CHAPTER.

INTRODUCTION TO INSURANCE

Every risk involves the loss of one or other kind. In older time, the contribution by the
person was made at the time of loss. Today, only one business, which offers all walks of
life, is insurance business. Owing to growing complexity of life, trade and commerce,
individual and business firms and turning to insurance to manage various risks. Every
individual in this world is subject to unforeseen uncertainties which may make him and
his family vulnerable. At this place, only insurance helps him not only to survive but
also recover his loss and continue his life in a normal manner. Insurance is an important
aid to commerce and industry. Every business enterprise involves large number of risks
and uncertainties. It may involve risk to premises, plant and machinery, raw material
and other things. Goods may be damaged or may be destroyed due to fire or flood.
Some risk can be avoided by timely precautions and some are unavoidable and are
beyond the control of a business. These unavoidable risks can be protected by
insurance.

In simple terms “Insurance is a co-operative device to spread the loss caused by a

particular risk over a number of persons, who are exposed to it and who agree to insure
themselves against the risk “Insurance may be defined as form of contract between
two parties (namely insurer and insured or assured) whereby one party (insurer)
undertakes in exchange for a fixed amount of money (premium) to pay the other party
(Insured), a fixed amount of money on the happening of certain event (death or
attaining a certain age in case of life) or to pay the amount of actual loss when it takes
place through the risk insured (in case of property)

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TERMINOLOGY USED IN DEFINITION OF INSURANCE

Insurer or insurance company – The agency involved in Insurance business is known as

insurer

Insured/ Assured – The person who gets his property/life insured is known as insured

Policy - The agreement or contract which is put in writing is known as a Policy

Premium – The consideration in return of which the insurer undertakes to make goods
the loss or give a certain amount in case of life insurance is known as premium

NATURE OF INSURANCE

Following are the main characteristics of insurance which are applicable to all types
of insurance (life, fire, marine and Life Insurance).

1. Sharing of Risks - Insurance is a device to share the financial losses which may occur
to individual or his family on the happening of certain events

2. Co-operative Device – Insurance is a co-operative device to spread the loss caused

by a particular risk over a large caused by a particular risk over a large number of
persons who are exposed to it and who agree to insure themselves against the risk.

3. Value of Risk – Risk is evaluated at the time of insurance. There are several methods
of valuing the risk. Higher the risks, higher will be premium

4. Payment on Contingency -If the contingency occurs, payment is made; payment is

made only for insured contingency. If there is no contingency, no payment is Made.

5. Amount of Payment of Claim - The amount of payment depends upon the value of
loss occurred due to the particular insured risk. The insurance is there up to that

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 amount. In life insurance insurer pay a fixed sum on the happening of an event or
within a specified time period...

6. Insurance is different from Charity - In charity, there is no consideration but

insurance is not given without premium

7. Large number of Insured Person - Insurance is spreading of loss over a large

number of persons. Larger the number of persons, lower the cost of insurance and
amount of premium and incase lower the number of persons, higher the cost of
insurance and amount of premium.

ORIGIN OF INSURANCE

Whenever there is uncertainty there is risk. We do not have any control over
uncertainties which involves financial losses. The risk 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. It comes under service sector and while
marketing this service due care is taken in quality product and customer
satisfaction. The main function of the Insurance is to provide protection against
the possible chances of generating losses. The insurance sector in India has come
a full circle from being an open competitive market to nationalization and back
to a liberalized market again. Tracing the developments in the Indian insurance
sector reveals the 360-degree turn witnessed over a period of almost two
centuries

3
BRIEF HISTORY OF THE INSURANCE SECTOR

The business of life insurance in India in its existing form started in India in the year
1818 with the establishment of the Oriental Life Insurance Company in Calcutta.
Some of the important milestones in the life insurance business in India are:

1912: The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the
central government and nationalized. LIC formed by an Act of Parliament, viz. LIC
Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.
The Life Insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first Life Insurance company established in the
year 1850 in Calcutta by the British.

Some of the important milestones in the Life Insurance business in India are:

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all
classes of Life Insurance business.

1957: Life Insurance Council, a wing of the Insurance Association of India, frames a
code of conduct for ensuring fair conduct and sound business practices.

4
1968: The Insurance Act amended to regulate investments and set minimum
solvency margins and the Tariff Advisory Committee set up.

1972: The Life Insurance Business (Nationalization) Act, 1972 nationalized the Life
Insurance business in India with effect from 1st January 1973. 107 insurers
amalgamated and grouped into four companies’ viz. the National Insurance
Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance
Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a
company. INSURANCE SECTOR

The opening up of Insurance sector was a part of the on going liberalization in the
financial sector of India. The changing face of the financial sector and the entry of
several companies in the field of life and non life Insurance segment are one of the
key results of these liberalization efforts. Insurance business by way of generating
premium income adds significantly to be the GDP.

Over the past three years, more than thirty companies have expressed interest in
doing business in India. The IRDA (Insurance Regulatory Development Authority) is
the regulatory authority, which looks over all related aspects of the insurance
business. The provisions of the IRDA bill acknowledge many issues related to
insurance sector.

The IRDA bill provides guidance for three levels of players - Insurance Company,
Insurance brokers and Insurance agent. Life Insurance sector is one of the key areas
where enormous business potential exists. In India currently the life insurance
premium as a percentage of GDP is 1.3 % against, 5.2 per cent in the US.Life
Insurance is another segment, which has been growing at a faster pace. But as per
the current comparative statistics.

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Life Insurance Business, Life Insurance Corporation (GIC) and its four subsidiaries
viz. New India Insurance, Oriental Insurance, National Insurance and United India
Insurance, are doing major business. The Life Insurance Industry has been growing
at a rate of 19 percent per year.

The entry of several private insurance companies, particularly international

insurance companies, through joint ventures, will speed up the process of insurance
mobilization. The competition will unleash new schemes and benefits, which will
give consumers a better Chance to save as well as insure. The regulatory system in
India is relatively new and takes some more time to make the Insurance sector a
perfectly competitive one.

Insurance Regulatory Authority of India issued regulations on 15 subjects which

included appointed. Actuary, actuarial report, Insurance agents, Solvency margins,
re-insurance, registration of Insurers, and obligation of insurers to rural and social
sector, investment and accounting procedure. The reform in Insurance in India is
guided by factors like availability of a variety of products at a competitive price,
improvement in the quality of customer services etc.

Also the employment opportunities in the Insurance sector wil1 increase as major
players set their business plans in India. The policy of the government to open up
the financial sector and the Insurance sector is expected to bring greater FDI inflow
into the country.

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INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor
R.N. Malhotra was formed to evaluate the Indian insurance industry and recommend
its future, direction. The Malhotra committee was set up with the objective of
complementing the reforms initiated in the financial sector.

In 1994, the committee submitted the report and some of the key recommendations
included:

STRUCTURE:

1.Government stake in the insurance Companies to be brought down to 50%.

2. Government should take over the holdings of GlC and its subsidiaries so that these
subsidiaries can act as independent corporations.

3. All the insurance companies should be given greater freedom to operate.

COMPETITION:

I. Private Companies with a minimum paid up capital of Rs. 1 bn should be allowed to

enter the industry.

2. No Company should deal in both Life and Life Insurance through a single entity.

3. Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.

4. Postal Life Insurance should be allowed to operate in the rural market.

5. Only one State Level Life Insurance Company should be allowed to operate in each
state

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REGULATORY BODY:

1. The Insurance Act should be changed.

2. An Insurance Regulatory body should be set up.
Controller of Insurance (Currently a part from the Finance Ministry) should be
made independent.

INVESTMENT:

1. Mandatory Investments of LIC Life Fund in government securities to be

reduced from 75% to 50%.
2. GIC and its subsidiaries are not to hold more than 5% in any company (There
current holdings to be brought down to this level over a period of time.)

CUSTOMER SERVICE:

1. LIC should pay interest on delays in payments beyond 30 days.

2. Insurance companies must be encouraged to set up unit linked pension plans.
3. Computerization of operations and updating of technology to be carried out in
the insurance industry.
The committee emphasized that in order to improve the customer

Services and increase the coverage of the insurance industry should open up to
competition. But at the same time, the committee felt the need to exercise caution
as any failure on the part of new players could ruin the public confidence in the
industry.

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INSURANCE REGULATORY AUTHORITY

On the recommendations of the Malhotra Committee, government has set up an

interim Insurance Regulatory Authority (IRA), with a view to activate an insurance
regulatory apparatus essential for proper monitoring and control of the insurance
industry. The IRA is headed by a chairman who is also Controller o0f insurance and
chairman of TBC. The other members of the IRA, not exceeding seven in number of
whom not more than three shall serve full time, shall be nominated by the central
government.

INSURERS:
Insurance industry, as on 1.4.2000, comprised mainly two players: the state
insurers.

LIFE INSURES
• Life Insurance Corporation of India (LIC) General Insurers

GENERAL INSURES
• Life Insurance Corporation of India (GIC) (with effect from Dec ‘2000, a national
reinsurer)

4 I’S OF INSURANCE SERVICE

The 4 I’s refers to the different dimensions/ characteristics of any service. Unlike
pure product, services have its own characteristics and its related problems. So the
service provider needs to deal with these problems accordingly. The service
provider has to design different strategies according the varying feature of the
service.

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These 4 I’s can be broadly classified as:

• Intangibility

• Inconsistency

• Inseparability

• Inventory

Intangibility: Insurance is a guarantee against risk and neither the risk nor the
guarantee is tangible. Hence, insurance rightly come under services, which are
intangible. Efforts have been made by the insurance companies to make insurance
tangible to some extent by including letters and forms

Inconsistency: Service quality is often inconsistent. This is because service personnel

have different capabilities, which vary in performance from day to day. This problem
of inconsistency in service quality can be reduced through standardization, training
and mechanization.

Inseparability: Services are produced and consumed simultaneously. Consumers

cannot and do not separate the deliverer of the service from the service itself.
Interaction between consumer and the service provider varies based on whether
consumer must be physically present to receive the service.

Inventory: No inventory can be maintained for services. Inventory carrying costs are
more subjective and lead to idle production capacity. When the service is available
but there is no demand, cost rises as, cost of paying the people and overhead
remains constant even though the people are not required to provide services due
to lack of demand.In the insurance sector however, commission is paid to the agents
on each policy that they sell.

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SOME PLAYERS IN THE INDUSTRY:

Life Insurance Life Insurance

Life Insurance Corporation of India. Life Insurance Corporation of India.

1. Oriental Insurance Company Ltd.
2. New India Assurance Company Ltd.
3. National Insurance Company Ltd.
4. United India Insurance Company Ltd.

New Entrants

ICICI Prudential Life Insurance Ltd. Bajaj Alliaz Life Insurance Company Ltd.

Tata AIG Life Insurance Corporation Ltd. Reliance Life Insurance Company Ltd.

ING Vysya Life Insurance Corporation Ltd. Tata AIG Life Insurance Company Ltd.

Om Kotak Mahindra Life Insurance Royal Sundaram Alliance Insurance Company

Corporation Ltd. Ltd.

RELIENCE LIFE INSURANCE Life Insurance

HDFC Standerd Life Insurance Company Ltd Company Ltd.

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IMPORTANCE OF INSURANCE

The world we live in is full of uncertainties and risks. Individuals, families, businesses,
properties and assets are exposed to different types and levels of risks. These include
risk of losses of life, health, assets, property, etc. While it is not always possible to
prevent unwanted events from occurring, financial world has developed products that
protect individuals and businesses against such losses by compensating them with
financial resources. Insurance is a financial product that reduces or eliminates the cost
of loss or effect of loss caused by different types of risks.

Apart from protecting individuals and businesses from many kinds of potential risks,
the Insurance sector contributes significantly to the general economic growth of the
nation by providing stability to the functioning of businesses and generating long-term
financial resources for the industrial projects.

Among other things, Insurance sector also encourages the virtue of savings among
individuals and generates employments for millions, especially in a country like India,
where savings and employment are important.

Let’s understand in detail how and why Insurance as a sector is key to development of
any economy.

Provides Safety and Security to Individuals and Businesses: Insurance provides

financial support and reduces uncertainties that individuals and businesses face at
every step of their lifecycles. It provides an ideal risk mitigation mechanism against
events that can potentially cause financial distress to individuals and businesses. )

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Generates Long-term Financial Resources: The Insurance sector generates funds by
way of premiums from millions of policyholders. Due to the long-term nature of these
funds, these are invested in building long-term infrastructure assets (such as roads,
ports, power plants, dams, etc.) that are significant to nation-building. Employment
opportunities are increased by big investments leading to capital formation in the
economy.

Promotes Economic Growth: The Insurance sector makes a significant impact on the
overall economy by mobilizing domestic savings. Insurance turn accumulated capital
into productive investments. Insurance also enables mitigation of losses, financial
stability and promotes trade and commerce activities those results into sustainable
economic growth and development. Thus, insurance plays a crucial role in the
sustainable growth of an economy.

Provides Support to Families during Medical Emergencies: Well-being of family is

important for all and health of family members is the biggest concern for most. From
elderly parents to newborn children, medication and hospitalization play important
role while ensuring well-being of families. Rising medical treatment costs and soaring
medicine prices are enough to drain your savings if not well prepared. Anyone can fall
victim to critical illnesses (such as heart attack, stroke, cancer etc.) unexpectedly.

And rising medical expense is of great concern. Medical Insurance is a policy that
protects individuals financially against different type of health risks. With a Health
Insurance policy, an insured gets financial support in case of medical emergency.

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Spreads Risk: Insurance facilitates moving of risk of loss from the insured to the insurer.
The basic principle of insurance is to spread risk among a large number of people. A
large population gets insurance policies and pay premium to the insurer. Whenever a
loss occurs, it is compensated out of corpus of funds collected from the millions of
policyholders.

BENEFIT OF INSURANCE CAN BE DIVIDED INTO THESE CATEGORIES -

1. Benefits to Individual

2 Benefits to Business or Industry

3. Benefits to the Society

1. BENEFITS TO INDIVIDUAL

(a) Insurance provides security & safety: Insurance gives a sense of security to the
policy holder. Insurance provide security and safety against the loss of earning at death
or in old age, against the loss at fire, against the loss at damage, destruction of
property, goods, furniture etc.

(b) Encourage Savings: Life insurance is best form of saving. The insured person must
regularly save out of his current income an amount equal to the premium to be paid
otherwise his policy get lapsed if premium is not paid on time.

(c) Providing Investment Opportunity: Life insurance provides different policies in

which individual can invest smoothly and with security; like endowment policies,
deferred annuities etc. There is special exemption in the Income Tax, Wealth Tax etc.
regarding this type of investment

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2. BENEFITS TO BUSINESS OR INDUSTRY

(a) Shifting of Risk: Insurance is a social device whereby businessmen shift specific
risks to the insurance company. This helps the businessmen to concentrate more on
important business issues.

(b) Assuring Expected Profits: An insured businessman or policyholder can enjoy

normal expected profits as he would not be required to make provisions or allocate
funds for meeting future contingencies.

(c) Improve Credit Standing: Insured assets are easily accepted as security for loans by
the Insurance Companys and financial institutions so insurance improve credit standing
of the business firm

(d) Business Continuation – With the help of property insurance, the property of
business is protected against disasters and chance of closure of business is reduced

3. BENEFITS TO THE SOCIETY

(a) Capital Formation: As institutional investors, insurance companies provide funds

for financing economic development. They mobilize the saving of the people and invest
these saving into more productive channels

(b) Generating Employment Opportunities: With the growth of the insurance business,
the insurance companies are creating more and more employment opportunities.

(c) Promoting Social Welfare: Policies like old age pension scheme, policies for
education, marriage provide sense of security to the policyholders and thus ensure
social welfare.

(d) Helps Controlling Inflation: The insurance reduces the inflationary pressure in two
ways, first, by extracting money in supply to the amount of premium collected and
secondly, by providing funds for production narrow down the inflationary gap.

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FUNCTIONS OF INSURANCE

Functions of insurance can be divided into parts;

I Primary functions.

II Secondary functions.

PRIMARY FUNCTIONS

1. Certainty of compensation of loss: Insurance provides certainty of payment at

the uncertainty of loss. The elements of uncertainty are reduced by better
planning and administration. The insurer charges premium for providing
certainty.

2. Insurance provides protection: The main function of insurance is to provide

protection against risk of loss. The insurance policy covers the risk of loss. The
insured person is indemnified for the actual loss suffered by him. Insurance thus
provide financial protection to the insured. Life insurance policies may also be
used as collateral security for raising loans.

3. Risk sharing: All business concerns face the problem of risk. Risk and insurance
are interlinked with each other. Insurance, as a device is the outcome of the
existence of various risks in our day to day life. It does not eliminate risks but it
reduces the financial loss caused by risks.

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SECONDARY FUNCTIONS

1. Prevention of losses: The insurance companies help in prevention of losses as

they join hands with those institutions which are engaged in loss prevention
measures. The reduction in losses means that the insurance companies would be
required to pay lesser compensations to the assured and manage to accumulate
more savings, which in turn, will assist in reducing the premiums.

2. Providing funds for investment: Insurance provides capital for society.

Accumulated funds through savings in the form of insurance premium are
invested in economic development plans or productivity projects.

3. Insurance increases efficiency: The insurance eliminates the worries and

miseries of losses. A person can devote his time to other important matters for
better achievement of goals. Businessman feel more motivated and encouraged
to take risks to enhance their profit earning. This also helps in improving their
efficiencies.
4. Solution to social problems: Insurance takes care of many social problems. We
have insurance against industrial injuries, road accident, old age, disability or
death etc.

5. Encouragement of savings: Insurance not only provides protection against risks

but also a number of other incentives which encourages people to insure. Since
regularity and punctuality pf payment of premium is a perquisite for keeping the
policy in force, the insured feels compelled to save.

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PRINCIPLES OF INSURANCE

The basic principles which govern the insurance are -

1. Principle of utmost good faith: A contract of insurance is a contract of Uberrimae

Fidei’ i.e., of utmost good faith. Both insurer and insured should display the utmost
good faith towards each other in relation to the contract. In other words, each
party must reveal all material information to the other party whether such
information is asked or not. There should not be any fraud, non-disclosure or
misrepresentation of material facts.

2. Principle of Insurable Interest: This principle requires that the insured must
have an insurable interest in the subject matter of insurance. Insurance interest
means some pecuniary interest in the subject matter of contract of insurance.
Insurance interest is that interest, when the policy holders get benefited by the
existence of the subject matter and loss if there is death or damage to the
subject matter.

3. Principle of Indemnity: This principle is applicable in case of fire and marine

insurance only. It is not applicable in case of life, personal accident and sickness
insurance. A contract of indemnity means that the insured in case of loss against
which the policy has been insured, shall be paid the actual cost of loss not
exceeding the amount of the insurance policy. The purpose of contract of
insurance is to place the insured in the same financial position, as he was before
the loss.

4. Principle of Contribution: The principle of contribution is a corollary to the

doctrine of indemnity. It applies to any insurance which is a contract of indemnity.
So it does not apply to life insurance. A particular property may be insured with
two or more insurers against the same risks.
18
 The right of contribution arises when:

(a) There are different policies which related to the same subject matters;

(b) The policies cover the same period which caused the loss;

(c) All the policies are in force at the time of loss; and

(d) One of the insurers has paid to the insured more than his share of loss.

5. Principle of Subrogation: The doctrine of subrogation is a collorary to the

principle of indemnity and applies only to fire and marine insurance. According to
doctrine of subrogation, after the insured is compensated for the loss caused by
the damage to the property insured by him, the right of ownership to such
property passes to the insurer after settling the claims of the insured in respect
of the covered loss.

6. Principle of Causa Proxima: Causa proxima means proximate cause or cause

which, in a natural and unbroken series of events, is responsible for a loss or
damage. The insurer is liable for loss only when such a loss is proximately caused
by the peril insured against. The cause should be the proximate cause and can
not the remote cause. If the risk insured is the remote cause of the loss, then the
insurer is not bound to pay compensation. The nearest cause should be
considered while determining the liability of the insured. The insurer is liable to
pay if the proximate cause is insured.

7. Principle of Mitigation of Loss: An insured must take all reasonable care to

reduce the loss. We must act as if the property was not insured.If a house is
insured against fire, and there is accidental fire, the owner must take all
reasonable steps to keep the loss minimum.

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TYPE OF INSURANCE

Insurance cover various types of risks and include various insurance policies
which provide protection against various losses.

There are two different views regarding classification if insurance:-

I. From the business point of view; and

II From the risk points of view

I.BUSINESS POINT OF VIEW

The insurance can be classified into three categories from business point of view

1. Life insurance;

2. Life Insurance; and

3. Social Insurance.

1. Life Insurance: The life insurance contract provide elements of protection and
investment after getting insurance, the policyholder feels a sense of protection
because he shall be paid a definite sum at the death or maturity. Since a definite
sum must be paid, the element of investment is also present. In other words,
life insurance provides against pre-mature death and a fixed sum at the maturity
of policy. At present, life insurance enjoys maximum scope because each and
every person requires the insurance.Life insurance is a contract under which one
person, in consideration of a premium paid either in lump sum or by monthly,
quarterly, half yearly or yearly installments, undertakes to pay to the person (for
whose benefits the insurance is made), a certain sum of money either on the
death of the insured person or on the expiry of a specified period of time.

20
Life insurance offers various polices according to the requirement of the
persons -

- Term Assurance

- Whole Life

- Endowment Assurance

- Family Income Policy

- Life Annuity Joint Life Assurance

- Pension Plans

2. Life Insurance: The Life Insurance includes property insurance, liability insurance
and other form of insurance. Property insurance includes fire and marine
insurance. Property of the individual and business involves various risks like fire,
theft etc. This need insurance Liability insurance includes motor, theft, fidelity
and machine insurance

Types of Life Insurance policies available are -

- Health Insurance

- Medi- Claim Policy

- Personal Accident Policy

- Group Insurance Policy

- Business Insurance

- Fire Insurance Policy

- Travel Insurance Policy etc.

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 3. Social Insurance: Social insurance provides protection to the weaker sections of
the society who is unable to pay the premium. It includes pension plans,
disability benefits, unemployment benefits, sickness insurance and industrial
insurance.

II. RISK POINTS OF VIEW

The insurance can be classified into three categories from Risk point of view

1. Property Insurance

2. Liability Insurance

3. Other forms of Insurance

1. Property Insurance: Property of the individual and business is exposed to risk of

fire, theft marine peril etc. This needs insurance. This is insured with the help of:-

(i) Fire Insurance

(ii) Marine Insurance

(iii) Miscellaneous Insurance

(i) Fire Insurance: Fire insurance covers risks of fire. It is contract of

indemnity. Fire insurance is a contract under which the insurer agrees to
indemnify the insured, in return for payment of the premium in lump sum or
by instalments, losses suffered by the him due to destruction of or damage to
the insured property, caused by fire during an agreed period of time. It
includes losses directly caused through fire or ignition. There are various types
of fire insurance policies.

- Consequential loss policy - Valued policy

- Valuable policy etc. - Comprehensive policy

22
 (ii)Marine Insurance: Marine insurance is an arrangement by which the insurer
undertakes to compensate the owner of the ship or cargo for complete or
partial loss at sea. So it provides protection against loss because of marine
perils. The marine perils are collisions with rock, ship attack by enemies, fire
etc. Marine insurance insures ship, cargo and freight.

The following kinds of marine policies are -

- Voyage policy

- Time policy

- Valued policy

(iii) Miscellaneous Insurance: It includes various forms of insurance including

property insurance; liability insurance, personal injuries are also insured. The
property, goods, machine, furniture, automobile, valuable goods etc. can be
insured against the damage or destruction due to accident or disappearance
due to theft.

Miscellaneous insurance covers

- Motor

- Disability

- Engineering and aviation risks

2. Liability Insurance: The insurer is liable to pay the damage of the property or to
compensate the loss of personal injury or death. It includes fidelity insurance,
automobile insurance and machine insurance.

The following are types of liability Insurance:-

23
 - Third party insurance

- Employees insurance

- Reinsurance

3. Other forms of Insurance: It include export credit insurance, state employee

insurance etc. whereby the insurer guarantees to pay certain amount at the
happening of certain events.

The following are other form of Insurance-

- Fidelity Insurance

- Credit Insurance - Privilege Insurance

SWOT ANALYSIS OF INSURANCE SECTOR

[1] STRENGTHS:

1. New Products- A range of new products had been launched to cater to different
segments of the market, while traditional agents were supplemented by other channels
including the internet and Insurance Company branches.

2. Business Growth- These developments were instrumental in propelling business

growth, in real terms, of 19% in life premiums and 11.1% in non life premiums between
1999 and 2003.

3. Rise in per capita Income- India has a large population with an increase in its per
capita income.

4. Emerging Middle Income Group- India’s middle income group is rapidly increasing
and would be emerging as a profitable market.

24
[2] WEAKNESS:

1. Low investment- India is among the lowest-spending nations in Asia in respect of

purchasing insurance (China, which spent USD 36.3 per capita on insurance products &
Indian spent USD 16.4)

2. Dominance of Public sector- Even after the liberalization of the insurance sector, the
public sector Insurance companies have continued to dominate the insurance market.

3. Promotion as a Barrier- In the long run, other forms of non-price competition like
aggressive advertisement wars are likely to lead increasing costs, eventually harming
the interests of the consumers.

4. Old tariff structure- A key challenge for India’s non-life insurance sector will be to
reform the existing tariff structure. From a pricing perspective, the Indian non-life
segment is still heavily regulated

5. Limited facilities- Reinsurance is only provided by GIC. Therefore limited facilities

hamper the insurance sector.

[3] OPPORTUNITIES:

1. Creation of stronger demand- India’s improving economic fundamentals will support

faster growth in per capita income in the coming years, which will translate into
stronger demand for insurance products.

2. Strong future growth- Strong growth can be sustained for 30–40 years before the
market reaches saturation. There is plenty of room for growth in personal accident,
health and other liability classes.

3. Rise in Income and Awareness- Rising household income and risk awareness will be
the key catalysts to spurring more demand for these lines of business in the future.

25
4. Health insurance- Health insurance could potentially have an important role in
driving insurance market development forward.

5. Rural sectors- The largely underserved rural sector holds great promise for both life
and non-life insurers

[4] THREATS:

1. Economic threats- Between 1985 and 2003, economic losses in India due to natural
catastrophes averaged around USD 1.2 billion or 0.4% of GDP every year.

2. Natural Perils- Floods were the main peril, accounting for 40% of cumulative losses
over the period, followed by storms (35%) and earthquakes (20%).

26
 CHAPTER.2

REVIEW OF LITRETURE ON INSURANCE

M.K. Brady and C.J. Joseph, “Some New thoughts on Conceptualizing Perceived Service
Quality; A Hierarchical Approach”, Journal of Marketing, Vol. 65, 2001, pp.34-47. M.K.
Brady and C.J. Joseph58 (2001) in their article titled, “Some New Thoughts on
Conceptualizing Perceived Service Quality; A Hierarchical Approach” have concluded
that evidence proved that customers form service quality perceptions on the basis of
the three primary dimensions: interaction, environment and outcome and customers
based their evaluation of these primary factors on their assessment of three
corresponding sub factors. The combination of all these constitute the customers’
overall perception of the service quality.

Shobhit and Sanjay Shukla, “Failure of Private Insurance Players in Rural Areas- An
Analysis”, Insurance Industry-The Current Scenario, ICFAI University Press, Hyderabad,
2005, pp.9-19. Shobhit and Sanjay Shukla (2005) conducted a study in Lucknow city and
its adjoining rural areas to expose the reasons for the failure of insurance players of
private sector in attaining a significant share in the rural market. The study revealed
that there is a major difference in the objectives and expectations between rural and
urban policyholders. Rural population showed high bias towards low premium and
maximum risk coverage. In rural areas private players have not achieved much success.
The private players have not been able to provide policies preferred by rural people.
In urban areas, for the conservative consumers insurance is a tax saving device. In
urban areas consumers belonging to the middle income group prefer policies of public
sector players and only high income group preferred private sector players.

27
Srinivasan K. K. “Changes in the Insurance Market Globally-Regulators’ Perspectives”,
IRDA Journal, October 2006, pp.12-15. Srinivasan K.K. (2006) in his article attempts to
identify the key areas of change that require the regulator’s urgent attention. The
regulator has to be supportive of industry development.
The regulator also has to play a positive role in enhancing international
competitiveness of the players. The regulator also has to monitor the rural and social
obligations of the insurers.

Khansili, Dinesh Chandra, “A New Way of Thinking-Innovation in Product and Pricing by

the LIC”, IRDA Journal, Vol.11, No. 6, May 2004, pp.25-26 . Khansill (2004) examines the
innovation in product design and pricing by LIC. Innovation in life insurance market is
attributed to the 37 initiatives taken by new private companies. The private life
insurance companies have joint venture partners from countries operating in US, UK,
Germany, Canada and Australia. The practices of the life insurance market of these
countries are reflected in the products made available in our country by private life
insurance companies.
Reddy, Appi V., Marketing of Life Insurance Services, Printwell Publishers, Jabalpur,
1998 Reddy (1994) in his study makes a comprehensive analysis of marketing
programmes of LIC of India to market its products to different segments of customers.
He has examined the problem on the basis of evaluation of the perception of different
customers’ segments in respect of different components of marketing mix that are
essential to meet the 39 challenges posed by intangibility in service-provider-
customerinteraction and customer involvement in service consumption and
production.

28
The results of the study suggest that policies with profit plans account for about ninety
percent of the total policies sold and policies without profit plans account for about ten
percent of the same. Segmentwise analysis of preference of policies also suggest that
majority of customers in all segments prefer policies with profit plans. Analysis of
motives for buying insurance policies indicates that risk coverage is the most important
motive in the selection of life insurance policies.

Lect. D.ramkumar(2003), “Relationship Marketing – The new mantra for life insurance
sector”. Department Of Management Studies, N.M.S.S. Vallaichamy Nadir College,
Nagamalai, Madurai studied the role of relationship marketing in life insurance sector.
In today’s impersonal marketplace, customer satisfaction, retention and loyalty are
rapidly become the thing of the past. Relationship marketing brings them back to the
forefront, providing easy-to-apply solutions and strategies for establishing meaningful
bonds with customers and turning them into reliable, life-long partners. Relationship
marketing can be defined as the process to “identify and establish, maintain and
enhance and, when necessary, terminate relationships with customers and other
stakeholders at a profit so that the objective of all parties involved are met; and this is
done by mutual exchange and fulfillment of promises”. The important objectives of
relationship marketing are to acquire new customers, maintain and enhance existing
relationships with existing customers, reactivation of ex-customers, and handling of
customer terminations.

29
Dr. Ch.rajesham (2004), “changing scenario of India insurance sector”, department of
commerce & Business Management, University P G college, Kakatiya University
Khammam, Andhra Pradesh revised that insurance sector has not only been playing a
leading role within the financial system in India but also has significant socio-
economical function, making inroads into the interiors of the economy and is being
considered as one of the fast developing area in the Indian financial sector too. It has
also been facilitating economic development with an objective to build an efficient,
effective and a stable insurance business in India as well as a strong base

to both the needs of the real economy and socio-economic objective of the country. It
has been mobilizing long term saving through life- insurance to support economic
growth and also facilitating economic development, insurance cover to a large segment
of people, while the non-life insurance and reinsurance firms in India are main
providers of risk financing for manmade disasters and natural catastrophes. Thus, both
life insurance and non-life insurance are found playing a significant role in avoiding or
facing the risk of life and business enterprises and also aiding to certain extents for
their smooth sailing.

J.Mehra (2005), “innovations in life insurance industry”, the financial express, new delhi
studied that economic growth in the emerging markets has time and again outpaced
the developed and industrialized countries. Alongside the rising importance of
emerging economics, their life insurance sectors are also drawing more attention. It’s
been four years since the life insurance sector was opened up for private players in
India.

30
The reasons that prompted the government to bring in reform in this sector are well
known. While the public sector life insurance companies made enormous contribution
in the spread of awareness about insurance, and expanded the market, it was
recognized that their reach was still limited, the range of product offered restricted to
the services to the consumer inadequate.
It was also felt that the rapid economic growth witnessed in the 90s couldn’t be
sustained without a thriving insurance sector.
Today, the private accounts for nearly 20% of the market. The market share of the
private players has to be seen in the context of this enlarged market. There has been a
flurry of private players providing a wide range of innovation products, services and
customized solutions.

Keerthi, P. and Vijayalakshmi, R., “A Study on the Expectations and Perceptions of the
Services in Private Life Insurance Companies, SMART Journals, Vol. 5, 2009. A study
conducted by Keerthi, P. and Vijayalakshmi, R. (2009)90 “A Study on the Expectations
and Perceptions of the Services in Private Life Insurance Companies” reveals that the
policyholders’ expectations are well met in the case of certain factors reacting to
service quality. But in the case of other variables, there exists a significant gap which
means that policyholders have experienced low levels of service as against their
expectations. If all the players in the Life insurance industry focus on the effective
delivery of services, they can win the hearts of customers and anticipate their increased
market share.

31
Ramanathan, K.V., A Project on “A Study on Policyholders Satisfaction with Special
Reference to Life Insurance Corporation of India, Thanjavur Division, Bharathidasan
University, 2011. Research has resulted in the development of a reliable and valid
instrument for assessing customer perceived service quality, awareness level, and
satisfaction level of customers towards life insurance industry. Here, service quality
needs to be measured using a six dimensional hierarchal structure consisting of
assurance, competence, personalized financial planning, corporate image, tangibles
and technology dimensions.

This would help the service managers to efficiently allocate resources, by focusing on
important dimensions first. There is no right and wrong in this. The success of
marketing insurance depends on understanding the social and cultural needs of the
target population, and matching the market segment with the suitable intermediary
segment.

R.S. Arora,“Marketing of Services: A Study of LIC in Jalandhar Division”, Ph.D. Thesis

Submitted to Guru Nanak Dev University, Amritsar, 2008. R.S.Arora64 (2008) in his
thesis entitled, “Marketing of Services: A Study of LIC in Jalandhar Division” has
explained that service quality to be a multidimensional construct. The research
indicated that the five dimensional structure of service quality was not only industry
specific but also country specific. The results also showed that out of the seven factors
used to define service quality, responsiveness had the strongest correlation and was
the best predictor of the overall quality.

32
Product conveniencewas found to have the greatest influence on customer satisfaction
followed by assurance and tangibility. The results regarding the intermediaries showed
that the agents attached 56 more weight to all aspects as compared to Insurance
Company employees. The agents gave more importance to good customer service and
regular updating of knowledge, whereas the Insurance Company employees stressed
more on providing objective information.

No significant difference was found in the demands of customers of both agents and
Insurance Company employees. The data analysis revealed that agents had better
success rate as compared to the Insurance Company employees in selling products and
that agent’s perceived lower competitive pressure than Insurance Company
employees.

R. Kumar, “Performance Evaluation of Life Insurance Companies: A Study of Post-

Reform Period”, Ph.D. Thesis Submitted to Punjabi University, Patiala, 2010. R.
Kumar65 (2010) in his thesis entitled, “Performance Evaluation of Life Insurance
Companies: A Study of Post-Reform Period” has explained that the public sector
exhibited higher underwriting losses in the post-reform period than the pre-reform
period. The higher investment return of the public sector Life Insurance companies
compensated their underwriting losses. The author had suggested that
Productivity of the private insurers was higher than the public insurers due to their hi-
tech environment and modern technology features supported by them. The study
suggested methods to improve the performance of these companies.

33
V. Singla, “Impact of Service Quality on Customer Loyalty: A Study of Hotel Industry in
Punjab and Chandigarh”, Ph.D. Thesis Submitted to Punjabi University, Patiala, 2010.
Singla 66 (2010) in her thesis entitled, “Impact of Service Quality on Customer Loyalty:
A Study of Hotel Industry in Punjab and Chandigarh” has modified the SERVQUAL scale
to include six dimensions. The gap scores were significant for a number of attributes
and these attributes were different for different categories of hotels.

The performance was found to be below the expectations of the customers. So, they
were 57 unable to deliver the service according to customers’ expectation. The study
also showed that the managers over estimated and were also too self-assured about
the delivery of a particular service. Lastly, the study had suggested measures for
improving customer loyalty.

34
 CHAPTER.3

RESEARCH AND METHDOLOGY

[

Reliance Life Insurance in India plays a major prerequisite for the healthy economic
growth of a country. The economic significance of any development programmer
cannot be assessed without proper reference to Insurance Sector development. In
study efforts are made to examine in detail the Types of Life Insurance of Reliance Life
Insurance in economic development of the country. The objective with which this study
is taken up and the methods by which the secondary data is required to be collected
are discussed in this chapter.

OBJECTIVE OF THE STUDY

 To study the Reliance Life Insurance Policies facilities are available to customer.
 To study the establishment, growth and progress of customer service provided
by Insurance Company.
 To make study of Types of Life Insurance provided by Reliance Life Insurance.
 To know the effective utilization facilities provided by Insurance Company.
 To study the company’s procedures conducted by the company for retaining the
customers.
 To study the current market trends in Customer Relationship Management.
 To study the company’s efforts in maintaining and motivating the advisors for
retaining an existing customer and building a new customer

35
SCOPE OF THE STUDY

To understand the relations maintained by the Reliance Insurance Company with

its customers. Ever increasing competition, low interest rates, and declining margins
have driven firms to discover the customer as the basic element in their business
equation Insurance as a sector has shown tremendous growth in recent years. People
now are becoming more secured in terms of their life as well as their money. They want
a profitable benefit out of their investment. There is a need to know the companies’
efforts towards convincing the customer about their product and to know how to
create loyal customers. Insurance happens to be a mega opportunity in India. It’s a
business growing at the rate of 15-20 per cent annually and presently is of the order of
Rs 450 billion.

LIMITATIONS OF THE STUDY

Though this study is purely explorative in nature, it is brought with a number of
limitations. The most outstanding among them could be listed as follows.

1. This study concentrates more on the CRM of Life Insurance of Reliance Life Insurance
without considering the private sector Insurance Company in India.

2. Adequate secondary data are not available regarding performance of Reliance Life
Insurance in India.

3. This study does not analyze the preambles of Reliance Life Insurance in India.

36
 CHAPTER.4

RELIENCE LIFE INSURANCE OVERVIEW

Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the
Reliance - ANIL DHIRUBHAI AMBANI Group. Reliance Capital is one of India’s leading
private sector financial services companies, and ranks among the top 3 private sector
financial services and banking companies, in terms of net worth. Reliance Capital has
interests in asset management and mutual funds, stock broking, life and Life Insurance,
proprietary investments, private equity and other activities in financial services.

Yet, nearly 80 per cent of Indian population is without life insurance cover while
health insurance and non-life insurance continues to be below international standards.
And this part of the population is also subject to weak social security and pension
systems with hardly any old age income security. This it is an indicator that growth
potential for the insurance sector is immense.

Few men in history have made as dramatic a contribution to their country’s economic
fortunes as did the founder of Reliance, Shri. DHIRUBHAI AMBANI. Fewer still have left
behind a legacy that is more enduring and timeless.

 As with all great pioneers, there is more than one unique way of describing the true
genius of DHIRUBHAI: The corporate visionary, the unmatched strategist, the proud
patriot, the leader of men, the architect of India’s capital markets, the champion of
shareholder interest.

37
 But the role Dhirubhai cherished most was perhaps that of India’s greatest wealth
creator. In one lifetime, he built, starting from the proverbial scratch, India’s largest
private sector enterprise.

 When Dhirubhai embarked on his first business venture, he had a seed capital of
barely US$ 300 (around Rs 14,000). Over the next three and a half decades, he
converted this fledgling enterprise into a Rs 60,000 crore colossus—an achievement
which earned Reliance a place on the global Fortune 500 list, the first ever Indian
private company to do so.

 Dhirubhai is widely regarded as the father of India’s capital markets. In 1977, when
Reliance Textile Industries Limited first went public, the Indian stock market was a
place patronised by a small club of elite investors which dabbled in a handful of
stocks.

 Undaunted, Dhirubhai managed to convince a large number of first-time retail

investors to participate in the unfolding Reliance story and put their hard-earned
money in the Reliance Textile IPO, promising them, in exchange for their trust,
substantial return on their investments. It was to be the start of one of great stories
of mutual respect and reciprocal gain in the Indian markets.

 Under Dhirubhai extraordinary vision and leadership, Reliance scripted one of the
greatest growth stories in corporate history anywhere in the world, and went on to
become India’s largest private sector enterprise.

 Throughout this amazing journey, Dhirubhai always kept the interests of the
ordinary shareholder uppermost in mind, in the process making millionaires out of
many of the initial investors in the Reliance stock, and creating one of the world’s
largest shareholder families.
38
RELIANCE CAPITAL

Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the
Reliance - Anil Dhirubhai Ambani Group. Reliance Capital is one of India’s leading
private sector financial services companies, and ranks among the top 3 private sector
financial services and banking companies, in terms of net worth. Reliance Capital has
interests in asset management and mutual funds, stock broking, life and Life Insurance,
proprietary investments, private equity and other activities in financial services.

 Reliance Capital Limited (RCL) is a Non-Banking Financial Company (NBFC) registered

with the Reserve Bank of India under section 45-IA of the Reserve Bank of India Act,
1934.

 Reliance Capital sees immense potential in the rapidly growing financial services
sector in India and aims to become a dominant player in this industry and offer fully
integrated financial services.

 Reliance Life Insurance is another step forward for Reliance Capital Limited to offer
need based Life Insurance solutions to individuals and Corporate.

Reliance capital entered into the life insurance business by acquiring AMP Sanmar in
October 2005. The business was thereafter renamed Reliance Life Insurance. Today
RLIC has over 20 products - 16 individual plans and 4 employee benefit plans - including
the two new innovative products – Connect to Life and Reliance Money Guarantee Plan
- that were launched recently.

Reliance Life Insurance Company (RLIC) has been accorded the ISO 9001-2000
certificate for its best-in-class management systems in Quality, Customer & Process
orientation.

39
With this, RLIC is one of the only two life insurance companies in India to get ISO
9001:2000 certifications covering all functional areas.

The scope of the certification covers the entire gamut of business processes ranging
from product design, sales - front-end and back-end operations, customer care and
investment, to all business support functions. The certification has been awarded by
internationally acclaimed Bureau VERITAS and is valid till 2010 subject to continued
satisfactory operation of RLIC's Quality Management System.

"This certification is a significant milestone in our continuous quest to offer innovative

products, outstanding services and improved customer satisfaction. It indicates that we
have been able to install systems, processes & performance measures that are in line
with the best in the industry and will form the basis of our business growth in
future", said P Nandagopal, CEO, Reliance Life Insurance Company.

Reliance Life Insurance is the fastest growing life insurance company in India and has
an incremental market share of 4 per cent amongst private insurers. The company has
third largest distribution network in terms of number of agents operating out of 143
locations across the country.

CORPORATE OBJECTIVE

At Reliance Life Insurance, we strongly believe that as life is different at every stage, life
insurance must offer flexibility and choice to go with that stage. We are fully prepared
and committed to guide you on insurance products and services through our well-
trained advisors, backed by competent marketing and customer services, in the best
possible way.

40
CORPORATE VISION AND MISSION

Vision

Empowering everyone live their dreams.

Mission

Create unmatched value for everyone through dependable, effective, transparent and
profitable life insurance and pension plans.

Our goal

Reliance Life Insurance would strive hard to achieve the 3 goals mentioned below:

Emerge as transnational Life Insurer of global scale and standard

Create best value for Customers, Shareholders and all Stake holders

Achieve impeccable reputation and credentials through best business practices

Achievements

 RLIC has been one of the fast gainers in market share in new business premium
amongst the private players with an incremental market share of 4.1% in the
Financial Year 2007-08 – from 3.9% in April 07 to 8% in Feb 08. ( Source: IRDA)
 Also continues to be amongst the fast growing Private Life Insurance Companies
with a YOY growth of 195% in new business premium as of Mar’08.
 A Company that has crossed 1.7 Million policies in just 2 years of operation, post
takes over of AMP Sanmar business.

41
  Initiated Express Life – an Unique ’Over the Counter’ sales process for Unit
Linked Insurance Policies in the Industry.
 Accomplished a large distribution ramp-up in the Industry in a short span of time
by opening 600 branches in 10 months taking the overall branch network above
740.
 RLIC continues to be one of the two Life Insurance companies in India to be
certified ISO 9001:2000 for all the processes.
 Awarded the Jamnalal Bajaj Uchit Vyavahar Puraskar 2007- Certificate of Merit
in the Financial Services category by Council for Fair Business Practices (CFBP).

PRODUCTS OFFERED BY RELIANCE LIFE

Reliance has number of insurance products in it’s Portfolio. It offers different products
for different customer profile. It targets its product according to the needs of people
which make them its customer.

Protection Plans

In today’s uncertain world, there could be calamity at every step of the life. It is up to
you to ensure that your family stays protected always. Reliance Protection Plans helps
you do exactly the same. You have a wide range of options to choose a plan from. Right
from limited period plans to lifetime protection plans, you can opt for the one that suits
your lifestyle.

While we understand that nothing can compensate for the loss of a life, we intend to
provide you the peace of mind. Investing in Reliance Protection Plans would mean your
family’s future is in safe hands.
42
1. Reliance Term Plan

Invest in the Reliance Term Plan, a pure life insurance plan that offers you
comprehensive and affordable coverage for a limited period of time to suit your
needs.

2. Reliance Simple Term Plan

Make a smart investment move by investing in the cost-effective Reliance Simple

Term Plan, which offers you comprehensive coverage for a specified period of
time to suit your need.

3. Reliance Special Term Plan

Imagine a life insurance policy, which on maturity returns to you all the
premiums you had paid for your basic policy. The Reliance Special Term Plan
offers that and much more.

4. Reliance Credit Guardian Plan

The Reliance Credit Guardian Plan secures your family from any loan liabilities
you have incurred in case of your untimely demise. On survival at maturity, you
will be returned all the premiums paid for the basic policy.

5. Reliance Special Credit Guardian Plan

Invest in the Reliance Special Credit Guardian Plan and protect your family from
any loan liabilities you have incurred. On survival at maturity, all premiums paid
for the basic policy will be returned to you.

6. Reliance Endowment Plan

The Reliance Endowment Plan gives you financial independence by allowing you
to decide the amount of Sum Assured based on your current financial position
and expected future expenses… Dream!!..

43
 7. Reliance Special Endowment Plan

Imagine an endowment plan that protects you for a certain period even after you
have received your lump sum—that is exactly what the Reliance Special
Endowment Plan offers you with other added benefits.

8. Reliance Connect 2 Life

The Reliance Connect 2 Life Plan gives you the option to upgrade your life cover
to keep pace with your changing lifestyle. As your income grows, your family will
have sufficient cover.

9.Reliance Whole Life Plan

Give your family a lifetime of timely financial support by investing in the Reliance
Whole Life Plan. This will help you enjoy your life to the fullest.
Wealth.

10. Reliance Cash Flow Plan

Invest in the Reliance Cash Flow Plan and reap the dual benefits of a life
insurance plan and easy liquidity through lump sum cash, which means you can
get a percentage of the Sum Assured at periodic intervals.

Savings & Investment Plans

In life, you have always given your family whatever they have wanted. Yet, there are
some promises you have to fulfill, such as taking your family for a vacation, or buying
that dream house.

44
Set aside some money to achieve these specific goals with the help of Reliance Savings
& Investment Plans. The plan allows you to experience the joys of life and provide for
your family’s needs.

Enjoy life without worrying about the promises you have made—we are here to fulfill
them.

1. Reliance Super Invest Assure Plan

Reliance Super Invest Assure is a complete plan which addresses your vital needs
like Flexibility, Security, Investment Return and Financial Planning. With all its key
benefits, it is here to ensure that there will always be more than you can ask for!

2. Total Investment Plan I - Insurance

Reliance TIPS -Series I- Insurance is a Unit Linked Investment + Insurance Plan

that helps you meet all your financial needs, without the complexity of managing
multiple products.

3. Reliance Wealth + Health Plan

Invest in the Reliance Wealth Health Plan and balance your health needs and
wealth needs, without compromising on either health or wealth.

4. Reliance Automatic Investment Plan

The Reliance Automatic Investment Plan is an enhanced unit linked plan that
allows you to choose the right investment mix to reap maximum benefits. It also
provides you with enhanced Life Cover.

45
5. Reliance Money Guarantee Plan

To reap the benefits of a rising market and to protect yourself from any market
decline, invest in the unit linked Reliance Money Guarantee plan that gives you
the perfect balance between Protection and Savings.

6. Reliance Cash Flow Plan

Invest in the Reliance Cash Flow Plan and reap the dual benefits of a life
insurance plan and easy liquidity through lump sum cash, which means you can
get a percentage of the Sum Assured at periodic intervals.

7. Reliance Market Return Plan

The Reliance Market Return Plan gives you insurance protection and allows you
to benefit from investment growth. It works through your life and meets the
changing requirements you may have from time to time.

8. Reliance Endowment Plan

The Reliance Endowment Plan gives you financial independence by allowing you
to decide the amount of Sum Assured based on your current financial position
and expected future expenses.

9. Reliance Special Endowment Plan

Imagine an endowment plan that protects you for a certain period even after you
have received your lump sum—that is exactly what the Reliance Special
Endowment Plan offers you with other added benefits.

10.Reliance Whole Life Plan

Give your family a lifetime of timely financial support by investing in the Reliance
Whole Life Plan. This will help you enjoy your life to the fullest

46
Retirement Plans

You are a young and earning individual. The income you earn allows you to enjoy life,
your only worry being whether you will be able to continue the same lifestyle after
retirement.

A Reliance Retirement Plan will help you save money for your retirement. It ensures
that you continue to get some income after retirement thereby ensuring that you do
not have to depend on any other person or make any compromises to maintain the
same lifestyle.

Invest in a Reliance Retirement Plan today and enjoy life after retirement on your own
terms.

1. Total Investment Plan II - Pension

When you invest in the Reliance Total Investment Plan, you give yourself the
assurance that you will make each one of your dreams come true!.

2. Reliance Golden Years Plan

The Reliance Golden Years Plan helps you save systematically and generate the
much-needed corpus to help you enjoy life after retirement.

3. Reliance Money Guarantee Plan

To reap the benefits of a rising market and to protect yourself from any market
decline, invest in the unit linked Reliance Money Guarantee plan that gives you
the perfect balance between Protection and Savings...

47
 Child Plans

Being a parent is one of the joys of life. Your child looks up to you and depends
on you for love, protection and support. You want to provide your child with the
best in life.

The Reliance Child Plan helps you save systematically so that you can secure your
child’s future needs. Be it higher education, his or her first home or any other
requirement, you will always be there for your child when he or she needs you.

So, invest in a Reliance Child Plan right away—it is the best gift you could ever
give your child.

1. Reliance Super Invest Assure Plan

Reliance Super Invest Assure is a complete plan which addresses your vital needs
like Flexibility, Security, Investment Return and Financial Planning. With all its key
benefits, it is here to ensure that there will always be more than you can ask for!

2. Reliance Child Plan

Save systematically and secure the financial future of your child by investing in
the Reliance Child Plan and let your child enjoy today without worrying about
tomorrow.

3. Reliance Secure Child Plan

Reliance Life Insurance presents a unit linked insurance plan that secures your
child’s financial future, leaving you free from worry.

48
CUSTOMER RELATIONSHIP MANAGEMENT
Customer Relationship Management focuses on acquiring, developing and
creating satisfied loyal customer; achieving profitable growth; and creating economic
value in company’s brand.Customer Relationship Management strives to improve the
customer’s 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.

49
 In India, the trend is positive. When compared to about twenty years ago , people
have more choice and every company knows it can’t 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 .
Today’s era is of service because customers are ultimate base line for any business
to sustain in this competitative 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.The current trends in corm followed by insurance
companies.

50
 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 SAS’s statistical tool for BI. Anil Tikoo, 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

Margins are under pressure: 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 Life 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 face—acquiring 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—

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protection, saving (investment option), loans and pension—have compelled insurance
companies to align with banks in reaching out to a larger audience,” says Tikoo. 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 bank’s high net worth customers with
insurance firms.

Where to begin—operational CRM or analytical CRM?

The choice between operational and analytical CRM as a starting point depends
upon the insurer’s 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 center text mining: This tool can help improve the customer experience by
resolving complaints rapidly. Insurers are using these tools to mine text from call
center transcripts to identify issues faced by customers. Text mining tools also
help detect and capture other useful pieces of information around a customer’s
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

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 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 Tikoo. Event-
triggering tools monitor incoming transaction and contact data in near-real-time
to recognize changes in a customer’s behavior 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-of-
business 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 behavior 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.

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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 behavior 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 consumer’s 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.
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 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 behavioral challenge more actively.

Consumer’s experience

There has been a vast change in the approach of the insurance agent from the
pre-liberalization 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
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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 company’s 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.

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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

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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 Life 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.

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 CHAPTER.5

FINDINGS AND CONCLUSION

FINDINGS

Even though the sales officers and advisors provide sufficient information to
customers, while selling the product 26% of the total customers feel that they had not
received sufficient information. Provided was complex, rest of the respondents feel
that the information provided was less.

Found that Reliance Life Insurance has large variety of products in its portfolio, it is
observed that 37% of the customer feel that the product purchased by most the
customer and their need are not matching.As compared to the Advisors, Sales people
perform more than advisors. In instance sales people have motivated the most of the
customers to purchase the product.The male were the dominating category in advisors
Due to lack of the effective training, most of the advisors were not able to handle the
customer properly, and may not solve the customer’s queries.

There are not satisfactory visits made by the advisors to the customer’s doorstep. Only
14% of the advisors have been visiting the customer at their doorstep at once a week.
So that they can find the need in the existing customers or can be able to build a new
customer for the Reliance Life Insurance 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.

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To generate more business, most the Sales officers feel that there should be a meeting
to be kept with the advisors. The services provided by advisor to the customer are most
of about 54% of the customer receive information of premium date reminding, while
34% receive information of new policies and 12% of customer get service of solving the
doubts.

62% of the advisors have tried to understand the customer’s needs, which in-turn will
help in suggesting a suitable product to the customer. But 38% of the advisors haven’t
tried in understanding the customer needs.About 32% of the advisors feel that the
company should provide help desk at the branch. And 16% of the advisors feel
generating leads by the company is necessary for generating more business.

70% of the advisors are highly satisfied with monetary benefits, and only 30% of the
advisors are satisfied with monetary benefits.30% of the advisors are highly satisfied
with the rewards. 50% of the advisors are satisfied with the rewards, and 20% advisor
are feeling normal about the Rewards40% of the advisors are highly satisfied with the
recognition, about 40% of the advisors are satisfied with the recognition, and 20%
advisor are feeling normal about the recognition.The advisors who are working with the
Reliance Life Insurance fall under the age group between, 25 to 30 Years. Most of the
advisors are young.

CONCLUSION

First chapter comprises introduction about Indian Insurance Industry, its development,
technology more particularly e-channels. The Indian Insurance Industry is explained
under various reforms taken place, phases of transformation and role of technology in
Insurance gains more attention. Chapter highlights various Functions along with

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benefits to customers and Insurance. The Insurance Regulatory and Development
Authority Act, 1999 is an act to provide for the establishment of an Authority to protect
the interests of holders of insurance policies, to regulate, promote and ensure orderly
growth of the insurance industry and for matters connected therewith or incidental
thereto and further to amend the Insurance Act, 1938, the Life Insurance Corporation
Act, 1956 and the General insurance Business (Nationalization) Act, 1972 to end the
monopoly of the Life Insurance Corporation of India (for life insurance business) and
General Insurance Corporation and its subsidiaries (for general insurance
business).There are also shown History of Insurance Industry in India, How Insurance
get started in India. Functions of Insurance also given in first chapter, what is the
function of an insurance industry. SWOT Analysis of Insurance Industry is also describe
in first chapter. Strength of insurance industry means things that make insurance
industry stronger.

There also include weakness of insurance industry, in which are insurance industry are
weak and how to make strong insurance industry of India. Opportunities to insurance
industry to expand industry, and also threat to insurance industry. It also explain the
Principals of Insurance , Changes in Insurance system and services, Impact of IT in
Insurance, opportunities, emerging challenges and issues faced in adopting Insurance
technology.Second chapter reviews the literature about all the aspects of study.
Various researches have been taken at national and international levels. Many studies
have been conducted on computerization of Insurance sector, Impact of Information
Technology in the Insurance Industry. Benefits of IT enabled Insurance services. Fourth
chapter explains the research methodology of the study.

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 BIBLIOGRAPHY

NAME OF BOOKS

 “Relationship Marketing”- Lect. D. Ram Kumar (2003) the new mantra of

Insurance Sector.
 “A new way of thinking innovation in product and Pricing by the LIC”- Dinesh
Chandra(2004) IRDA Journal.
 “Changing Scenario of India Insurance Sector”- Dr. Ch. Rajesham (2004)
Department of commerce & Business Management.
 “Innovation in life Insurance Industry”- J Mehra (2005) The Financial Express.
 “Performance Evaluation of General Insurance Companies”- R Kumar (2010)
 Marketing Management”- Philip Kotler, Kevin Lane Keller, Abraham Koshy,
Mithileshwar Jha- 13th Edition A South Asian Perspective
 “Marketing Management”- Arun Kumar, N Meenakshi

WEBSITES
 www.reliancelife.co.in
 www.licindia.com

NEWSPAPER

 Business Line

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