Context: Recently, Insurance Regulatory and Development Authority of India (IRDAI) has come out with the concept to cover the entire population in village areas, with the financial support of various institutions like NABARD and CSR funds.
Key highlights

• The idea behind the model village concept is to offer comprehensive insurance protection to all the major insurable risks that villagers are exposed to and make available covers at affordable or subsidised cost.
• The concept may be implemented in a minimum of 500 villages in different districts of the country in the first year and increased to 1000 villages in the subsequent two years.

Need for Model Insurance Village

• India is predominantly rural with more than 65% of the population residing in rural areas.
• Most rural people are hardly aware of insurance as a concept nor have they experienced the benefits of insurance.
• In rural areas, agriculture and allied activities are the main occupations and the prime source of livelihood.
• The target segment of rural insurance consists largely of low-income households or individuals who have little savings and limited financial capacity.

Significance of Model Insurance Village

• It aims to demonstrate the concept and efficacy of insurance as risk management tool and to make farmers and rural population aware of benefits of insurance.
• The special focused efforts need to be made to cover the entire population in the village and their property.
• The coverage will include farms/crops, farm machineries, vehicles, different village level services, manufacturing enterprises and other specific insurance needs of the particular village through targeted efforts.
• The model villages are expected to tackle losses due to natural calamities like floods and earthquakes as there is no catastrophe insurance in the country now.

Challenges in spreading insurance to rural areas

• Lack of awareness about the concept of insurance and its benefits among the rural population;
• Limited choice of insurance products with various flexible features;
• Absence of people-friendly and transparent claim settlement mechanisms;
• Weak network of insurance companies and intermediary presence in rural areas;
• Low/slow pace of modern technology adoption in the rural insurance segment;
• Underdeveloped market with constraints in offering affordable covers and proper servicing; and
• Lack of industry-wide well-coordinated efforts to serve the rural insurance segment.

Insurance Regulatory and Development Authority of India (IRDAI)

• The Insurance Regulatory and Development Authority of India (IRDAI) is an autonomous, statutory agency tasked with regulating and promoting the insurance and re-insurance industries in India.
• It was constituted following the recommendations of the Malhotra Committee report, by the Insurance Regulatory and Development Authority Act, 1999.
• Headquarter: Hyderabad, Telangana
• Composition: Total 10-member = 1 chairman + 5 full-time members + 4 part-time members appointed by the government of India.

Functions of IRDA

• Protect the rights of insurance policy holders.
• Provide registration certification to life insurance companies.
• Renew, modify or suspend this registration certificate.
• Promote professional organisations connected with insurance and reinsurance business; regulate investment of funds by insurance companies.
• Adjudication of disputes between insurers and intermediaries or insurance intermediaries.