HDFC - Marketing - Insurance Sector

PROJECT REPORT
ON
MARKETING RESEARCH ABOUT COMPETITION IN INSURANCE INDUSTRY & APPOINTMENT OF FCS

[EMPHASIS ON LIFE INSURANCE]
Respect Yourself
Submitted for the partial fulfillment towards the award of the degree in MASTER OF BUSINESS ADMINISTRATION of U.P. Technical University, Lucknow
(Session : 2006-2008)
UNDER THE SUPERVISION OF
MR. FAIZ KHAN
(Sales Development Manager, HDFC SLIC)
SUBMITTED TO DR. K.N. SINGH Faculty (MBA)
SUBMITTED BY ANSHUL CHAURASIA

MBA (IIIrd Sem) Roll No.: 0614970010
Marketing Research about Competition in Insurance Industry & Appointment of FCs
CENTER FOR MANAGEMENT TECHNOLOGY

25, 27, 28, KNOWLEDGE PARK, PHASE-I, GREATER NOIDA
STUDENT DECLARATION
I, hereby certify that the Survey data collection and analysis work related to research project report on Marketing Research about Competition in Insurance Industry & Appointment of FCs has been carried out exclusively on my own effort under the supervision of Mr. FAIZ KHAN (Sales Development Manager, HDFC, SLIC) is my research guide and Dr. K.N. Singh, Faculty Guide.
ACKNOWLEDGEMENT
First of all I would like expressing my gratitude to my Mentor, who guided me with his knowledge and skill and helped me in successful completion of the work. I gratefully acknowledge my project guide Dr. K.N. Singh, Faculty Guide, and Supervision of Mr. Faiz Khan (Sales Development Manager, HDFC, SLIC). They have been fully support and guide that was provided to me by various individuals that led to the successful completion of this project. Their vision of the problem gave me enough direction to bring out a meaningful result. I am grateful to their great support and help all throughout the project. I am thankful to them for taking out time and pointing out the multitudinous aspects of customer service and helping me increase my learning out of the project. I would heartily thank all the respondents of the survey without whose support & valuable inputs this project would not have been completed.
ANSHUL CHAURASIA MBA (IIIrd Sem)
TABLE OF CONTENTS
COMPANY PROFILE INTRODUCTION IMPORTANCE OF STUDY SCOPE OF STUDY LITERATURE REVIEW RESEARCH DESIGN RESEACH ANALYSIS RESERCH OBJECTIVE DATA COLLECTION DATA ANALSYIS/INTERPRETATION CONCLUSION RECOMMENDATION FURTHER SCOPE OF STUDY APENDIX QUESTIONNAIRE BIBLIOGRAPHY
COMPANY PROFILE
ABOUT HDFC
Incorporated in 1977 as a public limited company To specialize in provision of housing finance to individuals, co-operative societies & the corporate sector First private sector retail housing finance company HDFC is listed on both BSE and NSE Market capitalisation (June 2002) - Rs. 79 billion (US $ 1.6 bn)
Strengths of HDFC
Strong Brand
Customer base of over 2 million Stable and experienced management High service standards High quality loan portfolio Provision for contingencies Constant technological upgradation of systems One of the best capital adequacy ratio
BACKGROUND
HDFC was incorporated in 1977 meeting a social need that of providing long-term finance to needs. HDFC was promoted with 100 million. with the primary objective of promoting home ownership by households for their housing an initial share capital of Rs.
Business Objectives
The primary objective of HDFC is to enhance residential housing stock in the country through the provision of housing finance in a systematic and professional manner, and to promote home ownership. Another objective is to increase the flow of resources to the housing sector by integrating the housing finance sector with the overall domestic financial markets...
Organizational Goals
HDFCs main goals are to a) develop close relationships with individual households, b) maintain its position as the premier housing finance institution in the country, c) transform ideas into viable and creative solutions, d) provide consistently high returns to shareholders, and e) to grow through diversification by leveraging off the existing client base. HDFC is a professionally managed organization with a board of directors consisting of eminent persons who represent various fields including finance, taxation, construction and urban policy & development. The board primarily focuses on strategy formulation, policy and control, designed to deliver increasing value to shareholders.
Board of Directors
Mr. D S Parekh - Chairman Mr. Keshub Mahindra Vice Chairman Ms. Renu S. Karnad - Executive Director Mr. K M Mistry - Managing Director Mr. D M Sukthankar Mr. D N Ghosh Mr. S Venkitaramanan Dr. Mr. Mr. Mr. Mr. Dr. Ram S Tarneja N M Munjee D M Satwalekar Shirish B Patel Bansi S Mehta S A Dave
HDFC has a staff strength of 1029, which includes professionals from the fields of finance, law, accountancy, engineering and marketing.
Consultancy Services
HDFC is a unique example of a housing finance company which has demonstrated the viability of market-oriented housing finance in a developing country. It is viewed as an innovative institution and a market leader in the housing finance sector in India. The World Bank considers HDFC a model private sector housing finance company in developing countries and a provider of technical assistance for new and existing institutions, in India and abroad. HDFCs executives have undertaken consultancy assignments related to housing finance and urban development on behalf of multilateral agencies all over the world. HDFC has also served as consultant to international agencies such as World Bank, United States Agency for International Development (USAID), Asian Development Bank, United Nations Center for Human Settlements, Commonwealth Development Corporation (CDC) and United Nations Development Programme (UNDP). HDFC has also undertaken assignments for the United Nations Capital Development Fund in Ethiopia, for the UNCHS in Nairobi, for USAID in Russia and Bulgaria, and projects of the World Bank in Indonesia and Ghana. At the national level, HDFC executives have played a key role in formulating national housing policies and strategies. Recognizing HDFCs expertise, the Government of India has invited HDFCs executives to join a number of committees and task forces related to housing finance, urban development and capital markets.
Consultancy assignments undertaken:

Proj e c t Ti tl e State Mortga ge Inve stme nt B ank Re vie w of O pe rati ons of B ank Tabun ga N e gara De tai l e d Anal ysi s of Housi ng Si tuati on Study of Housi ng Fi nanc e Se c tor Manage me nt and O pe rati ons Audi t Te c hni c al B ank Assi stanc e for Al l i anc e N ew Housi ng Mortga ge Proj e c t C ountry Russi a I ndone si a B hutan Ghan a Thai l and O man Mauri ti us Age nc y USAI D W orl d B ank Govt. B hutan Govt. Ghana C D C Di re c t C D C of of
Fe asi bi l i ty of Fi nanc e C omp
Establ i shi ng
Fe asi bi l i ty Study for a Se c ond B ui l di ng Soc i e ty W ork shop on Housi ng Fi nanc e & Manage ri al Effe c ti ve ne ss for Housi ng Profe ssi onal s Re vie w of Ne pal Housi ng De ve l opme nt F i nanc e C ompany L i mi te d (N HDF C ) Eval uati on of an i nve stme nt proposal C ommonw e al th De vel opme nt C orporati on Turk s & C ai c os Isl ands Eval uati on of C ari bbe an Housi ng C orporati on L i mi te d, Jamai c a
Mal aw i Ghan a N e pal
Di re c t W orl d B ank USAI D & UN DP
of Turk s & C D C i n C ai c os Isl ands J amai c a B ul gari a Phi l i ppi ne s C oal i ti on Russi a Abt. Assoc i ate s C D C The Urban I nsti tute Asi an
F i nanc e and L oan
Re vie w of Mortgage Unde rw ri ti ng Se rvi c i ng Manual s de ve l ope d for B ul gari a W ork shop Re c ove ry on C re di t Apprai sal &
De ve l opme nt of Mortgage Se rvi c i ng Manu al
Over the past two decades, HDFC has been making inroads into varied spheres of development, while retaining a focus on lowincome housing and related issues. During this year, HDFC further consolidated its operations as a wholesaler in microfinance and weaker section housing, while advancing the reconstruction activities at Gujarat into an intensive phase. In addition, HDFC has been engaged in some specific micro-finance initiatives involving for e.g. policy frameworks and developing case studies; these have been captured in a separate section below.
Lending Operations in Weaker-Section Housing

HDFC continued to utilize the Kreditanstalt fr Wiederaufbau (KfW) lines (HDFC II and HDFC III) by making loans to Non Governmental Organisation (NGO) intermediaries and state government agencies towards low-cost rural and urban EWS housing projects. Under the second line comprising DM 30 million as grant (HDFC II), HDFC has drawn the full amount from KfW (INR equivalent Rs. 67.98 crore) and all sub-projects have now reached completion. This includes loan disbursements in the amount of Rs. 56.91 crore and the balance has been released as grant funds towards rehabilitation housing projects in response to natural calamities. The third line, also a grant of DM 30 million is split into two components the smaller component of Euro 6 million is towards the micro-enterprise Finance Facility (MFF), whereas Euro 9.34 million have been earmarked towards the EWS housing component. The cumulative loan approvals,
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disbursements and related information for the housing projects under HDFC II and III are furnished in Table I. The KfW has recently reviewed the progress under HDFC II and III and they have gathered that the borrowers were generally in control of their housing process, leading to optimal use of available resources, and good construction quality. The cost ceiling for housing construction has been increased to Rs. 60,000 per housing unit, as a consequence of which the endborrower loan size has increased from the current level of Rs. 45,000 to Rs. 54,000 (upto 90% of cost).
MFF Lending and KfW Lines for Micro-Finance

During the year, HDFC has approved 11 income-generation projects under the Micro-enterprise Finance Facility i.e. MFF component of HDFC III. On a cumulative basis, HDFC has approved 51 livelihood projects with a disbursement of Rs. 12.16 crore. The borrowing agencies, which act as social and financial intermediaries, range from professional micro-finance institutions (MFIs) to development NGOs to self-help group (SHG) federations. Until March 31, 2003, HDFC has covered over 35,000 EWS households, so far, and HDFC has experienced near 100% recoveries under the scheme. Under the National Renewal Fund Self Employed Women's Association (NRF SEWA) component comprising a special grant of DM 2.4 million from KfW towards micro-enterprise development (Sanjivani Project), HDFC has disbursed as at March 31, 2003, a cumulative amount of Rs. 4.37 crore to SEWA Bank, Ahmedabad. The SEWA Bank has utilized the funds in disbursing 2470 loans to their women members, covering a variety of livelihood activities. The bank's cumulative disbursements under this project stood at Rs. 4.15 crore, with an average loan size of Rs. 17,000. During the year KfW conducted an appraisal of the proposed Microfinance Refinance Facility (HDFC V, fifth line). As an outcome of which, bilateral funding of Euro 10 million has been committed, which includes a loan of Euro 9 million and the balance as a grant towards technical assistance (TA) and capacity building measures. In the first round of MFI selection, out of the eight detailed appraisals carried out, four prominent Indian MFIs have been identified viz. Bharatiya Samruddhi Finance Ltd., Friends of
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A womans World Banking, DHAN Foundation and the Indian Association for Savings and Credit (IASC). HDFC may include more MFIs in the program at a later stage. The Ministry of Economic Cooperation (BMZ), Federal Republic of Germany has also approved HDFC V; and the TA and capacity building measures are expected to commence shortly.
FUTURE
HDFC has always been market-oriented and dynamic with respect to resource mobilization as well as its lending Programme. This renders it more than capable to meet the new challenges that have emerged. Over the years, HDFC has developed a vast client base of borrowers, depositors, shareholders and agents, and it hopes to capitalize on this loyal and satisfied client base for future growth. Internal systems have been developed to be robust and agile, to take into account changes in the volatile external environment. HDFC has developed a network of institutions through partnerships with some of the best institutions in the world, for providing specialized financial services. Each institution is being fine-tuned for a specific market, while offering the entire HDFC customer base the highest standards of quality in product design, facilities and service.
AWARDS
HDFC Ranked as Indias Third Best Managed Company by Finance Asia 2005 Mr. Deepak Parekh awarded the 'Hall of Fame' award by Outlook Money magazine. HDFC receives the 'Dream Home' award for the best Housing Finance company for 2004 from Outlook Money magazine Awards galore by HDFC at the 44th ABCI Awards!!! 5th Best Company to work for in India, ranked by Business Today in November 2004 Economic Times Corporate Citizen of the Year Award, November 2004 Rated by Deutsche Bank as one of the top 5 banks/Financial Institutions in Asia in October 2004 Ranked among the Top 20 companies to deliver healthiest returns to shareholders, Outlook Money Magazine September 2004
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1st Prize at the New York Festival's Gold Midas Awards for Environmental Communication Ad in August 2004 Features in the Forbes list of Top 20 Leading Indian Companies in May 2004. One of the Top 10 Investor Friendly Companies, ranked by Business Today in March 2004. HDFC Ranked No. 3 - 'India's Best Managed Companies' by Finance Asia Clean Sweep by HDFC at the 43rd ABCI Awards!!! National Award for Excellence In Corporate Governance by The Institute of Company Secretaries of India 2nd Best Company for Corporate Governance in India by The Asset magazine. The Economic Times Lifetime Achievement Award - 2003. (For Mr. Deepak Parekh - Chairman, HDFC Ltd.) One of the Top Ten - Most Admired Companies in India ' 2003 by Business Barons One of the Top Ten - Most Admired CEOs in India ' - 2003 by Business Barons ( for Mr. Deepak Parekh ) India's Second Best Managed Company - 2003 by Finance Asia. India's Biggest Wealth Creator in the banking and financial series by the fourth Business Today - Stern Steward Survey. One of the Top Ten - Most Respected Companies in India' by Business world. Highest rating for ' Governance and Value Creation ' by CRISIL. One among the top ten ' Company Leaders in India' by the Far Eastern Economic Review Survey. Best Managed Financial Institution in India' by fox Pitt Survey.
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HDFC GROUP
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The Standard Life Insurance Assurance Company

Founded in 1825 Mutual Life Insurance Company since 1925 Largest mutual life insurance company in Europe Assets under management over Rs 707836 crores ( 89.2 bn) Total assets under management : Rs. 707836 Crores New premium income 2003 :Rs. 76277 Crores AA2 rated by Standard & Poors and Moodys
Financial Strengths of the company

Total assets under management: Rs. 5, 81,000 Crores New premium income 2001:Rs. 58,000 Crores AA2 rated by Standard & Poors and Moodys
About Standard Life

Standard Life has been looking after its customers for over 180 years, and currently over 7 million people rely on them for their financial needs. We have assets under management which are worth more than the combined market value of Shell, Reuters, Tesco, Cadbury Schweppes and Marks & Spencer.
Financial Security
Standard Life has the financial strength to remain secure and competitive. We aim to offer products that provide competitive returns to their customers while maintaining an adequate level of financial strength to ensure their security. Like most people, you want to know that your financial future is in good hands. Standard Life places a great deal of importance on getting your money to work hard for you; that's why we believe you can have confidence in us.
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Standard Life has been awarded the "Raising Standards" quality mark. This shows that we:

use clear language to describe their products documents, have appropriate products and Provide a quality service for our customers.
on key
The quality mark covers products bought by individuals including pensions, long-term savings and protection. We were independently tested against a number of rigorous standards. And we have to continue to pass these tests every year to keep using the quality mark. Standard Life won the Money Marketing 'Company of the Year' award in March 2005 for the seventh year running. Other awards the Standard Life group has received include:
Money Marketing Awards

Company of the Year every year from 1999 to 2005 Best Pension Provider 2004 and 2005 Best Group Pension Provider every year from 1998 to 2003 Best Personal Pension Provider every year since 1998 to 2003 Best Life Investment Product Provider 2003 and 2004 Gold Award in the Poster Campaign Category (Advertising) 2004
Money facts Investment, Life & Pensions Awards

Best Pension Product 2003, 2004 and 2005 Best Pension Service 2003, 2004 and 2005
Bank hall Achievement Awards
Pension Provider of the Year 2003 and 2004
Financial Adviser Provider Awards

Overall Winner in 1999, 2000, 2001 and 2002 Pensions Provider of the Year 1999, 2000, 2001, 2002 and 2003 Pensions Company of the Year 2004 Individual Pensions Company of the Year 2004 Group Pensions Provider of the Year 2004 Health Insurance Company of the Year 2004
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Financial Adviser Service Awards

Company of the Year every year from 1997 to 2001 5 Star Life and Pensions Provider every year from 1996 to 2004 5 Star Investment Provider every year from 1996 to 2002 and 2004
Pensions Management Administration and Service Awards

Overall Winner - Personal Pensions 2003 Overall Winner - Stakeholder Pensions 2002 and 2003 Overall Winner - Group Personal Pensions 2002 and 2004 Member Communications - Personal Pensions, Group Personal Pensions & Stakeholder Pensions 2003 Backup (branch office) - Personal Pensions 2003 Backup (head office technical support) - Personal Pensions & Stakeholder Pensions 2003
Pensions Management Technology Awards
Best extranet accessibility 2004
Guardian & Observer Consumer Finance Awards
Overall Winner in Personal & Stakeholder Pension Provider 2003
Professional Adviser Awards
Best Product Provider Website (adviser zone) 2005
Online Finance Awards

Best online Product Provider (ifazone) 2003 Best online Financial Adviser (ifazone) 2002
Head Office - Edinburgh, Scotland (UK) Presence United Kingdom: Canada Ireland 31 11 7 " branches "
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Germany Austria Spain Hong Kong China
1 1 31 1
" sales office branches representative office
2 representative office
Year

Award
Company of the Year Company of the Year Best Personal Pension Provider Company of the Year Company of the Decade Company of the year 4 star service award Overall best company 3 star service award Best mortgage services
2003 2002 2001 2000 1999 1996-99 1995 1992-94 1991 1990
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History Venture

of
Joint
Discussions commenced - January 1995 Joint venture agreement signed - October 1995 Joint venture agreement renewed - October 1998 Life Insurance project team established - January 2000 (Mumbai) Company officially incorporated - 14th August 2000 First private sector Life Insurance company to be granted a certificate of registration - 23 October 2000 Shareholding HDFC 81.4 % Standard Life 18.6 %
The Partnership: HDFC and Standard Life first came together for a possible joint venture, to enter the Life Insurance market, in January 1995. It was clear from the outset that both companies shared similar values and beliefs and a strong relationship quickly formed. In October 1995 the companies signed a 3 year
Joint venture agreement

Around this time Standard Life purchased a 5% stake in HDFC, further strengthening the
Relations
The next three years were filled with uncertainty, due to changes in government and ongoing delays in getting the IRDA
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(Insurance Regulatory and Development authority) Act passed in parliament. Despite this both companies remained firmly committed to the venture. In October 1998, the joint venture agreement was renewed and additional resource made available. Around this time Standard Life purchased 2% of Infrastructure Development Finance Company Ltd. (IDFC). Standard Life also started to use the services of the HDFC Treasury department to advise them upon their investments in India. Towards the end of 1999, the opening of the market looked very promising and both companies agreed the time was right to move the operation to the next level. Therefore, in January 2000 an expert team from the UK joined a hand picked team from HDFC to form the core project team, based in Mumbai. Around this time Standard Life purchased a further 5% stake in HDFC and a 5% stake in HDFC Bank. In a further development Standard Life agreed to participate in the Asset Management Company promoted by HDFC to enter the mutual fund market. The Mutual Fund was launched on 20th July 2000.
Incorporation of HDFC Company Limited:
Standard
Life
Insurance
The company was incorporated on 14th August 2000 under the name of HDFC Standard Life Insurance Company Limited. Their ambition from as far back as October 1995 was to be the first private company to re-enter the life insurance market in India. On the 23rd of October 2000, this ambition was realized when HDFC Standard Life was the only life company to be granted a certificate of registration. HDFC are the main shareholders in HDFC Standard Life, with 81.4%, while Standard Life owns 18.6%. Given Standard Life's existing investment in the HDFC Group, this is the maximum investment allowed under current regulations. HDFC and Standard Life have a long and close relationship built upon shared values and trust. The ambition of HDFC Standard Life is to mirror the success of the parent companies and be the yardstick by which all other insurance company's in India are measured.
Their Mission:
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They aim to be the top new life insurance company in the market. This does not just mean being the largest or the most productive company in the market, rather it is a combination of several things like
Customer service of the highest order Value for money for customers Professionalism in carrying out business Innovative products to cater to different needs of different customers Use of technology to improve service standards Increasing market share
Their Values:
SECURITY: Providing long term financial security to

policy holders will be their constant Endeavour. We will be doing this by offering life insurance and pension products. TRUST: We appreciate the trust placed by their policy holders in us. Hence, we will aim to manage their investments very carefully and live up to this trust. INNOVATION: Recognizing the different needs of their customers, we will be offering a range of innovative products to meet these needs.
Their mission is to be the best new life insurance company in India and these are the values that will guide us in this.
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METHODOLOGY
Part- 1 Visiting Different Mutual Funds Companies, for the
complete knowledge of Mutual Funds and all of their provisions
Part - 2 Visiting insurance companies and to compare their
Unit linked plans as per HDFC plans and to make a final comparison with the Mutual Funds.
Part 3 Conducting a Survey of various people APPROACH

Study is divided into 3 parts: Data collection Survey Comparative Study
DATA COLLECTION PRIMARY DATA SOURCES

A visit was made to Mutual Funds companies and knowing their investment plans. Visited the company as a customer and asked for their good schemes and about their ROI. The companies covered were: HDFC Mutual Funds ICICI Mutual Funds India Bulls Franklin Templeton
Collected the Brochures from Four Insurance companies and compared their Unit Linked endowment plans
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The Companies covered are o HDFC Standard Life o ICICI prudential o Birla Sun Life o Max New York Life A Survey was conducted in NCR region from 100 people and we asked about their interest in investment in mutual funds or unit linked plans The survey said o 62 percent people said that they want to invest in Unit Linked Policies o 27 percent people said that they want to invest in Mutual Funds o 8 percent people said they dont want to invest in private companies they just want to go with LIC traditional Plans as they dont want to bear risk. o 3 percent people said they want to invest in both the companies as they want to invest small amounts in all companies.
SECONDARY DATA SOURCES:

Websites was the Secondary data source 1. 2. 3. 4. 5. 6. www.investopedia.com www.hdfcinsurance.com www.valueresearchonline.com www.mutualfundsindia.com www.amfiindia.com www.hdfcmutualfunds.com
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CONCEPT OF INSURANCE
Insurance is aimed at compensating the financial loss suffered on the happening of an insured event. Insurance cannot prevent the happening of the event; however it can protect a person from the financial losses he may suffer after the happening of the event. The above can be understood with the help of a simple example.
Example 1:
In case a person has a car worth Rs 5, 00,000 and he insures the car for Rs 5, 00,000. In the event of a loss of Rs 1, 00,000 during the term of the insurance, he would be compensated the amount lost of Rs 1, 00,000. Although the insurance is for Rs 5, 00,000 the person cannot be paid more than Rs 1, 00,000 as this is the loss he has suffered. In case the insurance company pays more than the financial loss suffered by the policyholder then there is an incentive to the policyholder to make claims and make profits. This will increase in the premium amounts and in case all the policyholders claim losses then the insurance would be un-viable. Thus to protect the interests of all the group of policyholders the insurance offered is only to the extent of the financial loss suffered by the policyholder. Insurance is therefore only a compensation of a financial loss.
Example 2:
In case a person has a car worth Rs 5, 00,000 and he insures the car for Rs 10, 00,000 (over insurance). In the event of a loss of Rs 1,00,000 during the term of the insurance the person cannot be compensated more than the amount of loss i.e. Rs 1,00,000 in this case. In case the policyholder is paid double the amount lost because he has insured for double the value, then he would make a profit. Profit would act as an inducement for the person to go for over-insurance to a large extent. This would mean that the whole group of policyholders pays for the profits made by one policyholder. More the number of policyholders who make such profits the more un-viable the insurance would become. Hence in insurance it is an established principle that even in case of over-insurance the policyholder would not be paid more than the loss suffered by him.
Example 3
In case a person has a car worth Rs 5, 00,000 and he insures the car for Rs 2, 50,000 (under-insurance). In the event of a loss of
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Rs 1, 00,000 during the term of the insurance, the person would be compensated an amount of Rs 50,000 only. Whenever a person buys a car he is on risk. Any event like a theft, fire, riot, and earthquake can happen and destroy the car or cause a financial loss to him. In case he is not insured then he has to bear the loss himself. The maximum amount of such loss that can occur to him is the value of the car, which in this case happens to be Rs 5, 00,000. When a person buys the insurance, he actually transfers the risk, which he possesses, to the insurance company. Once insurance is granted to him the insurance company would pay in the event of the loss. As seen above the maximum amount of risk the person possesses is the value of the car. In case he insures for less than the value, what the person actually does is that he transfers a portion of the risk to the insurance company. In the given example the person has chosen to transfer half the risk to the insurance company. Thus in the event of the loss the person would be compensated only half the amount of loss. The reason being he chose to insure only half of the risk to the insurance company.
Subject matter of insurance:

When a person insurance his car the subject of the insurance is the car. What the insurance company guarantees is that in the event of a financial loss due arising due to an insured event then the company would compensate to the extent of the loss subject to the condition that the person has adequately insured the car. In Life insurance what is the subject matter? Or what is covered in life insurance. Surely it cannot be death because death cannot be compensated. It cannot be life either, as life too cannot be compensated. Life insurance aims to compensate the Income Earning Capacity of the person. In this session we are only talking of pure insurance or Term Assurance and not of any savings, investment or retirement plan.
Events covered in life insurance

In Life Insurance we cover the Income Earning Capacity. The loss of the Income Earning Capacity can be lost on the happening of the following events. 1. Death of the life assured 2. Sickness of the life assured (critical illness)
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3. Accident of the life assured (death or permanent disability due to accident) 4. Retirement of the life assured Death of the life assured can destroy the income earning capacity of the individual. When a person takes a life insurance (pure insurance) with the sum assured payable on death he protects his family from the loss of income earning capacity due to death. A Life Insurance company does not pay money to the family because the life assured has died, but because the family has lost the income earning capacity. Death itself is not covered. The loss of income earning capacity due to death is covered in life insurance. It is often felt that life insurance means only death insurance. This is not true. Life insurance is insurance against the loss of the income earning capacity of the person. Sickness (critical illness only) can affect an income earning capacity of an individual. Life insurance offers protection for the loss of income earning capacity due to a sickness. Since minor ailments do not permanently destroy the income earning capacity of an individual the minor ailments are not covered in life insurance. Insurance against critical illnesses pay not because the person has contracted a critical illness, but because the person has lost his income earning capacity due to the critical illness. Similar is the case with accident cover. All accidents are not covered only those accidents, which result in death or permanent disability of the life assured, are covered in life insurance. The payment is not made because the person has met with an accident, but the payment is made because a person has lost the income earning capacity due to an accident. Retirement on the other hand is a certain event. A certain event cannot be insured at all. The only alternative left for the person is to save for retirement. All the lives assured would definitely retire hence insurance cannot be offered for retirement. Income earning capacity is affected on retirement. The retirement plans are therefore savings plans, which help a person, save for the retirement. It is important that we understand some of the terms frequently used in Insurance. The following gives a brief description of what we mean by risk, peril and a hazard.
Risk
It is a possibility of a loss. The loss may occur or may not occur if there is a possibility of a financial loss we can say that a risk exists. When a person has an income there is a risk of the loss
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of the income. Similarly in case a person owns a car there is a risk that the car may be destroyed or damaged by fire, riots, strike, lightening etc.
Peril
It is the cause of the loss. The income earning capacity may be destroyed by death. Death in this case is the peril. Similarly fire, theft, earthquake are perils in car insurance.
Hazard
This is the condition that creates or increases the chance of the loss. An existing sickness is a condition that may cause death of the life assured at a future date. The existing sickness would be a hazard in life insurance. Risk is not avoidable. In case a person has income then there is a risk of loss of that income. The person has the choice to deal with the risk in the following manner: 1. Avoidance 2. Reduction 3. Retention 4. Transfer 5. Sharing Insurance is a means of sharing of the risk. All the policyholders agree to share the losses suffered by a few of the unfortunate policyholders. Since who is going to suffer the loss is not known all the policyholders are protected in case they are the victims of the insured event. All the risks cannot be insured. Only the risks, which satisfy the following criteria, can be insured. There has to be a large numbers of exposure units for the risk to be insured The loss occurred due to the risk should be definite and measurable The loss must be fortuitous The loss must not be catastrophic The losses due to the risk should be on suffered by the group of policyholders on random The risk cover should be economically viable The following are the limitation of insurance All risks cannot be insured There must be insurable interest
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Insurance is limited to the financial value There must be large number of similar risks It must be possible to calculate the risk of loss Losses should not be catastrophic Losses must not be too small Losses must be reasonably unexpected Losses must be accidental It must be consistent with public policy
The following are the differences between life insurance and non-life insurance Risk (possibility of a loss) is certain in life insurance. Every person who is insured is likely to die, and death would completely destroy the income earning capacity. In non-life insurance the risk is uncertain and the insured event may or may not result in the loss to the policyholder. Life insurance is a long term contract while non-life insurance contracts are one year contracts. Difficulty in determining value of human life in life insurance. In non-life insurance the value can be determined with much ease. Life insurance is not a strict contract of indemnity. Non-Life insurance contracts are strict indemnity contracts.
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WHY INSURANCE
Life Insurance has come a long way from the earlier days when it was originally conceived as a risk covering medium for short periods of time, covering temporary risk situations, such as sea voyages. As life insurance became more established, it was realized what a useful tool it was for a number of situations, including -
a) Temporary needs / threats:

The original purpose of life insurance remains an important element, namely providing for replacement of income on death etc.
b) Regular Savings:
Providing for one's family and oneself, as a medium to long term exercise (through a series of regular payment of premiums). This has become more relevant in recent times as people seek financial independence for their family.
c) Investment:
Put simply, the building up of savings while safeguarding it from the ravages of inflation. Unlike regular saving products, investment products are traditionally lump sum investments, where the individual makes a one off payment.
d) Retirement:
Provision especially can buy periodical for later years becomes increasingly necessary, in a changing cultural and social environment. One a suitable insurance policy, which will provide payments in one's old age.
An example to understand the need for insurance:

Mr. Atul is 45 and self-employed. His wife Nandini, who is a housewife, looks after their two children aged 3 and 7 years. They stay in a rented accommodation, where the rent is 15,000 rupees per month. Mr. Atul has taken up a loan of Rs. 2 lakh. His monthly earnings on average are 40,000 rupees. Mr. Atul passes away in an unfortunate road accident. What are some of the financial implications of his death on his family?
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There may be several financial implications on his family. Some of these are: a) The monthly income, previously provided by Mr. Atul would stop. b) His wife and children may have to seek financial assistance from other relatives. c) His wife may not have enough money to pay back the loan of Rs. 2 lakhs. d) The family may have to move into a cheaper accommodation. e) His widow may have to take up work to earn money. f) The education of his children may suffer. This simple example illustrates the impact premature death can have on a family, where the main earner has no life cover. Had Mr. Atul taken life cover, his family would not have faced such hardships in the event of his unfortunate death. A simple life insurance policy could have provided Mr. Atul's family with a lump sum that could have been invested to provide an income equal to all or part of his income. In simple words, insurance protects against untimely losses. Insurance has been found useful in the lives of persons both in the short term and long term. Short term needs like sudden medical costs and long term needs like marriage expenses etc can be met with using life insurance.
Life Insurance Products

To understand the difference between life insurance products and insurance the analogy of medical science works well. The following points can be made while explaining the concepts of products and insurance. The difference between an agent and a consultant can be brought about by an analogy of a chemist and a doctor. A chemist is interested in selling medicines but not qualified to advise. He knows the medicines but is not good at diagnosis and prescription. A doctor on the other hand is a person qualified to advise and prescribe medicines. The doctor is not interested in selling medicines but is more interested in curing the client. There is a difference in the training of the chemist and the doctor. A chemist studies chemistry and then studies the
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composition of the medicines and knows the manufactures of the medicines. He has to ensure that he gives the right medicines, which is prescribed by the doctor. On the other hand the doctor studies the human body and also studies the diseases. He has to understand the symptoms and then studies the effect of the medicines on the symptoms. He also knows the medicine and the compositions and is qualified to advice. When you are sick you need to take medicines. However taking any medicine would not work. What is important is that you consume the medicine designed to cure the ailment you are suffering from. The medicines are also to be consumed taking into account the body constitutions. Hence different people have to take different medicines as per their body constitution. There are certain limitations in medicines. One cannot consume medicines for the rest of ones life. One medicine cannot cure all the diseases. Medicines can be administered in more then one methods. Medicines can be made attractive by sugar coatings but the sugar coatings do not improve the medicine but only increase the price of the medicine. Products of life insurance are like medicine. Taking one policy is just not enough. It is important that the policy satisfies a need of the client. Life Insurance products are designed to satisfy a particular need of the client. When the product is sold as per the need of the client the product will be effective to satisfy the need of the client. There is no one product that satisfies all the need of the client. What a consultant needs to do is to make a combination of products so that he can satisfy the need of the client. Besides the financial circumstances of the client may dictate the insurance plans that the client needs to take. A consultant should note the financial condition of the client and suggest a plan as per the need of the client. The insurance needs of the clients keep on changing over a period of time and the consultant should help the client review his insurance needs periodically. Insurance is not a one-time affair. The consultant should build a relationship with the client and periodically help him review his insurance and suggest policies best suited to the needs of the client. One insurance policy cannot satisfy all the insurance needs of the client. A combination of the insurance policies can offer the insurance that a client needs. Consultants should suggest the best combination for the clients after analyzing the needs of the client. Simply suggesting a combination of the plans without analyzing the needs of the client is not correct and not in the interest of the client or the consultant.
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Additional features in an insurance product make the insurance product look attractive; however the features may be immaterial to the satisfaction of the clients needs. The client also has to pay a price for the additional feature as no feature in any insurance comes free. The consultant should bring this to the notice of the client in case the client is insisting on some additional feature. The role of a consultant should be distinguished from the role of an agent. An agent is like the chemist. He is more interested in selling the Companies products than providing insurance solutions to the clients. Since he does not have a good understanding of the clients needs he does not analyze the needs of the client but simply offers the insurance products. On the other hand the consultant is more interested in providing an insurance solution to the client. He analyses the clients needs and then offers a solution to the client. A consultant has a wider role to play than an agent. An agent is more trained in the products and its features. He is also aware of the procedures of the Insurance Company he represents. On the other hand the consultant can understand a clients needs and also understands the consequences a client may face in case he does not plan for the future. He can make solutions for the client and can help the client to plan for the future. A consultant is more professional than an agent. Life Insurance products are not solutions in it. In fact life insurance products are a means to an insurance solution. When a person buys life insurance products as per his needs he insures his future. Insurance should be purchased as per individual needs and the insurance solutions of two or more individuals may not be the same. Today there are many insurance products available in the market. Each company has its set of products that it offers to the customers. This makes it difficult to keep track of all the products all the time. A better way to understand them is by way of classification. All insurance products can be classified in 4 basic categories.
Protection
Investment
Pension
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Savings
This classification is based on the needs of the customers. Accordingly each of these categories has an end need to be satisfied and all the products coming under that category aim to fulfil that need e.g. Products coming under Investment category aim to provide long term real growth over the period. Thus understanding these categories will not only help us to understand various products but also help us to position our products strongly in a competitive market. Let us take a look at the distinctive features of each category:
Protection type of products: A typical protection type

of product aims at protecting income-earning capacity of the customers on happening of uncertain events mentioned above during the term of product. These are the pure risk products having no savings element. Naturally, these products dont have any maturity benefits. High-risk cover at low costs is the unique feature of this type that makes this category most attractive for the prospects who want high insurance cover without spending much for it. Usually offered for a definite term, mainly the Term Assurances come under this type. Various riders offered by different companies are also a part of protection category. The claim is paid only if the stipulated event happens otherwise there are no maturity values at the end of the term. There are some variations in protection products with refund of premiums, where some part of the premium has a savings component.
6. Investment type of products: In investment type of products, the focus is on maximizing returns for the customer over a period time. In a way, it is opposite to Protection type where the focus is maximizing the risk cover. Here the risk cover is very low. The objective is to put maximum in investments. The underlying principle is to commit money for a certain period of time and get the benefits of real long-term growth. The products are usually single premium policies where the entire premium is collected in advance. Surrenders are discouraged and there is a commitment for certain minimum no of years. In death during the term, value of the investments is returned. 7. Pension products : Along with the risk of an untimely death or disability, we also have a risk of living too long outliving our source of income. In other words, one needs to ensure that he gets a decent income even after his retirement and continues to get it as long as he lives! This is
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where we have pension products addressing the need for a comfortable retirement. One can opt for an immediate pension or for pension at a future date (also called as deferred pension). There is a range of options that one can have when selecting a pension plan. There is a great amount of flexibility when it comes to selecting a pension product. The important point to be noted is that Pensions is a part of ones present income that he reserves for future consumption. Every year that income is accumulated and invested. The lump sum accumulation then is used for purchasing pension on the vesting date. 8. Savings type products: People in India like to save. Our savings rate has been well above 20% of our GDP for last few years. We save for events like childrens marriage, education etc. Savings types of products aim to strike a good balance between risk cover as well as returns. It acts as a protection on savings. Sum assured is usually the targeted savings that one looks for. He gets that amount at the end of the term along with bonuses if it is a participating policy. On the protection side if any unfortunate event happens during the term, the sum assured (in other words the targeted savings) is still paid. So it encourages a person to save for an event at the same time ensures that his savings are protected. This is the unique advantage of savings through life insurance that no other savings product offers. We find very popular products like Endowment Assurance; Money Back plans in this category. As stated earlier all the products come under these 4 broad categories. To understand a product, it is essential to find out the category of that product based on its features. Needless to say that it will not be possible to compare one category product to another. Each category is unique and caters to particular needs of the customer. The best approach is to find out what customer needs and then suggest a solution accordingly. The products launched by HDFC Standard Life can be classified as follows
Term Assurance and Loan Cover Term Assurance
Single Premium Whole of Life Insurance Endowment Assurance Money back Plans Childrens Plan
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Personal Pension Plan
Protection Products Term Assurance and Loan Cover Term Assurance Plan Investment Product Single Premium Whole of Life Insurance Plan Pension Product Personal Pension Plan Savings Product Endowment Assurance, Money Back Plan and Childrens Plan
1. ROI RO I i s more i n Mutual funds, if c ustome r de al s prope rl y w i th the e qui ty, and i nve st i n good funds RO I is not fi xe d but e qui val e nt i n al l pl ans and thi s i s approx fi gure s, no one c an assure for re turns.
Comparasion o
AS per the survey Conducted for the People who are interested in Mutual Funds or Unit Linked Insurance Plans. Most of the Customer said that they will prefer for the Unit Linked insurance Plans as they are provided with Risk Cover also and even they are having the same facilities as per the mutual funds, and in long runs they are successful. As ULIP are the plans by the insurance companies and they invest the funds in AAA rated companies only, And they provide some riders also which are very beneficial to the customers.
Now the Survey was conducted for 100 people where the Results Are
o 62 percent people said that they want to invest in Unit Linked Policies
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8000000 7000000 6000000
o 27 percent people said that they want to invest in Mutual Funds o 8 percent people said they dont want to invest in private companies they just want to go with LIC traditional Plans as they dont want to bear risk. o 3 percent people said they want to invest in both the companies as they want to invest small amounts in all companies.
S Even if y
Market Factoid 1. The growth options of ULIP have recorded annualized returns of over 20 per cent. 2. Various charges amounting to approximately 25 per cent in the initial years in all the schemes. 3. Most companies normally allow customers to switch, a fixed number of times annually from one fund to other fund. Later, they charge approximately Rs.100 per switch.
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Rs3,00,000
4. Private insurance companies because of ULIPs today.
50
per
cent
sales
up
5. Individuals availing tax exemption under section 88 of Income Tax Act. 6. New Schemes coming into the market, which covers life insurance and accident insurance.
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SURVEY REPORT FOR THE CUSTOMERS PERCEPTION FOR THEIR AWARENESS OF INSURANCE PRODUCTS (ULIP) AND MUTUAL FUNDS AND THE BUYING PREFERENCE.
As per the Questionnaire, I conducted a survey of 100 People and asked about their awareness of private insurance companies and the companies they know. So the form consisted of 6 companies option and each customer gave different views, now as per the survey reports.. o o o o o o o ICICI Prudential 20% Birla Sun Life 15% HDFC Standard Life 15% Bajaj Allianz Life 13% Tata Aig Life 10% Aviva Life 7% Max New York Life 6% o o o o o o o ING Vysya 4% SBI Life 4% Metlife 2% Om Kotak 2% Royal Sundaram 1% AMP Sanmar 1% SAHARA Life 0%
People Aware about the Companies as per the c
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Out of Hundred People people are as Follows
the
Profession
of
the
Income of People According to the Survey
15 7
Status of insurance Cover according to the Survey
for
the
Persons
40
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GLOBAL SCENARIO
WORLD LIFE AND NON LIFE INSURANCE PREMIUMS
Year 1994 1995
W o r ld L if e a n d N o n L if e In s u r a n c e P r e m iu m s
Nonlife Life Total 846,600 906,781 909,100 896,873 891,352 912,749 926,503 969,945 1,098,412
0
3 ,0 0 0 ,0 0 0
1,121,186 1,236,627 1,196,736 1,231,798 1,275,053 1,424,203 1,518,401 1,445,776 1,534,061

N o n life L ife T o ta l
1,967,786 2,143,408 2,105,836 2,128,671 2,166,405 2,336,952 2,444,904 2,415,721 2,632,473 2,940,671
2 1996,5 0 0 ,0 0 0
1997,0 0 0 ,0 0 0 2
U S $1 ,5 0 0 ,0 0 0
1998 1999
1 2000,0 0 0 ,0 0 0
2001 2002 2003
5 0 0 ,0 0 0
1 9 9 1 9 91,268,157 9 1 9 9 9 0 0 2 01,672,514 4 19 919 91 9 8 2 0 020 020 03 5 6 7 1 Y e a rs
40
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The basic human trait is to be averse to the idea of taking risks. There is always an urge to minimise the risks and take protection against possible failure. The risk includes fire, death, accidents, etc. Any risk may be insured against at a premium commensurate with the risk involved. Thus collective bearing of risk is insurance. Insurance, whether life or non-life, provides people with a reasonable degree of security and assurance that they will be protected in the event of a calamity or failure of any sort. Indian insurance sector is witnessing exciting challenges, forcing companies to continuously innovate. Companies are under taking initiatives aimed at business process re-engineering, enterprise resource planning, customer relationship, breakdown of traditional organisational hierarchies besides introducing innovative, customer oriented insurance products. Service is becoming the source of gaining and retaining corporate leadership in the insurance business. Times have changed a lot since Triton insurance company has, was the first general insurance company to be established in India in 1850. The liberalised business environment led to competition in insurance sector also, which has helped ensure quality service to the customers besides spreading the market share.
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INSURANCE MARKET IN INDIA By any yardstick, India, with about 300 million middle class households, presents a huge untapped potential for players in the insurance industry. Saturation of markets in many developed economies has made the Indian market even more attractive for global insurance majors. (Table 1 in appendix reflects the low percentage and per capita penetration of insurance in India compared to other developed and developing countries.) 7 With the per capita income in India expected to grow at over 6% for the next 10 years and with improvement in awareness levels, the demand for insurance is expected to grow at an attractive rate in India. An independent consulting company, The Monitor Group has estimated that the life insurance market will grow from Rs.218 billion in 1998 to Rs.1003 billion by 2008 (a compounded annual growth of 16.5%). Winds of Change Reforms have marked the entry of many of the global insurance majors into the Indian market in the form of joint ventures with Indian companies. Some of the key names are AIG, New York Life, Allianz, Prudential, Standard Life, Sun Life Canada and Old Mutual. The entry of new players has rejuvenated the erstwhile monopoly player LIC, which has responded to the competition in an admirable fashion by launching new products and improving service standards. The following are the key winds of change brought about by privatisation. Market Expansion: There has been an overall expansion in the market. This has been possible due to improved awareness levels thanks to the large number of advertising campaigns launched by all the players. The scope for expansion is still unlimited as virtually all the players are concentrating on large cities and towns except by LIC to an extent there was no significant attempt to tap the rural markets. New Product Offerings: There has been a plethora of new and innovative products offered by the new players, mainly from the stable of their international partners. Customers have tremendous choice from a large variety of products from pure term
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(risk) insurance to unit-linked investment products. Customers are offered unbundled products with a variety of benefits as riders from which they can choose. More customers are buying products and services based on their true needs and not just traditional money-back policies, which is not considered very appropriate for longterm protection and savings. Customer Service: Not unexpectedly, this was one area that witnessed the most significant change with the entry of new players. There is an attempt to bring in international best practices in service and operational efficiency through use of latest Technologies. Advice and need based selling is emerging through much better trained sales force and advisors. There is improvement in response and turnaround times in specific areas such as delivery of first policy receipt, policy document, premium notice, final maturity payment, settlement of claims etc. However, there is a long way to go and various customer surveys indicate that the standards are still below customer expectation levels. Channels of Distribution: Till three years back, the only mode of distribution of life insurance products was through Agents. While agents continue to be the predominant distribution channel, today a number of innovative alternative channels are being offered to consumers. Some of them are banc assurance, brokers, the internet and direct marketing. Though it is too early to predict, the wide spread of bank branch network in India could lead to banc assurance emerging as a significant distribution mechanism. Though the market expansion has taken place, channel of distribution has increased and customer service is becoming the priority but still much has to be done as services are intangible, produced and consumed simultaneously and often less standardized than goods. These unique characteristics present special challenges and strategic marketing opportunities to the service marketers. The real competition between the service marketers was set after globalisation of the Indian economy the service marketing organisation has to adopt professional Management and its marketers have to imbibe the qualities of professionalism in order to meet the expectations of the customers.
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Customers are now looking at insurance as complete financial solutions offering stable returns coupled with total protection. Companies will need to constantly innovate in terms of product development to meet ever changing consumer needs. Understanding the customer better will enable insurance companies to design appropriate products, determine price correctly and increase profitability. In the present scenario, a key differentiated would be professional customer service in terms of quality of advice on enhancing customer convenience. According to one of the survey published in Indian Journal of marketing, 44 percent Respondents buy insurance to avoid tax; their major source of awareness is from friends. From the study it is observed that majority of the respondents are willing to take new policies in new companies. This suggests that most respondents are not happy with their existing company. Hence in this project study, an attempt has been made to understand the marketing strategies that are prevalent now and suggestions have been made to improve those strategies. Various factors that affect the marketing of insurance services have also been touched.
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EMERGENCE OF INSURANCE
Life insurance started in India about 200 years ago. The growth of the managing agencies system has been ascribed to the life insurance companies set up by the free merchants and the agency houses. Like insurance companies started in Calcutta and catered largely to the civil and military officers and European merchants. The Bombay Mutual Insurance society was started on immediate basis in the 1870s. The Oriental government security life Insurance company grew into the largest in Life Insurance Company. It was headed for many years by Sir Purshottam Das Thakur Das, who held director shit in over 60 companies, and was the President of the East India Cotton Exchange for many decades. Bharat Insurance was started in Lahore and was controlled by Lala Harkishan Lal before it was taken over by the Dalmias in 1933. Lakshmi insurance company was all so Lahore - based and was started by Lala Lajpat Rai. The Hindustan co-operative was pioneered by Sir NR Sircar in Calcutta. Another large Calcutta - based company was the National Insurance Company which was eventually taken over by a JK Singhania. The Birlas started new Asiatic and Ruby. Till 1939, there was no restriction on life Insurance company investments and the large business house is utilised their funds for the expansion and diversification of their trading and industrial interest. The Tatas had founded the New India Assurance Company in 1919. The garment of India decided to nationalise life insurance and the life Insurance Corporation (LIC) was set up in 1956. The second five - EA a plan had just started and the nationalisation of the Imperial Bank of India and life Insurance Corporation provided reforms for the large capital investment for the second plan investments. About 75 percent of the life Insurance Corporation (LIC) funds are invested in the public sector. A sizeable amount is also invested in foreign countries, in government securities, debentures and share has and loans to public bodies. Since 1955, with a marked fall in mortality, there has been a persistent demand for a reduction in the
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premium rates. The Morarka committee's recommendations resulted in a slight Reduction in the premium rates for without profit policies and some increase in bonus; the expense ratio remains very high and the rates for policies with profits are largely unchanged. The service has deteriorated; now there was a move to spread the corporation into a number of zonal companies. The Insurance regulatory Act provided for 26 percent foreign participation in life and general insurance area has now. A number of leading foreign insurance companies, both life and general or setting up joint ventures with some of the leading Indian houses to enter the insurance field which holds good growth potential. The life Insurance Corporation is the biggest investor in the country. Its total investment in 1978 - 79 amounted to Rs.7, 386.2 million and has grown several fold in the 1980 s and 1990 s. The General Insurance Corporation (GIC) was formed after the nationalisation or General Insurance in 1971. The activities other than allegiance Corporation and its subsidiaries cover all kinds of insurance (except of human life). It has integrated Annan's seven private companies into just four subsidiaries, viz., National Insurance company, Calcutta's; New India Assurance, Mumbai; Oriental fire and General Insurance, New Delhi; and United India Insurance, Chennai. In January 1979, the Corporation announced a premium relief of over rupees 280 million, which resulted from a reduction of 20 percent in the premium rates for fire insurance.
OPENING OF INSURANCE SECTOR
In line with the economic reforms that were ushered in India in early nineties, the Government set up a Committee on Reforms (popularly called the Malhotra Committee) in April 1993 to suggest reforms in the insurance sector. The Committee recommended throwing open the sector to private players to usher in competition and bring more choice to the consumer. The objective was to improve the penetration of insurance as a percentage of GDP, which remains low in India even compared to some developing countries in Asia.
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Reforms were initiated with the passage of Insurance Regulatory and Development Authority (IRDA) Bill in 1999. IRDA was set up as an independent regulatory authority, which has put in place regulations in line with global norms. So far in the private sector, 12 life insurance companies and 9 general insurance companies have been registered.
Rationale for opening of insurance sector A thriving insurance sector is of vital importance to every modern economy. First because it encourages the savings habit, second because it provides a safety net to rural and urban enterprises and productive individuals. And perhaps most importantly it generates long-term investible funds for infrastructure building. The nature of the insurance business is such that the cash inflow of insurance companies is constant while the payout is deferred and contingency related. Malhotra Committee appointed by the government of India for conducting a study on insurance is bullish on insurance sector potential. The poor reach of insurance in the country and the sheer numbers make India a market with tremendous potential. Some important recommendations of this committee were: The private sector to be allowed to enter insurance business An Insurance regulatory Authority to be set up to regulate, promote and ensure orderly growth of the insurance industry in India. Foreign insurance companies to be permitted on a selective basis, they may should be required to float an Indian company for the purpose preferably in a joint venture with a Indian partners. the quality of agents recruited needs to be improve, the minimum level of business to be written by them to be reviewed, institutional channels like cooperative societies, NGOs need to be harnessed as distribution channel
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Entry of private sector in insurance has been the hall mark of the emerging scenario. Consequent to establishing IRDA were a good number of companies being given licences to start insurance business in India. SWOT Analysis of Insurance Sector in India
The aim of liberalisation of this sector was to provide better Services to the customers, to provide innovativeness and need based products at reasonable premium rates and provide satisfactory returns. The figures of the basic parameters of the Industry's performance viz. insurance density and insurance penetration also are evident of the hither to existing low yield Indian market conditions. The figure of premium vis--vis the GDP of 2000 today at 0.54 percent for non-life insurance business and 1.39 percent for the life insurance business. The term "insurance density" reflects the insurance purchasing power. The premium per capita in India amounted to US $2.40 for non-life Insurance and US $ 6.10 for life insurance in 2000. According to 2000 - 01 figures, the per capita insurance premium in India was only $8 as compared to $4,800 in Japan, $1,000 in South Korea, $887 in Singapore, $823 in Hong Kong and $144 in Malaysia. India's share in total insurance premium worldwide was only 0.3 percent, though it was second most populous country in the world while Japan's share was 31 percent, EU 25 percent, South Africa 2.3 percent and Canada 1.7 percent. The total insurance premium in India is two percent of our GDP, which is far below the world average of 7.8 percent. India's Share in the world insurance market is only 0.39 percent as against 34.17 percent of US, 21.02 percent of and 8.4 percent of UK .
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STRENGTHS high growth rate of insurance sector; government's dependence on this sector for long range low cost funds for infrastructure development; huge contribution towards foreign exchange reserves by Re insurance ; high level of employment generation; Very big middle class (consuming class).
WEAKNESSES low per capita insurance premium; low penetration /reach; society's perception for saving ends at gold or house; Low faith of people in foreign companies for depositing hard earned savings; huge paper work/ time lag in settling claims; Rampant corruption in nationalised insurers; Low literacy rate.
OPPORTUNITIES huge potential to be tapped ; with coming of foreign insurance companies, their innovative insurance products and marketing expertise will also flow ; use of IT as service provider .
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THREATS Insurance (life) is a long term business and it is not feasible to predict the interest rates over long tenures; insurance is susceptible to vagaries of nature i.e. floods, earthquakes, etc which can make insurance companies bankrupt ; Wrong commitments / communication by insurance agents (on behalf of company) to the gullible consumers.
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MARKETING MIX IN THE INSURANCE SERVICES

PRODUCT
life insurance is a contract for payment of a sum of money to the person assured (or failing him/ her, to the person entitled to receive the same) on the happening of the event insured against.' usually the insurance contract provides for the payment of an amount of on the date of maturity or at specified rates at periodic intervals or at unfortunate death if it occurs earlier. Obviously, there is a price to be paid for this benefit. Among other things, the contract also provides for the payment of premiums by the assured. life Insurance is universally acknowledged as a tool to eliminate risk, substitute certainly for uncertainty and ensure timely aid for the family in the unfortunate event of the death of the breadwinner. In other words, it is the civilised world's partial solution to the problems caused by death. In a nutshell, life Insurance helps in two ways: dealing with the premature death, which leads to dependent families to fend for themselves and old age without visible means of support.
Product benefits Superior to any other savings plan: Unlike any other savings plan, a life insurance policy affords full protection against risk of death of the policy holder; the insurance company makes available the full sum assured to the policyholders' near and dear ones. In comparison, any other savings plan would amount to only the total savings accumulated till date. If the death occurs prematurely, such savings can be much less than the sum assured which means that the potential financial loss to the family is sizeable.
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Encourages and forces thrift: A savings deposit can easily be with drawn. The payment of life insurance premiums, however, is conceded sacrosanct and is viewed with the same seriousness as the payment of interest on a mortgage. Thus, a life insurance policy in effect brings about compulsory savings.
Easy settlement and protection against creditors: A life insurance policy is the only financial instrument the proceeds of which can be protected against the claims of the creditor of the assured by effecting a valid assignment of the policy.
Administering the legacy for beneficiaries: Speculative or unwise expenses can quickly cause the proceeds to be squandered. Several policies have foreseen this possibility and provide for payments over period of years or in a combination of instalments and lump sum amounts.
Ready marketability and suitability for quick borrowing: A life insurance policy can, after a certain time period be surrendered for a cash value. The policy is also acceptable as a security for a commercial loan, for example, a student loan. It is particularly advisable for housing loans when an acceptable LIC policy may also cause the lending institution to give loan at lower interest rates.
Disability benefits: Death is not the only hazard that is insured; many policies also include disability benefits. Typically, these provide for waiver of future premiums and payment of monthly instalments spread over a certain time period.
Accidental death benefits: Many policies can also provide for an extra sum to be paid, if death occurs as a result of accidents.
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PRICING The three main factors used for determining the premium rates under a life insurance plan or mortality, expense and interest. Significant changes in any of these factors normally entail revision of premium rates. Mortality: the average rate of mortality is one of the main considerations
than deciding upon the pricing strategy. In a country like South Africa which is unfortunately the plagued by a host of diseases especially like AIDS, the threat to life is very important. The price of the instalments, its frequency and its premium charges are decided accordingly. Expenses: the cost of processing, the kind of infrastructure costs involved
and the payment made to the agents, re insurance companies as well as the registration etc are all incorporated into the costs of the installments and premium sum and forms the integral part of the pricing strategy. Interest: the interest rate is one of the major factors, which determines
people's willingness to invest in the insurance issues. If the interest rate provided by the banks or other financial instruments has is much greater than the perceived returns from the insurance premiums then the people would not be willing to put their funds in this sector. The financial climate in South Africa how ever, is such that it is favourable to the insurance sector. The interest rate in South Africa is not very high. In fact for the past few years it has fluctuated in the early teen and this, compared to the interest rate in the other countries is certainly relatively low. Hence, we can safely say that the market is conducive to the perusal of Insurance Services in our chosen destination.
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DISTRIBUTION
Distribution is a key determinant of success for all insurance companies and the nationalised insurers currently have a large reach and presence. New entrant's cannot and do not expect to supplant or duplicate such a network. Building the distribution network is expensive and time-consuming. Yet, if insures are to take advantage of India's large population and reach a profitable mass of customers, new distribution avenues and alliances will be imperative. This is also true for the nationalised corporations, which must find fresh avenues to reach existing and new customers. Initially, insurance was seen as a complex product with a high advice and service component. Buyers prefer a face to face interaction and place a High premium on brand names and reliability. As products become simpler and awareness increases, they become off- the- shelf commodity products. Various intermediaries, not necessarily insurance companies, are selling insurance. In the UK, for example, retailer Marks and Spencer now sells insurance products. At this point, buyers look for low price. Brand loyalty could shift from insurer to seller. The financial services industries, worldwide, has successfully used remote distribution channels such as the telephone or the Internet to reach more customers, cut out intermediaries, bring down overheads and increase profitability. A well known example is the UK insurer Direct Line. Established in 1985, it relied on telephone sales and low pricing to become the UK's largest motor insurance operator within a decade.
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The traditional distribution model comprises Captive/Tied Agents: These are agents who sell policies of only one Insurance company which employs them.

Independent Agents: Individual agents who represent several companies and place Insurance policies for their clients with the company that offers the best rate and coverage. Corporate agents: Firms selling policies of several Insurance companies.
An amendment in October 2002, to the Act of Corporate Agents, recognized banks, brokers and other entities like cooperatives, NGOs and panchayats as intermediaries who can sell Insurance for a commission. While under the old laws the only corporate agent that was recognized was a firm where all directors were Insurance agents, the new law allows virtually any entity to sell Insurance. The measure will give a big boost to the private insurers in the country, who have been facing a distribution conundrum. The various channels that can be used under the purview of the amendments are Banks: Bancassurance in its simplest form is the distribution of Insurance products through a bank's distribution channel. Banks can straightaway leverage their existing capabilities in terms of database and face to face contacts to market Insurance products. Rural areas and small towns offer a huge potential to the Insurance companies. This potential was largely untapped due to inadequate distribution. The key to market access in these areas can be: a. Co-operative societies b. Village Panchayats c. Post Offices
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The Co-operative societies and village panchayats can act as Corporate Agents to sell Insurance products most specific to the communitys needs. For example, MetLife have signed an agreement with Apna Bazar Co-operative for selling life insurance policies. One of the oldest and amongst the largest consumer co-operative society, Apna Bazar's outlets are spread across Mumbai, Navi Mumbai, Ratnagiri & Goa, with a customer base of over 1.5 million. Based on the agreement, Apna Bazar Co-operative shall become corporate agents for Metlife India and offer Metlife India products to its huge customer base. mer base of over 1.5 million.
NGO-This channel could be used to increase awareness about the Insurance products. As many NGOs have strong presence and a positive reputation in rural areas they can prove to be an effective channel.
Group Channels Worksite Groups: Worksite marketing is the selling of voluntary
(employee-paid) Insurance and financial products at the worksite. The products may be on either an individual or group platform and are usually paid through periodic payroll deductions. Affinity groups: Affinity groups are homogenous groups. The major advantage of selling Insurance to affinity groups is that there is a greater likelihood of lasting. Personal advisors such as accountants, lawyers, doctors and tax planners Mutual Funds: Mutual Funds could capitalize on their existing customer bases to sell policies.
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Hospitals: A tie up with hospital chains for selling health Insurance can be an effective channel to reach a wide base of customers.
Some potential Indian players hope that their anticipated technology advantage will allow them to increase their reach, partly by using remote channels. However, financial Services companies, globally and in India, find that customers are making the shift to such channels slowly and only for lakhs complex transactions. In India, insurance, especially life Insurance, is still a service product. Indeed, even the successful international that insurers focus on standard covers such as motor insurance. Therefore, in India technology will not replace a distribution network, though it will offer advantages like better customer service. Banks and finance companies can emerge as an attractive distribution channel for insurance. This trend will be led by two factors, which already apply in other world markets. First banking, insurance, fund management and other financial services will all form a set of services rather than disparate ones. Second, banks and finance companies are being driven to increase their profitability and provide maximum value to their customers. Therefore, they are themselves looking for a range of products to distribute. In other markets, notably Europe, this has resulted in bank assurance: banks entering the insurance business. The Netherlands lead with financial services firms providing an entire range of products including Bank accounts, motor, home and life Insurance and pensions. In France, over half of all life insurance sales are made through banks. In the UK a KPMG survey found that 96 percent of banks and building societies surveyed dealt with insurers as providers of products, as early as 1995.
In India too, Banks hope to maximise expensive existing networks by selling a range of products. In the US, Banks lease space to insurers with in their bank branches or retail products for multiple insures. Another innovative distribution channel that could be used are the non-financial organisations. For example, insurance for consumer items such as refrigerators can
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be offered at the point of sale. This piggybacks on an existing distribution channel and increases the likelihood of insurance sales. Alliances with the manufacturers and retailers of consumer goods will be possible. With increasing competition they are wooing customers with various incentives, of which insurance can be one. Another potential channel that reduces the need for an owned distribution network is Worksite marketing. Insurers will be able to market pensions, health insurance and even other general covers through employers to their employees. These products may be purchased by the employer or simply marketed at the workplace with the employer's cooperation. Companies will have to ensure a strong brand identity. Distribution through third parties means that it is those companies is rather than the insurers who often reap the benefits of customer loyalty. This accelerates the shift of insurance to a commodity product. Since many new companies already offer other financial services products they will be tempted to sell only their own products. They must balance this against the advantages of offering customers the wide range of products. This is a especially important because it is anticipated that their will be the rise of pure financial service retailers who do not have any owned products and offer a broad range of products from different providers to consumers. PROCESS
The process involved in the insurance industry should be customer friendly. The speed and accuracy of payment is of vital importance. The processing methodology should be such that it provides total ease and convenience to the customers. Instalment schemes should be streamlined to cater to growing demands of the customers and keep pace with the competition in the market. The new developments,
which will smoothen the process flow, are IT and data warehousing. Firstly, information technology will help in servicing large number of customers efficiency and bring down overheads. Technology can complement or supplement distribution
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channels cost effectively. It can also help improve customer service levels considerably. Secondly, the use of data warehousing, management and mining will help to gauge the profitability and potential of various customer and product segments. Understanding the customer better will allow insurance companies to design appropriate products, determine pricing correctly and increase profitability. PEOPLE
Being a service industry involving a high level of people interaction, it is important to use this resource and efficiently in order to satisfy customers as also to have a competitive edge in the market. The two key areas which needs to be kept under consideration are training and development and strong relationships with intermediaries. Training the employees to introduce them to new products, use of information technology for efficiency, both at the Staff and the agents level or the distribution organisations is one of the key areas to look into. Also building strong relationships with intermediaries, such as agents, will help in meeting customer's needs and serve them effectively.
MARKETING MIX POLICIES
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Different companies can choose to position themselves differently and hence the marketing mix would be different. However, there are certain common characteristics that one can cull out from the possible strategies that companies can adopt. Product: The development of flexible products to suit individual requirements is what will differentiate the winners from the also-rans. The key to success is in providing insurance solutions, not standardised insurance products. The concept of riders/optional benefits has already been a huge innovation brought about by the new players, which has led to customisation of products for individual needs. However, companies may differentiate themselves on the basis of product segments that they choose to focus on and excel in. Distribution: Different companies may however choose different channels and different geographies to focus on. The channel options are - tied agency force, corporate agents and brokers and this is an area where different companies will make different choices. Many companies like HDFC Standard Life are focussing on all channels whereas companies like Max New York Life are focussing on the tied agency force only. Customer interface will be a key challenge for life insurance companies and includes every that interaction that the customer has with the company, such as sales, new business underwriting, policy servicing, premium payments, claim processing and so on. Technology can play a crucial role in delivering the highest standards of service set by the company and it will be imperative for any serious player to excel in all of these. Price: Price is a relevant differentiator only in two segments - pure term insurance and in pure annuities. Here too, service delivery and financial strength will need to be present at a minimum acceptable level for price to be a relevant differentiator. In case of savings oriented products, long term returns generated will be more relevant than just the price of the product. A focus on generating good investment performance and Keeping a tight control on costs will help in generating good long-term maturity value for customers. Norms have been laid down on all of these by IRDA and adhering to these while delivering good returns will be a challenge. Advertising and promotion: The level of demand is latent and will have to be activated
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considerably. The market needs to be developed. Greater awareness of insurance and the need to have it as a protection tool rather than as a tax planning measure needs to be appreciated by the Indian people. Various communication tools including advertising, direct marketing and road shows will contribute to all this and different companies will take different approaches on these.
SCOPE OF SCTUDY
SELLING INSURANCE PRODUCTS
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(CHALLENGES INVOLVED) Indian consumers till recently had been dealing with only one life insurance player the life Insurance Corporation in the public sector. The entry of private players in the market has now exposed them to a slew of innovative products customised to their needs. However, despite the launch of innovative products, the Indian market is still in a nascent stage. While consumers scepticism comes in the way of selling insurance products, there is also a huge potential that has not yet been explored penetration of life Insurance in India is as low as 2.15 percent of the GDP. Currently out of an insurable population of around 300 million people only 78 million are insured. Given the sheer geographical spread of the country there is a vast market that remains untapped and there is plenty of room for growth. Most of the Asian countries with the exception of Japan, South Korea and Taiwan have low insurance penetration as compared to the developed countries. Countries with low penetration levels such as India and China present a huge opportunity. Some of the issues in successfully selling insurance products in India are: Only A Tax-Saving Instrument The Indian consumer has traditionally looked at life insurance investment as an instrument for tax saving a rather than as a prudent investment decision or even as a protection device. The joint family system prevalent earlier also meant that life insurance was not seen as a necessity the way it is in some other countries as the family was there to help an individual in case of any difficulty. Tax savings has been the route taken by agents earlier in selling life Insurance to customers. The market has therefore been characterised by seasonality during the year end closing. This is not the ideal way for selling an insurance product. There has been no endeavour to correlate it with the needs of the customer. Here in lies the
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opportunity for any company that can provide advice based selling. Looking at this opportunity, the Aviva has created a special financial health checks" - a need based analysis of customers long-term savings and insurance needs. This is a free service administered by the companys expert financial planning advisers. Depending on the life stage and earnings, the financial health check assesses and recommends the right insurance product for the customer. The private insurance players have also been trying to change the perception of insurance products merely as a tax-saving product by marketing policies as comparable to other savings instruments available in the market. Flexibility of the insurance products offered by the players is enabling the customer to decide on the premium to be invested as well as the life cover.
Consumer Awareness And Credibility An enlightened consumer is always a boon for the insurer as he would look at insurance as being beyond a mystical product that can be bought only as a tax saving tool. Policy owners face difficulties in understanding the insurance products due to the complex feature as of products and Services offered, as well as the technical jargon used in the literature of insurance contracts and sales illustrations. Making a right choice in the purchase of an insurance policy is not an easy task. To this end educating consumers is crucial to enable them to make well informed decisions in order to find the insurance products that best suit their needs.
Traditionally the consumer has been used to guaranteed products offered to him. However, keeping in mind the fluctuating interest rates and the capital intensive nature of the business, this is not sustainable in the long run. In fact LIC itself has now moved away from guaranteed products. Nevertheless there is still a mindset among customers where they find it difficult to accept a nonguaranteed product. This presents a major challenge for the private players.
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Apart from offering non-guaranteed products some of the private players have even started offering unit linked insurance products to their customers. This includes the policy offering a life cover as well as investment returns. Unit linked products offer a flexibility for the customer where constituent parts of the product are unbundled and clearly identifiable to him
Though the IRDA does not allow rebating by insurance agents, this is not the reality in the market. The Indian consumer has been used to his agent passing on a percentage of his commission to him.
Manpower Problem Like any other service industry, in insurance too people are critical for the growth of the industry. As insurance was a nationalised industry, experienced people are only found in LIC. Professionals from other industries like banks, Mutual funds, FMCGs and other service companies have to be approached. Moreover, recruiting as well as retaining the right quality of people, whether in sales or other functions, is a major challenge for the insurers.
BRAND-BUILDING AND ADVERTISING Financial service brands are based on ensuring long-term financial security through a broad range of inherently risky services and investment options. In the insurance sector, branding has typically involved the concepts of stability, trust and protection. If
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there was one industry in India which least considered branding as essentiality, it would be the insurance industry. However, with liberalisation of the industry, players have to realise the need for branding in a competitive environment. Insurance companies need to strive to build a brand in order to attract both the end customer and intermediaries. Branding in the Insurance Sector Need For Branding In an industry characterised by commodity pricing, unprofitable policies and a saturated market, insurance companies are under an increasing pressure of maintaining clientele and grasping a major chunk of their investments. The industry, in general, faces the challenge of building the credibility of being a financial service provider while meeting customer's expectations of what it means to be financial services company. Financial service brands are based on ensuring long-term financial security through a broad range of inherently risky services and investment options. In the insurance sector, branding has typically involved the concept of stability, trust and protection from risks to be there in time of crisis or even protecting from crisis through a standard set of products. This positioning helps to give credibility to sell risk free" products designed to help customers ensure that their family and assets are protected
Brand strategy is one of the most critical parts of the underlying business strategy of any organisation. It will help to establish what insurers stand for and promise and will eventually help to give the industry a new in the image. If there was one industry in India which least considered branding as an essentiality, it would be the insurance industry. This was primarily because life insurance in India was the monopoly held by life Insurance Corporation of India. It was always felt as an abstract service or a fallback, more like a safety net. But
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with the liberalisation of the industry, players have to realise the need for branding in a competitive environment. Insurance companies need to strive to build a brand in order to attract both the end customer and intermediaries. Not only this, brand-building is also important for companies to be able to attract quality professionals and good employees, which, as of now, are a scarce commodity. This is one sector where trust and reliability are the most important factors that effect the choice of a customer. Focus and strategy are essential to the development of brand in any sector but it becomes more important in the case of life Insurance because it is and intangible service and service that requires expert advice. With the Internet redefining the way business is done, the brand position needs to be convincing in a new dimension. In cyberspace, clear corporate branding is even more vital in absence of physical presence and issues of trust and reliability are more imperative. Adequate time, investment and longer term management of the brand are essential, not only for success but also for the survival. All brands need to be built around well differentiated and credible positioning that springs from the organisation's history. The brand must not only be believed but also looked by management and employees.
Advertising and Communication in the Insurance Industry For an intangible and homogeneous word of financial Services, the role of advertising is expected to deliver three results 1. Build awareness 2. Building brand immediately 3. Generate leads
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According to Tony Meegham, brand image derives from the various components of identity with advertising being central to the process by informing consumers the inherent product benefits and positioning the brand in the minds of the consumer. But consumers are not passive recipients of image - laden advertising.
Advertising Tactics for Insurance Albers-Miller and conducted a comparative study of service industry advertisements across 11 countries and found that financial service advertisements rely more on the rational over emotional appeals. In one of the studies on Financial Services advertising across eight non-English speaking countries, 13 appeals have been identified which are considered relevant for Financial Services. The appeals are: 1. Cheap: when the advertisement describes the poor as "cheap, economical, inexpensive, bargain, discounted, under valued or good value" for instance the cost of Financial Services.
2. convenient : when the product is described as " convenient, handy, time saving, quick, easy, suitable, accessible and/ or versatile" example value of fast service, shot to wait time , easy to use, convenient products and locations, etc. 3. Effective: describing a product that is an effective work able, useful, pragmatic, consistent, strength, and having longevity of effect ". This factor was of concern to the business and professional consumer for a pawn by financial effectiveness of the service was a crucial factor.
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4. Family: importance of this appeal was unclear in the context of Financial Services. Hence, it has been omitted in this study. 5. Modern: described as "modern, contemporary, new, improved, progressive and/ or advanced". It appeals for new, modern, innovative and progressive products. 6. Neat: orderly, neat, clean, tidy, precise, etc. indicating that cleanliness of the organisation was indications of service quality. 7. Ornamental: described as beautiful, decorative, embellished or detailed. The description of ornamental environments and aesthetics and its effect on decision making of consumer. 8. Popular: advertisements described the product as popular, commonplace, well known, typical, universal and/ or everyday". The idea was to understand the popularity and repeat patronage. 9. Productivity: ambition, accomplishment, success and/ or proficient describing the products to be functional and productive. 10. Relaxation: rest, contentment, at ease, laid-back" where advertisements stressed on relaxation and comfort appeals to the customer.
11. Safety: appeals of safety, security, stability and caution" Were the appeals used in the financial advertisements.
12. Technological: technological advancement, research, science and discovery" were the appeals to describe availability of new and useful technology for the benefit of the customers.
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13. Wisdom: describing wisdom, sagacity, expertise, awareness, experience of the knowledgeable Staff of the organisation leading to better customer service.
Study of the advertisements A study was conducted to find out the approaches of the various insurance companies in Indian life insurance industry towards communicating itself and its products to the consumers. The study was intended to content analyze the advertisements and to know through a set of framework and model how closely the present day advertisements fall in line with what has been proposed in previous researches. To understand what are the features that come up in the insurance product advertisement in the Indian industry and how closely the advertisements are in line with what has been a theoretically prescribed as ideal way of communication for the insurance products. For elucidating the required information in a number of advertisements, print media were studied.
Observations about the advertisements of the insurance companies For each of the players studied, the advertisements the list in the magazines and pamphlets octane from the company offices were studied for various traits. The content analysis was also done against the 13 appeals identified in the previous study. A percentage recurrence for each of these traits in all the observed advertisements for both the print ads as well as the pamphlets was then tabulated to know the focal points of the communication strategy. These observations were then grouped under three basic categories:
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Visual: slice of life inspired from life attractive Visuals/ shots consistent colour schemes logo of one company only of the JV logo of both companies of the JV
Branding: single product branding multiple product branding corporate branding
Message: use of humour use of serious tone fantasy storyline only information symbolism benefits clearly mentioned use of Hindi Recurrence of words like trust, security, relax, care, needs, etc. optimism in the message undercurrent of fear, insecurity of the future in messages
A summary of the advertising activities of some of the players
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Players ICICI Prudential Max York Life HDFC standard Life LIC
Ad. Agency Lowe
Positioning Protection
Ad-line of We cover you.
Human Life and At every step in Lifestyles life Flexible Policies Your Partner for provider Mass market life Making life easy
New Equus Canco LIC
Value for Money for you Provider of Life We know India insurance policies Better for the entire country
LITERATURE REVIEW
LIFE INSURANCE CORPORATION OF INDIA
The logo depicts a lighted lamp protected by two hands with the three colours of the national flag as the backdrop. The logo signifies LIC protecting the happiness of life and the tri colour gives a nationalist face to LIC. The words "Yogkshemam
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Vahamyam" printed beneath in Sanskrit stand for your welfare is my responsibility". These words are actually a part of Bhagwad Geeta shlokas spoken to Arjuna by Lord Krishna.
Advertisements The LIC advertisements use catch lines like, " life is beautiful make it secure." " unlock your dreams, LIC provides the key." one of the advertisements shows a man in the state of meditation with the words," for peace of mind, call your agent.
For print ads: Visual: unlike some private insurance companies, advertisements of LIC were non-glossy, non-designer shots and very close to the life of the masses. Branding: LIC advertisements appeared distributed uniformly for multiple product, single product and corporate branding. Message: there is more of a rational appeal in the advertisements than emotional appeal. There was no storyline involved. However, traces of fantasy and humour could be seen. The text had also used words like trust, love, relax, security, etc. to lend the emotional appeal to the advertisements
HDFC STANDARD LIFE INSURANCE HDFC Standard life has a simple logo, which has the letter "Li", and the name of the company. Advertisements For print ads:
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Visual: the visual are attractive and inspired from life. Colour and layout is consistent in all advertisements. Symbolism was also used to express the message. Branding: most of the ads focus on corporate branding rather than single product branding. Message: most advertisements used rational appealed to attract customers. This however was done in a light, humorous manner. There was less emphasis on giving product attributes and benefits in detail. In most, the information centred on the organisation and why the customer should choose HDFC for insurance products.
ICICI PRUDENTIAL LIFE INSURANCE Media Campaigns: the company has brought out media campaigns using newspapers, hoardings and even television the vehicle to target the young and the old alike. Through their advertisements, they effectively convey the message of being with an individual at every phase of life. For every campaign the subhead used is, we cover you." the base line is joy hope freedom life
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For print ads: Visual: The visuals or slice of life showing happiness and joy. The advertisements showed people of all age groups - children, family, and old couples enjoying life as it comes. The headlines and sub-heads are set in bold and attractive enough to catch attention. Branding: most advertisements were based on corporate branding and a few on single product branding. There was hardly any advertisement on multiple products branding. Message: A genuine plan that works while you are working and keeps working even when you are not" and we cover you" are the constant reminders in each advertisement. The base line of JOY HOPE FREEDOM LIFE gives a very optimistic colour to whole advertisement. Some advertisements are very informative and have tried to render information in as systematic and tabular form as possible. Some speak simply of life and ICICI prudential. There is no storyline or fantasy involved in any message. Some advertisements mention benefits explicitly.
A DETAILED ANALYSIS:
Many of the organisations are using co-branding as their strategy wherein the names of both companies figure in the brand name, either in form of initials or completely.
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All players are using the logo of the parent domestic partner. The companies are trying to leverage the image of the domestic partner and hence the name. This is probably because masses have low awareness of the foreign partner as compared to domestic. The private players yet in the nascent stage of the introduction to the Indian market have invested largely on corporate branding to present their organisation as a worthy insurance company. This worth has been exhibited through the JV partners and leveraging the corporate brands of the partners, thus telling the consumer the organisations together can make life better for him. The new organisations use a lot of gloss and decorative appeal to attract the customers. (advertisements of ICICI prudential appear to have these features ) it is assumed from the quality, language and lifestyles depicted that the target customers are the sophisticated and educated upper middle and upper class segments of the society. The common man may not be able to identify himself with the depictions and the attraction of the advertisement may be Limited to the beauty of the visual rather than its actual purpose. The monolithic LIC is away from this style. Although a few of their advertisement do target the young earners, most of the advertisements have men earthy appeal. The target customers been the hot masses, there is always the average middle class Indian, who is part of their campaign. Very few players do use of Hindi for the leaflets. Probably this is according to the suggested target audience.
Colour and design consistency was also observed in the campaigns. The repetition of the colour schemes typical to an organisation is expected to help the customer to associate the scheme with the organisation, enhance recall and build identity.
When matched for the various appeals identified in the study on the financial service advertising in eight non-English speaking countries by Albers-Miller, the following observation was made:
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Convenience: the convenience appeal here mainly relates to convenience of payment mode and convenience through types of insurance packages offered to suit varied needs.
Effective: the effective appeal describing usefulness, functionally, strength of the insurance products was strongly etched across all advertisements. The effectiveness was made part of both the emotional and rational appeal in order to integrate its importance in one's life.
Family: this was also an integral part in maximum advertisements. The advertisements have linked the benefits of the insured with the protection, health, education, security and development of the family. Both emotional and rational modes of conviction are used to convey the importance of insurance.
Modern: the modern appeal of progressive, innovative products specifically has not been stressed upon in any advertisement. However, some organisations such as LIC and ICICI prudential have a big range of products in life insurance.
Neat: this appeal explained in terms of ``clean, spotless, precise, tidy ``surroundings did not form a part in any advertisement.
Ornamental: the use of the `òrnamental `àppeal in the study was unclear. Popularity: popularity has been talked about by insurers like Alliance Bajaj ``60 million satisfied customers across the world `ànd ICICI prudential also. Popular did not seem to be the main appeal in the advertisements.
Safety: this was the prime and recurrent appeal in all campaigns. As the industry itself thrives on the concept of financial security and safety for life, this was directly or indirectly incorporated in advertisements.
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Relaxation: the relaxation appeal has been shown as an outcome of having insured oneself against life's insecurities with the help of insurance policies.
Technological: most players being new and having collaborations with foreign players, the reputation of being technically advanced seems to already exist and hence Re enforcement of the same may not be required.
Wisdom: Wisdom of the service providers did not appear as a prominent appeal to attract customers.
BUILDING A BRAND
- The ICICI Prudential Experience
When the insurance industry was first opened up and private player entered the field in 2000, there was a host of challenges that lay before them. Consumer attitudes towards insurance were largely indifferent, and insurance was regarded as an inflexible, tax-saving product that
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offered low returns. Rarely was it recognised for the multi-dimensional protection instrument that it is. Service levels were low, products were not transparent and were typically sold as the one-size-fits-all kind, with very little relevance to a consumers actual need. The most broad-based challenge for all companies was to spread awareness about life insurance how it works, its benefits and most of all, its absolute necessity for anyone who has dependents. At a more company specific level, the task for ICICI Prudential was to build a relevant brand that customers could trust. Being a frontrunner in the life insurance industry, ICICI Prudential has always performed both the category task, as well as the brand task, with the help of advertising and public relations (PR). The companys initial campaigns addressed various myths and misconceptions about life insurance, seeking to change customer attitudes. For instance, life insurance had long been regarded as expensive, rigid, difficult to understand and good only for tax saving. As a result of ICICI Prudentials advertising, life insurance is now increasingly seen as a complete solution to meet ones myriad needs - health, wealth, life, child protection and retirement. Its a financial product that provides a stable return on investment, protects life at affordable cost, secures a childs future, does retirement planning in the most effective way and provides additional health protection. It is now an integral part of the consumers wealth management basket. The other major communications task at the time of launching operations was to present the visiting card of the company to the public at large and build credibility and stature, so as to give the consumer the confidence that here was a company that could be trusted to invest funds with. This required a corporate campaign, which started with advertising to establish the brand, build awareness and give the brand a larger than life image. The aim was to position ICICI Prudential as the new and modern face of the life insurance provider in India and change the perceptions of the target audience to view insurance not as a compulsory tax saving instrument, but as a means to lead a worry free and secured life. Amongst ICICI Prudentials innovative steps was the introduction of lifestage and need based solutions selling, thereby unshackling the category and meeting specific customer needs. The brand proposition for all the ad campaigns was reflected in the line We cover you. At every
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step in life, i.e. that ICICI Prudential Life is the only private life insurance company that provides consumer insurance solutions which are relevant to the unique needs at every stage of life. The campaign also provided several lines of support serving to inculcate trust and belief in the company, such as the competitive advantage or product performance, a showcase of products available for different segments, the flexibility and value addition in products and the sound financial backing and credentials of ICICI and Prudential. The advertising idea was encapsulated in an endearing, lasting and universally recognised symbol of protection the sindoor. The company launched a mass media campaign including print, outdoor, Internet and radio and finally culminating in the corporate film. With the geographical expansion of the company, TV became a viable medium and the corporate campaign was run on TV, because the medium lends itself well to an emotional type of film that strikes a chord with the audience. This campaign contributed extensively to raising brand awareness of the company and was short-listed as one of the 12 most effective campaigns for the year2001 in the Effie awards. Once the corporate image and brand identity were established, the next step is to give the customer a rational and tangible reason to buy first of all insurance, and secondly, from ICICI Prudential. This brought ICICI Prudential to the next phase of communication- to inform the consumer about the comprehensive product range and present the benefits of the same. This was tackled through product advertising, which gave the customer information that would help him make a decision. ICICI Prudential launched product-specific advertising campaigns for most of its products -largely through print and outdoor advertising - once more performing a category task, particularly in the retirement solutions and child solutions category. The retirement solutions campaign attempted to drive home the benefits of early retirement planning, while the Smart Kid campaign educated customers about a life insurance product that would leave nothing to chance in providing for their childs future. In fact, the retirement solutions campaign launched in September 2003 marked the first time that a private life insurer ventured into TV advertising for a specific product category and was one of ICICI Prudentials most effective campaigns, highly successful due to the integrated
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efforts of product development, advertising and direct marketing. Recognising the dire need for systematic retirement planning amongst the Indian public early on, ICICI Prudential invested the necessary resources in building awareness and introducing products. The challenge in this slow growth, low awareness, category was to reposition the traditional concept of retirement planning and create relevance for it among the 30 to 40years age group that traditionally had many emotional barriers against retirement planning. The word retirement itself brought to mind all the negatives associated with old age mainly the loss of social, financial and physical independence - causing avoidance or deferment of any decision relating to planning for retirement. ICICI Prudential launched a campaign specifically to address this psychological barrier by offering afresh perspective: be forever young and lead an unchanged life an aspirational appeal for the target group. The advertising campaign was complemented by other activities like seminars to spread awareness about the need for retirement planning and direct marketing innovations. The efforts paid off, and ICICI Prudential increased its market share of pensions market to 23 percent of the total pensions market and 73 per cent amongst the private players in the market within six months of launching its retirement campaign. Moreover, according to ORG MARG studies, the ICICI Prudential brand name and advertising had the highest recall amongst all private players, and was only marginally behind LIC. Four years since the liberalisation of the life insurance industry, consumers are becoming increasingly aware of and actively managing their financial affairs. They are looking to insurance companies to offer them a complete solution and one of the biggest challenges facing insurers is to continuously re-evaluate customer needs and develop products to fulfil this need. ICICI Prudentials strategy is to remain customer-centric in all that it does, thereby constantly evaluating and meeting customer needs. Regular focus groups, individual meetings with customers, listening to the Voice of the Customer, etc, are all methods that the company implements to ensure that the customer remains central to the ICICI Prudentials being.
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Building a Distinct Brand Identity

It is imperative that the companies build a distinct brand identity in order to compete in a market steaming with competitors. In order to do so, a company could strengthen its approach into following facets of brand identity: Personality: could be that of the friend or end adviser. Companies are trying to create that by using slogans like, ``friends for life `` etc. but the approach is so similar in all the companies that none of the brands has been able to develop a distinct personality. Culture: by using communication to bring it to the fore. Examples could be Indian culture or even a conservative culture (could indicate prudent and safe investment) of the parent companies. Customers reflection: could be built to create a reflection of target customer example, independent, smart or savvy. Relationship: to connote relationships like family bond of love that creates the need to protect loved once by buying insurance product of the particular brand. Physique: could be built around the salient feature of the company's service's like life Insurance which could be further narrowed down to reflect salient objectives like customisation, innovativeness, flexibility,etc. In order to be successful as a brand, a company would have to move from being a ``functional brand`` to an `èxperimental brand ``.
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CRM IN INSURANCE SECTOR
While the insurance sector is seeking to maintain a balance between acquiring customers and developing existing ones, customer acquisition is vital, as no retention strategy will entirely stem customer defection. That said, insurance companies are experiencing unacceptable levels of customer churn, thanks to which they are focusing on keeping the customers they already
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have in a bid to ensure a net growth in their customer base. Today, the focus is on selling more products to existing customers to improve profitability. Customer-focused strategies require CRM (customer relationship management) to help acquire customers thorough various touch points and translate operational data into actionable insights for proactively serving customers. CRM with BI (Business Intelligence) tools can help insurance firms monitor the ebb and flow of customer behaviour, giving them a holistic 360-degree view of their customers. 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 GoldMines (a sales and marketing tool) and HEAT (an operational CRM solution) from FrontRange Solutions. Last year it took a decision to invest in CM3 from Teradata and SASs statistical tool for BI. CRM helps in obtaining granular details about the customers, which help in designing better products, improve service levels and reduce operational costs. CRM has helped ICICI Prudential Life capture five lakh customers through effective event-based marketing and lead tracking to cross- and up-sell products. CRM helps Aviva Life Insurance Company to categorise and segment customers and align products that best suit them. Aviva says that CRM is helping them expand into rural areas. Aviva caters to close to 100,000 customers with its CRM solution. Thats not all. Players such as Birla Sun Life, Aviva, HDFC Life and MetLife are expected to adopt CRM tools as well in the near term.
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CURRENT MARKET SCENARIO

Insurance firms are tactically rolling out an application here and there rather than strategically implementing a complete CRM suite. In this, they are on the right track. They (insurance firms) are taking baby steps, starting with operational CRM to increase sales force automation. Once they have a sufficiently large customer database, they use BI tools to mine data from various sources (such as contact centres and from banks with which they align) pushing the need for analytical CRM solutions. CRM technologies such as sales force automation, contact centre segmentation and campaign management tools are maturing and finding wider adoption with large insurance companies. The banking, financial services and insurance (BFSI) sector and telecom will continue to drive the CRM market, but the uptake of CRM in the insurance vertical will climb steeply in 2004 and growth will be rapid and higher. The need to integrate customer data from multiple channels and to increase sales force productivity (including that of agents) and running productive marketing campaigns will continue to drive demand for CRM software.
Spending on CRM is up Insurance firms spend close to 12 percent of their IT budgets on CRM software and services. The cost includes operational CRM and spending on BI tools. Industry pundits believe that insurance firms are looking for CRM initiatives with budgets ranging from Rs 50 lakh going right up to Rs 3 crore. The sector is busy compiling data on individuals, including their purchasing patterns and buying preferences of policies, pension plans and the like. In many cases, policy renewal marketing to existing customers remains an unsophisticated exercise, often amounting to little more than a request to renew, with no attempt at putting a value proposition before the customer. With a little help from CRM software, insurance firms can sell multiple insurance policies and pension plans to the same customer.
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The Opportunity Is Huge Within the financial services sector, IT investment in insurance is expected to grow the fastest with a CAGR of 35 percent in the five-year forecast period (2001-02 to 2004-05). [Source: IDC India] Other sub-verticals of the financial services sector are expected to grow at a CAGR ranging from 21 to 25 percent. Much of this spending will be on CRM applications and integrating multiple delivery channels. IDC says that new delivery channels are evolving as the insurance market expands. According to a report from Indian Infoline, India has the highest number of life insurance policies in force in the world. The industry is pegged at Rs 400 billion in India. Gross premium collections stand at 2 percent of the GDP and this has been growing by 15 to 20 percent per year from the Life Insurance Corporation of India (LIC) and other governmentowned insurers. Privatisation has led to new players entering this market and it is expected to grow at a rapid pace. A substantial part of the insurance marketthe portion dealing in pension plans and insurance as an investment optionis protected by a tariff and administered price regime. Competition in pricing is yet to emerge. Once that happens, as with all dynamic customer-oriented service industries such as banking and telecom, the race to gain and retain customer mind share will be on.
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 general insurance products. All of them have equally strong international and local partners; all are focusing upon similar geographies and target audiences. The new firms selling life insurance and non-life insurance [pensions, insurance as saving, etc] have failed to emulate the LIC model because margins are getting squeezed. There are several pain reas that new insurance firms faceacquiring new customers, retaining them, cross-selling products and controlling rising costs while providing comprehensive support.
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Insurers have added a plethora 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 factorsprotection, saving (investment option), loans and pensionhave compelled insurance companies to align with banks in reaching out to a larger audience. This trend has led to anotherinsurance companies are joining hands with banks by becoming channel partners for insurance. Tata AIG has a marketing alliance with HSBC, Birla Sun Life has one with Citibank and IDBI and LIC ally with Corporation Bank, while Kotak Life Insurance has an arrangement with Kotak Bank. This strategy helps insurance firms increase their footprint to cover a larger part of the customer base in the 20-30 years demographic. CRM helps connect a banks high net worth customers with insurance firms. Customer expectations are rising: Customers, faced with a dizzying array of insurance products expect customised offerings, value, ease of access, and personalisation from insurers. Today, customers are expecting individual attention, responsiveness, customisation and access. At the same time, they dont want to pay a premium for these services. High customer expectations and lower exit barriers could lead to increased customer attrition.
Where to beginoperational CRM or analytical CRM? The choice between operational and analytical CRM as a starting point depends upon the insurers needs. Gartner says that insurance companies with multiple financial products and a big customer base, such as integrated insurance solution providers, will leverage their customer base to cross- and up-sell different financial products, including insurance. Such providers will benefit from adopting analytical CRM.
Market segmentation, campaign management and data mining applications will benefit them in many ways.
Call centre text mining: This tool can help improve the customer experience by resolving complaints rapidly. Insurers are using these tools to mine text from call centre transcripts to identify issues faced by customers. Text mining tools also help
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detect and capture other useful pieces of information around a customers life stage, financial needs and product interests. These can be used to generate leads and trigger cross-selling. However, to be fully effective, customer service representatives must be trained to probe for information that will help in cross-selling during the text mining phase. Text mining tools are leading-edge today, but are predicted to take off quickly.
Event-triggering and profiling: Insurers can use event triggers to generate leads that can be acted upon quickly, usually within 24 hours. Event-triggering tools monitor incoming transaction and contact data in near-real-time to recognise changes in a customers behaviour or profile to trigger actions or alerts.
Lead management gets sophisticated: Often the ability of an insurer to generate leads by means of event-triggering, re-engineered touch points and cross line-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 prioritise and manage leads.
Pure insurance providers who do not have a large customer base will derive the maximum value from operational improvements, especially in integrating customer information from multiple channels and sales force automation. Most insurers will look to empower their agents by deploying partner-facing applications. Apart from making agents more productive, it will let insurers keep in touch with customers, otherwise difficult in a primarily channel-driven business. Vendors and analysts agree that the need to acquire, retain and support customers will stimulate greater investment in CRM, covering customer life cycle management. Insurers who are in an IT catch-up mode have been relatively prosperous during the last 18 to 24 months. Now they are investing in CRM to lock in their gains.
Using analytical CRM insurance companies can enhance: Cross- and up-selling capability to provide market opportunities within an existing customer database.
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Predictive capability to determine customer behaviour. Information regarding customer retention or attrition helps determine the likelihood of policy lapses and helps identify customers worth targeting for retention campaigns. Customer segmentation that leverages data to create accurate categories for use in marketing strategies. Market automation that combines analytics with campaign management functionality to help drive a more effective and efficient marketing campaign.
Tips for insurance firms: Take baby steps in implementing CRM. Invest in bespoke CRM (customised CRM) and not an entire CRM suite in one go.
Broad CRM perspective Areas where it can be applied: Applying collaborative interfaces (such as e-mail, conferencing, chat, real-time) to facilitate interaction between customers and organisations, as well as between organisational entities dealing with customer information (customers to sales representatives, sales to marketing, agent to provider). Automating horizontal integrated business processes involving front-office customer touch points-sales, marketing, and customer service-via multiple, interconnected delivery channels and integration between front-office and back-office. Analysing data created on the operational side of the CRM equation for the purpose of business performance management. Analytical CRM is tied to a data warehouse architecture; it is most often evident in analytical applications that leverage data marts.
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THE POTENTIAL OF RURAL LIFE INSURANCE
The on going liberalisation of the insurance sector in India has brought in its wake new customised products and Services to the market with a greater focus on customers. But, very few attempts have been made to explore newer market segments since most players want a slice of the same pie. Particularly, no concerted effort has been made in the direction of fulfilling the promises of liberalisation in terms of increasing the width of insurance distribution, and it reaching out to consumers in rural areas. As a result, the penetration of insurance in rural India is low with vast untapped markets waiting to be serviced. With the growing awareness of insurance coupled with the felt need for protection against natural and man made calamities, disease and death, the rural sector is a very potential market waiting to be tapped.
Potential of rural life Insurance: the findings of one of the Studies on a rural insurance conducted by the marketing and research team (MART) for the foundation of research, training and education in insurance (FORTE) in October 2002 reveal that the rural India have, with almost three-fourth of its population, offers a huge business opportunity for life insurance (Details of FORTE study is in the Appendix). The study further shows that the considerable awareness about life Insurance in rural areas in as much as 51 percent of respondents have expressed their intention to by insurance products. The research has also come up with valuable data about the extensive network of delivery channels built by the rural development agencies, like the banks, the cooperative institutions, the NGOs, and self help groups, in most villages. Furthermore, the data reveals that with the on going IT and telecom revolution in India, the rural folks are the reason the bleat technology Literate and are not averse to its use in their day-to-day activities.
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Besides, the economic profile of the rural population has been changing for the better with a steady decline in the population below the poverty line. The rural market is looking up with a phenomenal increase in plan outlay for rural development programmes from Rs.1 40 billion in the 7th plan to Rs.300 billion and Rs.600 billion in the eighth and ninth plans respectively to a mind boggling Rs.900 billion in the 10th plan. During 1981 - 1991, the rural GDP had grown from Rs.65,000 crore to around Rs.2,60,000 crore, registering a fourfold increase. Furthermore, there was a 250 percent increase in the flow of institutional credit for agriculture between 1995 and 2000. The income generated from agriculture, according to government estimates, is about Rs.25, 000 crore. Economic growth in India's agricultural sector in 2001 was seven percent compared to three percent in the industrial sector. By some estimates the rural market is growing at five times the rate of the urban market. The impressive growth in the rural economy has led to rapid increase in the rural incomes. The consuming class households in rural areas art now 16 million, which is almost equivalent to the number in urban areas. These statistics definitely be one if feel of the life Insurance potential are held out by rural India.
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PROBLEMS
Despite a few efforts to popularise the various rural insurance policies, rural India continues to have great apprehensions about the prospects of life insurance business. The sheer size of the country coupled be the spread of its myriad villages and compounded by poor connectivity infrastructure makes rural marketing a nightmarish experience. Given its vastness and complexity, the other in terms of the number of villages to be covered or inhabitants to be targeted, there is a certain sense of scepticism in the minds of insurance marketers. A major mindset issue in rural marketing arises from the tendency to lump rural India under a single canvas. The dichotomous definition of the rural and the urban fails to capture the diverse market segments in the rural India. What is more, there is a feeling of unfathomable difficulties, a great cultural divide that is difficult to bridge and the cause and efforts too daunting to pursue the opportunity to its logical conclusion. Several major factors account for the slow growth of life Insurance in rural India.
Heterogeneity of Rural Population: The real India lives in the villages which consist of diverse religious, castes, and creeds, apart from different income levels giving rise to plenty of problems. The rural population is a heterogeneous group ranging from landlords to poor landless, agricultural labourers, artisans and craftsmen. On top of that, the concept of rural is fast changing due to rural urban migration and transformation of the rural culture under the impact of modernisation and information revolution. The heterogeneity of the rural population poses a big challenge. As rural India is widely dispersed over 600,000 odd villages, the customer base is so heterogeneous regarding employment, income and family size that is a sound understanding of savings is not easily available. This lack of understanding will pricing and frequency of premium payment. Besides, rural customers are so different from their urban counterparts in terms of their habits, customs, values and aspirations that an altogether different approach is required to cater their insurance needs. Further more, the rural geographies display considerable heterogeneity calling for rural specific and region specific strategy. For
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example, a farmer in rural Haryana is much more progressive than his counterpart in Orissa. Similarly, an agricultural labourer in Tamilnadu is far more educated than his counterpart in Rajasthan. Thus, servicing the rural market is not an easy proposition, given the lack of geographical concentration of the potential consumers.
Disparities in Rural Savings and Investments: Second, the disparities in rural savings and investments hinder the rapid growth of life Insurance. Though the savings are significant, the investments are made more in physical assets and in other forms of financial assets than in life insurance. The National Council of Applied Economic Research (NCAER) data on rural household income distribution suggest that the top four percent of the households earn about 15 percent of the household income and the bottom 50 percent of the population saves about three per cent of overall domestic savings. But, the rural saving habits are oriented towards fulfilling specific objectives such as celebrating weddings, purchase of land, cattle, or other farm assets and building a general corpus. The typical rural informal sector deploys about 68 percent of its savings in physical assets, farm, business, housing and gold. as a result, the rural folk art not Left with sufficient savings to invest in life insurance. Dearth of Effective Intermediary Personnel:
Third, the dearth of effective intermediary personnel in rural areas precludes the progress of life Insurance. In most cases, an insurance against from the nearby urban or semi-urban market visits the rural areas periodically to sell insurance products. Over the years the insurance agent has remained a well - grounded generalist, even when the trend in many professions has been toward the narrowly trained specialist. He normally lacks the understanding of the beneficiary, his income generation, savings surplus, and investment behaviour. Moreover, the selection of these agents and their training leave much to be desired. Almost anyone who is perceived as a source of procuring few proposals within his circle of influence is sponsored by the development officer for appointment. The existing systems of training, testing and confirmation of agents or so loosely administered
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that a high proportion of insurance agents continues as mere spotters without adequate knowledge and professional competence.
Lack of Efficient Distribution Channels: Fourth, the lack of efficient and reliable distribution channels in rural areas is yet another factor that affects the growth of life Insurance. While individual agents have been the most effective medium in selling life products says, there are practical difficulties in finding the right type and a good number of candidates to courage the insurance training and certification. Besides, the insurers in the rural regions need to ensure that there are effective systems to keep a watch his on the performance of agents and particularly on customer service aspect such as premium collection and prompt remittances have. Another area of challenge in dealing with distribution and operational channels is the need to provide sale literature, publicity materials and proposal forms in local language to attract rural customers. An early difficulty in completing proposal documentation in rural areas is the possibility of lack of age proof for which practical solutions are to be found. Insufficient Infrastructure: Fifth, the insufficient infrastructure in rural areas in terms of both man power and materials proves itself a stumbling block to the steady progress of life insurance, coming as it does in the way of effective policy servicing. The challenge that stems basically from the week infrastructure base of the rural areas is the communication gap between the insured and the insurers. A direct fallout of this problem is the irregular collection of the premium as it is very difficult to reach out far - flung rural areas. The insurers are expected to introduce and maintain measures of mobility as is in delivery systems so that the insurance problems can be attended to without much delay. This would entail provision of necessary vehicles and other communication mechanisms at the disposal of company representatives who are afoot in charge of insurance claims, surveys, and after sales service.
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Problem of Illiteracy Sixth, the problem of illiteracy of the rural masses in rural areas is another critical problem that precludes the growth of insurance in the rural sector. Communicating with the rural audiences is complex because of low-level of literacy, multiple regional languages and low reach of mass media. All these act as a stumbling block to the development of rural insurance programmes. So, there is a desperate need to make the rural masses litrate at least up to a certain reasonable level before launching any rural insurance information dissemination programme. And it will be a Herculean task to conduct adult education classes in rural areas to enlighten the illiterate masses on the importance of life Insurance.
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SOLUTIONS
These ticklish problems relating to rural life Insurance may appear daunting, but innovative solutions can be found since the insurance prospects are too alluring to overcome such challenges. The rural markets are still unexplored Territories to a great extent and offer exciting opportunities for insurance companies the surest path to success is to design innovative products with features of flexible premium payment options suiting the markets at prices that people can afford and the develop an efficient delivery system.
Identification of Potent Rural Needs: The first step to harness the full potential of the vibrant and dynamic rural markets is identification of the potent needs of the rural population. There is a need to study their daily lives, their unique needs, at the their occupational structure in order to understand their aspirations, their financial capacities, as well as their limitations and constraints and then come up with the insurance products that can appeal to them and satisfy their needs. There is also an urgent need to conduct elaborate surveys and extensive research projects in various districts of the rural areas to assess the actual potential possessed by these regions and to examine the risk exposures of the inhabitants. A typical villager is exposed to a great deal of uncertainty in his profession .For instance, monsoon is one variable, which is known to create havoc demand villages dependent primarily on agriculture. Likewise a cattle rearer faces the risk of an epidemic or death or theft of animals. In all these cases, insurance has a great role to play. Spread of Insurance Culture: The chief concern on the part of all those who are concerned with rural life Insurance is to give a much-needed boost to the awareness of life Insurance in rural areas. For, spreading insurance awareness and consumer education are essential for propagating the concept and benefits of life Insurance in rural India. No doubt, there is some general awareness about life Insurance among the rural masses, but the perceived
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need is generally low. The marketing efforts should, therefore, focus on increasing the awareness and knowledge level about life Insurance and creating the need for a life insurance. This could be done through group meetings, radio features and cultural events like a folk dances, songs, playlets and puppet shows. The need for insurance can also be communicated effectively by using traditional and popular entertainment methods such as audio-visual aids and publicity material in local languages for easier comprehension by large section of rural population. This massive awareness programme for spreading insurance education needs to be launched on an on ongoing basis. Also, the spread of insurance culture in the rural areas and will have other beneficial spin offs like employment and income generation, better health and hygiene awareness and growth and development of life Insurance. less dropouts from schools which would have go a long way in giving an impetus to the
Appropriate Products: To accelerate the penetration of life Insurance in the rural market, simple, easy to understand and flexible products need to be offered, taking into account the uneven income patterns in rural areas. The insurers have to design innovative policies provided on efficient mechanisms which have explicit benefits for the rural population to observe, understand and measure. This would go a long way in helping persistence of policies. Single premium products could be useful to take advantage of higher income in bumper years. As there is a strong bias in favour of the long term savings products into rural market, the term insurance schemes can be popularised through a network of institutions that are active in providing rural credit. The insurance companies can design a simple plan offering life cover to customers who have taken any form of loan facility from the banking is system. The term insurance cover could be offered as part of the loan so as to guarantee repayment of the outstanding loan amount to the lender in the event of death of the borrower. The lender can be persuaded to finance the premium amount as part of the loan arrangement. To sustain a financially viable distribution system, it is absolutely necessary to develop products for the rural market taking into consideration the factors specific to rural India. The product design needs to provide flexibility to rural policyholders in the matter of
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periodicity and quantum of premium payment. The premium payment dates should generally be linked to the period when the farm produce is sold and the cash flow is generated. Again, in designing savings schemes for rural households, there is every need to build flexibility for premium interruptions when the policy holders fail to pay the premium amount on account of crop failure and other general and reasons. On top of that, the life insurance companies would do well to combine life insurance policies with health care benefits in view of the rising awareness in the rural households of the need to save money to meet unforeseen medical costs. Group insurance will also be an effective means of providing significant insurance to members of institutions at an affordable cost. Lending institutions in rural areas could be the agencies for providing group credit life insurance to the borrowers.
Effective Distribution Channels: Despite the tremendous changes spurred on by Internet and e-commerce, the insurance industry in India is still traditional and conservative in terms of adopting new technologies in their distribution channels. Since successful insurance marketing depends largely on the effectiveness of the distribution channels such as banks and micro finance institutions, panchayats, Internet and e-commerce, and promote non-traditional intermediary for better penetration. This will eventually lead to substantial improvement in the pricing structure, flexibility in the frequency of payments of premium, and more importantly are rarely went customer service at pre- sale and post-sale levels. However, all of these have to be supported by appropriate policy measures at the ground level. Selecting the right mix of distribution channels will be critical for becoming successful in the rural initiative. Besides, identifying the right people to harness the full potential of the vibrant and dynamic rural markets will be imperative. In this regard, it is important to note that the agency channel will as still be a force to reckon with in rural areas. The individual agent system could be most potential instrument for distribution of insurance products. If the rural insurance business is to be given a real push, we require is a large number of adequately trained agents with the necessary skills and knowledge for a proper distribution, and to ``provide protection, improve persistency, and educate policyowners ". In recruiting and training insurance agents, it is essential to make use of the services of
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Women who can target the female segment of rural population more effectively than men. Since the opinion-makers drive the masses the word of mouth is the most powerful communication channel. Therefore, appointing one man offices in rural areas could be a solution to the rural distribution puzzle. However, the most potential agencies could be extra departmental post masters as life insurance agents. Agents can also be recruited from among the youth club members, postmen and gram sevaks. The other untapped agencies could be the fertiliser dealers, seed dealers, and other suppliers of agricultural needs in the rural area who have a live contact with farmers. And, in the context of the emergence of multi channel distribution environment, the regulatory authority can consider the rural cooperative societies and the panchayats to at as service-cum-collection agents since these institutions have great influence on rural population and could be very effective. Besides, associations, self help groups and registered NGOs are ideally suited to act as nodal agencies. Using of these channels provides the insurance companies the benefit of operating at a lower cost that can be passed on to the consumers who need it most. Containing the cost of delivery and service is essential to make life Insurance affordable for the multitude of rural population. As a further measure to bolster Trust and confidence in the perception of customer, supervision for the intermediaries behaviour should be built into the system. Max New York Life recognises the rural market and social sectors as being distinct, requiring different marketing and product strategies. Therefore, it has designed specific products and appointed gram sahayaks in various districts across India. These gram sahayaks help increase awareness of life insurance.
Use of Latest Technology: Above all, the use of latest technology in supporting life Insurance marketing operations in rural areas can make a significant impact in developing and nurturing the rural market. Hence, the insurance organisations have to develop the necessary managerial culture and behavioural processes to make the e-business transformation a success. Modern technology can be used to understand and manage the market place and meet the customer expectations. Information technology solutions have come to shape future
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strategies for insurance industry by integrating the Internet into businesses processes to help insurers and agents to be more efficient in their functioning. The Internet based interactions will provide customers enhanced access to rural insurance. Customer policy fulfilment process may also be enhanced through product re-configuration, process redesign and improved integration with agents, brokers and suppliers. In short the framework of IT can change life insurers basis of competition from product distribution, pricing and investment performance to attractive, low-cost product and high temporal efficiencies.
Wide Publicity: To eliminate the communication gap between the insured and the insurers which results in contact hurdles, publicity of life Insurance has to be undertaken on a war footing through measures of quick mobility in a delivery systems by making effort to build lifelong customer relationships. The rural communication strategy to woo rural customers should include all elements of communication. Since television and radio have reasonably good reach, they can be best used for creating an awareness and interest among the rural illiterate masses about the insurance products. Outdoor publicity in the form of wall paintings, hoardings and mobile advertising on transport vehicles can supplement as a reminder media. If the awareness of life insurance products is to lead to a desire for purchasing them there is a need to build assurance and trust about the insurance company concerned and its services. This can be done through the face-to-face below the line touch and feel and talk mode at different periodic markets, fares and agricultural market yards - the good old systems of selling and communicating that have served the rural people well for centuries. Besides, video vans can be used to attract rural audiences and also to sell products and build brand equity through video shows and rural cultural programmes.
Looking Beyond Regulatory Requirement The IRDA is expected to keep a close and constant watch to ensure that the mandate given to it by the government of India is strictly adhered to by all insurers. Nevertheless,
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the insurance companies should look upon the rural sector not merely as a mandatory obligation only to meet IRDA norms, but as an opportunity and a challenge, and what is more, work with a deep sense of commitment to promote the cause of rural insurance. Merely servicing the product is only a minor part of the insurance cycle and the major challenge is to efficiently service the customer. The insurers should, therefore, take the responsibility of evolving relevant distribution channels and promote non-traditional intermediary for promotion of rural life Insurance. An intensive focus on suitable product offerings and appropriate marketing strategies would enable the life insurers to look beyond meeting the regulatory requirement of rural business and for facilitate their serving the social cause. The insurance industry has to attract a higher proportion of rural household savings in financial assets and also get a part of household expenditure diverted from purchase of gold and jewellery to life Insurance all these measures will eventually lead to substantial improvement in the sale of products, pricing structure, flexibility in the frequency of premium payments and relevant customer service at all levels. However, keeping in mind the axiom of the life insurance industry that Insurance must be sold" since it is seldom brought", premium collections must be aggressively pursued to keep many policies in force.
Development of Professionalism and Excellence: The IRDA has to develop, through its regulations, proper atmosphere conducive to the fast growth of rural insurance in such a way that insurers undertake rural Insurance not out of compulsion, but as a sound business proposition. Furthermore, it can meet the growth of rural insurance industry more and more vibrant by facilitating the development of world-class professionalism among insurers, agents, sales personnel, underwriters and actuaries through research, training and education. The focus, however, could be on specific, application oriented research, consumer awareness programmes and especially on creation of excellence in people engaged in sale and service of insurance products, and making the consumer aware of the intricacies of rural insurance and enable them to take maximum advantage of the insurance services.
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Birla Sun Life Bima Kavach Yojana: (A Policy for rural underprivileged) The Birla Sun Life Bima Kavach Yojana is a single premium insurance policy specially designed for the rural underprivileged. As per IRDA regulations, a rural village must not have a population exceeding 5000; have a population density of not more than 400 per sq. km. and at least 75% of the male population should be dependant on agriculture for the livelihood. Given these specifications, the villages adopted by the Aditya Birla Group around Renukoot became the right place to launch Birla Sun Life Bima Kavach Yojana. Marketing strategy for Birla Sun Life Bima Kavach Yojana IRDA stipulates that at least 7.5% of life policies in the second year should be from rural population. Gradually the percentage reaches 15% by the fifth year of operation. Birla Sun Life Insurance is actively pursuing its rural marketing strategy, because within three years, the company wants to convert this operation into a viable business. Birla Sun Life Bima Kavach Yojana will be marketed through village level contacts. To create awareness about its insurance product, the company has appointed Village Extension Workers (VEWs). Typically, VEWs are people from the local Aditya Birla Group Companies that are involved in social improvement projects. The VEWs act as liaison points between villagers and Insurance Advisors. Each VEW will be in charge of a cluster of 10-15 villages and will act as a introducer of Bima Kavach Yojana.
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Max New York Life Rural Product: Max New York Life has Easy Term product that provides term insurance for Rs 10,000 for a sum of Rs 100. The annual premium on the products of Max New york life sells in the rural areas ranges between as low as Rs.50 and Rs.20, 000. The company has appointed more than 150 gram sahayaks, to serve the rural market. Gram sahayaks are local residents who belong to those villages and understand the People's psyche, their buying capacity and are are local influencers. The gram sahayaks game Max New York life leads on prospects who are then contacted by the company's trained agent advisers.
Aviva's Approach: Aviva's approach focuses on the special needs of the customer. It includes introduction of products that are easy to understand, do not require medical tests and have simple of documentation. It has introduced three low premium products which has premium as low as Rs.500. Aviva is using its bank assurance distribution network to reach the rural sector. Through its association with the Lakshmi Vilas Bank, Aviva the state tubes its Jena's Suraksha product.
Bright Prospects
An analysis of the potential of life insurance in the rural areas and the remedial measures to plug the loopholes in the system reveals that the prospects for life insurance in rural India are bright. The rural life insurance industry has significant opportunities from the perspective of both social commitment and business the allotment to make the rural community see life Insurance as a product that could be an answer for their adversities. By some estimates the rural market is growing at five times the rate of the urban market for fast moving consumer goods (FMCG) and the day is not far when the rural insurance market will also be affected by
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similar wave. The income dispersal projection shows that the number of poor households will shrink by half to 28 million households by the year 2006-07 from the 61 million in 1997-98 and that the middle income households will double and the rich households will treble over the decade. This upward push, taking rural people from poverty to prosperity will lead to greatly increased purchasing power. Today's non-consumers of life Insurance among the rural folk will enter the market as first time buyers in large numbers tomorrow. And to get a larger share of the growing rural pie a radical shift in management thinking is called for. Despite the existing dissimilarities between urban and rural segments, and the bottlenecks in the development of rural insurance business, well planned and organised efforts on the part of both IRDA and rural insurance functionaries can yield rich dividends. Already, a large number of rural districts have witnessed significant growth and prosperity in the recent past with a continuously decreasing poverty line. Several studies, especially that of the National Council of Applied Economic Research (NCAER), have shown that the need for goods and services in a poor rural India match that of URBAN India. Contrary to the expectations, there are specific functionaries and agencies in the rural areas that can help explore and exploit insurance business in the untapped rural market. There are also sufficient resources as well as willingness to spend among the rural population for quality services. While competition in the urban areas is turning to be more and more cutthroat, it tends to be rather gentler and kinder in rural areas. Although the policies in the rural areas would be of relatively smaller amounts, it could be compensated suitably by the higher volumes of potential in contrast with urban areas. This apart, with the communication explosion, the interface with the urban environment would be more extensive.
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INTERPRETATION
Over the past three years, around forty companies have expressed interest in entering the sector and many foreign and Indian companies have arranged alliances. The threats of new players taking over the market have been overplayed. As is witnessed in other countries where liberalisation took place in recent years, it can be safely concluded that nationalised players will continue to hold strong market share positions, but there will be enough business for new entrants to be profitable. In the life insurance market being the first mover affords significant advantage in terms of building trust.
Opening up the sector means new products, improve customer service, etc. Both New and existing players have to explore new distribution and marketing channels. Potential buyers for most of insurance lie in the middle class. Newer insurers must segment the market carefully to arrive at appropriate products and pricing. Recognising the potential, the players have already begun to target niches like pensions, women or children.
Competition will result in the market to grow beyond current rates and offer additional consumer choice through the introduction of new products services and price options.
India as a country is under-insured in the urban as well as the rural areas. Only 35 percent of the 250 million insurable population is insured. With 80 percent of the insurance business coming from endowment assurance and money back schemes, and with 71 percent of the population living in the rural areas, one can only conclude that the awareness of the need for insurance is very low.
Rural India is a very potential market for life insurance and ignoring it will be suicidal for any life Insurance company. A pattern of socio economic forces is emerging in to
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an overall environment that appears to be highly favourable for the growth of life insurance in the rural India. Apart from the legislative compulsions, the economic development of the rural sector coupled with the unfulfilled need for life insurance has tremendous potential to offer business development opportunities to life insurers. The present availability of life insurance in rural India is estimated to be Rs.3 trillion, compared to the need of Rs.21 trillion. If the need grows even at a steady rate of six percent a year, then life insurance business in rural areas has to grow at an estimated 17 percent a year for the next two decades to catch up with the projected need. Rural insurance should be looked upon as an opportunity, and not an obligation.
As the competition will increase, players have to aggressively target potential customers and this well increase the penetration of insurance. Competition will also develop a better understanding of consumer requirements leading to more customised products appropriate for the market place.
So far as branding and advertising is concern most of the companies are focusing on corporate branding rather than product branding. The two companies that focus on product branding are LIC and HDFC Standard life. These two have a more product oriented communication in its advertisements rather than company oriented.
One of the hurdles in the growth of any insurance company is agents attitude. Most agents are interested only in producing new business and not in servicing existing customers satisfactorily. This was also evident in the survey published in Indian Journal of marketing.
In Insurance sector, one cant differentiate on the basis of innovative products. The reason being, if the product is an excellent product it will not take too much time to be copied by other players. The thing which they cant copy is companys services and, I think, that would be the differentiating factor in the insurance arena.
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There would be substantial shifts in the distribution of insurance in India. Many of these changes will be according to international trends. Worldwide, insurance products move along a continuum from pure service products to pure commodity products then they could be sold through the medical shops, groceries, novelty stores etc. Once commodization, popularity and awareness of the products is attained then the products can move to remote channels such as the telephone or direct mail. In the UK for example, retailer Marks & Spencer now sells insurance products. At this point, buyers look for low price. Brand loyalty could shift from the insurer to the seller.
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CONCLUSION
The insurance sector was opened up for private participation four years ago. The reasons that prompted the government to bring in reform in the insurance sector are well known. While the Public Sector 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 products offered restricted and the service to the consumer inadequate. It was also felt that the rapid economic growth witnessed in the 90s cannot be sustained without a thriving insurance sector. It was also recognized that India has a vast potential that is waiting to be tapped and this could be achieved when sufficient competition is generated and it is exposed to the developments in the rest of the world. The insurance sector was, therefore, opened up for private sector participation with provision for limited foreign equity exposure. We have now four years experience of the public and private sector together operation in the market. The gains after opening up the sector are obvious. The total premium collected by the insurers both life and non-life in the year 2003-2004 is Rs.82, 415 crores (Rs.66, 288 crores in life and Rs. 16,127 crores in non-life) compared to Rs. 44, 985 crores (Rs.34,898 crores in life and Rs. 10,087 crores in non-life) during the year 2000-2001. This represents an 83% increase in the last three years over the base year 2000-01. This is what we have witnessed after the opening up of the sector. If we take the three year block prior to the opening of the sector, we find that the total premium collected in 1997-98 was Rs.27,089 crores (life: Rs.19354 crores; non-life Rs.7735 crores) which has grown to Rs.44,985 by 2000-2001 representing an increase of 66%. Insurance sector has obviously started growing at a rapid pace after the sector was opened up. The private sector accounts for nearly 13% of the first year premium market. The market share of the private players has to be seen in the context of this enlarged market. There is also evidence to show that the rate of growth of public sector undertakings had not shown any decline after the entry of the private sector companies. All of them are obviously having a share of a larger market. The Credit for enlarging the market should however, go to the private sector as they came up with an aggressive marketing strategy to establish their
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presence. The Public Sector has, in its turn, redrawn its priorities, revamped their marketing strategy, and together the public and private sectors have enlarged the market. Indian insurance business, which remained under developed with low levels of insurance penetration and insurance density has shown signs of improvement. The insurance penetration i.e. premium as percentage of GDP has increased from 2.32% in 2000 to 2.88% in 2003. The insurance density i.e. premium per capita has increased from USD 9.90 in 2000 to USD 16.40 in 2003. The overall world rankings in terms of total premium volumes have improved from 23rd in 2000 to 19th in 2003 and our share in the world market has increased from 0.41% to 0.59% during the same period. The world ranking in terms of life insurance premium volumes has improved from 20th in 2000 to 18th in 2003 and the share in world market has increased from 0.50% to 0.81%. Similarly in non life insurance rankings in term of premium volumes has improved from 29th in 2000 to 28th in 2003 and he share of world market has increased from 0.25% to 0.29%. While the improvements are not dramatic, but the insurance industry is moving in the right direction. As indicated by me earlier the insurance market has grown due to public sector continuing its presence by holding on to its market prompting the private companies to market new products. This they have been able to do as they have geared themselves to face the competition. The LIC, for instance, has concentrated on retaining its market in traditional products like endowment and money back and has not slackened its hold in the rural areas. It has simultaneously started experimenting with new products like Unit Linked where there is private sector domination. With its considerable presence in the whole country the LIC would continue to play a major role in the life insurance market. This would, in turn, prompt the private companies to innovate, find niche markets and expand into the rural areas. As a result the insurance penetration would increase and the customer would stand to gain. We are already witness to the beneficial effects of this type of competition between the public and private sector. The pension market has been developing in a big way which would benefit the large section of the people in the organized and unorganized sector. There is a thriving Unit Linked insurance market that has been generated exclusively by the private sector. There is a plethora of new and innovative products offered by the new players. Customers are offered unbundled products with a variety of benefits as riders from which they can choose. They can buy products and services that they need while hitherto they were purchasing
112
products as they alone are available in the market. This choice has empowered the customers and this is a positive signal. In addition to the growth of insurance market the other area where there is significant beneficial change with the entry of the private insurance companies is in the area of insurance intermediation. Till three years ago, the only mode of distribution or life insurance products was through agents. We have today alternate channels like bancassurance, brokers, corporate agents and direct marketing through internet. Though it is too early to predict, bancassurance has the potential to emerge as a significant distribution mechanism. Banks have not only data from which they can identify potential clients, but have also extensive reach and provide a point of contact for the insured. The Bank branch unlike an agent cannot be elusive after the sale of the product and has to respond to the needs of the insured. If there is proper disclosure at the time of sale of policy and efficient post sale service, there will be significant increase in the use of this model by the insurers to enlarge their business. The insurance broker offers the most efficient distribution system through which clients purchase commercial insurance. As the non-life insurance market open gradually, the value of the insurance broker's role will be better understood. There will be increasing opportunities to serve the needs of midsize companies arid small enterprises by delivering the specific services these clients need and in the way they want them delivered. These are perhaps the reasons for various agencies evincing interest in broking companies. This implies that there is enough business for a large number of brokers for the present and an early start would give them adequate time and opportunity to equip themselves with necessary skills to provide professional services. Corporate Agency is another area, which has been expanding rapidly. While this model has the potential to reach a large section of the population in a short time, there are concerns about the mode of sale of the policies. Insurance products are becoming complicated and unless the agent is conversant with the benefits and conditions attached to the policy, there is a distinct possibility of the sale being affected without full disclosure. While this may not be intentional the repercussions could have far-reaching consequences. The insurers will have to be extremely careful in dealing with corporate agents and keep a vigilant eye on the way the sales are effected.
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In spite of the proliferation of the intermediary channels, the traditional agent continues to play a dominant role in the sale of insurance policies. A significant feature in the post reforms era is the ability of the agency force to assess the requirements of risk cover for their prospect and suggest the policies that suit their individual requirements. It may be recalled that one of the criticisms against the public sector insurers is that they concentrated on sale of policies without looking into the needs of the customers. As a result many of the individuals remained underinsured. The average size of the life insurance policy before the opening up of the sector was around Rs.50,000/-. This has now risen to about Rs.80,000/-. The policies sold by the private insurers are in the range of Rs.1.1 lakhs to Rs.1.2 lakhs, way above the industry average. The limited coverage in the rural areas and the vulnerable sections of the society continues to be a source of concern. While the private insurers are adhering to the targets stipulated in the Regulations, there is need for a greater involvement of the management at various levels so that the product that is finally delivered serves the needs of those targeted group.
As we look back at these four years, one can reasonably be proud of the strides made by the industry. We are witnessing a demographic change in the country and the younger generation which is exposed to the outside world demands products and services which are at par with what is available in the advanced countries. This is the biggest challenge. The Indian insurance companies would face this challenge and provide services on par with services provided in the advanced countries.
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LIMITATIONS
Data is collected from secondary sources, therefore, control over data collection is not there. Most of the information and data are not current. Data may or may not be accurate.
Methodology used in data collection is not known.
So far as Internet Search is concerned, it is based on finding certain key words, there is a possibility that some important information will be missed.
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APPENDIX
1).Insurance percentage and per capita penetration in India as compared to other developed and developing countries:
Countries
Insurance penetration (Premiums as a % of GDP) 12.71 8.70 4.48 14.04 6.04 9.89 1.77 1.12 2.13 0.54 0.36
Insurance Density (Per capita premiums in $US) 3028.5 3165.1 1611.4 392.9 1193.5 935.6 7.6 9.5 86.4 4.0 12.9
UK Japan US South Africa Australia South Korea India China Malaysia Indonesia Brazil
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2) Life Insurance Industry in India FY 2006-07
Company LIC ICICI Prudential Birla sunlife Tata AIG HDFC Standard Life Allianz Bajaj Max New York Life Others
Premium u/w (Rs. Million) 59187 2464 988 792 760 582 526 1384
% of Total Policies (in Million) 88.8 3.7 1.5 1.2 1.1 0.9 0.8 2.0 9.9 0.14 0.05 0.08 0.08 0.08 0.05 0.22
% of Total Policies 94.2 1.3 0.5 0.8 0.8 0.8 0.5 2.0
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3) RURAL SECTOR STATISTICS (LIFE INSURERS)
Name of the Life Insurer Private Sector HDFC Standard Life ICICI Prudential Max New York Life OM Kotak Mahindra Birla Sunlife TATA-AIG SBI Life ING Vysya Metlife India Allianz Bajaj AMP Sanmar Aviva Life Insurance
Policies Issued in Rural Areas 2006-07 15,352 29,376 9,345 5,169 10,422 9,137 2,700 3,883 2,916 19,368 1,510 96 2005-06 1,365 6,940 5,551 770 2,005 3,894 148 658 84 3,881 72
--
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ANNEXURE
QUESTIONNAIRE:
Name: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Age: _ _ _ _ _ _ _ _ Phone No: __ __ __ __ __ __ __ __ __ __ Total Income from All Sources: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Occupation: _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ Are You Aware of Private Sector Life Insurance Companies _ _ _ _ _ _ If Yes Name Some Companies A.)__________________ C.) __________________ E.__________________ B.) __________________ D.) __________________ F.)__________________
Do you know about Life Insurance Products _ _ _ _ _ _ _ _ Do you have any insurance protection _ _ _ _ _ _ _ Which Company: LIC Private Insurance Company
Have You Heard about the Concept of Mutual Funds ___________ ? Do You Know about the Unit Linked Insurance Plans ___________ Which Plan Will You Prefer to Invest your Money? o UNIT LINKED INSURANCE PLANS o MUTUAL FUNDS o BOTH
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BIBLIOGRAPHY Books:
Ravishankar, Marketing of insurance services Survey of Indian Industry 2007 (Hindu Publication)
P N Agarwala, A Comprehensive History of Business in India
Journals and Magazines:

Journal Of Insurance & Risk Management , June 2007 Journal Of Insurance & Risk Management, June 2007 The chartered Accountant , May 2007 Business India , December 22,2006 January 4, 2007 Strategic marketing, January- February 2007 Indian journal of marketing , June 2007 Indian journal of marketing, January 2007 IRDA Journal, March 2007
Websites:

www.birlasunlife.com www.domain-b.com www.etstrategicmarketing.com www.ficci.com www.retailyatra.com www.indiainfoline.com
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PROJECT REPORT

MARKETING RESEARCH ABOUT COMPETITION IN INSURANCE INDUSTRY & APPOINTMENT OF FCS

MR. FAIZ KHAN

(Sales Development Manager, HDFC SLIC)

SUBMITTED TO DR. K.N. SINGH Faculty (MBA)

SUBMITTED BY ANSHUL CHAURASIA

Marketing Research about Competition in Insurance Industry & Appointment of FCs

CENTER FOR MANAGEMENT TECHNOLOGY

Marketing Research about Competition in Insurance Industry & Appointment of FCs

ANSHUL CHAURASIA MBA (IIIrd Sem)

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Consultancy assignments undertaken:

Fe asi bi l i ty of Fi nanc e C omp

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Mal aw i Ghan a N e pal

Di re c t W orl d B ank USAI D & UN DP

F i nanc e and L oan

De ve l opme nt of Mortgage Se rvi c i ng Manu al

Lending Operations in Weaker-Section Housing

Marketing Research about Competition in Insurance Industry & Appointment of FCs

MFF Lending and KfW Lines for Micro-Finance

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Marketing Research about Competition in Insurance Industry & Appointment of FCs

The Standard Life Insurance Assurance Company

Financial Strengths of the company

About Standard Life

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Money Marketing Awards

Money facts Investment, Life & Pensions Awards

Bank hall Achievement Awards

Pension Provider of the Year 2003 and 2004

Financial Adviser Provider Awards

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Financial Adviser Service Awards

Pensions Management Administration and Service Awards

Pensions Management Technology Awards

Best extranet accessibility 2004

Guardian & Observer Consumer Finance Awards

Overall Winner in Personal & Stakeholder Pension Provider 2003

Professional Adviser Awards

Best Product Provider Website (adviser zone) 2005

Online Finance Awards

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Germany Austria Spain Hong Kong China

" sales office branches representative office

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Joint venture agreement

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Incorporation of HDFC Company Limited:

Marketing Research about Competition in Insurance Industry & Appointment of FCs

SECURITY: Providing long term financial security to

Marketing Research about Competition in Insurance Industry & Appointment of FCs

Part - 2 Visiting insurance companies and to compare their

Part 3 Conducting a Survey of various people APPROACH

DATA COLLECTION PRIMARY DATA SOURCES

Marketing Research about Competition in Insurance Industry & Appointment of FCs