Revitalization of Rural Markets through Insurance


Anand Prakash
in Marketing, Statistics & Quantitative Techniques and Information Technology
Indira School of Business Studies
Thatwade, Pune

Given the uncertainty that abounds our environment, awareness is the most important thing as people in poor regions are not familiar with the concept of insurance. Insurance companies must work around this problem as a corporate social responsibility in countries like India where there is no state social security system.

The traditional agency channel for doing so may not be sustainable in the longer term in rural segment unless significant changes are made towards poor training, lower productivity, ineffective sales management, part-time sales of low quality, and high agent turnover. But, the question is how to address this in the short term, in a cost effective manner. Are there any alternatives?

The private players, especially the foreign banks, have strategically spread their operations to rural areas via self help groups and non-government organizations, micro-finance institutions and cooperatives as agents. For example, Aviva sells insurance through SEWA in Ahmedabad and Basix India, Hyderabad."

Distribution and servicing are two key areas in developing rural business. ICICI Prudential has a robust rural distribution model, involving tied agents, brokers as well as referral arrangements with NGOs, micro-finance institutions and corporates.

"We work closely with our partners like Uttaranchal Co-operative Marketing Federation, Gramasiri (an MFI), Cargill, Anarde Foundation, ICICI Bank and ITC's e-Choupal, to educate people about how life insurance can be used as a protection and savings instrument," says Shikha Sharma, CEO & MD, ICICI Prudential Life Insurance. Through these relationships ICICI Prudential is present in more than 15 States, including Andhra Pradesh, Madhya Pradesh, Tamil Nadu, Rajasthan and Uttar Pradesh.

"We have long been convinced of the need for and long-term potential of life insurance in rural India. Certainly, covering the lives of those in rural areas presents several unique challenges. We have remained true to our customer first philosophy by developing specific products and introducing simplified underwriting and claims guidelines, to help the rural customer secure his or her financial future," says Ms. Sharma. Unfortunately efforts do not seem to match concerns.


Most of the bancassurance relationships in India are started with a 'referral' type arrangement, where bank staff provide leads to a specialist insurance company sales force, in return for which, the bank receives a 'fee'. Although this model is still adopted by some insurers, the banking and insurance regulators are apparently unhappy with the scope for what they consider 'misuse of personal customer data' collected by referral agents of insurance companies posted at bank branches. The regulators also fear that the level of post-sale service provided to the clients may be compromised as a result of the bank not engaging itself with the sale process. As a result, they are now discouraging insurers and banks from entering into new referral arrangements.

The main alternative model is more bank-centric in its sales approach. Banks have to obtain a corporate agency license to permit bank staff to distribute insurance. In this model, bank staff carries out the selling activities, and the bank receives a commission for the sales as per the corporate agency agreement.

The distribution agreements on which these models are reliant typically have durations ranging from one to 10 years. Most agreements are loosely worded, without the bank partners paying much attention to the customer servicing responsibilities in the post-sale phase. This leaves the field wide open for corruption nepotism and exploitation by the haves against the have nots. Whereas ethics is required governance is imperative.

Some banks have taken a more committed approach, taking an equity stake in a new joint venture life insurance company. Examples include ING Vysya Life Insurance, where Vysya Bank holds a 49 per cent shareholding, or MetLife, where Jammu and Kashmir Bank holds 25 per cent. In theory, these relationships should prove to be more effective; however, as of now, insurers with 'distribution only' agreements with the banks, such as Birla Sun Life and Aviva, seem to be writing more business through their bancassurance partnerships. These companies attribute their success to the closer involvement with the partner banks on improving bank based selling capabilities.

Alternative methods such as tapping the corporate clients of the bank, conducting worksite marketing within corporate clients, as well as direct and telemarketing, are currently not being exploited to any great extent, but clearly represent significant potential for both banks and insurers.

Some bancassurance relationships have been relatively successful in developing loan-related or packaged products. However, the emergence of other more tailored products for bank customers is still at a nascent stage.


There are literally thousands of other potential affinity groups in India. To date, the insurers have been fairly selective in choosing to tie up with affinity groups primarily from a financial services background. Such organizations are probably closer to banks, in terms of the potential business volumes and also having some form of distribution capability.

These groups also include so called 'para-banking' organizations or 'non-banking finance companies' (NBFCs). NBFCs are companies with restricted banking licenses who are able to accept and hold deposits from the public. These groups also include multi-level marketing/distribution organizations. Generally insurers have preferred to set up corporate agency agreements with these companies, rather than establishing referral arrangements.

There are some 500 or so registered 'significant' NBFCs, with thousands of other potential affinity groups.


Product development is proving to be key as the many distribution partners are beginning to request a more tailored suite of products, as opposed to the generic offerings that the insurers launched when they started their business.

As bank and affinity partners become more aware of the opportunities and as new insurance companies look to enter the sector, the first wave of new entrants will need to work hard to maintain the relationships that they have developed to date. The success and sustainability of the existing relationships are likely to depend on the ability of insurance companies to respond to demands from distributors, in what is likely to be a very competitive space.

The challenges to successfully build on what has been achieved to date will also emerge once the so called 'low hanging fruit' has disappeared. A commitment from both the insurer and distributor to devote the time to develop the channels and to expand the range of products will be one of the key success factors for the development of a longer-term relationship.

Notwithstanding these challenges, there is no doubt that alternative distribution in India will play a major role as the insurance sector develops. Although only in its infancy, there are an even greater number of opportunities that remain untapped. India provides one of the most unique opportunities to work with a wide variety of distributors and to develop innovative distribution models. It will be interesting to see how the agency channel evolves and adapts in response to this increasing 'competition.'


With increased competition among insurers, service has become a key issue. Moreover, customers are getting increasingly sophisticated and tech-savvy. People today don't want to accept the current value propositions, they want personalized interactions and they look for more and more features and add ones and better service.

The insurance companies today must meet the need of the hour for more and more personalized approach for handling the customer. Today managing the customer intelligently is very critical for the insurer especially in the very competitive rural environment. Companies need to apply different set of rules and treatment strategies to different rural segments. However, to personalize interactions, insurers are required to capture customer information in an integrated system dedicated for rural business.

With the explosion of Website and greater access to direct product or policy information, there is a need to developing better techniques to give rural customers a truly personalized experience. Personalization helps organizations to reach their customers with more impact and to generate new revenue through cross selling and up selling activities.

Also, physical presence in the locality will be required to support client servicing. Having felt the cost pressure owing to modest sales-turnover may force companies to market insurance as that of FMCG companies. They may start their business opening more and more satellite offices. It is strongly recommended for adoption in penetrating the rural space for product marketing. But, the sales of insurance are the subject matter of financial services marketing, where personalization issues are more significant. The essence of the better service in respect of personalization is never found at the satellites, which is generally done through remotely and much centrally located hub branch.

Ironically, the deadlines are more focused when closing the sale unlike for providing service in time for settling the claims and other operational issues. Generally, it is believed that issues in the business result in the recruitment of the sales staff for loading sales with additional pressure of operations issues. For becoming successful in delicate rural segment, such issues and overloading of operational burden on sales staff may trigger a back fire resulting in loss of possible revenue for the company.

Drawing-board approach to formulate the sales figure for rural markets is unrealistic without having understood the rural sentiments. In India the insurance business can be said to be "a marathon, not a sprint". This is because of the nature of the business being long term. As insurance companies go more and more rural in search of business, there will be opportunities in the rural sector.


Those who understand rural India better will be in demand. When the rural consumer will start exhibiting an increasing propensity for insurance products, there is a once in a lifetime opportunity to transform dreams into visible reality for companies having understanding of rural outlook. This will essentially requires a leading TEAM (Together Everyone Achieves More) of professionals with the said rural outlook with mission to learn the Rural Business professionally with focus on Retail networking.

Following the RUN (Retail – Use – Network) system, marketing insurance in rural space sounds more realistic, when this being sold as Smart-Career. Smart-Career is involved in marketing of Insurance policies and allied services, having wide experience of Referral Marketing with sufficient present customer network. This may be marketed for successful career in rural insurance. Such a move of Smart-Career has to be marked with '6-P' template of Rural Insurance Marketing:


Being patience is very important when a new assignment is taken up without knowing what may happen due to non availability historical data. Often the contracts with banks having big presence in rural markets take unusually high time to be signed. Further, after getting into the contract, there might be delivery pressures from the management of the insurance company as well the said bank subject to the best possible service for the referral customers. Only patience with own mind action is the solution…


It is all about determination and high energy. Focus must be clear when rural sentiments are to be aligned to the organizational mission of becoming successful in rural insurance marketing. Also, an individual taking on the responsibility of making insurance big in rural market must review all the successes enjoyed in every area of life to become determined. This determination will pave the path of delight of making a strong foundation in rural markets.


Its' is difficult always a Push Start a car … its' better to have one that starts on its own. The battery within puts required energy to make the engine roar. Am I talking of a car? ... It is an effort just to relate to one professional with sufficient motivation. So, passionate working may bring right attitude to become successful in rural insurance marketing.


The knowledge about the product helps in providing best solutions for the customer who requires personalized and not generalized clarifications. The success mantra is to become an avid learner in the field of rural insurance marketing, who can be consulted even after the close of a sale. It is imperative to highlight that there is no patenting done in insurance products and, therefore, selling a product primary becomes full personalized effort. For becoming successful, it is imperative to be the master of the product.


It is about making habit of meeting people, and making sound network for being successful in rural insurance marketing. Making habit is significant! When a man makes the habit of smoking, even after knowing it being dangerous to the health, he smokes. So, is it a wrong idea to make meeting and networking people your habit, when you know that it is only and only aspect to make you booming?


Every body in business has some issue to remain in business where only tool to drive the business is programmes. You need to be good driver to handle a car; similarly a good driver of business must have handful understanding of driving programmes.


As per press reports, Pantaloon Retail India, the retail arm of the Future Group, has entered into an agreement with the Italian insurer Generali, to set up life and non-life insurance joint ventures. The insurance companies will be named Future Generali Life Insurance and Future Generali General Insurance. Pantaloon Retail will hold a 56% stake, Pantaloon Industries will hold a 18% stake with Generali holding the remaining 26% stake in both joint ventures. The joint ventures will leverage on Pantaloon's retail outlets for distribution of insurance products.

It is reported that IDBI Bank has tied up with Fortis Insurance and Federal Bank for a life insurance joint venture. IDBI Bank and Fortis will hold stakes of 49% and 26% respectively with Federal Bank holding the remaining stake of 25%.

PNB Principal Life expects to commence operations in September 2006, and plans to focus on the group insurance segment. It is reported that UK Paints (a subsidiary of Berger Paints) will hold a 32% stake in the joint venture, Punjab National Bank will hold a 30% stake, Principal will hold a 26% stake and Vijaya Bank will hold a 12% stake.

It is reported that Sompo has tied up with Allahabad Bank, Indian Overseas Bank, Karnataka Bank and Dabur to set up a non-life insurance joint venture later this year. As per reports, Allahabad Bank will hold a 30% stake in the joint venture, Sompo will hold a 26% stake, Indian Overseas Bank will hold a 19% stake, Karnataka Bank will hold a 15% stake and Dabur will hold a 10% stake.

Canara Bank is planning a foray into life insurance. It is reportedly in talks with a few foreign insurers for a possible joint venture. Canara Bank currently has a corporate agency distribution tie-up with Aviva.

Bank of India is reportedly looking to set up a life insurance company with a foreign partner. It currently has a corporate agency distribution tie-up with ICICI Prudential.

Oriental Bank of Commerce, currently a corporate agent for the LIC, is also reportedly looking to enter the life insurance sector.

With so much happening in the insurance foray, there is positive likelihood of rural renaissance as far as insurance is concerned. It may the rural India to drive the future growth for insurance where a lot more is required to be researched. Policy formulations in future may contribute more towards an understanding of how we can support rural masses struggle against vulnerability, risk and poverty in respect of providing better avenues for investments. It is an unexplored prospect and both scholars and policy makers should look into this phenomenon before it is too late!


1. Ramkishen Y., NEW PERSPECTIVES ON RURAL MARKETING, Jaico Publishing House, Mumbai, 2002.

2. Oommen A. Ninan, " Community approach for viable rural insurance"; THE HINDU Online edition of India's National Newspaper Monday, Jul 04, 2005.

3. Graham Morris & R. Krishnamurthy "The Emergence of Alternative Distribution in India", Asia Pacific Insurance Review, December 2005.

4. Graham Morris "
Bancassurance in India - the seeds are sown", Asia Pacific Insurance Review, Febeurary 2003.

Anand Prakash
in Marketing, Statistics & Quantitative Techniques and Information Technology
Indira School of Business Studies
Thatwade, Pune

Source: E-mail August 16, 2006


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