Page 42 - The Insurance Times October 2025

Rural Insurance

Unrealised Potential:

Rural Insurance in

India

Dr Ajay Verma
Head, Rural & Agriculture
Probus Insurance Brokers
Mumbai

Rural insurance penetration remains low due to several factors. Products typically cater to urban
areas, but prices often fail to account for irregular income cycles, and distribution channels lack
local trust and durability.

T he insurance regulator has repeatedly emphasised only crop insurance under the Pradhan Mantri Fasal Bima

Yojana (PMFBY) accounts for a significant share of rural
the importance of expanding insurance coverage
insurance coverage.
in rural areas through regulations in 2005, 2015,
2020, and most recently in 2024. Although
insurance companies have assured IRDAI of adopting suitable Then, what are the main challenges and the efforts required
local measures, rural insurance penetration remains low. in terms of product, pricing, and distribution?
Despite IRDAI's consistent focus on rural outreach and setting
targets for the rural and social sectors, motor third-party Real Challenges in Rural Insurance
pools, and others, tangible progress in implementation has
been limited. Penetration
Product-related: There is a mismatch between the products
In India, there are 57 insurance companies offering life, offered and rural needs. Many products are designed for
general, and specialised lines of business, along with several urban markets, with features and benefits not suitable for
reinsurance firms, premium management institutions for agriculture or low-income communities. The lack of
insurance expertise, and both international and domestic innovation in most microinsurance products fails to address
insurance distribution networks. These organisations are short-term risks associated with small premium ticket sizes
staffed by an experienced, knowledgeable, and skilled (e.g., illness for daily wage workers, weather shocks, and
workforce at various levels. Usually, any article about the several livelihood assets related). There is limited flexibility
rural sector emphasises that India has a substantial rural due to rigid terms, exclusion clauses, and documentation
market, with opportunities centred on distributing financial requirements (ID, address, income proof), which exclude
products, including insurance. Despite the presence of large rural populations.
capable insurers and distributors on one side and a large
uninsured population eager to access insurance on the Pricing-Related: An affordability gap exists because rural
other, the insurance penetration remains very low. Notably, incomes are often irregular, seasonal, and mainly cash-

The Insurance Times October 2025 39