Shobha Ramswamy

Tata AIG's rural life-insurance thrust has made premiums and policies part of the lexicon and daily life of many village communities

Everyone agrees that the country's insurance industry is on a roll, and almost as many think it has rolled right past rural India. This reinforces the belief, inside and outside the industry, that insurance in India is largely an urban phenomenon. But, as Tata AIG has proved, there are exceptions to the city-centred insurance rule.

A bit of background is necessary to better understand what Tata AIG Life Insurance has managed to do. Some 75 per cent of the Indian population resides in villages, with over 80 per cent of them earning less than Rs 6,000 per month. Though insurance players have in recent times percolated to the Indian countryside, they have concentrated on the rural rich. Irrelevant policies and relatively higher premiums mean that even the relatively well off here are left without any kind of life-insurance cover.

It was to extend the insurance net to as much of non-urban India as possible that the Insurance Regulatory and Development Authority — established by Parliament in 1999 prior to the industry being opened for private participation — made the acquisition of a certain amount of rural and social business mandatory for every company. That paved the way for 'micro-insurance', which translates into small-premium policies targeted at the weaker sections of society.

The micro-insurance concept has had a mixed run in several countries around the world, and, as the Tata AIG experience shows, it can work in India. But companies have to comprehend the ground realities of rural poverty before they set forth on any countryside insurance retail campaign.

The rural poor generally access credit for their livelihood and lifecycle needs. The inability to repay loans leads them into a debt trap that is passed down through generations. In the circumstances, micro-insurance can play a significant role in providing access to credit that enhances income-earning opportunities, and deliver savings services that build up resources for utilisation in case of emergencies. It is believed that long-term micro-insurance strategies, covering the different risks that poor people are exposed to, can be one of the answers to sustainable social-uplift programmes in the developing world, especially in situations where citizens lack a state sponsored social-security net.

Tata AIG's operations in rural India involve partnerships with several non-government organisations some of whom are also known as 'micro-finance institutions', which provide small loans that have to be repaid in short periods of time and are essentially used by low-income individuals with few collateral assets. Vijay S. Athreye, the company's national manager (rural), explains the rationale behind the initiative from a sustainability standpoint. "It was evident that a completely new strategy had to be evolved," he says. "We had to rethink products and their pricing, distribution, internal processes and promotions."

The company held extensive discussions with organisations working in rural areas and with low-income individuals to formulate its micro-insurance strategy. One of the projects has been implemented for landless, daily-wage labourers in Andhra Pradesh, and it was done on a matching-fund contribution basis with the British government's Department for International Development. The main features of the project were relevant and affordable long-tenure plans; livelihood creation through enlistment of women community enterprises; mentoring and monitoring through rural organisations; and specialised promotional activity tuned to the requirements of the target market.

On the product front the company launched three new micro-insurance schemes tailored for this rural market. Karuna Yojana and Jana Suraksha Yojana were 15-year term plans with death as well as survival benefits. The monthly premium on these schemes is as low as Rs 25 and Rs 60 respectively. Kalyan Yojana was a five-year term product offering a death benefit of Rs 10,000-15,000 with an annual premium of Rs 100.

Instead of recruiting a regular sales-agent force, the company decided to walk the innovative path. With the aid of non-government organisations, it identified women from low-income households. "We recruited women with some level of education and decent communication and leadership skills and we put them through 100 hours of insurance and product training," says Mr Athreye. The idea was to transform these rural women into agents of change.

Tata AIG realised that the delivery and servicing of micro-insurance programmes can be sustained only through grassroots community enterprises in villages. Post-training, groups of five women were helped to form 'rural community insurance groups' (CRIGs) that were registered as a partnership company. The women, through this company sell policies, collect premiums and settle claims for rural communities in which they reside. In return they earn commissions for the services they render.

The CRIGs arrangement affords a two-way advantage. The service is cost effective for those at the receiving end and it delivers a livelihood opportunity to those rendering it. With a critical mass of micro-insurance relationships, the community-enterprise infrastructure can be used to provide a variety of products and services to the target market.

The CRIGs have access to a Tata AIG van fitted with television and VCD for regular selling and other promotional work in the villages. They play a 20-minute vernacular movie on micro-insurance and its relevance to the target market. The company has also trained the women on how to use computers and the internet. A recently launched portal aimed at policyholders, sales people and others has made constant travelling unnecessary for the women.

Till date nine CRIGs, comprising 45 women associations, have been able to earn an average income of Rs 450-500 per person. "The response has been fantastic," says Mr Athreye. "Earlier, these women had no option but to work in the fields as labour on hourly wages. This project has changed their lives completely."

During the incubation period of any CRIG the target is to reach about 700 policyholders. Subsequently, the groups enter the developmental phase, where the women learn to sell higher-value policies. At that level they can earn enhance their incomes substantially. The project is flourishing to such an extent that there are 14 CRIGs waiting in the wings to be registered.

The CRIGs initiative, now a year old, has been successful in meeting targets on policy registration and premium collection (Tata AIG has covered over 22,000 lives through this method in 2003-04). Currently almost 40 per cent of the company's trained rural advisors are women who belong to self-help groups. Tata AIG has forged partnerships with more than 30 organisations working in rural areas to mentor and monitor the progress of this rural workforce.

Tata AIG's rural thrust has embraced nine states thus far and is expected to spread to three more by the end of the 2004 financial year. Several new initiatives launched as part of the project are being replicated or scaled up in other parts of India. The company is also exploring opportunities to market its products through rural channels such as farmer training centres, welfare trusts and fertiliser distributors.

"We are exceeding our rural obligations," says a satisfied Mr Athreye. "We don't view this as charity; rather, it is a way of expanding our business while also helping the community. " Given the facts, who can contend that rural India is a no-go zone for insurance companies?

Uploaded in March 2005