SCOPE OF MICRO-

INSURANCE IN CO-OPERATIVE
AND AGRICULTURAL SECTOR
PREPARED BY:- WORK
CARRIED OUT AT
VARUN KALIA BHARTI AXA
GENERAL INSURANCE CO. LTD.
AS A PART OF INDUSTRY INTERNSHIP PROGRAM

FACULTY GUIDE:-
COMPANY GUIDE:-

1
Ms. DIVYA BHUTANI Mr.
SIDDHARTHA SHARMA divyabhutani@chitkarauniversity.edu.in
siddhartasharma@bhartiaxa-gi.co.in

ACKNOWLEDGEMENT

I would like to express my deep sense of gratitude to the faculty at

Chitkara Business School, particularly Mr. Sandhir Sharma, HOD
Marketing, to have guided me through my internship program.

I would like to express heart felt thankfulness to my industry mentor,

Mr. Siddhartha Sharma, Regional manager- north to have given
me his precious time and expertise to help me keep learning during
my internship and for having made a big positive difference towards
the whole learning process.

A special mention for MR. DINESH & MR. AMANDEEP at bharti

AXA general insurance company ltd. For helping me gain useful
insights regarding agricultural insurance and prospective general
insurance business in co-operative banks.
Varun kalia

2
 TABLE OF
CONTENTS:-

CH NAME OF CHAPTER AND PAGE

NO
PARTICULARS NO.
.
- EXECUTIVE SUMMARY 5-7
1. LITERATURE REVIEW 9-12
2. INTRODUCTION 14-26
2.1 INDUSTRY PROFILE 14-20
2.2 COMPANY PROFILE 22-26
3. PROJECT PROFILE 27-41
4. FINDINGS & ANALYSIS AND 43-51
CONCLUSION
- REFERENCES 53
- ANNEXURE 55-56

3
EXECUTIVE
SUMMARY

The micro- insurance industry in India is facing stiff competition. The

impetus for this rising competition is the growth in the number of
private players in the market, though the public sector still enjoys
majority of the market share but with each passing year the private
companies are eating up small part of their shares.

4
The urban market is almost saturated but new trends suggest that
companies moving towards the largely untapped and potential
market- Rural and semi-urban India. The micro-insurance penetration
level was only 0.62% of the country’s GDP last year compared to
2.53% in case of life insurance segment, hence the market is still new
and needs to be tapped. The fact that nearly 72% of the total
population resides in these areas, which also has low penetration of
insurance cover, has been attracting many companies to enter this
segment. Bharti AXA is one of such companies, other major company
being Reliance General Insurance.

The Indian general insurance industry has historically been

dominated by the agency channel, through which 75% of total
premium income is sourced but in recent periods a new channel has
developed and become new buzz word in India- Bancassurance. The
banking and insurance industries have changed rapidly in the
changing and challenging economic environment throughout the
world. In this competitive and liberalized environment everyone is
trying to do better than others and consequently survival of the fittest
has come into effect and this has given rise to a mutual relationship
which amazingly complements each other’s strengths and
weaknesses.

Co-operative banks are one of the most important and strong

channels to reach out to under developed semi-urban and majorly
rural Indian market. These banks serve this segment of customers
largely and has about 80% of it’s branches in semi-urban and rural
areas, thereby providing a new and innovative channel to the general
insurers to educate and cross sell the products to the emerging
potential market. Hence, co-operative sector has become synonyms
with the rural and urban sector in India.

5
Bharti AXA General Insurance Company has tie ups with four districts
central co-operative banks in Punjab as of now- Amritsar Central Co-
operative bank, Gurdaspur Central Co-operative bank, Jalandhar Co-
operative co-operative bank and Hoshiarpur Central Co-operative
bank. Under this tie up, the company presently provides insurance
cover for following types of loans (securing bank loans):-
 Housing.
 Cash credits to traders.
 Loans given to non-farm sector.

The company has further plans of foraying into the rural and semi-
urban market through co-operative banks by cross-selling micro-
insurance products directly to the customer’s. Thus, this report
provides the study which was conducted in Punjab’s co-operative
sector with Jalandhar District as sample so as sample so as to find
and determine the micro- insurance products which would be a
success in the rural and semi-urban market.

This report provides an in-depth into the co-operative banking in

Punjab, alongwith a broad analysis of the Indian general insurance
industry. With this analysis as a base the report further explores the
under developed semi-urban and rural market in Punjab. This market
exploration has been carried out with the aim of finding scope of
micro-insurance in co-operative sector and hence determining the
micro-insurance product that will fit well in this market. The report
focuses on basic functions carried out by co-operative banks such as
deposits, loans etc. which can serve as a complementary to sell
insurance. The report even discusses different related aspects
regarding penetration of micro-insurance in rural areas and other

6
under-developed semi-urban areas in Punjab and what steps can be
taken to educate these customer’s about the micro-insurance
products.

CHAPTER 1
LITERATURE
REVIEW

7
Insurance is the safeguard against probable danger. Insurance can be
bought against a particular event for its possible occurrence. It is a
prevarication tool used as a preventive measure against future
losses. This device is applied for minimizing or managing the future
contingent risks. It is a mode of financially managing instrument
through which a person gets the benefit of insurance coverage for a
particular event. Therefore, a person buys future contentment and
pleasure living through insurance. While in cooperative banking
sector, insurance schemes are basically designed for the rural and
semi-urban customers as they form the major portion of their
customer base. Some of the reviewed articles have been presented in
this section which discuss about the bright scope of micro- insurance
in this sector.

The first article, RURAL INSURANC E : AN INTRODUCTION by

Subir Ghosh not only focuses Rural insurance as an introduction but
also provides the extent of Rural Insurance in cross-country analysis.
With a huge population and large untapped market, insurance
happens to be a big opportunity in India. However, insurance
penetration in the country continues to be low. insurance has far
been mostly city-oriented. But things are happening in the rural areas
where human life and income-generating rural assets need
protection, and there is tremendous scope for developing insurance
business. Apart from life insurance, the micro-insurance products
such as weather, crop, disaster, livestock, have huge potential in the
rural areas, but there is need to educate people about the benefits of

8
rural insurance. Insurance needs to be packaged in such a form that it
appears to be an acceptable investment to the rural people. In the
near future, micro-insurance will definitely be one option that rural
India is going to accept. Therefore, there exists an immense
opportunity to explore the rural potential with all its complexities and
variables and meet the challenge of developing insurance business in
India.

The second article, “INSURING RURAL INDIA” by Richard Holloway

and Rajagopalan Krishnamurthy , highlights the factors that spur the
Rural Insurance business in India. Studies have shown that the
awareness level of long-term savings in general, among the rural
population in India, is high. In fact, the rural savings to income ratio,
at 30%, is much higher than that of the urban population. Most of the
private players are now beginning to realize the potential of the rural
market, and have begun to make more proactive initiatives. Due to
these initiatives, there has been a rapid increase in insurance
penetration levels in rural regions.

The third article “THE WIDENING SCOPE OF INSURANCE” by Dr.

C. Rangarajan, Chairman Economic Advisory Council to the Prime
Minister says that the insurance sector has a vast potential not only
because incomes are increasing and assets are expanding but also
because the volatility in the system is increasing. In a sense, we are
living in a more risky world. Trade is becoming increasingly global.
Technologies are changing and getting replaced at a faster rate. In
this more uncertain world, for which enough evidence is available in
the recent period, insurance will have to play in reducing the risk
burden individuals and businesses have to bear.
In the emerging scenario, the insurance industry must pay attention
to (a) product innovation, (b) appropriate pricing, and (c) speedy
settlement of claims. The approach to insurance must be in tune with

9
the changing times. The mission of the insurance sector in India
should be to extent the insurance coverage over a large section of
the population and a wider segment of activities. The three guiding
principles of the industry must be to charge premium no higher than
what is warranted by strict actuarial considerations, to invest the
funds for obtaining maximum yield for the policy holders consistent
with the safety of capital and to render efficient and prompt service
to policy holders. With imaginative corporate planning and an abiding
commitment to improved service, the mission of widening the spread
of insurance can be achieved.

The fourth
article,

“BANCASSURANCE- AN EMERGING CONCEPT IN INDIA” by

Naveen Sethi talks about the insurance companies requiring
immense distribution strength and tremendous manpower to reach
out to such a huge customer base in present in India. This distribution
is undergoing a sea change as various insurance companies are
proposing to bring insurance products into the lives of the common

10
man by making them available at the most basic financial point, the
local bank branch, through bancassurance. Simply put,
bancassurance is the process through which insurance products are
sold to customers at their local banks. With a banking network of
65,000 branches serving more than 300 million retail banking
customers, insurance can be available at affordable prices to people
even in remote corners of the country. The relationship is symbiotic,
but there are challenges. The most common challenges to success
are poor manpower management, lack of sales culture, with bank and
insufficient product promotions. One more important obstacle is a set
of regulatory barriers.
But one thing stands obvious, if insurance in India is to succeed, it
can only be through bancassurance.

CHAPTER-2

11
 INTRODUCTIO
N
2.1 INDUSTRY
PROFILE

INSURANCE
It is a method or a technique which provides for a collection of small
amounts of premium from many individuals and firms out of which
the losses suffered by the few are paid.

The functions of insurance can be bifurcated into two parts:-

1. Primary functions
2. Secondary functions
3. Other functions
The primary functions of insurance include the following:-

12
1. Provide protection – The primary function of insurance is to
provide protection against future risk, accidents and uncertainty.
Insurance cannot check the happening of the risk, but can certainly
provide for the losses of risk. Insurance is actually a protection
against economic loss, by sharing the risk with others.
2. Collective bearing of risk – Insurance is a device to share
the financial loss of few among many others. Insurance is means by
which a few losses are shared among larger number of people. All
the insured contribute the premiums towards a fund and out of
which the persons exposed to a particular risk is paid.
3. Assessment of risk – Insurance determines the probable
volume of risk by evaluating various factors that give rise to risk.
Risk is the basis for determining the premium rate also.
4. Provide certainty – Insurance is a device, which helps to
change from uncertainty to certainty and whereby the uncertain
risks may be made more certain.

The secondary functions of insurance includes the following:-

1. Prevention of losses – Insurance cautious individuals and

businessmen adopt suitable device to prevent unfortunate
consequences of risk by observing safety instructions, installation of
automatic sparkler or alarm systems, etc. prevention of losses cause
lesser payment to the assured by the insurer and this will encourage
for more savings by way of premium. Reduced rate of premiums
stimulate for more business and protection to the insured.
2. Small capital to cover larger risks – Insurance relieves the
businessmen from security investments, by paying small amount of
premium against larger risks and uncertainty.
3. Contributes towards the development of larger
industries – Insurance provides development opportunity to those
larger industries having more risks in their setting up. Even the

13
financial institutions may be prepared to give credit to sick industrial
units which have insured their assets including plant and machinery.

The other functions of insurance include the following:-

1. Means of saving and investment – Insurance serves as
savings and investment, insurance is a compulsory way of savings
and it restricts the unnecessary expenses by the insured’s for the
purpose of availing income-tax exemptions also, people invest in
insurance.
2. Source of earning foreign exchange - Insurance is an
international business. The country can earn foreign exchange by
way of issue of marine insurance policies and various other ways.
3. Risk free trade – Insurance promotes exports insurance,
which makes the foreign trade risk free with the help of different
types of policies under marine insurance cover.

OVERVIEW OF GENERAL INSURANCE

MARKET IN INDIA

14
The general insurance business in India started with the
establishment of Triton Insurance company limited in 1850 at
Calcutta. In 1907, the first company, the mercantile insurance
ltd. was set up to transact all classes of general insurance business.
General insurance council, a wing of the insurance association of
India in 1957, framed a code for ensuring fair conduct and sound
business practices. In 1968, the Insurance Act was amended to
regulate and to set minimum solvency margins. In the same year,
the tariff committee was also set up. In 1972, the general insurance
business (nationalization) act was passed to nationalize the general
insurance business in India with effect from 1st January 1973. For
these 107 insurers was amalgamated and grouped into four
company’s viz., the national insurance company ltd., the new india
assurance company ltd., the oriental insurance company ltd.,
and the united india insurance company ltd. general
insurance corporation of india was incorporated as a
company. IRDA( insurance regulatory and development
authority) act 1999 paved the way for the entry of private players
into the insurance market which was hitherto the exclusive privilege
of public sector insurance companies/corporations.

Following graph shows the market share holdings of private vis-à-vis

public players.

15
 40.6

59.4 private players

public players

Due to the effectiveness of private marketing strategies, the market

share of public insurers has consistently declined. Given a faster
growth rate, the market share of the private sector is catching that
of the public sector and the two will likely converge over the
medium term. In the past, private insurers had aggressively
targeted the more profitable (and tariffed) corporate fire and
engineering businesses by combining them with discounted offers
on de-tariffed products, for example, personal accident and health,
marine cargo and hulls.

ANALYSIS OF INDIAN GENERAL INSURANCE

INDUSTRY

Strengths/opportunities
1. The intense competition brought about by deregulation has
encouraged the industry to innovate in all areas; from underwriting,
marketing, policy holder servicing to record- keeping.

16
2. Aggressive marketing strategies by private sector insurers will
buoy consumer awareness of risk and expand the markets for
products.
3. Competition in a deregulated environment will allow market
forces to set premiums that are appropriate for exposures and push
insurers to differentiate their products and services.
4. Innovations in distribution and improvements in market
penetration will follow as public and private insurers compete to
market their products.
5. Allowing insurers to issue their own policy wordings and setting
own rates will enable underwriters to tailor products to meet client
needs.
6. The Insurance Regulatory Development Authority of India’s
(IRDA) emphasis on quarterly reporting/monitoring of insurer
solvency will enhance capital adequacy and transparency. Licensed
brokers are very much part of the intermediary structure and only
those with adequate capital, professional experience and expertise
will be licensed by IRDA.

Weaknesses/challenges
1. Premium rates will remain under pressure due to intense
competition on the more profitable lines.
2. Private insurers need to raise more capital, otherwise growth
could be constrained since reliance on reinsurance for capital relief
is not always viable or available.
3. Traditional distribution channels, especially tied agents, need
to be improved to match the new product offerings.
4. There is general lack of transparency as financial and
operational data for insurers are not readily available as none of
India’s insurers are directly listed on stock exchanges.

17
5. Like all developing economies on a fast track, the shortage of
trained insurance professionals and technicians at all levels cannot
be remedied in the short term.
6. Natural catastrophes will always be present; the Indian sub-
continent is vulnerable to cyclones, floods, hurricanes and
earthquakes, and until there is a national capacity to manage losses,
dependence on overseas reinsurers will continue.

2.2 COMPANY
PROFILE

18
ABOUT BHARTI AXA GENERAL
INSURANCE
Bharti AXA General Insurance is a joint venture between Bharti,
one of India’s leading business groups with interests in Telecom,
Agri Business and Retail; and AXA, world leader in Financial
Protection and Wealth Management. Bharti Group holds 74% of
equity and AXA holds 26% of the equity.

With a vision to become the leader and preferred company for

financial protection in India, Bharti AXA General Insurance offers
its customers - individuals and businesses- a wide range of
products and services that meet their insurance needs. The
values upon which its business practices are based are
availability, attentiveness and reliability. The company leverages
the Bharti Group’s large customer pool, and has developed a
strong multi-channel distribution network in both urban and rural
markets.

The company was incorporated on 13th July 2007. Headquartered

in Bangalore, the company currently has 40 branches across
India.
The Management team at Bharti AXA General Insurance consists
of experienced leaders who are passionate about their company’s
vision and goals and are committed to the development of Bharti

19
AXA General Insurance as the preferred company for Financial
Protection in India.

Bharti AXA presents an array of protective plans to suit your

personal and business requirements. These embody our
commitment to our system of values.

a) Reliable – prompt settlements, customer service and

professionalism.

b) Attentive – to customer needs as they change with time, and

actively
listening to our customers.

c) Available – easy customer access to money and to our

company, and plans
that have built-in flexibility and convenience.

STRATEGY
 Quality Policy - To provide fast, fair and friendly service to
customers & partners.

 To achieve a leadership position in India through a multi-

distribution, multi-product platform.

 To adapt AXA's best practice blueprints as a sound platform

for profitable
growth.

 To leverage Bharti's local knowledge, infrastructure and

customer base.

 To deliver high levels of shareholder return.

20
  To build long term value with our business partners by
enhancing the proposition to their customers.

 To be the employer of choice to attract and retain the best

talent in India

 Strong distribution network & customer base of Bharti -

provides access to customer base of more than 60 million.

STRATEGIC DIFFERENTIATORS

 Multi channel execution capability

 AXA's current Asia product range which is a strong match to

products sold to the masses

 Global scale of AXA providing cost effective and speedy re-

use of systems, products and business capability

ABOUT AXA
AXA aspires to do business responsibly, and to build trust-based
relationships with its stakeholders:

 Clients: Consistently deliver efficient local service and

adapted solutions, while adhering to the highest standards of
professional conduct.

 Shareholders: Create lasting value by achieving operating

performance that ranks among the best in the industry,
and provide transparency financial information.

21
  Employees: Ensure professional fulfillment by offering a
supportive and respectful workplace where people are
empowered and the continuous development of
competencies is encouraged.

 Suppliers: Maintain excellent supplier relationships by

adhering to a set of clearly defined procurement guidelines
and promoting ongoing dialogue.

STRATEGY
AXA's strategy is to combine organic and external growth to meet
the challenge of operational excellence in all of the following
areas:

• Product innovation
• Core business expertise (underwriting, claims management,
pricing, investment performance)
• Distribution
• Quality of service
• Productivity
All AXA employees are champions of operational excellence. They
are supported in this aim by the AXA Way continuous process
improvement program.

Leveraging the resources of the AXA Group, and in accordance

with AXA's values and commitments, 214 044 people are working
daily to execute this strategy.

Group profile
In the financial markets, AXA is positioned as a global leader in
Financial Protection.

22
Key figures:

• 80 million clients worldwide

• 216 095 employees (including exclusive sales associates)
worldwide (at December 31, 2009)
• 400,000 shareholders
• 90.1 billion euros in revenues (at December 31,2009)
• 3.5 billion euros in adjusted earnings (at December 31,2009)

ORGANISATIONAL STRUCTURE

S.N NAME OF PERSON ROLE/POS

O. ITION
1. MR. SUNIL BHARTI CHAIRMAN
MITTAL
2. MR. PRAKASH NENE DIRECTOR
3. MR. SIEW POD NGO DIRECTOR
4. MR. JAN VAN DEN BERG DIRECTOR
5. MR. ALEX KIMURA DIRECTOR
6. MR. GUY MERCILLAT DIRECTOR
7. MR. AKHIL GUPTA DIRECTOR
8. MR. RAKESH BHARTI DIRECTOR
MITTAL
9. MR. MANIK JHANGIANI DIRECTOR
10. MR. NASSER MUNJEE DIRECTOR
11. MR. BHARAT S RAUT INDEPENDE
NT
DIRECTOR

23
12. MR. MILIND CEO
CHALISGAONKAR
13. DR. AMARNATH CEO
ANANTHANARAYAN

PRODUCTS OFFERED FOR RURAL

AREAS
The many important economic activities that are carried in rural
areas such as farming, cattle rearing, sericulture etc. are exposed
to several risks that threaten the livelihoods of the people
engaged in them. Attentive to the needs to the rural sector, Bharti
AXA has a range of Rural Insurance products to mitigate those
risks and offer financial protection to its rural customers.

Agricultural Pump Set Insurance Policy

Water is a precious resource and farmers depend on pumpsets to
deliver it to your fields. With so much at stake, it is vital that they
insure there pumpset against damage and theft. Likely losses flow
out and coverage benefits flow in when they would have the
Bharti AXA Agricultural Pump Set Insurance policy.

Cattle insurance policy

For a farmer, cattle plays a major role in sustaining him and his
family. Exposing them to diseases or accidents will affect their
business. To protect themselves and their most vital resources

24
from unforeseen losses, it’s a very fruitful and effective policy for
farmers to opt for.

MANY POLICIES SIMILAR TO THESE ARE AS

FOLLOWS-
1. Farmer’s package policy.
2. Machinery breakdown insurance policy.
3. Baggage policy.

CHAPTER-3

25
 PROJECT
PROFILE

AN INTRODUCTION TO CO-OPERATIVE
SECTOR
The concept of co-operation emphasizes on the collective action of
individuals to achieve common goals which may not have been
possible for one isolated individual.
The principles of co-operation define the basic characteristics of any
co-operative organization. These principles form the common thread
that runs through all the co-operative societies with marginal
variations. A cooperative is defined as an autonomous association of
persons united to meet their common economic, social and cultural
needs and aspirations through a jointly-owned and democratically-
controlled enterprise. It is a business organization owned and
operated by a group of individuals for their mutual benefit. A

26
cooperative may also be defined as a business owned and controlled
equally by people who use it’s services or who work for it.

Co-operatives have extended across the entire country and there

are currently an estimated 230 million members worldwide. The
cooperative credit system has the largest network in the world and
cooperatives have advanced more credit in the Indian Agricultural
sector than commercial banks. In fertilizer production and
distribution the INDIAN FARMERS FERTILISER COOPERATIVE
(IFFCO) commands over 35 % of the market. Dairy cooperatives
operating under the leadership of the NATIONAL DAIRY
DEEVELOPMENT BOARD and through 15 state cooperative milk
marketing federations have now become the largest producer of
milk in the world. The groundwork for this was laid in early 1970’s
when the largest dairy development programme in the world-
Operation Flood was launched.

The establishment of co-operative society in India is governed by a

separate and special Act called “THE CO-OPERATIVE SOCIETIES
ACT”.

CO-OPERATIVE BANKS
The co-operative banks have a history of almost 100 years. The co-
operative banks are important constituent of the Indian Financial
System, judging by the role assigned to them, the expectations they
are supposed to fulfill, their number, and the number of offices they
operate. The co-operative movement originated in the west, but the
importance that such banks have assumed in India is rarely
paralleled anywhere else in the world. Their role in rural financing
continues to be important even today, and their business in the

27
urban area has also increased phenomenally in recent years mainly
due to the sharp increase in the number of primary co-operative
banks.

While the co-operative banks in rural areas mainly finance

agricultural-based activities including farming, cattle, milk, hatchery,
personal finance, etc. along with some small scale industries and
self-employment driven activities, the co-operative banks in urban
areas mainly finance various categories of people for self-
employment, industries, small-scale units, home finance, consumer
finance, personal finance, etc. some of the co-operative banks are
quite forward looking and have developed sufficient core
competencies to challenge state and private sector banks.

There are two main categories of the co-operative banks:-

(a) short-term lending oriented co-operative banks- within
this category there are three sub categories of banks viz. state co-
operative banks, district co-operative banks and primary agricultural
co-operative societies.
(b) long-term lending oriented co-operative banks- within the
second category, there are land development banks at three levels;
state, district and village level.
Co-operatives operating in Punjab-
• Punjab state co-operative agricultural development bank ltd.
• Punjab state co-operative bank ltd.
• Punjab state co-operative supply & marketing federation ltd.
(markfed)
• Punjab state co-operative milk producer’s federation ltd.
(milkfed)
• The Punjab state federation of co-operative sugar mills ltd.
(sugarfed)

28
• The Punjab co-operative cotton marketing & spinning mills
federation ltd. (spinfed)
• Punjab state handlooms weavers apex co-operative society ltd.
(weavco)

DISTRICT CENTRAL CO-OPERATIVE BANKS OF PUNJAB STATE

CO-OPERATIVE
BANK
S.NO NAME OF THE CENTRAL CO-OPERATIVE LOCATION
BANK
1. AMRITSAR CENTRAL CO-OPERATIVE BANK AMRITSAR
2. BHATINDA CENTRAL CO-OPERATIVE BANK BHATINDA
3. FARIDKOT CENTRAL CO-OPERATIVE BANK FARIDKOT
4. FAZILKA CENTRAL CO-OPERATIVE BANK FAZILKA
5. FEROZEPUR CENTRAL CO-OPERATIVE BANK FEROZEPUR
6. GURDASPUR CENTRAL CO-OPERATIVE BANK GURDASPUR
7. HOSHIARPUR CENTRAL CO-OPERATIVE BANK HOSHIARPUR
8. JALANDHAR CENTRAL CO-OPERATIVE BANK JALANDHAR
9. KAPURTHALA CENTRAL CO-OPERATIVE BANK KAPURTHALA
10. LUDHIANA CENTRAL CO-OPERATIVE BANK LUDHIANA
11. MANSA CENTRAL CO-OPERATIVE BANK MANSA
12. MOGA CENTRAL CO-OPERATIVE BANK MOGA
13. MUKTSAR CENTRAL CO-OPERATIVE BANK MUKTSAR
14. NAWANSHAR CENTRAL CO-OPERATIVE BANK NAWANSHAR
15. PATIALA CENTRAL CO-OPERATIVE BANK PATIALA
16. ROPAR CENTRAL CO-OPERATIVE BANK ROPAR
17. SANGRUR CENTRAL CO-OPERATIVE BANK SANGRUR
18. TARANTARAN CENTRAL CO-OPERATIVE BANK TARANTARAN

29
Some attractive schemes provided by the bank to low credit rated
customers include-
 SEHKARI BIMA YOJANA- The co-operative banks in Punjab
are pioneers of starting this yojana w.e.f. 1.6.1999 in the country.
Under this scheme, every depositor who opens a saving bank with
Rs. 1100/-or more is provided personal accidental insurance cover
for Rs. 1 lakh, during the period he keeps the account with the bank,
at a very nominal premium.
 KISAN CREDIT CARD SCHEME- this new scheme has been
implemented by the bank for the benefit of farmers. The scheme
improves upon existing scheme of crop loans by allowing the
farmers flexibility and freedom of choice to avail and repay loans as
per requirements. Maximum credit limit of the farmers has been
raised from Rs. 70,000 per crop to Rs. 85,000 per crop.
 JEEVAN RAKSHA PENSION-CUM-GRATUITY SCHEME- this
scheme has been started by the bank particularly for the benefit of
rural old farmers who can enjoy pension facility in their old age by
depositing Rs. 650/- month. If the depositor dies before 10 years, the
nominee of the deceased is allowed to continue to deposit the
money in the scheme and for the pension after 10 years.
INTRODUCTION TO THE RESEARCH:
Time and again we hear or listen in television or journals that rural
India is the next big thing for Indian marketers and the fact stands
true for Micro-insurers too. Following figures substantiates it,
according to statistics:-
 800 million people.
 Estimated annual size of the rural and semi-urban market.
• Durables Rs. 5000 crores.
• Agri-inputs (incl. tractors) Rs. 45000 crores.
• 2/4 wheeler vehicles Rs. 8000 crores.

30
 41 million kisan credit-cards issued with cumulative credit of
Rs. 977 billion resulting in tremendous liquidity.
 42 million rural households are availing banking services in
comparison to 27 million urban households.
 Investment in formal savings instruments; 6.6 million
households in rural and 6.7 million in urban India.

The main purpose of our study is to elaborate the scope of

co-operative banks in micro-insurance industry and see to
its popularity and other factors that are important in
studying and referring to its significance for rural areas,
agriculture and poor farmers. Let’s see what micro-
insurance basically is.

Micro-insurance, the term used to refer to insurance to the low-

income people, is
different from insurance in general as it is a low value product
(involving modest
premium and benefit package) which requires different design
and distribution strategies such as premium based on community
risk rating (as opposed to individual risk rating), active
involvement of an intermediate agency representing the target
community and so forth. Insurance is fast emerging as an
important strategy even for the low-income people engaged in
wide variety of income generation activities, and who remain
exposed to variety of risks mainly because of absence of cost-
effective risk hedging instruments. Although the type of risks
faced by the poor such as that of death, illness, injury and
accident, are no different from those faced by others, they are
more vulnerable to such risks because of their economic
circumstance. In the context of health contingency, for example,
a World Bank study , reports that about one-fourth of hospitalized
Indians fall below the poverty line as a result of their stay in
hospitals. The same study reports that more than 40 percent of

31
hospitalized patients take loans or sell assets to pay for
hospitalization. Indeed, enhancing the ability of the poor to deal
with various risks is increasingly being considered integral to any
poverty reduction strategy.
Historically in India, a few micro-insurance schemes were
initiated, either by non governmental organizations (NGO) due to
the felt need in the communities in which these organizations
were involved or by the trust hospitals. These schemes have now
gathered momentum partly due to the development of micro-
finance activity, and partly due to the regulation that makes it
mandatory for all formal insurance companies to extend their
activities to rural and well-identified social sector in the country
(IRDA 2000). As a result, increasingly, micro-finance institutions
(MFIs) and NGOs are negotiating with the for-profit insurers for
the purchase of customized group or standardized individual
insurance schemes for the low-income people. Although the reach
of such schemes is still very limited---anywhere between 5 and 10
million individuals---their potential is viewed to be considerable.
Recently, the ILO prepared a list of products of all insurance
companies,
public as well as private, for the disadvantaged groups in India.
Some of the observations
made on the basis of the list are presented below:
• Out of 80 listed insurance products, 45 (55%) cover only a
single risk. The other
products, covering a package of risks, mostly focus on 2 (20%) or
3 (18%) risks.
• The available products cover a wide range of risks. However,
the broad majority
of the insurance products cover life (40 products or 52%) or
accident-related risks.
The health coverage remains very limited (12 products).
• Most life insurance products (23 out of 42) are addressed to
individuals. However,
some products may be bought both by individuals and groups.

32
• Most life insurance products (55%) have been designed to cover
an extended
contract duration ranging from 3 to 20 years.
• Out of 42 life insurance products, 23 are pure risk products. The
other 19 products
propose various types of maturity benefits.
• Out of the 12 currently available health insurance products, 7
have been designed
and are restricted to groups.
• Out of the total 12 health products, 7 products propose the
reimbursement of
hospitalization expenses while the other 5 have chosen to narrow
down the
coverage to some specific critical illnesses.
• Most of the health insurance products specifically exclude
deliveries and other
pregnancy-related illnesses. Most of these products also mention
amongst their
exclusion clauses, HIV/AIDS.
• Most products whether life or non-life require a single payment
of premium (i.e., a one-time payment) upon subscription.
• Private insurance companies have three times more products
than the public
companies.

As per the IRDA statistics, the public insurance companies still

play a predominant role in the present coverage of the rural and
social sectors. This is only to be expected since the incumbent
public insurers have been in the market for a number of years
now.

Health and life are two most important risks for which
micro-insurance is
demanded. Indeed, at low-income level, when much of the
income goes into meeting basic needs, the scope of having
varying priority needs is very limited. On the supply side it’s

33
observed that out of 80 odd products only 7 products are health
insurance products that provide for reimbursement of hospital
expenses. Admittedly, compared to life insurance, which is a
relatively straightforward business, health insurance is a much
more complex service as it involves addressing the provision of
healthcare that is location specific. The design and sale of
products are currently driven by the objective of meeting the
regulatory
obligation and the making of profits or reducing losses. In this
situation, there is a danger of certain priority needs getting
neglected by the insurance companies.

THE MOST COMMON PRODUCTS OF MICRO-INSURANCE ARE

AS FOLLOWS:-
• Credit life
• Term life/ personal accident
• Savings life
• Property insurance
• Endowment life
• Health insurance
• Agriculture

FOLLOWING IS THE TABLE WHICH SHOWS THE DIFFERENCE

BETWEEN CONVENTIONAL AND MICRO-INSURANCE:-

Conventional Insurance Micro-insurance

• Complex policy •Simple, easy to understand

document policy document
•Broadly inclusive, with few if
• Limited eligibility with any exclusions
• Premiums accommodate

34
standard exclusions
• Regular premium
payments as banking
transaction
•Usually minimum of 12
months
• Screening requirements
may include a medical
examination
•Small and large sums
insured
•Priced based on
age/specific risk
• Agents and brokers are
primarily responsible for
sales
•Market is largely familiar
with insurance
Micro Insurance Product Statistics:-
customers’ irregular cash
flows, paid in cash or with
another financial transaction
• Period of coverage can be
as short as 4 months
• Any screening requirements
would be limited to a
declaration of good health
•Only small sums insured
•Community or group pricing
• Distribution channel may
manage the entire customer
relationship, perhaps
including premium collection
and claims payment
•Market is largely unfamiliar
with insurance
35
 Year No. of Products approved
2006-07 5
2007-08 11
2008-09 6
2009-as on
1
date
Total 23

CHALLENGES AHEAD FOR MICRO-INSURANCE

POPULARITY:-
 Low insurance awareness among the targeted segment
 Need of more innovative but simple and flexible products
taking into account the life style and needs of the low
income group people
 Simplification
 Product development—exclusions must be made clear and
simple
 Proposal approval
 Premium payment
 Maturity / death claim settlement
 Grievance redressal mechanism
 Affordability of premium—limited disposable income
 Mobility of the targeted population
 High volatility and uncertainty of income

36
  Enhanced role of SHGs
 All documents must be in vernacular language
 Developing insurance awareness amongst the low income
band people
 Need to develop Health micro insurance products
 Need of good quality data
 Standardizing underwriting procedures for MI.
 Regulatory assistance

PROBLEM STATEMENT:-
Bharti AXA general insurance has tie-ups with a number of district
central co-operative banks in Punjab. It is currently in the
business of securing loans for these banks, these include
providing insurance cover for housing loans, cash credit to
customers and loans for to non-farm sector i.e., loans given to
people employed in work other than farming/agriculture.

37
Bharti AXA now aims to cross sell its line of General
Insurance products and now currently focusing on selling
its products through co-operative banks. Thus, going one
step ahead of its current business where it interacts only
with co-operative banks, by interacting directly with the
Bank Managers and cross selling insurance by obtaining
leads from the bank.

The research titled “ scope of micro-insurance in co-operative and

agricultural sector” aims to find best suited micro-insurance
products for the co-operative sector in Punjab, which implies
finding the product which is likely to be most preferred and
successful in the rural and semi-urban market in a few years.

SIGNIFICANCE TO THE
RESEARCHER
To get a good understanding of co-operative sector in Punjab and
recommend to the company the possible ways of conducting
successful business in this sector.

SIGNIFICANCE TO THE INDUSTRY

This is a limited study which takes into consideration the response
from rural and semi-urban areas of jalandhar district, punjab and
its nearby villages. This data can be explorated to take the view
of the trends across the industry. The significance for the industry
lies in studying these trends that emerge from the study. It is a
rapidly changing and evolving sector. People are only beginning
to wake up to its vast possibilities. A study like this can attempt to
guide the future of the industry based on current trends.

DATA COLLECTION TOOL

38
Survey approach method of sampling was used to collect
data. The survey method of obtaining information is based on the
questioning of respondents. 100 respondents were chosen
for survey. Respondents are asked a variety of questions
regarding their behaviour, intentions, attitudes, awareness and
motivations. Various things are to taken care of while designing a
good questionnaire. These include asking questions (before
designing) such as will the question be understood in the correct
manner by the respondent, how many close and open ended
questions should be included etc.

The questionnaire consisted of following types of questions:

• Dichotomous questions (Yes/ No)
• Multiple choice questions

CONTACT METHODS
A direct contact method was used to collect data i.e.,
Personal Interviewing. It is the most versatile method. This
method was applicable in both exploratory as well as descriptive
research. It was helpful in exploratory research as it helped to
reach out to experts and gather their views regarding the
problem at hand and thus providing a much clear picture for
carrying out descriptive research for the study.

LIMITATIONS OF THE RESEARCH

1. The research is confined to a certain parts of Punjab and
doesn’t necessarily shows a pattern applicable to all of the
country.
2. Some respondents were reluctant to divulge personal
information which can affect the validity of responses.
3. In a rapidly changing industry, analysis in one segment can
change very quickly. The environmental changes are vital to
be considered to assimilate the findings.

39
CHAPTER-4
40
FINDINGS &
ANALYSIS
AND
CONCLUSION

FINDINGS AND ANALYSIS

This section contains the informative data that was gathered as a
result of primary and secondary data collection. A graphical
analysis of primary data has been provided later in this section.

To begin with, some of the key facts regarding the District Central
Co-operative Bank need to be highlighted:-
 There are 72 branches of Jalandhar Central Co-operative
Bank in Jalandhar district, more than any other commercial
bank in the district.
 New schemes such as Sehkari bima yojna – provides a
personal accident cover of Rs. 1 lakh at a very nominal
premium to anyone who opens an account with a balance of
Rs. 1100 or more.

41
These facts are important as it can be inferred that the co-
operative bank in the district has a dense and widely spread
network and the major portion of bank’s customers come from
rural and semi-urban areas as evident from the deposits and
advances statistics. Thus, it serves as an effective and efficient
channel for reaching the rural and semi-urban customer segment.

With this preliminary information at hand, research was preceded

further by conducting a survey. Conclusions were made only after
an analysis of the findings obtained from the survey. The findings
have been quantified and graphs are used wherever possible for
better comprehension of the results.

ANALYSIS OF SURVEY FINDINGS:

TABLE 1- NUMBER OF PEOPLE HAVING INSURANCE

RESPONSE NO.OF SHARE(%)

RESPONDENTS
YES 70 70%
NO 30 30%
TOTAL 100 100%

42
 30%

NO
YES

70%

INTERPRETATION:
 Of the 100 respondents interviewed 70% hold an insurance
policy.
 This result is irrespective of whether insurance policy is life
or non-life.
 Data suggests insurance in general terms has made inroads
into the rural and semi-urban market.

TABLE 2-NUMBER OF RESPONDENTS HAVING

PERSONAL ACCIDENT POLICY

RESPONSE NO.OF SHARE(%)

RESPONDENTS
YES 11 31%
NO 23 69%
TOTAL 34 100%

43
 31%

69%
YES
NO

TABLE 3- NUMBER OF RESPONDENTS HAVING

HEALTH INSURANCE POLICY

RESPONSE NO.OF SHARE(%)

RESPONDENTS
YES 8 23.5%
NO 26 76.5%
TOTAL 34 100%

44
 24%

76%

YES
NO

TABLE 4- NUMBER OF RESPONDENTS HAVING

MOTOR VEHICLE (TWO WHEELER/FOUR WHEELER)
INSURANCE POLICY

RESPONSE NO.OF SHARE(%)

RESPONDENTS
YES 21 72.4%
NO 8 27.6%
TOTAL 29 100%

45
 28%

YES
NO

72%

INTERPRETATION:
 Out of 29 non-life policy holders, only 9 have a personal
accident policy cover.
 Even health policy has lower penetration, with only 11
holders among 29 non-life policy holders. Some of the health
policy holders include smart card holders issued under
Rashtriya Swasthiya Bima Yojna.
 Major non-life policies people hold are motor insurance as
80% respondents hold it. But there are many cases with
elapsed policy and where it is yet to be renewed.
 Among other non-life policies, people own building
insurance, cattle and crop insurance covers to some extent.

These findings are worth noting because these two micro-

insurance products are of highest concern among the line of
different micro-insurance products and they both are low on
penetration.
Following findings throw more light on the level of awareness
among people regarding various other products available.

46
TABLE 5- MICRO-INSURANCE POLICIES AWARENESS
AMONG RESPONDENTS

POLICY TYPE NO.OF

RESPONDENTS
MOTOR INSURANCE 83
HEALTH INSURANCE 18
PERSONAL ACCIDENT 27
CATTLE INSURANCE 41
CROP INSURANCE 36
ANY OTHER -
90 83
80
70
60
50
41
40 36
30 27
20 18
10
0
MOTOR HEALTH PERSONAL CATTLE CROP
INSURANCE INSURANCE ACCIDENT INSURANCE INSURANCE

• Out of the 100 respondents, 83 i.e., the maximum number of

respondents are aware about the motor vehicle insurance.
The reason being that loan for motor vehicle in the area is
quite popular and it is a mandate to get an insurance cover
before borrowing a loan for motor vehicle from the bank.
• The most significant findings among these is that the
pioneer products of micro-insurance such as health and

47
 personal accident are not among the list of products having
high level of awareness.
• Thus, apart from motor insurance, the other insurance
schemes haven’t made significant inroads into this particular
segment of market.

TABLE 6- PEOPLE’S OPINION ABOUT INDIAN

INSURANCE COMPANIES

RESPONSE NO.OF SHARE(%)

RESPONDENTS
RIGID PLANS 67 67%
NON-USER FRIENDLY 29 29%
UNSATISFACORY 26 26%
SERVICES
NON-AGGRESSIVE 35 35%
SATISFACTORY 24 24%
GOOD 10 10%
VERY GOOD 0 0%

48
 70 67
60
50
40 35
30 29 26 24
20
10 10
0 0

D
RY
ES

OD
S

VE
LY
AN

O
IC
ND

TO
SI

GO

GO
RV

ES
PL

AC
IE

RY
GR
SE
D

FR

SF
GI

VE
AG
RY

TI
ER
RI

SA
TO

N-
US

NO
AC
N-

SF
NO

TI
SA
UN

INTERPRETATION-
• 67% of the respondents have the opinion that Indian
Insurance Companies have rigid plans.
• 29% feel that Insurance companies are user-friendly.
• 26% feel that services of Indian Insurance Companies are
Unsatisfactory.
• 35% of the respondents are of the view that Indian Insurance
Companies are Non- aggressive.
• 24% feel that products and services of Indian Insurance
Companies is Satisfactory.
• Whereas, only 10% feel that it is good enough.
• And according to the present survey, no single person has
felt that it is very good.

FINANCIAL HIGHLIGHTS:-
(2009-10)

49
 BALANCE SHEET AS AT
31st MARCH 2010

UP TO UP TO QUARTER
QUARTER MARCH
MARCH 2009(RS. 000’)
2010(RS.000’)
SOURCES OF FUND
SHARE 2000,000 16,25,800
PENDING ALLOTMENT 750,000 -
RESERVES AND SURPLUS 589,134 274,200
FAIR VALUE CHANGE 1709 1070
ACCOUNT
BORROWINGS - -

TOTAL 3,340,843 1,901,070

APPLICATION OF FUND’S
INVESTMENT’S 2,631,213 1,159,990
LOANS
FIXED ASSETS 317,835 282,453
DEFERRED TAX ASSETS

CURRENT ASSETS
Cash and Bank Balances 284,357 56,587
Advances and Other Assets 428,279 159,387
Sub-Total (A) 712,636 215,974
CURRENT LIABILITIES 1,256,523 308,513

PROVISIONS 1,200,076 161,576

DEFERRED TAX LIABILITY

Sub-Total (B) 2,456,599 470,089

NET CURRENT ASSETS (C) = (1,743,963) (254,115)
(A - B)

MISCELLANEOUS
EXPENDITURE
DEBIT BALANCE IN PROFIT 2,135,758 712,742
AND
50
TOTAL 3,340,843 1,901,070
 COMPUTATION OF RATIOS:-
LIQUIDITY RATIOS:-

1. CURRENT RATIO:- CURRENT

ASSETS/CURRENT LIABILITIES
(Rs. IN LAKHS)
CURRENT ASSETS 7126.36
CURRENT LIABILITIES 12565.3
CURRENT RATIO 0.56:1

2. QUICK RATIO:-CURRENT ASSETS-STOCK-

PREPAID EXPENSES/CURRENT LIABILITIES

QUICK ASSETS 4495.36

CURRENT LIABILITIES 12565.3
QUICK RATIO 0.357

51
SOLVENCY RATIOS:-
1. DEBT – EQUITY RATIO= LONG TERM
DEBT/ EQUITY
DEBT 0
EQUITY 2000
DEBT EQUITY RATIO 0

2. EQUITY RATIO = SHAREHOLDER FUND/

TOTAL ASSETS * 100
SHAREHOLDERS 2000
FUND
TOTAL ASSETS 2949
EQUITY RATIO(%) 67.8

3. FIXED ASSETS TO NET WORTH RATIO

= FIXED ASSETS/TOTAL CAPITAL* 100
FIXED ASSETS 317.8
TOTAL CAPITAL 3339.13
FIXED ASSETSTO 9.51
NET WORTH
RATIO(%)

52
 3.TOTAL LIABILITY TO TOTAL ASSETS
RATIO= TOTAL LIABILITIES/TOTAL
ASSETS
TOTAL LIABILITY 11469.62
TOTAL ASSETS 2949
TOTAL LIABILITY TO 3.88
TOTAL ASSETS
RATIO

PROFITABILITY RATIOS:-
1. NET PROFIT RATIOS= NET PROFIT /
NET SALES * 100
NET PROFIT 2135.7
NET SALES 416.6
NET PROFIT RATIO 51.2

CONCLUSION
So, one of the major outcomes from the project was how to
interact with the customers and distributors (bankers) effectively.
This project gave an experience on how to deal with distributors,

53
being bankers in this case. Personal emphasis were given to bank
people so as to convince them that the tie-up with Bharti AXA
General Insurance will be lucrative for both company and bank.
The project even involved interacting with existing and
prospective customers. Customers generally have a wide range of
queries which have to be answered patiently and convincingly, as
a consequence that will satisfy the customer. So to deal with
customers is a fine art which has been learned from this project.

REFERENCE
S
54
WEBSITES:-
• http://www.ibef.org
• http://economictimes.indiatimes.gov.in
• http://www.pbcooperatives.gov.in
• http://www.irdaindia.org
• http://banknetindia.com
• http://bhartiaxa.org

ARTICLES FROM MAGAZINES:-

• Holloway R. And Krishnamurthy R.(2006 December),
“Insuring India” , Insurance chronicle, pp. 47-49
• RURAL INSURANC E : AN INTRODUCTION by Subir
Ghosh
• INSURING RURAL INDIA” by Richard Holloway and
Rajagopalan Krishnamurthy

55
• THE WIDENING SCOPE OF INSURANCE” by Dr. C.
Rangarajan, Chairman Economic Advisory Council to the
Prime Minister
• BANCASSURANCE- AN EMERGING CONCEPT IN INDIA”
by Naveen Sethi

ANNEXURE

QUESTIONNAIRE

56
NAME:
AGE:
OCCUPATION:

1. Do you hold an insurance policy?

a) Yes
b) No
2. If yes, which of the following you hold?
a) Life policy
b) Non-life policy
c) Both
3. Are you satisfied with the non-life policy you hold?
a) Yes
b) No
If yes,
(i) Are you satisfied with the service agent?
a) Yes
b) No
4. Are you time to time informed about different non-life/micro-
insurance policy schemes through agents or some other
channel?
a) Yes
b) No
5. Which of the non-life and micro policies you aware of?
a) Motor insurance
b) Health insurance
c) Personal accident
d) Cattle insurance
e) Crop insurance
f) Any other________________________________________

6. If you are holder of a non-life policy, then

i. Do you hold a personal accident policy?
a) Yes
b) No
ii. Do you hold a health insurance policy?

57
 a) Yes
b) No
iii. Do you hold a motor vehicle insurance policy?
a) Yes
b) No
iv. If you hold some other non-life policy, please mention
________________________________

7. How would you rate Indian Insurance Companies?

a) Rigid plans
b) Non-user friendly
c) Unsatisfactory services
d) Non-aggressive
e) Satisfactory
f) Good
g) Very good
8. What would you look for in an Insurance Companies?
a) A trusted name
b) Friendly service and responsiveness
c) Good plans
d) Accessibility

58
THANK YOU

59