An overview of the Insurance Sector in Rural

8/7/2019 An overview of the Insurance Sector in Rural

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Objective of the Presentation

Understand rural customers current knowledge,attitudes and practices regarding savings, loansand insurance

Identify existing factors, if any, prohibiting thepurchase of insurance policies

Profile potential rural customer segments in

terms of attitudes, behavior and demographics

Develop a broad, cost effective distributionstrategy


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Rural Marketing

Rural Marketing: The new Holy Grail. :

Rural Marketing: The new Holy Grail. This virgin marketwherever and whenever explored by any industry has alwaysproved its worth and powers no lesser then the Holy Grail TheIndian insurance industry also has witnessed exceptionalgrowth after private entities were allowed entry into the

sector . There exist a vast potential in the rural areas wheremore than 70 per cent of the population lives

The Next Billion :

The Next Billion What most of the insurance companies aremissing is an opportunity to serve the next billionconsumers. They are essentially the band of consumersuncomfortably positioned between those who are part of theformal economy and those at the bottom of the pyramid.


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Emergence of Rural Marketing. :

In recent years, rural markets have acquiredsignificance, as the overall growth of the economy

has resulted into substantial increase in the

purchasing power of the rural communities.On account of green revolution, the rural areas are

consuming a large quantity of industrial and urban

manufactured products.

In this context, a special marketing strategy, namely,

rural marketing, has emerged


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What Makes Rural Markets

Attractive? :

What Makes Rural Markets Attractive? :

What Makes Rural Markets Attractive? Rural market has following attributesand the following facts substantiate this: -

742 million people Estimated annual size of the rural market

FMCG Rs. 65,000 Crore Durables Rs. 5,000 Crore Agri-Inputs (includingtractors) Rs. 45,000 Crore 2 / 4 Wheelers Rs. 8,000 Crore In 2001-02,

LIC sold 55% of its policies in rural India. Of two million BSNL mobileconnections, 50% are in small towns / villages

Of the 6.0 lakh villages, 5.22 lakh have a Village Public Telephone (VPT).

41 million Kisan Credit Cards have been issued (against 22 million credit-

plus-debit cards in urban), with cumulative credit of Rs. 977 billion resultingin tremendous liquidity.

42 million rural households (HHs) are availing banking services incomparison to 27 million urban HHs.

Investment in formal savings instruments is 6.6 million HHs in rural and 6.7million HHs in urban.


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Insurance in Rural Sector :

Insurance in Rural Sector

Insurance in India :

Insurance in India Insurance sector in India is one ofthe booming sectors of the economy and is growingat the rate of 15-20 per cent annum. contributes toabout 7 per cent to the country's GDP Rural India

offers great potential that needs to be explored.

Next slide we will see how ING life insurance ispenetrating in to rural India.


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BLOCK COORDINATOR (14)

Coop BankPanchayatsCooperativesAgentsE-Bima

DISTRICT COORDINATOR (1)

385201

No of Channel Units per Block

Insurers

Resources

Suggested Strategy Model

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

Micro Study


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Strategy Strategies undertaken :

Strategies undertaken To tap the rural market, the company has developed a multi

channel distribution network to increase touch points. It has established 260 micro

offices in taluka and districts across key states, Appointed over 20,000 advisors

dedicated to the rural segment and Tied up with leading Regional Rural Banks,

Micro Finance Institutions (MFI)s and NGOs.

Out of 78 per cent households having awareness about life insurance in rural India,

only 24 per cent were policy owners. India's untapped rural market holds

tremendous growth opportunities for life insurance companies with business worth

US$ 231.67 million for insurance firms.

Another opportunity lies in offering low-interest personal loans to the rural

population. To tap this market, microfinance institutions (MFIs) are now using

mobile phone technologies to augment the reach of micro-financing in rural India.


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Flow OF Money

Annual Household Money Flows :

Annual Household Money Flows Estimated Avg.income: 5400040000 32000 Range of income: 20k 200k 15k-150k 5k - 80kSavings ratio: 35% 30% 30% (Avg. values (Rs.) As would beexpected, educational levels are correlated to income & also to

higher spending and saving Saving Habit :

20 (Figures in %) Avg. saving in - formal insts.: 12400 9500 5900 -insurance: 3500 3000 2900 The more affluent are more likely tosave in formal institutions and with insurance, with insuranceconstituting a large part of the savings pie. Saving Habit

Penetration ofInsurance Products :

Penetration of Insurance Products % Over one-third have insurance,with life insurance having the maximum penetration. Figures in %


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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.


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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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Key Findings of the Research (contd.)

Flexibility in Premium payments is important.

Security of income and bulk returns, especially for daughters marriage andchildrens 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 insurancethrough a private player vetted by the group Herd mentalitySafety in numbers.


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Recommendations & Conclusion

STRATEGIES FOR SUCCESS Heighten need for insurance Education on benefits of

general insurance .. though not a saving but a risk cover in case of adversities alifeline in times of adversity Ease of process - Subscription - Renewal - Claim

settlement

STRATEGIES FOR SUCCESS Product : Need to promote agriculture pump set and

cattle insurance among owners Also need to promote health and personal accidentpolicies, low awareness but high concerns Existing owners and lapsers of General

Insurance would be an easier target

STRATEGIES FOR SUCCESS Price : Lower premiums would be preferable, even by the

richer states like Punjab Place : Preferred channels are Banks, Co-operatives &Sarpanch Promotion : Participative information dissemination through small

cohesive groups at farmer meets, melas, co-operative society meets.

STRATEGIES FOR SUCCESS For vehicle loans tie ups with companies to insure

while selling the vehicle Tie with banks and co-operative societies to sell generalinsurance policies


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THANK YOU

Presented By:

Punit BhandariRoll NO. # 34

Ex-PGDM(FULL TIME)

Symbiosis Institute of Management Studies


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An overview of the Insurance Sector in Rural