CHAPTER

ONE

INTRODUCTION

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CONTENTS OF CHAPTER ONE INTRODUCTION

PART (A) INTRODUCTION:

1.1. Overview

1.2. Strategic Management:

1.3. Types of Strategic Management: 1.3.1. Organisation Strategy

1.3.2. Financial Management Strategy

1.3.3. Production Strategy

1.3.4. Marketing Strategy

1.3.5. Business Strategy

1. 4. Business strategy: 1.4.1. Concept and Definitions of Business Strategy:

1.4.2. Business:

1.4.3. Strategy: 1.4.3.1. Strategy Structure

A. Suitability

B. Feasibility

C. Acceptability

1.4.4. Evolution of Business Strategy:

1.4.4.1: Budgetary Planning (1950-1960)

1.4.4.2: Corporate Planning (1960 – 1968)

1.4.4.3: Corporate Strategy (1968 – 1975)

1.4.4.4: Industry and Competitive Analysis (1975 – 1985)

1.4.4.5: Internal Sourcing of Competitive Advantage (1985 – 1995)

1.4.4.6: Strategic Innovation and Implementation (1995 – 2001)

1.4.4.7: Strategic Thinking & Simplification (2003 and Beyond)

1.5. Importance of Business Strategy:

1.6. Process of Business Strategy: 1.6.1. Mission of the Company

1.6.2. Vision of the Leader

1.6.3. Strategy to Fulfil Mission Based On the Vision

1.6.4. Strategy Direction Setting

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1.6.5. Operation Practical Daily Execution

1.6.6. Strategy Evaluation and Control

1.7. Contents of Business Strategy

1.7.1 Statement of Strategic Intent for the Business

1.7.2. Principal Findings of Strategic Assessment

1.7.3. Strategic Choices Made and Supporting Rationale

1.7.4. Statement of Goals and Objectives

1.7.5. Outline of Strategic Initiatives

1.8: Factors Affecting To Business Strategies:

1.8.1. Political Factors

1.8.2. Economical Factors

1.8.3. Societal Factors

1.8.4. Technological Factors

1.8.5. Environmental Factors

1.8.6. Legal Factors

1.9. Globalization: 1.9.1 Statement of Globalization in the World:

1.9.2. Statement of Globalization in India:

1.10. Regulatory Policies of the Government of India: 1947-1991

1.11. Insurance Regulatory and Development Authority (IRDA)

1.12. Indian Insurance and Establishment of Insurance Regulatory

1.13. Insurance Regulatory Authority (IRA)

1.14. The Principal Responsibility Of The IRDA Includes:

1.15. Missions and Objective of the Indian Regulatory and Development Authority

1.16. Duties, Powers and Functions of IRDA

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1.17. Scope of Insurance Regulatory and Development Authority:

1.18. Insurance Penetration and Density in India after Establishment of IRDA

1.19. Growth of New Policies after Establishment of IRDA

1.20. Main Effects of Establishment of IRDA

PART (B) LITERATURE REVIEW

1.21. Review of Literature

1.22. Literature Review of Globalisation

1.23. Review of Literature in Indian Insurance And Aboard

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CHAPTER ONE INTRODUCTION

A: INTRODUCTION

1.1. Overview

Business Strategy in current days becomes an important characteristic of all

organisations; it’s because of the rapid changing and grows in business environment

and market in the world. Increasing of the global alliances between companies and

entering to the global trade in recent years provides many opportunities and threat to

the organisations, therefore for overcome to those changes; the companies should

adapt the correct strategies toward those matters to survive in market and business in

the world. Therefore determining the good strategies is the essentially needed to any

company for achievement of the organisation’s objectives and goals; so preparing the

good strategy is determinate the organisation’s failure or success. Therefore improving

the management strategic skill of organisation’s strategy maker’s is an important thing

in the business environment.

Strategic management as a term and concept is not new. It was first used in the

1970’s, and it meant that a staff of strategic planners more or less thought up ‘strategic

programs’ and then tried to sell them to decision makers.1 In the 1990s, the view of

strategic planning and strategic management was much different. The concept of

strategic management builds on this definition of strategic planning, recognizing that

although planning is the prelude of strategic management, and it is insufficient if not

followed by the deployment and implementation of the plan and the evaluation of the

plan in action. Strategic management is a systems approach to identifying and making

1 . Stephen o. asaju, 2011, strategic management – a model for growth-driven denominational, leadership

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the necessary changes and measuring the organization’s performance as it moves

toward its vision.2

To succeed of any company in the future, managers of the companies at all

levels of a company should know strategic management skills. The world has become

such a complex and fast moving market place that company cannot be longer succeed,

if only a few managers or staff experts are involved in formulating and implementing

strategies. Strategic management is not a task limited to select “Strategists” or to a

single staff group of “Strategic Planners”, but rather, it is a set of managerial skills that

can and should be used throughout the organization, in a wide variety of functions.3

Strategic management as a process comprising three major types of interrelated

activities: strategic analysis, strategy formulation, and strategy implementation.

Basically, strategic analysis is the forethought required to develop an appropriate

strategy; strategy formulation is the process that transforms this analysis into a plan-

the intended strategy; and strategy implementation is the process of continually

adjusting and refining the plan as it is put into action. Managers should know both a

conceptual and practical appreciation of different levels of company strategy. 4

Managers should provide that how any company, in any sector, analyze their own

operating environment and strategic options to select the better strategies for company

or industry.

2 . Denise Lindsey Wells, 1998,Strategic Management for Senior Leaders, A Handbook for Implementation 3. J.S.Harrison and C.H.St.John, Foundations in Strategic Management, Thompson2005 Arthur A.Thompson,Jr. and A.J.Strickland III

4. Arthur A.Thompson,Jr. and A.J.Strickland III, Crafting and Executing Strategy: Concepts and Cases, 2007 and Michael A. Hitt, et al., Strategic Management: Competitiveness and Globalization (4/e), Thomson Learning, 2001

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1.2. Strategic Management:

The business strategy is a part of management strategy that related to policies

used by companies. So it is important part to success or failure of any company.

Therefore, if the policies of the industries chosen properly and accurately then it will

help to grow of the company otherwise if those strategies were improper it will fail the

mission of the company.

Figure 1.1 structure of strategic management

Strategic management consists of the analysis, decisions, and actions of an

organization undertake in order to create and sustain competitive advantages. This

definition captures two main elements that go to the heart of the field of strategic

management.5

First, the strategic management of an organization includes of three ongoing

processes: analysis, decisions, and actions. That is, strategic management is concerned

with the analysis of strategic goals (includes: vision, mission, and strategic objectives)

5. Dess, Gregory G., G.T Lumpkin and Marilyn L, Taylor, 2005, Strategic Management 2 edition, New York: McGraw-Hill Irwin.

Strategic Management

Analysis

ActionsDecisions

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along with the analysis of the internal and external environment of the organization.

Next step, leaders must make strategic decisions. These decisions, address two basic

questions: What industries should we compete in? How should we compete in those

industries? These questions also often involve an organization’s domestic as well as

international operations. And last step are the actions that must be taken. Industries

must take the necessary actions to implement their strategies. This requires leaders to

allocate the necessary resources and to design the organization to bring the intended

strategies to reality.6

Figure1.2. process of strategic management

Second, the essence of strategic management is study of why some firms

outperform others. Thus, managers need to determine how a firm should compete, and

then they can obtain advantages that are sustainable over a long period of time. It

means focusing on two fundamental questions: How should we compete in order to

create competitive advantages in the marketplace? Managers must also ask how to

make such advantages sustainable, instead of highly temporary, in the marketplace.

That is: How can we create competitive advantages in the marketplace that are not

only unique and valuable but also difficult for competitors to copy or substitute?7

Ideas that work are almost always copied by rivals immediately. In the 1980s,

American Airlines tried to establish a competitive advantage by introducing the

6. Dess, Gregory G., G.T Lumpkin and Marilyn L, Taylor, 2005, Strategic Management 2 edition, New York: McGraw-Hill Irwin 7 . Dess, Gregory G., G.T Lumpkin and Marilyn L, Taylor, 2005, Strategic Management 2 edition, New York: McGraw-Hill Irwin

Analysis Decisions Actions

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frequent flyer program. Within weeks, all the airlines did the same thing. Overnight,

instead of competitive advantage, frequent flyer programs became a necessary tool for

competitive parity, not competitive advantage. The challenge, therefore, is to create

competitive advantage that is sustainable.8

Michael Porter argues that sustainable competitive advantage cannot be

achieved through operational effectiveness alone. Most of the popular management

innovations of the last two decades: total quality, just in time, benchmarking, business

process reengineering, outsourcing all are about operational effectiveness. Operational

effectiveness means performing similar activities better than rivals. Each of these is

important, but none led to sustainable competitive advantage, for the simple reason

that everyone is doing them.9 Strategy is all about being different from everyone else.

Sustainable competitive advantage is possible only through performing different

activities from rivals or performing similar activities in different ways. Companies

such as Wal-Mart, Southwest Airlines, and IKEA have developed unique, internally

consistent, and difficult to imitate activity systems that have provided them with

sustained competitive advantage. A company with a good strategy must make clear

choices about what it wants to accomplish, Trying to do everything that your rivals do

eventually leads to mutually destructive price competition, not long-term advantage.

1. 3. Types of Strategic Management:

1.3.1. Organisation Strategy

The purpose of organization strategy is to enable the management to perform

useful work, by linking individuals, groups of individuals, firms, and groups of firms

8. Dess, Gregory G., G.T Lumpkin and Marilyn L, Taylor, 2005, Strategic Management 2 edition, New York: McGraw-Hill Irwin 9. Dess, Gregory G., G.T Lumpkin and Marilyn L, Taylor, 2005, Strategic Management 2 edition, New York: McGraw-Hill Irwin page 10

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into a coherent and cohesive system that will facilitate decision making and decision

implementation. Vernon describes the management task of organization as follows:

"Organizations, it is evident, are created to link the behaviour of individuals: to collect

and pool information, skills, or capital; to engage in related actions towards the

achievement of a set of goals; to monitor performance, initiate corrections, and define

new goals.10

1.3.2. Financial Management Strategy

The task of the international financial manager is to ensure a continuous flow

of funds among the various subsidiaries and between the subsidiaries and the

headquarters sufficient to carry out the organisation’s operations. Translating human

efforts and goals into financial plans is always a very difficult task; at the international

level it is inordinately complicated. Nevertheless, the job must be done and done well,

as firms and manager’s rise and fall on the basis of their performances, which are put

under the financial magnifying glass at the manager’s headquarters.11

1.3.3. Production Strategy

The decision to produce overseas is dictated by pressures from the external

environment as well as from within the organization itself. Most governments around

the globe would rather a foreign investor acquire a local factory or set up a new one

than open a sales office or a distribution centre, Factories create "visible" employment

and revenues, which can be used by politicians as evidence of the success of their

10. Dewan & Sudarshan, 1996, International Business Management, discovery publish house, New

Delhi - Page 67

11. Thomson South-Western, 01-Jan-1990, Global Business Strategy: A Systems Approach

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policies. At the micro level, the firm's evolution dictates that at some time it must seek

gains somewhere outside its immediate and original market. As we have seen,

products tend to follow a life cycle; a manager can postpone the decline of a product

by having it "migrate" to a new environment. Products that have reached the mature

stage at home can be "reborn" in a country where demand is sufficient to justify local

production.12

1.3.4. Marketing Strategy

Marketing is the process through which a company familiarizes potential

customers with its products and tries to get them to make purchases. A company can

sell only what customers will buy, so managers must continually ask themselves,

"What do customers want and what will customers buy?" Lesson multinational

managers have learned over years of trying to answer this question is that equating

customer wants with customer purchases is dangerous. 13 Marketing textbooks are

replete with anecdotal and documented incidents of marketing blunders. A mismatch

between what the firm thinks the customers want and what the customers actually buy

can be caused either by the firm's misjudging market trends (bad marketing research)

or by the customers' changing their buying habits for psychological, economic, or

political reasons. In either case, a mismatch between what the company offers and

what the customers buy results in large inventories of unwanted products and/ or large

losses of customers to competitors.

12. Azhar kazmi, 2008, strategic management and business policy, published by Tata McGraw-hill, new Delhi 13. Asterios G.kefalas, 2008, global business strategy: a system approach published by south western publishing co., Zurich, Switzerland

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1.3.5. Business Strategy

Business strategy is a field that related to the major objectives and emergent

initiatives taken by general managers on behalf of owners that is involving the

utilization of resources, to enhance the performance of company in its external

environments. Its includes the specifying the organisation’s mission, vision,

objectives, developing policies and plans, often in terms of projects and programs,

which are designed to achieve these objectives, and then allocating resources to

implement the policies and plans, projects and programs. A balanced scorecard is

often used to evaluate the overall performance of the business and its progress towards

objectives.14

Figure1.3 Types of the Management Strategy

1.4. Business Strategy:

Business strategy is a level of managerial activity under setting goals and over

tactics. It is input to many activities of management, Lack of clear business strategies

14. Aman Dheer, Hitesh Kapoor, 2001. Refining Human Reliability through Application of Strategic

Management, Proceedings published by International Journal of Computer Applications® (IJCA)

Types of Strategic

Management

Organisation strategy

Financial Management

StrategyProduction

StrategyMarketing Strategy

Business strategy

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complicates the tasks of management.15 In the other hand managers need to contribute

to the creation and evaluation of the business strategy, because the Business strategy

provides overall direction to the enterprise. Managers should consider the several

common methods and models to work on strategy, such as strength, weakness,

opportunity, and threat analysis, and technology classification.

Business strategy is closely related to the field of Organization Studies. In the

field of business administration it is useful to talk about "strategic alignment" between

the organization and its environment or strategic consistency.16 According to Arieu

(2007), "there is strategic consistency when the actions of an organization are

consistent with the expectations of management, and these in turn are with the market

and the context." Business strategy includes not only the management team but can

also include the Board of Directors and other stakeholders of the organization. It

depends on the organizational structure. 17 The objective of business strategy is to

create competitive advantages in the industry in which a firm operates with the

strategy which represents a way how firms arrives a decision (Porter, 1985).18

15. Ahmad Ghayoumi and Mehdi Ghayoumi, 2001, Developing of Intelligent Schools with a New

Model of Strategic Management System, World Academy of Science, and Technology 60 2011.

16. Teresa Mwuese Nmadu, September 2011 , STRENGTH, WEAKNESS, OPPORTUNITY AND

THREAT ANALYSIS (SWOTA), University of Jos, P.M.B.2084 Jos

17. Over view , http://en.wikipedia.org/wiki/Strategic_management

18. Porter, M.E. (1985) Competitive Advantage, Free Press, New York,

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1.4.1. Concept and Definitions of Business Strategy:

Some definitions of business strategy those are as follows:

"Business strategy is less a function of grandiose predictions than it is a result

of being able to respond rapidly to real changes as they occur. That's why strategy has

to be dynamic and anticipatory.19

Business strategy is what is used when an opportunity or a crisis occurs. A

business strategy brings together the resources available (talent, capital, and time) to

maximize the opportunity or minimize the crisis. Unlike a business plan which is done

on an annual basis, the business strategy plan is done when an event occurs. Since the

event usually occurs infrequently most CEOs (Chief Executive Officers) and business

owners have little experience or no background in creating the best business strategy

plan to deal with the event.20

Business strategy, according to Rapid Business Intelligence Success, is a

business plan that takes place long-term in order to help achieve a specific goal or

objective. The aim of a business strategy is to strengthen a particular business so that

its performance increases and, in turn, the business becomes more profitable. Without

a business strategy, a business has no guide to follow and has an increased risk of not

succeeding.21

19.Jack welches and john a. byrne 2002, straight from the gut, grand central publishing, page 390.

20. Azhar kazmi, 2008, strategic management and business policy, published by Tata McGraw-hill, new Delhi 21. Christian crowe, http://www.rapid-business-intelligence-success.com/definition-of-business-strategy.html

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From this definition we can argue that the business strategy is a planning and

formulation of strategies for better events managing of the enterprise and

organisations and also for overcomes of any critical situations. And a good strategy

also determines the organisations success of failure in the market.

The conceptual frame of reference of business strategy management is not easy

to understand. The concept of strategy as applied to business studies has only been

appearing with any great frequency since about 1960 (Ansoff, 1965; Chandler,

1962).22 Since that date, it has gained wide acceptance, although ‘‘strategy’’ remains

an ambiguous and elusive concept.

Its meaning in the military context, ‘‘the art of so moving and disposing troops

as to impose upon the enemy the place and time and conditions for the fighting

preferred by oneself (Oxford English Dictionary) does not seem to lend itself easily to

business organizations.

In particular, it is argued, because resources of business organizations are

largely fixed in place and time (Pennings, 1985, p. 2). It is difficult to dispose

resources in time and space. In business organization contexts ‘‘strategy’’ has

sometimes been defined with a certain degree of opportunism. Its definition often

remains implicit, open to intuitive interpretation. Explicit definitions of strategy are

nevertheless quite numerous. The content assigned to the concept varies from one

author to another, but the essence of the many definitions converges in the concept of

strategy as ‘‘the pattern in the stream of decisions and activities (Mintzberg &

22. Ha˚kan Ha˚kansson, Ivan Snehota, 2006, The network concept of business strategy, Department of

Business Studies, University of Uppsala, Sweden

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McHugh, 1985, p. 6).23 In this concept Hofer and Schendel said, that characterizes

match an organization achieves with its environment and that is determinant for the

attainment of its goals (Hofer & Schendel, 1978, p. 25).24 In another word Hakan

Hakansson, Ivan Snehota said that; the emphasis is on the pattern of activities which

has an impact on the achievement of the organizational goals in relation to its

environment (Hakan Hakansson, Ivan Snehota 2006).25

Langfield-smith argue that Business Strategy is concerned with how a business

achieves competitive advantage (Slater and Olson, 2001) and it has been suggested

that the management control system should be tailored explicitly to support the

strategy of the business to lead to superior performance (Langfield-Smith, 1997).26

Strategy management is seen as a process of adapting the pattern of activities

performed by the organization to the external environmental conditions in which the

organization operates. Managing strategy thus means managing the process whereby

the pattern of activities to be performed by the organization is conceived (i.e., strategy

formulation), and then creating the conditions necessary to ensure that these activities

are carried out (i.e., strategy implementation). It is often stressed that because the

environment is always changing, this has to be a continuous process.27

23 23. Henry Mintzberg and Mc Hugh, 1978, Strategy Formation in An Adhocracy 24. Hofer C W & Schendel, D. (1978), Strategy formulation, analytical concepts. St. Paul, MN: West

Publishing. Imai, K. (1987). Network industrial organization in Japan, Working paper prepared for the

workshop on ‘‘new issues in industrial economics’’. 7–10 June 1987, Case Western Reserve

University, Cleveland 25, 27. Ha˚kan Ha˚kansson, Ivan Snehota, 2006, The network concept of business strategy, Department

of Business Studies, University of Uppsala, Sweden 26. Langfield-Smith, K. (1997). Management Control Systems and Strategy: A Critical Review. Accounting, Organizations and Society, 22(2): 207-232.

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Three assumptions are generally made explicitly or implicitly about the nature

of the process of adapting to the environmental conditions in the current strategy

management doctrine. Firstly, the environment of an organization is faceless,

atomistic and beyond the influence or control of the organization. Secondly, the

strategy, the pattern of critical activities, of a business organization results from the

deployment of resources controlled hierarchically (contractually) by the organization.

Controlled resources are allocated in certain combinations, providing products or

services to be exchanged with the environment. Thirdly, environmental conditions

change continuously, so that frequent if not continuous adaptation is required of the

organization (Hakan Hakansson, Ivan Snehota 2006).28

1.4.2. Business:

Essentially, business can be defined as an activity performed for profit. The

difference between carrying on a business and a hobby is that a business has an

expectation of profit, is run in a systematic, continuous and regular manner, and has

ordinary commercial principles governing it. For example someone running a shop

and providing the good or service to the costumer for purpose of earning the profit is

doing a business.

We can define the business as an economic system in which goods and

services are exchanged for one another or money, on the basis of their perceived

worth. Every business requires some form of investment and a sufficient number of

customers to whom its output can be sold at profit on a consistent basis. We can also

28. Ha˚kan Ha˚kansson, Ivan Snehota, 2006, The network concept of business strategy, Department of

Business Studies, University of Uppsala, Sweden

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define as an organisation that providing the good and services to the people that they

needed to these products.29

1.4.3. Strategy:

Concept of strategy is concerned to understanding the process of business

strategy. The term ‘strategy’ is derived from a Greek word ‘strategos’, which means

general ship – the actual direction of military force, as distinct from the policy

governing its deployment. Literally, therefore, the word ‘strategy’ means the art of the

general. In business parlance, there is no definite meaning assigned to strategy.30 It is

often used loosely to mean a number of things. A strategy could be:

• A plan or course of action or a set of decision rules making a pattern or

creating a common thread;

• The pattern or common thread related to the organisation’s activities which are

derived from the policies, objectives and goals;

• It is related to those activities which move an organisation from its current

position to a desired future states;

• It is also concerned with the resources necessary for implementing a plan of

following a course of action;

• It is concerned to the strategic positioning of a firm, making trade-offs between

its different activities and creating a fit among these activities;

• And the planned or actual coordination of the firm’s major goals and action, in

time and space that continuously co-align the firm with its environment.

29.definition of business, http://www.businessdictionary.com/definition/business.html

30. Azhar kazmi, 2008, strategic management and business policy, published by Tata McGraw-hill, new Delhi page 10,

Page | 18

In simplified term, a strategy is the means to achieve the objective. In complex

term, it may possess all the characteristics mentioned above. With so many different

interpretations of a term, it is really difficult to understand what strategy means. This

is understandable. Yet, we need to consider all those interpretations at once. This

diversity of interpretations gives us valuable insight into what thinkers and writers

have proposed from time to time. With the wealth of understanding we have at our

command, thanks to intellectuals who have contributed to creating it, we can broaden

our thinking.

1.4.3.1. Strategy Structure

Strategic structure is a combination of three main processes which are as follows:

Performing a situation analysis, self evaluation and competitor analysis: both

internal and external; both micro environmental and macro-environmental. Concurrent

with this assessment, objectives are set. These objectives should be parallel to a time

line; some are in the short-term and others on the long-term. These objectives should,

in the light of the situation analysis, suggest a strategic plan. The plan provides the

details of how to achieve these objectives. Strategy evaluation measuring the

effectiveness of the organizational strategy, it's extremely important to conduct

a SWOT analysis to figure out the strengths, weaknesses, opportunities and threats

(both internal and external) of the entity in business. This may require taking certain

precautionary measures or even changing the entire strategy. In corporate strategy,

Johnson, Scholes and Whittington present a model in which strategic options are

evaluated against three key success criteria:

• Suitability (would it work?):

• Feasibility (can it be made to work?)

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• Acceptability (will they work it?)

Figure1.4. Structure of Strategy

A. Suitability

Suitability deals with the overall rationale of the strategy. The key point to

consider is whether the strategy would address the key strategic issues underlined by

the organisation's strategic position. Does it make economic sense? Would the

organization obtain economies of scale or economies of scope? Would it be suitable in

terms of environment and capabilities? Tools that can be used to evaluate suitability

include: Ranking strategic options, Decision trees

B. Feasibility

Feasibility is concerned with whether the resources required to implement the

strategy are available, can be developed or obtained. Resources include funding,

people, time and information. Tools that can be used to evaluate feasibility include:

cash flow analysis and forecasting, break-even analysis, resource deployment analysis

StrategyStructure

Suitability Feasibility Acceptability

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C. Acceptability

Acceptability is concerned with the expectations of the identified stakeholders

(mainly shareholders, employees and customers) with the expected performance out

comes, which can be return, risk and stakeholder reactions.

1.4.4. Evolution of Business Strategy:

While the considering of the concept of strategy we can be traced to military

ancestry, the business application has gained in popularity and following. The good

Business strategy can drives companies at all shapes and sizes, and ideally capturing

the differences to carry a company’s success. Rich Horwath in his study review the

seven phases of business strategy evolution and the two approaches to business

strategy can provide a foundation for creating sound strategy in the future. Those

phases are as follow:31

Table 1.1.Time Line in Evolution of Business Strategy

Steps Descriptions Time line

1 Budgetary Planning (1950-1960)

2 Corporate Planning (1960-1968)

3 Corporate Strategy (1968-1975)

4 Industry and Competitive Analysis (1975-1985)

5 Internal Sourcing of Competitive Advantage (1985-1995)

6 Strategic Innovation and Implementation (1995 -2001)

7 Strategic Thinking & Simplification (2003 and beyond)

31. Rich Horwath, 2006, the evolution of business strategies, strategy thinking institute

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1.4.4.1: Budgetary Planning (1950-1960)

One of the first individuals credited with developing and implementing

strategy in the business landscape is Alfred Sloan, head of General Motors from 1923

to 1955. The other individual who worked around the concept of business strategy is

management icon Peter Drucker. Drucker published Concepts of the Corporation in

1946 in which he examined Sloan’s General Motors, General Electric, IBM and Sears,

Roebuck. The findings of his studies concluded that the most successful companies

were centralized and good at goal setting. Drucker was also the first to see that the

purpose of business is external in creating and satisfying customer needs. While

Drucker moved the day’s discussion closer to strategy, the period of the 1950’s is

marked by budgetary planning and control. Financial control was created through

operating budgets, which also took into account investment planning and project

appraisal.32

1.4.4.2: Corporate Planning (1960 – 1968)

In the 1960’s represent the acknowledged entrance of strategy into the business

community and the popularization of corporate planning. Alfred Chandler Jr. was the

first academic researcher of business strategy. He used an examination of prominent

companies (du Pont, General Motors, Standard Oil and Sears, Roebuck) to illustrate

his premises of business strategy. Chandler offers one of the first definitions of

strategy in the business context:

Business strategy is the determination of long-term goals and objectives of an

enterprise and the adoption of courses of action and the allocation of resources

32. Rich Horwath, 2006, the evolution of business strategies, strategy thinking institute

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necessary for carrying out those goals. Chandler advocated that firms should first

determine their strategy and then develop their structure to support the strategy. In

turn, he believed that large corporation’s best chances for success resided in their

move to decentralization. Chandler offers three basic business strategies:

1. Horizontal: Implies growth in markets which can be local, national or multinational.

2. Vertical: Implies absorbing functions that are either backwards toward suppliers or

forwards toward ultimate consumers.

3. Diversification: Decision to enter into related or unrelated markets.

These three business strategies form his thesis: Horizontal strategy produces a

unitary structure, while a vertical strategy produces a functional structure. The

decision to enter into related or unrelated product lines produces the multidivisional

structure.33

1.4.4.3: Corporate Strategy (1968 – 1975)

Bruce Henderson founded the Boston Consulting Group, a management

consulting firm, in 1963. One of the contributions of Henderson’s group is the

Growth/Share Matrix, which assesses the market growth rate in relation to a firm’s

relative market share. This accelerated adoption in the 1970’s of portfolio planning, in

which firm’s literally plotted their products/business units in these matrices to evaluate

their respective contributions. Corporate strategy’s adoption in the 1970’s was largely

influenced by portfolio planning and large companies need to establish synergy

between the business units and corporate parent. The 1970’s also witnessed the

33. Rich Horwath, 2006, the evolution of business strategies, strategy thinking institute

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beginning of the mammoth PIMS (Profit Impact of Market Strategy) study in an

attempt to understand the correlation between performance and strategy. Today, the

database for the study includes over 600 companies contributing information,

documenting the strategies and financial results of nearly 3,000 business units for

periods between 2-15 years. 34

1.4.4.4: Industry and Competitive Analysis (1975 – 1985)

These six findings led experts to believe that the structure of the industries in

which the firm competes and the competitive position of the firm’s businesses within

these industries are the key determinants of performance. These final two points lead

into the major focus for the period of the late 1970’s to the early 1980’s which is the

analysis of industry and competition. Firms began taking a closer look at their choice

of industries, their markets, segments and positioning within those segments. Putting a

depth charge into this field of thought was Harvard Business School Professor

Michael Porter, writing perhaps the most influential book on business strategy

entitled, Competitive Strategy, in 1980.

1.4.4.5: Internal Sourcing of Competitive Advantage (1985 – 1995)

The microeconomic perspective on strategy was followed in the late 1980’s

through the early 1990’s with a focus on the quest for competitive advantage.

However, the path for seeking competitive advantage changed, to one seeking sources

of competitive advantage within the firm. Embodying this shift in thinking was the

work by Gary Hamel and C.K. Prahalad entitled, competing for the Future, published

in 1994. Hamel and Prahalad introduced the term core competencies to represent the

34. Rich Horwath, 2006, the evolution of business strategies, strategy thinking institute

Page | 24

sources of competitive advantage inherent in the firm. They define core competencies

as a bundle of skills and technologies that enables a company to provide a particular

benefit to customers, representing the sum of learning across individual skill sets and

individual organizational units. The sourcing of competitive advantage from within

the firm follows the Resource-Based Theory, which focuses on the firm’ s assets and

capabilities and how these internal strengths provide advantage over rivals.35

1.4.4.6: Strategic Innovation and Implementation (1995 – 2001)

Strategic innovation and implementation have dominated the period of the mid

1990’s through 2001. The importance of strategic innovation has been exacerbated by

the application of technology to the business process. Companies that once aspired to

securing sustainable competitive advantage have realized that it no longer exists. The

goal now is to exploit dynamic sources of competitive advantage that can be leveraged

to finance the next wave of innovation. The other facet of business strategy that has

received significant attention recently is the implementation process. Too many

companies have realized all too well that even the most wonderfully conceived

strategy is irrelevant if not properly implemented.

1.4.4.7: Strategic Thinking & Simplification (2003 and beyond)

The emphasis on execution, objectives and metrics has left many business

practitioners wondering, “How do I go about creating strategy in the first place?”

There has been very little in the way of instruction on the keys to strategic thinking

and moving from strategy on an annual basis to strategy as a daily practice. The

primary problem is that many companies view strategic thinking and strategic

35. Rich Horwath, 2006, the evolution of business strategies, strategy thinking institute

Page | 25

planning as one in the same, and has failed to allocate sufficient time to the two

distinct activities.

The shifting emphasis for strategy will now move toward strategic thinking

and simplification: people learning the tangible skills of strategic thinking and using

them in simple frameworks that allow strategy development to be an on-going, daily

occurrence rather than an annual trek to the Mecca of strategy gods resting high above

the corporate hierarchy. 36

1.5. Importance of Business Strategy:

The Business Strategy is one that holds ambiguity and vast debate, partly

because of a lack of education or information, but perhaps more significantly because

of its extensive depth and multiple perspectives. It is sometimes difficult to know

where to start in strategizing a company and its outcome can often quite simply leads

to success or failure. Every organization should have a strategy, but it is different from

one organisation to another one for example, some have multiple strategies, and some

may even have a strategy and not know about it. Either way, having a well-defined

and planned business strategy nursed by effective communication can create immense

success and profitability.

As the business strategy is play’s the important role in success or failure of any

organisation considering the business strategy is very important. Creating a good

strategy is important to the organisation. This task is not belongs only to tap managers

or a special strategic planner group but it is related to the all the members of an

36. Rich Horwath, 2006, the evolution of business strategies, strategy thinking institute

Page | 26

organisation. Therefore having the good strategies is important part of the success of

the organisation.37

1.6. Process of Business Strategy:

Strategy formulation is the development of long range plans for the effective

management of environmental opportunities and threats in light of corporate strengths

and weaknesses. It includes defining the corporate mission, specifying achievable

objectives, developing strategies and setting policy guidelines. It begins with

situational analysis. The simplest way is to analyze through is SWOT analysis. This is

the method to analyze the strengths and weakness in order to utilize the threat and to

overcome the threat. SWOT is the acronym for Strength, Weakness, Opportunities and

Threats.38 In figure 1.5 the process of business strategy is given;

Figure1.5. Process in Business Strategy

37. Rich Horwath, 2006, the evolution of business strategies, strategy thinking institute 38.David Hunger and Thomas L Wheelen,2000, management strategy, Essentials of Strategic Management ,

Mission of the Company

vision of the Leader

Strategy to Fulfil Mission Based on the

Vision

Strategy Direction Setting

Operation Practical Daily

Execution

Strategy Evaluation and

Control

Page | 27

The Process of Business Strategy is as Follow:

1.6.1. Mission of the Company

An organization’s mission is the purpose or the reason for the organization

existence. A well conceived mission statement defines the fundamental, unique

purpose that sets a company apart from other firms of its type and identifies the scope

of the company's operation in terms of the products offered and markets served. A

mission statement may be defined narrowly or broadly in scope. A broadly defined

mission statement keeps the company from restricting itself to one field or product

line, but it fails to clearly identify what it makes or which product/market it plans to

emphasize. A narrow mission very clearly states the organizations primary business,

but it may limit the scope of the firm's activities in terms of product or service offered,

the technology used and the market served.39

1.6.2. Vision of the Leader

Vision is dreamt of more than it is articulated. The vision is a description of

something (an organisation, a corporate culture, a business, a technology, an activity)

in future. Therefore the leader of any organisation after face with a mission should

have a vision towards that problem. The leader’s vision should be:40

• an organisational charter of core values and principles,

• ultimate source of priorities, plans, goals

• A puller (not pusher) in to future

39.David Hunger and Thomas L Wheelen,2000, management strategy, Essentials of Strategic

Management , 40 . M. Golusin, 2007, The Role Of Strategic Planning In Waste Management, Faculty Of

Entrepreneurial Management, Novi Sad, Serbia

Page | 28

• A determination and publication of what makes the company unique

• A declaration of independence

The leader’s vision should not be:

• A high concept statement, motto or literature or an advertising slogan

• A strategy or plan and from the top

• A history of companies proud past

• A soft business issue

1.6.3. Strategy to Fulfil Mission Based on the Vision

Objectives are the end result of planned activity. They state what is to be

accomplished by when and should be quantified if possible. The achievement of

corporate objective should result in the fulfilment of a corporate mission. In contrast

to an objective, a goal is an open ended statement of what one wants to accomplish

with no quantification of what is to be achieved and no time criterion for completion.

The areas in which a company might establish its goals and objective are profitability,

growth, shareholder's wealth, utilization of resources etc.41

1.6.4. Strategy Direction Setting

It describes a company's overall direction in terms of its general attitude

towards growth and management of its various business and product lines. Corporate

strategy deals with three key issues facing the corporation as a whole.42

41. Thomas L. Wheelen, 2004,Concepts in Strategic Management and Business Policy, page 11

42. M.Thenmozhi, Strategy Formulation : An Overview, Indian Institute of Technology Madras

Page | 29

A. Directional Strategy – the firm’s overall orientation towards growth,

stability and retrenchment. The two basic growth strategies are concentration and

diversification. The growth of a company could be achieved through merger,

acquisition, takeover, joint ventures and strategic alliances. Turnaround, divestment

and liquidation are the various types of retrenchment strategy.

B. Portfolio Analysis – The industries or markets in which the firm

competes through its products and business units. In portfolio analysis, top

management views its product lines and business units as a series of portfolio

investment and constantly keep analyzing for a profitable return. Two of the most

popular strategies are the BCG Growth Share matrix and GE business screen

C. Parenting Strategy – the manner in which the management

coordinates activities and transfers resources and cultivate capabilities among product

lines and business units.

1.6.5. Operation Practical Daily Execution

Strategy implementation is the process by which strategies and policies are put

in to action through the development of programs. This might involve changes within

the overall culture, structure and/ or management system of the entire organization.

Strategies are implemented through a set of programs, budgets and procedures.43

1.6.6. Strategy Evaluation and Control

Evaluation and control is the process in which corporate activities and

performance can be compared with desired performance. Managers at all levels use

43. http://en.wikipedia.org/wiki/Strategic_management

Page | 30

the clear, prompt, unbiased information from the people below the corporation's

hierarchy to take corrective action and resolve problems. It can also pinpoint

weaknesses in previously implemented strategic plans and this stimulates the control

of performance. The evaluation and the control of performance complete the strategic

management model. Based on the performance results, management may need to

make adjustments in its strategy formulation or implementation or both.44

1.7. Contents of Business Strategy

The contents for business strategy could be too long. But it is possible to read

the documents and find it easy to understand. However, the document should give

clear answers to what are the contents of the business strategy. It would be wrong to

be too prescriptive in terms of the format for a business strategy but the five headings

below are likely to be included:45

1.7.1 Statement of Strategic Intent for the Business

This should describe in general terms the business as it expects to become in

the future. It should outline in practical and tangible terms how this future is different

from the present. Clearly, the strategic intent for the business has to relate to the

strategic intent for the enterprise as a whole and be coherent with any other corporate

strategies.

1.7.2. Principal Findings of Strategic Assessment

Typically, the strategic assessment will have involved detailed analyses of both

the external business environment and the capabilities of the enterprise. Only the most

important or most surprising results need to be recorded. However, this section should

44. M.Thenmozhi, Strategy Formulation : An Overview, Indian Institute of Technology Madras 45 . www.oup.com/uk/orc/bin/9780198782292/ch14.pdf

Page | 31

provide a reasoned assessment of current status and future prospects of the business if

present strategies were to be continued. This then makes the case for change in

business terms.

1.7.3. Strategic Choices Made and Supporting Rationale

This section has to summarize the options that have been identified and the

choices made. The reasons for preferring one direction to another have to be spelt out

and must be persuasive. The rationale for strategic choice should be based on a

rigorous analysis of the basis of competitive advantage and how that will relate to the

demonstrable capabilities of the enterprise. It is also desirable to show how the choice

matches the strategic intent of the enterprise as a whole.

1.7.4. Statement of Goals and Objectives

The overall goal is to realize the strategic intent of the business. More

measurable supporting goals are also very valuable. Objectives should not all be

financial. It is important that some objectives set measures that relate to the

fundamental nature of the business and to meeting customer and stakeholder needs.

1.7.5. Outline of Strategic Initiatives

This section will outline the principal actions to be undertaken to make the

strategy happen.

1.8: Factors Affecting To Business Strategies:

The factors that are affecting to shape the business strategies are into six

categories those are as follow: Political Factors, Economic Factors, Societal Factors,

Technological Factors, Environmental Factors, and Legal Factors.

Page | 32

1.8.1. Political Factors

Changing in the government such as new prime minister or changing in

government policies is affecting to the company’s business strategies.

1.8.2. Economical Factors

Economical factors that affect the business strategies may include the

spending behaviour of consumers, interest or exchange rates, as well as climate

of business investment. A stable market economy contributes to the incremental

business investments. For instance, the Chinese government had been reluctant to float

its currency in accordance to market value. This is due to the reason of lower currency

rate attracts investor to invest. Lower currency rate yields low capital investments and

low labour costs.

1.8.3. Societal Factors

Social factors is effecting to business strategy such as buying behaviour,

lifestyle improvements, demographic changes, and culture of the society in the market

also. These factors have to be paid attention to as it can be used to form strategic

positioning to capture niche markets based on different consumer preference.

1.8.4. Technological Factors

Technological advancement means more extensive line of product variety, a

new approach to research and development activity. Companies that have proprietary

technology will have an edge over other rivals.

Page | 33

1.8.5. Environmental Factors

Nowadays, rising awareness of eco-knowledge had move the global trend

in business operation towards minimizing pollution and the effects of climate change.

The implication of environmental factors causes many global businesses to adopt

“Green Policies”.

1.8.6. Legal Factors

Lastly, the legal factors may include new legislation such as product licensing,

new business contract agreement terms, and new contraband items.

1.9. Globalization:

Name of globalization is for the process of increasing the connectivity and

interdependence of the world's markets and businesses. This process has speeded up

dramatically in the last two decades as technological advances make it easier for

people to travel, communicate, and do business internationally. Two major recent

driving forces are advances in telecommunication infra structure and the rise of the

internet. In general, as economies become more connected to other economies, they

have increased opportunity but also increased competition.46

Some other definitions of globalisation are as follow, Joseph Stiglitz, an

economist and winner of the Nobel Prize defines Globalization as follows:

Globalization "is the closer integration of the countries and peoples of the world

...brought about by the enormous reduction of costs of transportation and

communication, and the breaking down of artificial barriers to the flows of goods,

46.definition and meaning of globalisation, http://www.investorwords.com/2182/globalization.html

Page | 34

services, capital, knowledge, and people across borders." (From Globalization and its

Discontents)47

Thomas Friedman, political reporter for the New York Times, defines

globalization in terms of paradigm shifts. We can compare the contemporary world to

the world of the cold war prior to the fall of communism (1989). The following is a

partial list of contrasts derived from Thomas Friedman’s book the Lexus and the olive

tree.48

Globalisation has caused dramatic changes to business practices around the

world. “Globalisation” refers to the process of increasing social and cultural inter-

connectedness, political interdependence, economic, financial and market integrations

that are driven by advance in communication and transportation technologies, and

trade liberalisation. The term globalisation has invaded the mind of every successful

businessman or manager and the concept of Global Village is a common issue in the

modern business world.

47. globalisations’ definition, http://www.mindtools.net/GlobCourse/gdef.shtml

Page | 35

Globalisation is the new buzzword that has come to dominate the world since

the nineties of the last century with the end of the cold war and the break-up of the

former Soviet Union and the global trend towards the rolling ball. Globalisation has

brought in new opportunities to developing countries. Greater access to developed

country markets and technology transfer hold out promise improved productivity and

higher living standard. But globalisation has also thrown up new challenges like

growing inequality across and within nations, volatility in financial market and

environmental deteriorations. Another negative aspect of globalisation is that a great

majority of developing countries remain removed from the process. Till the nineties

the process of globalisation of the Indian economy was constrained by the barriers to

trade and investment liberalisation of trade, investment and financial flows initiated in

the nineties has progressively lowered the barriers to competition and hastened the

pace of globalisation. 49

Globalization has a major impact on the management in developing countries

including India. It has led to homogenization and convergence in organization

strategies, structures and processes as well as in consumer choice. With accelerating

globalization, organizations have had to change and new trends have set in even in the

management. Globalization has led to changes in organization design and organization

structures are leaner thus improving efficiency but having a negative impact on staff

numbers which have had to be reduced. This means employees have been retrenched

in many sectors in order for those organizations to gain competitive advantage. The

non-core jobs have been outsourced which has led to an increase in independent

49. Chandrasekaran Balakrishnan, 2004, Impact of Globalisation on Developing Countries and India,

http://economics.about.com/od/globalizationtrade/l/aaglobalization.htm

Page | 36

contractors to service industries. However the homogeneity that results from

globalization has had a major effect in developing countries because of brain drain.

Globalization can therefore be said to have had a phenomenal impact on a developing

economy like India which is both positive and negative site.

1.9.1 Statement of Globalization in the World:

Globalization is profoundly affecting the lives of people around the world. It is

a set of processes in which capital, technology, people, goods, and information move

relentlessly across the inherited map of political boundaries and through which the

interdependence of societies over vast distances and ever-shortening time frames has

been intensified. This compression of time and space across a broad range of human

activities has been made possible by the dramatic decline in the costs of

transportation, communication, and production, and by changes in the formal rules

that once established substantial (though never entirely impermeable) barriers against

flows across borders.50

1.9.2. Statement of Globalization in India:

Table 1.2, Statement of globalization in India

steps Description Timing 1 Regulatory policies of the government of India (GOI): 1947-1991 2 Industrial Policy, 1948 3 Industrial Policy, 1956 4 Foreign Exchange Regulation Act (FERA), 1973 5 Industrial Policy, 1980 6 Industrial Licensing Policy, Start of Globalisation 1991

50. Edited by John O'Loughlin, Lynn Staeheli, Edward Greenberg, 2004, Globalization and Its Outcomes

Page | 37

1.10. Regulatory Policies of the Government of India (GOI):1947-1991

Tracing the history of the policies of the Government of India on international

trade and investment reveals much on the globalization process. The early policies

until around 1961 were quite liberal on trade and investment. Subsequently, from

1962 to 1977, the trade and investment policies were mainly driven by the needs of

local industry and economy. From 1978, the policies were clearly towards

liberalization of the economy, though they were implemented in small steps- The year

1991, however, was a major watershed in the liberalization and privatization process

in India. The analysis of the major policies of GOI during 1947-1991 reveals much of

these processes.51

Industrial Policy, 1948; this policy was the foundation of industrial development in

independent India. While emphasizing on public investment in the industrial

infrastructure of the country, the GOI looked for foreign investments in the other

sectors of the economy. Foreign investors were assured of unrestricted remittances of

profits and dividends and foreign companies were treated on equal terms with the

Indian companies. The Foreign Investment Statement (1949) was favourable to the

foreign companies in India.52

Industrial Policy, 1956: This policy reserved a few industries, based on the

strategic nature of the industries, for public investments and the foreign companies

were restricted from investing in these industries. However, the policy did not

distinguish between the local companies and the foreign companies on other accounts.

Following the foreign currency crisis in 1957-58, the Government of India offered the

51, Amar K J R Nayak, Kalyan Chakravarti and Prabina Rajib,, Globalization Process in India: A

Historical Perspective Since Independence, 1947, South Asian Journal Of Management

Page | 38

foreign companies, several incentives, concessions and relaxed restriction on entry in

some industries. Both the policy of 1948 and 1956 were such that foreign investments

into India in this period steadily increased until 1961.53

Foreign Exchange Regulation Act (FERA), 1973: According to Section (2)

of FERA, 1973, all foreign companies that owned more than 40% equity in their

Indian operations were required to get the permission of Reserve Bank of India to

continue their business in India. The law required the foreign firms to include local

participation in the equity of foreign companies in India. Depending on the nature of

business, some companies were allowed to own 51% of equity and others were

allowed to own 74% of equity. With this act, foreign companies were treated on par

with Monopolies and Restrictive Trade Practices (MRTP) companies. The foreign

companies also had to meet the export obligations under Industrial Licensing

Guidelines, 1970 for MRTP companies.54

Industrial Policy, 1980: Although, the Industrial Policy Statement, 1977 had

announced the relaxation in remittances of profits, royalties, dividends and

repatriation of capital of foreign companies, the Industrial Policy 1980 set the tone of

liberalization in a slow but steady pace. Industrial licensing was streamlined and made

easier. Provisions in MRTP Acts were modified to simplify business transactions.

Export-Import norms were also changed. The GOI - transferred most of the items that

were earlier imported through State Trading Corporation to Open General License

(OGL), wherein these imports and exports could be routed through private firms.

53, 53, Amar K J R Nayak, Kalyan Chakravarti and Prabina Rajib,, Globalization Process in India: A

Historical Perspective Since Independence, 1947, South Asian Journal Of Management

Page | 39

Increasing the number of items in the OGL meant a greater liberalization on the export

and import of items to and from India.

Industrial Licensing Policy, 1991: The GOI was in trouble by 1990. Its

foreign exchange reserve had reached to rock bottom. International Monetary Fund

and World Bank agreed to provide loans on the conditions that India make major

changes to liberalize trade and investments in India. The domestic pressure to meet the

imports of essential commodities and the external pressure to liberalize forced the

government to change its stance of protecting the domestic industries. That is how the

Industrial Licensing Policy, 1991 came into place. Industrial licensing was abolished

except for 18 industries. FDI up to 51% were allowed in 34 high priority industries

and the concept of phased manufacturing was removed. Custom duties on the imports

were to be removed in a phased manner.

1.11. Insurance Regulatory and Development Authority (IRDA)

The IRA Bill renamed as Insurance Regulatory and Development Authority

Bill, 1998 was passed by the Lok Sabha on December 2, 1999 and subsequently by the

Rajya Sabha on December 7, 1999, and notified on December 29, 1999. The

enactment of the Insurance Regulatory and Development Authority Act, 1999 ended

the State monopoly of the sector. The IRDA, as an autonomous body, was constituted

on April 19, 1999 vide Government of India notification no. 277. The Act vested the

IRDA with the 98responsibility of regulating and developing the business of insurance

and reinsurance in India. (Narayanan, 2006)

Insurance Regulatory and Development Authority (IRDA) is an autonomous

apex statutory body which regulates and develops the insurance industry under

Government of India in order to protect the interests of the policyholders and to

Page | 40

regulate, promote and ensure orderly growth of the insurance industry. It is basically a

ten members’ team comprising of a Chairman, five full time members and four part-

time members, all appointed by Government of India. This organization came into

being in 1999 after the bill of IRDA was passed in the Indian parliament. It was

constituted by a Parliament of India act called Insurance Regulatory and Development

Authority Act, 1999 and duly passed by the Government of India. The agency

operates its headquarters at Hyderabad, Andhra Pradesh where it shifted from Delhi in

2001.

1.12. Indian Insurance and Establishment of Insurance Regulatory

While considering the implications of opening up the insurance industry to

competition, the Malhotra committee also examined the role of the controller of

insurance, and the need for a regulatory body for the insurance sector.

The controller of insurance was vested with wide powers under the Indian

insurance act 1938. With the progressive nationalisation of the life and general

insurance sector, the power of the controller of insurance were reduced as many of the

functions were transferred to the Nationalised companies themselves or, wherever

necessary, the government itself started exercising the power directly. The committee

felt that this dispensation was flawed even in the context of a state monopoly and

would have to change in a competitive environment. The committee suggested

restoring the office of the controller of insurance to its full statutory power and

segregation it from the ministry of finance. The committee had also suggested setting

up an Insurance Regulatory Authority as a multi-member body and as a highly

professional and compact organisation with adequate IT support, similar to the

Security and Exchange Board of India (SEBI). With this in view, the Committee

Page | 41

proposed the establishment of a powerful and autonomous regulatory body on the

lines of SEBI. The Committee also further stated that the regulatory authority should

have full functional autonomy and operational flexibility to discharge its functions in a

free and fair manner (Narayanan, 2006).

1.13. Insurance Regulatory Authority (IRA)

Based on the recommendation of committee, the government constituted an

interim authority, called Insurance Regulatory Authority, to look in implementation

aspects of the report. The authority comprised a government nominee and a member

each from life and general insurance industries. The primary task of the authority was

to frame regulations on its functioning and act as insurance regulator. Subsequently,

based on the recommendation of a standing committee, the authority was vested with

the responsibility of developing insurance business in India and also train and develop

professionals and intermediaries for the purpose. In August 1997, when the Insurance

Regulatory Authority Bill was piloted in the Lok Sabha, it could not be passed. The

Bill was strongly criticized and denounced and had to be withdrawn. (Narayanan,

2006)

1.14. The Principal Responsibility of the IRDA Includes:

1. Regulate of the insurance companies

2. Control over the insurance companies

3. Making the rules and regulation regarding insurance companies

4. Promote the insurance business in India

5. Help to development of business in India

6. Provide security to the business houses

Page | 42

1.15. Missions and Objective of the Indian Regulatory and Development

Authority

1. To protect the interest of policy holders

2. To provide security to policy holders

3. To bring about speedy and orderly growth of the insurance industry (including

annuity and superannuation payments), for the benefit of the common man,

and to provide long term funds for accelerating growth of the economy;

4. To set, promote, monitor and enforce high standards of integrity, financial

soundness, fair dealing and competence of those it regulates;

5. To ensure speedy settlement of genuine claims, to prevent insurance frauds and

other malpractices and put in place effective grievance redressal machinery;

6. To promote fairness, transparency and orderly conduct in financial markets

dealing with insurance and build a reliable management information system to

enforce high standards of financial soundness amongst market players;

7. To take action where such standards are inadequate or ineffectively enforced;

8. To bring about optimum amount of self-regulation in day-to-day working of

the industry consistent with the requirements of prudential regulation

1.16. Duties, Powers and Functions of IRDA

As the section 14 of IRDA act, 1999 lays down the duties, powers, and

functions of IRDA, Subject to the provisions of this Act and any other law for the time

being in force, the Authority shall have the duty to regulate, promote and ensure

Page | 43

orderly growth of the insurance business and re-insurance business. Without prejudice

to the generality of the provisions contained in sub-section (1), the powers and

functions of the Authority shall include:

1. issue to the applicant a certificate of registration, renew, modify, withdraw,

suspend or cancel such registration;

2. protection of the interests of the policy holders in matters concerning assigning

of policy, nomination by policy holders, insurable interest, settlement of

insurance claim, surrender value of policy and other terms and conditions of

contracts of insurance;

3. specifying requisite qualifications, code of conduct and practical training for

intermediary or insurance intermediaries and agents

4. specifying the code of conduct for surveyors and loss assessors;

5. promoting efficiency in the conduct of insurance business;

6. promoting and regulating professional organisations connected with the

insurance and re-insurance business;

7. levying fees and other charges for carrying out the purposes of this Act;

8. calling for information from, undertaking inspection of, conducting enquiries

and investigations including audit of the insurers, intermediaries, insurance

intermediaries and other organisations connected with the insurance business;

9. control and regulation of the rates, advantages, terms and conditions that may

be offered by insurers in respect of general insurance business not so

Page | 44

controlled and regulated by the Tariff Advisory Committee under section 64U

of the Insurance Act, 1938 (4 of 1938);

10. specifying the form and manner in which books of account shall be maintained

and statement of accounts shall be rendered by insurers and other insurance

intermediaries;

11. regulating investment of funds by insurance companies;

12. regulating maintenance of margin of solvency;

13. adjudication of disputes between insurers and intermediaries or insurance

intermediaries;

14. supervising the functioning of the Tariff Advisory Committee;

15. specifying the percentage of premium income of the insurer to finance

schemes for promoting and regulating professional organisations referred to in

clause (f);

16. specifying the percentage of life insurance business and general insurance

business to be undertaken by the insurer in the rural or social sector;

17. exercising such other powers as may be prescribed

1.17. Scope of Insurance Regulatory and Development Authority:

The Insurance Regulatory and Development Authority have been authorized to

register the new insurance companies in India. The list of new insurance companies

also includes the collaborations of the renowned insurance companies overseas with

the existing Indian companies. The insurance companies in India are required to

Page | 45

approach the Insurance Regulatory and Development Authority for the purpose of

renewal of the insurance registration. The Insurance Regulatory and Development

Authority are allowed to withdraw registration of the companies and even cancel the

registration of a company if required. It is also authorized to modify the registration

procedure for a company.55

1.18. Insurance Penetration and Density in India after Establishment

of IRDA

IRDA is playing a significant role while insurance penetration and density of

insurance which reflects the level of development of insurance sector in a country.

The insurance penetration is measured as the percentage of insurance premium to

GDP. Similarly, insurance density is calculated as the ratio of premium to population

(per capita premium) India has achieved a commendable performance in insurance

density since insurance sector opened for private players. Similarly insurance

penetration, which surged consistently till 2009, slipped for the first time in 2010 due

to slower rate of growth in the life insurance premium as compared to the rate of

growth of the Indian economy. Insurance density had gone up from US D 11.5 in

2001 to US D 64.4 in 2010.similarly insurance penetrations had gone up from 2.71 per

cent in 2oo1 to 5.10 per cent in 2010. Within the insurance sector, the density of life

insurance sector shows a predominant and which was US D 9.1 against non-life

insurance density US D 2.4 in2001. The density of life insurance was rose by US D

55.7 against the non-life density US D 4.40 in 2010.which impetrates that the density

of life Insurance is more than that of the non-life insurance. It is concluded that

growing population with mass poverty cannot afford the insurance.

55 http://business.mapsofindia.com/finance-commission/institutions/insurance-regulatory-development-authority.html

Page | 46

On the other hand, within the insurance penetration, life insurance penetration

was significant than that of the non-life insurance, it is evident from the table 4 that

the life insurance penetration was consistently increased from 2.15 percent to 4.40

percent against to the 0.56 percent to the o.71 percent during 2001 to 2010. However,

this much of growth happened in insurance sector due to the establishment of IRDA.56

Table1.3: Insurance Penetration and Density in India after Establishment of IRDA

Life Non-life Industry

Year Density

(US D)

Penetration

(per cent)

Density

(US D)

Penetration

(per cent)

Density

(US D)

Penetration

(percent)

2001 9.1 2.15 2.4 0.56 11.5 2.71

2002 11.1 2.59 3.0 0.67 14.7 3.26

2003 12.9 2.26 3.5 0.62 16.4 2.88

2004 15.7 2.53 4.0 0.64 19.7 3.17

2005 18.3 2.53 4.4 0.61 22.7 3.14

2006 33.2 4.10 5.2 0.60 38.4 4.80

2007 40.4 4.00 6.2 0.60 46.6 4.70

2008 41.2 4.00 6.2 0.60 47.4 4.60

2009 47.7 4.60 6.7 0.60 54.3 5.20

2010 55.7 4.40 8.7 0.71 64.4 5.10

Source; IRDA Annual reports, various issues

56 Dr. H. H Bharadi, 2011, Role Of Insurance Regulatory And Development Authority In Indian Insurance Sector, International Journal In Multidisciplinary And Academic Research

Page | 47

Figure1.6. Density of Indian Insurance from 2001 to 2010

Figure1.7. Penetration of Indian Insurance from 2001 to 2010

1.19. Growth of New Policies after Establishment of IRDA

The IRDA in insurance industry in India has taken impressive measures in

recent years and has recorded phenomenal growth complemented by country’s

improving economic growth. The Indian insurance industry is gaining in size and is in

0

10

20

30

40

50

60

70

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Density of Indian Insurance

Life Insurance Density Non Life Insurance Density Industry Density

0

1

2

3

4

5

6

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Penetration of Indian Insurance

Life Insurance Penetration Non-Life Insurance Penetration

Industry Penetration

Page | 48

par with the Asian markets. The business of insurance is related to the protection of

the economic values of assets of the policy holders. The no. of new policies issued by

the life insurer in accordance with IRDA is an index of growth of life insurer. The

IRDA is looking at making insurance policies more investor friendly by introducing

tax exemptions on insurance policies. While IRDA is still considering a proposal by

LIC to link tax relief to the term of the life insurance policy, reports suggest IRDA has

backed a move to introduce separate tax exemption limit on life insurance policies.57

Table1.4: Life Insurers: Number of New Policies Issued (in lakhs)

Insurers 2010-11 2009-10 2008-09 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03

LIC 370.38

(-4.70)

388.63

(8.21)

359.13

(-4.52)

376.13

(-1.61)

382.29

(21.01)

315.91

(31.75)

239.78

(11.09)

269.68

(9.87)

245.46

(96.75)

Private

Sector

111.14

(22.61)

143.62

(-4.32)

150.11

(13.19)

132.62

(67.40)

79.22

(104.64)

38.71

(73.37)

22.33

(34.62)

16.59

(101.05)

8.25

(3.25)

Total 481.52

(-9.53)

532.25

(4.52)

509.23

(0.10)

508.74

(10.23)

461.52

(30.14)

354.62

(35.29)

262.11

(–8.44)

286.27

(12.83)

253.71

Note: Figure in bracket indicates the growth over the previous year in per cent. Source; IRDA Annual

reports, various issues

1.20. Main Effects of Establishment of IRDA

The creation of IRDA has brought revolutionary changes in the Insurance

sector. In last years of its establishment the insurance sector has seen tremendous

growth. When IRDA came into being; only players in the insurance industry were Life

Insurance Corporation of India (LIC) and General Insurance Corporation of India

57 Dr. H. h Bharadi, 2011, ROLE OF INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY ININDIAN INSURANCE SECTOR, International Journal in Multidisciplinary and Academic Research (SSIJMAR)

Page | 49

(GIC), however in last decade 48 new players have emerged in the field of insurance.

The IRDA also successfully deals with any discrepancy in the insurance sector.

The growth Performance of the insurance industry has been increased

tremendously, which supervise and controlled the entire insurance industry. The

increase in number of insurer both in life and non-life insurance, growth in insurance

penetration and density, increase in number of policies issued and increase in the

speed of claims settlement and in many more aspects the IRDA is playing a prominent

role in the Indian insurance sector. Some effects of IRDA in insurance sector are as

follow:

The number of registered life insurer increased from 4 to 24 including 1 public

sector insurer (LIC) but the increase in private sector insurer is more

significant during from 2000 to 2011.

The number of Non-life insurer has also increased to 24 industries as in

September 2011.

Most of the private players in the Indian insurance industry are a joint venture

between a dominant Indian company and foreign insurers.

Insurance density had gone up from USD 11.5 in 2001 to USD 64.4 in 2010.

Insurance penetrations also had gone up from 2.71 percent in 2001 to 5.10

percent in 2010.

In the insurance sector, the density of life insurance sector shows a

predominant and which was USD 9.1 against non-life insurance density USD

2.4 in 2001. The density of life insurance was raised by USD 55.7 against the

Page | 50

non-life density US D 4.40 in 2010.which impetrates that the density of life

Insurance is more than that of the non-life insurance.

The number of policies issued by the Insurer in India has been increased over

the years from 253.71 lakhs to 481.52 lakhs. The performance of private sector

insurance in terms of policies issued is more significant than that of the LIC.

Individual death policies and group policies have been claimed over the years.

Study data reveals that over 95 per cent of the total individual death claims

intimated have been paid by life insurers in each of the last five years.

Page | 51

B. Literature review

1.21. Review of Literature

The literature of my thesis is based on globalisation and its effect to the

business strategies of the Indian insurance industry; it has been gathered from various

sources, which are reliable. In this literature researcher used specific literature about

globalization to get a broad understanding concerning the chosen subject and try to

find as recent literature as possible to get reliable information. Inspiration from

respected newspapers was helpful when exploring the subject of globalization in

India. In this literature researcher tried to find literature regarding globalisation and

business strategies and Indian insurance companies.

1.22. Literature Review of Globalisation

Globalization in concept is not new. In past people used to travel to other

places for gaining control on others lands, finding out the better living style, finding

out the new places and to earn profits by selling in different regions. These activities

were carried out even thousands of years before. But it is said that the earliest form of

Globalization was started from Greek, Roman, Egyptian, and Babylonian Empires. In

the regime of Mongols, the famous Silk Road connected the Central Asia and

Europe.58 A lot of work has been done in the past on globalization but its effects on

the business strategies have not been discussed in detail. The question whether the

Globalization is beneficial for the world or harmful, is still unsolved and very

controversial. Besides all of its disadvantages, it is an accepted reality that

globalization is expanding very rapidly throughout the world.

58. Muhammad Akram Ch. , Muhammad Asim Faheem , Muhammad Khyzer Bin Dost, Iqra Abdullah, 2011, Globalization and its Impacts on the World Economic Development

Page | 52

Muhammad Akram Ch, Muhammad Asim Faheem, Muhammad Khyzer Bin

Dost and Iqra Abdullah (2011) studied regarding the Globalization and its Impacts on

the World Economic Development, mainly focusing on measuring how the

Globalization is affecting the fastest growing industries. They argue that World

Economy is composed of many sectors. Globalization has affected each sector of

world Economy, directly or indirectly.59

Suarez Orozco and Qin Hilliard have introduced comparative and

interdisciplinary materials. The writers scrutinized the complex psychological, socio-

cultural, and historical insinuations of globalization for children and adolescents

growing up today. The book discovers why new and extensive global images are

required to educate children and adolescents to be informed and occupied (Suárez-

Orozco and Qin-Hilliard).60

Bigman illustrates the globalization procedure and the internal strategy reforms

that the developing nations like Nigeria have applied during the past decade. These

have altered the comparative prices of almost all their inputs and outputs. Agricultural

makers have therefore been compelled to alter the structure and techniques of their

production. The objective of this book is to appraise the impact of globalization on

several issues. These incorporate the consequences of alterations in global trading

59. Muhammad Akram Ch. , Muhammad Asim Faheem , Muhammad Khyzer Bin Dost, Iqra Abdullah,

2011, Globalization and its Impacts on the World Economic Development 60 . Suárez-Orozco, Marcelo M, Qin-Hilliard. Globalization: culture and education for a new

millennium. California: University of California Press, 2004.

Page | 53

rules and guidelines, the elimination of trade barriers and the abolition of many

nation-specific trade agreements (Bigman).61

Kolodko asserted that in economic terms, globalization is the historical

procedure of steady, yet unrelenting liberalization. This is followed by the merging of

the largely splintered markets of goods, capital and labour into a sole international

market. The simultaneous regional integration procedures should in no way be

observed as a tendency to combat against globalization. The plan is to follow a

progressive and wise growth strategy and a well coordinated strategy on the global

scale. This would reduce the associated social stress. How to attain this goal is the

inquiry the authors address in this volume of their book (Kolodko).62

Venkatesh, Kassimir and Social Science Research Council (U.S.)

Collaborative Research Network on Youth and Globalization addressed the impact of

globalization on the lives of youngsters, highlighting on the role of authorized

institutions and discussions. The Human Development Report on Globalization for

Nigeria in 2000 asserted that in spite of being world’s 6th prime exporter of

petroleum, Nigeria ranks tremendously low in terms of human development, making it

possible to accomplish the advantages of globalization.63

The dynamics of a worldwide economy is being restructured by the economic

appearance of China. How the world's most crowded nation, China has administered

globalization as they follow economic reform and how liberalization will impact their

61 . Bigman, David. Globalization and the developing countries: emerging strategies for rural

development and poverty alleviation. CABI Publishing Series, Oxfordshire: CABI, 2002.] 62. Kolodko, Grzegorz W, Globalization and social stress, New York: Nova Publishers, 2005. 63. Venkatesh, Kassimir and Social Science Research Council (U.S.), 2000 Collaborative Research

Network on Youth and Globalization,

Page | 54

societies and the rest of the world are discussed by Kelly, Rajan and Goh. (Kelly,

Rajan and Goh) 64

Guthrie viewed presentday China and the massive alterations it is currently

undergoing. It emphasizes mainly on how economic structural alteration is driving the

procedures, but discusses a lot of other issues as well-politics, communal change,

reform, global economics, and cultural alteration (Guthrie). 65

Regarding effects of international trade and capital flows on employment vary

among economic theories. Based on Heckscher Ohlin and Stolper Samuelson

theorems, traditional trade theory predicts that trade alters relative prices and therefore

relative demand for the factors of production and their rewards. In a capital abundant

developed country with a comparative advantage in more capital intensive sectors,

after trade liberalization the employment of capital and profit rate is expected to

increase, since it is the abundant factor used intensively in the export sectors and the

scarce factor in the import competing sector.

In employment of labour and wages, however, declines in spite of aggregate

welfare gains. When the model differentiates between skilled and unskilled labour, in

a skilled labour abundant country, the prediction is that the employment and wages of

unskilled labour or certain groups of labour specialized in import competing industries

will fall. It is also argued that these effects need not materialize in the short run due to

the immobility of sector-specific capital, which prevents the optimal reallocation of

64. Kelly, David A, Rajan, and Ramkishen S. Goh, Gillian H. L., 2006, Managing globalization: lessons

from China and India: inaugural conference of the Lee Kuan Yew School of Public Policy. World

Scientific, 65. Guthrie, Doug. China and globalization: 2006, the social, economic and political transformation of

Chinese society. Volume 5 of globalizing regions, CRC Press,

Page | 55

production across sectors. This may result in a decline in real wages of the skilled

labour as well in the short run. Nevertheless, once the transition period is over, the

factors that are relatively abundant in the country are supposed to gain. In order to test

the trade effects based on trade theory, one has to test the effect of trade on relative

prices of exportables vs. importables; and then through the price channel, the effects

on the demand for factors used more intensively in the exporting sectors vs. the import

competing sectors can be estimated.

1.23. Review of Literature in Indian Insurance and Aboard

There are various studies related to Insurance Sector in India and abroad has

been done. In follow the numerous numbers of literatures is available on insurance

industry and its various aspects and few relevant reviews are putting here in the

context are given.

Kumar, Rohit, 2011, on his PhD research with the topic of Performance

evaluation of General Insurance Companies: a study of post-reform period for this

research he followed this objectives that are as follow:

1. To study the conceptual frame work of the reforms process in the Insurance

Industry in India.

2. To examine the effect of reforms on the performance of the Public Sector

General Insurance companies.

3. To appraise the comparative performance of the Public Sector and the

Private Sector General Insurance companies.

Page | 56

4. To assess the comparative service quality level of General Insurance

companies in India.

5. To identify the gaps in the performance and to make suggestions to improve

the performance of the General Insurance Industry in India.

He find that it can be said that the insurance industry as a whole has recorded

profound growth after liberalization and privatization of the sector, though the reforms

have adversely affected the underwriting results of all the public sector general

insurance companies, thanks to their increase in expense ratio and claim ratio in the

post-reform period. In the post-reform period, the comparative profitability analysis of

the public and private sectors reveals that the public sector general insurance

companies have exhibited higher underwriting losses than the private sector

companies but the higher investment income of the public sector has compensated

their higher underwriting losses which resulted into their higher profitability than the

private sector general insurance companies.

The liberalization process and the competitive environment acted as a catalyst

in the general insurance sector and inculcated efficiency in most of the public insurers

and made them more efficient as compared to their private competitors, though private

players are reducing the gap very fast by providing better service quality to their

customers. The latest market share figures indicate that in such a short span of time,

private players have captured market share to the extent of forty-one per cent, which is

an eye opener. It is high time for the public insurers to completely reorganize their

business model and service delivery to survive in the market.66

66 Kumar, Rohit, 2011, PhD research, Performance evaluation of General Insurance Companies: a study of post-reform period Punjabi University, Department of Commerce

Page | 57

In another PhD research about insurance Miremadi, Ali Reza, 2011, with the

topic of “A study of problems and prospects of life insurance companies adopted by

life insurance companies in India and Iran (1999-2004” followed the objectives and

hypothesises that are as follow:

The Objectives of Research Were:

1. To understand various promotional mix strategies undertaken by life

insurance companies in Iran and India.

2. To investigate whether there is any association between genders and

advertising recall.

3. To find out the relationship between customers subscribing to life insurance

and the utility of life insurance products based on the brand image of the life insurance

product.

The Hypothesis of Research Was:

1. There is difference between perceived benefits from life insurance products

based on country of origins.

2. There is integration effort of market research and survey with flurry of

media to get more prospective customer or buyer for life insurance companies.

3. There is an association between effort of company to develop a brand

building plan to create positive customer response and concentrate focus on putting

hard work on brand building.

Page | 58

He find out whenever there is uncertainty, there is risk .The risk cannot be

averted. It involves multi-faced losses. Risk is uncertainty of a financial loss. We do

not have any command on uncertainties. This makes it essential that we think in

favour of a device that becomes instrumental in spreading the loss .It is in this context

that we think about insurance which is considered to be a social device to accumulate

funds to meet uncertain losses. The main function of insurance is to provide protection

against the possible chances of generating losses. It eliminates worries and miseries of

losses at destruction of property and lives. Further, it provides capital to national

economy since the accumulated funds are invested in productive heads. The

industries, businesses, individuals are considerably benefited by services that are

provided by insurance organizations.67

Randhey and Ahuja (1999), Says that need for private sector entry has been

justified on the basis of enhancing the efficiency of operations, achieving a greater

density and penetration of life insurance in the country, and for grater mobilization of

long-term savings for long gestation infrastructure projects.68

Rao Tripti, D. (2000) stated that Privatization of insurance industry is based on

the view that competition would enhance efficiency through increased resource

utilization. It would spill over as benefits to the consumers in terms of reduction in

premium costs with proper pricing policy and wider choice. Liberalization may also

67 Miremadi, Ali Reza, 2011, with the topic of “A study of problems and prospects of life insurance companies adopted by life insurance companies in India and Iran (1999-2004” university of Pune, Department of Management 68. Randhey Ajit and Ahuja Rajeev (1999), “Life Insurance in India: Emerging Issues” Economic&

political weekly pg. 203-212, January 16-23 vol.34.

Page | 59

increase the scope of operation of insurance business from limited area to untapped

areas like health, crop and unemployment.69

Raju Satya R. (2004), Found that the insurance agents, development officers’

employees, executives at different levels should work together to achieve the

objectives and mission and also to face the present and future competition as a

challenge. The insurance product and services should be designed and offered as per

the customer requirements.70

Palande and his followers (2007) found that the Insurance industry is going to

witness see changes in its marketing strategies. The existing and the new insurers will

devise different strategies to retain and enhance their market share. It would be done

by various methods by bringing in new practices, settings new service standards and

creating new benchmarks.71

Selvakumar& Priyan (2010) found that insurance companies are increasingly

taping the semi-urban and rural areas to take across the message of protection of life

through insurance cover. Higher level of protection implies that customers are more

conscious of the need for risk mitigation, grater security, and about the future of their

dependents. Insurance sector has been evolving and improving its underwriting and

risk management abilities. The research review identifies the links between insurance,

financial sector performance and growth in substantial details, helping define the

69 . Rao, Tripti D. (2000), “Privatization and foreign participation in (Life) Insurance Sector”,

Economic& Political Weekly, pp 1107-1119, (March 25-31, 2000), vol.35 (13)

70. Raju Satya R., “Human Side of Insurance Sector” GITAM – Excel Series New Deal in Insurance, pg

73-88. 71. Palande, P.S & Shah R.S. and Lunawat, M.L.(2007), Insurance in India changing policies and

emerging opportunities, Response Books, Sage publications ltd.pp299-447(3).

Page | 60

insurance economic growth relationship and supporting the policy conclusions of this

report.72

While earlier studies on life insurance sector mainly focused upon LIC, it was

only after reforms in this sector that certain studies covering private players have

taken place.

Arora (2002) highlighted that LIC was likely to face tough competition from

private insurers having large established network and their trained intermediaries

throughout India.73

Verma (2003) analyzed the various types of products offered by public sector

giant and the new global players in the private sector.74

Kumar and Taneja (2004) highlighted the opportunities and challenges before

the insurance industry in India due to liberalization, globalization and privatization.75

Bhattacharya (2005) advocated that bancassurance provided the best

opportunities to tap the large potential in rural and semi urban areas as banks have a

strong network of more than 40000 branches in these areas. He suggested that the

72. selvkumar m. & priyan vimal j. (2010), “Indian life insurance industry: prospect for private sector”,

the journal ,vol. xxxiv (1) pg 52-57 zenith international journal of multidisciplinary research vol.1 issue

8, December 2011, issn 2231 5780 www.zenithresearch.org.in 305 73. Arora, R.S. “Financial Reforms and Service Sector–A Study of Life Insurance Industry in India”, In

B.B. Tandon and A.K. Vashisht (Eds.), Financial Sector Reforms–An Unpublished Agenda for

Economic Development: 259-270, New Delhi: Deep & Deep, 2002 74. Verma, Vinay, “New Trends in Product Design: An Overview of Life Insurance Products”, the

Insurance Times, 23 (6): 16-28, 2003. 75 . Taneja, Aruna, Kumar Narendera. “Insurance in India – Challenges and Opportunities”, the

Insurance Times, 24 (11): 34-37, 2004.

Page | 61

insurers should focus on Single Premium policies, Unit Linked Insurance, Pension

Market and Health Insurance.76

Kumar (2005) highlighted that private insurance players introduced a wider

range of insurance products and set up brand promotion as part of their new strategy.

These new covers had flexibility and added benefits to suit the needs of customers

who were unsatisfied with the traditional and rigid plans.77

Kulshrestha and Kulshrestha (2006) highlighted that demand for life insurance

in rural India was expanding at the annual rate of 18 per cent as compared to 3.9 per

cent in urban areas which provided good opportunity for life insurers to perform.78

76. Bhattacharya, Anbil... “Challenges before Life Insurance Industry”, Life Insurance Today, 1 (8): 3-6,

2005. 77. Kumar, Jogendra. “Insurance: Industry on Growth Path”, Life Insurance Today, 1 (9): 6-10, 2005.

78. Kulshresth, Laxmi R., Kulshresth, Anuja. 2006. “Liberalization and Rural Insurance Prospects and

Challenges”, Life Insurance Today, 1(10): 9-13.

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