New Delhi:

The Insurance Regulatory and Development Authority of India (IRDAI) has suggested setting up model insured villages throughout the country to increase insurance penetration in rural areas.

The concept of setting up model insured villages was mooted by the IRDAI in a discussion paper on increasing penetration of insurance in rural areas with a special focus on agriculture and allied activities.

"The concept may be implemented in 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," the paper said on which the insurance regulator has invited comments from stakeholders by May 17.

It also said the choice of villages is to be made carefully, considering various relevant aspects and parameters in order to implement the concept successfully for a period of three to five years.

Every general insurance and reinsurance company having office in India needs to be involved for piloting the concept, and the efforts in selected villages need to be continued for a minimum period of 3-5 years so as to make the insurance benefits visible to the community.

The discussion paper said the target segment of rural insurance consists largely of low-income households or individuals who have little savings and limited financial capacity.

It said the central government''s initiative through PMFBY has helped improve the insurance protection for crops in recent years. However, a large number of crops and cropped area are outside the scope of PFMBY and still remaining uninsured. These can be served through different tailored indemnity-based /weather index-based products. The allied farm risks, MSMEs, agro businesses, livestock and other personal insurance needs of rural population are also largely unserved.

Lack of awareness, limited choice of insurance products, absence of people-friendly and transparent claim settlement mechanisms, and weak network of insurance firms, are some of the issues and challenges in advancing growth of rural insurance business. Intermediary presence in rural areas and lack of industrywide well-coordinated efforts are also among the challenges.

The paper has stressed the need of creating awareness and publicity; and innovative, affordable, tech-based insurance products to overcome the challenges, besides the concept of model insurance village.

The paper further said various initiatives of the rural development ministry and informal network of SHG members /women SHG members, banking correspondence Sakhi (BC Sakhis) can be used for insurance product distribution and servicing.

The IRDAI paper said insurers can set up a dialogue with state governments and ministries that run various developmental programmes/schemes for farmers, rural and vulnerable sections of society. Insurance companies can integrate insurance with such programmes, it added.