Rural Insurance Scenario A Research based presentation

By : Naren N. Joshi Chief Representative ING Insurance International B.V.

Venue : 19 October, 2004 FICCI 9th Conference on Insurance New Delhi

Rural Insurance Research

FORTE- A collaboration between FICCI and ING Insurance, has conducted two research studies to understand the realities of the rural insurance market space

Macro Level Study conducted through MART

Rural Insurance : Issues, Challenges & Opportunities Micro Level Study conducted through James Martin & Co

Developing a Rural Distribution Strategy for Insurers

Macro Study

Objectives of the Research

Understand rural customers current knowledge, attitudes and practices regarding savings, loans and insurance Identify existing factors, if any, prohibiting the purchase of insurance policies Profile potential rural customer segments in terms of attitudes, behavior and demographics Develop a broad, cost effective distribution strategy

Macro Study

Key Findings of the Research

Rural sector offers a huge business opportunity for insurance companies Savings ratio is a healthy 30% of income across all socio economic segments Awareness about Life Insurance is near universal 27% of CWEs already have a life policy 51% of all respondents have expressed intention to purchase a life policy There are a total of 124 million rural households Nearly 20% of all farmers in rural India own a Kissan Credit Cards. The 23 million credit cards issued till date offer a huge data base and opportunity for insurance.
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Macro Study

Key Findings of the Research (contd.)

Delivery infrastructure in the form of District Cooperative Banks, Cooperative Societies, NGOs and Self Help Groups already exists in most villages. Rural connectivity through IT. E-choupal of ITC and other similar initiatives are available as additional delivery channels of insurance An extensive rural agent network for sale of Life insurance products exists

The agent plays a major role in creating awareness, motivating purchase and rendering other insurance services
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Macro Study

Key Findings of the Research (contd.)

78% of respondents prefer various combinations of life insurance like life + accident, life + loan, life + health + accident. Flexibility in Premium payments is important. Security of income and bulk returns, especially for daughters marriage and childrens education are major persuasions for taking life policy. While individuals are undecided about purchasing insurance from private players, members of different groups are favorably disposed to purchasing group insurance through a private player vetted by the group Herd mentalitySafety in numbers.

Macro Study

Complementary Delivery Systems

Name of the institution/ instrument Regional Rural Bank Commercial bank (Rural Branch) Post office Cooperative society *ITC E choupal Accessibility/ coverage of each branch 15-20 villages 5000 account holders spread over (35-40 villages) 5-6 villages 10,000 members spread over 2025 villages 5 to 7 villages Rural presence/ penetration 5000+ pop size village 5000+ pop size village 2000+ pop size village 5000+ pop size village Prosperous village

District cooperative bank

Kissan Credit Card

7500 accounts
12% of total no. of farmers in rural area

Block head quarter

Farmer of any village

* E-choupals manned by a Sanchalak provided with computer and internet connectivity for procurement of agri produce and giving information on variety of services to villagers.

Micro Research Study

Micro Study

Study Phase
Develop a comprehensive description of available channels and their delivery capabilities in the context of rural insurance potentials Identify and understand the concerns of insurers and their strategies for facing the challenges that rural market presents Develop an Evaluation Framework as a basis for selection, design and operationalisation of distribution channels Primary research in the Muzaffarnagar District of UP for the feasibility of each available channel applying evaluation criteria Develop an activity based cost model to profitably operationalise the feasible channels
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Micro Study

District Muzaffarnagar - Span of a Block

District

1
Per Block

Tehsils Blocks

14
112
1031

8 74
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Panchayats Villages

Micro Study
Available Channels

Distribution Channels
Evaluation Criteria Reach Influence on target segment Trust & reliability Business acquisition capability Support requirements Financial transaction handling Operational discipline Customer servicing Feasible Channels

Banks Cooperatives
Panchayats Agents Post Offices

Coop Banks Cooperatives Panchayats Agents

Cybermediaries
Industrial Fin Inst.
Eco Exchange Pts

Brokers
NGOs & SHGs

E-Bima
New Channel
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Micro Study

Suggested Strategy Model

DISTRICT COORDINATOR (1)

BLOCK COORDINATOR (14)

Insurers Resources

E-Bima
1

Agents Cooperatives Panchayats Coop Bank

20 5 8 3

No of Channel Units per Block Av. No. of Agents per LIC Dev Officer : 37
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Micro Study

E-BIMA
Infrastructure
A Van
A Simputer with a Printer Video-Audio Facility

Human Resources
One Driver

Site and Mode of Operation

Moves Village to Village

Two sales cum administrative staff / agent

Parks at Panchayat, Local School , Village Chaupal Visits 2 Villages and one haat a day Works 8 Hours a day
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Micro Study

Role

Role and Benefits of E-BIMA

Awareness Programmes Relationship Building and Management Business Acquisition

Policy Servicing and Business Retention through Premium Collection facilities

Other Benefits
Support to other Channels for Policy Servicing, Premium Collection, Policy Query Handling, Complaint Handling, Assistance in Claim Processing
Overcome limitations of channels
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Take Away
The rural market offers tremendous growth opportunities for insurance companies but their success will depend upon their ability to:
Develop viable and cost effective distribution channels; and Build consumer awareness and confidence

ING is one of the few private insurance companies highly committed to the rural insurance market in India . In fact, ING is currently running a pilot project in rural India.

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THANKS

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