INTRODUCTION
Insurance may be described as a social device to reduce or eliminate risk of life and property. Under the plan of insurance, a large number of people associate themselves by sharing risk, attached to individual. The risk, which can be insured against include fire, the peril of sea, death, incident, & burglary. Any risk contingent upon these may be insured against at a premium commensurate with the risk involved.
“Insurance is a contract between 2 parties whereby one party called insurer undertakes in exchange for a fixed sum called premium to pay the other party happening of a certain event.”
Definition of Insurance Insurance is a contract whereby, in return for the payment of premium by the insured, the insurers pay the financial losses suffered by the insured as a result of the occurrence of unforeseen events. With the help of insurance, large number of people exposed to a similar risk make contributions to a common fund out of which the losses suffered by the unfortunate few, due to accidental events, are made good. General definition: In the words of John Magee, “Insurance is a plan by which large number of people associate themselves and transfer to the shoulders of all, risks that attach to individuals.” Fundamental definition: In the words of D.S. Hansel, “Insurance may be defined as a social device providing financial compensation for the effects of misfortune, the payment being made from the accumulated contributions of all parties participating in the scheme.” Contractual definition: In the words of justice Tindall, “ Insurance is a contract in which a sum of money is paid to the assured as consideration of insurer’s incurring the risk of paying a large sum upon a given contingency.”
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BRIEF HISTORY OF INSURANCE SECTOR IN INDIA
The insurance sector in India has come a full circle from being an open competitive market to nationalisation and back to a liberalised market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries.The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973.
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107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.
INSURANCE SECTOR REFORMS
In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R. N. Malhotra, was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at “creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognising that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms…” In 1994, the committee submitted the report and some of the key recommendations included: i) Structure ? Government stake in the insurance Companies to be brought down to 50% ? Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations ? All the insurance companies should be given greater freedom to operate ii) ? ? ? ? ? iii) Competition Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the industry No Company should deal in both Life and General Insurance through a single entity Foreign companies may be allowed to enter the industry in collaboration with the domestic companies Postal Life Insurance should be allowed to operate in the rural market Only one State Level Life Insurance Company should be allowed to operate in each state
Regulatory Body ? The Insurance Act should be changed
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? An Insurance Regulatory body should be set up ? Controller of Insurance (Currently a part from the Finance Ministry) should be made independent
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Investments ? Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50% ? GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time) Customer Service ? LIC should pay interest on delays in payments beyond 30 days ? Insurance companies must be encouraged to set up unit linked pension plans ? Computerization of operations and updating of technology to be carried out in the insurance industry. The committee emphasized that in order to improve the customer services and increase the coverage of the insurance industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry.
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Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body.
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FUNCTION OF INSURANCE: I Primary Functions – The primary functions of insurance include the following. i) Provide Protection
The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Professor Hopkins observe "Insurance is a protection against economic loss, by sharing the risk with others.” ii) Collective bearing of risk
Insurance is a device to share the financial loss of few among many others. Dinsdale opines, insurance is a mean by which few losses are shared among longer people. Similarly, William Bevridge observes, "The collective bearing of risks is insurance." All the insured contribute the premiums towards a fund and out of which the persons exposed to a particular risk is paid. iii) Assessment of risk
Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. Risk is the basis for determining the premium rate also iv) Provide certainty
Insurance is a device which helps to change from uncertainty to uncertainty. This may the reason that John Magee writes that the function of insurance is to provide certainty. Similarly, Riegel and-Miller observe, "Insurance is device whereby the uncertain risks may be made more certain".
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II. Secondary functions Prevention of losses Insurance cautions individuals and businessmen to adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions; installation of automatic sparkler or alarm systems, etc. Prevention of losses cause lesser payment to the assured by the insurer and this will encourage for more savings by way of premium. Reduced rate of premiums stimulate for more business and better protection to the insured. Small capital to cover larger risks Dinsdale observes, insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty. Contributes towards the development of larger industries Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery. III. Other functions — They include: ? Means of savings and investment: insurance serves as savings and investment, insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured’s For the purpose of availing income-tax exemptions also, people invest in insurance. ? Source of earning foreign exchange: Insurance is an international business. The country can earn foreign exchange ^ by way of issue of marine insurance policies.
? Promotes exports insurance makes the foreign trade risk free with the help of different types of policies under marine insurance cover.
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ROLE OF INSURANCE SECTOR IN INDIA I Protective role Insurance has been playing protective role towards the development of industry and commercial institutions. The major protective measures have been : i) Protection from risks arising out of natural calamities Insurance has also been playing important role in protecting the industry and commercial activities from natural calamities like fire, marine losses, floods, earth quakes, cyclones etc. Protection from the risks caused by human beings Insurance provides protection against risks caused by human beings such as strikes by workers, their negligence in carrying out work, theft and decoity, evil disturbances and many other such acts. In addition to the issue of policies against such causes, insurance also issues policies to protect the industry and commercial institutions from the loss of money in transit. Protection against statutory liabilities Insurance also plays the role of protecting the industry and commerce in fulfilling statutory liabilities towards the workers, arising out of industrial accidents. The employer is bound to compensate such workers under the provision of Workers' Compensation Act. in case the employer obtains an accidental policy in favor of employees; the money to be paid as compensation to the accident victims, can be chimed from the insurance company. Financial security Insurance provides financial security also to industry and commerce. Exports of goods to other countries by sea, storage of goods in safe godowns and various other kinds of financial losses are secured by insurance policies. Protection from loss of profits Insurance' also has extended its role of prot6cting different industrial and commercial activities, it provides protection against losses arising from shops or factories. It also undertakes to indemnity the loss of profits from business functions. This way, the loss of profits and property / both are protected. Protection of debts A trader can protect himself by taking appropriate policy against the credit sales or property kept on security against goods or property. Thus, the insurance protests the trader even in case the debtor dies or of damages to the goods.
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ii) Protection to the business institution due to sudden death of the me key man The successful operation and development of a business largely depends on its directors, managers and administrative personnel. Sudden and untimely death of such person may badly affect the functioning of the business and many problems may also arise in day-to-day functioning of business. Insurance plays important role by insuring the life of key man in the business so that the future can be protected safely from uncertainties. Provides stability in commercial and industrial activities Insurance companies extend various kinds of assistance to business enterprise to run the business regularly and continuously. It plays important role in partnership business by insuring the life of partners so that in case of death of any partner, the claim received from the insurance company can be used for meeting payment to the dependents of deceased partner. II Promotional role of insurance Insurance plays important role in setting up industrial and commercial units; by way of capital formation, new investment, industrial entrepreneurship, under-writing of shares and investment in capital market. In addition to protective measures, it plays promotional role also, which are briefly described below: Extension of credit facilities Insurance extends credits to industrial and commercial institutions. An entrepreneur can get insurance of unit, plant and machinery, or permanent assets purchased by him and get them mortgaged with the financial institutions for getting credit. Facilities industrialization and commercialization Insurance contributes for the development of various commercial activities like buying-selling, transportation, communication, warehousing, packaging, advertising and publicity, and agricultural marketing etc. It is due to the insurance facility that many utility serves are created and the business solves various problems arising out of business conducts. Increases business and industrial efficiency The efficient management of industrial and commercial activities become possible due reductions in business risks. Insurance provides protection from various risks and thus it increases the business efficiency.
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Investment in shares and debentures Insurance companies extends its support for the development and expansion industrial and commercial activities by investing in shares and debentures issued by the industrial units. Contribution towards the development of basic industries Insurance has contributed much towards the development and expansion of basic industries like iron and steel cement, engineering, chemicals, petro-chemicals, electric goods, fertilizers, etc. by investing in shares and debentures. Contribution towards fulfillment of social and statutory obligations Insurance institutions in the country also have been contributing much in fulfillment of social and statutory obligations by contributing well in social welfare schemes operated by industrial establishments, social security, schemes, workers compensation plan, payment of gratuity etc. Contribution towards development of international trade The various policies issued by marine insurance companies help for the development of international trade by protecting the exporters/ importers from marine losses and risks. This role of insurance companies has been helpful in earning more foreign exchange by increased participation by traders in international trader Extension of export credit Export Credit and Guarantee Corporation (ECGC) extends export credit to the exporters and in cases where the importers commit defaults in making payment to the exporter, the ECGC compensate the exporter through its policy issued for this purpose. Increase competing ability among small and medium-scale units Insurance acts as a source among the small and medium scale industrial units to compete with larger industrial units. Large-scale industries can bear the expenses for protection against risks and uncertainties by getting insurance against such losses.
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Role of Insurance Agents
Then Insurance agent is undoubtedly the most important person in the insurance company, apart from the underwriters. He is the face of the company and is the person who can make or break a client. The Insurance agent is the person who advises the prospective clients as to the Insurance cover which would be most suitable for them as well as advises him on what should and what should not be done while he is insured under a specific plan, and thus if anything goes awry, it will be the Insurance agent who will have to take the flak form the clients. As already stated, an Insurance agent is the main product that is bought by the insured; hence then Insurance agent needs to be aware of all the going-on in the sector. He should be competent and professional enough to clearly understand your Insurance requirements and suggest a suitable scheme. With Insurance companies offering varying rate of commissions on different schemes, there is a likelihood that a ‘not-so-professional’ agent may be tempted to recommend a scheme which pays him a higher commission, though it may not be very suitable for your needs. This is especially so in the case of LIC, sole provider of life Insurance in our country till recently, where the eligibility criteria are not very rigorous and very often the level of knowledge and competence of the agents leaves a lot to be desired. The new players seem to be much more stringent in appointing agents and more committed in providing training to them. Further, the agent should be able to provide you with a comparison of multiple schemes and also explain them in simple terms, so that you are able to make an informed decision. Though these are the main characteristics of an Insurance agent, his role is fast changing. An Insurance agent is now not just a plain Insurance agent; he is now an Insurance advisor cum financial consultant. Today’s agent has a professional outlook, is more techno savvy, is in a position to satiate the hunger for custom made policies that were never heard of and believes prompt customer service is the key to success. Educating the customers on the need for Insurance in life is his first step. And before he could elaborate on the choice of covers available, he will want to know the prospects’ exact requirements and future planning in order that the cover can be designed accordingly – an
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aspect that was not considered earlier. In other words, he plays a much bigger role than he did earlier, thanks to the opening of the sector. The Insurance sector is witness to cut throat competition in the market, and Insurance companies have realized the importance of prompt customer service. Insurance agents will no more be able to afford a laid back attitude. They will have to be on their toes catering to the growing customer needs and serving them always, for his future referrals will come from them.
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SIGNIFICANCE OF INSURANCE
The significance or the utility of insurance can be categorized into the following four groups for the convenience of the study. I. II. III. IV. Significance for the individuals/family Significance for the business Social significance; and National significance
I. Significance for the individuals/family Security and stability Angel writes insurance is a permanent base to secure against uncertain risk. A man's life always involved with different types of risks like death, old age, accident, sickness etc. Similarly he is concerned about the risk of property and money by theft, dangers of fire, etc. Insurance provides security against risks. Increase efficiency Insurance relieves the people from mental worries due to safeguard provided by it against future risk and uncertainties. People who have insured their lives, need not worry about the future and can concentrate more efficiently on the present tasks. This may the reason that Angell observes that those who have little worried about the future can be a more efficient worker. Self reliance Death or accident are the instances in which the people become unsupportive. On the death of the earning member, the family members, especially the dependants face much problems of subsistence. Insurance is such a mean to make oneself self reliant economically. Mark Doreman observes that the basic element of insurance is to provide economic self sufficiency to the insured. Security of the property mortgaged If a person mortgages his property against any debt and fails to return the debt before his death, the mortgaged takes charge of the property. In case mortgaged property was secured by insurance policy the liability of paying off the debt can be transferred to the insurer. Mental peace Riegel and Miller observe that the important function of insurance is to
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reduce uncertain risk of individuals into certainty. Un security in life is the main cause of mental worries. A person insures against such uncertain risks get rid of himself from the bad effects and can lead a peaceful life. Create awareness among insured Insurance companies create awareness among [ the people for the need to protect themselves from possible risk off life, property charges and the goods. Certain insurance companies dealing in motor vehicle insurance, charges reduced premium rates ton the renewal of policies if the owner of the vehicle did not make any claim for payment in the previous year. Availability of credit against insurance policy The insurance companies grant loans to the insured upto certain percentage of the premium money paid, keeping in view of the surrender value of the policy on that date. Such loan faculty is given to the insured for his business purple or for some important domestic purpose. Exemption from tax liability Insurance is an important way of obtaining tax rebate. The money paid toward, insurance premium is deducted from the gross income and this is really an investment. Safety to investment made The money saved towards the payment of premium is totally safe, because the insurance policy cannot be acquired by creditors through any degree obtained from the court. This is possible only against the property and not against the policy. II Significance of insurance towards industry and business can be described under the following points: Safety against risks The movable and immovable property of the business is always subjected to risks. Even the production process is involved by dangers to workmen and property. It is the insurance that promise security against these risks. Loss prevention measures The insurance companies advice the business institutions in the safety matters and the measures to be followed in preventing such losses. The business where such safety measures are adopted, the premium rates may be comparatively lower. The money so saved by low rate of
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premium can help in capital formation. Protection to employees The employee interest can be secured by way of insurance. In case of any economic problem in business, it will have adverse impact on employees interest. Insurance can safeguard the interests of employees in paying pension, gratuity and other economic benefits through its policies. Promotes foreign trade Imports and exports trade are usually involved by marine penis and losses. Insurance helps in the development of foreign trade by making insurance claims against losses of ships and cargo. i) Contribution towards the growth of larger business houses Insurance has been beneficial towards the growth of larger business houses. Larger credit facilities, larger-buildings, wide channel of distribution system, larger production and marketing plans, bearing various industrial and commercial risks are the major means of contributions towards the business from the insurance companies. It is said that insurance is the founding father of large-scale industrial system and the whole business mechanism. Significance to small business Small business can keep the production cost lower and compete with large-scale business by transferring the business risks in the shoulders of insurance companies. Insurance companies extend easy terms of credit to small and medium scale industries in their development. Significance to partnership business Insurance is most important to partnership business. In case of death of a partner or he leaves the firm, it is required to repay the capital invested by him in the business together with interest, profits shared, goodwill etc. This will have an adverse impact on the conduct of business. A joint partnership policy can solve such problems of making payment to the diseased partner. Promotes employee welfare Business has social responsibility towards its employees under which it is the responsibility of the employer to promote labour welfare programmes., viz; to make provisions for old age, benefit like pension, provident fund, gratuity; and accidental benefit retirement benefit, medical and housing, etc. All these provisions can be covered under the comprehensive policy.
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Promotes industrialization Insurance can be a device for faster development of industrialization of a nation. On one side it protects the business from various kinds of risks, and on the other, the insurance companies make involvement in business activities by way of direct investment under-writing of shares, and extension of credit facilities^ Human resources development Insurance companies operate different schemes of human resource development. For the purpose of developing skill of supervisory and branch officers, different divisional training centres have been set up. Life Insurance Corporation runs seven such centres in the country. III Social significance Economic security Insurance provides economic security and better family life. It secures the family from sudden illness, death or accident of the bread earning member of the family. Insurance is the key for the well-being, and prosperity i) Encourages for education Insurance facilitates and encourages for education in the society. Insurance policies support education to the children. It also extends scholarships for poor students, in addition to extension of loan facility for education. Distribution of risks Insurance distributes the risks of a person among a large number of people. George Rejda writes," Insurance distributes the burden of loss of« person among the shoulders of entire society " Removes social evils The root cause of any evil in the society is lack of education, poverty and unemployment. The lack of opportunity to the people makes the way for committing social evils like theft, decoity, prostitution, extremism etc. Insurance helps a person to become self sufficient economically by providing for education, employment and protection against risk of life and property. Awareness towards health Insurance creates in the society for maintenance of good health. Insurance companies have started health improvement movement
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throughout the world, by distributing useful materials for health education. It also provides for free medical check up at the proposal stage of the policy, which will help in identifying any disease in a person, and advice him to take medical care.
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Contribution towards the development of utility services Insurance contributes towards the development of public utility services like water supply, electricity generation, housing, public works, etc. IV National significance Significance of insurance to nation is as under: i) It increased the national saving by way of small contribution of the people towards insurance premium. ii) insurance contributes towards investment in public utility services as well as various plans of government such as housing infrastructural development foreign trade etc. iii)Insurance makes available finance to industrial and commercial activities in the country. This way it facilitates for capital formation. iv)Insurance provides additional employment opportunities to the people. insurance contributes towards national plans like five year plans, rural development, self employment, construction of industrial estates. The premium collected by insurance companies by small savings from the insured are invested in such national schemes like electricity generation and irrigation, construction of dams and bridges, railways- lines, scientific research etc. v) Insurance contributes towards the national income of the nation. Different type of commercial and industrial units are set up every year with the financial assistance extended by insurance companies, in addition to providing for employment to good number of people in insurance companies. The government receives income from the industrial units by way of taxes and duties etc. And from employees by way of income tax. This way it contributes towards national income. vi)Insurance contributes social security measures. The m government under its social security schemes supports for old age pension, unemployment, disability etc. under the social insurance scheme these measures are provided to society by the government. vii) insurance companies operates business in other countries by opening branches and earn foreign exchange for the country. viii) Insurance companies invest in government securities. ix)Insurance companies contribute towards the development of capital market in the country by investing in shares and debentures.
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IRDA :
INSURANCE REGULATORY AND DEVELOPMENT AU THORITY ACT, 1999 Indian parliament passed IRDA in the year 1999. It is headed by the chairmen. It was setup on interim IRA for monitoring &controlling of the insurance business. IRA was sole authority responsible for awarding of licenses. There is no restriction for new licenses &no composite licenses for life &non life business. IRDA has some restriction for new licenses such like new player should commenced it business within 15-18 month. Shares are not allowed to transfer without approval. This Act was passed by Parliament in December 1999 and it received presidential assent in January 2000. This Act provides for the establishment of the Authority to protect the interest of holders of insurance policies, to regulate, promote and ensure orderly growth of insurance industry and for matters connected therewith or incidental thereto. It amended the Insurance Act, 1938, which has been noted above. It also amended the Life Insurance Corporation Act, 1956 and the General Insurance Business (Nationalization) Act, 1972, thus opening up the insurance sector to private participation. Under this Act, an authority called IRDA has been established. This is a corporate body established for the purpose and objects as set out in the explanation to the title. The " Authority" replaces "Controller" under Insurance Act 1938. The first schedule amends Insurance Act 1938. It states that if "Authority" is superseded by the Central Government, the "Controller of Insurance" may be appointed till such time as " Authority" is reconstituted. 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. 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.
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Bottlenecks Government Regulations The IRDA bill proposes tough solvency margins for private insurance firms, a 26% cap on foreign equity and a minimum capital of Rs 100crores for life and general insurance and Rs 200crores for reinsurance firms section 27A of insurance Act stipulates that LIC is required to invest 75% of its accretions through a controlled fund in mandated government securities LIC may invest the remaining 25% in private corporate sector, construction and acquisition of immovable assets besides sanctioning of loans to policy holder. These stipulations imposed on the insurance companies had resulted in lack of flexibility in the optimization of risk and profit portfolio. If this inflexibility continues the insurance companies will have very little leverage to earn more on their investments and they might not be able to offer as flexible products as offered abroad. The government might provide more autonomy to ;insurance companies by allowing them to invest 50% of their funds as per their own discretions. Recently RBI has issued stiff guidelines which had death a severe blow to the plans of banks and financial institutions to enter the insurance sector. It says that non performing assets ( NPA) levels of the prospective l players will have to be 1% point lower than the industry average (presently 7.5%). RBI has also stipulated that all prospective entrants need to have a net worth of Rs 500crores. These guidelines have made it virtually impossible for many banks to get into the insurance business. Also banks and FI who are planning to enter the business cannot float subsidiaries for insurance. RBI has taken too much caution to make sure that the news sector does not experience the kind of ups and downs that the non bank financial sector has experienced in the recent past. They had to rethink about these guidelines if India strong banks and financial institutions have to enter the new business. The insurance employees union is offering stiff resistance to any private entry.
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DEVELOPMENT IN INSURANCE SECTOR:
Insurance is an Rs400 billion in India &together with banking service add about 7% to Indian GDP. Gross premium collection is 2%of GDP &has been growing by 15-20%per India. India’s share of world insurance market has shown an increase of 10% from 0.34%in 1997-98.The insurance share in Life insurance business showed a growth of 11% thereby out performing the global average of 7.7%&nonlife business grew by 3.1%against global average of 0.20 % Growth of Insurance Global Industry Statistics Global Insurance Scenario (Figures in Percent) (Total in 1999: (Total in 2000: Country $2,128.7 billion) $2,244.3 billion) North America 34.5 37.32 Europe 31.4 31.93 Asia 29.1 26.46 Oceania 1.9 1.59 Latin America 1.8 1.67 Africa 1.3 1.03
Emerging Markets (Total Premium, figures in $billion) Taiwan 17.3 China 13.4 India 7.2 Hong Kong 6.1 Israel 5.8 Singapore 5.0
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Total premiums by Country, 2000 Share of *Premium Premiums *Premium world s per Country (USD s in % of market capita (in millions) GDP (in %) USD) United 865327 35.41 8.76 3152.1 States Japan 14 504005 20.62 10.92 3973.3 United 236960 9.7 15.78 3759.2 Kingdom Germany 123722 5.06 6.54 1491.4 + France + 121910 4.99 9.4 2051.1 Italy 63062 2.58 5.8 1084.3 South 58348 2.39 13.05 1234.1 Korea 14 Canada 11 46587 1.91 6.56 1516.8 Spain 37617 1.54 6.73 954.2 Netherland 36450 1.49 9.87 2290.2 s India 14* 9933 0.41 2.32 9.9 * estimated 11 Life business: net premiums 14 Financial year 01.4.2000–31.3.2001 + provisional
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PEST Analysis
PEST refers to all political, economic, social and technological factors affecting any industry. RocSearch's acclaimed team of industry analysts religiously follow industry trends and monitor any changes that occur in the business scenario. All reported information including insider titbits is examined and analyzed to produce an original document that effectively mirrors the external business environment. The document will cover the following: Political - Analysis of Legislations, Regulations, Government policies etc. Economic - Analysis of exchange rates, inflation levels, income growth, debt & saving levels etc. Social- Analysis of social factors that influence people's choices and include the beliefs, values and attitudes of society. Technological - Analysis of the impact of new technologies - the Internet, EDI, mobile phones, and the increasing advances in computing.
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SWOT ANALYSIS OF INSURANCE SECTOR
Strengths: ? Consumer Grievance Redressal The Insurers have to face the redressal of the consumers, grievances for deficiency in products and services. The Insurance Regulatory Development Authority (IRDA), the regulatory body has already appointed Ombudsman for looking into the grievances of the policyholders. His judgment will be binding on the insurers. Further under Consumer Protection Act, 1986, the consumer courts are operating at the district, state and national levels. This is a major strength from the consumer point of view as they could easily fight for their rights. ? Rural customers are a must As per the regulator IRDA, all the companies incorporated should at least do 5% of its business in the rural parts of the country. If not, the regulator would not allow the company to function anywhere within the country. So this is a great advantage for not only the rural population but also the newly formed companies since most of the revenue could be earned from the rural India. ? Channels Insurance companies are getting savvy. Enhanced marketing thus is crucial. Already, many companies have full operation capabilities over a 12-hour period. Facilities such as customer service center are already into 24-hour mode. These will provide services such as motor vehicle recovery. Technology also plays an important role in the market. Weakness: ? New insurers The new insurers will have to invest a minimum capital of Rs. 100 crores. The normal gestation period is of 5 years. The generation of profit normally starts in the sixth year. Hence the new insurers have to lock up their capital for at least 5 years. ? Outdated products Today, LIC has more than 60 products and GIC has more than 180 products to offer in the market. But most of them are outdated, as they are not suitable to the needs of the consumers. Hence old as well as new insurers have to offer innovative products to the consumers and bringing more products would require good amount of capital investment.
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Opportunities: ? Vast country India is a vast country with more than 5, 76,000 villages having a population of at least 500-600 per village. The companies could recognize the fact that if it takes the whole zilla as one, it would consist a population more than 5000-10000. One zilla could give them a good amount of business. The company could have this opportunity and tap it and reap revenues. ? Job opportunities Since the sector has opened up, many new companies have already started its operation and few are just about to begin, Major areas of employment in this sector are the agents. A company can appoint any number of agents anywhere within the country on commission basis. Moreover, the professional staff and the peons and clerks’ appointment also increase. Thus this sector has tremendous scope on employment. Threats: ? Lack of awareness Very soon the market will be flooded by a large number of products by a fairly large number of insurers operating in the Indian market. Even with limited range of products offered by LIC and GIC, there is chaos as far as the consumers are concerned. Their confusion will further increase in the face of a large number of products in the market. The existing level of awareness of the consumers for insurance products is very low. This is because only 62% of the population of India is literate and only 10% are well educated. Even the educated consumers are ignorant about the various products of insurance. With new companies coming in the market, the products would be comparatively more, which would again create confusion in the minds of the customers so as to which policy best suits the needs.
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PRIVITIZATION OF INSURANCE SECTOR
Insurance Services Insurance investors developed economies, particularly from Western Europe and the US find Indian market as having greater growth potential than their domestic markets. Therefore, a high level of interest exists for these companies to acquire insurance concerns. Many international players are eyeing the vast potential of the Indian market and are already making plans to enter. The entry of the foreign players in the sector with more financial resources/ better experience and lower operational costs will have an advantage over the Indian companies involved in the business. The bigger private players claim that opening up insurance will give policyholders better products and service, the opponents of privatization argue that in a poor country like India insurance needs to have social objectives and newcomers will not have that commitment. Better experience provides them with the wherewithal to have a better product mix and more operational flexibility. Moreover, they will operate with a lean staff and lower operational cost. The domestic insurance industry will as a result, have to face a greater competition. But the resources with the foreign players are limited, as they can invest up to 40 per-cent of the equity of their joint-venture with Indian firms. This is a great hindrance for them to perform at their optimum level. IRDA is working out to gradually dismantle the tariff structure. Not much threat is perceived as to any price war since the new companies will stress more on the non-actuarial product differentiation. However, the Indian Insurers due to their extensive branch networking and long-standing association with the client still have an advantage. Further, insurance products can become competing investment product vis-à-vis other saving, etc. Already LIC has launched Equity linked Indexed Insurance Policies, which have been received quite well. The new players are expected to bring in spate of such products. Insurance is viewed as a tax saving instrument rather than protecting one's own kith and kin from the vagaries of the future. The rush for insurance policies to save tax bills can be seen at the end of the financial year. With the entry of private and global players like HDFC Standard Life, JCTCI Prudential, Kotak Mahindra Club Insurance, Hindustan Times Commercial Union to name a few, the insurance industry is going to provide many jobs and is going to witness phenomenal growth.
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The new millennium has exposed the insurance sector to new challenges of competition and struggle for survival in this era of privatization, liberalization, deregulation and globalization. The Indian government nationalized private insurance companies in 1956 [Life Insurance Corporation of India (LIC) followed by Genera] Insurance in 1972] to bring this sector under government control. Two governments fell over the issue of liberalization of insurance sector. After 40 years of government protectionism of this massive sector the present government has initiated the process of opening this sector to private Indian business houses as well as international players. Although the growth of the Indian Insurance Industry has been slow for the last four decades the state owned insurance companies have grown creating only inefficiency. The idea of insurance was first conceptualized in the 12th century. At that time it: was used more as a tool for protection against financial loss of seafarers involved in foreign trade. Since then, the concept has undergone several changes. It is basically the unforeseen contingencies of human life that have given a totally new look to the industry. Gradually as competition increased the benefits given by the industry to its customers improved by leaps and bounds. The opening up of the sector has posed new challenges for the public sector insurance companies. Prior to liberalization, the regulatory environment was primarily based on consolidated provision of the Insurance Act 1938 and the Controller of Insurance had wide ranging powers. After nationalization, much of the powers of the Controller of Insurance were abridged for operational convenience of state owned LIC and GIC. In 1993, Malhotra Committee was constituted to review insurance regulations and carry out reforms. All attempts to even suggest letting private players into vital sector were met with resistance from the powerful insurance employees unions. Despite several developments that have taken place in the industry in the post-liberalization era, per capita premium for life insurance is as low as $6 and that for non life insurance is at level of $2. It accounts for 2 percent of the GDP compared to the world average of 7.8 percent.
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IMPACT OF BUDGET 2004
The finance minister’s reform to strengthen risk management in banking The Finance Bill has some brilliant promises to offer and yet there are adverse to the financial service sector. The decision to permit 49 per cent foreign direct investment (FDI) in insurance is welcome. The industry will agree that there is an acute need for it to grow and to write more business. If one were to analyze the growth of some new private sector insurance players the underlying strength seems to be their ability to get more capital and meet the solvency requirement perform, write more business and grow faster. Let’s not forget that these insurance companies will be able to tap the capital market in two to three years. The best performer in the sector have also expanded their capital to about Rs. 700 to 800 crore. A look at the non performers suggests that they do not have adequate capital to grow. Hence the increase in the FDI limit would help. More importantly, this will give greater control to the foreign partners in areas of management control and governance. They will now be more willing to bring in their expertise in product development, technology, and implement best practices. The striking future of the Finance Bill is that the government has accepted defined contribution as the way forward for pension reforms, particularly for new government employees. One could have expected some clarity on the subject of multiple regulators for pension. Though there be some benefits having a separate pension regulator, one supposes that there would be a strong case for just one regulator both the pension and insurance sectors. The government must examine the confusion that may arise on account of having multiple regulators. Banking and insurance companies are significant players in the securities market today. Midsize public sector banks may have made a turnover of about Rs. 40,000 crore on securities trade and larger banks would have made two to three times the number. The transaction tax of a 0.15 per cent would certainly eat away a good part of banks’ profits. Likewise, all services rendered by banks (except the fund based assistances) would attract service tax. Banks would be able to conveniently pass on some of these costs to the customers. So, each time an individual goes and gets a demand draft or pay order, they will end up paying much more than the existing rates. However, if competition becomes acute, banks would have to bear it, which is bad news for the banking companies.
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The funding to agriculture credit as well as infrastructure would certainly companies is a healthy step. But, let’s not forget that it would mean more capital requirement for banking companies.
TYPES OF INSURANCE
I Classification on the basis of nature of business Life Insurance Life insurance may be defined as a contract in which the insurer, in consideration of a certain premium, either in a lump sum or by other periodical payments, agrees to pay to the assured, or to the person for whose benefit the policy is taken, the assured sum of money / on the happening of a specified event contingent on the human life. A contract of life insurance, as in other forms of insurance, requires that the assured must have at the time of the contract an insurable interest in his half upon which the insurance is effected. In a contract of life insurance, unlike other insurance interest has only to be proved at the date of the contract, and not necessarily present at the time when the policy falls due. A person can assure in his own life and every part of it, and can insure for any sum whatsoever, as he likes. Similarly, a wife has an insurable interest in her husband and vice-versa. However, mere natural love and affection is not sufficient to constitute an insurable interest. It must be shown that the person effecting an assurance on the life of another is so related to that other person as to have a claim for support. For example, a sister has an insurable interest in the life of a brother who supports her. A person not related to the other can have insurable interest on that other person. For example, a creditor has insurable interest in the life of his debtor to the extent of the debt. A creditor can insure the life of his debtor up to the amount of the debt, at the time of issue of the policy. An employee has an insurable interest in the life of the employer arising out of contractual obligation to employ him for a stipulated period at fixed salary. Similarly, from an employer to the employer, who is bound by the contract to serve for a certain period of time.
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Fire Insurance A fire insurance is a contract to indemnity the insured for distribution of or damage to property caused by fire. The insurer undertakes to pay the amount of the insured's is loss subject to the maximum amount stated in the policy. Fire insurance is essentially a contract of indemnity, not against accident, but against loss caused by accident, ft is becoming very common in fire insurance policies to insert a condition, called the average clause, by which the insured is called upon to bear a portion of the loss himself. The main object of this clause is to check underinsurance and to encourage for full insurance. It impress upon the property-owner for the need of having his property accurately valued before insurance. Regarding insurable interest, the insured must have insurable interest in the subject matter both at the time of effecting the policy and at the time of loss. The risk in fire insurance policy commences from the moment of cover note, or the deposit receipt, or the interim protection is issued, and continues for the term covered by the contract of insurance. It may even date back; if the parties so intend. The rate of premium varies to the degree of hazard or risk involved. Marine insurance A contract of marine insurance is an agreement whereby the insurer undertakes to indemnity the assured in a manner and to the extent thereby agreed, against marine losses, that is, the losses incidental to marine adventure. There is a marine adventure when any insurable property is exposed to marine perils; Marine perils also known as perils of the seas, means the perils consequent on, or incidental to, the navigation of the sea or the perils of the seas, such as fire, war perils, pirates, rovers, thieves; captures. Jettisons, barratry and any other perils which are either of the like kind or may be designed by the policy. There are different types of marine policies known by different names according to the manner of their execution or the risk they cover. They are: Voyage policy, time policy, valued policy, unvalued policy, floating policy, wager or honour policy. Social insurance Social insurance has been developed to provide economic security to weaker sections of the society who are unable to pay the premium for adequate insurance Pension plans, disability benefits, unemployment benefits, sickness insurance, etc. are the various forms of social insurance.
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Miscellaneous Insurance The process of fast development in the society gave rise to a number of risks or hazards. To provide security against such hazards, many other types of insurance also have been developed. The important among them are:
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(i) Vehicle insurance on buses, trucks motorcycles, etc., (ii) Personal accident insurance (by pacing an annual premium of Rs 12/Policy worth Rs. 12000/- can be insured.) (iii) Burglary insurance - (against theft, decoity etc.) (iv) Legal liability insurance (insurance whereby the assured is liable to pay the damages to property or to compensate the loss of personal injury or death. This t& in the form of fidelity guarantee insurance, auto mobile insurance and machines etc.) (v) Crop insurance (crops are insured against losses due to heavy rain and floods, cyclone, draughts, crop diseases, etc.) (vi) Cattle insurance — (Insurance for indemnity against the loss of cattle’s from various kinds of disease) In addition to the above, insurance policies are available against crime, medical insurance, bullock cart insurance, jewelry insurance, cycle rickshaw insurance, radio – T.V. insurance, etc. II. Classification from risk point of view From risk point of view, insurance can be classified into four categories : i) ii) iii) iv) Personal insurance Property insurance Liability insurance Fidelity guarantee insurance
A brief description of each, is given below. i) Personal insurance Personal insurance refers, the loss to life by accident, or sickness to individual which is covered by the policy. The insurer undertakes to pay the sum insured on the happening of certain event or on maturity of the period of insurance. The insurable sum is determined at the time of effecting the policy and include life insurance, accident insurance, and sickness insurance. Life insurance contains the element of investment and protection, while the accidental, sickness or health insurance contain the element of indemnity only. ii) Property insurance Contract of property insurance is a contract of indemnity. Proof by the assured of loss is an essential element of property insurance. "The
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policies of insurance against burglary, home-breaking or theft etc. fall under this category. The assured is required to protect the insured property. After the loss has taken place, the assured usually required to notify the police as to losses. iii)Liability insurance Liability insurance is the major field of General insurance whereby the insurer promises to pay the damage of property or to compensate the tosses to a third party. The amount of compensation is paid directly to third party. The fields of liability insurance include workmen compensation insurance/ third party motor insurance, professional indemnity insurance and third party liability insurance etc. In liability insurance, there may be various reasons for the arising of liability; viz., accident of a worker at the workplace, defective goods, explosion in the factory during the process of production, formation of poisonous gas within the factory, due to the uses of chemicals and other such substances in the manufacturing process. iv) Fidelity guarantee insurance In this type of insurance, the insurer undertakes to indemnify the assured (employer) in consideration of certain premium, for losses arising out of fraud, or embezzlement on the part of the employees. This kind of insurance is frequently adopted as a precautionary measure in cases where new and untrained employees are given positions of trust and confidence. III On the basis of business point of view i) Life Insurance Life Insurance is universally acknowledged to be an institution which eliminates 'risk' and provides the timely aid to the family in the unfortunate event of death of the breadwinner. Life Insurance is a contract for payment of a sum of money to the person assured (or nominee) on the happening of the event insured against. The contract provides for the payment of premium periodically to the Insurance company by the assured. The contract provides for the payment of an amount on the date of maturity or at
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specified dates at periodic intervals or at unfortunate death, if it occurs earlier.
There are some benefits of life Insurance as: ? Protection: Life Insurance guarantee full protection against risk of death of the assured. In case of death, full sum assured is payable. ? Long term saving: Life insurance encourages long term saving. By paying a small premium in easy installments for a long period a handsome saving can be achieved. ? Liquidity: Loan can be obtained against a policy assured whenever required. ? Tax Profit: Tax relief in income tax and wealth tax can be availed on the premium paid for Life Insurance.
World Life and Non-Life Insurance Premiums, 1990-2000 (Figures in $billion) Year Non-life * Life Total 1990 648.4 707.2 1,355.7 1991 670.7 743.6 1,414.3 1992 697.5 768.4 1,465.9 1993 792.1 1,010.4 1,802.7 1994 846.6 1,121.1 1,967.7 1995 906.7 1,236.6 2,143.4 1996 909.1 1,196.7 2,105.8 1997 896.8 1,231.7 2,128.6 1998 891.3 1,275.0 2,166.4 1999 912.7 1,424.2 2,336.9 2000 922.4 1,521.2 2,443.6
Table below gives a snapshot of the performance for 2003-04 (up to October) of the 13 life insurance payers in India based on the first year premium.
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LIC Plans For Individual: ? Whole life Schemes. ? Endowment Schemes. ? Term assurance plan. ? Periodic money back plans. ? Plan for high-worth individuals & key men. ? Medical Benefits linked Insurance. ? Plans for Benefit of handicapped. ? Joint life plan. ? Plans for children needs. ? Investment plans.
That’s primarily because Life Insurance has been growing much faster than Non-Life Insurance as shown below.
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Life increasing. Non-Life stagnant
Life
Non-Life
Life 1999 2000 2001 2002
INSURANCE SHOWS DIVERSE TRENDS FOR LIFE VERSUS NONLIFE! After the huge excitement that surrounded the opening up of the Insurance sector in 2001, the entire composition of the Financial Services sector changed! Insurance within 6 months had shot up from 9% of the Financial Services monies spent on mass media shot up to almost a quarter of the overall spends as shown.
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13%
0%
10% 15%
1% 34%
20%
40%
14% 18% 9% 26%
We also wanted to evaluate if Life and Non-Life had both shown growths in terms of ad expenditure increase. The overall ad spends in 2002 in the Insurance category are estimated to be just under Rs. 2 billion. Of this close to Rs. 1.45 billion have been on TV+Press. Now within the Insurance sector, the Non-Life versus Life analysis yields very different results. One clear insight is that the distance between Life & Non-Life is growing as shown in chart above
Private players of Life insurance SBI Life Insurance Co. Ltd Allianz Bajaj Life Insurance Co. Ltd Om Kotak Mahindra Life Insurance Co. Ltd ICICI Prudential Life Insurance Co Ltd HDFC Standard Life Insurance Co. Ltd Birla Sunlife Insurance Co. Ltd
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ING Vysya Life Insurance Co. Ltd Tata-AIG Life Insurance Co.Ltd Metlife India Insurance Co. Pvt. Ltd AMP Sanmar Assurance Co. Ltd Dabur CGU Life Insurance Co. Pvt. Ltd Max New York Life Insurance Co. Ltd Procedure to obtain life insurance ? Filling up the proposal form
The first step in the process is to fill up the proposal form where in various kinds of details the proposer furnishes. The form can be obtained from the LIC office or will be available with insurance agent. The following details are furnished in the proposal form: 1) Name, address, nationality, occupation, nature of duties, name; and address of the present employer, length of service, name and address of previous employer, if any, length of previous service, etc. 2) Place of birth, date of birth, district, state, proof of age, etc. 3) Sum insured, period of premium payable (monthly, quarterly, halfyearly or yearly), amount of first premium payable. 4) Objectives of insuring. 5) Name, age, and relationship of nominee, full address, height and weight. 6) Family history of parents, sisters and brothers. 7) Hereditary disease like diabetes, insanity, epilepsy, gout, asthma, tuberculosis, cancer, leprosy, etc. 8) Any other disease, accident, operation, etc. 9) In the case of female adult proposer—further information regarding pregnancy, maternity and disturbances indicative of trouble with the female generative organs. The female proposers have to furnish further information relating to educational qualification, average monthly income, source of income, marital status, husband's name, his income, occupation, and his insurance policy, etc. Declaration by the proponent At the end, the proponent has to make a declaration that the statement
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given in the proposal are correct to the best of his knowledge and no information is concealed. The propose! is the basis of insurance contract when it is presented to the LIC. Attachment of proof of age Age proof is identified from the secondary school leaving certificate. Attested copy of this certificate is attached with the proposal form for this purpose. Age proof is also required to ascertain whether the proposer is a major or a minor. Moreover, age proof is also needed for determining the premium rate. Presentation of proposal to the agent The agent, on receipt of the proposal check it thoroughly whether any important information is left out without furnishing-. If anything is left out. he will get the same furnished by the proposer. In practice, it is noticed that the agent carries the proposal form and approaches the prospective proposer and get the same furnished with his help. Medical examination The insurance agent arranges for the medical examination of the proposer. Medical examination is conducted by the authorized medical practioner appointed by the LIC. The doctor records his remarks in the proposal form at the place provided for this purpose. In the following cases/ medical examination is not needed: 1) Where the age of the male proposer is below 30 years, educated and remained in employment for at least one year. Its sum assured is below Rs 40/000/-. 2) Where the proposer is a commissioned officer in Army service and below 45 years of age. His health is in 'A' category and sum assured is below Rs. 50.000/-. 3) Where the proposer is a woman leading a first life category and passed high school or equivalent, age is below 30 years and employed at least a period of one year. The a sum assured is below Rs 40/000/-. ! 4) An adult member below the age of 40 years and the sum assured is below Rs. 15/000. 5) In the case of re-insurance of a person who has already insured. Report by the Agent after the medical report, the agent gives his confidential report with regard to proposer's health condition, habits, family history source of
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income, etc. He gives his report after verifying information furnished by the proposer. The agent also wilt state his opinion regarding acceptance or rejection of the proposal. ? Scrutiny of proposal by the branch office On completion of all the above stated process, the proposal together with the medical report and agent confidential report, etc. is submitted to the concerned branch office. The branch office then arrange for verification in respect of: 1) 2) 3) 4) 5) 6) 7) 8) Name and address of the proposer Date of birth Occupation insured sum Nominee Signature of the proposes Family history Medical report and agent's report
After the verification, if any short comings is noticed, the proposer is asked to complete the same. If the proposal is found in order, the branch office takes the further steps in the matter. ? Depositing of premium The branch office issues first premium notice to the proposer. On depositing the premium money, the branch takes further steps in the matter. Registration of proposal On depositing the premium, the proposal is registered with the LIC, in the register maintained for this purpose by recording important information about the policy; such as the name of insured, sum insured, duration of the policy, risk, etc. At the time of registration, a registration number is allotted incorporating the code number of the branch where the proposal is registered. For example, if the registration No. 345678, 678 will be the code number of the branch and 345 shall be the proposal number of that branch. Sending the proposal to appropriate department After the registration of the proposal, it is sent to the appropriate department. In case the final authority is in the branch office, the proposal shall be sent to that officer in the branch office. Otherwise, it is
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sent to the divisional office. Taking final decision on the proposal On completion of all these steps, the final decision taken by the authority in the divisional office, on “Proposal ReviewSlip”, in view of acceptance of the propose premium paid. Issue of acceptance or request letter If the proposal is accepted, the intimation regarding acceptance of the proposal is sent to the proposer. Otherwise, a letter of regret is sent. Acceptance of the proposal is an evidence of conclusion of insurance contract. From this date the risk commences. Issue of insurance policy Having completed all the required formalities/ the corporation prepares the insurance policy and send it to the insured. The overleaf of the policy contains all terms and conditions of the policy along with the insured's name, address, sum assured, mode of payment of premium, etc. The policy bear the sea' of the LIC and the signature of the competent authority. ii) General Insurance
General insurance business refers to fire, marine, and miscellaneous insurance business whether carried on singly or in combination with one or more of them, but does not include capital redemption business and annuity certain business. (According to Sec. 3(g) of the General Insurance business (Nationalization) Act, 1972). Features of Indian General Insurance Market 1) Low market penetration. 2) Ever-growing middle class component in population. 3) Growth of consumer movement with an increasing demand for better insurance products. 4) Inadequate application of information technology for business. 5) Adequate fillip from the Government in the form of tax incentives to the insured, etc. 6) India is one of the least insured countries but the potential for further growth is phenomenal.
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7) Rates of claim settlement were earlier in India the highest in the world, 70 per cent in general insurance, compared to around 40 per cent internationally. 8) Non-life premium has a 0.71 per cent share of GDP. 9) General Insurers (Private Companies) have earned around Rs.1000-cr income. 10) Half of the current demand for comes from the corporate segment. Benefits of General Insurance 1) Insurance is the instrument of Security, saving and peace of mind. It provides several benefits by paying a small amount of premium to an insurance company. 2) Safeguards one’s assets. 3) Peace of mind-in case of financial loss. 4) Encourage saving. 5) Tax rebate. 6) Protection from the claim made by creditors. 7) Security against a personal loan, housing loan or other types of loan. ? Product Assurance Company Ltd., and the United India Insurance Company. The Government of India subscribed to the capital of GIC. GIC, in turn, subscribed to the capital of the four companies. All the four companies are government companies registered under the Companies Act. GIC is into the reinsurance business whereas its subsidiaries are into the insurance of Non Life products. Product Range i) Motor Insurance: Motor insurance is mandatory for all vehicles in India. There are two types of motor insurance • Third Party- only insures the party (parties) other than the owner in an incident. • Comprehensive- that insures the owner as well as the third party involved. The premium for motor Vehicles is decided on the value of the vehicle and location where it is to be registered. The premium for heavy commercial vehicle is decided on the value of the vehicle and gross laden weight. ii) Property Insurance: Property insurance covers land, building and the contents of the building. iii) Burglary: Burglary insurance covers all losses arisen out of burglary committed in one's premises.
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iv) Fire Insurance: Fire Insurance is a Comprehensive policy. This policy besides covering loss on account of fire also covers loss on account of the following Earthquake, Riots, Strikes, Malicious intent, Floods. v) Health Insurance: Health insurance polices ensure guarding ones health against any calamities that may cause long term harm to his/her life and can hamper ones earning available for ability for a lifetime. These health policies are individuals and groups. iv) Liability Insurance: This policy indemnifies the Directors or Officers or other professionals against loss arising from claims made against them by reason of any wrongful Act in their Official capacity. vii) Marine Insurance • Cargo in transit • Cargo declaration Policy • Marine Hull Insurance: Inland vessels ocean going vessels, fishing & sailing vessels, freight at risk, construction of ships, voyage insurance of various vessels, ship breaking, insurance Awaiting break up, Insurance Oil & Energy in respect of onshore & offshore risks including construction risk. viii) Travel Policy: Any tourist may die or loss their baggage’s, passport etc. while traveling. Travel policies are designed to care of all the problems that generally occur while traveling. ix) Business policy: A Business policy covers the risks of loss of business goods, plant and machinery etc. x) Other General Policy: Apart from other main general Insurance there are several other General polices and more are going to introduce, such as: • Bhagyashree Child Welfare Policy-covers girl child in the age group of 0 to 18 years. • Raj Rajeshwari Mahila Kalyan Vojans. • Crop Insurance Scheme. • Jald Rahat Yojana. Procedure to obtain NONLIFE INSURANCE Selection of insurer For the purpose of getting any property, goods, or house etc. insured first of all, it become necessary to identify a suitable insurance company. General insurance business in the country has been
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nationalized by the government in 1972 and it has four subsidiary companies operating in the country. One has to select any one of these companies and should present the certificate of his goodwill as furnished in the proposal form itself. Usually the insurance agent certifies the evidence of goodwill for this purpose. Presentation of proposal The next step in this process is to present the proposal before the insurer, by executing it in the prescribed form available with the insure ' or his agent It should be completed with good faith and accuracy avoiding strictly any misrepresentation. Otherwise the insurer may discharge from his liability. Evidence of goodwill The proposer should present the certificate of his goodwill as furnished in the proposal form itself. Usually the insurance agent certifies the evidence of goodwill. Recommendation of agent The next step in the process is t ^e recommendation by the agent on the proposal. Recommendation of agent has much importance in effecting the policy. Survey of the subject matter If the insurer finds it necessary he may make arrangement for the survey of subject matter by an expert the field with regard to various aspects like its structure, position, risk factors etc. This will help in verifying the facts and figures contained in the proposal. ? Report by the surveyors The report of the surveyors determines the validity of the proposal.. This report will state the physical and moral hazards involved in the subject matter. ? Determining of premium In view of the reports presented by the surveyors, the insurance authorities will scrutinize the report and determine the rate of premium after considering the risk factors. ? Acceptance of the proposal
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On the determination of premium, the proposal is accepted and inform accordingly to the proposer requesting him to remit the premium. In case the report of the surveyor contains adverse remarks on the proposal^ letter of regret is sent to the proposer by rejecting the proposal. ? Depositing premium On depositing the premium by the proposer in time, constitutes a illegal contract between the parties. ? Issuing a cover note or a temporary policy This cover note is the. evidence that the insurer has accepted the policy and the insured has remitted the premium. ? Issuing of insurance policy On compliance of all formalities by the insured, the insurance policy is issued to the insured. On the issue of policy, the validity of cover note will lapsed Market Players General Insurance in India Presently there are 12 general insurance companies with 4 public sector companies and 8 private insurers. Although the public sector companies still dominate the general insurance business, the private players are slowly gaining a foothold. A brief description of various players is given below: ICICI Lombard General Insurance TATA AIG Insurance Company Ltd Bajaj Allianz HDFC Chubb General Insurance Reliance General Insurance Company Limited Royal Sundaram Cholamandalam MS General Insurance Company Limited GIC and Four subsidiaries
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Prior to 1973, general insurance was urban-centric, catering mainly to the needs of organized trade and Industry. One hundred and seven insurers including branches of foreign companies operating the country were amalgamated. These were grouped into four companies, viz. the National Insurance Company Ltd., the Oriental Insurance Company Ltd., the New India
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Markets performance The market share of private players rose to 13.7 per cent, recording a growth of 86.72 per cent on an annual basis, while the market share of public sector majors stood at 86.3 per cent, registering a marginal growth of 6.03 per cent. The overall market has recorded a growth of 12.71 per cent. The total premium collections of general insurance industry stood at Rs 8,081.05 crore for the first half of current fiscal, of which the private sector contributed Rs 1,107.27 crore and the balance Rs 6,973.78 crore was brought in by the public sector non-life majors. Among the private sector insurers, ICICI Lombard topped the list with premium collection of Rs 234.85 crore, with a market share of 2.91 per cent, followed by Bajaj Allianz with Rs 218.06 crore of premium and 2.7 per cent market share and Tata AIG with 194.01 crore premiums and 2.4 per cent market share. Among the pub lic sector players, New India garnered a market share of 24.09 per cent with Rs 1,946.7 crore premium, followed by National with 20.59 per cent (Rs 1,664.18 crore), United India with 20.5 per cent (Rs 1,656.3 crore) and Oriental with 18.62 per cent (Rs 1,504.69 crore) share.
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DISTRIBUTION CHANNELS
Though a multi-channel strategy is better suited for the Indian market as well, it is important to keep in mind that this market is really a conglomeration of multiple markets. Each of the markets within this conglomeration requires a different approach. Apart from geographical spread the socio-cultural and economic segmentation of the market is very wide, exhibiting different traits and needs. Let us look at the various insurance distribution channels and the challenges faced by them from these perspectives.
i) Agents Today's insurance agent has to know which product will appeal to the customer, and also know his competitor's products in the same space to be an effective salesman who can sell his company, the product, and himself to the customer. To the average customer, every new company is the same. Perceptions about the public sector companies are also cemented in his mind.
The new companies are looking for educated, aware individuals with marketing flair, an elite group who can be attracted only with high remuneration and the lure of a fashionable job, all of which may not be possible in this business with its price pressures and the complexity of selling insurance. Unable to attract this segment, they have started easing recruitment conditions as against the stringent norms they had earlier, thereby diluting the process. While the public sector companies are able to attract agents, they continue to suffer from high attrition rates due to indiscriminate agent appointment. The most successful of these companies' tied agents are hardly of the elite variety of salesman. They are still the neighborhood do gooders -- the postman, the schoolteacher, and the shopkeeper -who know the people and are themselves known in the community. The challenge here is the lack of knowledge of the competitive market and the inability to do intelligent comparisons with the competitor's products. Educating and training these agents is a serious challenge for the insurance company. The relevance of this kind of agent continues even today as agents are sought or contacted by families by word of mouth. Insurance companies are advised not to follow the path of FMCG's/credit card companies, believing that a suited and booted customer care consultant or financial consultant will necessarily appeal to the average Indian customer. Another social feature in the market is the considerable respect for age in Indian society and a belief that an older person knows better. A very young up-market agent who is a typical salesman may not appeal to a
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large segment of the middle class, which is looking for a solid trustworthy person from whom they can buy insurance. In this context it might be a rewarding exercise to recruit some older people (who have taken VRS2 from banks and other financial institutions) to sell some lines of products like pension plans, annuities etc. Gender of agents is another relevant feature in the rural context that makes a difference, especially for the female population. Women to whom the customers can relate --e.g., nurses, gram sevikas 3 -- can target the female segment of the population more effectively. What is applicable for the rural women and children health programs and population control programs is equally applicable for insurance selling also. Max New York Life has adopted a version of this strategy by appointing gram sahayaks4 to sell and service the rural customers. With this kind of segmentation of intermediaries the challenge for the insurance company lies in training and educating these people to become effective sales persons. But this in no way diminishes the benefits of intermediary segmentation. ii) Banks Banks in India are all pervasive, especially the public sector banks. Can they also become the foremost channel for distribution of insurance? Perhaps in the future. The public sector banks, with their vast branch networks, are also plagued by a rigid unionized workforce and archaic systems, and lack vision of a broader service spectrum encompassing non-banking products. The newer banks are constrained by their lack of reach and meager branch strength. For banks to become a predominant channel for selling insurance will require a paradigm shift. But the encouraging fact for insurance companies waiting for banc assurance to take off is that bank branches are here to stay, and customers do want them. A customer survey by Deloitte Consulting5 in the western developed markets found that for banking activities, customers place high importance on having convenient branches in their banking relationships. This is good news for the Indian banks with their many branches, and also makes a strong case for taking up banc assurance. The major lines of business that can be sold through banc assurance successfully are term insurance, creditor insurance, and non-life products like Property, Motor and Personal accident, Homeowners comprehensive insurance etc.
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An example is SBI Life,6 which is waiting for the broker regulation to be put in place in order to move ahead aggressively with the banc assurance model. One of their major product lines is creditor insurance, and they have launched their first creditor insurance product, which covers the liabilities of the creditor in case of death of debtor. SBI Life is planning a similar product for home loan borrowers of State Bank of India. This model has high relevance in the Indian context with far-flung villages where the insurance potential is in volume and not in high per capita premiums. Some advantages and disadvantages are: Advantages assurance of banc Disadvantages assurance of banc
High credibility (as trustworthy Economic viability for the caretakers of money) with the banks to take up as banc public assurance is a volume business A ready customer base Training of people and lack of vision and awareness
Low cost channel for selling Useful for selling only certain simple vanilla products lines of products Extensive reach including the Initial investment in systems rural pockets and processes and people training The strategy should be to use multiple banks according to their presence in different regions. Success would come by using banc assurance where it will be most effective – i.e., selling simple, cheap products to the masses at a low cost. This awareness is growing and is evident from the fact that nearly every insurance company has partnered with one or many banks to implement banc assurance.
iii) Brokers With the broker regulation under review and expected any time, this could be the next hope, especially for the urban market. This will be a new experience for the insurance customer, accustomed to brokers in financial services, real estate, and travel and tourism. For historical reasons the image that 'broker' carries in the minds of the customer is not very favorable. Thus the new breed of insurance brokers face the challenge of establishing credibility.
The positives are that brokers in the urban arena can attract the elite and the upper middle class customer. Brokers represent the customer and will sell the products of more than one company. They seek to determine the best fit for the client and can effectively address the mind
51
block faced by the public about the various companies. This is applicable in the case of life insurance for the high-end and corporate/group segment. In the non-life segment, broking is not entirely new, as reinsurance brokers were arranging exotic covers. For individual customers also, with a wide range of competitive products, the broker can get a good deal. The corporate broking companies will have to play a prominent role. If NGOs based in rural areas can be attracted into the rural sector cooperatives arena, they stand a good chance of succeeding and can help the new players get a foothold in the rural market. These are the players with the potential to make the difference, as they have the trust of the people. We envisage scenarios like that in Bangladesh's micro lending growth and the milk co-operatives7 in Gujarat selling insurance in addition to milk production and distribution. It would be a new dawn in Indian insurance distribution! With the right impetus the Indian rural insurance scenario could be one with high business volume and tremendous growth potential. ICICI Prudential Insurance and HDFC Standard Life Insurance have already partnered with NGOs8 to sell some low cost insurance in rural areas. However, the challenge lies in establishing regulations that protect the customer and attract the right players into the brokerage market rather than creating another middlemen segment eroding the premium. Work site marketing This area needs to be tapped, as in any country one of the biggest markets is through the worksite. With changes in human resources management polices and compensation packages, group products or work site products do have a definite market that cannot be ignored. Here the advantages would be:
iv)
? ? ? ?
Captive customer base Potential to sell individual insurance and group insurance High trust factor High hit ratio for the intermediaries
The challenges would be the cost effectiveness, product customization and efficient post sales servicing, which would determine continued business. Technology has a key role to play in worksite marketing to ensure cost benefits. Banks and financial institutions have been successfully marketing credit cards and other financial products using
52
this channel. If not an identical model a similar approach can be used for selling insurance.
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Internet Though India is joining the fast growing breed of net users, using net for transactions has not yet caught up. Though a few banks provide online banking, the usage is still a small fragment. The insecurity associated with transactions over the net is still an inhibiting factor. At present most of the insurance companies have product information and/or illustrative tools on the web. We do not see the web evolving into a means for direct selling of insurance in the current scenario. In the Indian market, where insurance is sold after considerable persuasion even after face-to-face selling, the selling over the net, which must be initiated by the client, would take some more time. While the technology capability is there, improvements in bandwidth and infrastructure are needed. Also needed are simpler products where auto-underwriting is feasible. Automobile insurance, one of the segments of insurance purchased "off the shelf" in India, would be the ideal segment to start with. On the life side, term assurance for standard lives with simplified underwriting is a possibility. These channels by themselves will not be able to overcome the mindset of the people, but rather can only be enablers for the human channels.
v) vi) Invisible Insurer In this model, the insurance company or its representative is not the entity marketing the products. The insurance cover is sold by an automobile /credit card company as an add-on product leveraging the brand of the retailer. The risk is carried by the insurance company, which underwrites it. . Products like creditor insurance, automobile insurance, and credit card related insurance could be distributed using this channel. This model can be adopted in all market segments for the lines of business mentioned. It is already prevalent in some areas like credit card insurance and crop insurance for agricultural loans. The new players are also attempting this model. The venture of Maruti into insurance by setting up two subsidiaries MIDS10 and MIBL11 to sell automobile insurance is a case in point. These firms will largely arrange insurance cover for Maruti's captive customer base. MIDS has been registered as a corporate agent with an exclusive arrangement with Bajaj Allianz General Insurance, while MIBL has linked up with stateowned National Insurance Company Limited. What makes these arrangements attractive is the low distribution cost and captive customer base. However, repeat business or renewal of business cannot be assured. In the life segment, group creditor insurance may be the most suitable product for this channel.
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INSURANCE CLAIM
“Insurance is a financial service. It falls under the purview of Consumers Protection Act. The Consumer Forum accepts complaints from the aggrieved insured and decides such cases.” The origin of insurance has been from cooperation among risk-takers so as to spread (share) the heavy losses incurred by some amongst the larger number. This harbingers the concept of utmost good faith. If some members of the association, thus formed to ameliorate the misfortunes of the few unfortunate members, change their minds and refuse to indemnify the losses suffered on the occurrence of the contingency, the purpose of the association would be defeated. This call for advance payment of premium, which is held as a trust. A contract of insurance is not a wagering contract, but is subject to existence of an insurable interest. It is of indemnity is involved. The principle of indemnity is involved in a contract by which one party promises to save the other from a loss. In fire and life insurance, insurable interest must exist at the time policy is made, while in marine insurance the policyholder must have acquired the insurable interest at the time of loss. Claim Settlements (life) The settlement of a claim arises due to Death of the Policyholder or due to Maturity of the Policy.
? •
•
Death Claim In respect of a death claim an intimation regarding death of a policyholder from a relative / nominee / or assignee is to be received. The facts required to be submitted are: 1. Date of death, 2. Reason and Place of Death, 3. Full details of policies held by the Life assured should also be submitted.
Death claims are categorized as Non-Early Death claims and Early Claims. The procedure for processing these claims is different.
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Non-early Death Claim: Non-early Death Claims refer to death of the Life assured occurring after 3 years from the date of commencement of policy or Date of last revival / reinstatement If the policy is in force till death by regular payment of premiums, full sum assured is payable along with bonus (if it is a with profit policy).
?
The following are the requirements for the settlement of the death claim:
• • • • • • •
Policy Document Death Certificate from the appropriate authority Legal evidence of Title, if the claimant is not an assignee / nominee Abridged claim Form (3783/A) Discharge Form in 3801, duly signed Assignment / Reassignment deed, if any Age proof, if age is not already admitted
Once these documents are received and if they are found in order, claim is settled and payment is made to the person entitled to. Early Claims: Early Claims refer to the death of Life assured occurring within 3 years from commencement of policy. The following forms are to be submitted duly completed:
? • • • • •
•
Claim Form B: Statement from the medical attendants who last treated the deceased Life assured. Claim form B1: certificate of treatment issued by the hospital authorities where the deceased was treated last. Claim form E - certificate by the employer if the deceased was an employee. Claim form C - certificate of burial/cremation signed by a person who attended the funeral of the deceased. Where death takes place due to accident, the death has to be reported to the police and a FIR (First Information Report), police inquest report, and postmortem report (if conducted only) are to be submitted. Wherever death takes place within 2 years from Date of commencement an enquiry is conducted to determine the genuineness of claim.
On the basis of these, the decisions to settle accidental benefits are taken. ? Maturity:
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If the life insured survives to the full term, then basic sum assured is payable. This payment by the insurer to the insured on the date of maturity is called maturity payment. In majority of the plans, full sum assured becomes payable along with Bonus as a maturity payment, unless survivals benefits are paid earlier as in a money back policy. At least 2 months before maturity date, information is sent to the life assured with a blank discharge form for signature & completion by him. It is to be returned to the office along with:
• • •
Original Policy document Age proof if age not already submitted Assignment /reassignment, if any.
Postdated cheques are submitted to the Life Insured on receipt of the above mentioned requirements. Certain Relaxations in Settlements of the claims: Legally no claim is acceptable in respect of a lapsed policy or death of the Life assured occurring within 3 years from the date of commencement of the policy. However, some concessions are available and payment of claims are made •
•
If the Life assured had paid at least 3 years' premiums and thereafter if premiums have not been paid, the nominees get proportionate paid up value. In the event of the death of the Life assured within 3 years and the policy is under the lapsed position, nothing is payable.
Other concessions are: If minimum 2 years premiums are paid and if death of Life assured occurs : 1. Within 3 months from the Date of first unpaid premium Full sum assured along with bonus is payable subject to recovery of the premium already fallen due and the premium that falls during the policy anniversary. 2. Between 3 to 6 months from fully unpaid premium Only 50% of basic sum assured is payable. No bonus is paid and no arrears of premium are received. 3. 6 months to 1 year from fully unpaid premium Only notional paid up value is given.
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Claim settlements (non- life)
?
General Claims procedure
All insurance contracts are based on the information provided by the insured in the proposal form. The correctness of the information furnished in the proposal form is verified at the time of a claim, when physical inspection of the property is done. In case of any misrepresentation, it would be the prerogative of the Insurance Company to avoid a claim, or avoid the policy itself, or pay a claim for a reduced amount. It should therefore be understood that the completed proposal form plays an important role as it affects the claims under the policy. Claim settlement procedure for the public sector general insurance companies(New India Assurance, Oriental Insurance, United India Insurance and National Insurance) Here are some important points, which would help you in the claims procedure.
• • •
•
• •
•
The loss or damage should be reported to the insurer immediately. On receipt of claim intimation, the insurer will forward a claim form. Submit the completed claim form along with an estimate of the loss to the insurer. It is preferable to submit an itemized estimate with separate values. The insurer will arrange for inspection of the damaged items to assess the loss. In case of major losses, a specialist-licensed surveyor is deputed. The insured has to provide the required documents to substantiate the extent of loss. In case the cause of loss is not established, it is for the insured to prove that the loss or damage has occurred due to an insured peril. On agreement of claim amount between the insured and the insurer, the claim is settled.
In view of varied nature of policies, certain points distinct to individual policies, in addition to the above, are listed below : ? Fire claims • Firstly the insured should take all possible steps to minimize the loss. • The fire brigade may be intimated immediately.
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•
•
•
• •
Lodge a police complaint in case of a fire arising out of - rioting mob, striking workers, malicious damage by third parties or terrorist damage. Obtain a meteorological report in case of loss due to cyclone, flood & inundation and if the loss is localized like in the case of flood & inundation from a local water source, MRO report may be obtained. If the policy is on 'reinstatement basis', the claim is settled only after completion of repairs/replacement of the damaged items and submission of bills for claim payment. ? Burglary claims Immediately report to the police and obtain a non-traceable certificate that the items are not found. The insurers will insist upon a letter of undertaking on a stamp paper of appropriate value, for refunding the claim amount when the stolen property is recovered.
'All risks' policy for Jewelry and valuables
•
Report to the police and obtain a non-traceable certificate.
Breakdown of domestic Appliances
•
Notice of claim and estimated cost of repairs should be filed with the insurers to arrange for inspection. In case of partial losses, no depreciation is charged but when the items are not insured for its present day replacement value, the items are treated as under-insured and the claim amount is proportionately reduced. Depreciation is only applied for Total Loss claims.
If an appliance is partially damaged, it should be repaired (on approval from insurance company) before it is put to use, as otherwise further loss is not covered. ? Motor vehicle (Private & two wheelers) claims Claims under Act policies
• • •
Notice of an accident (not necessarily a claim) involving third parties should be reported to the insurers. The insured may be interested to pay compensation without going into whether he is liable to pay or not. It is therefore an express condition of the policy that no claim should be admitted or a compromise arrived at, without the approval of the insurers.
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•
•
•
• •
•
•
•
•
In case of major claims, the insurers may be willing to defend criminal case against the driver also on the basis of which compensation claims may be decided in the civil courts. Every accident involving third parties is required to be reported to police. M.V.Act provides that a third party victim can proceed against the insurers directly. If the alleged accident is not reported to the insurers, the insurers can consider this as violation of policy condition. In such circumstances, even if insurers are required to pay compensation by a court of law, they have an option of recovering such claim amounts from the insured for violation of specific policy condition. The insured can proceed with repairs provided the insurers are submitted an estimate of repairs and the estimated cost of repairs does not exceed Rs.500 in case of Private cars and Rs.150 in case of two wheelers. ? Mediclaim policy Notice of claim should be lodged within 24 hours. The insured should submit 'discharge summary' of the hospital/nursing home along with original hospital/medical bills, reports of the labs and investigation reports. In other words every item in the claim bill should be supported. ? Overseas Mediclaim The claim procedure varies from country to country and therefore the insured should get in touch with the overseas claim settling agents of the insurers immediately. The Insured should carry the policy document with him, which may be produced as evidence if necessary. The policy document also contains the full information as to how to get in touch with the claim settling agents for assistance. ? Personal Accident Claims In case of accidental death, the capital sum is paid to the legal nominee of the insured. If the insured fails to provide the name of the nominee, succession certificate from a court of law is necessary. In case of other claims, the insurers may get the insured examined by a specialist or refer the matter to medical board as is necessary, the cost of which will be borne by the insurers.
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MARKET SEGMENTATION IN THE INSURANCE ORGANIZATIONS
In the insurance organizations, the task of formulating the overall marketing strategies cannot be performed efficiently unless we segment the market. It was against this background that marketing studies engineered a sound foundation for segmenting the markets of insurance business. The market for the insurance business is found vast, the potential policyholders are in a very good number and their needs and requirements are not identical. The segmentation helps the insurance organizations in dividing and sub-dividing the market into small segments in which the needs and requirements are found by and large identical. Significance of Segmentation to the Insurance Business: The main purpose of market segmentation is to know the market. Unless the needs and requirements of the policyholders are known, it is difficult to formulate a sound marketing strategy. It is quite natural that the needs and requirements of different users living in different regions are not identical. The marketers bear the responsibility of identifying the difference in preferences so that the strategic decisions are formulated in line with the same. This helps in sensitizing the market resources. The marketing inputs are found instrumental in developing the required marketing outputs. Also, it is not productive to concentrate on only one segment. The insurance professionals need to business in all the segments such as rural and urban, men and women, agricultural and industrial and so on and so forth. It is important that insuranc3e is spread to even the agricultural sector of the economy. In addition to the mobilization of savings, there is also a need to promote investments. Knowing and understanding the market is considered significant to the insurance professionals since the process helps them in scanning the changing needs and requirements of the agricultural sector. A study of segmentation would help insurance professionals in formulating a sound marketing strategy. Thus segmentation would help in the following: ? Making the promotional measures creative which would be instrumental in sensitizing the prospects. ? Personal selling would be effective since the sales personnel are aware of the needs and requirements of the customers. ? The pricing and fee decisions can be rationalized in case of the weaker sections of the society. ? The expectations of the prospects can be perceived in a right fashion.
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?
?
It helps in identifying and emerging profitable segment. For e.g. in the Indian perspective, we find the rural market to be a profitable market for both bank and insurance organizations in the 21st century. If due weight age is given to the rural segment, they can make their services or schemes rural oriented and such orientation would make ways for positive developments. The development of the most profitable or attractive package of insurance services or schemes would also be possible.
In view of the above, it is rightly said that segmentation needs a priority attention of insurance professionals. How to reach and influence the target market is found meaningful to accomplish the corporate objectives. The segmentation would help the marketers in transforming the ‘prospects’ into the ‘users’.
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INSURANCE & RURAL INDIA
PRESENT RURAL POLICIES IN INDIA We have had insurance policies targeted at the rural populace for quite sometime now. The first crop insurance scheme was tentatively taken in the year 1979-80 and was launched in 12 states. Then, in April 1985, a Comprehensive Crop Insurance Scheme (CCIS) was launched by the Govt. of India in conjunction with GIC. Its objective was to provide financial compensation to farmers whose crop had failed due to drought or floods. The ceiling amount of the crop loan that the scheme could cover was Rs. 10000/-. The rate of the premium varied from 1 to 2% depending on the crop insured. Then there was an Experimental Crop Insurance Scheme (ECIS) launched in the year 1997-98 wherein the insurance charges would be borne by the Central and State governments. However, there are some inherent deficiencies in it. The CCIS. India- Rural Market Opportunities & Challenges Opportunities • The rural market in India constitutes 740+ million people, and is by far the largest potential market in the world • Rural annual household income averages Rs.56,630 with high savings rates • Changing rural aspirations in consumption patterns and lifestyle unfolds opportunities for rural marketing Challenges • Lack of understanding of rural customers and data • Poor infrastructure • Low level of literacy • Poor reach of mass media
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Saving Habit
Insurance Chit fund No savings
60 50 40 30 20 10 0
Bank Post office
Cooperative bank No Form al Savings
60 46 30 22 5 11 19 6 6 5 6 Segm ent B 32 32 22 19 20 7 4 9 Segm ent C 36 27
Segm ent A
Avg. saving in - formal insts.: - insurance: •
12400 3500
9500 3000 2900
5900
The more affluent are more likely to save in formal institutions and with insurance, with insurance constituting a large part of the savings pie.
Penetration of Insurance Products
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Any Insurance
36 27 14 10 3 0.5 0.5 0.3 0.2
0 10 20 30 40 50 60 70
General Insurance Tractor
Accident
Pumpset
Over one-third have insurance, with life insurance having the maximum penetration.
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Awareness of Types of Insurance Insurance companies also provides new industrial set up in the country by investing in shares and •
100% 7 9 39 37 24 39 41 20
54
56
56
62
66
Unaware
50%
76
Aided Unaided
84
31 15
31 13
33 11
27 11
0%
24 10
19 5
•
Awareness of life insurance is almost universal, but much less for general insurance products.
Intention to Purchase Insurance
All Respondents
Non- Policy Holders
Policy Holders
ot Ac or ci de nt Ca ttl e Tr ac t P r or op er ty He al th Ag ri Cr im op pl em en ts
51 62 38
0 10 20 30 40 50 60
Li
fe
M
70
80
•
Most respondents do intend to purchase an insurance policy in the future, especially those with no policy currently. The more affluent are most keen to purchase some form of insurance.
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Hierarchy of Insurance Needs
60
10
40 20 0
Rank 2 Rank 1
18 16 20 10 11 10
lth
42
17 7
16 6 4 4
Ca ttl e
2
Cr op
3 2
ct Tr a or
1
Lo Li an fe Li +A fe cc +H id ea en lth t +A cc id en t
•
More than three-quarters (78%) ranked various combinations of life insurance as the most important. Insuring assets were not such a priority Segment
Target Market for Life Insurance National Rural Population (%) 123%
Segment A (Class X +) – most affluent Target market for Individual policies Segment B (Class V - IX) –affluent Target market for Individual policies Segment C (less than Class V) – least affluent Target market for Group policies Total Rural population - 742 million
255%
646%
•
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M id ot en or t +A cc id en t
Li fe
Li fe +
He a
Ac c
DISTRIBUTION CHANNELS
Available Channels
Distribution Channels
Evaluation Criteria Re ch a In e ceo t rg tse m n flu n n a e g e t Tru & re b y st lia ilit Bu e a u io ca b y sin ss cq isit n pa ilit Su p rt re u m n s po q ire e t Fin n l t n ct n h n lin a cia ra sa io a d g O e t n ld p ra io a iscip e lin Cu m r se icin sto e rv g Feasible Channels
Banks Cooperatives Panchayats Agents Post Offices Cybermediaries Industrial Fin Inst.
Eco Exchange Pts
Coop Banks Cooperatives Panchayats Agents
Brokers
NGO’s & SHG’s
E-Bima
New Channel
27
DISTRICT COORDINATOR (1) BLOCK COORDINATOR (14)
Insurer’s Resources
Coop Bank Panchayats E-Bima Agents Cooperatives
1 20 5 8 3
No of Channel Units per Block Av. No. of Agents per LIC Dev Officer : 37
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Span of Channels Suggested Strategy Model Key Findings of the Research ? Rural sector offers a huge business opportunity for insurance companies ? Savings ratio is a healthy 30% of income across all socio economic segments ? Awareness about Life Insurance is near universal ? 27% of CWEs already have a life policy ? 51% of all respondents have expressed intention to purchase a life policy ? There are a total of 124 million rural households ? Nearly 20% of all farmers in rural India own a Kissan Credit Cards. The 23 million credit cards issued till date offer a huge data base and opportunity for insurance. ? Delivery infrastructure in the form of District Cooperative Banks, Cooperative Societies, NGO’s and Self Help Groups already exists in most villages. ? Rural connectivity through IT. ? E-choupal of ITC and other similar initiatives are available as additional delivery channels of insurance ? An extensive rural agent network for sale of Life insurance products exists ? The agent plays a major role in creating awareness, motivating purchase and rendering other insurance services ? 78% of respondents prefer various combinations of life insurance like life + accident, life + loan, life + health + accident. ? Flexibility in Premium payments is important.
INSURANCE SERVICES
The insurance landscape in India is in the process of tremendous change. Closed to foreign competition since nationalization in 1956, the Indian insurance industry was run by the government for over 40 years through the Life Insurance Corporation of India (LIC) and the four general insurance companies that spanned the length and breadth of the country. Today, the Indian life insurance industry has a dozen private players, each of whom are making strides in raising awareness levels, introducing innovative products and increasing the penetration of life insurance in this vastly underinsured country. Each of the private insurers has introduced revamped products to meet the needs of their target customers and in line with their business objectives. Who Wins?
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Undoubtedly, the biggest beneficiary of the competition amongst life insurers has been the consumer. A wide range of products, customerfocused service and professional advice has become the mainstay of the industry, and the Indian consumer forms the pivot of each company’s strategy. At the back of advertising campaigns, seminars and workshops, there has been a dramatic increase in customer awareness. Penetration of life insurance is beginning to cut across socio-economic classes and attract people who have never purchased insurance before. With this heightened awareness and consumer education comes a willingness to view life insurance as an integral part of the financial portfolio, marking a significant change from the earlier attitude, where insurance was purchased as a tax-saving tool.
USERS OF INSURANCE SERIVCE
INDIVIDUAL
INSTITUTIO NAL
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Service marketing is unique in many ways in the insurance industry. There are 3 players in the transaction process:? Company An Insurance company listens to the customers and evolves/develops various insurance policies and communicates the attractiveness and the utility of the policy directly to the customers. Here it (the company) performs external marketing. The company makes promises to the customers. Companies like LIC and ICICI Prudential makes promises to the customers and sees to it that these promises are delivered by the providers. These companies should bridge the gap between their employees and customers in order to achieve customer satisfaction. ? Providers They are the insurance company’s internal customers constituting employees and agents (advisors). ICICI Prudential Life Insurance does internal marketing with the providers by educating, training and motivating them about the idea of the particular insurance policy which they can offer to their customers depending upon their needs and their financial situation. This is done to enable the providers to effectively carry out the service transaction process. The advisors of ICICI Prudential make provisions for office space, accessibility and connectivity. In case of LIC, the agents are ready to meet their prospects at their choice of destination, for the purpose of delivering the promise made to them. ? Customers The customers are the reasons that the insurance company exists and for whom the company has designed a host of insurance policies as well as set up the infrastructural facilities and spent money on employee development programmes. Here the providers are the only ones who interact with the customers, like the insurance agents interact with the customers and not the company. In case of ICICI Prudential, the advisors interact with their customers and study their financial condition and offers policies accordingly. The agents perform interactive marketing which is on-time, all-time, every-time basis. This is the most crucial aspect of service marketing in the insurance sector. In LIC the agents remain in constant touch with their clients and gets in touch with them according to their convenience. Those agents have the responsibility of ‘keeping promises’ made and enabled by the company. The providers (agents) are responsible for the perceived quality level of the service transaction. This underlines the uniqueness of service marketing.
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LIFE INSURANCE CORPORATION OF INDIA
Life Insurance Corporation of India was formed on 1st September 1956. It can be said that with the formation of LIC, utilization of peoples money invested in Life Insurance for planned economic development took roots. One of the reasons/objective of Nationalization of life insurance industry was channelising of its funds for the benefit of the community at large. “Explore and enhance the quality of life of people through financial security by providing products and services of inspired attributes with competitive returns, and by rendering resources for economic development.” Forms the mission of the company
Characteristic of LIC Services….
Intangibility
Inseparabili ty
Service
Heterogeneit y
Perishability
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The Life Insurance Corporation’s services can be explained with the help of the following: ? Intangibility LIC policies are an example of the way in which the financial services are presented to customers. They can enhance the image of the service and the provider can even bestow status or implied benefits upon the user. Physical reminders of the service product, brand name and value serve to reassure the consumer and help the organizations positioning. ? Inseparability Many everyday transactions are carried out now via automated services are now very familiar because access to these systems has been broadened to allow use of any particular machine by customers of other institutions, the customer will often not be dealing directly with their own provider. ? Heterogeneity/variability LIC helps the customer to make simple transaction via MIS – database management, Online Enquiry service, Downloading of Policy forms or via branch counter where they might be fairly standardized but subject to some variation in quality. ? Perishability An insurance policy becomes perishable the minute it expires, but for the whole of is active duration it represents an ongoing service. LIC sell insurance on the basis that customers have a short ‘cooling off’ period, in case the customer changes their mind or to offer them protection if heavy-handed sales pressure has been used. Everything that can be done to tangibilize the services by offering clear and attractive documentation, for example offering reassurance and confidence to the consumer is considered by the company.
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CORE PRODUCT AND SUPPLEMENTARY SERVICES OF LIC
• LIC health line • Single window system • Availing loans on policy • Revival of lapsed Policy • Grievance redressal system • Claim settlement • Online Calculation
• Comput erized Services
• Instruction Manual
• Installment premium • Insurance Advisor
• Brochures in regional languages
Policy
• Policy status • Post sales services
• Payment through service providers
• Toll Free Phone • New policy update
• Interactive Voice Response system
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“8 Ps of LIC” Product Mix of LIC LIC has a variety of insurance plans to choose from. These plans cater to all categories of people and to their diverse needs. The plans are simply unmatched in reliability, benefits and in providing happiness and security.
Term assura -nce
Whole life money back
Endo wment plans
Mone y back plans
Endowm ent + whole life
Pensio n
plan
Plans at a glance
Children
policy
Invest -ment plans Medic al Insura nce
High risks low premium
Handi cappe d policy
Whole life policy
74
? LIC also provide customer can mix They may choose customer here has
the customer product mix facility where the and match the product according to their needs. one policy at a time or six plans at a time. The to mention his age profile to the company.
i) Place & Time: LIC has about 2048 branches- fully computerized covering all policy servicing aspects to give prompt computerized services from new policy introduction, acceptance of renewal premium, revivals, loans, etc to final claims settlement. • LIC’s Wide Area Network covers 100 Divisional Offices connecting about 1500 Branches through network. This helps the customer to pay LIC premium in any of the Branches connected to the network. Green Channel facility has also been introduced for on the spot policy completion. • Payment of premiums can be made through internet through service providers, viz., HDFC Bank, ICICI Bank, Times of money.com, Bill Junction.com, UTI Bank, Bank of Punjab, GTB Bank, Citi Bank, Corporation Bank, Federal Bank and Bill desk. • LIC's website www.licindia.com has several features like product information on LIC’s various plans, ready reckoner for premium, online calculations of Income tax, installment premium and policy bonus, Insurance Advisor, etc. • LIC has installed Information Kiosks at selected 150 locations which give policy status report, other details about life insurance plans and servicing aspects. • Policyholders at the Metro Centers have been provided with toll-free telephone, access to contact the Grievance Redressal Officers for hassle free complaint processing. • First Policy Service Info Centre was commissioned at Mumbai in March 2002. Info Centres at Pune, Delhi, Kolkata, Chennai, Ahmedabad, Hyderabad and Bangalore were also commissioned. This centre is equipped with state of art technology and manned by trained persons. People desiring any information regarding their life insurance needs and about their policies can get the same by calling the Info Centre Telephone. • LIC also has Interactive Voice Response Systems in 59 urban centres. Customers can get selected information regarding their policies by calling the prescribed telephone numbers.
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Promotion & Education: For over 40 years LIC enjoyed total monopoly over the Insurance industry. It was the lone player providing insurance till late 1990s and early 2000- when the Insurance sector was thrown open to the private players. LIC still leverages on the publicity & recognition it earned in its 40 years. The services are still majorly promoted by the LIC agents/advisors, though in the recent years due to the entry of the private players LIC has started with aggressive marketing in the Mass Media. However it is still the LIC agents, who promote the company and communicate its benefit to the customers. Price: LIC offers a variety of policies, which differ according of the customers. The product of LIC is very relative to the customer and varies individually from customer to customer and as such the policies do not have a fixed price i.e. premium. These premiums vary according to the policies and the amount for which the insurance is taken and various other factors.
Physical Evidence: LIC’s logo depicting an oil lamp covered by two hands is a symbolic portrayal of security and safety. It tangibles the LIC’s commitment of security and safety that are guaranteed by the policies. In addition LIC has made available to the customers the brochures and literatures relating to the services in regional languages so as to make it simple and easy to understand. Moreover the advertisement and other promotions of the LIC emphasize strongly on the safety aspect. People: LIC interact with two types of customers –internal and external on a regular basis. Internal customers are the agents and advisors who are employees as well as the customers of the company. LIC trains its internal customer and educates them about the various policies. It is these agents who act as an intermediary between the end consumer and the company, hence it required to train them properly. LIC communicates with its external customers through advertisements and various other promotional tools. It is of utmost importance that the agents deliver what the advertisements promise. Process: A consolidated database of registered policies is maintained by LIC. This database is updated at regular intervals on the basis of changes received from the original servicing branches. LIC also sends auto-mailers to the registered policyholders informing the registration status. LIC validates the registration data in case of payment through the service provider and informs the bank/service provider about the
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registration status. Since LIC’s database is de-centralized, generally it takes a week’s time for confirmation of registration data. • LIC regularly send the bills/invoices mentioning the due dates, premium amount, late fees, validity date, etc to the service provider/bank of which the customer is a registered member. Information regarding the payment of the premium is displayed in the net banking account page. • LIC service providers/banks also help the customer to pay the premium through auto pay facility and phone banking facility where the customer can follow the telephonic payment instructions. Customers are then informed through mail regarding the status of the registration or payment. Productivity and Quality: LIC has lived up to its standards but actually delivering what it has promised. LIC follows a stringent Customer redressal system and actually follows up on Customer feedback to help them serve better. • For LIC it is not the end of the services once the customer has taken the policy. Services are provided by the company in terms of processing and release of claims. • Afford the customers, opportunities to provide the organization with feedback about the perception of our services and to suggest improvement through customer surveys and customer needs. • Providing opportunities to customers to meet the designated grievance redressal officer in all offices of the organization without the prior appointment • In addition to Plan Suggestor the company also provides the customer the ready recknor, suggestion based upon income and suggestion based upon the investible amount. • Customer service section of LIC guide through the various intricacies of a life insurance contract and the facts that a customer must know to make the best out of their life insurance policy like policy conditions, alteration in policy, if policy is lost, nomination, when to pay the premium, grace period for the payment of premium, surrender value, maturity, death claims etc… • Enhancing customer conveniences in the areas of information and communication, simplification of processes etc..
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THE LIC SERVICE TRIANGLE MODEL
LIC
Internal marketing “Enabling Promises”
External marketing “Making Promises”
Service provider
Interactive Marketing “Keeping Promises”
Custome rs
EXTERNAL MARKETING In this stage the company has to design the services according to the need and wants of the consumers. This requires the study of the market and knowledge of the consumers. LIC listens to the customers and evolves/develops various insurance policies and communicates the attractiveness and the utility of the policy directly to the customers. Here it (the company) performs external marketing. The company makes promises to the customers. LIC conducts the market survey, make use of business as well as marketing intelligence to tap the potential customer, make consumer aware of their existence through publicity, advertising etc…
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INTERNAL MARKETING The customer comes to the LIC for availing the service, thus to “Enable the Promise” made; it becomes very essential for the company motivate their salesperson as well as to train them to serve the customer better. Necessary infrastructure, technology, security, facilities, after sales service, online information, claim settlement, easy structure for the payment of premium, flexibility in the policy, insurance advisor, and complaint cell are some of the attributes which form the part of the internal marketing and also enable the company to fulfill the promises made to the customers. The agents of LIC are ready to meet their prospects at their choice of destination, for the purpose of delivering the promise made to them. This also compromises of the internal environment and the mannerism existing in the company. INTERACTIVE MARKETING Here the providers are the only ones who interact with the customers, like the insurance agents interact with the customers and not the company. The advisors interact with their customers and study their financial condition and offers policies accordingly. The agents perform interactive marketing which is on-time, all-time, every-time basis. This is the most crucial aspect of service marketing in the insurance sector. In LIC the agents remain in constant touch with their clients and gets in touch with them according to their convenience. THE MOMENTS OF TRUTH” is the provocative point and also the judgment period where the customer finally gauges the difference between the promises made, the promises kept, thus evaluating the service’s worth. These are called the “Moments of Truth” because what was dreamt is achieved and also if it is not achieved this moment gives an insight into the shortcomings and why it could not be achieved.
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Service Encounter Cascade Customer visits the LIC office (receptionist) for initial enquiry Customer is asked to meet one of the agents, who does his need analysis. A date for next meeting is fixed. The agent suggests the customer various policies suitable, and if the customer selects a policy the deal is done and other formalities are This is informal meeting where the agent meets the customer to remind him about payment of premium and other new information about the policies. The agent gets reference through such meetings. This is also an informal meeting were the agent keeps a track of the customer and informs about the maturity of the polices. The agent does this to ask them to renew their policies. Here the customer gets his policy money when matured. Service Encounter Cascade From the customer’s point of view, the most vivid impression of service occurs in the service encounter, or “the moments of truth”, when the customer interacts with the company. It is in these encounters that the customers receive a snapshot of the organization’s service quality, and each encounter contributes to the customer’s overall satisfaction and willingness to do business with the organization again. From the organization’s point of view, each encounter thus presents an opportunity to prove its potential as a quality service provider and to increase customer loyalty. Some services have few encounters while other services have numerous encounters
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Thus as seen in the above diagram, there exists primarily 6 contact points between the service provider and customer in company. The customer’s perception of quality is influenced in these encounters. Thus it is upto the service provider to deliver a high quality of offerings and thereby increase customer loyalty and satisfaction in these stages. LIC thus trains the agents and its employees to handle the customer in a very efficient manner, customer are suggested the various policies which suit their age, income, family, and other requirements. The providers here are trained in such a way so as to communicate in a best manner with the customer, the providers here are not only trained to sell the policies to the customer but also to handle the customer complaints and to provide after sales service, to inform them the new policies, the benefits of the policies, reminding them for their payment of premium, helping them to design their own policies etc… The company also sees that they can bridge the gap between customer an d the employees in order to achieve customer satisfaction. Interacting with the customer is not only at personal levels but also at the various other providers like when the customer makes the payment of the premium through its bank account affiliated with the LIC or through the ECS system or through telephone etc… Hence training the employees, taking care of the customer complains and grievances, motivating the employees to provide the better services to the customer by the way of incentives and bonus etc form the back end operations for the company.
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SERVQUAL MODEL
Expected service GAP 5 Perceived Service
GAP4
Service Delivery
GAP 3 Customer-driven service design & standards GAP 2 Management Perceptions of Consumer Expectations
External Communications to Consumers
GAP 1
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GAP ONE BW Consumer Expectation and Management Perception Management does not always perceive correctly what customers want. This gap is because of not having the knowledge what exactly the customer requires. LIC faces the problem in this area as the customers are not very cooperative enough to share the personal information like disclosure of income, the type of business etc…Hence the service providers due to lack of sufficient knowledge about the customer detail cannot suggest him the right policy.
M a P e o f E x n r C p a g e c e p t u s t o e c t a m e n Et x p e c t e d io n s S e r v ic e m e r t io n s
GAP TWO BW Management Perception and Service Specification Management may correctly perceive the customers wants but not set a specified performance standard. Say in the LIC the customer expects the settlement of claim to be done quickly in case of an accident or death but the company needs time to scan all the relevant documents, study the matter, and some times it takes time to settle the claim due to the limited resources like lack of adequate proof, documentation etc.. hence in this case the company wants to settle the claims as quickly as possible but due to limited information and legal procedures it is not able to do so in the expected time.
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S e r v ic e M a n a g e Q u a lit y P e r c e p t p e c i f i c a t oi o f n C s u s t o E x p e c t a
m e n t io n s m e r t io n s
GAP THREE BW Service quality specification and service delivery
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In this case there is a gap of internal communication. LIC trains their agents and describe them the % of commission in each policy. Some S e r v ic e S e r v insurance advisors try to sell only D e liv e r y Q u a those policies which gives them high return in terms of commission. Hence S p e c i such attitude of the advisors may not allow him to suggest the right policy to the customer according to his needs and requirements. GAP FOUR BW Service Delivery & External Communications Consumer expectations are affected by the statements made by the company representatives and advertisement. Like the consumer in case of insurance policy expects a fair amount of discount on the premium. Hence just to sell the policies the advisor promises him to give the discount which is not legal, hence this affects the expectations of the customer from the company.
ic e lit y f ic a t io n
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e r v ic e e l i v e r yC
x t e r n a l o m m u n ic a t io n t o C u s t o m e r s
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GAP FIVE Percieved Service & Expected Service This occurs when the consumer misperceives the service quality. A customer will have a pre-conceived notion about the service being offered by the company (expected service). In the same way, perceived service is what the company thinks the customer wants which is again a pre-conceived notion. A gap occurs when both do not match. In this case, the agent may keep regular contact with their customers to show care, but the customers may interpret this as a channel for acquiring references.
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e r v ic e e l i v e r yC t o
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x t e r n a l m m u n ic a t io n C u s t o m e r s
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Filling the GAP And Recommendations
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Proper communication should be established between the customer and the insurance advisor. The insurance advisors should be able to convince the customer and should also try to win his trust so that the customer would feel free to discuss his income and about his business matter. This will help the company to understand the needs of the customer and to provide the right policy to the customer. The customer always wants the settlement of claim to be completed as soon as possible. Thus the company should make a point to collect personally all the required documents from the customer. This will help the customer to relax in a situation of panic (like accidents). In some complicated situations the advisor should suggest the development officer to handle the matter. Internal communication should be more specific. The development officer should keep the track of each salesperson, how many policies he sold in a month and what are the types of policies. This will help the company to keep the track of the advisors. This will also help the company to know whether the advisor is really helping the customer or just wants to make his part of commission. Also when we compare the LIC with the ICICI Prudential we can see the difference in product marketed by each of the company. LIC market the products basically related to life insurance and term plans. Whereas ICICI are more concentrating on the pension plans The services of both the company are almost similar. LIC is the market leader in the Life insurance market, but some part of its market share are taken over by the private players like ICICI Prudential. This is because with the entry of the ICICI in the market gave a boost to advertising of insurance services. Previously the insurance services were not advertised LIC should now to face the competition from such players should also start aggressive advertising especially in case of Pension plans. LIC conducts its operations in a very wide area due to which unknowingly they lose the personal touch with the customer. Whereas in ICICI personal contact with the customer is always maintained with the customer. In case the insurance advisor is not able to understand the needs of the customer the company should arrange the lectures for the agents to understand their problems and also to provide the solutions. In ICICI they motivate their employees in terms of DO OR DIE. In case the salesperson doesn’t complete the target he is fired. This
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strategy is not followed by the LIC. Hence the number of policies sold in ICICI in pension plans is more as compared to LIC. Customer education is also important so as to educate them about the new policy and also the importance of insurance in their life.
Hence for the company to overall improve their services the company should increase the personal touch with their customer, increase the advertising, and also to train their employees to handle the customer in more efficient manner……
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COMPARISON BETWEEN LIFE INSURANCE OF INDIA & ICICI PREDUENTIAL
LIFE INSURANCE CORPORATION ORGANISATION
Products
Individual plans ? Whole life schemes 1. Whole Life With Profits Plan - 002 Features: This plan is mainly devised to create an estate for the heirs of the policyholder as the plan basically provides for payment of sum assured plus bonuses on the death of the policyholder. However, considering the increased longevity of the Indian population, the Corporation has amended the above provision, thereby providing for payment of sum assured plus bonuses in the form of maturity claim on completion of age 80 years or on expiry of term of 40 years from date of commencement of the policy whichever is later. The premiums under the policy are payable up to age 80 years of the policyholder or for a term of 35 years whichever is later. If the payment of premium ceases after 3 years, a paid-up policy for such reduced sum assured will be automatically secured provided the reduced sum assured exclusive of any attached bonus is not less than Rs.250/-. Such reduced paid-up policy is not entitled to participate in the bonus declared thereafter but the bonuses already declared on the policy will remain attach, provided the policy is converted in to a paid-up policy after the premiums are paid for 5 years.
Suitable For: This policy is suitable for people of all ages who wish to protect their families from financial crises that may occur owing to the policyholder’s premature death.
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2. Limited Payment Whole Life - Plan 005 (With Profits) Features: This is the best form of life assurance for family provision since it enables the Life Assured to pay all the premiums during the ordinarily vigorous and most productive years of life. He need not pay any premium in the later stages of life if and when his conditions might become adverse. With Profits Limited Payments Policies do not cease to participate in profits after completion of the premium paying period but continue to share in the periodical Bonus Distribution until the death of the Life Assured. The Without-Profit option is available under Table no. 3. If the policyholder pays at least 3 years' premiums and then discontinues paying any more premium, a reduced paid-up assurance policy comes into force. Such a reduced paid-up Policy will not be entitled to participate in the profits declared thereafter, but such Bonus as has already been declared on the Policy will remain attached thereto. The premium paying term under this plan is five years minimum and 55 years maximum.
3. Single Premium Plan no.8 (With profits) Features: This is the best form of life assurance for family provision since it enables the Life Assured to pay the premium during the ordinarily vigorous and most productive years of life, relieving him from the necessity of making payments later in life when they might become a burden. With Profits Single Premium policies do not cease to participate in profits after completion of the period for which premium has been paid ,but continue to share in the periodical Bonus Distribution until the death of the Life Assured. Suitable For:
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Being a limited-payment life assurance policy, this plan is suitable for people of all ages and social groups who wish to protect their families from a financial setback that may occur owing to their demise.
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? Investment plans 1. Bima Nivesh 2004 (T. No. 166) Bima Nivesh 2004 is a plan with compound rate of guaranteed additions and loyalty additions . This is the revised version of our popular Bima Nivesh Plan and is introduced to meet the overwhelming demand for a single premium plan from our customers. It is a single premium, ideal investment plan for those who have no regular income but good periodical income . Bima Nivesh 2004 is available for terms 5 and 10 years. The guaranteed surrender value is payable after the policy has run for at least one year. Term Assurance Rider is also available by payment of a single premium at the option of the proposer. BENEFITS: • Guaranteed Additions : Guaranteed additions at the compound rate of Rs.40 per thousand Sum Assured per annum for the policy with term of 5 years and at the compound rate of Rs.45 per thousand Sum Assured per annum for the policy with term of 10 years. Loyalty Addition : Depending upon the Corporation's experience with regard to mortality, interest and expenses and based on term of the policy, Loyalty addition, if any, may be declared by the corporation and paid on maturity. Maturity Benefit : The Basic Sum Assured along with compounded Guaranteed Additions will be payable. Note : Loyalty addition, if any, will also be added to this benefit. Payment on death : In case of the unfortunate death of the Life Assured during the term of the policy, Sum Assured along with the accrued guaranteed additions will be payable. Surrender Value : Surrender value is payable after the policy has run at least for one year.
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? Money back plan 1. Money Back with Profit - Plan no.75 & 93 Features: Unlike ordinary endowment insurance plans where the survival benefits are payable only at the end of the endowment period, this scheme provides for periodic payments of partial survival benefits as follows during the term of the policy, of course so long as the policy holder is alive. In the case of a 20-year Money-Back Policy (Table 75), 20% of the sum assured becomes payable each after 5, 10, 15 years, and the balance of 40% plus the accrued bonus become payable at the 20th year. For a Money-Back Policy of 25 years (Table 93), 15% of the sum assured becomes payable each after 5, 10, 15 and 20 years, and the balance 40% plus the accrued bonus become payable at the 25th year. An important feature of this type of policies is that in the event of death at any time within the policy term, the death claim comprises full sum assured without deducting any of the survival benefit amounts, which have already been paid. Similarly, the bonus is also calculated on the full sum assured.
? Features:
Plans to cover the housing loans 1. Mortgage Redemption- Plan no.52
The Mortgage Redemption Assurance policy (without profits) plan is designed to meet the requirements of the policy holding individual who seeks to ensure that all his outstanding loans and debts are automatically paid up in the event of his demise. Under the Mortgage Redemption Assurance policy (without profits) The proponent will have to bear the cost of the mandatory medical examination.
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The policies are usually issued only to male lives aged 50 years or lesser. The policies are subject to a condition that the insurance cover would not extend beyond 65 years. All loans must be liquidated by the time the borrower attains the age of 65. The policies bear no surrender value. Suitable For: Middle-aged to elderly professionals whose dependents might need assistance in clearing their debts in case of their unexpected demise are most suited for the Mortgage Redemption Assurance policy. ? Joint life plan 1. Jeevan Sathi- Plan no.89 Features: This policy is issued on the lives of the husband and wife provided the female's life belongs to Category I or is actively engaged in her spouse's business. Incase of death of one of the policy holder the surviving partner gets the sum assured, the premium is stopped and on death or maturity full sum assured along with bonus is paid back. Suitable For: This policy protects the incomes of both husband and wife, also grants equivalent benefits to their survivors in case neither survive the policy term period. Benefits: Survival benefits: If one or both the lives survive to the maturity date, the sum assured, along with the accumulated bonus, is payable. Death Benefits: In case either of the couple dies during the policy’s term, two things happen. One, LIC pays to the surviving spouse the full sum assured.
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And, two, the policy continues on the life of the surviving partner without him/her having to pay any further premiums, i.e. the life cover on the survivor continues free of cost. The sum assured is again be payable on the death of the other partner in case both the husband and wife were to die during the term of the policy. Vested bonus would also be paid along with the sum assured on the second death.
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ICICI PRODUCTS
Protection Plans ICICI Prudential Life Insurance offers LifeGuard - a set of pure protection plans. Choose from amongst three different product structures to insure your life and provide total security to your family, at a very affordable cost. Level Term Assurance with return of premium ? ? On death the entire sum assured will be paid. On maturity, all the premiums paid will be returned.
Level Term Assurance Under this plan, in case of death of the life assured during the term, the Sum Assured will be paid to the beneficiary. There are no maturity benefits. Hence on survival till maturity, the policy will terminate. You will need to pay the regular annual premium, for the term chosen. You will be provided with life cover equal to the Sum Assured. The table below provides indicative premiums for various age-term combinations for a Sum Assured of Rs. 10 lakhs.
Level Term Assurance without return of premium ? On death the entire sum assured will be paid. ? No survival or maturity benefits.
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Level Term Assurance with return of premium Should you select this plan, you will need to pay a regular annual premium for the term chosen. You will be provided with life cover equal to the Sum Assured. In case of death of the life assured during the term, the Sum Assured under the plan will be paid to the beneficiary. On survival till maturity, all the premiums paid, will be returned. The plan also offers the unique feature of an additional extended cover for 5 years after maturity of the policy, for 50% of the Sum Assured. This provides additional protection, even after the Premium Paying Term. The table below provides indicative premiums for various Extended Life Cover The plan also offers the unique feature of an additional extended cover for 5 years after maturity of the policy, for 50% of the Sum Assured. This provides additional protection, even after the Premium Paying Term. The table below provides indicative premiums for various age-term combinations for a Sum Assured of Rs. 10 lakhs.
You can also enhance the above two policies by adding Accident & Disability Benefit Rider and Waiver of Premium Rider (WOP). Level Term Assurance - Single premium ? On death the entire sum assured will be paid. ? No survival or maturity benefits GROUP (TERM) INSURANCE SCHEME A) Nature of the Scheme : Group (term) Insurance Scheme is meant to provide life insurance protection to groups of people. Administration of the scheme is on group basis and cost is very low. Under Group (Term) Insurance Scheme, life insurance cover is allowed to all the members of a group subject to some simple insurability conditions without insisting upon any medical evidence. The restrictions under a Group Term Insurance Scheme mainly
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relate to size of the group, amount of cover allowable, minimum and maximum age limit for eligibility of cover (18 & 60), participation of minimum percentage (75%) of eligible members of the group at inception and compulsory participation of all new members. B) Premium Chargeable : Group (Term) Insurance Scheme is at present offered under One Year Renewable Group term assurance plan (OYRGTA). Every year on Annual Renewal date LIC charges the premium depending upon the changes in size and age distribution of the age group. The Premium rates applicable to a group at commencement depend on its size as also the occupation, employment and working conditions of the members of the group. Subsequently, the Premium Rates may be reviewed on the basis of actual experience. In some schemes, a part of the excess of premium over actual claim is allowed as rebate from subsequent year's premium as Experience Rating adjustment or Profit Sharing if the claim experience is favourable. C) Different Schemes : Group (term) Insurance Scheme has a number of varieties (see the chart given below). The Scheme may provide for a uniform cover to all members of the group or graded covers for different categories of members, cover for all amounts of outstanding housing loans or vehicle advances, or some other benefits (e.g., life cover to supplement pension or PF benefits in case of death). The conditions for allowing a Group (term) Insurance Scheme and the amounts of cover allowable under the Scheme depend on the particular nature of the Scheme and type of the group, particularly whether it is an employer-employee group or otherwise (non-conventional group). D)General Features of various Group Insurance Schemes i) MASTER POLICY : A single Master Policy is issued covering all the members of the scheme and the scheme is administered by the Employers, Associations, Societies etc. called Nodal agencies. ii) PREMIUM : The premium under such scheme may be wholly paid by the employer or the Nodal Agency. However, the scheme may be contributory i.e. the members may also contribute.
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iii) TAX BENEFIT : The premiums paid by the employer are allowed as business expenses and the amounts are not treated as perquisites in the hands of the employees. The premiums paid by the members are eligible for income-tax rebate under Section 88. The benefits paid under the scheme are tax-free. iv) EXPERIENCE RATING : All Group Insurance schemes are subject to basic review of Rating, i.e. the Table of OYRGTA Premium Rates is reviewed from time to time depending on actual experience. v) DOUBLE ACCIDENT BENEFIT : Double Accident Benefit, i.e. payment of double the sum assured on death due to accident (without permanent disability benefit), may be allowed under Group Insurance Schemes for an extra premium Rs. 0.75 per Thousand Sum Assured per annum. Double accident cover under all Group Schemes taken together should not exceed Rs. 4.5 lakhs. vi) ELIGIBILITY : For Group Insurance Scheme in lieu of EDLIS the insurability condition is that should be a member of the Provident Fund Scheme of the employer. For other GI Schemes of employer-employee groups the insurability condition is that the member should not be absent on ground of sickness on the entry date. For all non-employeremployee Group Schemes the basic insurability condition is that the member should be in good health on the date of entry. vii) INSTALLATION OF THE SCHEME : In respect of Group Insurance Schemes the steps to be taken for introduction of the scheme are to frame rules of the scheme in consultation with LIC, to forward to LIC the employees' data and Master Proposal forms together with a copy of the rules and to pay the premium as required by LIC. viii) ADMINISTRATION OF THE SCHEME : At the commencement and thereafter on each Annual Renewal Date, the Group Policyholder will have to send all the member's data (and particulars of the new entrants from time to time) to the P & GS unit of LIC. Detailed OYRGTA premium calculation will be made on each Annual Renewal Date. When a claim arises, the particulars of the respective member are to be intimated together with the claim form and death certificate. Special Features of each Group Insurance Schemes can be obtained from LIC & P&GS unit. ICICI Group Term Assurance
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ICICI Pru's flexible group term solution helps provide affordable cover to members of a group. The cover could be uniform or based on designation/rank or a multiple of salary, and can be extended to all employees between the ages of 18 and 65 years. The benefit under the policy is paid on the event of the member’s death to the beneficiary nominated by the member. It is a one-year renewable policy where one master policy covers all proposed employees comprising the group, with a minimum group size of 25 persons. New members can join the group and outgoing members can leave the group at any point during the policy term. Highlights include: ? Greater convenience for the employees underwriting and medical requirements. with relaxed
? "Free Cover Limits" with simplified underwriting depending upon the number of employees in the group and the level of cover chosen. ? Guaranteed benefit : On death during the term of the contract (while in service), the sum assured will be paid to the beneficiary of the employee. ? Choice of additional coverage in form an Accident and Disability Benefit Rider and Critical Illness Cover ? Premium is viewed as a business expense in the year of payment. GROUP GRATUITY SCHEME Under the Payment of Gratuity Act, 1972, it is employers statutory liability to pay 15 days salary (15/26 of a month's wages) for every completed years service to each of his employees on their exit, for any reason after five years of continuous service, subject to maximum limit of 3.5 lakhs. Higher benefits can be paid if the employer so desires. Gratuity payable to the employees can be paid as and when liability arises and can be claimed as deductable expense under P & L A/c of the relevant financial years. However, the sound system of financial management envisages providing for Gratuity liability every year and claiming the tax benefits as it is mandatory as per Accounting Standards 15 (AS15) to account for the liability on Actual basis. This can be done by creating a Trust, managed privately or by LIC and paying the amount
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to the Trust every year. In case of Privately Managed Trust, investment of funds will have to be done as per Income-Tax Act, by the trustees and entire administration of the Trust including Actuarial Valuation will be the responsibility of the Trustees. In case of LIC managed trust, the job of investment and actuarial valuation is taken over by the corporation free of charge and in addition, interest is paid by the Corporation on the accumulated funds. We give below the details as how the Group Gratuity (Cash Accumulation) Scheme provides for a convenient mode of funding the statutory obligation of an employer under the payment of Gratuity Act : (1) LIC offers a very attractive rate of interest depending upon the size of the fund.
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INTEREST RATES FOR 2003-2004
Fund Size Below Rs. 25 lakhs Rs. 25 lakhs or more but less than Rs.50 lakhs Rs. 50 lakhs or more but less than Rs.75 lakhs Rs. 75 lakhs or more but less than Rs.1 crore Rs. 1 crore or more but less than Rs. 2 crores Rate of Interest 7.55% 7.65% 7.75% 7.85% 8.00%
(2) There would be no occasion for keeping the funds idle for investments as we give credit from the date of receipt of contribution from the employer and the fund start earning interest from that very date. (3) Trustees will have to open Bank Account in the name of Trust and future contributions to the fund are to be routed through the Trust A/c by the company. (4) When the fund is handed over to LIC trustees will not be required to obtain the certificate from outside actuary since the valuation done by LIC would suffice for the purpose of claiming income tax rebate. (5) The Trustees would have not to bother about the investment of the funds as that aspect would be taken care of by LIC once the funds are handed over to it. (6) By handing over the funds to LIC, the administration work would be considerably reduced. (7) The trustees will perform the statutory roles as envisaged in the act. However, in view of the above points considerable work would be attend to by LIC on behalf of the trustees.
LIFE COVER - AN ADDED ATTRACTION: A unique feature of our Scheme is to provide, in the event of pre-mature unfortunate death, a sum equal to the gratuity payable in respect of the entire service (actual and future). Future service gratuity i.e. life cover is restricted to limits as specified herein below and subject to overall gratuity limits as per rules of the company.
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No. of Employees 10 - 49 50 - 99 above 100
Limit 1.75 lakhs 3.50 lakhs 4.50 lakhs
This is in sharp contrast to the benefits payable only for the actual service under other methods of funding/ paying gratuity. The benefit is secured at a low cost through One Year Renewable Term Assurance Plan. EXAMPLE: (at half a month's salary per year of completed service - 15/26 of month's salary) An employee joined the service at age -25 years Retirement age -60 years Death at age -35 years Anticipated service -25 years Salary at the time of death -Rs.10000/-per month Gratuity on the accured basis - Rs. 57692/- approx Gratuity on anticipated basis -Rs.2,01,923/- (accrued Gratuity plus life cover of Rs. 1,44,231/- approx) Life cover is based on salary as at annual renewal date. THE SPECIAL FEATURES: The employer has to pay an initial contribution at the inception of the scheme to secure past Service gratuity. The initial contribution may be paid in lump sum or spread over a maximum period of five years. The corporation determines contribution payable as annual premium , under the policy, on the basis of an actuarial variation of the gratuity liability subject to the statutory limit of 8 1/3% of the annual wage bill taking
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into consideration the relevant factors. When the Trustees pay the contribution under the policy, the amount required towards the premium for life insurance benefits is utilized and balance is credited to the running account of the scheme which accumulates at an interest rate declared by LIC form time to time. When the contingency of payment of gratuity arises the necessary amount is withdrawn from the running account for making payment. Upon a claim arising by death the gratuity pertaining to the past service is withdrawn from the running account and the balance is paid from LIC's Life fund. ICICI Group Gratuity Plan ICICI Pru's group gratuity plan helps employers fund their gratuity obligation in a scientific manner. Employers can avail of the tax benefits as applicable to approved gratuity funds. The plan can also be customized to structure schemes that can provide benefits beyond the statutory obligations. Highlights include: ? Wider choice of investments with Market Linked Plans - to meet the diverse financial goals. We offer 4 investment options (short-term debt, debt and balanced and capital guarantee plan) where investments will be made in accordance with the fund objectives. ? Transparency through Daily disclosure of Unit Value and regular disclosure of the portfolio of each of the investment option ? Flexibility through switching and contribution redirection option to enable reshuffling of portfolio ? Bundled Life Cover greater value to the employee by packaging life insurance cover with the gratuity, with minimal amount of underwriting. ? Actuarial services to provide a scientific estimation of the gratuity liability. ? Low explicit charge structure with the conditions for exit specified upfront.
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? Enhanced service levels through faster claim settlement, easier access to information and regular statements. ? Complete end to end solution in the legal and regulatory approval process for scheme set up or transfer.
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Employee Benefits ? The contribution made by the employer is not included in the value of taxable perquisites in the hands of the employee. ? Gratuity received up to Rs 350000 is exempt from Income tax under Sec 10(10) Employer Benefits ? Annual contribution up to 8.33% of salary bill in a financial year is allowed a deduction for the purpose of computation of profits and gains of business ? Contribution towards past service liability is allowed as deduction as per the Income Tax rules. LIC SUPER ANNUATION An organization today, has not only to man the various positions with competent and trained personnel but also has to create an environment wherein they can give their best and derive a sense of well-being, a sense of fulfillment and security and take pride in their continued association with the organization. Provision of pension may be an attraction for such persons to continue in the organization and give their best to the organization, as with continuous improvement in longevity a regular income even after retirement has become a necessity. To provide the pension benefits to employees, an employer has two alternatives under the provisions of Rule 89 of Income Tax Rules 1962. i) Create a privately managed trust fund and as and when a member retires, purchase annuity from LIC to provide pension for such retiring member. ii) Entrust the Management of the Pension Fund to LIC by purchasing its Group Superannuation Scheme. ADVANTAGES OF THE LIC MANAGED PENSION FUND : The LIC managed Pension fund has the following added and distinct advantages :1) An attractive yield on the fund will be credited to Fund A/c. The rate of interest declared for the year 2003-2004 varies between 7.55 to 9.00 depending on fund size. 2) The problem of liquidity gets automatically eliminated as soon as the fund is managed by LIC.
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3) We conduct free actuarial valuations of the funds administered by us from time to time. 4) The Administration of the fund is carried out by us in a scientific manner and claims are promptly settled. 5) Group Insurance in conjunction with the Group Superannuation Scheme can be taken by an Organization to provide for an attractive lump sum payment on the unfortunate death of a member while in service, at very nominal cost. Superannuation Scheme Provided by LIC : The employer contributes a certain fixed percentage of salary of Such Contributions are accumulated by LIC and the accumulated amount is utilized to provide various benefits as mentioned below. BENEFITS: 1) ON RETIREMENT : On Retirement of a member, the corpus (contributions plus interest) is utilized to provide the following :a) Commuted Value (Equivalent to 1/3rd of the corpus) which is tax free. b) The corpus that remains after providing for the commuted value is taken as the purchased price to provide for pension. 2) ON DEATH : The Pension is payable on the life of the beneficiary. Corpus is utilized towards the payment of pension of the type the beneficiary may opt and the benefit so received is tax free. A lump sum payable by way of death besides the pension, if the employer has taken Group Insurance Scheme in conjunction with the Group Superannuation Scheme. 3) ON WITHDRAWAL : a) He can get the equitable interest transferred to the Superannuation Scheme of the new employer provide the rules of both the Schemes provide for the same. b) He may opt for a pension from the normal retirement date as provided in the old employer's scheme.
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c) He may opt for payment of commuted value and pension, immediately in which case the benefits would be taxable. PENSION OPTIONS PROVIDED BY LIC : 1) Life Pension ceasing at death . 2) Life Pension with Return of Capital and Group Pension Terminal Bonus on death. 3) Life Pension guaranteed for 5.10.15 or 20 years and life thereafter. 4) Joint Life Pension payable on the last survivor of the employee and spouse. 5) Joint Life Pension payable to the last survivor of the employee and spouse with return of capital on the death of the last survivor. ELIGIBILITY CONDITION : It is not obligatory or statutory on the part of the employer to provide for pension to all employees. It is entirely upto him to decide to which class/ classes of employees he desires to extends the scheme. The eligibility conditions may be defined on the basis of designation or salary. (However, after the categories are specified, employer cannot discriminate between the employees and thus extends the scheme uniformly). ICICI Group Superannuation Plan ICICI Pru’s Superannuation Scheme (for both Defined Benefit and Defined Contribution funds) offers substantial benefits to both employers and employees. The employer and employee can avail of tax benefits applicable to an approved superannuation trust. The scheme will provide for a retirement fund for each participating employee. An employee would be able to choose from various annuity options or opt for partial commutation of corpus at retirement. Highlights include:
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? Wider choice of investments with Market Linked Plans - to meet the diverse financial goals. We offer 5 investment options (short-term debt, debt, balanced, growth and capital guarantee plan) where investments will be made in accordance with the fund objectives. ? Control - Each member/employer can exercise greater control over investments by choosing one or more of the investment options. ? Multiple Annuity Options - 5 annuity options and open market option ? Transparency - Transparency through Daily disclosure of Unit Value and regular disclosure of the portfolio of each of the investment option ? Flexibility - Flexibility through switching and contribution redirection option to enable reshuffling of portfolio ? Low explicit charge structure with conditions for exit specified upfront. ? Enhanced service levels through faster claim settlement, easier access to information and regular statements. ? Complete end to end solution in the legal and regulatory approval process for scheme set up or transfer Plan for need of Children 1. LIC’s Jeevan ANURAG LIC’s Jeevan ANURAG is a with profits plan specifically designed to take care of the educational needs of children. The plan can be taken by a parent on his or her own life. Benefits under the plan are payable at prespecified durations irrespective of whether the Life Assured survives to the end of the policy term or dies during the term of the policy. In addition, this plan also provides for an immediate payment of Basic Sum Assured amount on death of the Life Assured during the term of the policy. BENEFITS: Assured Benefit: Payment of 20% of the Basic Sum Assured at the start of every year during last 3 policy years before maturity. At maturity, 40% of the Basic Sum Assured along with reversionary bonuses declared from time to time on full Sum Assured for the full term and the Terminal bonus, if any shall be payable. For example, if term of
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the policy is 20 years, 20% of the Sum assured will be payable at the end of the 17th,18th, 19th year and 40% of the Sum Assured along with the reversionary bonus and the terminal bonus, if any, at the end of the 20th year. Death Benefit: Payment of an amount equal to Sum Assured under the basic plan immediately on the death of the life assured. ICICI SmartKid Education Plans As a responsible parent, you will always strive to ensure a hassle-free, successful life for your child. However, life is full of uncertainties and even the best-laid plans can go wrong. Here’s how you can give your child a 100% safe and assured tomorrow, whatever the uncertainties. SmartKid is especially designed to provide flexibility and safeguard your child’s future education and lifestyle, taking all possibilities into account. Choose from amongst a basket of 4 plans: 1. SmartKid regular premium 2. SmartKid unit-linked regular premium 3. SmartKid unit-linked regular premium II 4.SmartKid unit-linked single premium II All these plans offer you: ? Financial Benefits: Regular payments at critical stages in your child’s life, like Board examinations, Graduation and Postgraduation. ? Total peace of mind, even if you are not around ? Sum Assured is paid immediately: Ensures that your loved ones stay financially secure, even in your absence. ? All future premiums are waived: Ensuring that your family is not financially burdened in your absence. ? Policy benefits continue: The educational benefits of the policy continue, ensuring that your child can realize his or her dreams without any hassles. ? Development Allowance: SmartKid guarantees regular income to secure your child’s educational career and also ensures his or her all-round development, for a nominal additional amount. The Income Benefit Rider takes care of this through an annual payment of 10% of the sum assured, to your child, till the maturity
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of the policy, in the unfortunate event of the death of the parent. ? All SmartKid plans can be enhanced with the Accident & Disability Benefit Rider and Income Benefit Rider.You can also an Accident Benefit Rider to a SmartKid Regular Premium policy,and a Waiver of Premium Rider (WOP) to SmartKid unit-linked regular premium policy.
CONCLUSION Over the last 3 yrs around 40 companies have expressed interest in entering the sector .Many foreign & Indian companies have arranged anticipatory alliance .It has concluded that nationalized player will continue to hold strong market share position but there will be enough business for new entrants to be profitable.
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LIC settles 1.43 claims every Second.
Growth in LIC's Policies Year 69-70 74-75 79-80 89-90 95-96 96-97 97-98 98-99 No of Policies, in millions 14.0 18.8 22.1 40.4 71.0 77.8 85.0 91.7 Sum assured, in Rs. crore 6348.1 11852.2 19242.6 94823.2 295758.0 344619.3 400747.9 459201.04
Year 75-76 78-79 81-82 85-86 89-90 93-94 97-98 98-99 LIFE INSURANCE (Term)
Growth in LIC's Claims Claims (Death + Maturity) 165.9 232.9 376.6 728.8 1196.9 2725.3 6677.0 7583.18
Annual premium in Rs AGE LIC HDFC STD 2,460 BIRLA MAX K 20 1,455 2,560 2,000 2,800 2,278 OM KOTAK ICICI PRU
SUNLIFE NEWYOR
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25 30 35 40 45 50
1,601 2,037 2,910 4,462 7,227 11,204
2,620 2,820 3,050 3,790 5,520 8,320
2,890 2,950 3,310 4,310 5,990 8,790
2,110 2,280 2,920 4,160 6,370 10,000
3,100 3,400 4,200 5,778 8,056 12,020
2,327 2,504 2,925 3,601 5,336 8,197
THE COMPANY ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential''s equity base stands at Rs. 675 crore with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. In the quarter ended June 30, 2004, the company issued over 100,000 policies, for a total sum assured of over Rs 3,753 crore and had a new business premium income of Rs. 242 crore. Today the company is the #1 private life insurer in the country. DISTRIBUTION ICICI Prudential has one of the largest distribution networks amongst private life insurers in India, having commenced operations in 62 cities and towns in India. These are: Agra, Ahmedabad, Ajmer, Allahabad, Amritsar, Aurangabad, Bangalore, Bareilly, Bhatinda, Bhopal, Bhubhaneshwar, Chandigarh, Chennai, Coimbatore, Dehradun, Goa, Guntur, Gurgaon, Gwalior, Hyderabad, Hubli, Indore, Jaipur, Jalandhar, Jamnagar, Jamshedpur, Jodhpur, Kanpur, Karnal, Kochi, Kolkata, Kolhapur, Kota, Kottayam, Kozhikode, Lucknow, Ludhiana, Madurai, Mangalore, Meerut, Mumbai, Nagpur, Nasik, Noida, New Delhi, Patiala, Pune, Raipur, Rajkot, Ranchi, Rourkela, Siliguri, Surat, Thane, Thrissur, Trichy, Trivandrum, Udaipur, Vadodara, Vashi, Vijayawada and Vizag.
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The company has ten bancassurance tie-ups, having agreements with ICICI Bank, Federal Bank, South Indian Bank, Bank of India, Lord Krishna Bank, as well as some co-operative banks and corporate agents. It has
Year 2001-02 2002-03 2003-04 ICICI Pru Locations 11 24 54 Towns Covered 12 27 59 SEC AB HH % Coverage % Coverage ('000) SEC AB HH Total HH 3,718 4,429 5,513 45% 54% 67% 42% 51% 64%
also tied up with organisations like Dhan for distribution of Salaam Zindagi, a policy for the socially and economically underprivileged sections of society. .ICICI Prudential has recruited and trained over 36,000 insurance agents to interface with and advise customers. Further, it leverages its state-of-the-art IT infrastructure to provide superior quality of service to customers. ICICI Prudential Life Insurance Joint Venture between ICICI Bank and Prudential Plc. (UK) India’s No. 1 Private Life Insurance Company consecutively for 3 years in a row Market Share (Among Private Life Insurers) – 36% Paid Up Capital – Rs.675 Crores No. Of Policies Sold – 1 million Assets Under Management – 1700 Crores Sum Assured – 20,000 Crores
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ABOUT US ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential's equity base stands at Rs. 8.25 billion with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. In the half year ended September 30, 2004, the company garnered Rs 498 crore of new business premium for a total sum assured of over Rs 23,000 crore and had over 1 million policies. The company has a network of over 40,000 advisors; as well as 7 bancassurance tie-ups. Today, ICICI Prudential has emerged as the No. 1 private life insurer in the country, with a wide range of flexible products that meet the needs of the Indian customer at every step in life. ICICI Market Share Total Market size: INR 205 Billion
ING Vyasa 3.5% AVIVA Life SBI Life 3.7% 4.1% Om Kotak 5.7% Max NYL 6.2%
Metlife 1.1%
AMP Sanmar 1.2% ICICI Pru 36.2%
Allianz Bajaj 8.7%
Tata AIG 6.0%
Birla Sunlife 14.0%
HDFC Standard 9.4%
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Market share with other players
LIC ICICI PRU SUNIFE BIRLA TATA AIG OTHERS
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FUTURE POSSIBILITIES (NEXT 5-10 YEARS)
Job opportunities are likely to increase manifold. The number of people working in the insurance sector in India is roughly the same as in the UK with a population that is 1/7 India's; the US with a population 1/4 the size of India has nearly 4 times the number. In the emerging markets, the picture is no less encouraging. In S Korea, the no of full time employees more than doubled over a ten year period. Thailand added 50 per cent more jobs in four years. The liberalization of the insurance sector promises several new jobs opportunities for those employed in the finance sector who are equipped with degrees in finance. Finance professionals who had witnessed a slump in the job market would be a much-relieved lot to hear about the privatization of the insurance sector. Let us look into the type of jobs that will be created once the private players come on the scene. Certainly, it won't be far different from the traditional streams in any other industry. There will be demand for marketing specialists, finance experts, human resource professionals, engineers from diverse streams like the petrochemical and power sectors, systems professionals, statisticians and even medical professionals. Apart from this, there will be high demand for professionals in the streams like Underwriting and claims management and actuarial sciences. There could be a huge inflow of funds into the country. Given the industry's huge requirement of start-up capital, the initial years after opening up are bound to see a strong inflow of foreign capital. Moreover, given that the break-even, typically, comes much later than in the case of other sectors, odds are that the first remittance of dividend will not happen before a good 10-15 years. In the areas of reinsurance, huge capacity is likely to be created with players like Swiss Re and Munich Re keenly observing the unfolding saga of liberalization of insurance industry in India. Not only the outward reinsurance will reduce, it is bound to attract inward reinsurance from the neighboring countries and regions. If the regulator is forward looking and legislature is supportive, this trend may well lead to the creation of a Lloyds like market for the direct as well as reinsurance businesses.
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However, increased competition is very likely to result in rate reductions in certain classes of business, but in those areas that have so far been cross subsidized, an increase in rates may be possible. Overall, the rate reductions may outweigh the increases, thus bringing down the reinsurance premium volume available. Apart from pure re-insurance activities, which is providing insurance protection, a revolution will come in service related fields like training, seminars, workshops, know-how transfer regarding risk assessment and rating, risk inspections, risk management and devising new policy covers, etc. Also, with more players in the market, there will be significant increase in advertising, brand building, and keen pricing not ridiculous pricing and this will benefit whole lot of ancillary industries. Another effect of de-regulation will be that, projects, especially megaprojects where one needs the capacities of the international reinsurance market, will get exposed to international trends to an even greater extent than is the case today. This will affect rates too. Areas like the personal lines segment, where we also expect to see substantial growth as also new types of covers, would usually not be affected by international trends in the same way as, there is much less need for global re-insurance support. Substantial shift in the distribution of insurance in India is likely to take place. Many of these changes will echo international trends. Worldwide, insurance products move along a continuum from pure service products to pure commodity products. Initially, insurance is seen as a complex product with a high advice and service component. Buyers prefer a faceto-face interaction and place a high premium on brand names and reliability. As products become simpler and awareness increases, they become offthe-shelf, commodity products. Sellers move to remote channels such as the telephone or direct mail. Various intermediaries, not necessarily insurance companies, sell insurance. In the UK for example, retailer Marks & Spencer now sells insurance products. In some countries like Netherlands and Japan, insurance is marketed using post office's distribution channels. At this point, buyers look for low price. Brand loyalty could shift from the insurer to the seller. In other markets, notably Europe, this has resulted in banc assurance: banks entering the insurance business. The Netherlands led with financial services firms providing an entire range of products including bank accounts, motor, home and life insurance, and pensions. Other European markets have followed suit. In France over half of all life
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insurance sales are made through banks. In the UK, almost 95% of banks and building societies are distributing insurance products today. In India too, banks hope to maximize expensive existing networks by selling a range of products. Various seminars and conferences on banc assurance are taking place and many bankers have clearly shown their inclination to enter insurance market by leveraging their strengths in the areas of brand image, distribution network, face to face contact with the clients and telemarketing coupled with advanced information technology systems. The mergers of Citibank with Travellers in USA and of Winterthur, the largest Swiss Co. with Credit Suisse are recent examples of the phenomenon likely to sweep India too. Insurers in India should also explore distribution through non-financial organizations. For example, insurance for consumer items such as refrigerators can be offered at the point of sale. This piggybacks on an existing distribution channel and increases the likelihood of insurance sales. Alliances with manufacturers or 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 co-operation. Worldwide interest in E-commerce and India's predominant position in information technology and software development is also likely to be a major factor in the marketing of insurance products in the immediate future. The internet account is increasing in arithmetic progression and the trend has already been set by some of the leading insurers and insurance brokers worldwide. Finally, some potential Indian entrants into insurance hope to ride their existing distribution networks and customer bases. For example, financial organizations like ICICI, HDFC or Kotak Mahindra intend to tap the thousands of customers who already buy their deposits, consumer loans or housing finance. Other hopeful entrants anticipate specific alliances such as with hospitals to provide health cover.
CONCLUSION
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The huge life fund can be utilized for financing the infrastructure industry as well as provide support to other industries in the country. Hence, the insurance industry is likely to play a key role in changing the economic landscape of the country. However, the success of the insurance industry will primarily depend upon meeting the rising expectations of the consumer who will be the real king in the liberalized insurance market in future.
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BIBLOGRAPHY ? Service Marketing by:- Ravi Shankar ? Insurance by:- M.J. Mathew ? Service Sector Management by:- Romeo Mascreaneous ? Financial Times ? Internet ? Times of India
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INDEX 1. INTRODUCTION 1 2. BRIEF HISTORY OF INSURANCE SECTOR IN INDIA 2 3. INSURANCE SECTOR REFORMS 3 4. FUNCTION OF INSURANCE 5 5. ROLE OF INSURANCE SECTOR IN INDIA 7 6. SIGNIFICANCE OF INSURANCE 11 7. LAWS GOVERNING INSURANCE SECTOR 16 8. DEVELOPMENT IN INSURANCE SECTOR 18 9. PEST ANALSIS 20 10. 11. 12. SWOT ANALYSIS 21
PRIVITIZATION OF INSURANCE 23 IMPACT OF BUDGET(2003-04) 25
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13. 14.
TYPES OF INSURANCE 26 DISTRIBUTION CHANNELS 43 INSURANCE CLAIMS 48
15. 16.
INSURANCE IN RURAL INDIA 56 17. SERVICEMARKETING 62
18. COMPARISON BETWEEN LIC &ICICI PRUDENTIAL 79 19. UTURE OF INSURANCE 102
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doc_503680412.doc
Insurance may be described as a social device to reduce or eliminate risk of life and property. Under the plan of insurance, a large number of people associate themselves by sharing risk, attached to individual. The risk, which can be insured against include fire, the peril of sea, death, incident, & burglary. Any risk contingent upon these may be insured against at a premium commensurate with the risk involved.
“Insurance is a contract between 2 parties whereby one party called insurer undertakes in exchange for a fixed sum called premium to pay the other party happening of a certain event.”
Definition of Insurance Insurance is a contract whereby, in return for the payment of premium by the insured, the insurers pay the financial losses suffered by the insured as a result of the occurrence of unforeseen events. With the help of insurance, large number of people exposed to a similar risk make contributions to a common fund out of which the losses suffered by the unfortunate few, due to accidental events, are made good. General definition: In the words of John Magee, “Insurance is a plan by which large number of people associate themselves and transfer to the shoulders of all, risks that attach to individuals.” Fundamental definition: In the words of D.S. Hansel, “Insurance may be defined as a social device providing financial compensation for the effects of misfortune, the payment being made from the accumulated contributions of all parties participating in the scheme.” Contractual definition: In the words of justice Tindall, “ Insurance is a contract in which a sum of money is paid to the assured as consideration of insurer’s incurring the risk of paying a large sum upon a given contingency.”
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BRIEF HISTORY OF INSURANCE SECTOR IN INDIA
The insurance sector in India has come a full circle from being an open competitive market to nationalisation and back to a liberalised market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries.The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973.
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107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.
INSURANCE SECTOR REFORMS
In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R. N. Malhotra, was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at “creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognising that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms…” In 1994, the committee submitted the report and some of the key recommendations included: i) Structure ? Government stake in the insurance Companies to be brought down to 50% ? Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations ? All the insurance companies should be given greater freedom to operate ii) ? ? ? ? ? iii) Competition Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the industry No Company should deal in both Life and General Insurance through a single entity Foreign companies may be allowed to enter the industry in collaboration with the domestic companies Postal Life Insurance should be allowed to operate in the rural market Only one State Level Life Insurance Company should be allowed to operate in each state
Regulatory Body ? The Insurance Act should be changed
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? An Insurance Regulatory body should be set up ? Controller of Insurance (Currently a part from the Finance Ministry) should be made independent
4
iv)
Investments ? Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50% ? GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time) Customer Service ? LIC should pay interest on delays in payments beyond 30 days ? Insurance companies must be encouraged to set up unit linked pension plans ? Computerization of operations and updating of technology to be carried out in the insurance industry. The committee emphasized that in order to improve the customer services and increase the coverage of the insurance industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry.
v)
Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body.
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FUNCTION OF INSURANCE: I Primary Functions – The primary functions of insurance include the following. i) Provide Protection
The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Professor Hopkins observe "Insurance is a protection against economic loss, by sharing the risk with others.” ii) Collective bearing of risk
Insurance is a device to share the financial loss of few among many others. Dinsdale opines, insurance is a mean by which few losses are shared among longer people. Similarly, William Bevridge observes, "The collective bearing of risks is insurance." All the insured contribute the premiums towards a fund and out of which the persons exposed to a particular risk is paid. iii) Assessment of risk
Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. Risk is the basis for determining the premium rate also iv) Provide certainty
Insurance is a device which helps to change from uncertainty to uncertainty. This may the reason that John Magee writes that the function of insurance is to provide certainty. Similarly, Riegel and-Miller observe, "Insurance is device whereby the uncertain risks may be made more certain".
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II. Secondary functions Prevention of losses Insurance cautions individuals and businessmen to adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions; installation of automatic sparkler or alarm systems, etc. Prevention of losses cause lesser payment to the assured by the insurer and this will encourage for more savings by way of premium. Reduced rate of premiums stimulate for more business and better protection to the insured. Small capital to cover larger risks Dinsdale observes, insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty. Contributes towards the development of larger industries Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery. III. Other functions — They include: ? Means of savings and investment: insurance serves as savings and investment, insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured’s For the purpose of availing income-tax exemptions also, people invest in insurance. ? Source of earning foreign exchange: Insurance is an international business. The country can earn foreign exchange ^ by way of issue of marine insurance policies.
? Promotes exports insurance makes the foreign trade risk free with the help of different types of policies under marine insurance cover.
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ROLE OF INSURANCE SECTOR IN INDIA I Protective role Insurance has been playing protective role towards the development of industry and commercial institutions. The major protective measures have been : i) Protection from risks arising out of natural calamities Insurance has also been playing important role in protecting the industry and commercial activities from natural calamities like fire, marine losses, floods, earth quakes, cyclones etc. Protection from the risks caused by human beings Insurance provides protection against risks caused by human beings such as strikes by workers, their negligence in carrying out work, theft and decoity, evil disturbances and many other such acts. In addition to the issue of policies against such causes, insurance also issues policies to protect the industry and commercial institutions from the loss of money in transit. Protection against statutory liabilities Insurance also plays the role of protecting the industry and commerce in fulfilling statutory liabilities towards the workers, arising out of industrial accidents. The employer is bound to compensate such workers under the provision of Workers' Compensation Act. in case the employer obtains an accidental policy in favor of employees; the money to be paid as compensation to the accident victims, can be chimed from the insurance company. Financial security Insurance provides financial security also to industry and commerce. Exports of goods to other countries by sea, storage of goods in safe godowns and various other kinds of financial losses are secured by insurance policies. Protection from loss of profits Insurance' also has extended its role of prot6cting different industrial and commercial activities, it provides protection against losses arising from shops or factories. It also undertakes to indemnity the loss of profits from business functions. This way, the loss of profits and property / both are protected. Protection of debts A trader can protect himself by taking appropriate policy against the credit sales or property kept on security against goods or property. Thus, the insurance protests the trader even in case the debtor dies or of damages to the goods.
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ii) Protection to the business institution due to sudden death of the me key man The successful operation and development of a business largely depends on its directors, managers and administrative personnel. Sudden and untimely death of such person may badly affect the functioning of the business and many problems may also arise in day-to-day functioning of business. Insurance plays important role by insuring the life of key man in the business so that the future can be protected safely from uncertainties. Provides stability in commercial and industrial activities Insurance companies extend various kinds of assistance to business enterprise to run the business regularly and continuously. It plays important role in partnership business by insuring the life of partners so that in case of death of any partner, the claim received from the insurance company can be used for meeting payment to the dependents of deceased partner. II Promotional role of insurance Insurance plays important role in setting up industrial and commercial units; by way of capital formation, new investment, industrial entrepreneurship, under-writing of shares and investment in capital market. In addition to protective measures, it plays promotional role also, which are briefly described below: Extension of credit facilities Insurance extends credits to industrial and commercial institutions. An entrepreneur can get insurance of unit, plant and machinery, or permanent assets purchased by him and get them mortgaged with the financial institutions for getting credit. Facilities industrialization and commercialization Insurance contributes for the development of various commercial activities like buying-selling, transportation, communication, warehousing, packaging, advertising and publicity, and agricultural marketing etc. It is due to the insurance facility that many utility serves are created and the business solves various problems arising out of business conducts. Increases business and industrial efficiency The efficient management of industrial and commercial activities become possible due reductions in business risks. Insurance provides protection from various risks and thus it increases the business efficiency.
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Investment in shares and debentures Insurance companies extends its support for the development and expansion industrial and commercial activities by investing in shares and debentures issued by the industrial units. Contribution towards the development of basic industries Insurance has contributed much towards the development and expansion of basic industries like iron and steel cement, engineering, chemicals, petro-chemicals, electric goods, fertilizers, etc. by investing in shares and debentures. Contribution towards fulfillment of social and statutory obligations Insurance institutions in the country also have been contributing much in fulfillment of social and statutory obligations by contributing well in social welfare schemes operated by industrial establishments, social security, schemes, workers compensation plan, payment of gratuity etc. Contribution towards development of international trade The various policies issued by marine insurance companies help for the development of international trade by protecting the exporters/ importers from marine losses and risks. This role of insurance companies has been helpful in earning more foreign exchange by increased participation by traders in international trader Extension of export credit Export Credit and Guarantee Corporation (ECGC) extends export credit to the exporters and in cases where the importers commit defaults in making payment to the exporter, the ECGC compensate the exporter through its policy issued for this purpose. Increase competing ability among small and medium-scale units Insurance acts as a source among the small and medium scale industrial units to compete with larger industrial units. Large-scale industries can bear the expenses for protection against risks and uncertainties by getting insurance against such losses.
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Role of Insurance Agents
Then Insurance agent is undoubtedly the most important person in the insurance company, apart from the underwriters. He is the face of the company and is the person who can make or break a client. The Insurance agent is the person who advises the prospective clients as to the Insurance cover which would be most suitable for them as well as advises him on what should and what should not be done while he is insured under a specific plan, and thus if anything goes awry, it will be the Insurance agent who will have to take the flak form the clients. As already stated, an Insurance agent is the main product that is bought by the insured; hence then Insurance agent needs to be aware of all the going-on in the sector. He should be competent and professional enough to clearly understand your Insurance requirements and suggest a suitable scheme. With Insurance companies offering varying rate of commissions on different schemes, there is a likelihood that a ‘not-so-professional’ agent may be tempted to recommend a scheme which pays him a higher commission, though it may not be very suitable for your needs. This is especially so in the case of LIC, sole provider of life Insurance in our country till recently, where the eligibility criteria are not very rigorous and very often the level of knowledge and competence of the agents leaves a lot to be desired. The new players seem to be much more stringent in appointing agents and more committed in providing training to them. Further, the agent should be able to provide you with a comparison of multiple schemes and also explain them in simple terms, so that you are able to make an informed decision. Though these are the main characteristics of an Insurance agent, his role is fast changing. An Insurance agent is now not just a plain Insurance agent; he is now an Insurance advisor cum financial consultant. Today’s agent has a professional outlook, is more techno savvy, is in a position to satiate the hunger for custom made policies that were never heard of and believes prompt customer service is the key to success. Educating the customers on the need for Insurance in life is his first step. And before he could elaborate on the choice of covers available, he will want to know the prospects’ exact requirements and future planning in order that the cover can be designed accordingly – an
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aspect that was not considered earlier. In other words, he plays a much bigger role than he did earlier, thanks to the opening of the sector. The Insurance sector is witness to cut throat competition in the market, and Insurance companies have realized the importance of prompt customer service. Insurance agents will no more be able to afford a laid back attitude. They will have to be on their toes catering to the growing customer needs and serving them always, for his future referrals will come from them.
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SIGNIFICANCE OF INSURANCE
The significance or the utility of insurance can be categorized into the following four groups for the convenience of the study. I. II. III. IV. Significance for the individuals/family Significance for the business Social significance; and National significance
I. Significance for the individuals/family Security and stability Angel writes insurance is a permanent base to secure against uncertain risk. A man's life always involved with different types of risks like death, old age, accident, sickness etc. Similarly he is concerned about the risk of property and money by theft, dangers of fire, etc. Insurance provides security against risks. Increase efficiency Insurance relieves the people from mental worries due to safeguard provided by it against future risk and uncertainties. People who have insured their lives, need not worry about the future and can concentrate more efficiently on the present tasks. This may the reason that Angell observes that those who have little worried about the future can be a more efficient worker. Self reliance Death or accident are the instances in which the people become unsupportive. On the death of the earning member, the family members, especially the dependants face much problems of subsistence. Insurance is such a mean to make oneself self reliant economically. Mark Doreman observes that the basic element of insurance is to provide economic self sufficiency to the insured. Security of the property mortgaged If a person mortgages his property against any debt and fails to return the debt before his death, the mortgaged takes charge of the property. In case mortgaged property was secured by insurance policy the liability of paying off the debt can be transferred to the insurer. Mental peace Riegel and Miller observe that the important function of insurance is to
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reduce uncertain risk of individuals into certainty. Un security in life is the main cause of mental worries. A person insures against such uncertain risks get rid of himself from the bad effects and can lead a peaceful life. Create awareness among insured Insurance companies create awareness among [ the people for the need to protect themselves from possible risk off life, property charges and the goods. Certain insurance companies dealing in motor vehicle insurance, charges reduced premium rates ton the renewal of policies if the owner of the vehicle did not make any claim for payment in the previous year. Availability of credit against insurance policy The insurance companies grant loans to the insured upto certain percentage of the premium money paid, keeping in view of the surrender value of the policy on that date. Such loan faculty is given to the insured for his business purple or for some important domestic purpose. Exemption from tax liability Insurance is an important way of obtaining tax rebate. The money paid toward, insurance premium is deducted from the gross income and this is really an investment. Safety to investment made The money saved towards the payment of premium is totally safe, because the insurance policy cannot be acquired by creditors through any degree obtained from the court. This is possible only against the property and not against the policy. II Significance of insurance towards industry and business can be described under the following points: Safety against risks The movable and immovable property of the business is always subjected to risks. Even the production process is involved by dangers to workmen and property. It is the insurance that promise security against these risks. Loss prevention measures The insurance companies advice the business institutions in the safety matters and the measures to be followed in preventing such losses. The business where such safety measures are adopted, the premium rates may be comparatively lower. The money so saved by low rate of
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premium can help in capital formation. Protection to employees The employee interest can be secured by way of insurance. In case of any economic problem in business, it will have adverse impact on employees interest. Insurance can safeguard the interests of employees in paying pension, gratuity and other economic benefits through its policies. Promotes foreign trade Imports and exports trade are usually involved by marine penis and losses. Insurance helps in the development of foreign trade by making insurance claims against losses of ships and cargo. i) Contribution towards the growth of larger business houses Insurance has been beneficial towards the growth of larger business houses. Larger credit facilities, larger-buildings, wide channel of distribution system, larger production and marketing plans, bearing various industrial and commercial risks are the major means of contributions towards the business from the insurance companies. It is said that insurance is the founding father of large-scale industrial system and the whole business mechanism. Significance to small business Small business can keep the production cost lower and compete with large-scale business by transferring the business risks in the shoulders of insurance companies. Insurance companies extend easy terms of credit to small and medium scale industries in their development. Significance to partnership business Insurance is most important to partnership business. In case of death of a partner or he leaves the firm, it is required to repay the capital invested by him in the business together with interest, profits shared, goodwill etc. This will have an adverse impact on the conduct of business. A joint partnership policy can solve such problems of making payment to the diseased partner. Promotes employee welfare Business has social responsibility towards its employees under which it is the responsibility of the employer to promote labour welfare programmes., viz; to make provisions for old age, benefit like pension, provident fund, gratuity; and accidental benefit retirement benefit, medical and housing, etc. All these provisions can be covered under the comprehensive policy.
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Promotes industrialization Insurance can be a device for faster development of industrialization of a nation. On one side it protects the business from various kinds of risks, and on the other, the insurance companies make involvement in business activities by way of direct investment under-writing of shares, and extension of credit facilities^ Human resources development Insurance companies operate different schemes of human resource development. For the purpose of developing skill of supervisory and branch officers, different divisional training centres have been set up. Life Insurance Corporation runs seven such centres in the country. III Social significance Economic security Insurance provides economic security and better family life. It secures the family from sudden illness, death or accident of the bread earning member of the family. Insurance is the key for the well-being, and prosperity i) Encourages for education Insurance facilitates and encourages for education in the society. Insurance policies support education to the children. It also extends scholarships for poor students, in addition to extension of loan facility for education. Distribution of risks Insurance distributes the risks of a person among a large number of people. George Rejda writes," Insurance distributes the burden of loss of« person among the shoulders of entire society " Removes social evils The root cause of any evil in the society is lack of education, poverty and unemployment. The lack of opportunity to the people makes the way for committing social evils like theft, decoity, prostitution, extremism etc. Insurance helps a person to become self sufficient economically by providing for education, employment and protection against risk of life and property. Awareness towards health Insurance creates in the society for maintenance of good health. Insurance companies have started health improvement movement
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throughout the world, by distributing useful materials for health education. It also provides for free medical check up at the proposal stage of the policy, which will help in identifying any disease in a person, and advice him to take medical care.
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Contribution towards the development of utility services Insurance contributes towards the development of public utility services like water supply, electricity generation, housing, public works, etc. IV National significance Significance of insurance to nation is as under: i) It increased the national saving by way of small contribution of the people towards insurance premium. ii) insurance contributes towards investment in public utility services as well as various plans of government such as housing infrastructural development foreign trade etc. iii)Insurance makes available finance to industrial and commercial activities in the country. This way it facilitates for capital formation. iv)Insurance provides additional employment opportunities to the people. insurance contributes towards national plans like five year plans, rural development, self employment, construction of industrial estates. The premium collected by insurance companies by small savings from the insured are invested in such national schemes like electricity generation and irrigation, construction of dams and bridges, railways- lines, scientific research etc. v) Insurance contributes towards the national income of the nation. Different type of commercial and industrial units are set up every year with the financial assistance extended by insurance companies, in addition to providing for employment to good number of people in insurance companies. The government receives income from the industrial units by way of taxes and duties etc. And from employees by way of income tax. This way it contributes towards national income. vi)Insurance contributes social security measures. The m government under its social security schemes supports for old age pension, unemployment, disability etc. under the social insurance scheme these measures are provided to society by the government. vii) insurance companies operates business in other countries by opening branches and earn foreign exchange for the country. viii) Insurance companies invest in government securities. ix)Insurance companies contribute towards the development of capital market in the country by investing in shares and debentures.
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IRDA :
INSURANCE REGULATORY AND DEVELOPMENT AU THORITY ACT, 1999 Indian parliament passed IRDA in the year 1999. It is headed by the chairmen. It was setup on interim IRA for monitoring &controlling of the insurance business. IRA was sole authority responsible for awarding of licenses. There is no restriction for new licenses &no composite licenses for life &non life business. IRDA has some restriction for new licenses such like new player should commenced it business within 15-18 month. Shares are not allowed to transfer without approval. This Act was passed by Parliament in December 1999 and it received presidential assent in January 2000. This Act provides for the establishment of the Authority to protect the interest of holders of insurance policies, to regulate, promote and ensure orderly growth of insurance industry and for matters connected therewith or incidental thereto. It amended the Insurance Act, 1938, which has been noted above. It also amended the Life Insurance Corporation Act, 1956 and the General Insurance Business (Nationalization) Act, 1972, thus opening up the insurance sector to private participation. Under this Act, an authority called IRDA has been established. This is a corporate body established for the purpose and objects as set out in the explanation to the title. The " Authority" replaces "Controller" under Insurance Act 1938. The first schedule amends Insurance Act 1938. It states that if "Authority" is superseded by the Central Government, the "Controller of Insurance" may be appointed till such time as " Authority" is reconstituted. 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. 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.
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Bottlenecks Government Regulations The IRDA bill proposes tough solvency margins for private insurance firms, a 26% cap on foreign equity and a minimum capital of Rs 100crores for life and general insurance and Rs 200crores for reinsurance firms section 27A of insurance Act stipulates that LIC is required to invest 75% of its accretions through a controlled fund in mandated government securities LIC may invest the remaining 25% in private corporate sector, construction and acquisition of immovable assets besides sanctioning of loans to policy holder. These stipulations imposed on the insurance companies had resulted in lack of flexibility in the optimization of risk and profit portfolio. If this inflexibility continues the insurance companies will have very little leverage to earn more on their investments and they might not be able to offer as flexible products as offered abroad. The government might provide more autonomy to ;insurance companies by allowing them to invest 50% of their funds as per their own discretions. Recently RBI has issued stiff guidelines which had death a severe blow to the plans of banks and financial institutions to enter the insurance sector. It says that non performing assets ( NPA) levels of the prospective l players will have to be 1% point lower than the industry average (presently 7.5%). RBI has also stipulated that all prospective entrants need to have a net worth of Rs 500crores. These guidelines have made it virtually impossible for many banks to get into the insurance business. Also banks and FI who are planning to enter the business cannot float subsidiaries for insurance. RBI has taken too much caution to make sure that the news sector does not experience the kind of ups and downs that the non bank financial sector has experienced in the recent past. They had to rethink about these guidelines if India strong banks and financial institutions have to enter the new business. The insurance employees union is offering stiff resistance to any private entry.
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DEVELOPMENT IN INSURANCE SECTOR:
Insurance is an Rs400 billion in India &together with banking service add about 7% to Indian GDP. Gross premium collection is 2%of GDP &has been growing by 15-20%per India. India’s share of world insurance market has shown an increase of 10% from 0.34%in 1997-98.The insurance share in Life insurance business showed a growth of 11% thereby out performing the global average of 7.7%&nonlife business grew by 3.1%against global average of 0.20 % Growth of Insurance Global Industry Statistics Global Insurance Scenario (Figures in Percent) (Total in 1999: (Total in 2000: Country $2,128.7 billion) $2,244.3 billion) North America 34.5 37.32 Europe 31.4 31.93 Asia 29.1 26.46 Oceania 1.9 1.59 Latin America 1.8 1.67 Africa 1.3 1.03
Emerging Markets (Total Premium, figures in $billion) Taiwan 17.3 China 13.4 India 7.2 Hong Kong 6.1 Israel 5.8 Singapore 5.0
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Total premiums by Country, 2000 Share of *Premium Premiums *Premium world s per Country (USD s in % of market capita (in millions) GDP (in %) USD) United 865327 35.41 8.76 3152.1 States Japan 14 504005 20.62 10.92 3973.3 United 236960 9.7 15.78 3759.2 Kingdom Germany 123722 5.06 6.54 1491.4 + France + 121910 4.99 9.4 2051.1 Italy 63062 2.58 5.8 1084.3 South 58348 2.39 13.05 1234.1 Korea 14 Canada 11 46587 1.91 6.56 1516.8 Spain 37617 1.54 6.73 954.2 Netherland 36450 1.49 9.87 2290.2 s India 14* 9933 0.41 2.32 9.9 * estimated 11 Life business: net premiums 14 Financial year 01.4.2000–31.3.2001 + provisional
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PEST Analysis
PEST refers to all political, economic, social and technological factors affecting any industry. RocSearch's acclaimed team of industry analysts religiously follow industry trends and monitor any changes that occur in the business scenario. All reported information including insider titbits is examined and analyzed to produce an original document that effectively mirrors the external business environment. The document will cover the following: Political - Analysis of Legislations, Regulations, Government policies etc. Economic - Analysis of exchange rates, inflation levels, income growth, debt & saving levels etc. Social- Analysis of social factors that influence people's choices and include the beliefs, values and attitudes of society. Technological - Analysis of the impact of new technologies - the Internet, EDI, mobile phones, and the increasing advances in computing.
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SWOT ANALYSIS OF INSURANCE SECTOR
Strengths: ? Consumer Grievance Redressal The Insurers have to face the redressal of the consumers, grievances for deficiency in products and services. The Insurance Regulatory Development Authority (IRDA), the regulatory body has already appointed Ombudsman for looking into the grievances of the policyholders. His judgment will be binding on the insurers. Further under Consumer Protection Act, 1986, the consumer courts are operating at the district, state and national levels. This is a major strength from the consumer point of view as they could easily fight for their rights. ? Rural customers are a must As per the regulator IRDA, all the companies incorporated should at least do 5% of its business in the rural parts of the country. If not, the regulator would not allow the company to function anywhere within the country. So this is a great advantage for not only the rural population but also the newly formed companies since most of the revenue could be earned from the rural India. ? Channels Insurance companies are getting savvy. Enhanced marketing thus is crucial. Already, many companies have full operation capabilities over a 12-hour period. Facilities such as customer service center are already into 24-hour mode. These will provide services such as motor vehicle recovery. Technology also plays an important role in the market. Weakness: ? New insurers The new insurers will have to invest a minimum capital of Rs. 100 crores. The normal gestation period is of 5 years. The generation of profit normally starts in the sixth year. Hence the new insurers have to lock up their capital for at least 5 years. ? Outdated products Today, LIC has more than 60 products and GIC has more than 180 products to offer in the market. But most of them are outdated, as they are not suitable to the needs of the consumers. Hence old as well as new insurers have to offer innovative products to the consumers and bringing more products would require good amount of capital investment.
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Opportunities: ? Vast country India is a vast country with more than 5, 76,000 villages having a population of at least 500-600 per village. The companies could recognize the fact that if it takes the whole zilla as one, it would consist a population more than 5000-10000. One zilla could give them a good amount of business. The company could have this opportunity and tap it and reap revenues. ? Job opportunities Since the sector has opened up, many new companies have already started its operation and few are just about to begin, Major areas of employment in this sector are the agents. A company can appoint any number of agents anywhere within the country on commission basis. Moreover, the professional staff and the peons and clerks’ appointment also increase. Thus this sector has tremendous scope on employment. Threats: ? Lack of awareness Very soon the market will be flooded by a large number of products by a fairly large number of insurers operating in the Indian market. Even with limited range of products offered by LIC and GIC, there is chaos as far as the consumers are concerned. Their confusion will further increase in the face of a large number of products in the market. The existing level of awareness of the consumers for insurance products is very low. This is because only 62% of the population of India is literate and only 10% are well educated. Even the educated consumers are ignorant about the various products of insurance. With new companies coming in the market, the products would be comparatively more, which would again create confusion in the minds of the customers so as to which policy best suits the needs.
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PRIVITIZATION OF INSURANCE SECTOR
Insurance Services Insurance investors developed economies, particularly from Western Europe and the US find Indian market as having greater growth potential than their domestic markets. Therefore, a high level of interest exists for these companies to acquire insurance concerns. Many international players are eyeing the vast potential of the Indian market and are already making plans to enter. The entry of the foreign players in the sector with more financial resources/ better experience and lower operational costs will have an advantage over the Indian companies involved in the business. The bigger private players claim that opening up insurance will give policyholders better products and service, the opponents of privatization argue that in a poor country like India insurance needs to have social objectives and newcomers will not have that commitment. Better experience provides them with the wherewithal to have a better product mix and more operational flexibility. Moreover, they will operate with a lean staff and lower operational cost. The domestic insurance industry will as a result, have to face a greater competition. But the resources with the foreign players are limited, as they can invest up to 40 per-cent of the equity of their joint-venture with Indian firms. This is a great hindrance for them to perform at their optimum level. IRDA is working out to gradually dismantle the tariff structure. Not much threat is perceived as to any price war since the new companies will stress more on the non-actuarial product differentiation. However, the Indian Insurers due to their extensive branch networking and long-standing association with the client still have an advantage. Further, insurance products can become competing investment product vis-à-vis other saving, etc. Already LIC has launched Equity linked Indexed Insurance Policies, which have been received quite well. The new players are expected to bring in spate of such products. Insurance is viewed as a tax saving instrument rather than protecting one's own kith and kin from the vagaries of the future. The rush for insurance policies to save tax bills can be seen at the end of the financial year. With the entry of private and global players like HDFC Standard Life, JCTCI Prudential, Kotak Mahindra Club Insurance, Hindustan Times Commercial Union to name a few, the insurance industry is going to provide many jobs and is going to witness phenomenal growth.
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The new millennium has exposed the insurance sector to new challenges of competition and struggle for survival in this era of privatization, liberalization, deregulation and globalization. The Indian government nationalized private insurance companies in 1956 [Life Insurance Corporation of India (LIC) followed by Genera] Insurance in 1972] to bring this sector under government control. Two governments fell over the issue of liberalization of insurance sector. After 40 years of government protectionism of this massive sector the present government has initiated the process of opening this sector to private Indian business houses as well as international players. Although the growth of the Indian Insurance Industry has been slow for the last four decades the state owned insurance companies have grown creating only inefficiency. The idea of insurance was first conceptualized in the 12th century. At that time it: was used more as a tool for protection against financial loss of seafarers involved in foreign trade. Since then, the concept has undergone several changes. It is basically the unforeseen contingencies of human life that have given a totally new look to the industry. Gradually as competition increased the benefits given by the industry to its customers improved by leaps and bounds. The opening up of the sector has posed new challenges for the public sector insurance companies. Prior to liberalization, the regulatory environment was primarily based on consolidated provision of the Insurance Act 1938 and the Controller of Insurance had wide ranging powers. After nationalization, much of the powers of the Controller of Insurance were abridged for operational convenience of state owned LIC and GIC. In 1993, Malhotra Committee was constituted to review insurance regulations and carry out reforms. All attempts to even suggest letting private players into vital sector were met with resistance from the powerful insurance employees unions. Despite several developments that have taken place in the industry in the post-liberalization era, per capita premium for life insurance is as low as $6 and that for non life insurance is at level of $2. It accounts for 2 percent of the GDP compared to the world average of 7.8 percent.
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IMPACT OF BUDGET 2004
The finance minister’s reform to strengthen risk management in banking The Finance Bill has some brilliant promises to offer and yet there are adverse to the financial service sector. The decision to permit 49 per cent foreign direct investment (FDI) in insurance is welcome. The industry will agree that there is an acute need for it to grow and to write more business. If one were to analyze the growth of some new private sector insurance players the underlying strength seems to be their ability to get more capital and meet the solvency requirement perform, write more business and grow faster. Let’s not forget that these insurance companies will be able to tap the capital market in two to three years. The best performer in the sector have also expanded their capital to about Rs. 700 to 800 crore. A look at the non performers suggests that they do not have adequate capital to grow. Hence the increase in the FDI limit would help. More importantly, this will give greater control to the foreign partners in areas of management control and governance. They will now be more willing to bring in their expertise in product development, technology, and implement best practices. The striking future of the Finance Bill is that the government has accepted defined contribution as the way forward for pension reforms, particularly for new government employees. One could have expected some clarity on the subject of multiple regulators for pension. Though there be some benefits having a separate pension regulator, one supposes that there would be a strong case for just one regulator both the pension and insurance sectors. The government must examine the confusion that may arise on account of having multiple regulators. Banking and insurance companies are significant players in the securities market today. Midsize public sector banks may have made a turnover of about Rs. 40,000 crore on securities trade and larger banks would have made two to three times the number. The transaction tax of a 0.15 per cent would certainly eat away a good part of banks’ profits. Likewise, all services rendered by banks (except the fund based assistances) would attract service tax. Banks would be able to conveniently pass on some of these costs to the customers. So, each time an individual goes and gets a demand draft or pay order, they will end up paying much more than the existing rates. However, if competition becomes acute, banks would have to bear it, which is bad news for the banking companies.
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The funding to agriculture credit as well as infrastructure would certainly companies is a healthy step. But, let’s not forget that it would mean more capital requirement for banking companies.
TYPES OF INSURANCE
I Classification on the basis of nature of business Life Insurance Life insurance may be defined as a contract in which the insurer, in consideration of a certain premium, either in a lump sum or by other periodical payments, agrees to pay to the assured, or to the person for whose benefit the policy is taken, the assured sum of money / on the happening of a specified event contingent on the human life. A contract of life insurance, as in other forms of insurance, requires that the assured must have at the time of the contract an insurable interest in his half upon which the insurance is effected. In a contract of life insurance, unlike other insurance interest has only to be proved at the date of the contract, and not necessarily present at the time when the policy falls due. A person can assure in his own life and every part of it, and can insure for any sum whatsoever, as he likes. Similarly, a wife has an insurable interest in her husband and vice-versa. However, mere natural love and affection is not sufficient to constitute an insurable interest. It must be shown that the person effecting an assurance on the life of another is so related to that other person as to have a claim for support. For example, a sister has an insurable interest in the life of a brother who supports her. A person not related to the other can have insurable interest on that other person. For example, a creditor has insurable interest in the life of his debtor to the extent of the debt. A creditor can insure the life of his debtor up to the amount of the debt, at the time of issue of the policy. An employee has an insurable interest in the life of the employer arising out of contractual obligation to employ him for a stipulated period at fixed salary. Similarly, from an employer to the employer, who is bound by the contract to serve for a certain period of time.
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Fire Insurance A fire insurance is a contract to indemnity the insured for distribution of or damage to property caused by fire. The insurer undertakes to pay the amount of the insured's is loss subject to the maximum amount stated in the policy. Fire insurance is essentially a contract of indemnity, not against accident, but against loss caused by accident, ft is becoming very common in fire insurance policies to insert a condition, called the average clause, by which the insured is called upon to bear a portion of the loss himself. The main object of this clause is to check underinsurance and to encourage for full insurance. It impress upon the property-owner for the need of having his property accurately valued before insurance. Regarding insurable interest, the insured must have insurable interest in the subject matter both at the time of effecting the policy and at the time of loss. The risk in fire insurance policy commences from the moment of cover note, or the deposit receipt, or the interim protection is issued, and continues for the term covered by the contract of insurance. It may even date back; if the parties so intend. The rate of premium varies to the degree of hazard or risk involved. Marine insurance A contract of marine insurance is an agreement whereby the insurer undertakes to indemnity the assured in a manner and to the extent thereby agreed, against marine losses, that is, the losses incidental to marine adventure. There is a marine adventure when any insurable property is exposed to marine perils; Marine perils also known as perils of the seas, means the perils consequent on, or incidental to, the navigation of the sea or the perils of the seas, such as fire, war perils, pirates, rovers, thieves; captures. Jettisons, barratry and any other perils which are either of the like kind or may be designed by the policy. There are different types of marine policies known by different names according to the manner of their execution or the risk they cover. They are: Voyage policy, time policy, valued policy, unvalued policy, floating policy, wager or honour policy. Social insurance Social insurance has been developed to provide economic security to weaker sections of the society who are unable to pay the premium for adequate insurance Pension plans, disability benefits, unemployment benefits, sickness insurance, etc. are the various forms of social insurance.
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Miscellaneous Insurance The process of fast development in the society gave rise to a number of risks or hazards. To provide security against such hazards, many other types of insurance also have been developed. The important among them are:
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(i) Vehicle insurance on buses, trucks motorcycles, etc., (ii) Personal accident insurance (by pacing an annual premium of Rs 12/Policy worth Rs. 12000/- can be insured.) (iii) Burglary insurance - (against theft, decoity etc.) (iv) Legal liability insurance (insurance whereby the assured is liable to pay the damages to property or to compensate the loss of personal injury or death. This t& in the form of fidelity guarantee insurance, auto mobile insurance and machines etc.) (v) Crop insurance (crops are insured against losses due to heavy rain and floods, cyclone, draughts, crop diseases, etc.) (vi) Cattle insurance — (Insurance for indemnity against the loss of cattle’s from various kinds of disease) In addition to the above, insurance policies are available against crime, medical insurance, bullock cart insurance, jewelry insurance, cycle rickshaw insurance, radio – T.V. insurance, etc. II. Classification from risk point of view From risk point of view, insurance can be classified into four categories : i) ii) iii) iv) Personal insurance Property insurance Liability insurance Fidelity guarantee insurance
A brief description of each, is given below. i) Personal insurance Personal insurance refers, the loss to life by accident, or sickness to individual which is covered by the policy. The insurer undertakes to pay the sum insured on the happening of certain event or on maturity of the period of insurance. The insurable sum is determined at the time of effecting the policy and include life insurance, accident insurance, and sickness insurance. Life insurance contains the element of investment and protection, while the accidental, sickness or health insurance contain the element of indemnity only. ii) Property insurance Contract of property insurance is a contract of indemnity. Proof by the assured of loss is an essential element of property insurance. "The
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policies of insurance against burglary, home-breaking or theft etc. fall under this category. The assured is required to protect the insured property. After the loss has taken place, the assured usually required to notify the police as to losses. iii)Liability insurance Liability insurance is the major field of General insurance whereby the insurer promises to pay the damage of property or to compensate the tosses to a third party. The amount of compensation is paid directly to third party. The fields of liability insurance include workmen compensation insurance/ third party motor insurance, professional indemnity insurance and third party liability insurance etc. In liability insurance, there may be various reasons for the arising of liability; viz., accident of a worker at the workplace, defective goods, explosion in the factory during the process of production, formation of poisonous gas within the factory, due to the uses of chemicals and other such substances in the manufacturing process. iv) Fidelity guarantee insurance In this type of insurance, the insurer undertakes to indemnify the assured (employer) in consideration of certain premium, for losses arising out of fraud, or embezzlement on the part of the employees. This kind of insurance is frequently adopted as a precautionary measure in cases where new and untrained employees are given positions of trust and confidence. III On the basis of business point of view i) Life Insurance Life Insurance is universally acknowledged to be an institution which eliminates 'risk' and provides the timely aid to the family in the unfortunate event of death of the breadwinner. Life Insurance is a contract for payment of a sum of money to the person assured (or nominee) on the happening of the event insured against. The contract provides for the payment of premium periodically to the Insurance company by the assured. The contract provides for the payment of an amount on the date of maturity or at
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specified dates at periodic intervals or at unfortunate death, if it occurs earlier.
There are some benefits of life Insurance as: ? Protection: Life Insurance guarantee full protection against risk of death of the assured. In case of death, full sum assured is payable. ? Long term saving: Life insurance encourages long term saving. By paying a small premium in easy installments for a long period a handsome saving can be achieved. ? Liquidity: Loan can be obtained against a policy assured whenever required. ? Tax Profit: Tax relief in income tax and wealth tax can be availed on the premium paid for Life Insurance.
World Life and Non-Life Insurance Premiums, 1990-2000 (Figures in $billion) Year Non-life * Life Total 1990 648.4 707.2 1,355.7 1991 670.7 743.6 1,414.3 1992 697.5 768.4 1,465.9 1993 792.1 1,010.4 1,802.7 1994 846.6 1,121.1 1,967.7 1995 906.7 1,236.6 2,143.4 1996 909.1 1,196.7 2,105.8 1997 896.8 1,231.7 2,128.6 1998 891.3 1,275.0 2,166.4 1999 912.7 1,424.2 2,336.9 2000 922.4 1,521.2 2,443.6
Table below gives a snapshot of the performance for 2003-04 (up to October) of the 13 life insurance payers in India based on the first year premium.
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LIC Plans For Individual: ? Whole life Schemes. ? Endowment Schemes. ? Term assurance plan. ? Periodic money back plans. ? Plan for high-worth individuals & key men. ? Medical Benefits linked Insurance. ? Plans for Benefit of handicapped. ? Joint life plan. ? Plans for children needs. ? Investment plans.
That’s primarily because Life Insurance has been growing much faster than Non-Life Insurance as shown below.
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Life increasing. Non-Life stagnant
Life
Non-Life
Life 1999 2000 2001 2002
INSURANCE SHOWS DIVERSE TRENDS FOR LIFE VERSUS NONLIFE! After the huge excitement that surrounded the opening up of the Insurance sector in 2001, the entire composition of the Financial Services sector changed! Insurance within 6 months had shot up from 9% of the Financial Services monies spent on mass media shot up to almost a quarter of the overall spends as shown.
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13%
0%
10% 15%
1% 34%
20%
40%
14% 18% 9% 26%
We also wanted to evaluate if Life and Non-Life had both shown growths in terms of ad expenditure increase. The overall ad spends in 2002 in the Insurance category are estimated to be just under Rs. 2 billion. Of this close to Rs. 1.45 billion have been on TV+Press. Now within the Insurance sector, the Non-Life versus Life analysis yields very different results. One clear insight is that the distance between Life & Non-Life is growing as shown in chart above
Private players of Life insurance SBI Life Insurance Co. Ltd Allianz Bajaj Life Insurance Co. Ltd Om Kotak Mahindra Life Insurance Co. Ltd ICICI Prudential Life Insurance Co Ltd HDFC Standard Life Insurance Co. Ltd Birla Sunlife Insurance Co. Ltd
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ING Vysya Life Insurance Co. Ltd Tata-AIG Life Insurance Co.Ltd Metlife India Insurance Co. Pvt. Ltd AMP Sanmar Assurance Co. Ltd Dabur CGU Life Insurance Co. Pvt. Ltd Max New York Life Insurance Co. Ltd Procedure to obtain life insurance ? Filling up the proposal form
The first step in the process is to fill up the proposal form where in various kinds of details the proposer furnishes. The form can be obtained from the LIC office or will be available with insurance agent. The following details are furnished in the proposal form: 1) Name, address, nationality, occupation, nature of duties, name; and address of the present employer, length of service, name and address of previous employer, if any, length of previous service, etc. 2) Place of birth, date of birth, district, state, proof of age, etc. 3) Sum insured, period of premium payable (monthly, quarterly, halfyearly or yearly), amount of first premium payable. 4) Objectives of insuring. 5) Name, age, and relationship of nominee, full address, height and weight. 6) Family history of parents, sisters and brothers. 7) Hereditary disease like diabetes, insanity, epilepsy, gout, asthma, tuberculosis, cancer, leprosy, etc. 8) Any other disease, accident, operation, etc. 9) In the case of female adult proposer—further information regarding pregnancy, maternity and disturbances indicative of trouble with the female generative organs. The female proposers have to furnish further information relating to educational qualification, average monthly income, source of income, marital status, husband's name, his income, occupation, and his insurance policy, etc. Declaration by the proponent At the end, the proponent has to make a declaration that the statement
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given in the proposal are correct to the best of his knowledge and no information is concealed. The propose! is the basis of insurance contract when it is presented to the LIC. Attachment of proof of age Age proof is identified from the secondary school leaving certificate. Attested copy of this certificate is attached with the proposal form for this purpose. Age proof is also required to ascertain whether the proposer is a major or a minor. Moreover, age proof is also needed for determining the premium rate. Presentation of proposal to the agent The agent, on receipt of the proposal check it thoroughly whether any important information is left out without furnishing-. If anything is left out. he will get the same furnished by the proposer. In practice, it is noticed that the agent carries the proposal form and approaches the prospective proposer and get the same furnished with his help. Medical examination The insurance agent arranges for the medical examination of the proposer. Medical examination is conducted by the authorized medical practioner appointed by the LIC. The doctor records his remarks in the proposal form at the place provided for this purpose. In the following cases/ medical examination is not needed: 1) Where the age of the male proposer is below 30 years, educated and remained in employment for at least one year. Its sum assured is below Rs 40/000/-. 2) Where the proposer is a commissioned officer in Army service and below 45 years of age. His health is in 'A' category and sum assured is below Rs. 50.000/-. 3) Where the proposer is a woman leading a first life category and passed high school or equivalent, age is below 30 years and employed at least a period of one year. The a sum assured is below Rs 40/000/-. ! 4) An adult member below the age of 40 years and the sum assured is below Rs. 15/000. 5) In the case of re-insurance of a person who has already insured. Report by the Agent after the medical report, the agent gives his confidential report with regard to proposer's health condition, habits, family history source of
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income, etc. He gives his report after verifying information furnished by the proposer. The agent also wilt state his opinion regarding acceptance or rejection of the proposal. ? Scrutiny of proposal by the branch office On completion of all the above stated process, the proposal together with the medical report and agent confidential report, etc. is submitted to the concerned branch office. The branch office then arrange for verification in respect of: 1) 2) 3) 4) 5) 6) 7) 8) Name and address of the proposer Date of birth Occupation insured sum Nominee Signature of the proposes Family history Medical report and agent's report
After the verification, if any short comings is noticed, the proposer is asked to complete the same. If the proposal is found in order, the branch office takes the further steps in the matter. ? Depositing of premium The branch office issues first premium notice to the proposer. On depositing the premium money, the branch takes further steps in the matter. Registration of proposal On depositing the premium, the proposal is registered with the LIC, in the register maintained for this purpose by recording important information about the policy; such as the name of insured, sum insured, duration of the policy, risk, etc. At the time of registration, a registration number is allotted incorporating the code number of the branch where the proposal is registered. For example, if the registration No. 345678, 678 will be the code number of the branch and 345 shall be the proposal number of that branch. Sending the proposal to appropriate department After the registration of the proposal, it is sent to the appropriate department. In case the final authority is in the branch office, the proposal shall be sent to that officer in the branch office. Otherwise, it is
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sent to the divisional office. Taking final decision on the proposal On completion of all these steps, the final decision taken by the authority in the divisional office, on “Proposal ReviewSlip”, in view of acceptance of the propose premium paid. Issue of acceptance or request letter If the proposal is accepted, the intimation regarding acceptance of the proposal is sent to the proposer. Otherwise, a letter of regret is sent. Acceptance of the proposal is an evidence of conclusion of insurance contract. From this date the risk commences. Issue of insurance policy Having completed all the required formalities/ the corporation prepares the insurance policy and send it to the insured. The overleaf of the policy contains all terms and conditions of the policy along with the insured's name, address, sum assured, mode of payment of premium, etc. The policy bear the sea' of the LIC and the signature of the competent authority. ii) General Insurance
General insurance business refers to fire, marine, and miscellaneous insurance business whether carried on singly or in combination with one or more of them, but does not include capital redemption business and annuity certain business. (According to Sec. 3(g) of the General Insurance business (Nationalization) Act, 1972). Features of Indian General Insurance Market 1) Low market penetration. 2) Ever-growing middle class component in population. 3) Growth of consumer movement with an increasing demand for better insurance products. 4) Inadequate application of information technology for business. 5) Adequate fillip from the Government in the form of tax incentives to the insured, etc. 6) India is one of the least insured countries but the potential for further growth is phenomenal.
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7) Rates of claim settlement were earlier in India the highest in the world, 70 per cent in general insurance, compared to around 40 per cent internationally. 8) Non-life premium has a 0.71 per cent share of GDP. 9) General Insurers (Private Companies) have earned around Rs.1000-cr income. 10) Half of the current demand for comes from the corporate segment. Benefits of General Insurance 1) Insurance is the instrument of Security, saving and peace of mind. It provides several benefits by paying a small amount of premium to an insurance company. 2) Safeguards one’s assets. 3) Peace of mind-in case of financial loss. 4) Encourage saving. 5) Tax rebate. 6) Protection from the claim made by creditors. 7) Security against a personal loan, housing loan or other types of loan. ? Product Assurance Company Ltd., and the United India Insurance Company. The Government of India subscribed to the capital of GIC. GIC, in turn, subscribed to the capital of the four companies. All the four companies are government companies registered under the Companies Act. GIC is into the reinsurance business whereas its subsidiaries are into the insurance of Non Life products. Product Range i) Motor Insurance: Motor insurance is mandatory for all vehicles in India. There are two types of motor insurance • Third Party- only insures the party (parties) other than the owner in an incident. • Comprehensive- that insures the owner as well as the third party involved. The premium for motor Vehicles is decided on the value of the vehicle and location where it is to be registered. The premium for heavy commercial vehicle is decided on the value of the vehicle and gross laden weight. ii) Property Insurance: Property insurance covers land, building and the contents of the building. iii) Burglary: Burglary insurance covers all losses arisen out of burglary committed in one's premises.
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iv) Fire Insurance: Fire Insurance is a Comprehensive policy. This policy besides covering loss on account of fire also covers loss on account of the following Earthquake, Riots, Strikes, Malicious intent, Floods. v) Health Insurance: Health insurance polices ensure guarding ones health against any calamities that may cause long term harm to his/her life and can hamper ones earning available for ability for a lifetime. These health policies are individuals and groups. iv) Liability Insurance: This policy indemnifies the Directors or Officers or other professionals against loss arising from claims made against them by reason of any wrongful Act in their Official capacity. vii) Marine Insurance • Cargo in transit • Cargo declaration Policy • Marine Hull Insurance: Inland vessels ocean going vessels, fishing & sailing vessels, freight at risk, construction of ships, voyage insurance of various vessels, ship breaking, insurance Awaiting break up, Insurance Oil & Energy in respect of onshore & offshore risks including construction risk. viii) Travel Policy: Any tourist may die or loss their baggage’s, passport etc. while traveling. Travel policies are designed to care of all the problems that generally occur while traveling. ix) Business policy: A Business policy covers the risks of loss of business goods, plant and machinery etc. x) Other General Policy: Apart from other main general Insurance there are several other General polices and more are going to introduce, such as: • Bhagyashree Child Welfare Policy-covers girl child in the age group of 0 to 18 years. • Raj Rajeshwari Mahila Kalyan Vojans. • Crop Insurance Scheme. • Jald Rahat Yojana. Procedure to obtain NONLIFE INSURANCE Selection of insurer For the purpose of getting any property, goods, or house etc. insured first of all, it become necessary to identify a suitable insurance company. General insurance business in the country has been
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nationalized by the government in 1972 and it has four subsidiary companies operating in the country. One has to select any one of these companies and should present the certificate of his goodwill as furnished in the proposal form itself. Usually the insurance agent certifies the evidence of goodwill for this purpose. Presentation of proposal The next step in this process is to present the proposal before the insurer, by executing it in the prescribed form available with the insure ' or his agent It should be completed with good faith and accuracy avoiding strictly any misrepresentation. Otherwise the insurer may discharge from his liability. Evidence of goodwill The proposer should present the certificate of his goodwill as furnished in the proposal form itself. Usually the insurance agent certifies the evidence of goodwill. Recommendation of agent The next step in the process is t ^e recommendation by the agent on the proposal. Recommendation of agent has much importance in effecting the policy. Survey of the subject matter If the insurer finds it necessary he may make arrangement for the survey of subject matter by an expert the field with regard to various aspects like its structure, position, risk factors etc. This will help in verifying the facts and figures contained in the proposal. ? Report by the surveyors The report of the surveyors determines the validity of the proposal.. This report will state the physical and moral hazards involved in the subject matter. ? Determining of premium In view of the reports presented by the surveyors, the insurance authorities will scrutinize the report and determine the rate of premium after considering the risk factors. ? Acceptance of the proposal
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On the determination of premium, the proposal is accepted and inform accordingly to the proposer requesting him to remit the premium. In case the report of the surveyor contains adverse remarks on the proposal^ letter of regret is sent to the proposer by rejecting the proposal. ? Depositing premium On depositing the premium by the proposer in time, constitutes a illegal contract between the parties. ? Issuing a cover note or a temporary policy This cover note is the. evidence that the insurer has accepted the policy and the insured has remitted the premium. ? Issuing of insurance policy On compliance of all formalities by the insured, the insurance policy is issued to the insured. On the issue of policy, the validity of cover note will lapsed Market Players General Insurance in India Presently there are 12 general insurance companies with 4 public sector companies and 8 private insurers. Although the public sector companies still dominate the general insurance business, the private players are slowly gaining a foothold. A brief description of various players is given below: ICICI Lombard General Insurance TATA AIG Insurance Company Ltd Bajaj Allianz HDFC Chubb General Insurance Reliance General Insurance Company Limited Royal Sundaram Cholamandalam MS General Insurance Company Limited GIC and Four subsidiaries
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Prior to 1973, general insurance was urban-centric, catering mainly to the needs of organized trade and Industry. One hundred and seven insurers including branches of foreign companies operating the country were amalgamated. These were grouped into four companies, viz. the National Insurance Company Ltd., the Oriental Insurance Company Ltd., the New India
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Markets performance The market share of private players rose to 13.7 per cent, recording a growth of 86.72 per cent on an annual basis, while the market share of public sector majors stood at 86.3 per cent, registering a marginal growth of 6.03 per cent. The overall market has recorded a growth of 12.71 per cent. The total premium collections of general insurance industry stood at Rs 8,081.05 crore for the first half of current fiscal, of which the private sector contributed Rs 1,107.27 crore and the balance Rs 6,973.78 crore was brought in by the public sector non-life majors. Among the private sector insurers, ICICI Lombard topped the list with premium collection of Rs 234.85 crore, with a market share of 2.91 per cent, followed by Bajaj Allianz with Rs 218.06 crore of premium and 2.7 per cent market share and Tata AIG with 194.01 crore premiums and 2.4 per cent market share. Among the pub lic sector players, New India garnered a market share of 24.09 per cent with Rs 1,946.7 crore premium, followed by National with 20.59 per cent (Rs 1,664.18 crore), United India with 20.5 per cent (Rs 1,656.3 crore) and Oriental with 18.62 per cent (Rs 1,504.69 crore) share.
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DISTRIBUTION CHANNELS
Though a multi-channel strategy is better suited for the Indian market as well, it is important to keep in mind that this market is really a conglomeration of multiple markets. Each of the markets within this conglomeration requires a different approach. Apart from geographical spread the socio-cultural and economic segmentation of the market is very wide, exhibiting different traits and needs. Let us look at the various insurance distribution channels and the challenges faced by them from these perspectives.
i) Agents Today's insurance agent has to know which product will appeal to the customer, and also know his competitor's products in the same space to be an effective salesman who can sell his company, the product, and himself to the customer. To the average customer, every new company is the same. Perceptions about the public sector companies are also cemented in his mind.
The new companies are looking for educated, aware individuals with marketing flair, an elite group who can be attracted only with high remuneration and the lure of a fashionable job, all of which may not be possible in this business with its price pressures and the complexity of selling insurance. Unable to attract this segment, they have started easing recruitment conditions as against the stringent norms they had earlier, thereby diluting the process. While the public sector companies are able to attract agents, they continue to suffer from high attrition rates due to indiscriminate agent appointment. The most successful of these companies' tied agents are hardly of the elite variety of salesman. They are still the neighborhood do gooders -- the postman, the schoolteacher, and the shopkeeper -who know the people and are themselves known in the community. The challenge here is the lack of knowledge of the competitive market and the inability to do intelligent comparisons with the competitor's products. Educating and training these agents is a serious challenge for the insurance company. The relevance of this kind of agent continues even today as agents are sought or contacted by families by word of mouth. Insurance companies are advised not to follow the path of FMCG's/credit card companies, believing that a suited and booted customer care consultant or financial consultant will necessarily appeal to the average Indian customer. Another social feature in the market is the considerable respect for age in Indian society and a belief that an older person knows better. A very young up-market agent who is a typical salesman may not appeal to a
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large segment of the middle class, which is looking for a solid trustworthy person from whom they can buy insurance. In this context it might be a rewarding exercise to recruit some older people (who have taken VRS2 from banks and other financial institutions) to sell some lines of products like pension plans, annuities etc. Gender of agents is another relevant feature in the rural context that makes a difference, especially for the female population. Women to whom the customers can relate --e.g., nurses, gram sevikas 3 -- can target the female segment of the population more effectively. What is applicable for the rural women and children health programs and population control programs is equally applicable for insurance selling also. Max New York Life has adopted a version of this strategy by appointing gram sahayaks4 to sell and service the rural customers. With this kind of segmentation of intermediaries the challenge for the insurance company lies in training and educating these people to become effective sales persons. But this in no way diminishes the benefits of intermediary segmentation. ii) Banks Banks in India are all pervasive, especially the public sector banks. Can they also become the foremost channel for distribution of insurance? Perhaps in the future. The public sector banks, with their vast branch networks, are also plagued by a rigid unionized workforce and archaic systems, and lack vision of a broader service spectrum encompassing non-banking products. The newer banks are constrained by their lack of reach and meager branch strength. For banks to become a predominant channel for selling insurance will require a paradigm shift. But the encouraging fact for insurance companies waiting for banc assurance to take off is that bank branches are here to stay, and customers do want them. A customer survey by Deloitte Consulting5 in the western developed markets found that for banking activities, customers place high importance on having convenient branches in their banking relationships. This is good news for the Indian banks with their many branches, and also makes a strong case for taking up banc assurance. The major lines of business that can be sold through banc assurance successfully are term insurance, creditor insurance, and non-life products like Property, Motor and Personal accident, Homeowners comprehensive insurance etc.
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An example is SBI Life,6 which is waiting for the broker regulation to be put in place in order to move ahead aggressively with the banc assurance model. One of their major product lines is creditor insurance, and they have launched their first creditor insurance product, which covers the liabilities of the creditor in case of death of debtor. SBI Life is planning a similar product for home loan borrowers of State Bank of India. This model has high relevance in the Indian context with far-flung villages where the insurance potential is in volume and not in high per capita premiums. Some advantages and disadvantages are: Advantages assurance of banc Disadvantages assurance of banc
High credibility (as trustworthy Economic viability for the caretakers of money) with the banks to take up as banc public assurance is a volume business A ready customer base Training of people and lack of vision and awareness
Low cost channel for selling Useful for selling only certain simple vanilla products lines of products Extensive reach including the Initial investment in systems rural pockets and processes and people training The strategy should be to use multiple banks according to their presence in different regions. Success would come by using banc assurance where it will be most effective – i.e., selling simple, cheap products to the masses at a low cost. This awareness is growing and is evident from the fact that nearly every insurance company has partnered with one or many banks to implement banc assurance.
iii) Brokers With the broker regulation under review and expected any time, this could be the next hope, especially for the urban market. This will be a new experience for the insurance customer, accustomed to brokers in financial services, real estate, and travel and tourism. For historical reasons the image that 'broker' carries in the minds of the customer is not very favorable. Thus the new breed of insurance brokers face the challenge of establishing credibility.
The positives are that brokers in the urban arena can attract the elite and the upper middle class customer. Brokers represent the customer and will sell the products of more than one company. They seek to determine the best fit for the client and can effectively address the mind
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block faced by the public about the various companies. This is applicable in the case of life insurance for the high-end and corporate/group segment. In the non-life segment, broking is not entirely new, as reinsurance brokers were arranging exotic covers. For individual customers also, with a wide range of competitive products, the broker can get a good deal. The corporate broking companies will have to play a prominent role. If NGOs based in rural areas can be attracted into the rural sector cooperatives arena, they stand a good chance of succeeding and can help the new players get a foothold in the rural market. These are the players with the potential to make the difference, as they have the trust of the people. We envisage scenarios like that in Bangladesh's micro lending growth and the milk co-operatives7 in Gujarat selling insurance in addition to milk production and distribution. It would be a new dawn in Indian insurance distribution! With the right impetus the Indian rural insurance scenario could be one with high business volume and tremendous growth potential. ICICI Prudential Insurance and HDFC Standard Life Insurance have already partnered with NGOs8 to sell some low cost insurance in rural areas. However, the challenge lies in establishing regulations that protect the customer and attract the right players into the brokerage market rather than creating another middlemen segment eroding the premium. Work site marketing This area needs to be tapped, as in any country one of the biggest markets is through the worksite. With changes in human resources management polices and compensation packages, group products or work site products do have a definite market that cannot be ignored. Here the advantages would be:
iv)
? ? ? ?
Captive customer base Potential to sell individual insurance and group insurance High trust factor High hit ratio for the intermediaries
The challenges would be the cost effectiveness, product customization and efficient post sales servicing, which would determine continued business. Technology has a key role to play in worksite marketing to ensure cost benefits. Banks and financial institutions have been successfully marketing credit cards and other financial products using
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this channel. If not an identical model a similar approach can be used for selling insurance.
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Internet Though India is joining the fast growing breed of net users, using net for transactions has not yet caught up. Though a few banks provide online banking, the usage is still a small fragment. The insecurity associated with transactions over the net is still an inhibiting factor. At present most of the insurance companies have product information and/or illustrative tools on the web. We do not see the web evolving into a means for direct selling of insurance in the current scenario. In the Indian market, where insurance is sold after considerable persuasion even after face-to-face selling, the selling over the net, which must be initiated by the client, would take some more time. While the technology capability is there, improvements in bandwidth and infrastructure are needed. Also needed are simpler products where auto-underwriting is feasible. Automobile insurance, one of the segments of insurance purchased "off the shelf" in India, would be the ideal segment to start with. On the life side, term assurance for standard lives with simplified underwriting is a possibility. These channels by themselves will not be able to overcome the mindset of the people, but rather can only be enablers for the human channels.
v) vi) Invisible Insurer In this model, the insurance company or its representative is not the entity marketing the products. The insurance cover is sold by an automobile /credit card company as an add-on product leveraging the brand of the retailer. The risk is carried by the insurance company, which underwrites it. . Products like creditor insurance, automobile insurance, and credit card related insurance could be distributed using this channel. This model can be adopted in all market segments for the lines of business mentioned. It is already prevalent in some areas like credit card insurance and crop insurance for agricultural loans. The new players are also attempting this model. The venture of Maruti into insurance by setting up two subsidiaries MIDS10 and MIBL11 to sell automobile insurance is a case in point. These firms will largely arrange insurance cover for Maruti's captive customer base. MIDS has been registered as a corporate agent with an exclusive arrangement with Bajaj Allianz General Insurance, while MIBL has linked up with stateowned National Insurance Company Limited. What makes these arrangements attractive is the low distribution cost and captive customer base. However, repeat business or renewal of business cannot be assured. In the life segment, group creditor insurance may be the most suitable product for this channel.
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INSURANCE CLAIM
“Insurance is a financial service. It falls under the purview of Consumers Protection Act. The Consumer Forum accepts complaints from the aggrieved insured and decides such cases.” The origin of insurance has been from cooperation among risk-takers so as to spread (share) the heavy losses incurred by some amongst the larger number. This harbingers the concept of utmost good faith. If some members of the association, thus formed to ameliorate the misfortunes of the few unfortunate members, change their minds and refuse to indemnify the losses suffered on the occurrence of the contingency, the purpose of the association would be defeated. This call for advance payment of premium, which is held as a trust. A contract of insurance is not a wagering contract, but is subject to existence of an insurable interest. It is of indemnity is involved. The principle of indemnity is involved in a contract by which one party promises to save the other from a loss. In fire and life insurance, insurable interest must exist at the time policy is made, while in marine insurance the policyholder must have acquired the insurable interest at the time of loss. Claim Settlements (life) The settlement of a claim arises due to Death of the Policyholder or due to Maturity of the Policy.
? •
•
Death Claim In respect of a death claim an intimation regarding death of a policyholder from a relative / nominee / or assignee is to be received. The facts required to be submitted are: 1. Date of death, 2. Reason and Place of Death, 3. Full details of policies held by the Life assured should also be submitted.
Death claims are categorized as Non-Early Death claims and Early Claims. The procedure for processing these claims is different.
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Non-early Death Claim: Non-early Death Claims refer to death of the Life assured occurring after 3 years from the date of commencement of policy or Date of last revival / reinstatement If the policy is in force till death by regular payment of premiums, full sum assured is payable along with bonus (if it is a with profit policy).
?
The following are the requirements for the settlement of the death claim:
• • • • • • •
Policy Document Death Certificate from the appropriate authority Legal evidence of Title, if the claimant is not an assignee / nominee Abridged claim Form (3783/A) Discharge Form in 3801, duly signed Assignment / Reassignment deed, if any Age proof, if age is not already admitted
Once these documents are received and if they are found in order, claim is settled and payment is made to the person entitled to. Early Claims: Early Claims refer to the death of Life assured occurring within 3 years from commencement of policy. The following forms are to be submitted duly completed:
? • • • • •
•
Claim Form B: Statement from the medical attendants who last treated the deceased Life assured. Claim form B1: certificate of treatment issued by the hospital authorities where the deceased was treated last. Claim form E - certificate by the employer if the deceased was an employee. Claim form C - certificate of burial/cremation signed by a person who attended the funeral of the deceased. Where death takes place due to accident, the death has to be reported to the police and a FIR (First Information Report), police inquest report, and postmortem report (if conducted only) are to be submitted. Wherever death takes place within 2 years from Date of commencement an enquiry is conducted to determine the genuineness of claim.
On the basis of these, the decisions to settle accidental benefits are taken. ? Maturity:
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If the life insured survives to the full term, then basic sum assured is payable. This payment by the insurer to the insured on the date of maturity is called maturity payment. In majority of the plans, full sum assured becomes payable along with Bonus as a maturity payment, unless survivals benefits are paid earlier as in a money back policy. At least 2 months before maturity date, information is sent to the life assured with a blank discharge form for signature & completion by him. It is to be returned to the office along with:
• • •
Original Policy document Age proof if age not already submitted Assignment /reassignment, if any.
Postdated cheques are submitted to the Life Insured on receipt of the above mentioned requirements. Certain Relaxations in Settlements of the claims: Legally no claim is acceptable in respect of a lapsed policy or death of the Life assured occurring within 3 years from the date of commencement of the policy. However, some concessions are available and payment of claims are made •
•
If the Life assured had paid at least 3 years' premiums and thereafter if premiums have not been paid, the nominees get proportionate paid up value. In the event of the death of the Life assured within 3 years and the policy is under the lapsed position, nothing is payable.
Other concessions are: If minimum 2 years premiums are paid and if death of Life assured occurs : 1. Within 3 months from the Date of first unpaid premium Full sum assured along with bonus is payable subject to recovery of the premium already fallen due and the premium that falls during the policy anniversary. 2. Between 3 to 6 months from fully unpaid premium Only 50% of basic sum assured is payable. No bonus is paid and no arrears of premium are received. 3. 6 months to 1 year from fully unpaid premium Only notional paid up value is given.
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Claim settlements (non- life)
?
General Claims procedure
All insurance contracts are based on the information provided by the insured in the proposal form. The correctness of the information furnished in the proposal form is verified at the time of a claim, when physical inspection of the property is done. In case of any misrepresentation, it would be the prerogative of the Insurance Company to avoid a claim, or avoid the policy itself, or pay a claim for a reduced amount. It should therefore be understood that the completed proposal form plays an important role as it affects the claims under the policy. Claim settlement procedure for the public sector general insurance companies(New India Assurance, Oriental Insurance, United India Insurance and National Insurance) Here are some important points, which would help you in the claims procedure.
• • •
•
• •
•
The loss or damage should be reported to the insurer immediately. On receipt of claim intimation, the insurer will forward a claim form. Submit the completed claim form along with an estimate of the loss to the insurer. It is preferable to submit an itemized estimate with separate values. The insurer will arrange for inspection of the damaged items to assess the loss. In case of major losses, a specialist-licensed surveyor is deputed. The insured has to provide the required documents to substantiate the extent of loss. In case the cause of loss is not established, it is for the insured to prove that the loss or damage has occurred due to an insured peril. On agreement of claim amount between the insured and the insurer, the claim is settled.
In view of varied nature of policies, certain points distinct to individual policies, in addition to the above, are listed below : ? Fire claims • Firstly the insured should take all possible steps to minimize the loss. • The fire brigade may be intimated immediately.
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•
•
•
• •
Lodge a police complaint in case of a fire arising out of - rioting mob, striking workers, malicious damage by third parties or terrorist damage. Obtain a meteorological report in case of loss due to cyclone, flood & inundation and if the loss is localized like in the case of flood & inundation from a local water source, MRO report may be obtained. If the policy is on 'reinstatement basis', the claim is settled only after completion of repairs/replacement of the damaged items and submission of bills for claim payment. ? Burglary claims Immediately report to the police and obtain a non-traceable certificate that the items are not found. The insurers will insist upon a letter of undertaking on a stamp paper of appropriate value, for refunding the claim amount when the stolen property is recovered.
'All risks' policy for Jewelry and valuables
•
Report to the police and obtain a non-traceable certificate.
Breakdown of domestic Appliances
•
Notice of claim and estimated cost of repairs should be filed with the insurers to arrange for inspection. In case of partial losses, no depreciation is charged but when the items are not insured for its present day replacement value, the items are treated as under-insured and the claim amount is proportionately reduced. Depreciation is only applied for Total Loss claims.
If an appliance is partially damaged, it should be repaired (on approval from insurance company) before it is put to use, as otherwise further loss is not covered. ? Motor vehicle (Private & two wheelers) claims Claims under Act policies
• • •
Notice of an accident (not necessarily a claim) involving third parties should be reported to the insurers. The insured may be interested to pay compensation without going into whether he is liable to pay or not. It is therefore an express condition of the policy that no claim should be admitted or a compromise arrived at, without the approval of the insurers.
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•
•
•
• •
•
•
•
•
In case of major claims, the insurers may be willing to defend criminal case against the driver also on the basis of which compensation claims may be decided in the civil courts. Every accident involving third parties is required to be reported to police. M.V.Act provides that a third party victim can proceed against the insurers directly. If the alleged accident is not reported to the insurers, the insurers can consider this as violation of policy condition. In such circumstances, even if insurers are required to pay compensation by a court of law, they have an option of recovering such claim amounts from the insured for violation of specific policy condition. The insured can proceed with repairs provided the insurers are submitted an estimate of repairs and the estimated cost of repairs does not exceed Rs.500 in case of Private cars and Rs.150 in case of two wheelers. ? Mediclaim policy Notice of claim should be lodged within 24 hours. The insured should submit 'discharge summary' of the hospital/nursing home along with original hospital/medical bills, reports of the labs and investigation reports. In other words every item in the claim bill should be supported. ? Overseas Mediclaim The claim procedure varies from country to country and therefore the insured should get in touch with the overseas claim settling agents of the insurers immediately. The Insured should carry the policy document with him, which may be produced as evidence if necessary. The policy document also contains the full information as to how to get in touch with the claim settling agents for assistance. ? Personal Accident Claims In case of accidental death, the capital sum is paid to the legal nominee of the insured. If the insured fails to provide the name of the nominee, succession certificate from a court of law is necessary. In case of other claims, the insurers may get the insured examined by a specialist or refer the matter to medical board as is necessary, the cost of which will be borne by the insurers.
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MARKET SEGMENTATION IN THE INSURANCE ORGANIZATIONS
In the insurance organizations, the task of formulating the overall marketing strategies cannot be performed efficiently unless we segment the market. It was against this background that marketing studies engineered a sound foundation for segmenting the markets of insurance business. The market for the insurance business is found vast, the potential policyholders are in a very good number and their needs and requirements are not identical. The segmentation helps the insurance organizations in dividing and sub-dividing the market into small segments in which the needs and requirements are found by and large identical. Significance of Segmentation to the Insurance Business: The main purpose of market segmentation is to know the market. Unless the needs and requirements of the policyholders are known, it is difficult to formulate a sound marketing strategy. It is quite natural that the needs and requirements of different users living in different regions are not identical. The marketers bear the responsibility of identifying the difference in preferences so that the strategic decisions are formulated in line with the same. This helps in sensitizing the market resources. The marketing inputs are found instrumental in developing the required marketing outputs. Also, it is not productive to concentrate on only one segment. The insurance professionals need to business in all the segments such as rural and urban, men and women, agricultural and industrial and so on and so forth. It is important that insuranc3e is spread to even the agricultural sector of the economy. In addition to the mobilization of savings, there is also a need to promote investments. Knowing and understanding the market is considered significant to the insurance professionals since the process helps them in scanning the changing needs and requirements of the agricultural sector. A study of segmentation would help insurance professionals in formulating a sound marketing strategy. Thus segmentation would help in the following: ? Making the promotional measures creative which would be instrumental in sensitizing the prospects. ? Personal selling would be effective since the sales personnel are aware of the needs and requirements of the customers. ? The pricing and fee decisions can be rationalized in case of the weaker sections of the society. ? The expectations of the prospects can be perceived in a right fashion.
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?
?
It helps in identifying and emerging profitable segment. For e.g. in the Indian perspective, we find the rural market to be a profitable market for both bank and insurance organizations in the 21st century. If due weight age is given to the rural segment, they can make their services or schemes rural oriented and such orientation would make ways for positive developments. The development of the most profitable or attractive package of insurance services or schemes would also be possible.
In view of the above, it is rightly said that segmentation needs a priority attention of insurance professionals. How to reach and influence the target market is found meaningful to accomplish the corporate objectives. The segmentation would help the marketers in transforming the ‘prospects’ into the ‘users’.
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INSURANCE & RURAL INDIA
PRESENT RURAL POLICIES IN INDIA We have had insurance policies targeted at the rural populace for quite sometime now. The first crop insurance scheme was tentatively taken in the year 1979-80 and was launched in 12 states. Then, in April 1985, a Comprehensive Crop Insurance Scheme (CCIS) was launched by the Govt. of India in conjunction with GIC. Its objective was to provide financial compensation to farmers whose crop had failed due to drought or floods. The ceiling amount of the crop loan that the scheme could cover was Rs. 10000/-. The rate of the premium varied from 1 to 2% depending on the crop insured. Then there was an Experimental Crop Insurance Scheme (ECIS) launched in the year 1997-98 wherein the insurance charges would be borne by the Central and State governments. However, there are some inherent deficiencies in it. The CCIS. India- Rural Market Opportunities & Challenges Opportunities • The rural market in India constitutes 740+ million people, and is by far the largest potential market in the world • Rural annual household income averages Rs.56,630 with high savings rates • Changing rural aspirations in consumption patterns and lifestyle unfolds opportunities for rural marketing Challenges • Lack of understanding of rural customers and data • Poor infrastructure • Low level of literacy • Poor reach of mass media
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Saving Habit
Insurance Chit fund No savings
60 50 40 30 20 10 0
Bank Post office
Cooperative bank No Form al Savings
60 46 30 22 5 11 19 6 6 5 6 Segm ent B 32 32 22 19 20 7 4 9 Segm ent C 36 27
Segm ent A
Avg. saving in - formal insts.: - insurance: •
12400 3500
9500 3000 2900
5900
The more affluent are more likely to save in formal institutions and with insurance, with insurance constituting a large part of the savings pie.
Penetration of Insurance Products
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Any Insurance
36 27 14 10 3 0.5 0.5 0.3 0.2
0 10 20 30 40 50 60 70
General Insurance Tractor
Accident
Pumpset
Over one-third have insurance, with life insurance having the maximum penetration.
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Awareness of Types of Insurance Insurance companies also provides new industrial set up in the country by investing in shares and •
100% 7 9 39 37 24 39 41 20
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56
56
62
66
Unaware
50%
76
Aided Unaided
84
31 15
31 13
33 11
27 11
0%
24 10
19 5
•
Awareness of life insurance is almost universal, but much less for general insurance products.
Intention to Purchase Insurance
All Respondents
Non- Policy Holders
Policy Holders
ot Ac or ci de nt Ca ttl e Tr ac t P r or op er ty He al th Ag ri Cr im op pl em en ts
51 62 38
0 10 20 30 40 50 60
Li
fe
M
70
80
•
Most respondents do intend to purchase an insurance policy in the future, especially those with no policy currently. The more affluent are most keen to purchase some form of insurance.
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Hierarchy of Insurance Needs
60
10
40 20 0
Rank 2 Rank 1
18 16 20 10 11 10
lth
42
17 7
16 6 4 4
Ca ttl e
2
Cr op
3 2
ct Tr a or
1
Lo Li an fe Li +A fe cc +H id ea en lth t +A cc id en t
•
More than three-quarters (78%) ranked various combinations of life insurance as the most important. Insuring assets were not such a priority Segment
Target Market for Life Insurance National Rural Population (%) 123%
Segment A (Class X +) – most affluent Target market for Individual policies Segment B (Class V - IX) –affluent Target market for Individual policies Segment C (less than Class V) – least affluent Target market for Group policies Total Rural population - 742 million
255%
646%
•
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M id ot en or t +A cc id en t
Li fe
Li fe +
He a
Ac c
DISTRIBUTION CHANNELS
Available Channels
Distribution Channels
Evaluation Criteria Re ch a In e ceo t rg tse m n flu n n a e g e t Tru & re b y st lia ilit Bu e a u io ca b y sin ss cq isit n pa ilit Su p rt re u m n s po q ire e t Fin n l t n ct n h n lin a cia ra sa io a d g O e t n ld p ra io a iscip e lin Cu m r se icin sto e rv g Feasible Channels
Banks Cooperatives Panchayats Agents Post Offices Cybermediaries Industrial Fin Inst.
Eco Exchange Pts
Coop Banks Cooperatives Panchayats Agents
Brokers
NGO’s & SHG’s
E-Bima
New Channel
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DISTRICT COORDINATOR (1) BLOCK COORDINATOR (14)
Insurer’s Resources
Coop Bank Panchayats E-Bima Agents Cooperatives
1 20 5 8 3
No of Channel Units per Block Av. No. of Agents per LIC Dev Officer : 37
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Span of Channels Suggested Strategy Model Key Findings of the Research ? Rural sector offers a huge business opportunity for insurance companies ? Savings ratio is a healthy 30% of income across all socio economic segments ? Awareness about Life Insurance is near universal ? 27% of CWEs already have a life policy ? 51% of all respondents have expressed intention to purchase a life policy ? There are a total of 124 million rural households ? Nearly 20% of all farmers in rural India own a Kissan Credit Cards. The 23 million credit cards issued till date offer a huge data base and opportunity for insurance. ? Delivery infrastructure in the form of District Cooperative Banks, Cooperative Societies, NGO’s and Self Help Groups already exists in most villages. ? Rural connectivity through IT. ? E-choupal of ITC and other similar initiatives are available as additional delivery channels of insurance ? An extensive rural agent network for sale of Life insurance products exists ? The agent plays a major role in creating awareness, motivating purchase and rendering other insurance services ? 78% of respondents prefer various combinations of life insurance like life + accident, life + loan, life + health + accident. ? Flexibility in Premium payments is important.
INSURANCE SERVICES
The insurance landscape in India is in the process of tremendous change. Closed to foreign competition since nationalization in 1956, the Indian insurance industry was run by the government for over 40 years through the Life Insurance Corporation of India (LIC) and the four general insurance companies that spanned the length and breadth of the country. Today, the Indian life insurance industry has a dozen private players, each of whom are making strides in raising awareness levels, introducing innovative products and increasing the penetration of life insurance in this vastly underinsured country. Each of the private insurers has introduced revamped products to meet the needs of their target customers and in line with their business objectives. Who Wins?
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Undoubtedly, the biggest beneficiary of the competition amongst life insurers has been the consumer. A wide range of products, customerfocused service and professional advice has become the mainstay of the industry, and the Indian consumer forms the pivot of each company’s strategy. At the back of advertising campaigns, seminars and workshops, there has been a dramatic increase in customer awareness. Penetration of life insurance is beginning to cut across socio-economic classes and attract people who have never purchased insurance before. With this heightened awareness and consumer education comes a willingness to view life insurance as an integral part of the financial portfolio, marking a significant change from the earlier attitude, where insurance was purchased as a tax-saving tool.
USERS OF INSURANCE SERIVCE
INDIVIDUAL
INSTITUTIO NAL
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Service marketing is unique in many ways in the insurance industry. There are 3 players in the transaction process:? Company An Insurance company listens to the customers and evolves/develops various insurance policies and communicates the attractiveness and the utility of the policy directly to the customers. Here it (the company) performs external marketing. The company makes promises to the customers. Companies like LIC and ICICI Prudential makes promises to the customers and sees to it that these promises are delivered by the providers. These companies should bridge the gap between their employees and customers in order to achieve customer satisfaction. ? Providers They are the insurance company’s internal customers constituting employees and agents (advisors). ICICI Prudential Life Insurance does internal marketing with the providers by educating, training and motivating them about the idea of the particular insurance policy which they can offer to their customers depending upon their needs and their financial situation. This is done to enable the providers to effectively carry out the service transaction process. The advisors of ICICI Prudential make provisions for office space, accessibility and connectivity. In case of LIC, the agents are ready to meet their prospects at their choice of destination, for the purpose of delivering the promise made to them. ? Customers The customers are the reasons that the insurance company exists and for whom the company has designed a host of insurance policies as well as set up the infrastructural facilities and spent money on employee development programmes. Here the providers are the only ones who interact with the customers, like the insurance agents interact with the customers and not the company. In case of ICICI Prudential, the advisors interact with their customers and study their financial condition and offers policies accordingly. The agents perform interactive marketing which is on-time, all-time, every-time basis. This is the most crucial aspect of service marketing in the insurance sector. In LIC the agents remain in constant touch with their clients and gets in touch with them according to their convenience. Those agents have the responsibility of ‘keeping promises’ made and enabled by the company. The providers (agents) are responsible for the perceived quality level of the service transaction. This underlines the uniqueness of service marketing.
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LIFE INSURANCE CORPORATION OF INDIA
Life Insurance Corporation of India was formed on 1st September 1956. It can be said that with the formation of LIC, utilization of peoples money invested in Life Insurance for planned economic development took roots. One of the reasons/objective of Nationalization of life insurance industry was channelising of its funds for the benefit of the community at large. “Explore and enhance the quality of life of people through financial security by providing products and services of inspired attributes with competitive returns, and by rendering resources for economic development.” Forms the mission of the company
Characteristic of LIC Services….
Intangibility
Inseparabili ty
Service
Heterogeneit y
Perishability
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The Life Insurance Corporation’s services can be explained with the help of the following: ? Intangibility LIC policies are an example of the way in which the financial services are presented to customers. They can enhance the image of the service and the provider can even bestow status or implied benefits upon the user. Physical reminders of the service product, brand name and value serve to reassure the consumer and help the organizations positioning. ? Inseparability Many everyday transactions are carried out now via automated services are now very familiar because access to these systems has been broadened to allow use of any particular machine by customers of other institutions, the customer will often not be dealing directly with their own provider. ? Heterogeneity/variability LIC helps the customer to make simple transaction via MIS – database management, Online Enquiry service, Downloading of Policy forms or via branch counter where they might be fairly standardized but subject to some variation in quality. ? Perishability An insurance policy becomes perishable the minute it expires, but for the whole of is active duration it represents an ongoing service. LIC sell insurance on the basis that customers have a short ‘cooling off’ period, in case the customer changes their mind or to offer them protection if heavy-handed sales pressure has been used. Everything that can be done to tangibilize the services by offering clear and attractive documentation, for example offering reassurance and confidence to the consumer is considered by the company.
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CORE PRODUCT AND SUPPLEMENTARY SERVICES OF LIC
• LIC health line • Single window system • Availing loans on policy • Revival of lapsed Policy • Grievance redressal system • Claim settlement • Online Calculation
• Comput erized Services
• Instruction Manual
• Installment premium • Insurance Advisor
• Brochures in regional languages
Policy
• Policy status • Post sales services
• Payment through service providers
• Toll Free Phone • New policy update
• Interactive Voice Response system
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“8 Ps of LIC” Product Mix of LIC LIC has a variety of insurance plans to choose from. These plans cater to all categories of people and to their diverse needs. The plans are simply unmatched in reliability, benefits and in providing happiness and security.
Term assura -nce
Whole life money back
Endo wment plans
Mone y back plans
Endowm ent + whole life
Pensio n
plan
Plans at a glance
Children
policy
Invest -ment plans Medic al Insura nce
High risks low premium
Handi cappe d policy
Whole life policy
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? LIC also provide customer can mix They may choose customer here has
the customer product mix facility where the and match the product according to their needs. one policy at a time or six plans at a time. The to mention his age profile to the company.
i) Place & Time: LIC has about 2048 branches- fully computerized covering all policy servicing aspects to give prompt computerized services from new policy introduction, acceptance of renewal premium, revivals, loans, etc to final claims settlement. • LIC’s Wide Area Network covers 100 Divisional Offices connecting about 1500 Branches through network. This helps the customer to pay LIC premium in any of the Branches connected to the network. Green Channel facility has also been introduced for on the spot policy completion. • Payment of premiums can be made through internet through service providers, viz., HDFC Bank, ICICI Bank, Times of money.com, Bill Junction.com, UTI Bank, Bank of Punjab, GTB Bank, Citi Bank, Corporation Bank, Federal Bank and Bill desk. • LIC's website www.licindia.com has several features like product information on LIC’s various plans, ready reckoner for premium, online calculations of Income tax, installment premium and policy bonus, Insurance Advisor, etc. • LIC has installed Information Kiosks at selected 150 locations which give policy status report, other details about life insurance plans and servicing aspects. • Policyholders at the Metro Centers have been provided with toll-free telephone, access to contact the Grievance Redressal Officers for hassle free complaint processing. • First Policy Service Info Centre was commissioned at Mumbai in March 2002. Info Centres at Pune, Delhi, Kolkata, Chennai, Ahmedabad, Hyderabad and Bangalore were also commissioned. This centre is equipped with state of art technology and manned by trained persons. People desiring any information regarding their life insurance needs and about their policies can get the same by calling the Info Centre Telephone. • LIC also has Interactive Voice Response Systems in 59 urban centres. Customers can get selected information regarding their policies by calling the prescribed telephone numbers.
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Promotion & Education: For over 40 years LIC enjoyed total monopoly over the Insurance industry. It was the lone player providing insurance till late 1990s and early 2000- when the Insurance sector was thrown open to the private players. LIC still leverages on the publicity & recognition it earned in its 40 years. The services are still majorly promoted by the LIC agents/advisors, though in the recent years due to the entry of the private players LIC has started with aggressive marketing in the Mass Media. However it is still the LIC agents, who promote the company and communicate its benefit to the customers. Price: LIC offers a variety of policies, which differ according of the customers. The product of LIC is very relative to the customer and varies individually from customer to customer and as such the policies do not have a fixed price i.e. premium. These premiums vary according to the policies and the amount for which the insurance is taken and various other factors.
Physical Evidence: LIC’s logo depicting an oil lamp covered by two hands is a symbolic portrayal of security and safety. It tangibles the LIC’s commitment of security and safety that are guaranteed by the policies. In addition LIC has made available to the customers the brochures and literatures relating to the services in regional languages so as to make it simple and easy to understand. Moreover the advertisement and other promotions of the LIC emphasize strongly on the safety aspect. People: LIC interact with two types of customers –internal and external on a regular basis. Internal customers are the agents and advisors who are employees as well as the customers of the company. LIC trains its internal customer and educates them about the various policies. It is these agents who act as an intermediary between the end consumer and the company, hence it required to train them properly. LIC communicates with its external customers through advertisements and various other promotional tools. It is of utmost importance that the agents deliver what the advertisements promise. Process: A consolidated database of registered policies is maintained by LIC. This database is updated at regular intervals on the basis of changes received from the original servicing branches. LIC also sends auto-mailers to the registered policyholders informing the registration status. LIC validates the registration data in case of payment through the service provider and informs the bank/service provider about the
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registration status. Since LIC’s database is de-centralized, generally it takes a week’s time for confirmation of registration data. • LIC regularly send the bills/invoices mentioning the due dates, premium amount, late fees, validity date, etc to the service provider/bank of which the customer is a registered member. Information regarding the payment of the premium is displayed in the net banking account page. • LIC service providers/banks also help the customer to pay the premium through auto pay facility and phone banking facility where the customer can follow the telephonic payment instructions. Customers are then informed through mail regarding the status of the registration or payment. Productivity and Quality: LIC has lived up to its standards but actually delivering what it has promised. LIC follows a stringent Customer redressal system and actually follows up on Customer feedback to help them serve better. • For LIC it is not the end of the services once the customer has taken the policy. Services are provided by the company in terms of processing and release of claims. • Afford the customers, opportunities to provide the organization with feedback about the perception of our services and to suggest improvement through customer surveys and customer needs. • Providing opportunities to customers to meet the designated grievance redressal officer in all offices of the organization without the prior appointment • In addition to Plan Suggestor the company also provides the customer the ready recknor, suggestion based upon income and suggestion based upon the investible amount. • Customer service section of LIC guide through the various intricacies of a life insurance contract and the facts that a customer must know to make the best out of their life insurance policy like policy conditions, alteration in policy, if policy is lost, nomination, when to pay the premium, grace period for the payment of premium, surrender value, maturity, death claims etc… • Enhancing customer conveniences in the areas of information and communication, simplification of processes etc..
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THE LIC SERVICE TRIANGLE MODEL
LIC
Internal marketing “Enabling Promises”
External marketing “Making Promises”
Service provider
Interactive Marketing “Keeping Promises”
Custome rs
EXTERNAL MARKETING In this stage the company has to design the services according to the need and wants of the consumers. This requires the study of the market and knowledge of the consumers. LIC listens to the customers and evolves/develops various insurance policies and communicates the attractiveness and the utility of the policy directly to the customers. Here it (the company) performs external marketing. The company makes promises to the customers. LIC conducts the market survey, make use of business as well as marketing intelligence to tap the potential customer, make consumer aware of their existence through publicity, advertising etc…
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INTERNAL MARKETING The customer comes to the LIC for availing the service, thus to “Enable the Promise” made; it becomes very essential for the company motivate their salesperson as well as to train them to serve the customer better. Necessary infrastructure, technology, security, facilities, after sales service, online information, claim settlement, easy structure for the payment of premium, flexibility in the policy, insurance advisor, and complaint cell are some of the attributes which form the part of the internal marketing and also enable the company to fulfill the promises made to the customers. The agents of LIC are ready to meet their prospects at their choice of destination, for the purpose of delivering the promise made to them. This also compromises of the internal environment and the mannerism existing in the company. INTERACTIVE MARKETING Here the providers are the only ones who interact with the customers, like the insurance agents interact with the customers and not the company. The advisors interact with their customers and study their financial condition and offers policies accordingly. The agents perform interactive marketing which is on-time, all-time, every-time basis. This is the most crucial aspect of service marketing in the insurance sector. In LIC the agents remain in constant touch with their clients and gets in touch with them according to their convenience. THE MOMENTS OF TRUTH” is the provocative point and also the judgment period where the customer finally gauges the difference between the promises made, the promises kept, thus evaluating the service’s worth. These are called the “Moments of Truth” because what was dreamt is achieved and also if it is not achieved this moment gives an insight into the shortcomings and why it could not be achieved.
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Service Encounter Cascade Customer visits the LIC office (receptionist) for initial enquiry Customer is asked to meet one of the agents, who does his need analysis. A date for next meeting is fixed. The agent suggests the customer various policies suitable, and if the customer selects a policy the deal is done and other formalities are This is informal meeting where the agent meets the customer to remind him about payment of premium and other new information about the policies. The agent gets reference through such meetings. This is also an informal meeting were the agent keeps a track of the customer and informs about the maturity of the polices. The agent does this to ask them to renew their policies. Here the customer gets his policy money when matured. Service Encounter Cascade From the customer’s point of view, the most vivid impression of service occurs in the service encounter, or “the moments of truth”, when the customer interacts with the company. It is in these encounters that the customers receive a snapshot of the organization’s service quality, and each encounter contributes to the customer’s overall satisfaction and willingness to do business with the organization again. From the organization’s point of view, each encounter thus presents an opportunity to prove its potential as a quality service provider and to increase customer loyalty. Some services have few encounters while other services have numerous encounters
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Thus as seen in the above diagram, there exists primarily 6 contact points between the service provider and customer in company. The customer’s perception of quality is influenced in these encounters. Thus it is upto the service provider to deliver a high quality of offerings and thereby increase customer loyalty and satisfaction in these stages. LIC thus trains the agents and its employees to handle the customer in a very efficient manner, customer are suggested the various policies which suit their age, income, family, and other requirements. The providers here are trained in such a way so as to communicate in a best manner with the customer, the providers here are not only trained to sell the policies to the customer but also to handle the customer complaints and to provide after sales service, to inform them the new policies, the benefits of the policies, reminding them for their payment of premium, helping them to design their own policies etc… The company also sees that they can bridge the gap between customer an d the employees in order to achieve customer satisfaction. Interacting with the customer is not only at personal levels but also at the various other providers like when the customer makes the payment of the premium through its bank account affiliated with the LIC or through the ECS system or through telephone etc… Hence training the employees, taking care of the customer complains and grievances, motivating the employees to provide the better services to the customer by the way of incentives and bonus etc form the back end operations for the company.
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SERVQUAL MODEL
Expected service GAP 5 Perceived Service
GAP4
Service Delivery
GAP 3 Customer-driven service design & standards GAP 2 Management Perceptions of Consumer Expectations
External Communications to Consumers
GAP 1
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GAP ONE BW Consumer Expectation and Management Perception Management does not always perceive correctly what customers want. This gap is because of not having the knowledge what exactly the customer requires. LIC faces the problem in this area as the customers are not very cooperative enough to share the personal information like disclosure of income, the type of business etc…Hence the service providers due to lack of sufficient knowledge about the customer detail cannot suggest him the right policy.
M a P e o f E x n r C p a g e c e p t u s t o e c t a m e n Et x p e c t e d io n s S e r v ic e m e r t io n s
GAP TWO BW Management Perception and Service Specification Management may correctly perceive the customers wants but not set a specified performance standard. Say in the LIC the customer expects the settlement of claim to be done quickly in case of an accident or death but the company needs time to scan all the relevant documents, study the matter, and some times it takes time to settle the claim due to the limited resources like lack of adequate proof, documentation etc.. hence in this case the company wants to settle the claims as quickly as possible but due to limited information and legal procedures it is not able to do so in the expected time.
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S e r v ic e M a n a g e Q u a lit y P e r c e p t p e c i f i c a t oi o f n C s u s t o E x p e c t a
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GAP THREE BW Service quality specification and service delivery
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In this case there is a gap of internal communication. LIC trains their agents and describe them the % of commission in each policy. Some S e r v ic e S e r v insurance advisors try to sell only D e liv e r y Q u a those policies which gives them high return in terms of commission. Hence S p e c i such attitude of the advisors may not allow him to suggest the right policy to the customer according to his needs and requirements. GAP FOUR BW Service Delivery & External Communications Consumer expectations are affected by the statements made by the company representatives and advertisement. Like the consumer in case of insurance policy expects a fair amount of discount on the premium. Hence just to sell the policies the advisor promises him to give the discount which is not legal, hence this affects the expectations of the customer from the company.
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GAP FIVE Percieved Service & Expected Service This occurs when the consumer misperceives the service quality. A customer will have a pre-conceived notion about the service being offered by the company (expected service). In the same way, perceived service is what the company thinks the customer wants which is again a pre-conceived notion. A gap occurs when both do not match. In this case, the agent may keep regular contact with their customers to show care, but the customers may interpret this as a channel for acquiring references.
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Filling the GAP And Recommendations
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Proper communication should be established between the customer and the insurance advisor. The insurance advisors should be able to convince the customer and should also try to win his trust so that the customer would feel free to discuss his income and about his business matter. This will help the company to understand the needs of the customer and to provide the right policy to the customer. The customer always wants the settlement of claim to be completed as soon as possible. Thus the company should make a point to collect personally all the required documents from the customer. This will help the customer to relax in a situation of panic (like accidents). In some complicated situations the advisor should suggest the development officer to handle the matter. Internal communication should be more specific. The development officer should keep the track of each salesperson, how many policies he sold in a month and what are the types of policies. This will help the company to keep the track of the advisors. This will also help the company to know whether the advisor is really helping the customer or just wants to make his part of commission. Also when we compare the LIC with the ICICI Prudential we can see the difference in product marketed by each of the company. LIC market the products basically related to life insurance and term plans. Whereas ICICI are more concentrating on the pension plans The services of both the company are almost similar. LIC is the market leader in the Life insurance market, but some part of its market share are taken over by the private players like ICICI Prudential. This is because with the entry of the ICICI in the market gave a boost to advertising of insurance services. Previously the insurance services were not advertised LIC should now to face the competition from such players should also start aggressive advertising especially in case of Pension plans. LIC conducts its operations in a very wide area due to which unknowingly they lose the personal touch with the customer. Whereas in ICICI personal contact with the customer is always maintained with the customer. In case the insurance advisor is not able to understand the needs of the customer the company should arrange the lectures for the agents to understand their problems and also to provide the solutions. In ICICI they motivate their employees in terms of DO OR DIE. In case the salesperson doesn’t complete the target he is fired. This
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strategy is not followed by the LIC. Hence the number of policies sold in ICICI in pension plans is more as compared to LIC. Customer education is also important so as to educate them about the new policy and also the importance of insurance in their life.
Hence for the company to overall improve their services the company should increase the personal touch with their customer, increase the advertising, and also to train their employees to handle the customer in more efficient manner……
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COMPARISON BETWEEN LIFE INSURANCE OF INDIA & ICICI PREDUENTIAL
LIFE INSURANCE CORPORATION ORGANISATION
Products
Individual plans ? Whole life schemes 1. Whole Life With Profits Plan - 002 Features: This plan is mainly devised to create an estate for the heirs of the policyholder as the plan basically provides for payment of sum assured plus bonuses on the death of the policyholder. However, considering the increased longevity of the Indian population, the Corporation has amended the above provision, thereby providing for payment of sum assured plus bonuses in the form of maturity claim on completion of age 80 years or on expiry of term of 40 years from date of commencement of the policy whichever is later. The premiums under the policy are payable up to age 80 years of the policyholder or for a term of 35 years whichever is later. If the payment of premium ceases after 3 years, a paid-up policy for such reduced sum assured will be automatically secured provided the reduced sum assured exclusive of any attached bonus is not less than Rs.250/-. Such reduced paid-up policy is not entitled to participate in the bonus declared thereafter but the bonuses already declared on the policy will remain attach, provided the policy is converted in to a paid-up policy after the premiums are paid for 5 years.
Suitable For: This policy is suitable for people of all ages who wish to protect their families from financial crises that may occur owing to the policyholder’s premature death.
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2. Limited Payment Whole Life - Plan 005 (With Profits) Features: This is the best form of life assurance for family provision since it enables the Life Assured to pay all the premiums during the ordinarily vigorous and most productive years of life. He need not pay any premium in the later stages of life if and when his conditions might become adverse. With Profits Limited Payments Policies do not cease to participate in profits after completion of the premium paying period but continue to share in the periodical Bonus Distribution until the death of the Life Assured. The Without-Profit option is available under Table no. 3. If the policyholder pays at least 3 years' premiums and then discontinues paying any more premium, a reduced paid-up assurance policy comes into force. Such a reduced paid-up Policy will not be entitled to participate in the profits declared thereafter, but such Bonus as has already been declared on the Policy will remain attached thereto. The premium paying term under this plan is five years minimum and 55 years maximum.
3. Single Premium Plan no.8 (With profits) Features: This is the best form of life assurance for family provision since it enables the Life Assured to pay the premium during the ordinarily vigorous and most productive years of life, relieving him from the necessity of making payments later in life when they might become a burden. With Profits Single Premium policies do not cease to participate in profits after completion of the period for which premium has been paid ,but continue to share in the periodical Bonus Distribution until the death of the Life Assured. Suitable For:
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Being a limited-payment life assurance policy, this plan is suitable for people of all ages and social groups who wish to protect their families from a financial setback that may occur owing to their demise.
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? Investment plans 1. Bima Nivesh 2004 (T. No. 166) Bima Nivesh 2004 is a plan with compound rate of guaranteed additions and loyalty additions . This is the revised version of our popular Bima Nivesh Plan and is introduced to meet the overwhelming demand for a single premium plan from our customers. It is a single premium, ideal investment plan for those who have no regular income but good periodical income . Bima Nivesh 2004 is available for terms 5 and 10 years. The guaranteed surrender value is payable after the policy has run for at least one year. Term Assurance Rider is also available by payment of a single premium at the option of the proposer. BENEFITS: • Guaranteed Additions : Guaranteed additions at the compound rate of Rs.40 per thousand Sum Assured per annum for the policy with term of 5 years and at the compound rate of Rs.45 per thousand Sum Assured per annum for the policy with term of 10 years. Loyalty Addition : Depending upon the Corporation's experience with regard to mortality, interest and expenses and based on term of the policy, Loyalty addition, if any, may be declared by the corporation and paid on maturity. Maturity Benefit : The Basic Sum Assured along with compounded Guaranteed Additions will be payable. Note : Loyalty addition, if any, will also be added to this benefit. Payment on death : In case of the unfortunate death of the Life Assured during the term of the policy, Sum Assured along with the accrued guaranteed additions will be payable. Surrender Value : Surrender value is payable after the policy has run at least for one year.
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? Money back plan 1. Money Back with Profit - Plan no.75 & 93 Features: Unlike ordinary endowment insurance plans where the survival benefits are payable only at the end of the endowment period, this scheme provides for periodic payments of partial survival benefits as follows during the term of the policy, of course so long as the policy holder is alive. In the case of a 20-year Money-Back Policy (Table 75), 20% of the sum assured becomes payable each after 5, 10, 15 years, and the balance of 40% plus the accrued bonus become payable at the 20th year. For a Money-Back Policy of 25 years (Table 93), 15% of the sum assured becomes payable each after 5, 10, 15 and 20 years, and the balance 40% plus the accrued bonus become payable at the 25th year. An important feature of this type of policies is that in the event of death at any time within the policy term, the death claim comprises full sum assured without deducting any of the survival benefit amounts, which have already been paid. Similarly, the bonus is also calculated on the full sum assured.
? Features:
Plans to cover the housing loans 1. Mortgage Redemption- Plan no.52
The Mortgage Redemption Assurance policy (without profits) plan is designed to meet the requirements of the policy holding individual who seeks to ensure that all his outstanding loans and debts are automatically paid up in the event of his demise. Under the Mortgage Redemption Assurance policy (without profits) The proponent will have to bear the cost of the mandatory medical examination.
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The policies are usually issued only to male lives aged 50 years or lesser. The policies are subject to a condition that the insurance cover would not extend beyond 65 years. All loans must be liquidated by the time the borrower attains the age of 65. The policies bear no surrender value. Suitable For: Middle-aged to elderly professionals whose dependents might need assistance in clearing their debts in case of their unexpected demise are most suited for the Mortgage Redemption Assurance policy. ? Joint life plan 1. Jeevan Sathi- Plan no.89 Features: This policy is issued on the lives of the husband and wife provided the female's life belongs to Category I or is actively engaged in her spouse's business. Incase of death of one of the policy holder the surviving partner gets the sum assured, the premium is stopped and on death or maturity full sum assured along with bonus is paid back. Suitable For: This policy protects the incomes of both husband and wife, also grants equivalent benefits to their survivors in case neither survive the policy term period. Benefits: Survival benefits: If one or both the lives survive to the maturity date, the sum assured, along with the accumulated bonus, is payable. Death Benefits: In case either of the couple dies during the policy’s term, two things happen. One, LIC pays to the surviving spouse the full sum assured.
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And, two, the policy continues on the life of the surviving partner without him/her having to pay any further premiums, i.e. the life cover on the survivor continues free of cost. The sum assured is again be payable on the death of the other partner in case both the husband and wife were to die during the term of the policy. Vested bonus would also be paid along with the sum assured on the second death.
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ICICI PRODUCTS
Protection Plans ICICI Prudential Life Insurance offers LifeGuard - a set of pure protection plans. Choose from amongst three different product structures to insure your life and provide total security to your family, at a very affordable cost. Level Term Assurance with return of premium ? ? On death the entire sum assured will be paid. On maturity, all the premiums paid will be returned.
Level Term Assurance Under this plan, in case of death of the life assured during the term, the Sum Assured will be paid to the beneficiary. There are no maturity benefits. Hence on survival till maturity, the policy will terminate. You will need to pay the regular annual premium, for the term chosen. You will be provided with life cover equal to the Sum Assured. The table below provides indicative premiums for various age-term combinations for a Sum Assured of Rs. 10 lakhs.
Level Term Assurance without return of premium ? On death the entire sum assured will be paid. ? No survival or maturity benefits.
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Level Term Assurance with return of premium Should you select this plan, you will need to pay a regular annual premium for the term chosen. You will be provided with life cover equal to the Sum Assured. In case of death of the life assured during the term, the Sum Assured under the plan will be paid to the beneficiary. On survival till maturity, all the premiums paid, will be returned. The plan also offers the unique feature of an additional extended cover for 5 years after maturity of the policy, for 50% of the Sum Assured. This provides additional protection, even after the Premium Paying Term. The table below provides indicative premiums for various Extended Life Cover The plan also offers the unique feature of an additional extended cover for 5 years after maturity of the policy, for 50% of the Sum Assured. This provides additional protection, even after the Premium Paying Term. The table below provides indicative premiums for various age-term combinations for a Sum Assured of Rs. 10 lakhs.
You can also enhance the above two policies by adding Accident & Disability Benefit Rider and Waiver of Premium Rider (WOP). Level Term Assurance - Single premium ? On death the entire sum assured will be paid. ? No survival or maturity benefits GROUP (TERM) INSURANCE SCHEME A) Nature of the Scheme : Group (term) Insurance Scheme is meant to provide life insurance protection to groups of people. Administration of the scheme is on group basis and cost is very low. Under Group (Term) Insurance Scheme, life insurance cover is allowed to all the members of a group subject to some simple insurability conditions without insisting upon any medical evidence. The restrictions under a Group Term Insurance Scheme mainly
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relate to size of the group, amount of cover allowable, minimum and maximum age limit for eligibility of cover (18 & 60), participation of minimum percentage (75%) of eligible members of the group at inception and compulsory participation of all new members. B) Premium Chargeable : Group (Term) Insurance Scheme is at present offered under One Year Renewable Group term assurance plan (OYRGTA). Every year on Annual Renewal date LIC charges the premium depending upon the changes in size and age distribution of the age group. The Premium rates applicable to a group at commencement depend on its size as also the occupation, employment and working conditions of the members of the group. Subsequently, the Premium Rates may be reviewed on the basis of actual experience. In some schemes, a part of the excess of premium over actual claim is allowed as rebate from subsequent year's premium as Experience Rating adjustment or Profit Sharing if the claim experience is favourable. C) Different Schemes : Group (term) Insurance Scheme has a number of varieties (see the chart given below). The Scheme may provide for a uniform cover to all members of the group or graded covers for different categories of members, cover for all amounts of outstanding housing loans or vehicle advances, or some other benefits (e.g., life cover to supplement pension or PF benefits in case of death). The conditions for allowing a Group (term) Insurance Scheme and the amounts of cover allowable under the Scheme depend on the particular nature of the Scheme and type of the group, particularly whether it is an employer-employee group or otherwise (non-conventional group). D)General Features of various Group Insurance Schemes i) MASTER POLICY : A single Master Policy is issued covering all the members of the scheme and the scheme is administered by the Employers, Associations, Societies etc. called Nodal agencies. ii) PREMIUM : The premium under such scheme may be wholly paid by the employer or the Nodal Agency. However, the scheme may be contributory i.e. the members may also contribute.
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iii) TAX BENEFIT : The premiums paid by the employer are allowed as business expenses and the amounts are not treated as perquisites in the hands of the employees. The premiums paid by the members are eligible for income-tax rebate under Section 88. The benefits paid under the scheme are tax-free. iv) EXPERIENCE RATING : All Group Insurance schemes are subject to basic review of Rating, i.e. the Table of OYRGTA Premium Rates is reviewed from time to time depending on actual experience. v) DOUBLE ACCIDENT BENEFIT : Double Accident Benefit, i.e. payment of double the sum assured on death due to accident (without permanent disability benefit), may be allowed under Group Insurance Schemes for an extra premium Rs. 0.75 per Thousand Sum Assured per annum. Double accident cover under all Group Schemes taken together should not exceed Rs. 4.5 lakhs. vi) ELIGIBILITY : For Group Insurance Scheme in lieu of EDLIS the insurability condition is that should be a member of the Provident Fund Scheme of the employer. For other GI Schemes of employer-employee groups the insurability condition is that the member should not be absent on ground of sickness on the entry date. For all non-employeremployee Group Schemes the basic insurability condition is that the member should be in good health on the date of entry. vii) INSTALLATION OF THE SCHEME : In respect of Group Insurance Schemes the steps to be taken for introduction of the scheme are to frame rules of the scheme in consultation with LIC, to forward to LIC the employees' data and Master Proposal forms together with a copy of the rules and to pay the premium as required by LIC. viii) ADMINISTRATION OF THE SCHEME : At the commencement and thereafter on each Annual Renewal Date, the Group Policyholder will have to send all the member's data (and particulars of the new entrants from time to time) to the P & GS unit of LIC. Detailed OYRGTA premium calculation will be made on each Annual Renewal Date. When a claim arises, the particulars of the respective member are to be intimated together with the claim form and death certificate. Special Features of each Group Insurance Schemes can be obtained from LIC & P&GS unit. ICICI Group Term Assurance
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ICICI Pru's flexible group term solution helps provide affordable cover to members of a group. The cover could be uniform or based on designation/rank or a multiple of salary, and can be extended to all employees between the ages of 18 and 65 years. The benefit under the policy is paid on the event of the member’s death to the beneficiary nominated by the member. It is a one-year renewable policy where one master policy covers all proposed employees comprising the group, with a minimum group size of 25 persons. New members can join the group and outgoing members can leave the group at any point during the policy term. Highlights include: ? Greater convenience for the employees underwriting and medical requirements. with relaxed
? "Free Cover Limits" with simplified underwriting depending upon the number of employees in the group and the level of cover chosen. ? Guaranteed benefit : On death during the term of the contract (while in service), the sum assured will be paid to the beneficiary of the employee. ? Choice of additional coverage in form an Accident and Disability Benefit Rider and Critical Illness Cover ? Premium is viewed as a business expense in the year of payment. GROUP GRATUITY SCHEME Under the Payment of Gratuity Act, 1972, it is employers statutory liability to pay 15 days salary (15/26 of a month's wages) for every completed years service to each of his employees on their exit, for any reason after five years of continuous service, subject to maximum limit of 3.5 lakhs. Higher benefits can be paid if the employer so desires. Gratuity payable to the employees can be paid as and when liability arises and can be claimed as deductable expense under P & L A/c of the relevant financial years. However, the sound system of financial management envisages providing for Gratuity liability every year and claiming the tax benefits as it is mandatory as per Accounting Standards 15 (AS15) to account for the liability on Actual basis. This can be done by creating a Trust, managed privately or by LIC and paying the amount
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to the Trust every year. In case of Privately Managed Trust, investment of funds will have to be done as per Income-Tax Act, by the trustees and entire administration of the Trust including Actuarial Valuation will be the responsibility of the Trustees. In case of LIC managed trust, the job of investment and actuarial valuation is taken over by the corporation free of charge and in addition, interest is paid by the Corporation on the accumulated funds. We give below the details as how the Group Gratuity (Cash Accumulation) Scheme provides for a convenient mode of funding the statutory obligation of an employer under the payment of Gratuity Act : (1) LIC offers a very attractive rate of interest depending upon the size of the fund.
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INTEREST RATES FOR 2003-2004
Fund Size Below Rs. 25 lakhs Rs. 25 lakhs or more but less than Rs.50 lakhs Rs. 50 lakhs or more but less than Rs.75 lakhs Rs. 75 lakhs or more but less than Rs.1 crore Rs. 1 crore or more but less than Rs. 2 crores Rate of Interest 7.55% 7.65% 7.75% 7.85% 8.00%
(2) There would be no occasion for keeping the funds idle for investments as we give credit from the date of receipt of contribution from the employer and the fund start earning interest from that very date. (3) Trustees will have to open Bank Account in the name of Trust and future contributions to the fund are to be routed through the Trust A/c by the company. (4) When the fund is handed over to LIC trustees will not be required to obtain the certificate from outside actuary since the valuation done by LIC would suffice for the purpose of claiming income tax rebate. (5) The Trustees would have not to bother about the investment of the funds as that aspect would be taken care of by LIC once the funds are handed over to it. (6) By handing over the funds to LIC, the administration work would be considerably reduced. (7) The trustees will perform the statutory roles as envisaged in the act. However, in view of the above points considerable work would be attend to by LIC on behalf of the trustees.
LIFE COVER - AN ADDED ATTRACTION: A unique feature of our Scheme is to provide, in the event of pre-mature unfortunate death, a sum equal to the gratuity payable in respect of the entire service (actual and future). Future service gratuity i.e. life cover is restricted to limits as specified herein below and subject to overall gratuity limits as per rules of the company.
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No. of Employees 10 - 49 50 - 99 above 100
Limit 1.75 lakhs 3.50 lakhs 4.50 lakhs
This is in sharp contrast to the benefits payable only for the actual service under other methods of funding/ paying gratuity. The benefit is secured at a low cost through One Year Renewable Term Assurance Plan. EXAMPLE: (at half a month's salary per year of completed service - 15/26 of month's salary) An employee joined the service at age -25 years Retirement age -60 years Death at age -35 years Anticipated service -25 years Salary at the time of death -Rs.10000/-per month Gratuity on the accured basis - Rs. 57692/- approx Gratuity on anticipated basis -Rs.2,01,923/- (accrued Gratuity plus life cover of Rs. 1,44,231/- approx) Life cover is based on salary as at annual renewal date. THE SPECIAL FEATURES: The employer has to pay an initial contribution at the inception of the scheme to secure past Service gratuity. The initial contribution may be paid in lump sum or spread over a maximum period of five years. The corporation determines contribution payable as annual premium , under the policy, on the basis of an actuarial variation of the gratuity liability subject to the statutory limit of 8 1/3% of the annual wage bill taking
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into consideration the relevant factors. When the Trustees pay the contribution under the policy, the amount required towards the premium for life insurance benefits is utilized and balance is credited to the running account of the scheme which accumulates at an interest rate declared by LIC form time to time. When the contingency of payment of gratuity arises the necessary amount is withdrawn from the running account for making payment. Upon a claim arising by death the gratuity pertaining to the past service is withdrawn from the running account and the balance is paid from LIC's Life fund. ICICI Group Gratuity Plan ICICI Pru's group gratuity plan helps employers fund their gratuity obligation in a scientific manner. Employers can avail of the tax benefits as applicable to approved gratuity funds. The plan can also be customized to structure schemes that can provide benefits beyond the statutory obligations. Highlights include: ? Wider choice of investments with Market Linked Plans - to meet the diverse financial goals. We offer 4 investment options (short-term debt, debt and balanced and capital guarantee plan) where investments will be made in accordance with the fund objectives. ? Transparency through Daily disclosure of Unit Value and regular disclosure of the portfolio of each of the investment option ? Flexibility through switching and contribution redirection option to enable reshuffling of portfolio ? Bundled Life Cover greater value to the employee by packaging life insurance cover with the gratuity, with minimal amount of underwriting. ? Actuarial services to provide a scientific estimation of the gratuity liability. ? Low explicit charge structure with the conditions for exit specified upfront.
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? Enhanced service levels through faster claim settlement, easier access to information and regular statements. ? Complete end to end solution in the legal and regulatory approval process for scheme set up or transfer.
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Employee Benefits ? The contribution made by the employer is not included in the value of taxable perquisites in the hands of the employee. ? Gratuity received up to Rs 350000 is exempt from Income tax under Sec 10(10) Employer Benefits ? Annual contribution up to 8.33% of salary bill in a financial year is allowed a deduction for the purpose of computation of profits and gains of business ? Contribution towards past service liability is allowed as deduction as per the Income Tax rules. LIC SUPER ANNUATION An organization today, has not only to man the various positions with competent and trained personnel but also has to create an environment wherein they can give their best and derive a sense of well-being, a sense of fulfillment and security and take pride in their continued association with the organization. Provision of pension may be an attraction for such persons to continue in the organization and give their best to the organization, as with continuous improvement in longevity a regular income even after retirement has become a necessity. To provide the pension benefits to employees, an employer has two alternatives under the provisions of Rule 89 of Income Tax Rules 1962. i) Create a privately managed trust fund and as and when a member retires, purchase annuity from LIC to provide pension for such retiring member. ii) Entrust the Management of the Pension Fund to LIC by purchasing its Group Superannuation Scheme. ADVANTAGES OF THE LIC MANAGED PENSION FUND : The LIC managed Pension fund has the following added and distinct advantages :1) An attractive yield on the fund will be credited to Fund A/c. The rate of interest declared for the year 2003-2004 varies between 7.55 to 9.00 depending on fund size. 2) The problem of liquidity gets automatically eliminated as soon as the fund is managed by LIC.
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3) We conduct free actuarial valuations of the funds administered by us from time to time. 4) The Administration of the fund is carried out by us in a scientific manner and claims are promptly settled. 5) Group Insurance in conjunction with the Group Superannuation Scheme can be taken by an Organization to provide for an attractive lump sum payment on the unfortunate death of a member while in service, at very nominal cost. Superannuation Scheme Provided by LIC : The employer contributes a certain fixed percentage of salary of Such Contributions are accumulated by LIC and the accumulated amount is utilized to provide various benefits as mentioned below. BENEFITS: 1) ON RETIREMENT : On Retirement of a member, the corpus (contributions plus interest) is utilized to provide the following :a) Commuted Value (Equivalent to 1/3rd of the corpus) which is tax free. b) The corpus that remains after providing for the commuted value is taken as the purchased price to provide for pension. 2) ON DEATH : The Pension is payable on the life of the beneficiary. Corpus is utilized towards the payment of pension of the type the beneficiary may opt and the benefit so received is tax free. A lump sum payable by way of death besides the pension, if the employer has taken Group Insurance Scheme in conjunction with the Group Superannuation Scheme. 3) ON WITHDRAWAL : a) He can get the equitable interest transferred to the Superannuation Scheme of the new employer provide the rules of both the Schemes provide for the same. b) He may opt for a pension from the normal retirement date as provided in the old employer's scheme.
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c) He may opt for payment of commuted value and pension, immediately in which case the benefits would be taxable. PENSION OPTIONS PROVIDED BY LIC : 1) Life Pension ceasing at death . 2) Life Pension with Return of Capital and Group Pension Terminal Bonus on death. 3) Life Pension guaranteed for 5.10.15 or 20 years and life thereafter. 4) Joint Life Pension payable on the last survivor of the employee and spouse. 5) Joint Life Pension payable to the last survivor of the employee and spouse with return of capital on the death of the last survivor. ELIGIBILITY CONDITION : It is not obligatory or statutory on the part of the employer to provide for pension to all employees. It is entirely upto him to decide to which class/ classes of employees he desires to extends the scheme. The eligibility conditions may be defined on the basis of designation or salary. (However, after the categories are specified, employer cannot discriminate between the employees and thus extends the scheme uniformly). ICICI Group Superannuation Plan ICICI Pru’s Superannuation Scheme (for both Defined Benefit and Defined Contribution funds) offers substantial benefits to both employers and employees. The employer and employee can avail of tax benefits applicable to an approved superannuation trust. The scheme will provide for a retirement fund for each participating employee. An employee would be able to choose from various annuity options or opt for partial commutation of corpus at retirement. Highlights include:
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? Wider choice of investments with Market Linked Plans - to meet the diverse financial goals. We offer 5 investment options (short-term debt, debt, balanced, growth and capital guarantee plan) where investments will be made in accordance with the fund objectives. ? Control - Each member/employer can exercise greater control over investments by choosing one or more of the investment options. ? Multiple Annuity Options - 5 annuity options and open market option ? Transparency - Transparency through Daily disclosure of Unit Value and regular disclosure of the portfolio of each of the investment option ? Flexibility - Flexibility through switching and contribution redirection option to enable reshuffling of portfolio ? Low explicit charge structure with conditions for exit specified upfront. ? Enhanced service levels through faster claim settlement, easier access to information and regular statements. ? Complete end to end solution in the legal and regulatory approval process for scheme set up or transfer Plan for need of Children 1. LIC’s Jeevan ANURAG LIC’s Jeevan ANURAG is a with profits plan specifically designed to take care of the educational needs of children. The plan can be taken by a parent on his or her own life. Benefits under the plan are payable at prespecified durations irrespective of whether the Life Assured survives to the end of the policy term or dies during the term of the policy. In addition, this plan also provides for an immediate payment of Basic Sum Assured amount on death of the Life Assured during the term of the policy. BENEFITS: Assured Benefit: Payment of 20% of the Basic Sum Assured at the start of every year during last 3 policy years before maturity. At maturity, 40% of the Basic Sum Assured along with reversionary bonuses declared from time to time on full Sum Assured for the full term and the Terminal bonus, if any shall be payable. For example, if term of
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the policy is 20 years, 20% of the Sum assured will be payable at the end of the 17th,18th, 19th year and 40% of the Sum Assured along with the reversionary bonus and the terminal bonus, if any, at the end of the 20th year. Death Benefit: Payment of an amount equal to Sum Assured under the basic plan immediately on the death of the life assured. ICICI SmartKid Education Plans As a responsible parent, you will always strive to ensure a hassle-free, successful life for your child. However, life is full of uncertainties and even the best-laid plans can go wrong. Here’s how you can give your child a 100% safe and assured tomorrow, whatever the uncertainties. SmartKid is especially designed to provide flexibility and safeguard your child’s future education and lifestyle, taking all possibilities into account. Choose from amongst a basket of 4 plans: 1. SmartKid regular premium 2. SmartKid unit-linked regular premium 3. SmartKid unit-linked regular premium II 4.SmartKid unit-linked single premium II All these plans offer you: ? Financial Benefits: Regular payments at critical stages in your child’s life, like Board examinations, Graduation and Postgraduation. ? Total peace of mind, even if you are not around ? Sum Assured is paid immediately: Ensures that your loved ones stay financially secure, even in your absence. ? All future premiums are waived: Ensuring that your family is not financially burdened in your absence. ? Policy benefits continue: The educational benefits of the policy continue, ensuring that your child can realize his or her dreams without any hassles. ? Development Allowance: SmartKid guarantees regular income to secure your child’s educational career and also ensures his or her all-round development, for a nominal additional amount. The Income Benefit Rider takes care of this through an annual payment of 10% of the sum assured, to your child, till the maturity
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of the policy, in the unfortunate event of the death of the parent. ? All SmartKid plans can be enhanced with the Accident & Disability Benefit Rider and Income Benefit Rider.You can also an Accident Benefit Rider to a SmartKid Regular Premium policy,and a Waiver of Premium Rider (WOP) to SmartKid unit-linked regular premium policy.
CONCLUSION Over the last 3 yrs around 40 companies have expressed interest in entering the sector .Many foreign & Indian companies have arranged anticipatory alliance .It has concluded that nationalized player will continue to hold strong market share position but there will be enough business for new entrants to be profitable.
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LIC settles 1.43 claims every Second.
Growth in LIC's Policies Year 69-70 74-75 79-80 89-90 95-96 96-97 97-98 98-99 No of Policies, in millions 14.0 18.8 22.1 40.4 71.0 77.8 85.0 91.7 Sum assured, in Rs. crore 6348.1 11852.2 19242.6 94823.2 295758.0 344619.3 400747.9 459201.04
Year 75-76 78-79 81-82 85-86 89-90 93-94 97-98 98-99 LIFE INSURANCE (Term)
Growth in LIC's Claims Claims (Death + Maturity) 165.9 232.9 376.6 728.8 1196.9 2725.3 6677.0 7583.18
Annual premium in Rs AGE LIC HDFC STD 2,460 BIRLA MAX K 20 1,455 2,560 2,000 2,800 2,278 OM KOTAK ICICI PRU
SUNLIFE NEWYOR
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25 30 35 40 45 50
1,601 2,037 2,910 4,462 7,227 11,204
2,620 2,820 3,050 3,790 5,520 8,320
2,890 2,950 3,310 4,310 5,990 8,790
2,110 2,280 2,920 4,160 6,370 10,000
3,100 3,400 4,200 5,778 8,056 12,020
2,327 2,504 2,925 3,601 5,336 8,197
THE COMPANY ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential''s equity base stands at Rs. 675 crore with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. In the quarter ended June 30, 2004, the company issued over 100,000 policies, for a total sum assured of over Rs 3,753 crore and had a new business premium income of Rs. 242 crore. Today the company is the #1 private life insurer in the country. DISTRIBUTION ICICI Prudential has one of the largest distribution networks amongst private life insurers in India, having commenced operations in 62 cities and towns in India. These are: Agra, Ahmedabad, Ajmer, Allahabad, Amritsar, Aurangabad, Bangalore, Bareilly, Bhatinda, Bhopal, Bhubhaneshwar, Chandigarh, Chennai, Coimbatore, Dehradun, Goa, Guntur, Gurgaon, Gwalior, Hyderabad, Hubli, Indore, Jaipur, Jalandhar, Jamnagar, Jamshedpur, Jodhpur, Kanpur, Karnal, Kochi, Kolkata, Kolhapur, Kota, Kottayam, Kozhikode, Lucknow, Ludhiana, Madurai, Mangalore, Meerut, Mumbai, Nagpur, Nasik, Noida, New Delhi, Patiala, Pune, Raipur, Rajkot, Ranchi, Rourkela, Siliguri, Surat, Thane, Thrissur, Trichy, Trivandrum, Udaipur, Vadodara, Vashi, Vijayawada and Vizag.
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The company has ten bancassurance tie-ups, having agreements with ICICI Bank, Federal Bank, South Indian Bank, Bank of India, Lord Krishna Bank, as well as some co-operative banks and corporate agents. It has
Year 2001-02 2002-03 2003-04 ICICI Pru Locations 11 24 54 Towns Covered 12 27 59 SEC AB HH % Coverage % Coverage ('000) SEC AB HH Total HH 3,718 4,429 5,513 45% 54% 67% 42% 51% 64%
also tied up with organisations like Dhan for distribution of Salaam Zindagi, a policy for the socially and economically underprivileged sections of society. .ICICI Prudential has recruited and trained over 36,000 insurance agents to interface with and advise customers. Further, it leverages its state-of-the-art IT infrastructure to provide superior quality of service to customers. ICICI Prudential Life Insurance Joint Venture between ICICI Bank and Prudential Plc. (UK) India’s No. 1 Private Life Insurance Company consecutively for 3 years in a row Market Share (Among Private Life Insurers) – 36% Paid Up Capital – Rs.675 Crores No. Of Policies Sold – 1 million Assets Under Management – 1700 Crores Sum Assured – 20,000 Crores
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ABOUT US ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and Prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential's equity base stands at Rs. 8.25 billion with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. In the half year ended September 30, 2004, the company garnered Rs 498 crore of new business premium for a total sum assured of over Rs 23,000 crore and had over 1 million policies. The company has a network of over 40,000 advisors; as well as 7 bancassurance tie-ups. Today, ICICI Prudential has emerged as the No. 1 private life insurer in the country, with a wide range of flexible products that meet the needs of the Indian customer at every step in life. ICICI Market Share Total Market size: INR 205 Billion
ING Vyasa 3.5% AVIVA Life SBI Life 3.7% 4.1% Om Kotak 5.7% Max NYL 6.2%
Metlife 1.1%
AMP Sanmar 1.2% ICICI Pru 36.2%
Allianz Bajaj 8.7%
Tata AIG 6.0%
Birla Sunlife 14.0%
HDFC Standard 9.4%
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Market share with other players
LIC ICICI PRU SUNIFE BIRLA TATA AIG OTHERS
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FUTURE POSSIBILITIES (NEXT 5-10 YEARS)
Job opportunities are likely to increase manifold. The number of people working in the insurance sector in India is roughly the same as in the UK with a population that is 1/7 India's; the US with a population 1/4 the size of India has nearly 4 times the number. In the emerging markets, the picture is no less encouraging. In S Korea, the no of full time employees more than doubled over a ten year period. Thailand added 50 per cent more jobs in four years. The liberalization of the insurance sector promises several new jobs opportunities for those employed in the finance sector who are equipped with degrees in finance. Finance professionals who had witnessed a slump in the job market would be a much-relieved lot to hear about the privatization of the insurance sector. Let us look into the type of jobs that will be created once the private players come on the scene. Certainly, it won't be far different from the traditional streams in any other industry. There will be demand for marketing specialists, finance experts, human resource professionals, engineers from diverse streams like the petrochemical and power sectors, systems professionals, statisticians and even medical professionals. Apart from this, there will be high demand for professionals in the streams like Underwriting and claims management and actuarial sciences. There could be a huge inflow of funds into the country. Given the industry's huge requirement of start-up capital, the initial years after opening up are bound to see a strong inflow of foreign capital. Moreover, given that the break-even, typically, comes much later than in the case of other sectors, odds are that the first remittance of dividend will not happen before a good 10-15 years. In the areas of reinsurance, huge capacity is likely to be created with players like Swiss Re and Munich Re keenly observing the unfolding saga of liberalization of insurance industry in India. Not only the outward reinsurance will reduce, it is bound to attract inward reinsurance from the neighboring countries and regions. If the regulator is forward looking and legislature is supportive, this trend may well lead to the creation of a Lloyds like market for the direct as well as reinsurance businesses.
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However, increased competition is very likely to result in rate reductions in certain classes of business, but in those areas that have so far been cross subsidized, an increase in rates may be possible. Overall, the rate reductions may outweigh the increases, thus bringing down the reinsurance premium volume available. Apart from pure re-insurance activities, which is providing insurance protection, a revolution will come in service related fields like training, seminars, workshops, know-how transfer regarding risk assessment and rating, risk inspections, risk management and devising new policy covers, etc. Also, with more players in the market, there will be significant increase in advertising, brand building, and keen pricing not ridiculous pricing and this will benefit whole lot of ancillary industries. Another effect of de-regulation will be that, projects, especially megaprojects where one needs the capacities of the international reinsurance market, will get exposed to international trends to an even greater extent than is the case today. This will affect rates too. Areas like the personal lines segment, where we also expect to see substantial growth as also new types of covers, would usually not be affected by international trends in the same way as, there is much less need for global re-insurance support. Substantial shift in the distribution of insurance in India is likely to take place. Many of these changes will echo international trends. Worldwide, insurance products move along a continuum from pure service products to pure commodity products. Initially, insurance is seen as a complex product with a high advice and service component. Buyers prefer a faceto-face interaction and place a high premium on brand names and reliability. As products become simpler and awareness increases, they become offthe-shelf, commodity products. Sellers move to remote channels such as the telephone or direct mail. Various intermediaries, not necessarily insurance companies, sell insurance. In the UK for example, retailer Marks & Spencer now sells insurance products. In some countries like Netherlands and Japan, insurance is marketed using post office's distribution channels. At this point, buyers look for low price. Brand loyalty could shift from the insurer to the seller. In other markets, notably Europe, this has resulted in banc assurance: banks entering the insurance business. The Netherlands led with financial services firms providing an entire range of products including bank accounts, motor, home and life insurance, and pensions. Other European markets have followed suit. In France over half of all life
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insurance sales are made through banks. In the UK, almost 95% of banks and building societies are distributing insurance products today. In India too, banks hope to maximize expensive existing networks by selling a range of products. Various seminars and conferences on banc assurance are taking place and many bankers have clearly shown their inclination to enter insurance market by leveraging their strengths in the areas of brand image, distribution network, face to face contact with the clients and telemarketing coupled with advanced information technology systems. The mergers of Citibank with Travellers in USA and of Winterthur, the largest Swiss Co. with Credit Suisse are recent examples of the phenomenon likely to sweep India too. Insurers in India should also explore distribution through non-financial organizations. For example, insurance for consumer items such as refrigerators can be offered at the point of sale. This piggybacks on an existing distribution channel and increases the likelihood of insurance sales. Alliances with manufacturers or 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 co-operation. Worldwide interest in E-commerce and India's predominant position in information technology and software development is also likely to be a major factor in the marketing of insurance products in the immediate future. The internet account is increasing in arithmetic progression and the trend has already been set by some of the leading insurers and insurance brokers worldwide. Finally, some potential Indian entrants into insurance hope to ride their existing distribution networks and customer bases. For example, financial organizations like ICICI, HDFC or Kotak Mahindra intend to tap the thousands of customers who already buy their deposits, consumer loans or housing finance. Other hopeful entrants anticipate specific alliances such as with hospitals to provide health cover.
CONCLUSION
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The huge life fund can be utilized for financing the infrastructure industry as well as provide support to other industries in the country. Hence, the insurance industry is likely to play a key role in changing the economic landscape of the country. However, the success of the insurance industry will primarily depend upon meeting the rising expectations of the consumer who will be the real king in the liberalized insurance market in future.
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BIBLOGRAPHY ? Service Marketing by:- Ravi Shankar ? Insurance by:- M.J. Mathew ? Service Sector Management by:- Romeo Mascreaneous ? Financial Times ? Internet ? Times of India
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INDEX 1. INTRODUCTION 1 2. BRIEF HISTORY OF INSURANCE SECTOR IN INDIA 2 3. INSURANCE SECTOR REFORMS 3 4. FUNCTION OF INSURANCE 5 5. ROLE OF INSURANCE SECTOR IN INDIA 7 6. SIGNIFICANCE OF INSURANCE 11 7. LAWS GOVERNING INSURANCE SECTOR 16 8. DEVELOPMENT IN INSURANCE SECTOR 18 9. PEST ANALSIS 20 10. 11. 12. SWOT ANALYSIS 21
PRIVITIZATION OF INSURANCE 23 IMPACT OF BUDGET(2003-04) 25
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13. 14.
TYPES OF INSURANCE 26 DISTRIBUTION CHANNELS 43 INSURANCE CLAIMS 48
15. 16.
INSURANCE IN RURAL INDIA 56 17. SERVICEMARKETING 62
18. COMPARISON BETWEEN LIC &ICICI PRUDENTIAL 79 19. UTURE OF INSURANCE 102
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