microinsurance in india

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  • 1. A REPORT ON IDENTIFICATION OF RURAL CHANNELS OF DISTRIBUTION FOR THE SALE OF INSURANCE PRODUCTS AND PREPARE BUSINESS PLAN ACCORDINGLY By Anurag Mehra 11BSPHH010989 FINO A report submitted in partial fulfilment of the requirements of MBA Program of IBS HyderabadDate of Submission: 18 April 2012
  • 2. Table of Contents1. Acknowledgement2. SIP Certificate3. Executive Summary4. Introduction 4.1. Background 4.2. Objective 4.3. Methodology 4.4. Scope & Limitations5. Industry Analysis 5.1. Porters Model6. Company Profile 6.1. About 6.2. Vision 6.3. Mission 6.4. Investors 6.5. Management 6.6. Partners 6.7. Lines of Businesses 6.8. Solutions 6.9. Services7. Project Specific Analysis 7.1. Product Profile(Marketing Mix) 7.2. Product Life Cycle 7.3. Competitors Analysis 7.4. On site Project Report 7.4.1.Current Strategy 7.4.2.Work Performed 7.4.3.Findings8. Recommendations9. Learning from SIP10. References2|Page
  • 3. AcknowledgementI hereby take this opportunity to thank FINO for providing me with a fruitful association by wayof Summer Internship. This association, however short lasting, has provided me with acomprehensive insight into the Technical Expertises present in the rural financial inclusionIndustry and pros & cons of the same. I would like to express my deep gratitude to my companyguide Mr. Anand Kumar Tiwari, State Head (Haryana), CDVG department who provided aconstant support, valuable inputs and encouragement in understanding the nuances of theproject.I would like to extend my sincere thanks to my faculty guide Prof. Rajan Mani of IBS Hyderabad,for his constant guidance, immense support; motivation and encouragement which inspired mepursue my project with added interest and enthusiasm.I would also like to thank my short term colleagues Mr. Lokesh Sharma for his co-operation andall my friends, and my family members for their, support and help as and when required as wellas for inspiring me to put in my best efforts for this project.3|Page
  • 4. Executive SummaryMicro insurance is the provision of insurance services to low-income households, which serves as animportant tool to reduce risks for the already vulnerable population. It is in growth stage in India asrural market is still untapped in India. My project title was to build a business plan for the sale ofinsurance products in rural areas of Sonepat, Haryana. However, my work was to sell insuranceproducts in rural areas and make new customer enrolments for financial inclusion project.My methodology in the project was different in both the project works. While doing the microinsurance, I opted to visit the villages which have customer enrolments i.e. have our bio metriccards, so that we can do their insurance. We visited these villages at the time of pension distribution(for old age), the main reason for holding a camp at that place was that people were alreadycollected over there for a reason and they were our target market at that point of time. Myapproach for financial inclusion project i.e. customer enrolments was to visit those villages where wehad low customer enrolments and those villages where customer enrolments were average buttransactions were low.While doing the project I first tried to understand their current strategy, company did not have anywritten strategy for marketing their product. In every village, we have one employee who isbelonging to that village only; we call our employee as Bandhu as this name relates to ourconsumers. This person is our Point of connection with our consumers and plays an important rolein the companys position in the consumers mind. This person always belongs to the village he isassigned to so that people can believe him and they can rely on us.After that, I went to sell the micro insurance with the Bandhu in villages, as said before we chosevillages with high customer enrolments. While doing the insurance of the people, I talked to severalof them to get the feedback of the company and product. There, I got to know that many of themwere buying our product because of reference i.e. Word of Mouth however; they were not awareabout the financial services and knew little less about product and company.While doing the other project, financial inclusion i.e. customer enrolments, we chose villages wherewe had low penetration. In those villages, we adopted door to door strategy in some villages andin others we asked the head/sarpanch of the village to make a gathering, wherein we can tell themabout our services. While doing this project, I talked to people of these villages, and here I got mixedpeople i.e. people who are not aware/does not believe in financial services and people who areaware of these services but do not use as banks are very far. Those who were not aware ofservices/who did not believe in these services, we told them about our services and its benefits intheir lives. Those who were not using these services, because of other reasons such as banks farway, we made their biometric cards and enrolled them so that they can operate their account fromtheir village only.My recommendation is to hold Financial Literacy Program, wherein we can hold camps to educaterural people about financial services and its benefit in their life. By this medium we will be able tograb higher market which is still untapped and our position will improve in minds of consumers.4|Page
  • 5. Introduction:BackgroundRisk is pervasive in the lives of poor and low-income groups. Economic, social, natural, and otherfactors distort households risk management capability and their struggle to come out of poverty.Faced with multiplicity of risks, poor and weaker sections are often forced to deplete their financial,physical, social and human assets just to cope with the contingencies. Some common risks theyconfront with are unemployment, illness, and accident, death of main earning members of thefamily, crop loss, loss of livestock, fire, theft, drought, flood, and loss in petty trading activity due tomarket factors. Some groups are more vulnerable to many of these risks than the others and unableto cope with risk events. Hence, uninsured risk leaves many poor households more vulnerable to thelosses from negative shocks. However, impact of such risks lingers for a longer period depending onthe nature and severity of risks and strategy adopted by the household for coping. On the otherhand, household exposure to risks not only results in substantial financial losses but also thesuffering accentuates the fear and uncertainty relating to the risk. Because of this perpetualapprehension, many poor households are less likely to take advantage of income-generatingopportunities which could be a way out of poverty.Risk pooling and informal insurance are not entirely new to many low income households. Informalrisk-sharing practices have been around for generations. Options for protecting against risks includesdiversifying household resources and income, building assets, stocking food, investing in livestock,renewing & strengthening social networks, saving and borrowing from informal sources,participating in public social security programme, enrolling in insurance schemes etc. The riskmanagement approaches differ under socio-economic and agro-climatic conditions and alsodepending upon its exposure to risk. Unfortunately, risk coping mechanisms are limited in assuringbenefits and typically cover only a small portion of the total loss of income and income generatingopportunity. Households informal means to manage risks may not provide adequate and long termprotection, especially to poor and low income groups who are prone to loss of entitlements incurreddue to variety of risks. Households follow variety of coping strategies to manage different kind andnature of risks that affect their income and consumption smoothing. But many informal risk copingstrategies come at a cost, as assets are depleted when trying to cope with risk such as distress saleduring crises, reduction of household expenditure on food, withdrawing children from school,postponing or avoiding expenditure on health, social functions etc. It has both short term and long-term adverse impacts on households. Though household diversification often viewed as positiveresponse against risk events many such coping strategies followed by the poor do compensate theentire loss. If household risks are not carefully designed and strategically handled it may result inbigger welfare losses. The situation would be worse when risks to life and livelihoods recur morefrequently and there is limited risk managing options. So provision of formal insurance cover tothese vulnerable groups could be useful to protect them against risks and supplement their riskmanaging capacity. As formal insurance can directly impact on householdsex-post risk copingmechanisms, it is believed that households participation in insurance would help to maintainincome and consumption soothing and avoid asset loss. But ac


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