Introduction
The insurance industry in India liberalized in 2000. Even after two decades, the reach has not expanded beyond the urban domains. If the overall market has to grow, insurance companies need to look at rural markets rather than fight for the same urban market pie. Despite the vast potential in rural areas, the insurers believed that the rural opportunity is commercially unviable except for regulatory requirements.Rural insurance is a significant challenge for public and private insurers due to the scattering of masses over a broad dissection of the geographical, socio-cultural, and linguistic landscape. Further, the rural folks prioritize their assets over their own precious life. This article examines the opportunity, problems, and strategies for harnessing the potential in rural India.
The rural opportunity
In the absence of a definition of rural as per census, we solely rely on the inference, what is not urban, is rural. Insurance Regulatory & Development Authority (IRDA) qualification for rural is a population of less than 5,000, density < 400 people per sq km,and at least 25 percent people engaged in agricultural pursuits. The definition brings 72 percent of the population under the rural ambit.
The rural market is vibrant and holds tremendous potential for the growth of the insurance business, mainly because of the strong saving habit. There are more than 6 lakh villages with a population of 905 m (Statista, 2022). The large population, high savings rate, much disposable income, changing rural aspirations, rising literacy levels, significant progress in Information and communication technology, and infrastructure point toward the largely untapped market.
With 33% of public sector bank branches in rural areas, 90% of the post offices in India catering to rural areas, haats (periodic markets) and melas (exhibitions), mandis (Agri-markets), and a sizeable public distribution system, the rural markets offer an ample opportunity.C. K. Prahalad emphasized that “the future lies with those companies who see the poor as their customers.” In terms of purchasing power, it may not have great depth, but it has enormous width, like the bottom of any pyramid.The rural markets are pretty heterogeneous, with state-wise variations in rural demographics.
Problems
The life insurance industry’s engagement with rural India is only a corporate social responsibility (CSR) rather than a business. Rural insurance, much like priority sector lending, is seen as a poison pill by the private players. The fulfillment of IRDA’s norms for insuring rural lives lacks proactive enthusiasm. IRDA mandates insuring 5000 new lives or selling 7% of policies in rural areas in the first year.The number stands at 20,000 new lives or 16% number of policies in the fifth financial year since the inception of an insurance company.The insurers find that the rural population is widely scattered and demands long-distance travel of agents. The other significant challenges are as follows:i) lack of awareness and education, ii) non-availability of documents for certification, iii) non-availability of age proofs and death certificates, and iv)lack of focus on pure risk, and v) high lapsation of policies. The small number of advisors operative in rural markets is another big grey area. IRDA has revealed that the agent population is much lesser in rural areas. Therefore, alternative distribution channels become crucial for success in rural areas.
Rural marketing practices of players
Only LIC has been doing somewhat well on the rural marketing front, primarily due to government support and initiatives.The social security fund set up by LIC finances 50% of the premia in some popular rural group insurance schemes, such as Jana Shree Bima Yojana (JSBY) and Landless Agricultural Labourers’ Group Insurance (LALGI). The LIC has been doing intense publicity through mobile vans and other media. The radio and television reach almost every village through community sets.
Furthermore, like all other financial institutions, the word private seems to signal a worry among the rural folks. The task facing most private players is to get into an exercise of building image and trust to gain credibility. Rural folks trust banks and post offices more for buying insurance than buying from the agents.Expensive policies, products not designed to meet villagers’ requirements,and the professional working style have failed to generate confidence as the rural population prefers a personalized approach.
Among the private players, Aviva, ING,and Tata AIG are some names who have been keenly trying to do something in rural areas. Aviva has adopted a differentiated approach of focusing on unique products to suit the customers’ needs. These products are easy to understand, do not require medical tests, and have more straightforward documentation. Their unique network of advisers recruited from the local populace and promoting life insurance through rural media such as wall paintings, vans, local events,and village haats are noteworthy.
Strategies
To tap the rural markets effectively and profitably, insurers need specific strategies for the marketing mix ingredients.They should offer simple and flexible product sat affordable premia considering the seasonal harvest income.A combination of health and life cover design must cater to the rural mass. Micro-insurance products can better address self-employed rural consumers and laborers as the willingness to buy depends ontrust. Composite insurance products for the rural poor’s life and assets should do well. IRDA needs to relax the norm of life insurance companies offering non-life insurance products for miraculous results. Group insurance will be best-suited for women belonging to low-income segments.
A judicious mix of the promo tools is essential. Since TV and print media has limited usefulness, wall paintings, posters, hoardings in bright, attractive colors and shades should be utilized. Talk shows, free health check-up camps, and other social development activities can help build trust.Brochures and pamphlets containing testimonials of influential customers/ opinion leaders must be vernacular.
The selling process and operations should be simple and hassle-free. For rural customers, a standard age proof will help. In cases of accidental death or similar situations, the insurance companies should be willing to substitute a First Information Report (FIR) with a declaration from community members. The premium payment process should be convenient and cost-effective. The customer helplines extending help during policy form filling and later for claim settlement should be easily accessible and user-friendly. The policy documents should be easy to comprehend to minimize mistakes in filling the claim forms.
Distribution channels would hold the key to a successful rural life insurance marketing strategy. The cost of building exclusive rural delivery systems is prohibitive. Channel choice needs to base on reach, trust, and reliability. For a ‘win-win’ situation, the insurers must collaborate with other institutions like panchayats, district cooperative banks, dairy/agricultural cooperatives, NGOs, Post offices, health workers, teachers, the village sarpanches, patwaris, and self-help groups. The NGOs involved in micro-finance would be well suited because they work extensively with the rural poor for social causes and enjoy goodwill.Significantly few insurers are tapping these channels for effective rural reach. Hence, it is apt to say that the rural market is no longer sleeping; the insurance players are.
The insurers should exploit India’s most relevant and largest postal network globally. Due to extensive and satisfied clientele for savings/recurring deposits and Kisan Vikas Patras, the postal department’s Rural Postal Life Insurance may offer a possibility of a strategic alliance between the insurers and the post offices.Besides the postal agents, educated cable TV operators and youth club members are also potential agents. The cable operators have access to all homes and visit them to collect the monthly subscription. The youth club members who are also part of government programs,e.g.,health, sanitation,and education, need to be roped in. Registered medical practitioners and teachers command considerable respect and influence and enjoy villagers’ trust.
