Selling insurance policies in rural India is no more just to fulfil the mandatory rural sector obligations prescribed by the Insurance Regulatory & Development Authority (IRDA). Insurers are flocking to rural areas as they say that financial growth has reached villages too.
IRDA norms require that life insurance firms underwrite a percentage of their total policies in rural markets depending on their year of operations.
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For instance, ICICI Prudential Life, being in its eighth year of operations, has to ensure that 19 per cent of the total policies written this year are from rural areas. The company, however, says it has been underwriting over 30 per cent of the total policies in rural markets.
Similarly, SBI Life Insurance, in its seventh year of operation, has to sell 18 per cent of the new policies this year in rural areas, but is already selling 28-30 per cent of policies here. On the same lines, Max New York Life underwrites close to 20 per cent of policies in rural markets.
ICICI Prudential Life Insurance, which launched its rural operations in February last year, has collected Rs 450 crore of new business premium since then.
Of the total new business premium of Rs 2,192.34 crore underwritten from April to July 2008, 7 per cent has come from rural markets. In five states — Punjab, Rajasthan, Gujarat, Kerala and Andhra Pradesh — where focused rural operations were launched, the contribution of rural insurance is around 15 per cent of the total.
“Nearly 42 per cent of the total new business premium comes from bancassurance, of which 16-20 per cent comes from SBI’s rural branches. We have developed 4-5 traditional policies for rural markets and two micro-insurance policies,” says SBI Life Senior Vice-President Anand Pejawar.
ICICI Prudential Executive Director Bhargav says rural and urban markets are not very different. “People are moving up the wealth ladder. In fact, the business underwritten in rural markets is of better quality as policy tenures are longer,” he says.
For ICICI Prudential Life, the average policy premium is Rs 23,000 in urban areas and Rs 19,000 in the rural markets. Max New York and ICICI use the hub-and-spoke model, where six micro branches in talukas and the district headquarters are attached to a rural branch.
While the consumer behaviour may be similar, firms use different strategies to sell their products in the rural markets. Along with local languages, the low-cost marketing strategies such as wall paintings, road shows and street plays are used.
