Scenario of Insurance Market in Rural India

With a population of over 140 million people, India’s insurance industry is still in its infancy. Despite its small population, it accounts for 1.5% of global insurance premiums. Traditional life and health insurance models give very limited coverage in the country. It’s because more than 70% of the population lives in rural areas that have been mostly untouched by major insurance companies.

Life insurance coverage in rural India is currently at 8%-10%, with less than 20% of the rural population having any form of health insurance. In addition, 95% of Indian homes have no sort of property insurance. India’s vast geographic and economic diversity contributes to the country’s poor coverage rates. Additionally, the country faces various internal obstacles, including distributional issues such as last-minute access, a shortage of sustainable products, and transactional inconveniency, among others.

According to a Boston Consulting Group report titled “The changing face of Indian insurance,” insurance plans like the Pradhan Mantri Fasal Bima Yojana (PMFBY) have raised crop insurance coverage by 6%. In addition, since September 2016, the Rail Insurance Scheme has insured almost 9 crore passengers.

The government is assisting in the expediting of rural India’s insurance coverage. However, there are two factors that are critical to moving this project ahead.

Technology

Rural India’s underserved insurance industry cannot be penetrated without more technology-driven, easily accessible models and solutions. These must be carefully curated to meet the demands and income levels of the target demographic. The following are some examples of such models and products:

Aadhaar-based digital banks that use AePs for transactions make digital financial services available to rural people. Insurers can bundle health, life, and livestock insurance plans and make them available digitally for quick access.

Rural Insurance Policies are available for purchase digitally through online insurance policy selling platforms. Individuals do not need to visit a physical location to study and purchase insurance. They can do it now using any smartphone or computer with an active internet connection.

In this perspective, mobile insurance solutions are a significant advancement. Rural India is no exception, with every second person owning a smartphone. Insurance mobile solutions provide the technology that allows insurance products to be accessed via mobile devices.

Insurance agency management systems assist insurance businesses in streamlining their procedures and offering timely responses to insured claims and questions. They also assist these businesses in reducing expenses, allowing them to supply more inexpensive and efficient products to the rural populace.

To ensure accessibility and affordability, insurance businesses must embrace technologically advanced solutions. Economic reforms such as Jan Dhan accounts, the Unified Payment Interface (UPI), and Aadhaar integration will speed the adoption of these models and ensure a whole new market for the insurance industry.

Bite-sized insurance products

Another crucial factor that would help the insurance business penetrate rural India is bite-sized insurance goods and plans. Because of their cheaper premium rates, minimal documentation requirements, and simple accessibility via cellphones, these insurance are more widely available. They’re more popular with first-time policy buyers, millennials, and those who want to cover a specific risk. Dengue insurance, travel insurance, and cab trip insurance are just a few examples of such products.

Several insurers offer low-income groups specialised insurance packages tailored to their specific needs. Some insurers hold IRDAI licences to sell their products, while others have formed relationships with traditional insurance companies to co-create and market these products.

One example is the relationship between Mobikwik with major firms such as Max Bupa and Edelweiss Tokio. They work together to provide coverage for vector-borne diseases as well as term insurance plans. By the end of 2019, Max Bupa had sold about 100 HospiCash policies every day. Mobikwik also sold over 5 lakh insurance in the same year, earning INR 4 crore in premium. The sales number demonstrates the rapid acceptance of bite-sized items in rural India.

It’s one thing to develop these items; it’s another to make them affordable to low-income people. To assist with this, insurtech enterprises offer their consumers the option of selecting the appropriate insurance policies from several organisations via their PoSPs. The hybrid concept of supplying physical and digital products and services makes these things more easily available to India’s rural people.

Final Thoughts

To increase insurance uptake in rural India, insurers must also establish trust and boost financial literacy.

Because the agricultural business is primarily dependent on unpredictable circumstances such as weather, changes in government policy, and natural calamities, product modifications will aid in developing confidence. Incorporating these unforeseen occurrences into policy benefits rural India and builds trust by addressing their needs.

The next step will be to recruit local agents (PoSPs) who will use door-to-door selling techniques. This will give first-time purchasers confidence in the insurance product because it will be presented by a member of their community. It will also help people become more aware of the numerous items available on the market.

Rural markets still have a lot of room for expansion. Insurance policies can be tailored to provide coverage for small enterprises, particularly those launched by women, catastrophe bonds, and crops not covered by government schemes. Insurance businesses might invest in design thinking training for their workers to focus on developing products for the rural market and analysing techniques to make them accessible to the populace for their benefit.