A

Project Report

On

“Distribution Channels of Insurance Sector in Relation to Life

Insurance Corporation”

Done At

LIC INDIA

School of Business and Management

Jaipur National University

Submitted To: Submitted By:

Prof. Rajesh Mehrotra Ashutosh Awana

Director M.B.A Dual 3rd

Preface

Training is the systematic development of the knowledge, skills and attitude

required by an individual to perform adequately a given task or job. It imparts

practical knowledge to an individual which in turn makes work more efficient

and more organized. In present times and age it holds great importance in an

individual professional development. My training in Life Insurance Corporation

of India has been truly a learning experience where, I explored my strengths and

weakness and it facilitated me in coming out with this project on “Distribution

Channels of Insurance Sector in Relation to Life Insurance Corporation of India.

I got to know about the various Distribution Channels. By this study I got to

know LIC has taken the strategic decision of Direct Marketing through

comparative study among various other steps. After the study I have come out

with some interesting findings which one can explore in my project.

Acknowledgement

‘When a person is help, guide and co-operated his or her is bound to pay

gratitude.’

My summer Internship Training (SIP) experience has been filled with

interesting challenges and people that I will appreciate forever; numerous

people have contributed in varying capacities which permitted completion of

this project. I would like to begin by thanking Mr. Suresh Soni for guidance,

constant inspiration & keep interest shown during the project. I deliberate my

profound sense of gratitude to him.

It is not a single man’s effort which is sufficient for the accomplishment of a

research various factors, situations and person integrate to provide background

for accomplishment of a task requires the effort of so many people and the work

is no different.

I extend my sincere thanks to all the members of LIC group family who have

made my stay in LIC most fruitful and a learning experience. I also sincerely

thank to my JNU teachers for allowing me takes up the in LIC India.

Declaration

I hereby declare that the project Titled “Distribution Channels of Insurance

Sector in relation to Life Insurance Corporation of India” is an original piece of

research work carried out by me under the guidance and supervision of Mr

Suresh Soni. The information has been collected from genuine & authentic

sources. The work has been submitted in partial fulfilment of the requirement of

M.B.A to our college.

Place: Bikaner

Date: 25/07/2015

Ashutosh Awana

M.B.A (Dual) 3 rd

Certificate

TITLE INDEX

CHAPTER NO. LIST OF CONTENTS PAGE NO.

1 Executive Summery 8-10

2 Introduction 12-16

3 Objective and Scope of the project 18-19

4 Company Profile 22-28

5 SWOT Analysis 29

6 Research Methodology 31-36

7 Data analysis and Interpretation 38-44

8 Findings 46

9 Suggestions 48

10 Limitations of the project 50

11 Conclusion 52

12 Bibliography 53

13 Annexure 55-59

14 Case Study 61

CHAPTER -1

EXECUTIVE SUMMARY

EXECUTIVE SUMMARY

Someone has greatly said that practical knowledge is far better than classroom

teaching. During this project I fully realized this and come to know about the

present real world of Insurance sector. It includes all the activities involved in

providing insurance products to the final customers. I am pleased to know about

the consumers’ wants and competitors activities in the real world of Insurance.

The subject of my study is to analyse the present insurance sector and products

offered by LIC by applying various tools like cold calling and through direct

interaction with customer’s. I have also done research on the growth of private

life insurance companies in the last five years.

The report contains first of all brief introduction about the company. Then it

contains the current status of private insurance companies and foreign insurance

companies in India.

I also put forward recommendations of the consumers and conclusions that will

help LIC to provide consumer satisfactory services in the insurance sector.

Introduction

Insurance is nothing but a system of spreading the risk of one onto the shoulders of many. While it becomes somewhat impossible for a man to bear by himself 100% loss to his own property or interest arising out of an unforeseen contingency, insurance is a method or process which distributes the burden of the loss on a number of persons within the group formed for this particular purpose.

Basic Human trait is to be averse to the idea of risk taking. Insurance, whether life or non-life, provides people with a reasonable degree of security and assurance that they will be protected in the event of a calamity or failure of any sort. Insurance may be described as a social device to reduce or eliminate risk of loss to life and property. Under the plan of insurance, a large number of people associate themselves by sharing risks attached to individuals. The risks, which can be insured against, include fire, the perils of sea, death and accidents and burglary. Any risk contingent upon these, may be insured against at a premium commensurate with the risk involved. Thus collective bearing of risk is insurance.

Insurance Indemnifies Assets & Income Every Asset has a value and generates Income to its Owner. There is a normally expected Life-time for the Asset during which time it is expected to perform. If the Asset gets lost earlier, being destroyed or made Non-functional through an Accident or other unfortunate event the Owner is Prejudiced. Insurance helps to reduce CONSEQUENCES of such Adverse Circumstances which are called Risks.

Insurance is the science of spreading of the risk

It is the system of spreading the losses of an Individual over a group of Individuals.

Insurance is a Method of sharing of financial losses

Of a few from a common fund formed out of Contribution of the many who are equally exposed to the same loss. What is uncertainty for an individual becomes a certainty for a Group. This is the basis of All Insurance Operations. Thus insurance convert uncertainties to certainty.

The History of Indian Insurance Industry

Life Insurance:

In 1818 the British established the first insurance company in India in Calcutta,

the Oriental Life Insurance Company. First attempts at regulation of the

industry were made with the introduction of the Indian Life Assurance

Companies Act in 1912. A number of amendments to this Act were made until

the Insurance Act was drawn up in 1938. Noteworthy features in the Act were

the power given to the Government to collect statistical information about the

insured and the high level of protection the Act gave to the public through

regulation and control. When the Act was changed in 1950, this meant far

reaching changes in the industry. The extra requirements included a statutory

requirement of a certain level of equity capital, a ceiling on share holdings in

such companies to prevent dominant control (to protect the public from any

adversarial policies from one single party), stricter control on investments and,

generally, much tighter control. In 1956, the market contained 154 Indian and

16 foreign life insurance companies. Business was heavily concentrated in

urban areas and targeted the higher echelons of society. "Unethical practices

adopted by some of the players against the interests of the consumers" then led

the Indian government to nationalize the industry. In September 1956,

nationalization was completed, merging all these companies into the so-called

Life Insurance Corporation (LIC). It was felt that "nationalization has lent the

industry fairness, solidity, growth and reach."

THE HISTORY OF INDIAN INSURANCE INDUSTRY

Some of the important milestones in the life insurance business in India are:

1912: The Indian Life Assurance Companies Act enacted as the first statute to

regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government

to collect statistical information about both life and non-life insurance

businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with

the objective of protecting the interests of the insuring public.

1956: The market contained 154 Indian and 16 foreign life insurance

companies.

General Insurance

The General Insurance industry in India dates back to the Industrial Revolution

and the subsequent increase in trade across the oceans in the 17th century. As

for Life Insurance, the British brought General Insurance to India, and a similar

path was followed in the development of this industry. A number of private

companies were in existence for years and years until, in 1971, the Indian

Government decided that the public interest would be served by nationalizing

the industry, merging all the 107 companies into four companies, depending on

the sort of business transacted (Marine, Fire, Miscellaneous). These were the

National Insurance Company Ltd., the Oriental Insurance Company Ltd., the

New India Assurance Company Ltd., and the United India Insurance Company

Ltd. located in Calcutta, New Delhi, Bombay and Madras respectively. The

General Insurance Corporation (GIC) was set up in 1972 as a 'holding'

company, having these four companies as its subsidiaries.

Some of the important milestones in the general insurance business in India

are:

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact

all classes of general insurance business. 1957: General Insurance Council, a

wing of the Insurance Association of India, frames a code of conduct for

ensuring fair conduct and sound business practices. 1968: The Insurance Act

amended to regulate investments and set minimum solvency margins and the

Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalization) Act, 1972 nationalize

the general insurance business in India with effect from 1st January 1973. 107

insurers amalgamated and grouped into four company’s viz. the National

Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental

Insurance Company Ltd. and the United India Insurance Company Ltd. GIC

incorporated as a company.

Present scenario in the insurance sector

• Insurance agent’s arc the main intermediaries in the Indian insurance market,

but with liberalization brokers will be an additional channel for selling

insurance products.

• Brokers are likely to play a major role in ensuring clients get insurance covers

tailor made to suit their requirements at good terms.

• Fast growing middle class of 300 million who can afford insurance.

• Increasing financial strength of middle class with disposable income.

• Narrowing gap between rural and urban populace in terms of access to

information and services.

• More and more entrepreneurs in traditional and modern business areas. •

Increase in number of double income families leading to lifestyles and attitude

changes • Growth of rural market is at 4 times of urban markets. • The potential

of the Indian insurance market is huge with current life insurance penetration

being only 1.9 of the GDP. • Insurance market is set to touch 25 billion by 2010

in India. (It was only 7.2 billion in 98-99 survey. At that time India's rank in

annual premium was 23rd for Life insurance and contribution in GDP was

merely 1.4%). Presently it is still lower then develops economy but increased to

2.61% of GDP in 2002. So immense opportunity can't be ignoring.

MAJOR PLAYERS IN THE INSURANCE INDUSTRY IN INDIA

• Life Insurance Corporation of India

Life Insurance Corporation of India (LIC) was established on 1 September 1956

to spread the message of life insurance in the country and mobilise peoples

savings for nation-building activities. LIC with its central office in Mumbai and

seven zonal offices at Mumbai, Calcutta, Delhi, Chennai, Hyderabad, Kanpur

and Bhopal, operates through 100 divisional offices in important cities and

2,048 branch offices. LIC has 5.59 lakh active agents spread over the country.

The Corporation also transacts business abroad and has offices in Fiji, Mauritius

and United Kingdom. LIC is associated with joint ventures abroad in the field of

insurance, namely, Ken-India Assurance Company Limited, Nairobi; United

Oriental Assurance Company Limited, Kuala Lumpur; and Life Insurance

Corporation (International), E.C. Bahrain. It has also entered into an agreement

with the Sun Life (UK) for marketing unit linked life insurance and pension

policies in U.K.

In 1995-96, LIC had a total income from premium and investments of $ 5

Billion while GIC recorded a net premium of $ 1.3 Billion. During the last 15

years, LIC's income grew at a healthy average of 10 per cent as against the

industry's 6.7 per cent growth in the rest of Asia (3.4 per cent in Europe, 1.4 per

cent in the US).

LIC has even provided insurance cover to five million people living below the

poverty line, with 50 per cent subsidy in the premium rates. LIC's claims

settlement ratio at 95 per cent and GIC's at 74 per cent are higher than that of

global average of 40 per cent. Compounded annual growth rate for Life

insurance business has been 19.22 per cent per annum

• General Insurance Corporation of India (GIC).

The general insurance industry in India was nationalized and a government

company known as General Insurance Corporation of India (GIC) was formed

by the Central Government in November 1972. With effect from 1 January

1973 the erstwhile 107 Indian and foreign insurers which were operating in the

country prior to nationalization, were grouped into four operating companies,

namely, (i) National Insurance Company Limited;(ii) New India Assurance

Company Limited; (iii) Oriental Insurance Company Limited; and (iv) United

India Insurance Company Limited. (However, with effect from Dec'2000, these

subsidiaries have been de-linked from the parent company and made as

independent insurance companies). All the above four subsidiaries of GIC

operate all over the country competing with one another and underwriting

various classes of general insurance business except for aviation insurance of

national airlines and crop insurance which is handled by the GIC. Besides the

domestic market, the industry is presently operating in 17 countries directly

through branches or agencies and in 14 countries through subsidiary and

associate companies.

IN ADDITION TO ABOVE STATE INSURERS THE FOLLOWING

HAVE BEEN PERMITTED TO ENTER INTO INSURANCE BUSINESS:

The introduction of private players in the industry has added to the colours in

the dull industry. The initiatives taken by the private players are very

competitive and have given immense competition to the on time monopoly of

the market LIC. Since the advent of the private players in the market the

industry has seen new and innovative steps taken by the players in this sector.

The new players have improved the service quality of the insurance. As a result

LIC down the years have seen the declining phase in its career. The market

share was distributed among the private players. Though LIC still holds the

75% of the insurance sector but the upcoming natures of these private players

are enough to give more competition to LIC in the near future. LIC market

share has decreased from 95% (2002-03) to 82 %( 2004-05).

I. HDFC Standard Life Insurance Company Ltd.

HDFC Standard Life Insurance Company Ltd. is one of India's leading

private life insurance companies, which offers a range of individual

and group insurance solutions. It is a joint venture between Housing

Development Finance Corporation Limited (HDFC Ltd.), India's

leading housing finance institution and The Standard Life Assurance

Company, a leading provider of financial services from the United

Kingdom. Their cumulative premium income, including the first year

premiums and renewal premiums is Rs. 672.3 for the financial year,

Apr-Nov 2005. They have managed to cover over 11, 00,000

individuals out of which over 3, 40,000 live have been covered

through our group business tie-ups.

II. Max New York Life Insurance Co. Ltd.

Max New York Life Insurance Company Limited is a joint venture

that brings together two large forces - Max India Limited, a multi-

business corporate, together with New York Life International, a

global expert in life insurance. With their various Products and Riders,

there are more than 400 product combinations to choose from. They

have a national presence with a network of 57 offices in 37 cities

across India.

III. ICICI Prudential Life Insurance Company Ltd.

ICICI Prudential Life Insurance Company is a joint venture between

ICICI Bank, a premier financial powerhouse and prudential plc, a

leading international financial services group headquartered in the

United Kingdom. ICICI Prudential was amongst the first private

sector insurance companies to begin operations in December 2000

after receiving approval from Insurance Regulatory Development

Authority (IRDA). The company has a network of about 56,000

advisors; as well as 7 bancassurance and 150 corporate agent tie-ups.

IV. Om Kotak Mahindra Life Insurance Co. Ltd.

Kotak Mahindra Old Mutual Life Insurance Ltd. is a joint venture

between Kotak Mahindra Bank Ltd. (KMBL), and Old Mutual plc.

V. Birla Sun Life Insurance Company Ltd .

Birla Sun Life Insurance Company is a joint venture between Aditya

Birla Group and Sun Life financial Services of Canada.

MARKET SHARE OF TOP 10 IN COMPANIES:

• LIC (Life Insurance Corporation of India) still remains the largest

life insurance company accounting for 64% market share. Its share,

however, has dropped from 74% a year before, mainly owing to entry

of private players with innovative products and better sales force.

• ICICI Prudential Life Insurance Co Ltd is the biggest private life

insurance company in India. It experienced growth of 58% in new

business premium, accounting for increase in market share to 8.93%

in 2009-10 from 6.97% in 2008-09 • Bajaj Allianz Life Insurance Co

Ltd has reported a growth of 52% and its market share went up to

6.98% in 2009-10 form 5.66% in 2008-09. The company ranked

second (after LIC) in number of policies sold in 2009-10, with total

market share of 7.36%.

• SBI Life Insurance Co Ltd in terms of new number of policies sold,

the company ranked 6th in 2009-10. New premium collection for the

company was Rs 4,792.66 crore in 2009-10, an increase of 87% over

last year. • Reliance Life Insurance Co Ltd Total collected was Rs

2,792.76 crore and its market share went up to 2.96% from 1.23% a

year back. It now ranks 5th in new business premium and 4th in

number of new policies sold in 2009-10.

• HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680

crore in FY 2009-10, registering a year-on-year th growth of 64%. Its

market share is 2.88% and it ranks 6 among the insurance companies

and 5th amongst the private players.

• Birla Sun Life Insurance Co Ltd market share of the company

increased from 1.22% to company moved to the 7th position in 2009-

10 from 8th a year 2.11% in 2009-10. The before, pushing down Max

New York Life insurance company.

• Max New York Life Insurance Co Ltd has reported growth of 73%

in 2009-10. Total new business generated was Rs 641.83 crore as

against Rs 387.51 crore. The company was pushed down to the 8th

position from 7th in 2009-10.

• Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2009-10,

the company reported growth of 80%, moving from the 11th position

to 9th. It captured a market share of 1.19% in 2009-10. Last year the

company doubled its branch network to 150 from 74.

• Aviva Life Insurance Company India Ltd ranking dropped to 10th in

2009-10 from 9th last year. It has presence in more than 3,000

locations across India via 221 branches and close to 40 bancassurance

partnerships. Aviva Life Insurance plans to increase its capital base by

Rs 344 crore. With the fresh investment, total paid-up capital of the

insurer would go up to Rs 1,348.8 crore.

RESEARCH METHODOLOGY

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.

RESEARCH DESIGN

Basically there are 3 types of approaches used during the 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 problem and the available information.

TYPES OF DATA USED:

Both primary and secondary data is used in the research.

Data Collection Methods

To conduct the market research the data is collected by two sources.

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, and Insurance Post.

• Internet

PRIMARY DATA

The primary sources of data refer to the first-hand information Primary data is collected during the survey with the help of Questionnaires.

Introduction of the Company

Company Profile:

COMPANY NAME: LIFE INSURANCE CORPORATION OF INDIA

ADDRESS: BHARTIYA JIVAN BIMA NIGAM HIGH

SCHOOL ROAD, SHRI DUNGARGARH,

BIKANER.

LOCATION: DUNGARGARH BIKANER (RAJASTHAN)

COMPANY OVERVIEW

VISION:

"A trans-nationally competitive financial conglomerate of significance to

societies and Pride of India."

MISSION:

"Explore and enhance the quality of life of people through financial security by

providing products and services of aspired attributes with competitive returns,

and by rendering resources for economic development."

OBJECTIVES:

Spread Life Insurance widely and in particular to the rural areas and to

the socially and economically backward classes with a view to reaching

all insurable persons in the country and providing them adequate

financial cover against death at a reasonable cost.

Maximize mobilization of people's savings by making insurance-linked

savings adequately attractive.

Bear in mind, in the investment of funds, the primary obligation to its

policyholders, whose money it holds in trust, without losing sight of the

interest of the community as a whole; the funds to be deployed to the best

advantage of the investors as well as the community as a whole, keeping

in view national priorities and obligations of attractive return.

Conduct business with utmost economy and with the full realization that

the moneys belong to the policyholders.

Act as trustees of the insured public in their individual and collective

capacities.

Meet the various life insurance needs of the community that would arise

in the changing social and economic environment.

Involve all people working in the Corporation to the best of their

capability in furthering the interests of the insured public by providing

efficient service with courtesy.

Promote amongst all agents and employees of the Corporation a sense of

participation, pride and job satisfaction through discharge of their duties

with dedication towards achievement of Corporate Objective.

Members On The Board Of The Corporation

Shri S. K. Roy ( Chairman, LIC of India )

Shri S.B. Mainak ( Managing Director, LIC of India )

Shri V K Sharma ( Managing Director, LIC of India )

Smt Usha Sangwan ( Managing Director, LIC of India)

Shri Rajiv Mehrishi ( Secretary, Department of Economic Affairs and Finance

Secretary, MOF, GOI) 

Dr. Hasmukh Adhia (Secretary, Financial Services, MOF, GOI) 

Shri Ashwani Kumar ( CMD, Dena Bank )

Smt Manjari Kackar (Non-Official Member) 

Shri Sanjay Kallapur (Non-Official Member)

Introduction to Life Insurance Corporation (LIC)

The Life Insurance Corporation of India popularly known as “LIC of India” was incorporated on September 1, 1956 by nationalizing 245 Indian as well as foreign companies. It was established 52 years ago with a view to provide an insurance cover against various risk in life. The luminaries who spearheaded this move at that time visualized an entity that will provide life insurance to Indians, especially the vast rural people, at an economical cost and channel the savings for the betterment of the nation. It is the largest life insurance company

in India and also the country’s largest investor. It is fully owned by the Government of India and headquarter is Mumbai. Today LIC function with 2048 fully computerized branch offices, 100 divisional offices, 7 Zonal offices and the corporate office. LIC’s wide area Network cover 100 divisional offices and connects all the branches through a Metro area network. LIC has tied up with some Banks and service providers to offer on- line premium collection facility in selected cities. LICs ECS and ATM premium payment facility is an addition to customer convenience. Apart from on-line kiosks and IVRS, info centres have been commissioned at Mumbai, Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, New Delhi, Pune and many other cities. With vision of providing easy access to its policyholders, LIC has launched its SATELLITE SAMPARK offices. The digitalized record of the satellite offices will facilitate anywhere to serve and other convenience in the future.

LIC has crossed many milestones and has set unprecedented performance records in various aspect of life insurance business. The same motives which inspired our forefathers to bring insurance into existence in this country inspire us at LIC to take this message of protection to light the lamps of security in as many homes as possible and to help the people in providing security to their families

LIC Operate All Over India

Products offered by LIC

Insurance Plans:

As individuals it is inherent to differ. Each individual's insurance needs and

requirements are different from that of the others. LIC's Insurance Plans are

policies that talk to you individually and give you the most suitable options that

can fit your requirement.

Endowment Plan

Lic's Single Premium Endowment Plan

Lic's New Endowment Plan

Lic's New Jeevan Anand

LIC's Jeevan Rakshak

LIC's Limited Premium Endowment Plan

LIC's Jeevan Lakshya

Money Back Plans

LIC's NEW MONEY BACK PLAN - 20 YEARS

LIC's NEW MONEY BACK PLAN - 25 YEARS

LIC's NEW BIMA BACHAT

LIC's NEW CHILDREN'S MONEY BACK PLAN

LIC's Jeevan Tarun

Term Assurance Plans

LIC's Anmol Jeevan II

LIC's Amulya Jeevan II

LIC's e-Term

LIC's NEW TERM ASSURANCE RIDER - (UIN: 512B210V01)

Pension Plans:

Pension Plans are Individual Plans that gaze into your future and foresee

financial stability during your old age. These policies are most suited for senior

citizens and those planning a secure future, so that you never give up on the best

things in life.

Jeevan Akshay-VI

LIC's New Jeevan Nidhi

Unit Plans:

Unit plans are investment plans for those who realise the worth of hard-earned money.

These plans help you see your savings yield rich benefits and help you save tax even if you

don't have consistent income.

LIC's NEW ENDOWMENT PLUS

Micro Insurance Plans:

LIC’s Micro Insurance Plans are not plans but opportunities that knock on your door once

in a lifetime. These plans are a perfect blend of insurance, investment and a lifetime of

happiness!.

LICs New Jeevan Mangal

Micro - Insurance Forms

LIC's Bhagya Lakshmi Plan

Group Schemes:

Group Insurance Scheme is life insurance protection to groups of people. This scheme is

ideal for employers, associations, societies etc. and allows you to enjoy group benefits at

really low costs.

LIC’s SINGLE PREMIUM GROUP INSURANCE

LIC's New Group Leave Encashment Plan

LIC's New Group Superannuation Cash Accumulation Plan

LIC's NEW ONE YEAR RENEWABLE GROUP TERM ASSURANCE

PLAN

LIC's NEW ONE YEAR RENEWABLE GROUP TERM ASSURANCE

PLAN

LIC's New Group Gratuity Cash Accumulation Plan

Withdrawn Plans:

Jivan Nischay

Market Plus 1

Wealth Plus

Profit Plus

Jeevan Aastha

Money Plus 1

Jeevan Varsha

Child Fortune PlusFortune Plus

Jeevan Saathi Plus

Health Plus Samridhi Plus

Pension Plus

Jeevan Nidhi

New Jeevan Dhara 1

SWOT analysis

The SWOT analysis involves an in depth study of the strength and weakness of

the provided organization and it also provides information to the promoter,

consultant, other agencies and helps in long term viability of the project.

Strength:

1. It is the oldest and most well experienced player having a Plan India

presence.

2. LIC has a strong and very well developed distribution network.

3. It is has consumer base and evolved as one of the most powerful brands of

the country.

4. It has a large product portfolio and claim settlement is easier to get.

5. It has the advantage of government guarantee is accompanied with it.

Weakness:

1. Its employees and other staff are lethargic and least motivated to render

prompt and sincere customer service.

2. After sales customer grievance redressal mechanism is inefficient.

3. Agents not taking into account the needs of people and promote policies

having high commissions only.

4. Very slow decision making and internal problems between top management

and lower cadre staff.

5. The top management or boss are mediocre and there is large scale corruption

in main office.

6. The development officers and agents who are the foundation pillars of LIC

are not provided with extra funds and powers to promote its products

aggressively.

Opportunity:

1. Emergency of a huge concern over average income consumers of market in

the country

2. People becoming more aware and demanding so there is scope for a whole lot

of innovative products.

3. Pension markets, health insurance and large real estate portfolio.

Threats:

1. There is too much internal discord.

2. Entry of new private players in industry.

3. Red-tapism is very much persistent.

Marketing of Insurance In India

Insurance is in a manner of speaking the last frontier in the financial sector to open. It is also a sector, which leads to benefits across the full spectrum, from the individual who now have wider choices, to the economy, which see increased savings, to the infrastructure sector, which can look forward to long term funding being available. In an under-insured economy, newer channels of distribution have to be utilized to intensify the reach of insurance both in urban and rural markets. This will create huge employment opportunities not only within insurance companies but also as agents and consultants of insurance

companies.

Marketing Mix Policies

Different companies can choose to position themselves differently and hence the Marketing Mix is different. However, there are certain common characteristics that one can cull out from the possible strategies that companies

adopt.

Product:

The development of flexible products to suit individual requirements is what will differentiate the winners from the also-rans. The key to success is in providing insurance solutions, not standardized insurance products. The concept of riders/optional benefits has already been a huge innovation brought about by the new players, which has led to customization of products for individual needs. However, companies may differentiate themselves on the basis of product segments that they choose to focus on and excel in.

Place:

Different companies may however choose different channels and different geographies to focus on. The channel options are - tied agency force, corporate agents and brokers and this is an area where different companies will make different choices. Many companies like HDFC Standard Life are focusing on all channels whereas companies like Max New York Life are focusing on the tied agency force only. Customer interface will be a key challenge for life insurance companies and includes every that interaction that the customer has with the company, such as sales, new business underwriting, policy servicing, premium payments, claim processing and so on. Technology can play a crucial role in delivering the highest standards of service set by the company and it will be imperative for any serious player to excel in all of these.

Price:

Price is a relevant differentiator only in two segments - pure term insurance and in pure annuities. Here too, service delivery and financial strength will need to be present at a minimum acceptable level for price to be a relevant differentiator. In case of savings oriented products, long-term returns generated are more relevant than just the price of the product. A focus on generating good investment performance and keeping a tight control on costs help in generating good long-term maturity value for customers. Norms have been laid down on all of these by IRDA and adhering to these while delivering good returns will be a challenge.

Promotion and Advertising:

The level of demand is latent and will have to be activated considerably. The market needs to be developed. Greater awareness of insurance and the need to have it as a protection tool rather than as a tax planning measure needs to be appreciated by the Indian people. Various communication tools including advertising, direct marketing and road shows contribute to all this and different companies take different approaches on these.

Process:

Cashless settlement:

One of the most defining and customer-friendly changes that we've seen in recent years relates to the way claims settlements are made. The advent of the third-party administrator (TPA) regime has facilitated the transition to the hugely convenient era of cashless settlement of health and auto insurance claims. TPAs are entities who process claims on behalf of insurers: the IRDA licenses them after it is satisfied that they have the financial strength, the trained manpower, the infrastructure and the skills to undertake this activity.

Likewise, with auto insurance, the TPA ties up with garages and authorized service centres for cashless settlement of auto insurance claims.

Lower premiums:

The spirit of competition and the broadening of the risk experience of insurance companies have contributed to a fall in premiums over the years. That's because, other things being equal, an insurer who covers the lives just of 10 people bears a higher risk than an insurer who covers the lives of, say, 100 people. Further, a broader base will provide greater efficiencies on costs such as distribution, management and claims. A broad basing of the mortality experience, therefore,

gives insurers the elbowroom to compete by lowering premiums, and that trend is expected to continue. Premium payment flexibility: Insurers have imparted certain flexibility to premium payment options in order to address this concern. For instance, one now have the option to pay your premiums upfront, which is then carried forward for the tenure of the policy. The yearly premiums are drawn from the initial corpus. Insurers have also introduced the concept of `automatic cover maintenance' to protect your policy from lapsing owing to your omission to pay your premium on time. Under this, in the event of your not paying the premium, the insurer dips into your investment account to the extent of the premium. Of course, this comes with an in-built drawback: your investment portion diminishes year on year to the extent of the amount paid to cover your risk.

Physical Evidence:

This can play a significant role for marketing in the Indian scenario. Since Internet users are comparatively lesser than countries such as US, the offline mode will be preferred in India. Although the distribution model is largely agent-based, wherever the customer is in contact with the company, this factor can play a significant role in luring the customer.

People:

The most important factor that materializes sales and maintains customer relationships on a long-term basis is this factor. No matter what distribution strategy a company adopts, customer relationship has to be taken care of in order to maintain the customer base on a long-term basis.

Distribution channels in Insurance Sector:-

An insurance cover is an intangible product evidenced by a written contract known as the 'policy'. Insurers market various insurance covers either directly or through various distribution

Channels—individual agents, corporate agents (including Bancassurance) and Brokers. The marketer in the distribution network is in direct interface with the prospect and the customer. Life insurance products are sold through individual agents and many of them have this as their only career occupation. General insurance products are sold through individual agents, corporate agents and brokers. Distribution channels such as agents are licensed by the IRDA. To get an agency license, one has to have certain minimum qualifications; practical training in insurance subjects and pass an examination conducted by the Insurance Institute of India. IRDA regulations on licensing of agents/brokers lay down the code of conduct for individual agents, corporate agents and brokers. A separate note on the code of conduct is appended to this note. Thus it is seen that the dos and don'ts for these intermediaries are given clearly at the point of sale as well as in the event of a claim. Service does not end with the customer receiving his document; it in fact only begins here. After sales service is as important or even more important — like when a refund has to be made or when a claim has to be made. One of the issues that is of great concern affecting professionalism in insurance activities is resorting rebating by intermediaries. Rebating is prohibited as per Section 41 of the Insurance Act, 1938 and the public are advised not to deal with intermediaries offering rebate of any kind. Rebating means a share of commission receivable by the agent/broker is given to the prospect/client. This is done to attract the client in the purchase of insurance contract by offering cash. Competition among agents/brokers is so cut-throat, some agents indulge in such unethical practices. Public are advised not to ask for any prohibited rebates in premium since commission payment to an agent is the only income for some to take care of their families. Similarly, agents are also advised not to indulge in such practices which could cause them loss of agency income.

Why there is need for alternate distribution channels?

1. To increase insurance penetration in the country.

2. To differentiate on basis of customer service. To retain and attract new customers so as to expand business

3. To increase insurance awareness and knowledge among people.

4. To satisfy the needs of more demanding customers.

5. To improve cost efficiency in insurance distribution.

6. What determines choice of distribution channel for an insurance company?

7. Where are the customers?

8. What is target customer profile?

9. Which product (linked, traditional, term etc.) can be sold through distribution channel?

10. Which channel provides best buying experience and value to target customer segment?

1 1. The customer preferences vary by market segment like geography, age, income, life style etc, and market characteristics change over time.

The emergence of new distribution channels:

There was a time when captive agents wrote the bulk of an insurance company's business. But increasingly people are buying insurance products from independent producers and institutional channels such as banks, broker-dealers, IFAs and wire houses. In a way, this is good news for insurance companies. Managing a captive agency force is an expensive business. Studies estimate that insurance companies invest anywhere between $65,000 and $200,000 in training each agent. This investment often does not deliver the desired return because there is a great deal of attrition among agents. Besides training, there are huge operational overheads attached to maintaining a captive force. Independent producers and institutional channels are likely to bring new efficiencies into the distribution framework and corner a larger percentage of the policies written. For instance, banks and large broker-dealers already have huge networks in place, existing relationships with customers and brand equity. If insurance companies are able to position themselves as preferred partners with these channels, they could quickly increase their market share and at the same time bring down their cost per business acquisition.

Types of Distribution Channels:

Focus on multiple distribution channels though a multi-channel strategy is better suited for the Indian market as well, it is important to keep in mind that this market is really a conglomeration of multiple markets. Each of the markets within this conglomeration requires a different approach. Apart from geographical spread the socio-cultural and economic segmentation of the market is very wide, exhibiting different traits and needs. Let us look at the various insurance distribution channels and the challenges faced by them from these perspectives.

1. Agents

Today's insurance agent has to know which product will appeal to the customer, and also know his competitor's products in the same space to be an effective salesman who can sell his company, the product, and himself to the customer. To the average customer, every new company is the same. Perceptions about the public sector companies are also cemented in his mind.

The new companies are looking for educated, aware individuals with marketing flair, an elite group who can be attracted only with high remuneration and the lure of a fashionable job, all of which may not be possible in this business with its price pressures and the complexity of selling insurance. Unable to attract this segment, they have started easing recruitment conditions as against the stringent norms they had earlier, thereby diluting the process.

While the public sector companies are able to attract agents, they continue to suffer from high attrition rates due to indiscriminate agent appointment. The most successful of these companies' tied agents are hardly of the elite variety of salesman. They are still the neighbourhood do good -- the postman, the school teacher, and the shopkeeper -- who know the people and are themselves known in the community. The challenge here is the lack of knowledge of the competitive market and the inability to do intelligent comparisons with the competitor's products. Educating and training these agents is a serious challenge liar the insurance company.

The relevance of this kind of agent continues even today as agents are sought or

contacted by families by word of mouth. Insurance companies are advised not

to follow the path of FMCG's/credit card companies, believing that a suited and

booted customer care consultant or financial consultant will necessarily appeal

to the average Indian customer.

This is the main distribution channel due to complexity of most insurance

products.

(Endowment, Whole of life, Unit-linked).

Social feature in the market is the considerable respect for age in Indian society

and a belief that an older person knows better. A very young up-market agent

who is a typical salesman may not appeal to a large segment of the middle class,

which is looking for a solid trustworthy person from whom they can buy

insurance. In this context it might be a rewarding exercise to recruit some older

people (who have taken VRS from banks and other financial institutions) to sell

some lines of products like pension plans, annuities etc.

Gender of agents is another relevant feature in the rural context that makes a

difference, especially for the female population. Women to whom the customers

can relate --e.g., nurses, gram sevikas -- can target the female segment of the

population more effectively. What is applicable for the rural women and

children health programs and population control programs is equally applicable

for insurance selling also. Max New York Life has adopted a version of this

strategy by appointing gram sahayaks to sell and service the rural customers.

With this kind of segmentation of intermediaries the challenge for the insurance

company lies in training and educating these people to become effective sales

persons. But this in no way diminishes the benefits of intermediary

segmentation.

Advantage —past experience as well as ability to deliver right advises.

Disadvantage- This channel can be expensive and it is a time consuming sales

process.

Product- Endowment, whole of life, Unit-linked, pension plans, annuities etc.

2 Banks:

Banks in India are all pervasive, especially the public sector banks. Can they also become the foremost channel for distribution of insurance? Perhaps in the future. The public sector banks, with their vast branch networks, are also plagued by a rigid unionized workforce and archaic systems, and lack vision of a broader service spectrum encompassing non-banking products. The newer banks are constrained by their lack of reach and meager branch strength. For banks to become a predominant channel for selling insurance will require a paradigm shift.

But the encouraging fact for insurance companies waiting for bancassurance to take off is that bank branches are here to stay, and customers do want them. A customer survey by Deloitte Consulting in the western developed markets found that for banking activities, customers place high importance on having convenient branches in their banking relationships. This is good news for the Indian banks with their many branches, and also makes a strong case for taking up bancassurance.

Product- The major lines of business that can be sold through bancassurance successfully are term insurance, creditor insurance, and non-life products like Property, Motor and Personal accident, Homeowners comprehensive insurance etc.

Process- (Distribution technique) In general distribution can be made through a quick and convenient sale such as during loan application process. However bank may act as a source of financial planning advice therefore, the use of highly trained advisor is very important. The bank staff at all levels to be able to serve the customer properly must also support this advisor. In no case should the advisor be marginalized as an "out-sider"from the bank's stand point. Simple straightforward product with the right amount of protection (e.g loan amount) sufficient. For Example the process may identify a need for life insurance, medical insurance as well as saving for education for child.

An example is SBI Life, has plan to take advantage from the brokers regulation to be put in place in order to move ahead aggressively with the bancassurance model. One of their major product lines is creditor insurance, and they have launched their first creditor insurance product, which covers the liabilities of the creditor in case of death of debtor. SBI Life is planning a similar product for home loan borrowers of State Bank of India.

This model has high relevance in the Indian context with far-flung villages where the insurance potential is in volume and not in high per capita premiums. Some advantages and disadvantages are:

Advantages of bancassurance Disadvantages of bancassurance

High credibility (as trustworthy caretakers of money) with the public

Economic viability for the banks to take up as bancassurance is a volume business.

A ready customer base Training of people and lack of vision and awareness.

Low cost channel for selling simple Vanilla products

Useful for selling only certain lines of products.

Extensive reach including the rural ‘pockets.

Initial investment in systems and processes and people training.

The strategy should be to use multiple banks according to their presence in different regions. Success would come by using bancassurance where it will be most effective —i.e., selling simple, cheap products to the masses at a low cost. This awareness is growing and is evident from the fact that nearly every insurance company has partnered with one or many banks to implement bancassurance.

3 Brokers

With the broker regulation 2002 come into effect this could be the next hope, especially for the urban market. This will be a new experience for the insurance customer, accustomed to brokers in financial services, real estate, and travel and tourism. For historical reasons the image that 'broker' carries in the minds of the customer is not very favourable. Thus the new breed of insurance brokers faces the challenge of establishing credibility.

The positives are that brokers in the urban arena can attract the elite and the upper middle class customer. Brokers represent the customer and will sell the products of more than