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Rural Insurance Scenario – A Research based presentation

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

New Delhi

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

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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”

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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

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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.

Macro Study

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Key Findings of the Research (contd.) Delivery infrastructure in the form of District Cooperative

Banks, Cooperative Societies, NGO’s 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

Macro Study

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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 daughter’s

marriage and children’s 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 mentality…Safety in numbers.

Macro Study

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Name of the institution/instrument

Accessibility/ coverage of each branch

Rural presence/ penetration

Regional Rural Bank 15-20 villages 5000+ pop size village

Commercial bank (Rural Branch)

5000 account holders spread over (35-40 villages)

5000+ pop size village

Post office 5-6 villages 2000+ pop size village

Cooperative society 10,000 members spread over 20-25 villages

5000+ pop size village

*ITC E choupal 5 to 7 villages Prosperous village

District cooperative bank 7500 accounts Block head quarter

Kissan Credit Card 12% of total no. of farmers in rural area

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.

Complementary Delivery Systems

Macro Study

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Micro Research Study

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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

Micro Study

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Villages

Panchayats

Blocks

Tehsils

District

1031

112

14

5

1

District Muzaffarnagar - Span of a Block

74

8

Per Block

Micro Study

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Evaluation Criteria

Available Channels

Feasible Channels

Banks

Panchayats

NGO’s & SHG’s

Cooperatives

Agents

Post Offices

Industrial Fin Inst.

Cybermediaries

Eco Exchange Pts

Brokers

Coop Banks

Panchayats

Cooperatives

Agents

Reach

Support requirements

Business acquisition capability

Influence on target segment

Operational discipline

Customer servicing

Financial transaction handling

E-Bima

New Channel

Trust & reliability

Distribution Channels

Micro Study

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BLOCK COORDINATOR (14)

Coop BankPanchayatsCooperativesAgentsE-Bima

DISTRICT COORDINATOR (1)

385201

No of Channel Units per Block

Insurer’s Resources

Suggested Strategy Model

Av. No. of Agents per LIC Dev Officer : 37

Micro Study

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Infrastructure• A Van• A Simputer with a Printer• Video-Audio Facility

Human Resources• One Driver• Two sales cum administrative staff / agent

Site and Mode of Operation• Moves Village to Village• Parks at Panchayat, Local School , Village Chaupal• Visits 2 Villages and one haat a day• Works 8 Hours a day

E-BIMA

Micro Study

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Role

• 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

Role and Benefits of E-BIMA

Micro Study

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• 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.

Take Away

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THANKS