Life insurance companies are looking at the micro-insurance segment as a profitable and viable business venture in the future and a growth driver. Micro-insurance or insurance for the poor and rural population is generally sold under group schemes. As per the Insurance Regulatory and Development Authority (Irda), all insurance companies are mandated to get a certain percentage of their total business from micro-insurance policies. Percentage of obligatory business differs due to the scope and size of the insurance companies.
In financial year 2009-10, life insurers earned new business premium of Rs 401.64 crore from micro-insurance policies.
“We don’t see micro-insurance as obligatory business at all. We will soon turn profitable and make money from the micro-insurance segment. At present, we are in break even stage,” TR Ramachandran, chief executive offer, Aviva Life Insurance, told Financial Chronicle.
Ramachandran added that smaller cities and towns would soon become focus areas for insurance companies looking for growth.
Aviva Life Insurance has already surpassed its share of obligatory micro-insurance business and hopes to underwrite more business. Insurers say that the key to profitable micro-insurance policies is finding out right distribution strategy.
“We feel the correct market potential of the rural segment will be revealed when insurers offer the right products at right prices. In the rural segment, the main problems that insurers face is the high cost of reaching these markets and then managing the distribution channels. Therefore, it makes a lot of sense to have micro financial institutions to distribute and service rural products that suit their clients who come to them for their various financial needs,” said Amitabh Chaudhry, managing director and chief executive officer, HDFC Standard Life.
“At present, the rural business is not considered a profitable one, but we certainly feel that it will provide vast opportunities in the future. Financial product awareness and shortage of funds remain the cause of concern in the rural market. Although, it is too early for us to comment on fulfilment of our rural obligation, we expect to fulfil it comfortably by the end of this financial year,” said GV Nageshwara Rao, managing director and chief executive officer, IDBI Federal Life Insurance.
Insurance Regulatory and Development Authority is also working on the guidelines to regulate and improve micro-insurance products. Underpenetration would also favour early movers.
[Source- mydigitalfc]
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