marketing strategy of hdfc standard life insurance co. ltd final
TRANSCRIPT
A
PROJECT REPORT
ON
MARKETING STRATEGY OF HDFC
STANDARD LIFE INSURANCE CO. LTD.
RESEARCH GUIDE :
PROF. ANGSHUAMAN PAUL
SUBMITTED BY:
YADURAJ
SEC- SG2
ROLL NO. – 91
ID NO.- D1012SSISBE-B10184(JAI-4A-JI-3152)
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ACKNOWLEDGEMENT
I would like to take an opportunity to thank all the people who helped me in
collecting necessary information and making of the report. I am grateful to all of
them for their time, energy and wisdom.
Getting a project ready requires the work and effort of many people. I would like
all those who have contributed in completing this project. First of all, I would like
to send my sincere thanks to Mr. Ravindra Singh Chauhan for his helpful hand
in the completion of my project.
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TABLE OF CONTENTS
1. Introduction to the Industry 5 - 19
2. Company profile 20 - 39
Profile of the organization
Problems of the organization
Competition Information
S.W.O.T Analysis
3. Conceptual Discussion 40 - 62
4. Research Methodology 63 - 67
Title
Objectives
Scope of the Study
Significance of the Study
Research Design
Sampling Methodology
Sampling Unit
Sampling Technique
Sampling Area
Sampling Size
Limitations
5. Data Analysis and Interpretation 68 - 83
6. Facts and Findings 84 - 86
7. Recommendations 87 - 88
8. Conclusion 89 - 90
9. 10. Annexure 91 - 94
QUESTIONNAIRE
10. Bibliography 95 - 96
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CHAPTER 1
INTRODUCTION TO INDUSTRY
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INTRODUCTION
1.1 OVERVIEW OF THE INDUSTRY – INSURANCE INDUSTRY
The insurance sector in India has come a full circle from being an open competitive
market to nationalization and back to a liberalized market again. Tracing the mends in the
Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two
centuries.
With such a large population and the untapped market area of this population Insurance
happens to be a very big opportunity in India. Today it stands as a business growing at
the rate of 15-20 per cent annually. Together with banking services, it adds about 7 per
cent to the country’s GDP .In spite of all this growth the statistics of the penetration of
the insurance in the country is very poor. Nearly 80% of Indian populations are without
Life insurance cover and the Health insurance. This is an indicator that growth potential
for the insurance sector is immense in India. It was due to this immense growth that the
regulations were introduced in the insurance sector and in continuation “Malhotra
Committee” was constituted by the government in 1993 to examine the various aspects of
the industry. The key element of the reform process was Participation of overseas
insurance companies with 26% capital. Creating a more efficient and competitive
financial system suitable for the requirements of the economy was the main idea behind
this reform.
Since then the insurance industry has gone through many sea changes .The competition
LIC started facing from these companies were threatening to the existence of LIC. Since
the liberalization of the industry the insurance industry has never looked back and today
stand as the one of the most competitive and exploring industry in India. The entry of the
private players and the increased use of the new distribution are in the limelight today.
The use of new distribution techniques and the IT tools has increased the scope of the
industry in the longer run.
A BRIEF HISTORY
The origin of insurance is very old .The time when we were not even born; man has
sought some sort of protection from the unpredictable calamities of the nature. The basic
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urge in man to secure himself against any form of risk and uncertainty led to the origin of
insurance.
The business of life insurance in India in its existing form started in India in the year
1818 with the establishment of the Oriental Life Insurance Company in Calcutta.
Some of the important milestones in the life insurance business in India are:
1912: The Indian Life Assurance Companies Act enacted as the first statute to
regulate the life insurance business.
1928: The Indian Insurance Companies Act enacted to enable the government to collect
statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the
objective of protecting the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies taken over by the central
government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act,
1956, with a capital contribution of Rs. 5 crore from the Government of India.
The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in the
year 1850 in Calcutta by the British.
Some of the important milestones in the general insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all
classes of general insurance business.
1957: General Insurance Council, a wing of the Insurance Association of India, frames a
code of conduct for ensuring fair conduct and sound business practices.
1968: The Insurance Act amended to regulate investments and set minimum solvency
margins and the Tariff Advisory Committee set up.
1972: The General Insurance Business (Nationalisation) Act, 1972 nationalized the
general insurance business in India with effect from 1st January 1973.
107 insurers amalgamated and grouped into four companies viz.
1. National Insurance Company Ltd. 2. Oriental Insurance Company Ltd.
3. New India Assurance Company Ltd. 4. United India Insurance Company Ltd.
GIC incorporated as a company.
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INSURANCE SECTOR REFORMS
In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor
R.N. Malhotra, was formed to evaluate the Indian insurance industry and recommend its
future direction.
The Malhotra committee was set up with the objective of complementing the reforms
initiated in the financial sector.
The reforms were aimed at “creating a more efficient and competitive financial system
suitable for the requirements of the economy keeping in mind the structural changes
currently underway and recognizing that insurance is an important part of the overall
financial system where it was necessary to address the need for similar reforms…”
In 1994, the committee submitted the report and some of the key recommendations
included:
i) Structure
Government stake in the insurance Companies to be brought down to 50%
Government should take over the holdings of GIC and its subsidiaries so that
these subsidiaries can act as independent corporations
All the insurance companies should be given greater freedom to operate
ii) Competition
Private Companies with a minimum paid up capital of Rs.1bn should be allowed
to enter the industry.
No Company should deal in both Life and General Insurance through a single
entity.
Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.
Postal Life Insurance should be allowed to operate in the rural market.
Only one State Level Life Insurance Company should be allowed to operate in
each state.
iii) Regulatory Body
The Insurance Act should be changed.
An Insurance Regulatory body should be set up.
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Controller of Insurance (Currently a part from the Finance Ministry) should be
made independent.
iv) Investments
Mandatory Investments of LIC Life Fund in government securities to be reduced
from 75% to 50%
GIC and its subsidiaries are not to hold more than 5% in any company (There
current holdings to be brought down to this level over a period of time)
v) Customer Service
LIC should pay interest on delays in payments beyond 30 days.
Insurance companies must be encouraged to set up unit linked pension plans.
Computerization of operations and updating of technology to be carried out in the
insurance industry.
The committee emphasized that in order to improve the customer services and increase
the coverage of the insurance industry, it should be opened up to competition. But at the
same time, the committee felt the need to exercise caution as any failure on the part of
new players could ruin the public confidence in the industry.
Hence, it was decided to allow competition in a limited way by stipulating the minimum
capital requirement of Rs.100 crores. The committee felt the need to provide greater
autonomy to insurance companies in order to improve their performance and enable them
to act as independent companies with economic motives. For this purpose, it had
proposed setting up an independent regulatory body.
The Insurance Regulatory and Development Authority
Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in
Parliament in December 1999. The IRDA since its incorporation as a statutory body in
April 2000 has fastidiously stuck to its schedule of framing regulations and registering
the private sector insurance companies.
The other decisions taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies were the launch of the
IRDA’s online service for issue and renewal of licenses to agents.
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The approval of institutions for imparting training to agents has also ensured that the
insurance companies would have a trained workforce of insurance agents in place to sell
their products, which are expected to be introduced by early next year.
Since being set up as an independent statutory body the IRDA has put in a framework of
globally compatible regulations. In the private sector 12 life insurance and 6 general
insurance companies have been registered.
IMPACT OF LIBERALIZATION
The introduction of private players in the industry has added to the colors in the dull
industry. The initiatives taken by the private players are very competitive and have given
immense competition to the on time monopoly of the market LIC. Since the advent of the
private players in the market the industry has seen new and innovative steps taken by the
players in this sector. The new players have improved the service quality of the
insurance. As a result LIC down the years have seen the declining phase in its career.
The market share was distributed among the private players. Though LIC still holds the
75% of the insurance sector but the upcoming natures of these private players are enough
to give more competition to LIC in the near future. LIC market share has decreased from
95% (2002-03) to 81 %( 2004-05). The following companies has the rest of the market
share of the insurance industry.
CURRENT SCENARIO OF THE INDUSTRY
INSURANCE MARKET IN INDIA
India with about 200 million middle class household shows a huge untapped potential for
players in the insurance industry. Saturation of markets in many developed economies
has made the Indian market even more attractive for global insurance majors. The
insurance sector in India has come to a position of very high potential and
competitiveness in the market.
Innovative products and aggressive distribution have become the say of the day. Indians,
have always seen life insurance as a tax saving device, are now suddenly turning to the
private sector that are providing them new products and variety for their choice.
Life insurance industry is waiting for a big growth as many Indian and foreign companies
are waiting in the line for the green signal to start their operations. The Indian consumer
should be ready now because the market is going to give them an array of products,
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different in price, features and benefits. How the customer is going to make his choice
will determine the future of the industry.
1. CUSTOMER SERVICE
Consumers remain the most important centre of the insurance sector. After the entry of
the foreign players the industry is seeing a lot of competition and thus improvement of
the customer service in the industry. Computerisation of operations and updating of
technology has become imperative in the current scenario. Foreign players are bringing in
international best practices in service through use of latest technologies. The one time
monopoly of the LIC and its agents are now going through a through revision and
training programmes to catch up with the other private players. Though lot is being done
for the increased customer service and adding technology to it but there is a long way to
go and various customer surveys indicate that the standards are still below customer
expectation levels.
2. DISTRIBUTION CHANNELS
Till date insurance agents still remain the main source through which insurance products
are sold. The concept is very well established in the country like India but still the
increasing use of other sources is imperative. It therefore makes sense to look at well-
balanced, alternative channels of distribution.
LIC has already well established and have an extensive distribution channel and
presence. New players may find it expensive and time consuming to bring up a
distribution network to such standards. Therefore they are looking to the diverse areas of
distribution channel to have an advantage. At present the distribution channels that are
available in the market are:
Direct selling
Corporate agents
Group selling
Brokers and cooperative societies
Banc assurance
BANCASURANCE - India has an extensive bank network established over the years.
What Insurance companies have to do is to just take advantage of the customers' long-
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standing trust and relationships with banks. This is a mutually beneficial situation as
banks can also expand their range of products on offer to customers, while the insurance
company will also earn profits from the exposure. Another advantage is that banks, with
their network in rural areas, help to fulfill rural and social obligations stipulated by the
Insurance Regulatory and Development Authority (IRDA) recently. Insurance companies
should see banc assurance as a tool for increasing their market penetration in India. It is
also good for the one who sees banc assurance in terms of reduced price, high quality
product and delivery at doorsteps. Everybody is a winner here. The creation of banc
assurance operations has made an important impact on the financial services industry at
large. This is though a new concept but it has gained a lot of importance in the industry at
present and has a great future.
3. PRODUCT INNOVATION
There has been a plethora of new and innovative products offered by the new players.
Customers have tremendous choice from a large variety of products from pure term (risk)
insurance to unit-linked investment products. Customers are offered unbundled products
with a variety of benefits as riders from which they can choose. More customers are
buying products and services based on their true needs and not just traditional money-
back policies, which is not considered very appropriate for long-term protection and
savings. There is lots of saving and investment plans in the market. However, there are
still some key new products yet to be introduced - e.g. health products.
4. RURAL MARKETING
Rural India seems to have an appetite for mobile phones, computers, and cars and to add
to it we have insurance. In India with the private players having entered into the
insurance industry, the expected explosion in job opportunities may not actually happen
but for them the catchments area is the opportunities in the rural India. In India the
insurance business can be said to be "a marathon, not a sprint". This is because of the
nature of the business being long term. With merely two years of the industry being
opened, not surprisingly, the new comers are making losses. The public sector
companies, notably the LIC, have gained in strength, thanks to the deepening of the
market consequent to the awareness created by the new companies. However this does
not deterred the private sector, which knows know that the race is a marathon, not a
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sprint. However it seems that they if not anything, are only increasing their spending,
though only out of the capital. Today, there are 18 insurance companies in India
excluding the PSU’s, with 12 in the life insurance business and the rest in non-life .As
insurance companies go more and more rural in search of business, there will be
opportunities in the rural sector. A research conducted exhibited that the rural consumers
are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium each year. In
the insurance the awareness level for life insurance is the highest in rural India, but the
consumers are also aware about motor, accidents and cattle insurance. In a study
conducted by MART the results showed that nearly one third said that they had
purchased some kind of insurance with the maximum penetration skewed in favor of life
insurance. The study also pointed out the private companies have huge task to play in
creating awareness and credibility among the rural populace. The perceived benefits of
buying a life policy range from security of income bulk return in future, daughter's
marriage, children's education and good return on savings, in that order, the study adds.
Regulatory and Development Authority (IRDA) have set stiff rural targets for insurance
companies. For the life sector, in the first year, 5 per cent of the total policies written
should come from the rural sector. This will go up to 15 per cent in five years. Similarly,
for the non-life sector, two per cent of the total gross premium income should come from
the rural sector going up to 5 per cent in five years, according to the regulation. All these
moves will make the investment the rural area a big start.
5. INFORMATION TECHNOLOGY AND INSURANCE
In the insurance industry today, there is a clear trend away from selling a broad range of
products to a large volume of customers in a one –size-fits-all manners. Instead of
focusing on their different products lines as silos (i.e., life, property and casualty etc)
insurers are looking for ways to offer highly targeted insurance products that are tailored
to the individuals customers with the highest propensity to buy them.
There is a evolutionary change in the technology that has revolutionized the entire
insurance sector. Insurance industry is a data-rich industry, and thus, there is dire need to
use the data for trend analysis and personalization.
With increased competition among insurers, service has become a key issue. Moreover,
customers are getting increasingly sophisticated and tech-savvy. People today don’t want
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to accept the current value propositions, they want personalized interactions and they
look for more and more features and add ones and better service The insurance
companies today must meet the need of the hour for more and more personalized
approach for handling the customer. Today managing the customer intelligently is very
critical for the insurer especially in the very competitive environment. Companies need to
apply different set of rules and treatment strategies to different customer segments.
However, to personalize interactions, insurers are required to capture customer
information in an integrated system.
With the explosion of Website and greater access to direct product or policy information,
there is a need to developing better techniques to give customers a truly personalized
experience. Personalization helps organizations to reach their customers with more
impact and to generate new revenue through cross selling and up selling activities. To
ensure that the customers are receiving personalized information, many organizations are
incorporating knowledge database-repositories of content that typically include a search
engine and lets the customers locate the all document and information related to their
queries of request for services. Customers can hereby use the knowledge database to
mange their products or the company information and invoices, claim records, and
histories of the service inquiry. These products also may be able to learn from the
customer’s previous knowledge database and to use their information when determining
the relevance to the customers search request.
The insurance sector remains a very competitive market and those companies that are
able to best utilize their data and provide their customer with the most personalized
options will have the distinct competitive advantage. The insurers that come up to the top
will be those who leverage the appropriate technology solutions effectively in order to
foster customer loyalty, attract new customers and improve operational efficiency by
providing common information across their lines of business.
6. MERGERS AND AQUISITIONS
This is an era of mergers and acquisitions. Private companies including MNC’s are
amalgamating the world over to get more competitive edge. Currently, the general
insurance industry has been opened up. The question here is that for over two years, eight
private companies have operated and has the size of the cake expanded. The insurers are
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doing enough to raise the level of risk awareness or are they merely content to compete in
the markets organized and established. However sooner or later the private sector players
will have to put in place strategies aimed not at winning the existing accounts of the
public players but at diversifying markets penetration as a whole. The private players in
the future would have to turn their attention to working in the unorganized and under
served markets.
.
The purpose of having four companies all subsidiaries of General Insurance Corporation
of India (GIC)– National Insurance Company, New India Assurance Company, Oriental
Insurance Company, And The United India Insurance Company; at the time of
nationalization was to have competition among themselves –in service and products at
the same price. The service provided by them was also equally good or bad depending on
the experience of the customers.
Now with real competition coming in with most of the global insurance players setting
footprints here, it is felt that the time for merger has come and to enjoy the benefits if the
size. It is to be sated that size does matter in insurance business. All over the world’s
mergers and acquisitions in the risk-underwriting sector is common. The benefits if the
four insurance companies merge will be enormous. The merged entity will enjoy higher
underwriting and risk retention capacity; increase in reinsurance premium, reduction in
reinsurance outflow, healthy solvency margins, setting right the asset –liability mismatch
and reduction in cost. The insurance market thus becomes a gambling place. Had the
public sector companies made into a single entity, perhaps the total premium of the four
public sector companies in the year 2003-04 would have gone up but 25 percent. But the
public sector alone is forced to underwrite the loss making motor third party liability
(TPL) insurance. The public insurance companies insured a loss of Rs 1943 crore on this
portfolio on just one year (03-04). The cumulative loss under this portfolio is
astronomical. The loss of profitable business in view of undeserved competition among
the public sector companies is hampering the subsidization of social insurance including
the motor TPL.
It is thus clear that it is good for the public sector companies to merge immediately when
they are still strong, lest a merger becomes inevitable later after the independent public
14
sector companies fail one after another. This does not bid well for the public sector, nor
fort he insuring public and not for the economic development either. For a progress me
require merger of strong public sector companies. Else it would render public sector
companies weak and destroy them.
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NAME OF THE PLAYER MARKET
SHARE (%)
LIC 82.3
ICICI PRUDENTIAL 5.63
BIRLA SUN LIFE 2.56
BAJA ALLIANZ 2.03
SBI LIFE 1.80
HDFC STANDARD 1.36
TATA AIG 1.29
MAX NEW YORK 0.90
AVIVA 0.79
OM KOTAK MAHINDRA 0.51
ING VYASA 0.37
AMP SANMAR 0.26
METLIFE 0 .21
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POTENTIAL OF INSURANCE INDUSTRY IN INDIA:
Only ONE out of FIVE insurable populations in India has insurance coverage.
In terms of Insurance premium per capita and premium per GDP, India ranks as one
of the lowest in the world.
Life insurance premium constitutes only 9% of domestic savings.
By 2010, hundred million elderly look to planning for old age pension and annuities.
More than 325 million labor forces have no social security.
With an annual growth rate of 15-20% and the largest number of life insurance policies in
force, the potential of the Indian insurance industry is huge. Total value of the Indian
insurance market (2004-05) is estimated at Rs. 450 billion (US$10 billion). According to
government sources, the insurance and banking services' contribution to the country's
gross domestic product (GDP) is 7% out of which the gross premium collection forms a
significant part. The funds available with the state-owned Life Insurance Corporation
(LIC) for investments are 8% of GDP.
Till date, only 20% of the total insurable population of India is covered under various life
insurance schemes, the penetration rates of health and other non-life insurances in India is
also well below the international level. These facts indicate the of immense growth
potential of the insurance sector.
The year 1999 saw a revolution in the Indian insurance sector, as major structural
changes took place with the ending of government monopoly and the passage of the
Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry
restrictions for private players and allowing foreign players to enter the market with some
limits on direct foreign ownership.
.
The life insurance industry in India grew by an impressive 36%, with premium income
from new business at Rs. 253.43 billion during the fiscal year 2004-2005, braving stiff
competition from private insurers. Though the total volume of LIC's business increased in
the last fiscal year (2004-2005) compared to the previous one, its market share came
down from 87.04 to 78.07%. The 14 private insurers increased their market share from
about 13% to about 22% in a year's time. The figures for the first two months of the fiscal
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year 2005-06 also speak of the growing share of the private insurers. The share of LIC for
this period has further come down to 75 percent, while the private players have grabbed
over 24 percent.
There are presently 12 general insurance companies with four public sector companies
and eight private insurers. According to estimates, private insurance companies
collectively have a 10% share of the non-life insurance market.
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CHAPTER 2
COMPANY PROFILE
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PROFILE OF THE ORGANISATION—HDFC STANDARD
LIFE INSURANCE CO. LTD
HDFC i.e. HOUSING DEVELOPMENT AND FINANCING CORPORATION.
HDFC Standard Life is a joint venture between HDFC of India and Standard Life of UK.
The new company, HDFC Standard Life, was one of the first to be awarded a license in
the recently deregulated Indian market and one of the first to open its doors for business
and issue policies.
Founded in 1977, HDFC id India’s market leader in housing finance, providing finance
for more than 1.5mn homes. They have 83 offices in India, one international office in
Dubai and three service associates in Kuwait, Qatar and the Sultanate of Oman.
Like Standard Life, HDFC is strongly committed to providing quality products and
excellent customer service and has won a number of important awards: In Jan 2001 Asia
money named them as second ‘Best managed company in India’.
HDFC is also financially very strong and for the last six years has enjoyed the highest
financial strength ratings from India’s two leading rating agencies.
The HDFC group includes:
HDFC Bank
HDFC Asset Management
HDFC Realty Ltd.
HDFC Securities Limited
Over the period of operations, HDFC group has been felicitated with various rewards.
Some of them are as follows:
United Nations Scroll of Honor –1991
India’s best managed company by Asiamoney magazine – 1995 and 1996
Most competitive Indian company by Euromoney –1997
One of the 5 best Indian Boards by Business Today – 1997
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Rated as one of the best companies in India for strategy & management and
investor relations by Asiamoney –1998.
Excellence in service industry by the Indian Institute of Marketing Management
& Top Management Club (Pune) –1998
Shield for the best presented accounts for banks and financial institutions – over
11 times (last 8 years in a row)
1999 IMC Ramakrishna Bajaj National Quality Award in the service category.
CII-Exim Bank Commendation Certificate for commitment to Total Quality
Management – 2000.
HISTORY OF THE JOINT VENTURE
Discussions commenced -- January 1995
Joint Venture agreement signed – October 1995
Joint venture agreement renewed – October 1998
Life insurance project team established – January 2000 (Mumbai)
Company officially incorporated - 14th August 2000
First Private Sector Life Insurance company to be granted a certificate of registration –
23rd October 2000
Shareholding – HDFC 81.4%
Standard Life 18.6%
A BRIEF HISTORY
HDFC Standard Life Insurance Company Ltd. is one of India's leading private insurance
companies, which offers a range of individual and group insurance solutions. It is a joint
venture between Housing Development Finance Corporation Limited (HDFC Ltd.),
India's leading housing finance institution and a Group Company of the Standard Life,
UK. HDFC as on December 31, 2007 holds 72.38 per cent of equity in the joint venture.
Key strengths:
1. Financial Expertise
As a joint venture of leading financial services groups, HDFC Standard Life has the
financial expertise required to manage your long-term investments safely and efficiently.
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2. Range of Solutions
We have a range of individual and group solutions, which can be easily customised to
specific needs. Our group solutions have been designed to offer you complete flexibility
combined with a low charging structure.
3. Track Record so far
Our gross premium income, for the year ending March 31, 2008 stood at Rs. 4,859 crores
and new business premium income stood at Rs. 2,685 crores.
The company has covered over 9,59,000 lives year ending March 31, 2008.
MISSION STATEMENT OF HDFCSLIC :
We aim to be the top new life insurance company in the market.
This does not just mean being the largest or the most productive company in the
market, rather it is a combination of several things like –
Customer service of the highest order
Value for money for customers
Professionalism in carrying out business
Innovative products to cater to different needs of different
customers
Use of technology to improve service standards
Increasing market share.
VISION STATEMENT
“The most successful and admired life insurance company, which means that we are the
most trusted company, the easiest to deal with , offer the best value for money, and set
the standards in the industry. In short, “the most obvious choice for all”.
VALUES THAT WILL BE OBSERVED IN HDFCSL :
Integrity
Innovation
Customer Centric
People Care
Team Work – One for all & all for one
Joy & Simplicity
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INTEGRATED FINANCIAL SERVICES
REF NO:1.0
23
HDFC realty.com
HDFC HOME LOANS
HDFC DEPOSITS
HDFC
SLIC
CENTRE FOR HOUSING FINANCE
HDFC MUTUAL FUNDS
SECURITISATION
INTELNET
HDFC CHUBB
GENERAL INSURANCE CO.
LTD
HDFC
FUTURE ACTIVITIES
CIBIL i.e CREDIT INFORMATION BUREAU
LTD.
HDFC BANK
HDFC SECURITIES
DISTRIBUTION
Sale Growth
Fiscal Year No. of policies sold in FY New Business in FY
2001-2002 21,376 7 Cr.
2002-2003 1,15,965 69 Cr.
2003-2004 1,86,443 180 Cr.
2004-2005 2,88,189 857 Cr.
2005-2006 7,81,685 2717 Cr.
2006-2007 20,79,217 4270 Cr.
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AN INSURANCE COMPANY(HDFC)
In the insurance industry the sales team following the typical organization structure:
Hierarchy in Insurance Company
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SALES MANAGER
AREA SALES MANAGER
AREA SALES MANAGER
AREA SALES MANAGER
UNIT
MANAGER
UNIT
MANAGER
UNIT
MANAGER
ADVISORS ADVISORS ADVISORS
FUTURE PLAN OF THE ORGANISATION
HDFC SLIC promises to provide higher returns in higher investments. The plans
smart assure will help the customer in wealth creation and is aimed at providing
efficiency affordability and flexibility to customer needs. The product offer the customer
a choice of allocating up to 100% of premium paid beyond specified premium bracket.
As the premium goes up, the allocation charges keep on decreasing with no allocation
charges levied on premium upward rupees 3lakhs.
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1.3 PROBLEMS OF HDFCSL
Since HDFC SLIC is a private player in the insurance industry, it has not yet
reached break-even. Hence, it has high cost due to which its premiums are high as
compared to LIC.
It has to create credibility in the public.
It has to compete with the wide range of products that its competitors offer.
It has to focus towards rural segment also which has a great scope of growth.
It has to decide on the strategies to be adopted which will help to counter
competition.
It has to increase its no. of branches and also enhance its network of agents so that
it can compete with LIC.
It has to focus on providing effective training to its agents so that the customer
base can be increased and moreover customer satisfaction can be ensured.
1.4 COMPETITORS INFORMATION
Major Life insurance Companies in India are:
Aviva Life Insurance
Bajaj Allianz
Birla Sun Life Insurance
HDFC Standard Life Insurance
ICICI Prudential
ING Vysya
Kotak Mahindra
LIC
MetLife India Insurance
SBI Life Insurance
Shriram Life Insurance
Tata AIG Life Insurance
.
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RECRUITMENT OF AGENT
Recruitment refers to the process of finding right people for the right job or function,
usually undertaken by recruiters. It also may be undertaken by an employment agency or
a member of staff at the business or organization looking for recruits. Advertising is
commonly part of the recruiting process, and can occur through several means: through
online, newspapers, using newspaper dedicated to job advertisement, through
professional publication, using advertisements placed in windows, through a job center,
through campus graduate recruitment programs, etc.
Suitability for a job is typically assessed by looking for skills, e.g. communication skills,
typing skills, computer skills. Evidence for skills required for a job may be provided in
the form of qualifications (educational or professional), experience in a job requiring the
relevant skills or the testimony of references. Employment agencies may also give
computerized tests to assess an individual's "off-hand" knowledge of software packages
or typing skills. At a more basic level written tests may be given to assess numeracy and
literacy. A candidate may also be assessed on the basis of an interview. Sometimes
candidates will be requested to provide a résumé (also known as a CV) or to complete a
Job application form to provide this evidence.
Detailed Job Profile
During our specified training at HDFC SLIC, our job profile was "Agency Recruitment".
Agency Recruitment means the recruitment of Advisor/Agent for the channel
development, development of the agency force of the company send this is done by
identifying people from qualified background with good communication skills and selling
skills to bring good business for the company.
During our training period, we were the telesales of the company, calling the persons and
providing them all the necessary information and the benefits for being the Financial
Advisor of the company. If the person is showing some interest towards the proposal
offered, we have to approach to his place to fill up his Advisor's Recruitment form.
Once the person is recruited, he undergoes 100 hr of training given by the company
followed by an exam by IRDA. If the person is able to pass the exam, he becomes the
Advisor for that company and has to bring business for them. These Advisors are also
called IFAs (Independent Financial Advisor).
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The selection of the Advisor has done on the basis of a "Q SCORE CARD" issued by the
company. The “Q SCORE CARD" contains some provisions that the person to whom we
are recruiting as an Agent/Advisor must be -
- At least 25 years of age.
- Married
- Minimum Total family income of Rs 2 lakhs per annum.
- Must be a resident of Jaipur for at least 5 years.
- A Graduate.
If any person who has at least 3 of these 5 Q Scores the Advisor for HDFC SLIC.
Agent Advisor
An agent is one who acts on behalf of others. An “Agent” is a person employed to do any
act for another or represent in dealing with a third person. In the insurance industry, the
term ‘agent’ is applied to a person engaged by the insurer to procure new business.
Independent Financial Advisors (IFAs) are very common in overseas markets, but are
new in India. IFAs are qualified professionals who can provide invaluable help to the
customer in identifying the products that suits his personal requirements. IFAs aid the
client/customers in selection of insurance products. They charge for their services in
contrast to the company paying commissions. Graduates in the age group of 21 to 35
years are preferred.
Role of Advisor
To identify prospective customers by providing them the complete information about the
products offered, providing tailor-made solutions to cater individual needs, conduct
regular reviews to keep customer on track, achieve targets and also providing them better
services which is most important in life insurance because unlike other savings or
investment plans, life insurance is a long term commitment.
Advisor Benefits
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A premium product portfolio that caters to wide range of financial needs, excellent
backend support, attractive payments and benefits, round the clock customer service and
extensive training for that edge over their competition.
Advisor Rewards and Recognitions
HDFC SLIC advisors are constantly recognized and rewarded for their performance.
Numerous contests all year round promote healthy completion amongst advisors and
recognition for their efforts.
Advantages of becoming a financial advisor with HDFC SLIC:
Be your own Boss.
Work from home or office.
No prior selling skills required.
World-class training enhances personal skills.
No start up capital required.
Work with a flexible working environment.
Unlimited earning potential.
Advisor must have :
Confidence
Self motivation
Persuasion
Urge to be financially independent
Relationship skills
Recognition programs
Foreign trips and seminar
ADVISOR’S CAREER
At HDFC SLIC, career development is emphasized upon from the very day the advisor
joins the system. Though individual meetings with his or her manager, the advisor can
discuss various issues related to business development and career enhancement.
Expectations from organization in term of chalking a career in the insurance industry are
also discussed.
Some of the programs offered to the advisors are:
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Tiger Team Pinnacle
Program Fast Track
Pinnacle Program
Procedure of Recruiting an Advisor
Following are some of the steps of recruiting an Advisor for our
Company:
Identification of the target market.
Selection of potential customers from the target market.
Calling the potential customer and providing them the necessary information
regarding the business opportunity.
If the person is interested, we fix his appointment with our Manager or we meet
him personally.
Providing him the complete information regarding the business opportunity and
benefits that he will receive.
Further, if he likes the proposal, and agreed to become the advisor, he has to fill
up the forms.
Forms include “INSURANCE ADVISOR APPLICATION FORM,
AGREEMENT FOR APPIONTMENT OF INSURANCE ADVISOR”, and
“APPLICATION FOR PRE-RECRUITMENT TEST FOR AGENTS”.
Some of the documents required at the time of submitting the forms are:
12th pass certificate/Graduation certificate.
Address proof
Age proof documents
7-10 photographs
A demand draft of Rs 1000/cash
Once the form has been filled and submitted, the person has to undergo training of 100 hr
followed by an exam conduct by the IRDA.
If that person has cleared the exam, he will get the license issued by the
IRDA advisor for that company.
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CAREER PROGRESSION AND FUTURE OPPORTUNITIES
Agency Champion
Through this career program, the company takes the advisor’s business to the next
level by giving them the opportunity to increase their reach and earning potential.
Developing their own business by recruiting new advisors and building their own team.
Presenting them the opportunity to become the agency champions.
Support and Training
At HDFC SLIC, training is an intrinsic element of the company’s for the new
advisors. Some of the training initiatives are:
Foundation Program
Independent of their work experience, the foundation program will perfect the
advisors knowledge about the insurance industry; equip them with excellent selling skills
along with the comprehensive knowledge about the products.
Instant Recognition
Advisors achievements in the first three months of business will be well
acknowledge with the company’s SPRINT and RACE awards. These are the trophies
accompanied by the certificate and point rewards given to the advisor for getting off to a
flying start.
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Business Development Clinic
After one month of field experience, this program will give the practical insight
on objections handling and generate ideas to get new customers and big premium
policies.
Advance Training Programs
Once the person is accustomed to the insurance industry, the company will
continuously upgrade their capability and knowledge through sophisticated training
programs on financial products and markets. These advance selling skills seminars will
assist them in planning for high net worth and building their business through
relationship management.
HDFC SLIC understands the importance of training in a dynamic business
environment. Their advisors go trough both generic and specific, professional program
that help them remain well informed and knowledge about the company’s products in the
market. There is a further focus on soft skills such as communication, managing long-
term relationships and selling, which are very relevant in a service-driven industry like
life insurance.
State of the art infrastructure training facilities coupled with an excellent faculty,
guarantee an exceptional learning environment. For advisor who might be occupied with
their daily business/professional routines, HDFC SLIC also offers convenient training
options such as online and self-learning are also provided by the organization.
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AREA ASSIGNED
For identifying an insurance agent for the company, our first target market was
our natural market. This natural market consist of persons to whom we know and to
whom we recognize like friends, relatives and reference collected from them. The
persons that our company wants us to target were:-
Doctors
Housewives
Businessman
Lawyers
Retired persons
Teachers
Each of these has to be approached in a different way and all these have to be
identified from within JAIPUR. A person who is not resident of JAIPUR cannot be an
advisor for the company. However, a person who is the advisor of the company can bring
business from anywhere in the country.
TYPES OF LIFE INSURANCE
Whole Life
At the time of purchase, a whole life policy represents the insurance company’s promise
to provide coverage for the entire life of the insured person, as long as premiums are paid.
There is an investment component to the whole life policy. Viewed strictly as an
investment, a whole life policy from a quality company can compare favorably with other
conservative vehicles, particularly due to the tax-deferred growth of the policy cash
value.
Term Life
Term life insurance, which doesn’t have an investment component, provides coverage for
a specific length of time, the policy’s “term.” Whether, and at what cost, an expired term
policy can be renewed for an additional period of coverage is another matter entirely.
Within each variety are many options and features to consider, and it can be a
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complicated process to sort through the available choices. Once you’ve figured out what
you need, it’s wise to research and crunch numbers to find the best deal.
Variable Life Insurance
An alternative to the traditional whole life policy is the variable life policy, in which the
investment component and return of the policy (not the insured person) varies. This is
because the insured, not the insurance company, takes responsibility for selecting where
the investment portion of the premium dollar goes. Insurance policy benefits are paid
directly to the beneficiary after death, so the named beneficiary gets the proceeds free of
all taxes, and doesn’t have to go through probate court. Life insurance benefits are
considered as part of the estate of the deceased for federal estate tax purposes. One way
around this is to make an irrevocable trust the owner of the policy. Insurance sales people
like to say that a life insurance death benefit is purchased with “discounted dollars.”
PURPOSE AND NEED OF INSURANCE
Assets are insured, because they are likely to be destroyed, through accidental
occurrences. Such possible occurrences are called perils. Fire, floods,
breakdowns, lightning, earthquakes, etc, are perils. If such perils can cause
damage to the asset, we say that the asset is exposed to that risk. Perils are the
events. Risks are the consequential losses or damages. The risk to an owner of a
building, because of the peril of an earthquake, may be a few lakhs or a few corers
of rupees, depending on the cost of the building and the contents in it.
The risk only means that there is a possibility of loss or damage. The damage
may or may not happen. Insurance is done against the contingency that it may
happen. There has to be an uncertainty about the risk. Insurance is relevant only if
there are uncertainties. If there is no uncertainty about occurrence of an event, it
cannot be insured against. In the case of a human being, death is certain, but the
time of death is uncertain. In the case of a person who is terminally ill, the time of
death is not uncertain, though not exactly known. He cannot be insured.
Insurance doesn’t not protect the asset. It doesn’t not prevent its loss due to the
peril. The peril cannot be avoided through insurance. The peril can sometimes be
avoided, through better safety and damage control management. Insurance only
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tries to reduce the impact of the risk on the owner of the asset and those who
depend on that asset. It only compensates the losses and that too, not fully.
Only economic consequences can be insured. If the loss is not financial, insurance
may not be possible. Examples of non-economic losses are love and affection of
parents, leadership of managers, sentimental attachments to family heirlooms,
innovative and creative abilities, etc.
INSURANCE AS A SOCIAL SECURITY TOOL
The united nations declaration of human rights 1948 provides that “everyone has a
right to a standard of living adequate for the health and wellbeing of himself and
his family, including food, clothing, housing and medical care and necessary
social services and the right to security in the event of unemployment, sickness,
disability, widowhood or other lack of livelihood in circumstances beyond his
control”.
When the bread winner dies, to that extent, the family’s income dies. The
economic condition of the family is affected, unless other arrangements come into
being to restore the situation. Life insurance provides such an alternate
arrangement. If this did not happen, another family would be pushed into the
lower strata of society the lower strata creates a cost on society. Poor people cost
the nation by way of subsidies and doles and so on. Poor people also cost by way
of larger growth in population, poor education and vagaries in behavior of
children. Life insurance tends to reduce such costs. In this sense, the life insurance
business is complimentary to the state’s efforts in social management.
Under a socialistic system the responsibility of full security would be placed upon
the state to find resources for providing social security. In the capitalistic society,
provisions of security are largely left to the individuals. The society provides
instruments, which can be used in security this aim. Insurance is one of them. In a
capitalistic society too, there is a tendency to provide some social security by the
state under some schemes where members are required to contribute e.g. social
security scheme in UK.
In India, social security finds a place in our constitution. Article 41requires the
state, within the limits of its economic capacity and development, to make
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effective provision for securing the right to work, to education and to provide
public assistance incase of unemployment, old age, sickness and disablement and
in other cases or poorer sections are met through the mechanism of life insurance.
As per the law and the directions of the regulatory authorities, insurance
companies in India are obliged to extend insurance benefits to economically
weaker sections of the society in the unorganized sector.
ADVANTAGES OF LIFE INSURANCE
Life insurance has no competition from any other business. Many people think
that life insurance is an investment or a means of saving. This is not a correct view. When
a person saves, the amount of funds available at any time is equal to the amount of money
set aside in the past, plus interest. This is so in a fixed deposit in the bank, in national
savings certificates, in mutual funds and all other savings instruments. If the money is
invested in buying shares and stocks, there is the risk of the money being lost in the
fluctuations of the stock market. Even if there is no loss, his available money at any time
is the amount invested plus appreciation. In life insurance however, the fund available is
not total of the savings already made (premiums paid), but the amount one wished to
have at the end of the savings period (which is the next 20 or 30 years). The final fund is
secured from the very beginning. One is paying for it later, out of the savings. One has to
pay for it only as long as one life or for a lesser period if so chosen. There is no other
scheme which provides this kind of benefit. Therefore life insurance has no substitute.
Even so, a comparison with other forms of savings will show that life insurance has
the following advantages.
In the event of death, the settlement is easy. The heirs can collect the moneys
quicker, because of the facility of nomination and assignment. The facility of
nomination is now available for some bank accounts.
There is a certain amount of compulsion to go though the plan of savings. In other
forms, if one changes the original plan of savings, there is no loss. In insurance,
there is no loss
Creditors cannot claim the life insurance moneys. They can be protected against
attachments by courts.
There are tax benefits, both in income tax and in capital gains
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2.5 S.W.O.T ANALYSIS OF HDFCSL
STRENGTHS
Premiums are increasing and so are commissions.
The variety of products is increasing.
Transparency in working is followed.
Fund charges are less i.e. 0.8%
Stronger financial base.
Employee centric organization.
WEAKNESS
Strong competitors like LIC, ICICI Pru, Birla Sun Life etc.
Premium is priced high as compared top the market leader.
Infrastructure cost is high.
Less expenditure on promotion.
Products not customized for lower segment.
OPPORTUNITIES
The ability to cross sell financial services barely being tapped.
Technology is improving to the point that paperless transactions are available.
The client's increasing need for an "insurance consultant" can open new ways to
service the client and generate income.
THREATS
Government regulations on issues like health care, mold and terrorism can quickly
change the direction of insurance.
The increasing expenses and lower profit margins.
Intense competition from LIC.
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CHAPTER- 3
CONCEPTUAL DISCUSSION
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Introduction to Compensation, Job Satisfaction and Employee
Retention:
Compensation Management:
Compensation is the remuneration received by an employee in return for his/her contribution to
the organization. It is an organized practice that involves balancing the work-employee relation
by providing monetary and non-monetary benefits to employees
Compensation refers to all forms of pay and rewards received by employees for the performance
in their jobs including all forms of cash, benefits, services, and perks. It is important to recognize
and communicate your "total" compensation as "all" the pay you are providing your employees.
This should be done so that the value of what you are offering in compensation is clear and that it
in turn attracts and retains the people you need. Compensation is given in financial rewards that
are either:
Direct
Wages and salaries
Base pay
Dearness allowance
Short term incentives
Long term incentives
Income tax protection
Bonuses and commissions
Stock options
Indirect
Provident fund
Pension schemes
Medical and health insurance
Sick leave
Indirect benefits are costly to you and their value should be communicated and acknowledged
when discussing the compensation you offer. When accompanying a base wage or salary with
incentives, bonuses, and/or benefits, you in turn create a compensation program that should
support the values and goals of your business.
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When developing your business’s total compensation program it is important that you understand
and incorporate what is important to your business and its objectives. Consider creating a
combination or variety of elements to your compensation program in accordance to your
employee demographic and budgetary constraints. Program design, guidelines and procedures
should always be tailored to contribute to your business’s success within the context of its
operating environment. Ensure to include the following:
The different elements that will comprise the total compensation your business offers to
its employees
That it is comparable or competitive within the industry
That it is internally fair; meaning that there is a logical increase in pay dependent on
things like length of service, job performed, or the skills or abilities required to
successfully complete the job
That there are established criteria that result in pay increase
A means of measuring and controlling your payroll costs
A means of measuring the success of your compensation program. For example being
able to determine how competitive your compensation is in relation to similar businesses,
and whether it accomplishes targeted outcomes of retention, performance and motivation.
Objective of compensation:
Attract employees
Meet legal requirements
Retain valued employees
Motivate performance
Motivate personal growth
Some current trends in compensation are linking pay to performance objectives,
competencies or skills required to perform the job, larger business strategies or goals, the
position in relation to its importance of the business strategy and/or rewarding team
accomplishments. It is essential that you realize the importance of compensation and the
flexibility you and your business have in creating a more customized compensation package.
This will in turn promote the attraction, retention and development of quality people.
Job satisfaction:
Job satisfaction has been defined as a pleasurable emotional state resulting from the appraisal of
one’s job, an affective reaction to one’s job; and an attitudes towards one job. Generally we can
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say that if the expectation of the employee are getting fulfill from the job then he would be
satisfy from his job.
Job satisfaction has been defined as a pleasurable emotional state resulting from the appraisal of
one’s job; an affective reaction to one’s job; and an attitude towards one’s job. Weiss (2002) has
argued that job satisfaction is an attitude but points out that researchers should clearly distinguish
the objects of cognitive evaluation which are affect (emotion), beliefs and behaviours. This
definition suggests that we form attitudes towards our jobs by taking into account our feelings,
our beliefs, and our behaviors
Job satisfaction describes how content an individual is with his or her job. The happier people are
within their job, the more satisfied they are said to be. Job satisfaction is not the same as
motivation, although it is clearly linked. Job design aims to enhance job satisfaction and
performance; methods include job rotation, job enlargement and job enrichment. Other influences
on satisfaction include the management style and culture, employee involvement, empowerment
and autonomous work groups. Job satisfaction is a very important attribute which is frequently
measured by organizations. The most common way of measurement is the use of rating scales
where employees report their reactions to their jobs. Questions relate to rate of pay, work
responsibilities, variety of tasks, promotional opportunities the work itself and co-workers. Some
questioners ask yes or no questions while others ask to rate satisfaction on 1-5 scale (where 1
represents "not at all satisfied" and 5 represents "extremely satisfied").
Compensation and the job satisfaction equation:
The company's goals are best met if employees are committed. Such commitment presupposes
satisfaction on the way the company operates. Satisfied employees can freely challenge existing
practices so that the achievement of goals is facilitated. Pay is just one factor that determines
employee satisfaction. The degree of empowerment of employees is another. The importance
accorded to employee input as a means to achieve company output as well as the prospect of
reward, material or otherwise, plays a significant role in making employees feel responsible
toward the company and increasing their sense of fulfillment.
It is generally believed that high levels of employee satisfaction translate into increased employee
commitment, productivity and retention for organizations. However, if employees are dissatisfied
with their jobs, trouble lies ahead. Low job satisfaction is associated with higher levels of
decreased productivity and increased turnover--three conditions that organizations can ill afford
in today's highly competitive search for talent. According to employees, the top five "very
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important" aspects of job satisfaction were, benefits, job security, work/life balance, and
communication between employees and senior management.
HR professionals' top five were relationship with immediate supervisor, compensation,
management recognition of employee job performance, benefits, and communication between
employees and senior management. While HR professionals agreed with employees on three of
the top five components of job satisfaction, the rankings revealed different perspectives between
the two groups. For example, HR professionals viewed employees' relationships with their
immediate supervisors as the most important aspect of employee job satisfaction, while
employees placed it eighth on their list. Similarly, HR professionals perceived management
recognition of employee job performance to be more important to job satisfaction than employees
themselves did (65 percent and 49 percent, respectively). In general, the survey report showed
that HR professionals perceived several factors to be more important to employees than
employees did. In each of SHRM's job satisfaction surveys since 2002, HR professionals
predicted that "relational" aspects had a higher priority in employee job satisfaction than
employees indicated. HR professionals; responses suggest that their perceptions of employee
satisfaction reflect traditional "HR thinking" regarding employee needs for communication and
recognition. To be sure, "people issues" clearly are important to employees. However, it remains
a challenge for HR professionals to balance the relational aspects of job satisfaction with tangible
rewards, such as benefits, compensation, job security and flexibility.
SHRM job satisfaction surveys consistently show that, although HR professionals generally agree
with the aspects most important to employees--benefits and compensation, they allow these
factors to be overshadowed by issues that are not the most relevant to employees. It is important
that HR professionals constantly be aware of the most immediate concerns of employees. If these
are overlooked, retaining top talent--already a major challenge for organizations--will become
even more difficult.
Employee Retention:
Employee retention is a process in which the employees are encouraged to remain with the
organization for the maximum period of time or until the completion of the project. Employee
retention is beneficial for the organization as well as the employee .
An effective employee retention is a systematic effort by employers to create and foster an
environment that encourages current employees to remain employed by having policies and
practices in place that address their diverse needs. A strong retention strategy becomes a powerful
recruitment tool.
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Retention of key employees is critical to the long-term health and success of any organization. It
is a known fact that retaining your best employees ensures customer satisfaction, increased
product sales, satisfied colleagues and reporting staff, effective succession planning and deeply
imbedded organizational knowledge and learning. Employee retention matters as organizational
issues such as training time and investment; lost knowledge; insecure employees and a costly
candidate search are involved. Hence failing to retain a key employee is a costly proposition for
an organization. Various estimates suggest that losing a middle manager in most organizations
costs up to five times of his salary.
Intelligent employers always realize the importance of retaining the best talent. Retaining talent
has never been so important in the Indian scenario; however, things have changed in recent years.
In prominent Indian metros at least, there is no dearth of opportunities for the best in the business,
or even for the second or the third best. Retention of key employees and treating attrition troubles
has never been so important to companies.
In an intensely competitive environment, where HR managers are poaching from each other,
organizations can either hold on to their employees tight or lose them to competition. For gone
are the days, when employees would stick to an employer for years for want of a better choice.
Now, opportunities abound.
It is a fact that, retention of key employees is critical to the long-term health and success of any
organization. The performance of employees is often linked directly to quality work, customer
satisfaction, and increased product sales and even to the image of a company. Whereas the same
is often indirectly linked to, satisfied colleagues and reporting staff, effective succession planning
and deeply embedded organizational knowledge and learning.
Employee retention matters, as, organizational issues such as training time and investment, costly
candidate search etc., are involved. Hence, failing to retain a key employee is a costly proposition
for any organization. Various estimates suggest that losing a middle manager in most
organizations, translates to a loss of up to five times his salary. This might be worse for BPO
companies where fresh talent is intensively trained and inducted and then further groomed to the
successive stages. In this scenario, the loss of a middle manager can often prove dear.
In fact, some reports suggest that attrition levels in IT companies are as high as 40 per cent. The
only way out is to develop appropriate retention strategies.
Though BPO industry shoots ahead at 40 to 50 per cent a year, it is now losing 35 to 40 per cent
of its 350,000-odd employees as well.
In India there are few sectors where the attrition level is much larger compared to other
sectors. For example: IT sector and BPO. Where as there are organizations like Air India,
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HAL, DRDO, BARC where the attrition is nearly 5% or less than that.Employee Retention
Strategies helps organizations provide effective employee communication to improve
commitment and enhance workforce support for key corporate initiatives.
Importance of Employee Retention:
Now that so much is being done by organizations to retain its employees, why is retention so
important? Is it just to reduce the turnover costs? Well, the answer is a definite no. It’s not only
the cost incurred by a company that emphasizes the need of retaining employees but also the need
to retain talented employees from getting poached.
The process of employee retention will benefit an organization in the following ways:
1 The Cost of Turnover: The cost of employee turnover adds hundreds of thousands of money
to a company's expenses. While it is difficult to fully calculate the cost of turnover (including
hiring costs, training costs and productivity loss), industry experts often quote 25% of the average
employee salary as a conservative estimate.
2 Loss of Company Knowledge: When an employee leaves, he takes with him valuable
knowledge about the company, customers, current projects and past history (sometimes to
competitors). Often much time and money has been spent on the employee in expectation of a
future return. When the employee leaves, the investment is not realized.
3 Interruption of Customer Service: Customers and clients do business with a company in part
because of the people. Relationships are developed that encourage continued sponsorship of the
business. When an employee leaves, the relationships that employee built for the company are
severed, which could lead to potential customer loss.
4 Turnover leads to more turnovers: When an employee terminates, the effect is felt
throughout the organization. Co-workers are often required to pick up the slack. The unspoken
negativity often intensifies for the remaining staff.
5 Goodwill of the company: The goodwill of a company is maintained when the attrition rates
are low. Higher retention rates motivate potential employees to join the organization.
6 Regaining efficiency: If an employee resigns, then good amount of time is lost in hiring a new
employee and then training him/her and this goes to the loss of the company directly which many
a times goes unnoticed. And even after this you cannot assure us of the same efficiency from the
new employee
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Role of compensation in job satisfaction and employee retention:
Compensation constitutes the largest part of the employee retention process.The employees
always have high expectations regarding their compensation packages. Compensation packages
vary from industry to industry. So an attractive compensation package plays a critical role in
retaining the employees. Compensation includes salary and wages, bonuses, benefits,
prerequisites, stock options, bonuses, vacations, etc. While setting up the packages, the following
components should be kept in mind:
Salary and monthly wage: It is the biggest component of the compensation package. It is also
the most common factor of comparison among employees. It includes
o Basic wage
o House rent allowance
o Dearness allowance
o City compensatory allowance
Salary and wages represent the level of skill and experience an individual has. Time to time
increase in the salaries and wages of employees should be done. And this increase should be
based on the employee’s performance and his contribution to the organization.
Bonus: Bonuses are usually given to the employees at the end of the year or on a festival.
Economic benefits: It includes paid holidays, leave travel concession, etc.
Long-term incentives: Long term incentives include stock options or stock grants. These
incentives help retain employees in the organization's startup stage.
Health insurance: Health insurance is a great benefit to the employees. It saves employees
money as well as gives them a peace of mind that they have somebody to take care of them in bad
times. It also shows the employee that the organization cares about the employee and its family.
After retirement: It includes payments that an Employee gets after he retires like EPF
(Employee Provident Fund) etc.
Miscellaneous compensation: It may include employee assistance programs (like psychological
counseling, legal assistance etc), discounts on company products, use of a company cars, etc.
All the above components helps in retaining and satisfying the employees. If an organization is
providing all these benefits to its employees then the basic needs and wants are automatically
fulfilled. so his satisfaction level will be increase. Because he is satisfy with the job after getting
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all these benefits so it will force the employee to retain the employees in the organization for a
long long time.
Some other components of compensation which helps in employee retention and job satisfaction:
Personal use by an employee of a company owned or leased vehicle.
Personal use by an employee of a company owned cell phone unless employees
keep and regularly submit detailed records of both incoming and outgoing calls,
plus all related usage charges.
The value of group term life insurance providing benefits . .
The premium cost of any non-group life insurance paid by the employer in which
the employee names the beneficiary. If the employer is the beneficiary of the
policy, this is not a taxable benefit to the employee.
Advances paid to commissioned sales persons unless there is a written promise by
the employee to repay any unearned commission.
.
Personal expenses of the employee paid by the employer are subject to repayment by the
employee.
Most cash and non-cash awards or prizes paid to, or on behalf of, an employee.
Payments for an employee’s medical care under a medical reimbursement plan.
Certain payments made by an employer to an employee for moving expenses.
Transfer of property to employees, or other non-cash payments. This includes
gifts to an employee on account of recognition for an employee achievement.
Payment to employee for business related expenses they incur if the employee
is not required to substantiate the expense.
Fringe benefits, including health insurance, group life insurance, and disability
Insurance.
Retention tips and tools:
Key employee retention is critical to the long term health and success of your business. Managers
readily agree that retaining your best employees ensures customer satisfaction, product sales,
satisfied co workers and reporting staff, effective succession planning and deeply imbedded
organizational knowledge and learning. If managers can cite these facts so well, why do they
behave in ways that so frequently encourage great employees to quit their jobs?
Employee retention matters. Organizational issues such as training time and investment; lost
knowledge; mourning, insecure co workers and a costly candidate search aside, failing to retain a
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key employee is costly. Various estimates suggest that losing a middle manager costs an
organization up to 100 percent of his salary. The loss of a senior executive is even more costly.
Employee retention is one of the primary measures of the health of your organization. If you are
losing critical staff members, you can safely bet that other people in their departments are looking
as well. Exit interviews with departing employees provide valuable information you can use to
retain remaining staff. Heed their results. You’ll never have a more significant source of data
about the health of your organization.
Management thinkers from Ferdinand Fournies ( Why Employees Don't Do What They're
Supposed to Do and What to Do About It) to Marcus Buckingham and Curt Coffman (First Break
All the Rules agree that a satisfied employee knows clearly what is expected from him every day
at work. Changing expectations keep people on edge and create unhealthy stress. They rob the
employee of internal security and make the employee feel unsuccessful. I’m not advocating
unchanging jobs just the need for a specific framework within which people clearly know what is
expected from them.
The quality of the supervision an employee receives is critical to employee retention.
People leave managers and supervisors more often than they leave companies or jobs. It
is not enough that the supervisor is well-liked or a nice person, starting with clear
expectations of the employee, the supervisor has a critical role to play in retention.
Anything the supervisor does to make an effort.
Employee feel unvalued will contribute to turnover. Frequent employee complaints
center on these areas.
* lack of clarity about expectations,
* lack of clarity about earning potential,
*lack of feedback about performance,
* failure to hold scheduled meetings, and
*failure to provide a framework within which the employee perceives
The ability of the employee to speak his or her mind freely within the organization is
another key factor in employee retention. Does your organization solicit ideas and
provide an environment in which people are comfortable providing feedback? If so,
employees offer ideas, feel free to criticize and commit to continuous improvement. If
not, they bite their tongues or find themselves constantly "in trouble" - until they leave.
Talent and skill utilization is another environmental factor your key employees seek
in your workplace. A motivated employee wants to contribute to work areas outside of
his specific job description. How many people could contribute far more than they
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currently do? You just need to know their skills, talent and experience, and take the time
to tap into it. As an example, in a small company, a manager pursued a new marketing
plan and logo with the help of external consultants. An internal sales rep, with seven
years of ad agency and logo development experience, repeatedly offered to help. His
offer was ignored and he cited this as one reason why he quit his job. In fact, the
recognition that the company didn't want to take advantage of his knowledge and
capabilities helped precipitate his job search.
Myths about Employee Morale Prevent Companies from Achieving
Retention Success:
Despite years of research that point to far different solutions, many companies use the wrong
tactics when trying to improve employee morale, satisfaction and retention. These myths prevail,
in part, because businesses have used these methods, however wrong, for a very long time and
have become used to trying the same ideas.
Myth #1: People most often leave a company for more pay.
Exit interviews, conducted to learn why people leave an organization, contain some of America’s
greatest fiction. People frequently say they’re leaving for more money because it’s the easiest
reason to give. More often the causes leading to departure are related to issues that were
unsatisfying in the job or the company.
Typical issues that cause dissatisfaction are company policies and procedures, quality of
supervision, working conditions, relationship with the immediate supervisor and salary. Yes, pay
does matter. While research shows most people don’t actually leave a job for more money, there
are two important facts: Very-low-income workers will leave for more money because it’s a
survival issue. For the rest of workers, the issue of money actually is about fairness. People
become dissatisfied with pay when they feel it is unfair within the company, within the industry
or when pay doesn’t seem to match the amount or type of work required.
To increase employee satisfaction and retention, companies make more gains by working to
improve whether people feel a sense of achievement, recognition, competence and growth,
whether there are choices about how work gets done and whether employees feel respected by
management..
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Myth #2: Incentive programs produce long-term profits and improve productivity and morale.
So, who doesn’t like free stuff? However, incentives such as gifts and cash bonuses formeeting
speed and volume goals don’t affect employee commitment. They’re really a
Throw back to outdated management beliefs that workers must be coerced in order to work hard.
All the extras don’t add up to the real glue that creates employee commitment: the chance to learn
and grow, meaningful work, good supervisors and respect and appreciation for a job well done.
Incentives have been over-used particularly in the past decade, as management books touted the
importance of improving recognition of excellent work. Yet, studies show that carrot-and-stick
motivation actually does not pay off in long-term company profitability or employee satisfaction
or retention. To the contrary, incentives can harm quality when employees aim for speed or other
goals rather than quality.
Myth # 3: People don’t want more responsibility.
They don’t want more work if they’re already overloaded due to lean staffing; but people indeed
want the opportunity to grow and develop their skills, advance their careers and have the
opportunity for greater variety. Keep in mind what the research confirms: People do want to try
new things, to feel skillful and to experience the personal satisfaction of higher levels of
achievement.
People don’t need a job promotion in order to gain more responsibility. The same job can be
broadened to include more variety, more contact with different parts of the organization and
greater control over decisions on accomplishing work tasks.
Myth #4: Loyalty is dead.
Not at all, though it is ailing in many organizations. People are seeking greater work-life
balance than in the past, and employers have made great strides in providing more flexible hours
and dress codes. Still, people seek to make a contribution, and organizations that provide healthy
doses of the main satisfiers enjoy significantly lower turnover and higher morale. Profits are
higher, too, according to recent research studies Things have changed, indeed. Today’s workers
will, in fact, change careers and jobs much more often. When the economy is good, people have
become much more at ease in changing companies, are more likely to acquire new skills and
move to companies that offer greater chance to use more of their knowledge and more willing to
take the risks of starting anew at another organization.
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What has emerged in current management studies are that the same qualities that hold employees
are the ones that best serve the customers: Employees who can make quick decisions on behalf of
the customer and the company; employees who have a broader scope of responsibility that allows
them some freedom and leverage to solve customer problems; learning opportunities that give
employees the skillfulness to address customer issues; and supportive management and
supervisors who use any mistakes that occur as teaching opportunities.
Myth #5: Improving employee satisfaction is expensive.
Research tells us the true satisfiers can’t even be bought: career growth, meaningful work, respect
and appreciation and being able to influence how work gets done. In these leaner times employers
have the same opportunity to gain true loyalty despite lowered budgets.
The trinkets and prizes given in recognition and rewards programs aren’t necessary ingredients
for developing an engaged workforce. The “glue” that holds people is made of much different
stuff: Management that listens and responds to employees’ ideas about improving service,
supervisors who support people’s growth and initiative, training in how to do the job
successfully, good relationships with coworkers and genuine appreciation for a job done well.
There are no costs incurred to build or enhance these motivators
Myth #6: Employee satisfaction is “fluff.”
Does having engaged workers make a difference in the bottom line? Studies now show that
lower turnover and greater levels of employee satisfaction have a definite positive impact on
customer satisfaction and profitability, which are the key factors in company growth and
sustainability. Consider these facts:
•A strong link was found in a study by PricewaterhouseCoopers between employee retention and
the quality of service as rated by companies’ customers.
•According to the American Society of Training & Development, organizations that invested the
most in training had higher gross margins and income per employee.
•The cost of replacing an employee who leaves has been estimated by various studies to be
between 70 and 200 percent of that worker’s annual salary.
•The Council on Competitiveness found that a 10-percent increase in education has a more
positive impact on productivity than a 10-percent increase in work hours.
Investing in people and using the most effective management practices increases profits.
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Myth #7: Supervisors are the problem.
Many senior leaders express dismay about the quality and actions of their middle managers and
front-line supervisors. The “blame game” is old, yet the solutions are strikingly similar to those
required to build an engaged workforce.
In most organizations today, supervisors have more people reporting to them than in the past,
more demanding customers than ever and greater amounts of change – all occurring at the same
time. Yet, the amount of training provided to managers and supervisors in many organizations is
minimal. More importantly, the amount of time that senior managers spend in dialogue with
middle and line managers also is minimal.
Middle managers and supervisors can appear resistant to improvement efforts. However, the true
failure exists in our understanding of their world, the challenges they face and the support they
need in order to be successful.
Successful organizations seek to build teamwork between senior leaders and middle managers
and line supervisors (which is a key ingredient in creating teamwork throughout the company).
Myth # 8: My company/industry/people are different!
Yes, every company is unique, and every industry has its own set of unusual challenges.
However, a very costly mistake is made when we believe information from other sectors doesn’t
apply to us or our organization.
Retention research studies cross all industries, all types of work settings and in varied economic
conditions. Still, the same results come up time and again. We build employee loyalty – and,
indirectly, customer loyalty – through providing people with growth and learning opportunities,
minimizing red tape, allowing people to think and make good choices, supporting middle
managers and front-line supervisors and appreciating the efforts that people give to help our
customers.
It’s downright dangerous to ignore these findings – risky to the bottom line and the organization’s
future.
Barriers to Success
* Lack of support from management team.
* Inability to provide hard numbers.
* Company culture does not support change.
* Back lash from single workers.
* Failure of other programs due to low utilization.
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10 Factors That Affect Employee Retention
Most managers understand the importance of employee retention and its impact on the overall
health and vitality of an organization. The importance of retaining top organizational talent will
only increase over the coming years as the massive cohort of baby boomers begin to reach
retirement age making it easy for younger employees to find work.
In a previous article we identified some useful tips to help improve employee retention in your
organization. Given the importance of employee retention, we have compiled another list of 10
important factors that can affect employee retention in your organization.
• Shorten the feedback loop –
Do not wait for an annual performance evaluation to come due to give feedback on how an
employee is performing. Most team members enjoy frequent feedback about how they are
performing. Shortening the feedback loop will help to keep performance levels high and will
reinforce positive behavior. Feedback does not necessarily need to be scheduled
or highly structured; simply stopping by a team member's desk and letting them know they are
doing a good job on a current project can do wonders for morale and help to increase retention.
• Offer a competitive compensation package –
Any team member wants to feel that he or she is being paid appropriately and fairly for the work
he or she does. Be sure to research what other companies and organizations are offering in terms
of salary and benefits. It is also important to research what the regional and national
compensation averages are for that particular position. You can be sure that if your compensation
package is not competitive, team members will find this out and look for employers who are
willing to offer more competitive compensation packages.
• Balance work and personal life –
Family is incredibly important to team members. When work begins to put a significant strain on
one's family no amount of money will keep an employee around. Stress the importance of
balancing work and one's personal life. Small gestures such as allowing a team member to take an
extended lunch once a week to watch his son's baseball game will likely be repaid with loyalty
and extended employment with an organization.
• Beware of burnout –
Staff adequately to reduce the amount of unwanted overtime a team member must work. Some
employees enjoy the extra money that accompanies overtime hours, while others would rather
spend their time with their families or doing other activities they enjoy. Burnout can be a leading
cause of turnover. Recognize the warning signs and give employees a break when they need it.
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• Provide opportunities for growth and development –
Offer opportunities for team members to acquire new skills and knowledge useful to the
organization. If an employee appears to be bored or burned out in a current position offer to train
this individual in another facet of the organization where he or she would be a good fit. Nobody
wants to feel stuck in their position will no possibility for advancement or new opportunities.
• The ability to provide input and be taken seriously –
Everybody has opinions and ideas, some are better than others. However every team member
wants to feel that their input is welcome and will be taken seriously without ridicule or
condescension. Some of the greatest ideas can come from the most unlikely of places and people.
Creating a culture where input is welcome from all level of the organizational chart will help your
organization grow and encourage employee retention.
• Management must take the time to get to know team members –
It's not a big surprise that one of the greatest complaints that employees express in exit interviews
is a feeling that management didn't know they existed. Nobody wants to feel like just another
spoke in a big wheel. Managers are very busy - everybody is busy, but it is crucial that managers
and supervisors take the time get to know the team members who work under them. Learn and
remember a team member's name, what skills and talents they bring to the table, and what their
business interests are. The time spent by management getting to know team members is well
invested and can eliminate the headaches caused by having to continually hire and re-train new
employees.
• Provide the tools and training an employee needs to succeed –
Nothing can be more frustrating to an employee than a lack of training or the proper tools to
successfully complete his or her duties. You wouldn't try to build a house without a hammer, so
why should an office job be any different? Providing a team member with the tools and training
she needs to be successful shows a commitment and investment in that employee and will
encourage the team member to stay with the organization.
• Make use of a team member's talents, skills, and abilities –
All team members have knowledge, skills, and abilities that aren't directly related to their job
description, but are still useful to an organization. Utilizing a team member's talents in areas other
than their current position will indicate to an employee that management appreciates and
recognizes all that an employee has to offer to the organization. This can also provide work
variety and helps to break up the everyday grind of work.
• Never threaten a team member's job or income –
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While threatening an employee with termination or demotion might seem like a surefire way to
get the results needed from him or her, doing so will likely cause the employee to leave the
organization. Put yourself in the employee's shoes, what is the first thing you would do if your job
was threatened? Odds are you would probably update your resume and start checking for open
job postings expecting the worst. If a team member's performance is not what you had hoped it
would be, work with that team member on ways to improve his performance, saving termination
only as a last resort.
Take some time and seriously evaluate what your organization is doing to encourage a high
retention workforce. Having a seasoned and well trained workforce can deliver a competitive
advantage that is difficult to replicate. The best part is most of your efforts to retain your
employees come free or with little charge and offer huge returns on a manger's investment in time
and resources.
Reason for Employee to come to the organization
Pay,
Location,
Benefits,
Advancement Possibilities,
Job Security,
Nature Of Work,
Personal/Family Time.
Employee Recognition Increases Retention
It seems that now more than ever employee recognition is limited at best in many organizations.
Unfortunately many managers don't understand the importance of recognizing a team member's
hard work and a job well done. Many might even ask why they should recognize their employees
when they are "just doing their job." The truth is that recognizing employees for their hard work
is one of the least expensive and easiest ways to improve the level of employee retention in your
organization. The return on investment for a manager's time and limited expenses can be
incredible.
Recognizing an employee's performance reinforces positive behavior and encourages additional
positive behavior. If a team member feels that he or she is appreciated they will be much more
likely to repeat their behaviors in the future and even put out more effort than before. When a
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business leader understands the power of recognizing his or her employees the culture of an
organization reacts to this recognition and moves in a positive direction helping to retain more
employees.
Employee recognition can be as simple or as extravagant as one desire. The following is a short
list of simple ways to recognize team members for a job well done and improve retention in your
organization.
•A simple "thank you" or "nice job" given in regular frequency can significantly boost team
morale. Often times a team member will greatly appreciate the time you spent to find him at his
desk and deliver the message in person.
•Send a thank you card or e-card. Also photocopy the thank you and document the reason for the
recognition in the employee's file. Let the employee know you did this - it will let her know that
her hard work will not be forgotten.
•Movie tickets, gift certificates, or an engraved gift are excellent rewards for an employee who
has excelled or put in the extra effort to make a project happen.
•Recognize the team member's contribution in front of members of management. This can reduce
the tendency for employees to feel that their supervisors take all the credit for their hard work.
•Recognize loyalty and exceeding expectations. Mention the team member's hire anniversary,
large contract won, or surpassing of a sales goal in the company newsletter or at a staff meeting.
•Know how to recognize your staff. Not all staff members want to be singled out at a gathering of
hundreds of fellow team members, while for others it would make their week. The approach to
recognizing team members can vary greatly by generational cohort. You might seriously
embarrass a baby boomer by having them stand up in front a
Group of their peers and discuss their recent success, while a Gen X-er will relish this
opportunity.
Retention Strategies Help to Drive Revenue Growth
Employee satisfaction is essential to any effective employee retention strategy - any good HR
manager knows that. However few managers think of the impact that employee satisfaction has
on their customers and ultimately company profits. One can assume that happier, more productive
employees will make more sales, treat customers better, and ultimately make more money for the
company, but few companies have analyzed this assumption to the extent that Sears, Roebuck
and Company has. Sears has put this common assumption to the numbers test and the results are
intriguing to say the very least. 1992 was the worst year on record for Sears, losing almost 4
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billion dollars on over 52 billion dollars in retail sales. The early and mid 1990s were truly trying
times for the retail giant and tested the will and resolve of managers and employees alike. During
this time the company was in near shambles, morale was low, revenues were suffering, and the
bottom line was hemorrhaging red ink. This was in stark contrast to nearly a century of stellar
results that Sears had comfortably enjoyed. For Sears, something needed to be done, and fast!
Sears began their turnaround by identifying three key objectives: Creating a compelling place to
work, a compelling place to shop, and lastly creating a compelling place to invest. One of the
tools used to establish these objectives was the employee-customer-profit chain. The employee-
customer-profit chain is essentially a flow chart that diagrams revenue creation starting with
employee attitudes and satisfaction, followed by its effect on customer satisfaction, and
ultimately the effect on revenue and bottom line profit generation.
One thing Sears realized it needed to do was exert a greater effort focusing on the customer. This
is often times easier said than done for many organizations. However Sears took an innovative
approach to increasing customer focus. Based on the employee-customer-profit chain, it realized
that it could not better focus on the customer without first focusing on its employees. For Sears
70% of its workforce was part-time status and turnover among its part-time workforce had
become alarmingly high. Sears suspected that low morale and poor employee attitudes towards
the company were to blame. Sears began a rigorous process of measuring employee attitudes and
satisfaction via a 70 question employee survey. The results of this survey were then juxtaposed to
customer satisfaction surveys and ultimately compared to revenue and profit trends for the
company. The correlations drawn from the data were greater than Sears could have ever
imagined.
Undoubtedly Sears expected to see some positive correlation between employee and customer
satisfaction and ultimately revenue and profit generation; however they were amazed to see just
how great an impact employee satisfaction levels had on the bottom line. The data revealed that
for each five point improvement on the employee attitude scale, there was a subsequent 1.3%
improvement in customer satisfaction, and a 0.5% increase in revenue growth.
A 0.5% increase in revenue might sound miniscule, however when it is based on revenues of over
50 billion dollars it adds up quickly and significantly. For Sears this would equate to a 250
million dollar increase in revenues a year! This revenue increase does not require investments
into advertising, new facilities, or improved operations, only an investment into the satisfaction
and happiness of employees.
There are also cost savings that can be attributed to improved levels of employee satisfaction. It
should come as no surprise that happy employees stay in their jobs longer than unhappy
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employees. By focusing on increasing employee satisfaction Sears was able to concurrently
increase revenues and reduce the costs associated with employee turnover. Sears was also able to
determine that employees with greater levels of satisfaction and a favorable attitude towards the
company were more likely to speak positively about the company and recommend shopping there
to friends and family members.
By increasing employee satisfaction Sears was able to generate free word of mouth advertising
spread by its employees, thus in a way reducing the reliance on paid advertising to generate
revenue. Sears realized the importance of its employees and their levels of satisfaction and made
it a corporate goal to increase levels of employee satisfaction throughout the company. Sears feels
that employee satisfaction levels are so important to the company's health and vitality that it treats
attitude and satisfaction numbers the same as "hard" financial numbers. Sears is so committed to
these numbers that it has them audited by an accounting team to ensure validity and reliability
just as it does with all of its internal financial measures.
For Sears its turnaround did not take place overnight. It took several years of hard work and
dedication from managers and employees at all levels. Improving levels of employee satisfaction
was not the sole contributing factor to Sears' remarkable turnaround. However it is fair to assume
that without the focus on the employee as a base to better focus on the customer the turnaround at
Sears would not have been as quick or amazing as it was. As business leaders we should all pay
careful attention to the approach that Sears took to improving its bottom line. The urge to
drastically cut costs through outsourcing, layoffs, reducing benefits, and streamlining operations
might well be overly complex solutions to a relatively simple problem.
The Three R’s of Employee Retention
To keep employees and keep satisfaction high, you need to implement each of the
three R’s of employee retention: respect, recognition, and rewards.
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Respect is esteem, special regard, or particular consideration given to people. As the pyramid
shows, respect is the foundation of keeping your employees. Recognition and rewards will have
little effect if you don’t respect employees.
Recognition is defined as “special notice or attention” and “the act of perceiving clearly.” Many
problems with retention and morale occur because management is not paying attention to
people’s needs and reactions.
Rewards are the extra perks you offer beyond the basics of respect and recognition that make it
worth people’s while to work hard, to care, to go beyond the call of duty. While rewards represent
the smallest portion of the retention equation, they are still an important one.
You determine the precise methods you choose to implement the three Rs, but in general, respect
should be the largest component of your efforts. Without it,recognition and rewards seem hollow
and have little effect—or they have negative effects. The magic truly is in the mix of the three.
Rewards
Recognition
Respect
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When you implement the “three R’s” approach, you will reduce turnover and enjoy the
following:
➣ Increased productivity
➣ Reduced absenteeism
➣ A more pleasant work environment (for both employees and you!)
➣ Improved profits
Compensation provided by the Hdfc Slic to retain and satisfy its employees:
A part from the legal and mandatory benefits such as provident-fund and gratuity, below is a list
of other benefits…:
1) Fixed pay: This company provides fixed salary to its employees for their survival. By
getting fix salary employee feels a job security .which increase their level of satisfaction.
2) Group Medi-claim Insurance Scheme: This company provide adequate insurance
coverage of employees for expenses related to hospitalization due to illness, disease or
injury or pregnancy in case of female employees or spouse of male employees. All
employees and their dependent family members are eligible. Dependent family members
include spouse, non-earning parents and children above three months
3) Personal Accident Insurance Scheme: This scheme is to provide adequate insurance
coverage for Hospitalization expenses arising out of injuries sustained in an accident.
This covers total / partial disablement / death due to accident and due to accidents.
4) Company Leased Accommodation: The company provides shared accommodation for
all the out station employees. The purpose is to provide to the employees to lead a more
comfortable work life balance.
5) Corporate Credit Card: The main purpose of the corporate credit card is enable the
timely and efficient payment of official expenses which the employees undertake for
purposes such as travel related expenses like Hotel bills, Air tickets etc
6) Cellular Phone / Laptop: Cellular phone and / or Laptop are provided to the employees
on the basis of business need. The employee is responsible for the maintenance and
safeguarding of the asset.
7) Personal Health Care (Regular medical check-ups): The company provides the facility
for extensive health check-up. For employees with above 40 years of age, the medical
check-up can be done once a year.
8) Loans: The company provide loan facility on three different occasions: Employees are
provided with financial assistance in case of a medical emergency. Employees are also
provided with financial assistance at the time of their wedding. And, the new recruits are
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provided with interest free loans to assist them in their initial settlement at the work
location.
9) Educational Benefits: The company have this policy to develop the personality and
knowledge level of their employees and hence reimburses the expenses incurred towards
tuition fees, examination fees, and purchase of books subject, for pursuing MBA, and/or
other management qualification at India's top most Business Schools.
10) Performance based incentives: The company they have plans for, performance based
incentive scheme. The parameters for calculation are process performance i.e. speed,
accuracy and productivity of each process. The Pay for Performance can be as much as
22% of the salary.
11) Flexi-time: The main objective of the flextime policy is to provide opportunity to
employees to work with flexible work schedules and set out conditions for availing this
provision. Flexible work schedules are initiated by employees and approved by
management to meet business commitments while supporting employee personal life
needs .The factors on which Flexi time is allowed to an employee include: Child or
Parent care, Health situation, Maternity, Formal education program
12) Flexible Salary Benefits: Its main objective is to provide flexibility to the employees to
plan a tax-effective compensation structure by balancing the monthly net income, yearly
benefits and income tax payable. It is applicable of all the employees of the organization.
The Salary consists of Basic, DA and Conveyance Allowance. The Flexible Benefit Plan
consists of: House Rent Allowance, Leave Travel Assistance, Medical Reimbursement,
Special Allowance
13) Regular Get together and other cultural programs: The companies organizes cultural
program as and when possible but most of the times, once in a quarter, in which all the
employees are given an opportunity to display their talents in dramatics, singing, acting,
dancing etc. Apart from that the organizations also conduct various sports programs such
as Cricket, football, etc and regularly play matches with the teams of other organizations
and colleges.
14) Wedding Day Gift: Employee is given a gift voucher of Rs. 2000/- to Rs. 7000/- based
on their level in the organization.
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CHAPTER 4
RESEARCH METHODOLOGY
4.0 TITLE
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MARKETING STRATEGY OF HDFC STANDARD
LIFE INSURANCE CO. LTD.
4.1. TITLE JUSTIFICATION
The Working capital, also known as "marketing strategy", is a metric which represents
the concept of company to sale their product to a business. The main purpose of our
study is to render a better understanding of The concept “marketing strategy”. Along with
with the planning and management, marketing strategy is considered a part of operation
&function. It is considered as total effort to marketed a product for customer.
4.2 OBJECTIVE OF THE STUDY
How the company like HDFC STANDARD LIFE INSURANCE CO.
LTD. would meet the cash disbursement needs (payment schedule);
1. Organization like HDFC STANDARD LIFE INSURANCE CO. LTD. how to
minimize funds committed to cash balances.
2. To understand the planning and management of markegting used by the HDFC
STANDARD LIFE INSURANCE CO. LTD Finance managers and how does it
help to take the decision.
3. To study the optimize way to use the Liquidity in the company and trend in the
company
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4.3. SIGNIFICANCE OF THE STUDY
The need of the project is to study and analyses certain issues HDFC
STANDARD LIFE INSURANCE CO. LTD and event management, which need further
attention. And some suggestions have been given to make HDFC STANDARD LIFE
INSURANCE CO. LTD and Marketing Strategy industry more effective in order to
utilize its full potential and serve the objective of an event and be mutually beneficial for
the agency, the Corporate and the customer.
4.4 SCOPE OF THE STUDY
1. It gives knowledge about the inflow and outflow of cash in the organization.
2. It helps to understand and calculate the daily or day to day expenses of the
organization.
3. It helps people to identify the financial position of the organization.
4. It also provides the knowledge about working capital
4.5. MANAGERIAL USEFULNESS OF THE STUDY
Gross Working Capital refers to the firm’s investment in current assets. Current assets are
the assets which can be converted into cash within an accounting year and include cash,
short-term securities, debtors, bills receivable and stock.
4.6 RESEARCH METHODOLOGY
Data has been collected through one to one interaction and discussion with
various people who are involved in the business of insurance as Sales manager, Life
Advisors, Marketing Manager Customers and others. Newspapers, Internet,
Magazines and Journals would provide ample material about latest trends and
practices in insurance industry. Kotak organizes various outdoor activities to boost its
business and brand. Interaction with customers during such outdoor activities would
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enable to understand the success ratio of such kind of outdoor activities. Various
products of the company would be discussed with respect to their benefits and
advantages. Various insurance players would be compared with respect to their
market share and products that they offer.
Research Design
i. This project is not have any probability
ii. It is non probability based project and it is simply calculated from the
differential based technique.
iii. Exploratory research will be taken for this project work
Sampling Methodology
Sample Design
Sampling is the process of collecting information only from a small representative part of
the population. Stratified Random Sampling is one amongst the most elementary random
sampling techniques. A stratified random sampling is a method that allows each possible
sample to have an equal probability of being picked and each item or individual in the
entire population have an equal chance of being included in the sample. For this project
work, without replacement sampling method is used. It means that a person or item once
selected is not returned to the frame and therefore cannot be selected again. This selection
process continues until the desired sample size ‘n’ is obtained.
i. Sampling chosen with the Random method
ii. Sampling Area would be Jaipur and near area only
65
iii. Sample Size: 100
4.7 TYPE OF SAMPLING
Simple random sampling
4.7 LIMITATION OF THE STUDY
Only Jaipur region covered for this report because of not availability of time and
resource. Also for human resource Practice Company are not sharing more internal
information either on internet or ready to give.
66
CHAPTER 5
DATA ANALYSIS
&
INTERPRETATION
67
DATA ANALYSIS AND INTERPRETATION
INSURANCE ADVISOR
ANALYSIS AND FINDINGS:-
Insurance Advisor survey of finalized the deals:-
Gender of the respondent
Table 1:-
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid 1 to 5 11 16.9 16.9 16.9
5 to 10 6 9.2 9.2 26.2
More
than 1048 73.8 73.8 100.0
Total 65 100.0 100.0
1 to 5 5 to 10 more than 10
0
10
20
30
40
50
Fre
qu
en
cy
customer size per month of the respondent
68
Inference-On an average an insurance advisor deals with more than 100 customers in a
month and out of them he converts 80% of the calls i.e. he sells policies to them. 73.8%
of the respondents had a customer base of more than 10 which was the minimum figured
option included in our questionnaire. And these were the advisors who had been in this
field for the last 5 to 8 years or more than that.
69
Table 2:-
What are the sources of contacting clients?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Personal
meeting &
telephone
9 13.8 13.8 13.8
Telephone &
references10 15.4 15.4 29.2
All 46 70.8 70.8 100.0
Total 65 100.0 100.0
9
10
46
personal meeting & telephone
telephone & references
all
contacting the customer by the respondent
Inference-When respondents were asked that what are the ways they use for contacting
the clientele base they are having then 70.8% of them named telephone calls, personal
meetings and references as the major means of keeping in touch with their customers
while only 15.4% named telephone calls and references as their sources.
70
Frequency of visiting the customer by the respondent
Table 3:-
How often you visit?
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Once a
month10 15.4 15.4 15.4
Twice a
month49 75.4 75.4 90.8
More
than that6 9.2 9.2 100.0
Total 65 100.0 100.0
71
once a month twice a month more than that
0
10
20
30
40
50
Fre
qu
en
cy
frequency of visiting the customer by the respondent
Inference-75.4% of the advisors were find to visit their customers almost twice a month
for various purposes like updating the customers for new policies and products company
is introducing etc. and only 15.4% visited their clients once a month.
Table 4:-
Do you consider customers income if yes than how much?
Frequency PercentValid Percent
Cumulative Percent
Valid Below Rs. 50,000
4 6.2 6.2 6.2
Rs. 50,000 -- 1,00,000
15 23.1 23.1 29.2
Above Rs. 1,00,000
46 70.8 70.8 100.0
Total 65 100.0 100.0
72
below Rs. 50,000 Rs. 50,000 -- 1,00,000 above Rs. 1,00,000
0
10
20
30
40
50F
re
qu
en
cy
annnual productivity of the respondent
Inference
The commission earned by the advisors on the policy they sell to their customers is called
the premium or the productivity. 70.8% of them had an annual productivity of more than
1 lac due to the large amount of business they gained via insurance only while 23.1%
were earning between 50,000 to 1,00,000 because either they were new to this business
or they were not able to devote much time to this field.
Source of information of the customer
Table 5:-
How much deals are finalized through below sources?
Frequency PercentValid Percent
Cumulative Percent
Valid Newspapers 15 23.1 23.1 23.1 Television and
radio14 21.5 21.5 44.6
Relatives/friends 24 36.9 36.9 81.5 Other sources 12 18.5 18.5 100.0 Total 65 100.0 100.0
73
newspapers television and radio relatives/friends other sources
0
5
10
15
20
25
Fre
qu
en
cy
source of information of the customer
Inference-As per the point of view of the 36.9%advisors, the customers usually get to
know about the policies and products of any insurance company via their relatives or
friends while 23.1% advisors gave the credit to the advertising in the newspapers as the
source of information to the people. TV and Radio had 21.5% of the advisors favoring
them. Parameters Demanded in insurance policies
74
Table 6:-
What is the feedback of the consumer for your products:-
Frequency Percent
Valid
Percent
Cumulative
Percent
Valid Service 14 21.5 21.5 21.5
Quality 18 27.7 27.7 49.2
Product
features11 16.9 16.9 66.2
Brand 22 33.8 33.8 100.0
Total 65 100.0 100.0
21.54
27.69
16.92
33.85
service
quality
product features
brand
parameters demanded in insurance policies
Inference-33.8% advisors feel that while buying a policy what customer looks is the
brand name associated with it. Like for selling a LIC, which is a generic brand you don’t
need to do that much hard work because customer knows it.
75
27.7% favored quality of the product they are selling as the top priority of the
customer.16.9% advisors gave their consent to the product features as one of the enticing
factor for the customers in buying into a policy.
PIE CHARTS
Pie-chart 1:-
What is your profession other than a insurance advisor?
Business 15
Student 21
Profession 29
House Wife 6
Others 29
100
What is your profession other than a insurance advisor?
Business
Student
Profession
House wife
others
Interpretation: The above graph shows that out of 100 respondents the 15 are business
man, 21 are students, 29 are professional, 6 are housewives and remaining 29 in other
fields.
76
Pie-chart 2:-
How frequently you approach your customers?
Regular 20
Once in a Week 30
Once in a Month 50
Approach to Customers
Regular
Once in a Week
Once in a Month
Interoperation: Out of 100 respondents 20 are regularly approached their customers, 30
are approached once in a week and remaining 50approahced their customers once in a
month.
77
20
30
50
Pie-chart 3:-
Are you aware about advisors schemes?
Yes 74
No 26
100
Aware about advisors schemes
Yes
No
Interpretation: Out of 100 respondents 74 having their good knowledge of advisors
sachems.
78
26
74
Pie-chart 4:-
Are you aware about your job profile?
Yes 65
No 35
100
Aware about the job profile
Yes
No
Interpretation: The above shows that out of 100 respondents 65 are aware about the job
profile.
79
35
65
Pie-chart 5:-
What type of policy you prefer to clients?
Endowment 10
Money back 45
Term policy 5
Whole life 35
Single
premium 5
100
Policy prefere to clients
Endowment
Money back
Term policy
Whole life
Single premium
Interpretation: Out of 100 respondents 10 prefer endowment policy to their clients, 45
prefer Money Bank policy to their clients, 5 prefer term policy to their clients, 35 prefer
whole life policy to their clients and remaining 5 prefer single premium policy to their
clients.
80
10
45
5
35
5
Pie-chart 6:-
What kind of advisor are you?
Broker 6
Trust
department 6
Insurance
agent 45
Registered
advisor 43
Kind of advisor met
broker
Trust department
Insurance agent
Registered advisor
Interpretation: Out of 100 respondents, 6 are broker, 6 are trust debarment, 45 insurance
agent and 43 are registered advisor.
81
6643
45
Pie-chart 7:-
Are you satisfied with your present employment?
Yes 76
No 24
Advisors satisfied with their employment
Yes
No
Interpretation: Out of 100 respondents 76 are satisfied with their present employment and
remaining 24 are not satisfied.
Product of HDFC SLIC life insurance sold by their Advisors:-
Individual plans
Savings(endowment)
HDFC SLIC endowment plan
HDFC SLIC special endowment plan
HDFC SLIC cash flow plan
HDFC SLIC child plan
HDFC SLIC whole life plan
Pension
HDFC SLIC golden year plan
Investment
82
76
24
CHAPTER 6
FACT FINDING
83
FACTS & FINDINGS
1) what are the customer size per month ?
a) 1 to 3 b) 3 to 9
c) More than 9
Cusrtomer size Percentage
1 to 3 20
3 to 9 30
More than 9 70
(2) What are the sources of contacting clients?
(a) Refences
(b) Telephone
(c) ALL
Contacting clients Percentage
Refences 13
Telephone 11
ALL 76
(3) How often frequency of visiting the customers?
(a) Once in a week
(b) Twice in month
(C) More than that
visiting the customers Percentage
once in a week 22
Twice in month 33
More than that 55
84
(4) What is the feedback of the consumer for your product?
(a) Quality
(b) Brand
(c) Service
consumer for your product Percentage
Quality 40
Brand 30
Service 30
(5) Do you consider customer income if yes than how much?
(a) Below Rs 25,000
(b) Rs 25,000-50,000
(c) Rs 50,000-75,000
Customer income
Below Rs 25,000
Rs 25,000-50,000
Rs 50,000-75,000
85
CHAPTER 7
RECOMMENDATIONS
86
RECOMMENDATIONS
Organization should to organize training programs on small intervals
for insurance advisor as well as for unit managers it will increase their efficiency
to work and will sharp their skills also.
Unit managers should to recruit those people who are having good
communication skill and can work as a team which will help in increasing sale of
products.
Survey reveal that percentage of insurance advisor who are free
lancers are more than permanent employ for this unit managers have to give more
emphasis on recruitment part and have to recruit those who can give more time to
organization.
Unit managers and insurance advisor have to look after their existing
customers also so that they can get more references through them.
Company should reveal its entire plan in their own website.
87
CHAPTER 8
CONCLUSION
88
CONCLUSION
Today marketing must be understand not in the old sense of making a sale “telling
and selling”-but in the new sense of satisfying customer needs. While selling life
insurance one does not sell any tangible product. That’s why it becomes very essential to
understand customer needs, which will help to distribute and promote the product
effectively and it will be easy to sell the products.
HDFC Standard life Insurance is most respected private life insurance company.
In very short time it has won the confidence of people because of its unique features like
good services and promising future in insurance sector. While working on this project I
came to know facts about insurance business, that there is a cutthroat competition and
every company is trying its best to sell the products. Hence it is required to strengthen the
selling chain so as to compete in the market, as a part of my project I have tried to
strengthen the chain by employing few people for the company with a desired profile. I
have discussed various issues in the project, which should be taken care of while
recruiting the financial consultants for the company.
Lastly I would like to conclude by saying quoting the following quote,
Which signifies the importance of Life insurance in ones, Life.
“Iron is strong but fire melts it,
Man is strong but death is stronger,
So survive death through Life Insurance”
89
CHAPTER 9
ANNEXURES
&
QUESTIONNAIRE
90
QUESTIONNAIRE
Study of insurance Advisor work in Insurance Market:-
The personal questions from the advisors:
1).Name ___________________________
2).Sex
Male……
Female…….
3).Occupation other than a insurance advisor?
Student …….
Profession……..
Servcice ………
Business man…….
House wife…….
Other specify……..
4).Age?
18 – 21……..
21 – 30……..
31- 45……..
above 45………
5).What is your Monthly Income?
5,000 – 10,000……
10,000 – 20,000…….
more than 20,000……..
91
6).Do you understand what ‘Insurance’ is?
Yes……
No………
7).Are you aware about insurance companies?
Yes….
No………
8).Are you aware about advisors schemes?
Yes…….
No………
9).Are you aware about your job profile?
Yes……
No……..
10). Are you satisfied with your present employment?
Yes…………..
No…………..
11). What do you look for, while selecting for a Life Insurance Company?
Incentives & commission……….
Goodwill………
Additional Benefits………
Security………
Others, specify ……….
92
12). With whom will I be working in future? And why?
L.I.C……..
HDFC SLIC……..
Tata Aig………
Aviva………..
Kotak Mahindra……….
I.C.I..C.I………
SEBI…………
Max New York………
Other specify………….
13).What kind of advisors are you?
the Broker……
the Trust Department………
the Insurance Agent…….
the Registered Investment Advisor (RIA)………
14).What is your investment philosophy?
………………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………
15).How you search for prospective customers?
through relations………….
through e-mail data………….
through reference of past clients…………
93
CHAPTER 10
BIBLIOGRAPHY
94
BIBILIOGRAPHY
Magazines & Newspapers
HDFC SLIC brochure & magazines
Times of India
Hindustan Times
Other various magazines
Internet Sites
www.lic.com
www.hdfcsl.com
www.google.com
www.altavista.com
www.reliancelife.co.in
95