Rural Insurance Scenario A Research based presentation

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

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” 2

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 3

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 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. 4

Macro Study 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 5

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 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. 6

Macro Study Complementary Delivery Systems 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 2025 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. 7

Micro Research Study 8

Micro 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 9

Micro Study District Muzaffarnagar - Span of a Block District 1 Per Block Tehsils 5 Blocks 14 8 Panchayats 112 74 Villages 1031 10

Micro Study Available Channels Banks Cooperatives Panchayats Agents Post Offices Cybermediaries Industrial Fin Inst. Eco Exchange Pts Brokers NGO’s & SHG’s Distribution Channels Evaluation Criteria Reach Influence on target segment Feasible Channels Coop Banks Trust & reliability Business acquisition capability Support requirements Financial transaction handling Operational discipline Cooperatives Customer servicing E-Bima Panchayats Agents New Channel 11

Micro Study Suggested Strategy Model DISTRICT COORDINATOR (1) BLOCK COORDINATOR (14) E-Bima 1 Insurer’s Resources Panchayats Coop Bank Agents Cooperatives 20 5 8 3 No of Channel Units per Block Av. No. of Agents per LIC Dev Officer : 37 12

Micro Study E-BIMA § 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 13

Micro Study 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 14

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. 15

THANKS 16