INTRODUCTION TO FINANCIAL

PRODUCT.
Financial products refer to those instruments that
help you save, invest, get insurance or get a mortgage. These
are issued by various banks, financial institutions, stock
brokerages, insurance providers, credit card agencies and
government sponsored entities. Financial products are
categorized in terms of their type or underlying asset class,
volatility, risk and return.
In the past, traditional financial products were
offered in India through government initiatives by Public Sector
Banks(PSBs) (deposit account, credit account), Life Insurance
Corporation (LIC), and postal department (recurring deposit,
National Saving Certificate, Kisan Vikas Patra). However, in
recent years with the advent of liberalization of financial
services industry, diverse financial products have been
introduced through participation of private and foreign entities
in addition to the public sector enterprises

Management of Financial

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FINANCIAL PRODUCTS: MARKETING

Organizations, both existing players and potential

entrants, are looking to aggressively compete in the
growing banking, financial services, and insurance
(BFSI) sector in India. Therefore, there is a lot of action
on the marketing front SUCH AS: Customer Focus:
Various factors influence consumer behavior in
purchasing financial
Products. A situational approach can be adopted to
understand buyer
Behavior: On the basis of level of involvement and
consumer confidence (which depends on the
perceived uncertainty).
Marketing research : Contributes in terms of market
structure analysis, market potential, and demand
forecasting.
Segmentation: Financial marketers generally adopt
one of the following.
Targeting strategies -- undifferentiated marketing,
differentiated marketing, and concentrated
marketing.
CRM includes customer knowledge management,
technology adoption and implementation, and
performance measurement. The customer knowledge
management process (journey) is a cycle with four interrelated steps developing a customer-focused strategy;
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developing the customer buying process; implementing

actions, tactics, campaigns; and customer learning

REGULATORY BODIES.
With the growth of a product comes about a lot of legal
and ethical issues,so it becomes necessary for the
government to intervene in the activites carried out
inorder to ensure investor protection,ethical means of
carrying out the activites and also to provide the
framework in which the activities should be carried out.
Sebi:
The securities exchange board of india was
establishedon April 12, 1992 in accordance with the
provisions of the Securities and Exchange Board of India
Act, 1992.
FUNCTIONS:
Review of the market operations, organizational
structure and administrative control of the
exchange.
Registration and regulation of the working of
intermediaries.

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 Registration and regulation of mutual fund ,

venture ,capital funds and collective investment
schemes.
Promoting and regulating self regulatory
organization.
Prohibiting fraudulent and unfair trade practices in
the securities market.
Prohibition of insider trading.
Investor education and the training of
intermediaries, Inspection and inquiries.
Regulating substantial acquisition of shares and
take over.

Irda:
The Insurance regulatory and development authority has the
following duties, functions and powers as laid sown by The
Section 14 of IRDA Act, 1999.
issue to the applicant a certificate of registration, renew,
modify, withdraw, suspend or cancelsuch registration;
protection of the interests of the policy holders in matters
concerning assigning of policy, nomination by policy
holders, insurable interest, settlement of insurance claim,
surrender value of policy and other terms and conditions
of contracts of insurance;
specifying requisite qualifications, code of conduct and
practical training for intermediary or insurance
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intermediaries and agents specifying the code of conduct

for surveyors and loss assessors; promoting efficiency in
the conduct of insurance business;
promoting and regulating professional organisations
connected with the insurance and reinsurance business

Various Financial Product:

Debit
card.
Credit
card
Mutual
fund.
Derivatives.

Life and Non-life

Insurance.

Treasury
Bills
Annuities.

Option.

Financial
product.

Bonds.

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Share.
Postal department
schemes.
Credit default
swaps.

I.

Certificate of
Deposited.

Shares: These represent ownership of a company. While

shares are initially issued by corporations to finance their
business needs, they are subsequently bought and sold by
individuals in the share market. They are associated with
high risk and high returns. Returns on shares can be in the
form of dividend payouts by the company or profits on the
sale of shares in the stock market. Shares, stocks, equities
and securities are words that are generally used
interchangeably.

II.

Bonds: These are issued by companies to finance their

business operations and by governments to fund expenses
like infrastructure and social programs. Bonds have a fixed
interest rate, making the risk associated with them lower
than that with shares. The principal or face value of bonds
is recovered at the time of maturity.

III.

Treasury Bills: These are instruments issued by the

government for financing its short term needs. They are
issued at a discount to the face value. The profit earned by
the investor is the difference between the face or maturity
value and the price at which the Treasury Bill was issued.

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IV.

Options: Options are rights to buy and sell shares. An

option holder does not actually purchase shares. Instead,
he purchases the rights on the shares.

V.

Mutual Funds: These are professionally managed

financial instruments that involve the diversification of
investment into a number of financial products, such as
shares, bonds and government securities. This helps to
reduce an investors risk exposure, while increasing the
profit potential.

VI.

Certificate of Deposit: Certificates of deposit (or CDs)

are issued by banks, thrift institutions and credit unions.
They usually have a fixed term and fixed interest rate.

VII.

Annuities: These are contracts between investors and

insurance companies, wherein the latter makes periodic
payments in exchange for financial protection in the event
of an unfortunate incident.

VIII.

Debit Cards or Credit Debit: Cards are electronic

plastic cards that are used as a substitute for cash. Bank
Debit Cards help reduce the need for carrying cash and
checks. Debit cards are directly linked to a cardholders
bank account. Whenever a card holder withdraws money
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from an ATM or uses the debit card for making payments,

his/her account balance is automatically reduced.

IX.

Life and non-Insurance: Insurance against risk of loss to

one's life is covered under Life Insurance. Life insurance is
also known as long term insurance or life assurance. It
includes Whole Life Assurance, Endowment Assurance,
Assurances for Children, Term Assurance, Money Back
Policy etc. To buy or get information on life insurance
products offered by us, please click on the link above.

Complex Financial Products

There are certain financial products that are highly complex in
nature. Among these are:
I.

Credit Default Swaps (CDS): Credit default swaps are

highly leveraged contracts that are privately negotiated
between two parties. These swaps insure against losses on
securities in case of a default. Since the government does
not regulate CDS related activities, there is no specific
central reporting mechanism that determines the value of
these contracts.

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II.

Collateralized Debt Obligations (CDO): These are

securities that are created by collateralizing various
similar debt obligations such as bonds and loans. CDOs
can be bought and sold. The buyer gains the right to a
part of the debt pools principal and interest income.

A financial product includes any of the following:

interests in a managed investment scheme, derivatives,
general insurance, life insurance, superannuation, basic
deposit products and retirement savings accounts. For
some purposes shares and debentures are also classed
as financial products.

INSURANCE
What is insurance?
We face a lot of risks in our daily lives. Some of these
lead to financial losses. Insurance is a way of protecting
against these financial losses. For a payment (premium),
an insurance company will take the responsibility of
compensating your financial losses.
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Why should one insurance?

One of the main reasons one should insure is to protect ones
belongings and assets against financial loss. When one has
earned and accumulated property, protecting it is prudent. The
law also requires us to be insured against some liabilities. That
is, in case we should cause a loss to another person, that
person is entitled to compensation. To ensure that we can
afford to pay that compensation, the law requires us to buy
liability insurance so that the responsibility of paying the
compensation is transferred to an insurance company.

Life insurance:
Life insurance or life assurance is a contract between the policy
owner and the insurer, where the insurer agrees to pay a
designated beneficiary a sum of money upon the occurrence of
the insured individual's or individuals' death or other event,
such as terminal illness or critical illness. In return, the policy
owner agrees to pay a stipulated amount at regular intervals or
in lump sums. There may be designs in some countries where
bills and death expenses plus catering for after funeral
expenses should be included in Policy Premium. In the United
States, the predominant form simply specifies a lump sum to be
paid on the insured's demise. As with most insurance policies,
life insurance is a contract between the insurer and the policy
owner whereby a benefit is paid to the designated beneficiaries
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if an insured event occurs which is covered by the policy The

value for the policyholder is derived, not from an actual claim
event, rather it is the value derived from the 'peace of mind'
experienced by the policyholder, due to the negating of
adverse financial consequences caused by the death of the Life
Assured. To be a life policy the insured event must be based
upon the lives of the people named in the policy.

Insured events that may be covered include:

Serious illness: Life policies are legal contracts and the terms
of the contract describe the limitations of the insured events.
Specific exclusions are often written into the contract to limit
the liability of the insurer; for example claims relating to
suicide, fraud, war, riot and civil commotion.

Life-based contracts tend to fall into two major categories:

Protection policies: Designed to provide a benefit in the
event of specified event, typically a lump sum payment. A
common form of this design is term insurance.
Investment policies: Where the main objective is to facilitate
the growth of capital by regular or single premiums. Common
forms (in the US anyway) are whole life, universal life and
variable life policies.

Types of life insurance

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Life insurance may be divided into two basic classes

temporary and permanent or following subclasses - term,
universal, whole life and endowment life insurance.
Term Insurance:
Term assurance provides life insurance coverage for a
specified term of years in exchange for a specified premium.
The policy does not accumulate cash value. Term is generally
considered "pure" insurance, where the premium buys
protection in the event of death and nothing else.
There are three key factors to be considered in term insurance:
Face amount (protection or death benefit),
Premium to be paid (cost to the insured), and
Length of coverage (term).

Various insurance companies sell term insurance with many

different combinations of these three parameters. The face
amount can remain constant or decline. The term can be for
one or more years. The premium can remain level or increase.
Common types of term insurance include Level, Annual
Renewable and Mortgage insurance. Level Term policy has the
premium fixed for a period of time longer than a year. These
terms are commonly 5, 10, 15, 20, 25, 30 and even 35 years.
Level term is often used for long term planning and asset
management because premiums remain consistent year to
year and can be budgeted long term. At the end of the term,
some policies contain a renewal or conversion option.
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Guaranteed Renewal, the insurance company guarantees it will

issue a policy of equal or lesser amount without regard to the
insurability of the insured and with a premium set for the
insured's age at that time. Some companies however do not
guarantee renewal, and require proof of insurability to mitigate
their risk and decline renewing higher risk clients (for instance
those that may be terminal). Renewal that requires proof of
insurability often includes a conversion options that allows the
insured to convert the term program to a permanent one that
the insurance company makes available. This can force clients
into a more expensive permanent program because of anti
selection if they need to continue coverage. Renewal and
conversion options can be very important when selecting a
program. Annual renewable term is a one year policy but the
insurance company guarantees it will issue a policy of equal or
lesser amount without regard to the insurability of the insured
and with a premium set for the insured's age at that time.
Another common type of term insurance is mortgage
insurance, which is usually a level premium, declining face
value policy. The face amount is intended to equal the amount
of the mortgage on the policy owners residence so the
mortgage will be paid if the insured dies.
A policy holder insures his life for a specified term. If he
dies before that specified term is up (with the exception of
suicide see below), his estate or named beneficiary receives a
payout. If he does not die before the term is up, he receives
nothing. However, in some European countries (notably Serbia),
insurance policy is such that the policy holder receives the
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amount he has insured himself to, or the amount he has paid to

the insurance company in the past years. Suicide used to be
excluded from ALL insurance policies[when?], however, after a
number of court judgments against the industry, payouts do
occur on death by suicide (presumably except for in the unlikely
case that it can be shown that the suicide was just to benefit
from the policy). Generally, if an insured person commits
suicide within the first two policy years, the insurer will return
the premiums paid. However, a death benefit will usually be
paid if the suicide occurs after the two year period.

Permanent Life Insurance:

Permanent life insurance is life insurance that remains in
force (in-line) until the policy matures (pays out), unless the
owner fails to pay the premium when due (the policy expires
OR policies lapse). The policy cannot be canceled by the insurer
for any reason except fraud in the application, and that
cancellation must occur within a period of time defined by law
(usually two years). Permanent insurance builds a cash value
that reduces the amount at risk to the insurance company and
thus the insurance expense over time. This means that a policy
with a million dollar face value can be relatively expensive to a
70 year old. The owner can access the money in the cash value
by withdrawing money, borrowing the cash value, or
surrendering the policy and receiving the surrender value.

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The four basic types of permanent insurance are whole life,

universal life, limited pay and endowment.

Whole life coverage:

Whole life insurance provides for a level premium, and a

cash value table included in the policy guaranteed by the
company. The primary advantages of whole life are guaranteed
death benefits, guaranteed cash values, fixed and known
annual premiums, and mortality and expense charges will not
reduce the cash value shown in the policy. The primary
disadvantages of whole life are premium inflexibility, and the
internal rate of return in the policy may not be competitive with
other savings alternatives. Also, the cash values are generally
kept by the insurance company at the time of death, the death
benefit only to the beneficiaries. Riders are available that can
allow one to increase the death benefit by paying additional
premium. The death benefit can also be increased through the
use of policy dividends. Dividends cannot be guaranteed and
may be higher or lower than historical rates over time.
Premiums are much higher than term insurance in the shortterm, but cumulative premiums are roughly equal if policies are
kept in force until average life expectancy. Cash value can be
accessed at any time through policy "loans" and are received
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"income-tax free". Since these loans decrease the death benefit

if not paid back, payback is optional. Cash values support the
death benefit so only the death benefit is paid out.
Dividends can be utilized in many ways. First, if Paid up
additions is elected, dividend cash values will purchase
additional death benefit which will increase the death benefit of
the policy to the named beneficiary. Another alternative is to
opt in for 'reduced premiums' on some policies. This reduces
the owed premiums by the unguaranteed dividends amount. A
third option allows the owner to take the dividends as they are
paid out. (Although some policies provide other/different/less
options than these - it depends on the company for some
cases)

Universal life coverage:

Universal life insurance (UL) is a relatively new insurance
product intended to provide permanent insurance coverage
with greater flexibility in premium payment and the potential
for a higher internal rate of return. There are several types of
universal life insurance policies which include "interest
sensitive" (also known as "traditional fixed universal life
insurance"), variable universal life insurance, and equity
indexed universal life insurance.
A universal life insurance policy includes a cash account
but the cash decreases over time. Premiums increase the cash
account, but, the cost of interest increases each year so the
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cash deteriorates over time. Interest is paid within the policy

(credited) on the account at a rate specified by the company,
but then mortality charges and administrative costs are then
charged against (reduce) the cash account. The surrender value
of the policy is the amount remaining in the cash account less
applicable surrender charges, if any. Universal Life does not
work in a recession or low interest rate environment.
With all life insurance, there are basically two functions
that make it work. There's a mortality function and a cash
function. The mortality function would be the classical notion of
pooling risk where the premiums paid by everybody else would
cover the death benefit for the one or two who will die for a
given period of time. The cash function inherent in all life
insurance says that if a person is to reach age 95 to 100 (the
age varies depending on state and company), then the policy
matures and endows the face value of the policy.
Actuarially, it is reasoned that out of a group of 1000
people, if even 10 of them live to age 95, then the mortality
function alone will not be able to cover the cash function. So in
order to cover the cash function, a minimum rate of investment
return on the premiums will be required in the event that a
policy matures.
Universal life insurance addresses the perceived
disadvantages of whole life. Premiums are flexible. Depending
on how interest is credited, the internal rate of return can be
higher because it moves with prevailing interest rates (interestsensitive) or the financial markets (Equity Indexed Universal
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Life and Variable Universal Life). Mortality costs and

administrative charges are known. And cash value may be
considered more easily attainable because the owner can
discontinue premiums if the cash value allows it. And universal
life has a more flexible death benefit because the owner can
select one of two death benefit options, Option A and Option B.
Option A pays the face amount at death as it's designed to
have the cash value equal the death benefit at maturity
(usually at age 95 or 100). With each premium payment, the
policy owner is reducing the cost of insurance until the cash
value reaches the face amount upon maturity. But, it does not
perform like a whole life policy when each year the costs
increase and never stop. In whole life, the costs are complete
within the first few years of the policy.
Option B pays the face amount plus the cash value, as it's
designed to increase the net death benefit as cash values
accumulate. Option B offers the benefit of an increasing death
benefit every year that the policy stays in force. The drawback
to option B is that because the cash value is accumulated "on
top of" the death benefit, the cost of insurance never decreases
as premium payments are made. Thus, as the insured gets
older, the policy owner is faced with an ever increasing cost of
insurance (it costs more money to provide the same initial face
amount of insurance as the insured gets older).

Limited-pay:

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Another type of permanent insurance is Limited-pay life

insurance, in which all the premiums are paid over a specified
period after which no additional premiums are due to keep the
policy in force. Common limited pay periods include 10-year,
20-year, and paid-up at age 65.
Endowments:
Endowments are policies in which the cash value built up
inside the policy, equals the death benefit (face amount) at a
certain age. The age this commences is known as the
endowment age. Endowments are considerably more expensive
(in terms of annual premiums) than either whole life or
universal life because the premium paying period is shortened
and the endowment date is earlier.
In the United States, the Technical Corrections Act of 1988
tightened the rules on tax shelters (creating modified
endowments). These follow tax rules as annuities and IRAs do.
Endowment Insurance is paid out whether the insured lives or
dies, after a specific period (e.g. 15 years) or a specific age
(e.g. 65).
Accidental Death:
Accidental death is a limited life insurance that is designed
to cover the insured when they pass away due to an accident.
Accidents include anything from an injury, but do not typically
cover any deaths resulting from health problems or suicide.
Because they only cover accidents, these policies are much less
expensive than other life insurances.
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It is also very commonly offered as "accidental death and

dismemberment insurance", also known as an AD&D policy. In
an AD&D policy, benefits are available not only for accidental
death, but also for loss of limbs or bodily functions such as
sight and hearing, etc.
Accidental death and AD&D policies very rarely pay a
benefit; either the cause of death is not covered, or the
coverage is not maintained after the accident until death
occurs. To be aware of what coverage they have, an insured
should always review their policy for what it covers and what it
excludes. Often, it does not cover an insured who puts
themselves at risk in activities such as: parachuting, flying an
airplane, professional sports, or involvement in a war (military
or not). Also, some insurers will exclude death and injury
caused by proximate causes due to (but not limited to) racing
on wheels and mountaineering.
Accidental death benefits can also be added to a standard
life insurance policy as a rider. If this rider is purchased, the
policy will generally pay double the face amount if the insured
dies due to an accident. This used to be commonly referred to
as a double indemnity coverage. In some cases, some
companies may even offer a triple indemnity cover.

PROCEDURE OF CONTRACTING.

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Parties to contract:
There is a difference between the insured and the policy
owner (policy holder), although the owner and the insured are
often the same person. For example, if Joe buys a policy on his
own life, he is both the owner and the insured. But if Jane, his
wife, buys a policy on Joe's life, she is the owner and he is the
insured. The policy owner is the guarantee and he or she will be
the person who will pay for the policy. The insured is a
participant in the contract, but not necessarily a party to it.
However, "insurable interest" is required to limit an unrelated
party from taking life insurance on, for example, Jane or Joe.
The beneficiary receives policy proceeds upon the
insured's death. The owner designates the beneficiary, but the
beneficiary is not a party to the policy. The owner can change
the beneficiary unless the policy has an irrevocable beneficiary
designation. With an irrevocable beneficiary, that beneficiary
must agree to any beneficiary changes, policy assignments, or
cash value borrowing.
In cases where the policy owner is not the insured (also
referred to as the celui qui vit or CQV), insurance companies
have sought to limit policy purchases to those with an
"insurable interest" in the CQV. For life insurance policies, close
family members and business partners will usually be found to
have an insurable interest. The "insurable interest" requirement
usually demonstrates that the purchaser will actually suffer
some kind of loss if the CQV dies. Such a requirement prevents
people from benefiting from the purchase of purely speculative
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policies on people they expect to die. With no insurable interest

requirement, the risk that a purchaser would murder the CQV
for insurance proceeds would be great. In at least one case, an
insurance company which sold a policy to a purchaser with no
insurable interest (who later murdered the CQV for the
proceeds), was found liable in court for contributing to the
wrongful death of the victim (Liberty National Life v. Weldon,
267 Ala.171 (1957)).
Contract terms:
Special provisions may apply, such as suicide clauses
wherein the policy becomes null if the insured commits suicide
within a specified time (usually two years after the purchase
date; some states provide a statutory one-year suicide clause).
Any misrepresentations by the insured on the application are
also grounds for nullification. Most US states specify that the
contestability period cannot be longer than two years; only if
the insured dies within this period will the insurer have a legal
right to contest the claim on the basis of misrepresentation and
request additional information before deciding to pay or deny
the claim.
The face amount on the policy is the initial amount that
the policy will pay at the death of the insured or when the
policy matures, although the actual death benefit can provide
for greater or lesser than the face amount. The policy matures
when the insured dies or reaches a specified age (such as 100
years old).
Costs, insurability, and underwriting:
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The insurer (the life insurance company) calculates the

policy prices with intent to fund claims to be paid and
administrative costs, and to make a profit. The cost of
insurance is determined using mortality tables calculated by
actuaries. Actuaries are professionals who employ actuarial
science, which is based in mathematics (primarily probability
and statistics). Mortality tables are statistically-based tables
showing expected annual mortality rates. It is possible to derive
life expectancy estimates from these mortality assumptions.
Such estimates can be important in taxation regulation.
The three main variables in a mortality table have been
age, gender, and use of tobacco. More recently in the US,
preferred class specific tables were introduced. The mortality
tables provide a baseline for the cost of insurance. In practice,
these mortality tables are used in conjunction with the health
and family history of the individual applying for a policy in order
to determine premiums and insurability. Mortality tables
currently in use by life insurance companies in the United
States are individually modified by each company using pooled
industry experience studies as a starting point. In the 1980s
and 90's the SOA 1975-80 Basic Select & Ultimate tables were
the typical reference points, while the 2001 VBT and 2001 CSO
tables were published more recently. The newer tables include
separate mortality tables for smokers and non-smokers and the
CSO tables include separate tables for preferred classes.
Recent US select mortality tables predict that roughly 0.35
in 1,000 non-smoking males aged 25 will die during the first
year of coverage after underwriting.[2] Mortality approximately
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doubles for every extra ten years of age so that the mortality
rate in the first year for underwritten non-smoking men is about
2.5 in 1,000 people at age 65.[3] Compare this with the US
population male mortality rates of 1.3 per 1,000 at age 25 and
19.3 at age 65 (without regard to health or smoking status).
The mortality of underwritten persons rises much more
quickly than the general population. At the end of 10 years the
mortality of that 25 year-old, non-smoking male is
0.66/1000/year. Consequently, in a group of one thousand 25
year old males with a $100,000 policy, all of average health, a
life insurance company would have to collect approximately
$50 a year from each of a large group to cover the relatively
few expected claims. (0.35 to 0.66 expected deaths in each
year x $100,000 payout per death = $35 per policy).
Administrative and sales commissions need to be accounted for
in order for this to make business sense. A 10 year policy for a
25 year old non-smoking male person with preferred medical
history may get offers as low as $90 per year for a $100,000
policy in the competitive US life insurance market.
The insurance company receives the premiums from the
policy owner and invests them to create a pool of money from
which it can pay claims and finance the insurance company's
operations. The majority of the money that insurance
companies make comes directly from premiums paid, as money
gained through investment of premiums can never, in even the
most ideal market conditions, vest enough money per year to
pay out claims.[citation needed] Rates charged for life

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insurance increase with the insurer's age because, statistically,

people are more likely to die as they get older.

Given that adverse selection can have a negative impact

on the insurer's financial situation, the insurer investigates each
proposed insured individual unless the policy is below a
company-established minimum amount, beginning with the
application process. Group Insurance policies are an exception.
This investigation and resulting evaluation of the risk is
termed underwriting. Health and lifestyle questions are asked.
Certain responses or information received may merit further
investigation. Life insurance companies in the United States
support the Medical Information Bureau (MIB),[4] which is a
clearinghouse of information on persons who have applied for
life insurance with participating companies in the last seven
years. As part of the application, the insurer receives
permission to obtain information from the proposed insured's
physicians.
Underwriters will determine the purpose of insurance. The
most common is to protect the owner's family or financial
interests in the event of the insurer's demise. Other purposes
include estate planning or, in the case of cash-value contracts,
investment for retirement planning. Bank loans or buy-sell
provisions of business agreements are another acceptable
purpose.

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Life insurance companies are never required by law to

underwrite or to provide coverage to anyone, with the
exception of Civil Rights Act compliance requirements.
Insurance companies alone determine insurability, and some
people, for their own health or lifestyle reasons, are deemed
uninsurable. The policy can be declined (turned down) or rated.
[citation needed] Rating increases the premiums to provide for
additional risks relative to the particular insured.
Many companies use four general health categories for
those evaluated for a life insurance policy. These categories are
Preferred Best, Preferred, Standard, and Tobacco.[citation
needed] Preferred Best is reserved only for the healthiest
individuals in the general population. This means, for instance,
that the proposed insured has no adverse medical history, is
not under medication for any condition, and his family
(immediate and extended) have no history of early cancer,
diabetes, or other conditions. Preferred means that the
proposed insured is currently under medication for a medical
condition and has a family history of particular illnesses.
[citation needed] Most people are in the Standard category.
[citation needed] Profession, travel, and lifestyle factor into
whether the proposed insured will be granted a policy, and
which category the insured falls. For example, a person who
would otherwise be classified as Preferred Best may be denied
a policy if he or she travels to a high risk country.[citation
needed] Underwriting practices can vary from insurer to insurer
which provide for more competitive offers in certain
circumstances.
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Death proceeds:
Upon the insured's death, the insurer requires acceptable proof
of death before it pays the claim. The normal minimum proof
required is a death certificate and the insurer's claim form
completed, signed (and typically notarized).[citation needed] If
the insured's death is suspicious and the policy amount is large,
the insurer may investigate the circumstances surrounding the
death before deciding whether it has an obligation to pay the
claim.
Proceeds from the policy may be paid as a lump sum or as an
annuity, which is paid over time in regular recurring payments
for either a specified period or for a beneficiary's lifetime.
[citation needed]
Insurance vs Assurance:
The specific uses of the terms "insurance" and "assurance" are
sometimes confused. In general, in these jurisdictions
"insurance" refers to providing cover for an event that might
happen (fire, theft, flood, etc.), while "assurance" is the
provision of cover for an event that is certain to happen.
"Insurance" is the generally accepted term, but people using
this description are liable to be corrected. In the United States
both forms of coverage are called "insurance", principally due
to many companies offering both types of policy, and rather
than refer to themselves using both insurance and assurance
titles, they instead use just one.

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NON-LIFE INSURANCE.

What is General Insurance?

Insurance other than Life Insurance falls under the
category of General Insurance. General Insurance comprises of
insurance of property against fire, burglary etc, personal
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insurance such as Accident and Health Insurance, and liability

insurance which covers legal liabilities. There are also other
covers such as Errors and Omissions insurance for
professionals, credit insurance etc.
Non-life insurance companies have products that cover
property against Fire and allied perils, flood storm and
inundation, earthquake and so on. There are products that
cover property against burglary, theft etc. The non-life
companies also offer policies covering machinery against
breakdown,there are policies that cover the hull of ships and so
on. A Marine Cargo policy covers goods in transit including by
sea, air and road. Further, insurance of motor vehicles against
damages and theft forms a major chunk of non-life insurance
business.
In respect of insurance of property, it is important that the
cover is taken for the actual value of the property to avoid
being imposed a penalty should there be a claim. Where a
property is undervalued for the purposes of insurance, the
insured will have to bear a rateable proportion of the loss. For
instance if the value of a property is Rs.100 and it is insured for
Rs.50/-, in the event of a loss to the extent of say Rs.50/-, the
maximum claim amount payable would be Rs.25/- ( 50% of the
loss being borne by the insured for underinsuring the property
by 50% ). This concept is quite often not understood by most
insureds.
Personal insurance covers include policies for Accident,
Health etc. Products offering Personal Accident cover are
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benefit policies. Health insurance covers offered by non-life

insurers are mainly hospitalization covers either on
reimbursement or cashless basis. The cashless service is
offered through Third Party Administrators who have
arrangements with various service providers, i.e., hospitals. The
Third Party Administrators also provide service for
reimbursement claims. Sometimes the insurers themselves
process reimbursement claims.
Accident and health insurance policies are available for
individuals as well as groups. A group could be a group of
employees of an organization or holders of credit cards or
deposit holders in a bank etc. Normally when a group is
covered, insurers offer group discounts.
Liability insurance covers such as Motor Third Party
Liability Insurance, Workmens Compensation Policy etc offer
cover against legal liabilities that may arise under the
respective statutes Motor Vehicles Act, The Workmens
Compensation Act etc. Some of the covers such as the
foregoing (Motor Third Party and Workmens Compensation
policy ) are compulsory by statute. Liability Insurance not
compulsory by statute is also gaining popularity these days.
Many industries insure against Public liability. There are liability
covers available for Products as well.
There are general insurance products that are in the
nature of package policies offering a combination of the covers
mentioned above. For instance, there are package policies
available for householders, shop keepers and also for
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professionals such as doctors, chartered accountants etc. Apart

from offering standard covers, insurers also offer customized or
tailor-made ones.
Suitable general Insurance covers are necessary for every
family. It is important to protect ones property, which one
might have acquired from ones hard earned income. A loss or
damage to ones property can leave one shattered. Losses
created by catastrophes such as the tsunami, earthquakes,
cyclones etc have left many homeless and penniless. Such
losses can be devastating but insurance could help mitigate
them. Property can be covered, so also the people against
Personal Accident. A Health Insurance policy can provide
financial relief to a person undergoing medical treatment
whether due to a disease or an injury.
Industries also need to protect themselves by obtaining
insurance covers to protect their building, machinery, stocks
etc. They need to cover their liabilities as well. Financiers insist
on insurance. So, most industries or businesses that are
financed by banks and other institutions do obtain covers. But
are they obtaining the right covers? And are they insuring
adequately are questions that need to be given some thought.
Also organizations or industries that are self-financed should
ensure that they are protected by insurance.
Most general insurance covers are annual contracts.
However, there are few products that are long-term.It is
important for proposers to read and understand the terms and
conditions of a policy before they enter into an insurance
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contract. The proposal form needs to be filled in completely and

correctly by a proposer to ensure that the cover is adequate
and the right one.

PROMOTION OF FINANCIAL PRODUCT:

Advertisement of life insurance:Advertising plays a very important role in modern business.

Due to excessive specialization, mass production and
competition, advertising has become an indispensable activity
in business. It is growing as a backbone of modern national and
international marketing. When life insurance is being talked of,
it is one of the hottest picks in the insurance industry. Keeping
this in view, insurance companies try to pull crowd towards life
insurance, and go for different advertisement techniques to
attract people.
Life insurance Advertising companies are employing every
new mean to advertise themselves. The most obvious but
expensive forms of advertising being employed by them is the
television. A huge number of people are glued to the television,
so insurance companies target this medium on a prime basis.
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They build distinct advertisements that arrest the attraction of

the viewers, thus putting a mark on them about the importance
of life insurance and what they have to offer. TV
advertisements are very effective since target audience both
see and listen to what is being told at the same time.
Advertising about life insurance in local newspapers is also
a very effective way to advertise and market the agency, since
the companies try to build brand name recognition for
themselves. The online version of the Wall Street Journal has
over 4.5 million visitors, having a catchy insurance
advertisement there will definitely pull a big crowd. Life
insurance companies also understand that local audience and a
family type atmosphere is a great way for advertising insurance
business. So, these firms play their advertisements in movie
halls when people are out with their family to watch a film,
typically coming up when viewers are sitting in their seats
waiting for the movie to start
Life insurance companies are also finding different
innovative ways of advertising their brand. They are
distributing newsletters so as to reach target customers in
person. These firms are also advertising life insurance through
their business stationary and supplies. They distribute stuffs
like pens, paperweights, calendars etc with their names
embarked on the stuffs. Online advertisements on popular web
portals are also being employed by these firms. Along with
publicizing their brand names, the life insurance companies
also keep reminding people about the importance of getting life
insurance.
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Introduction to promotion of financial product:

Financial products are characterized by two-way
communication and fiduciary responsibility, in addition to the
standard set of four characteristics of services, that is,
intangibility, inseparability, heterogeneity, and perishability.
Certain types of financial instruments also have issues with
respect to lack of transparency of performance, uncertainty of
outcome, and poor comparability. The macro-environment of
the financial products sector can be classified broadly into
economic environment, socio-cultural environment, political
and legal environment. The sector is regulated by various
bodies at various levels in India, including the government, the
Reserve Bank of India (RBI), the Securities and Exchange Board
of India (SEBI), and the Insurance Regulatory & Development
Authority (IRDA). The micro environment includes suppliers,
customers, channel members or marketing intermediaries,
competitors, and the society at large. The internal environment
is within the control of the management; it includes the mission
and objectives of the company, management structure, human
resources, company image and reputation, and technology.
In the liberalized era, competition between organizations
and the resultant pressure to maintain profitability were two of
the important factors that led to the marketing orientation. As a
result, there was a shift in marketing practices, especially in
product customization, technology adoption, and customer
service.
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Customer Focus in Financial Products:

Various factors influence consumer behavior in purchasing
financial products. A situational approach can be adopted to
understand buyer behavior. Specifically, Beckett's matrix
classifies consumers of financial products on the basis of level
of involvement and consumer confidence (which depends on
the perceived uncertainty). Marketing has to be viewed from
the perspective of three levels in an organization -- corporate
level, business unit level, and functional level.
Marketing research is an important function that
contributes to the marketing of financial products in terms of
market structure analysis, market potential, and demand
forecasting. To satisfy the requirements of marketers,
marketing research provides information on customers,
markets, and the competition. Segmentation models can be
broadly categorized into a priori and post hoc approaches.
Various bases of segmentation are applicable for segmenting
consumers. Financial marketers generally adopt one of the
following targeting strategies -- undifferentiated marketing,
differentiated marketing, and concentrated marketing.
It should be noted that positioning in financial products
marketing differs from that of other products and services in
that organizational positioning is given more importance than
product level positioning. The corporate brand can be
positioned based on various factors such as price, relationship
or service benefit, security benefit, user type, accessibility
benefit, and perceived quality.
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Customer service is an important factor that differentiates

the product offerings in the service industry. Service quality can
be improved along the dimensions of tangibles, reliability,
responsiveness, assurance, and empathy. Financial product
marketers need to imbibe in them the philosophy of providing
quality customer service in order to increase their profitability.
Good customer service and proper handling of customer
complaints pave the way for building lasting relationships.
Financial product marketers need to manage their product
portfolio in response to the changing environment and
consumer needs, in addition to managing customer
relationships effectively for achieving long-term profitability.
The concept of a product can be understood in terms of the
following four terms - actual product, expected product,
augmented product, and potential product. For a financial
product, the product strategy is greatly influenced by
customers, competitors, technology, and government &
legislation. Depending on these factors, the product mix
strategy could be product mix expansion, product mix
contraction, and product modification. Branding in financial
services is done more at the corporate level than at the product
level. Branding should start with a clear strategy for targeting
and positioning. The brand image should be consistent with the
marketing strategy. Advertising can be successful in building
the brand only if the financial product caters to the
requirements of the consumer and the entire service
experience is consistent with the brand image that is
communicated. In the financial product sector, brands can
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occur in three tiers -- master brand, core brands, and sub-core

brands.
When there are multiple tiers, the brands in all the tiers
should convey the same organizational values. These values
can be communicated through brand logos and taglines. CRM is
a strategic tool for marketers to acquire customers, retain
them, and maintain long-term profitable relationships with
them. It uses information technology to achieve these
objectives. Competitive pressures have led marketers to realize
the necessity of customer retention to survive in a deregulated
economy. CRM has enabled the shift in approach from being
product-centric to being customer-centric. In addition to
maximizing customer value, CRM helps marketers to cross-sell
products, achieve long-term profitability, and build the brand.
Relationship marketing is concerned with relationships
that exist between any two stakeholders of a business. It
involves relationship building with both external customers and
internal customers. In an organization, relationship marketing
can be at one of the following five levels -- basic, reactive,
accountability, proactive, and partnership levels. One-to-one
marketing essentially involves knowing about each and every
possible need of the targeted customers and developing tailormade solutions for them. To implement one-to-one marketing,
the marketer needs to identify the target customers,
differentiate them into groups, interact with each customer
group, and provide customized products and solutions in a costeffective manner. This can be done using the technique of mass
customization.
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Customer knowledge, customer loyalty, and customer

switching are three important concepts in CRM. The
components of customer knowledge can be classified into three
broad categories: knowledge about the customer, knowledge to
support the customer, and knowledge from the customer.
Customer loyalty can be either affirmative loyalty or reluctant
loyalty. The level of affirmative loyalty is influenced not only by
traditional factors, such as customers, product offerings,
employees, and measurement systems, but also on emerging
practices such as electronic customer care. Eight different
reasons have been identified for customer switching. They
include (a) core service failures, (b) service encounter failures,
(c) price failures, (d) inconvenience, (e) employee response to
service failures, (f) attraction by competitors, (g) ethical
problems, and (h) involuntary switching. The first five reasons
in this list can be addressed through the use of CRM
techniques.
Implementation of CRM includes customer knowledge
management, technology adoption and implementation, and
performance measurement. The customer knowledge
management process (journey) is a cycle with four inter-related
steps - developing a customer-focused strategy; developing the
customer buying process; implementing actions, tactics,
campaigns; and customer learning. Technology implementation
has become the key to CRM implementation in an organization
as huge volumes of customer data can be stored, managed,
and retrieved using the latest technologies. CRM software tools

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can be categorized into operational CRM tools and analytical

CRM tools.
When the performance measurement of the CRM activities
is done using a carefully defined basket of metrics, it helps in
managing and controlling the CRM initiatives in the
organization. In the future, large enterprises in India are
expected to opt for CRM applications which have pre-built
interfaces with standard ERP applications, while the small and
medium business enterprises may still continue to use standalone CRM applications. The usage of CRM in India is expected
to evolve from ensuring operational efficiency (in customer
handling) to yielding strategic benefits -- through real-time
customer segmentation, and co-creation of products with
customers.
The marketing of bank products to corporate customers is
discussed in the chapter. On the basis of sales volume and/or
capital employed, banks may classify corporate customers into
three segments large corporations, mid-size companies, and
small and medium business enterprises (SMEs). Corporate
customers may also be segmented into industry verticals, such
as automobiles, aviation, tourism, etc. As part of their
marketing efforts, banks develop long-term relationships with
their corporate customers. Strong relationships help the banks
improve profitability and retain customers in a competitive
market. The interactions and relationships between the banks
and their corporate customers are influenced by three groups
of factors the external environment, the atmosphere of the
interactions, and the interaction process. The 'Partnership
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Relationship Lifecycle Model' describes the evolution of the

bank-corporate customer relationship, beginning at an early
stage where a 'customer' shows interest in the bank's offerings,
and maturing to become a mutually beneficial 'partnership
relationship' between the 'client' and the bank.
Banking products are broadly classified into fund-based
products and fee-based services. Fund-based products are
further sub-divided into asset products and liability products.
Liability products include salary accounts, current accounts,
fixed deposits, and payment cards. Asset products include
various kinds of credit products like trade finance, corporate
finance, project finance, and term loans. New product
development and innovation are considered vital for a bank's
long term sustainability. Banks need to address the changing
requirements of their clients through new product
development. However, financial products can be easily copied.
To maintain differentiation, banks also need to come up with
innovations on how they deliver the new product.
The pricing of banking products directly impacts customer
retention and customer acquisition, in addition to profitability
and long-term viability. For the marketer, price is a mechanism
to cover the costs of operations which include production costs,
distribution costs, promotion costs, and other operational
expenses. The pricing decision is influenced by cost,
competition, customers, and other constraints. With the advent
of deregulation and the consequent increase in competition,
many of the banks have adopted a competitive pricing strategy.
RBI has deregulated the pricing mechanism for both asset and
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liability products. Every bank has to set its own Benchmark

Prime Lending Rate (BPLR) to price its asset products. A bank
may price its asset products (for a given customer either above
or below the BPLR, depending on situational factors such as
creditworthiness of the customer, stage of relationship, etc.
Personal selling is the most important component of the
promotional mix for corporate banking. As personal selling is a
two-way interaction, it also plays an important role in the
service delivery. To reduce the overall cost of personal selling,
banks may use direct-response advertising or telemarketing to
identify high potential customers, who are then approached
through the personal selling option. Advertising is used to reach
out to a vast audience in a cost-effective manner, as at the
time of introducing a new product or service. Public Relations
(PR) is used to provide publicity to the bank, to improve its
public image, and to overcome a negative image (if any). PR
tools include press releases, annual reports, seminars and
speeches, cause-related marketing, in-house magazines &
newsletters, corporate social responsibility (CSR) initiatives,
and event sponsorships. As part of sales promotion, banks give
employees incentives to achieve business targets such as
volume of new business, extent of cross-selling, etc. Customer
promotions (such as gifts) are less important as banks can
decide the price (interest rate) for customers on a case-to-case
basis.
Corporate banking products are distributed mainly through
bank branches and a direct sales force, supplemented by phone
and Internet banking. Relationship officers are based at
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different branches; they make frequent client visits to nurture

relationships and to develop new business opportunities. Banks
attempt to develop an optimal distribution mix using
personal/non-personal modes of delivery, in order to achieve
multiple objectives such as superior customer service,
operational efficiency, and profitability. Integrated banking
software applications usually referred to as Core Banking
Solutions (CBS) -- are vital to the real-time synchronization of
the transactions that happen through the different modes of
distribution.
The small and medium business enterprises (SME) sector
is considered as the growth engine of the Indian economy; it
generates employment for nearly 30 million people and
contributes around 30 percent to the nation's GDP. However,
corporate bankers neglected this segment for a long time due
to the high incidence of Non-Performing Assets (NPA) and the
lack of proper methods to assess the credit rating of the SMEs.
This trend is changing and the SME segment is now one of the
focus areas of growth for many banks. This shift has been
influenced by the policy initiatives introduced by the
Government and the RBI in favor of SMEs. With large
enterprises getting access to cheaper funds from other
channels, their bargaining power has increased with respect to
the banks. This situation has also induced corporate bankers to
look at SMEs as an avenue for profitable growth.

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