awareness generation and initiatives of the life insurance...
TRANSCRIPT
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Awareness generation and Initiatives of the
Life Insurance Companies in India for inclusive growth
Dr. Nagaraja Rao,
Alliance School of Business,
Alliance University,
Bangalore, India.
Dr. Sukanya Kundu,
Alliance School of Business,
Alliance University,
Bangalore, India.
_____________________________________________________________________
Abstract
Only 21% of insurable population is covered by the all twenty and odd life insurance
companies and there is much untapped potential in the areas. In order to analyze the reasons,
the researchers conducted a survey in two rural districts of Karnataka, India and collected
data from 500 policyholders and 200 insurance agents. The data was later on tabulated and
analyzed with SPSS package.
The results indicate that low levels of insurance awareness are the main reason for people not
going for insurance. Life insurance, though an essential commodity, is sold and rarely
bought. Though the regulatory body, the Insurance Regulatory and Development Authority
(IRDA) ordains certain rural obligations on all the players in this sector, they are viewed
more as obligations and companies evince a very little interest in promoting inclusive growth.
Further people in rural India have no belief in the efficacy of regulatory body, i.e., Insurance
Regulatory and Development Authority (IRDA) and they do not perceive investment in private
companies as safe. The products of life insurance companies do not focus exclusively for
rural areas and as a result of which major chunk of rural India is isolated by life insurance
companies and inclusive growth and inclusive protection have become distant dreams.
___________________________________________________________________________
Key Words: Insurance awareness, rural India, inclusive growth
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1. Introduction
In India rural market is significantly different from the urban market. It consists of a set of
customers exhibiting behavior that is different from the behavior of consumers in urban areas
in terms of needs and wants, social and cultural practices, nature of occupation etc.
(Velayudhan, 2007). Rohrer (1999) characterized rural market segment as less identifiable,
less accessible, resistant, limited resources, less affordability, high vulnerability and
underserved. Rural markets require a different marketing approach because of variation in
consumer behavior and income levels and also differences in macro and micro environment
of consumers located in rural areas (Rajendhiran, Saiganesh and Asha, 2004). Against any
human indicators the performance of rural India lags far behind urban India (Ahmed, 2013).
70% of Indian population live in rural areas but have no access; or have negligible access to
insurance (Gopinath, 2009). Promotional activities and agents of life insurance companies are
all about to inform, bringing awareness, develop belief, to reinforce trust etc. (Venugopal,
2008). Selling of life Insurance products largely depends on the skill and efficiency of the
distributor. In Indian market with aggressive marketing approach private players are gradually
capturing the Indian market and giving direct threat to the dominant life Insurance player like
LIC (Sharma, 2010). Companies such as ICICI Prudential Life Insurance and ING Vysya Life
Insurance have tied-up with Suvidhaa Infoserve, which runs 13,000 kirana stores that
provides grocery, mobile and telephone services, pharmacy products, internet and travel
services to customers in 400-odd locations. The tie-up allows a policyholder to pay his
premium at the store, where the store owner will punch details into a kiosk to generate a
payment receipt. DLF Pramerica Life Insurance has partnered with Srei Sahaj E-Village, an
arm of Srei Infrastructure Finance, to reach out to 27,000 villages, while Max New York Life
has tied up with Kisan Seva Kendras run by Indian Oil Corporation in rural areas.
It is important for the insurance service providers to understand the need and want of the
rural population and to formulate marketing and operational policies accordingly to create
awareness as a first step to capture the potential that lies in rural Indian market. The pulse of
the customers and distributors is to be analyzed by the Insurance service providers in order to
design suitable products for the customers in rural areas. Several researches can be found on
customer satisfaction with insurance products in India and abroad (Tsoukatos and Rand,
2007; Kaur and Negi, 2010; Borah, 2013; Gizaw and Pagidimarri, 2014). This paper analyses
the perceptions of rural customers and insurance advisers regarding hurdles in selling policies
in rural areas and the willingness of the insurance companies to cater to the rural areas,
features of insurance policies to meet rural customers’ needs etc. It also tries to find out the
customer perception particularly on safety aspect to invest in insurance products of private
players.
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2. Literature Review
Bodla and Verma (2007) studied buyer behavior regarding life insurance policies in the
rural area of Haryana. The study revealed that respondents belonging to the age group 31-40
years dominate the rural insurance market; agents are the most important source of
information and motivation as the people take a policy that is suggested by the agent. Athma
and Kumar (2007) in their article tried to identify the factors which the consumers take into
consideration before selecting life Insurance products. Both, product and non-product
attributes have been found to be important in selecting a policy but they have been rated
differently. Rating is different in urban and rural areas. In case of urban areas, product
attributes are ranked first and non-product attributes like agents and company are secondary.
At the same time, in rural areas, non-product attributes play a major role in selection of a
policy. Thamodaran and Ramesh (2010) found the influence of demographic variables like
education, occupation and income factors to the respondents’ decision making factors like
awareness, getting interest and purchase intention. The study carried out in rural India found
out that there is no difference of opinion among the respondents towards creating awareness
on insurance through print advertisement based on their educational level. In his paper
Ahmed (2013) examines the present state of affairs of rural life insurance in India and
attempts to explore the issues and challenges which led to poor penetration of rural life
insurance markets. The research study of Borah (2013) revealed insurance companies should
give more importance in the reliability, assurance and empathy factors to enhance customer
satisfaction.
The articles from the journal of the regulatory body, viz, Insurance Regulatory and
Development Authority (IRDA) for the last five years also helped in finding authenticated
information on life insurance market in India. The major reports on the insurance market in
India, viz, Capgemeni’s World Insurance Report, 2008, Old Age Social & Income Security
Report (OASIS) and Mckinsey & CO Report on Insurance, 2007 are reviewed. Scores of
research articles presented for different Universities by different research scholars are also in
handy for the relevant topic of research.
The literature review points out that there is a wide gap between the rural insurance tapped
so far vis-à-vis the potential available. Hardly 25% of the eligible rural people are covered by
any form of life insurance. The second important point emanated out of the literature survey
is that there has been no systematic study of rural life insurance market from the perspectives
of customers and insurance agents and all the literature is generic in nature based on
secondary data.
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Thirdly there is no research on the life insurance awareness levels of rural people and
actual interest shown by the life insurance companies in product design and in educating the
rural people.
The research problem, therefore, is how best we can increase the insurance coverage in
rural areas. The article works in that direction with the objective studying the perceptions of
the customers and facilitating the analysis to insurance providers for their advantage.
3. Methodology
The study was conducted in rural areas of two districts of Karnataka- Bangalore and Kolar.
The two districts are selected as all private players and the public sector LIC (Life Insurance
Corporation of India) have offices in these two districts.
Customers are selected on simple random sampling basis and responses for a questionnaire
were collected from 250 customers each from the two districts and thus the total respondents
are 500. 200 agents of major five insurance companies were also contacted (100 each from
Bangalore rural and Kolar rural) and obtained the responses. The presence of majority of
private life insurance companies in these two districts provided an opportunity to study the
life insurance market in a thorough manner.
The research design selected is ‘exploratory’ research and the major emphasis is on the
discovery of ideas and insights. The primary data is collected through questionnaires. The
questionnaire was simple and easy to understand with both open-ended and close-ended
questions taking in to account the intellectual levels of the rural customers.
4. Results
SPSS (Statistical Package for Social Sciences) was applied for data analysis. The secondary
data is collected from servicing manuals, insurance reports, journals and various websites of
the insurance companies.
4.1 Agent perception
Hurdles in selling policies in rural areas:
An exclusive question was put to the insurance advisors/ agents asking about their perception
as to what they feel hurdles in selling the policies in rural areas. The responses are depicted in
Figure 1:
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Figure 1: Hurdles in selling policies in rural areas
The question aimed at eliciting information from the agents as to the exact hurdles in selling
policies in rural areas.
26% Bangalore rural district agents and by 55% of Kolar rural agents attribute the low
penetration of life insurance in rural areas to ‘lack of awareness’.
47% Bangalore rural district agents and by 34% of Kolar rural agents attribute the low
penetration of life insurance in rural areas to ‘lack of need based’ products.
It can be inferred that there is a strong reason for creating insurance awareness and design
need based policies in rural areas.
Exclusiveness of life insurance products to meet rural customer needs:
Figure 2: Exclusiveness of life insurance products to meet rural customer needs
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The Figure 2 is aimed at eliciting information from the customers if the products of
insurance companies tailored to the needs of the customers.
76% Bangalore rural district agents and by 77% of Kolar rural agents attribute the low
penetration of life insurance in rural areas to ‘lack of awareness’ opine that the products are
not really designed to the needs and requirements of the policyholders.
The insurance companies need to take this aspect in to consideration. They need to
evaluate the usefulness of their existing products and also design rural customer oriented
products for their own benefit.
Willingness of life insurance companies in rural business:
Figure 3: Willingness of life insurance companies in rural business
The Figure 3 is aimed at eliciting information from the insurance advisors/ agents if the
existing life insurance companies evince any real interest in rural life insurance business.
79% Bangalore rural district agents and by 89% of Kolar rural agents opine that the life
insurance companies are not interested in the rural life insurance business.
Summary of the primary data suggests that the life insurance awareness in rural areas is
very low and insurance companies are not evincing much interest in developing insurance
business in rural areas.
Customer perception
Safety of investment in private companies:
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Figure 4: Safety of investment in private companies
The Figure 4 is aimed at eliciting the views of the customers if their investments in private
companies would be safe and secure.
Out of 250 Bangalore rural district policyholders as many as 161 policyholders
constituting 64.4% opine that investments in private life insurance companies are unsafe.
Out of 250 Kolar rural district policyholders as many as 148 policyholders constituting 59.2%
opine that investments in private life insurance companies are unsafe.
Hypothesis testing:
The rural customers of life insurance companies feel that their investments in
private life insurance companies are secure.
A Chi-Square test is conducted in order to test the frequency of responses. From the
secondary data the safety aspect of private insurers is not available anywhere and hence we
have taken 50% since the probability of answering ‘yes’ or ‘no’ is 50%.
H0: There is no significant difference between the opinion of the rural policyholders if their
investments in private life insurance companies are safe or unsafe.
H1: There is significant difference between the opinion of the rural policyholders if their
investments in private life insurance companies are safe or unsafe.
Table 1: results of Chi-Square (the proportions among the responses of the respondents)
Investment in
private life
insurance are
safe
Category N Expected df Chi Square Significance
Yes 191 250 1 27.85 at 0.01 Level
No 309 250
Total 500 500
The Chi-Square results show less than 1% of significance level and hence the null
hypothesis is rejected. It can be concluded that there is significant difference between the
opinions of the rural policyholders about investments in private life insurance companies.
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Frequency of responses shows that investment in private companies is viewed upon as unsafe
by the rural policyholders.
To ascertain if the opinion is same across Bangalore rural and Kolar rural districts, the
proportions are also compared between the districts.
H0: There is no significant difference in the opinion of the Bangalore rural policy holders and
Kolar rural policyholders that investment in private life insurance companies is unsafe.
H1: There is significant difference in the opinion of the Bangalore rural policy holders and
Kolar rural policyholders that investment in private life insurance companies is unsafe.
Table 2: Results of Chi-Square test (the proportions across the districts)
Premiums
for Private
Insurers are
secure
Category N Expected df Chi Square Significance
Bangalore 89 95.5 1 0.88 Not Significant
Kolar 102 95.5
Total 191 191
The results reveal that the Significance value is 0.88 at 1% significance level. Therefore,
the null hypothesis is accepted. It can be concluded that there is no difference in the opinion
of Bangalore district rural policyholders and Kolar district rural policyholders that
investments in private life insurance companies are unsafe. In both Bangalore and Kolar rural
districts, the policy holders opine that investments in private life companies are unsafe.
From the above, it can be inferred that awareness about regulatory mechanism is very low
in rural areas of both Bangalore and Kolar. The insurers have to focus on this lack of
awareness and try to create/ enhance awareness levels in rural areas.
IRDA can take care of the safety of customer investments
Figure 5: IRDA can take care of the safety of customer investments
119 respondents in Bangalore rural and 121 respondents from Kolar feel that IRDA can
effectively safe guard their investments in insurance companies. 131 respondents of
Bangalore and 129 respondents of Kolar feel that IRDA cannot safeguard their investments.
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In other words 52% of the total population opines that IRDA cannot guarantee their
investments.
The players in the insurance market, especially the private players have to take care of this
aspect and focus their marketing strategy towards awareness generation before pushing their
products in the rural areas.
Hypothesis testing
Insurance Regulatory and Development Authority (IRDA) is not known as regulating
agency to rural clients’.
A Chi-Square test is conducted in order to test the frequency of responses. From the
secondary data the confidence levels of the policyholders with regard to IRDA is not
available anywhere and hence we have taken 50% since the probability of answering ‘yes’ or
‘no’ is 50%.
H0: There is no significant difference between the opinion of the Bangalore and Kolar rural
district policyholders about the effectiveness of IRDA in safe-guarding or not safe-guarding
their investments in private life insurance companies.
H1: There is significant difference between the opinion of the Bangalore and Kolar rural
district policyholders about the effectiveness of IRDA in safe-guarding or not safe-guarding
their investments in private life insurance companies.
Table 3: Results of Chi-Square test (the proportions among the responses of the respondents) IRDA safe-
guards
investments in
private
companies
Category N Expected df Chi Square Significance
Yes 240 250 1 0.80 Not Significant
No 260 250
Total 500 500
The results of the Chi-Square value are 0.80 and it is not significant. Hence the null
hypothesis is accepted. It can be concluded that there is no significant difference between the
perceptions of the rural people about the effectiveness of IRDA in safe-guarding or not safe-
guarding their investments in private life insurance companies. The frequencies of responses
show that rural policyholders do not trust the regulatory mechanism of IRDA in safeguarding
their investments.
To ascertain if the opinion is same across the two districts the proportions are compared
between the two districts.
H0: There is no significant difference in the opinion of the Bangalore rural district
policyholders and Kolar rural district policyholders with regard to the effectiveness of IRDA
in safeguarding the interest of the policyholders in private life insurance companies.
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H1: There is significant difference in the opinion of the Bangalore rural district policyholders
and Kolar rural district policyholders with regard to the effectiveness of IRDA in
safeguarding the interest of the policyholders in private life insurance companies.
The results of the Chi-Square test at 1% significance level are vide table 4 as follows:
Table 4: Results of Chi-Square test (the proportions across the districts)
Safety
guaranteed by
IRDA with
regard to
investments in
private life
insurance
companies.
Category N Expected df Chi Square Significance
Bangalore 119 120 1 0.02 Not Significant
Kolar 121 120
Total 240 240
The results of the Chi-Square value are 0.02 which is not significant. Hence the null
hypotheses are accepted. It can be concluded that there is no significant difference in the
opinion of the rural policyholders of Bangalore rural and Kolar rural districts with regard to
effective regulatory mechanism of IRDA with regard to investments in private life insurance
companies.
The IRDA and the life insurance companies have to educate the rural customers about the
role of IRDA as a regulating agency and boost the trust levels of the rural customers.
5. Discussion
The initiatives of the insurance companies in generating rural life insurance awareness
(Secondary data):
Life insurance deals with intangible products. The insurance companies sell a promise
which is to be redeemed at a future date. Unlike other intangible products of other service
companies, life insurance business has a tough job of selling a concept which is based on the
happening of the eventuality (death of the policyholder) which is repugnant to the ears of the
customers, particularly the rural folk. Given the awareness levels of the rural customers with
regard to life insurance, the sales of insurance product still more tuff. ‘Various Superstitions,
taboos, religious and cultural leanings, heterogeneity etc make things complicated. Further
there is the vast spectrum of village customs, dress and physique that make up the Indian
village tapestry. A picture of a Punjab farmer may not be acceptable to the farmer of Andhra
Pradesh’ (Rao, Nagaraja, 2011).
According to Shirodkar, “In view of this diversity LIC of India tried to take the lowest
common denominator in designing its communication tools. It has effectively made use of a
fleet of publicity vans with a special material prepared for the masses. The local heroes and
local themes are selected in films – for example, a film on Shivaji is shown in Maharashtra
whereas Rana Pratap was the theme in Rajastan. The death of these heroes is shown as a great
loss and had there been insurance, there would have been a little grievance (some financial
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relief) to the families would be the message given at the end. The stories of Ramayana, Maha
Bharatha laced with insurance concepts, social and educative themes on agriculture and
family planning also play a pivotal role in creating awareness programs. At the end of the film
the publicity officer would call up a boy from the audience and promise him a surprise gift if
he can narrate the story. The advantage of this gimmick is multi fold. The adult audience pays
immediate attention to see if their boy is clever enough to narrate and win the prize. The
message gets careful repetition. These types of programs are conducted under the supervision
of the Village Pramukh to boost up the ego and he is asked to address the audience”.
LIC has perfected certain techniques in order to educate as well as advertise its products in
rural areas. One such technique is ‘Cheque presentation’ in the villages, especially when there
occurs a death claim in rural areas. This type of meetings are used by the LIC officials to
invite the ‘Village Head’, the members of the village panchayat and other dignitaries to the
dais and everybody would grieve the death of the life assured. After presenting the claim
cheque to the claimant, the company officials would explain the benefits of insurance.
Some private players like Tata AIG Life, ICICI Life insurance and Aegon Religare Life
insurance companies print the leaflets in regional languages and distribute them in rural areas
through the network of insurance advisors. Normally the name of the insurer is not printed on
the pamphlets. These are intended purely for educating the rural masses.
To increase the operational efficiency Bajaj Allianz Life Insurance Company developed a
robust IT department and generates claim intimation letters two months in advance. The
company has added the settlement area in to the Branch Service Index Meter (BSIM) to
ensure prompt settlement of maturity claims with in the due date. The company engaged an
outsourced organization for early death claim investigations to ensure fast settlement of death
claims. To avoid pitfalls and loopholes, the company devised an IT backed initiative of
generating policy specific claim forms with bar codes to be dispatched to the claimants. This
ensures curbing the unethical practice of not registering claims until receiving the
requirements at the branch levels for avoiding delays. The company has Claims Review
Committee for redressing the customer complaints.
Bajaj Allianz Life Insurance Company has a special unit linked plan called Family Gain,
the premiums of which are invested in funds that are approved by Shariyat principles. These
funds, in other words are not invested in companies dealing with gambling, liquor,
entertainment, contests, films, TVs, hotels, banks etc which are against the pious Muslim
tenets. This plan is positioned for pious Muslim sector who do not want to earn out of
gambling, racing, liquor business etc. Even though this plan is for both urban and rural India,
it can be sold in rural areas where ever there is good percentage of pious Muslim population.
(Source: New Family Gain pamphlet) taken from Bajaj Allianz Product Specs developed by
Product Development Department, Page No.12.
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Max Vijay has an innovate product designed by Max New York Life for financial
inclusion of under privileged masses. Keeping in view the savings and protection needs of the
people, three premium payment options are provided with minimal premiums of Rs 1000/, Rs
1500 and Rs 2500 per year. Renewal premiums can be paid from Rs 10 to Rs 2500 per day
depending upon the availability of the disposable income. The policy does not lapse as long
as there is sufficient value in policy account. No medical report is also required.
Building brand image in rural areas (Secondary data):
“Bima Grams: LIC of India conceived and perfected a marketing tool of designating a
village a ‘Bima Gram’ in which at least 75% of the households have at least one LIC
policy. LIC offers Rs 25,000 for the wellbeing of the village normally in a special
meeting held in the presence of all villagers and village elders. At the village
entrance, an LIC hoarding is put indicating that it is a Bima Gram. The visual
appearance of the hoarding enhances the trust of the rural people in LIC. This
marketing technique is not being popularized by the private players.
“Madhur Grams: It is part of the micro insurance product, Jeevan Mathur launched by
LIC. In any village, if 75% of the households opt this policy, the village is designated
as Madhurgram.
“Bima Schools: Normally children and youth are the best ambassadors of any brand
or company. In order to educate this segment, LIC has come out with the concept of
Bima Schools. In this, the school is declared Bima School if 25 students of that
school take life insurance policies. An amount of Rs 2500 is given out to the school
also. By virtue of this concept, school management talk of insurance to children,
children in turn with parents and the circle goes on and enhances the brand image of
LIC. Again this technique is not popular with private players.
A critical analysis of the marketing initiatives of life insurance companies in generating
awareness:
Long (2007) studied the Chinese insurance market marketing skills from the aspect of
training and concluded marketing skills had greater impact on insurance sale. A critical
analysis of the marketing techniques used by life insurance companies for the promotion of
rural insurance indicate that the efforts only at the periphery level only. The so called Bima
Grams, Madhur Grams and Bima villages are just a fraction of the total size of rural
hinterland. No insurance company could able to penetrate six lakh plus villages. “The
awareness programs of LIC and other private insurance companies is limited to very few
villages in the country and cannot be treated as awareness generation programs” (Rao,
Nagaraja, 2011). The hoardings of LIC are seen at least in few villages but none of the private
players have their hoardings in villages. The hoardings of private players are only in metros
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and towns. The selling value of ads in TVs and other electronic media, especially of the
intangible and abstract nature of life insurance is yet to be analyzed by the future researchers.
Suggestions for the life insurance companies for capturing the rural market:
The major reason for the low penetration of life insurance in rural areas is the lack of
interest of the insurance companies coupled with low levels on insurance awareness of the
rural people. It is true that the IRDA has prescribed that certain percentage of business in each
year must be rural business. But IRDA has no monitory mechanism to check whether the
rural policy statistics submitted by all insurance players is trust-worthy. For enhancing rural
coverage, the following suggestions may be looked upon by the insurance players:
Raising the insurance awareness levels:
Insurance companies can form a consortium and start educating the rural masses in a big
way. They can make use of mobile vans, common pamphlets and common ads just to promote
insurance awareness. In this way the expenses can be distributed among all the players for
their mutual advantage.
In majority of the villages, the practice of ‘weakly market’ is very much in vogue. Large
number of villagers invariably visit these markets on the appointed day, normally once in a
week. Insurance companies can certainly organize exhibitions where they can show video
films in regional language and distribute insurance literature. The purpose of this program is
to reach out to the customer, understand his requirements, reinforce interest levels towards the
insurance companies and try to reengineer the behavioral psychology of the customer for
accepting the idea of insurance.
Insurance companies can resort to CSR practices in rural areas and build up related
marketing strategies for the benefit of the companies and the customers at large.
The recruitment of agents may be on sound lines. It should be ensured that the agents should
have the expert knowledge of competitive products in order to convert the prospects in to
clients. Companies may also think of recruiting agents from the stream of village elders and
opinion makers.
Suggestions for generating awareness towards IRDA:
All insurance policy bonds of all companies can be printed with an exclusive page
specifying the regulatory mechanism, the IRDA. This can be done both in English and
regional language. It helps the customers in knowing the regulatory mechanism, thereby
reinforcing the safety aspects of their investments with private players.
IRDA, being a government body, can advertise about itself in all print and electronic media to
reinforce trust of the rural policyholders.
Suggestions for behavioral change of customers’ for positive orientation towards the private
players:
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“The customers are the backbone for the survival of any life insurance company or for that
matter any customer centric organization. A satisfied customer is the ambassador for the
growth prospects of a company. Any sales push strategy can supplement the sales objectives
but cannot supplant the long term objective of building the edifice of a solid organization
which is founded on the trust of the customers. As long as the vital objective is achieved, the
sales cannot be viable and economical”, Rao, Nagaraja, 2011).
The private life insurance companies can gain the confidence of their customers in the
following ways.
The maturity and death claims are to be processed promptly. There should be relaxation of
rules in at least small sum assured cases in order to gain the confidence of rural customers.
The policy servicing which include plethora of policyholders’ needs should be prompt and
courteous.
Misselling should be viewed as an offence and cases of misspelling should be punished. In a
way, the companies must publicly demonstrate their sincerity and gain the confidence of the
customers.
6. Conclusion
From the discussion as above, we can conclude that there lies a gap between the realities
and the marketing techniques with regard to rural life insurance market. The life insurance
awareness levels are low and are not addressed properly. The products are not rural specific to
attract the attention of the customers. The rural initiatives are by and large have limited focus
and the private players attention in the rural market is less significant. There is a strong need
to develop this market for an inclusive growth.
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pp. 40-48
B S Bodla, B. S. and Verma, S. R. (2007), Life Insurance Policies in Rural Area: Understanding Buyer
Behavior, The ICFAI University Press.
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