Rural marketingopportunitiesRural India with a vast population is a goldmine for insurance companies.It requires a different approach with plenty of localization.

INSURANCE INDUSTRY

The lessons for Insurance Companies & Advisors

56 | F INANCIAL PLANNING JOURNAL | JULY - DECEMBER 2007

The fact that rural India hasenormous business potential iswidely accepted across all

segments of the industry. And it isattributed not merely to the population of700 Million that reside here; otherstatistics make an equally strongstatement. For instance, while ruralhouseholds contribute to 45% of the totalhousehold income of the country, thesavings to income percentage in rural, at30%, is even higher than urban. The earlysuccess of FMCG, telecom and consumerdurables is only a pointer to inherentpurchasing power this segment has.

Within the rural sector, however thereare vast variations in socio-economicprofiles. The entire population is spreadover 6,30,000 villages across the vastexpanse of the country. The incomedistribution amongst these is highlyskewed with some of the villages reapingthe rewards of agricultural revolution andenjoying similar standards of living liketheir urban counterparts, while a bulk ofvillages are still grappling with the basicissues of electricity and water. Thesevariations are not only at the regionallevel, but even within the state and thedistrict. The income patterns too arediverse.

All the above factors make theexecution of rural strategy a daunting taskfor any product or services provider. Toincrease the penetration of insurance inthis sector, the regulator IRDA, had madeit mandatory for insurers to write agrowing proportion of its business in therural market. Most of the early forays ofthe private life insurance companies in therural sector have been towards meetingthese requirements. The products sold aretypically low premium term insuranceproduct. The average risk cover providedis low enough not to warrant any medicalcheck ups.

Lately however, there is a growing

realization amongst the life insurers aboutthe potential of the rural market and thereare visible initiatives being taken. Mostof the studies suggest that the awarenessof insurance in rural India is high.However, unlike in urban areas where taxand investment are the mainconsiderations, here insurance isconsidered a long term savings tool.Traditionally the endowment productshave been sold in this segment.

There are several challengesconfronting sales and marketingexecutives in the rural domain. The firstone is a strong need for regionalization.The entire sales delivery should preferablybe in the local language. This calls for notjust the translation of sales and marketingcontent but also customization of the sameto suit the regional cultural sensitivities.

Rural incomes are largely seasonal innature –dependent on the monsoon andconsequently the crop cycle. Therefore thepremium payments on a regular basis are

tough for rural consumers. This leads to ahigh percentage of policy terminations.Other operational challenge is in procuringreliable and standard documentation. Inmost cases income and age proofdocuments are not available at all. Thisleads to difficulties in policy issuance aswell as during claim processing.Managing a high number of cashtransactions also adds to the risk and cost.

From a branding perspective, theprimary challenge for the new entrants isto create an awareness of the brand. Aphysical presence in terms of a branchoffice in the vicinity could be the biggestcollateral for the brand. A brick and mortar

presence also goes a long way inestablishing credibility in the minds of therural consumers, who might be wary oftrusting their funds to a hitherto unknownentity. However the cost of putting upinfrastructure has to be looked into froma long term returns point of view. Someof the other commonly employedmarketing initiatives are sponsoring thelocal festivals and fairs (melas), creatingvisibility around haats and mandis, road-shows, hoardings, wall paintings etc.

There are various distribution modelsthat life insurers have been trying out inrural. Tie-ups with NGOs, Self HelpGroups are common to target the ruralmasses. In certain parts of the country theMFIs have an extensive reach andpresence. As financial intermediaries theyhave an existing relationship with theconsumers and this can go a long way insynergising the sales of life insurance.

Regional rural banks, which have beenset up in rural and semi-urban areas underthe sponsorship of some of thenationalized banks, also offer a wide reachto the rural customer. After theamalgamation, the RRBs have been given

clear directives by the RBI to focus onsharing operating costs and generatingprofitability through distribution of thirdparty products including insurance.

As more and more banks are investingin setting up rural infrastructure, it alsoprovides an opportunity for insurers toreach the consumer throughBancassurance tie-ups. In this regard,bundling of insurance with credit productscan lead to mutual benefit. While it givesthe insurer access to the banks’ distributionchannel, for the bank, it is collateral forcovering the risk of non-repayment. Also,it can buffer up the wafer thin margins thatthe banks enjoy in rural market because

RURAL EXPERIENCE SUGGESTS that more saleshappen on trust and familiarity with the agent thanon a structured administration of FinancialPlanning tools

Rishi ShrivastavaSr. VP & Head - Rural BusinessICICI Prudential Life Insurance Company

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58 | F INANCIAL PLANNING JOURNAL | JULY - DECEMBER 2007

of higher cost of operation and low tickettransactions.

While the above channels have beenexplored intensively for gaining quickaccess to the rural markets, in the longterm, building own distribution of tiedagents is the most cost effective as wellas scalable option. Rural experiencesuggests that more sales happen on trustand familiarity with the agent than on astructured administration of FinancialPlanning tools. The agent has to besomeone who is local and trustworthy. Theagent also has an incentive in providingafter sales service and collection ofpremium from the customers as his futurebusiness is heavily dependent on the

referrals and the word of mouth that hegets. The agent represents the brand of hisorganisation in the village. Hence he needsto be very well trained on the products andprocesses himself. The 100 hours trainingthat is mandated by IRDA has to besupplemented by detailed product trainingby the life insurance organisation. Thetraining content and delivery should be inregional language to familiarize the agentwith the right vocabulary. Also thereshould be frequent refresher courses toupdate and test his knowledge.

Penetration in rural would beattainable only if the organizations keepin mind the psyche of rural consumers, thecultural and social dynamics and aboveall cater to the diverse yet uniquerequirements of this segment.

Establishing a pool ofcollective wisdom amongst theFinancial Services professionals

To become a Charter Member, Industry Member or to join the CFPCM Certification Education Program

contact us at:

Financial Planning Standards Board, India

312 Turf Estate, Off Dr E Moses Road, Mahalaxmi, Mumbai 400011.

Phone : 91 22 66663268 Fax: 91 22 66663269

Email: info@fpsbindia.org

THE TRAININGCONTENT and

delivery should be inregional language tofamiliarize the agent

with the rightvocabulary.