DEEPENING OF INDIAN INSURANCE PENETRATION THROUGH THE ENSUING GLOBAL FINANCIAL INCLUSION TO IMPLEMENT

 THE CURRENT ERA OF INDIAN INSURANCE SECTOR:-

After the introduction of liberalization & privatization of in Indian Insurance Industry, the last 10 years had been a decade of stabilization, with a new regulatory mechanism & with an absolutely new regime with a different look, and now it is obvious that the insurers are about to conclude their process of settling down to this new environment and at the same time the regulator has also been settled down. All the insurers are more or less familiar now with the contours of business, market segments & policy/products positioning that will sell well. At this juncture, the insurers are invited to look at the budget speech FY 2013-14 when the Honourable UPA Finance Minister announced his vision of insurance inclusion and stated that “The Government proposes….all towns of India with a population of 10,000 or more will have an office of LIC and at least one public sector General Insurance Co.”.

Inclusive growth is now recognized as a necessary condition to ensure long-term sustainability of growth in Insurance market of India. Bringing in financial inclusion for the poor, rural and socially disadvantaged sections of the society is now a major thrust area for policy interventions. The vulnerability of this category of households is very high to various risks related to their lives and livelihood activities. Therefore, making insurance services available to them becomes a key strategy to ensure that sustainable social protection is offered to these households. The rural and social sector obligations and the micro-insurance regulations from IRDA are definitely the important steps in the direction of ensuring financial inclusion and social protection for the poor.

Pensions, life, general insurance and reinsurance players may well become the victim of the great unwind after the Global Financial Crisis of 2008-09 – raising to the spreading infection in the DNA of Capitalism as a result of the unprecedented level of disruption in the global financial markets. The scale, speed, severity and synchronization of the global downturn are turning new chapters in history near the speed of light and comparisons with 1929 are being rendered inadequate in real time. It is said that generals always prepare to fight the last war. Are governments and central banks doing the same with the present great unwinding global financial crisis by dealing with it as if it was 1929 all over again? As Mark Twain said, “History doesn’t repeat itself, it rhymes!”The focus is entirely on cutting interest rates, rescuing banks and arranging government stimulus. Along the way we have forgotten to connect the dots of how this crisis is likely to affect the entire “Roof Top & Underlay”, i.e., life, pensions and general insurance, and “The Pillars of Hercules”, i.e., reinsurance. They together provide the super-structure for globalised capitalism as a system to rest on and operate from. This runaway capitalism includes the massively interconnected “Eight Bubbles” – sub-prime mortgages; emerging market loans; commodities; corporate bonds; commercial and residential property; credit card debt; currencies; and credit default swaps within derivatives – of which Pensions, life, general insurance and reinsurance are the DNA of modern capitalism. In order to understand how modern capitalism works and how risk is syndicated, one has to be able to understand the mechanisms of risk transfer that are inherent within insurance and reinsurance. The vital role which the insurance industry plays in our future within a globalised economy, as the underlying fabric of commerce, community and globalization, is often overlooked. One just has to look closely: the many challenges that humanity faces collectively — including climate chaos and the environment; geo-politics and energy; organized crime & extremism, advanced technologies such as bio, info, nano, robo & AI; demographics skews; resource shortages; pandemics; financial systems and systemic risk, trans-humanism and ethics — are manifest as embryo or established risk transfer mechanisms within the insurance and reinsurance markets. As an example, Lloyd’s of London which was established in 1688 remains one of the premium places in the world for mapping out and covering global risk via its syndicates that provide specialist risk cover. The different components of the insurance industry stand to fare very differently as a result of the global credit crunch. Pension and life insurers are likely to take a harder hit than health, property and casualty insurers because of their typical asset mix. Their exposure to global equity markets, commercial property and corporate bonds — asset classes which have suffered heavy falls during the last one decade — has had a severe impact on balance sheets. In addition, the way assets in many complex securities are reported, result in unprecedented collapse in mark-to-market valuations. Even if balance sheets looked solid years ago they don’t do so any more in many cases in insurance parlance.

INDIAN INSURANCE MARKETS HAVE POTENTIALITY FOR INCREASING PENETRATION :-

One of key roles of the insurers in India is safeguarding the financial health of small & medium sized enterprises. In addition to the protection provided by various social security systems, insurance cover is highly essential for people to insure themselves against inability to work, to set aside money for retirement or protect themselves against loss of their assets and may relate to ensuring various liabilities to their employees & others. Insurance also reduces the investment risks faced by different organizations and the state. Many companies find it expensive, if not impossible, to take out a loan without purchasing the requisite insurance policies. Insured thereby is allowed to reduce the cost of raising capital they need. By reducing the investment risk, insurance may definitely encourage companies to go for long-term planning to increase their risk tolerance. A good lot of investments in new production facilities & adopting the new technology to upgrade their processes and even for the newly established company may require adopting necessary financial means to immediately and as far as possible adequately to make good every conceivable or sustained loss. May be debated but it is of no overstatement that the availability of insurance cover is often heralded as a factor of production in itself. Therefore, in India insurance market has invariably has a huge potential to have a greater market share.

For the exact efficiency, efficacy, effectiveness and governance of insurance inclusion we need to admit that in today’s business climate, we really need and expect right information at our fingertips, whenever needed. We therefore require a resilient, scalable warehousing of data solution that could recognize and consolidate our data and ensure that we could access and manage data easily. While insurers increasingly acknowledge the importance of data warehousing and the explicit role of data – both big and small, that plays havoc in insurance business – but as it appears insurers in India are less inclined to manage it effectively. Here a recent research showed 74 percent of insurance executives said that information will be a main source of competitive differentiation while 80% cited the ability to collect and analysis data fast enough as the biggest data challenge. In this world of sophistication where we can provide solutions around the globe instantaneously, we are guilty of perpetuating a world of reconciliation, spreadsheets & manual accounting and estimation. Since data sources come from multiple places – even if it’s not strictly big or process data, Insurers hold almost immeasurable amounts of the stuff, a commodity that offers huge opportunity. The ability to unlock insights will be the key of essence. Searching for the right data is extremely time consuming and often hamper the productivity and problem solving. Skilled employees are wasting time navigating between systems, carrying out on-the-fly analysis. Fast excess to relevant high-quality data can make the difference between a well-informed decision and a catastrophic one. Since pragmatic and cost effective systems are available for effective increase in market share our target must be to get the right data and delivering it at the correct point of decision.

CONSIDERING THE CURRENT INDIAN INSURANCE MARKET POSITION:-

Good-lot of favourable factors being in place for Indian insurance industry to bloom into one of the fastest growing financial services markets in the world. This still growing insurance market is at an inflection point as – the rising incomes driven by economic growth are deliberately boosting the demands, and also increasingly sophisticated consumers with differing needs are driving some differentiated acumen of the underwriters to play. So in this current era, the insurers to emerge as winners, they must re-examine their strategies and commit for some bold, breakthrough approaches. This will not only help branding the Insurance Company and putting that insurer in pole position in the race of insurance customers, but will also help them to build sustainable and profitable portfolio.

Now with the passing of 49% FDI, the regulatory framework will be widely open to technology, compliance, corporate governance and invite global competition. The insurance penetration will invariably increase if the people of India can be made aware of the various risks associated with their living – i.e. threats of their live, business and various other external & internal environmental hazards. Moreover, the massage must be spread very widely that insurance business is providing very essential service to the society, insurance business is the art of selling promise to protect and providing the economic security which is the need of the current era to every individual as carefully & cautiously provided through insurance, and thereby strengthening India’s economy, growth and financial stability.

ABOUT LIFE INSURANCE MARKET IN INDIA:-

India’s life insurance market has been rapidly growing over the past eight years, with accretion of new business premium at over 35-40% per year. This impressive growth has been driven by liberalisation of the life sector, enabled the entry of a good number of new players with significant growth aspirations and capital infusions. These new players have contributed to life sectors’ development by significantly enhancing product awareness, promoting consumer education and information and establishing more organized & competitive distribution channels.

In urban areas, the penetration of life insurance in around 60%, and it is remarkably less in the low-income unbanked segment. In rural areas, life insurance penetration in the banked segment is estimated to be around 40%. In rural market consumers rank life insurance higher than other investment options / products because of its ease and comfortable convenience in investing, tax benefits, and protection it assures.

Insurance players have now just begun addressing areas beyond traditional life products. There is an untapped opportunity in health and pension insurance areas, where the life insurers so far have no meaningful presence as the health insurance is only allowed as the rider but Mediclaim Policies covering all expenses relating to the medical treatments are only covered by General Insurance Companies. Health insurance in India is about one-fifth the size of that in the United States or Germany. Again in relation to Personalised Policies, as per Old Age Social and Income Security (OASIS Report, 1999), there will be 113 million Indians over 60 years of age by 2016 and 179 million by 2026 – so invariably the longevity risks are on the rise as advanced healthcare has increased life expectancy and thereby increased the risk that the people may outlive their savings as they need to live at least a full 15 odd years or more after their retirement as most of the Indians will have an expected lifespan of over 75 to 80 years.  Moreover, the healthcare costs have outstripped general inflation, eroding the retirees’ purchasing power. Savings and investment risks are intensifying, with rising inflation or steep market declines. A current estimate shows that barely 10 to 11 per cent of the working population in India is somehow covered by formal old-age social security mechanisms. So systemic reform and individual insurer’s innovation in pension policies – both are of dire need of the current. Indian policy-makers need to leverage learning from other countries to improve retirement benefits to those under the pension net, and also explore creative options to bring more people from the unorganized sector into the retirement pension schemes that is the dire social need.

The Indian health insurance riders in life insurance market (as the basic health is still in its infancy, with only around 2% of total health care expenditure covered through insurance products. We expect the health insurance market to grow significantly, driven by both increased supply and demand, but some critical challenges will have to be overcome. These items include poor standardization of treatment costs across health providers, a lack of data for risk management and product design, untested demand from the individual segment, and limited bargaining power of health insurance players with the providers. So a selective and more focused role to be played by the insurers and life insurance players could initially focus on these segments and develop the required strategies for dealing the same.

With the life insurance premiums have grown over the last 7/8 years, low-margin single-premium products and potentially volatile ULIPs have accounted for most of the growth in life sector. These products have proven invariably easier to sell, but focusing exclusively on these could impair growth and long-term profitability for the life Insurance sector in India.

Adding to the growth driven by sheer economics is the demand for long-term savings and investment products – a gap met by life insurance for the Indian consumer. Consumers rank life insurance higher than other investment options because of its ease, convenience in investing, inherent trust in operation, tax benefits, and protection. Amongst all financial products in India, life insurance enjoys the highest popularity and demand. Contrary to the conventional directly correlated risk – return relationship, Indian Life Assured perceives life insurance as a low-risk and high-return investment – basically a perception driven by high awareness of the Life Insurance Corporation of India (LIC) and its record of delivering stable returns over the decades.

ABOUT GENERAL INSURANCE MARKETING INDIA:-

In General Insurance Sector the priority of smaller new entrant’s (i.e. the private sector companies) is simpler, but is very crucial one. These private companies need to achieve volume and build scale rapidly as most of them are operating below optimal scale and no doubt find themselves at increasing competitive disadvantages. If this widening gap with the large-scale players is not bridged, the small player will face increasing structural barriers to grow – particularly on distribution and fewer degrees of freedom in pricing and cost management. To combat pressure from large players, small new entrants in the private sector general insurance market need to consider the following approaches;

1. Distinctive segment wise or channel-specialist strategy to penetrate the selected space in the specific segment of the market;
2. Focus on two/ three customer segments adopting a tailored approach for deep penetration;
3. Definite focus on building a high-quality and profitable portfolio by becoming the channel specialist – may be through direct marketing (being direct-only player in the market with specific approach) or resorting to strong bancassurance linkages.
4. To refine a best-in-breed approach in managing talent constraints – creating a large, readily accessible & dynamic agents, and obviously managing attrition & productivity better that their competitors, or introducing a new distribution alliance strategy to overcome bottlenecks in human-channel distribution growth.
5. There is a need to resorting to the right marketing channel and ensure the scope to boost alternative channels simultaneously. Of all non-agency channels bancassurance is more acceptable to Indian customers for buying insurance than are non-bank finance companies. Some of them are resorting to direct channels such as telephone or internet.

Given the high penetration of banking products, bancassurance could be the most important channel for General Insurers to rapidly acquire new customers. But the cross-sell rates of Indian Banks are definitely lower than those in developed markets (say, in Spain, Italy or in France, around 15 to 20% of a bank’s customers would have bought insurance cover through the banks only). Bank employees have high variance in selling skills and banks in the public-sector typically face low operating flexibility in creating a true sales culture. Low technological capability and lack of process integration also lead to poor servicing.

Increasing income levels and dramatic demographic shifts will lead to the emergence of distinct consumer segments that need to be served in fundamentally different ways. Consumers in this current era are having three distinct features:

1. Growing middle class: The middle class, consisting of ‘seekers’ (having annual household income in between Rs. 2 to 5 lakhs) and ‘strivers’ annual household income of Rs. 5 to 10 lakhs) will grow to 16.2% of the population or around 40 million households by 2015 and in those segments insurance is utilized mainly for tax planning, retirement planning and savings, as well as for risk protection for the higher income professional (so called ‘Buddhijibi’) class. Although very attractive, this market segment is under intensifying competition, as most life & general insurance players are focusing on it for building their business volume.
2. Emerging more bank user: At the lower base of the population pyramid, the ‘aspirers’ (annual household income of Rs. 1 to 2 lakhs) will comprise 45.6 per cent of the population (around 120 million households by 2015 end), representing a formidable emerging bank-user class where insurance is used deliberately for long-term savings, promising & providing higher return at low risk, being considered as the sure security for covering uncertainty / contingencies, given the lack of alternative investment option. Key challenges in this segment are managing profitability due to low premium size and high underwriting risk.
3. Growing high income earner in the urban areas: With the various schemes being implemented in the urban areas and the better technical guidance being available therein, with the increase in the length of motor able roads – there are rising effluents in Indian urban areas. This segment may have relatively low need for risk protection, being self-insured with high investment balance – may invariably resort to avail various insurance covers as insurance is viewed by them mainly as an investment vehicle (consideration for using the products of life insurance sector) &/or an estate/employee management tool (for using the insurance products in the non-life sector).

Here the product distribution excellence will determine success. Success for non-life insurance players will hinge on achieving excellence in distribution by raising agency productivity while simultaneously exploring new models in non-agency product distribution – like direct on-line selling of products.

HEALTH SECTOR IN GENERAL INSURANCE INDUSTRY:

General Insurers as per the recent segment wise IRDA statement, total gross premium on non-life insurance have reached Rs. 77541 Crores (as on 31.03.2014) with 12.20% growth rate. Highest share came from Motor portfolio with Rs. 33887 Crores (showing 14.30% growth). In Health sector, overall growth achieved over 13.5% with a premium base of Rs. 17624 Crores. With FDI limit in insurance sector set to go up to 49% from the current 26%, several global insurance giants are likely to revive their plans to enter the under penetrated the Indian insurance market. Expected FDI amount in Indian Insurance Market (Life, General & Health Sectors) are between Rs. 20000 – 25000 Crores. So, segment-wise the highest premium written in Motor Department (for Own Damage & Third Party Policies) but Health Sector is becoming the segment for second highest growth in general insurance market. Health Insurance is an ideal mechanism for protecting an individual’s earnings by transferring the risk to the insurer. A properly managed health insurance program would not only protect the finances of the individual but also ensure wellness by providing access to preventive health care. Claim outgo is being funded from either reserves or cross-subsidized by other classes of insurance business like fire and engineering. Life insurers also market health insurance which is mostly in the form of riders or long term benefit policies. There are very few stand-alone health insurance products in the life sector. Health insurance continues to be one of the most dynamic & fastest growing sectors. Health insurance portfolio has grown in an average 20% of last few years. It is estimated that in coming 6 – 7 years it might overtake motor insurance portfolio. Research, innovation, develop marketed products that cover maternity benefits, cash less facility, CB, restoration benefits, covering critical illness riders, top-up plans, senior citizen plans, multiplier benefits, OPD coverage,  life-long renewal etc. Health Insurance in India began with the ESI Act, 1948 and it provided for both cash and medical benefits. The ESIS  was soon followed by a scheme for Central Government employees, the Central Government Health Scheme (CGHS).The first serious attempt to standardize the terms and conditions of health insurance was made  by the GIC is known as the “Mediclaim” Policy. The insurance industry also innovated and launched certain other health insurance related products for lower socio-economic groups (Universal Health Scheme).From 2008 onwards Union Government  has introduced RSBY Policy for  BPL Families for all over the India. Hon’ble President of India Sri Pronab Mukherjee has recently expressed in Joint Session of Parliament about the urgency & tightening Health Insurance & Pension safety nets. Hon’ble Prime Minister Of India Sri Narendra Modi called a meeting on Health Reforms recently where  the format of Health Insurance for all Indian Citizens, setting up Medical Colleges in each District & 3 yrs B.Sc. Course in Community Health are discussed. High power meeting was conducted by PM Mr. Narendra Modi on health reforms where decision was taken for health insurance coverage for all Indian citizens by opening new medical colleges in each district. Three years B.Sc. course in community health services is likely to be introduced. Finance Minister Sri Arun Jeitley expressed the need for a National Policy on Health as well as reforms in Health Insurance. The then Health Minister Dr Harsh Vardhan recently offered the first glimpse into BJP Govt’s ambitious UHA Scheme for Health Insurance component including Diagnostics & availability of 50 essential drugs. Union health Ministry is eager to set up E-health regulator to regulate health care providers through Electronic Health Record guidelines (EHR). With the help of ICT (Information & Communication Technology) adoption it is expected to archive remote consultation, diagnosis & treatment through Telemedicine.

Health Sector is becoming the segment for highest growth in general insurance market. Health Insurance is an ideal mechanism for protecting an individual’s earnings by transferring the risk to the insurer. A properly managed health insurance program would not only protect the finances of the individual but also ensure wellness by providing access to preventive health care. Claim outgo is being funded from either reserves or cross-subsidized by other classes of insurance business like fire and engineering. Life insurers also market health insurance which is mostly in the form of riders or long term benefit policies. Hon’ble Prime Minister of India Sri Narendra Modi called a meeting on Health Reforms recently where the format of Health Insurance for all Indian Citizens, setting up Medical Colleges in each District & 3 yrs B.Sc. Course in Community Health are discussed. In Health sector, overall growth achieved over 13.5% with a premium base of Rs. 17624 Crores.  In Non-life sector, Health Portfolio will become the 2^nd largest business segment after Motor Insurance portfolio.

Heath Insurance Industry in India is having several teething problems which create obstructions in expansion.

• High Claims ratio.
• Involvement of moral & morale hazards.
• Including various fraudulent claims (refer news item of ‘Mumbai Mirror’ in article).
• Increasing litigation with Customers.
• Dissatisfaction of Insured : Due to loading of Premium, delay by TPAs in providing Pre-Authorization to obtain cashless services, delay by insurer to provide float fund & TPA charges, over charge by Hospital / Nursing Home.

Advantages of Health Insurance as perceived in India:

For Individual clients:

i) Protection against financial loss for medical treatment & peace of mind.

ii) Better quality of private medical care.

iii) Choice of facilities with freedom in selection of a time for treatment (no waiting period).

vi) Choice of hospitals and doctors as per personal convenience.

v) Private room and “hotel” facilities.

vi) Health consciousness in day to day affairs.

vii) Limited individual health costs.

For Corporate Clients:

i) Attraction and retention of qualified staff.

ii) Healthy workforce in general.

iii) Limited health care budget for the organisation.

iv) Increase productivity/profitability in the portfolio.

v) Reduce employees’ absentee rate.

vi) Employees’ loyalty.

vii) Reduce employee exodus.

HEALTH CARE & HEALTH INSURANCE REGULATIONS AS AVAILABLE IN INDIA AT PRESENT:-

Health is a state of complete physical and mental well-being and not mere absence of disease or infirmity. Health Insurance is going to be an important portfolio, huge potential of Indian market, which is largely remained untapped. Therefore, Government has taken initiative to make a change in the Indian Health Care Sector through Insurance. At present there is no standardization or regulation in the health care sector. Fastest growing segment in General Insurance Industry – Average growth is 38% to 40% per year. In Non-life Sector, Health Portfolio has become the 2^nd largest business segment after Motor Insurance portfolio. But still, majority of the population in India is not covered by Health Insurance; only 15% of total Indian citizens are covered. Two thirds of Health spending funded by own resources of the citizen. Growing middle class with high expectations and higher disposable income, is increasing demand for better health care and risk mitigation.

IRDA have issued following instructions:

• Health insurer can no longer load an individual policy claim.
• Discounts on premium will not be at the discretion of the insurer. It must be highlighted in the prospectus & policy.
• Once the health proposal is accepted minimum 50% cost of pre-acceptance health check-up will be borne by the insurer.
• If the insurer makes a claim in a particular year, the cumulative bonus accrued may be reduced at the same rate (5%) at which it is accrued.
• Age limit for all health insurance policy is extended up to 65 years. Once the health policy is being issued, it must be renewed without any break for life-long unless there is a fraud & misrepresentation.
• 15 days free look period is allowed to provide rejection of cover by the proposer, if not satisfied.

Recently IRDA has come out with a set of new guidelines. A common industry-wide pre-authorization & claim form will significantly streamline process at all stages. It is helpful to obtain a timely prior authorization. Standardization of IRDA guidelines, including common terms & conditions, up-loading of documents & keeping records in digital e-format is the need of the hour.

Issues now to be addressed in this Health Insurance segment in India:

• Prudent underwriting;
• Proper pricing;
• Educating client on economy of usage;
• Training of marketing force;
• Loss minimization;
• Expeditious claims disposal;
• Grievance redressal – with help desk method.

CONSIDERING OUR RESPONSIBILITY FOR LOW INCOME & RURAL COMMUNITY:-

Since the maximum people in India belong to low income community & living mostly in villages so we need to boost micro-insurance products mainly in rural & un-organized social sectors. In global parlance – to learn how to extend insurance to low-income households, long back, the CGAP Working Group on micro-insurance launched a research project in 2003 to document the experiences of micro-insurance operations around the world and identify good and bad practices. This project conducted a series of case studies of insurance companies, micro-finance institutions and community-based insurance schemes from around the world to learn about the provision of life/ property/health insurance to the poor. While other types of insurance are also relevant for the low-income market, including property and agricultural insurance, this initiative focused on two risks – death and illness— that are most frequently identified in demand research.

In rural areas, in India, life insurance penetration in the banked segment is estimated about 38.96% while it is marginal at best in the unbanked segment. This will change as India is seen strongly accelerating household income and a more favourable demographic profile over the next one decade thereby invariably accelerating insurance penetration and per capita coverage.

Now-a-days the followings features relating to rural populace have emerged out in India:

1. The rural people are having very high awareness levels;
2. The concept of life insurance to them is synonymous to long term saving plan;
3. Tangible & definite benefit seen at the end of tenure;
4. There are altogether more than 60 Operational Schemes at present but definitely low penetration and out of all the existing schemes – 59% of schemes provide life insurance and 57% of them provide health insurance; 74% of the schemes operate in 4 southern states of Indian territory; Of 80 listed insurance products, 45 cover only as a single risk;
5. Most products available for the rural market – whether life or for non-life – all requires a single payment of premium upon subscription.

There is a dire need to inculcate the habit of insuring amongst the villagers. The rural masses need a conviction that buying insurance is more worthwhile to them than being without it. Inculcating a habit among the rural masses to insure the assets, the lives and the health of their families has remained an elusive goal, notwithstanding the recent introduction of specialist insurance regulation that is very insurer-friendly. The task of mobilizing the efforts of insurance units to make this goal partly achievable has yet remained a slow-starter. The task is formidable but essential. Now let us discuss about — What misconceptions of the mental models and physical infirmities have been the hindrances to make even the smallest progress?

Each segmented market, including the rural one, has its particularized system of its specialist needs, values and beliefs, and a particular manner of responding to the stimuli that insurances provide it. Most of them have led their lives without insurance till now. The concept of insurance itself is new to them. The rural masses, therefore, need a definite conviction that buying insurance is more worthwhile to them than being without availing micro-insurance products. Who should take responsibility for it – is the fundamental question.  The volumes of the likely consumer demands for insurance are likely to be large, if rural segment is brought into the insurance net; but the premium per policy for the supplier may not be quite high. Not cost per policy but margins on volumes should be the primary goal. It should be a long-term corporate strategy of the insurer to create a larger future new market that has the potential to pay back in huge premium volumes, provided necessary investments in money, structure, manpower and customer education are undertaken right now. It calls for individualized selling and experts from the marketers an intimate knowledge of the product to be sold and a persuasive ability to carry proof and conviction. Another very important question is – How does one build such internal organizational competences? The main issue relates to concerning –

1. The insurance suppliers’ reluctance to enter the rural fray, and
2. The unexplained, unwillingness of the intended rural beneficiaries to accept the ideas behind the initiatives of insurers.

Development of rural markets is one of the avowed goals of Section 32 B & C of the Insurance Act, 1938. There is an element of mandated compulsion to develop an integrated system that includes the Rural Market Insurers need to keep this aspect in mind in making their annual marketing plans and long term strategies. The regulator, IRDA has also to pursue this aspect vividly with all the insurers.

Need to understand rural markets: The value and belief systems of the rural people that are targeted for sale of micro-insurance products have to be understood and analyzed. One would also have to evaluate how their needs of ‘insurance’ are currently being met and from what sources and how much they are costing them now. What kind of price-value proposition of insurers would make these rural/poor people consider a switch? How could the principle of insurance, wherein premiums are paid upfront for a promise of future financial delivery of an insurer, be sold as an acceptable proposition? Answer to all these questions will be available through effective market research to understand the preferences of the rural prospects are required.

Requirement to fulfil the rural markets’ need: The insurance products to be sold have to be acceptable and must be useful alternatives to current sources of need; the premium must be affordable, when the cost vs. benefits analysis is made. Since both the marketing process and selling the product are new to both, there have to be several nearby information and service centres that could provide information on the products, prices, and claims services of insurers.   There has also to be an infrastructure for sales and service acceptable both to the buyers and sellers in place at the grass-roots levels, as visible demonstrations of serious intent of the insurance players.

Role of NGOs for the rural market: NGOs are suggested by regulation, as one of the most important intermediaries for the insurance marketing process in the rural areas. While the NGOs usually are Good Samaritans, they are not experts in insurance marketing in which money is exchanged for a future financial contingent promise. How can they drum up consumer demand in the first place? What should insurers do to invest their money and time and a committed work force to develop a market environment that is conducive to selling micro-insurance products?

Selling non-life insurance products, where there is no return of money paid needs more insurance education of buyers. It is insurance pure and simple and not a saving instrument or an asset. How can this information be effectively converted? Is there a choice for insurers other than the NGOs? Micro-insurance is not merely an insurance program to be marketed through NGOs but a movement of large expectations to be taken to its full potential. Only the vision of insurers can set limits on the movement.

Popularizing insurance: Songs, slogans and slide shows should spread the message of what micro-insurance buying can do. Organizing public meetings at which celebrities could participate is another. Insurance selling should not merely be regarded as a program to sell insurance covers but must be regarded as a movement to inculcate the habit of buying insurance to protect the assets and health of the families to cash in on the growing levels of rural incomes in the future. It is the inculcation of the habit of buying insurance that should be the primary goal and not the volumes or premiums that would take time to mine from it. Interested insurers need to finance such programs as entry curtain raisers for their eventual entry. The soil must be prepared, the seeds have to be sown, the plants have to be nurtured before there can be a harvest. One should not expect a harvest without going through the whole process. The thinking and strategic habits of insurers need big changes first.

Insurance must be mandated in most of the social and political gatherings (like respected Chief Minister Ms. Mamata Banerjee announced her “Kanyashree Prokalpa (Scheme)” in various political addressing in different places of Bengal and it must be a priority in all such economic development.

POSITION OF FINANCIAL INCLUSION IN THE GLOBAL MARKET:-

Current projections show that, by 2030, the global middle class could constitute 50% of the world’s population. Financial inclusion – that is, access to banking services and insurance products – is critical in this societal transformation, providing valuable safety nets and springboards to potentially billions of consumers in the low-income sector who we refer to as emerging consumers.

To convert the emerging consumer opportunity into profitability, however, insurers must address considerable uncertainty and formidable operational challenges. Specifically, operational excellence is an imperative to establish and expand profitable insurance businesses across the country; even as today’s low-income consumers become tomorrow’s middle class.

Outlining the opportunity for global carriers in the recent report released during May, 2014 from EY and Leap Frog Investments (a profit-with-purpose private equity fund and the world’s largest dedicated investor in insurance and related financial services to low-income consumers in Africa and Asia), highlighting the various components of operational excellence that will be required for success in tapping the emerging consumer market. These requirements include:

1. Greater financial, operational and technical investment;
2. A differentiated operational strategy backed by a dedicated organizations, skilled manpower and robust performance management systems;
3. The ability to effectively target emerging customers through awareness (marketing), affordability (products) and accessibility (ease of purchasing, servicing and claims handling).
4. Insurance for low-income consumers has evolved differently across geographies — from 200% growth between 2008 and 2012 in Africa to a steady evolution in India and other Asian economies.
5. In Indian urban areas, after privatization of insurance market the penetration of life insurance in the mass market is about 60% but it is considerably less in the low-income unbanked segment.

WHILE CONCLUDING IN THIS DISCUSSION On FINANCIAL INCLUSION – WE NEED TO observe:-

The UN defines the goal of financial inclusion as follows (which is obviously & absolutely applicable in Indian Insurance Sector):

1. Access at a reasonable cost for all households to a full range of financial services.
2. Sound and safe institutional governed by clear regulation and industry performance standards.
3. Financial and institutional sustainability, to ensure continuity and certainty of investment; and
4. Competitions to ensure choice and affordability.

In India we find that deepening insurance penetration is possible through the following:

• Harnessing the technology & efficient management of data;
• Adopting to adequate & very effective publicity to create consciousness and understanding the need;
• Increasing accessibility of various insurance schemes & products by the customers through the creation of awareness amongst the people;
• Launching Micro-insurance products (specially Accident cover like GPA Covers) for marginalized groups;
• Creating an atmosphere of comfort & trust for people in lower strata by useful & effective underwriting of insurance befitting to the need of the customers as well as efficient handling of documentations & claims.

References: Different contemporary discussions & information as collected & collated from various text materials online & hard copies.

Source : Published in The Insurance Times, April 2015