Prof. Manoj Kr. Pandey, BIMTECH
Rural Insurance Scenario:-
In spite of good industrial and urban developments in last few decades majority of the Indian population continue to reside in rural belt. Although the agriculture & allied industries in country has not been doing well but because of the overall growth of the economy , the living condition and the aspirations of the people in rural belt have gone up. Rural market has become a hot spot for many industries particularly that of FMCG with its growing consumption pattern. However the story is not same for insurance industry. The rural India has got a huge market potential for agriculture , cattle and other lines of insurance business but the insurance companies have so far failed in harnessing the full potential. As per a rough estimate almost more 80% of agriculture, 90% of cattle , more than 50% of vehicles do not carry insurance coverage. The real reason for it is the cost of distribution & servicing which is much higher in rural areas because of geographical spread and thin population density.
Common Service Centre
The CSC(Common Service Centre) is a strategic cornerstone of the National e-Governance Plan (NeGP), approved by the Government of India in May 2006, as part of its commitment in the National Common Minimum Programme to introduce e-governance on a massive scale. It is being implemented by the Department of Electronics and Information Technology (DeITY), Government of India on a Public-Private-Partnership (PPP) model. CSCs are the front-end delivery points for government, private and social sector services to citizens of India. The CSCs are to offer web-enabled e-governance/private companies services in rural areas, including application forms, certificates, and utility payments such as electricity, telephone and water bills, rural & micro banking and insurance etc. The Scheme creates a conducive environment for the private sector to play an active role in implementation of the CSC Scheme, thereby becoming a partner of the government in development of rural India. The PPP model of the CSC scheme envisages a 3-tier structure consisting of the CSC operator (called Village Level Entrepreneur or VLE); the Service Centre Agency (SCA), that will be responsible for a division of 500-1000 CSCs; and a State Designated Agency (SDA) identified by the State Government responsible for managing the implementation in the entire State.
To make the scheme financial viable sale of insurance and other financial line products were made part of the bouquet to enhance the fee based income of the operator i.e. Village Level Entrepreneur (VLE). By the end of 2014-15 there were approximately 125000 VLEs across the country.
Sale of Insurance through CSC :-
As per the original scheme and model CSCs were established by various Service Centre Agencies (SCAs) in different states. Hence, for distribution of insurance through VLEs the insurance companies were required to enroll these state level SCAs as a Corporate Agent. These SCAs were not much aware about insurance services and therefore not much inclined for adding this service in bouquet of services being provided through them. Other limitation was that of them being corporate agent and restricted to the sale of the products of only one insurance company each from life and general domain which was not that great from their income point of view because customer were having preference for certain well known brands. The VLEs were spread in a large geographical locations & it was difficult to identify those who were interested to sell insurance. Providing training to the selected VLEs on insurance Product and process was a big challenge. Even supplying product collaterals for marketing purposes was a challenge because of the distances in rural areas.
In September, 2013, Insurance Regulatory & Development Authority ( IRDA) came out with a separate guideline for the sale of insurance policies through CSCs and brought in place a broker model as they were open to all insurance companies and could offer a choice to the customers.
For this particular purpose M/s CSC e-Governance Services India Limited, a Special Purpose Vehicle (SPV) was formed to work as an insurance broking company having on its roll all those VLEs through their respective state level institution (SDAs ) who were interested in selling insurance policies. The guidelines so issued permitted both Life and Non Life Insurers in India to market certain categories of pre-underwritten and simple retail insurance policies and services through M/s CSC e-Governance Services India Limited (CSC-SPV) and its Common Service Centers Network. The prime objective of these Guidelines was to facilitate the Insurers in India to reach out to the rural India utilizing the network of CSC-SPV.
CSC-SPV now as an insurance intermediary & have entered in to agreements with Insurance companies for sales / servicing of the rural clients. They assist the VLEs now named as RAPs(Rural Authorized Person) to undergo the prescribed training and certification as per regulatory requirements. On successful completion of training and passing the prescribed examination and based on the certificate issued by examining institute, CSC-SPV enters into an agreement with the RAP authorizing him to solicit the approved insurance products. The entire system is web based and all the RAPs are to register themselves on www.apna.csc.gov.in to get access of the services provided by CSC SPV. The remuneration so mutually agreed and approved by IRDAI is shared by RAPs (80%), SDA/SCA (12%) and CSC SPV (8%). All the Insurers are to integrate their IT system to the CSC SPV portal for easy access and technology enabled services by RAPs. Initially the regulator allowed only Motor-TP product but subsequently in October,2014 they extended the product range to include Personal Accident , Farmer’s Package, Agricultural Pump set, Livestock and Fire & Burglary for dwellings and Life Insurance.
Progress so far :-
Likeany other initiative, CSC-SPV model had a slow start but it is picking up well now. Against the collection of mere Rs 33.77 crores in year 2013, the figure stood at Rs 128.69 in calendar year 2015. In the first five months of calendar year 2016 – the figure has crossed 110 Cr and future looks very bright. HDFC Ergo, Future Generali, Iffco Tokio and Reliance General have taken initial lead and they are doing very well. Motor third party product continues to be the most sought after product contributing almost 92% of premium followed by Life insurance which shares 6%. But in life insurance most of the premium collected is of renewal less of new business. The number of RAPs has crossed 10k mark and the progress is very good on this count. The launch of Pradhan Mantri Fasal Bima yojana and its possible sale through CSC-SPV would add more value to this channel.
The scheme is operative in almost all major states and so far more than 25 companies have join it. The big daddy LIC so far has restricted this channel only for renewal collection. Sale of LIC’s new business would be a booster , if it happens for all because of its brand and ease of sale.