Marketing of Health Insurance in Rural Area: A Study With Reference to Dakshina Kannada and Udupi Districts of Karnataka

Name

Mr. Santhosha

Guide Name

Dr. M.G. Krishnamurthy

Research Centre

Department of Management Studies, Jawaharlal Nehru National College of Engineering, Shivmoga

Year of Registration

May 2009

Marketing of Health Insurance in Rural Area: A Study With Reference to Dakshina Kannada and Udupi Districts of Karnataka

1. Introduction to Study 1.1 Overview of Rural Markets In India ever since independence, because of some obvious reasons, marketing acquired a largely urban bias. Hence, there was no attempt on the part of marketers to know the rural consumer and satisfy their needs. The indifferent attitude also due to the assumption that the rural people were poor and had no purchasing power to buy expensive branded products. Besides such, lack of transportation and communication links and limited reach of mass media were also responsible for neglect of the rural consumer by the business firms. The green Revolution in the seventies provided a much needed boost to the agriculture-based rural economy in the country. This made India as a self- sufficient economy in food production and also contributed towards overall economic growth of the rural sector. Subsequently, other allied activities such as dairying, poultry and horticulture gained momentum to supplement the land owners income from crop farming. Infrastructural facilities in the form of road links, electricity and communication networks also improved largely during the seventies and eighties. These positive developments led many firms to take interest in the rural markets and extend their penetration and reach to smaller towns and villages. The Indian rural market with its vast size and large demand base definitely offers huge opportunities to marketers. Rural marketing has gained prominence in the last decade. The nineties saw widespread changes in the Indian business environment. Urban markets for many consumer goods either got saturated or were badly hit by recession. A fear of

competition in urban markets and huge opportunities in rural markets forced all marketing strategist to enter the rural markets. Rural Marketing in India has gained importance in recent years due to the newer understanding of the concept of rural market. Vast nations such as China and India, which account for one third of population, have 70% of their population living in rural areas. Marketers have started giving importance to the neglected rural markets because of the saturated urban markets and improved incomes and spending power of the rural consumers. 1.2 Financial Services in Rural Markets Financial services are a form of services that provide solution to the financial needs of consumers. They are of various types like banking, insurance, mutual funds, securities financial transaction service etc. Provision of quality access to financial solutions is vital for development of people in rural areas. Low income households and micro enterprises can be extremely benefited from bank credit, savings, securities, mutual funds and insurance services. Investing in securities generates regular cash flow and also gives capital appreciation. Banking services enable people to take advantage of profitable business opportunities and increase their earnings potential. Insurance services can help all the stake holders to manage the associated risk with life, business and agriculture. Attitude of rural people towards use of money and saving has changed after nineties. The age-old practice of keeping the savings in the form of cash or gold has given way to preference for bank accounts, mutual funds, securities and insurance. Recently self-help group concept has got tremendous success in rural areas. This study concentrates on rural insurance.

1.3 Insurance in Indian Rural Markets The insurance market in India, liberalized in 2000 with the advent of private insurance companies in November 2000 has not expanded in real terms beyond the urban domain. There exists a vast potential in the rural areas where more than 70% of our population lives. But it is common perception and belief amongst the insurance companies that it is expensive to do business in rural areas. Most companies are focusing only on meeting regulatory requirements from rural areas and dont see them as commercially viable rural business opportunities, waiting to be exploited. When the insurance sectors opened up to private player in the year 2000, the insurance Regulatory and Development Authority(IRDA) had made it mandatory for the private insurance players to sell a percentage of new polices written in the rural sector. The initial guidelines had stipulated that 5 percent of total polices sold by private sector insurance players had to be in the rural areas. Currently, life insurance companies are required to sell 7 per cent, 9 per cent, 12 per cent, 14 per cent and 16 per cent of their policies in rural areas in the first, second, third, fourth and fifth financial years, respectively. It also defined rural area as one with a total population of less than 5,000, with a population density of less than 400 per square kilometer, and more than 25% of the male working population is engaged in agricultural pursuits. India as country is under insured in the urban as well as the rural areas. Only 35 percent of the 250 million insurable population is insured. In India there about 30 insurance in life insurance business and non-life sector. To increase the penetration levels insurance companies will need to look at newer segments especially the relatively untapped rural market rather than fighting for a share in the same pie in the urban markets.

1.4. Health Insurance in India The greatest resource India has is its human resource and with it come the health issues. Size is a corollary for potential. Thus India obviously has a huge market for health care and health insurance is an integral part of it. The concept of medical insurance started catching up in India only during the mid 1980s. Initially, only the basic version of hospitalization cover was offered. With the opening up of the industry and the resultant competition, more innovative products have been introduced in the market. But still the health insurance sector has not made much headway in India. Overall, only a small percentage of (less than nine) of the population is covered by some form of health insurance. Health insurance in the Indian market has made considerable progress in the post-liberalization era. However, considering the vast potential that is available in the country, it is still far from where it should be. Health insurance constitutes a paltry 10% the total industry revenue and has not kept pace the expansion of the healthcare industry on the whole. Unlike non-life insurance, health insurance is still in nascent stage in India and will probably take some time to settle down. 1.5 Health Insurance in Rural India Though India has made rapid strikes in the health sector since independence, the cost of healthcare is burdensome for most families in rural India. Around 70 per cent of Indias population lives in villages. Of these, less than 2 per cent are insured. Though the rural health insurance market is huge, it has so far remained untapped. Recently, IRDA has constituted a committee to chalk out a plan for spreading health insurance in rural areas. Today, the health insurance providers face lot of hurdles and challenges in reaching the rural population due to various factors such as lack of healthcare facility, belief in non-medical means, problem of accessibility to institutional healthcare, improper agent service and the problem of affordability.

Today significant portion of the rural population which is engaged in pure agriculture is slowly withdrawing from it. A lot of people belonging to the second generation are getting white-collar jobs. Thus insurance companies have lot of opportunities to penetrate in the rural India. Extension of health insurance coverage to rural population may seem to be

intimidating now, but in the long run it will enhance the quality of healthcare and hygiene in the rural 1.6 An Overview of Dakshina Kannada District Dakshina Kannada is a coastal district of Karnataka. The Dakshina Kannada district is in fore front in education. Mangalore is the head-quarter and chief city of the district. The Dakshina Kannada district has an area 4560 square kilometer. Density of human population is 416 persons per square kilometer. There are 354 villages in the district. Three national bank out of 19 nationalized banks are established in Dakshina Kannada namely, Vijaya bank, Canara bank, Corporation bank. Red clay tile (Mangalore tiles), Cashew processing factories and Beedi industries are flourished in this district. Agriculture has taken back seat because of influx of money from natives settled in other areas. Significant people from this district work in gulf countries and other states of India. Tables 1.1 and 1.2 give the some statistics of Dakshina Kannada. Table 1.1 Data of Dakshina Kannada-Population Particulars Total population Males Females Rural Population Total literacy rate Male literacy rate Female literacy rate
Source: Census of India 2001

Statistics 18,97,730 9,38,434 9,59,296 11,68,428 83.35% 89.70 77.21

Table 1.2 Data of Dakshina Kannada-Villages Sl. No 1 2 3 4 5 Name of the Taluk Bantwal Belthangadi Mangalore Puttur Sulya Total 1.7 An Overview of Udupi District Udupi District was created in August 1997. There were eight districts in undivided Dakshina Kannada and the three northern taluks, such as udupi, Kundapura, and Karkal were separated from Dakshina Kannada district. The administrative headquarters of Udupi district is Udupi. The district has mostly small scale industries. There is not any noteworthy industry at present. There are some red clay tile, cashew, coconut oil industries providing employment to hundreds. Syndicate bank was established in this district. Tables 1.3 and 1.4 give the some statistics of Udupi. Table 1.3 Data of Udupi-Population Particulars Total population Males Females Rural Population Total literacy rate Male literacy rate Female literacy rate
Source: Census of India 2001

No of Villages as per census 2001 79 80 88 67 40 354

Statistics 11,12,243 5,22,231 5,90,012 9,05,890 81.25% 88.23% 75.19%

Table 1.4 Data of Udupi -Villages Sl. No 1 2 3 Name of the Taluk Karkal Kundapura Udupi Total No of Villages as per census 2001 50 99 99 248

Above table show that nearly 63 percent of population lives in rural Dakshina Kannada and nearly 82 percent of population lives in rural Udupi. These districts have high literacy rate compared to other districts of Karnataka. According the observation penetration of private companies in the area of health insurance in these districts is low. Some governmental plans like Yahshasvini is playing important role in rural health care. Yashashvini plan is having its own limitations. 1.8 Literature Review The old and related literatures are reviewed to get the in-depth understanding of the research topic. Following are the some of the reviewed studies: Chakravarthi (2006) reported that health insurance schemes are more complex and because of various demand and supply side imperfections there are inherent problems in the health insurance market. He also says that most of the perspective population is unaware of the pros and cons of the different schemes of health insurance. Ratna and Sarkar (2007) reported that rural population treat health as an important aspect and are interested in a health insurance scheme. They reported that High costs of hospitalization and surgery is not posing financial risks for poor households. They also reported that Poor rural people are able to take judicious decisions regarding the composition of a health insurance benefit packages.

Naveen and Veerashekhrappa (2009) reported that Micro-insurance is entirely a new financial product for the rural poor in the study villages. All respondents heard about the micro health insurance for the first time through the SHGs and the NGO staff. They say that large numbers of the SHG members cover their health insurance through micro-health insurance program. They also reported that the accessibility of micro health insurance is more skewed towards the income group of very poor and moderately poor households. Vinod and Saharan (2007) reported those general publics are slowly becoming aware about the benefits of the health insurance and its importance in todays world. They say that the premium level and index of growth of health insurance business is continuously rising up in India. They also reported that public sector players are declining with their market share in health portfolio whereas the private sector players are on the rise in their contribution level. Pradip and Parthi (2007) reported that Competition is yet to reach the pricing arena in health insurance. The oligopoly nature of market has turned to restrict the free play of market forces through product differentials. They also reported that health insurance has positioned itself today as one of the throbbing classes of insurance in non-life insurance sector in India. Charkravarti (2006) reported that below poverty line population are not capable of paying health insurance premium and the insurance agents are not properly informed about the policy. He says that general publics take financial help from the neighbours/community to bear the financial burden of medical expenses. He reports that a large section of the rural poor in West Bengal simply avoid health implications due their poverty; as they are unable to bear the cost of treatment. 2. Need for the Present Study As stated above India as a country is under insured in the urban as well as the rural areas. Only 35 percent of the 250 million insurable population is insured. In India there about 30 insurance in life insurance business and non-life sector. To increase the penetration levels

insurance companies will need to look at newer segments especially the relatively untapped rural market rather than fighting for a share in the same pie in the urban markets. In healthcare insurance in urban market is penetrated by private and public sector companies. In rural areas due lack of awareness in the minds of rural customers companies have not concentrated on this segment. There is a need of health insurance in rural India to finance the medical expenses. This study concentrates on the marketing strategies followed by private and public sector to penetrate the rural market. This study also discovers the attitude, awareness level, of rural customers towards health insurance in Udupi and Dakshina Kannada Districts of Karnataka. In these areas there is no such study conducted by the any other researchers, or any other research organizations in specific. This study helps private and public health insurance companies to adopt effective marketing strategies to penetrate these markets. 3. Objectives of the Study The main objective of the study is to understand the marketing of health insurance in rural areas of Udupi and Dakshina Kannada Districts of Karnataka. Other sub specific objectives are: a) To determine current knowledge, attitudes and practices regarding health insurance of Dakshina Kannada and Udupi rural customers b) Identify the factors which are prohibiting the purchase of health insurance policies. c) Compare the risk factor and other factors of purchasing health insurance policies. d) Determine the potential rural customers perceived need for acceptance of and willingness to purchase health insurance policies. e) Determine the Knowledge of the rural consumers regarding private health insurance companies and their products f) Know the rural health insurance in India

g) Know the present marketing strategies adopted by private and public sector companies in these two districts. h) Know the performance of General insurance companies and other private insurance companies in India i) Role of IRDA in regulating health insurance sector in India j) Know the reasons behind low penetration of health insurance schemes in India and specifically in Udupi and Dakshina Kannada districts. 4. Scope of the Study The scope of the study is restricted to surveying of rural consumers in Udupi and Dakshina Kannada districts of Karnataka. It attempts to throw lights on health insurance services in financial services industries. Surveys are restricted to the villages of these two districts. Study also attempts throe lights on present marketing strategies followed by public and private insurance payers in Dakshina Kannada 5. Methodology 5.1 Statement of the Problem Marketing of health insurance in rural area: a study with reference to Dakshina Kannada and Udupi districts of Karnataka 5.2 Research Approach A survey approach is considered as the best method to find out the marketing of health Insurance in rural areas of udupi and Dakshina Kannada Districts. 5.3 Design of the Study The study design adopted is descriptive research design. The study will be conducted at Dakshina Kannada and Udupi District of Karnataka State. The study will be conducted in the selected villages of Dakshina Kannada and Udupi District.

5.4 Sampling Design 5.4.1 Population All policy holders of different health insurance and non policy holders of health insurance in Udupi and Dakshina Kannada villages are population for this study. The non policy holders will also be considered to find out whether they will be potential customers and have any idea about health insurance policy schemes for the rural sector by the insurance companies. 5.4.2 Sampling Frame Information of data about selected districts in Karnataka state is obtained form Census 2001. Data of selected villages from selected two districts will be collected from respective village pachayaths to ascertain whom the researcher will consider as the sample respondents for the study. 5.4.3 Sampling Units Target respondents are policy holders of health insurance of respective villages. In order to know the awareness about various insurance schemes for the rural people, even non policy holders will be considered. The proposed sample size for the present study is 1,200 out of which 600 each will be policy holders and non policy holders of health insurance. 5.4.4 Sampling Method Target respondents for the present study are people living in rural areas of D.K and Udupi districts. The samples will be selected using multi stage random sampling. Out of the 5 taluks of D.K district, it is randomly proposed to select 3 taluks, from each taluks so selected, it is proposed to select 10 villages by simple random sampling. Out of the selected villages, it is proposed to select 20 sample respondents out of which 10 each will be concentrated on policy holders and non policy holders of the health insurance. Out of the 3 taluks of Udupi district it is proposed to select 10 villages by simple random sampling. Out of the selected villages, it is proposed to select 20 sample respondents out of

which 10 each will be concentrated on policy holders and non policy holders of the health insurance. 5.5 Sources of Data Collection: 5.5.1 Primary Data The sources of the primary data for the present study are collected through the personal interviews using research instrument as questionnaire. Data will be obtained from different health insurance policy holders and non policy holders of Udupi and Dskshina Kannada districts through structured interview schedule. 5.5.2 Secondary Data The secondary data includes data collected from periodicals such as magazines, business news papers, and from subject related books. Dakshina Kannada and udupi districts information will be collected from the respective district office and respective panchayath offices. Industry and company profile will be collected from different insurance companies by their company records and through personal interview. 5.5.3 Content Validity To ensure content validity, the interview schedule will be submitted to experts in the field. The experts will consist of researchers and Insurance executives who have made a mark in the field. To refine the research study pilot test will be conducted. 5.5.4 Data Collection Procedure The research study will be preceded by visiting the selected villages in the taluks through administering the interview schedule to the respondents personally. It is proposed to develop the interview schedule in both English in Kannada. The English version will then be translated into Kannada for better comprehension of the respondents.

5.5.5 Plan for Data Analysis The data analysis for the present study will include both descriptive and inferential statistical measures where the analysis will be done using latest version of SPSS (Version 16.0) 6. Probable Chapter Scheme The entire study is broadly divided into 5 chapters Chapter-1- Introduction: The Introduction gives an understanding about the topic selected and the significance of the study, importance of the study, and objectives of the study. Chapter-2- Review of Literature: Gives an insight about Indian health insurance industry, rural health insurance, structure of the industry, profile of the different health insurance companies, their market share industry emerging trends, IRDA regulations, literature review etc Chapter-3-Methodology: Gives insight into the research approach, design sampling, data collection, Chapter-4-Data Analysis: Gives detailed analysis of survey conducted in the area of Udupi and Dakshina Kannada districts villages. Chapter -5-Summary of the Findings: Gives key findings of the study Chapter-6-Suggestions and Conclusion: Gives suggestions for health insurance players based the findings of the study. Second part of this chapter concludes the study and gives the limitations of the study

(SANTHOSHA)

(DR. M. G. KRISHNAMURTHY) Research Guide

Research Scholar

7. References 1. Dixit Kavadeep, (August 2007), Rural Marketing Issues and Strategies, Marketing Mastermind, Vol-VII, Issue-8, The ICFAI University Press, Hyderabad, Pp. 29-36. 2. Singh Jagaman, (March 2008), Business Challenges in Rural Areas, Marketing Mastermind, Vol-VIII, Issue-3, The ICFAI University Press, Hyderabad, Pp. 23-26. 3. Honnalli Shivadattagouda, (April 2008), Tapping Rural Markets Opportunities, Challenges and Strategies, Marketing Mastermind, Vol-VIII, Issue-4, The ICFAI University Press, Hyderabad, Pp. 21-23. 4. Dogra Balram, Karminder Ghuman, (2008), Rural Marketing Concepts and Practices, Tata Macgraw-Hill Publishing Company Limited, New Delhi. 5. Thakur Anand, BS Hundal, (February 2006), Rural Consumer: A opportunity Beyond Saturated Markets, The ICFAI Journal of Marketing Management, Vol-VI, Issue-1, The ICFAI University Press, Hyderabad, Pp. 27-34 6. Saran Rohit, (December 2004), Call of the Countryside. India Today, Pp 48-61. 7. V. Yatgiri Prashant, (September 2004), Urban Orientation: An obstacle for Rural Marketing Success, Tatva-The Essence of Excellence. , Pp.42-53. 8. Ramaswamy, V.S and S Namakumari (2004), Marketing Management-planning Implementation and Control. Macmillan, New Delhi. 9. Bady N.V. and NV. Bady, (2004), Rural marketing First Edition, Himalaya Publishing House, Mumbai. 10. Sarathy V. Partha, (2005), Rural Marketing-Concepts and Cases, The ICFAI University Press Hyderabad, Hyderabad. 11. Rehaman K.S.Habeeb-ur, (2004), Rural Marketing in India. First Edition, Himalaya Publishing House, Mumbai. 12. Singh Sukhpal, (2004), Rural Marketing, Vikas Publishing House, New Delhi. 13. Richard Holloway, Rajagopalan Krishnamurty, (December 2006), Insuring Rural India, Insurance Chronicle, Vol-VI, Issue-VII, The ICFAI University Press, Hyderabad, Pp. 47-51. 14. L.P Gupta, (June 2008), Social Security in India, Insurance Chronicle, Vol-VIII, IssueVI, The ICFAI University Press, Hyderabad, Pp. 17-21. 15. TS Rama Krishna Rao, (January 2008), Indian Insurance Industry-the new Thrust, Insurance Chronicle, Vol-VIII, Issue-I, The ICFAI University Press, Hyderabad, Pp. 19-23. 16. Bhakti Cuganee,(2005), Rural Insurance Market in India, Edited by K. Suresh, The Icfai University Press, Hyderabad, Pp. 105-113.

17. G.V. Rao, (April 2008), Micro-insurance in Rural India-the Regulatory Challenges, Insurance Chronicle, Vol-VIII, Issue-IV, The ICFAI University Press, Hyderabad, Pp. 19-23. 18. Kumar Ranjit, (2005), Research Methodology -A Step by Steps Guide for Beginners, Second Edition, Pearson Education, New Delhi. 19. Dipak Kumar Bhattacharyya (2006), Research Methodology, Second Edition, Excel books, New Delhi. 20. S. N Murthy, U. Bhojanna, (2008), Business Research Methods, Second Edition, Excel Books, New Delhi. 21. Sinha Ritu, (December 2008), Micro Insurance-An Approach to Serve the Poor, Insurance Chronicle, Vol-VIII, Issue-XII, The ICFAI University Press, Hyderabad, Pp. 4752. . 22. Dr. S. Jayaprakash, (August 2008), Indian Health Insurance League-A Pitch to Cover , Insurance Chronicle, Vol-VIII, Issue-VIII, The ICFAI University Press, Hyderabad, Pp. 2323. Dr. S. Jayaprakash, (January 2009), Empowering Health Insurance through Empirical studies, Insurance Chronicle, Vol-IX, Issue-I, The ICFAI University Press, Hyderabad, Pp. 65-68. 24. Krishnamurthy R., Gayle Adams, (November 2008), Developing Sustainable Health Insurance in India, Insurance Chronicle, Vol-VIII, Issue-IX, The ICFAI University Press, Hyderabad, Pp. 35-45. 25. Qude de Walter and Krishnamurthy R, (February 2006), The health Insurance Industry in India and Its Growing potential, Insurance Chronicle, Vol-VI, Issue-II, The ICFAI University Press, Hyderabad, Pp. 33-36. 26. Venugopal R, (February 2009), Health Insurance in India, Insurance Chronicle, VolIX, Issue-II, The ICFAI University Press, Hyderabad, Pp. 55-61. 27. Jawaharla U, (January 2006), Indian Health Insurance Market-A Road Map to the Future, Insurance Chronicle, Vol-VII, Issue-I, The ICFAI University Press, Hyderabad, Pp. 24-27. 28. Oza Arman, (February 2009), Health Insurance, Insurance Chronicle, Vol-VII, Issue-I, The ICFAI University Press, Hyderabad, Pp. 28-35. 29. Kumar K. Praveen, (February 2009), Health Insurance in India, Insurance Chronicle, Vol-VII, Issue-I, The ICFAI University Press, Hyderabad, Pp. 38-41. 30. Bhasin Sampa, (February 2009), Health Insurance-An Imperative, Insurance Chronicle, Vol-VII, Issue-I, The ICFAI University Press, Hyderabad, Pp. 42-45

31. Jeyaseelan, (December 2007), Micro-health Insurance-A way of Ensuring Financial Security to the Poor, Insurance Chronicle, Vol-VII, Issue-XII, The ICFAI University Press, Hyderabad, Pp. 23-39. 32. Menon Sudha, (April 2007), Health Security for Rural Poor Study of Community based Health Insurance System in India, Insurance Chronicle, Vol-VII, Issue-IV, The ICFAI University Press, Hyderabad, Pp. 42-53. 33. Sekhar B. Samuel, (June 2007), Extending Micro-health Insurance Scheme to Lower Middle Class, Insurance Chronicle, Vol-VII, Issue-VI, The ICFAI University Press, Hyderabad, Pp. 34-39. 34. Devi N. Sumithra, (October 2007), Health Insurance for Rural Poor, Insurance Chronicle, Vol-VII, Issue-X, The ICFAI University Press, Hyderabad, Pp. 40-50. 35. Devi Ratna and Sarkar Ambarish Sarkar, (October 2007), Health Insurance for Rural Indai-Myths & Realities, Insurance Chronicle, Vol-VII, Issue-X, The ICFAI University Press, Hyderabad, Pp. 51-54. 36. Biswas Sourav and Devi Rana, (January 2008), Making Health Micro Insurance Work, The ICFAI Journal of Risk and Insurance, Vol-V, Issue-I, The ICFAI University Press, Hyderabad, Pp. 50-59. 37. Shetty K Naveen and Veerashekhrappa, (January 2009), Institutional Innovations and Access to Micro-health Insurance for the Poor: Evidence from Karnataka, The ICFAI Journal of Risk and Insurance, Vol-VI, Issue-I, The ICFAI University Press, Hyderabad, Pp. 50-67. 38. Bishnoi Vinod and Renu Saharan, (March 2007), Health Insurance in India: Introspects and Prospects, The ICFAI Journal of Risk and Insurance, Vol-IV, Issue-III, The ICFAI University Press, Hyderabad, Pp. 58-68. 39. Bishnoi Vinod and Renu Saharan, (January 2007), Health Insurance-Competition Among the Players is Yet to Touch the Pricing Arena, Insurance Chronicle, Vol-VII, Issue-I The ICFAI University Press, Hyderabad, Pp. 45-56. 40. Charkravarti Srabanti, (September 2006), Health Insurance Distribution for the Poor in West Bengal: Existing Challenges and Possible Solutions, The ICFAI Journal of Management Research, Vol-V, Issue-9, The ICFAI University Press, Hyderabad, Pp. 29-47.

***