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TYBCBI

TATA AIG

SR.
NO.

CHAPTER NAME

Overview of Distribution Channels of TATA AIG


Executive Summary
Research And Methodology
Objective Of The Project
Limitations Of The Study
Sources Of Data Collection
1 Background of Insurance Sector
2 TATA AIG profile
More Focused Information on TATA AIG
Description of the Indian Insurance Market
Efforts Tata AIG in Rural India
More than two lakh employees spread across the
country and plan to tap this huge base
Future Plan of TATA AIG
Operation of TATA AIG
Strategy of TATA AIG For Life Insurance and General
Insurance
3 Distribution Channels of Insurance Industry In India
(A)
Distribution-the key Differentiator
(B)
Challenging Scenario Demanding role transformation
of Intermediaries
(C)
What Should Company Look At
(D)
Distribution Scenario In the Indian Market
(E)
Focus on Multiple Distribution Channels

Agents
Banks
Brokers
Work Site Marketing
Internet

Interpretation and Data Analysis


Data Analysis
Interpretation
SWOT Analysis

5 Summary Finding and Conclusion


1

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Challenges
Recommendations
Case Study On Life Insurance
Conclusion

6 Sum Up
Questionnaire
Biblography

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TATA AIG

Overview of Distribution Channels Of TATA AIG


Introduction
The winds of liberalization initiated vast changes in the functioning of the industry
today. Increasing number of multinational partnership with private insurers paved
the way for a radical shift in insurance selling- through a number of new
distribution channels besides bringing about more awareness on the need for
insurance and also stressing on the important role technology can play.
In the developed markets, many insurers have a preferred mode of distribution
(e.g., agents, brokers or banc assurance, DSA). In India, many players are
hedging their bets because the need for scale outweighs considerations of focus
and because non-agency distribution, which is presently operational for the last
two

years forms a basis for study.

Tata AIG has a corporate agency channel, which handles its corporate agents and
have tie-ups with 38 corporate houses.
Insurers want to lower distribution costs by finding more efficient channels. The
new private players are developing multiple channel models; many insurers use or
plan to use several banks as distributors. Because most banks have strong
regional bias, in this regards Tata AIG has

agreement with HSBC( corporate

agency distribution) through that it is doing both life insurance and general
insurance business..
Because most banks have a strong regional bias, Insurers can use several banks
without creating large overlap. Many larger banks are sourcing products from
several insurers acting as manufacturers.

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TATA AIG

An important distribution challenge facing insurers is the need to meet the rural
and social sector legislative requirements stipulated in terms of market opening.
For Tata AIG, it takes rural insurance as an opportunity and not an obligation.
For

achieving objective in rural area it has also tie with NGOs(Bridge stone for

Karnataka and Kerala).


In this project mainly focus is distribution
AIG

and little bit of

distribution of

channel of Life Insurance of Tata

General Insurance of Tata AIG also. So

as the whole topic of distribution can be known for the both company of Tata
AIG ( Life and General insurance). Gradually channels are incorporating day by
day for the growth of business.
In the span of two to three years Tata AIG achieve much more business growth
what it expected at the time of entrance in Indian market. It happened because it
has quality people, innovative management, be able to employ technology
effectively besides having right product.

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TATA AIG

EXECUTIVE SUMMARY
This project has been a great learning experience for me; at the same
time it gave me enough scope to implement my analytical ability. Tata
Group is one of the India's largest and most respected business groups.
Tata Group's name is synonymous with India's industrialization.

Tata

AIG Insurance Solutions is one of the leading insurance companies that provide
both life insurance as well as general insurance. ThSis pioneer company is a joint
collaboration between the American International Group, Inc. (AIG) and
Tata Group. They own the company in the ratio of 26:74. It is a
leading financial institution that has carved a niche for itself all over
the world. Tata AIG Insurance Company is having different insurance
policies. At the end of the project people will be knowledgeable about
various
study

insurance
of

Tata

organizations.
AIG

Insurance

Project

is

Company

on
in.

the
To

market
get

to

potential
know

questionnaire has been prepared which contains open ended and close ended
questions.

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TATA AIG

RESEARCH METHODOLOGY
In this project descriptive research use. The research methodology adopted for
carriying out the study was at the first stage theoretical study is attempted and at
the second stage observedin an internet.

OBJECTIVE OF THE STUDY


To find out various channel of Tata AIG operating in India (mainly Life
Insurance little bit of General Insurance also).
To find out contribution in distribution of Agents and Other channel.
To find out contribution of new distribution channel as: Corporate Direct Sales Associate (DSA)
Bancassurance

LIMITATION OF THE STUDY


Research work has been done in Mumbai so recommendation may differ
from the other place of the country. Variation is expected due to
population, business environment and culture of the particular region.
Secondary Data is obtained from different source. There is a possibility of
occurrence of bias. So it can influence our inferences.
At the time of interviews precaution should be taken for unbiased point of
opinion to the responders. But 100% perfection cant be possible. But in
our project we consider all the data 100% right and whatever they have
given that are directly consider for analysis.
They have given data in comparative form or percentage. It would be more
perfect if we get the data in absolute (discrete or exact value) term.

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TATA AIG

SOURCE OF DATA COLLECTION


Consists of primary data and secondary data. Primary data was collected by
holding semi- structured and focused individual interviews of sales Agent,
executive, Consultant and Personnel associated with Corporate Direct sales
associate.
For the primary data Interviewed 35 insurance personnel, out these 15 were
Executives including Consultants, Executive (Managerial), and associated
Executive from other tied organization.
Where as secondary data was obtained by different records, magazines,
newspapers, inter nets and various pamphlets of Tata AIG.

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TATA AIG

Chapter-I
Background of the Insurance sector
Insurance is over one and one-half centuries old in India. The First general
insurance company, Titan Insurance Company Ltd., was established in 1850.
Life insurance came to India from the U.K. in 1880, with the establishment of
the Oriental Life Assurance Company in Calcutta.

By 1938, the insurance market

was buzzing with 176 companies--both life and non-life.


In 1956, the Government of India recognized that malpractice had entered the
management of the life insurance.

Consequently, the life insurance industry was

nationalized under the Life Insurance Corporation (LIC) of India. Although efforts
were made to maintain an open market for the general insurance industry by
amending the Insurance Act of 1938 from time to time, malpractice escalated
beyond control. Thus, the general insurance industry was nationalized in 1972.

Political ScenarioUntil recently, India continued to be one of the few remaining countries of the
world to remain insulated from the direct foreign investment in its insurance
sector. However, things are changing now with the passage of Insurance
Regulatory Development Act (IRDA) through Indian Parliament in late 1999. A
much awaited and much debated act, it met with strong resistance from the
political institutions of India and took almost six years to see daylight. Though
first recommended by Malhotra Committee on Insurance Reforms in 1994, what
emerges is a diluted form of the original recommendations. However in the long
awaited period of its passage, the issue was nationally debated and was finally
'de-politicized,' meaning that the reform path is 'irreversible.

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TATA AIG

'
IRDA, for the time being, prohibits 100% foreign equity in insurance. It requires
the Indian promoter to invest either wholly in an insurance venture or team up
with a foreign insurer, with a cap of 26% of equity for a foreign partner. The
Indian promoter is permitted to divest only after 10 years to the Indian public,
through a public offering of shares, at which time the equity structure will
provide for equal participation between the Indian and foreign partner with a
share of 26% each in the share capital. The underlying tone of the 26% cap for
the foreign insurer is to ensure that financial interest substantially vests with the
Indian promoter, permitting the foreign co-promoter a definite say in direction
and management (By Indian Company Law, 26% is the minimum equity to move
a resolution or vetoing a resolution in Board of Directors' Meeting).

Recent initiatives
Privatization is expected to foster competition, innovations and greater awareness
on the need for buying insurance services and variety of products. The IRDA bill
Passed by the parliament was an important development in the field of Insurance
business. The IRDA Act marks an end to the monopoly of the government in
the insurance sectors by opening it up to private players. It gives priority in the
Utilization of the policyholders funds for development of society and
Infrastructure sector.
The features of the IRDA are:

Removal of exclusive privilege of existing companies to do life and general


insurance business.

An Indian insurance company is a company in which foreign equity


shareholding shall not exceed 26% of equity shareholding and this includes
holdings of NRIS, FIIS and overseas corporate bodies.
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After the commencement the Indian promoters can hold more than 26%
equity for 10 years the balance being held by non-promoter Indian
shareholders.

On foreign promoters the maximum of 26% will always be operational.


Thus they will not be allowed any equity holding beyond this ceiling.

The IRDA will have all the powers that the controller of insurance had.

Minimum paid up equity capital of Rs.100crores for life and general


insurance. And Rs.200crores for reinsurance.

Solvency margin fixed at not less than Rs.50crores for life and general
insurance.

All companies to deposit Rs.10crores as security deposit.

Provision prohibiting investment of policyholders funds outside India and


compulsory investment in society and infrastructure.

All companies have to provide rural insurance and policies to backward


sections of society.

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Views of

TATA AIG

IRDA:-

IRDA is working Very satisfactorily it makes and incorporates many regulation


that are required for the insurance industry and company. Particular I would like
to discuss one of the latest regulations Insurance Brokers and Insurance
Consultants regulations, 2002.
Composite broker:- means an insurance broker who arranges insurance for clients
with insurance companies and to whom the license has been granted by the
Authority(IRDA) under regulation 12.Alt: means a person who is licensed under
the regulation to carry on both direct broking and reinsurance broking.
Direct general insurance broker: - means a person who is for the time being
registered in respect of general insurance business but does not include broking of
insurance business.
Direct Life insurance broker:- means a person who is for the time being
registered in respect of Life business but does not include broking of insurance
business.
Insurance broker:- means a person who for a consideration or otherwise arrange
insurance for clients with underwriting insurance companies and to whom a
license has been granted by

the authority under regulation12 to act as an

insurance broker.
Insurance consultants:- shall mean a person , other than an insurance broker as
as specified under categories I(direct general insurance broker), II( direct life
insurance broker),III(a reinsurance broker & IV(composite broker) of regulation
3(2) who directly or indirectly represent

or assists an insurer in negotiating or

effectuating insurance, disseminating information relating to coverage rates, risk

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TATA AIG

management and inspection of risk and assist the policy holder in matters
relating to settlement of claims.
Principal officer:- means (i) proprietor, in the case of a propriety concern;
(ii) Managing partner, in the case of a partnership
(iii) Director, who is responsible for the activities of the
insurance broking in the case of a body corporate.

Reinsurance broker:- means an insurance broker who arranges reinsurance


for client insurers with insurance and reinsurance companies and to whom the
license has been

granted by the authority(IRDA) under regulation 12.

Function of direct
insurance broker:The Function of both

general

insurance

broker

and

direct

life

shall be to:

a) obtain detailed knowledge of the client business and philosophy


b) maintain clear records of clients so that this can be explained to an
insurer and other parties
c) render advice based on technical
law

matters, development in insurance and

d) maintain detailed knowledge of available market;


e) make selection and recommendation of an insurer and group of insurers;
f) negotiate with insurers on behalf of clients;

The function of reinsurance broker:The function of reinsurance broker shall be toa) obtain detailed knowledge of the insurers business and philosophy;
b) maintain clear records of insurance business to assist the insurer(s) or
others;
c) render advice based on technical data on the reinsurance covers available
in the international insurance and reinsurance market;
d) maintain detailed knowledge of available market;
e) select and recommend of a rein surer and a group of reinsures;

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f) negotiate with insurers on the insurers behalf;

Function of insurance consultant:An Insurance consultants, risk management consultant or any other nomenclature
as may be approved by the authority shall mean a person, other than an insurance
broker and excluding an insurance surveyor and loss authority shall mean a
person, other than an insurance broker and excluding an insurance surveyor and
loss assessors, who for a consideration or otherwise offers insurance consultancy
or related services to his clients and

to whom a license has been granted by the

authority under regulation 12.

Present scenario in the insurance sector

Insurance agents are the main intermediaries in the Indian insurance market,
but with liberalization brokers will be an additional channel for selling
insurance products.

Brokers are likely to play a major role in ensuring clients get insurance
covers tailor made to suit their requirements at good terms.

Fast growing middle class of 300m who can afford insurance.

Increasing financial strength of middle class with disposable income

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


information and services.

More and more entrepreneurs in traditional and modern business areas.

Increase in number of double income families leading to lifestyles and


attitude changes

Growth of rural market is at 4 times of urban markets.

The potential of the Indian insurance market is huge with current life
insurance penetration being only 1.9 of the GDP.

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THE GREAT INDIAN INSURANCE MARKET:There are two factors that make India an attractive market for most insurance \
companies.
First, of course is the sheer size of the market. With a population of over one
billion, out of which about 40-45% is the insurable population. India is clearly a
market poised for growth. The insurance penetration as well as the size of the
average cover is well below international average, again providing a great
marketing opportunity for the insurance companies.
Second, till about two years back life

insurance in India was synonymous to

LIC has done commendable work, there is still a great deal of scope for
bringing in innovative products and distribution channels to tap this market.

The list of foreign players entering the Indian Insurance


sector and their Indian partners:
Present Status
The list of foreign
players entering the
Indian Insurance sector
and their Indian
partners: Indian
Partner

Foreign Insurer

Specialization
It is for 2000.

Now many have tak


license

Aditya Birla Group


Sun Life, Canada

Life

Received License

Kotak Mahindra Finance Old Mutual, South


Africa

Life

Received License

HDFC

Life

Received License,
Standard Life, UK

Commences Operation

Reliance

No Foreign Alliance
14

Life, Non-Life and

Received License for

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TATA AIG

Health

Non-Life

ICICI

Prudential, UK

Life

Received License,
Commences Operation

ICICI

Lombard, Canada

Non-Life

Not applied

Max India

New York Life, USA

Life

Received License

Sundaram

Royal & Sun Alliance


Plc, UK

Non-Life

Received License

IFFCO

Tokio Marine, Japan

Non-Life

Received License

Tata Group

AIG, USA

Life and Non-Life

Received License

Vysya Bank

ING Insurance,
Netherland

Life

Applied for License

Hero Group

Zurich, Switzerland

Life

Not Applied

Cholamandalam Group

Undecided

Life

Not Applied

Hindustan-Times

Undecided

Life

Not Applied

Dabur

CGNU Life, UK

Life

Not Applied

Bajaj Auto

Allianz

Non Life

IRDA Seeks more


information

Undecided

Metlife, USA

Life

Not Applied

Sanmar Group

AMP, Australia

Life

Not Applied

SBI

Cardiff, France

Life

Not Applied

S Kumars, J&K Bank

Undisclosed

Non-Life

Finalizing Partner

Corporation Bank

Undisclosed

Life

Finalizing Partner

Undisclosed

Aegon, Netherlands

Life and Pensions

Finalizing Partner

Undisclosed

Cigna, USA

Life and Health

Finalizing Partner

Undisclosed

Chubb, USA

Property & Casualty

Finalizing Partner

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TATA AIG

Undisclosed

Yasuda Marine and Fire, Non-Life


Japan

Finalizing Partner

Undisclosed

Mitsui Marine and Fire Non-Life

Finalizing Partner

Undisclosed

Nationwide, USA

Life and Pensions

Finalizing Partner

Citibank, India

Undecided

Non-Life

Finalizing Partner

Undisclosed

GE Capital Services
International, USA

Life

Finalizing Partner

Videocon International

Talks on with BNP


Paribas, AXA, France

Non-Life

Finalizing Partner

Tata AIG

General Insurance

Tata AIG General Insurance Company provides non-life insurance solutions to


individuals, groups and corporate houses in India. The company was established in
2001. Tata Sons holds a 74 percent stake in the company with American
International Group Inc (AIG) holding the balance 26 percent. AIG is the worlds
leading international insurance and financial services organization.

Location
Headquartered in Mumbai, the company employs over 2,100 people across 160+
locations in the country.
CAREERS AT TATA AIG
Tata AIG General Insurance Company, which started its operations in India on
January 22, 2001 offers the complete range of insurance for automobile, home,
personal accident, travel, energy, marine, property and casualty, as well as several
specializefinanciallines.
Tata AIG offers exciting opportunities to learn, contribute and build careers. As a
leading name in the fast-paced insurance industry, we are constantly growing and
are always in search of bright talent across all levels. The company's philosophy
is strongly oriented to developing talent through larger and more enriching
assignments. We recognize potential and consistent performance - fast!
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Chapter-II
Tata AIG Profile
Tata (Indian)+ AIG( American Insurance Group Inc.)= Tata AIG;
It set up base in December 2000;
Tata AIG General Insurance started its operations in April 2001;
It has both Life and Nonlife insurance with a separate entity;
Tata AIG Life insurance company has covered 4.4 lakh individuals in2002;
Results has recorded 81.6crore in the first year of operation( March 2002),
become top Life insurer among private players;.
Company sold around 11% of all life policies in the rural areas, thus
fulfilling the IRDA stipulated norms minimum of 5%;.
Network of branches in all the four metros and in Hyderabad, Bangalore,
Pune, Ahmedabad, Chandigarh & Guwahati;.
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Sales force is close to 10,000;


In it's first year of operations Tata AIG General Insurance issued more that
90,000 policies.
It is the first joint venture to offer gratuity and superannuation:
Tata AIG is a joint venture between the Tata Group and American International
Group, Inc. (AIG). The Tata Group is the most respected industrial conglomerate
in India, with revenues of more than US $ 8.4 billion. The Group has long been
a market leader in steel, commercial vehicles, electric power generation in the
private sector and computer software. In recent times, it has promoted several new
ventures in high growth areas of the economy such as financial services,
telecommunications, information technology, auto components, oil field services and
process management systems. The Group has had a long association with India's
insurance sector having been the largest insurance company in India prior to the
nationalization of insurance.
Tata-AIG General Insurance company is a joint venture between the Tata Group
and American International Group, Inc (AIG), the leading US-based international
insurance and financial services organization and the largest underwriter of
commercial and industrial insurance in America.
Its member companies write a wide range of commercial, personal and life
insurance products through a variety of distribution channels in approximately 130
countries and jurisdictions throughout the world. AIGs global businesses also
include financial services and asset management, including aircraft leasing,
financial products, trading and market making, consumer finance, institutional,
retail and direct investment fund asset management, real estate investment
management, and retirement savings products.
American International Group, Inc. (AIG) is the world's leading U.S.-based
international insurance and financial services organization, the largest underwriter
of commercial and industrial insurance in the United States, and among the topranked U.S. life insurers. Its member companies write a wide range of general
insurance and life insurance products for commercial, institutional and individual
customers through a variety of distribution channels in approximately 130 countries
and jurisdictions throughout the world. AIG's global businesses also include
financial services, retirement savings and asset management. AIG's financial
services businesses include aircraft leasing, financial products, trading and market
making, and consumer finance. AIG has one of the largest retirement savings
businesses in the United States and is a leader in asset management for the
individual and institutional markets, with specialized investment management
capabilities in equities, fixed income, alternative investments and real estate. AIG's
common stock is listed on the New York Stock Exchange, as well as the stock
exchanges in London, Paris, Switzerland and Tokyo
Tata AIG insurance will provide General and Life insurance solutions to
individuals and corporates. The non-life insurance arm, Tata AIG General
Insurance, will offer a complete range of automobile, homeowners, personal

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accident, travel, energy, marine, property, casualty and several specialized financial
lines of insurance.
Tata AIG Life Insurance products will include a broad array of life insurance
coverage to both individuals and groups. For groups the company has Life
products whereas for individuals, Tata AIG life has term products, endowment
products as well as money-back products. For groups and individuals, various
types of add-ons and options are available to give consumers flexibility and
choice. The range of products will continue to grow throughout the year.
Tata AIG General Insurance started its operations in April 2001. It has a wellestablished network of branches in all the four metros and in Hyderabad,
Bangalore, Pune, Ahmedabad, Chandigarh & Guwahati. The Company has 24-hour
central toll free number, which can be reached from all major cities and towns in
India. Tata AIG General Insurance plans to expand its geographical reach to 5
more cities in current financial year.
As far as Tata AIG is concerned, it set up base in December 2000 and began
commercial operations in April 2001. India is the last frontier in the world for
AIG before it begins to sell in outer space! And make Tata as partner. Tata is a
big name in India and it has a fantastic brand name. Of the total equity
investment of Rest 125cr, 74 per cent has come from the Tata.
Tata AIG General Insurance Company Limited today announced that its gross
revenues for the year ending 31st March 2002 are Rs.81.6cr. In it's first year of
operations Tata AIG General Insurance issued more that 90,000 policies.

More focused information on Tata AIG


Tata AIG becoming the largest private Indian life insurer in its first year of
operations.
Tata AIGs life and general insurance operations have touched the lives of over
half a million Indians in their first year of existence. On the life side it covered
over four lakh people through group and credit insurance and individual policies.
Today it is the largest private Indian life insurance player in terms of lives
covered (on the basis of yearly growth) Comparatively, LIC did 23 million
policies last year. The market potential is huge and It is young. It has a long
way to go

Description of the Indian insurance market.


Insurance is a sunshine industry in India and its very exciting. The projections
for the industry are that it will touch $ 50 billion in 20 years, with individual
life insurance accounting for almost $ 40 billion of this huge pie. Over 300
million individuals in this country do not have insurance. Even given that many
of them cannot afford insurance, the potential is tremendous.
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Efforts Tata AIG in rural India


Tata AIGs rural program has accounted for around 11 per cent of all the life
policies it sold in the year ended March 2002, as against the stipulated minimum
of 5 per cent. Its aim was to create an asset for the rural poor in the form of
hedging their economic loss in the event of an earning member of the family
expiring.
The rural market is huge and it is growing aggressively. It has tailored products
with smaller premiums to suit the needs of this market. It have a strong strategic
alliance with the Bridge Foundation a micro-finance company dealing with nongovernmental organizations in southern India to use its network to distribute its
products. The company has undertaken a pilot program in Tamil Nadu, and this
has been extended to rural markets in Kerala and Karnataka.

More than two lakh employees spread across the country


and plan to tap this huge base.
Tata companies and employees are one of its major focus areas. It is working
with various Tata companies to understand and fulfill their life, general and
pension needs; this will be an ongoing process. For the staff of Tata Group
companies, It has crafted special products with reduced premium rates.
It has piloted workside marketing, wherein a team of agents goes to the
workplace and explains our products and advises people about them. This has
been introduced in Tata Tea, Titan and Tata Engineering. About 25 to 30 per cent
of its total business in 2002 came from Tata Group companies.

Future plan of Tata AIG


It wants to maximize its penetration and expand its staff. Currently it is in nine
cities: Mumbai, Delhi, Chandigarh, Kolkata, Chennai, Bangalore, Hyderabad, Kochi
and Guwahati. It will, in the near future, be opening offices in Jaipur,
Jamshedpur, Ahmedabad, Lucknow and Coimbatore. It will continue to focus on
growing Its reach, with strategic expansion across geographies and channels.
It expect two or three insurance companies to lead the market in terms of growth,
aggression, size and perception; others might concentrate on niche areas. It wants
to be the fastest-growing private insurance company in India, offering the best
service and being the most profitable.

Operation of Tata AIG


AIG has been a composite insurance company all along. The only thing that has
changed over the years is the structure of its business. In 1981 life insurance
comprised about 30 per cent of AIG's operations and non-life 70 per cent. Today
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50 to 55 per cent comes from life and only 40 per cent from non-life (the rest is
derived from financial services). AIG's life insurance division has been growing at
an average of about 15 per cent.

Strategy of
Insurance.

Tata

AIG

for

life

Insurance

and

General

There is no question of competing with LIC. It already has about 9 lakh agents
and that number is likely to go up to 10 lakh by the end of the current fiscal.
No company is allowed to poach on another's agents, least of all on LIC's. We
only select freshers and, five years down the line, we hope to have about 1 lakh
agents. Unlike the non-life segment, selling life insurance requires a more personal
touch, which is why good agents are important in this business. In life insurance,
policies are sold not bought. As of now about 60 per cent of our agents work
on a part-time basis, but the ratio will come down to 50 per cent by the end of
our fifth year [in operation]. All our agents earnings are commission-based. They
make a 40 per cent commission in the first year on new business and 7.5 per
cent in the next two years on renewable business. The commission rate declines
to 5 per cent in the fourth year.
The company is targeting a policy base of one million covering three million lives
and an agency force of one-lakh agents in five years. As against others who have
set targets of sum insured or premium income, Tata AIG strategy is to cover the
maximum number of Indians among the new companies. Already the company
together with its general insurance partner, Tata AIG General Insurance provides
cover to close half a million individuals.

Innovative Products and Services


Life Insurance
(I)

Individual

(II)

Corporate

General Insurance
(I)

Individual

(a) Motor Vehicle


(b) Accident and Health

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(c) Overseas Travel


(d) Home
(II)

Corporate

(a) Energy
(b) Accident and Health
(c) Property
(d) Marine
(e) Contingents.

Chapter-III
Distribution Channel of insurance Industry in India
The insurers must refine and exploit the market segment product distribution
system linkage.
This will lead to distribution system pluralism; many different distribution systems
will be implemented across companies rather than across the industry.
Distribution channels:Why it is needed.

A) Distribution - the key differentiator


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It has been two years since the Indian insurance market has opened up, and the
new entrants into the market have set up shop in every major city. The public
sector companies have already established themselves in the market. But there are
multiple challenges faced by these insurance companies, of which two are critical:
Designing of products suiting the market

Using the right distribution channel to reach the customer

While the companies have been quite successful in dealing with the first of these
challenges using the existing product features and leveraging the technical knowhow of their partners, most are still grappling with the right channel mix for
reaching potential customers.
This paper discusses the distribution channels from the perspective of the sociocultural ethos of the market and how these channels fit into it, along with where
the various companies face challenges and bottlenecks. Whenever any debate arises
about the intermediaries and distribution channels, the discussion veers to
technology and its impact on distribution. However, the authors believe that the
basic existential problems being faced by the channels in this market needs to be
looked into first, and then the question of enablers technology, tools, training,
learning etc. -- is to be taken up.

B)

Challenging Scenario
of intermediaries

demanding

role

transformation

Insurance has to be sold the world over, and the Asian Market is no exception.
The touch point with the ultimate customer is the distributor or the producer (as
they are known in certain markets), and the role played by them in insurance
markets is critical.
It is the distributor who makes the difference in terms of the quality of advice
for choice of product, servicing of policy post sale and settlement of claims. In
the Asian markets, with their distinct cultural and social ethos, these conditions
will play a major role in shaping the distribution channels and their effectiveness.
In today's scenario, insurance companies must move from selling insurance to
marketing an essential financial product. The distributors have to become trusted
financial advisors for the clients and trusted business associates for the insurance
companies.
This calls for leveraging multiple distribution channels in a cost effective and
customer friendly manner. For example, in the developed markets producers
(brokers and agents) form the major channels of distribution, while the web as a
complementary channel is catching up slowly. According to a Forrester survey,
88% of the Life insurance executives responding identified agents as the primary
channel of distribution.

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The distinction of channels in the developed markets is: personal distribution


systems and direct response systems. Personal distribution systems include all
channels like agencies of different models and brokerages, bancassurance, and
work site marketing. Direct response distribution systems are the method whereby
the client purchases the insurance directly. This segment, which utilizes various
media such as the Internet, telemarketing, direct mail, call centers, etc., is just
beginning to grow.

C) What should the companies look at?


Basically companies have to take a look at the intermediaries they are using,
whether it is optimal to use them, and what are the alternatives?
The new companies have attempted appealing only to the middle, upper middle
and elite classes in the major cities. Contrasted with Public sector insurance
companies, with their offices across the country, the new companies have miles to
go before they reach anywhere. They must overcome the mindset of the customer
that life insurance is Life Insurance Corporation of India (LIC) and general
insurance is General Insurance Corporation of India (GIC) if they hope to grow in
the market. Meanwhile, the public sector companies are going to great lengths to
revamp their image to look and feel more contemporary.

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Both the public and new private sector companies are fighting their own battles
from the perspective of customer perception management:

Public Sector Companies

Private Sector Companies

Identity is well established, but the Have to build their identity in a


perception
of
"
poor
service market where the public does not
providers" is a stigma.
distinguish them.
Products are not attractive and Remove the perception that anything
flexible enough but expensive.
that looks good is expensive
To retain their creamy layer clientele Work against the people's mindset
who are the most likely to be wooed that they are not here for the long
by the new companies
term
Retain and attract good intermediaries Attract
intermediaries
especially
agents
with
the
requisite
qualifications and attributes who can
market the company and the product.
Match the aura created by the new Run the risk of tapping an already
companies in the urban market
insured market for repeat insurance
instead of tapping new virgin pockets
in the market
In this process all are targeting the same market --the existing pie is being cut up
further, but no attempt is being made to increase the size of the pie. For
example, while attempts are made to complete the quota of rural insurance in
percentage terms, the rural market potential is yet to be tapped, as the new
insurers are not able to attract the right kind of talent into their distribution force
to address this. Intelligent segmentation of distribution channels to match the
market segmentation is what will help the companies to move in this direction

D) Distribution Scenario in the Indian market


In today's Indian insurance market, the challenge to insurers and intermediaries is
two-pronged:
Building faith about the company in the mind of the client
Intermediaries being able to build personal credibility with the clients
Traditionally tied agents have been the primary channels for insurance distribution
in the Indian market; the public sector insurance companies have their branches in
almost all parts of the country and have attracted local people to become their
agents. The agents are from various segments in society and collectively cover
the entire spectrum of society. A person who has lived in the locality for many
years sells the products of the insurance company with a local branch nearby.
This ensures the last mile touch point being closer to the customer. Of course, the
profile of the people who acted as agents suggests they may not have been
sufficiently knowledgeable about the different products offered, and may not have
sold the best possible product to the client. Nonetheless, the customer trusted the
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agent and company. This arrangement worked adequately in the absence of


competition.
In today's scenario agents continue as the prime channel for insurance distribution
in India, as is the case in most markets, supported by call centers to a small
extent. Almost all the new players follow this model primarily because the
regulations for other channels are yet to be put in place.
However there is great excitement in the industry over the impending broker
regulations, and companies are planning possible channels in their enthusiasm to
increase volumes. The belief that all these channels will grow and seamlessly
integrate to bring in business seems a fallacy.
What has emerged is a much more difficult and evolving market scene with
existing players, more new players coming in, and global marketing practices and
ideas being tested. But none of this has changed the fundamental character of the
market, which we believe will take more time than expected
As the insurance market in India is liberalized, the pattern of distribution is
likely to undergo some changes with new channels being introduced
A quantum jump in insurance business in terms of premium, policies, lives
covered, etc would necessitate a corresponding increase in the capacity of
the distribution channels.
The cost of effectiveness of certain channels would induce insurers to start
using them.
There are sectors of market for whom the agency channel may not be the
most efficient and introduction of new channel will help to increase the
penetration of insurance products.
Creation of awareness and demand as a result of the increasing distribution
channels.
Dissatisfaction with the existing channels.

Key issue in increasing the number of policies sold would be;

The number of agents


Public awareness
Public perception of the need for protection and long term savings.
Favourable tax treatment
Professionalism of financial advisors
Quality and range of products.

The distribution channels would play an important role in meeting the increased
volumes. Traditionally, the life insurers have been working primarily on the agency
distribution force, while the general insurance business has depended primarily on
the development officer. The private players are bringing with them international
experience, new technology, new channels of distribution and of course, new
products. The ground rules in the insurance business are being redefined. Even the
existing public sector players are gearing up with matching strategies to face
competition.
Earlier there was only one distribution channel

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Changes in distribution pattern of life insurance after IRDA came into


existence.
FROM TIDE AGENTS
TO

MULTIPLE CHANNELS

BANKS
CORPORATES/
INSTITUTIONS
BROKERS
TELEMARKETING/
WORK-SITE MKTG./
DIRECT MKTG.

INTERNET

E) Focus on multiple distribution channels


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

Agents
Today's insurance agent has to know which product will appeal to the customer,
and also know his competitor's products in the same space to be an effective
salesman who can sell his company, the product, and himself to the customer. To
the average customer, every new company is the same. Perceptions about the
public sector companies are also cemented in his mind.
The new companies are looking for educated, aware individuals with marketing
flair, an elite group who can be attracted only with high remuneration and the
lure of a fashionable job, all of which may not be possible in this business with
its price pressures and the complexity of selling insurance. Unable to attract this
segment, they have started easing recruitment conditions as against the stringent
norms they had earlier, thereby diluting the process.
While the public sector companies are able to attract agents, they continue to
suffer from high attrition rates due to indiscriminate agent appointment. The most
successful of these companies' tied agents are hardly of the elite variety of
salesman. They are still the neighborhood do good -- the postman, the school
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teacher, and the shopkeeper -- who know the people and are themselves known in
the community. The challenge here is the lack of knowledge of the competitive
market and the inability to do intelligent comparisons with the competitor's
products. Educating and training these agents is a serious challenge for the
insurance company.
The relevance of this kind of agent continues even today as agents are sought or
contacted by families by word of mouth. Insurance companies are advised not to
follow the path of FMCG's/credit card companies, believing that a suited and
booted customer care consultant or financial consultant will necessarily appeal to
the average Indian customer.
This is the main distribution channel due to complexity of most insurance
products (Endowment, Whole of life, Unit-linked).
Social feature in the market is the considerable respect for age in Indian society
and a belief that an older person knows better. A very young up-market agent
who is a typical salesman may not appeal to a large segment of the middle class,
which is looking for a solid trustworthy person from whom they can buy
insurance.
In this context it might be a rewarding exercise to recruit some older people (who
have taken VRS from banks and other financial institutions) to sell some lines of
products like pension plans, annuities etc.
Gender of agents is another relevant feature in the rural context that makes a
difference, especially for the female population. Women to whom the customers
can relate --e.g., nurses, gram sevikas -- can target the female segment of the
population more effectively. What is applicable for the rural women and children
health programs and population control programs is equally applicable for
insurance selling also. Max New York Life has adopted a version of this strategy
by appointing gram sahayaks to sell and service the rural customers.
With this kind of segmentation of intermediaries the challenge for the insurance
company lies in training and educating these people to become effective sales
persons. But this in no way diminishes the benefits of intermediary segmentation.
Advantage Past experience as well as ability to deliver right advises.
Disadvantage- This channel can be expensive and it is a time consuming sales
process.
Product- Endowment, whole of life, Unit-linked, pension plans, annuities etc.

Banks
Banks in India are all pervasive, especially the public sector banks. Can they also
become the foremost channel for distribution of insurance? Perhaps in the future.
The public sector banks, with their vast branch networks, are also plagued by a
rigid unionized workforce and archaic systems, and lack vision of a broader
service spectrum encompassing non-banking products. The newer banks are
constrained by their lack of reach and meager branch strength. For banks to
become a predominant channel for selling insurance will require a paradigm shift.
But the encouraging fact for insurance companies waiting for bancassurance to
take off is that bank branches are here to stay, and customers do want them. A
customer survey by Deloitte Consulting in the western developed markets found
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that for banking activities, customers place high importance on having convenient
branches in their banking relationships. This is good news for the Indian banks
with their many branches, and also makes a strong case for taking up banc
assurance.
Product- The major lines of business that can be sold through banc assurance
successfully are term insurance, creditor insurance, and non-life products like
Property, Motor and Personal accident, Homeowners comprehensive insurance etc.
Process- (Distribution technique) In general distribution can be made through a
quick and convenient sale such as during loan application process. However bank
may act as a source of financial planning advice therefore, the use of highly
trained advisor is very important. The bank staff at all levels to be able to serve
the customer properly must also support this advisor. In no case should the
advisor be marginalized as an out-siderfrom the banks stand point. Simple
straightforward product with the right amount of protection (e.g loan amount)
sufficient. for Example the process may identify a need for life insurance, medical
insurance as well as saving for education for child.
An example is SBI Life, has plan to take advantage from the brokers regulation
to be put in place in order to move ahead aggressively with the bancassurance
model. One of their major product lines is creditor insurance, and they have
launched their first creditor insurance product, which covers the liabilities of the
creditor in case of death of debtor. SBI Life is planning a similar product for
home loan borrowers of State Bank of India. This model has high relevance in
the Indian context with far-flung villages where the insurance potential is in
volume and not in high per capita premiums. Some advantages and disadvantages
are:
Advantages of banc assurance
Disadvantages of banc assurance
High credibility (as trustworthy Economic viability for the banks to
caretakers of money) with the take up as banc assurance is a
public
volume business
A ready customer base
Training of people and lack of
vision and awareness
Low cost channel for selling simple Useful for selling only certain lines
vanilla products
of products
Extensive reach including the rural Initial investment in systems and
pockets
processes and people training
The strategy should be to use multiple banks according to their presence in
different regions. Success would come by using banc assurance where it will be
most effective i.e., selling simple, cheap products to the masses at a low cost.
This awareness is growing and is evident from the fact that nearly every
insurance company has partnered with one or many banks to implement banc
assurance.

Brokers
With the broker regulation 2002 come into effect this could be the next hope,
especially for the urban market. This will be a new experience for the insurance
customer, accustomed to brokers in financial services, real estate, and travel and
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tourism. For historical reasons the image that 'broker' carries in the minds of the
customer is not very favorable.
Thus the new breed of insurance brokers face
the challenge of establishing credibility.
The positives are that brokers in the urban arena can attract the elite and the
upper middle class customer. Brokers represent the customer and will sell the
products of more than one company. They seek to determine the best fit for the
client and can effectively address the mind block faced by the public about the
various companies. This is applicable in the case of life insurance for the highend and corporate/group segment.
In the non-life segment, broking is not entirely new, as reinsurance brokers were
arranging exotic covers. For individual customers also, with a wide range of
competitive products, the broker can get a good deal. The corporate broking
companies will have to play a prominent role.
If NGOs based in rural areas can be attracted into the rural sector cooperatives
arena, they stand a good chance of succeeding and can help the new players get
a foothold in the rural market. These are the players with the potential to make
the difference, as they have the trust of the people. We envisage scenarios like
that in Bangladesh's micro lending growth and the milk co-operatives in Gujarat
selling insurance in addition to milk production and distribution. It would be a
new dawn in Indian insurance distribution! With the right impetus the Indian rural
insurance scenario could be one with high business volume and tremendous
growth potential.
ICICI Prudential Insurance and HDFC Standard Life Insurance have already
partnered with NGOs to sell some low cost insurance in rural areas.
Product products for this channel must match the distribution technique whole
life policies and general insurance policies should be offer that enable the broker
to offer a lot of choice and options to the client.
Process- (Distribution technique) Insurance brokers are organisations who assess
the complete insurance needs of client and then work out back to back policies
with insurers to give a complete solution to the client.
However, the challenge lies in establishing regulations that protect the customer
and attract the right players into the brokerage market rather than creating another
middlemen segment eroding the premium.

Work site marketing


This area needs to be tapped, as in any country one of the biggest markets is
through the worksite. With changes in human resources management polices and
compensation packages, group products or work site products do have a definite
market that cannot be ignored.
Here the advantages would be:
Captive customer base
Potential to sell individual insurance and group insurance
High trust factor
High hit ratio for the intermediaries
The challenges would be the cost effectiveness, product customization and efficient
post sales servicing, which would determine continued business. Technology has a
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key role to play in worksite marketing to ensure cost benefits.


Banks and
financial institutions have been successfully marketing credit cards and other
financial products using this channel. If not an identical model a similar approach
can be used for selling insurance.

Internet
Though India is joining the fast growing breed of net users, using net for
transactions has not yet caught up. Though a few banks provide online banking,
the usage is still a small fragment. The insecurity associated with transactions over
the net is still an inhibiting factor. At present most of the insurance companies
have product information and/or illustrative tools on the web.
We do not see the web evolving into a means for direct selling of insurance in
the current scenario.
In the Indian market, where insurance is sold after
considerable persuasion even after face-to-face selling, the selling over the net,
which must be initiated by the client, would take some more time.
While the technology capability is there, improvements in bandwidth and
infrastructure are needed.
Also needed are simpler products where autounderwriting is feasible. Automobile insurance, one of the segments of insurance
purchased "off the shelf" in India, would be the ideal segment to start with. On
the life side, term assurance for standard lives with simplified underwriting is a
possibility.
These channels by themselves will not be able to overcome the mindset of the
people, but rather can only be enablers for the human channels.

Direct marketingProcess- Direct marketing if done properly can be a great source of distribution It
is a great way to reach a large population. Typically , Direct Mail(DM) or
Telemarketing is used.It is important to target the right customer with the right
affinity and message
Product- Product tend to be simple with simple underwriting, personal accident
policies, terms policies and other simple product tend to work better than complex
participating or unit linked product.
Other distribution channelOther distribution channels that have promise are department stores/Post offices,
Retail chain. Basically, these channels provide the convenient features and simple
underwriting. These channels can also be used to generate leads for a more
complex sale.

Invisible Insurer
In this model, the insurance company or its representative is not the entity
marketing the products. The insurance cover is sold by an automobile /credit card
company as an add-on product leveraging the brand of the retailer. The risk is
carried by the insurance company, which underwrites it. . Products like creditor
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insurance, automobile insurance, and credit card related insurance could be


distributed using this channel. This model can be adopted in all market segments
for the lines of business mentioned. It is already prevalent in some areas like
credit card insurance and crop insurance for agricultural loans.
The new players are also attempting this model. The venture of Maruti into
insurance by setting up two subsidiaries MIDS and MIBL to sell automobile
insurance is a case in point. These firms will largely arrange insurance cover for
Maruti's captive customer base. MIDS has been registered as a corporate agent
with an exclusive arrangement with Bajaj Allianz General Insurance, while MIBL
has linked up with state-owned National Insurance Company Limited.
What makes these arrangements attractive is the low distribution cost and captive
customer base. However, repeat business or renewal of business cannot be assured.
In the life segment, group creditor insurance may be the most suitable product for
this channel.

Essence
The success of marketing insurance depends on understanding the social and
cultural needs of the target population, and matching the market segment with the
suitable intermediary segment.
In addition a major segment of the Indian population has low disposable income,
meaning that every penny won will be obtained after a lot of persuasion and the
expected value for money is high.
All intermediaries can't sell all lines of business profitably in all markets. There
should be clear demarcation in the marketing strategies of the company from this
perspective.
Clients should also receive price differentials for using different
channels. This is not a new concept, as the Public sector Property & Casualty
companies are giving discounts in lieu of agency commission.
The channel
composition should not be homogeneous but should reflect the larger society.
For example:
Agents from different economic, social strata and different age and gender.
Bancassurers ranging from multinational banks to micro credit lending
agencies.
Brokers stretching from corporates to NGOs to milk co-operatives
These intermediaries need to be empowered with the right learning, training and
sales tools and technology enablers. Coupled with the right product mix, this will
help the insurers to survive and flourish in this competitive market.
Let us tell a story of a retired postal clerk who became a success story for
selling postal savings and insurance in his village in Punjab in Northern India.
The person is well known, who is a retired postal employee and took up agency
for postal savings and insurance to supplement his meager retirement earnings.
Today -- 10 years later -- he is one of the top agents selling postal savings and
insurance in his village, assisted by his illiterate wife and grandson (a seven year
old computer literate) doing all the administrative work from home on a small

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Personal computer using a package (developed by Local a programmer) to handle


his client portfolio.
The entire village population trusts him with the investment advices that he does
out and has no qualms in handing over small amounts of cash to him for
depositing in the post office. He is their trusted customer care or financial
consultant. This we feel is the essence of distribution of financial products in
India.
Another true story is related with Shree Lambother jha agent (chairman Club LIC,
Bihar). 10 years ago when he was merely a student he decided to sell LIC policy
in his village and nearby with bicycle and even without that.
Now he is millionaire. Basically his approach is so good that people recognized
him as a good solicitor regarding their insurance investment or disposable income.
He always tries to make people aware of the policy and according to suitability
suggest a policy taking convenience as a factor of consideration. He has done all
these things in so ethical way that people have faith on him. Not only has he
sold the product but he also serves the society by suggesting the utility of
insurance product.
He is a live example. He became a Brand in his area. He makes himself a
member agent of distinguished chairman club from simple agent. Presently LIC
has given all special facility at his home and his local office. He also has given
employment (voluntary) of his two brothers for administrative work in his office
and some time (peak month) field for premium collection.
This shows that channel member should be aware about the requirement and need
of the people and product of insurance both.
The players have started exploring new channels of distribution just the way the
developed economies have done it in the past. Some of the new channels of
distribution are marketing through a dedicated
(a) Sales force (tied agents),
(b) Corporate agents (DSA like),
(c) Banc assurance,
(d) Work-site marketing,
(e) Independent financial advisors (individual qualified agents)
telemarketing(DM),
(f) Retail chains,
(g) Internet,
(h) NGOs,
(i) Brokers etc.
The mantra is innovation and diversification. Distribution is more crucial for the
life insurer, which needs to have a mass retail base to minimize the chances of
being adversely affected by any casualty.
The companies are using different models each model has its pros and cons, the
banc assurance model is cost-effective and is also quite efficient for market
penetration. This is for the simple reason that since the banking and insurance

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industry share a common target of financial services customers, the existing


customer base of banks can be targeted rather than building a new one.

Chapter IV
Interpretation And Data Analysis
3.1 DATA ANALYSIS AND INTEPRETATION
Q.1 Are you insured?
YES

NO
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Intepretation
Analysis of this information make us clear that maximum no people said that
means 65% people are have an insurance policy and 35% of people are not have
an insurance policy.

Q.2 Which kind of policies do you have?


Life insurance

General insurance

Health insurance

All of them

Intepretation
40%

people said that they have a general insurance policy

35% people said that they have a life insurance policy


25% people said that they have a health insurance policy

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Q.3 Are you aware all the plans and update from company?
YES

NO

Intepretation
70% of people said that they are aware of plans and update of company,and 30%
of people are not aware of plan and update of company.

Q.4 Are you satisfy of the plans of these company?


YES

NO

Intepretation
65%

of people said that they are satisfy of the plan of these company,

35%

of people said that they are not satisfy of the plan of these company.

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TATA AIG

Do you have an insurance policy in the following companies?


LIC

TATA AIG

ICICI

BIRLA SUN LIFE

Intepretation
30%

of people said that they have an insurance policy in TATA AIG

25%

of people said that they have an insurance policy in LIC

20%

of people said that they have an insurance policy in ICICI

20%

of people said that they have an insurance policy in BIRLA SUN LIFE

Q.6 Which type of policy do you prefer?


LIFE

MOTOR

PENSION PLAN

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Intepretation
Analysis of the information 55% of people said that they prefer life insurance,25%
of people prefer motor insurance and 20% of people prefer pention plan policy.

Q.7

How do you come to know about these company product?


NEWS PAPER

AGENT

ADVERTISEMENT

MOUTH OF SPREAD

Intepretation
Analysis of the information, 35% of people said they come to know through as
an agent, 35% of said that they come to know through as an advertisement, 15%
of people said that they come to know through as an news paper, 15% of people
said that they come to know

Q.8

through as a mouth of spread.

What are the reasons for which you remain in this

organisation?
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Job security

job satisfaction

monetary factors

status

Intepretation
35%

of people said that for the job security they are remain in organisation,

25% are remain in organisation for job satisfaction, 20% are remain in
organisation for monetory and another 20% of people said that for the status they
are remain in organisation.

Q.9

What are the reasons for which you are a part of this TATA

AIG?

Trust

security

others

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Intepretation
50% of the people said that they are part of this organisation for trust, 25% of
people said that for security and another 25% of people said that they are part of
this organisation for others.

Q.10 Are you satisfy of the plan of this company?


Yes

No

Intepretation
65% of the people said that they are satisfy of the plan of this company and
35% of people said that they are not satisfy of the plan of this company.

INTERPRETATION
1) Analysis of this information make us clear that maximum no people said
that means 65% people are have an insurance policy and 35% of people
are not have an insurance policy.
2) 40%

people said that they have a general insurance policy

35% people said that they have a life insurance policy


25% people said that they have a health insurance policy
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3) 70% of people said that they are aware of plans and update of
company,and 30% of people are not aware of plan and update of company.
4) 65% of people said that they are satisfy of the plan of these company,
35%

of people said that they are not satisfy of the plan of these

company.

5) 30%

of people said that they have an insurance policy in TATA AIG

25%

of people said that they have an insurance policy in LIC

20%

of people said that they have an insurance policy in ICICI

20%

of people said that they have an insurance policy in BIRLA SUN

LIFE

6) Analysis of the information 55% of people said that they prefer life
insurance,25% of people prefer motor insurance and 20% of people prefer
pention plan policy.
7) Analysis of the information, 35% of people said they come to know
through as an agent, 35% of said that they come to know through as an
advertisement, 15% of people said that they come to know through as an
news paper, 15% of people said that they come to know through as a
mouth of spread

8) 35%

of people said that for the job security they are remain in

organisation, 25% are remain in organisation for job satisfaction, 20% are
remain in organisation for monetory and another 20% of people said that
for the status they are remain in organisation.
9) 50% of the people said that they are part of this organisation for trust,
25% of people said that for security and another 25% of people said that
they are part of this organisation for others.

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10) 65% of the people said that they are satisfy of the plan of this company
and 35% of people said that they are not satisfy of the plan of this
company.

SWOT ANALYSIS

OF TATA AIG

Tata AIG

Parent Company

Tata Sons & AIA group limited

Category

NBFC

Sector

Insurance and finance

Tagline/ Slogan

A new look at life; With you always

USP

Its a JV between two of the Biggest brands


STP

Segment

Personal and Group Insurance


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Target Group

Urban and Rural Investors

Positioning

Complete Insurance and financial solutions


SWOT Analysis

Strength

1. Customised Insurance Solutions for customers


2. State of Art I.T Infrastructure
3. Products with emphasis on social aspects
4. Global Exposure with Expertise in Asian Markets in over 15
countries

Weakness

1. Less penetration in rural areas


2. Small Agent Strength as compared to competitors
3. Cases of fraud agents have caused problems to the brand

Opportunity

1. Growing rural market


2. Earning Urban Youth

Threats

1.
2.

Global economic crisis


Entry of new NBFCs in the sector
Competition

Competitors

1.

Bajaj Allianz

2.

Sahara Life Insurance

3.

Reliance

Life Insurance

Chapter V
Summary Finding and Conclusion
Challenges Tata AIG faces.
Credit to LIC, the awareness regarding insurance is strong among people, but
there are problems. The peculiarity of this market is that people tend to buy
policies to save tax, which is why the three months prior to the end of financial
year are when most of our business is conducted; this is followed by nothing
periods. But insurance also offers protection against death and disability, besides
being a savings instrument.
The challenge for Tata AIG is to change the mindsets of people through education
about the need-based sale of life insurance. It has to convince people to park
their hard-earned money in long-term insurance and savings. This will take time.

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It is using our trained agents and advisors to bring about this change in
perception.
Also, consumers were accustomed
long. With privatization, plenty of
are offering too much choice. This
and either making wrong decisions
insurance education.

to having a single, dominant player for too


companies have entered the fray and they
has resulted in the consumer getting confused
or making none at all. Hence it has focus on

Differentiation of Tata AIG from its competitors.


What sets it apart is experience and r innovative services and products, and
the fact that it deliver what It promise. The Tata name has always stood
for trust, stability and fair play, and AIG is, in market value, the world's
largest insurance group.
Our focus is on customer service and experiences. A
invested in educating its agents, so that its customers
guidance. Besides, the company offers the full range of
corporate, gratuity and superannuation. In fact, it is the
gratuity and superannuation.

lot of time and effort is


get the right advice and
insurance products: group,
first joint venture to offer

It is strong in terms of product innovation. Take, for instance, the Maha-Life


Plan: the first policy of its kind in India, it offers a whole life insurance cover
that doubles up as an annuity plan. And it generates guaranteed, tax-free income,
besides paying cash dividends from the sixth year onwards. Its aim is to deliver
good value to our customers.

Recommendations
These are the recommendations, which can help Tata AIG to become master in
the field of Insurance.
(I)

Infrastructure facilities like that of adequate phone connection and


computers, internets should be made available for the agents to make
their data entries.

(II)

Regularly hold competitions and incentive scheme to motivate agents


to strive for more (just like FMCG sectors)

(III)

One window from processing facilities and paperwork should be reduced


to the minimum level.

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TATA AIG

(IV)

Because most of the agent come due to brand value and status with
monetary benefit. So they should provide lumpsump amount as a
stipend and require respect.

(V)

The ambience of the office should be bright and contemporary so as


to bring about a sense of pride to the agents to be a part of the
organization.

(VI)

At the time of maximum demand seasons (generally Dec-Mar) company


should gives required traveling facilities to the agent.

CASE STUDY OF TATA AIG


THE CASE
American Insurance group in USA will have a bearing on its business in India, particularly its
insurance business which it is running in collaboration with Tata.
However sources in the industry say that policy holders are not required to worry as the
financial condition of insurance subsidiaries of AIG in India is quite stable, and they are able
to meet all the liabilities emerging out of claims from their policy holders.
Insurance Regulatory Development Authority (IRDA) has also expressed its concern over the
recent developments in the United States financial markets. AIG, which is one of the leading
insurance group of US, has asked financial assistance from the Federal Reserves. AIG is
operating in both the life and non-life insurance sectors.

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TATA AIG

In a statement IRDA said that reports of life insurance and general insurance companies
promoted by Tata and AIG as on March 29, 2008 indicated that both companies have
satisfactory solvency position which suggests that they have enough assets which is capable of
meeting their liabilities. IRDA further clarified that life and general insurance companies
promoted by Tatas and AIG are companies registered under the Indian Companies Act and are
restricted by the provisions of the Insurance Act .
From the reliable sources we found that policy holders should wait for clarification before
taking any decision. AIG in USA has a solvency issue but in India there is no liquidity issue
due to the intervension of IRDA. So there may not be a problem in the Indian insurance
market.
Though in many countries, policy holders are in a hurry to cancel their policies, but in India
there is no need to take such steps. Thus Industry experts said that there is no need to worry
and policy holders should keep their insurance policies intact.
This companys general insurance is among the top 5 general insurance companies of the
world and has earned a net premium of RS.812 in 2008-09. This company is also one of the
leading primary sectors and has earned a yearly premium of Rs.970 corer.

Solution of the case


One of the officials Tata said that if AIG is not able to survive in the USA & is forced to
file for insolvency, Tata will buy out the 26% share of AIG in both the companies and the
customers interest will remain safe. Then find some other foreign company and sell that 26%
to them. So IRDA took the decision that they will seek a new promoter incase Tatas buys
out the share or not the policiers interest will remain unaffected.
But later on the matter settled down and AIG somewhat regained its lost position and thus
Tata decided not to buy off their shares and till date they are continuing their insurance
company together.

Conclusion
In India the insurance market was suffering before but now it has regained its lost status. But
still now Life Insurance Corporation of India acquires 64% share of the entire insurance
holders followed by ICICI prudential which has only 9% approx. of the market. Tata AIG has
almost a negligible Insurance market share which is less than 2%. So they need to work a
lot in order to establish their hold in Indian market.

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CONCLUSION
The insurance industry is in the throes of a silent revolution and the best part is
that all of us are part of this revolution process, contributing to it and influencing
shape of things to merge. It will be quite interesting to see a plethora of
distribution system taking shape and competing with each others.
But we can be confident that in the insurance industry in India, for quite some
time to come, the agency channel is going to dominate the scene, for the simple
reason that majority of customers would prefer a one-to one, eye ball sale, so far
as their savings oriented risk and pension plans are concerned.
Particular in rural areas this channel is going to hold greater sway as the rural
marketing is still relationship-based where an insurance agent happens to be a
family friend and it becomes difficult to distinguish him from the rest of the
family.

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TATA AIG

However, the new channels will very soon develop their own niche appeal. The
market will also see the development of segment-specific and product specific
channels. The Internet is going to be yet another prominent player in the
distribution network because of its appeals, access and reach.
The success of the insurer in the new environment, therefore, will depend upon
his capacity to build up a network of distribution channels, thereby increase his
market access and delivery capacity.
At the same time, the expertise in channel management and putting the network
to more productive uses like research in customer relationship management etc.
will be the factors deciding as to who among the many emerges as a market
leader in the industry
There is one truth in marketing that is different consumers Approach buying
differently. Studies have time and again shown that insurance is bought because of
convenience, product features, product placement, and safety of funds, advice, and
not the price. Tata AIG makes their product to sale according to the nature of the
distribution channel and demand of the market. It can fulfill the gap both the
channel as well as demand of the Market.
Tata AIG has adopted the policy to established maximum possible innovative
marketing channel through, well-educated sales force, tie with different organization
and brokers firm with HSBC bank that enable it to provide full financial solution
to its customer.
We can expect from this organization that it will lead the innovative process with
quality of services that will help the Indian consumer to take advantage from
insurance business.
+

Chapter 6
Questionnaire

Dear Sir/Madam,
We are conducting a survey on Market potential study of Tata AIG in Mumbai by Insurance
organizations. We hope for your kind coordination.
Name:

Age:

Sex: Male [ ]

48

Female [ ]

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TATA AIG

Name and address of the organization:


.
.........................
............
Contact Number:
E-mail
address:
...........

1. Family Members: (Please tick)


a)1-4

[ ]

d)

[ ]

12-16

b) 4-8

[ ]

e) 16>

c) 8-12

[ ]

[ ]

2. Number of dependent family members: (Please Tick)


a) 1-2

[ ]

b) 2-4

d)

[ ]

e) More:

6-8

c) 4-6

[ ]

3. Occupation: (Please Tick)


a) Service

[ ]

b) Business

[ ]

c) Professional

[ ]

[ ]

b) d) Any other: ...

4. Annual Income: (Please Tick)


a) 50000-100000

[ ]

b) 100000-300000

[ ] c) 300000-500000

c) 500000-1000000

[ ]

e) 1000000

[ ]

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TATA AIG

5. In which would you like to invest? (Please Tick)


a) Fixed deposit

[ ]

d) Share buying

[ ]

b) Post office

[ ]

e) Insurance policy

c) Mutual fund

[ ]

[ ]

6. Do you have any insurance policy? (Please Tick)


a) Yes

[ ]

b) No

[ ]

7. Which sector do you prefer? (Please Tick)


a) Public Sector

[ ]

b) Private Players

[ ]

8. Do you have any Insurance policy in the Following companies? (Please Tick)
a) LIC

[ ]

b) Tata AIG

[ ]

c) Birla Sun life

c) ICICI

[ ]

e) Max New York

[ ]

f) Any Other:

[ ]

9. Which type of policy do you prefer? (Please Tick)


a) Life Insurance

[ ]

d) Medi claim

[ ]

b) Vehicle Insurance [ ] c) Pension plan


e) Any Other:

Que.10 How do you come to know about these company product?

50

[]

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TATA AIG

a. News paper
b. Agent
c. Advertisement
d. Mouth of spread
e.

Que. 11 Are you satisfy of the plans these company?


a. Yes

b. No

Any Comments:
............
................................
.

BIBLIOGRAPHY
For the references different books, journals, and newspapers have been used and
different websites have been used.

Name of books:
Title

Author

Insurance industry in ndia

Uma Narang

Insurance principles and practice

M.N.Mishra & S.B.Mishra

General insurance : business

Dr. K.C.Mishra, Dr. Simita Mishra

operation in executing
Tata AIG life insurance company

CGAP working group

Limited,
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Insurance regulatory development

C.S.Rao.

Authority (IRDA)

Name of newspaper:
The Hindu

25.02.2014

The Economic Times,

06.03.2014

Times of India

17.10.2012

Business standard

10.08.2013

Hindustan times

02.11.2013

NAME Of WEBSITES

http://www.tata-aig-life.com/
https://apps.tata-aig-life.com/CP/news/current-news.jsp
http://www.irda.gov.in/ADMINCMS/cms/frmGeneral_List.aspx?DF=insprdts&mid=.1
http://www.economy watch.com/insurance-overviewaccess
www.scribd.com

http://www.managementparadise.com/29381-distribution-channels-tata-aig.html

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