A Study on Rural Insurance in IDBI

By Devanshu Divya Roll no. 2012105 IMT-Nagpur

Company Guide
C.Shanthi Asst Branch Head. IDBI Federal Life

Faculty Guide
Prof. Hanish Rajpal IMT, Nagpur

Date 14-06-2013

Acknowledgement
I would like to express my sincere gratitude to my company guide Mrs. C. Shanthi Yagyanath, Asst Branch Head, IDBI Federal Life Insurance Co. Ltd., Coimbatore for guiding and helping me complete my Project Report. Her encouragement, time and effort are greatly appreciated. I would then like to thank my faculty guide, Prof. Hanish Rajpal, for all his valuable inputs and constant support towards me and providing me an opportunity to learn outside the class room. Till now, it has been a truly wonderful learning experience. I would like to thank all my friends who are doing their SIP from IDBI Federal Life Insurance Co. Ltd. for their valuable suggestions and support. Last but not the least I would like to thank all the respondents who are offering their opinions and suggestions and sometimes critical views, which is helping me to constantly update myself and come out with a successful project report.
Devanshu Divya

Table of Contents
S. No. Title Page no.

1.

Executive summary

4-6

2.

Introduction

7-18

Objective of the study

19

Description of model studied

20-21

IDBI profile

22-24

Research Methodology

25-27

Tabulation and Results

28-40

Interpretations and conclusion

28-40

Recommendations

41-45

10

Limitation of study

46

11

Scope for future improvements

47-48

12

Bibliography

49

Executive summary
IDBI Federal entered into Microinsurance as a condition for acquiring a license to sell insurance in India. Unlike many other insurance companies, IDBI Federal immediately saw the benefits of microinsurance. These included fulfilment of corporate social responsibility; use of the microinsurance to get the brand into a new market (todays micro clients may be tomorrows high premium clients); and as a means of developing a good relationship with the Indian insurance regulator. The Insurance Regulatory and Development Authority (IRDA) feels strongly about the importance of microinsurance and the need for private insurers to play a role in serving the rural and social sectors. Company realised that microinsurance would require innovative thinking because insurance products for low-income households was not just normal insurance with lower premiums and benefits. In particular, company also realised that selling micro insurance would require a new distribution mechanism. Rural market of India is one of the most unexplored markets so far. A huge customer base of rural market is opening new dimensions of marketing. IDBI has also entered into rural market with insurance coverage named Microsurance. This plan is extremely useful to Micro Finance Institutions, Self Help Groups and NGOs to insure the lives of their group members and thus provide security to the group members families. The plan can also be used for providing loan protection to the group members families. This project will aim to gather more information about rural market and try to find new insurance plan. Also a SWOT analysis can be done for IDBI in rural market. An attempt for better plan for rural market can also be developed or some significant changes can be bought in rural insurance sector. First we discuss the roadmap how we are exploring market for IDBI here. The objective of the study is decided and it followed up by research. A proper research design is farmed for it and research methodology is followed up. The research methodology followed here is survey method. The survey is conducted by the help of questionnaire; this survey is conducted in villages nearby to Patna and in Hindi language. Later the questionnaire is updated in English to carry out the analysis part. The analysis will include key findings about insurance in rural sector and answers to objectives targeted. The distribution costs, product designing to the needs of the rural people, the viability of opening offices in rural areas are preventing major life insurance companies to opt out of this market. In this thesis an effort is made to study the rural life insurance market and try to identify the major factors inhibiting the insurance companies leading to ignore this market.

The techniques that are being adopted by the top 5 insurance companies in the rural market , the limitations of their techniques and specific recommendations of marketing techniques for wide spread insurance coverage etc are discussed. The study is based on the analysis of the data collected from at least 200 individual policy holders having insurance policies in one or more number of insurance companies and also from two hundred agents. Rural India is where the next big opportunity is. Indian rural market constitutes approximately 72% of total Indian population even as of date. The diverse customers spread through 638,635 villages across the states and union territories of India present a great untapped opportunity. More than half of the Indian population residing in these areas has seasonal income while the other part of the population draws irregular income. Majority of rural population is involved in farming sector either directly or indirectly (farming, marginal farming, and marginal land labourers etc.) and the balance of the large population comprises of skilled labourers; artisans which includes carpenters, masons etc.; and small scale shop owners

Looking at the spending pattern in Rural India, there is an immense scope for financial services, including insurance services.

Financial services providers like banks, mutual funds, Life & Non-Life insurers, card distributors, chit funds are aggressively looking at rural India for high growth rates. Several research reports state that by 2020 India is poised to have largest youth population in the world and as we all know, much of it will be from the rural hinterland of India.

At present major players in the Indian insurance market are Life Insurance Corporation of India, Bajaj Allianz, ICICI Prudential, IDBI federal life insurance HDFC Standard, SBI Life under life insurance segments and New India, National Insurance, Oriental, United India, ICICI Lombard under non-life insurance segments etc.

In the year 2000 when the insurance regulator came into being and the sector was opened up for private sector participation, the insurance penetration (total premium as a percentage of GDP) in India was just 2.1 per cent and the coverage was largely concentrated among the well-off. The Authority, which has been vested with developmental responsibilities apart from its regulatory functions, therefore sought to not only expands coverage but also to correct the imbalances in availability/distribution of insurance across geographic locations and economic classes An attempt is made to find the lacuna in the existing marketing techniques adopted by different life insurance companies and suggestions based on the data collected and analysis are provided to develop tailor made techniques suiting the rural poor.

Introduction
Apraaptasya praapanam yoga; Praaptsya rakhanam kshema
Thus says Shankara in his commentary on Bhagavadgita (Geetha Bhashyam). Yoga means getting the things one has not got and Kshema means protection of things one has got. The sum and substance of the two are the essence of insurance. Life insurance is a social security tool. This is more pronounced in rural areas that promote and sustain the life links of the economy. The various programs of the government promoting agriculture and tiny industries, the scientific agricultural practices, the agrarian reforms, the empowerment of village panchayats and such other activities have created reasonable disposable incomes in the hands of the rural folk. At the same time we find the rural economy dependent on vagaries of monsoons. The existence of Below Poverty Line (BPL) families, the stark illiteracy, and the low levels of awareness are the major stumbling blocks to protect themselves against risks. The life insurance penetration in rural areas as percentage of Gross Domestic Product (GDP) is around 2.8% as at 2005 and again the so called penetration is catering to the needs of rural rich. Indias insurance industry, private and public, has its roots in the 19th century. The British government set up state-run social protection schemes for its colonial officials, many of which evolved into todays schemes. The first private insurance company was the Oriental Life Insurance Company, which started in Calcutta in 1818. Under British rule, many insurers operated in India. In 1938, the British passed the Insurance Act, comprehensive insurance legislation, which remains the cornerstone of the insurance industry today. Regulated insurers are divided into two categories: life and general insurance. Life insurance includes products like endowments policies and retirement annuities. General insurance covers all other types of insurance. In 1956, the Indian government nationalized the life insurance industry. The reasons given at the time were high levels of fraud in the industry and a desire to spread insurance more widely, as Nehru noted at time in parliament, we require life insurance to spread rapidly all over the country and to bring a measure of security to our people. The government combined 154 insurance providers and formed the Life Insurance Corporation (LIC) of India. General insurance remained in private hands until 1973 when it too was nationalized. Prior to nationalization, 68 Indian and 45 non-Indian entities sold insurance. All of these were absorbed into one giant corporation, the General Insurance Corporation (GIC) with its four subsidiaries: Oriental Insurance Company Limited, New India Assurance

Company Limited, National Insurance Company Limited, United India Insurance Company Limited. Despite Nehrus desires, in the decades following nationalization, insurance products were designed primarily for those with regular income streams, i.e., those in formal employment. These were overwhelmingly men in urban areas. The poor, working mostly in agriculture, were largely overlooked by these new companies. When the ideological winds of change blew in the early the early 1990s, the Indian government set about liberalizing its insurance markets. It set up a commission of enquiry under the chairmanship of R N Malhotra. The central outcome of the commission was the establishment of the Insurance Regulatory and Development Authority (IRDA) that in turn laid the framework for the entry of private (including foreign) insurance companies. Under the provisions of sections 32B and 32C of the Insurance Act, 1938, insurance companies are obliged to provide such percentages of business as may be specified by the IRDA, for persons in the rural sector or social sector, workers in the unorganised or informal sector, for economically vulnerable or backward classes of the society and other categories of persons, as may be specified by the IRDA. The IRDA has, in pursuance of the provisions of the above two sections of the Insurance Act, issued the (Obligations of Insurers to Rural or Social Sectors) Regulations, 2000, which lays down that every insurer transacting general insurance business, shall underwrite business in the rural sector, to the extent of at least 2% of total gross premium in the first financial year, at least 3% of gross premium in the second financial year and 5% of the gross premium in the third and further financial years. The obligations include insurance for crops. The Rural sector has been defined as any place which, as per the last census, has a population of not more than 5000, density of population of not more than 400 per square kilometre, and at least 75% of the male working population engaged in agriculture. The Government of India has launched various programmes for the benefit of small farmers, marginal farmers, agricultural labourers, etc. Since 1980, all these programmes have been integrated into Integrated Rural Development Programme (IRDP) which is funded by the Central and State governments on 50:50 basis. The objective of the programme is to provide, to the target group of rural families, a package of assistance comprising of income generating assets, working capital, etc. through subsidy, institutional credit, etc. Special insurance schemes are framed to protect the beneficiaries of IRDP projects. Under these policies, the rates of premium are lower and claims procedure is simplified. Whenever, the word scheme is used hereafter, it refers to these special policies. Insurers will evolve appropriate strategies and plans to meet these obligations.

The Life Insurance Corporation of India identified the need of rural life insurance and the very first objectives of the LIC of India is to spread life insurance much more widely and in particular to the rural areas and to the socially and economically backward classes with a view to reaching all insurable persons in the country and providing them adequate financial cover against death at a reasonable cost. (Central office, LIC of India: Corporate Policies published in1984) In spite of the above laudable objective, the concept of marketing entered in to life insurance industry very lately and the rural focus is still nascent. Challenges in rural market

Consumers are scattered and spread over a vast area. Exposure to print media is very low. Variations to dialect and life styles abound. Message comprehension poor. Non-conventional media more expensive and cumbersome. Awareness and distribution channels not available particularly for insurance.

The general insurance industry in India, prior to nationalization concentrated its efforts in the urban organized sector to the relative neglect of the vast population in the rural areas. After nationalization, the approach of the general insurance industry towards the rural market has changed considerably. The insurers have broken their old shell of big cities and large business houses. They have made sincere efforts in reaching their service to the remotest village and satisfying insurance need of the rural population which are very different from the traditional urban market. Many need based covers have been designed, especially for the rural market, keeping in view the needs of economic activity in rural areas. By opening offices in smaller towns and appointing Development officers and agents, specially catering to rural areas, we 57 have also tried to make the services available as near to the clients as possible. Through our innovative publicity and advertising efforts in local languages through media which are easily accessible to the rural population, we have also attempted to reach the message of insurance to the rural population.

Shirodkar, S.M says, Insurance industry in other parts of the world has also been somewhat slow in adopting marketing concepts and it is natural that our country is not an exception to this general trend .......... It is now becoming increasingly evident that a new stage of societal orientation is being ushered in. Insurance industry must take due cognizance of this shift in emphasis and recognize the truth of 'the old order changeth, yielding place to new'. An increasing marketing orientation will alone usher in long term success based on consumer satisfaction and loyalty. Some signs of this change are visible in the shape of LIC's new pension plans (Jeevan Dhara and Jeevan Akshay) as well as its entering in to the mutual fund and housing finance fields to satisfy customer needs in these areas. The decentralizations of servicing functions and authority to the first line (branch) offices and use of microprocessors to improve customer service are other steps taken towards this end. New Horizons in Planning: Path to Progress published by the LIC of India (1990) says as follows Till then the market has been broadly divided into urban and rural. Till then the market has been broadly divided into urban and rural. However it was felt that this broad classification did not give sufficient knowledge as regards the extent of market exploitation and potential availability. It was felt a detailed planning; segment wise on the following pattern will lead to better results. Basic segments on the basis of occupations (to be recorded in proposal papers)

1. Segment I: Professional and managerial group (professional, technical, executive and managerial workers)

2. Segment II: Regular income group (clerical and sales workers).

3. Segment III: Self-employed group (farmers, fisher men, cultivators and other related workers).

4. Agricultural labourers.

Thus segmental planning with rural focus started after the OIC (Organization Improvement Cell) set up of decentralization of the LIC of India in early 80s. Corporate Policies published by LIC Central Office (1994) elaborates the objectives and goals of its marketing policy as follows: Objectives:

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As a national organization LIC should provide optimal financial security through life insurance, as extensively as possible, to diverse populations in urban and rural areas: with different occupations and sources of income and economic value; and in high, middle and low income levels and more especially those whose income is not regular and the economically weaker sections; having in mind The changing socio-economic environment of the country; The organization's prime concern with customer satisfaction; The need to provide cover at the minimum possible price; The need for mobilizing an increasing volume of savings; and The economic viability of operations to ensure stability and growth of LIC. For achieving the above- stated objectives, the goals are spelt out as follows: Bringing about a marketing approach in the various tiers of the organizational hierarchy. Better penetration into rural areas and market segments urban& rural -hitherto not adequately explored. Offering adequate range of products suitable for different segments of people. Improving customer satisfaction. Developing a dynamic field organization. Improving cost effectiveness.

The techniques adopted are: Planning and performance budgeting. Product development. Product mix. Competent and productive agency organization. Adequate training of the sales force. Reward system to agents. Incentives to the development officers. Introduction of group schemes. Consumer education. PR & Publicity.

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Philip Kotler has dealt the subject of marketing with reference to life insurance industry in USA which is worth relevant and significant. He says thus: Marketing entered into the consciousness of different industries at different times --Marketing spread most rapidly in consumer packaged goods companies, consumer durable companies, and industrial equipment companies in that order Bankers initially showed great resistance to marketing but in the end embraced it enthusiastically. Marketing has begun to attract interest in the insurance industry and the stock brokerage industry although marketing is still poorly understood in these industries.

Mc Kinsey & Company, a global Management consulting firm published its report on Indian life insurance in 2007 and it says, By 2012 about 10.3 million household with income greater than Rs 2 lakh will control more than 22 per cent of rural consumption. Further more rural India will not be one market. Pockets of attractive rural market will emerge in certain parts of India. Players will need to understand their needs, design products to match them and create distribution models to reach a highly fragmented consumer base cost effectively. It further says, Though private sector players are dwarfed by LIC's presence some private insurers have reached a meaningful scale. Significantly, these players are entering second and third tier towns and even rural areas. D.K. Mehrotra, MD of LIC in his address to Indian Merchants Chamber, Mumbai says that a noticeable aspect of the Indian market is its rural blend. The Indian population is largely rural and a welcome feature in terms of prospects is that the affluence in our country is on the increase in rural India. It is encouraging to see life insurance companies getting proactive in rural markets. With the momentum building up, most of them are lining up new micro products that exclusively cater to rural clientele. Given the pace of business, estimates suggest that rural sales are likely to account for over 22-25% of the total sales revenue over the next few months. Belying the general perception that it is expensive to do business in rural areas and that insurers just stick to mandatory numbers as per rules, it is cheering news for rural India that many private life insurers are putting in place exclusive marketing initiatives to take on rural business as a vibrant business proposition. And why not, rural is profitable business! Market surveys have indicated that the rural savings to income ratio is around 30%, which is higher than the urban population. Given the vast potential for insurance products in rural India, different techniques are likely to emerge.
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Segmentation of the rural market, new approaches to leverage extensive rural banking services or savings oriented insurance products to provide flexibility in premium payment could be techniques to tap the vast rural potential. Rural India is going rapid transformation and various markets are awakening to the realization of the potential that exists in the rural and semi urban areas. The distinction between urban, semi urban and rural areas is getting blurred. It is no longer correct to presume that whatever is not urban is rural. However despite such an open market, around 68% of the rural economy still lies untapped due to lack of perceived opportunities by the investors'. Indian insurance market is suddenly agog with
activity. Several universally renowned players have entered into tie up with Indian companies for a fruitful alliance. This has led to the emergence of a vibrant market with the hitherto monopolistic public sector players joining the race with renewed fervour. Whether all this is

going to be translated into a victory for the customer is the million dollar question, especially in low thrust areas like rural insurance, pension product etc. The new insurers variously need the government to: Liberalize distribution. Lift foreign ownership restrictions. Provide access to the attractive parts of the pensions market. Issue longer dated securities. Deregulate non-life tariffs.

A dissertation on comparative and competitive analysis of private life insurance companies in India since their entry says that LIC is an undoubted leader in the field of average number of policies per year in the last five years. It is seen that private insurance companies are gaining momentum and are trying to defeat LIC in case of new insurances. Main reason behind LIC for having such a large number of policies is the trust of the common man. LIC being a government agency has got a faith of Indian mass. People are not yet prepared to give their savings in the hands of private players. World Insurance Report, 2008 by Capgemini, while dealing with Indian life insurance, observes that despite recent growth, there is still tremendous untapped potential in the Indian insurance sector. India accounts for 16% of the world population, but accounted for only 1.68% of the world life insurance market in 2006. India is also far behind world averages in terms of insurance penetration, and insurance density. A mere 20% of the insurable population aged 20 to 60 years is currently covered by life insurance.

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Dr Vinayagara Murthy, in his research article, Indian Insurance: Modern Marketing Approach, says, Marketing strategies for insurance in the emerging scenario could be understood in terms of the following Steps: R>>>>>>STP>>>>>MM>>I>>>>C. Here, R = Market Research STP = Segmentation, targeting and positioning. MM = Marketing Mix I = Implementation C = Control Having done market research and finalizing on segmentation, targeting and positioning the strategy would focus on the marketing mix. While determining the implementation methodology, the four characteristics viz., intangibility, inseparability, perishability and variability give rise to certain unique requirements that deserve careful attention while formulating the marketing strategy for insurance. After implementation, the insurers should concentrate on the effective control that would enhance their business. The agents, by using various strategies sell the product by convincing the customers. Moreover, they push policies with highest premium to pocket a higher commission. The consultative approach to selling is the modern approach, which helps customers to buy. The four step process includes: 1. Need discovery, 2. Selection of product 3. Need satisfaction presentation, and 4. Servicing the sale This approach to selling requires understanding of concepts and principles borrowed from the fields of psychology, communications, and sociology and needs a lot of personal commitments and self-discipline from the seller. Low penetration of insurance in India, as elsewhere, has varied explanations, economic and sociological. One basic factor that puts a brake on growth is low propensity to consume: low propensity for life insurance, not necessarily because of considerations of affordability nor because of inadequate range of insurance products and services. The major determining factor is lack of awareness of life insurance per se. And this phenomenon is not confined to rural and semi-rural segments of society: it pervades urban populace as well. Surprising isnt it, but true. In Oracle White Paper on insurance, Chuk Johnston says, the question for todays insurance carriers and providers is this: how adaptable are your IT systems and what impact can adaptive systems have on your business? Having adaptive systems can help you to identify and remove constraints that impede your ability to prepare for and respond to an ever14

changing market. By using adaptive systems that provide a solid foundation along with process flexibility, data elasticity, and information access, you can open the dam that is holding back the potential of your business, and seize new opportunities. The feedback obtained from existing bank assurance customers showed that 13% of the customers did not know the details of the policy they have purchased and its future usage or benefits, 19% customers felt they have not got sufficient cover for insurance needs of their family, 96% of customers rated LIC as the best financially stable insurance company and 17% of customers felt private insurers can better service the claims than PSU insurers but rest 83% considered PSU insurers as better in claim paying ability and systems. The report published by Celent says that Indias life insurance market is booming and the market has grown at a healthy CAGR of 24% over the past 5 years. Most of this growth is from the urban areas. The increase in competition is forcing insurance providers to look beyond urban centres and take their trade to the more challenging rural hinterlands of the country, where only 3% of the population of more than 720 million people have any form of life insurance coverage.

Understanding rural life insurance and assumptions:

The discussion on rural marketing and life insurance rural marketing led to the idea that rural life insurance marketing encompasses the whole gamut of activities which include the following: There is availability of much untapped rural potential with regard to life insurance. Lack of proven marketing techniques and lack of will for penetration from the private players. Inadequate market research of the needs of rural customers with regard to life insurance. Inadequate use of new techniques for tapping the rural market. Viewing rural coverage more of regulatory obligation than social obligation by the private players. One size fits all strategy in designing products.

The following points emerged from the review of literature with regard to techniques for the spread of insurance coverage in rural areas. The identification of rural needs and necessities. Designing the products suiting to the needs. Devising innovative methods to price the insurance products suiting the needs.

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Positioning the product around the rural horizon. Selection of opinion makers as advisers and also buyers of insurance products to infuse trust towards the companies. Creating the innovative distribution channels and strengthening the existing channels. Advertising products understandable to rural folk. Aiming at inclusive growth. More business orientation and not a charity. And also fulfilling a social obligation. Scientific management and collection mechanism with rural focus.

The following points emerged from the review of literature:

The rural market is fast growing and rural customers are market savvy as do the urbanites. The awareness levels of rural people with regard to life insurance are less. The needs and necessities of rural people have certain special features. The purchase decisions are broadly decided on special parameters. The commitment of the individual insurance companies towards social objectives can enhance the rural life insurance coverage. Insurance companies are using yesterdays techniques to todays markets.

Insurance penetration in the rural areas is very low. The private players have no definite and exclusive marketing techniques for this sector. The large untapped potential in rural hinterlands is known to all insurers but their marketing techniques are prosaic. Every author talks of devising innovative marketing techniques but there is less research as to what techniques fit in to spectrum at micro level. Based on this research gap and literature review, the problem of designing meaningful marketing techniques gains importance. The research problem therefore is identified as identifying and determining the specific marketing techniques for wider insurance coverage. Therefore this study gains relevance for analysing the existing rural life insurance market, the existing marketing techniques and suggest suitable methods for a wider insurance coverage as a total social protection. Further the review has focused on important issues such as: Lack of adequate life insurance awareness. Lack of proven marketing techniques by the private players. Low spread of Insurance message. Heterogeneity of rural landscape. The gap between the potential available and tapped. The research gap in terms of rural expectations and rural coverage.

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Rural and Social Sector Obligations

There are two central regulations that have shaped microinsurance in India. The first is a set of regulations published in 2002 entitled the Obligations of Insurers to Rural Social Sectors. This is essentially a quota system. It compels insurers to sell a percentage of their policies to de facto low-income clients. It was imposed directly on insurers that entered after the market was liberalised. The old public insurance monopolies have no specified quotas, but have to ensure that the amount of business done with the specified sectors was not less than what has been recorded by them for the accounting year ended 31st March, 2002. Rural areas are all locations outside of officially classified urban areas. Life insurers must sell 7% of total policies by number (not value) in the first year, with increasing amount of up to 16% in Year 5. With general insurance, 2% of gross premium income must come from rural areas in the first year, 3% in Year 2, and 5% thereafter. The regulations for the rural sector do not specify the income levels of clients directly. They specify that the clients must come from rural areas. With the great majority of poverty in India located in rural areas, the effect of such a stipulation is to ensure that poor clients are sold policies. At present, the rural quotas are relatively low, so it is possible for many insurers to meet their rural sector targets by selling high value policies to wealthier residents of rural areas, but the quota rises each year. The targets for life insurance are likely to be easier to hit than for general insurance. Consider, for example, how many insurance policies covering huts need to be sold to equal 5% of the premium of a $100,000 house in Bangalore. This regulation has generated massive pressure on insurers to sell microinsurance. Without selling microinsurance, they cannot sell their more profitable products. To date the IRDA has fined a number of insurers for failing to meet their targets. Continued non-compliance to the rural and social obligations could result in suspension of license to operate. The social sector includes low-income groups consisting of unorganised workers and economically vulnerable or backward classes in urban and rural areas, for example Dalits or untouchables. Insurers must cover a specified number of new lives each year from these groups, from 5000 policies in Year 1, up to 20,000 policies in Year 5. It is difficult to assess the costs and benefits of the regulation without further research. On the one hand, the regulation has created a frenzy of interest by regulated insurers to enter into microinsurance. The regulation has also been the motor for important innovation. To date,

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much of the innovation in other countries has derived from donors, academics or MFIs working on the issue. In India, in their drive to meet their rural and social sector targets, regulated insurers are developing innovative new products and delivery channels. They bring their considerable resources to this task. The impact of the quota is of course not all positive. There have been unverified reports that some insurers are dumping poorly serviced products on clients solely to meet their targets. As soon as they have met their targets, some have immediately stopped selling microinsurance. This practice is difficult to regulate, as it is harder to police the quality of insurance sold and serviced to the poor than its quantity. It would certainly be socially unfortunate if the regulation resulted in a mass of poorly serviced products sold at a loss, to enable insurers to concentrate on their more profitable products. This situation would not result in meaningful sustainable financial deepening, but more akin to charity, forced on insurers to allow them to do business in India.

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Objective of study
I. II. III. IV. To understand the potential of the rural insurance sector To develop a plan for exploring new market or less explored market. To study the market penetration in rural sector by IDBI. To analyse the competition in rural insurance market i.e. IDBI VS other leading insurance companies. V. To develop a plan for increasing customer base in existing rural insurance market. VI. VII. To develop new insurance plan according to their needs and requirements. To improve the presence of IDBI in rural insurance sector.

Insurance sector in India is very much explained by urban population. However companies are now showing inclination towards rural India also. Many companies have launched their rural project. Our objective aims to study the rural insurance in every possible aspect. Questions are raised for every issues and a survey is conducted to find solution of every query. Questionnaire is generated to arrive at conclusion of our objectives. We will try to study the whole insurance sector also whether they really show interest in rural market or they have entered in rural market just for completion purpose. We would also find the answers effectiveness of advertisement and other promotional activities of life insurance companies.

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Description of concept used

As rural security is vital for the growth of the economy, the most serious problem confronting the rural security is inadequate life insurance coverage and inadequate coverage of all their liabilities. Inclusive growth demands inclusive insurance coverage for a tension free life. Creating assets without the provision of an insurance umbrella prove to be a futile exercise in the long run. Lack of market research with regard to specific life insurance needs and lack of societal marketing have inhibited the growth of life insurance penetration in the rural areas. The present study aims at studying the rural life insurance market in all angles rural aspirations and expectations, the insurance awareness, present marketing techniques, the deficiencies in the light of low levels of rural penetration and offering some suggestions for improvement in profitability of the companies coupled with wider rural coverage. The present research is intended to study the rural life insurance market and the rural centric marketing techniques and the expectations of the rural customers which are specified in objectives. The research design selected is, therefore, exploratory or formulative research and the major emphasis is on the discovery of ideas and insights. A critical pre requisite to this study is to know the marketing strategies which is the domain of the top management and may not be revealed officially. Since the researcher himself is a person from the life insurance industry for nearly 3 decades and having worked in 2 major life insurers and having seen the techniques from inside the offices, the personal observation over the years at work situation is brought in for the study. The reliance on the observation is only to the extent of ensuring the objectivity of the data gathered and is not central to the study. The known details are explained and deficiencies are identified to suggest suitable suggestions at the end of the thesis. Still, since the marketing techniques are dynamic and ever changing and are the domain of the top management, the research design is aimed at to see what is there than to predict, to interpret what is distinct and visible rather than to visualize and finally suggest viable marketing techniques for wider rural coverage. The objectives of the study are made use of to formulate hypothesis and primary data is utilized to check the hypotheses. The works of other writers on insurance also provided insights for formulating hypotheses.

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Hypotheses for study:

Based on the objectives of the study and the points emerged from the survey of literature, the following hypotheses are made for testing: For studying the awareness levels of rural people with regard to life insurance and their perception of private companies with regard to safety aspects: Majority of the customers believe that SBI Life Insurance Company is a government company. The rural policy holders perceive that investment in private life insurance companies is safe. IRDA is considered as a guaranteeing authority of investments in the minds of rural people. For studying the expectations of the rural customers with regard to type of products and frequency of payment of premiums: Direct sale strategy with cheaper premiums is preferred in rural areas. People in rural areas prefer insurance coverage on liabilities. People in rural areas prefer pension plans. The daily pygmy collection of premium is inversely proportional to yearly income.

For studying the rural centric marketing management techniques adopted by the life insurance companies and also the deficiencies vis--vis expectations of the customers. The existing rural policies of different companies are need based. Life insurance agents are influenced by extra rewards for promoting rural policies. Life Insurance companies are really interested in rural businesses. Satisfaction of customer influences repeat businesses. Group insurance is preferred than the individual business by the agents for rural people. Life insurance awareness has an effect on the business volumes of companies. The caste/ religion of the agent have effect on sale of insurance policies.

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Company Profile
About IDBI Federal Life Insurance IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, Indias premier development and commercial bank, Federal Bank, one of Indias leading private sector banks and Ageas, a multinational insurance giant based out of Europe. In this venture, IDBI Bank owns 48% equity while Federal Bank and Ageas own 26% equity each. Having started in March 2008, in just five months of inception, IDBI Federal became one of the fastest growing new insurance companies to garner Rs 100 Cr in premiums. The company offers its services through a vast nationwide network of 2137 partner bank branches of IDBI Bank and Federal Bank in addition to a sizeable network of advisors and partners. As on 28th February 2013, the company has issued over 8.65 lakh policies with a sum assured of over Rs. 26,591 Cr. They have been awarded the PMAA Awards (2009) for best Dealer/Sales force Activity, EFFIE Award (2011) for effective advertising, and conferred with the status of Master Brand 2012-13 by the CMO Council USA and CMO Asia.

About the sponsors of IDBI Federal Life Insurance Co Ltd

IDBI Bank Ltd. continues to be, since its inception, Indias premier industrial development

bank. It came into being as on July 01, 1964 (under the Companies Act, 1956) to support Indias industrial backbone. Today, it is amongst Indias foremost commercial banks, with a wide range of innovative products and services, serving retail and corporate customers in all corners of the country from 1077 branches and 1702 ATMs. Federal Bank is one of Indias leading private sector banks, with a dominant presence in the state of Kerala. It has a strong network of over 1060 branches and 1158 ATMs spread across India. The bank provides over four million retail customers with a wide variety of financial products. Federal Bank is one of the first large Indian banks to have an entirely automated and interconnected branch network. Ageas is an international insurance group with a heritage spanning more than 180 years. Ranked among the top 20 insurance companies in Europe, Ageas has chosen to concentrate its business activities in Europe and Asia, which together make up the largest share of the global insurance market. These are grouped around four segments: Belgium, United Kingdom, Continental Europe and Asia.

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Product Range

INCOMESURANCE Incomesurance not only gives you unmatched transparency and flexibility but there are lots of other features which are inbuilt in the product like convenient premium payment options, Tax benefits and double advantage of Endowment and Money Back plan. Incomesurance combines Endowment and Money Back benefits into one plan. You can get periodic payments as in Money Back or get a lump sum at maturity as in Endowment. You can make it into an Endowment plan or Money Back plan, as you wish.

WEALTHSURANCE The Wealthsurance Foundation Plan enables you to save and build wealth to meet your financial goals. However, unlike other investment alternatives, it also enables you to achieve your wealth goals even in the event of unexpected death, accidents, disablement or serious illness. The Wealthsurance Foundation Plan can ensure that your plans for wealth creation are achieved by protecting that plan with insurance benefits. With Wealthsurance Foundation Plan, you can: Save into the Plan as much money as you want whether at one time, at regular intervals or as per your convenience. Build your wealth by choosing the investments your savings go into and change them from time to time as you wish. Get adequate life insurance cover with a unique built-in terminal illness benefit, so that the financial security of your loved ones is assured and your plans are always realized.

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RETIRESURANCE The IDBI Federal Retiresurance Pension Plan is a Unit Linked Insurance Plan that helps you accumulate your funds for your retirement. The plan is tailor-made for the ever changing investment environment, with built-in flexibilities to manage your investment mix. On retirement, you can use the maturity proceeds to buy an annuity so that you have a monthly pay check for life, even after you stop earning your regular income.

HOMESURANCE The Homesurance Protection Plan is a reducing term plan, which provides insurance cover equal to the outstanding balance of your home loan. In the unfortunate event of death of the home loan borrower, the insurance cover enables repayment of the home loan liability. A home loan is usually a large liability and if the breadwinner who would repay the loan were not to be there, it could become a serious burden to the family. The Homesurance Protection Plan protects against this liability. BONDSURANCE Bondsurance is a single premium plan which allows you to make a one-time investment and get a guaranteed amount on maturity. You can choose a maturity period of 5 or 10 years for your investment. At the end of the chosen period, you will receive a guaranteed maturity amount. Besides the guaranteed maturity amount, Bondsurance also provides a life insurance cover. In case of death before the maturity date, a Death Benefit which is also guaranteed will be paid. Thus you can get life insurance cover, while earning an assured return on your investment.

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Research Methodology
Materials and methods which are used in conducting the study are presented under the following headings: Research location. Sampling design. Collection of data. Analysis of data.

Research location:
Life Insurance marketing in rural areas is spread throughout the country extending more than the six lakh villages. The social security and life insurance needs are felt in all these villages. All these villages fall under the category of either pure rural or semi urban. Two such districts of Bihar, namely, Hajipur (pure rural) and Patna rural district (rural and semi urban characteristics) are selected for the study. The survey for doing this research was conducted in these 2 districts of Bihar viz, Hajipur rural and Patna rural districts. The offices of all private insurance companies are located in Patna and hence Patna rural district is selected. For selecting the other district, the following criteria are considered: Exposure to all private players. Contribution of primary sector, The rationale for selecting Hajipur and Patna (rural) being their proximity to the capital city, Patna where the branches of all private life insurance companies are present and the customers are exposed to all private players in one way or other. The population of Patna is nearly 24 lakhs and population of Hajipur is 7 lakhs including rural population. However the rural population is not known.

Sampling design:
For collecting the responses from the customers, cluster sampling technique followed by simple random sampling is adopted to ensure the representation of the data for the whole population. Cluster sampling means random selection of sampling units consisting of population elements. Then from each selecting unit, a sample of population elements is drawn by either simple random selection or stratified random selection. A survey for questionnaire is conducted in these two villages. Their response is entered by surveyor as many of respondents were not able to understand English. The category to which they belongs 1. Landless agricultural labourers. 2. Farmers who own lands. 3. Salaried professionals such as teachers, doctors, nurses, anganwadi workers and such other people. 4. Artisans, petty shop owners, hoteliers, cobblers, potters, bidi workers, weavers etc. 5. People engaged in service sector like agents (post and insurance), pigmy collectors, vegetable dealers, suppliers and distributors of products.

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Data collection
Primary data:
The primary data is collected through questionnaires. The questionnaires contain both open ended and close ended questions that are simple and easy to understand. The questionnaires administered to customers have close ended questions which include dichotomous (Yes or No answers) and multiple choice questions to the tune of 5 (selecting from 5 given alternative answers). Open ended questions are asked where diverse information is required giving scope for the customers to air their views Questions aimed at eliciting life insurance awareness levels like whether they know the existence of private players, whether investing in private companies is safe as per their perception, whether they recognize SBI Life Insurance Company as a government owned company, knowledge of IRDA, what prompted them to take policy ( agent pressure/ savings/ to meet future expenses/ to meet contingencies) etc. Questions aimed at eliciting information with regard to satisfaction/ dissatisfaction levels like whether they received policy bonds and premium notices on time, whether claims are settled on time, whether they have gone for repeat sales etc. Questions aimed at eliciting the life insurance product knowledge like whether they are aware of rural insurance. Are they aware of IDBI Federal insurance company and are they aware of Microinsurance.

The primary data is collected from respondents of two village. This Experience Survey from the people having experience with the problem under study is felt necessary since the objective of the research is to obtain insight in to the new ideas relating to the research problem. The questions are both open ended (seven) and close ended (fourteen). Questions are also asked with regard to their suggestions for spreading the message of life insurance in rural areas. The questions are designed to elicit the following information: The questions aimed at eliciting information whether in their view the different life insurance companies have plans to suit the needs of rural people, whether there is a necessity to design cost effective policies, whether the life insurance companies, in their opinion, are really interested in social security etc. The questions aimed at eliciting information as to the real difficulties in selling the rural policies, what type of policies they suggest for rural folk, suggestions for popularizing insurance plans in rural areas etc. The questions aimed at eliciting information whether the customers, in their view, believe that the investment in private companies are safe, whether the investment decisions are swayed by caste and religious considerations, whether opinion makers have any say in investment decisions etc. The questions aimed at eliciting information whether they expect more incentives/ commissions for popularizing insurance in rural areas.

Secondary Data:
The secondary data is collected through the annual reports of LIC of India and other life insurance companies, the journals of IRDA, the internal magazine of LIC, viz., Yogakshema, the publications of Information & Broad Casting dept, viz, Yojana, India Year Books, the web sites

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of LIC of India and other private companies, the lead bank reports of the selected districts under study etc. The brochures, pamphlets and advertisement material are collected from across the branches of different life insurance companies.

Tools of analysis of data:

Primary Data Analysis
To test the reliability of the questionnaire meant for the customers, the questionnaire was initially administered to 30 policy holders each for Patna and Hajpur respondents as a pilot study. On analysing the answers of the customers, suitable changes are effected to the main questionnaire and administered to 200 respondents from Patna and Hajipur rural areas.

Secondary data analysis

The secondary data collected is analysed by tabulation, histograms, pie charts, line diagrams and graphs.

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Analysis
Total numbers of respondents for survey were 90 and the analysis will be made with the response these 90 respondents.

What is your age group?

o 15-25 o 26-35 o 36-45 o 46+

17 22 28 23

Table 1.1

Age Group
o 46+ 26% o 15-25 19% o 26-35 24%

o 36-45 31%

Analysis showed 26% respondents were over age of 46+ 24% of respondents were between age of 26-35. 31% respondent were between age of 36-45 19% of respondent were in age group of 15-25.

This shows that most of respondent were employed and earning their livelihood by their self An age group of 15-25 includes people who just joined some work or are student who assists their family in any kind of work. This age group has least inclination towards buying insurance.

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Analysis on gender

You are o Male o Female

78 12

Table 1.2

Gender
o Female 13%

o Male 87%

87% of respondents were male. 13% of respondents were female

Most of the working people in village or rural part are male, fewer female were working in village and they mostly run grocery store or small business managed by them.

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Your income level

o 0-25000 o 25000-50000 o 50000-100000 o 100000-200000 o more than 200000

75 12 3 0 0

Table 1.3

o 50000100000 3%

Income Level

o 100000-200000 0%

o more than 200000 0%

o 25000-50000 14%

o 0-25000 83%

Income level suggested that around 83% of people were having income under Rs. 25,000. Around 14% of respondent has income level of 25,000-50,000 3% of respondent reported income level 50,000-100,000 No respondent reported income over 200000

We can conclude that there less per capita income in villages so insurance with low premium will be more popular in villages. However the purchasing power of these income groups cant be doubted

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Your profession o Student o Govt. service o Self employed o Business o Others

12 11 23 11 33

Table 1.4

Profession
o Student 13%

o Others 37%

o Govt. service 12%

o Business 12%

o Self employed 26%

Analysis shows 13% of respondent were student 12% were public servant 12% owed some business 25% of respondent were self employed 37% had vivid way of earning livelihood

The interpretation which can be drawn here is that most of the respondent earned their livelihood by depending on farming, running small business, owned shop etc. Since most of them were earning livelihood by their self they may need insurance in some part of their life. This analysis confirms the tremendous potential hidden inside rural sector. Insurance may also be a part of this business.

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have you heard of IDBI Federal o Yes o No

27 63

Table 1.5

Have u heard of idbi

o Yes 30%

o No 70%

This question was framed to understand the popularity of IDBI in villages. Survey explained above facts. 30% of respondent said they have heard about IDBI. 70% of respondent said they have not heard of IDBI, and it was the first they heard this word.

What we can draw from this analysis is IDBI needs to work on its rural project. Less awareness of IDBI Federal in villages is causing others to take market share. Advertisement in rural sector needs to be worked on in order to gain more popularity. Penetration of IDBI in rural sector or villages is still less.

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Do you have insuarance policy o Yes o No

74 16

Table 1.6

Do you have insuarance policy

o No 18%

o Yes 82%

82% of respondent owned insurance policy in villages however most of these policies were LIC policy. On inspection everyone confirmed their trust lies in LIC. 18% of respondent said that they dont own any insurance. Most of them who dont own insurance were those who were not earning and they were assisting their family in business or any work. A considerable number among these respondents were those could not afford to buy anything because of extremely low income. However a large number of individuals own insurance which implies there is good potential for insurance as these individual may buy more policies. Also we may conclude buyer of past can always become your customer in future.

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would you like to buy insurance policy o Yes o No

57 33

Table 1.7

would you like to buy insurance policy

o No 37%

o Yes 63%

82% of respondent said they own policy and now 63% of individual confirmed that they would like to buy policy. Now this clearly suggests the potential of insurance sector in rural market.

37% of respondents who said no to buy insurance were extremely poor, unhappy customers, non-earning and illiterate. Now this 63% of individual are those who are future buyer, we shouldnt think they are immediate buyer and they are not giving any commitment however they must have some plan before saying yes to buying insurance.

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Are you satisfied with the insurance service agent o Yes o No

52 38

Table 1.8

Are you satisfied with the insurance service agent

o No 42% o Yes 58%

Are you satisfied with your insurance policy o Yes o No

62 28

Table 1.9

Are you satisfied with your insurance policy

o No 31% o Yes 69%

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58% of respondent said that they were satisfied with their insurance service agent. The satisfaction level according to them is the way they were explained about the details of insurance, ways of paying premium, benefits of buying insurance, convincing the buyer. Many other reasons were given but they on individual view. We omit them.

Individual who were not satisfied with their policies because of blurred explanations by their agent. They were not properly briefed about the kind of policies they were buying and the benefits they were covered under.

When asked about the satisfaction level with their policies around 70% of respondent said they were very much satisfied with their policy. The reasons of their satisfaction being the kind of policy under which they were covered, hassle free way of paying premium, premium based on their choice and dependent on their income.

Around 30% of respondent said that they were not happy with their policy they own. They quoted various reasons for being unsatisfied, frequent of them were payment of premium, they were not properly informed about their policies. Some of them did not even know the plan into which they were.

A better implementation of plans in rural sector may fetch customers from other insurance company and can also help in consumer retention. A market study said that around 30% of business comes from the existing consumer. Thus a better service provided may help in building brand and making better penetration in any market.

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Did any insurance agent ever approached you? o Yes o No

82 8

Table 1.10

o No 9%

Did any insurance agent ever approached you?

o Yes 91%

This question was asked in survey in order to know the overall penetration of the insurance sector in rural market. This will give a clear picture to understand the efficiency of insurance agents in rural market.

91% of respondent agreed that they were approached by insurance agent. This shows insurance agent penetrated the rural market, however this survey is done near to state capital village and because of presence of almost all insurance companies agents were able to reach the rural market. However many villages which are remotely located the reach of insurance company is questionable. However no confirm or exact statement can be made in this question.

9% of respondents were not tapped even in this rural market on this sample size. On bigger note the penetration of insurance agents may be doubted.

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Have you heard of Rural insurance o Yes o No

4 86

Table 1.11

Have you heard of Rural insurance

o Yes 4%

o No 96%

Are you aware of Microsurance from IDBI Federal o Yes o No

12 78

Table 1.12

Are you aware of Microsurance from IDBI Federal

o Yes 13%

o No 87%

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This question actually tried to explore the awareness of rural insurance and rural insurance offered from IDBI Federal. Microinsurance is a rural insurance offered from IDBI Federal. Knowing the awareness and popularity of a given product we can determine the kind of strategy. Our objective is also to know the awareness of IDBI in rural market. The survey shows following description. Around 96% of the respondent said that they never heard of rural insurance. 4% of respondent confirmed that they have heard of rural insurance. Since the penetration was low on further drill it was known that those who knew rural insurance are the one who owns the rural insurance or was briefed by any agent. Some of the respondent said they made enquiry in companies regarding any special facility for villages in insurance companies.

Microsurance There were several policy holder of IDBI Federal however they did not know what is the meaning of rural insurance but they owned rural insurance. 13% of the respondent confirmed that have heard of Microsurance as they own or they know someone who are owning this policy. They had little knowledge about what it is or any details. The low penetration is a positive sign for developing a new market base in many rural sectors. 87% of the respondent said that never had heard of Microsurance so any further drill to this survey was not required.

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Have you ever seen any insurance ads? o Yes o No

82 8

Table 1.13

Have you ever seen any insurance ads?

o No 9%

o Yes 91%

91% of respondent said that they have seen insurance ads by any medium. This concludes that there is a wide popularity of insurance sector and every possible way of ad is already used. This 91% figure is valid for all insurance companies which include bill boards in cities too. So not much can be explained of how much it has ad penetration in rural market. Most of the ads dont talk about the rural insurance so probably rural insurance is also need to be advertised for better penetration. 9% of respondents said they have not seen any insurance ads. Most of these respondents were illiterate or was too busy with their work to pay attention.

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Recommendations
1. Recommendations aiming at generating life insurance awareness in rural areas
The low levels of life insurance awareness are evident from the analysis of the primary and secondary data. With a view to educate the customers and raising the awareness levels, apart from the existing techniques such as mobile publicity vans and publicity in print and electronic media, The industry can create a consortium of life insurance companies with the involvement of IRDA for educating the rural people on a mass scale. Social marketing technique is to be used to market the idea of insurance before the individual life insurance company steps in to the business. This consortium has to organize exhibitions, slide shows, short films and such other activities in the village markets frequently.

2. Recommendations aiming at generating awareness program of the regulatory body (IRDA)

The primary data has revealed that majority of the people in the rural areas are not aware of the regulatory body, i.e., IRDA and with the result averse to invest in private companies perceiving them to be unsafe. It is therefore recommended to print in all brochures, pamphlets and policy bonds of all life insurance companies the Grievance Redress Mechanism and highlight the role of IRDA. This strategy is aimed at creating trust in the mind sets of the rural customers. The consortium of life insurance companies can also enlighten the role of the regulating authority to the rural people. 3. Recommendations

for suitable techniques aimed at customer

satisfaction
From the primary data it is deduced that increased customer satisfaction lead to repeat sales. Programs aiming at customer satisfaction are felt more important by private players to show demonstrative effect that they mean business. In order to maximize customer service, the life insurance companies need to introduce employee appraisal linked branch service index meters in all branches where each and every service activity is measured according to scale by the robust IT department monitoring from the head office. The Service areas relate to issue of flawless policy bond, change of address, sending premium notice, mode correction, registering

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nominations & assignments, settling survival benefits before date, loan sanctioning, fund switching , claim settlement, free look cancellation, courteous response to queries, disciplinary actions against mis selling and a host of service related things. Printing policy bond in regional language and communicating in regional language avoiding insurance jargons create right chord to relate the company to the rural customer.

4. Recommendations for techniques aiming at designing need based products

We found that there is dearth of products suiting to rural psyche. Except a few products of a few companies, the general product design of all companies has no exclusive rural orientation with a unique selling proposition. The primary data also suggest that lack of need based products as one of the reasons for low levels of rural coverage. In order to design need based products, insurance companies are advised to survey the rural market thoroughly to assess the needs. A family policy covering all members of the family can be launched in order to cover maximum people at a stroke.

5. Recommendations with regard to recruitment of rural agents aiming at more rural coverage
With a view to spread the message of life insurance on a wider scale in each and every village, the life insurance companies need to prepare branch socio economic profile of each branch office with all details of caste / religion/ income/ occupation composition of all villagers and try to appoint agents from each stratum to tap the business from each group. The Black Spot villages (where there is no agent of any company) need to be identified and agents are to be appointed in such villages. Since opinion leaders play an important role in purchase decisions, companies need to enlist the opinion leaders as their Sales Force.

6. Recommendations for wider rural coverage through low cost pension products
Since the incomes of the lower income groups in rural areas could not be spared to purchase high premium policies, the companies need to develop low cost group insurance pension products on the lines of YS Abhaya Hastham pension plan launched by AP government and administered by LIC of India.

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7. Recommendations for wider rural coverage by insuring the liabilities

The liabilities of the rural people are not insured and therefore the dependents of the bereaved families are inheriting the debt. With an aim to provide social security, the insurance companies can launch individual plans, group plans and term plans to cover each and every loan taken by the poor people. The life insurance companies should educate the cooperative societies for getting formal approval by cooperative members for the mandatory insurance scheme for all loans sanctioned by them. The commission can be paid to co-operative societies.

8. Recommendations aiming at a marketing strategy of daily pigmy collection of premiums for agricultural labourers
Having analysed the expectations of the low income agricultural labour group from the primary data, it was discussed that daily wage earners can spare a few rupees daily but find it difficult to pay a bulk premium at a time. Insurance companies need to design policies with daily pigmy collection mechanism and position the products to agricultural labours.

9. Recommendations aiming at a marketing strategy of rewarding the repeat purchasers to sustain eternal relationship
Insurance companies should start giving reward points for each repeat purchase and for each recycling of maturity claim which can be redeemed when the last policy results in to claim by way of maturity or death. This model may be christened Generations Relationship Rewards Scheme (GRRS). This ensures loyalty on the part of the customer towards the company at no extra expense. Preparing and perfecting a unique customer ID for a policy holder with various policies is a pre requisite for the success of this model.

10.Recommendations for flexible and rural centric premium collection mechanisms

The alternate premium collection mechanisms, viz, ECS, Internet payment, Salary Saving Schemes may not work with un bankable and financially exclusive population. Insurance companies through consortium of all insurers collect premiums through mobile vans at the village markets and through Collecting Banks.

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11.Recommendations aiming at increasing the bank assurance potential in wider rural coverage
In India only 2% of the captive customers of the banks are given insurance through bank assurance against the global bench mark of 50 to 60%. Having analyzed the reasons for low performance it is recommended for the life insurance companies to have tie up with all regional and cooperative banks and apart from paying commission to banks, the insurance companies should float business competitions to individual bank branch managers and reward them without which they have no incentive to work and bank assurance would be another portfolio to the already existing jobs in the bank. Insurance companies should also launch easy to understand bank assurance specific exclusive products for facilitating the bank managers to push the sales in an easy fashion.

12.Recommendations aiming at creation of Rural Vertical department at the corporate offices of the life insurance companies
The IRDA stipulations of rural coverage are viewed by the private life insurance companies more as on obligation than as a commitment towards wider social coverage. To unleash the rich untapped potential of the rural areas it is recommended that the insurance companies establish a Rural Vertical department at the corporate office for planning, organizing and implementing rural social objectives without losing sight on profits. Entrepreneurship on a massive scale is need of the hour and the life insurance companies explore the world of rural markets through a separate set of agents specialized in rural markets.

13.Recommendations aiming at advanced professional training to rural agents for meeting the rising expectations of the rural people
Rural India is a mixture of opposites. We witness raising affluence of some and at the same time financially excluded lot of people on the other side. We need insurance advisors who are ambidextrous enough to cater to the rural rich and also rural poor. The rural agent has to equip himself with the subject of wealth creation as well as social insurance coverage. It is therefore recommended for all the insurance companies to form a consortium and establish a National Insurance Academy for training the agents of rural areas on the lines of NIA, Pune and for initiating an exclusive training activity and devise curriculum to rural agents across India. The

44

trainers of life insurance to the agents at the branch offices need to be trained in this Academy.

14.Recommendations for robust IT initiatives for rural life insurance coverage

The IT initiatives presently practiced by the life insurance companies are inadequate to rural life insurance coverage. Recommendations for robust IT initiatives for rural life insurance coverage: The IT initiatives presently practiced by the life insurance companies are inadequate to rural life insurance coverage. This model where the company representative chat with the villagers and personally explain the features of the new products. Companies can issue credit cards to rural policyholders and provision can be made for paying premiums through credit cards. Life Insurance companies are recommended to develop data ware housing for each village of all districts comprising the income, caste, religion and occupation details and make use of the data for recruitment of agents from stratified data, designing need based products , positioning of the products and such other marketing initiatives.

15.Recommendations towards marketing strategy of multilateral marketing at village level

The primary data suggests that villagers expect to get rewards from canvassing new business to their friends, kith and kin. Insurance companies need to think out of box solutions to approach the poor by partnering with them to have a win- win scenario. The commissions that are traditionally paid to agent can be paid to the villagers doing multi.

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Limitations of the study:

The results obtained are based on the information provided by the customers of life insurance products at the time of survey. The area covered is representative and not exhaustive due to time and financial constraints. As it is not possible to cover the entire population of customers, a cluster sampling method of population is adopted to select the clusters and questionnaires are distributed and responses are collected from Patna and Hajipur rural district customers. They are selected by simple random sampling to represent the whole population of these two rural districts. The procedure is given in detail at the subsequent section. The secondary data related to the rural areas of these 2 districts is not exhaustive since no insurance company is willing to part with strategic business data. No insurance company has at present district specific marketing policy and hence the research is confined to secondary data at macro level and the primary data collected from customers and agents from the two districts.

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Scope for Future Improvements

1.

NEED TO RAISE FDI IN INSURANCE:

Importance of FDI in the insurance sector is well recognized by the experts and also referred at many forums over the last years. The sector is highly capital intensive, since its development period is too long. It requires capital infusion at regular intervals and particularly in India the need for capital infusion is highly necessary to reduce fixed cost and to cover Indias the vast geographic spread. But at present, the FDI in the insurance sector is restricted to 26% which is a huge deterrent to growth in the industry.

2. HIGH EXPENSE RATIO/ OPERATING COST:

Both expense ratio and operating ratio is very high in the Indian insurance sector, especially for the private players. In FY 09, the private sector life insurance segment had an expense ratio (operating expenses & commission expenses) of 30.6%. It is observed that the CAGR of operating expenses for LICI is 13.06 % (03-04 to 9-10) while this is 42.29 % for other private players. Public sector companies have been in existence for a couple of decades and hence, have managed to reduce their expenses over time. However, experts on insurance field (Seth, 2010) believed that the expenses ratio should be around 10-15% from long term sustainability & profitability perspectives. A high expense ratio directly impacts profitability. Since the insurance industry is still at a nascent stage, many companies are yet to break down & rising expenses can further delay this process.

3. NEED TO STRENGTHEN CORE PRODUCT PROPOSITION:

Although the life insurance sector has shown rapid growth over the last few years, low margin single premium products & potentially volatile ULIPs have accounted for most of the growth. These products are proven to be easily sold, but merely focusing on these could weaken the growth and long term profitability for Indias life insurers.

4. DELAYED BREAK EVEN FOR PRIVATE INSURANCE COMPANIES:

Breakeven point is achieved in the insurance industry when the new business premium is equal to the renewal premium. However, as the Indian industry is growing, the volume of new premiums is much more than the renewal premiums. Globally, life insurance Companys breakeven is six to eight years but in India, it has not achieved & it may take another couple of years due to recent financial crisis in the world. Other reasons for delayed breakeven are the high operating expenses like management costs, real estate prices, salaries, distribution expenses and technology expenses which are higher

47

than what was accounted for in the original business plans of insurers. Moreover, the capital intensive nature of the life insurance segment has extended this process by a couple of years.

5. PROMOTION OF BANC ASSURANCE:

It is further observed from the survey of existing literature that customers prefer banc assurance channel next to agency channel. Given the highest penetration of banking products, banc assurance could be the single most important channel for insurers to rapidly acquire new customers. However, cross-sell rates in Indian banking are significantly lower than those in developed markets. In developed economics like Spain, Italy & France, between 12 & 24% of a banks customer would have brought insurance through the bank. In India, this number is estimated to be less than 0.5% for Public sector banks, 1 to 2 % in private sector banks and 2to 4 % for foreign banks (Swiss Re Sigma, 2004). A lot of actors are responsible for such low rate of banc assurance namely high variance in selling skills, low operational flexibility in respect to develop sell culture, low technological capabilities , lack of process integration etc.

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Bibliography
http://www.idbifederal.com http://www.policybazaar.com www.irda.org

Other Materials Marketing Management by Philip Kotler. Product Brochures.

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