A Project Report On

Customer Relationship Management in IDBI Federal Life Insurance

Submitted in partial fulfilment of the requirements for
Summer Internship

Submitted by
ANKIT PANDEY
Under the Guidance of
Mrs. Shaanthi Yagyanath
IDBI Federal Life Insurance Co. Ltd.
Xavier Institute of Management
Bhubaneswar,Odisha

ACKNOWLEDGEMENT
As I look back after the completion of my project I feel it would not have been possible
without the guidance. I am very grateful to all the people who have lent their precious time
and advice for rendering this project successful. I take this opportunity to thank them all.
Firstly, I am grateful to IDBI FEDERAL LIFE INSURANCE COMPANY LTD, for
giving me an opportunity to undertake this project in their organization.
I sincerely express my thanks to my company project guide Mrs Shaanthi Yagyanath for
her strong support and inspiration during my project period.
I am thankful to Mr. Gireesh, Mr. Sachin Garg, Ms. Jaya and all the executives of the
company for their valuable guidance and for sharing their experience in completing this
project successfully,
I also express thanks to my parents, my family members, and all my friends for their valuable
support in completion of this project successfully.
Last but not least I am thankful to all those people who helped us directly and indirectly.

DECLARATION
I

hereby

declare

that

the

project

entitled

CUSTOMER

RELATIONSHIP

MANAGEMENT undertaken at IDBI FEDERAL LIFE INSURANCE COMPANY LTD.

submitted in partial fulfilment of the requirement for the completion of summer internship. It
is my original work and is not submitted for the award of any other degree or diploma.

Place: LUCKNOW
Date: 30/06/2014

ANKIT PANDEY

Table of Contents
INTRODUCTION 5
COMPANY PROFILE

CUSTOMER RELATIONSHIP MANAGEMENT

14

CUSTOMER RETENTION 21
RESEARCH METHODOLOGY

27

DATA COLLECTION, ANALYSIS & INTERPRETATION

EXPECTED CONTRIBUTION FROM THE STUDY
FINDINGS

46

CONCLUSION

47

45

28

INTRODUCTION
Wherever there is uncertainty there is risk. We do not have any control over uncertainties
which involves financial losses. The risks may be certain events like death, pension,
retirement or uncertain events like theft, fire, accident, etc.
Insurance is a financial service for collecting the savings of the public and providing them
with risk coverage. The main function of Insurance is to provide protection against the
possible chances of generating losses. It eliminates worries and miseries of losses by
destruction of property and death. It also provides capital to the society as the funds
accumulated are invested in productive heads.

Types of Insurance:
1. Life Insurance - Insurance guaranteeing a specific sum of money to a designated
beneficiary upon the death of the insured, or to the insured if he or she lives beyond a
certain age.
2. Health Insurance - Insurance against expenses incurred through illness of the
insured.
3. Liability Insurance - This insures property such as automobiles, property and
professional/business mishaps.

Challenges faced by Insurance Industry

Threat of New Entrants: The insurance industry has been budding with new entrants
every other day. Therefore the companies should carve out niche areas such that the
threat of new entrants might not be a hindrance. There is also a chance that the big
players might squeeze the small new entrants.

Power of Suppliers: Those who are supplying the capital are not that big a threat. For
instance, if someone as a very talented insurance underwriter is presently working for
a small insurance company, there exists a chance that any big player willing to enter
the insurance industry might entice that person off.

Power of Buyers: No individual is a big threat to the insurance industry and big
corporate houses have a lot more negotiating capability with the insurance companies.
Big corporate clients like airlines and pharmaceutical companies pay millions of
dollars every year in premiums.

Availability of Substitutes: There exist a lot of substitutes in the insurance industry.

Majorly, the large insurance companies provide similar kinds of services be it auto,
home, commercial, health or life insurance.

Present scenario of Insurance industry

The brief outlook about the regulatory changes done by the Indian Government over the years
is given below:-

The effect of insurance reforms has been positive on the insurance industry. There has been
positive growth in all the segments, with investments flowing in the right direction. Reforms

have helped to achieve rapid growth in critical areas and sustain them over a period of time
through channelized strategies.
Post reforms, the number of players have increased from 4 to 22 players presently registered
under IRDA (INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF
INDIA).

Financial viability of insurance companies

However, although the insurance industry is a flourishing in world economy today, one needs
to keep in mind that financial viability/stability of the insurance company is a major
consideration at the time of purchasing insurance contract. The viability factor is important
because many a times, an insurance premium paid currently provides coverage for losses in
distant future and there are instances where a number of insurance companies have gone
insolvent, thus leaving their policyholders with little helpful or no coverage. Therefore, even
if the global industry is strengthening more and more, the weak links are also co-existent and
blind faith can lead to a severe downfall. There are also independent rating agencies for
insurance companies which could be helpful in providing sound information on financial
viability of various insurance companies.

Marketing in Insurance
Insurance comes under the service sector and while marketing this service, due care is to be
taken in quality product and customer satisfaction. While marketing the services, it is also
pertinent that they think about the innovative promotional measures. It is not sufficient that
you perform well but it is also important that you let others know about the quality of your
positive contributions.
The creativity in the promotional measures is the need of the hour. The advertisement, public
relations, word of mouth communication needs due care and personal selling requires
intensive care.
There are insurance marketing strategies that can take any insurance agency from mediocre to
success when utilized correctly. Hence it is necessary that an insurance company formulize
their marketing strategies with lot of thought and diligence to capture the untapped potential
in the insurance industry. Through this project we aim to understand the strategies adopted by

IDBI Federal and to find out the effectiveness of these promotional strategies through a study
on consumer behaviour.

The insurance industry

The insurance sector has gone through a number of phases and changes. Insurance in India
used to be tightly regulated and monopolized by state-run insurers. Following the move
towards economic reform in the early 1990s, various plans to revamp the sector finally
resulted in the passage of the Insurance Regulatory and Development Authority (IRDA) Act
of 1999. Significantly, the insurance business was opened on two fronts. Firstly, domestic
private-sector companies were permitted to enter both life and non-life insurance business.
Secondly, foreign companies were allowed to participate, albeit with a cap on shareholding at
26%. With the introduction of the 1999 IRDA Act, the insurance sector joined a set of other
economic sectors on the growth march.
During the 2003 financial year, life insurance premiums increased by an estimated 12.3% in
real terms to INR 650 billion (USD 14 billion) while non-life insurance premiums rose 12.2%
to INR 178 billion (USD 3.8 billion). Growth in insurance premiums has been averaging at
11.3% in real terms over the last decade. There are strong arguments in favor of sustained
rapid insurance business growth in the coming years, including Indias robust economic
growth prospects and the nations high savings rates.

COMPANY PROFILE

IDBI Federal Life Insurance Co. Ltd.:

IDBI Federal Life Insurance Co. Ltd. (formerly known as IDBI Fortis Life Insurance Co.
Ltd.), is a joint venture between three financial companiesDevelopment and Commercial
Bank, IDBI Bank, Indias private sector Bank, Federal Bank and European insurer Ageas
(formerly Fortis).
IDBI Federal Life Insurance Co. Ltd. was formed on March 2008. In this venture, IDBI Bank
owns 48% equity while Federal Bank and Ageas own 26% equity each. The Headquarters is
located in Mumbai, India.
IDBI Bank Ltd. continues to be, since its inception, Indias premier industrial development
bank. Created in 1956 to support Indias industrial backbone, IDBI Bank has since evolved
into a powerhouse of industrial and retail finance.
Today, it is amongst Indias foremost commercial banks, with a wide range of innovative
products and services, serving retail and corporate customers in all corners of the country
from 720 branches and 1228 ATMs. The Bank offers its customers an extensive range of
diversified services including project financing, term lending, working capital facilities, lease
finance, venture capital, loan syndication, corporate advisory services and legal and technical
advisory services to its corporate clients as well as mortgages and personal loans to its retail
clients.

As part of its development activities, IDBI Bank has been instrumental in sponsoring the
development of key institutions involved in Indias financial sector such as the Securities
and Exchange Board of India (SEBI), National Stock Exchange of India Limited (NSE) and
National Securities Depository Ltd.
Federal Bank is one of Indias leading private sector banks, with a dominant presence in the
state of Kerala. It has a strong network of 708 branches and 749 ATMs spread across India.
The bank provides over four million retail customers with a wide variety of financial
products. Federal Bank is one of the first large Indian banks to have an entirely automated
and interconnected branch network.
In addition to interconnected branches and ATMs, the Bank has a wide range of services like
Internet Banking, Mobile Banking, Tele Banking, and Any Where Banking, debit cards,
online bill payment and call centre facilities to offer round the clock banking convenience to
its customers. The Bank has been a pioneer in providing innovative technological solutions to
its customers and the Bank has won several awards and recommendations.
Fortis is an international insurance group composed of AG Insurance, the overall market
leader in life and non-life insurance in Belgium, distributing its insurance products through
the network of BNP Paribas Fortis Bank and independent insurance brokers, and Fortis
Insurance International with subsidiaries in the UK, France, Hong Kong, Luxembourg (Nonlife), Germany, Turkey, Russia and Ukraine, and joint ventures in Luxembourg (Life),
Portugal, China, Malaysia, Thailand and India.

Vision and Values

Vision
To be the leading provider of wealth management, protection and retirement solutions that
meets the needs of our customers and adds value to their lives.
Mission
To continually strive to enhance customer experience through innovative product offerings,
dedicated relationship management and superior service delivery while striving to interact
with our customers in the most convenient and cost effective manner. To be transparent in the

way we deal with our customers and to act with integrity. To invest in and build quality
human capital in order to achieve our mission.
Values
Transparency: Crystal Clear communication to our partners and Stakeholders.
Value to Customers: A product and service offering in which customers perceive value.
Rock Solid and Delivery on Promise: This translates into being financially strong,
operationally robust and having clarity in claims.
Customer-friendly: Advice and support in working with customers and partners.
Profit to Stakeholders: Balance the interests of customers, partners, employees,
shareholders and the community at large.
Excellence: "In every aspect of work ranging from the in-house training institute to the
detailed Personal Insurance Plan. IDBI Federal is focused on achieving the highest standards
of quality in every aspect of their business".
Honesty: "Is the heart of the Life Insurance business? IDBI Federal believes that above all,
Life Insurance is based on trust. Transparency, Dependability and Integrity will form the
cornerstones of the IDBI Fortis experience."
Knowledge: "Is what makes experts. IDBI Federal is focused on the Life Insurance business.
Perfectly combining global expertise with local knowledge, IDBI Federal is the Indian Life
Insurance specialist."
Caring: "For the customer IDBI Federal is redefining the Life Insurance paradigm to focus
on the needs of the customers. The IDBI Federal service process is responsive, personalized,
humane and empathetic."
Culture: Our "in house culture recipe" has some of the finest ingredients going into its
making. Some of the more prominent aspects of our culture are stated below:
1. Customer comes first.
2. Do it right the first time.

3. Bias for result oriented action.

4. Financial strength and discipline.
5. Clarity of purpose.
6. International quality standards.
7. Inclusive Meritocracy.
8. Learning opportunities.
9. Fun at work.
10. Commitment to published value system
Technology: To monitor and manage its network equipment across 34 sites, IDBI Federal
uses Tulip Proactive Managed CE solution. The solution includes device management,
proactive troubleshooting and notification support. With the implementation of the solution,
IDBI has reported improvement of network performance and availability, with a faster, more
effective change and configuration management.

Products
IDBI Federal launched its first set of products across India in March 2008, after receiving the
requisite approvals from the Insurance Regulatory and Development Authority (IRDA). IDBI
Fortis offers services through a nationwide network across the branches of IDBI Bank and
Federal Bank in addition to a network of advisors and partners. IDBI Federal has 35 branches
across the country.

Sponsorships, Awards
IDBI Federal Life Insurance Company was selected as the title sponsor for the India-Sri
Lanka Cricket Series. This was followed by the IDBI Federal Wealthsurance Twenty20.
Wealthsurance Made Easy (WME), a knowledge aid by IDBI Federal for its sales force,
won The Bronze Dragon in the category for Best Dealer/Sales Force activity at the
Promotion Marketing Awards of Asia (PMAA).

Milestones
March 2008

IDBI Federal starts operations with two products Homesurance &

Wealthsurance.

August 2008

IDBI Federal becomes one of the fastest growing new life insurers to
collect premiums worth Rs 100 crores.

October 2008

IDBI Federal launches Bondsurance

January 2009

IDBI Wealthsurance Cup 2009 India v/s Sri Lanka held in Sri Lanka.

March 2009

Collected premium of over 328 corers and

assured of Rs 2825 crores since inception

87,000 policies and a Sum

November 2009 IDBI Federal launches Incomesurance

At
present
7500

Fastest
100
crore
2825 Cr in last fiscal,
currently over

35 branches so
far as part of

IDB
I
Fed
era
l

One
of the

Focu
s on

Half yearly
business grow th
of

CUSTOMER RELATIONSHIP MANAGEMENT

Customer Relationship Management focuses on acquiring, developing and creating satisfied
loyal customer; achieving profitable growth; and creating economic value in companys
brand.
Customer Relationship Management strives to improve the customers experience of how
they interact with the company and produce high customer equity .the more loyal customer,
the higher are the customer equity.
Recently CRM has taken a center stage in the business world with businesses concentrating
on saving money and increasing profits by redefining internal processes and procedures. It
costs a company dramatically less to retain and grow an existing client, than it does to court
new ones. It is said that It is seven times more expensive to acquire a new customer than to
keep an existing one, therefore the value of customer information and management should
never be underestimated.
Customer equity comprises of three drives

Value equity

Brand equity

Relationship equity

CRM (Customer Relationship Management) is something that is not restricted to any country
or culture. Wherever customers are there, business cannot afford to keep them unhappy; and
that is where CRM comes in as a strong requirement.

In India, the trend is positive. When compared to about twenty years ago , people have more
choice and every company knows it cant take customer for granted .May be the movement is
slow ,but we see a steady progress towards an increased focus on the customer rather than
merely on the products and price .
Todays era is of service because customers are ultimate base line for any business to sustain
in this competitive world
For example: Banks started providing gold, silver cards to its valued customer, depending
on their needs the customer get faster services.
The concept of CRM is relatively simple and familiar to insurers. The two points of the
concept are:

Understand your customers' unique requirements.

Offer them the services and products over their lifetime that will maintain or increase
their profitability and retain them as your customers.

These are the some supporting strategies that implement these concepts to yield significantly
greater results and a true competitive advantage.
These supporting strategies generally fall into three groupings: analytical, marketing and
operational. The analytical path focuses on mining the data you have on your existing
customers, and marrying that data with external data when possible to develop a scoring
index. This index can then be reliably applied to individual customers to indicate their level
of profitability, tendency to remain a customer, and propensity to acquire other products and
services.
While the CRM market in India is still nascent, bigger players such as ICICI Prudential Life
Insurance Company are adopting it in a big way. The company was earlier using Gold Mines
(a sales and marketing tool) and HEAT (an operational CRM solution) from Front Range
Solutions. Last year it took a decision to invest in CM3 from Tera data and SASs statistical
tool for BI. Head-IT at ICICI Prudential Life Insurance Company says, As a forward
looking company, we see CRM playing a significant role in acquiring new customers. CRM
lets us obtain granular details about our customers, helping us to design better products,
improve service levels and reduce operational costs. CRM has helped ICICI Prudential Life

capture five lack customers through effective event-based marketing and lead tracking to
cross- and up-sell products.

Business drivers for CRM

A couple of years ago, LIC dominated the insurance market with the help of its sales force
and channels and margins were reasonably high. Today, there are close to 20 companies
offering both life and general insurance products. All of them have equally strong
international and local partners; all are focusing upon similar geographies and target
audiences. The new firms selling life insurance and non-life insurance [pensions, insurance as
saving, etc] have failed to emulate the LIC model because margins are getting squeezed.
There are several pain areas that new insurance firms faceacquiring new customers,
retaining them, cross-selling products and controlling rising costs while providing
comprehensive support.
Insurers have added a variety of products and services to their kitty. These range from
insurance as an investment option to pension plans. They target the younger generation in the
20 to 30 years age group. The convergence of four factors protection, saving (investment
option), loans and pension has compelled insurance companies to align with banks in
reaching out to a larger audience, says Head IT. This trend has led to another insurance
companies are joining hands with banks by becoming channel partners for insurance. Tata
AIG has a marketing alliance with HSBC, Birla Sun Life has one with Citibank and IDBI and
LIC ally with Corporation Bank, while Kotak Life Insurance has an arrangement with Kotak
Bank. This strategy helps insurance firms increase their footprint to cover a larger part of the
customer base in the 20-30 years demographic. CRM helps connect a banks high net worth
customers with insurance firms.

Where to beginoperational CRM or analytical CRM?

The choice between operational and analytical CRM as a starting point depends upon the
insurers needs. Gartner says that insurance companies with multiple financial products and a
big customer base, such as integrated insurance solution providers, will leverage their
customer base to cross- and up-sell different financial products, including insurance. Such
providers will benefit from adopting analytical CRM. Market segmentation, campaign
management and data mining applications will benefit them in many ways.

Call centre text mining: This tool can help improve the customer experience by
resolving complaints rapidly. Insurers are using these tools to mine text from call
centre transcripts to identify issues faced by customers. Text mining tools also help
detect and capture other useful pieces of information around a customers life stage,
financial needs and product interests. These can be used to generate leads and trigger
cross-selling. However, to be fully effective, customer service representatives must be
trained to probe for information that will help in cross selling during the text-mining
phase. Text mining tools are leading edge today, but are predicted to take off quickly.

Event-triggering and profiling: Insurers can use event triggers to generate leads
that can be acted upon quickly, usually within 24 hours, says Head IT. Eventtriggering tools monitor incoming transaction and contact data in near-real-time to
recognize changes in a customers behaviour or profile to trigger actions or alerts.

Lead management gets sophisticated: Often the ability of an insurer to generate

leads by means of event-triggering, re-engineered touch points and cross line-ofbusiness referral can outstrip their ability to manage said leads. In such a situation,
though the number of leads generated rises, the conversion rate does not. It may even
drop. CRM can help provide sales representatives with a mechanism to prioritize and
manage leads.

Changing customer behaviour in insurance buying

In insurance buying, most customers would probably describe their level of understanding of
insurance contracts in the above manner. Customers know generally what a policy covers;
they also know that there are several fine prints in insurance contracts, which they do not
know, or perhaps care to know, at the time of buying. And they also seem to generally
conclude that when it comes to making a claim under an insurance policy, there could be
several issues of which they are just unaware at the time of buying the policy in the first
place.

Changing expectations
A remarkable trend in the insurance industry in the last three years is the rapid change in the
knowledge level as well as expectations of the customers. A study conducted last year by

Forte, a collaborative effort between FICCI and ING Vysya Insurance Co. about the
consumer behaviour in the pre and post liberalization days of the industry had revealed
stunning changes in consumer expectations.
It looks as though the docile, uninformed, insurance consumer has suddenly been transformed
into an aggressive and highly demanding species. While the fresh air of competition in every
sector of the economy brings in major changes in consumer expectations (witness the sea
change in the attitude of automobile buyers in India in the last five years), the insurance
industry has witnessed a few unique aspects, such as regulation-inspired efforts to educate
insurance buyers, and a vast change in the skills and capabilities of the intermediaries
involved in distribution.

Motivating factors
In respect of life insurance, potential buyers are driven to buying a policy for one or more of
three major reasons: security of the money invested, saving for one or more specific
purposes, and the availability of tax benefit. Customers are increasingly known to place less
reliance on the tax benefit factor, and stress more on the security aspect and the end-use
objective. The challenge of the insurance companies is to address the motivating factors
imaginatively and come up with genuine solutions. Take for example, the consumers
objective of taking a policy to save money for higher education of a child. This has been a
driving force in the sale of new insurance contracts in several other countries too, notably in
Asia.
A potential buyer primarily expects that the saving should be a painless process and that the
money saved should be absolutely safe. The challenge is to provide not only convenient
payment options, but also mechanisms that could offer some measure of protection and relief
to the customer if he is forced to disrupt the payment arrangement for unforeseen reasons.
On the issue of the consumers perception of security of the money invested, there are two
important aspects. One is how the features of the insurance contract are put across to the
buyer (whether it is a unit-linked policy or endowment oriented).
The second is how to address more effectively the question about the dependability of the
new generation companies that potential new insurance buyers raise during sales calls

especially outside metros and in small towns (referred to in publicity jargon as buyers in the
SEC B and C categories). Both insurance companies and the Regulator need to address this
behavioural challenge more actively.

Consumers experience
There has been a vast change in the approach of the insurance agent from the preliberalization days. While the agent in the past established informal contacts with potential
buyers and often depended on referrals from friends and family members, the new age
companies insist on a professional, and often aggressive stance on the part of the sales staff.
Customer expectations in this regard revolve around two key aspects: first, whether the
customer is getting truthful advice from the agent, or if he is pushing a product that yields
him the highest commission rate. Invariably, the customers today expect the insurance agent
(and other intermediaries such as the banc assurance sales staff) to provide a ready
comparison of competitors products and how the product the agent is suggesting is superior
to the others. How far is the need-based analysis of insurance requirement, that the new age
sales staff are trained to offer, found to be relevant and useful to potential insurance buyers?
The answer varies from the metro cities and small towns. However outside metro cities,
customers tend to take a clear view that saving-oriented policies are more needed. There is
also marked reluctance to disclose the true personal financial status and the corresponding
insurance needs to insurance salespersons.
The second aspect of customers perception about the new generation of insurance agents is
the level of continuing commitment of the agent to arrange post-sale service. Potential
insurance buyers are unsure that they would continue to deal with the same agent who sold
the policy throughout the term.
They would tend to place more reliance on the companys general promises of service and
commitment. This is an important message for the insurance companies. As insurance
customers increasingly make arrangements to pay periodical premiums directly through the
electronic medium, or though automatic transfers from their bank accounts, thereby
bypassing the need for regular post-sale service by the agents, customers would tend to place
more reliance on the direct standard of service from the company concerned. Instances of
customers requiring agents to arrange for loans against their policies, or change nominations

etc. are rare. Therefore companies need to gear themselves to provide high service standards
directly.

Premium shopping
Is pricing or the premium rate for a policy, a deciding factor for buying insurance? It is
indeed so in a price sensitive market such as ours. In several forums, customers have voiced
the general feeling that as insurance products become more complex, and they get bundled
with several riders, it is becoming impossible to make price comparisons between different
companies.
An increasingly larger segment of customers now questions why the premium rate should be
the same for a policy if bought direct from the company over Internet, or through a channel
considered simpler, such as the banc assurance channel. There is logic in the insurance
companies passing on the cost saving to customers in such cases.
It is time the Regulator seriously considered the customer expectations of differential
premium rates for the same policy bought through different channels and allowed the
practice. It should therefore be conceivable to offer premium rebate to insurance buyers who
consciously decide to approach the company directly for buying a policy (after presumably
taking the trouble of educating themselves about the product features and other aspects), and
choose to deal with the company directly for future servicing needs.

High expectations
One aspect of customer service from new age insurance companies that a remains to be tested
widely is the claim payment record. While consumers seem to be satisfied that the survival
benefits under a life insurance policy would get paid rather promptly from the tech-savvy
new companies, obviating the need for interlocution by the insurance agent, insurance buyers
are not yet convinced about hassle-free payment in the event of a claim, whether under a life
policy or a general insurance policy. This is especially so in respect of rider benefits such as
critical illness or hospitalization benefits.
The level of consumer skepticism on claim payment is markedly high in respect of non-life
insurance products, such as Householders Package or Medicaid policies. There is

considerable work to be done to boost the level of confidence both by insurance companies
and the Regulator. By the time a company completes the development of a strategy and
makes investments to pursue the strategy, the opportunity often ceases to exist. It is therefore
important that the new age insurance companies become kinetic enterprises, which can take
advantage of unpredictable customer demands and unexpected market events immediately.
This is vastly relevant for the Indian market where the insurance consumers are rapidly
coming of age.

CUSTOMER RETENTION
Introduction
A literature review discusses published information in a particular subject area, and
sometimes information in a particular subject area within a certain time period. A literature
review can be just a simple summary of the sources, but it usually has an organizational
pattern and combines both summary and synthesis. A summary is a recap of the important
information of the source, but a synthesis is a re-organization, or a reshuffling, of that
information. It might give a new interpretation of old material or combine new with old
interpretations. Or it might trace the intellectual progression of the field, including major
debates. And depending on the situation; the literature view may evaluate the sources and
advice the reader on the pertinent or relevant. This chapter began with retention, measuring
retention, importance of customer retention, advantage of customer retention, benefits of
customer retention.
In todays challenging economy and competitive business world, retaining their customer
base is critical to organization success. If the company doesnt give their customer some good
reason to stay, organizations competitors will give the customer a reason to leave. Customer
retention and customer satisfaction drive profits. Its far less expensive to cultivate

organization existing customer base and sell more service to the customer than it to seek new,
single- transaction customers. Most surveys across industries shows that keeping one existing
customer is five to seven times more profitable than attracting one new customer. A customerfocused approach among its employees is still not present. In this era of intense competition
.it is very important for any service company to understand that merely acquiring customer is
not sufficient because there is a direct link between customer retention over time and
profitability & growth. Customer retention to a great extent depends on service quality and
customer satisfaction. Complaints are natural part of any service activity as mistakes are an
unavoidable feature of all human endeavour and thus also of service recovery. Service
recovery is the process of putting things right after something goes wrong in the service
delivery. Customer retention is the maintenance of continuous trading relationships with
customers over the long term. Customer retention is the mirror image of customer defection
or chum.
High retention is equivalent to low defection. In an industry where there are a multiple
purchases over the years, organizations entire team should be very focused on retaining those
customers:
i.
ii.
iii.
iv.
v.

Delivering service thats consistent with your value proposition and brand.
Cross-selling, up-selling and asking for referrals from existing customers.
Developing programs to increase customer loyalty and decrease turnover
Prioritizing retention as a major focus in your annual marketing plan.
Knowing the lifetime value for different segments and using that data to improve
the marketing. Studies say it costs ten times more to generate a new customer than
to maintain an existing one.

If organization has a small number of customers, losing a few could cripple company. Even if
there are a large number of customers, a small increase in the rate should dramatically
increase profits. The maintenance of the patronage of people who have purchased a
companys goods or services once and the gaining of repeat purchases. Customer retention
occurs when a customer is loyal to a company, brand, or to a specific product or service,
expressing long-term commitment and refusing to purchase from competitors. Of critical
importance to such strategies are the wider concepts of customer service, customer relations,
and relationship marketing. Companies can build loyalty and retention through the use of a
number of techniques, including database marketing, the issue of loyalty cards, redeemable
against a variety of goods or service, preferential discounts, free gifts, special promotions,

newsletters or magazines, members clubs or customized products in limited editions. It has

been argued that customer retention is linked to employee loyalty, since loyal employees
build up long-term relationships with customers. Customer retention has always been an
important topic for the marketing. For sure, the advantages of loyal clients are obvious. Often
CRM is only implementing new systems for data mining and client segmentation or
operational system like a complaint management. But the thing is: data mining system or
client clubs are not the basis. They are the cherry of the cake called client retention. A key
principle of relationship marketing is the retention of customers through varying means and
practices to ensure repeated trade from pre-existing customers by satisfying requirements
above those of competing companies through a mutually beneficial relationship.
This techniques is now used as a means of counter balancing new customer and
opportunities with current and existing customers as a means of maximizing profit and
counteracting the leaky bucket theory of business in which new customer gained in order
direct marketing oriented businesses were at the expense of or coincided with the loss of
older customers. This process of "churning" is less economically viable than retaining all or
the majority of customers using both direct and relationship management as lead generation
via new customers requires more investment.
Many companies in competing markets will redirect or allocate large amounts of resources or
attention towards customer retention as in markets with increasing competition it may cost 5
times more to attract new customers than it would to retain current customers, as direct or
"offensive" marketing requires much more extensive resources to cause defection from
competitors. However, it is suggested that because of the extensive classic marketing theories
center on means of attracting customer and creating transactions rather than maintaining
them, the majority usage of direct marketing used in the past is now gradually being used
more alongside relationship marketing as its importance becomes more recognizable.
According to Buchanan and Gilles the increased profitability associated with customer
retention efforts occurs because of several factors that occur once a relationship has been
established with a customer.
i.

The cost of acquisition occurs only at the beginning of the relationship, so the

ii.

longer the relationship, the lower the amortized cost.

Account maintenance costs decline as a percentage of total costs or as a
percentage of revenue.

iii.

Long-term customers tend to be less inclined to switch, and also tend to be fewer
prices sensitive. This can result in stable unit sales volume and increase in dollar-

iv.
v.

sales volume.
Long-term customer may initiate free word of mouth promotions and referrals.
Long-term customers are more likely to purchase ancillary products and high

vi.

margin supplemental products.

Customer that stay with company tend to be satisfied with the relationship and are
less likely to switch to competitors, making it difficult for competitors to enter the
market or gain market share.

Importance of customer retention

There are a number of reasons for this. To begin with, to acquire a customer a company
incurs promotional costs like advertising, sales promotion etc. It is said that it costs five times
more to attract a new customer than retaining one. The operating cost decrease when a
customer stays. Service being rich in experience and credence qualities, it takes some time for
customers to get accustomed to it and once they are used to the service and are satisfied with
the service provider, they tend to purchase more over a period of time. As they remain
satisfied with a service provider, they spread a positive word of mouth, which is very
effective in case of service for attracting new customers. Longer the customer stays with an
organization, more the organization knows about him, which enables it to offer a customized
service which makes it difficult for the customer to defect. This may even provide
opportunities to the organization to charge price premium by offering individualized service
which may be difficult for the competitors to offer. Considering the importance of retaining
customers in service business, Reichheld & Sasser coined a term Zero Defection. They
highlighted that companies can boost profits by almost 100% by retaining just 5% more of
their customers. Further, it is also very important to understand the life time value of a
customer. Further, if by a positive word of mouth, he brings just one more customer to the
organization, his value to the organization doubles. Therefore, it is important for all the
employees in the organization to understand the life time value of their customers.

Advantages of customer retention

Possibility of repeat business: This is probably the most obvious advantage of customer
retention. Effective services that lead to customer satisfaction will make customer coming
back to again, thus giving repeat business. Repeat business is a win-win proposition for the
business or service and the customer. The business reduces the cost of customer acquisition,
while the customer reduces the cost of finding a reliable vendor and thus also saves on costs
associated with switching vendors.
Reduced costs for customer acquisition: Acquiring a customer has certain associated costs.
These include the costs associated with advertising, following up, sales demos, travel and
meeting cost etc. having a repeat customer means that the customer means that the customer
is already aware of your processes and can predict certain quality of output, thus minimizing
the cost involved in new customer acquisition. Having a repeat customer also has the
potential to open up another channel to advertise your business word of mouth. Word of
mouth advertising / recommendations are perhaps the most important outcome of having a
satisfied customer.
Fostering greater interaction between business and customer: Todays markets are
increasingly moving away from mass produced standard products and service, towards a
more customized market, where products and service are tailored to meet customers specific
requirements. Having a repeat customer is an opportunity for you to build a more focused
relationship based on your customers specific needs and requirements. Being ensured of
having a customer who comes back, you have more confidence to suggest improvements,
provide an insight to better understand their needs and consequently design products and
services that are relevant. Having a repeat business also provides an opportunity for the buyer
and the seller to co-create products and services.
Having more delighted customers: Effective customer retention strategies allow you to
move from the zone of customer satisfaction to customer delight. Studies have shown that
customer delight is achieved only when there is a perfect synergy between the buyer needs
and the buyer understands what the seller can deliver exactly what the customer need. If you
are able to deliver your customers, you have better chance of them coming back to you, since
they now know why you are different from the rest of competition.
Statistics:

i.

Acquiring new customer can cost five times more than satisfying and retaining

ii.

current customers.
2% increase in customer retention has same effect on profits as cutting costs by

iii.
iv.

10%.
The average company losses 10% of its customer each year.
5% reduction in the customer defection rate can increase profits by 25-125%,

v.

depending on the industries.

The customer profitability rate tends to increase over the life of a retained

vi.

customer.
Companies can boost profits anywhere from 25 to 125% by retaining merely5%

vii.

more existing customers.

Only one out of 25 dissatisfied customers will express dissatisfaction.

Measuring Customer Retention

Retention rate is normally calculated as the number of customers who have been lost over a
period of time, usually calculated over a quarterly or annual period. The key is to calculate
the percentage versus existing customers, and not underestimate the loss rate by tallying new
customer acquisitions into the mix. The customer retention rate refers to the number of
customer lost over a period of time. It is normally calculated by the percentage of lost
customer versus existing customers over a quarterly or annual period, without tallying new
customer acquisitions. While there are obvious benefits to keeping customers loyal and
maintaining retention rates, it can be extremely challenging for management to keep retention
rates up. Some companies can measure retention rate using their CRM system, since any of
the vendors with solid sales modules should offer this capability. Customer service expert
Lori Bocklund recommends that companies look for this functionality when evaluating CRM
solutions, even though it is unlikely to be the differentiating factor. Companies like witness,
Performix, AIM, and Merced offer these types of tools. To measure this, some companies
combines data from the CRM system and data from other systems, such as your systems,
such as your quality monitoring system, ACD or CTI solution handling contact routing and
reporting. There are no hard and fast rules on calculating customer defection and customer
retention, according to Lowenstein. It can depend on the industries or the type of business,
since companies have long-term arrangements with customers. However, several consulting
and database management companies have succeeded in creating them. However, the
appropriate interval over which retention rate should be measured is not always one year.
Rather, it depends on the customer repurchase cycle. Car insurance and magazine

subscriptions are bought on an annual basis. Carpet tiles and hi-fis are not. If the normal hi-fi
replacement cycle is four years, then retention rate is more meaningful if it is measured over
four years instead of twelve months. Additional complexity is added when companies a sell a
range of products and services, each with different repurchase cycles. Automobile dealers
might sell cars, parts, fuel and service to a single customer. These products have different
repurchase cycles which make it very difficult for the dealer to have a whole of customer
perspective on retention. Sometimes companies are not clear about whether an individual
customer has defected. This is because of the location of customer related data, which might
be retained in product silos, channel silos or functional silos.

Type Of Customer Retention Rate

Raw customer retention rate:
This is the number of customer doing business with a firm at the end of a trading period,
expressed as percentage of those who were active customer at the beginning of the period.
Sales-adjusted retention rate:
This is the value of sales achieved from the retained customers, expressed as a percentage of
the sales achieved from all customers who were active at the beginning of the period.
Profit-adjusted retention rate:
This is the profit earned from the retained customers, expressed as a percentage of the profit
earned from all customers who were active at the beginning of the period.

RESEARCH METHODOLOGY
Introduction
The system of collecting data for research projects is known as research methodology. The
data may be collected for either theoretical or practical research for example management
research may be strategically conceptualized along with operational planning methods and
change management. Research methodology is to describe how to gather information
(method) this can be survey interview, litterateur review etc. And then explain each method
what are they, what are the method. Some important factors in research methodology of
measure most of your work is finished by the time you finish the analysis of data.
Formulation of research questions along with sampling weather probable or non-probable is
followed by measurement that includes surveys and scaling. This is followed by research
design, which may be either experimental or quasi-experimental. Methodology includes a
philosophically coherent collection of theories, concepts or ideas as they relate to a particular
discipline or field of inquiry.

Method of Data Presentation

Any research finally leads to a result, which would be analyzed, from the data that have been
received by the researcher. Data analysis is meant to be the most sensitive part of any
research work. On achieving this various methods can be adopted there are three different
methods using for data analysis such as univariate statistic.
The univariate analysis consist of mean, standard deviation, percentage etc. although the
mean most commonly seen representation of central tendency and the stranded deviation
takes into account each observations distance from the mean. The obtained data were

presented through table based on the percentage of the respondents and were analysis through
spread sheet under the univariate measures such as mean, standard deviation.

DATA COLLECTION, ANALYSIS & INTERPRETATION

Sampling Method:
The data collection was done from a sample of existing IDBI customers.
Population Size =
Sample Size =
The sample consisted of existing IDBI customers from different locations of India. Thus,
stratified sampling method was used. The customers were grouped into separate strata
based on their location. Each stratum was then sampled as an independent sub-population,
out of which individual elements were randomly selected. This implies that Simple Random
Sampling was used for each stratum.
Method of Data Collection: After the data analysis, it must be evaluate to get the decision.
The likers scale is given 1-3 to each statement in the questionnaires.
1) Agree 2) Neutral 3) Disagree.

Personal Information: The research is to identify the customer retention in IDBI federal
insurance Co limited in Coimbatore branch. Retaining the customer is based on the customer
satisfaction. Age, sex, civil status, education level, occupation, income also decide the
satisfaction.
Questionnaire:
Good morning. I am Ankit from IDBI federal one of the leading wealthsurance solution
provider in India. Do you have a moment to talk? I work extensively in the area of proving

future financial planning solution to people. My expertise includes planning for your familys
financial security, your childrens education, marriage or your personal retirement. The
reason why I called you today is to get your idea and feedback about IDBI federal can I
continue?
Part A: Personal Details
1. Is your age:
a) 17-35 years
b) 35-50 years
c) Over 50 years
2. Gender:
a) Male
b) Female
3. Marital status
a) Single
b) Married
4. Education qualification
a) UG degree holder
b) PG degree holder
5. Monthly income
a) Rs 10000-25000
b) Rs 25000-45000

c) Above Rs 50000
Part B: Research Details
Evaluate the statement on the basis of the point given below 1. Agree 2. Neutral 3. Disagree
6. In thinking about the recent experience with IDBI Federal life insurance, rate the
satisfaction with the customer service received by you?
7. The process for getting your concerns resolved is fast?
8. Please think about the features and the benefits of the insurance you took. Are you satisfied
with the insurance?
9. Customer service Representative Pertain to the customer service representative you spoke
with most recently please indicate whether you agree or disagree or none to the following
statements
a.) The customer service representative was very courteous
b.) The customer service representative handled your call quickly
c.) The customer service representative was knowledgeable
10. The policy plans of IDBI Federal Company provide highest benefits for you?
11. The insurance plans policy and procedure of IDBI insurance company are understandable
easily?
12. Is the premium payment mode of IDBI federal insurance is easy?
13. Do you like work or held the relationship between you and IDBI insurance company for
long time?
14. Do you recommend IDBI Insurance Company to your friends?
15. You insure in IDBI because friends insisted?
16. Would you like to have another insure policy in IDBI in future?

Thanks a lot for your response

Have a nice day!

Analysis:
A1. Age Distribution

AGE DISTRIBUTION

PERCENTAGE

17-35 YEARS

73%

35-50 YEARS

15%

OVER 50 YEARS

12%

AGE DISTRIBUTION (PERCENTAGE)

12%

17-35 YEARS
35-50 YEARS

15%

OVER 50 YEARS

73%

A2. Gender

GENDER

PERCENTAGE

MALE

78%

FEMALE

22%

GENDER PERCENTAGE

22%

MALE
FEMALE

78%

A3. Marital status

MARITAL STATUS
SINGLE
MARRIED

PERCENTAGE
37%
63%

MARITAL STATUS PERCENTAGE

37%

63%

A4. Educational Qualification

SINGLE
MARRIED

QUALIFICATION
U.G. DEGREE HOLDER
P.G. DEGREE HOLDER

PERCENTAGE
29%
71%

QUALIFICATION PERCENTAGE

29%

U.G. DEGREE HOLDER

P.G. DEGREE HOLDER

71%

A5. Income
INCOME RANGE (PER MONTH)
10000-25000
25000-45000
ABOVE 50000

PERCENTAGE
24%
48%
28%

MONTHLY INCOME RANGE PERCENTAGE

24%

28%

10000-25000
25000-45000
ABOVE 50000

48%

PART B:
A6.
CUSTOMER SATISFACTION
AGREE
NEUTRAL
DISAGREE

PERCENTAGE
40%
8%
52%

CUSTOMER SATISFACTION PERCENTAGE

AGREE
NEUTRAL

40%

DISAGREE

52%

8%

A7.
PERCENTAGE
45%
15%
40%

FAST CONCERN RESOLUTION

AGREE
NEUTRAL
DISAGREE

FAST CONCERN RESOLUTION

AGREE
NEUTRAL

40%

45%

15%

A8.

DISAGREE

PERCENTAGE

SATISFIED WITH INSURANCE

FEATURES AND BENEFITS
AGREE
NEUTRAL
DISAGREE

30%
10%
60%

SATISFIED WITH INSURANCE FEATURES AND BENEFITS

30%

AGREE
NEUTRAL
DISAGREE

60%
10%

A9(a).
CUSTOMER SERVICE
REPRESENTATIVE WAS VERY
COURTEOUS
AGREE
NEUTRAL
DISAGREE

PERCENTAGE

82%
8%
10%

CUSTOMER SERVICE REPRESENTATIVE WAS VERY COURTEOUS

10%

AGREE

8%

NEUTRAL
DISAGREE

82%

A9(b).
CUSTOMER SERVICE
REPRESENTATIVE HANDLED
YOUR CALL QUICKLY

PERCENTAGE

AGREE
NEUTRAL
DISAGREE

55%
5%
40%

CUSTOMER SERVICE REPRESENTATIVE HANDLED YOUR CALL QUICKLY

AGREE
NEUTRAL

40%

DISAGREE
55%

5%

A9(c).
CUSTOMER SERVICE
REPRESENTATIVE WAS
KNOWLEDGEABLE
AGREE
NEUTRAL
DISAGREE

PERCENTAGE

60%
7%
33%

CUSTOMER SERVICE REPRESENTATIVE WAS KNOWLEDGEABLE

AGREE

33%

NEUTRAL
DISAGREE
60%

7%

A10.
THE POLICY PLANS OF IDBI
FEDERAL COMPANY PROVIDE
HIGHEST BENEFITS FOR YOU?
AGREE
NEUTRAL
DISAGREE

PERCENTAGE

30%
15%
55%

THE POLICY PLANS OF IDBI FEDERAL COMPANY PROVIDE HIGHEST BENEFITS FOR YOU?

30%

AGREE
NEUTRAL
DISAGREE

55%
15%

A11.
EASILY UNDERSTANDABLE?
AGREE
NEUTRAL
DISAGREE

PERCENTAGE
70%
8%
22%

EASILY UNDERSTANDABLE?

22%

AGREE
NEUTRAL
DISAGREE

8%
70%

A12.

IS THE PREMIUM PAYMENT MODE

OF IDBI FEDERAL INSURANCE IS
EASY?
AGREE
NEUTRAL
DISAGREE

PERCENTAGE

80%
5%
15%

IS THE PREMIUM PAYMENT MODE OF IDBI FEDERAL INSURANCE IS EASY?

15%

AGREE

5%

NEUTRAL
DISAGREE

80%

A13.
LONG TIME CUSTOMER RELATION
AGREE
NEUTRAL
DISAGREE

PERCENTAGE
26%
15%
59%

LONG TIME CUSTOMER RELATION

AGREE

26%

NEUTRAL
DISAGREE
59%

15%

A14.
DO YOU RECOMMEND IDBI
INSURANCE COMPANY TO YOUR
FRIENDS?
AGREE
NEUTRAL
DISAGREE

PERCENTAGE

45%
8%
47%

DO YOU RECOMMEND IDBI INSURANCE POLICY TO YOUR FRIENDS?

AGREE
NEUTRAL
45%

47%

8%

DISAGREE

A15.
INFLUENCE OF FRIENDS FOR IDBI
INSURANCE?
AGREE
NEUTRAL
DISAGREE

PERCENTAGE
56%
4%
40%

INFLUENCE OF FRIENDS FOR IDBI INSURANCE?

AGREE
NEUTRAL

40%

DISAGREE
56%
4%

A16.
ANOTHER INSURANCE POLICY IN
IDBI IN FUTURE
AGREE
NEUTRAL
DISAGREE

PERCENTAGE
42%
9%
49%

ANOTHER INSURANCE POLICY IN IDBI IN FUTURE

AGREE
42%

49%

NEUTRAL
DISAGREE

9%

Interpretation based on above data:

The target group is between 17-35 years of age and from middle income group
Problems/Threats to Customer Retention:

Over 50% of the sample of existing customer base is dissatisfied with the IDBI
Insurance policies
59% of the sample do not wish to continue long time customer relation with IDBI
Federal. This implies that the customer retention ability currently is poor.
47% of the sample does not recommend IDBI Federal Insurance policies to others
over competitors policies. This indicates poor word of mouth and customer
dissatisfaction.
49% of the sample disagreed to take another insurance policy in future. This is
another indication of customer dissatisfaction.

Strengths:

Customer Service Representative

o Good behaviour
o Knowledgeable
o Efficient in handling service calls
Policy terms and conditions are easily understandable to the customers
Easy and convenient premium payment mode

Weaknesses:

Concern resolution speed is slow

60% of the sample dissatisfied with the insurance policy features and benefits
55% of the sample did not rate IDBI policy to be best in the market

Suggestions for Customer Retention

The IDBI federal insurance company in Coimbatore branch has to take some action to have
customers for long time.
i.
ii.
iii.
iv.
v.

Free some amount of premium on continuous purchase.

Give some gifts which must satisfy the needs of the customers.
Establish membership cards and membership programs
Frequent buyer programs which permit customers to build up fair play
Databases that keep track of customers purchases, preferences, complements and

vi.

complaints, which are used to carry out loyalty building services and dialogs.
Integrated marketing programs where the advertising, direct communications,
customer service, database marketing and sales programs are all orchestrated together
and designed to build loyalty.

EXPECTED CONTRIBUTION FROM THE STUDY

As the number of visits made by the advisors to the customers is less, and the relation can
be build/maintained by effective communication with the customers by being in constant
touch with the customer. As many of the new life insurance companies are entering, IDBI
Federal Life Insurance Co. Ltd. has to maintain its relation with the customer, So that it
can be able to generate more number of loyal customers.

 To educate the customers about the new products, the company can use SMS service for
reaching its customers. Due to large number of customers, the reach of the entire
customers in less time may not be possible from its advisors and sales officers. This can
be a less costly medium of taking direct response of the customers. As it does not disturb
the customer.
To effective closing of any sales call, one should understand the need of the customers in
depth. The Advisors can be trained by the sales officers, and training institution.
The IDBI Federal Life Insurance Co Ltd. should come up with more number of Products
for those customers who are feeling that the product that they purchased does not match
their needs
This research has been brought up many facts regarding the Customer relationship
Management. IDBI Federal Life insurance has large number of products in its portfolio. But
the advisors are unable to find out the need of the customers and they are unable to suggest
the right suitable product. By this project, now I can understand the various factors of
insurance industry and how the customer relation is maintained in this industry. The potential
customers are more in number and they are still not secured their life. Due to distribution
channels, to reach every other customer in shortest time is not possible; hence company can
adopt some of the suggestions

FINDINGS
1. Even though the sales officers and advisors provide sufficient information to customers,
while selling the product some of the customers feel that they had not received sufficient
information. Information was rather complex, rest of the respondents feel that the information
provided was less.

2. Found that IDBI Federal Life Insurance has large variety of products in its portfolio, it is
observed that many of the customer feel that the product purchased by them and their needs
are not matching.
3. Most of the advisors do not prepare themselves for the sales call; in turn they may not
perform better at the call of the customer. They do not provide adequate help to the customers
and they just try to avoid it and refer it to the higher officials.
4. Due to lack of the effective training, most of the advisors were not able to handle the
customer properly, and may not solve the customers queries

CONCLUSION
The data were collected from the customers response of the IDBI Federal Life Insurance
Corporation Limited Coimbatore branch. Based on the percentage of the customers 100
sample size was collected. The age, gender, marital statuses, educational qualification,
occupation, monthly income, were analyzed as personal information in the questionnaire.
According to the collected personal information, most of the sample customers were young

age, single, educated, higher income customers who got insurance. According to the research
the IDBI Federal Life Insurance Corporation Limited Coimbatore have high customer
relinquishment because most of the customers did not insure out of their own interest.
Parents, Friends who are working or doing their project or internship in IDBI Federal Life
Insurance wanted them to have a policy. This is the reason why customers move out of IDBI
Federal.