A

Project Report on

 

Penetration Strategy for the Rural Area

(Surat District)

 

for

IFFCO-Tokio General Insurance Co.Ltd.

 

A report submitted towards the partial fulfillment of the requirements of the two year full-time M.B.A. Programme.

 

Submitted by : Rahuldev V. Dhodia

Roll No. : 03022

 

G.H.PATEL POST GRADUAGE INSTITUTE OF BUSINESS MANAGEMENT

SARDAR PATEL UNIVERSITY

VALLABH VIDHYANAGAR

Website: - http://www.ghpibm.org

 
PREFACE

 

In M.B.A programme (2nd semester) SUMMER TRAINING is compulsory. The students are placed in different types of industrial undertaking where in they shall study and report on the departments of the unit.

The main objective behind industrial training at this level is to give a perspective about the organization and functioning of management of the particular aspect in an industrial unit.  Practical knowledge is required in business so it is crucial and it must for every student.

Practical knowledge plays a vital role in the market and thus enables the student to know abut the functioning and working of the unit. This training has given me something new that what I had done during my study.

I had a great and wonderful experienced and knowledge at IFFCO-TOKIO GENERAL INSURANCE CO. LTD.

 

 
ACKNOWLEDGEMENT
 

A project cannot complete without taking guidance from others. There is always need of help from another people. For untouched topic like General Insurance, it is compulsory for me to take help.

Firstly I would like to thank Mr. Milan Sanghvi, Senior Manager for granted my summer training programme in Surat SBU. He is always ready to give knowledge about the office work. I would then like to thank Mr. Prerak Amin for giving me guidance about insurance sector.

I would also like to thank Mr. Ramesh Patel, Manager, Bardoli TPSU for granted second part of summer training programme. Also I am thankful to Mr. Manish Desai with whom I got experience of real marketing.

Lastly, I would like to thank all those people who help directly and indirectly preparing this project.

Rahuldev V. Dhodia

03022

 

 

j       TABLE OF CONTENTS  j

 

 

No.

Topic

Page

1

Executive Summary

1

2

General Insurance

2

2.1

General Insurance Industry In India

3

2.2

Key Market Indicators

4

2.3

General Insurers

5

3

Introduction to Company

6

3.1

IFFCO-Tokio General Insurance Co. Ltd.

6

3.2

IFFCO-Tokio Insurance Services Limited

10

3.3

The Products

11

3.4

ITGI’s turnkey system

13

3.5

Company Performance

14

4

Introduction to Problem

15

5

Objectives

19

6

Methodology

20

7

Data Collection and Analysis

21

8

Summary of Findings

30

9

Suggestions

33

10

Conclusions

35

11

Bibliography

36

 

1

Executive Summary

Top

Insurance is age-old industry in India. Many nationalised general insurance companies are serving their services in all areas of India. After liberalization many private general insurance companies are arrived in the Indian market with foreign partnerships.

            These companies are serving mostly in urban areas and high-income classes. They are not fulfilling obligations towards rural areas. These companies believe that business in the rural area is not profitable.

            Rural insurance should be looked upon as an opportunity and not an obligation. A smaller bundle of innovative products in sync with rural needs and perception and an efficient delivery system are the two aspects that have to be developed in order to penetrate the rural markets.

            It is advisable for these companies to carry out market research to find profitability in the rural areas. Products and services should be found out for rural area that can make the business profitable.

            In this project research is carried out to identify the need of general insurance in rural area. Also the services which are not serving properly by government companies and the marketing strategy for implementation.

            It is found out in this research that lack of agents and agency in the rural area results in small business from rural area .So more agents should be appointed so that there would be profit in future.

 

2

General Insurance

 Top

Every asset has a value and the business of general insurance is related to the protection of economic value of assets. Assets would have been created through the efforts of owner, which can be in the form of building, vehicles, machinery and other tangible properties. Since tangible property has a physical shape and consistency, it is subject to many risks ranging from fire, allied perils to theft and robbery.

            Concepts of insurance have been extended beyond the coverage of tangible asset. Now the risk of losses due to sudden changes in currency exchange rates, political disturbance, negligence and liability for the damages can also be covered.

            But if a person judiciously invests in insurance for his property prior to any unexpected contingency then he will be suitably compensated for his loss as soon as the extent of damage is ascertained.

            Few of the General Insurance policies are:

Property Insurance: The home is most valued possession. The policy is designed to cover the various risks under a single policy. It provides protection for property and interest of the insured and family.

Health Insurance:  It provides cover, which takes care of medical expenses following hospitalization from sudden illness or accident.

Personal Accident Insurance: This insurance policy provides compensation for loss of life or injury (partial or permanent) caused by an accident. This includes reimbursement of cost of treatment and the use of hospital facilities for the treatment.

Travel Insurance: The policy covers the insured against various eventualities while traveling abroad. It covers the insured against personal accident, medical expenses and repatriation, loss of checked baggage, passport etc.

Liability Insurance:  This policy indemnifies the Directors or Officers or other professionals against loss arising from claims made against them by reason of any wrongful Act in their Official capacity.

Motor Insurance:  Motor Vehicles Act states that every motor vehicle plying on the road has to be insured, with at least Liability only policy. There are two types of policy one covering the act of liability, while other covers insurers all liability and damage caused to one's vehicles.

Since a single policy cannot meet all the insurance objectives, one should have a portfolio of policies covering all the needs

 

2.1  General Insurance Industry In India

The general insurance industry took roots in India way back in 1850, with the establishment of Triton Insurance Company Ltd. in Calcutta. The central government nationalised the general insurance industry in India and set up General Insurance Corporation of India (GIC) in November 72. 107 Indian and foreign insurers which were operating in the country prior to nationalisation were grouped into four operating subsidiaries of GIC, namely, (i) National Insurance Company Limited; (ii) New India Assurance Company Limited; (iii) Oriental Insurance Company Limited; and (iv) United India Insurance Company Limited. All these four subsidiaries of GIC competed with one another and underwrote various classes of general insurance business except aviation insurance of national airlines and crop insurance, which was handled by the GIC.

 

2.2  Key Market Indicators

 

Size of Market, Life and Non-Life

$16 billion

Total global insurance premium (as on 2001)

$2408.25 billion (-1.5% as against 2000)

Rate of Annual Growth year 2002-03

Life 11.27%

 

Non-life 23% (Premium underwritten in India and abroad)

Geographical Restriction for new players

None. Players can operate all over the country

Equity restriction in a new Indian insurance company

Foreign promoter can hold upto 26% of the equity#

Registration Restriction

Composite Registration not available.

Number of Registered Companies

Type of business

Public Sector

Private Sector

Total

 

Life Insurance

1

12

13

 

General Insurance

6

8

14

 

Reinsurance

1

0

1

 

Total

8

20

28

 

 2.3  General Insurers

 

Public Sector

1. The New India Assurance Co. Ltd.

2. National Insurance Co. Ltd.

3. The Oriental Insurance Co. Ltd.

4. United India Insurance Co. Ltd.

 

New players

1. Bajaj Allianz General Insurance Company Limited

2. ICICI Lombard General Insurance Co. Ltd.

3. IFFCO-Tokio General Insurance Company Limited

4. Reliance General Insurance Company Limited

5. Royal Sundaram Alliance Insurance Co. Ltd.

6. TATA-AIG General Insurance Company Limited

7. Cholamandalam MS General Insurance Co. Ltd.

8. HDFC Chubb General Insurance Co. Ltd.

9. Export Credit & Guarantee Corporation

10. Agriculture Insurance Company of India Limited

 

Re-insurer

General Insurance Corporation of India

 

3

Introduction to the company

 Top

3.1  IFFCO-Tokio General Insurance Co. Ltd. (ITGI)

IFFCO-Tokio General Insurance Co. Ltd. (ITGI) is a joint venture between IFFCO and The Tokio Marine and Fire Insurance Co. Ltd, Japan. Incorporated on 4th December, 2000 and within this short span it has become a leading Insurance Company in India. ITGI is also the pioneer in launching innovative products like "Sankat Haran Policy" for farmers. With the Corporate office in Gurgaon and operating offices in 26 offices, ITGI is looking at expanding the market base of general insurance in India by opening Offices in most major cities in India. The company believes in educating the general masses about insurance and bringing to the market simple and customised insurance policies. With a claim process as simple and friendly as can be, it promises to give its policyholders "The Life They Deserve". To be approachable from all places, ITGI has also opened up call centres with a universal toll-free number that can be accessed throughout India.

Indian Farmers Fertiliser Co-operative Limited (IFFCO) is well known as a pioneer in large-scale fertiliser manufacturing and is the leading fertiliser producer in the country. IFFCO has a membership of about 35,000 Co-operatives at State, District and Primary level spread in 22 States and 2 Union Territories. The manufacturing plants are at Kalol, Kandla, Phulpur and Aonla which have been consistently operating at a capacity utilization of more than 100% for the past several years.

The Tokio Marine & Fire Insurance Co.Ltd. has over one hundred and twenty years of experience in general insurance business and is the largest and oldest general insurance company of Japan. It is a member of the large and highly diversified Mitsubishi group comprising of over 1500 companies. The company is rated 'AA' (strong financial security characteristics) by the international rating agency Standard & Poor's. Tokio Marine has been continuously serving as one of the important reinsurance companies to the nationalized Indian Insurance market.

ITGI Mission

To win the TRUST of Individuals, Trade, Industry and Commerce and protect Citizens, Corporates, Cooperatives and International Investors in India.

 

ITGI Vision

To be the INDUSTRY LEADER by Building customer satisfaction through Fairness, Transparency and Quick Response; Providing Innovative Products and Service to suit every Customer's need;

Being Technology Driven, Cost Conscious and Price Competitive; creating a niche in the Rural Segment

 

ITGI Promoters

 

Indian Partners

INDIAN FARMERS FERTILIZERS CO-OP LTD.

During mid- sixties the Co-operative sector in India was responsible for distribution of 70 per cent of fertilisers consumed in the country. This Sector had adequate infrastructure to distribute fertilisers but had no production facilities of its own and hence dependent on public/private Sectors for supplies. To overcome this lacuna and to bridge the demand supply gap in the country, a new cooperative society was conceived to specifically cater to the requirements of farmers. It was a unique venture in which the farmers of the country through their own Co-operative Societies created this new institution to safeguard their interests. The number of co-operative societies associated with IFFCO has risen from 57 in 1967 to more than 36,000 now.

http://www.iffco.nic.in

 

 

 

KRISHAK BHARATI COOPERATIVE LIMITED

Krishak Bharati Cooperative Limited (KRIBHCO), a premier Cooperative Society for manufacture of fertilizer, registered under Multi-State Cooperative Societies Act-1985, was promoted by the Govt. of India, IFFCO, NCDC and other agricultural co-operative societies spread all over the country.

KRIBHCO has setup a Fertilizer Complex to manufacture Urea, Ammonia & Bio-fertilizers at Hazira in the State of Gujarat, on the bank of river Tapti, 15 Kms from Surat city on Surat - Hazira State Highway.

http://www.kribhco.net/

 

INDIAN POTASH LIMITED

The company was incorporated in 1995 as a consortium of importers of Muriate of Potash (MOP) who are primarily in the private sector. The company started in a small way in south India but very soon expanded their marketing network to the whole of India.

On the recommendations of National Commission on Agriculture, the Government of India expanded the equity base of the company with majority of equity holding and Board seats with cooperative and Public Sector Fertilizer companies.

Today, Cooperative and State/Central Public Sector Companies hold more than 90 per cent equity with IFFCO as the largest shareholder with 33.98 per cent.

Indian Potash Limited (IPL) remained as the sole agency for import, handling, distribution and sales promotion of Potassic Fertilizers in the country from 1970 to 1992 when import of Potassic Fertilizers was decontrolled and decanalised. However, the company continues to be one of the three state Trading Enterprises and is also entrusted with the responsibility of maintaining buffer stocks on behalf of Ministry of Chemicals & Fertilizers for decontrolled fertilizers.

IPL is registered as a Public Limited Company under the Companies Act 1956 and has its own Memorandum and Articles of Association. Its annual turnover is USD 330 million (approx.) and it has an uninterrupted record of making profit and paying dividend to the shareholders except for one year in its history.

 

Foreign Partners

MILLEA ASIA

As a part of Tokio Marine Group vision which is to provide the customer with a new total Risk Management service, Millea Asia Pvt. Ltd has come into existence with a concrete plan to provide maximum value to customers and share holders by concentrating on the strengths of each company and form a new insurance group which integrates with life, property & causality business under the integrated management.

Millea Asia Pvt. Ltd considers the Asian market as top priority area and has assumed the role of regional management head quarters and as a technical support center for the Asian subsidiaries / affiliates like ITGI. Management skills and insurance technical knowledge is centered at this management entity and shared with and transferred to ITGI for the betterment in all respects.

http://www.millea.co.jp/

TOKIO MARINE GROUP

Headquartered in Tokyo, Japan, Tokio Marine has a worldwide network in 41 countries or regions to meet our customers' various demands.

Over 3,400 employees, with different nationalities, backgrounds and languages work within a total of 35 subsidiaries and affiliated companies forming the Tokio Marine Group, in order to support our customers.

http://www.tokiomarine.co.jp/index-e.html

 

3.2  IFFCO-TOKIO Insurance Services Limited (ITIS)

IFFCO-TOKIO General Insurance Company Limited (ITGI) has recently formed a wholly owned subsidiary called IFFCO-TOKIO Insurance Services Limited (ITIS) for the purpose of marketing and distribution of insurance products. To begin with it shall sell the General Insurance Products of ITGI and from there, grow on to become a one-stop financial solutions provider.

The company would comprise of well-trained marketing professionals. The objective is to offer world-class services to the clients. Such a model has been implemented to great success by Tokio Marine and Fire Insurance, which have operations in 41 countries across the world. The elite channel of marketing professionals are set to redefine the way financial services are offered to customers.

ITIS while consolidating marketing through the conventional channels would also develop and implement models of insurance distribution with alternative channels like cooperatives, associations etc. It is envisaged that the new outfit shall bring the spread and reach for ITGI while at the same time ITGI can have a more focused approach on the higher end of general insurance business. The focus would be on the retail and the SME sector.

ITIS would, to its marketing team offer an excellent pathway and a fast track growth by rewarding the high performers and thus stimulating growth.

 

3.3  The Products

Retail Products

The products under the Retail Lines cater to the insurance needs where the insured is an individual or small/medium units.

Examples of insurances which an individual may require to undertake:

  • Motor Vehicle Insurance
  • Travel Overseas Insurance
  • Home

Examples of insurances Small and medium units may require:

  • Trade Protector
  • Office Protector
  • Small & Medium Enterprises Package Policy

In addition to the above the products offered are :

  • Health (for Group)
  • Critical Illness
  • Surgery Protector
  • Personal Accident

One way ITGI achieved this rapid growth was by leveraging its reach as a fertilizer company to penetrate India’s agricultural industry. One of the company’s most innovative policies, called “Sankat Haran” (which translates as something that protects against troubles), provides farmers a free year of personal injury coverage with each purchase of a 50kg bag of fertilizer — and introduces those farmers to ITGI’s coverage for indemnity against Personal Accident. To date over a million Indian farmers are covered under Sankat Haran.

Commercial Products

The products under the Commercial Lines cater to the insurance needs of mainly industrial houses with few exceptions which may also be applicable to Individuals or small/medium units.

Examples of some products under this category are as follows:

  • Standard Fire & Special Perils Policy
  • Burglary Policy
  • Marine Policy
  • Engineering Policies
  • Liability Policies

3.4  ITGI’s Turnkey System

Integration with ITGI’s turnkey system to let partners and agents process and issue policies on demand, at point of sale, with minimal training and without compromising security.

Customer need:

1) Quickly penetrate India’s wide-open market for personal insurance lines by extending a turnkey insurance administration application to widely distributed retail partners and agents.

2) The ability to generate the insurance documentation at the point of sale without compromising the security.

Solution:

The Front Office System, an IBM® Lotus® Notes® and Domino™ based application, that integrates with ITGI’s turnkey system to let partners and agents process and issue policies on demand, at point of sale, with minimal training and without compromising security.

 

3.5  Company Performance

Financial Highlights

The financial highlights of the year's operations are summarized below:

(Rs. in Crores)

  Particular

Year ended 31.3.03

Year ended 31.3.02

Year ended 31.3.03

Year ended 31.3.02

Year ended 31.3.03

Year ended 31.3.02

Year ended 31.3.03

Year ended 31.3.02

Gross Written Premium

103.52

36.14

18.42

3.34

91.39

31.02

213.33

70.51

Net Premium

16.86

2.07

8.52

1.53

44.65

9.53

70.03

13.13

Earned Premium

9.67

0.94

3.66

0.02

26.17

2.79

39.50

3.75

Interest

0.52

0.18

0.56

0.03

1.89

0.38

2.97

0.59

Total

10.19

1.12

4.22

0.05

28.06

3.17

42.47

4.34

Commission

(26.00)

(10.26)

(1.42)

(0.52)

(7.07)

(4.59)

(34.49)

(15.37)

Incurred Claims

2.93

0.36

4.51

0.37

21.06

3.55

28.50

4.28

Expenses of Management

23.64

12.10

4.19

1.12

20.86

10.43

48.69

23.65

Total

0.57

2.20

7.28

0.97

34.85

9.39

42.70

12.56

Underwriting Profit/(Loss)

9.62

(107.92)

(3.06)

(0.92)

(6.79)

(6.22)

(0.23)

(8.22)

 

 Particular

Year ended 31.3.2003

Year ended 31.3.2002

Underwriting Profit/(Loss)

(0.23)

(8.22)

Interest

9.81

10.12

Other Expenses

(0.21)

(0.17)

Profit Before Tax

9.37

1.73

Provision for Tax

3.01

6.00

Profit after Tax

6.36

1.67

Proposed Dividend

2.26

 

Balance transferred to Reserves

4.10

1.67

 

 

4

Introduction to the Problem

Top 

Most of people in India are living in rural area. Main business of the people is agriculture. Many small-scale industries are also situated in the rural area. They are giving higher contribution in the national income.

            Many services and privilege are given to the rural area by government. Newly formed government is also giving priorities to this sector. Various government departments, organizations and companies also provide business services. Insurance is also one of the services which are provided by the nationalised companies in rural area. The market share of nationalized insurance companies in rural area is high.

It is estimated that, in India, only 20 million out of 80 million insurable individuals purchased insurance. It implies that only 10% of the households (families) have access to insurance. The average annual premium paid in India is around $10 (Rs.500) compared to $42 in Thailand and $1000 in South Korea. The total insurance premium collected on life and non-life insurance services is Rs.550,000 million during 2001-02, which is only 0.9% of GDP. So far, in India, insurance is seen mostly as a savings and tax minimization instrument rather than as a financial protection tool. Of the life premium collected, only 20% is paid towards risk coverage and the rest towards savings.

As per provisional figures of Insurance Regulatory and Development Authority of India (IRDA) journal the premium collected from 25.4 million new life policies, including group policies, issued during FY 2002-03 is Rs123,248 million. This indicates an average premium of Rs.4180 per individual policy. On General insurance, the premium collected on 41.85 million policies affected during 2002-03 is Rs.142,793 million indicating an average premium of Rs 3400.

The process of reforms initiated some three years back has some achievements to its credit. The process of liberalisation has enhanced competition, provided a choice to the customer, triggered innovative ways and means to carry out insurance activities, improved the efficiency levels of the industry, increased the coverage of insurance in terms of density and penetration, obligated the insurers for providing for the needs of rural and social sectors, increased awareness about necessity of insurance, to name a few. However, the achievements till date need to be built upon to further improve the efficiency of the insurance sector, thereby reducing the costs, and increase the penetration of the industry across the country. The industry cannot afford to rest on its laurels.

There is big scope for private insurance companies in the rural area. There are also obligations formed by IRDA for private insurance companies towards rural area. Specifying the percentage of life insurance business and general insurance business to be undertaken by the insurers in the rural or social sector The Committee on reforms in the insurance sector, while advocating opening up of the industry to the private sector, had made a strong case for the new players being subjected to compliance of minimum stipulations for underwriting business in the rural and the social sectors. This requirement for the industry, both life and non-life insurers, is laid down in the regulations framed by the Authority on obligations of the insurers for the rural and social sectors. The amendments to the regulations were notified by the Authority in October, 2002. Under the amendments, the term ‘rural sector’ has been redefined, and the words ‘agricultural pursuits’, elaborated. The amendments also dwell on the ‘informal sector’. Simultaneously, the obligations for life insurers towards the rural sector have been raised. In keeping with the need for insurers to meet their obligations to the society, the Authority has further stipulated that in terms of volume of business, no insurer shall write rural/social sector business less than what was recorded for the accounting year ended 31st March, 2002. The amendments came into effect from the financial year 2002-03.

Regulations framed under IRDA Act, 1999

  • IRDA (Obligations of Insurers to Rural or Social Sector) Regulations, 2000 July 19, 2000
  • IRDA (Obligations of Insurers to Rural or Social Sector) Regulations, 2002 Oct 17, 2002

The Authority levied a penalty on Reliance General Insurance Co. Ltd. under section 105B of the Insurance Act, 1938 for not fulfilling the rural sector obligations under Section 32B and 32C of the Insurance Act, 1938.

Amendments to the Insurance Act, 1938 The much awaited Insurance (Amendment) Bill was passed in both the Houses of Parliament and notified on 23rd September, 2002. The major amendments incorporated in the Act include co-operative societies recognized to carry on insurance business the amendment provides for setting up of co-operatives exclusively for carrying on insurance business. The co-operatives would be subject to same paid up capital requirement, solvency requirements, deposits with Reserve Bank of India, maintenance of the accounts, audit etc., as in the case of other applicants. By nature of their being engaged in the activity of disbursing credit and being closer to the rural markets, co-operatives are expected to help in the penetration of insurance cover to rural areas.

The general insurance companies have drawn up various strategies to improve insurance penetration and insurance density. Most of the companies have tied up with banks either in the form of corporate agency or under the referral arrangement for utilizing the extensive and broad reaches, which the banks provide to market insurance products. For the development of rural business, the insurers are tying up with State Cooperative Banks, State Level Cooperatives of Cotton growers, Dairy Owners, Sugar Cooperatives, etc. New need based packaged products for rural markets, such as women’s self-help groups, handloom weavers, artisans, tribal, etc are also being devised by the insurers.

Overall, the extensive network built by rural development agencies, banks, co-operative institutions, NGOs, SHGs, Youth Clubs and Panchayats can be tapped and effectively utilised by the insurers to penetrate the rural pockets of the country. The growing purchasing power of the rural segments, coupled with opportunities, which are opening up on account of the IT, and telecom revolutions, can be effectively utilised to ensure spread of insurance to these sectors. Insurance companies need to translate these opportunities into actual sale of insurance products by building dedicated distribution systems.

Meeting the obligations towards the rural and social sectors, and taking these obligations beyond the context of the statutory compliance is important. Business statistics furnished by the insurers reveal that the insurance companies are somehow making an effort to meet the targets as a year-end annual obligation. With the changing profile of the populace in the rural and semi urban areas, there is tremendous potential for selling insurance beyond the urban areas. This has been adequately demonstrated by the manufacturing sectors, with their targeted marketing strategy. The experience needs to be duplicated in the insurance sector as well. There are lessons to be drawn from the success stories, as has been demonstrated by the surveys/studies conducted.

Of the eight insurers who have entered the insurance industry during the last three years, five insurers have met, both the rural and the social sector obligations. Out of these, in case of three insurers, whose first year of operations comprised of a very short span, although the financial year 2002-03, was the third year of their operations, given the peculiarity of their situation, the said year was considered the second year for the purpose of determining compliance with the requirements of the rural and social sector obligations. In one instance, the insurer met with the social sector obligations. However, there was a minor shortfall in compliance with the rural sector obligations. In respect of the two insurers who commenced operations during the financial year 2002-03, compliance of the rural and the social sector obligations, on proportionate basis, could not be ensured. These insurers are required to ensure compliance with the shortfall in the financial year 2003-04. Companies like Iffco-Tokio have sold their products through both National and State level Co-operatives of dairy owners, cotton growers, sugar cooperatives and Banks. The insurer's efforts have been a landmark in underwriting social sector business.

Keeping in view the obligations towards rural area and increased competition in general insurance sector, there is need to find perfect strategy to penetrate in rural area. To find appropriate marketing strategy it is necessary to carry out marketing research.

 

5

Objectives

 Top

Before launching the product in rural market there is need to understand four P’s of marketing i.e. Product, Place, Price, and Promotion. Product of the company is obviously the general insurance policies. There are different policies for different sections. Industry has different policies while rural area has different policies. Place of the company is rural area of Surat district of Gujarat. Price means insurance premium paid by the insured person. Insurance company uses agents, brokers, and marketing associates for selling the product which is called the promotion.

Main objective of the study is to know possible strategy for penetration in the rural area of Surat district. Other objectives of the study are given bellow

  • To know the awareness of general insurance and products in the rural area. It is necessary to find customer awareness about various nationalized and private companies. Also the information about consumer awareness about different policies will help in making decision.
  • To know the awareness regarding the company. How many people know about the company is necessary to know.
  • To know the ways of promoting the company’s product in rural area.
  • To know the need of different products of general insurance in rural area.
  • To know the services expected by customers
  • To get the suggestion from the customers and analyse the suggestions for implementation.

  

6

Methodology

 Top

            For the purpose of marketing research, questionnaire is prepared. The questionnaire is designed keeping in view the objectives of the study. To make convenience to the respondent of the rural areas, the questionnaire is designed in Gujarati language.

Universe (Research area)

Surat District

Respondents

Men

Financial decision makers of the household. 

Women

Influencers in the financial decision-making.  

            As men are decision makers in the rural area all respondents are men.

Different life stages

           25-40 years

           41-55 years  

            From the age 25 people think of taking Life and/or General Insurance. After the age of 40 their children are also become decision influencer. 

Income generating asset owners

           Land, Cattle, Tractor owners etc. 

Non- Income generating asset owners

           Landless working as employees  

In short, only those who have the power to make decisions are included in the research.

Research Approach

            Respondents will be taken by convenience randomly from the places like bus-stand, railway-station, APMC yard, shops etc.

            For the shake of convenience some towns like Bardoli, Vyara, Madhi etc.

 

7

Data collection and analysis

 Top

1.      Do you have Life Insurance policy?

Out of 50 respondents 46 have the life insurance policy. This means that in the rural area there is good awareness about the life insurance policy.

2.      Do you have General Insurance policy?

Out of 50 respondents 46 have the General Insurance policy. This means that in the rural area there is not awareness about the General Insurance policy with compare to Life Insurance policy.

 

 

 

3.      How many General Insurance Policies do you have?

            Out of 50 respondents 54 percent of people have only one general insurance policy, 34 percent have two policies, 9 percent have 3 policies while 3 percent have 4 policies.

            That means majority of people have only one policy.

4.      Which policies are there in General Insurance?

      Majority of the people who have General insurance policy have Auto (Vehicle) policy, second number policies are accident and house insurance policy.

 

 

 

5.      Which company’s policies do you have?

The New India Assurance Co. Ltd. has big market share in the rural area of Surat district according to survey.

6.      Do you know about IFFCO-Tokio General Insurance Company (ITGI)?

Out of 50 people only 12 people know about the company. Majority of people don’t know about the company.

 

 

 

 

 

7.      How much premium do you pay for General Insurance?

Most of People in the rural area are paying premium less than 5,000 rupees.

8.      Does the government company provide good service ?

32 out of 50 people believe that government companies provide good service in rural area.

 

 

 

9.      In which thing the government company doesn’t provide good service?

1

Faster receipt of policy

2

Faster claim settlement

3

Faster settlement of claim money

4

Other service(Specify)

Many people say that government is not providing faster settlement of claim amount. This thing is also connected with faster settlement of claim.

 

10. Which service do you expect the most?

19 out of 50 people expecting faster claim settlement.

 

11. How do you get information about the private company?

 

22 out of 50 people believe that information about private company is received from agents.

12. Why there is low trust in the private company?

1

Low advertisement

2

No office near place

3

Less contact by agent

4

Other reason (Specify)

21 out of 50 people believe that as there is no office at near place, people have less trust on private companies. That means lack of office in near place makes lack of trust in private companies.

 

13. What private company should do to get trust?

1

Establishment of agency office at each taluka

2

Appointment of agent in each village

3

Appointment of co-operative societies as agents

4

Other solution

21 out of 50 people believe that to get customer trust, private company should appoint one agent in each village.

14.  What can be the main advantage by appointing co-operative societies as agents?

 

 

 

1

Time can be saved

2

More information can be received

3

More trust on co-operative societies

4

Other advantage

 

24 out of 50 people believe that co-operative societies as agents are more reliable than ordinary agents.

 

15. Give rank according to your need to the policies given below:

 

In this question, ranks given by different respondents are collected. Then the total of one item e.g. Auto is derived. This total is divided by 50 to get average rank. Average rank of all items are given below:

                       

No.

Policy

Rank

1

Motor Insurance

2.68

2

Fire Insurance

4.26

3

Personal Accident Insurance

2.52

4

Home Insurance

2.56

5

Critical Illness Insurance

2.98

            According to this information we can say that more people shows intention to buy personal accident policy and home insurance policy while less intention to buy fire policy.

 

 

 

 

16. Give rank according to your need to the policies given below:

 

No.

Policy

Rank

1

Motor Insurance

3.64

2

Fire Insurance

2.64

3

Personal Accident Insurance

3.82

4

Trade/Shop Insurance

1.64

5

Burglary Insurance

3.27

                       

According to this information we can say that more traders/shopkeepers shows intention to buy Trade/Shop Insurance policy while less intention to buy Personal Accident Insurance policy.

 

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Summary of findings

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  • High awareness of life insurance
  • Low awareness of general insurance
  • Most of people have one policy.
  • Most of people have Auto(Vehicle) policy
  • Most of people have policy from New India Assurance Co.Ltd.
  • Most of people are unaware about IFFCO-Tokio General Insurance Company Limited
  • Most of people pay premium of less than 5,000 Rupees.
  • Most of people say that Government Company doesn’t provide fast payment of claim amount.
  • Most of people expect from Company that it should provide fast payment of claim amount.
  • Most of people get information about private company from agents.
  • Most of people believe that as there is no office at near place, people have less trust on private companies.
  • Most of people believe that to get customer trust, private company should appoint one agent in each village.
  • Most of people believe that co-operative societies as agents are more reliable than ordinary agents.
  • People shows intention to buy personal accident policy and home insurance policy while less intention to buy fire policy.
  • Traders/shopkeepers shows intention to buy Trade/Shop Insurance policy while less intention to buy Personal Accident Insurance policy.

 

Life Insurance 

Very high awareness levels 

General Insurance  

Awareness levels and depth of knowledge varies across general insurance products

           High for insurance related to vehicles

           Low for all other insurance products 

 

Life Insurance 

Synonymous to long term saving plan 

Tangible & definite benefit seen at the end of tenure 

Pushed aggressively by agents

General Insurance 

An unnecessary expense 

No long-term benefit perceived as no money back scheme in case of no claim 

Lack of sufficient push and effort from the channel due to 

Lack of attractive commission for agents 
Results in tendency to lapse in spite of initial subscription

 Penetration of General Insurance 

Higher penetration of insurance for products like tractors and cattle, taken on bank loans, as insurance is a prerequisite 

Vehicle insurance penetration on account of mandatory public liability insurance 

Poor penetration for all other general insurance products

 

 

BARRIERS  

Poor comprehension of insurance in terms of the key benefit and the process – what / why / how it works 

No push

            Sheer lack of promotion, education and information 

Weak distribution channel

Inaccessibility of the agent 

Processes cumbersome 

Stereotype belief in luck , coupled with uninterested attitude, therefore tendency to not purchase / renew.

 

 

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Suggestions

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Indian insurance industry has begun a new growth phase with liberalization of the sector. The awareness on insurance in rural India is low. There is a pressing need for increased awareness, suitable rural insurance products, effective distribution systems and importantly, orientation of insurance products towards financial risk protection. With low Sum Assured and small premiums, the distribution cost of rural insurance products is high compared to that of urban products. As in the case of micro credit, it is necessary to have effective insurance distribution systems to serve the large un-served rural market. Under the present regulations there are obligatory minimum insurance business targets prescribed for achieving in rural and social sectors. The targets are meant to encourage every insurer enter the rural insurance market. However, it is to be seen whether a proactive approach will prevail on the part of insurers to Indian rural market.

Based on findings of the research some suggestions are given below:

  • One agent should be appointed for 5-10 villages in developed talukas like Bardoli, Kamrej, Chouryasi, and Palsana. While in undeveloped talukas like Vyara, Songadh, Uchhal, Nizar agents should be appointed for 10-20 villages.
  • One agent office or agency should be there in each takuka.
  • More co-operative societies should be appointed as agents.
  • Customer should be given all services properly. Customer should be convinced that there would be faster payment of claim amount.
  • More attention should be there to sell Personal Accident policy, as more people are demanding because people come daily Udhna-Surat for working as labour.

 

 

STRATEGIES FOR SUCCESS 
 Heighten need for insurance

            Education on benefits of general insurance

            … though not a saving but a risk cover in case of adversities

            “A lifeline in times of adversity” 

Ease of process   -   Subscription

                             -   Renewal

                             -   Claim settlement 

Product 

Need to promote agriculture pump set and cattle insurance among owners. 

Also need to promote health and personal accident policies, low awareness but high concerns.

Existing owners and lapsers of General Insurance would be an easier target.
Price 

Lower premiums would be preferable, even by the richer states like Punjab 

Place

Preferred channels are Banks, Co-operatives & Sarpanch  

Promotion

Participative information dissemination

     “through small cohesive groups at farmer meets, melas, co-operative society meets….” 
 

Leverage current perceptions of ITGI as a trustworthy organisation and exploit the USPs of accessibility and wide network of ITGI & its channels fully.  

For vehicle loans  – tie-ups with companies to insure while selling the vehicle.

Tie with banks and co-operative societies to sell general insurance policies.

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Conclusion

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It must be borne in mind that India is a predominantly rural country and will continue to be so in the near future. New players may tend to favor the "creamy" layer of the urban population. But, in doing so, they may well miss a large chunk of the insurable population. A strong case in point is the current business composition of predominant market leader – the Life Insurance Corporation of India. The lion's share of its new business comes from the rural and semi-rural markets.  In a country of 1 billion people, mass marketing is always a profitable and cost-effective option for gaining market share. The rural sector is a perfect case for mass marketing.

Competition in rural areas tends to be "kinder and gentler" than that in urban areas, which can easily be termed cutthroat And the generally smaller policy amounts in rural areas would be more than offset by the higher volume potential in these areas in contrast with urban areas. Identifying the right agents to harness the full potential of the vibrant and dynamic rural markets will be imperative.

As far as reaching rural and semi-rural areas are concerned, all the players appear to be viewing it as a necessary evil and more as a statutory requirement that needs to be fulfilled. No player seems to be viewing it as an opportunity. Consider this; according to Nirmala Ayyar, retired Chief (Data Control and Purification), LIC, "Do these (rural) people need insurance? Yes, they do. Can they pay for it? No sir, they cannot afford to pay for it?" Contrary to popular perception, rural markets can be a large opportunity in terms of business size as well as profitability if one is able to carefully plan and tailor an entire business value chain with a set of low-cost activities - right from product design to distribution, advertising and promotion.

 

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Bibliography

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