Insurance safeguards the individuals or organizations against unforeseen dangers. But it is mainly concentrated in and around urban centers, ignoring rural areas. In the rural areas, it is still in its nascent stage. In spite of various marketing strategies being adopted by reputed insurance players, it is unable to penetrate the rural areas. This article discusses the prospects for insurers and the opportunities and challenges faced by them in the rural markets.

India is fast emerging as a strong economy and a global power in the world. It is experiencing rapid development and growth. All industries are registering considerable growth and insurance is no exception. In fact, it is the most booming industry among all others because of the high Indian population and low insurance penetration levels. When the world insurance market was in a stage of saturation, it is the Indian market which has shown tremendous potential for expansion of business of many insurers. The major factors responsible for the sector's tremendous growth are introduction of new products, innovative channels for their distribution and penetration of various insurers, particularly private insurance companies into the markets which were hitherto uncovered. However, when it comes to rural insurance one can easily say that it is still in its nascent stage. This is because of the popular misconception among insurance companies that doing business in rural areas is quite expensive. This is despite the fact that 70% of population in India conitnues to reside in rural areas.

With the opening up of this sector in 2000, private insurance companies started mushrooming, as joint ventures between Indian and foreign insurance companies took place. This has induced competition in the otherwise dull sector, mainly dominated by the state-owned insurer, LIC. Many new and innovative products were introduced and the sector has been transformed from a product-oriented one to a customer-centric one.

When the insurance sector was opened up for private players in 2000, the Insurance Regulatory and Development Authority (IRDA) made it mandatory for all players to sell a percentage of their new policies in the rural areas. As per the guidelines, at least 5% of the total policies written directly should be in rural areas in the first financial year. In the subsequent financial years, the percentages are 7%, 9%, 12%, 14% and 16% respectively. Though to some extent the targets have been achieved by the private players, the results are not great.

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