The Indian law states that insurance companies should be accommodative of persons in the rural sector or social sector, persons in the economically vulnerable or backward classes of the society, workers in the unorganised or informal sector etc. (as specified by the IRDA). In the Insurance Act, 1938, sections 32–B and 32–C is where this particular law can be found. It defines the percentage of business that insurance companies are expected to put aside for the persons in the categories mentioned above. Further, the IRDA has tried to accommodate the two sections of the Insurance Act by making it compulsory for insurers who offer general insurance to support business in the rural sector as well. The IRDA has specified a minimum of 2% of total gross premium during the first financial year, a minimum of 3% of gross premium in the second financial year and a minimum of 5% of the gross premium in the third and additional financial years. The plan must include insurance for crops.
Various programmes has been launched by the Government of India for the benefit of marginal farmers, small farmers, agricultural labourers, etc. Integrated Rural Development Programme (IRDP) have integrated these programmes since 1980 with the help of funding from the Central and State governments.
The main objective of the programme is to make sure that the rural families involved are provided with working capital and assistance in the form of income generating assets, etc. Institutional credit, subsidy etc. will be offered for the same purpose. The beneficiaries of IRDP projects will be protected with the special insurance schemes. The policies come with reduced rates of premium and simplified procedures for claims.
Eligibility of Rural Insurance:
According to the IRDA, Rural sector can only be defined as such only if it fills the following categories (according to the last census):
- Has a population of less than 5000
- The density of population in the area must not be more than 400 per square kilometre.
- A minimum of 75% of the male working population must be engaged in agriculture related work.
The following can be insured under Rural insurance policies:
- Sub-animals including honeybee, silkworm etc.
- Livestock including sheep, cattle, goat, etc.
- Property. For example agricultural pumpsets, etc.
- Plantation and horticultural crops including grapes, rubber trees etc.
- Persons. For example gramin accident.
Coverage for the policy includes the following:
Death due to:
- Accident due to lightning, fire, flood, storm, inundation, hurricane, cyclone, earthquake, tornado, tempest and famine.
- Cattle contracting diseases or disease occurring during the policy period.
- Riot and strike
- Surgical operations
Disability (PTD) may be covered if the policy holder opts to pay an extra premium:
- Permanent Total Disability, if in the case of Milch Cattle, for example, means the total and permanent incapacity to yield milk or conceive.
- Permanent Total Disability, if in the case of Stud Bulls, for example, means permanent inability to breed.
- Permanent Total Disability, if in the case of Calves / Heifers, Bullocks, and castrated male buffaloes, means the permanent and total inability of carrying out the use as mentioned in the proposal form.
If it is found that the cattle has been through any of the following, then the insurer will not cover the cost:
- Overloading, wilful or malicious injury or neglect, unskilful treatment or not using the animals for the purpose that has been stated in the policy.
- Deliberate slaughter of the animal. This does not include cases where the animal is killed due to incurable suffering of the animal, in which case there must be a certificate from a qualified Veterinarian. This also does not include cases where the animal is slaughtered by the order of lawfully constituted authority.
- The animal will not be covered if it contracted a disease or was in an accident before the insurance period.
- Clandestine sale or theft of the insured animal will not be covered.
- Risks involved while transporting the animal by air and sea will not be covered.
- Pleuro–pneumonia if the insured cattle is in Sibasagar Districs of Assam or Lakimpur.
- The insurer will not be liable to pay the claim if the animal died due to a disease which occurred within 15 days from the commencement of risk.
- The ear tags must be surrendered to the company, without which the claim will not be entertained. It is the responsibility of the insured to make sure that the company is informed if a tag is lost and also to get the animal retagged.
If the insured animal dies, the policy holder must immediately intimate the news to the insurer. He/ she must also provide the insurer with the duly–filled claim form, Death Certificate from a qualified veterinarian, Post-mortem examination report (if the company requires it), Ear Tag of the animal and also must make sure that the value of the animal has been established as required.
The market value of cattle may differ according to the breed, time and area. A qualified veterinarian recommends the sum insured based on the particular animal’s market value. Security of the animal is based on market value or sum insured, whichever is less. For scheme animals, the policy is issued as agreed value policy and claims are settled for 100% of sum insured.
The premium rates are higher for non-scheme animals than for scheme animals. This mainly includes crossbred/ indigenous animals. Exotic animals will be charged higher rates. Long-term discounts and group discounts are available. In case of adverse claims experience, there is a possibility of increasing the renewal premium.
Other policies that rural insurance have cover for:
- Farmers’ package insurance
- Hut insurance
- Gramin personal accident insurance
- Animal–driven cart insurance
- Cycle rickshaw policy
- Lift irrigation insurance
- Failed–well insurance
- Agricultural pump set policy
- Horticulture / plantation insurance scheme
- Honey bee insurance
- Sericulture (silk worm) insurance
- Aqua culture (shrimp / prawn) insurance
- Poultry insurance
- Sheep and goat insurance
- Insurance cover is also available for the following types of animals:
- Zoo and Circus animals and birds
GST of 18% is applicable on life insurance effective from the 1st of July, 2017