Rural and Social Sector Obligations of Insurance

With a view to ensuring that benefits of life and non-life insurance also reaches the weaker sections of our people, the IRDA has stipulated a minimum obligation on every insurer for rural as well as social sectors.

Every insurer shall, after the commencement of the IRDA Act, 1999, discharge the obligations
specified under Section 32B to provide life insurance and general insurance policies to the persons
residing in the rural sector, workers in the unorganized or informal sector, or for economically
vulnerable or backward classes of the society and other categories of persons as may be specified by
regulations made by the Authority and such insurance policies shall include insurance for crops.

Under these regulations, the two sectors have been defined as under:

1 Rural Sector
Any place as per the latest census which has:
1. A population of less than five thousand.
2. A density of population of less than 400 per square kilometer.
3. More than 25 per cent of the male working population is engaged in agricultural pursuits. The categories of workers falling under agricultural pursuits are as under:
i. Cultivators
ii. Agricultural labourers
iii. Workers in livestock, forestry, fishing, hunting, plantations, orchards, and allied activities.

2 Social Sector
It includes unorganized sector, informal sector, economically vulnerable or backward classes, and other categories of persons, both in rural and urban areas.
Classification of the Social Sector

(A) Unorganized Sector:
(1) Beedi workers
(2) Brick-kiln workers
(3) Carpenters
(4) Cobblers
(5) Fishermen
(6) Hamals
(7) Handicraft artisans
(8) Agricultural labourers
(9) Handloom and Khadi weavers
(10) Lady tailors
(11) Leather and tannery workers
(12) Papad workers
(13) Physically handicapped self-employed persons
(14) Primary milk producers
(15) Rickshaw pullers/auto-rickshaw drivers
(16) Safai karmacharis
(17) Salt producers
(18) Tenduleaf collectors
(19) Vegetable vendors
(20) Construction workers
(21)Sericulture workers
(22) Toddy tappers
(23) Powerloom workers
(24) Working women in remote rural hilly areas
(25) Sugarcane cutters
(26) Worker women.

(B) Economically Vulnerable or Backward Classes
It includes persons below poverty line.

(C) Other Categories of Persons
In includes:
1. Persons with disability as per ‘Persons With Disability Act, 1995’, and who are not gainfully employed.
2. Guardians who need insurance to protect spastic or disabled persons.

(D) Informal Sector
It includes small scale, self-employed workers typically at a low level of organization and technology,
with the primary objective of generating employment and income, with heterogeneous activities like retail trade, transport and maintenance, construction, personal and domestic services, and manufacturing, with the work mostly labour-intensive, having often unwritten and informal employer - employee relationship.
The above-said sections of society, are normally neglected by insurers. They are difficult to reach and
the scope for insurance is limited. But they need insurance more than the other segments.

3 Obligations
Every new insurer is required to fulfill the following obligations during the first five years:

Rural Sector
1. In the first financial year, going up to at least 5 per cent (in the year 2000, but in 2002 it was amended
and changed to 7 per cent) of the total policies written direct
2. In the first financial year, going up to 9 per cent in the second financial year
3. 12 per cent in the third financial year
4. 14 per cent in the fourth financial year
5. 16 per cent in the fifth financial year

Social Sector
With regard to the social sector, the obligations are laid down as
1. 5,000 lives in the first financial year
2. 7,500 lives in the second financial year
3. 10,000 lives in the third financial year
4. 15,000 lives in the fourth financial year
5. 20,000 lives in the fifth financial year

It has also been provided that in the first year, if the period of operation is less than 12 months, the
obligation of lives in the social sector, could be proportionately less. It is also provided that the IRDA
may normally revise the obligations once in five years.

With regard to existing insurers like LIC and GIC, the regulations provide that obligations would be
decided by the IRDA after consultation but the quantum would not be less than what had been recorded for the year ended 31 March 2002.
The insurer would develop appropriate polices to comply with the obligations under the Act. The
extent of the compliance will depend on the vigour with which the agents will carry forward the efforts in these sectors.

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