Mr. Anil Aggarwal has over 27 years of experience in managing accounting, auditing and finance operations for Non-Banking Finance Companies. He is a Fellow Member of Institute of Chartered Accountants of India (ICAI) and an Associate of Insurance Institute of India (III). He has extensive experience in Accounts, Finance and Investments. He has been with Shriram General Insurance since its inception, playing a key role in formulating policies. India Insurance Summit and Awards, 2019 announced Anil as CEO of The Year General Insurance.
Over 65% of India’s population lives in rural areas, but insurance penetration–calculated in terms of total premium as a percentage of GDP–was a mere 0.5% for the rural segment as compared with the national average of 3.76% in FY20.
Non-life insurance companies underwrote gross direct premium of Rs 17,680 crores in Oct ‘21, up 12.5% on-year. Total premium underwritten by these insurers stood at Rs 126,385 crores as of Oct ‘21.
However, most of the citizens residing in rural and semi-urban areas are unaware of insurance as a concept and have never experienced its benefits. Further, 80-90% of the country’s workforce is in the informal sector, accounting for around 50% of India’s GDP. They have low disposable incomes and no minimum wages or social security.
The untapped rural market is in great need of insurance, as it can help them overcome disruptions in their livelihood and protect them against unforeseen losses. This warrants that they be offered fast-tracked claims and affordable coverage–customised to their needs–in the form of rural insurance plans. The ‘one size fits all’ doesn’t work and products need to be customised to their needs.
Rural insurance penetration remains low due to multi-fold reasons which include limited choice of insurance products that offer flexible features, absence of people friendly and transparent claim settlement mechanisms, weak network of insurance companies and intermediaries, slow pace of adoption of modern technology and digitisation, underdeveloped market with constraints in offering affordable covers and proper servicing, and lack of industrywide co-ordinated efforts to serve the rural insurance segment.
Even within this, more people may be aware of life, health and crop cover due to government initiatives and other social welfare schemes. Few have heard of motor insurance despite many being dependent on a vehicle for their livelihood and/or as the only source of commuting. Moreover, local small and medium-sized businesses also use commercial vehicles for transportation of goods and services.
As per reports, around 85% of two-wheelers in rural parts of the country are currently uninsured. But, with the rural economy struggling due to the COVID-19 pandemic and many people left unemployed, awareness regarding insurance has been gaining momentum, including for a motor cover. This has also been aided by the increasing availability and acceptability of digital channels for the purchase of insurance.
Small businesses in the country side are witnessing demand recovery, which will translate into increased demand for commercial vehicles to speed up the movement of goods and services as the economy recovers further in the coming months.
The government has indicated that kharif crop and food grain production will be higher this year than the last five years. This will generate higher cashflow in the rural economy, a portion of which will go into the purchase of two-wheeler and commercial vehicles.
As per the Motor Vehicles Act, it is mandatory for any vehicle plying on the roads or any public space to be insured under ‘third party liability’ motor policy. This cover is important and essential in the event of an accident involving the vehicle.
The two-wheeler insurance policy covers vehicles such as scooters and motorbikes against accidents, disasters, fire, theft as well as any damages and injuries to the third-party. It also offers a mandatory personal accident cover for the owner/rider, which can be availed by passengers too.
Commercial vehicle insurance, on the other hand, covers vehicles that are not for personal use, such as trucks, buses, heavy commercial vehicles, light commercial vehicles, multi-utility vehicles, agricultural vehicles, taxis/cabs, ambulances and auto-rickshaws.
Since signing up for third-party motor insurance is mandatory in India, it automatically safeguards vehicle owners against accidents caused by other policyholders. For instance, if an accident caused by a policyholder damages another person’s vehicle or injures them, then the insurance cover saves the policyholder from legal repercussions and paying for the treatment.
Thus, this insurance cover helps policyholders breathe easy as the insurer foots the bill in cases of accidental damages and repairs, instead of the unexpected expense burning a big hole in the insured’s pocket.
In metro cities, customers tend to buy insurance while buying a new vehicle to comply with this law, and generally the trend is that they continue the policy as long as they can. But, since there isn’t much pressure of compliance in rural areas, consumers do not take it seriously and tend to avoid taking motor insurance.
What they don’t understand is that the cost of repair soars in the case of an accident, which was the main reason behind the government mandating third-party motor insurance covers.
Accordingly, the majority of uninsured consumers in India are owners of commercial vehicles and motorcycles, skewed towards semi-urban and rural geographies.
This presents a huge opportunity for insurers to create awareness about the benefits of their products in rural and semi-urban areas, and offer relevant products and hassle-free claims processing. In order for insurance distribution and services to reach out to all corners of the country, insurers look for informal networks such as self-help group members, banking correspondence model, agents, common service points, points of sale and digital kiosks–all of which are labour and capital intensive.
Thus, much of this opportunity is today being seen in providing access to insurance through digital and online channels, which bypass the physical constraints of reach, geography and more recently, the COVID-related lockdowns.
Insurance companies are investing heavily in technology and digital driven insurance in the hope that the convenience and benefits of buying a cover online will encourage customers to seek out relevant policies. Online channels help policyholders file requests and claims from the comfort of their home and via a completely paperless process which is more transparent and efficient