A study by The Associated Chambers of Commerce and Industry of India showed that only 8-10% of rural Indian households hold life insurance. Having already realized that rural India constitutes a massive untapped market, a greater number of life insurance companies are increasingly expanding their rural distribution network by offering products customized for lower-income populations and partnering with regional rural banks. Life insurance companies are targeting the hinterland in a big way. Most life insurers are not just increasing their distribution network in rural areas, but also offering traditional insurance products for the ‘cost and return sensitive’ rural populace.

Most private life insurers have realised that growth will come mainly from over 90 per cent of the so far untapped households in rural areas. A recent study by ASSOCHAM on Rural India and its New Investors says that only 8- 10 per cent of the rural households are covered under life insurance, while the remaining 90 per cent can be targeted with innovative insurance schemes. The industry body expects that Rs 1,000 crore can be added to the networth of these insurance companies from the 200 million rural households, that are looking for alternative savings channels for their surpluses, provided these come out with innovative schemes at affordable premium.

Companies like Max New York Life Insurance, Canara HSBC Oriental Bank of Commerce Life Insurance, and ING Life Insurance are not just meeting the requirement for rural insurance set by Insurance Regulatory and Development Authority (IRDA), but are surpassing these targets.

“Nowadays companies are developing viable and cost-effective distribution channels; building consumer awareness and confidence. An extensive rural agent network for sale of insurance products is being established by most players. We are going in for customer education and consciousness to motivate purchase of insurance products, especially those that offer guaranteed returns,” said Ajay Kapoor, executive vice president, ING Life Insurance.

Max New York Life, which sells 28 per cent of its policies in rural areas, too, is considering new micro insurance products. “Our focus is on strengthening our distribution channels in rural areas. We foresee that insurance penetration can be achieved in 60 per cent of the rural households, which offers us a tremendous potential for growth,” said V Viswanand, director and head- products and persistency. He was in town to launch a new child plan for funding the college education of children.

Canara HSBC Oriental Bank of Commerce Life Insurance offers special endowment plans for rural customers.The company is planning to add more low-priced traditional plans with simple underwriting to encourage the habit of saving, alongwith providing protection for fixed term for the rural segment. “We are tying up with regional rural banks to reach out to the rural population,’ he added. http://www.tribuneindia.com/2011/20110217/biz.htm#2