Selling insurance through kirana stores

August 1, 2012

(The views expressed in this column are the author’s own and do not represent those of Reuters)

India is considered to be a large untapped market for insurance products. There seems to be enough scope for improvement on the insurance density and insurance penetration counts for the country. While this is true, the challenge lies in reaching out to the large population in the rural areas where the traditional financial distribution channels just don’t make economic sense.

The traditional insurance products would also not make sense in these areas as the requirements would be very different from what a tier 1 or tier 2 city would need. After selling, the ability to service these customers too would form a crucial part of the link to increase these numbers.

These plans are called micro insurance plans and are specially meant for the rural areas to meet their requirements. The insurance regulator has analysed the performance of these plans and the distribution network and made some suggestions to improve the sales of these products. Currently NGOs, SHGs and MFIs form a majority of the micro insurance agents, but it was found that most of the little business that was done by the agents was being done through NGOs. It is felt that the insurance industry has not tapped into them well enough to increase sales of these products.

Hence, one of the key steps which have been proposed is increasing the distribution network in addition to the already lucrative remuneration structure for the sale of these plans. District co-operative banks, regional rural banks, primary agricultural societies and individual agents can now qualify as micro insurance agents.

In addition, a big and refreshingly broad-based step is to include owners of kirana shops, fair price shops, medical shops, petrol pumps and PCOs to act as micro insurance agents. Tapping into this large independent network of well established individuals has been tried by various financial institutions with varying levels of success. In fact, the large count of agents of LIC is something which contributes significantly to their business and is something which other companies have found difficult to replicate. These individuals typically are well established and in regular contact with their clients and if paid well can go a long way in selling micro insurance plans. In fact, a lot of product suggestions also might come from them as they interact with their clientele on a daily basis and often provide even credit services in terms of monthly billing.

This is a bold step in the right direction and has the potential to reach out to a large number of people in rural areas. Successful or not, it is definitely worth trying. Increasing levels of insurance coverage in rural areas is a must for a strong and vibrant India.

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