Rural Insurance
Rural Insurance
Rural Insurance
1. INTRODUCTION
1.2 RURAL INSURANCE
DEFINITION :
Rural areas (also referred to as "the country," and/or "the
countryside") are settled places outside towns and cities. Such areas are
distinct from more intensively settled urban and suburban areas; Inhabitants
live in villages, hamlets, on farms and in other isolated houses.
In modern usage, rural areas can have an agricultural character, though
many rural areas are characterized by an economy based on logging, mining,
petroleum and natural gas exploration, wind or solar power or tourism.
The report Rural Texas in Transition states that factors used to determine the
"rural" or "urban" status of an area include population, population density,
"occupational opportunities," "relative presence of agriculture," sizes of
nearby cities and towns, and "quality of life."
The IRDA guidelines define a Rural sector as a place which as per the latest
census has:
The total population of not more than 5000.
The density of population of not more than 400/sq.km. and at least 25 %
of the male population is dependant on agriculture as source of livelihood.
A change in the definition of what constitutes `rural' has given some leeway
for insurance companies to get in the mandatory percentage. In August 2004,
Insurance Regulatory and Development Authority altered the definition,
aligning it with the census definition of `rural'.
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The census does not define rural area. It defines only an urban area. And by
inference, what is not urban is a rural area.
The erstwhile IRDA definition of rural areas included all areas with a
population of less than 5,000, with a density of population less than 400 sq
km and where at least 75 per cent of the male working population was
engaged in agricultural pursuits. The IRDA had amended the definitions
earlier in 2002 to bring down the requirement stipulating that at least 25 per
cent of the population had to be engaged in agricultural pursuits.The revised
definition has widened the market.Mr. Vivek Khanna, Director, Marketing,
Aviva Life Insurance Company, said, "A couple of thousand villages would
now be brought under the fold. The earlier definition meant that only some
remote villages could be tapped. And there is no ambiguity now."
RURAL SECTOR.
India lives in villages. There are more than 5 lakh villages, with population of
5000 or less, with a total population of nearly 75 crores. But nearly 25% of
the rural population is below the poverty line. The people in these areas are
scattered far and wide. Hence, to contact these people, one has to travel long
distances along roads that are very well constructed. There may not be any
convenient places for visitors to stay or to eat food in these areas. It would,
therefore, probably be more profitable for insurance companies to
concentrate their efforts on the urban areas.
To combat this tendency, the Insurance Regulatory and Development
Authority has made it mandatory for every insurance company in India to
undertake a specific percentage of life insurance business and general
insurance business in rural and social sector, as specified in the official
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for real assets, superstitions, low earnings and credibility can really be the
threats to the insurers trying to capture rural business. Hence some special
products need to be designed for them.
Compared to the organized sector, the unorganized sector constitutes
major section in the Indian population, which includes cultivators,
agricultural laborers and workers who work in the unorganized
manufacturing and service industries and also includes self-employed.
Around 30 percent of the Indian population still lives below the poverty line
and cannot afford even their basic necessities. The Government of India and
the LIC have launched group insurance schemes for these downtrodden
sections of society such as landless agricultural laborers, beneficiaries of the
IRDP program, etc. One such scheme is the Rural Group Insurance Scheme
1995.
There are some other schemes introduced by the government in association
with LIC of India such as Janashree Bima Yojana, Krishi Shramik Samajik
Suraksha Yojana 2001, Shiksha Sahayog Yojana. Under these schemes the
sum covered was very low and the claim amount was very meager.
Involvement of middlemen, bureaucracy and red-tapism were the major
negative factors in this regard.
Indian agriculture is highly dependent on monsoon, and crops are
exposed to several risks. In this direction the NAIS National Agricultural
Insurance Scheme was introduced in year 2000 which replaced the existing
comprehensive Crop Insurance Scheme (operating since 1985). NAIS was
primarily aimed at covering all food crops, oilseeds and annual
commercial /horticultural crops. 11 crops are covered under NAIS. For Small
and Marginal Farmers, 50% subsidy was given (which was equally shared by
the Center and respective State governments). On these lines, a Pilot Seed
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Crop Insurance Scheme was introduced in the same year to protect the seed
breeders. All public sector general insurance companies also provided
livestock insurance. NABARD and the public sector general insurance
companies have set up the Agricultural Insurance Corporation of India Ltd.,
which will take care of insuring farms, agricultural properties, cattle, poultry,
etc. The estimated size of the agricultural insurance business is around
Rs.1000 crores and it is expected to grow 10 times in the years to come. In
order to avoid possible negligence by the insurers towards rural markets (the
new players in particular), IRDA formulated the Obligations of Insurers to
Rural Social Sectors and it is worth mentioning that the performance of both
life and the general insurers has been much above the required level.
RURAL INSURANCE.
No doubt the vast potential of the rural market in insurance remains
untapped.
Only the Life Insurance Corporation of India with its large number of branch
offices and network of agents throughout the country is able to do a
reasonable percentage of business in rural areas.
However, to tap the full potential the insurance companies will have to
introduce new products to suit the needs of the people, combining it with
facilities to meet their short-term requirements and so on.
OBJECTIVES
1 To study the insurance provided to rural areas by insurance sector.
2 To compare the urban and rural insurance services provided by
insurance sector.
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happening in the rural areas where human life and income-generating rural
assets need protection, and there is tremendous scope for developing
insurance business. This shows up the gross neglect of the rural areas vis-avis insurance cover, though since the late-1960s, a silent economic revolution
has been on in the villages.
Now that the insurance sector is open to the private sector and foreign
companies, the Government should pay serious attention to covering the rural
areas.While it is true that access to insurance cover depends on the
literacy/awareness levels and assured income, well-planned and organised
efforts by committed private sector companies can yield rich dividends from
the rural areas. This is because:
(1) A large number of rural districts have witnessed significant growth and
prosperity;
(2) Access to reliable and authentic data and information has improved
considerably, which can enable quick and correct decision-making;
(3) There are specific functionaries and agencies in the rural areas which can
help explore and exploit insurance business in the untapped rural market.
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2. CATTLE INSURANCE
Cattle Insurance was governed under Market Agreement as devised by
GIC and the rates, terms, conditions etc. all were applicable to all the four
Insurance Companies. However, w.e.f May 2003, it is no longer under
Market Agreement.
This policy covers indigenous cross bred and exotic cattle owned by
private owners, various financial institutions, dairy farms, cooperatives,
corporate dairies etc. The word cattle include Milch, Cows and Buffaloes
calves and heifers, stud bulls, bullocks and he-buffaloes and mithuns. Age
group is specified for all the animals. The evaluation of the animal is done by
a veterinary surgeon.
SCOPE OF COVER/INSURANCE COVERAGE
The policy shall give indemnity only for death of cattle due to:
i. Accident (Inclusive of flood, cyclone, famine) or any other fortuitous
circumstances (fortuitous means accidental in origin)
ii. Diseases (Inclusive of Rinder-pest, Block Quarter, Hemorrhagic
Septicemia, Foot and Mouth disease subject to vaccination against this
disease).
iii. Surgical operations
iv. Strike riot and civil commotion and terrorism.
v. Earthquake.
Policy is subject to certain standard and general exclusions. Animals
are identified by way of ear tagging. The policy covers both scheme and nonscheme animals. Scheme animals are those animals, which are sponsored by
the Government agencies and are financed by some financial institutions,
which may or may not involve any subsidy. Master Policy arrangements are
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SUITABILITY:
This policy is suitable for the poultry farmers, the beneficiaries of schemes
sponsored by DRDA, DPAP, IRDP and financial institutions providing
assistance to poultry units.
SALIENT FEATURES:
This comprehensive policy is issued to cover poultry consisting of Broiler
chick / Layer chickens /Cocks and hens in the poultry farms. A minimum
number of 100 broilers / 500 layers or 200 birds per batch in the hatchery can
be covered under this policy.The policy provides compensation for loss to
birds dead due to accident (including fire, lightning, flood, cyclone,
earthquake, riot, strike, terrorist act); diseases contacted or occurring during
the period of insurance.
BENEFITS:
Policy provides compensation when the mortality rate of the birds exceeds
the following limits.
Birds
Age
Mortality Rate
Broilers
Layers
72nd week
to
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Premium rates depend on the age of the bird; whether or not they are
financed under IRDP scheme as follows:
Birds
Broilers
Age
1 day to 8 weeks
Premium Rate
For
IRDP Non
scheme
0.25
IRDP
scheme
%per 1.5 % (6 %p.a.)
bird/batch
Layers
1 day to 6 weeks
1 day to 20 weeks
21 weeks to 72 weeks
1 day to 72 weeks
Parent stock(hatchery)
REQUIREMENTS:
- 3.2 %
5.5 %
5.00 %
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birds, which are exotic and cross-bred. Indigenous and non-descript birds will
not be insured. All birds in a farm should be covered. The scheme is
applicable to poultry farms consisting of minimum 100 birds under scheme
category and 500 birds under non-scheme category. In general, it is 100
broilers per batch, 500 layers per batch and 2000 hatchery birds per batch.
For layers, the cover is provided from 1 day to 20 weeks, 21 weeks to 72
weeks or 1 day to 72 weeks. Broilers are covered from 1 day to 6 weeks or 8
weeks. Hatchery birds are covered from 1 day to 72 weeks. The value of the
bird is fixed according to the age. The cover is provided against death of the
birds due to accident or disease. All applicable cases, vaccination are a must.
The valuation of the birds is arrived by a multiplying factor with the age in
weeks. The multiplier is applied to the prevailing feed cost and the day old
chick cost is added to arrive at week wise valuation. Certain common and
standard exclusions applied. Since all the birds are covered, there is no need
for identification. The poultry farmer is expected to maintain all the relevant
records like feed register, flock record on day to day basis, daily stock
register, mortality, culling, vaccination, feed consumption, production, debreaking, and incidents of diseases, sales and purchase.
5. AQUA CULTURE INSURANCE:
SUITABILITY:
This policy is suitable for licensed farms or farms provided in accordance
with the Government Notification for growing brackish water shrimp / Fresh
water prawns by adopting extensive / modified extensive / semi intensive
systems.
SALIENT FEATURES:
1 The policy grants cover two sections.
Section I: Basic cover which covers only losses due to natural
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calamities
Section II: Comprehensive cover granting Cover for disease also. Policy is
usually given for a period of 4 months.
2 The basic cover provides compensation for total loss of shrimp /
Prawns due to :
3
Summer kill, Pollution from external source, poisoning, riot, strike and
malicious acts of third parties, Terrorism, Explosion / Implosion, Air
craft & aerial devices or articles dropped there from, impact damage,
earthquake, storm, tempest, cyclone, flood and inundation, volcanic
eruption and other convulsions of nature. Comprehensive cover in
addition to basic cover encompasses death due to diseases except those
caused by bad management and nutritional deficiencies.
BENEFITS:
1 In the event of a fortuitous event resulting in a loss, the basis of loss
settlement will be the sum insured fixed as follows:Sum insured = Number of seeds released X expected survival rate (%)
X expected average body weight in grams X input cost per Kg.
2 For losses upto 4th fortnight stage, maximum liability shall be restricted
to 80% of the input cost only. From 5 th fortnight onwards claims are
admitted as a percentage of biomass.
3 Deductions towards salvage are made.
4 When the percentage of loss at any stage equals or exceeds 80% of the
total shrimps / Prawns insured, it will be treated as total loss.
PREMIUM:
Premium rates have been fixed as follows:-
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Section I (Basic)
Section
II
(Comprehensive)
a) For highly cyclone prone 3%
7 %
zones
b)Others
2%
6%
REQUIREMENTS:
1 The farm should obtain statutory license for setting up conducting
aqua culture operations in the area as per Government legislation.
2 The ponds should be prepared as per prescribed, recommended and
established standards. The seed should be healthy, of good quality,
selected as per prescribed norms and obtained from well known
source.
reputed firms.
Insurance companies
therefore enforce strict warranties for mitigation of losses and also extend
their technical assistance, which explains why it makes good sense in taking
this insurance.
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This new scheme is being introduced to scheme covers all crosssections of women in the age group of 10 to 75 years irrespective of their
income, occupation or vocation. The scheme would benefit housewives,
students, domestic labor, skilled or unskilled labor and other women engaged
themselves in similar or other types of activities in rural, semi-urban areas.
Since this is a low cost insurance cover, it is hoped that the Central
Governments would come forward and extend all support for the
implementation of the scheme.
The scheme would cover death and/or disablement to women arising
out of accidents all types of accidents as defined further.
a. Permanent Total Disablement Rs.25, 000/b. Loss of one limb and one eye or loss of both eyes and/or loss of both limbs
Rs.25, 000/c. Loss of one limb/sight in one eye Rs.12, 500/It is further understood and agreed as under:
i. In case of unmarried women, the policy will be extended to cover death
due to accident as defined in the policy in which even the compensation will
be payable to the nominee or legal heir. The compensation shall be Rs.25,
000/-.
ii. In case of married women, the policy is extended to cover the death of the
insureds husband arising out of accidental death caused by external violent
and visible means and the compensation is payable to wife only.
The compensation shall be Rs.25, 000/-. It is clarified for avoidance of doubt
that in the event of wife predeceasing the husband or in the event of
simultaneous death of husband and insured wife no compensation shall arise
under this extension.
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Plantation such as
Strawberry, Betel vine, Cardamom, Sweet lime, Oil Palm, Tea, Apple,
Coconut, Sugarcane and Safed Musli.
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BENEFITS:
Claims are paid to the extent of 80% of the assessed loss subject to the over
all limit of the sum insured. Sum insured shall be based on the cost of
cultivation i.e. input cost or cost of rising / development of trees. Only such
claims exceeding 10% of sum insured per acre or minimum of Rs. 1000/shall be admitted.
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RATE
1.25 %
4. Betel vine
6.0 %
4.4 %
0.60 %
4 years to 7 years
0.50 %
1.50 %
REQUIREMENTS:
Inter cropping may be done only if it does not interfere with normal
growth and health of the trees.
No smoking or cooking shall be allowed in the open fields and within
30m of the property insured. Dry vegetation & leaves should be removed
periodically.
RECOMMENDATIONS:
Plantations are exposed to a variety of perils ranging from pests to forest
fires. It becomes very difficult for the farmer to come out of loss in the
absence of comprehensive insurance cover. It is for this reason, this
insurance policy is devised which is very popular and hence
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recommended.
10. FLORICULTURE INSURANCE:
SUITABILITY:
Growers of commercial flowering plants such as rose, chrysanthemum and
jasmine having adequate agricultural expertise in the subject may take out
his policy.
SALIENT FEATURES:
This policy covers only plants whilst growing in the farm / green house / Poly
house against total loss or damage due to
1. Fire including forest fire and bush fire.
2. Lightning.
3. Acts of terrorism, Riot & strike.
4. Strom, hailstorm, cyclone, flood & inundation.
5. Earthquake.
6. Impact damage by rail / road / air vehicle & animals
ADDITIONAL COVERS: Policy may be extended to cover risks of loss
due to drought, Pests, & diseases specific to flowering plants.
BENEFITS: The Policy covers the input costs incurred till the time of loss.
These are the recurring expenses incurred to raise / maintain the plants
such as soil preparation, fertilizer, manure, cost of plants / seeds/
saplings/ cost of planting /sowing & Pruning, pesticides, insecticides,
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RATE
Basic
cover
1.25
%
2.5 %
In
open
field
0.75 %
open
field
1.5 %
REQUIREMENTS:
At the time of taking out insurance, the Plants should be at least one month
old after plantation / transportation i.e.; the plants should be well
established in the soil.
Insurance cover will be granted subject to pre-acceptance inspection by
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Animals are identified by means of small brass buttons ear tags. Animals
under scheme category enjoy certain benefits in premium rate and claim
procedure.
14. CAMEL INSURANCE
The camels are covered against death due to accident or disease as per
Standard Cattle Insurance Policy. The max. S.I. is restricted to Rs.3000/-.
15. PIG INSURANCE
All indigenous, cross-bred and exotic pigs are covered however under
scheme category exotic animals are not covered. The age group is from 4
months to 3 years. The coverage is against death due to accident or disease.
Exclusions as per Cattle Policy apply here also. Permanent total disablement,
breeding and furrowing risks are not covered. Vaccination in applicable
diseases is compulsory.
Evaluation depends upon the age of the animal. Animals are identified by
means of small brass buttons ear tags.
16. HORSE, MULE, DONKEY, PONY, YAK INSURANCE
The Coverage is as per Standard Cattle Policy. However the age group
is restricted to 2 yrs to 8 yrs.
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business of around 38%. Due to this increase there has been a rapid growth in
number of policies taken by rural customers thereby increasing the business.
This can be shown with the help of the chart given below.
Subsequently LIC experienced a rise in the sum assured i.e claim settlement.
This can be shown with the help of the diagram.
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Farm issues
Though less than 25 per cent of GDP is contributed by the farm sector, it
employs more than 70 per cent of the workforce.
India is in a paradoxical situation where it is reaping the benefits of being
the largest producer of several commodities while, at the same time, not
experiencing any material enhancement. The country requires customized
solutions for its problems.
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WEATHER INSURANCE
Overall, the company realizes Rs 200 crore as livestock insurance currently.
Mr. Prasad says ICICI Lombard aims to insure one million cattle by 200910. Before that, it plans to have at least 2.5 lakh cattle insured during the
next fiscal.
Meanwhile, index-based weather insurance is also drawing the farmers
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interest. From a meager enrolment of a little over 200 farmers in 2004, ICICI
Lombard now has enlisted 2.5 lakh farmers for this policy. About three lakh
hectares have been covered by this, Mr. Prasad says.
The weather insurance ensures that farmers are compensated through the
policy in case weather plays truant with the crop or its output. Different
parameters have been set up and the weather index is drawn up district-wise
through a tie-up with National Collateral Management Services, an arm of
NCDEX. The index monitors rainfall during sowing and temperature during
harvest.
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Bert Patterson, managing director, Aviva Life Insurance, India said, "Aviva
has been a serious player in the micro insurance arena. We have been
associated with BASIX since 2002 and together we have insured lives of
many in the social sector. With the launch of Grameen Suraksha for BASIX
customers, we hope to increase our reach and provide the benefits of life
insurance to maximum number of people in rural and social sector. Aviva
India has covered close to 900,000 lives in the social sector in association
with BASIX and other micro insurance organizations."
Under the new plan, the premium is calculated based on the sum assured
and age (18 to 45 yrs) of the policyholder. The minimum sum assured is Rs
5,000 and the maximum is Rs 50,000. The policyholder also has the option
of surrendering the policy in which case the surrender value is then paid.
ING VYSYA PLANS TIE-UPS TO TAP RURAL INSURANCE
ING Vysya Life Insurance Company is eyeing collaborations to tap what
they consider a vast potential market in rural India where most people
remain uncovered by insurance.
"The challenge is to reach out to nearly 90 percent of the Indians who are
uncovered by any type of insurance. As almost 60 percent of Indians live in
rural areas, we are looking at partnering with institutions and NGOs that will
help us to spread awareness about insurance and reach out to the potential
customers," said Yvo R. Metzelaar, managing director of ING Vysya, which
also has GMR Technologies and Industries as a third partner.
A joint venture between Dutch financial major ING and southern Indiabased Vysya Bank, ING Vysya Life Insurance Company is among 12 private
players competing for a bigger slice of the Indian market that opened to
private sector participation only 2 yrs ago.
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tremendous
potential
for
growth
in
the
rural
areas.
With only 11% of Indians covered by old age pension or provident fund
schemes and the lack of any social security or medical cover for an
overwhelming majority in the unorganized sectors, insurance is slowly
becoming need-based instead of a tax-saving measure, the FORTE study
observed.
Unlike their urban counterparts, the rural folks still have low awareness
about advantages of insurance cover for life and property, said sources in the
insurance industry.
"The challenge in the rural areas is to win more trust than in urban areas. For
this we need to have alliances with cooperatives, local banks and NGOs that
have the local expertise and reach," said Metzelaar.
In the last 2 yrs, ING Vysya Life Insurance's main concentration has been on
creating new markets in a country where a decades-old establishment like
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about 200 million rural youth with reasonable per capita income, investment
opportunities are virtually non-existent.
This is because, these have no access to popular savings instruments of
various commercial banks, insurance companies and post offices branches
in ulteriors of countryside and are disparately looking to channelise their
finances for suitable returns. A good number of rural investors are also
aspiring to become self reliant but lack avenues for credit in areas for food
processing, better horticultural and agricultural facilities, training for skill
development to process their milk etc., says the Paper.
It recommends that in aforesaid areas, disbursement of agri loan would work
as a magic and insurance schemes would provide rural youth safety net to
protect their investments, suggesting that financial institutions and insurance
companies should come forward to adequately harness this hitherto
unexplored areas, says ASSOCHAM President, Mr. Venugopal N. Dhoot
while releasing the Paper.
Apart from agri loans, FIs can lure rural investors for housing, personal, auto
and education loan. The public and private insurance companies can also
introduce affordable insurance schemes with their premium keeping at Rs.
500 to Rs.1000 per month. With this premium, the companies can design
schemes that can cover rural youth for at least Rs.50, 000-Rs.1 lakh for a
period of minimum 10 years.
Currently, only 8-10% rural households are covered under life insurance
schemes and remaining 90% can be targeted for these insurance schemes.
According to ASSOCHAM, rural youths, income has risen due to shifting of
its occupation from agriculture to non-farm agricultural income and it has
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become an important facet of rural India. This income mainly comes from
dairy, food processing and packaging, commodity trading and infrastructure
development income. The non-agriculture base of rural occupation and
income have been growing in rural GDP figures that are estimated at 45%.
In view of rural investors rising income, they have now more buying
capacity than before.
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through
the
publications/surveys
of
the
Central
Statistical
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the District Rural Development Agency, the District Industries Centre, the
District Development Manager of nationalised banks and Lead District
Manager of the Lead Bank. All these institutions and agencies can offer
considerable information to insurance companies.
Educated unemployed youths of the villages can be trained and become
valuable assets for the companies. While insurance companies are eager
to build their business in the urban areas, there is a hitherto untapped
potential for business in the rural areas which can be exploited.
The Centre and the State governments must encourage private and
foreign insurance companies to enter the rural areas, and provide protection
to rural assets from damage and loss due to natural and man-made
calamities. For this purpose, reasonable and need-based concessions/reliefs
in
taxations
and
subsidies
required
infrastructural
facilities
and
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8. BIBLIOGRAPHY
Books:
INDIAN INSURANCE INDUSTRY TRANSACTION AND
PROSPECTUS, D.C. SRIVASTAV & SHASHANK SRIVASTAV
INSURANCE THEORY AND PRACTICE, NALINI PRAVA TRIPATHY
& PRABIR PAL
INSURANCE MANAGEMENT, SURENDER MANOLA.
News Papers:
1 Economic Times
2 Times Of India
WEBSITES:
1.
www.rediff.com
2.
www.khoj.com
3.
www.google.com
4.
www.yahoo.com
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