Date:23/06/2006 URL: http://www.thehindubusinessline.com/2006/06/23/stories/2006062301690600.htm

Back `Rural insurance needs differential pricing'

Our Bureau

Post offices best suited to improve penetration, says former IRDA chief

MR N. RANGACHARY

Hyderabad , June 22

A new pricing policy targeted at rural areas is a must for the insurance sector to expand into the vast rural markets, the former Chairman, Insurance Regulatory Development Authority (IRDA), Mr N. Rangachary, has said.

The principle of differential pricing is a necessity. Further, a fresh approach is required to sell insurance products in rural areas because of the limitations in the business, he said, while inaugurating a day-long seminar on rural insurance, organised jointly by the Rural Marketing Agencies Association of India and Public Relations Council of India, here today The market in rural areas was as good or better than urban. However, since activity revolved mostly around agriculture, products such as rain insurance, loss of productivity, price fluctuations in market and personal accident cover needed to be designed targeting the rural people, Mr Rangachary said.

Bet on Post offices

He felt the Post Offices network was the best suited to spread insurance across the country. With 1,60,000 post offices, "We have a ready made system in place to develop the insurance sector. It needs a slight amendment in the postal regulation to facilitate this". The Postal Department is already into life insurance. Further in villages the postman enjoys people's confidence and with insurance business requiring confidence and trust to grow, the network was ideal, Mr Rangachary, presently Advisor to the Andhra Pradesh Chief Minister, said.

Referring to the roleof Non-Governmental Organisations (NGOs), Mr Rangachary said people thought NGOs are the cheapest and best mode to distribute products/services in rural areas. Unfortunately it was not true.

For distribution of health cover in rural areas, the NGOs demand a commission of 7.5 per cent. "If I am wrong, I am ready to apologise," the former IRDA chief said.

An opportunity

The CEO of MART, the Market Research Organisation specialised in rural marketing, Mr Pradeep Kashyap, said rural insurance was not an obligation, but an opportunity for the insurance companies.

Mr Pawan Verma, Head, Rural & Social business of Reliance Life Insurance, in his presentation said there were hardly any exclusive products for the rural rich or middle class. Most products in the insurance sector in the last six years have been tailored to meet the regulatory demands, hence to grow the markets, especially in rural areas, requires a totally different approach.

The Head, Rural of Birla Sun Life Insurance Co, Mr Bipul Chatterjee, said 70 per cent of the estimated 1.9 million rural households are insurable.