As a competitive intelligence professional in an emerging economy, documentation is my pet peeve. Business and economic growth in developing economies will be higher with greater transparency and information, all other things remaining unchanged.

The argument is simple. Under-documentation is a big impediment to decision making. It makes informed decision making very expensive. This means that there is less efficiency in the system as a whole.

Market research professionals and competitive intelligence practitioners in India have long cried hoarse about the need for improving the (government) statistical machinery. For without it, we are all shooting in the dark.

I recently came across another interesting angle on documentation in developing economies!

Hernando de Soto, well known Peruvian economist and guru of trickle up capitalism, argues for yet another reason for improving documentation in the developing countries. He argues that increased documentation of activities (including identities of people) brings them into the legal system. They are then able to participate in the “neighbourhood economies” and this is a way out of poverty for them. This is how the “trickle up” happens.

A slum dweller without an address and identity proof finds it much harder to get employment than one who has it. If he owns a hut with a clear title, it has some value; he has some wealth. Without the title, he owns the hut because his neighbours know he lives there; he cannot monetise it.

His prescription is to start the documentation from the very bottom of the pyramid.

Nandan Nilekani’s initiative – the Unique Identification Authority of India (UIAI) for giving a unique ID (UID) to each citizen; does not have Soto’s rationale for documenting identities as part of its vision or mission; but will serve the same purpose.

The next step for the government is to integrate the UID with the remaining statistical machinery so as to have consistent information and databases. Put these developments together with the recent Right to Information Act – and I think I am beginning to see a light at the end of the tunnel – albeit a very small one.

The industry (particularly the life insurance segment) has grown very fast in the last 10 years. While initial growth came at a very fast pace, it has now slowed down somewhat and the industry will have to work harder to grow in the next decade.

My antenna picked up a few pain areas the industry is likely to come up against in the years to come, where the players will need good competitive intelligence.

One area of focus is to understand the customer and educate him on insurance in order to increase insurance penetration. Despite very high growth in the last 10 years, life insurance penetration stands at only around 4%. A not-so-high growth in the non-life segment has kept the penetration there to a measly 0.6%.  This is significantly lower than many other countries. The key issue (to different extents in life and non life segments) here are that the customers don’t understand the products well and the companies don’t understand the customer well.

The other much talked-about pain point is channel productivity. Both life and non-life segments have armies of agents that deliver, on average very low sales. Companies want to and need to monitor channel productivity and benchmark their own against those of their competitors and the industry as a whole. While everyone needs to have this information, no-one wants to share their own data with the others. A little like compensation data, I guess, where everyone wants to know the others’ while keeping their own confidential.

Related to channel productivity is the need for research on distribution channels. The individual agent is the primary distribution channel for both life and non-life segments, though newer companies like Canara HSBC are experimenting with greater reliance on banc assurance. The disconnect between the perceptions of the industry players on the one hand and those of the agents and customers on the other stood out during the conference.  While insurance companies grumbled about the high incidence of false claims, one of the agents complained about the difficulties he faced in getting legitimate claims of his clients processed. Going by the murmurs at the venue, this seemed to be a shared opinion of many agents present there. Going forward, industry players will really need to understand the issues of their agents to make them more productive.

Finally, most speakers discussed the need to reach out to the “bottom of the pyramid”. In fact, the conference had a whole session dedicated to discussing micro-insurance. Indeed, as with many other industries, once the urban and SEC A& B markets get saturated, the attention inevitably turns to the bottom of the pyramid, which as one speaker pointed out is not the same as the rural market but resides primarily in rural areas. Insurance companies don’t necessarily need to create new products, as one speaker pointed out. Most of them have almost too many policies in their stables, one or more of which will be suitable for the small ticket insurer. The first difficulty is in reaching the customers and educating them. A bigger challenge is in servicing those policies. Insurance companies need to develop processes and delivery mechanisms that are cost efficient even for small ticket transactions in remote areas. Many of them are looking to find solutions through mobile and internet technologies. Regulations will also play a very important part in the evolution of distribution and delivery models.

Bottom line is that I expect that individual insurance companies the industry as a whole will need to allot significant bandwidth on competitive intelligence in the coming years.

In many industries (FMCG, telecom, consumer durables, etc), companies have seen higher growth in rural markets than in urban areas in recent years. Their strategy so far has been to sell the same products to the rural customers that they sell in urban markets but in smaller-size packs – sachets, to get the rural folk hooked on. And reports suggest that the rural consumers do seem to have shifted from local non-branded products to branded soaps, detergents, biscuits and so on.

But no one really understands what is driving this growth – most of what they know is conjecture. Good monsoons (hence agricultural performance) from 2004-2008 was considered to be the key driver of rural growth – till 2009.  Rural markets have grown in the first two quarters of 2009 despite poor performance of agriculture. We now attribute this to non-agricultural income – various rural employment and rural income generation schemes. The fact is, no one has any hard data on the rural markets.

According to Rama Bijapurkar, an authority on consumer trends in India, “The truth is that we don’t yet have an answer to this through direct field surveys that actually ask people who their customers or their employers are. Sadly, Indian companies’ willingness to pay for hard data is low and in the absence of this, India is now at a pace where conjecture, no matter how widely believed, can be a dangerous basis for business planning.” (Rural consumption myths I)

This is also the reason why there have really been no attempts to design new products for the rural markets. And there are some very good reasons why rural markets should really be studied is distinct from urban ones. Rama Bijapurkar has described some of them in another article on the same theme – Rural consumption myths II

As a research company, we see many research requests that focus on understanding the bottom of the pyramid in India – but always focussed on the “urban conglomerations”. I guess understanding urban markets is hard enough given the (poor) availability of data – you need the very brave to take on the rural markets. But unless someone does this, sellers to the rural markets will continue to flounder in the dark.