Rural Insurance Scenario – A Research based presentation

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

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. 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

4. 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 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.

5. 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

6. 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.

7. Macro Study Complementary Delivery Systems * 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.

8. Micro Research Study

9. Micro Study 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

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

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

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

13. 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

14. Micro Study Role and Benefits of E-BIMA • 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

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

16. THANKS