SUSTAINABILITY & FEASIBILITY OF COMMON SERVICE CENTERS IN INDIA

Life and non-life insurers are now marketing some categories of their retail products through common service centres network of CSC e-Governance Services India Ltd. The Insurance Regulatory and Development Authority (IRDA) has issued guidelines in this regard. CSC was created by the Department of Electronics and Information Technology on a public private partnership model as part of national e-governance plan. For marketing insurance products, CSC has to obtain a prior license from the insurance regulator which would be valid for three years. It should also enter into a separate agreement with the insurers in a prescribed format. In order to increase insurance penetration in the country, IRDA has allowed insurance companies to use licensed Common Service Centres (CSCs) as a distribution network in rural areas. The facility has enabled both life and non-life insurers to market some categories of retail insurance policies through special purpose vehicle (SPV) network in the rural areas with the help of Rural Authorized Person (RAP) who will act as insurance agents. Marking the opening of a new sales channel aimed at increasing insurance penetration in rural areas, many insurance companies have launched sale and services through the common service centres (CSC) across India. The CSC platform is currently being used by citizens to access and pay for the services offered by multiple government agencies and private sector players. An army of digitally trained individuals are leading a silent entrepreneurship revolution in the heart of Indian villages. Through common service centres (CSC) or Jan Seva Kendras, many young people have enrolled to become Rural Authorised Persons (RAP) to solicit business. Through RAPs, the sale and procurement of general insurance products are extended among the vicinity of the village or town that they reside in. Consequent upon promulgation of Insurance Laws (Amendment) Act, 2015, Common Service Centres are included in the definition of intermediary and insurance intermediary. As a result of the amendments in the Act the existing Guidelines on Common Service Centres were converted into Regulations. The IRDAI issued guidelines for utilising the CSC network to sell insurance products in September 2013 and granted licence to CSC SPV Limited in the same month. CSCs operate in rural areas where there is no access to internet. It provides services like e-governance, education, health, issuance of birth certificates, death certificates, utility payments etc. in remote locations. It works on public-private partnership (PPP) model implemented by the Department of Electronics and Information Technology through National e-Governance Plan (NeGP) in 2006. The products being made available on the CSC platform are sold by rural authorised persons or village entrepreneurs. The regulation contains the Definition of CSC product, Code of Conduct for CSC-SPV, on boarding charges, Remuneration, Types, Procedure and conditions applicable for Life and General Insurance products etc. These individuals need to undergo training and examination as specified by the IRDAI, in the subject of insurance products and other necessary topics. The online examination for RAPs is conducted by the National Institute of Electronics and Information Technology or any other institute as approved by IRDAI from time to time in their centre spread across India. In India, CSCs are set up by CSC e-Governance Services India Ltd, which is a special purpose vehicle created specifically to monitor the implementation of the Common Service Centre scheme of the government and ensure a centralised collaborative framework for delivery of services to citizens. The procedure of grant of registration, validity and renewal of registration of CSC-SPV has been specified. WHAT IS COMMON SERVICE CENTER? Common service centres (CSCs), are “a strategic cornerstone of the Digital India programme”. They are the access points for delivery of various electronic services to villages in India, thereby contributing to a digitally and financially inclusive society. A CSC is a low-cost set up and distribution centre for government institutions to deliver e-governance services to the rural population. The CSC-SPV (special purpose vehicle) has been established by the Indian government under the National e-Governance Plan. To monitor and supervise the progression of CSC-SPVs, a State Designated Agency (SDA) acts as a nodal agency, and the Service Centre Agency (SCA) becomes the implementing agency which provides the required investment budget and the functional specification of the CSC as identified by the SDA. Keeping in mind the eligibility norms to operate a CSC, the principal officer, a person employed by the CSC-SPV, should have a clean history without involvement in financial forgery or criminal acts, and should have the requisite qualifications and experience. The government had revamped its scheme for CSCs by rebranding it as CSC 2.0. Under the new programme, at least one CSC is envisaged in each of the 2.5 lakh gram panchayats for delivery of various electronic services to citizens across rural India. This also include strengthening and integrating the existing 1,00,000 CSCs under the new CSC scheme and making operational an additional 1.5 lakh CSCs in gram panchayats “CSC-SPV” means M/s CSC e-Governance Services India Limited, the Special Purpose Vehicle (SPV) incorporated to facilitate delivery of government, private and social sector services to citizens of India through the Common Services Centres (CSCs) network, and approved by the Authority under these Regulations, who for remuneration arranges insurance contracts with insurers on behalf of its clients and offers other insurance related services through CSC Network. There are 2,50,000 Common Service Centre for the delivery of various G2C services to the rural citizens of India. This is the largest network in the world which utilized by both private and government agencies for the purpose of delivery of commodities and services to rural citizen of the country. The products developed for CSC model should not have the sum assured (per life or risk) exceeding Rs 2 lakh except for motor insurance. CSC-SPV is the CSC e-Governance Services Limited, Special Purpose Vehicle incorporated to facilitate delivery of government, private and social sector services to citizens of India through CSC network. CSC INSURANCE PRODUCTS: CSC-SPV will have to deploy RAP for the selling insurance policies. RAPs must have minimum educational qualification of matriculation with basic computer knowledge. Also, they should complete 20 hours training from any recognized institute and pass the exam with at least 35% marks. Except for motor insurance, the coverage provided under life and non-life offered through CSCs should not exceed Rs 2 lakh. These products come at premiums ranging from Rs 100 to Rs 1,000. The CSC-SPV shall market exclusive products under this channel which will be pre-fixed with the words “CSC”. Currently non-participating non linked variable insurance products with regular premium payment and pure term insurance products with regular premium payment of life insurers have been approved by the Authority under the file & use guidelines. Like-wise motor insurance, personal accident insurance, cattle/ livestock insurance, farmer’s package policy and fire & allied peril dwellings insurance of general insurance have been approved by the Authority. Within the CSC framework there are Service partner Agency which includes the State Designated Agency or the Service Centre Agency or any other agency under the CSC Scheme who will train, guide and mentor the VLEs. The CSC-SPV markets insurance products and also offer other insurance related services through the CSC network of those insurance companies who have entered into an agreement with the CSC-SPV. Currently non-participating non linked variable insurance products with regular premium payment and pure term insurance products with regular premium payment of life insurers have been approved by the Authority under the file & use guidelines. Like-wise motor insurance, personal accident insurance, cattle/ livestock insurance, farmer’s package policy and fire & allied peril dwellings insurance of general insurance have been approved by the Authority. The CSC-SPV shall market exclusive products under this channel which will be pre-fixed with the words “CSC”. The maximum sum assured/ insured allowed these policies is `2 lakhs excluding the sum insured under motor insurance. Currently non-participating non linked variable insurance products with regular premium payment and pure term insurance products with regular premium payment of life insurers have been approved by the Authority under the file & use guidelines. Like-wise motor insurance, personal accident insurance, cattle/ livestock insurance, farmer’s package policy and fire & allied peril dwellings insurance of general insurance have been approved by the Authority. SUSTAINABILITY OF CSCs: A Common Service Center (CSC) is an information and communication technology (ICT) access point created under the National e-Governance Project of the Indian government.  The project plan includes the creation of a network of over 100,000 CSCs throughout the country. The purpose of the project is to provide much-needed information and services to underserved Indians in rural areas. To get the licence in insurance sector, the CSC operators have to pay an application processing fee of Rs 5,000 to IRDA for three years. For its renewal, they will have to pay Rs 1000. According to the guidelines, the RAPs should have completed 20 hours of theoretical (online) training and pass an exam conducted by national institute of electronics and information technology (NIELIT). As guidelines state, the CSC SPV will distribute 80 percent of the remuneration from insurers to the RAP, 12 percent to the SCA, agency which appoints the CSC operators and manage the CSC network in states and rest of 8 percent will go to the SPV. All VLEs who qualify as RAP will be provided with a monthly income of Rs 2000. This income is apart from what they receive as remuneration from selling and managing policies. The move is expected to boost the viability of the CSCs which have been struggling for viability since their inception. Some of the SCAs, however, are not happy with the move, as it is “eating into their margins”. CSCs enable the three vision areas of the Digital India programme.   In India, CSCs are set up by CSC e-Governance Services India Ltd, which is a special purpose vehicle created specifically to monitor the implementation of the Common Service Centre scheme of the government and ensure a centralised collaborative framework for delivery of services to citizens. CSCs also collect Rs. 1 crore premium a day as agents for insurance companies. This has led to a higher renewal for insurance firms and a better commission for the local entrepreneurs who run the CSC. The CSC SPV is a private organization – the government holds just 49 percent equity – and so it can’t get preferential treatment from the IRDA and act as insurance aggregator. The margins have been cut in cases of other services being offered through the CSCs. The relationship between SCA and VLE has to be symbiotic. And as time goes, the participation of the intermediaries will get leaner and thinner.. The statistics regarding the CSC-SPV channel for the period 1.4.2016 till 31.8.2016 is as under:

1. No. of RAP who have undergone training & passed exam/issued certificates – 11,621
2. Total premium collected (New & renewal) – `117.42 crores
3. Total New Insurance premium – `6.62 crores (General) + `0.28 crores (Life)
4. Total Renewal Premium – `110.52 crores (Life)
5. Total no. of customers serviced – 3.78 lakhs
6. No of insurers with whom agreement signed: General – 16; Health – 3; Life – 18 (14(Renewal) + 4(Fresh & Renewal
7. No of policies sold – i) Motor Third Party – 56,484;
8. ii) PA – 4,521; iii) Life Insurance – 2,622; iv) Crop – 1,187; v) others – 223
9. Added new products such as motor comprehensive, travel insurance, crop insurance and Government Insurance Schemes to the list of approved products.

AGREEMENT TIMELINE: The major challenge for the industry is to design specific products for the new distribution channel. Non-life products like agriculture or crop insurance, insurance of animals etc. will now take off in a big way through CSC. Insurance companies enter into an agreement with CSC-SPVs for distribution of its products through these centres. The timeline for such an agreement is fixed for three years. Insurance companies at their end, amalgamate their technology portals with the interface used by CSC-SPVs. A RAP within the contours of the village is authorised to solicit insurance business on completion of the necessary training and examination as specified by the authority. A RAP sells and procures general insurance products. The essential paper work and identification of the insured are seamlessly carried out at the CSC with the help of technology tools. Premiums are collected by CSC-SPV centres in cash, which is later remitted to the insurer. The policy contract, too, is submitted to the prospect through the RAPs. Such personal touch points through RAPs have given those in villages’ access to simple-to-understand products to mitigate the risk to life, motor, agriculture pump sets, personal accident insurance and farmers’ package policies. By limiting the sum insured of these products to Rs.2 lakh (other than for motor insurance), insurers are able to extend such micro-covers and obviate the risk emerging from such groups. Further, insurers have consciously decided to keep away complex products which require specialised knowledge on premium computation for RAPs’ to solicit and service products. Earlier, general insurance covers including personal accident Insurance and cattle/livestock Insurance were permitted to be solicited and marketed under the CSC scheme. For life insurance, it has been stipulated that products developed for CSC Model shall not have the sum assured (per life or risk) exceeding rupees two lakhs, except for motor insurance. Such products approved by the Authority for the CSC Model shall be marketed only through the CSC model. The insurance regulator has said that the inclusion of new product lines under CSC-SPV was done after receiving request from insurers to expand the list of products. However, it has specified that the word CSC should be prefixed to the products sold through the CSC-SPV channel. The procedure for disciplinary proceedings against the CSC-SPV and the RAP has also been specified in the proposed regulations. The regulations also specify reports to be submitted by the insurers and CSC-SPV to the Authority. Common service centres (CSCs), according the government, are “a strategic cornerstone of the Digital India programme”. They are the access points for delivery of various electronic services to villages in India, thereby contributing to a digitally and financially inclusive society. SELLING CROP INSURANCE THROUGH CSC: The existing platforms — banks, insurance companies and cooperatives — are not sufficient for the last mile connectivity to non-loanee farmers. Moreover, banks are not that keen to sell crop insurance policies to non-loanee farmers, while insurance companies and cooperatives have limited reach in villages. So, Government has decided to use CSC infrastructure and post offices. There are 1.75 lakh CSCs which can be used for collection and uploading of crop insurance documents at a nominal rate. Insurance regulator IRDA has already given permission to agents and intermediaries to access the CSC portal for crop insurance. This is being tested at present. CSCs, set up under the Ministry of Electronics and Information Technology, till now were being utilised for booking railway tickets, providing Aadhaar numbers and passport applications. At present, it is mandatory for loanee farmers to take the crop insurance policy. The government wants both loanee and non-loanee to take advantage of Pradhan Mantri Fasal Bima Yojana (PMFBY) as well as weather-based crop insurance scheme. Non-loanee farmers who have taken the crop insurance policy at present are only 22 per cent. The government has decided to use 1.75 lakh Common Service Centres (CSC) and post offices in a big way to encourage more non-loanee farmers to take up crop insurance schemes such as PMFBY in 2017-18 crop year beginning July. The government has empanelled 13 insurance companies for 2017-18 crop year (July-June) to sell crop insurance policies — PMFBY and WBCIS. More insurance companies are enrolled to provide competition in the market. CSC is providing Insurance products and services through Authorised Village Level Entrepreneur (VLE). In addition services for Life Insurance, Health Insurance, Crop Insurance, Personal Accident, Motor Insurance etc. is provided. The freshly-created category of over-the-counter products is not only easy to comprehend for the village-level entrepreneur, but also the right entry-level product for the rural population. The other insurance allowed to be solicited and marketing through this platform include crop insurance (Government insurance schemes such as Pradhan Mantri Fasal Bima Yojana (PMFBY), weather-based crop insurance scheme (WBCIS) & Coconut Palm Insurance Scheme (CPIS) without any limit on Sum Insured). One can now purchase travel and home insurance from common service centre–special purpose vehicles (CSC-SPV). Also, included in the list are government insurance schemes such as Pradhan Mantri Jeevan Suraksha Bima Yojana (PMJSBY) without any limit on Sum Insured. The Common Services Center (CSC) Scheme is a part of the ambitious National e-Governance Plan (NeGP). The Village Level Entrepreneur (VLE) can register and get detailed information on how to avail online government services offered by the Central and State Governments. IRDA. in order to expand the penetration of insurance products and services market in the rural India through CSCs had appointed CSC SPV as an intermediary. In the guidelines issued, IRDA permitted both Life and Non Life Insurers in India to market certain categories of Retail Insurance Policies and services through the network of CSCs. CSC SPV has been issued a license for soliciting insurance business through the CSC Network. CSCs are more than service delivery points in rural India. They are positioned as change agents, promoting rural entrepreneurship and building rural capacities and livelihoods. They are enablers of community participation and collective action for engendering social change through a bottom-up approach with key focus on the rural citizen. In creating the digital infrastructure, common service centres (CSCs) are the second limb … the common service centres are those which provide digital services, banking, insurance, making of passports, facilitation of e-ticketing etc in those areas where digital connectivity is not available. CSCs are slowly but surely bringing about an e-governance revolution in rural India Digitisation of India Post transforms the traditional ways of banking by replacing the need for bank branch in the area for core banking services, giving access to 24/7 ATM facility in under banked areas, enabling access to insurance services and enabling online tracking of posts etc.  The vast network of India post has made it possible for Indian citizens residing in areas with no banks to easily access core banking, insurance and e-Commerce services. As leading insurance companies rollout out insurance products and services through CSC network; the rural insurance market gets ready to be redefined.

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About the Author JAGENDRA KUMAR Ex. CEO, Pearl Insurance Brokers 71/143, “Ramashram” Paramhans Marg, Mansarovar, JAIPUR-302020

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References:

1. IRDA Annual Report 2015-16 ( Data contents)
2. http://www.business-standard.com/article/economy-policy/govt-to-start-selling-crop-insurance-policy-at-post-offices-cscs-117052500860_1.html
3. How to enhance insurance penetration in rural market – Opportunity and Challenges: Garima Gupta & Others.
4. http://www.governancenow.com/news/regular-story/cscs-sell-insurance
5. https://india.gov.in/services-portal-common-services-centres-scheme
6. http://www.financialexpress.com/industry/banking-finance/now-purchase-travel-home-insurance
7. http://indianexpress.com/article/india/india-news-india/govt-to-set-up-1-lakh-common-service-centres-in-rural-areas-
8. https://www.csc.gov.in/
9. Newspapers & Journals

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