The insurance players are gearing up for an encore in the rural areas. Faced with the imminent relaxation of FDI norms in the sector, they want to get a foothold in the area which has hitherto been slow to respond to their overtures. Tie-ups with microfinance institutions (MFIs) and targeting women are the latest strategies of the private insurance players in this fast-emerging market.
Even after having better distribution networks, private players were unable to crack the rural code to their satisfaction. “We’ve successfully implemented the partner-agent model in the micro-insurance space with micro-finance institutions (MFIs) such as Basix; and believe this to be an effective and reliable channel for reaching out to the people at the bottom of the pyramid. We have covered close to 1.5 million lives through such associations,” says Aviva India corporate initiatives director Monica Agrawal.
A study says that the rural market for insurance products is expected to grow to $1.95 billion by 2015 from $487 million in India. Insurance, combined with micro-credit, is the first step towards financial protection for this market, says Bharati AXA chief marketing and distribution officer Shyamal Saxena. “It provides a firm foundation for insurers to take to the rural markets their other financial protection offerings,” he adds.
Apart from this tie-up with MFIs, the insurance companies are working with women self-help groups to target them. With increasing literacy levels of women, they are wielding more of this power in the rural areas, says ISB, Hyderabad associate professor Shamika Ravi. So, the insurance firms are coming up with products that make it easier to sell to women through MFIs. For example, Aviva has a customised product for women’s self-help groups (SHGs) which are normally made up of 15-20 members, and MFIs. This product forms a comprehensive part of livelihood initiatives run by these groups. “We have seen such groups to be very influential in the household, with higher bargaining power,” says Aviva’s Agrawal.
Shamika Ravi has shown that success of the insurance sector in rural areas is higher as its interaction with MFIs increases, and as the women get more empowered through literacy. Ravi’s study was on 2,79,214 individuals in the rural areas whose health coverage started after May 1, 2006 and half of them are females. The probability of filing claims increases by 8% when female literacy level goes up marginally. “This is very true, and we see this as an empowerment of the women in rural areas,” says Mr Saxena.
“Women in those areas have been stable clients,” says ICICI’s Srivastava, adding that this has also taken the emphasis in insurance from the male member to the female member of the family. Ravi points out one reason for low claims in those areas. “Well, currently microfinance is increasing coverage of insurance by tying it to credit and making it mandatory. So, automatically when people take a loan, they have insurance cover. This is also partly the reason that people don’t understand insurance and treat the premium as an added fee for the loan,” explains Ravi. This, according to her, had reduced the insurance claims.
With more awareness about the insurance products, that has benefited players like ICICI Prudential, Aviva and Bharti AXA, has also come higher claims. Aiding this are the MFIs themselves. Ravi shows how some innovative microfinance institutions like SEWA have started investing in training their clients about insurance; others like BASIX have tied up with agents to help people with filing claims. This has also meant more insurance claims as the rural folk are now clearer about what they are insured against. ICICI Prudential is working with more than 100 such agencies, says ICICI Prudential senior vice-president and head of the rural business Rishi Srivastava. The company does more than Rs 300 crore of business from the rural areas.
Source: The Economic Times
No comments:
Post a Comment