Rural India’s untapped insurance market


India, with a population of over 140 crores, is in its infancy when it comes to the insurance industry. Its market represents 1.5% of total global insurance premiums despite its population. Coverage provided by traditional life or health insurance models is very low in the country. This is because more than 70% of citizens live in rural areas which have remained untapped by the big players in the insurance market.

At present, life insurance coverage in rural India is pegged at only 8-10%, while less than 20% of the rural population has any form of health insurance. Moreover, 95% of Indian housing does not have any form of ownership cover. India has wide geographic and economic variations, which makes low coverage rates prevalent in the country. Additionally, several internal challenges still exist in the country including distribution issues such as last minute access, lack of durable products, transactional inconveniences, among others.

A report by the Boston Consulting Group titled “The Changing Face of Indian Insurance,” highlights that insurance schemes such as the Pradhan Mantri Fasal Bima Yojana (PMFBY) have increased crop insurance coverage by 6% . In addition, the railway insurance scheme introduced in September 2016 has already insured over 9 million passengers.

The government is helping to speed up the process of providing insurance coverage to rural India. However, two elements are crucial to move this initiative forward.

1. Technology

Penetrating rural India’s untapped insurance market cannot be achieved without creating more technology-driven accessible models and products. These should be specially organized keeping in mind the needs and income levels of the target population. Some of these models and products are:

Digital banks built on the aadhaar architecture that use AeP for transactions make digital financial services accessible to the rural population. Insurers can bundle health, life and livestock insurance policies and make them available digitally for easy access.

Online insurance sales platforms offer rural insurance policy that can be easily purchased digitally. Individuals don’t have to go to a brick-and-mortar office to review and purchase policies. They can now do this from any smartphone or computer and an active internet connection.

Mobile insurance solutions are an important development in this context. One in two people owns a smartphone and rural India is no different. Mobile insurance solutions provide the technology to make insurance products accessible via mobile phones.
Insurance agency management systems help insurance companies streamline their processes and quickly resolve policyholder claims and questions. They also help these companies save significant costs which can help them provide more affordable and efficient products to the rural population.

Insurance companies need to adapt state-of-the-art solutions to ensure accessibility and affordability. The economic reforms brought about by Jan Dhan accounts, Unified Payment Interface (UPI) and Aadhaar integration will accelerate the adaptation to these models and secure a whole new market for the insurance industry.

2. Small insurance products

Another important element to facilitate the penetration of rural India by the insurance market is small-scale insurance products and policies. These policies are accessible to a wider population due to their lower premium rates, low documentation requirements and easy accessibility via smartphones. They are more popular with first-time buyers, millennials and those who want to insure a specific risk. Some examples of such policies are dengue fever insurance, travel insurance, taxi ride insurance, among others.

There are several insurers that offer tailor-made insurance products for low-income groups according to their needs. Some insurers have IRDAI licenses to sell their products, others have partnerships with traditional insurance companies to co-create these products and make them accessible to as many people as possible.

The partnership of major players like Max Bupa and Edelweiss Tokio with Mobikwik is an example of this. They collaborate to offer vector-borne disease coverage and term insurance plans, respectively. Max Bupa had sold nearly 100 HospiCash policies per day by the end of 2019. In the same year, Mobikwik had also sold nearly 5 lakh policies and collected a premium of INR 4 crore. The sales figure shows the rapid adoption of bite-sized products that can reach rural India.

Developing these products is one thing, but making them accessible to low-income groups is another. To achieve this, insurtech companies offer their customers the opportunity to choose the right insurance products from different companies through their outlets. The hybrid model of delivering products and services through physical and digital modes makes these products more easily accessible to the rural population of India.

The need for confidence and awareness of the rural population

Insurers also need to build trust and improve financial literacy to improve insurance uptake in rural India.

Customization of products will help build trust, as the agricultural sector is highly dependent on variable factors such as weather, changes in government policies, natural disasters, among others. Including these unforeseen circumstances in the policies benefits rural India and gains its confidence as its needs are catered for.

The second step will be to integrate local agents (PoSP) who will adopt door-to-door sales methods. This will ensure that first time buyers can trust the insurance product as it will be introduced by someone in their community. It will also facilitate awareness of the different products available in the market to choose from.

Rural markets still have enormous potential for growth. Insurance products can be tailor-made to provide coverage for small businesses, especially those set up by women, catastrophe bonds and crops that are not covered by Indian government-run schemes. Insurance companies can invest in training their employees in design thinking to focus on creating products specifically for the rural market and analyzing methods to make them accessible to the population for their benefit.



The opinions expressed above are those of the author.



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