Project on insurance by sanghaviharshil


Sr. No.        Subjects Covered                                 Pages
     1.                         Project Proposed                9 - 11
          1.1 Objective of the project
          1.2 Methodology
          1.3 Sampling
          1.4 Limitations
     2.                           Introduction                  12 - 16
          2.1 Definition of insurance
          2.2 Functions of insurance
          2.3 Definitions of life insurance
          2.4 Role of life insurance
          2.5 Importance of life insurance
     3.                       Agency business model             17 - 19
          3.1 Insurance agencies
          3.2 Functions of agency manager
          3.3 Operational work of insurance agency
     4.        Indian insurance industry                        20 - 27
          4.1 History
          4.2 IRDA
          4.3 Changing perception of customers
          4.4 Changing face of Indian life insurance industry
          4.5 Possibilities

5.                   Global insurance industry             28 - 29
6.               Functioning of insurance industry         30 - 36
      6.1 Insurer’s business model
      6.2 Investment management
      6.3 Key ratios and terms
      6.4 Requirements of an insurance risk
      6.5 Various types of insurance products
7.                    Insurance and economy                37 - 39
8.                 SBI Life insurance company              40 - 42
9.               Distribution of insurance product         43 - 46
10.         Effective marketing strategies for insurance   47 - 52
11.                   Competitors of SBI Life              53 - 62
12.               Comparison of ULIP products              63 - 69
13.                         Questioner                     70 - 71
14.                  Conclusions and findings              72 - 91
15.                     Recommendations                        92

                        1. Project proposed
Agency business model of different insurance companies- competitive
Different agencies of different insurance companies are having some
strategies to survive in the market. Their strategies may be in the form of:
    How they target their customers.
    How they make their advisors active.
    How they make their operational and sales department effective.
    How they promote their employees.
    How they handle the conflict in agency.

Objective of the project: - Main objective of the project is to find out
the strategies of different insurance agencies and evaluate them. Project is
about to penetrate the competitors of SBI life. Conclusion of this project can
give an idea of strategies of different companies which may be helpful to the
company. Now days all the insurance companies in India are trying to
establish themselves in the competitive market. They are introducing
innovative marketing strategies to survive in the market. Many other private
companies are looking to enter in the Indian insurance market .so it is very
essential to a company to innovate their marketing strategies in terms of

    Recruiting their advisors
    To make their advisors active
    Well educated and capable employee in the agency
    Marketing of their products

    Deployment of their products
    Targeting the right and potential customers
    Differentiating from other companies
    Future plan of the company

           This study consists of to find out the marketing strategies of
   different insurance companies which are the competitors of SBI Life
   insurance. This research requires the interview of branch managers of
   different insurance companies and find out their branches are working in
   terms of above mentioned factors.


Research is totally based on primary data. Secondary data can be used only
for the reference. Research has been done by primary data collection, and
primary data has been collected by meeting with the branch and agency
manager of different insurance agencies and branches in Calicut. Data
collection has been done through by giving structured questioner. Research
has been done after 27 branch managers or agency manager. This study will
be based on judgment sampling and this research is skewed to organization
level. This is an exploratory type of research. And this research needs further
study also Research is a kind of pilot study.

Sample size has been taken by judgment sampling. Judgment sampling is a
process in which the selection of a unit, from the population is based on the
pre judgment. This research requires the survey of different insurance
agencies in Calicut city. So research concentrates on the branch or agency

manager of different insurance companies. So the selection of unit for this
research has been judged by the researcher. Sample size for this research is

       Time limitation
       Research has been done only in Calicut.
       Companies did not disclose their secrets data and strategies.
       Possibility of Error in data collection.
       Possibility of Error in analysis of data due to small sample size.

                            2. Introduction
The story of insurance is probably as old as the story of mankind. Tendency
of a human being to secure themselves against loss and disaster has been
from the starting of world. They sought to avert the evil consequences of fire
and flood and loss of life and were willing to make some sort of sacrifice in
order to achieve security. Though the concept of insurance is largely a
development of the recent past, particularly after the industrial era – past few
centuries – yet its beginnings date back almost 6000 years as per records.

Insurance business is divided into four classes:
    Life Insurance
    Fire
    Marine
    Miscellaneous Insurance.

Insurance provides:
    Protection to investor.
    Accumulation of savings.
    Channeling these savings into sectors needing huge long term

Functions of insurance:
   Provide protection: The primary function of insurance is to provide
     protection against future risk, accidents and uncertainty. Insurance
     cannot check the happening of the risk, but can certainly provide for
     the losses of risk. Insurance is actually a protection against economic
     loss, by sharing the risk with others.

   Collective bearing of risk: Insurance is an instrument to share the
     financial loss of few among many others. Insurance is a mean by
     which few losses are shared among larger number of people. All the
     insured contribute the premiums towards a fund and out of which the
     persons exposed to a particular risk is paid.

   Assessment of risk: Insurance determines the probable volume of
     risk by evaluating various factors that give rise to risk. Risk is the
     basis for determining the premium rate also.

   Provide certainty: Insurance is a device, which helps to change from
     uncertainty to certainty. Insurance is device whereby the uncertain
     risks may be made more certain.

   Small capital to cover larger risk:              Insurance relieves the
     businessmen from security investments, by paying small amount of
     premium against larger risks and uncertainty.

    Contributes towards the development of industries:              Insurance
      provides development opportunity to those larger industries having
      more risks in their setting up. Even the financial institutions may be
      prepared to give credit to sick industrial units which have insured their
      assets including plant and machinery.

    Means of savings and investment: Insurance serves as savings and
      investment, insurance is a compulsory way of savings and it restricts
      the unnecessary expenses by the insured's For the purpose of availing
      income-tax exemptions also, people invest in insurance.

    Source of earning foreign exchange: Insurance is an international
      business. The country can earn foreign exchange by way of issue of
      marine insurance policies and various other ways.

    Risk free trade: Insurance promotes exports insurance, which makes
      the foreign trade risk free with the help of different types of policies
      under marine insurance cover.

Life insurance:
Life insurance is a contract under which the insurer (Insurance Company) in
Consideration of a premium paid undertakes to pay a fixed sum of money on
The death of the insured or on the expiry of a specified period of time
Whichever is earlier. In case of life insurance, the payment for life insurance
policy is certain. The Event insured against is sure to happen only the time
of its happening is not known. So life insurance is known as ‘Life

Assurance’. The subject matter of insurance is life of human being. Life
insurance provides risk coverage to the life of a person. On death of the
person insurance offers protection against loss of income and compensate
the titleholders of the policy.

Roles of life insurance:

    Life insurance as an investment: - Insurance products yield more
      than any other investment instruments and it also provides added
      incentives or bonus offered by insurance companies.

    Life insurance as risk cover: - Insurance is all about risk cover and
      protection of life. Insurance provides a unique sense of security that
      no other form of invest can provide.

    Life insurance as tax planning: - Insurance serves as an excellent
      tax saving mechanism too.

Importance of life insurance:-
    Protection against untimely death: - Life insurance provides
      protection to the dependents of the life insured and the family of the
      assured in case of his untimely death. The dependents or family
      members get a fixed sum of money in case of death of the assured.

 Saving for old age: - After retirement the earning capacity of a
   person reduces. Life insurance enables a person to enjoy peace of
   mind and a sense of security in his/her old age.
 Promotion of savings: - Life insurance encourages people to save
   money compulsorily. When life policy is taken, the assured is to pay
   premiums regularly to keep the policy in force and he cannot get back
   the premiums, only surrender value can be returned to him. In case of
   surrender of policy, the policyholder gets the surrendered value only
   after the expiry of duration of the policy.
 Initiates investments: - Life Insurance Corporation encourages and
   mobilizes the public savings and canalizes the same in various
   investments for the economic development of the country. Life
   insurance is an important tool for the mobilization and investment of
   small savings.
 Credit worthiness: - Life insurance policy can be used as a security
   to raise loans. It improves the credit worthiness of business.
 Social Security: - Life insurance is important for the society as a
   whole also. Life insurance enables a person to provide for education
   and marriage of children and for construction of house. It helps a
   person to make financial base for future.
 Tax Benefit: - Under the Income Tax Act, premium paid is allowed
   as a deduction from the total income under section 80C.

                   3. Agency business model

In India insurance is sold through mainly four channels.
    Through branch
    Through agency
    Through financial institution
    Through banks

Independent agency system means of selling and servicing property and
casualty insurance through agents who represent different companies. The
agents own the records of the policies they sell.

Insurance is now governed by a blend of statutes, administrative agency
regulations, and court decisions. State statutes often control premium rates,
prevent unfair practices by insurers, and guard against the financial
insolvency of insurers to protect insureds.

In most states, an administrative agency created by the state legislature
devises rules to cover procedural details that are missing from the statutory
framework. To do business in a state, an insurer must obtain a license
through a registration process. This process is usually managed by the state
administrative agency. The same state agency may also be charged with the
enforcement of insurance regulations and statutes.

Administrative agency regulations are many and varied. Insurance
companies must submit to the governing agency yearly financial reports
regarding their economic stability. This requirement allows the agency to
anticipate potential insolvency and to protect the interests of insureds.

Agency regulations may specify the types of insurance policies that are
acceptable in the state, although many states make these declarations in
statutes. The administrative agency is also responsible for reviewing the
competence and ethics of insurance company employees.

Insurance agencies:
Insurance agency can be defined as a group of insurance agents or advisor.
These agents or advisors create a distribution channel to sell the different
insurance products. These advisors are the strongest distribution channel for
an insurance agency. An advisor or agent works as a third party or
intermediate between insurance company and customers. All the advisors in
an agency work as a team. Main work of insurance advisor or agent is to
promote and sell different insurance products of company.

Functions of agency manager:
a person who governs a group of insurance advisors is known as agency
manager. Success of an agency manager depends on the success of their
advisors. work of agency manager is to control the advisors in an efficient
way. Agency manager is like a creature of two wings. He has to recruit
advisors as well as to give sales to the insurance company.
    To recruit advisors.
    Make them aware of different insurance products.
    To give them training session.
    To motivate them for efficient work.
    To get maximum and efficient work from their advisors.

Operation work of insurance agency (SBI Life):
Every industry has an operational department which supports the market

            Front office partners (independent agents)
               Develop insurance products      Distribute product
CUSTOMERS           Plan and manage company          BUSINESS PARTNERS
                     Fulfill and service product   Claims

Back office provider                          Regulatory institutions

In the reference to the SBI Life insurance, development of insurance
products, distribution, planning services products and claims are taken care
by the head office. Back office providers are those persons who take care of
the operational part of the organization and front office providers are the
people who brings sell to the organization. Back office has its own hierarchy
which is connected to head office, and every policy has to be processed to
head office. Unit for the operations is known as processing centre, and
processing centre within the city is known as mini processing centre.
Proposal forms come through front office and the verification of the
proposal is done by manually which is known as scrutiny. After scrutiny the
operational staff enters it in SBI Life website, which is done online. the entry
of a proposal is done in a sequential order starting with scrutiny, inwards,
proposal wise inwards, cashier entry, cashier entry approval, data entry and
finally outwards. After finishing all these operations policy issues from the
head office of the state.

                 4. Indian insurance industry
           Life insurance came to India from England in 1818 when
oriental life insurance company started in Calcutta by Europeans. After this
many insurance companies had been started in India. But these companies
were looking after only the needs of European community established in
India. Indian people were not being insured by these companies. First Indian
life insurance company came as Bombay mutual life insurance assurance.
Second company was Bharat insurance company came in 1896. After this
the united India in madras, national Indian and national insurance in Calcutta
and the co-operative assurance in Lahore were established in 1906.
             To regulate Indian insurance business first insurance act came
in 1912 as life insurance company act and provident fund act. These acts
consist of premium rates tables and periodical valuations of companies. In
the first two decade of 20th century many life insurance companies were
started. So the insurance act came in 1938 to governing life and non life
insurance companies and to provide strict state control. In 1956 the life
insurance business in India was nationalized. In 1956 life insurance
corporation of India (LIC) was created to spreading life insurance much
more widely particularly in rural areas. In that year LIC had 5 zonal offices,
33 divisional offices and 212 branch offices. In 1957 the business of LIC of
sum assured of 200crores, 1000crores in 1970, and 7000crores in 1986.

Indian regulatory development authority:
In 1999, the Insurance Regulatory and Development Authority (IRDA) was
constituted as an autonomous body to regulate and develop the insurance
industry. The IRDA was incorporated as a statutory body in April, 2000. The
key objectives of the IRDA include promotion of competition so as to
enhance customer satisfaction through increased consumer choice and lower
premiums, while ensuring the financial security of the insurance market. The
IRDA opened up the market in August 2000 with the invitation for
application for registrations. Foreign companies were allowed ownership of
up to 26%. The Authority has the power to frame regulations under Section
114A of the Insurance Act, 1938 and has from 2000 onwards framed various
regulations ranging from registration of companies for carrying on insurance
business to protection of policyholders’ interests.
Role of IRDA:
    Protecting the interests of policyholders.
    Establishing guidelines for the operations of insurers, and brokers.
    Specifying the code of conduct, qualifications, and training for
      insurance intermediaries and agents.
    Promoting efficiency in the conduct of insurance business.
    Regulating the investment of funds by insurance companies.
    Specifying the percentage of business to be written by insurers in rural
    Handling disputes between insurers and insurance intermediaries.

Changing perception of Indian customers:
Indian Insurance consumers are like Indian Voters, they are soft but when
time is right and ripe, they demand and seek necessary changes. De-tariff of
many Insurance Products are the reflection of changing aspirations and
growing demand of Indian consumers.

For historical years, Indian consumers were at receiving end. Insurance
Product was underwritten and was practically forced onto consumers on a
“Take-it-As-it-basis”. All that got changed with passage of IRDA act in
1999. New insurance companies have come into existence leading to open
competition and hence better products for customers.

Indian customers have become very sensitive to Coverage / Premium as well
as the Products (read Risk Solution), that is given to them. There are not
ready to accept any product, no matter even if that is coming from the
market leader, should that product is not serving the purpose. A case in point
is ULIP Product / Group Life and Credit Life in Life Insurance segment and
Travel / Family Floater Health and Liability Insurance in the Non-life
segment are new age Avatar. The new products are constantly being
demanded by Indian consumers, which is putting huge pressures on
Insurance companies (Read Risk Under-writers) and Brokers to respond.

Customers are looking at Insurance for covering Pure Risk now which I
have covered in my next section. Another good reason why we are seeing
quick changes in the buying behavior of Insurance from mere Investment to
risk mitigation is the cost of Replacement of Goods (ROG) or Cost of
Services (COS).

Now Indian customers are aware of insurance industry and insurance
products provided by companies. They have become more sensitive. They
would not accept any type of insurance product unless it fulfills their
requirements and needs. In historic day’s customers looking at insurance
products as a life cover which can provide security against any unacceptable
events, but now customers look at insurance products as an investment as
well as life cover. So today’s customers wants good return from the
insurance companies. The Indian customer’s forms the pivot of each
company’s strategy.

Investment of Indian household savings (as a % in different sector)

BANK DEPOSITS                            39%
CORP. BANKS                              2%
SHARES AND DEBENTURES                    1%

MUTUAL FUNDS                             2%
NBFC’S                                   3%
GOVT. BONDS                              13%
INSURANCE                                13%
PF/ RETIRE FUNDS                         21%
CURRENCY                                 6%

                                           Source: - www.

Changing face of Indian insurance industry:

     After the Insurance Regulatory and Development Authority Act have
been passed there has been establishment of many private insurance
companies in India. Previously there was a monopoly business for Life
Insurance Corporation of India (L.I.C.) who was the only life-insurance
company for the people till 2000. L.I.C. still holds 71.4% of the market
share in 2006. But after the introduction of private life insurance companies
there is a great competition in Indian market now. Everyone is trying to
capture the fresh market here and penetrate it with aggressive marketing
strategies. Today life-insurance is not only limited up to just life risk cover
and maturity period bonuses but changed to greater return from the
investments. With the introduction of the unit linked insurance policies these
companies are investing the money in different investment instruments like
shares, bonds, debentures, government and other securities.        People are
demanding for higher returns with the life risk cover and private companies
are giving 30-40% average growth per annum. These life-insurance
companies have every kind of policies suiting every need right from
financial needs of, marriage, giving birth and rearing up a child, his
education, meeting daily financial needs of life, pension solutions after
retirement. These companies have every aspects and needs of our life
covered along with the death-benefit.

                                 In India only 25% of the population has life
insurance. So Indian life-insurance market is the target market of all the
companies who either want to extend or diversify their business. To tap the
Indian market there has been tie-ups between the major Indian companies
with other International insurance companies to start up their business. The

government of India has set up rules that no foreign insurance company can
set up their business individually here and they have to tie up with an Indian
company and this foreign insurance company can have an investment of
only 24% of the total start-up investment.

Indian insurance industry can be featured by:

    Low market penetration.

    Ever growing middle class component in population.

    Growth of customer’s interest with an increasing demand for better
      insurance products.

    Application of information technology for business.

    Rebate from government in the form of tax incentives to be insured.

              Today, the Indian life insurance industry has a dozen private
players, each of which are making strides in raising awareness levels,
introducing innovative products and increasing the penetration of life
insurance in the vastly underinsured country. Several of private insurers
have introduced attractive products to meet the needs of their target
customers and in line with their business objectives. The success of their
effort is that they have captured over 28% of premium income in five years.

              The biggest beneficiary of the competition among life insurers
has been the customer. A wide range of products, customer focused service
and professional advice has become the mainstay of the industry, and the
Indian customer’s forms the pivot of each company’s strategy. Penetration

of life insurance is beginning to cut across socio-economic classes and
attract people who have never purchased insurance before.
              Life insurance is also now being regarded as a versatile
financial planning tool. Apart from the traditional term and saving insurance
policies, industry has seen the entry and growth of unit linked products. This
provides market linked returns and is among the most flexible policies
available today for investment. Now products are priced, flexible, and
realistic and sustain so people in better position to understand the risk and
benefits of the product and they are accepting these innovative products.
               So it is clear that the face of life insurance in India is
changing, but with the changes come a host of challenges and it is only the
credible players with a long term vision and a robust business strategy that
will survive. Whatever the developments, the future and the opportunities in
this industry will surely be exciting.

There are 12 private players in Indian life insurance market.

6 bank owned insurers: - HDFC standard life, ICICI prudential, ING
Vysya, MetLife, OM Kotak, SBI life.
6 independent insurers: - Aviva, ANP sanmar, Birla sun life, Bajaj Allianz,
Max New York life, Tata AIG.
                           Major international insurers are- Prudential and
Standard life from UK, Sun life of Canada, AIG, MetLife and New York life
of the US.

Increasing growth since liberalization:
YEAR                    LIC (in bn rs.)            PRIVATE PLAYER
FY03                    110                        10
FY04                    120                        20
FY05                    130                        40
FY06                    140                        60
FY07                    240                        160

                Source: - Insurance Industry (ICFAI publication book)

Possibilities for insurance companies in India:
   Further deregulation of the market.
   Greater concern for the customers.
   Newer products and services.
   Competition and quality consciousness.
   Cost effective operations.
   Restructuring of the public sector.
   Consolidation of domestic insurance markets.
   Technology driven shift in product design.
   Actual operations and distribution.
   Convergence of financial services.

                 5. Global insurance industry
Globally, insurers increasingly are pressured by the demands of their clients.
The development of global insurance industry over the past few years was
influenced by booming stock markets which enabled considerable capital
gains to be made in non life business. Increase in insurers equity capital
increased underwriting capacity, while demand did not develop at the same
pace, resulting in decrease in insurance policies prices. The stock market

boom of the past few years led to demand for unit linked insurance products.

    The global insurance industry is growing at rapid pace. Most of the
markets are undergoing globalization. Lot of mergers and acquisition are
taking place in the insurance world. The rapidity in the industry,
technological improvement has resulted in pressures on a few economic
parameters. The world insurance industry is at peak of its globalization
           Global insurance market is increasing by an average of six percent
per year since 1990. Insurance companies have collected $2443.7 billion
premium world wide according to the global development of premium
volume in 144 countries in 2005. $1521.3 has been generated as life
insurance premium and $922.7 as non life insurance premium. The US
accounted for 35% of global life and non life premium, Japan had global
share of 21%, and UK was having 10% of global share.

Influence on Indian insurance industry:
In this era of globalization, insurance companies face a dynamic global
environment.    Dramatic    changes   are   taking   place   owing    to   the

internationalization of activities, appearance of new risk, new types of
covers to match with new risk situations, and unconventional and innovative
ideas on customer services. Low growth rates in developed markets,
changing customers needs, and the uncertain economic conditions in the
developing world are exerting pressure on insurer’s resources and testing
their ability to survive. Now the existing insurers are facing difficulties from
non-traditional competitors those are entering the retail market with new
approaches and through new channels.
         India has a rapidly growing middle class and this section can afford
to buy insurance products. This shows the attraction that the Indian market
holds for foreign insurers who have been putting pressure on developing
countries as well as on India to open up its market.

Life insurance penetration as a % of GDP
United kingdom                           8.9%
Japan                                    8.3%
Korea                                    7.3%
United states                            4.1%
Malaysia                                 3.6%
India                                    3.0%
China                                    1.8%
Brazil                                   1.3%

                          Source: -

           6. Functioning of insurance industry:
Insurer’s business model:
Profit = earned premium + investment income - incurred loss - underwriting

Insurers make money in two ways: (1) through underwriting, the processes
by which insurers select the risks to insure and decide how much in
premiums to charge for accepting those risks and (2) by investing the
premiums they collect from insured.

The most difficult aspect of the insurance business is the underwriting of
policies. Using a wide assortment of data, insurers predict the likelihood that
a claim will be made against their policies and price products accordingly.
To this end, insurers use actuarial science to quantify the risks they are
willing to assume and the premium they will charge to assume them. Data is
analyzed to fairly accurately project the rate of future claims based on a
given risk. Actuarial science uses statistics and probability to analyze the
risks associated with the range of perils covered, and these scientific
principles are used to determine an insurer's overall exposure. Upon
termination of a given policy, the amount of premium collected and the
investment gains thereon minus the amount paid out in claims is the insurer's
underwriting profit on that policy.

An insurer's underwriting performance is measured in its combined ratio.
The loss ratio (incurred losses and loss-adjustment expenses divided by net
earned premium) is added to the expense ratio (underwriting expenses
divided by net premium written) to determine the company's combined ratio.
The combined ratio is a reflection of the company's overall underwriting

profitability. A combined ratio of less than 100 percent indicates
underwriting profitability, while anything over 100 indicates an underwriting

Insurance companies also earn investment profits on “float”. “Float” or
available reserve is the amount of money, at hand at any given moment that
an insurer has collected in insurance premiums but has not been paid out in
claims. Insurers start investing insurance premiums as soon as they are
collected and continue to earn interest on them until claims are paid out.

. Naturally, the “float” method is difficult to carry out in an economically
depressed period. Bear markets do cause insurers to shift away from
investments and to toughen up their underwriting standards. So a poor
economy generally means high insurance premiums. This tendency to swing
between profitable and unprofitable periods over time is commonly known
as the "underwriting" or insurance cycle.

Finally, claims and loss handling is the materialized utility of insurance. In
managing the claims-handling function, insurers seek to balance the
elements of customer satisfaction, administrative handling expenses, and
claims overpayment leakages.

Investment management:
Investment operations are often considered incidental to the business of
insurance, and have traditionally viewed as secondary to underwriting. In the
past risk management was the most important part of business, whereas
today the focus has shifted to fund management. Investment income is a
large component of insurance revenues, skilful and careful management of
funds. Insurance is a business of large numbers and generates huge amount

of funds over time. These funds arise out of policyholder funds in the case of
life insurance, and technical and free reserves in the non-life segments. Time
lag between the procurement of premium and the payment of claim provides
an interval during which the funds can be deployed to generate income.
Insurance companies are among the largest institutional investors in the
world. Assets managed by insurance companies are estimated to account for
over 40% of the world’s top ten asset managers.
                    Returns on investments influence the premium rates and
bonuses and hence investment income will continue to be an important
component of insurance company profits. In life insurance, benefits from
insurance profits accrue directly to policy holders when it is passed on to
him in the form of a bonus. In non life insurance the benefits are indirect and
mostly by the creation of an investment portfolio. Investment income has to
compensate for underwriting results which are increasingly under pressure.
In the case of insurance, the difference between revenue and the expenses is
known as operating surplus.

Revenue =premium.
Expenses =sum of claims + commission payable on procurement of
business + operating expenses.
Operating surplus =revenue-expenses.

Net investment income includes income from trading in and holding stock
market securities including government securities, special deposits with the
central government, loans to several public utilities and service providers in
state government.

             Insurance premium collected is converted in a pool of fund then
divided in to four expenses.
    To pay the expenses of the management.
    To pay agency commission.
    To pay for the claims.
    Surplus money will be invested in govt. securities.

Requirements of an insurance risk

Insurance normally insure only pure risks .However, not all pure risk is
insurable .certain requirements usually must be fulfilled before a pure risk
can be privately insured .From the view point of the insurer, there are ideally
six requirement of an insurable risk

    There must be a large number of exposure units
    The loss must be accidental and unintentional.
    The loss must be determinable and measurable.
    The loss should not be catastrophic.
    The chance of loss must be calculable.
    The premium must be economically feasible

Comparison of Insurance with other Similar Factors
   (1) Insurance and gambling compared
       Insurance is often erroneously confused with gambling .There are
two important differences between them .First ,gambling creates a new
speculative risk ,while insurance is a technique for handling an already
existing pure risk .thus ,if you bet Rs 300 on a horse ,a new speculative
technique is created ,but if you pay Rs 300 to an insurer for fire insurance
,the risk of fire is already present and is transferred to the insurer by a
contract. No new risk is created by the transaction.
       The second difference between insurance and gambling is that
gambling is socially unproductive, because the winner’s gain comes at the
expense of the loser .In contract; insurance is always socially productive,
because neither the insurer nor the insured is placed in a position where the
gain of the winner comes at the expense of the loser. The insurer and the
insured have a common interest in the prevention of a loss. Both parties win
if the loss does occur .Moreover, consistent gambling transaction generally
never restore the losers to their former financial position .In contract
,insurance contracts restore the insured’s financially in whole or in part if a
loss occurs

   (2) Insurance and hedging compared
       The concept of hedging is to transferring the risk to the speculator
through purchase of future contracts .An insurance contract, however, is not
the same thing as hedging .Although both technique are similar in that risk is
transferred by a contract, and no new risk is created, there are some
important difference between them. First, an insurance transaction involves

the transfer of insurable risks, because the requirement of an insurable risk
generally can be met .However, hedging is a technique for handling risks
that are typically uninsurable ,such as protection against a decline in the
price agriculture products and raw materials.
A second difference between insurance and hedging is that insurance and
hedging is that insurance can reduce the objective risk of an insurer by
application of the law of large numbers. As the number of exposure units
increases, the insurer’s prediction of future losses improves, because the
relative variation of actual loss from expected loss will decline .thus, many
insurance transactions reduce objective risk. In contract, hedging typically
involves only risk transfer , not risk reduction .The risk of adverse price
fluctuation is transferred because of superior knowledge of market
conditions .The risk is transferred, not reduced, and prediction of loss
generally is not based on the law of large numbers.

Various types of life insurance policies:-
    Endowment policies:            This type of policy covers risk for a
      specified period, and at the end of the maturity sum assured is paid
      back to policyholder with the bonuses during the term of the policy.
    Money back policies:             This type of policy is for periodic
      payments of partial survival benefits during the term of the policy as
      long as the policy holder is alive.
    Group insurance: This type of insurance offers life insurance
      protection under group policies to various groups such as employers-
      employees, professionals, co-operatives etc it also provides insurance
      coverage for people in certain approved occupations at the lowest
      possible premium cost.

 Term life insurance policies: This type of insurance covers risk
  only during the selected term period. If the policy holder survives the
  term, risk cover comes to an end. These types of policies are for those
  people who are unable to pay larger premium required for endowment
  and whole life policies. No surrender, loan or paid up values are in
  such policies.

 Whole life insurance policies: This type of policy runs as long
  as the policyholder is alive and is covered for the entire life of the
  policyholder. In this policy the insured amount and the bonus is
  payable only to nominee on the death of policy holder.

 Joint life insurance policies:           These policies are similar to
  endowment policies in maturity benefits and risk cover, but joint life
  policies cover two lives simultaneously such as married couples. Sum
  assured is payable on the first death and again on the death of survival
  during the term of the policy.

 Pension plan: a pension plan or annuity is an investment over a
  certain number of years but does not provide any life insurance cover.
  It offers a guaranteed income either for a life or certain period.

 Unit linked insurance plan: ULIP is a kind of insurance plan
  which provides life cover as well as return on premium paid over a
  certain period of time. The investment is denoted as units and
  represented by the value called as net asset value (NAV).

                 7. Insurance and economy
 Indian economy is growing in reference to global market. Business of
   insurance with its unique features has a special place in Indian
 It is a highly specialized technical business and customer is the most
   concern people in this business, therefore this business is able to spur
   the growth of infrastructure and act as a catalyst in the overall
   development of Indian economy.
 The high volumes in the insurance business help spread risk wider,
   allowing a lowering of the rates of the premium to be charged and in
   turn, raising profits. When there is a bigger base, the probabilities
   become more predictable, and with system wide risks balanced out,
   profits improve. This explains the current scenario of mergers,
   acquisitions, and globalization of insurance.
 Insurance is a type of savings. Insurance is not only important for tax
   benefits, but also for savings and for providing security. It can be
   serving as an essential service which a welfare state must make
   available to its people.
 Insurance play a crucial role in the commercial lives of nations and act
   as the lubricants of economic activities. Insurance firms help to spread
   the potentially financial consequences of risk among the large number
   of entities, to mobilize and distribute savings for productive use,
   facilitate investment, support and encourage external trade, and
   protect economic entities against external risk.

Insurance and economic growth mutually influences each other. As the
economy grows, the living standards of people increase. As a consequence,
the demand for life insurance increases. As the assets of people and of
business enterprises increase in the growth process, the demand for general
insurance also increases. In fact, as the economy widens the demand for
new types of insurance products emerges. Insurance is no longer confined to
product markets; they also cover service industries. It is equally true that
growth itself is facilitated by insurance. A well-developed insurance sector
promotes economic growth by encouraging risk-taking. Risk is inherent in
all economic activities. Without some kind of cover against risk, some of
these activities will not be carried out at all. Also insurance and more
particularly life insurance is a mobilizer of long term savings and life
insurance companies are thus able to support infrastructure projects which
require long term funds. There is thus a mutually beneficial interaction
between insurance and economic growth. The low income levels of the vast
majority of population have been one of the factors inhibiting a faster
growth of insurance in India. To some extent this is also compounded by
certain attitudes to life. The economy has moved on to a higher growth path.
The average rate of growth of the economy in the last three years was 8.1
per cent. This strong growth will bring about significant changes in the
insurance industry.

      At this point, it is important to note that not all activities can be
insured. If that were possible, it would completely negate entrepreneurship.
Professor Frank Knight in his celebrated book “Risk Uncertainty and Profit”
emphasized that profit is a consequence of uncertainty.        He made a
distinction between quantifiable risk and non-quantifiable risk. According

to him, it is non-quantifiable risk that leads to profit. He wrote “It is a world
of change in which we live, and a world of uncertainty. We live only by
knowing something about the future; while the problems of life or of
conduct at least, arise from the fact that we know so little. This is as true of
business as of other spheres of activity”. The real management challenges
are uninsurable risks. In the case of insurable risks, risk is avoided at a cost.

                       8. SBI Life insurance

SBI Life insurance is a joint venture between the State Bank of India and
Cardiff SA of France. SBI Life insurance is registered with an authorized
capital of Rs 500 crore and a paid up capital of Rs 350 crores. SBI owns
74% of the total capital and Cardiff the remaining 26%. State Bank of India
enjoys the largest banking franchise in India. Along with its 7 Associate
Banks, SBI Group has the unrivalled strength of over 14,000 branches across
the country, the largest in the world.

Cardiff is a wholly owned subsidiary of BNP Paribas, which is The Euro
Zone’s leading Bank. BNP is one of the oldest foreign banks with a presence
in India dating back to 1860. It has 9 branches in the metros and other major
towns in the country. Cardiff is a vibrant insurance company specializing in
personal lines such as long-term savings, protection products and creditor
insurance. Cardiff has also been a pioneer in the art of selling insurance
products through commercial banks in France and 29 more countries .In
2004, SBI Life insurance became the first company amongst private
insurance players to cover 30 lakh lives.

The company expects to carve a niche in the Indian insurance market
through extensive product innovation and aims to provide the highest
standards of customer service through a technological interface. To facilitate
this, call centre’s have been already installed and help lines will be installed
and customers will have access to their accounts through the Internet or
through SBI branches. SBI Life insurance is uniquely placed as a pioneer to
usher banc assurance into India. The company hopes to extensively utilize
the SBI Group as a platform for cross-selling insurance products along with

its numerous banking product packages such as housing loans, personal
loans and credit cards. SBI’s access to over 100 million accounts provides a
vibrant base to build insurance selling across every region and economic
strata in the country.

Under section 88 of insurance act 1961 an individual is entitled to a rebate
of 20 per cent on the annual premium payable on his/her life and life of
his/her children or adult children. The rebate is deductible from tax payable
by the individual or a Hindu Undivided Family. This rebate is can be availed
up to a maximum of Rs 12,000 on payment of yearly premium of Rs 60,000.
By paying Rs 60,000 a year, you can buy anything upwards of Rs 10 lakh in
sum assured. (Depending upon the age of the insured and term of the policy)
This means that you get an Rs 12,000 tax benefit. The rebate is deductible
from the tax payable by an individual or a Hindu Undivided Family.

SBI Life Insurance is currently growing at an impressive rate of 200%. As
per the latest IrDA report SBI Life ranks No. 3 amongst the private insurers.
The company's market share has increased to 10% amongst the private
players and is 2.25% in the total industry. This year, the company is aiming
at a growth of 150%. The new business premium of the company from
beginning of the year to September 2006 is Rs 660 crores. The total business
premium of the company from the beginning of the year till September 2006
is Rs 765 crores. The company aims to collect first year premium of over Rs
2,000 crores. SBI Life follow a multi distribution channel approach and
expect all channels to contribute to the overall growth. Today, the agency
channel contributes over 50% and banc assurance channel contributes to
40% of the business. Other channels like Credit Life and Group Corporate
are also performing very well.

Products of SBI Life insurance: - (Source: -

(1) Unit Linked products                   (1) Group Employee Benefit
    Horizon 11                            Retirement Solutions
                                                Cap Assure Gratuity
    Unit Pus 11
                                               Cap Assure Superannuation
    Unit plus child Plan
                                               Cap Assure Leave
    Unit Plan Elite
(2) Pension Products
                                               Group Immediate Annuity
    Horizon 11 Pension
                                               SBI Life Golden Gratuity
    Unit Plus 11 Pension
                                           Protection Plan
    Lifelong Pension                          Sampoorn Suraksha

(3) Pure Protection Products                   SBI Life Group Term Life
                                                Scheme In Lieu of EDLI
    Swadhan
                                           Specialized Term Insurance
    Shield                                    SBI Life Keyman Insurance
    keyman                                (2) Group Loan Protection Products
                                           Dhanaraksha Plus
(4) Protection cum savings products            Dhanaraksha Plus SP
    Sudarshan                                 Dhanaraksha Plus LPPT
    Scholar11                                 Dhanaraksha Plus RP
    Setubandhan                           (3) Group Savings Protection Plan
(5) Money back scheme products                 Nidhi Raksha RP

                                           (4) Group Micro Insurance
    Money Back
                                               Grameen Shakti and Super
    Sanjeevan Supreme                           Suraksha

          9. Distribution of insurance products

Insurance has to be sold the world over. The Touch point with the ultimate
customer is the distributor or the producer and the role played by them in
insurance markets is critical. It is the distributor who makes the difference in
terms of the quality of advice for choice of product, servicing of policy post
sale and settlement of claims. In the Indian market, with their distinct
cultural and social ethics, these conditions will play a major role in shaping
the distribution channels and their effectiveness. In today's scenario,
insurance companies must move from selling insurance to marketing an
essential financial product. The distributors have to become trusted financial
advisors for the clients and trusted business associates for the insurance

         Challenges for insurance companies and intermediaries in India-
    Building faith about company in the mind of clients.
    Building personal credibility with the clients.

   Different distribution channels in India:-

    A multi-channel strategy is better suited for the Indian market. Indian
   insurance market is a combination of multiple markets. Each of the
   markets requires a different approach. Apart from geographical spread
   the socio-cultural and economic segmentation of the market is very wide,
   exhibiting different traits and needs. Different multi-distribution channels
   in India are as follows

 Agents:       Agents are the primary channel for distribution of
   insurance. The public and private sector insurance companies have
   their branches in almost all parts of the country and have attracted
   local people to become their agents. Today's insurance agent has to
   know which product will appeal to the customer, and also know his
   competitor's products to be an effective salesman who can sell his
   company, the product, and himself to the customer. To the average
   customer, every new company is the same. Perceptions about the
   public sector companies are also cemented in his mind. So an
   insurance agent can play an important role to create a good image of

 Banks: Banks in India are all pervasive, especially the public sector
   banks. Many insurance companies are selling their products through
   banks. Companies which are bank owned, they are selling their
   products through their parent bank. The public sector banks, with their
   vast branch networks, are helpful to insurance companies. This
   channel of selling insurance is known as Banc assurance.

ICICI prudential                        ICICI bank, bank of India, Citibank,
                                        Allahabad bank, Federal bank, south
                                        Indian bank, Punjab and Maharashtra
                                        cooperative bank
SBI life                                State bank of India
Birla sun life                          Deutsche bank, Citibank, bank of
                                        Rajasthan, Andhra bank
ING Vysya bank                          Vysya bank
Aviva life insurance                    ABN amro bank, canara bank
HDFC standard life                      Union bank, Indian bank
Met life                                Karnataka bank, j&k bank

                         Source: - Hindu Business Line, January 08, 2007
    Brokers:        Now a day’s different financial institution are selling
      insurance. These financial institutions are known as brokers. They are
      taking some underwriting charges from the insurance companies to
      sell their insurance products.
    Corporate agents: Corporate agency is a cross selling type of
      channel. Insurance companies’ tie-up with business houses in other
      industries to sell insurance either to their employees or their
      customers. Insurance industry, during the past 2 years has witnessed a
      number of such strategic tie-ups and alliances. Corporate agents have
      become a major force to reckon with in distributing insurance
      products. Such as- Bajaj Allianz tied up with Maruti Udyog and Ford
      for auto insurance and Tata AIG life has tied up with Tata tea,

  khaitan’s Williamson major and bridge foundation for selling rural
 Internet: In this technological world internet is also a channel of
  selling insurance. This can be as direct marketing.

             10. Effective marketing strategies

Now the Indian consumer is knowledgeable and sensitive. Consumers are
increasingly more aware and are actively managing their financial affairs.
People are increasingly looking not just at products, but at integrated
financial solutions that can offer stability of returns along with total
protection. In view of this, the insurance managers need to understand more
about the details that go into the introduction of insurance products to make
it attractive in this competitive market. So now days an insurance manager
requires leadership, commitment, creativity, and flexibility. "Every family
in every village in the country should feel safe and secure". This vision alone
will help to bring the new ideas to the insurance manager.

             Financial, marketing and human resource polices of the
corporations influence the unit mangers to make decisions. Performance of
insurance company depends on the effectiveness of such policies. Insurance
corporations formulate and revise these policies from time to time to ensure
that the performance of the managers is best for the organization.
In the competitive market, insurance companies are being forced to adopt a
strictly professional approach in marketing. The insurance companies face
the challenge of changing the uninspiring public image of the industry.
Some of the important marketing elements are-
    Marketing mix.
    The importance of relationship.
    Positioning.
    Value addition.
    Segmentation.

    Branding.
    Insuring service quality.
    Effective pricing.
    Customer satisfaction research.

The growth of insurance sector is governed largely by factors external to it.
The following factors influence the market and demand of product-
    Government policies.
    Growth in population.
    Changing age profile.
    Income wise distribution of the population.
    Level of insurance awareness.
    The pricing of the policies.
    The economic climate of the country.
    The aversion to risk.
    Social and political features of the country.
    Growth scenario in the world.

Different companies adopt different approaches in their marketing strategies.
One approach is focus upon product quality which can give confidence in
the mind of customers that they are offered by best featured products. And
other approach is focusing on customer’s needs, which involve a heavy
investment in developing relationships with policyholders. Under this
approach customer can expect a range of products and service offered to
him. Third approach is market segmentation under which the population can
be divided into several homogeneous products and groups, the effort should

be tie clients to the company by customized combination of coverage, easy
payment plans, risk management advice, and convenient and quick claim

An insurance product can be classified in three phases:
Core product: In insurance industry the core product is the policy that
provides protection to the customers.

Expected product: Because of competition customers start to expect
more from an insurance product. Then insurance companies provide some
tangible attributes in their product to differentiate from competitors, such as-
    Brand
    Some additional features in existing product
    By providing instruction manual with the policy.

Augmented product: An insurance company can provide different
types of services to differentiate their products-
    Post sales services.
    Branches in different places for customers.
    Customer complaint management.
    Payment option convenient to customers.

                          The entry of private players and their foreign
   partners has given domestic players a tough time, because the opening up
   of the sector has not brought in only foreign players, but also professional
   techniques and technologies. The present scene in India is such that

  everyone is trying to put in the best efforts. There are marketing
  strategies more for survival than growth. But the most important gift of
  privatization is the introduction of customer-oriented services. Utmost
  care is being taken to maximize customer satisfaction.

Success of an insurance company depends on four important functions:-
   Identification of markets: Identification of markets means need to
     understand the trends in culture and businesses constantly, through
     conducting research and analysis. Insurance companies can take this
     job on their own or assign it to an external agency. Relying on an
     external agency can be risky due to the questionable loyalty of the

   Assessment of risks (of the insured and the insurance corporation)
     and estimation of losses: Efficiency of actuaries and assessors of the
     insurance policies in fixing premiums and settling claims is foremost
     an important area for achieving overall efficiency in operations. The
     quality of assessing the risk and estimation of losses has the largest
     claim on the performance of an insurance company. Well trained,
     experienced and expert hands are needed for the operations.
   Penetration into and exploitation of markets: Market penetration
     or exploitation of a company can be identified with the growth in
     number of policies in each type of insurance, growth rate in earnings
     or turnover, company’s market share, increase in number of branches
     and divisions etc. Efforts of the company as a whole and that of the
     divisions and branches are assessed to measure the effectiveness.

 Control over investment and operating costs:                Control over
   resources such as men, machines, and materials at each level of the
   organization provides measures of efficiency of a unit as well as the
   organization. Investment control and expense control are dealt
   separately and the effectiveness of management’s’ decisions at
   various levels is to be assessed separately

To find best prospects:
 Allocating marketing strategies against market potential.
 Estimating potential for specific products within local markets.
 Identifying high opportunity areas.
 Measuring agency performance relative to market potential.
 Optimizing your agency network against market potential.

Attributes to develop marketing strategies:
 Channel data: - Useful to know future buying preferences, learning
   about products and purchase channels.
 Consumer attitudes.
 Consumption data: - Useful to evaluate annual premiums, number of
   annuities owned, value of annuities, and with which company the
   current policy is held.

Effective strategies for insurance agents:

   Learn how to construct a mental image for success.
   Learn how to find a proper perspective and how to turn off all the
     signals that cause people not to buy from you.
   Learn how to get and set more appointments.
   Learn how to convert a new lead into sales.
   Learn how to act when you meet a client for the first time.
   Learn how the order in which you explain the types of policies can
     double your income.
   Take Easy steps to avoid delays in issuing policies.

          11. Competitors of SBI life insurance
ICICI prudential: ICICI prudential insurance is a joint venture of ICICI
bank and prudential plc a leading financial service group in the UK. Total
capital stands for Rs. 37.72 billion, with ICICI Bank holding a stake of 74%
and Prudential plc holding 26%. ICICI begin their operations in December
2000 after receiving approval from IRDA. Now ICICI prudential is having
over 1000 offices, over 270000 advisors and 21bancassurance partners.
ICICI Prudential was the first life insurer in India to receive a National
Insurer Financial Strength rating of AAA from Fitch ratings. ICICI
prudential is working on the base of five core values-
    Integrity
    Customer first
    Boundary less
    Ownership
    Passion

   Key features:

       Understanding the needs of customers and offering them superior
         products and service.
       Leveraging technology to service customers quickly, efficiently
         and conveniently.
       Developing and implementing superior risk management and
         investment strategies to offer sustainable and stable returns to
       Providing an enabling environment to foster growth and learning
         for employees.

HDFC standard life insurance: HDFC Standard Life Insurance Company
Ltd. is one of India's leading private insurance companies. It is a joint
venture of Housing Development Finance Corporation Limited, India's
leading housing finance institution and a Group Company of the Standard
Life in UK. HDFC as on March 31, 2007 holds 81.9 per cent of equity
venture. Gross premium income of the HDFC for the year ending March 31,
2007 was Rs. 2, 856 crores and new business premium income was Rs.
1,624 crores. The company has covered over 8, 77,000 lives year ending
March 31, 2007. HDFC standard is having 1000 advisors in 11 towns.

Key features:

    Creating corporate agents through HDFC bank in India.
    Creating agents to provide total financial consultancy.
    Introducing low cost group schemes for companies and NGOs.

Reliance life insurance: Reliance Life Insurance Company Limited is a
part of Reliance Capital Ltd. of the Reliance - Anil Dhirubhai Ambani
Group. Reliance Capital is one of India’s leading private sector financial
services companies, and ranks among the top 3 private sector financial
services and banking companies, in terms of net worth. Reliance Capital has
interests in asset management and mutual funds, stock broking, life and
general insurance, proprietary investments, private equity and other
activities in financial services. Reliance Capital Limited (RCL) is a Non-
Banking Financial Company (NBFC) registered with the Reserve Bank of
India under section 45-IA of the Reserve Bank of India Act, 1934.

Aviva life insurance: Aviva is UK’s largest and the world’s fifth largest
insurance Group. It is one of the leading providers of life and pensions
products to Europe and has substantial businesses elsewhere around the
world. Aviva has a joint venture of Dabur, one of India's oldest, and largest
Group of companies. And country's leading producer of traditional
healthcare products. In accordance with the government regulations Aviva
holds a 26 per cent stake in the joint venture and the Dabur group holds the
balance 74 per cent share. Aviva has 193 Branches in India (including rural
branches) supporting its distribution network. Through its Banc assurance
partner locations, Aviva products are available in more than 2,795 locations
across India. Aviva has a sales force of over 30000 financial planning

Key features:

    Through the “Financial Health Check” (FHC) Aviva’s sales force has
      been able to establish its credibility in the market. The FHC is a free
      service administered by the FPAs for a need-based analysis of the
      customer’s long-term savings and insurance needs. Depending on the
      life stage and earnings of the customer, the FHC assesses and
      recommends the right insurance product for them.
    Introduced the concept of Banc assurance in India.
    Products to provide customers flexibility, transparency and value for
    Differentiation in fund management operations.

MetLife insurance: MetLife India Insurance Company Limited            is an
affiliate of MetLife, Inc. and was incorporated as a joint venture between
MetLife International Holdings, Inc.and The Jammu and Kashmir Bank, M.
Pallonji and Co. Private Limited and other private investors. MetLife is one
of the fastest growing life insurance companies in the country. It offers a
range of innovative products to individuals and group customers at more
than 600 locations through its bank partners and company-owned offices.
MetLife has more than 32,000 Financial Advisors. It has approximately 70
million customers all over world. MetLife is working on the base of six core

    Innovation
    Long term relationship
    Customer centered and result focused vision
    Creating high performance organization
    Working with integrity, fairness and financial prudence
    Partnering with internal and external customers

Max New York life insurance: Max New York Life Insurance Company
Ltd. is a joint venture between New York Life, a Fortune 100 company and
Max India Limited, one of India's leading multi-business corporations The
Company's paid up capital is Rs. 907.4 crore. Max New York life is working
on the base of six core values-

    Excellence,
    Honesty,
    Knowledge,
    Caring,

    Integrity

The Company practices a lot of importance on its selection process of
insurance advisors which comprises four stages - screening, psychometric
test, career seminar and final interview. 337 agent advisors have qualified
for the Million Dollar Round Table (MDRT) membership in 2007 and Max
New York Life has moved up to 21st rank in MDRT global list.

Key features:

      Max New York Life has adopted prudent financial practices to ensure
       safety of policyholder's funds.
    Investing significantly in its training programme and each agent is
       trained for 152 hours as opposed to the mandatory 100 hours
       stipulated by the IRDA before beginning to sell in the marketplace.
    Using a five-pronged strategy to pursue alternative channels of
       distribution which include the franchisee model, rural business, direct
       sales force involving group insurance and telemarketing opportunities,
       banc assurance and corporate alliances.

Bharti Axa life insurance: Bharti Axa life insurance is a joint venture
between Bharti, one of India’s leading business groups with interests in
telecom, agri business and retail, and Axa world leader in financial
protection and wealth management. The joint venture company has a 74%
stake from Bharti and 26% stake of Axa. The company started its operations
in December 2006. Now company is having over 5200 employees across
over 12 states in the country. Company is working on the base of five core

    Professionalism
    Innovation
    Team Spirit
    Pragmatism
    Integrity

Key features:

       Using multi-distribution, multi product platform techniques.
       Adapting AXA's best practices as a sound platform for profitable
       Leveraging Bharti's local knowledge, infrastructure and customer
       Delivering high levels of shareholder return.
       Building long term value with business partners by enhancing the
         proposition to their customers.
       Retaining the best talent in India.

Tata AIG life insurance: Tata AIG Life Insurance Company Limited (Tata
AIG Life) is a joint venture company of the Tata Group and American
International Group, Inc. (AIG). The Tata Group holds 74 per cent stake in
the insurance venture with AIG holding the balance 26 percent. Tata AIG
Life provides insurance solutions to individuals and corporate. Tata AIG
Life Insurance Company started to operate its business in India on April 1,
2001. Tata AIG is having 3000 advisors all over India.

Key features:

    Establishing direct mailers; call-centers in 60 centers.
    Creating awareness workshops in housing societies.
    15-day trial period with refund, premium payment through credit card.

Bajaj Allianz life insurance: Bajaj Allianz life insurance company ltd. Is a
joint venture of Allianz AG, one of the world’s largest insurance companies
and Bajaj auto, one of the biggest two and three wheeler manufacturing
companies in the world. Company is having over 440000 satisfied customers
in India. Company is having 550 branches across the country and over
60000 advisors.

Key features:

    Tying up with seven regional rural banks sponsored by Syndicate
      Bank to tap the rural market.
    Introducing micro-insurance products and coming out with a new
      capital guarantee product.
    Expanding its agency force from 1.60 lakh to 2 lakh and the branch
      network will also be increased from 900 to 1400.

ING Vysya life insurance: ING Vysya Life Insurance Company Limited a
part of the ING group the world’s largest financial services provider entered
in the private life insurance industry in India in September 2001.ING Vysya
Life is currently present in 246 cities and has a network of over 300
branches, staffed by 7,000 employees and over 51,000 advisors, serving over
5.5 lakh customers. ING Vysya Life has a diversified distribution channels,.
While Tied Agency remains the strongest channel, the Alternate Channels

business within ING Vysya Life is one of the fastest growing distribution
channels. ING Vysya Life has strengthened its position as the unparallel
leader in the life insurance industry in cooperative banks tie ups. The
company currently has tie ups with 130 cooperative banks across the
country. The Alternate Channels division has Banc assurance, ING Vysya
Bank, Corporate Agents and SMINCE. ING Vysya is working on the base of
five core values-

    Professionalism
    Entrepreneurial
    Trustworthy
    Approachable
    Caring

Birla sun life insurance:         Birla Sun Life Insurance Company Limited
(BSLI) is a joint venture between the Aditya Birla Group and the Sun Life
Financial Services of Canada. It started operations in March 2001 after
receiving its registration license from IRDA in January 2001. Company is
having more than 45 branches across India.

Key features:

    Focus on unit linked insurance products supported with protection
      products to maintain leadership in product innovation.
    Use of multi distribution channels- Direct Sales Force, Alternate
      Channels and offering convenient channels of purchase to customers.
    Web-enabled IT systems for superior customer services and issuing
      policies on the internet.

    High degree of transparency in all business practices and procedures.
    Working on operational Business Continuity Plan.

Market share of different insurance companies:

ICICI Prudential                      9.1%
HDFC Standard                         2.4%
SBI Life                              3.0%
Bajaj Allianz                         4.2%
Aviva life insurance                  1.3%
MetLife insurance                     0.6%
Reliance life insurance               1.1%
Birla sun life insurance              1.0%
Max new York life insurance           2.3%
Bharti AXA life insurance             0.1%
Tata AIG                              1.6%
ING Vysya                             0.7%
Kotak Mahindra                        0.9%

                                    Source: -

Growth in premiums of different insurance companies:-

Companies         Premium up    Premium up    Growth %
                  to oct 07     to oct 06
                  (Rs.mill.)    (Rs.mill.)
ICICI             31831.8       20808.5       53
HDFC Standard 10675.7           6595.7        61.9
SBI Life          14717.4       8142.4        80.8
Bajaj Allianz     26498.1       15208.2       74.2
Aviva life        4586.8        3464.2        32.4
MetLife           2756.0        1162.7        137.0
Reliance life     8571.2        2803.7        205.7
Birla sun life    7595.4        3844.7        97.6
Max new York      6942.0        3720.4        86.6
life insurance
Bharti AXA life   258.7         1.1           22907.8
Tata AIG          4413.0        3264.8        35.2
ING Vysya         3047.7        2086.7        46.1
Kotak             3476.6        2172.6        60.0

   12. Comparison of ULIP products of different
                      insurance companies
ICICI Prudential
Fund options- growth fund, balanced fund, income fund, and preserver.
allocation to equities- upto 100% in growth fund, upto 40% in balanced
fund, nil in income fund, 50% in preserver.
minimum premium- 20,000.
min/max age at entry- upto 65 years.
sum assured- annual premium*term/2.
fund management charges- 1.5% in growth fund, 1.0% in balanced fund,
.75% in income and preserver fund.
fixed monthly expenses- 60rs.
partial withdrawals- above one partial withdrawal 100 rs. charge per
charges on top ups- 1%.
switching charges- above 4 switches in a year 100 rs. Per switching.

Birla Sun Life Insurance
fund options- enhancer fund, builder fund, protector fund.
allocation to equities- maximum 35% in enhancer fund, maximum 20% in
builder fund, maximum 10% in protector fund.
minimum premium- 20,000 rs.
min/max age at entry- 30 days to 60 years.
sum assured- face amount + policy fund.
fund management charges- 1% for all the fund options.
fixed monthly expenses- 22 rs.+ annual charges as applicable.

partial withdrawals- 2 free partial withdrawals in a year.
charges on top ups- 2%.
switching charges- 2 free switches in a year, and 100 rs. Per switching.

HDFC Standard Life Insurance
fund options- growth fund, balanced fund, defensive fund, secure fund,
liquid fund.
allocation to equities- 100% in growth fund, 30-60% in balanced fund, 15-
30% in defensive fund, 0% in secure and liquid fund.
minimum premium- 10,000.
min/max age at entry- 18- 65 years.
sum assured- annual premium*term/2, to 40 times the regular premium
fund management charges- .80%.
fixed monthly expenses- 20 rs.
partial withdrawals allowed- above 6 partial withdrawals 250 rs. per
charges on top ups- 2.5% for initial 2 years, after 1%.
switching charges- 24 free switching and then 100 rs. per switching.

SBI Life Insurance
fund options- equity fund, bond fund, growth fund, balanced fund.
allocation to equities- upto 100% in equity fund, upto 20% in bond fund, 40
- 100% in growth fund, 40 – 60% in balanced fund.
minimum premium- 24,000.
min/max age at entry- 7 – 65 years.
sum assured- 5 – 50 times the regular premium amount.

fund management charges- 1.5% for equity fund, 1.35% for growth fund,
1.25% for balanced fund, 1% for bond fund.
fixed monthly expenses- 60 rs.
partial withdrawals allowed- above 4 partial withdrawals 100 rs. per
charges on top ups- 1%.
switching charges- above 4 switching 100 rs. per switching.
Max New York Life Insurance
fund options- growth fund, balanced fund, conservative fund, secure fund.
allocation to equities- 20 – 70% in growth fund, 10 – 40% in balanced
fund, 0 – 15% in conservative fund, 0% in secure fund.
minimum premium- 15,000.
min/max age at entry- 12 – 60 years.
sum assured- minimum sum assured 100,000 rs.
fund management charges- .90% - 1.25% of net assets in the fund.
fixed monthly expenses- 50 rs.
charges on top ups- nil.
switching charges- above 2 switching per year 500 rs. Per switching.

Reliance Life Insurance
fund options- equity fund, growth fund, balanced fund, capital secure fund.
allocation to equities- upto 100% in equity fund, upto 40% in growth fund,
upto 20% in balanced fund, 0% in capital secure fund.
minimum premium- 10,000.
min/max age at entry- 30 days to 65 years.
sum assured- for age of 12 years 5 times, above 12 years 5 times to

fund management charges- 1.75% in equity and growth fund, 1.5% in
capital secure fund.
fixed monthly expenses- 40 rs.
partial withdrawals allowed- rs. 100 for every withdrawal.
charges on top ups- 2%.
switching charges- above 1 switching 100 rs. Per switching.

Insurer      Market view    Product focus     Distribution    Others
ICICI        Market         Pension and       Significantly   Significant
Prudential   growth at      healthy           diversified     capital
             60%CAGR        products likely with 40%          requirement
             in medium      to grow given     from non        for maintain
             term, target   aging             agency force,   share in a
             to maintain    population and expanding          high growth
             share at 30% increasing life     reach to non    market, both
             in private     expectancy.       metro areas.    partners
             segment.       Product                           willing to
                            awareness is                      contribute,
                            slightly behind
                            LIC despite a
                            health could
                            comprise 3 –
                            5% of product
                            mix in 5 years.

  HDFC         Expect high        Focus on       Prefer own        Breakeven
Standard life double digit         regular       offices versus not
 insurance     market             premium        franchisees,      necessarily
               growth over      products and     higher focus      in next 18
               next few            higher        on training       months, it
               years, steady    persistency      agents rather     would
               state not        levels, group    than hard sell, require
               expected         focus given      rural focus       capital even
                                flexibility in   required but      if FDI were
                                   equity        obstacles         raised to
                                investment,      include lack      49%.
                                competitive      of bank
                               versus mutual     infrastructure.
                                  funds for
                               longer tenure
                               products given
                                 lower amc
   Bajaj       Current         Most products     More focus        Growth and
Allianz life   industry        homogeneous       on smaller        market share
 insurance     growth          across players, towns,              oriented
               sustainable     not much price greater              strategy,
               for next 7 –    differentiation, emphasis on        detarrifing
               10 years,       ULIPsales         agency force      would hit
               target 10%      unlikely to be    expansion.        non life
               market share affected by                            segment

              in next 5       recent                            adversely.
              years           regulations,
                              not much
                              threat from
                              mutual funds.
Birla sun life Target to be   Currently only Agent               It believes
insurance      top in 5       unit linked      productivity         some
               years          products sold    is an issue        marginal
                              but group        given their      players could
                              linked           part time         br bought
                              products are     nature, target       out.
                              focus area for   is 130
                              development.     branches all
                                               over India,
                                               also will
                                               leverage on

                           13. Questioner
IBS Kochi
Chakrampilly Towers Puthiya Road, NH-47 Bye Pass
Palarivattom, PO
Kochi 682025
Ph. 0484-2338823




Contact no.-

The following questionnaire is for the purpose of our research project as a part of
our MBA curriculum on ‘Marketing Strategy of different Insurance companies’. It
is assured from us that any information given by the company will not be disclosed
by any means. With this assurance I expect accurate data from company to help me
for my project.

1. How long you have been in insurance industry?
(a) < 2 years     (b) 2-5 years     (c) 5-8 years          (d) >8 years

2. When did you join your present company?
(a) < 2 years       (b) 2-5 years    (c) 5-8 years           (d) >8 years

3. Your designation while joining this company………………………..

4. How many advisors do you have?
(a) <250          (b) 250-400                (c) 400-550        (d) >550

5. On what basis do you recruit your advisor?
(a) Through personal reference
(b) Through advertisement
(c) Through walk in interviews

(d) Through placements agencies

6. How do you make them active?
(a)By increasing incentives
(b)By offering higher channel position
(c)By awarding non-cash prizes
(d)By giving training session

7. How many MBAs do you have in your agency?
(a) None      (b) 1-3         (c) 4-6        (d) more than 6

8. On what products you are stressing more?
(a) Term insurance
(b) Unit linked products
(c) Money back products
(d) Endowment products

9. What is the basis of your product deployment?
(a) Profit oriented
(b) On customers need and demand
(c) On channel feedback from market
(d) By adding some additional benefits in current product

10. How do you differentiate your product from your competitors?
(a) By advertising and promotional activities
(b) By pricing of the product
(c) Based on the deployment of funds
(c) By providing better service quality

11. Your mode of interaction with customers.
(a) Direct marketing
(b) By telephonic contacts (creating database)
(c) Through advertisement
(d) Through online contacts

12. Which kind of strategies should an insurance company use to compete in
the market (in your view)?
(a) Better service quality
(b) Accordingly change in the pricing of product
(c) By increasing periodicity of interaction with advisors and customers

(d) By providing extra benefits to advisors and customer

13. What is average total premium collection in your branch (in a month)
(a) <2 Cr.       (b) 2-4 Cr.      (c) 4-5 Cr.        (d) >5 Cr.

14. Other useful activities which you do in agency (if any, please

15. What are your future plans (please define)………………………….

                            14. Findings
Primary data has been collected by the survey of branch and agency
manager of different insurance companies in Calicut. sample size for this
research is 27.

Recruitment of advisors:- In insurance industry advisors play most
important role, and these advisors are recruited through different ways.
Mainly four ways for recruiting the advisors are-
  1. Through personal references.
  2. Through advertisements.
  3. Through walk in interviews.
  4. Through placement agencies.


 Response       Frequency              Percent
yes                         24                    88.9
no                           3                    11.1
Total                       27                   100.0


 Response       Frequency              Percent
yes                         10                    37.0
no                          17                    63.0
Total                       27                   100.0


 Response       Frequency              Percent
yes                         12                    44.4
no                          15                    55.6
Total                       27                   100.0


Response                        Frequency                    Percent
no                                          27                             100.0

So most of the companies are recruiting their advisors through personal
reference and through advertisement, some companies are recruiting their
advisors through walk in interviews also, but none company is recruiting
their advisors through placement agencies.

                                                 Recruitment of advisors

 Through placement agencies

   Through walk in interviews


      Through advertisement

 Through personal references

                                0      5             10           15         20    25   30

Making advisors active: To get efficient work from their advisors
companies do some practices to make them active. some practices are-
  1. By increasing incentives.
  2. By offering higher channel position.
  3. By awarding them non cash prizes.
  4. By giving them training session.


 Response       Frequency                Percent
yes                          7                      25.9
no                          20                      74.1
Total                       27                     100.0


 Response       Frequency                Percent
yes                          6                      22.2
no                          21                      77.8
Total                       27                     100.0


 Response       Frequency                Percent
yes                         10                      37.0
no                          17                      63.0
Total                       27                     100.0


 Response        Frequency                Percent
yes                          14                      51.9
no                           13                      48.1
Total                        27                     100.0

So most of the companies are giving training session and awarding non cash
prizes to make their advisors active, some of the companies are increasing
incentives and offering higher channel position to make their advisors active.

Type of products: Different insurance companies are having different
categories of insurance products. Some product categories are-
   1. Term insurance products.
   2. Unit linked products.
   3. Money back products.
   4. Endowment products.


 Response      Frequency                 Percent
yes                       5                         18.5
no                       22                         81.5
Total                    27                        100.0


 Response      Frequency                 Percent
yes                     26                          96.3
no                       1                           3.7
Total                   27                         100.0


 Response      Frequency                 Percent
yes                       1                          3.7
no                       26                         96.3
Total                    27                        100.0


 Response      Frequency                 Percent
yes                       2                          7.4
no                       25                         92.6
Total                    27                        100.0

So all the companies are promoting their unit linked products and some
companies are promoting rest of the products including unit linked products.

                                               Type of products promoted

    Endowment products

    Money back products


     Unit linked products

 Term insurance products

                            0         5           10           15          20       25   30

Basis of product deployment: - All insurance companies are deploying
their products in various categories. Some of the tactics are-
       1. Profit oriented.
       2. On customers need and demand.
       3. On channel feedback from market.
       4. By adding some additional benefits in current products.


Response                    Frequency                        Percent
yes                                        6                                 22.2
no                                        21                                 77.8
Total                                     27                                100.0


Response    Frequency                       Percent
yes                      20                            74.1
no                        7                            25.9
Total                    27                           100.0


Response    Frequency                       Percent
yes                       2                             7.4
no                       25                            92.6
Total                    27                           100.0


Response    Frequency                     Percent
yes                       5                            18.5
no                       22                            81.5
Total                    27                           100.0

So most of the companies are deploying their products based on the
customers need and demand.

                                                 Baiss of product deployment

   By adding extra benefits

 On channel feed back from


         On customer need

             Profit oriented

                               0             5             10              15           20   25

Differentiation strategies: To make their products different from their
competitors companies are using some strategies which are-
  1. By advertisement and promotional activities.
  2. By pricing of the product.
  3. Based on the deployment of the funds.
  4. By providing better service quality.

Response                 Frequency                              Percent
yes                                        4                                     14.8
no                                        23                                     85.2
Total                                     27                                    100.0


Response      Frequency                        Percent
yes                    13                                 48.1
no                     14                                 51.9
Total                  27                                100.0


Response      Frequency                        Percent
yes                       7                               25.9
no                       20                               74.1
Total                    27                              100.0


Response      Frequency                        Percent
yes                    17                                 63.0
no                     10                                 37.0
Total                  27                                100.0

So most of the companies are giving better service quality and better pricing
to differentiate their products from their competitors.

                                               Differentiation strategies

      By better service quality

 Based on deployment of funds


         By pricing of product

      By promotional activities

                                  0   2    4         6         8       10   12      14   16   18

Mode of interaction: There are different types of way to interact with
customers. Some of the important ways are-
   1. Direct marketing.
   2. By creating database (telephonic contact).
   3. Through advertisement.
   4. Through on line contacts.


 Response                     Frequency                        Percent
yes                                   17                                          63.0
no                                    10                                          37.0
Total                                 27                                         100.0


 Response      Frequency                Percent
yes                    15                          55.6
no                     12                          44.4
Total                  27                         100.0


 Response      Frequency                Percent
yes                     1                           3.7
no                     26                          96.3
Total                  27                         100.0


 Response      Frequency                Percent
yes                      1                          3.7
no                      26                         96.3
Total                   27                        100.0

So almost all the companies are interacting with customers through direct
marketing and by telephonic contacts (creating database).

                                        Mode of interaction with customers

 Through online contacts

 Through advertisement


  By telephonic contacts

        Direct marketing

                           0   2    4          6        8        10          12   14    16     18

Strategy to compete in market: Most common strategies to compete
in the market for insurance companies are-
    1. Better service quality.
    2. Change in pricing of products.
    3. By increasing periodicity of interaction with advisors and customers.
    4. By providing extra benefits to advisors and customers.


 Response                      Frequency                                Percent
yes                                                21                                   77.8
no                                                  6                                   22.2
Total                                              27                                  100.0


 Response                    Frequency           Percent
yes                                        2               7.4
no                                        25              92.6
Total                                     27             100.0


 Response                   Frequency          Percent
yes                                       7            25.9
no                                       20            74.1
Total                                    27           100.0


  Response                      Frequency       Percent
yes                                        3           11.1
no                                        24           88.9
Total                                     27         100.0

So most of the insurance companies think that providing better service
quality is most suitable strategy to compete in the market.

                                           Competitive strategies

 By providing extra benefits

 By increasing periodicity of


          Change in pricing

       Better service quality

                                0      5           10               15        20         25

Premium collection:-

                                    Premium Collection

 Premium                                                Frequency              Percent
less than 2 cr.                                                          20           74.1
2 to 4 cr.                                                                5           18.5
4 to 5 cr.                                                                1            3.7
more than 5 cr.                                                           1            3.7
total                                                                    27          100.0

So most of the companies are collecting premium less than 2 crores. at an
agency or branch level in a month.

                             Premium collected

  More than 5 cr.

Four to five crore


Two to four crore

Less than two cr.

                     0   5    10                 15   20   25

Recruitment of advisors through personal reference and
making them active:-

                         Recruitment through personal reference



                                                                  By increasing incentives
                                                                  By giving them higher channel position
                                                                  By awarding non cash prizes
                                                                  By giving them training session


Companies, recruiting their advisors through personal reference are doing
practices to make them active in under mentioned numbers.

By increasing incentives- 6 (17.65%)
By awarding non cash prizes- 9 (26.47%)
By giving higher channel position- 5 (14.71%)
By giving them training session- 14 (41.78%)

So companies are concentrating on training session and awarding non cash
prizes to make their advisors active.

Recruitment of advisors through advertisement and making
them active:-

                           Recruitment through advertisement



                                                               By increasing incentives
                                                               By giving them higher channel position
                                                               By awarding non cash prizes
                                                               By giving them training session



Companies, recruiting their advisors through advertisement are doing
practices to make them active in under mentioned numbers.

By increasing incentives- 4 (26.67%)
By awarding non cash prizes- 4 (26.67%)
By giving higher channel position- 2 (13.33%)
By giving them training session- 5 (33.33%)

So companies, recruiting their advisors through advertisement are
concentrating on increasing incentive, awarding non cash prizes and training

Recruitment of advisors through walk in interviews and
making them active:-

                         Recruitment through walk in interviews

              4                                4

                                                                  By increasing incentives
                                                                  By giving them higher channel position
                                                                  By awarding non cash prizes
                                                                  By giving them training session



Companies, recruiting their advisors through walk in interviews are doing
practices to make them active in under mentioned numbers.

By increasing incentives- 4 (23.52%)
By awarding non cash prizes- 6 (35.3%)
By giving higher channel position- 3 (17.6%)
By giving them training session- 4 (23.52%)

So companies, recruiting their advisors through advertisement are
concentrating on increasing incentive, awarding non cash prizes and training


 Insurance companies are recruiting their advisors mainly through
  personal reference, through advertisement, and through walk in
  interviews. None of the company is recruiting their advisors through
  placement agencies. But some companies have started recruiting their
  advisors through placement agencies as a trial basis.

 Those advisors who are recruited through personal references need
  more training session and company has to put effort to make them
  active. Most of the companies are giving training session to advisors
  to make them active. Only one or two companies are providing higher
  channel position and increasing incentives to make them active.

 Most of the insurance companies have started recruiting agency
  manager and high posted people from professional colleges to
  improve efficiency of the insurance company.

 Insurance companies have forgotten their traditional products.
  Companies are totally concentrating on selling ULIP products. Now
  insurance companies are selling their products as an investment
  product not as life insurance products.

 Insurance companies are deploying their products mostly based on
  customer needs and demands. Insurance companies are not doing
  enough market researches to know the potential of the market.

 Most of the insurance companies are differentiating themselves from
  the competitors by providing better service quality. Some companies
  are differentiating themselves providing better pricing of the product.

 Branch managers of most of the companies think that providing better
  service quality is the best tool to compete in the market. Better service
  quality may be in the form-
     1. Issuing policy in time.
     2. Providing claims in time.
     3. Making customers aware about their status of policy.

                 15. Recommendations

 SBI Life should start recruiting advisors through placement agencies.
  By practicing this SBI Life will get more capable advisors who can
  work efficiently. Inactive advisors kind of thing would not happen.

 SBI Life should also promote the term and endowment insurance
  products including ULIP products. Because these are basic insurance
  products. Promote products as life insurance products not an as
  investment products.

 Somewhat the brand name of SBI is harming the SBI Life insurance,
  because most of the people are not happy with the service provide by
  SBI bank, so it is necessary to change the mentality of the people that
  SBI Life insurance is different from SBI bank. SBI Life should
  promote their product features rather than promoting their brand

 To increase awareness in rural market SBI Life should do some
  activities in villages and small towns. This can be done by putting
  kiosk in fairs and festival melas organizing in villages.

 SBI Life can sell their products through charitable institutions.

 SBI Life should sell their products through head of the villages or
  through panchayat in villages. People in villages believe on the head
  and panchayat so selling insurance will be easier in villages.

 SBI Life can introduce some special policies for the farmers to tap the
  rural market, and pricing for these kinds of products should be less so
  farmers can easily afford to take policies.

 As SBI Life is coming in general insurance so it can introduced
  products like cattle insurance and water pump insurance. It will
  also help to promote the products of SBI Life insurance.

                             16. References

Books                 Magazines             News papers      Internet
Insurance in India    Business world        The Hindu        IRDA website

Insurance             Magazines on          Business Line    Google search
distribution (ICFAI   investment

Insurance industry                          Economic Times        Websites of
(ICFAI                                                        different insurance
Publications)                                                     companies


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