Study of rural insurance market in India with special reference to life insurance

Abstract

Life Insurance is a social security tool. It provides the much needed security and when the income of the head of the family ceases owing to the unexpected risk, the family is protected to the extent of insurance coverage. More than 70% of Indians live in villages but the rural life insurance penetration is as low as 25% as at March, 2009. The Government of India has nationalized life insurance industry in 1956 by the amalgamation of two hundred and odd private companies and established LIC of India with a mission to spread the message of life insurance to rural areas. In a span of four decades, the LIC of India made rapid strides both in premium income and number of lives but its spread to rural India was limited to 20% of the insurable public as at 2000. The Government of India established Malhotra Committee to study and recommend structural reforms in insurance industry. As per its recommendations, the government has opened up the industry to private players and established a regulating agency called and#8215;IRDA in 2000 with an object to regulate and develop insurance to all the deserving lives. As at March, 08, we have nearly 21 life insurance players operating in the Indian market. The reforms in life insurance sector and its opening to private players saw huge rise in premium income. The insurance office branches grew from 2100 in March, 2000 to 8913 as at March,08. The agency force grew from 10 lakh to 25.2 lakh strong force in the same period. The growth is more of urban centric and rural penetration hardly increased by 5%. The rural obligations as put forth by IRDA that at least 16% of rural lives are to be underwritten in the first five years of operations were viewed more as obligations only and never reached the stage of commitments.