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India at a glance Population: 1 Billion Economy: 5th largest in the world in terms of
Purchasing Power Parity (PPP) GDP growth Rate: Over 6% per year on an average for the last decade Savings Rate: Around 26% of GDP Estimated middle class population: 300 Million Insured population: 70 million only The Life Insurance Scenario in India
Since 1956, with the nationalization of insurance industry, the state-run Life Insurance Corporation of India (LIC) has held the monopoly in that country's life insurance sector. General Insurance Corporation of India (GIC), with its four subsidiaries, was its counterpart in the casualty sector. Over time, taking advantage of its monopoly and virtual prerogative in establishing premiums, LIC has evolved into a monolith. With around 600,000 agents in every nook and corner of the vast country, it has created an enviable brand name, particularly among the rural population of the country. It has around $40 billion as its life fund and is a strong player in the financial sector. However, on the qualitative side, it has very little to take pride in. And there lies the potential for private players to challenge this behemoth. As is
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typical with monopolies, the premium rates charged by LIC are among the highest in the world, and its track record in customer service can, at best, be called shabby. With a huge unionized, rigid workforce mostly in the clerical category, LIC runs the risk of high fixed cost, which will be the deciding factor in productivity in the competitive scenario. While boasting full-scale automation of its operation, the truth is that its technology is outdated. The new players, with the state-of-the-art technology under their belt, will be in an advantageous position. 80% of LIC's business is procured by 20% of its ill-trained agent force. The foreign player, with the domestic partner's strong brand value, can test the unconventional distribution channels like brokers, the Internet, the banking distribution system, etc. Although foreign players may be tempted to keep their operation in the big cities for the 'creamy layer' of the society, the real market lies in rural India, which accounts for the lion's share of LIC's present business. The foreign player must learn to adapt to Indian realities. The wellpublicized failures of world famous consumer goods companies like Electrolux, Whirlpool, Reebok, Nike etc. to gauge the Indian psyche and sentiments demonstrate the concept. They failed in the areas of realistic pricing, product promotion and reaching to the consumer. The foreign companies need to know the "ground realities" to the details.
INSURANCE SECTOR IN INDIA
The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries.
A brief history of the Insurance sector
The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are:
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1912: The Indian Life Assurance Companies Act enacted as the first 1928: The Indian Insurance Companies Act enacted to enable the
statute to regulate the life insurance business.
•
government to collect statistical information about both life and non-life insurance businesses.
•
1938: Earlier legislation consolidated and amended to by the Insurance 1956: 245 Indian and foreign insurers and provident societies taken over
Act with the objective of protecting the interests of the insuring public.
•
by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.
Opportunities and threats in rural markets:
Opportunities and threats go hand in hand in every industry and insurance industry is no acceptance. Identification of opportunities and threats helps in better analyses of the market. An attempt is made to examine the opportunities and threats related to rural insurance market and how insurers can get most out of them.
Opportunities:
Gigantic population: India has higher population growth rate. The rural population amounts to nearly 72% of the total population and as discussed earlier, majority of them are left uncovered. This can be a major avenue for the players in the insurance market. Agriculture insurance: agriculture is the major vocation and source of income for the rural India. This segment has vast potential that cannot be overlooked. Growth in income level of the rural population: the income of the country as well as the individual income level is on the rise. The agriculture and allied sector are showing steady growth rate. The rural market contributes up to 55% of national GDP. It points out to the tremendous amount of potential available in rural areas. High savings habit: Indians, and in particular rural people have high savings habit. This may be due to uncertainties and perils; they are exposed to in the rural areas. Hitherto, they had only a few investments of avenues like bank deposits, and
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Insurance could be made and alternate investment, opportunity with the benefit of life cover. Falling interest rates: Insurance has become an alternative investment product. With the fall in the interest rates, insurance products can be made investment avenues, which give good returns with insurance protection.
Threats:
Uneven distribution of population: The Indian population is not evenly distributed. The percentage of villages with population below 200 is 20% and the percentage of villages between 200 & 500 is 40%. The total villages exceed 6 lakhs in number. The uneven population distribution could be a hurdle for insurance companies to reach the final customers. Because insurance is a unique product which is to be solved by the methods of personal selling i.e. high in cost. Hence it will take a long time and alternative channels of distribution. Low literacy level and insurance awareness: statistics suggest that literacy is as low and much has to be done in this area. Low literacy stands out as another major threat for the insurers because communicating the benefits and mechanism of insurance products to the illiterate or semi-literate masses may not be easy. Rural employment condition: the major employment source for the rural populace exists only in agriculture and allied activities. These professions need much muscle work, which affect the longevity of the person. the earning power of a person is a crucial point for life insurance underwriting, and insurers cannot ignore this fact Traditional savings habit: if we give a close look at the saving habit of rural population, we find that they prefer to invest in real assets than in intangible assets like banks; insurance, post and non-agricultural, gold and silver etc. to shift their saving habits from tangible to intangible assets would be a big challenge for the financial institutions. Health conditions: with the effort of governmental and non-governmental organizations there is some improvement in the health conditions of Indian population, especially in the urban areas. But much ahs to be done in the rural areas. Many of the villages still do not have minimum basic amenities like proper sanitation, drinking water facilities, good hygiene environment, and health facilities etc., which have direct and indirect impact on their health condition.
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People’s psychology: the majority o the Indian, especially rural population, believe in god and are superstitious to some extent. They tend to either retain the risk or avoid the risk, instead of managing or hedging the risk. This tendency should also be considered as a potential threat in selling insurance. Credibility: the research studies conducted by FICCI in association with ING insurance reveal that, one of the major factors influencing the marketing of insurance in rural areas is the credibility of the insurers. In the past, there were cases of financial frauds, which affected the faith of rural population adversely. Confidence building exercises need to be carried out, and government and the IRDA need to join hands with the insurers in this regard.
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 recognizing 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: 1)
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
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2)
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
3)
Regulatory Body
The Insurance Act should be changed An Insurance Regulatory body should be set up Controller of Insurance (Currently a part from the Finance Ministry) should be made independent
4)
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)
5)
Customer Service
LIC should pay interest on delays in payments beyond 30 days
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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. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crore. 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. The Budget opens up insurance to private domestic companies The Bharatiya Janata Party-led coalition government presented its first Union Budget on June 1. In a landmark move, it opened up the insurance sector for competition from private Indian companies. It also promised to grant statutory status to the Insurance Regulatory Authority (IRA) later in the year. The Finance Minister, Mr Yashwant Sinha, said that inviting domestic competition into insurance was aimed at improving insurance coverage for Indians and to augment long-term funds that can be used to finance infrastructure projects. However, he did not specify the insurance segments in which competition from private players will be permitted; nor did he specify whether foreign insurance companies registered in India (which are technically also termed "Indian companies") would be allowed to provide insurance services.
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Proposed ventures
Life Insurance
Indian partner HDFC 20th Century Finance ITC Tata Group Godrej Group ICICI Ranbaxy Dabur Foreign partner Standard Life Canada Life Eaglestar AIG J Rothschild Prudential CIGNA Liberty Mutual
Privatization: Start Up Strategy
Potential private entrants therefore expect to score in the areas of customer service, speed and flexibility. They point out that their entry will mean better products and choice for the consumer. Critics counter that the benefit will be slim, because new players will concentrate on affluent, urban customers as foreign banks did until recently. This might seem a logical strategy from the point of view of new players. Startup costs-such as those of setting up a conventional distribution network-are large and high-end niches offer better returns. However, in the long run 'middle-market' offers the greatest potential as in terms of it is the second largest market in the world. This may still be an urban market but goes beyond the affluent segment. Insurance, even more than banking, is a volume game. A very exclusive approach is unlikely to provide meaningful numbers. Therefore, private insurers
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would be best served by a middle-market approach, targeting customer segments that are currently untapped.
UNIVERSAL Insurance - Profile of existing business in India
Life Insurance business was privatised and Universal Insurance Corporation came into existence on 1st September, 1998 with its Corporate Office at Mumbai. Some of the objectives are:
• • • •
To spread Life Insurance To maximize mobilisation of people’s savings To meet the various life insurance needs of the country To discover new markets in rural India
A portfolio of 4.17 lacs of policies in India and total Sum Assured of Rs. 174 crores was undertaken by UIC for servicing . UIC has grown by leaps and bounds during these 6 years and in 1999-2000 alone 1.48 lacs of new policies with a Sum ssured of Rs. 75.31 crores were sold. UIC registered a mammoth all round growth and is a competitive player in Life Insurance business with its diversified products. UIC is present throughout the country through its 48 Branch offices, 10 Divisional Offices and 4 Zonal Offices. The extra-ordinary growth of UIC was possible because it tried to spread the message of “INSUARANCE” not only to the urban area of the country but also has given special thrust on rural life insurance and especially in the states of Gujarat & Maharashtra.
Our Strength is our Field Force
We reach our products to our customers through our massive field force. As on 31.3.02 UIC had 27,684 agents on roll working under the supervision of 1,100 Development Officers. These agents are being trained through 4 sales Training Centers. The recruited agents spread over the different parts of the country. To make the agency force professional, RURAL and URBAN agents are being recruited by UIC. These agents are provided with fixed stipends in addition to the commissions derived from the business procured by these forces.
Thrust on Rural Insurance
Another important thrust area is “RURAL INSUARANCE” sustained and constant efforts are made to carry the message of life insurance into the rural masses,
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especially in the back ward and remote areas. As a result , there has been steady all round growth in the industry. The share of industry’s Rural business in 1998-99 50.2% and 45.2% in Policies and Sum Assured respectively.
Measures adopted by UIC for better servicing
• • • • • • • • •
Providing quick and satisfactory services to the customers. Up gradation of Technology-Front End Application Packages Metro Area Net Working Inter Active Voice Responding Systems (IVRS) Reduction in Time Lag Inclusion of retired H C Judge in Claims Review Committee at Zonal Offices. Monday Grievance Redressed Cell Special Revival Campaign every year UIC International E C at Bathroom for Indian rupees and other Local currencies
Urban v/s Rural Markets.
The growth in the insurance sector is higher than the GDP growth-rate of the country. The insurance premium income has grown from 1.77 % to 2.59 % of the GDP in the last one year. Indian Insurance can be divided into urban and rural markets. These two segments are diverse in nature and have distinguished characteristics. The economic growth of the two have not been the same. A wide disparity exists between per capita income and literacy rate, among other things in these two sectors. From insurance perspective, statistics show that rural population has a much lower reach. The agent per 1000 persons is around 0.25, which is far low in comparison to that of the urban market. Insurers may use this knowledge in designing innovative products, needbased selling of insurance, better penetration, development of new channels etc. Most new insurance companies started operating from metros and urban areas. As a result, the urban population got more attention and led to more penetration in urban than in rural markets. The urban segment in India is small compared to rural segment. Hence exploring the rural markets poses to be the Herculean task to the insurers. Experts are of the opinion that the urban markets are rapidly being saturated, and the future growth potential lies in the rural areas. However, it does not signal that the whole of urban population is roofed, but the percentage of the first time buyers would be on decline. It is a fact that the urban population has greater accessibility and reach to the insurance products. Also, most of this population is a
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part of organized sector and has an insurance cover directly or indirectly. Their higher education has led to the better awareness of financial and insurance products. They are more informed about market conditions, and demand product innovations to suit their growing needs. But the situation with the rural populace is different. A majority of them are left uncovered although they are exposed to similar risks similar to or even higher ratio of rural Indian population is very high and it has a growing insurance needs; therefore, it is a fact that the potential growth of insurance industry lies in the rural market, both of life and general (non-life) insurance. A lot of study and research was and is being carried out in this direction to develop new strategies to explore the untapped area of Indian insurance market.
MISSION
Our corporate mission at The Universal Insurance is to provide premier personal Life insurance products and quality service to our agents and customers. Our overall objective is to produce consistent underwriting results by structuring exceptional programs and providing superior service, and to grow our business every year. This objective will be accomplished by creating a workplace where employees are challenged to improve our work product. We will strive to make certain that our people understand the link between their performance and the success of the company; that goals are established, responsibilities are given, and measurements are installed to ensure accountability across functions; and, that we operate a company with integrity where mutual respect and teamwork are more than mere words. In today's rapidly changing economic climate, we like to think of ourselves as both challenged and fortunate to be able to serve our insured in ways they have grown to trust in the past. Our goal at The Universal Insurance is to do just that. After all, that's what "Universal" means – excellence allover.
SWOT OF THE COMPANY Strength
Brand Image: - A brand image that we have created over the years in the Indian market does help us to sell the product. It is also due to our goodwill. Pace: - The pace at which we deliver our service to the client from removing his/her policy to the receipt of the sum assured.
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Special policies for rural market to suit the needs of the people of rural area that is designed to fit in their economy giving them maximum protection.
Weaknesses
Difficulty in marketing: - Because of the size of the rural population varying, lack of insurance knowledge among the villagers and also the product asking for personal selling Consumer Perception: - The customer is not so sure investing in a non government organization and he doesn’t trust them either. Lack Of proper and efficient risk management system.
Opportunities.
Huge Population out of which 70% of the people are uninsured out of which 45% make for the people aging more than 25 years Growing Awareness: - with the growing influence of the new products on the rural population people get aware about this product too. Growth of discretionary income.
Threats.
Competition from public and private players.
Uncertainty in Socio-Economic and political conditions.
Government Interference: - The government interferes in the company’s targets policy structure and the amount of premium.
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MARKET SHARE
Private Insurer ICICI Prudential SBI Life Birla Sunlife Tata-AIG Universal Insurance Co. Met Life Aviva Bajaj Allianz Om Kotak
Market Share 2002-03 2003-04 1.51 3.14 2.03 2.96 2.63 2.76 1.69 2.2 1.5 2.02 1.27 1.6 1.3 1 0.07 0.69 0.1 0.6
Insurer New India National United India Oriental
Market Share 2002-03 2003-04 27.5 24.99 20.08 21.2 20.81 19.04 19.52 17.8
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7’P’s Or The Marketing Mix Of The Service (Insurance) Industry Product & Price: JAN SEVA POLICY
General Policy Conditions Min. age at entry 18yrs Max. Age at entry 45yrs Max maturity age 60yrs Minimum term 15yrs Maximum term 30 yrs Min sum assured Rs. 25000 Max sum assured Rs. 500000 S.A. in multiples of Rs. 500 modes allowed all accident benefit per 1000 S.A INC. T.P Underwriting requirements Female lives category 1/2/3 Age proof Std/Non.Std Form No 320jp/300 Dating back @ 10.5% Allowed Non-medical (general) upto 25000 Non-medical (express) upto 35000 Non-medical (prof) upto 25000 Non-medical (special) upto 35000 Risk coverage S.A.+ Bonus actual sum assured basic S.A. Policy servicing Policy loan. Housing loan. Assignment. Surrender of policy Survival of policy Agriculture loan Educational loan
Maximum age of entry is restricted to 40 yrs in case of non- medical sub. to a max. S.A. of Rs. 25000. Age proof is not insisted, if sum assured is Rs 25000 or less. Best suited for people with irregular income and whose job is not secured. For example farmer, artisan, milkman petty businessmen. On maturity, sum assured + bonus is given. On death of the policyholder before maturity, sum assured + bonus is given to the nominees. Plan is not allowed to widows belonging to category 3 Even if the policyholder is not able to pay further premiums after paying first two years. Premiums, the life risk cover continues for three more years from the date of premium unpaid. Premiums have to be paid till maturity or death of the policyholder, whichever is earlier.
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For females under category 3, plan is allowed only for literate females having independent income subject to a maximum of Rs 25000 S.A. Maximum term is restricted to 20 years in case of non- standard age proof subject to maximum S.A. of Rs 25000. Financial security for the family, in case of unfortunate death of the policyholder, as risk is covered during lapsed period of the policy, (up to 3 yrs) after the premium is paid for two years.
JAN SEVA LIFE GOLD
(A WHOLE LIFE PLAN FOR THOSE WHO WANT THEIR LIFE INSURANCES POLICY TO DO AS MUCH FOR THEM AS FOR THOSE THEY LEAVE BEHIND) The universal Maha Life gold plan is truly one of a kind offering you many services and benefits. Only a 15-year premium paying period for lifetime coverage. Cash dividend from 6th year onward* tax-free. On death or on maturity at age 100, the entire sum assured will be paid. Taxfree. Premium paid eligible for tax exemption benefit u/s88 as per current income tax act. Guaranteed annual payment of 5% on sum assured from the10th policy anniversary onwards for life. This amount is tax-free. ELIGIBILITY Entry age- 30years to 60 years. Minimum sum insured- Rs.50, 000
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BIMA SANDESH POLICY Urban policy
General Policy Conditions Min. age at entry 18yrs Max. age at entry 50yrs Max maturity age 65yrs Minimum term 25yrs Maximum term 50 yrs Min sum assured Rs. 50000 Max sum assured Rs. 10000000 S.A in multiplies of Modes allowed all Accident benefit / 1000 S.A Inc. T.P Underwriting requirements Policy servicing Yes Female lives category 1/2 Policy loan. No age proof Std/ Housing loan. Yes Form No 300 Assignment. Yes Dating back @ 10.5% Allowed Revival Yes Non-medical (general) not allowed Surrender of policy No Non-medical (express) not allowed Survival of policy No Non-medical (proof) not allowed Non-medical (special) not allowed Risk coverage S.A. Actual sum assured 2 times S.A.
A must policy for youngest, whose income is less but insurances needs are large. More suitable for businessmen with huge commitment and (a) Who do not want to pay high premium. (b) Who generally do not bother about returns? (c) Who consider insurances is necessary. Plan is not allowed to non-earning major lives. No bonus. In case of death before maturity, nominee is paid full sum assured. True insurance, low premium and high risky cover. People involved in hazardous occupation are not allowed to take this policy. Full medical report is a must irrespective of sum assured & doctors limits should be2 times of S.A. On survival till maturity only total premium paid is given.
ASHA BIMA
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SANDESH
General Policy Conditions Underwriting requirements Policy servicing Min. age at entry 18yrs female lives category 1/2 Policy loan. Yes Max. Age at entry 50yrs age proof Std Housing loan. No Max maturity age 65yrs Form No 300 Assignment. No Minimum term 20/25YRS Dating back @ 10.5% Allowed Revival Yes Maximum term 15/20/25YRS Non-medical (general) not allowed Surrender of policy Yes Min sum assured Rs. 50000 Non-medical (express) upto 1 lacs Survival of policy No Max sum assured Rs.5 lakhs Non-medical (prof) not allowed S.A in multiplies of 10,000 Non-medical (special) upto 1lacs Modes allowed all Risk coverage S.A.+bonus Accident benefit per 1000 S.A INC. T.P actual sum assured 1.5 times S.A.
This is health insurance policy. The health benefit is available only after one year of taking the policy. On maturity or early death, 50% of the sum assured + bonus till/ maturity death whichever is earlier is paid. It covers the following 4 major health ailment 1.cancer 2. Paralytic stroke leading to permanent disability 3. Renal failure of both kidneys 4.coronary artery diseases where bye-pass surgery has been done. A good policy that provides immediate amount in case of policyholder getting any of the above of the 4 health problem
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Competitor in Gujarat BIRLA SUN LIFE
Birla Sun Life Bima Kavach Yojana
The Birla Sun Life Bima Kavach Yojana is a single premium insurance policy specially designed for the rural underprivileged.
What is the product?
Eligibility How much do you pay Duration of the plan On death during the duration of plan On surviving the duration of plan Within 1 year Between year1 & year 2 Between year 2 & year 3 Aged between 18 and 50; Gainfully employed and active at work A one-time payment of Rs.50/- or Rs.100/- or Rs.200/3 years We pay your nominee one hundred times the amount paid by you We pay 1.10 times the amount paid by you On Surrender: Premium amount 1.04 times Premium amount 1.08 times Premium amount What are the benefits
General Exclusion: If the life insured dies during the duration of plan, the cause of death being suicide, we will not pay the normal death benefit but will refund the amount paid by you as premium.
Competitor In Maharashtra
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ICICI- Prudential
Policy Of ICICI PRUDENTIAL in Rural Maharashtra ICICI Pru Mitr – Endowment Plan ICICI Pru Mitr offers the following features: Life Cover and Savings Regular Premiums Age at entry : Premium Mode : Term : Sum Assured : Premium / Year : Maturity/Death : benefit
18 - 45 Yrs Half Yearly / Yearly 5,10,15 Yrs Rs.5,000 -20,000 Rs. 507 - 553 (SA: Rs.10,000) Sum Assured
ICICI Pru Suraksha - Regular Premium ICICI Pru Suraksha is a regular premium policy with the following features: Individual policy Only Life cover Term - 3 & 5 Yrs Age independent premium Age at entry Sum Assured Premium / Year Maturity/Death benefit Death Benefit
: 18 - 45 Yrs : Single : Rs 50 - 200 : Rs.5,000 - 20,000 : Sum Assured
Service Flower
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P R E M I U
Rural Marketing
M
A mt. Cu mu lati on
e Ser vic Do orDo or
s T a x B e n ef it
A market segment consists of a large identification group within a market. A company that practices segment marketing recognizes that buyers differ in their wants, purchasing power, geographical locations, buying attitudes and buying habits. Hence Company tries to isolate some broad segments that make up the market. We have segmented our market on basis of the age and gender. Rural Age Wise Distribution Age Group 15 – 18 18 – 24 25 – 34 35 – 44 45 & Above Percentag e 16.2 18.5 29 23 13
And on the basis of gender, we have segmented as
Male Female and Kids
s n e pt io c x E
S A F E T Y
SEGMENTING
TARGETING
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As a market for our new policy, we have targeted males above the age of 18 involved in agriculture and supply of agricultural products. Because mostly adult people take insurance as the protection and security. Young people in villages are not even aware of the same. Because females in villages are conservative and they don’t take part in the economy of the house. Also they are unaware of the various insurance policies, benefits etc.
POSITIONING
The male or the head of the family generally take insurance for his family as a security and protection so that if because of the uncertainty the future of his children and family is not affected. Hence we have positioned ourselves as Suraksha aapke aapno ki, which means: Protection for you as well as your beloved. Tamara Parivar no aadhar : Support for your own Family. CONSUMER BEHAVIOUR MOBILE phones, computers, cars, and now insurance. Rural India seems to have an appetite for it all. Going by the findings of a recent study conducted by market research agency, MART, the rural consumer is now exhibiting an increasing propensity for insurance products. And the biggest surprise is this — rural consumers are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium each year, though the maximum takers are for products with sum assured of anything between Rs 25,001-Rs 50,000. Besides, 23 per cent of the respondents are willing to buy insurance worth Rs 75,001-Rs 1,00,000. According to the study, while the awareness levels for life insurance is the highest, consumers in rural India are also aware of motor, accident and cattle insurance. "Insurance awareness in the life sector is extremely high, thanks to the Governmentowned Life Insurance Corporation," said Mr Pradeep Kashyap, Managing Director, MART.
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Over one-third of the respondents profiled by MART said that they had purchased some type of insurance, with maximum penetration skewed in favour of life insurance.
Place: IRDA guidelines The IRDA guidelines define a Rural village as one in which : The total population is not exceeding 5000. The density of population is not more than 400/sq.km. At least 25 % of the male population is dependant on agriculture as source of livelihood. The places that we have chosen in India to market the policy in rural parts are the states of Maharashtra and Gujarat.
Profile Maharashtra: State Capital Population ('000s in 2001) Area ('000 sq. km) Females per 1000 males (1991) Literacy rate (1991) Ratio of urban population (1991) Growth Rate Gross Domestic Product Per Capita Income (Rs. at current prices in 1992-93) Principal Language Mumbai 96,752 308 934 77.27% 42.11% 4.0% (2002-03) 10,984 Marathi
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Profile Gujarat: State Capital Gandhi Nagar Population ('000s in 1991) 41,310 Area ('000 sq. km) 196 Females per 1000 males (1991) 934 Literacy rate (1991) 61.3% Ratio of urban population (1991) 34.5% Net Domestic Product (Rs. mn at current prices in 1992-93) 322,400 Per Capita Income (Rs. at current prices in 1992-93) 7,586 Principal Language Gujarati Total Area 196,024 sq km
Promotion: Advertising: We advertise in newspapers of the Marathi (in Maharashtra) and Gujrathi (in Gujarat) and occasionally in the Times of India, Economic times and the Mid day for broad coverage. We also advertise in televisions on Doordarshan, and on radio channels like AM 106.
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We donate 5% of our annual profits to a hospital that is named under the company for the free check up of the clients and also providing some emergency services as & when required. These hospitals are only present in one among four neighboring villages. We have such 7 hospitals in Maharashtra & 5 in Gujarat.
24 Hour Help line: To help our customers with all the information all the time we have taken an initiate of keeping a 24-hour toll free help line number 1600-333-333.This helps the customer to know about the policy and this also helps to select them a policy that would match their requirements and demands.
Sales Promotion: To make people aware of the company and its policies along with all the other help full information required by them to become the clients of the company we conduct exhibitions and promotions. During these promotions stalls are setup in the weekly bazaars or on the days of the panchayats. The Sarpanch conveys the benefits of the taking up insurance and becoming our clients as he holds the command of Panchayats. The village agents who know to speak the local language handle all these promotions. The main aim of these promotions is to make the villagers aware of the company’s policies and the benefits of the same.
Word Of Mouth Promotion: We as a company do keep up the value of the service we provide to the customers so that they do say a good word about the services provided by us. Even this can help us to gain a bit in the market share, because in villages this is a popular way of promotion in villages.
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Personal Selling: This technique is of contacting people those come in the sales promotion or contact us on the toll free number for the information. We go door – door to provide our services and do create awareness to increase the sales.
Puppet Shows : This is one of the strategies used by the company’s agents to attract the villagers to know the benefits of the insurance. For e.g. :- one of the puppet shows can be that two men while crossing the road meet in an accident with a truck. One of the families is helpless as he was the only workingman in the family and didn’t have an insurance cover. But the other person was again the only man working in the family but had one of the policy of the company that did help the family to live as they received as fair amount of the assured sum.
People: A service-based organization cannot work properly until it doesn’t have people to provide the services in time. The people involved in an organization providing insurance are as under
Brokers: The brokers, who are professionals in the area of insurance, will be acting on behalf of the customers, rendering quality advice to them not only on the products but also on the company from which they can take such products. The brokers have to maintain a certain capital limit as per the Regulator to protect the customer’s interest.
Agents: These are the people who promote the policies of the company in either ways of people coming to them or they trying to approach the people and completing their monthly targets. Agents start from the point of enquiry of a prospect, then knowing
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the person in terms of income age and the term for which he would like to have a policy & then suggesting him a policy according to his requirements, taking the first premium and then issuing the policy.
Company Staff: As on 31.3.02 UIC had 27,684 agents on roll working under the supervision of 1,100 Development Officers. These agents are being trained through 4 sales Training Centers.
Physical Evidence: The physical evidence being our four regional offices at Delhi, Mumbai (Head Office), Kolkatta and Banglore &48 Branch offices, 10 Divisional Offices and 3 Zonal Offices. The others are the Pamphlets, Brochures, The 7 crores Of Clients that we have are the evidence of our presence in the market.
Process: Whenever there is the death of the client who has a policy the successor or the legal heir has to go through four simple and quick steps for getting the Sum Assured from the company. First being Application in this step the successor or the legal heir has to submit the application as an intimation of the sad demise of his beloved one. Then Verification is the next step in which a company person inspects and verifies the death certificate, the successor or the legal heir’s relation with the deceased along with the verification of his identity. Then finally if everything comes clear the company sanctions the Sum Assured. The final step being the receipts of the sum assured by the successor or the legal heir by signing the conformation of the amount received in cheque.
Distribution channel
THE LIMITATIONS OF THE CURRENT DISTRIBUTION CHANNELS Until now, the all-dominant player in the market--Life Insurance Corporation of India (LIC)-- has depended solely on its distribution channel of almost 800,000 agents. But LIC has been unsuccessful in the retention of agents, with a high attrition rate stemming from selection of non-quality agents. LIC's typical strategy has been to
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employ a large number of marketing people as "Development Officers" in each branch. These Development Officers in turn employ and train a number of agents, thereupon receiving their incentives from business generated by these agents apart from their usual salaries from the company. The cost-effectiveness of this channel of distribution has thereby suffered, with LIC paying bonuses and commissions twice -to agents and Development Officers -- for every new policy and every subsequent renewal of premiums. After a few years of agent recruitment, Development Officers actually collect a large revenue stream in commissions almost effortlessly. Not surprisingly, they are one of the wealthiest classes of government servants in the country. Efforts by LIC to impose stricter incentive schemes have been defeated by the powerful Union of Development Officers. And a halfhearted attempt to introduce "career agent"-type distribution also failed. So new players must recognize these limitations of their rival and decide upon the right mix of distribution channels in their business.
Conclusion
Competition will surely cause the market to grow beyond current rates, create a bigger "pie," and offer additional consumer choices through the introduction of new products, services, and price options. Yet, at the same time, public and private sector companies will be working together to ensure healthy growth and development of the sector. Challenges such as developing a common industry code of conduct, contributing to a common catastrophe reserve fund, and chalking out agreements between insurers to settle claims to the benefit of the consumer will require concerted effort from both sectors. The market is now in an evolving phase where one can expect a lot of actions in coming days. The current impediments for foreign participation – like 26% equity cap on foreign partner, ill defined regulatory role of IRDA (Insurance Regulatory development Authority- the watchdog of the industry) in pension business etc.—are expected to be removed in near future. The early-adopters will then have a clear advantage compared to laggards in gaining the market share and market leadership. The will need to make sure right now that all their infrastructure is in place so that they can reap the benefit of an "unlimited potential." Over the past three years, around 40 companies have expressed interest in entering the sector and many foreign and Indian companies have arranged anticipatory alliances. The threat of new players taking over the market has been overplayed. As is witnessed in other countries where liberalization took place in recent years we can safely conclude that nationalized players will continue to hold strong market share positions, but there will be enough business for new entrants to be profitable.
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Opening up the sector will certainly mean new products, better packaging and improved customer service. Both new and existing players will have to explore new distribution and marketing channels. Potential buyers for most of this insurance lie in the middle class. New insurers must segment the market carefully to arrive at appropriate products and pricing. Recognizing the potential, in the past three years, the nationalized insurers have already begun to target niches like pensions, women or children.
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India at a glance Population: 1 Billion Economy: 5th largest in the world in terms of
Purchasing Power Parity (PPP) GDP growth Rate: Over 6% per year on an average for the last decade Savings Rate: Around 26% of GDP Estimated middle class population: 300 Million Insured population: 70 million only The Life Insurance Scenario in India
Since 1956, with the nationalization of insurance industry, the state-run Life Insurance Corporation of India (LIC) has held the monopoly in that country's life insurance sector. General Insurance Corporation of India (GIC), with its four subsidiaries, was its counterpart in the casualty sector. Over time, taking advantage of its monopoly and virtual prerogative in establishing premiums, LIC has evolved into a monolith. With around 600,000 agents in every nook and corner of the vast country, it has created an enviable brand name, particularly among the rural population of the country. It has around $40 billion as its life fund and is a strong player in the financial sector. However, on the qualitative side, it has very little to take pride in. And there lies the potential for private players to challenge this behemoth. As is
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typical with monopolies, the premium rates charged by LIC are among the highest in the world, and its track record in customer service can, at best, be called shabby. With a huge unionized, rigid workforce mostly in the clerical category, LIC runs the risk of high fixed cost, which will be the deciding factor in productivity in the competitive scenario. While boasting full-scale automation of its operation, the truth is that its technology is outdated. The new players, with the state-of-the-art technology under their belt, will be in an advantageous position. 80% of LIC's business is procured by 20% of its ill-trained agent force. The foreign player, with the domestic partner's strong brand value, can test the unconventional distribution channels like brokers, the Internet, the banking distribution system, etc. Although foreign players may be tempted to keep their operation in the big cities for the 'creamy layer' of the society, the real market lies in rural India, which accounts for the lion's share of LIC's present business. The foreign player must learn to adapt to Indian realities. The wellpublicized failures of world famous consumer goods companies like Electrolux, Whirlpool, Reebok, Nike etc. to gauge the Indian psyche and sentiments demonstrate the concept. They failed in the areas of realistic pricing, product promotion and reaching to the consumer. The foreign companies need to know the "ground realities" to the details.
INSURANCE SECTOR IN INDIA
The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries.
A brief history of the Insurance sector
The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are:
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1912: The Indian Life Assurance Companies Act enacted as the first 1928: The Indian Insurance Companies Act enacted to enable the
statute to regulate the life insurance business.
•
government to collect statistical information about both life and non-life insurance businesses.
•
1938: Earlier legislation consolidated and amended to by the Insurance 1956: 245 Indian and foreign insurers and provident societies taken over
Act with the objective of protecting the interests of the insuring public.
•
by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India.
Opportunities and threats in rural markets:
Opportunities and threats go hand in hand in every industry and insurance industry is no acceptance. Identification of opportunities and threats helps in better analyses of the market. An attempt is made to examine the opportunities and threats related to rural insurance market and how insurers can get most out of them.
Opportunities:
Gigantic population: India has higher population growth rate. The rural population amounts to nearly 72% of the total population and as discussed earlier, majority of them are left uncovered. This can be a major avenue for the players in the insurance market. Agriculture insurance: agriculture is the major vocation and source of income for the rural India. This segment has vast potential that cannot be overlooked. Growth in income level of the rural population: the income of the country as well as the individual income level is on the rise. The agriculture and allied sector are showing steady growth rate. The rural market contributes up to 55% of national GDP. It points out to the tremendous amount of potential available in rural areas. High savings habit: Indians, and in particular rural people have high savings habit. This may be due to uncertainties and perils; they are exposed to in the rural areas. Hitherto, they had only a few investments of avenues like bank deposits, and
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Insurance could be made and alternate investment, opportunity with the benefit of life cover. Falling interest rates: Insurance has become an alternative investment product. With the fall in the interest rates, insurance products can be made investment avenues, which give good returns with insurance protection.
Threats:
Uneven distribution of population: The Indian population is not evenly distributed. The percentage of villages with population below 200 is 20% and the percentage of villages between 200 & 500 is 40%. The total villages exceed 6 lakhs in number. The uneven population distribution could be a hurdle for insurance companies to reach the final customers. Because insurance is a unique product which is to be solved by the methods of personal selling i.e. high in cost. Hence it will take a long time and alternative channels of distribution. Low literacy level and insurance awareness: statistics suggest that literacy is as low and much has to be done in this area. Low literacy stands out as another major threat for the insurers because communicating the benefits and mechanism of insurance products to the illiterate or semi-literate masses may not be easy. Rural employment condition: the major employment source for the rural populace exists only in agriculture and allied activities. These professions need much muscle work, which affect the longevity of the person. the earning power of a person is a crucial point for life insurance underwriting, and insurers cannot ignore this fact Traditional savings habit: if we give a close look at the saving habit of rural population, we find that they prefer to invest in real assets than in intangible assets like banks; insurance, post and non-agricultural, gold and silver etc. to shift their saving habits from tangible to intangible assets would be a big challenge for the financial institutions. Health conditions: with the effort of governmental and non-governmental organizations there is some improvement in the health conditions of Indian population, especially in the urban areas. But much ahs to be done in the rural areas. Many of the villages still do not have minimum basic amenities like proper sanitation, drinking water facilities, good hygiene environment, and health facilities etc., which have direct and indirect impact on their health condition.
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People’s psychology: the majority o the Indian, especially rural population, believe in god and are superstitious to some extent. They tend to either retain the risk or avoid the risk, instead of managing or hedging the risk. This tendency should also be considered as a potential threat in selling insurance. Credibility: the research studies conducted by FICCI in association with ING insurance reveal that, one of the major factors influencing the marketing of insurance in rural areas is the credibility of the insurers. In the past, there were cases of financial frauds, which affected the faith of rural population adversely. Confidence building exercises need to be carried out, and government and the IRDA need to join hands with the insurers in this regard.
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 recognizing 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: 1)
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
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2)
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
3)
Regulatory Body
The Insurance Act should be changed An Insurance Regulatory body should be set up Controller of Insurance (Currently a part from the Finance Ministry) should be made independent
4)
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)
5)
Customer Service
LIC should pay interest on delays in payments beyond 30 days
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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. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crore. 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. The Budget opens up insurance to private domestic companies The Bharatiya Janata Party-led coalition government presented its first Union Budget on June 1. In a landmark move, it opened up the insurance sector for competition from private Indian companies. It also promised to grant statutory status to the Insurance Regulatory Authority (IRA) later in the year. The Finance Minister, Mr Yashwant Sinha, said that inviting domestic competition into insurance was aimed at improving insurance coverage for Indians and to augment long-term funds that can be used to finance infrastructure projects. However, he did not specify the insurance segments in which competition from private players will be permitted; nor did he specify whether foreign insurance companies registered in India (which are technically also termed "Indian companies") would be allowed to provide insurance services.
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Proposed ventures
Life Insurance
Indian partner HDFC 20th Century Finance ITC Tata Group Godrej Group ICICI Ranbaxy Dabur Foreign partner Standard Life Canada Life Eaglestar AIG J Rothschild Prudential CIGNA Liberty Mutual
Privatization: Start Up Strategy
Potential private entrants therefore expect to score in the areas of customer service, speed and flexibility. They point out that their entry will mean better products and choice for the consumer. Critics counter that the benefit will be slim, because new players will concentrate on affluent, urban customers as foreign banks did until recently. This might seem a logical strategy from the point of view of new players. Startup costs-such as those of setting up a conventional distribution network-are large and high-end niches offer better returns. However, in the long run 'middle-market' offers the greatest potential as in terms of it is the second largest market in the world. This may still be an urban market but goes beyond the affluent segment. Insurance, even more than banking, is a volume game. A very exclusive approach is unlikely to provide meaningful numbers. Therefore, private insurers
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would be best served by a middle-market approach, targeting customer segments that are currently untapped.
UNIVERSAL Insurance - Profile of existing business in India
Life Insurance business was privatised and Universal Insurance Corporation came into existence on 1st September, 1998 with its Corporate Office at Mumbai. Some of the objectives are:
• • • •
To spread Life Insurance To maximize mobilisation of people’s savings To meet the various life insurance needs of the country To discover new markets in rural India
A portfolio of 4.17 lacs of policies in India and total Sum Assured of Rs. 174 crores was undertaken by UIC for servicing . UIC has grown by leaps and bounds during these 6 years and in 1999-2000 alone 1.48 lacs of new policies with a Sum ssured of Rs. 75.31 crores were sold. UIC registered a mammoth all round growth and is a competitive player in Life Insurance business with its diversified products. UIC is present throughout the country through its 48 Branch offices, 10 Divisional Offices and 4 Zonal Offices. The extra-ordinary growth of UIC was possible because it tried to spread the message of “INSUARANCE” not only to the urban area of the country but also has given special thrust on rural life insurance and especially in the states of Gujarat & Maharashtra.
Our Strength is our Field Force
We reach our products to our customers through our massive field force. As on 31.3.02 UIC had 27,684 agents on roll working under the supervision of 1,100 Development Officers. These agents are being trained through 4 sales Training Centers. The recruited agents spread over the different parts of the country. To make the agency force professional, RURAL and URBAN agents are being recruited by UIC. These agents are provided with fixed stipends in addition to the commissions derived from the business procured by these forces.
Thrust on Rural Insurance
Another important thrust area is “RURAL INSUARANCE” sustained and constant efforts are made to carry the message of life insurance into the rural masses,
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especially in the back ward and remote areas. As a result , there has been steady all round growth in the industry. The share of industry’s Rural business in 1998-99 50.2% and 45.2% in Policies and Sum Assured respectively.
Measures adopted by UIC for better servicing
• • • • • • • • •
Providing quick and satisfactory services to the customers. Up gradation of Technology-Front End Application Packages Metro Area Net Working Inter Active Voice Responding Systems (IVRS) Reduction in Time Lag Inclusion of retired H C Judge in Claims Review Committee at Zonal Offices. Monday Grievance Redressed Cell Special Revival Campaign every year UIC International E C at Bathroom for Indian rupees and other Local currencies
Urban v/s Rural Markets.
The growth in the insurance sector is higher than the GDP growth-rate of the country. The insurance premium income has grown from 1.77 % to 2.59 % of the GDP in the last one year. Indian Insurance can be divided into urban and rural markets. These two segments are diverse in nature and have distinguished characteristics. The economic growth of the two have not been the same. A wide disparity exists between per capita income and literacy rate, among other things in these two sectors. From insurance perspective, statistics show that rural population has a much lower reach. The agent per 1000 persons is around 0.25, which is far low in comparison to that of the urban market. Insurers may use this knowledge in designing innovative products, needbased selling of insurance, better penetration, development of new channels etc. Most new insurance companies started operating from metros and urban areas. As a result, the urban population got more attention and led to more penetration in urban than in rural markets. The urban segment in India is small compared to rural segment. Hence exploring the rural markets poses to be the Herculean task to the insurers. Experts are of the opinion that the urban markets are rapidly being saturated, and the future growth potential lies in the rural areas. However, it does not signal that the whole of urban population is roofed, but the percentage of the first time buyers would be on decline. It is a fact that the urban population has greater accessibility and reach to the insurance products. Also, most of this population is a
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part of organized sector and has an insurance cover directly or indirectly. Their higher education has led to the better awareness of financial and insurance products. They are more informed about market conditions, and demand product innovations to suit their growing needs. But the situation with the rural populace is different. A majority of them are left uncovered although they are exposed to similar risks similar to or even higher ratio of rural Indian population is very high and it has a growing insurance needs; therefore, it is a fact that the potential growth of insurance industry lies in the rural market, both of life and general (non-life) insurance. A lot of study and research was and is being carried out in this direction to develop new strategies to explore the untapped area of Indian insurance market.
MISSION
Our corporate mission at The Universal Insurance is to provide premier personal Life insurance products and quality service to our agents and customers. Our overall objective is to produce consistent underwriting results by structuring exceptional programs and providing superior service, and to grow our business every year. This objective will be accomplished by creating a workplace where employees are challenged to improve our work product. We will strive to make certain that our people understand the link between their performance and the success of the company; that goals are established, responsibilities are given, and measurements are installed to ensure accountability across functions; and, that we operate a company with integrity where mutual respect and teamwork are more than mere words. In today's rapidly changing economic climate, we like to think of ourselves as both challenged and fortunate to be able to serve our insured in ways they have grown to trust in the past. Our goal at The Universal Insurance is to do just that. After all, that's what "Universal" means – excellence allover.
SWOT OF THE COMPANY Strength
Brand Image: - A brand image that we have created over the years in the Indian market does help us to sell the product. It is also due to our goodwill. Pace: - The pace at which we deliver our service to the client from removing his/her policy to the receipt of the sum assured.
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Special policies for rural market to suit the needs of the people of rural area that is designed to fit in their economy giving them maximum protection.
Weaknesses
Difficulty in marketing: - Because of the size of the rural population varying, lack of insurance knowledge among the villagers and also the product asking for personal selling Consumer Perception: - The customer is not so sure investing in a non government organization and he doesn’t trust them either. Lack Of proper and efficient risk management system.
Opportunities.
Huge Population out of which 70% of the people are uninsured out of which 45% make for the people aging more than 25 years Growing Awareness: - with the growing influence of the new products on the rural population people get aware about this product too. Growth of discretionary income.
Threats.
Competition from public and private players.
Uncertainty in Socio-Economic and political conditions.
Government Interference: - The government interferes in the company’s targets policy structure and the amount of premium.
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MARKET SHARE
Private Insurer ICICI Prudential SBI Life Birla Sunlife Tata-AIG Universal Insurance Co. Met Life Aviva Bajaj Allianz Om Kotak
Market Share 2002-03 2003-04 1.51 3.14 2.03 2.96 2.63 2.76 1.69 2.2 1.5 2.02 1.27 1.6 1.3 1 0.07 0.69 0.1 0.6
Insurer New India National United India Oriental
Market Share 2002-03 2003-04 27.5 24.99 20.08 21.2 20.81 19.04 19.52 17.8
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7’P’s Or The Marketing Mix Of The Service (Insurance) Industry Product & Price: JAN SEVA POLICY
General Policy Conditions Min. age at entry 18yrs Max. Age at entry 45yrs Max maturity age 60yrs Minimum term 15yrs Maximum term 30 yrs Min sum assured Rs. 25000 Max sum assured Rs. 500000 S.A. in multiples of Rs. 500 modes allowed all accident benefit per 1000 S.A INC. T.P Underwriting requirements Female lives category 1/2/3 Age proof Std/Non.Std Form No 320jp/300 Dating back @ 10.5% Allowed Non-medical (general) upto 25000 Non-medical (express) upto 35000 Non-medical (prof) upto 25000 Non-medical (special) upto 35000 Risk coverage S.A.+ Bonus actual sum assured basic S.A. Policy servicing Policy loan. Housing loan. Assignment. Surrender of policy Survival of policy Agriculture loan Educational loan
Maximum age of entry is restricted to 40 yrs in case of non- medical sub. to a max. S.A. of Rs. 25000. Age proof is not insisted, if sum assured is Rs 25000 or less. Best suited for people with irregular income and whose job is not secured. For example farmer, artisan, milkman petty businessmen. On maturity, sum assured + bonus is given. On death of the policyholder before maturity, sum assured + bonus is given to the nominees. Plan is not allowed to widows belonging to category 3 Even if the policyholder is not able to pay further premiums after paying first two years. Premiums, the life risk cover continues for three more years from the date of premium unpaid. Premiums have to be paid till maturity or death of the policyholder, whichever is earlier.
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For females under category 3, plan is allowed only for literate females having independent income subject to a maximum of Rs 25000 S.A. Maximum term is restricted to 20 years in case of non- standard age proof subject to maximum S.A. of Rs 25000. Financial security for the family, in case of unfortunate death of the policyholder, as risk is covered during lapsed period of the policy, (up to 3 yrs) after the premium is paid for two years.
JAN SEVA LIFE GOLD
(A WHOLE LIFE PLAN FOR THOSE WHO WANT THEIR LIFE INSURANCES POLICY TO DO AS MUCH FOR THEM AS FOR THOSE THEY LEAVE BEHIND) The universal Maha Life gold plan is truly one of a kind offering you many services and benefits. Only a 15-year premium paying period for lifetime coverage. Cash dividend from 6th year onward* tax-free. On death or on maturity at age 100, the entire sum assured will be paid. Taxfree. Premium paid eligible for tax exemption benefit u/s88 as per current income tax act. Guaranteed annual payment of 5% on sum assured from the10th policy anniversary onwards for life. This amount is tax-free. ELIGIBILITY Entry age- 30years to 60 years. Minimum sum insured- Rs.50, 000
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BIMA SANDESH POLICY Urban policy
General Policy Conditions Min. age at entry 18yrs Max. age at entry 50yrs Max maturity age 65yrs Minimum term 25yrs Maximum term 50 yrs Min sum assured Rs. 50000 Max sum assured Rs. 10000000 S.A in multiplies of Modes allowed all Accident benefit / 1000 S.A Inc. T.P Underwriting requirements Policy servicing Yes Female lives category 1/2 Policy loan. No age proof Std/ Housing loan. Yes Form No 300 Assignment. Yes Dating back @ 10.5% Allowed Revival Yes Non-medical (general) not allowed Surrender of policy No Non-medical (express) not allowed Survival of policy No Non-medical (proof) not allowed Non-medical (special) not allowed Risk coverage S.A. Actual sum assured 2 times S.A.
A must policy for youngest, whose income is less but insurances needs are large. More suitable for businessmen with huge commitment and (a) Who do not want to pay high premium. (b) Who generally do not bother about returns? (c) Who consider insurances is necessary. Plan is not allowed to non-earning major lives. No bonus. In case of death before maturity, nominee is paid full sum assured. True insurance, low premium and high risky cover. People involved in hazardous occupation are not allowed to take this policy. Full medical report is a must irrespective of sum assured & doctors limits should be2 times of S.A. On survival till maturity only total premium paid is given.
ASHA BIMA
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SANDESH
General Policy Conditions Underwriting requirements Policy servicing Min. age at entry 18yrs female lives category 1/2 Policy loan. Yes Max. Age at entry 50yrs age proof Std Housing loan. No Max maturity age 65yrs Form No 300 Assignment. No Minimum term 20/25YRS Dating back @ 10.5% Allowed Revival Yes Maximum term 15/20/25YRS Non-medical (general) not allowed Surrender of policy Yes Min sum assured Rs. 50000 Non-medical (express) upto 1 lacs Survival of policy No Max sum assured Rs.5 lakhs Non-medical (prof) not allowed S.A in multiplies of 10,000 Non-medical (special) upto 1lacs Modes allowed all Risk coverage S.A.+bonus Accident benefit per 1000 S.A INC. T.P actual sum assured 1.5 times S.A.
This is health insurance policy. The health benefit is available only after one year of taking the policy. On maturity or early death, 50% of the sum assured + bonus till/ maturity death whichever is earlier is paid. It covers the following 4 major health ailment 1.cancer 2. Paralytic stroke leading to permanent disability 3. Renal failure of both kidneys 4.coronary artery diseases where bye-pass surgery has been done. A good policy that provides immediate amount in case of policyholder getting any of the above of the 4 health problem
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Competitor in Gujarat BIRLA SUN LIFE
Birla Sun Life Bima Kavach Yojana
The Birla Sun Life Bima Kavach Yojana is a single premium insurance policy specially designed for the rural underprivileged.
What is the product?
Eligibility How much do you pay Duration of the plan On death during the duration of plan On surviving the duration of plan Within 1 year Between year1 & year 2 Between year 2 & year 3 Aged between 18 and 50; Gainfully employed and active at work A one-time payment of Rs.50/- or Rs.100/- or Rs.200/3 years We pay your nominee one hundred times the amount paid by you We pay 1.10 times the amount paid by you On Surrender: Premium amount 1.04 times Premium amount 1.08 times Premium amount What are the benefits
General Exclusion: If the life insured dies during the duration of plan, the cause of death being suicide, we will not pay the normal death benefit but will refund the amount paid by you as premium.
Competitor In Maharashtra
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ICICI- Prudential
Policy Of ICICI PRUDENTIAL in Rural Maharashtra ICICI Pru Mitr – Endowment Plan ICICI Pru Mitr offers the following features: Life Cover and Savings Regular Premiums Age at entry : Premium Mode : Term : Sum Assured : Premium / Year : Maturity/Death : benefit
18 - 45 Yrs Half Yearly / Yearly 5,10,15 Yrs Rs.5,000 -20,000 Rs. 507 - 553 (SA: Rs.10,000) Sum Assured
ICICI Pru Suraksha - Regular Premium ICICI Pru Suraksha is a regular premium policy with the following features: Individual policy Only Life cover Term - 3 & 5 Yrs Age independent premium Age at entry Sum Assured Premium / Year Maturity/Death benefit Death Benefit
: 18 - 45 Yrs : Single : Rs 50 - 200 : Rs.5,000 - 20,000 : Sum Assured
Service Flower
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A market segment consists of a large identification group within a market. A company that practices segment marketing recognizes that buyers differ in their wants, purchasing power, geographical locations, buying attitudes and buying habits. Hence Company tries to isolate some broad segments that make up the market. We have segmented our market on basis of the age and gender. Rural Age Wise Distribution Age Group 15 – 18 18 – 24 25 – 34 35 – 44 45 & Above Percentag e 16.2 18.5 29 23 13
And on the basis of gender, we have segmented as
Male Female and Kids
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S A F E T Y
SEGMENTING
TARGETING
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As a market for our new policy, we have targeted males above the age of 18 involved in agriculture and supply of agricultural products. Because mostly adult people take insurance as the protection and security. Young people in villages are not even aware of the same. Because females in villages are conservative and they don’t take part in the economy of the house. Also they are unaware of the various insurance policies, benefits etc.
POSITIONING
The male or the head of the family generally take insurance for his family as a security and protection so that if because of the uncertainty the future of his children and family is not affected. Hence we have positioned ourselves as Suraksha aapke aapno ki, which means: Protection for you as well as your beloved. Tamara Parivar no aadhar : Support for your own Family. CONSUMER BEHAVIOUR MOBILE phones, computers, cars, and now insurance. Rural India seems to have an appetite for it all. Going by the findings of a recent study conducted by market research agency, MART, the rural consumer is now exhibiting an increasing propensity for insurance products. And the biggest surprise is this — rural consumers are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium each year, though the maximum takers are for products with sum assured of anything between Rs 25,001-Rs 50,000. Besides, 23 per cent of the respondents are willing to buy insurance worth Rs 75,001-Rs 1,00,000. According to the study, while the awareness levels for life insurance is the highest, consumers in rural India are also aware of motor, accident and cattle insurance. "Insurance awareness in the life sector is extremely high, thanks to the Governmentowned Life Insurance Corporation," said Mr Pradeep Kashyap, Managing Director, MART.
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Over one-third of the respondents profiled by MART said that they had purchased some type of insurance, with maximum penetration skewed in favour of life insurance.
Place: IRDA guidelines The IRDA guidelines define a Rural village as one in which : The total population is not exceeding 5000. The density of population is not more than 400/sq.km. At least 25 % of the male population is dependant on agriculture as source of livelihood. The places that we have chosen in India to market the policy in rural parts are the states of Maharashtra and Gujarat.
Profile Maharashtra: State Capital Population ('000s in 2001) Area ('000 sq. km) Females per 1000 males (1991) Literacy rate (1991) Ratio of urban population (1991) Growth Rate Gross Domestic Product Per Capita Income (Rs. at current prices in 1992-93) Principal Language Mumbai 96,752 308 934 77.27% 42.11% 4.0% (2002-03) 10,984 Marathi
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Profile Gujarat: State Capital Gandhi Nagar Population ('000s in 1991) 41,310 Area ('000 sq. km) 196 Females per 1000 males (1991) 934 Literacy rate (1991) 61.3% Ratio of urban population (1991) 34.5% Net Domestic Product (Rs. mn at current prices in 1992-93) 322,400 Per Capita Income (Rs. at current prices in 1992-93) 7,586 Principal Language Gujarati Total Area 196,024 sq km
Promotion: Advertising: We advertise in newspapers of the Marathi (in Maharashtra) and Gujrathi (in Gujarat) and occasionally in the Times of India, Economic times and the Mid day for broad coverage. We also advertise in televisions on Doordarshan, and on radio channels like AM 106.
Hospital: 23
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Rural Marketing
We donate 5% of our annual profits to a hospital that is named under the company for the free check up of the clients and also providing some emergency services as & when required. These hospitals are only present in one among four neighboring villages. We have such 7 hospitals in Maharashtra & 5 in Gujarat.
24 Hour Help line: To help our customers with all the information all the time we have taken an initiate of keeping a 24-hour toll free help line number 1600-333-333.This helps the customer to know about the policy and this also helps to select them a policy that would match their requirements and demands.
Sales Promotion: To make people aware of the company and its policies along with all the other help full information required by them to become the clients of the company we conduct exhibitions and promotions. During these promotions stalls are setup in the weekly bazaars or on the days of the panchayats. The Sarpanch conveys the benefits of the taking up insurance and becoming our clients as he holds the command of Panchayats. The village agents who know to speak the local language handle all these promotions. The main aim of these promotions is to make the villagers aware of the company’s policies and the benefits of the same.
Word Of Mouth Promotion: We as a company do keep up the value of the service we provide to the customers so that they do say a good word about the services provided by us. Even this can help us to gain a bit in the market share, because in villages this is a popular way of promotion in villages.
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Personal Selling: This technique is of contacting people those come in the sales promotion or contact us on the toll free number for the information. We go door – door to provide our services and do create awareness to increase the sales.
Puppet Shows : This is one of the strategies used by the company’s agents to attract the villagers to know the benefits of the insurance. For e.g. :- one of the puppet shows can be that two men while crossing the road meet in an accident with a truck. One of the families is helpless as he was the only workingman in the family and didn’t have an insurance cover. But the other person was again the only man working in the family but had one of the policy of the company that did help the family to live as they received as fair amount of the assured sum.
People: A service-based organization cannot work properly until it doesn’t have people to provide the services in time. The people involved in an organization providing insurance are as under
Brokers: The brokers, who are professionals in the area of insurance, will be acting on behalf of the customers, rendering quality advice to them not only on the products but also on the company from which they can take such products. The brokers have to maintain a certain capital limit as per the Regulator to protect the customer’s interest.
Agents: These are the people who promote the policies of the company in either ways of people coming to them or they trying to approach the people and completing their monthly targets. Agents start from the point of enquiry of a prospect, then knowing
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the person in terms of income age and the term for which he would like to have a policy & then suggesting him a policy according to his requirements, taking the first premium and then issuing the policy.
Company Staff: As on 31.3.02 UIC had 27,684 agents on roll working under the supervision of 1,100 Development Officers. These agents are being trained through 4 sales Training Centers.
Physical Evidence: The physical evidence being our four regional offices at Delhi, Mumbai (Head Office), Kolkatta and Banglore &48 Branch offices, 10 Divisional Offices and 3 Zonal Offices. The others are the Pamphlets, Brochures, The 7 crores Of Clients that we have are the evidence of our presence in the market.
Process: Whenever there is the death of the client who has a policy the successor or the legal heir has to go through four simple and quick steps for getting the Sum Assured from the company. First being Application in this step the successor or the legal heir has to submit the application as an intimation of the sad demise of his beloved one. Then Verification is the next step in which a company person inspects and verifies the death certificate, the successor or the legal heir’s relation with the deceased along with the verification of his identity. Then finally if everything comes clear the company sanctions the Sum Assured. The final step being the receipts of the sum assured by the successor or the legal heir by signing the conformation of the amount received in cheque.
Distribution channel
THE LIMITATIONS OF THE CURRENT DISTRIBUTION CHANNELS Until now, the all-dominant player in the market--Life Insurance Corporation of India (LIC)-- has depended solely on its distribution channel of almost 800,000 agents. But LIC has been unsuccessful in the retention of agents, with a high attrition rate stemming from selection of non-quality agents. LIC's typical strategy has been to
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employ a large number of marketing people as "Development Officers" in each branch. These Development Officers in turn employ and train a number of agents, thereupon receiving their incentives from business generated by these agents apart from their usual salaries from the company. The cost-effectiveness of this channel of distribution has thereby suffered, with LIC paying bonuses and commissions twice -to agents and Development Officers -- for every new policy and every subsequent renewal of premiums. After a few years of agent recruitment, Development Officers actually collect a large revenue stream in commissions almost effortlessly. Not surprisingly, they are one of the wealthiest classes of government servants in the country. Efforts by LIC to impose stricter incentive schemes have been defeated by the powerful Union of Development Officers. And a halfhearted attempt to introduce "career agent"-type distribution also failed. So new players must recognize these limitations of their rival and decide upon the right mix of distribution channels in their business.
Conclusion
Competition will surely cause the market to grow beyond current rates, create a bigger "pie," and offer additional consumer choices through the introduction of new products, services, and price options. Yet, at the same time, public and private sector companies will be working together to ensure healthy growth and development of the sector. Challenges such as developing a common industry code of conduct, contributing to a common catastrophe reserve fund, and chalking out agreements between insurers to settle claims to the benefit of the consumer will require concerted effort from both sectors. The market is now in an evolving phase where one can expect a lot of actions in coming days. The current impediments for foreign participation – like 26% equity cap on foreign partner, ill defined regulatory role of IRDA (Insurance Regulatory development Authority- the watchdog of the industry) in pension business etc.—are expected to be removed in near future. The early-adopters will then have a clear advantage compared to laggards in gaining the market share and market leadership. The will need to make sure right now that all their infrastructure is in place so that they can reap the benefit of an "unlimited potential." Over the past three years, around 40 companies have expressed interest in entering the sector and many foreign and Indian companies have arranged anticipatory alliances. The threat of new players taking over the market has been overplayed. As is witnessed in other countries where liberalization took place in recent years we can safely conclude that nationalized players will continue to hold strong market share positions, but there will be enough business for new entrants to be profitable.
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Opening up the sector will certainly mean new products, better packaging and improved customer service. Both new and existing players will have to explore new distribution and marketing channels. Potential buyers for most of this insurance lie in the middle class. New insurers must segment the market carefully to arrive at appropriate products and pricing. Recognizing the potential, in the past three years, the nationalized insurers have already begun to target niches like pensions, women or children.
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