Even as banking and financial services (BFSI) sector witnesses a growing interest from rural India, these areas continue to be underinsured, reveals Karvy’s India 2017 Wealth Report.
Penetration of life insurance industry rose only 2.72% in financial year 2017 with premium growth of 8% during this period, said the report.
“Insurance is growing but at a slower pace as compared to others. There is increasing visibility of other financial products in the rural market which was not there earlier. Hence, people, who invested only in life insurance earlier, are opting for other financial instruments. Besides, in life insurance you have to pay for a longer time period whereas in other financial instruments you can pay once,” said Varun Saxena, head of marketing and alternate channels at Karvy Private Wealth.
“The government is set to drive the Pradhan Mantri Jeevan Bima Yojana that was launched in 2015 and this will lead to increase in penetration of insurance sector in rural India,” he added.
Meanwhile, affluent Indians in rural areas are looking to park their funds in alternative investment funds (AIFs) like private equity, real estate funds and pre-IPO based AIFs. Total individual wealth in alternative assets rose 20% to Rs 92,963 crore from the previous year. Inflows into mutual funds have also been high. According to data by the Association of Mutual Funds in India (AMFI), MFs have seen their assets under management (AUM) grow 38% in beyond (top) 15 (B15) cities to Rs 3.79 lakh crore by the end of September 2017 as compared with the 28% growth in Top 15 (T15) cities. The highest growth in AUM came from cities like Ranchi, Madurai, Siliguri, Jabalpur, Bhavnagar, Gorakhpurm Vasco, Bilaspur, Shillong and Kharagpur.
With rural demand contributing a major portion to overall consumption, it could be a force multiplier for BFSI segment in the coming years.