insurance contract or health insurance contract; with or without an accident benefit rider, either on individual or group basis, as shown in Table 8.1.6 TABLE 8.1 Micro-insurance Product Regulations The micro-insurance regulations also specify guidelines on distribution and product design of micro-insurance products.
According to the guidelines, insurers have to issue insurance contracts to the individual micro-insurance policyholders in the vernacular language which is simple and easily understood by the policyholders. They have to impart at least twenty-five hours of training through their designated officers in the local vernacular language to all micro-insurance agents. The training has to cover all areas of insurance selling, policyholder servicing and claims administration. The regulation authorizes insurance companies to use MFIs, SHGs and NGOs as intermediaries to distribute their products in the rural and social sector.
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