life insurance market in india final

8/8/2019 Life Insurance Market in India Final

1/18

Life Insurance Market in India The Changing Norms

With largest number of life insurance policies in force in the world, Insurancehappens to be a mega opportunity in India. The US$ 41-billion Indian life

insurance industry is considered the fifth largest life insurance market, and isgrowing at the rate of 15-20 per cent annually, according to the Life InsuranceCouncil. Together with banking services, it adds about 7 per cent to the countrysGDP. Gross premium collection is nearly 2 per cent of GDP and funds availablewith LIC for investments are 8 per cent of GDP. Gross domestic savings of Indiawere estimated at Rs 18,11,585 crore in 2008-09, 32.5 per cent of the grossdomestic product, which is the second highest in the world just after China whichhas a savings rate of over 50 per cent ( as per finance ministers chief economic

advisor, Kaushik Basu). Yet, nearly 75 per cent of Indian population is without lifeinsurance cover. Till date, only 25% of the total insurable population of India iscovered under various life insurance schemes, the penetration rates of health andother non-life insurances in India is also well below the international level. India isfar behind the world averages and ranks 78th in terms of insurance density and 54th in terms of insurance penetration. The world averages are US $ 469.6 in terms of insurance density and 8.06% in terms of insurance penetration. Against this,insurance density was US$ 19.70 and insurance penetration was 3.17% in India for

the year 2003. One obvious reason behind such low penetration is the lack of aggressive distribution of insurance products and lack of competition in this sector till recent years. Tracing the developments in the Indian insurance sector revealsthe 360 degree turn witnessed over a period of almost two centuries.

Historical Perspective

The history of life insurance in India dates back to 1818 when it was conceived asa means to provide for English Widows. Interestingly in those days a higher

premium was charged for Indian lives than the non-Indian lives as Indian liveswere considered more riskier for coverage.

The Bombay Mutual Life Insurance Society started its business in 1870. It was thefirst company to charge same premium for both Indian and non-Indian lives. TheOriental Assurance Company was established in 1880. The General insurance

business in India, on the other hand, can trace its roots to the Triton (Tital)


2/18

Insurance Company Limited, the first general insurance company established in theyear 1850 in Calcutta by the British. Till the end of nineteenth century insurance

business was almost entirely in the hands of overseas companies.

Insurance regulation formally began in India with the passing of the Life InsuranceCompanies Act of 1912 and the provident fund Act of 1912. Several frauds during20's and 30's sullied insurance business in India. By 1938 there were 176 insurancecompanies. The first comprehensive legislation was introduced with the InsuranceAct of 1938 that provided strict State Control over insurance business. Theinsurance business grew at a faster pace after independence. Indian companiesstrengthened their hold on this business but despite the growth that was witnessed,insurance remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life insurers

and provident societies under one nationalised monopoly corporation and LifeInsurance Corporation (LIC) was born. Nationalisation was justified on thegrounds that it would create much needed funds for rapid industrialization. Thiswas in conformity with the Government's chosen path of State lead planning anddevelopment.

The (non-life) insurance business continued to thrive with the private sector till1972. Their operations were restricted to organised trade and industry in largecities. The general insurance industry was nationalised in 1972. With this, nearly107 insurers were amalgamated and grouped into four companies- NationalInsurance Company, New India Assurance Company, Oriental Insurance Companyand United India Insurance Company. These were subsidiaries of the GeneralInsurance Company (GIC).

Im portant m ilestones in the general insurance business in I ndia are:

1907: The Indian Mercantile Insurance Ltd. set up- the first company to transact allclasses of general insurance business.

1957: General Insurance Council, a wing of the Insurance Association of India,frames a code of conduct for ensuring fair conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set minimumsolvency margins and the Tariff Advisory Committee set up.

1972: The general insurance business in India nationalised through The GeneralInsurance Business (Nationalisation) Act, 1972 with effect from 1st January 1973.


3/18

107 insurers amalgamated and grouped into four companies- the NationalInsurance Company Limited, the New India Assurance Company Limited, theOriental Insurance Company Ltd. and the United India Insurance Company Ltd.GIC incorporated as a company.

Im portant m ilestones in the life insurance business in I ndia:

1912: The Indian Life Assurance Companies Act enacted as the first statute toregulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government tocollect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act withthe objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by thecentral government and nationalised. LIC formed by an Act of Parliament- LICAct 1956- with a capital contribution of Rs. 5 crore from the Government of India.

The main objective of LIC was to make insurance cover available to a largenumber of people, particularly to the lower segments of the society. Thus LIC

launched several group insurance and social security schemes to enhance its reachin the rural areas. But typically the life insurance business remained confined to thehigher strata of the society.

Thus in 1993 , Malhotra Committee - headed by former Finance Secretary and RBI G overnor R.N. Malhotra - was formed to evaluate the Indian insuranceindustry and recommend its future direction.The Malhotra committee was set upwith the objective of complementing the reforms initiated in the financial sector.The reforms were aimed at creating a more efficient and competitive financialsystem suitable for the requirements of the economy keeping in mind the structural

changes currently underway and recognising that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms. In 1994, the committee submitted the report and some of the keyrecommendations included:

i) StructureGovernment stake in the insurance Companies to be brought down to 50%.


4/18

Government should take over the holdings of GIC and its subsidiaries so that thesesubsidiaries can act as independent corporations. All the insurance companiesshould be given greater freedom to operate.

ii) CompetitionPrivate Companies with a minimum paid up capital of Rs.1bn should be allowed toenter the sector. No Company should deal in both Life and General Insurancethrough a single entity. Foreign companies may be allowed to enter the industry incollaboration with the domestic companies.Postal Life Insurance should be allowed to operate in the rural market. Only oneState Level Life Insurance Company should be allowed to operate in each state.

iii) Regulatory BodyThe Insurance Act should be changed. An Insurance Regulatory body should be set

up. Controller of Insurance- a part of the Finance Ministry- should be madeindependent

iv) InvestmentsMandatory Investments of LIC Life Fund in government securities to be reducedfrom 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in anycompany (there current holdings to be brought down to this level over a period of time)

v) Customer Service

LIC should pay interest on delays in payments beyond 30 days. Insurancecompanies must be encouraged to set up unit linked pension plans.Computerisation of operations and updating of technology to be carried out in theinsurance industry.

The committee emphasised that in order to improve the customer services andincrease the coverage of insurance policies, industry should be opened up tocompetition. But at the same time, the committee felt the need to exercise cautionas any failure on the part of new players could ruin the public confidence in theindustry. Hence, it was decided to allow competition in a limited way bystipulating the minimum capital requirement of Rs.100 crores.

The committee also suggested that :

(a) The LIC should be selective in the recruitment of LIC agents. Train these people after the identification of training needs.


5/18

(b) The committee suggested that the Federation of Insurance Institute, Mumbaishould start new courses and diploma courses for intermediaries of the insurancesector.(c) The LIC should use an MBA specialized in Marketing (a similar suggestion for the GIC subsidiaries). M ukherjee Co mm ittee

Immediately after the publication of the Malhotra Committee Report, a newcommittee (called the Mukherjee Committee) was set up to make concrete plansfor the requirements of the newly formed insurance companies. Recommendationsof the Mukherjee Committee were never made public. But, from the informationthat filtered out it became clear that the committee recommended the inclusion of certain ratios in insurance company balance sheets to ensure transparency inaccounting. But the Finance Minister objected. He argued (probably on the advice

of some of the potential entrants) that it could affect the prospects of a developinginsurance company.

The Malhotra committee felt the need to provide greater autonomy to insurancecompanies in order to improve their performance and enable them to act asindependent companies with economic motives. For this purpose, it had proposedsetting up an independent regulatory body.

I nsurance Regulatory Act (1999 )

After the report of the Malhotra Committee came out, changes in the insuranceindustry appeared imminent. Unfortunately, instability in Central Government,changes in insurance regulation could not pass through the parliament.The dramatic climax came in 1999. On March 16, 1999, the Indian Cabinetapproved an Insurance Regulatory Authority (IRA) Bill that was designed toliberalize the insurance sector. The bill was awaiting ratification by the IndianParliament. However, the BJP Government fell in April 1999. The deregulationwas put on hold once again. An election was held in late 1999. A new BJP-ledgovernment came to power. On December 7, 1999, the new government passed theInsurance Regulatory and Development Authority (IRDA) Act. This Act repealedthe monopoly conferred to the Life Insurance Corporation in 1956 and to theGeneral Insurance Corporation in 1972. The authority created by the Act is nowcalled IRDA. It has ten members. New licenses are being given to privatecompanies (see below). IRDA has separated out life, non-life and reinsuranceinsurance businesses. Therefore, a company has to have separate licenses for eachline of business. Each license has its own capital requirements (around USD24million for life or non-life and USD48 million for reinsurance).


6/18

S om e Details of the I RDA BillOn July 14, 2000, the Chairman of the IRDA, Mr. N. Rangachari set forth a set of regulations in an extraordinary issue of the Indian Gazette that details of theregulation.

Regulations

The first covers the Insurance Advisory Committee that sets out the rules andregulation.

The second stipulates that the "Appointed Actuary" has to be a Fellow of theActuarial Society of India. Given that there has been a dearth of actuaries in Indiawith the qualification of a Fellow of the Actuarial Society of India, this becomes arequirement of tall order. As a result, some companies have not been able to attracta qualified Appointed Actuary (Dasgupta, 2001). The IRDA is also in the processof replacing the Actuarial Society of India by a newly formed institution to becalled the Chartered Institute of Indian Actuaries (modeled after the Institute of Actuaries of London). Curiously, for life insurers the Appointed Actuary has to bean internal company employee, but he or she may be an external consultant if thecompany happens to be a non-life insurance company.

Third, the Appointed Actuary would be responsible for reporting to the IRDA adetailed account of the company.

Fourth, insurance agents should have at least a high school diploma along withtraining of 100 hours from a recognized institution. More than a dozen institutionshave been recognized by the IRDA for training insurance agents (the list appearsonline at http://www.irdaonline.org/press.asp ).

Fifth, the IRDA has set up strict guidelines on asset and liability management of the insurance companies along with solvency margin requirements. Initial marginsare set high (compared with developed countries). The margins vary with the linesof business (for example, fire insurance has a lower margin than aviationinsurance).


7/18

Sixth, the disclosure requirements have been kept rather vague. This has beendone despite the recommendations to the contrary by the Mukherjee Committeerecommendations.

Seventh, all the insurers are forced to provide some coverage for the rural sector.(1) In respect of a life insurer, (a) five percent in the first financial year; (b) seven

percent in the second financial year; (c) ten percent in the third financial year; (d)twelve percent in the fourth financial year; (e) fifteen percent in the fifth year (of total policies written direct in that year).(2) In respect of a general insurer, (a) two percent in the first financial year; (b)

three percent in the second financial year; (c) five percent thereafter (of total gross premium income written direct in that year).

New Entry

Immediately after the passage of the Act, a number of companies announced thatthey would seek foreign partnership. In mid-2000, the following companies made

public statements that they already were in the process of setting up insurance business with foreign partnerships (see Table). However, not all the partnerships panned out in the end (see below).IN D I AN CO M PA NIE S W IT H FOR EIGN PAR TNE R S H I P I ndian Partner I nternational Partner Alpic Finance Allianz Holding, GermanyTata American Int. Group, USCK Birla Group Zurich Insurance, SwitzerlandICICI Prudential, UK Sundaram Finance Winterthur Insurance, SwitzerlandHindustan Times Commercial Union, UK Ranbaxy Cigna, USHDFC Standard Life, UK Bombay Dyeing General Accident, UK DCM Shriram Royal Sun Alliance, UK Dabur Group Allstate, USKotak Mahindra Chubb, US

Godrej J Rothschild, UK Sanmar Group Gio, AustraliaCholamandalam Guardian Royal Exchange, UK SK Modi Group Legal & General, Australia20th Century Finance Canada LifeM A Chidambaram Met LifeVysya Bank ING


8/18

Source: U.S. Department of State FY 2001 Country Commercial Guide: India

Since opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 21 private companies have been

granted licenses. Innovative products, smart marketing, and aggressive distributionhave enabled fledgling private insurance companies to sign up Indian customersfaster than anyone expected. Indians, who had always seen life insurance as a taxsaving device, are now suddenly turning to the private sector and snapping up thenew innovative products on offer. The life insurance industry in India grew by animpressive 36%, with premium income from new business at Rs. 253.43 billionduring the fiscal year 2004-2005, braving stiff competition from private insurers.The market share of the state behemoth, LIC, has clocked 21.87% growth in

business at Rs.197.86 billion by selling 2.4 billion new policies in 2004-05.(Source: Report on Indian Insurance Industry: New Avenues for Growth2012). But this was still not enough to arrest the fall in its market share, as private

players grew by 129% to mop up Rs. 55.57 billion in 2004-05 from Rs. 24.29 billion in 2003-04. Though the total volume of LIC's business increased in the lastfiscal year (2004-2005) compared to the previous one, its market share came downfrom 87.04 to 78.07%. The 14 private insurers increased their market share fromabout 13% to about 22% in a year's time. The figures for the first two months of the fiscal year 2005-06 also speak of the growing share of the private insurers. The

share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent. On a closer retrospection it was found thatthe reason for such fall in market share of LIC is non-aggressive distribution. Although LIC has been in existence since 1956, it had not until the year 2000thought of distribution of products through channels other than agency channel.

The existing insurance player like LICs penetration in the market remained quitelow due to following a single mode of distribution i.e. distribution throughindividual agents. Even today Individual Agents happen to be the primedistribution medium followed by insurance companies worldwide. It providesemployment to millions. Infact 90% of the Life Insurance worldwide are soldthrough Individual Agents.


9/18

Life Insurance Business Underwritten Through Various Intermediaries

Insurer Individual

AgentsCorporate AgentsBanks Others

Brokers Referral * DirectBusiness

PrivateSector

59.71 16.87 8.92 0.83 7.06 6.61

LIC 98.37 1.25 0.32 0.06 0.00 0.00

Total 85.67 6.38 3.15 0.31 2.32 2.17

All data are in percentage Source: IRDA annual report 2005-06

*Referral here refers to the referral company whose database is acquired by the insurance company to get prospects. Referrals are increasing the already spiraling costs of insurers. Therefore IRDA said referral fee should be paid only on successful conversion. " An insurance company shall pay remunerationto the referral company for acquiring its database...and in no case shall exceed 25 per cent of thecommission," I nsurance Regulatory and Development Authority ( IRDA) said in a draft regulation .

The major benefits that are derived due to distribution through Individual agentsare as follows:

Greater relationship and more face to face contact.

Consumers are used to the channel.

Since they are the traditional medium of distribution therefore they havehigh experience and greater knowledge of the industry.

Agents provide various pre-sales and post sales services to the customers.

Due to personal contact, it can provide valuable feedback about the need andexpectation of consumers. Agents usually enjoy personal credibility withcustomers. This channels awareness and acceptability is maximum among people.


10/18

However post liberalization, with the opening up of the insurance sector,competition mounted up and industry felt the need to be more cost efficient and

increase penetration in the market. The requirement of alternative distribution

channel was felt.

N eed for Alternate Distribution S yste m :

To increase insurance awareness and knowledge among people.

To increase insurance penetration in the country.

To improve cost efficiency in insurance distribution.

Fierce battle in the Indian Insurance Industry post- liberalization.

Allianz Bajaj Life Insurance built a multi-channel distribution network comprising of agents, corporate agents, and strategic alliances with banksetc.Signed MOU with Standard Chartered for an exclusive bancassurancedistribution agreement.

Max New York worked making the quality of the agents as its maindifferentiating factor.Focussed on the career agent system.The selection

process of career agents comprised of 4 stages- screening, psychometric

tests, career seminars and final interview. Because adequate concept, product and soft skill training is sine quo non for effective distribution.

Similarly HDFC Standard Life decided to rely on individual consultants andcorporate agents for distributing its products.

Challenges of distribution through Individual Agents.

Challenges of Distribution through I ndividual Agents:

1) The primary challenge of this distribution system is high attrition rate. Dueto this the initial investment done on training and educating the agents goeswaste.


11/18

2) Higher cost for insurer and consumer due to high commission rate. Infact by2002 LIC had around 0.8 million agents, and the company ended up paying

bonuses and commissions twice for every new policy and subsequentrenewal of premiums- to both agents and development officers.

3) Old fashioned channel, not fully updated with technology. This profession isalso not left untouched by Information Technology. Most of the companieshave a dedicated agent s portal but the number of agents accessing them is

less than satisfactory. One step forward in making the agents more efficient

and professional is to make them more tech-savvy through training andother means.

4) Lack of coverage. Till the yr 2002 , insurance coverage had been extendedto about 25% of the entire insurable population and the fact is that morethan 75% of the insurable population was untapped. Even today , as per TataAIG MD Trevor Bull, only 20% of the insurable population has beencovered.

5)

Finally, majority of the agents are dormant. At present, the number of agents working in life insurance industry is approximately 15Lacs but amajority of them are dormant which leads to poor activity ratio.

The massive agency force is a pragmatic example of 80-20 rule. What is need of the hour is not the quantity but the quality. Having some productive and lots of unproductive lot drags down the morale of the community of agents, leads todiscontent within the profession and the respect for the profession is downgraded.Over manning has its cost to the company in terms of unrecovered or under

recovered training cost. Also, opportunity cost in terms of a more productive agentserving in place of a dormant agent cant be looked over. Over manning alsocontributes to mis-selling and rebating.

Adequate concept, product and soft skill training is sine quo non for professionalizing agency force. IRDA mandates companies to impart 100 hour training to its agents and today most of the companies have in-house training


12/18

facility. But number of agents attending subsequent product trainings at the time of product launches and other soft skill training sessions gets reduced substantially. Itleads to poor knowledge about companys whole basket of offerings and agentsselling only a few products instead of doing a true need-based selling to customers.The concern of the regulator towards growing proportion of linked products incompanies total percentage of business can also be attributed to biasedness of training programs in favor of linked products. Training becomes all the moreimportant in todays competitive environment where the agent is not only sellinginsurance but the company providing insurance. Adequate and quality initialtraining at the time of licensing is like laying a strong foundation for agentsentering the industry and subsequent trainings are like sharpening the agents sawto stay competitive.

Agents are off-roll employees of an insurance company and keeping them

motivated is a big challenge. Companies run loyalty and engagement programs(like club membership) and sales incentive programs (like short term contests)

providing various monetary and nonmonetary benefits. They serve well to motivatethe agents to perform better, increase interaction of agents with the companies,

promote spirit of healthy competition among the agents and to recognize good performing agents, provided these programs are easily comprehendible,transparent and quick in benefit disbursal and grievance redressal and adequateknowledge about the programs is given to agents.

Insurance selling is a tough job. Agents are facing razor sharp competition fromother alternative distribution channels and with so many insurance players in thefray, their job has become all the more difficult. Hence various other distributionchannel e.g. corporate agent, bancassurance, NGOs, VEWs and internet weredeveloped .


13/18

Distribution Chain of InsuranceCompanies

IndividualAgent

CorporateAgent

BancassuranceNGO &VEWs

Customers

Internet

Insurance

Company

The choice of distribution channel depends largely on the customer preferenceswhich vary by market segment like geography, age, income, life style etc, andmarket characteristics change over time.

The Corporate Agent is a concept introduced with a view of taking advantage of the presence of a large number of firms, corporations, banks, NGOs, cooperativesocieties and panchayats who are in contact with people in normal discharge of their activities and utilize their presence and services for canvassing the sale of insurance contracts. They are corporate entities (NBFCs) that source policies for the Insurance Company with whom they have a tie-up. For example the HDFCStandard Life tied up with corporate agents all over the country, including its tieup with HDFC.It was also in talks with NGOs that were involved with HDFCshousing schemes in rural areas.

But the major challenges faced by Corporate Agents are as follows:

Creating an environment of top level involvement of NBFCs management.

Resolving possible conflicts of interest between the CA and the insurer.


14/18

E stablishing credible service level agreements between the CA and the

insurer.

Setting up distribution procedures consistent with the manual systems in

the CA.

Bringing relevance, motivation and skill development at the operating level

at CAs branches.

Thus many of the insurance companies started distributing their products

through Bancassurance. The difference between CA and Bancassurance

arrangement is that the former trains its own employees to sell the policies

while in case of Bancassurance arrangement, the employees of the

insurance company (FSCs) source the business. Due to the good qualityadministration of the bank and strong service delivery mechanism, and

familiarity with the needs of the target customer, analysts believe that

bancassurance would play a very important role in India, since banks arealso familiar with the needs of the target customer. With complete

integration of insurance and bank products and services thus it was a win-

win situation for both the bank and the insurance company. The benefits

for the banks were:

Total of 65700 commercial bank branches across India. Thus with wider

network and greater spread the market reach will be greater.

Good awareness of geographic region Lower per lead cost. Banks have

good brand awareness within their geographical region which provides for

a lower per lead cost.

Fee based income in the scenario of tightening interest margins.

Customer retention by providing wider range of services.

Whereas the benefits for the Insurance service provider were:

Channel diversification.

Increased volume of business and improved geographic reach.


15/18

Benefit from substantial database of the bank.

Known customer , hence risk assessment is easier.

Can develop new financial product by collaborating with the bank.

The bancassurance system also proved to be beneficial for the consumers. Some

of them are:

y Greater convenience by meeting all financial needs under one roof, universal banking

y Reduced distribution cost will lead to reduced premiums.y Provide easy accessibility.y Double Assurance/credibilityy

Convenience in paymenty Easy and automatic renewal

But unfortunately most of the banks and the insurance companies did not have any jointly agreed business plans. Thus the major challenges bancassurance posed are:

Lack of proper training of Bank Staffs

Lack of Branch personnels involvement.

Lack of sales culture within the bank.Insufficient product promotions.

Failure in integrating marketing plans of both bank and insurance company.

Inadequate incentives to the bank personnel involved in the sales of insurance products.

Hence the insurance companies started focusing on other source of distributions

available. For example the Birla Sun Life Insurance started distributing their products targeted at rural market through VEWs.VEWs are people from the localAditya Birla Group Companies who are involved in social improvement

projects.VEWs act as a liaison point between the villagers and the insuranceadvisors. Each VEW will be in charge of a cluster of 10-15 villages and will act asa first level underwriter and introducer of the insurance products. These villages


16/18

should have a population of over 5000 and population density of not more than 400 per sq. km. and at least 75% of the male population should be dependant onagriculture for the livelihood.

Moreover companies also started distributing their products through the internet.However for distributing products through internet it is required for the product to be simple. If a product is complex by nature then the product is best sold bydriving quoted leads to a licensed call centre. In 2001, 12% insurance productsworld wide were sold through internet. The number will definitely rise in future.

However not all insurance companies adopt all the above discussed distributionchannel for distributing all their products. The effectiveness of a distributionchannel depends on the reach of the distribution channel and also on the influence

of the distribution channel on the target segment. Moreover before adopting adistribution channel the insurance service provider also have to look on the supportrequirements of the channel. Because Insurance knowledge is complex andinvestment has to be made on education, training and establishment of adistribution channel. It is responsibility of distribution channel to develop expertiseand to provide customer with insurance knowledge. Channel member shouldbe in a

position to advise the prospect as to what is the best choice for him in the givencircumstance. They need to have comprehensive knowledge about the life cycle

stages of an individual. The company also has to ensure that its channel membersare not engaged in mis-selling. Unintentionally or intentionally in some cases thechannel members are forced to sell products that are best suited and beneficial tochannel rather than the proposer.Mis-selling is very common in insurance industry.This occurs when, perhaps, to earn a much higher commission rate. For exampleagents do not assess the needs of the customer properly while recommending

products. Sometimes agents or advisors misrepresent facts by promising unrealisticreturns to customers, or even provide incorrect information on product features. Asa result, the customer is unhappy and saddled witha product that does not meeteither his immediate or future needs. Rebating has been an unfortunate practice inevery variety of financial products in India. It is illegal to share the commissionwith the clients, but the fine is just Rs 500. The average lapse ratio for theinsurance industry is about 25% which is an indicator of mis-selling.


17/18

Thus as much important it is for the insurance companies to select its distributionchannel properly , equally important it is for them to engage in distribution of insurance products through multiple channel . Because even after so much of endeavor of the insurance companies , they are serving only the 25% of the

insurable market. 75% of the insurable population is untapped even today. So thesecompanies have to increase their penetration in order to reach this untappedmarket.

Thus we suggest that some concrete endeavor should be taken to spread and penetrate insurance products in he rural India. The rural market offers tremendousgrowth opportunities for insurance companies. The ASSOCHAM found that thereare a total 124 million rural households. Nearly 20% of all farmers in rural Indiaown a Kissan Credit cards. The 25 million credit cards used till date offer a hugedata base and opportunity for insurance companies. ASSOCHAM suggests that tounderstand the prospects for insurance companies in rural India, it is veryimportant to understand the requirements of Indias villagers, their daily lives, their

peculiar needs and their occupational structures. There are farmers, craftsmen,milkmen, weavers, casual labourers, construction workers and shopkeepers and soon. More often than not, they are into more than one profession. Thus we suggestthat insurance and particularly micro insurance is the product that should betargeted towards this rural India. Hence these products can be marketed towards

them by leveraging the distribution network of the microfinance organizations ,since they have deep penetration in rural India. Other alternative distributionnetwork should also be explored to reach this high potential market.

Hence it is not too distant , when even departmental stores,ATMs,Internet kiosks,and supermarkets would be selling insurance.


18/18

life insurance market in india final

Documents