Investing in Indian Insurance Sector: Rural Market holds the Key.

Five years back from today, who considered investing in the insurance sector of rural India? Not even the most daring venture capitalists. But today, the scenario has undergone a sea change. According to a study by ASSOCHAM, the rural Indian market offers a business opportunity worth US$ 23 billion. Insurance companies in India, no matter public or private, are making a beeline to invest in the rural insurance segment, offering a host of financial services.

In the beginning of this decade, when the private investors in financial services industry, were taking baby steps to lure only urban Indian, with a lean basket of mostly life insurance products, rural market did not feature anywhere in their scheme of things then. The segment was small in size, and the faithful LIC held the monopoly.

Cut to present, economic reforms have enabled the rural population of India to choose from a number of professions beyond traditional farming. This has bolstered their per capita earning and the savings, as a result, and they are looking for alternate channels for savings. But, financial investment options available to the rural community are inadequate to cater to the demand. The penetration of insurance, investment and other financial services in rural India, presently, is lower than 30%, whereas, in urban India it is 47%. Obviously, there lies a huge investment opportunity in the rural sector for the insurance companies.

Today, LIC alone has sold over 11 million insurance products in rural areas in the past year, as against its total sales of slightly over 50 million. Thrilled by the success, it has set a target of selling four million policies in rural areas in the current financial year. ICICI Prudential Life has covered 117000 customers in rural areas in 2007-08, as against its target of 25000. SBI Life was expected to sell 18% of all its policies in the rural areas. It ended up selling 22%. The instances unmistakably point to the tremendous growth of rural insurance investment sector in India.

To tap the market, it calls for innovative products with attractive savings schemes beyond traditional life insurances. Alongside, one needs to remember that rural segment is not a homogenous category and is geographically dispersed which offers challenges in product distribution.

Rural kiosk can be a revolutionary new point of service delivery. Rural entrepreneurs can be encouraged to own such kiosks and function as micro-insurance agents. That is how investment banking and life insurance companies can get a strong foothold in the attractive segment of rural India.

http://www.ibef.org/industry/insurance_industry.aspx

About The Author Smith is a business journalist, who covers the world economies and industries extensively. His writes columns and articles for various websites and internet journals. In the domain of economy and businesses, he is widely recognized. http://www.ibef.org/