LIC targets to sell 4 million policies in rural areas

Speaking at the Skoch Summit, TS Vijayan, chairman, LIC said that two years ago, the insurer had sold 8 lakh policies through its tieup with NGOs, micro-finance organisations, co-operative societies and rural banks.

"Now that LIC's technology platform is perfected, we are confident of moving out in a big way. Having realised that the key to greater spread will come from creating new distribution avenues, we have set a target of selling more than 4 million policies in the current year," he said.

 

The insurance penetration in urban India is 47 per cent (which means that almost one out of every two paid workers in urban India is insured), while it is only 27 per cent in rural areas. Vijayan said that one of the challenges faced by insurers in making their services available in the rural areas is affordability.

"The rural and informal sectors are not a homogenous category and are geographically dispersed. So, distribution is very expensive. It has been estimated that if the cost of a policy is Rs 300-400, the distribution cost is double."

Vijayan said additional provisions must be made available to the insurance sector on the lines of a RBI's technology infusion fund for micro-credit and Nabard's micro-credit fund.

"A panel chaired by former LIC chairman, NM Govardhan recently recommended new sales channels for retail insurance products with adequate safeguards. Importantly, it broadened the definition of a micro-insurance agency to include rural kiosks and other rural distribution networks. This is exactly what we at LIC are visualising," he added.

The rural kiosk can be a revolutionary new point of service delivery. Whether a makeshift stall, or a multipurpose store offering other services, the kiosks too are owned by entrepreneurs who need individual risk cover apart from their potential role as micro-insurance agents. One of the strategies is to stimulate demand in areas that are currently not served at all, he said.