Lic Suggests Common Term For Rural Areas

While acknowledging the vast potential in rural markets, Life Insurance Corporation of India (LIC) today suggested a common definition for these areas instead of the present system of three classifications -- one from the census, another for banks and a third one for insurance companies.

Speaking at the sixth international conference on insurance, organised by Ficci, executive director of the corporation, T K Banerjee, said by the end of the last fiscal, LIC's rural sector exposure, according to Insurance Regulatory and Development Authority's (Irda's) classification, was at 18.18 per cent compared with 55.53 per cent as per the census definition, which LIC had been using since its inception in 1956.

 

In absolute terms, the number of policies in rural areas, under the census definition, has gone down from 1,07,91,316 to 35,33,694 policies by the end of the last fiscal.

Irda has specified regions with population upto 5,000 persons and a population density of upto 400 persons per square kilometre as rural areas. Also, at least 75 per cent of working male population is to be engaged in agriculture for the area to be classified as rural.

On the other hand, according to the census definition, areas with population of less than 5,000 persons and with population density of below 400 persons per square kilometre have been classified as rural. Under the definition over 25 per cent male working population has to be engaged in agricultural activities.

"It seems that Irda, while defining rural sector from the urban definition of census, has only replaced the word 'non-agriculture' with 'agriculture'," Banerjee said.

He added that following the announcement of Irda's definition of rural population, as a percentage of total population, has decreased from 74.3 per cent to 44.5 per cent, while the total number of inhabited villages, according to the 1991 census, are estimated at 5.80 lakh compared with 4.38 lakh, according to Irda's definition.

Despite the reduction in LIC's rural exposure, Irda chairman, N Rangachary, said a film produced by the state-owned life insurer has been circulated to private insurers as a model.

Banerjee said there was tremendous growth opportunity in rural markets, not only due to mobility of the rural population towards higher-income groups but also due to bad experience that the people residing in those areas have had with non-banking finance companies and co-operative banks as also institutionalisation of savings.