Rural Micro insurance Retailing

Strategy

IIRM Hyderabad October 14th

Vijay Athreye
TATA-AIG Insurance Distribution
in Rural Areas
 Multi channel approach
 Agency operations in Rural areas – Regular Insurance
Products
 Alternate channels operations in Rural areas – Regular
Insurance Products
 Corporate agents viz Financial Intermediaries
 Insurance Brokers.
 Rural Banks
 Rural and Social channels –
 Micro insurance and Rural Insurance products.
 Regulation notwithstanding TATA-AIG Life views
Rural and Micro insurance as an integral part of its
business development activity in India

Global Micro insurance Conferen 2

ce Munich 10/2005
Foray into MI --OBJECTIVES

 Regulator
 YOY Growth and Industry Leadership
 Sustainability
 3C Approach
 Replicable and Scalable
 Developmental
 2/3rd of Human Race.
 PR Value
 New and Innovative

Global Micro insurance Conferen 3

ce Munich 10/2005
Our Strategy
Relevant
and Socially
Affordable responsible
Low products Outsourced
business
Cost Front Distribution
end Management
Processes Supplementary
Livelihoods

Investment Committed
Move up from in Grassroots Top Mgt
the bottom Advisor And Staff
of the pyramid Training
Global Micro insurance Conferen 4
ce Munich 10/2005
Pyramid –How Long ?
Rural 74 % Households Urban 26 % Households

3 6 11 25
H

4 6 12 22
UM

10 18 23 26
M

LM 36 46 35 24

L 47 24 18 3

1998 – 99 2006 – 07 1998 – 99 2006 – 07

Source : NCAER

Global Micro insurance Conferen 5

ce Munich 10/2005
Rural Services
Socio Economics' Rural
Class Income Range 92-93 95-96 99-00
(000’s) ----
98/99 prices
% HH % HH % HH Can Community
Low < 35 65 57 44 Service Providers be formed here ?
Lower 35-70 22 29 35
Middle
Middle 70-105 8 8 12

Upper 105-140 3 3 4
Middle Most
High >140 1.5 2 3.5
Rural
Service
Providers
Poor Uptake belong here
of Services
by Lower
Lower Middle

Global Micro insurance Conferen 6

ce Munich 10/2005
 The Product /Market
Segmentation
Banc
Assurance
Brokerage ANP>
/Corporate Agency
I 10K
Agency Market
Market ANP> 5K
PSS
5K<ANP< 20K R
and
PS S

RP Rural Market 1000<ANP < 5000

P Social Products Market ANP < Rs 1000
Global Micro insurance Conferen 7
ce Munich 10/2005
Social ( Micro insurance ) Product
Details (Read Rs 1000= US $ 22)
•Kalyan Yojana ( Five year renewable • Karuna Yojana (( 15 year protection plan
protection plan with maturity benefits -- Premium Rs 75 per
qtr.
Age Sum Assured Ann.Prem.. Age Projected Sum Assured (SA in Rs )
maturity
20 Rs 15,000.00 Rs.72.00 Benefit
30 Rs 15,000.00 Rs 84.00 Pure Term term with Rop Total
40 Rs 15,000.00 Rs 132.00 20 5175 6000.00 19000.00 25,000.00
30 4500 10,000.00 15,000.00 25,000.00
50 Rs 10,000.00 Rs 180.00 40 3150 13,000.00 7,000.00 20,000.00
55 Rs 10,000.00 Rs 276.00
• Jana Suraksha Yojana ( 15 year protection plan with
maturity benefits -- Premium Rs 180 per qtr.
Age Projected Sum Assured (SA in Rs )
maturity
Benefit
Pure Term term with Rop Total
20 13,050 6000.00 48,000.00 54,000.00
30 12,150 11,000.00 40,000.00 51,000.00
40 10,575 15,000.00 23,000.00 38,000.00

Global Micro insurance Conferen 8

ce Munich 10/2005
Micro agent Model for MI retailing
 Not limited to MFI’s.
 Revenue for the NGO Partner.
 Supp. Livelihood based
 Developmental impact – livelihoods.
 Target market Development– awareness ,choice etc.
 Based on geo. Jurisdiction – bigger inclusive market.
 Service infrastructure leveraging possibilities.
 More compliant implementation and control for
Company.
 Social—Rural Bottom up Approach. Company can
plan on long term business strategy

Global Micro insurance Conferen 9

ce Munich 10/2005
Public Private Partnership with
DFID
TATA-AIG FDCF
Personnel Infrastructure Product Training Collateral
RO
Rural NGO
Community Mentoring
Insurance Groups
SHG’s Leader +Members
Awareness

Low Income Rural Community

Mid / Higher Income Rural Market

Global Micro insurance Conferen 10

ce Munich 10/2005
MicroInsurance --Summary of
Benefits
 Untapped potential. Market.
 Poling of RISK and Law of LARGE Numbers.
 Portfolio of profits -- Some yield more some less.
 Experience –Scalable and Replicable.
 Demonstration and Rub off effect.
 Developmental
 Arrest of Poverty perpetuation.
 Rural Livelihoods.
 Services Infrastructure.
 Choices for the poor.

Global Micro insurance Conferen 11

ce Munich 10/2005
Results MI vs. Rural and Company Numbers and Premium - Micro insurance/Rural

   

Details Dec 01-- Nov 02 Dec 02 -- Nov Dec 03 -- Dec 04-Jun Jun 05-Nov Dec 05 --
03 Nov 05 05 Nov
04 06

FYP ( Rs ) 000s 600 580 1458 2374 3126 12500

Numbers 7380 3232 10073 13388 17427 64000

Total Rural NA NA 34000 33934 37100 135000

Micro insurance NA NA 30 39 45 48
percent in Rural

Microinsrance percent NA NA 5 9.1 9.3 12

of Company
numbers

Global Micro insurance Conferen 12

ce Munich 10/2005
Results Regulatory Mandate
versus Actual
Mandate/Achieve Parameter Year 1 Year 2 Year 3 Year4 Apr 05 to Mar 06 Yr 6
ment onwards
  Proj.
YTD Jun
 
Rural
Requirement Percent of 5% 9% 12% 14% 16% 16% 18%
New Policies

Achievement Percent of 10.60% 10.30% 14.30% 17.85% 25.50% 21% 23%

New Policies

Social
Requirement No. of New 5000 7500 10000 15000 20000 25000
Social Sector
lives
Achievement No. of New 9000 9344 10758 16117 100000 40000 Will be met
Social Sector
lives

Global Micro insurance Conferen 13

ce Munich 10/2005
Challenges
 Sustainability and Persistency
 Products
 Relevant ,affordable and Profitable.
 Personnel
 New Breed --- Committed ,suitable.
 Organization
 Vision and Long term Commitment
 Adaptability of Processes
 Regulator
 Policy framework.
 Economy
 Cascading growth

Global Micro insurance Conferen 14

ce Munich 10/2005
With a little Help !!

 Regulations on MI.
 Type of agents.
 Agent Licensing procedures.
 Long tenure products (10-15 years )
 Composite products /agents , bundling of riders
etc.
 Levellized commission structure.
 Concept of a servicing agent.
 TDS on small earnings.

Global Micro insurance Conferen 15

ce Munich 10/2005
There is fortune at the bottom of the pyramid. The key
question -- how businesses can become more inclusive
to reach this segment ? When rural development
becomes a key business concern we should have a win-
win situation !!

Vijay Athreye
AVP and National Head
Rural and Social
TATA-AIG Life Ins. Co. Ltd.