1 Rural Insurance Scenario – A Research based presentation Venue : 19 October, 2004 FICCI 9 th Conference on Insurance New Delhi By : Naren N. Joshi Chief Representative ING Insurance International B.V.

2 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 ”

3 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

4 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

5 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

6 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

7 Name of the institution/ instrument Accessibility/ coverage of each branch Rural presence/ penetration Regional Rural Bank15-20 villages5000+ pop size village Commercial bank (Rural Branch) 5000 account holders spread over (35-40 villages) pop size village Post office5-6 villages2000+ pop size village Cooperative society10,000 members spread over villages pop size village *ITC E choupal5 to 7 villagesProsperous village District cooperative bank7500 accountsBlock head quarter Kissan Credit Card12% 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

8 Micro Research Study

9 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

10 Villages Panchayats Blocks Tehsils District District Muzaffarnagar - Span of a Block 74 8 Per Block Micro Study

11 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

12 BLOCK COORDINATOR (14) Coop Bank PanchayatsCooperatives AgentsE-Bima DISTRICT COORDINATOR (1) No of Channel Units per Block Insurer’s Resources Suggested Strategy Model Av. No. of Agents per LIC Dev Officer : 37 Micro Study

13  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

14 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

15 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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