India’s insurance penetration stands at only 3.69%
Leveraging the strong trust factor and network of Kirana stores is a great way to reach customers at the last mile
The flexibility in microinsurance has the potential to reduce poverty and inequality
Coronavirus has gripped the world in a paralysing panic. The media is flooded with travel advisories and the travel industry has taken a huge hit. Back home, even a common cold is treated with extreme caution. The outbreak of this disease has forced us to take notice, and take stock of how we protect ourselves against unexpected eventualities in life.
Risk is especially pervasive in the middle and lower-income groups, where economic, social, and political factors distort an individual’s risk management capabilities. Studies by the India Human Development Survey show that the Indian lower-middle-class, which comprises of more than 14% of the population lives barely or not far above India’s poverty line. Most Indians today are walking a financial tightrope in their daily lives and are often one bad event away from catastrophe.
A mass chunk of the rural population is engaged in labour-intensive, risk-prone activities that are harmful to their health. According to the British Safety Council report, 48,000 workers in India die due to work-related accidents annually.
In the face of unforeseen, unfortunate incidents; insurance is a major, overarching pillar to a progressive economy, and is yet one of the most ignored sectors due to the general wariness associated with the manner in which it is offered. The stereotypical distribution model of agents going door to door is a huge turn off for most.
According to the Economic Survey of 2018-19 and the India Brand Equity Foundation, India’s insurance penetration stands at 3.69%, one of the lowest in the world, with one of the slowest growth rates. While a lack of awareness, high premiums and cumbersome procedures are cited as the primary reasons for the skewed adoption, high costs of market penetration combined with under-utilization of available distribution channels, have been hindering the distribution, especially in the hinterlands.
To increase insurance uptake, there is a critical requirement to recognize the most integral needs of the population. India’s diverse demographic makes it an extremely unique market influenced by geography, education and even religion. Democratising the deployment of insurance schemes according to the specific needs of the population is the singular way to inclusive financial growth.
India with all its diversity in income patterns, education levels, occupations etc., is a huge experimental playground for microinsurance products while focusing on the most financially vulnerable.
Finances are all about trust and selling a financial service is all about establishing trust. Therefore, the current system is in dire need of a transformative change in its approach and offering. In that case what better way to establish trust in a locality than through its local ambassadors?
In India, the local kirana store in the neighbourhood is a symbol of trust for its communities and is attuned to their needs. The retailer is already a dependable partner of the social ecosystem, therefore leveraging his connect and expertise within the community to bring about effective changes and financial inclusion in his locality. With no calculative and pushy sales motivation, financial services including insurance can be made available effectively through these retail partners.
Additionally, introducing OTC banking in granularized sachets through this well-established framework across the country will help propagate and broad-base banking services in the country. With familiar, trusted faces serving as the ambassadors and communicating in a familiar language, the mammoth task of reach and dispersal of insurance becomes a reality.
Democratising the deployment of insurance schemes according to the specific needs of the population is the singular way to inclusive financial growth. India with all its diversity in income patterns, education levels, occupations etc., is a huge experimental playground for microinsurance products focusing on the stratum of society that is the most financially vulnerable.
Such a form of microinsurance can play the role of a comprehensive tool to reduce poverty and inequality, particularly where public social protection measures are inadequate and unevenly distributed. Besides affordable pricing, flexibility in paying premiums through daily, fortnightly, monthly or quarterly instalments allows them to revise their pricing within a reasonable range.
Moreover, the concept of assisted financial services through the most trusted makes adoption even more seamless. Micro product offerings and a renewed distribution approach can thus aid in branching out and reaching customers even at the last-mile. This will facilitate the smooth transition of a population from being less-aware to more financially savvy.
Although still in nascent stages, there is an emerging trend of banks tying up with new-age fintechs, small shop owners and business correspondents to leverage their local geographical knowledge and reach in a widely distributed environment. Arming local insurance crusaders with technology will streamline the process and also make it more accessible to the masses at large.
Collaboration and disruptive technologies will serve as a hotbed for innovation and value proposition, which is dire, needed at this juncture when India is eyeing a more financially inclusive society. If leveraged properly, these kirana stores can serve as the hub that can help India traverse beyond insurance, and eventually embrace the whole gamut of financial offerings.