Selling Life Insurance in Rural India

by , May 23, 2008


Bangalore, India 23 May 2008

Rural India is the next frontier for life insurance companies. Cost-effective distribution channels and client awareness will be critical to success in this market.

India's life insurance market is booming. From a single company a decade ago to 18 active players today, the market has grown at a healthy CAGR of 24% over the past five years. Most of this growth is coming from the urban areas. The increase in competition is forcing insurance providers to look beyond urban centers and take their trade to the more challenging rural hinterlands of the country, where only 3% of the population of more than 720 million people have any form of life insurance coverage.

Rural India is witnessing a surge of income growth, and the propensity to consume financial products has increased considerably in recent years. With increased urbanization, the rural centers' contribution to the national GDP has come down in percentage but increased significantly in value. Insurance providers are working overtime to ensure that this additional wealth is effectively channeled.

This newfound capacity to tap the rural life insurance industry is expected to grow rural revenues from the current US$487 million to US$1.95 billion by 2015. Providers will have to explore ways of creating a granular reach model to tap the market in over 600,000 villages across the country.

"The clincher in the rural life market will be the footprint set up by private insurance players," says Ravi Nawal, analyst in Celent's banking practice and author of the report. "State-owned entities have a formidable footprint that has been established over the past 30 years and is not easily replicable today. Thus, it becomes imperative for private providers to innovate to ensure distribution effectiveness in a very challenging but lucrative market."

This report focuses on a key aspect of tapping this immense market opportunity: distribution channels. It analyzes the current distribution models and provides perspective on the models of the future, providing the reader with an understanding of the strengths and weaknesses of each of these channels.

The 34-page report contains 10 tables and 7 figures. A table of contents is available online.

Members of Celent's Life/Health Insurance research service can download the report electronically by clicking on the icon to the left.  Non-members should contact for more information.  

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

Bangalore, India 23 May 2008

Executive Summary 3
Introduction 5
Understanding the Rural Market 7
Key Characteristics of the Rural Indian Market 12
Regulatory Intervention 14
Current Rural Life Insurance Landscape 16
Distribution Models for Low Cost Insurance 18
Distribution Channels for Rural Market 22
Conclusions 31


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