Model Insurance Village (MIV)

In News

Recently, the Insurance Regulatory and Development Authority of India (IRDAI) has come out with the concept of model insurance villages to offer comprehensive insurance protection in rural areas.

Rationale Behind The Move

• According to the Economic Survey for 2020-21, India’s insurance penetration, which was at 2.71% in 2001, has steadily increased to 3.76% in 2019, but stayed much below the global average of 7.23%.
• Recently, the Parliament has passed the Insurance Amendment Bill 2021 to increase the foreign direct investment (FDI) limit in the insurance sector to 74% from 49%.
• Also, IRDAI has recently advised all the insurance companies for issuance of digital insurance policies via digilocker.
• India is predominantly rural with more than 65% of the population residing in rural areas. Most rural people are hardly aware of insurance as a concept nor have they experienced the benefits of insurance.

Concept of Model Insurance Village (MIV)

• The idea behind the model village concept is to offer comprehensive insurance protection to all the major insurable risks that villagers are exposed to and make available covers at affordable or subsidised cost.
• IRDAI suggested a minimum of 500 villages in different districts of the country in the first year and increased to a minimum of 1,000 villages in subsequent two years.
  • In these model villages, insurance companies will have to work towards covering the entire populations and their properties, farms, machineries, vehicles and different village-level services, among others.
• IRDAI has stated that insurance companies need to study the risk profile of villages, their insurance needs and design their products accordingly.
• To make the premium affordable, financial support from governments as well as institutions such as NABARD and CSR funds must be explored.
•  IRDAI advised Insurance companies to tap various initiatives of the rural development ministry as well as network of SHG members and bank correspondent Sakhis (BC Sakhis) for insurance product distribution and servicing.

Offerings Under Model Insurance Village (MIV)

• Weather index products or hybrid products combining weather index and indemnity-based insurance protection for various crops that remain uncovered under Pradhan Mantri Fasal Bima Yojana (PMFBY).
• Flexible farm insurance package policies targeting comprehensive needs of crops, livestock, farmer, farm implements
• Separate products for high value agriculture, contract farming and corporate farming community as their needs are different
• Even states can be offered macro insurance covers based on predefined parametric weather indexes covering large complex risks arising out of natural catastrophes affecting the agriculture ecosystem and rural economy.

Significance

• This will boost insurance penetration and make people of the village aware of the concept of insurance and its benefits.
• The model villages are expected to tackle losses due to natural calamities like floods and earthquakes. There is no catastrophe insurance in the country now.

Challenges In Providing Insurance To Rural Areas

• Lack of awareness about the concept of insurance and its benefits among the rural population.
• Limited choice of insurance products with various flexible features.
• Weak network of insurance companies and intermediary presence in rural areas.
• Lack of technology & underdeveloped market with constraints in offering affordable covers.
• Lack of industry-wide well-coordinated efforts to serve the rural insurance segment.

Way Forward

• Awareness and publicity: Focused publicity campaigns need to be carried out to make aware people about its benefits and features. 
• Coordinated efforts needed: The support and involvement of the central government can be explored. 
  • It is also in line with the initiative and vision of the Centre’s “Atma Nirbhar Bharat Abhiyan”.
• Insurance product innovation: Make products Innovative, affordable, technology-based, in the form of package and/or combo policies that provide a flexible choice of risk protection  & adequate risk coverage in rural and semi-urban areas which would attract the rural population. 

Source: IE