Hyderabad: To increase insurance penetration in rural areas, the Indian Insurance Regulatory and Development Authority (IRDAI) has proposed the ‘Model Insurance Village’ (MIV) concept.
As part of this, IRDAI asked insurers to create IVMs in 500 villages across the country in the first year and gradually increase to 1,000 villages in the following two years.
In these model villages, insurers will have to work to cover the entire population and its properties, farms, machinery, vehicles and various village-level services, among others.
The idea of this initiative is not only to increase insurance penetration, but also to ensure that rural people begin to understand the concept of insurance and its benefits.
“Efforts in selected villages need to be continued for a minimum of three to five years in order to make the benefits of insurance visible to the community,” said the IRDAI in a newspaper published on Monday.
The IRDAI said that insurers need to study the villages’ risk profile, their insurance needs and design their products accordingly. In addition, they will also have to involve insurance technology companies, as well as financial technology companies, to support product design and concept implementation using technology at all levels of insurance processes, from marketing, maintenance, claims assessment until settlement of claims.
IRDAI suggested that, to make the award accessible, financial support from governments, as well as institutions like NABARD and CSR funds, should be explored.
Insurers were advised to take advantage of various initiatives by the Ministry of Rural Development, as well as the SHG member network and banking correspondent Sakhis (BC Sakhis) for the distribution and maintenance of insurance products.
“Currently, 11,189 sakhis BC are present in 11,552 villages in 330 districts in 18 different states,” he added.
Insurance companies were instructed to explore partnerships with different suppliers of agricultural inputs, financial institutions, rural service providers to direct the distribution of small, short-term or tailored products.
In addition, the insurance insurer stated that, as the bank guarantee proved to be more acceptable than any other traditional intermediary, banks in rural areas can be used to sell rural and agricultural insurance products.
It also asked senior insurance officials, preferably CEO or CMDs, to monitor and periodically review the progress of the implementation of the MIV initiative in their respective selected villages.
The regulator requested comments from interested parties until May 17, 2021.
WHAT CAN INSURERS PROVIDE IN THE IVM?
– Climate index products or hybrid products that combine climate index and indemnity-based insurance protection for various crops that remain uncovered under Pradhan Mantri Fasal Bima Yojana (PMFBY)
– Flexible agricultural insurance package policies targeting comprehensive needs for crops, livestock, farmer, agricultural implements
– Separate products for high-value farming, contract farming and the corporate farming community, as their needs are different
– Even states can receive macro-insurance coverage based on predefined parametric meteorological indices, covering large complex risks arising from natural disasters that affect the agricultural ecosystem and the rural economy.