CONTENTS Section – I The Service Marketing Perspective 1. Need of life insurance. 2. The life insurance mix. 3. Life insurance marketing triangle. 4. Life insurance – flower of service. 5. 4 – I‘s of Life insurance. 6. Complaint handling. Section – II A Study of the Industry 1. A sectoral study. 2. PEST analysis of the life insurance sector. 3. SWOT analysis of the life insurance sector. 4. Findings and Hypothesis. EXECUTIVE SUMMARY “There is nothing more uncertain than life and there is nothing more certain than life insurance” --- Miles Dawson (the business of life insurance) Security has always been a universal desire, right from the earliest civilizations. This quest for security has been a major motivating force in the progress of mankind. The early societies looked up to their families for providing this security, which resulted in cohesive units. Gradually, as lifestyles changed and as man progressed into a more modern industrialized setup, this cohesive quality of the family started fading. One had to look for other ways of providing economic security and somewhere along the line was born „insurance‟. The insurance landscape in India is in the process of tremendous change. Closed to foreign competition due to 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 four general insurance companies that spanned the length and breadth of the country. While these companies had done a commendable job in helping the industry grow, the task of making an essential financial product available to the masses gave scope to several other companies to participate in this arena Only 22% of the insurable populations in India possess life insurance, and in a country of over 1.06 billion people, life insurance premia forms 1.8% of the G.D.P., indicating the extent of underinsurance or rather revealing the latent potential in insurance spectrum. Liberalization is in full swing in the Indian markets. Insurance industry being one of the most affected markets has experienced a plethora of new relationships in the last couple of years there are a few forces acting on the industry that have brought about significant changes in the behavior of the industry trends. Moreover there have been significant changes in the service outlook with respect to insurance industry. From the opinion that it was an instrument intended to provide monetary support at the time of the death of an individual, life insurance life insurance grew up to be a major financial instrument during the past 50 years in our country. There has also been a change in the consumer outlook with regards to life insurance as very beneficiary financial tool as against the orthodox thinking of unfruitful use of money. The findings of this project throw light on the service perspective bringing out the fundamentals of service marketing and its determinants. The finding of the research widens the consumer understanding aspect and it would be very helpful to imbibe customization. The research studies the changing trends in life insurance and describes the latent potential and also gives a hypothesis on the future of the insurance industry based on the study of insurance sector and the expert opinion. SECTION– I THE SERVICE MARKETING PERSPECTIVE Does one need insurance? The business of insurance is related to protection of the economic values of the assets. Every asset is of some value and is expected to last for a certain period of time during which it will deliver that value. In case the asset is destroyed it ceases to provide the value to the owner thus leading to an unpleasant situation. Insurance is a mechanism to reduce the affect of such unpleasant situation. Human life is considered to be a value generating asset and is also subject to risks. Assets are insured because there if a possibility that perhaps they might get destroyed, through accidental occurrences. Such possible occurrences are called perils. If such perils can cause damage to the asset we say that the asset is exposed to risk. Insurance is done against the contingency that it might happen. Insurance is relevant only if there are uncertainties. If there is no uncertainty about the occurrence of an event, it cannot be insured against. In case of human beings death is certain; however the time of death is uncertain. Insurance doesn„t protect the asset. It doesn„t prevent the loss due to its peril. The perils can sometime be avoided by ensuring better safety and damage control management. Insurance only tries to reduce the impact of the risk the of the asset and those who depend on that asset. Only economic consequences can be insured. If the loss is not financial, insurance may not be possible. Moreover insurance is backed up with many economic benefits which can be enlisted as follows: untimely or premature death. ndividuals, who are in credit business, can ensure for themselves recovery of loan in case their debtor dies. by each in the business. ‘keyman ’insurance, an organization can insure the lives of their executives, whose expertise greatly contributes to their profits. employee- welfare program. holder. procuring loans from the market. THE LIFE INSURANCE MIX Product Mix. The best way to get and keep customers is to constantly figure out how to give them more for less. .In case of insurance sector, the product mix comprises Life and Non – life insurance policies that are offered to the customer by the company. The length of a product mix refers to the total number of items in the mix. In case of insurance sector, the following is the length of product mix: The depth of a product mix refers to how many variants are offered of each product in the line. In the insurance sector, one policy can be made available in different variations. THE SERVICE PRODUCT The offer has a nucleus or core in the center, which is supported by series of tangible and intangible features and benefits and these form a cluster around the core product. The surrounding features are known as supplementary services. The core product and the supplementary services share a symbiotic relation, i.e. both are not complete without each other. Hence supplementary services are of immense importance. EXPECTED CORE AUGMENTED POTENTIAL Content Insurance sector Level Type of product/ service Level Core or generic Basic service product 1 product/ service -life insurance policy Level Expected Basic product and 2 product/ service minimum purchase that must be met period Level Augmented Something different which 3 product/ service enables one product to be differentiated from other payment cards Standing instruction to bank Level Potential Features that attract the claims 4 product/ service customers and are useful to settled on or before them. the maturity date. Price Mix. Price is one element in the marketing mix that produces revenue; all the other elements produce costs. Prices are easiest marketing mix elements to adjust; product features, channels and even promotion take more time. Price also com m unicates to the m arket the company„s intended value positioning of its product or brand. The price in case of insurance sector refers to the premium charged on the policy. The Tariff advisory committee fixes the price for each policy. Hence all insurance companies have to charge approximately similar premium on similar policies. However, different elements affect the rate of premium to be charged on each policy. The price for the same policy is different for different companies. The company must set its price in relation to the value delivered and perceived by the customer. If, the price is higher than the value received, the customer will not be willing to pay so high and the company will lose potential profits. If the price is less than the value received then, the company will fail to receive the profit that it deserves for providing a good service. . HIGH MISSED V A OPPORTUNITIES L U E P E R MEDIUM C PRICE = VALUE I E V E D UNHARVESTED VALUE LOW LOW MEDIUM HIGH PRICE PAID There are various steps, which are followed in order to fix the price. They are as follows: 1) Selecting The Pricing Objective 2) Determining Demand 3) Estimating Costs 4) Analyzing com petitor„s costs, price and offers 5) Selecting the Final Price STEP 1 In the first step, the company decides where it wants to position its market offering. The clearer the firm„s objective, easier it is to set the price. STEP 2 Each price will lead to a different level of demand therefore has a different impact on company„s marketing strategy. STEP 3 Demand sets the ceiling whereas costs set the floor on the price the company can charge for its product/service. In case of insurance sector, it comprises costs of recruiting, training, motivating agents along with other fixed and variable costs. STEP 4 Within the range of possible prices determined by the market demand and company costs, the firm must take the competitor„s costs, prices and possible price reaction into account. In order to win the market share, such products/ services, which have not yet been created by the competitors, should be created by the company. STEP 5 In selecting the price in insurance sector, the company must consider life expectancy of the person as well as his financial position. In case of Life Insurance, if the person while taking the policy is at a high risk of some terminal disease then he is charged a higher premium. At the same time, if a person who does not enjoy good financial condition cannot take a high price insurance policy. Thus, every customer taking a policy should disclose all his medical as well as financial details in utmost good faith to the insurance agent. Place Mix Today you have to run faster to stay in the same place Place mix can be defined as the ―Physical distribution i.e. the delivery of goods/ services at the right time at the right place to the customers. Place decisions involve building relationships with the wholesalers, retailers and through these intermediaries building relationships with the customers. Products and services must be at the right place, at the right time in order to be consumed. Probably the best way to perceive place is to think of the flow of products from manufacturer through intermediaries to the consumer or user. This flow can be thought of as a channel used to move goods and services. The channel of distribution is a component of the place mix. According to Philip Kotler, Channels are sets of interdependent organizations involved in the process of making the product or service available for use or consumption. CHANNELS Direct Selling Call Centers Partner Selling Selling through Corporate Electronic channels Promotion Mix. The best advertising is done by an augmented customer. Promotion is a descriptive term for the m ix of communication activities, which a service organization carries out in order to influence the public on whom their sales depend. It is an element in an organization„s marketing m ix that serves to inform, persuade, or/ and remind people about an organization or individual goods, service, image, ideas, community involvement or impact on the society. People Mix. It is no longer enough to satisfy the customers, you must delight them. Employees The various employees involved in providing service to the customer in insurance sector are: Customer service representatives Marketing and sales managers Claims adjusters, appraisers, examiners, and investigators Underwriters Insurance sales agents Lawyers Actuaries Customers People mix not only includes employees but also customers. The customers are to be treated with respect and courtesy. LIC (India) ltd. provides following facilities to keep the customers happy and satisfied. The birth dates of the policyholders are recorded and on the day of the birthday, the policyholder is given a ―happy birthday call by the com pany. The customers are reminded to pay their premium on time through sms. Physical Evidence. Companies try to demonstrate their service quality through physical evidence and presentation. However, in case of insurance sector, the customer rarely visits the insurance company. The customer comes mostly only in contact with the service provider hence the service provider (insurance agent) should. Have good communication skills. The physical evidence factor is directly proportional to the level of faith of customers as well as the employees in the organization. Physical evidence goes way beyond an individual. It includes the company‟s advertisements, public relation, employees, and branches. Insurance Service Tangibles as Physical Evidences 1 Policy Documents 2 Brochures 3 Periodic Statements 4 Renewal Notices 5 Business Cards 6 Stationary 7 Calendar, Diaries 8 Letters/Cards 9 Website Process Mix. It is more important to do what is strategically right than what is immediately profitable - Philip Kotler In case of insurance sector, the process mix includes the various interactions that take place between the insurance agent and the customer in the process of selling the policy to the customer till the settlement of claims. The following process mix is followed by insurance companies in case of life insurance: 1) The insurance agent calls up the customer and informs him about the different policies offered by the company and the price mix of all the policies. If, the customer seems interested in taking the policy then, he fixes an appointment with the customer. 2) The insurance agent meets the customer and gives him some information about the insurance company and also about the benefits of the policy. 3)The customer is then asked to fill a financial review form (FRF) and the agent is asked to find out the standard of living of the customer. 4) The insurance company offers various policies but they might not be suitable for the customer hence, on the basis of his requirements and is then asked to fill up the proposal form which contains various financial status, the insurance agent suggests two or three policies to the customer, which will be suitable for him. 5) The insurance agent explains the different policy plans in detail to the customer i.e. the amount of premium to be paid, the time interval at which the premium is to be paid, the benefits of each of the policy etc. 6) Then, the insurance agent provides a feedback form to the customer and asks him to give his feedback regarding the policies that he has been informed about. 7) Then, the next appointment is fixed by the insurance agent with the customer and in this meeting; the customer selects the policy plan, which appeals to him. The customer details of the payment and he is asked to make the first premium payment. 8) Then, the insurance agent submits the duly filled and signed for in the insurance office along with the other necessary documents. 9) The customer must get himself examined from the approved doctor of LIC. The medical examination is necessary to determine the physical fitness of the customer. If the medical report is favorable, then only LIC will issue the policy. 10) An average twelve days time is taken by the company to verify the submitted documents. After the twelve days period, the insurance agent meets the customer to provide him a policy document, which consists of the terms and conditions of the policy. 11) Then, a reconfirmation is taken by the agent from the customer that he agrees with the terms and conditions of the policy. 12) The insurance agent then regularly collects the premium from the customer whenever the premium becomes due. BLUE PRINTING - SEVICE MAPPING The blue printing show what the product should look like a details the specification to which it should conform. In contrast to the physical architecture of building, ship, or piece of equipment service process have a largely intangible structure. The process of logistics, industrial engineering, decision theory, and computer system analysis each of which employs blue print techniques to describe processes involving flow, sequences, relationship and dependencies. Telephonic conversation between Interaction with customer and the agent and potential consumer analyzing customer need. Explaining product clearing every Offering a product with various doubt. It should be presented in a product specifications. customized manner. Completing formalities like filling Collecting payments and forms and receiving necessary closing the sale. documents. After sale service, handling Customer queries. Life Insurance Marketing Triangle. The concept of services marketing triangle is as follows:- COMPANY Internal Marketing External Marketing SERVICE PROVIDER CONSUMERS The above diagram explains the services triangle with its three constituents, namely, the company, the provider and the consumer. Each of them have been explained as follows:- The Company The company makes various promises to its customers through external marketing. The way and means of marketing will be covered it the marketing mix. The Provider The agents and the development officers act as the front-line staff and they are in direct contact with the potential or existing customers. They are the ones who keep or satisfy the promises made by the company. The marketing of insurance basically comes under concept selling. The agents are thus given various incentives, rewards, commissions and all the necessary training required. As regards incentive, they receive PLI (Productivity Linked Incentive), which is based on the increase in premium amount and the sums assured by the agent. They are also given extra commissions in case of policies, which are of high value. There are normal promotions for any good work done on a regular basis. The agents generally work under the training and guidance of their respective development officers. The Consumers The consumers are the policyholders. Apart from the routine life insurance policies other services like housing finance, mutual funds, pension and group insurance. Thus the range of consumers is far and wide. Life Insurance Flower of Service. Flower of services refer to a well-formed package of total services with all the supplementary services being well formulated along with the core services. The various petals of the flower are: Information: A marketer needs to provide adequate information to his employees and his customers. This information is general information provided through various communication channels. In the insurance industry information is provided to the customers with the help of: Agents Seminars Web sites Print media Radio Television, etc. Consultancy: This is additional customized information provided to the potential customers by the service provider. In the insurance industry it is provided by com pany„s staff and agents. Example: In LIC when a customer enters asking of information about the policy, he is directed towards the assistant sales manager. Assistant sales manager w ill listen to the customer„s requirement and as per his requirement list the number of policies that are available. He will also ask the customer about the price and limit the number of options for the customer, so that he can easily choose the policy without confusion to the customer. Order taking: Order taking should be done without mistakes. In LIC order taking is generally done by: By Agents On Web site By Assistant sales manager directly in the office. Hospitality: Hospitality is a very pretty petal, reflecting pleasure at meeting new customers and greeting old ones when they return. Hospitality finds its full expression in face-to-face encounters. In LIC customers directly come in contact with the sales manager. The customers are treated as guests. The sales managers of LIC are given special training of how to sell the policies to the clients. It is only in LIC that a customer can meet the chairman directly without any appointment. Safe keeping: It is in the process and procedures used by marketers to safe guard and to maintain secrecy. In LIC the data of the customers is very important. They feed the data of the customers in their Front and Application Program Software which is connected with all the branches of LIC. The data is only available with the sales people and not shown to any person. Exceptional: E xceptional service m eans service over and above custom er„s expectation. LIC has the fastest claim settlement in the world thereby providing exceptional service. LIC also solves complains of the customers within 7days. Payment: The payment of premium is normally through cheques. Customer can make payment in LIC through: Agents Loans Web sites Standing instruction to banks: In this the account holder will give standing instruction to his bank to pay the amount of premium every month without his consent on the given date directly to LIC. Billing: The billing should be done in such a way that there are no mistakes and if there are any they must be immediately rectified. The billing should provide break-ups of premium charged, service charges, etc. 4 I’s for Life Insurance Life insurance has four major characteristics that greatly affect the marketing programs. Intangibility Inseparability I Inconsistency Service Inventory 1. Intangibility: Unlike products, services cannot be held, touched, or seen before the purchase decision thus, they should be made tangible to a certain extent. Marketers should ―tangibilize the intangible‖ to com m unicate service nature and quality. This can be done through: Environment Uniforms Paperwork Brochures Insurance is a guarantee against risk and neither the risk nor the guarantee is tangible. Hence, insurance rightly come under services, which are intangible. Efforts have been made by the insurance companies to make insurance tangible to some extent by including letters and forms. 2. Inconsistency: Service quality is often inconsistent. This is because service personnel have different capabilities, which vary in performance from day to day. This problem of inconsistency in service quality can be reduced through standardization, training and mechanization. In insurance sector, all agents should be trained to bring about consistency in providing service or, the insurance process should be mechanized to a certain extent. E.g.: the customers can be reminded about the payment of premium through e- mails and sms instead of agents. 3. Inseparability: Services are produced and consumed simultaneously. Consumers cannot and do not separate the deliverer of the service from the service itself. Interaction between consumer and the service provider varies based on whether consumer must be physically present to receive the service. In insurance sector too, the service is produced when the agent convinces the consumer to buy the policy and it is said to be consumed when the claim is settled and the policyholder gets the money. In both the above cases, it is essential for the service provider (agent) and the consumer (policy holder) to be present. 4. Inventory: No inventory can be maintained for services. Inventory carrying costs are more subjective and lead to idle production capacity. When the service is available but there is no demand, cost rises as, cost of paying the people and overhead remains constant even though the people are not required to provide services due to lack of demand. In the insurance sector however, commission is paid to the agents on each policy that they sell. Hence, not much inventory cost is wasted on idle inventory. As the cost of agents is directly proportionate to the policy sold. Complaint Handling. In a vast Organization like LIC, catering to the various needs and aspirations of millions of policyholders, grievances of customers do arise occasionally. In order to redress these grievances LIC has established elaborate Grievance Rederessal Machinery and the details are as under. 1) Grievance Redressal Officers: II) Complaint Cells: III) Claims Review Committee: IV) Complaints received through the Government: V) Policyholder Councils and Zonal Advisory Boards: VI) Consumer Affairs Committee: VII) Citizens' Charter SECTION – II A STUDY OF THE INDUSTRY A Sectoral study Insurance is suddenly gaining all the attention and what used to be a strangewould in it is a household name, thanks to opening up of the industry, while there are several reasons for opening up of insurance sector the foreign investors are eyeing it as a very lucrative prospect. After the opening up, several private insurers have started operating in life insurance, especially in metro areas. New marketing channels like Bancassurance, brokers, etc. are also in the offing. KEY MARKET INDICATORS. Size of market life & non life $16 billion Total Global insurance premium $2408.25 billion(-1.5% as against 2000) Rate of annual growth 2002-03 Life- 11.27% Non life- 23% Geographical restriction for new None. Players can operate all over the players country. Registration restriction Composite registration not available. Equity restriction in the new Indian Foreign investor can hold up to 26% of the insurance company equity. Number of registered companies. Public sector – 01 Private sector – 13 Source: IRDA annual report 2002 - 03 Life insurers in India. As an answer to globalization of economy and the increasing pressure of the WTO regulations, the govt. appointed the Malhotra Committee. After considering all aspects, the government ultimately enacted Insurance Regulatory and development authority and vested the authority to formulate regulations for insurance industry. Public sector Private sector 1. Life Insurance Corporation 1. Allianz bajaj life insurance. (LIC) 2. Birla sun life insurance 3. HDFC standard life insurance 4. ICICI Prudential life insurance. 5. Reliance life insurance. 6. ING vysya life insurance 7. Max New York life insurance 8. MetLife insurance 9. Kotak mahindra life insurance. 10. SBI insurance Co Ltd. 11. TATA-AIG life insurance Co Ltd. 12. AMP-Sanmar Assurance Co Ltd. 13.Aviva Life insurance Company Ltd.. Present Market Structure The insurance sector in India has come a full circle from being an open competitive market to nationalization and now back to a liberalized market again. After privatization LIC is no longer a monopoly. Insurance sector was converted into Oligopoly. The market share of private players is as under. Metlife ING Vyasa 1.1% AMP Sanmar AVIVA Life 3.5% SBI Life 1.2% 3.7% 4.1% Om Kotak ICICI Pru 5.7% 36.2% Max NYL 6.2% Allianz Bajaj 8.7% Tata AIG Birla Sunlife HDFC Standard 6.0% 14.0% 9.4% Total market share of LIC as compared to other private players. LIC ICICI PRU SUNIFE BIRLA TATA AIG OTHERS Characteristics of Insurance sector as oligopoly: 1. Presence of few sellers: After liberalization the no. of sellers increased from 1 to 13 as on date, like LIC, ICICI Prudential, HDFC Standard, Birla Sun life, Om Kotak, SBI Life, ING Vysya, and MAX New York Life etc. 2. Regulator: IRDA (Insurance Regulatory Development Authority) regulates the Insurance industry. License to the new comer is granted by it only. All products, premiums, Tariffs require its approval. 3. Price Giver: Price of the policy i.e. premium is calculated by the actuaries of the respective companies depending upon the nature of risks covered, coverage of the policy and many other probability calculations. But premium as well as the product needs to be approved by IRDA. 4. Entry or Exit Barrier: There is no free entry into this sector as already outlined New entrants has to satisfy certain condition before entering into this industry. Exit is even tougher since all the contracts are long term so there are very strict regulations for exit from the industry by IRDA. 5. Product Differentiation: There are no homogenous products. There are wide varieties of products available in the market. Each seller can introduce any new policy depending on the efficiency of its product development team within the broad guidelines of IRDA. PEST ANALYSIS OF INSURANCE SERVICES Political/ Legal Influences which have an impact on financial services and consumer confidence include the following: The Insurance Regulatory and Development Authority: Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Privatization of Insurance sector: The introduction of private players in the industry has added to the colours in the dull industry. The initiatives taken by the private players are very competitive and have given immense competition to the on time monopoly of the market LIC. Since the advent of the private players in the market the industry has seen new and innovative steps taken by the players in this sector. The new players have improved the service quality of the insurance.The market share was distributed among the private players. FDI in insurance sector: Then, the issue came of amount of FDI to be allowed by a foreign player in the insurance sector. The government had allowed the private players to have foreign equity up to just 26 %. Economic Indian economy – growth projections: By 2025 the Indian economy is projected to be about 60 per cent the size of the US economy. The transformation into a tri-polar economy will be complete by 2035, with the Indian economy only a little smaller than the US economy but larger than that of Western Europe. By 2035, India is likely to be a larger growth driver than the six largest countries in the EU, though its impact will be a little over half that of the US. Growing premiums: Growing premiums are obviously attracting the new players. During the financial 2004 05 alone, the life insurance premium grew by 35% to over $ 13.5 billion in 2004-05. According to Mumbai based research agency Crystalise Research, over the next five years, this figure to zoom past the US $ 33.5 billion mark. Per capita GDP: According to a study by Swiss Re, a leading global reinsurance company once per capita GDP touches $10,000, life insurance premium collection takes off. India„s per capita G D P is hovering around $ 3000 but is expected to go up steeply given the economic growth projections. Socio-cultural Life expectancy & Mortality rate: The life expectancy is defined as the number of years for which a new born baby will live in the prevailing mortality condition ns of that particular year. The mortality or crude death rate refers to the number deaths per thousand people. Both these factors are very important as they are used to derive the premium of a particular policy. All the insurance companies follow a set standard table referring to which they decide upon the premium rates. This is generally prescribed by the government. Following is the life expectancy and death rate in India: Gender discrimination: Gender based discrimination is rampant in any industry. In the insurance sectore, different premium rates prevail for women and men. Demographics: One of the major influences on the premiums or prices charged by insurance companies is on the basis of the demographics. Premium rates largely depend on the age, sex of the individual insured. All the insurance policies have a different rate of premiums to be paid. Improving standard of living: If, by 2030 AD 50% Indian population reaches the level of middle class, ndian market for Insurance Sector will reach the level of 600 million from conservatively estimated present level of 100 million Consumer attitude and preferences: Insurance was always viewed by people as a safety net. The insurance industry is primarily based on the fact that people live their family their belongings and hence want them to be with them forever. This is the basic attitude of people towards insurance. Other factors: Technological. Computerization: This brought about greater efficiency and quick service delivery. Internet: Internet usage has drastically improved in the last decade. There was a tremendous increase in the use of technology by L IC during the late 1990„s. The company launched its website www.licindia.com in the m id 1990„s to offer basic services such as modifying policies Metropolitan Area Network (MAN) and Wide Area Network LIC has commissioned a MAN connecting more than 75 branches in Mumbai. These MAN centres were connected to each other by a WAN network. This WAN was designed for distributed processing without a central database – each division maintained a database of the policyholders. Electronic Clearance Service (ECS): Almost all the big organizations today provide the ECS facility to its customers. A policy holder having an account in any bank which is a member of the local clearing house can opt for ECS debit to pay premiums. Call Centres and SMS services: Al the insurance companies have their own call centres which cater to the phone based queries of the policyholders. This service is 24x7 and they have the Interactive Voice Response (IVR) systems. SWOT ANALYSIS OF INSURANCE SECTOR Strengths: 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. The gradual growth of the industry and also the increasing number of claims settled has slowly led to the increase in the awareness in the minds of the customers. These aware customers are now potential clients which can be used by the companies and converted into new clients. Insurance companies are getting savvy. Enhanced marketing thus is crucial. Already, many companies have full operation capabilities over a 12-hour period. The opening up of the industry has defined new frontiers of distribution of which consumer concern is an indispensable part. Weakness: 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. Today, LIC has more than 60. 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. 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 of a population morethan5000-10000. One zilla could give them a good amount of business. The company could have this opportunity and tap it and reap revenues. Trained manpower. Since the sector has opened up, many new companies have already started its operation and few are just about to begin. The government has also introduced professional courses like Bcom. (Banking and insurance), identifying the potential growth in the insurance sector. Threats: Lack of understanding. 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, 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. Findings from the study With an annual growth rate of 15-20% and the largest number of life insurance policies in force, the potential of the Indian insurance industry is huge. Total value of the Indian insurance market (2004-05) is estimated at Rs.450 billion. According to government sources, the insurance and banking services' contribution to the country's gross domestic product (GDP) is 7% out of which the gross premium collection forms a significant part. Till date, only 20% of the total insurable population of India is covered under various life insurance schemes, the penetration rates of health and other non-life insurances in India is also well below the international level. These facts indicate the of immense growth potential of the insurance sector. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent. There are presently 12 general insurance companies with four public sector companies and eight private insurers. According to estimates, private insurance companies collectively have a 10% share of the non-life Thus it is clear, that insurance sector is booming and is one of the most dynamically growing sectors of the Indian chapter. Growth potentials are tremendous, and in era of cut-throat competition, the best marketer can reach to dizzying heights. The life insurance industry in India grow by an impressive 36%, with premium income from new business at Rs.253.43 billion during the fiscal year 2004-2005, braving stiff competition from private insurers. Future of the Insurance Sector – A hypothesis based on the study. Wage and salary employment in the insurance industry is projected to increase 8 percent between 2002 and 2012, more slowly than the 16 percent average for all industries combined. While demand for insurance is expected to rise, downsizing, productivity increases due to new technology, and a trend toward direct mail, telephone, and Internet sales will limit job growth. Also, thousands of openings are expected to arise in this large industry to replace workers who leave the many successful insurance com panies w ill recognize the Internet„s potential as a powerful marketing tool. Not only might this reduce costs for insurance companies, but it also could enable many clients to turn to the Internet first to get information on their policies, obtain quotes, or submit claims. As insurance companies begin to offer more information and services on the Internet, some occupations, such as insurance sales agent, could experience slower employment growth. 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. Sales agents working in the property and casualty market, particularly in auto insurance, will be most affected by increasing reliance on the Internet. Auto policies are relatively straightforward and can be issued more easily without the involvement of a live agent. Insurance companies will continue to face increased competition from banks and securities firms entering the insurance markets. As more of these firms begin to sell insurance policies, increasing numbers of insurance sales agents will be employed in them, rather than in insurance companies. In order to stay competitive, insurance companies have begun to expand their financial service offerings or to establish partnerships with banks or brokerage firms. Productivity gains caused by the greater use of computer software will continue to limit the growth of certain jobs within the insurance industry. For example, the use of underwriting software that automatically analyzes and rates insurance applications will limit the employment growth of underwriters. Also, computers linked directly to the databases of insurance carriers and other organizations have made communications easier among sales agents, adjusters, and insurance carriers, so that all have become much more productive. Furthermore, efforts to contain costs have led to an increasing reliance on customer service representatives to deal with the day-to-day processing of policies and claims. In addition, the Internet has made insurance investigators more productive by drastically reducing the amount of time it takes to perform background checks, allowing investigators to handle an increasing number of cases, but limiting their employment growth. Sales agents and adjusters still are needed to meet face-to-face with clients, many of whom prefer to talk directly with an agent, especially regarding complicated policies. Opportunities will be best for sales agents who sell more than one type of insurance or financial service. Adjusters will still be needed to inspect damage and interview witnesses, and although the number of available jobs for actuaries will be limited due to the small size of the occupation, employment opportunities should be good as stringent qualifying requirements resulting from the examination system limit the number of new entrants. 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. Concluding summary. Life Insurance in India has a long way to go in terms of percentage of population covered by life insurance companies if we compare ourselves to most of the developed and developing nations and in terms of customer service. Some of the statistics that further gives evidence of the immense scope of Life Insurance industry in India o The global life insurance market stands at $1,521.2 billion while the non-life insurance market is placed at $922.4 billion. o The United States itself accounts for about one-third of the $2443.6 billion global insurance market and Japan stands next with a 20.62% share. o India takes 23rd position with US $9.933 billion annual premium collections and a meager 0.41% share. o Out of one billion people in India, only 35 million people are covered by life insurance. o Indian insurance market is set to touch $25 billion by 2010, on the assumption of a 7 % real annual growth in GDP. Planning of various reforms in this industry are in the process like privatization of pension funds, increase in the FDI in this sector, increasing automation and better customer service. But the biggest barriers in the growth of Life Insurance Industry is in terms of the attitude of people towards life insurance and certain bad practices existing in the market as a result of prolonged monopoly of public sector. Some People still think that it is an investment product where we get low return or a simple tax saving device u/s 88 or Sec10CCC.Awareness regarding the insurance is not merely an investment but it covers your life risk as well; is required and new private players have already started the job of enlightening people. The problem of lack of knowledge of the product among the distributors has already been solved by IRDA by making the 100 hrs training compulsory for all the distributors. More and more stress should be given on customer service and prompt payment of claim. Bibliography. PRIMARY DATA The 100 hours training at Tata-AIG proved to be the main source of primary data. Also the guidance provided by Mr. Sidharth Saxena was very beneficial in deriving conclusions. SECONDARY DATA I. Books o Service Marketing by:- Ravi Shankar o Insurance by:- M.J. Mathew o Life insurance IC-33. II. Journals o ICFAI insurance industry vol. – III th o 46 annual report of the LIC of India o Money outlook o Insurance chronicle III. Websites o www.lic.com. o www.tataaig.com.
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