Rural Micro insurance Retailing Strategy IIRM Hyderabad October 14 th Vijay Athreye.

Rural Micro insurance Retailing Strategy

IIRM Hyderabad October 14th

Vijay Athreye

Global Micro insurance Conference Munich 10/2005

2

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


3

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


4

Our StrategyRelevant

and Affordable products Outsourced

Distribution Management

Move up from the bottom

of the pyramid

Low Cost Front

end Processes

Investment in Grassroots

Advisor Training

Committed Top MgtAnd Staff

Socially responsible

business

SupplementaryLivelihoods


5

Pyramid –How Long ?

Urban 26 % Households

1998 – 99 2006 – 07

25

22

26

24

3

11

12

23

35

18

3

4

10

36

47

6

6

18

46

24

Rural 74 % Households

1998 – 99 2006 – 07

L

LM

M

UM

H

Source : NCAER


6

Socio Economics' Rural

3.521.5>140High

433105-140UpperMiddle

128870-105Middle

35292235-70LowerMiddle

445765< 35Low

99-00

% HH

95-96

% HH

92-93

% HH

Income Range(000’s) ----98/99 prices

Class

Can Community Service Providers be formed here ?

Most Rural

Service Providers

belong herePoor Uptake of Servicesby Lower

Lower Middle

Rural Services


7

The Product /Market Segmentation

Social Products Market ANP < Rs 1000

Rural Market 1000<ANP < 5000

Brokerage /Corporate

AgencyMarket

5K<ANP< 20K

AgencyMarket

ANP> 5K

P

PS

PSS

I

BancAssurance

ANP>10K

R and S

RP


8

Social ( Micro insurance ) Product Details (Read Rs 1000= US $ 22)•Kalyan Yojana ( Five year renewable

protection plan

Age Sum Assured Ann.Prem..20 Rs 15,000.00 Rs.72.00 30 Rs 15,000.00 Rs 84.0040 Rs 15,000.00 Rs 132.0050 Rs 10,000.00 Rs 180.0055 Rs 10,000.00 Rs 276.00

Age ProjectedmaturityBenefit

Sum Assured (SA in Rs )

Pure Term term with Rop Total20 13,050 6000.00 48,000.00 54,000.0030 12,150 11,000.00 40,000.00 51,000.0040 10,575 15,000.00 23,000.00 38,000.00

• Jana Suraksha Yojana ( 15 year protection plan with maturity benefits -- Premium Rs 180 per qtr.

Age ProjectedmaturityBenefit

Sum Assured (SA in Rs )

Pure Term term with Rop Total20 5175 6000.00 19000.00 25,000.0030 4500 10,000.00 15,000.00 25,000.0040 3150 13,000.00 7,000.00 20,000.00

• Karuna Yojana (( 15 year protection plan with maturity benefits -- Premium Rs 75 per qtr.


9

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


10

Public Private Partnership with DFID

Low Income Rural Community

Rural Community

Insurance GroupsLeader +Members

RONGO

Mentoring

Awareness

TATA-AIG

SHG’s

Personnel Infrastructure Training CollateralProduct

FDCF

Mid / Higher Income Rural Market


11

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.


12

Results MI vs. Rural and Company Numbers and Premium - Micro insurance/Rural

Details Dec 01-- Nov 02 Dec 02 -- Nov 03

Dec 03 -- Nov 04

Dec 04-Jun 05

Jun 05-Nov 05

Dec 05 -- Nov 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 percent in Rural

NA NA 30 39 45 48

Microinsrance percent of Company numbers

NA NA 5 9.1 9.3 12


13

Results Regulatory Mandate versus Actual

Mandate/Achievement

Parameter Year 1 Year 2 Year 3 Year4 Apr 05 to Mar 06 Yr 6 onwards

YTD Jun

Proj.

Rural

Requirement Percent of New Policies

5% 9% 12% 14% 16% 16% 18%

Achievement Percent of New Policies

10.60% 10.30% 14.30% 17.85% 25.50% 21% 23%

Social

Requirement No. of New Social Sector lives

5000 7500 10000 15000 20000 25000

Achievement No. of New Social Sector lives

9000 9344 10758 16117 100000 40000 Will be met


14

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


15

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.

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 AthreyeAVP and National Head

Rural and SocialTATA-AIG Life Ins. Co. Ltd.

Rural Micro insurance Retailing Strategy IIRM Hyderabad October 14 th Vijay Athreye.

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