Interview with Mr. Pranav Prashad, Head, Rural and Agriculture business, ICICI Lombard.
ICICI Lombard General Insurance Company Limited was established in 2001. ICICI Lombard is a 74:26 joint venture between ICICI Bank Limited, India’s second largest bank with $ 79 billion in assets and Fairfax Financial Holdings Limited, a Canada based $ 26 billion diversified financial services company engaged in general insurance, reinsurance, insurance claims management and investment management.
“The penetration of insurance in the Indian market is low. The entry of private insurance companies few years ago began to generate awareness among the general public about the need for general insurance. Awareness in key areas like health and travel is gaining traction,” avers Mr. Pranav Prashad, Head, Rural and Agriculture business, ICICI Lombard.
He further maintains, “General insurance companies like ICICI Lombard have significantly contributed to the expansion of the country’s insurance market by providing multi-channel distribution of insurance products and focussing on superior customer service. ICICI Lombard has pioneered the introduction of innovative products like weather and cattle insurance in the rural sector.” Mr. Prashad is an Economic graduate and an MBA from FMS, Delhi.
Growth in Rural Markets
Mr. Prasad sees a lot of growth in the rural sector. “70% of India’s population lives in the rural areas. Hence, they represent a great opportunity for growth. Given our focus on growing the rural market, we have invested significantly in developing new innovative products in this area,” he avers.
He further says, “The rural economy is exposed to fundamental risks and has limited access to appropriate risk mitigating solutions. Penetrating the rural market calls for a paradigm shift and significant investment in building a base for the future. The rural market and the rural mass in India are exposed to many risks for livelihood as well as for their assets like home, farm equipment, cattle, crop failure etc. These risks lead to heavy financial draining. Rural insurance acts as a cover for all the above mentioned risks.”
List of Schemes
Following the schemes offered by the company:
· ICICI Lombard and SKS Microfinance covers 1.5 million lives in rural India under ‘Swayam Shakti Suraksha’ across four states. The policy offers low cost insurance coverage for beneficiaries in the lower socio-economic strata in semi-urban and rural areas. Swayam Shakti is a customized insurance product covering each member of SKS Microfinance, the member’s spouse and two children against pre-existing infirmity, maternity, hospitalization, and accident for a period of 12-months.
The low cost insurance policy covers both cashless and reimbursement options. ICICI Lombard partnered with SKS Microfinance to develop the Swayam Shakti Health Insurance product to address the significant need for insurance in rural and semi-urban India.
· ICICI Lombard has extended weather insurance to mustard crops in Agra, Bareli, Shahjahanpur and Hardoi districts of Uttar Pradesh. Mr. Prshad claims that the company has extended weather insurance benefits to more than 2, 50,000 farmers across India. Weather insurance provides security against unpredictable weather conditions faced by farmers. ICICI Lombard’s weather insurance comes with multiple features like customization of insurance products as per need of weather risk. It allows farmers to have the flexibility to take up insurance for a particular critical stage of crop growth or for the entire crop cycle.
· ICICI Lombard has partnered PepsiCo to offer weather insurance for farmers. The weather insurance scheme was introduced on a pilot basis for farmers in three states last year primarily for potato farmers who are suppliers for PepsiCo’s potato chips business. A total of 2,000 acres in Karnataka, 1,800 acres in Maharashtra and 900 acres of potato crop in Punjab was insured. Following the success of trial runs in Punjab, Maharashtra and Karnataka, the scheme has been rolled out for potato growers in 10 Indian states covering an area of 14,000 hectares. The scheme protects these farmers against the vagaries of weather that affect their crop resulting in losses.
Weather Insurance Product
ICICI Lombard offers weather insurance product which is based on the weather index. “We offer customized insurance cover for Rabi and Kharif crops recognizing that the weather conditions affecting the two types of crops are different and need to be addressed differently,” avers Mr. Prashad.
“While it started out as a deficient rainfall cover, we now also cover excess rainfall, high and low temperatures, relative humidity and a combination of the above depending upon the weather related risks being faced by the various crops. Farmers do understand that climate change poses risk to their business. However, they can do nothing to protect their income. Products like weather insurance have in fact helped them mitigate risks. As weather insurance is mainly offered for farmers, it is impacted by all the factors of conducting business in rural areas.
“Our officials have stepped outside the purview of their defined roles to first create awareness about the concept of insurance and then educate the community on what are the nuances of taking an insurance policy. In fact, we have also appointed facilitators who guide people in rural areas on the documentation involved and hand-hold them through the process. Impact of climate change on health issues and cattle insurance are also being highlighted in field level discussions and the help of ground level channels such as Microfinance Institutions (MFIs) and NGOs is taken for spreading the message of insurance.”
Amount of Premium
When asked about the amount of premium a farmer needs to pay, for insuring his crop in one acre, Mr. Prasad says, “We offer index based weather insurance solutions for various crops. The premiums vary according to the risks being covered and typically are in the range of 7-10% of the sum assured.” Adding, “The government provides subsidy for specific crops which helps the farmers to pay the premiums. The risk is carried entirely by the insurers.”
Weather Insurance Settlement
All farmers connected to a weather station are eligible for a claim if a pre specified index has been triggered. The weather data is available from open sources, hence, it can be objectively calculated and paid. The sum assured is specified for each product and policy and that defines the maximum amount which can be claimed.
Mr. Prashad maintains that a detailed correlation analysis is carried out to ascertain the way weather impacts yields of the crops to arrive at compensation levels. “A unique aspect of weather insurance is that farmers need not lodge a claim. Instead, the insurance company monitors the policy and calculates claims based on the certified data received from third party agencies automatically during the policy period. Weather insurance brings significant benefits to the farmers. Weather insurance is a hassle-free process offering speedy claim settlement with transparent terms and conditions,” he adds.
The company has rural marketing channels across 970 towns. These include rural marketing agents and chains of rural retail outlets like the Hariyali Kisan Bazaar and Godrej Aadhar.
“To penetrate deeper in the rural market, the company offers online insurance solutions embedded in rural e-governance kiosks in collaboration with 3i-Infotech and Comat Technologies in Haryana and Karnataka. These kiosks act as a medium to sell on-the-spot insurance policies to the rural communities. We also use innovative methods like organizing munadis (drum beating) campaigns to make public announcements,” avers Mr. Prashad.
He adds, “ICICI Lombard supplements its traditional distribution channels with innovative distribution strategies suitable to rural and urban markets. We have developed a variety of ground-level strategies like tie-ups with hospitals and out-patient clinics for health insurance and garages for motor insurance. We have also partnered with non-governmental orgazinations (NGOs), micro-finance institutions (MFIs), Self-Help Groups and distributors of seeds and fertilizers.”
Head, Rural and Agriculture business
ICICI Lombard General Insurance
South Towers, 6th Floor,
Bandra-Kurla Complex,Bandra Ea
Mumbai, Maharashtra 400 051
Tel : 022 24907900,24906999