Nov. 2, 2009 (The Hindu Business Line) --
Roudra Bhattacharya
It is well known that more than 70 per cent of India’s population lives in rural areas. For any industry looking to expand, it is just a matter of when and how it looks to tap this market. With the insurance industry largely being negative or flat during the last fiscal, companies such as Max New York Life Insurance are finalising their rural strategies.
“If you review the top few towns, 60 per cent of the business is already coming from category II, III and IV towns. Especially after 2006 a lot of companies have gone to these towns and so have we,” said Mr Prashant Tripathy, Executive Vice-President-Strategic Planning and Business Development, Max New York Life. In at least the top 400 towns, he said, one would find the top six or seven insurers.
Linkages
According to the company, it plans to start with tailor-made micro-insurance policies for smaller towns – such as Max Vijay for which a pilot project is being implemented in Agra – and then move on to more remote areas.
“Last year we expanded a lot in the semi-urban areas. We now have about 139 offices in such places – what we call emerging market offices. We are obviously looking at it in a very commercial manner,” said Mr Tripathy.
Max New York has also established a third-party relationship with Indian Oil Corporation to use their Kisan Seva Kendras for selling policies. “These are petrol pumps where they sell lots of seeds and agricultural stuff. We have rented space in about 300 of such stations,” he said.
Cost cutting
The company said it has also tied up with IBM (NYSE:IBM) to minimise the cost of underwriting and servicing of Max Vijay. The policy, which won the Golden Peacock Award for Innovation in 2008, has been designed to be easily affordable.
“You can’t keep high margins in these areas. Your costs have to be really low. It is a volume game. The policy can also be topped up at any time for as low as Rs 20, so it is like a Bachat Beema kind of thing,” said Mr Tripathy.
He said Max New York Life is also working with Grameen banks for distribution, as they have an extensive rural network. But it is tough to get the right scale of operations with them, added Mr Tripathy.
