"Study of Consumer Perception about Life Insurance"
Study of Consumer Perception about Life Insurance TABLE OF CONTENTS CHAPTER 1 – INTRODUCTION 1 About the Industry 2 Major Players in Life Insurance 11 Range of Products and Services 12 SWOT Analysis 19 CHAPTER 2 – RESEARCH METHODOLOGY 21 Research Objective 22 Research Design 23 Types of Data used 24 Sample Design 25 CHAPTER 3 – COMPANY PROFILE 26 CHAPTER 4 CONCEPTUAL DISCUSSION 31 CHAPTER 5 – DATA ANALYSIS & INTERPRETATION 43 CHAPTER 6 – CONCLUSION / FINDINGS 62 CHAPTER 7 – RECOMMENDATIONS 68 CHAPTER 8 – ANNEXURE 70 CHAPTER 9 – BIBLIOGRAPHY / REFERENCES 73 2 INTRODUCTION 3 INTRODUCTION ABOUT THE INDUSTRY A well developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructural development and at the same time strengthens the risk taking ability. Life insurance is also now being regarded as a versatile financial planning tool in India. India being a country having a huge population of around one billion people with only 33.2% of the population possessing life insurance. The country has a vast potential that has been left untapped till now. Therefore, what this has led to is the flooding of life insurance market with a number of private players which in collaboration with recognized foreign companies promises to deliver the best of services at the least price. All these companies are trying to grasp the maximum of market share in life insurance sector. For that they are developing a channel i.e. recruiting world-class insurance advisors/agents who sell their products or policies. But what a consumer needs or what he perceives about life insurance still needs to be answered these are some questions I have tried to answer in the project. LIFE INSURANCE There are two types of insurance 1) Life insurance 2) General insurance 4 One of the major types of insurance is life insurance. Life insurance companies sell life insurance, annuities and pension products. Life insurance provides a monetary benefit to the decedent's family or other designated beneficiary, and may specifically provide for burial, funeral and other final expenses. Life insurance policies often allow the option of having the proceeds paid to the beneficiary either in a lump sum cash payment or an annuity. In most countries, life insurers are subject to different regulatory regimes and different tax and accounting rules. Insurance companies are generally classified as either mutual or stock companies. This is more of a traditional distinction as true mutual companies are becoming rare. Mutual companies are owned by the policy holders, while stockholders (who may or may not own policies) own stock insurance companies. ADVANTAGE OF LIFE INSURANCE (I) It is superior to a traditional saving vehicle As well as providing a secure vehicle to build up savings etc, it provides peace of mind to the policyholder. In the event of untimely death, of the main earner in the family, the policy will pay out the guaranteed sum assured, which is likely to be significantly more than the total premiums paid. With more traditional savings vehicles, such as fixed deposits, the only return would be the amount invested plus any interest accrued. (II) It encourages saving and forces thrift 5 Once an insurance contract has been entered into, the insured has an obligation to continue paying premiums, until the end of the term of the policy; otherwise the policy will lapse. In other words, it becomes compulsory for the insured to save regularly and spend wisely. In contrast savings held in a deposit account can be accessed or stopped easily. (III) It provides easy settlement and protection against creditors Once a person is appointed for receiving the benefits (nomination) or a transfer of rights is made (assignment), a claim under the life insurance contract can be settled easily. In addition, creditors have no rights to any monies paid out by the insurer, where the policy is written under trust. Under the Married Women’s Property Act (M.W.P Act), the money available from the policy forms a kind of trust which cannot be attached by judgment creditors. (IV) It helps to achieve the purpose of the Life Assured If someone receives a large sum of money, it is possible that they may spend the money unwisely or in a speculative way. To overcome this, the person taking the policy can instruct the insurer that the claim amount is given in installments. (V) It can be in cashed and facilitates quick borrowing: Some contracts may allow the policy to be surrendered for a cash amount, if a policyholder is not in a position to pay the premium. A loan, from certain policies, can be taken for a temporary period to tide over the difficult. Some lending institutions will accept a life insurance policy as collateral for a personal or commercial loan. (VI) Tax Relief The policyholder obtains Income Tax rebated by paying the insurance premium. The specified forms of saving which enjoy a tax rebate, under section 88 of the Income Tax Act, include Life Insurance 6 Premiums and contributions to a recognized Provident Fund etc., section 10 (10D) & other sub- sections of Section 80 of the Income Tax Act. (VII) Acts as a Social Security Tool. INSURANCE SECTOR IN INDIA Introduction The insurance sector is of considerable importance to every developing economy; it inculcates the saving habits, which in turn generates long-term investments or funds for infrastructure building. The nature of insurance business ensures constant inflow of funds - the payout is staggered and contingency related - thereby making it readily available for investment on infrastructure building. Insurance is one sector whose contribution to GDP is quite significant. Post independence, the Indian Government nationalized the private life insurance companies with a view to raise funds for the infrastructure developments, which lagged behind pathetically. The scatter of general insurance companies was brought under one umbrella – the General Insurance Company in 1972. Nationalization however brought with it the public sector bureaucracies, cumbersome procedures and inefficiencies but still these nationalized companies managed to have millions of policyholders who had no other options. Any attempt to even suggest private participation with a view to instill healthy competition and efficient services was only met with stiff resistance. While the early 90s brought forth liberalization on all major economic fronts, the insurance was left untouched. But before long, the passage of IRDA bill in 1999 paved the way for the liberalization of the Indian insurance sector. 7 History Insurance is a federal subject in India and has a history dating back to 1818. Life and general insurance in India is still a nascent sector with huge potential for various global players with the life insurance premiums accounting to 2.5% of the country's GDP while general insurance premiums to 0.65% of India's GDP. The Insurance sector in India has gone through a number of phases and changes, particularly in the recent years when the Govt. of India in 1999 opened up the insurance sector by allowing private companies. Ever since, the Indian insurance sector is considered as a booming market with every other global insurance company wanting to have a lion's share. Currently, the largest life insurance company in India is still owned by the government. Insurance in India has its history dating back till 1818, when Oriental Life Insurance Company was started by Europeans in Kolkata to cater to the needs of European community. Pre-independent era in India saw discrimination among the life of foreigners and Indians with higher premiums being charged for the latter. It was only in the year 1870, Bombay Mutual Life Assurance Society, the first Indian insurance company covered Indian lives at normal rates. At the dawn of the twentieth century, insurance companies started mushrooming up. In the year 1912, the Life Insurance Companies Act, and the Provident Fund Act were passed to regulate the insurance business. The Life Insurance Companies Act, 1912 made it necessary that the premium rate tables and periodical valuations of companies should be certified by an actuary. However, the disparage still existed as discrimination between Indian and foreign companies. The insurance sector went through a full circle of phases from being unregulated to completely regulated and then currently being partly deregulated. 8 Opening doors for private players and FDI The insurance premium in India accounted for a mere 2% of GDP as against the world average of 7.8% and G-7 average of 9.2% during 90s. The insurance premium as a percentage of savings in India is 5.95% as compared to 52.5% in UK. The nationalized insurance companies could barely unearth the vast potential of the Indian population since the policies lacked flexibility and the Indian life insurance products are not linked to the contemporary investment avenues. LIC had a total premium income of $5 billion during 1995-96 and General Insurance recorded a net premium of $1.3 billion. LIC’s income has grown substantially on an average of 10% as against the industry’s 6.7% in the rest of Asia. LIC has catered its services to more than 5 million people living below poverty line with a subsidized premium rate. Claim settlement ratio of LIC stood at 95% and GIC at 74% which is much higher than the global average of 40%. But the other side of the coin gives a dismal picture. Large-scale operations and bureaucracies entangled in the public sector companies were the main areas of concern of the nationalized insurers. The state owned insurance companies did not show any initiative to venture into the rural areas to sell crop insurance or any other personal insurance. Another area, which requires an in-depth study, is the pension segment. Indian demand for pension products will be huge keeping in mind the lack of a comprehensive social security system leading to an upward trend in the savings sentiments. But LIC despite its optimal performing abilities brought in pension premium only to the tune of $22 million. Hence innovative measures to convert the pension products into lucrative saving instruments became the need of the day by which the investors would be allowed to deploy funds before the annuities commence and to invest them in different schemes that would yield a relatively higher income. 9 Another potential area insufficiently served was the health insurance and other personal insurance products such as householders, shopkeepers, personal accident, travel insurance and professional indemnity covers, which constitute only 12 per cent of Indian general insurance premium. General Insurance Company’s Mediclaim scheme served only 2.5% of the total population. The Indian health insurance products were not comprehensive in nature – there was no cover against disability. FACTORS CHANGED DUE TO PRIVATIZATION: 1) Market Expansion: There has been an overall expansion in the market. This has been possible due to improved awareness levels thanks to the large number of advertising campaigns launched by all the players. The scope of expansion is still unlimited as virtually all the players are concentrating on large cities and towns- except by LIC to an extent there was no significant attempt to tap the rural markets but the private companies are also targeting the untapped rural market. 2) New Product Offerings: There has been a large number of new and innovative products offered by the new players, mainly from the stable of their international partners. Customers have tremendous choice from a large variety of products from pure term (risk) insurance to unit-linked investment products. Customers are offered unbundled products with a variety of benefits as riders from which they can choose. More customers are buying products and services based on the true needs and not just traditional money-back policies, which is not considered very appropriate for long-term protection and savings. However, there are still some key new products yet to be introduced. 10 3) Customer Service: Not unexpectedly, this was one area that witnessed the most significant change with the entry of new players. There is an attempt to bring in international best practice in service and operational efficiency through use of latest technologies. Advice and need based selling is emerging through much better trained sales force and advisors. There is improvement in response and turnaround times in specific areas such as delivery of first policy receipt, policy document, premium notice, final maturity payment, settlement of claims etc. However, there is a long way to go and various customer surveys indicate that the standards are still below customer expectation levels. 4) CHANNELS OF DISTRIBUTION: Till two years back, the only mode of distribution of life insurance products was through agents. While agents continue to be the predominant distribution channel, today a number of innovative alternative channels are being offered to consumers. Some of them are bank assurance, brokers, Internet and direct marketing. Though it is too early to predict, the wide spread of bank branch network in India could lead to bank assurance emerging as a significant distribution mechanism. 11 IRDA The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India, based in Hyderabad. It was formed by an act of Indian Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. Mission of IRDA As stated in the act is "to protect the interest of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected there with or incidental there to." 12 MAJOR PLAYERS IN LIFE INSURANCE IN BOTH PUBLIC AND PRIVATE SECTOR Life Insurer in Public Sector 1. Life Insurance Corporation of India Life Insurers in Private Sector 1. Bajaj Allianz Life 2. ICICI Prudential Life Insurance 3. HDFC Standard Life 4. Birla Sunlife 5. SBI Life Insurance 6. Kotak Mahindra Old Mutual Life Insurance 7. Aviva Life Insurance 8. Reliance Life Insurance Company Limited 9. Tata AIG Life 10. Metlife India Life Insurance 11. ING Vysya Life Insurance 12. Max Newyork Life Insurance 13. Sahara Life Insurance - Now they are not into business 14. Shriram Life Insurance 13 RANGE OF PRODUCT & SERVICES Children’s Endowment Policy It is the only one of its kind life insurance policy to be introduced in India. The Policy has two variants: Endowment to 18 and Endowment to 24. It can be bought for a child till he/she is of age 13 or 15 depending upon which variant one chooses. In a world of spiraling costs, whether it is higher education or marriage, this takes care of a child’s future. The Policy ensures that a child gets a fixed amount when he/she turns 18 or 24 respectively. This Policy is ideal for parents with small children, and is the best way to gift a child security and prosperity. Benefits: Guaranteed Sum on maturity at 18/24: A child will be eligible for the Face Amount at the age of 18/24 plus any Bonuses that may accrue. Automatic Vesting at age 18: The Policy will automatically vest in the child when the child turns 18 years of age. Option to buy further insurance on maturity: Within 6 months of this Policy maturing, the child can buy a permanent life insurance policy, without medical examinations, for an amount not exceeding the Face Amount of this Policy. Children’s Endowment Policy To Age 18 To Age 24 Minimum Issue Age 91 days 91 days Maximum Issue Age 13 years 15 years Expiry Age 18 years 24 years Minimum Face Account Regular Premium: Regular Premium: Rs 100,000/- Rs 100,000/- Single Premium: Single Premium: 14 Rs 75,000/- Rs 75,000/- Maximum Face Amount Rs 1 crore Rs 1 crore Additional Benefits: Bonus Options: This Policy entitles you to get Bonuses, with a choice of 3 options on how you would want it paid to you: Annual Bonus payment Bonus accumulated and paid on maturity Bonus used to offset Premiums No Bonuses are paid in the first two years of the Policy, and that Bonuses are not guaranteed and will be as declared by the Company from time to time. Facility of a Loan: Once the Policy has acquired a Cash Surrender Value, the policy holder will be eligible for a loan in accordance with the Company’s terms then. Cash Surrender Value Accumulation: - The Children’s Endowment to Age 18/24 Policy will acquire a Cash Surrender Value at the end of three years. - This will continue to increase every year thereafter. - Finally, if there are amounts payable to the Company at the time, they will be deducted from the Cash Surrender Value. Whole Life Insurance A Whole Life Policy provides benefits for as long as you live, and even beyond. In addition to which it also builds a Cash surrender Value. The Cash Surrender Value that accumulates in the Policy can be accessed to meet any unforeseen need even while the Policy is in existence. 15 Max New York Life offers you the option of choosing either a Whole Life Participating or a Whole Life Non-Participating Policy. Whole Life Participating Policy: In a Whole Life Participating Policy, the Basic Amount insured is guaranteed. In addition, this makes you eligible for Bonuses two years after your Policy comes into effect. However, Bonuses are not guaranteed and will be as declared by the Company from time to time. Whole Life Non-Participating Policy: This, while not eligible for Bonuses, offers you a guaranteed Death Benefit. Benefits: They get protection for life with a guaranteed Death Benefit. Their Policy acquires a Cash Surrender Value after 3 years’ Premiums have been paid. Loan facility to fund unforeseen expenses, after their Policy has acquired a Cash Surrender Value. Finally, a guaranteed, fixed Premium throughout life allows you to plan you finance better. Whole Life Policy Participating Non-Participating Minimum Issue Age 91 days 91 days Maximum Issue Age 70 years 70 years Expiry Age 100 years 100 years Minimum Face Amount Rs. 1 lac Rs. 1.5 lacs Maximum Face Amount Rs. 1 crore Rs. 1 crore 16 Additional Benefits: Bonus Options: Annual Bonus payment Bonus accumulated and paid on maturity Bonus used to offset Premiums Bonus used to buy one-year term insurance Bonus used to buy paid-up additions Option to Participate in Progressive Bonuses: This option allows you to purchase additional benefits in the form of Bonuses that will be paid on maturity of the Base Policy or in the unfortunate event of the death of the Life Insured. Additionally, with this option you can continue to invest more funds without having to provide any further evidence of insurability. Facility of a Loan: Once the Policy has acquired a Cash Surrender Value, you will be eligible for a loan in accordance with the Company’s term, at that point in time. Cash Surrender Value Accumulation: - The Whole Life Insurance Policy will acquire a Cash Surrender Value at the end of three years. - This will continue to increase every year thereafter. - However, the benefits of the Cash Surrender Value will be valid only if the Policy is in existence. - Finally, if there are amounts payables to the Company at the time, they will be deducted from the Cash Surrender Value. 17 20 Year Endowment Insurance Policy 20 Year Endowment Participating Insurance Policy is ideal for saving money for a specific purpose. You get a guaranteed sum, along with the accumulated Bonuses at the end of 20 years. It also offers a Death Benefit, which is guaranteed for the term of Policy. Moreover, the Cash Surrender Value that accumulates in the Policy can be accessed to meet unforeseen expenses even while the Policy is in existence. Benefits: Meeting vital financial needs of the future, such as your children’s education or marriage. The sum that they receive on maturity serves as an additional source of income. It has a guaranteed Death Benefit during the term of the Policy. They Policy acquire a Cash Surrender Value after 3 years’ Premiums have been paid. They have the facility to take a loan after their Policy has acquired a Cash Surrender Value, to fund unforeseen expenses. A guaranteed, fixed Premium. They will get Bonus, payable once the Policy has been in effect for at least two years, with an option of how you want it paid. 20 Year Endowment Participating Insurance Policy Minimum Issue Age 20 years Maximum Issue Age 50 years Expiry Age 70 years Minimum Face Amount Rs. 1 lac Maximum Face Amount Rs. 1 crore 18 Additional Benefits: 1) Annual Bonus payment 2) Bonus accumulated and paid on maturity 3) Bonus used to offset Premiums 4) Bonus used to buy one-year term insurance 5) Bonus used to buy paid-up additions Endowment to Age 60 Policy The life after retirement, when one’s source of income reduces but one’s expenses doesn’t. You have to pay from medical costs to children’s marriage expenses. So it makes great sense to plan well in advance for a secure life after retirement. To make sure your expenses will be covered with dignity, to make sure you will be there to provide for your children when they need you most. And to help you achieve that life of dignity and freedom, you can invest you hard earned served money in “Endowment to Age 60 Policy”. Benefits: Financial Security: You get a guaranteed sum, along with the accrued Bonus at the age of 60. It is ideal for saving money for covering your expenses after your retirement, such as your child’s marriage, your medical expenses or financing a house for your family. Guaranteed Death Benefit: In case of the unfortunate event of your death during the tenure of the policy, the sum insured will be paid to the beneficiary. Liquidity: You have the facility to take a loan (after your Policy has acquired a Cash surrender Value) to fund unexpected requirements. Better Financial Planning: A guaranteed, fixed premium allows you to plan your finances better. You will be eligible for Bonus once the Policy has been in effect for at least two years, with an option of how you want it paid. For example, you can even get cash every year rather than wait for 19 the maturity of the policy. However, Bonuses are not guaranteed and will be as declared by the Company from time to time. Endowment to Age 60 Policy Minimum Issue Age 91 days Maximum Issue Age 50 years Expiry Age 60 years Minimum Face Amount Rs. 100,000/- Maximum Face Amount Rs. 5 crore Additional Benefits: Bonus Options: This Policy entitles you to get Bonuses, with a choice of 5 options on how you would want it paid to you: 1) Annual Bonus payment 2) Bonus accumulated and paid on maturity 3) Bonus used to offset Premiums 4) Bonus used to buy one-year Team Insurance 5) Bonus used to buy paid-up additions Do remember though that no Bonuses are paid in the first two years of the Policy, and that Bonuses are not guaranteed and will be as declared by the Company from time to time. Facility of a Loan: Once the Policy has acquired a Cash Surrender Value, you will be eligible for a loan in accordance with the Company’s terms then. Cash Surrender Value Accumulation: 20 - The Endowment to Age 60 Policy will acquire a Cash Surrender Value at the end of three years. - This will continue to increase every year thereafter. - Finally, if there is amounts payable to the Company at that time, they will be deducted from the Cash Surrender Value. SWOT ANALYSIS OF MAX NEW YORK LIFE STRENGTHS Knowledge based being quality oriented rather than quantity oriented Provide in- house training to advisors. Cost effective organization Persuasiveness of customer service representative to address the problems. Effective customer Personal consulting for customized policy. Perceived financial loyalty programmes. Customized policies that cover the specific terminal disease. WEAKNESSES Less Brand Awareness Time consuming ( in picking advisors) Process Oriented( process are too lengthy) Fewer suggestions in terms of precautionary measures for avoiding perils. Are pulled by the engine of powerful brands like TATA AIG and Bajaj Allianz. 21 OPPORTUNITIES It can enter in the General insurance sector. Opportunity in the rural sector as there is a under-penetrated insurance market in rural sector. Relative market potential in not only the rural markets but also the semi-urban markets. Better customer services like utmost promptness in issuance of the policy, giving cheque pick up facilities and not making customers not waiting for months. Making more loyal customers and attracting other customers with better service THREATS LIC because today also people show much faith towards LIC as it is a public company Competitors in the private sector. With players like SBI Life and ICICI Prudential spending lot in advertisements, it may take away the market. Sometimes more focus on innovative products may affect the main fruitful products. Stiff competitions due to new companies are entering day by day. 22 RESEARCH METHODOLOGY 23 RESEARCH OBJECTIVES To know the procedure of selection and recruitment of insurance advisors/ agents at Max New York Life. RESEARCH METHODOLOGY Studying on Agency channel, one of the channels of distribution used by Max New York Life. Studying current ways used by Max New York Life to expand its agency channel and to find new ways for the same To study various financial products on MNYL The main focus of the project was collection of names through different sources like- from relatives, friends, neighbors and references company data base etc got from them. . As far as practical aspect is concern, we also collected name through personal interaction with different people like from:- Shopkeepers Clubs Kitty parties Malls 24 Telephonic conversion and personal interviews with different people were two of my best weapons which help in collecting the quality data for developing a channel. To understand how to develop a channel of people who will work for selling the products of the company. To understand the procedure of selection and recruitment of insurance advisors/agents. To find the suitable person for the recruitment as an insurance advisor. Judgment of satisfaction level and perception of consumers about Life Insurance, Companies and the motivation behind buying Life Insurance, by the use of Questionnaires designed for the same. Understanding the Financial Products Basket of Max New York Life. RESEARCH DESIGN To conduct the market research first of all it is necessary to create a research design. A research design is basically a blue print of how a research is to be conducted, it may include; 1. Choosing the approach 2. Determining the types of data needed. 3. Locating the source of data. 4. Choosing a method of data. 25 Basically there are 3 types of approaches used during any research :- 1. Exploratory. 2. Descriptive. 3. Experimental. During this research Descriptive and Exploratory approach is taken into consideration because of the availability of relevant information to describe the relationships between the marketing problems and the available information. Types of Data Used Both primary and secondary data is used in the research – PRIMARY DATA The primary sources of data refer to the first hand information Primary data is collected during the survey with the help of Questionnaire. (Given in the later part of the project) SECONDARY DATA Secondary data is one which already exists and is collected from the published sources. The sources from which secondary data was collected are : Newspapers and Magazines like Economic Times, Insurance Times, Insurance Post. Internet Library Conferences 26 SAMPLE DESIGN Sample Element / Sample Unit Government Servants Professionals Housewives Businessmen Self Employed Retired People Extent New Delhi : East of Kailash Green Park Panchsheel South Extension Pitam Pura Model Tow Rohin 27 COMPANY PROFILE 28 COMPANY PROFILE About Max India Max India Limited is a multi-business corporate, driven by the spirit of enterprise, focused on knowledge, people and service-oriented businesses of healthcare and life insurance. Founded in 1985, Max India Limited is a Public Limited company listed in the NSE and BSE of India with over 37,000 shareholders. Today, Max India Limited is a multi-business corporate, driven by the spirit of Enterprise, focused on Knowledge, People and Service oriented businesses of: Healthcare (Max Healthcare) Life Insurance (Max New York Life Insurance) Clinical Research (Neeman Medical International) Max also maintains interests in: Specialty Plastic Products for the packaging industry (Max Speciality Products) Healthcare Staffing (Max Health Staff) Prominent shareholders are Mr Analjit Singh and a leading private equity firm, Warburg Pincus which accounts for 28.7% of the total shareholding. The balance shareholding is held by the public and Institutional Investors. 29 About New York Life New York Life Insurance Company, a Fortune 100 company, is the largest mutual life insurance company in the United States and one of the largest life insurers in the world. Founded in 1845 and headquartered in New York City, New York Life and its affiliates offer life insurance, annuities and long-term care insurance. New York Life Investment Management, LLC, a New York Life affiliated, provides institutional asset management, retirement plan and trust services. Other New York Life affiliates provide an array of securities products and services, as well as institutional and retail mutual funds. New York Life International offers insurance products through its subsidiaries and affiliates in Argentina, Hong Kong, India, Mexico, the Philippines, South Korea, Taiwan, Thailand and China. The company also has a representative office in Hanoi, Vietnam. Corporate Profile of Max New York Life Insurance Max New York Life is a joint venture between New York Life (ranked 68 th in the fortune 500 list, 2005) and Max India limited. Max New York Life is a 74:26 partnership company between New York Life and Max India Ltd. Through its wide network of highly competent life insurance Agent Advisors and flexible products and solutions, Max New York Life is committed to creating a partnership for life with its customers in India. In line with its values of financial responsibility, Max New York Life has adopted prudent financial practices to ensure safety of policyholder’s funds. It invests only in debt instruments and meets both Indian and international disclosure norms. The Company’s paid up capital is Rs. 300 crore, which makes it among the highest capitalized its primary channel of distribution. The Company places a lot of emphasis on its selection process, which comprises four stages – screening, psychometric test, career seminar and final interview. The agents are trained in-house 30 to significantly in its training programme and each agent is trained for 152 hours as opposed to the mandatory 100 hrs stipulated by the IRDA before beginning to sell in the marketplace. Training is a continuous process for agents at Max New York Life and ensures development of skills and knowledge through a structured programme spread over 500 hours in two years. This focus on continuous quality training has resulted in the company having amongst the highest agent pass rate in IRDA examinations and over 45 of its agents qualifying to be nominated to the MDRT, which is among the highest suite of flexible products. It now has 13 life insurance products and 9 options & riders that can be customized to over 400 product combinations enabling customers to choose the policy that best fits their need. Leadership Team Analjit Singh (Chairman, Max India Limited) Gary G. Benanav (Chairman and Chief Executive Officer, New York Life International Inc.) Anuroop ‘Tony’ Singh (Chief Executive Officer and Managing Director of Max New York Life) 31 Vision Become the most admired Life Insurance Company in India. Mission Become one of the top 3 new Life Insurance Companies Become a National Player – Dominant in North India Be the Brand of FIRST choice among all stakeholders Become the employer of Choice Be the principal of Choice for Agents 32 CONCEPTUAL DISCUSSION 33 CONCEPTUAL DISCUSSION CHANNEL DEVELOPMENT . Who is a professional agent? 1) An agent is the representative of an insurance company who sells different products to its customers. Another term used for insurance agents is – advisors 2) He/she should not offer rebate. If any prospect demands/expects rebate, Section 41 should be invoked. This also should be included in the code of conduct for agents. Everybody knows cracking down on this practice is easier said than done. It is a complicated and evil socio-economic problem. It is like abolishing the dowry system by just passing a law. To achieve success in this area, insurance transactions should be made transparent. 3) Life insurance company’s advisors are known to be the backbone of the whole system. Advisors/agents do not work on monthly payroll basis; they receive a certain commission on the policies they sell to the clients. For developing a channel, company need person who will Identify future clients Make appointments Conduct financial review meetings with prospects/clients Close sale 34 Get referrals Provide service to clients Other intermediaries like brokers and insurance consultants are also part of this distribution channel. Eligibility norms provided by IRDA for becoming an insurance advisor Person should be at least 18 years of age; Person have completed 10+2; Person should attain 100 hours training. Other than this the person should possess Good communication skills Relationship skills Confidence Self motivation Persuasion Urge to be financially independent 35 STRATEGIES INVOLVED IN SEARCHING POTENTIAL ADVISORS Your search for prospective advisors must be continuous and systematic – just like prospective for sales, you must search among several sources on a regular basis sources are broadly classified as primary source and secondary source. Personal observation This method is uniquely personal. It permits you to apply your own standards and exercise your own judgment. Always be on the alert for prospective advisor in your daily selling activities in instinctively apprise as prospective advisors those you see, meet or sell. Stay in circulation and meet a lot of people on a regular basis. Develop these individuals as friends and clients, and then determine whether or not to recruit them. Present advisor Recommendation No one knows more about the kind of person you seek and the kind of opportunities you have for the prospective advisor than the present members of your sales organization. Moreover, they have a selfish interest in wanting their associates to be type of person who will reflect favorably on their organization. Many successful advisors have an ability to attract promising prospective advisors who can and do succeed. 36 Client referrals Clients are readily accessible source of prospective advisor and referrals. It is safe to assume that client who has relied upon your agency to handle their insurance is pleased with both you and your work. Since you have created a favorable impression, the can picture themselves or others as having the same success. Therefore, it is mostly a matter of helping them to help you by making enquires and asking questions designed to remind them of names of prospective advisors. Newspaper advertisement Newspaper advertising created considerable activity. It is one of the fastest ways to get name and talk people seeking a change in employment. Consider as a “wholesale method” of widening your range of contacts with prospective advisors. Keep in mind that generally develops “pop-up prospects” that must be screened carefully. Direct Mail Mass mailing is a system if used can be a very successful tool. One system is to send letters with reply cards on a regular basis especially to “centers of influence.” Use list from club, church and alumni directories. The standards letter should briefly describe the rewards of a successful insurance sales career. 37 CHANNEL DEVELOPMENT AT MNYL: MNYL uses strategies like: Personal observation. Present advisor recommendation. Client referrals MNYL doesn’t follow the method of giving direct mails or giving advertisements in newspapers. Recruiting success formula MNYL believes in a formula that is: 1OO CONTACTS 32 SCREENINGS 8 SELECTED 38 Channels of distribution of MNYL are: MNYL Agency Bank Alternative Cooperative assurance Channels Channel Bank Assurance - This refers to establishing relationships with various banks so as to enable sale of policies through banks. There are many options in this area with reference to the bank’s role in selling policies. One option can be that the banks only provide a database of their customers. Other option can be of banks getting into an aggressive mode and directly selling policies. MNYL’s bank assurance move is channeled through two routes. In one, it will offer customized solutions through small banks while its strategy for the big banks will be through an equity relationship. The company’s bank assurance model is only 3 months old and currently, MNYL has a bank assurance relationship with Yes Bank and Thane Janata Cooperative Bank. 39 Alternative channels: Direct Sales Team Channel - In this, the direct sales people are not recruited as advisors but as employees of the company and they work on a fixed and variable income pattern. This channel includes telemarketing and an upcoming alliance with Amway called Amsure in which Amway will be utilizing its distribution channel to sell MNYL’s policies. Agency – Corporate agents of Max New York Life include: Metro Finance Corporation, Futuristic Consultancies Ltd, Jaydev R. Patel Insurance Agency Private Limited, Akshay Consultants, Golden Trust Multi Services etc. Another route is the franchisee route opted by MNYL, especially in the East. MNYL, presently has 9 franchisees. Max New York Life initially identified Individual agents as its primary channel of distribution. But now the company is focusing on widening its distribution mix by pursuing the franchisee model, bank assurance, rural business, direct sales force involving group insurance and telemarketing opportunities and also corporate alliances. This year MNYL has achieved around 77 per cent of its business from the agency distribution system, while the alternative distribution network contributed the balance of around 23 per cent. 40 My study involves study of Agency channel as a channel of distribution. It is a direct channel which makes it the most effective channel. In this while recruiting you get a chance to recruit people from all walks of life. For e.g.: Upper Class - IAS officers Politicians Celebrities Upper middle class – Army Retired people Civil Service class who are looking forward to generate more income. 41 OFFICIAL PROCESS FOR RECRUITMENT 105 Hours of training Class Room Training Product Training IRDA Exam Issue of License To pass the IRDA exam a minimum of 50% marks is required. On passing the examination a license is issued. This is a fully commission based job where an Advisor in Max New York Life can earn 40% of the premium as his commission. Max New York Life has a strong channel of distribution for which it identified Individual agents. Max New York Life believe in developing a quality model i.e. they recruit only quality people as their insurance advisors, who work not as an employee of the company but as a part of the company. 42 The criteria for selecting quality people is that:- Person should be 25 years of age, and Minimum qualification is 10+2, but as we work on quality model so we prefer people who have at least a graduate degree. And the categories on which we focus are:- Housewives Retired people Self employed Person who had taken VRS This process includes four stages:- Screening Psychometric test Career seminar Final interview 43 1) Screening:- For calling people on screening, some data is collected regarding names, their age, occupation etc. After collecting names, quality data is grab out from the collected data and accordingly people are called for screenings. In screening some general questions were asks about their occupation, their family background, their interest in this field, etc. After that, the person who came for screening is given a booklet called P-200, in which they are required to fill the details of the person whom they know personally and references which they got from their relatives. 2) Psychometric Test:- In this stage the person who come for screening is required to fill P-200 with details of the persons whom he/she know personally or with the names of the persons which he/she got from his/her personal contacts. After that if the data collected by him is good, he will be eligible for final interview. 3) Career Seminar:- Some times the person who is interested in becoming insurance advisor, will be called to attend the seminar so that he/she is able to understand the whole profile of the job and can solve all his/her queries. After that all the present members of the seminar are given P-200 for collecting which is considered as next step in their selection. 4) Final Interview:- The last stage of recruitment and selection of an insurance advisor is final interview with Branch Manager. The person is called for final interview if he/she is successful in fulfilling the booklet called P-200 which will be his/her target customers. And if he successful in clearing that interview, he/she will be given 100 hours in-house training on which company spends from their own side. 44 DATA ANALYSIS AND INTERPRETATION 45 DATA ANALYSIS & INTERPRETATIONS 1. How would you rate Life Insurance as a means of investment via other forms of Investments? Frequeny Percent Valid Poor 1 2.0 Fair 8 16.0 Good 25 50.0 Excelle 16 32.0 nt Total 50 100.0 poor fair good excellent 46 50 40 30 Frequency 20 10 0 Poor Fair Good Excellent . Analysis of above Diagram- Approximately 50% of the people surveyed believe that Insurance is a good source of Investment.32% believes that it is an excellent source of Investment and Remaining 22% believe that it ranges from fair to poor, where only 2% believed that it is a poor source of investment. Hence it can be concluded that majority believe that investment in Life Insurance is a good option. 47 2. Return on Investment as factor for selecting Life Insurance policy. Frequency Percent Valid not important 3 6 moderately 4 8 important important 23 46 very important 20 40 Total 50 100.0 50 40 Frequency 30 20 10 0 Not Important Moderately important Important Very Important Analysis of the above Diagram-From the above diagram, we can conclude that 46% respondents believe that Return on Investment is important, while 40% of the respondents believe that is very important. So 86% of the respondents recognized the importance of Life insurance as an investment. Whereas only 14% believe it ranges from moderately important to not important. 48 3. Goodwill as factor for selecting Life Insurance policy. Frequency Percent Valid not important 1 2.0 moderately 8 16.0 important important 25 50.0 very important 16 32.0 Total 50 100 not important moderately important important very important Analysis of the above Diagram-The majority of the respondents i.e. 50%,believed that goodwill of a company is Important while selecting an Insurance Policy.32% believed it is very important, only 2% of the respondents believed that it is not important and the remaining 32% considered it to be moderately important. 49 4. Security as factor for selecting Life Insurance policy. Frequency Percent Valid not important 1 2.0 moderately 2 4.0 important important 24 48.0 very important 23 46.0 Total 50 100.0 50 40 Frequency 30 20 10 0 0.00 1.00 2.00 3.00 4.00 5.00 Analysis of the Above Diagram- The majority of the respondents i.e. 48%,believed that goodwill of a company is Important while selecting an Insurance Policy.46% believed it is very important, only 2% of the respondents believed that it is not important and the remaining 4% considered it to be moderately important. 50 5. Tax rebate as factor for selecting insurance policy Frequency Percent Valid not important 2 4.0 moderately 4 8.0 important important 20 40.0 very important 24 48.0 Total 50 100.0 50 40 Frequency 30 20 10 0 Not important Moderately Important Important Very Important Analysis of the above Diagram-From the above histogram it can be concluded that for 48% of the respondents Tax Benefit involved with buying a Life Insurance Policy is Very Imporatnt,40% of the respondents consider it to be Important whereas only 4% believe it is not at all important while the reaming 8% believe it is Moderately Important. 51 6. What motivates you to purchase insurance plans Frequency Percent Valid assurance 8 16.0 Savings 5 10.0 high return 8 16.0 tax benefit 21 42.0 old age 8 16.0 benefit Total 50 100.0 50 40 Frequency 30 20 10 0 Assurance Savings High Return Tax Benefit Old Age Benefit Analysis of the above Diagram-Tax benefit was cited as the most important reason by 42 % of the respondents. The other factors stand very close to each other, Assurance as a reason stands at 16%, High Return at 16%, Old Age Benefit at 16% and Savings at 10% 52 7. Amount of Premium paid every year Frequency Percent Valid rs.5000-rs.25000 12 24.0 rs.25001-rs.45000 15 30.0 rs.45001-rs.75000 11 22.0 rs.75000 and above 12 24.0 Total 50 100.0 40 30 Frequency 20 10 0 Rs.5000-Rs.25000 Rs.25000-Rs.45000 Rs.45000-Rs.75000 Rs.75000 and above Analysis of the above Diagram-As far as paying of Annual premium is concerned 30% of the respondents pay a premium ranging from Rs 25000 to Rs 45000.24% paid premium ranging more than Rs.75000.24% of the respondents pay an annual premium ranging from Rs 5000- Rs 25000, and nearly 22% of the respondents pay an annual premium of Rs 45000- Rs 75000. 53 8. Does Advertisement play important role while buying Life Insurance. Frequency Percent Valid not important 2 4.0 moderately 12 24.0 important important 23 46.0 very important 13 26.0 Total 50 100.0 50 40 Frequency 30 20 10 0 Not Important Moderately Important Important Very Important Analysis of the above Diagram-For 46% of the respondents surveyed Advertisement plays an Important Role while buying Life Insurance. Whereas 26% believe that it is very important and 24% respondent believe it is Moderately Important. The Remaining 4% believes that advertisement is Not Important at all and does not influence their buying decision. 54 9. Which Pvt Life Insurance co. advertisement is more informative? Frequency Percent Valid Max New York 23 46.0 Life HDFC 14 28.0 ICICI 7 14.0 ing Vysya 4 8.0 AVIVA 2 4.0 Total 50 100.0 50 40 Frequency 30 20 10 0 ICICI HDFC Max New York Life Ing Vysya Aviva Analysis of the Above Diagram-46% of the respondents did find the Advertisement of Max New York Life more Informative, the primary reason to this could be the strong TV Advertisement Rounds being followed by the company in the recent times.HDFC was the next favorite at 28% .stand for ICICI at 14% ING Vyasa at 8% and Aviva Life Insurance at 4% 55 10. Whom do u keep in mind while taking a Life Insurance policy? Frequency Percent Valid Yourself 15 30.0 Spouse 5 10.0 Children 5 10.0 Whole Family 25 50.0 Total 50 100.0 60 50 40 Frequency 30 20 10 0 Spouse Children Yourself Whole Family Analysis of the above Diagram-When the respondents were asked whom they kept in mind while buying a Life Insurance Policy a majority i.e. 50% of them replied that they kept in mind the Whole Family.30% said they buy Life Insurance considering Self.10% replied that they consider their Spouse while buying Life Insurane and 10% said that they consider their Children. 56 11. Occupation of the respondent. Frequency Percent Valid Business 17 34.0 Service 22 44.0 Self 5 10.0 Employed Others 6 12.0 Total 50 100.0 50 40 Frequency 30 20 10 0 Business Service Self Employed Others Analysis of the above Diagram-44% of the respondents surveyed were having occupation as Service.34% were involved in their own Business,10% of the people surveyed were self employed and the remaining 12% belonged to the category of Others which might include the Retired ,Old or Unemployed People. 57 CONCLUSION AND FINDINGS 58 CONCLUSION / FINDINGS MY ROLE AND LEARNING AT MNYL My job at MNYL was to sell a career to people. It means I had to recruit insurance advisors for the company. The kind of people I was looking forward were: people above the age of 25 years minimum qualification- plus 2, but we prefer people who have a graduate degree in any field. And the categories on which focused were: Housewives: as they are the home-makers and when they advice you how to manage your funds then they are highly influential. Retired people: these are the people who have seen life therefore their advice are also liked by people. Voluntary retired people Self employed people Activities performed by me: Name Gathering: Our 1st activity was name gathering. On the first day we were taught a pen framing exercise for this. This exercise helps you in getting 50 names from one person. We were told about the categories from which we can gather names. Figure given below depicts the same: 59 DATABASE RELATIVES FRIENDS NAMES NEIGHBOURS CUSTOMES Fig. 10 Firstly we were asked to target our family. Every name was entered in the centre box of the above figure and person’s friends, relatives, neighbour’s names were asked. Similar exercise was done with friends and relatives. On the first day when sir asked me to give 5 names of people whom I know and who fulfill the criteria (as stated above), I found it very difficult but by the end of the day I was able to collect around 40 names. I went to kitty parties to tap housewives. I met some of my father’s friends who are retired. I tried to convince them and invited them to attend the career seminar. I did cold calling also. I got the telephone directory and called them, told them about the career opportunity and tried to invite them for the career seminar. 60 After collecting names, we had to find out names of people from that list who were either housewives, retired people and self employed i.e. quality people and after that inviting them. INVITING: Our second activity was to invite people to the career seminar. For this I had a conversation (telephonic) with the people whose references I got from people and invited them for the career seminar. For the conversation to be effective a script was given to us stating that what all we have to speak, how to convince them to meet us and how to get further references from them. After the career seminar we used to give a project-200 booklet to them which they were supposed to fill. In this they were asked to fill at least 100 names of the people whom they know as advisors are asked to tap their natural market first and touch the reference market later on. INITIAL SCREENING: I had to keep a follow up with the people who attended career seminar. I used to call them for initial screening, with their filled P-200’s. In the initial screening my job was to see the profile they have filled in their P-200. Then I had to ask certain simple questions like who according to him/her is a successful sales person. If I find the person suitable then I had to send him/her to my senior for further screenings. 61 FINDING (A) HOUSEWIVES: The reason behind our approaching Housewives for a possible tie-up was their large presence and interaction with a large number of customers. And MNYL believes that housewives are the home makers, they manage their finances at home very well and when they give financial advices to others then it has a better impact. RESPONSE: The efforts to establish a tie-up in this segment had a mixed response. Most of them found it interesting and good way of earning money. But few of them were reluctant as they believed that it would be hectic. PROBLEMS FACED: Though there was much interest shown by the housewives, but it was vacation time and most of them had their vacation plans and because of this they were not ready to join in the month of June. Some of them said that they would prefer staying at home and some had a problem of having small kids. (B). RETIRED PEOPLE: The main criterion that led us to select this particular segment was that these people have better understanding of finance and they know how to deal with people. In this our main target was Army retired people as the past records show that they do real good in this field. These people find it easy to win the trust of the customer. 62 RESPONSE: The initial response that we got from this particular sector was good. The people in this segment seemed interested enough about knowing of the business proposal. The success ratio in this segment was good. PROBLEMS FACED: People were not ready to attend training because of hot climate. (C) SELF EMPLOYED: The main selection criterion of this sector was that these people have many good contacts. They have a better understanding of customer’s behavior and their needs. These people try to tap mostly the big corporate clients and they know how to make long-term relationship with their customers. And also the fact that the people of this segment are good at dealing customers. RESPONSE: The overall response of the entire sector did not seem to be positive enough. PROBLEMS FACED: MNYL provides full time training and these people didn’t have time to spend on full time training. 63 RECOMMENDATIONS 64 RECOMMENDATIONS 1. Max New York Life should focus on developing an AGENT SALES SUPPORT SYSTEM, as initially whatever policies an agent sells is mainly through his personal contacts and after certain time period his personal contacts saturates and he is totally dependent on referrals. 2. Here MNYL can step in by providing a common interphase for interaction between agents and prospective policy buyers. 3. There is a huge opportunity in the rural sector, so Max New York Life should expand its activities in rural sector. 4. Max New York Life should use the method of newspaper advertisement as this will help them in tapping the market that has remained untouched till now. 5. Apart from expanding agency channel, Max New York Life should expand its other channels also. It should start providing on-line training. 6. Max New York Life’s process of picking advisors is very time consuming. They should try to curtail the time spent on it. 65 ANNEXURE 66 ANNEXURE Questionnaire Name: Age: 1. How would you rate Life Insurance as a means of investment via other forms of Investments? o Poor o Fair o Good o Excellent 2. Return on Investment as factor for selecting Life Insurance policy. o Not important o Moderately important o Important o Very important 3. Goodwill as factor for selecting Life Insurance policy. o Not important o Moderately important o Important o Very important 4. Security as factor for selecting Life Insurance policy. o Not important o Moderately important o Important o Very important 5. Tax rebate as factor for selecting insurance policy o Not important o Moderately important o Important o Very important 6. What motivates you to purchase insurance plans o Assurance o Savings o High return o Tax benefit o Old age benefit 67 7. Amount of Premium paid every year o rs.5000-rs.25000 o rs.25001-rs.45000 o rs.45001-rs.75000 o rs.75000 and above 8. Does Advertisement play important role while buying Life Insurance. o Not important o Moderately important o Important o Very important 9. Which Pvt. Life Insurance co. advertisement is more informative? o ICICI o HDFC o Max New York Life o Ing Vysya o AVIVA 10. Whom do u keep in mind while taking a Life Insurance policy? o Yourself o Spouse o Children o Whole Family 11. Occupation of the respondent. o Business o Service o Self Employed o Others 68 BIBLIOGRAPHY 69 BIBLIOGRAPHY Books:- 1. GUPTA C.B. (10th edition) 2005. Marketing Management. 2. KOTLER PHILIP, (5th edition) 2004. Marketing Management Magazines:- The week Business today Insurance times Websites:- 1. www.maxnewyorklife.com 2. www.altavista.com 3. www.yahoo.com 4. www.maxindia.com 70