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INSURANCE IN CO-OPERATIVE
AND AGRICULTURAL SECTOR
PREPARED BY:- WORK
CARRIED OUT AT
VARUN KALIA BHARTI AXA
GENERAL INSURANCE CO. LTD.
AS A PART OF INDUSTRY INTERNSHIP PROGRAM
FACULTY GUIDE:-
COMPANY GUIDE:-
1
Ms. DIVYA BHUTANI Mr.
SIDDHARTHA SHARMA divyabhutani@chitkarauniversity.edu.in
siddhartasharma@bhartiaxa-gi.co.in
ACKNOWLEDGEMENT
2
TABLE OF
CONTENTS:-
3
EXECUTIVE
SUMMARY
4
The urban market is almost saturated but new trends suggest that
companies moving towards the largely untapped and potential
market- Rural and semi-urban India. The micro-insurance penetration
level was only 0.62% of the country’s GDP last year compared to
2.53% in case of life insurance segment, hence the market is still new
and needs to be tapped. The fact that nearly 72% of the total
population resides in these areas, which also has low penetration of
insurance cover, has been attracting many companies to enter this
segment. Bharti AXA is one of such companies, other major company
being Reliance General Insurance.
5
Bharti AXA General Insurance Company has tie ups with four districts
central co-operative banks in Punjab as of now- Amritsar Central Co-
operative bank, Gurdaspur Central Co-operative bank, Jalandhar Co-
operative co-operative bank and Hoshiarpur Central Co-operative
bank. Under this tie up, the company presently provides insurance
cover for following types of loans (securing bank loans):-
Housing.
Cash credits to traders.
Loans given to non-farm sector.
The company has further plans of foraying into the rural and semi-
urban market through co-operative banks by cross-selling micro-
insurance products directly to the customer’s. Thus, this report
provides the study which was conducted in Punjab’s co-operative
sector with Jalandhar District as sample so as sample so as to find
and determine the micro- insurance products which would be a
success in the rural and semi-urban market.
6
under-developed semi-urban areas in Punjab and what steps can be
taken to educate these customer’s about the micro-insurance
products.
CHAPTER 1
LITERATURE
REVIEW
7
Insurance is the safeguard against probable danger. Insurance can be
bought against a particular event for its possible occurrence. It is a
prevarication tool used as a preventive measure against future
losses. This device is applied for minimizing or managing the future
contingent risks. It is a mode of financially managing instrument
through which a person gets the benefit of insurance coverage for a
particular event. Therefore, a person buys future contentment and
pleasure living through insurance. While in cooperative banking
sector, insurance schemes are basically designed for the rural and
semi-urban customers as they form the major portion of their
customer base. Some of the reviewed articles have been presented in
this section which discuss about the bright scope of micro- insurance
in this sector.
8
rural insurance. Insurance needs to be packaged in such a form that it
appears to be an acceptable investment to the rural people. In the
near future, micro-insurance will definitely be one option that rural
India is going to accept. Therefore, there exists an immense
opportunity to explore the rural potential with all its complexities and
variables and meet the challenge of developing insurance business in
India.
9
the changing times. The mission of the insurance sector in India
should be to extent the insurance coverage over a large section of
the population and a wider segment of activities. The three guiding
principles of the industry must be to charge premium no higher than
what is warranted by strict actuarial considerations, to invest the
funds for obtaining maximum yield for the policy holders consistent
with the safety of capital and to render efficient and prompt service
to policy holders. With imaginative corporate planning and an abiding
commitment to improved service, the mission of widening the spread
of insurance can be achieved.
The fourth
article,
10
man by making them available at the most basic financial point, the
local bank branch, through bancassurance. Simply put,
bancassurance is the process through which insurance products are
sold to customers at their local banks. With a banking network of
65,000 branches serving more than 300 million retail banking
customers, insurance can be available at affordable prices to people
even in remote corners of the country. The relationship is symbiotic,
but there are challenges. The most common challenges to success
are poor manpower management, lack of sales culture, with bank and
insufficient product promotions. One more important obstacle is a set
of regulatory barriers.
But one thing stands obvious, if insurance in India is to succeed, it
can only be through bancassurance.
CHAPTER-2
11
INTRODUCTIO
N
2.1 INDUSTRY
PROFILE
INSURANCE
It is a method or a technique which provides for a collection of small
amounts of premium from many individuals and firms out of which
the losses suffered by the few are paid.
12
1. Provide protection – The primary function of insurance is to
provide protection against future risk, accidents and uncertainty.
Insurance cannot check the happening of the risk, but can certainly
provide for the losses of risk. Insurance is actually a protection
against economic loss, by sharing the risk with others.
2. Collective bearing of risk – Insurance is a device to share
the financial loss of few among many others. Insurance is means by
which a few losses are shared among larger number of people. All
the insured contribute the premiums towards a fund and out of
which the persons exposed to a particular risk is paid.
3. Assessment of risk – Insurance determines the probable
volume of risk by evaluating various factors that give rise to risk.
Risk is the basis for determining the premium rate also.
4. Provide certainty – Insurance is a device, which helps to
change from uncertainty to certainty and whereby the uncertain
risks may be made more certain.
13
financial institutions may be prepared to give credit to sick industrial
units which have insured their assets including plant and machinery.
14
The general insurance business in India started with the
establishment of Triton Insurance company limited in 1850 at
Calcutta. In 1907, the first company, the mercantile insurance
ltd. was set up to transact all classes of general insurance business.
General insurance council, a wing of the insurance association of
India in 1957, framed a code for ensuring fair conduct and sound
business practices. In 1968, the Insurance Act was amended to
regulate and to set minimum solvency margins. In the same year,
the tariff committee was also set up. In 1972, the general insurance
business (nationalization) act was passed to nationalize the general
insurance business in India with effect from 1st January 1973. For
these 107 insurers was amalgamated and grouped into four
company’s viz., the national insurance company ltd., the new india
assurance company ltd., the oriental insurance company ltd.,
and the united india insurance company ltd. general
insurance corporation of india was incorporated as a
company. IRDA( insurance regulatory and development
authority) act 1999 paved the way for the entry of private players
into the insurance market which was hitherto the exclusive privilege
of public sector insurance companies/corporations.
15
40.6
public players
Strengths/opportunities
1. The intense competition brought about by deregulation has
encouraged the industry to innovate in all areas; from underwriting,
marketing, policy holder servicing to record- keeping.
16
2. Aggressive marketing strategies by private sector insurers will
buoy consumer awareness of risk and expand the markets for
products.
3. Competition in a deregulated environment will allow market
forces to set premiums that are appropriate for exposures and push
insurers to differentiate their products and services.
4. Innovations in distribution and improvements in market
penetration will follow as public and private insurers compete to
market their products.
5. Allowing insurers to issue their own policy wordings and setting
own rates will enable underwriters to tailor products to meet client
needs.
6. The Insurance Regulatory Development Authority of India’s
(IRDA) emphasis on quarterly reporting/monitoring of insurer
solvency will enhance capital adequacy and transparency. Licensed
brokers are very much part of the intermediary structure and only
those with adequate capital, professional experience and expertise
will be licensed by IRDA.
Weaknesses/challenges
1. Premium rates will remain under pressure due to intense
competition on the more profitable lines.
2. Private insurers need to raise more capital, otherwise growth
could be constrained since reliance on reinsurance for capital relief
is not always viable or available.
3. Traditional distribution channels, especially tied agents, need
to be improved to match the new product offerings.
4. There is general lack of transparency as financial and
operational data for insurers are not readily available as none of
India’s insurers are directly listed on stock exchanges.
17
5. Like all developing economies on a fast track, the shortage of
trained insurance professionals and technicians at all levels cannot
be remedied in the short term.
6. Natural catastrophes will always be present; the Indian sub-
continent is vulnerable to cyclones, floods, hurricanes and
earthquakes, and until there is a national capacity to manage losses,
dependence on overseas reinsurers will continue.
2.2 COMPANY
PROFILE
18
ABOUT BHARTI AXA GENERAL
INSURANCE
Bharti AXA General Insurance is a joint venture between Bharti,
one of India’s leading business groups with interests in Telecom,
Agri Business and Retail; and AXA, world leader in Financial
Protection and Wealth Management. Bharti Group holds 74% of
equity and AXA holds 26% of the equity.
19
AXA General Insurance as the preferred company for Financial
Protection in India.
STRATEGY
Quality Policy - To provide fast, fair and friendly service to
customers & partners.
20
To build long term value with our business partners by
enhancing the proposition to their customers.
STRATEGIC DIFFERENTIATORS
ABOUT AXA
AXA aspires to do business responsibly, and to build trust-based
relationships with its stakeholders:
21
Employees: Ensure professional fulfillment by offering a
supportive and respectful workplace where people are
empowered and the continuous development of
competencies is encouraged.
STRATEGY
AXA's strategy is to combine organic and external growth to meet
the challenge of operational excellence in all of the following
areas:
• Product innovation
• Core business expertise (underwriting, claims management,
pricing, investment performance)
• Distribution
• Quality of service
• Productivity
All AXA employees are champions of operational excellence. They
are supported in this aim by the AXA Way continuous process
improvement program.
Group profile
In the financial markets, AXA is positioned as a global leader in
Financial Protection.
22
Key figures:
ORGANISATIONAL STRUCTURE
23
12. MR. MILIND CEO
CHALISGAONKAR
13. DR. AMARNATH CEO
ANANTHANARAYAN
24
from unforeseen losses, it’s a very fruitful and effective policy for
farmers to opt for.
CHAPTER-3
25
PROJECT
PROFILE
AN INTRODUCTION TO CO-OPERATIVE
SECTOR
The concept of co-operation emphasizes on the collective action of
individuals to achieve common goals which may not have been
possible for one isolated individual.
The principles of co-operation define the basic characteristics of any
co-operative organization. These principles form the common thread
that runs through all the co-operative societies with marginal
variations. A cooperative is defined as an autonomous association of
persons united to meet their common economic, social and cultural
needs and aspirations through a jointly-owned and democratically-
controlled enterprise. It is a business organization owned and
operated by a group of individuals for their mutual benefit. A
26
cooperative may also be defined as a business owned and controlled
equally by people who use it’s services or who work for it.
CO-OPERATIVE BANKS
The co-operative banks have a history of almost 100 years. The co-
operative banks are important constituent of the Indian Financial
System, judging by the role assigned to them, the expectations they
are supposed to fulfill, their number, and the number of offices they
operate. The co-operative movement originated in the west, but the
importance that such banks have assumed in India is rarely
paralleled anywhere else in the world. Their role in rural financing
continues to be important even today, and their business in the
27
urban area has also increased phenomenally in recent years mainly
due to the sharp increase in the number of primary co-operative
banks.
28
• The Punjab co-operative cotton marketing & spinning mills
federation ltd. (spinfed)
• Punjab state handlooms weavers apex co-operative society ltd.
(weavco)
29
Some attractive schemes provided by the bank to low credit rated
customers include-
SEHKARI BIMA YOJANA- The co-operative banks in Punjab
are pioneers of starting this yojana w.e.f. 1.6.1999 in the country.
Under this scheme, every depositor who opens a saving bank with
Rs. 1100/-or more is provided personal accidental insurance cover
for Rs. 1 lakh, during the period he keeps the account with the bank,
at a very nominal premium.
KISAN CREDIT CARD SCHEME- this new scheme has been
implemented by the bank for the benefit of farmers. The scheme
improves upon existing scheme of crop loans by allowing the
farmers flexibility and freedom of choice to avail and repay loans as
per requirements. Maximum credit limit of the farmers has been
raised from Rs. 70,000 per crop to Rs. 85,000 per crop.
JEEVAN RAKSHA PENSION-CUM-GRATUITY SCHEME- this
scheme has been started by the bank particularly for the benefit of
rural old farmers who can enjoy pension facility in their old age by
depositing Rs. 650/- month. If the depositor dies before 10 years, the
nominee of the deceased is allowed to continue to deposit the
money in the scheme and for the pension after 10 years.
INTRODUCTION TO THE RESEARCH:
Time and again we hear or listen in television or journals that rural
India is the next big thing for Indian marketers and the fact stands
true for Micro-insurers too. Following figures substantiates it,
according to statistics:-
800 million people.
Estimated annual size of the rural and semi-urban market.
• Durables Rs. 5000 crores.
• Agri-inputs (incl. tractors) Rs. 45000 crores.
• 2/4 wheeler vehicles Rs. 8000 crores.
30
41 million kisan credit-cards issued with cumulative credit of
Rs. 977 billion resulting in tremendous liquidity.
42 million rural households are availing banking services in
comparison to 27 million urban households.
Investment in formal savings instruments; 6.6 million
households in rural and 6.7 million in urban India.
31
hospitalized patients take loans or sell assets to pay for
hospitalization. Indeed, enhancing the ability of the poor to deal
with various risks is increasingly being considered integral to any
poverty reduction strategy.
Historically in India, a few micro-insurance schemes were
initiated, either by non governmental organizations (NGO) due to
the felt need in the communities in which these organizations
were involved or by the trust hospitals. These schemes have now
gathered momentum partly due to the development of micro-
finance activity, and partly due to the regulation that makes it
mandatory for all formal insurance companies to extend their
activities to rural and well-identified social sector in the country
(IRDA 2000). As a result, increasingly, micro-finance institutions
(MFIs) and NGOs are negotiating with the for-profit insurers for
the purchase of customized group or standardized individual
insurance schemes for the low-income people. Although the reach
of such schemes is still very limited---anywhere between 5 and 10
million individuals---their potential is viewed to be considerable.
Recently, the ILO prepared a list of products of all insurance
companies,
public as well as private, for the disadvantaged groups in India.
Some of the observations
made on the basis of the list are presented below:
• Out of 80 listed insurance products, 45 (55%) cover only a
single risk. The other
products, covering a package of risks, mostly focus on 2 (20%) or
3 (18%) risks.
• The available products cover a wide range of risks. However,
the broad majority
of the insurance products cover life (40 products or 52%) or
accident-related risks.
The health coverage remains very limited (12 products).
• Most life insurance products (23 out of 42) are addressed to
individuals. However,
some products may be bought both by individuals and groups.
32
• Most life insurance products (55%) have been designed to cover
an extended
contract duration ranging from 3 to 20 years.
• Out of 42 life insurance products, 23 are pure risk products. The
other 19 products
propose various types of maturity benefits.
• Out of the 12 currently available health insurance products, 7
have been designed
and are restricted to groups.
• Out of the total 12 health products, 7 products propose the
reimbursement of
hospitalization expenses while the other 5 have chosen to narrow
down the
coverage to some specific critical illnesses.
• Most of the health insurance products specifically exclude
deliveries and other
pregnancy-related illnesses. Most of these products also mention
amongst their
exclusion clauses, HIV/AIDS.
• Most products whether life or non-life require a single payment
of premium (i.e., a one-time payment) upon subscription.
• Private insurance companies have three times more products
than the public
companies.
Health and life are two most important risks for which
micro-insurance is
demanded. Indeed, at low-income level, when much of the
income goes into meeting basic needs, the scope of having
varying priority needs is very limited. On the supply side it’s
33
observed that out of 80 odd products only 7 products are health
insurance products that provide for reimbursement of hospital
expenses. Admittedly, compared to life insurance, which is a
relatively straightforward business, health insurance is a much
more complex service as it involves addressing the provision of
healthcare that is location specific. The design and sale of
products are currently driven by the objective of meeting the
regulatory
obligation and the making of profits or reducing losses. In this
situation, there is a danger of certain priority needs getting
neglected by the insurance companies.
34
standard exclusions customers’ irregular cash
• Regular premium flows, paid in cash or with
payments as banking another financial transaction
transaction • Period of coverage can be
as short as 4 months
• Any screening requirements
•Usually minimum of 12 would be limited to a
months declaration of good health
•Only small sums insured
• Screening requirements •Community or group pricing
may include a medical
examination • Distribution channel may
manage the entire customer
•Small and large sums relationship, perhaps
insured including premium collection
•Priced based on and claims payment
age/specific risk •Market is largely unfamiliar
with insurance
• Agents and brokers are
primarily responsible for
sales
35
Year No. of Products approved
2006-07 5
2007-08 11
2008-09 6
2009-as on
1
date
Total 23
36
Enhanced role of SHGs
All documents must be in vernacular language
Developing insurance awareness amongst the low income
band people
Need to develop Health micro insurance products
Need of good quality data
Standardizing underwriting procedures for MI.
Regulatory assistance
PROBLEM STATEMENT:-
Bharti AXA general insurance has tie-ups with a number of district
central co-operative banks in Punjab. It is currently in the
business of securing loans for these banks, these include
providing insurance cover for housing loans, cash credit to
customers and loans for to non-farm sector i.e., loans given to
people employed in work other than farming/agriculture.
37
Bharti AXA now aims to cross sell its line of General
Insurance products and now currently focusing on selling
its products through co-operative banks. Thus, going one
step ahead of its current business where it interacts only
with co-operative banks, by interacting directly with the
Bank Managers and cross selling insurance by obtaining
leads from the bank.
SIGNIFICANCE TO THE
RESEARCHER
To get a good understanding of co-operative sector in Punjab and
recommend to the company the possible ways of conducting
successful business in this sector.
38
Survey approach method of sampling was used to collect
data. The survey method of obtaining information is based on the
questioning of respondents. 100 respondents were chosen
for survey. Respondents are asked a variety of questions
regarding their behaviour, intentions, attitudes, awareness and
motivations. Various things are to taken care of while designing a
good questionnaire. These include asking questions (before
designing) such as will the question be understood in the correct
manner by the respondent, how many close and open ended
questions should be included etc.
CONTACT METHODS
A direct contact method was used to collect data i.e.,
Personal Interviewing. It is the most versatile method. This
method was applicable in both exploratory as well as descriptive
research. It was helpful in exploratory research as it helped to
reach out to experts and gather their views regarding the
problem at hand and thus providing a much clear picture for
carrying out descriptive research for the study.
39
CHAPTER-4
40
FINDINGS &
ANALYSIS
AND
CONCLUSION
To begin with, some of the key facts regarding the District Central
Co-operative Bank need to be highlighted:-
There are 72 branches of Jalandhar Central Co-operative
Bank in Jalandhar district, more than any other commercial
bank in the district.
New schemes such as Sehkari bima yojna – provides a
personal accident cover of Rs. 1 lakh at a very nominal
premium to anyone who opens an account with a balance of
Rs. 1100 or more.
41
These facts are important as it can be inferred that the co-
operative bank in the district has a dense and widely spread
network and the major portion of bank’s customers come from
rural and semi-urban areas as evident from the deposits and
advances statistics. Thus, it serves as an effective and efficient
channel for reaching the rural and semi-urban customer segment.
42
30%
NO
YES
70%
INTERPRETATION:
Of the 100 respondents interviewed 70% hold an insurance
policy.
This result is irrespective of whether insurance policy is life
or non-life.
Data suggests insurance in general terms has made inroads
into the rural and semi-urban market.
43
31%
69%
YES
NO
44
24%
76%
YES
NO
45
28%
YES
NO
72%
INTERPRETATION:
Out of 29 non-life policy holders, only 9 have a personal
accident policy cover.
Even health policy has lower penetration, with only 11
holders among 29 non-life policy holders. Some of the health
policy holders include smart card holders issued under
Rashtriya Swasthiya Bima Yojna.
Major non-life policies people hold are motor insurance as
80% respondents hold it. But there are many cases with
elapsed policy and where it is yet to be renewed.
Among other non-life policies, people own building
insurance, cattle and crop insurance covers to some extent.
46
TABLE 5- MICRO-INSURANCE POLICIES AWARENESS
AMONG RESPONDENTS
47
personal accident are not among the list of products having
high level of awareness.
• Thus, apart from motor insurance, the other insurance
schemes haven’t made significant inroads into this particular
segment of market.
48
70 67
60
50
40 35
30 29 26 24
20
10 10
0 0
D
RY
ES
OD
S
VE
LY
AN
O
IC
ND
TO
SI
GO
GO
RV
ES
PL
AC
IE
RY
GR
SE
D
FR
SF
GI
VE
AG
RY
TI
ER
RI
SA
TO
N-
US
NO
AC
N-
SF
NO
TI
SA
UN
INTERPRETATION-
• 67% of the respondents have the opinion that Indian
Insurance Companies have rigid plans.
• 29% feel that Insurance companies are user-friendly.
• 26% feel that services of Indian Insurance Companies are
Unsatisfactory.
• 35% of the respondents are of the view that Indian Insurance
Companies are Non- aggressive.
• 24% feel that products and services of Indian Insurance
Companies is Satisfactory.
• Whereas, only 10% feel that it is good enough.
• And according to the present survey, no single person has
felt that it is very good.
FINANCIAL HIGHLIGHTS:-
(2009-10)
49
BALANCE SHEET AS AT
31st MARCH 2010
UP TO UP TO QUARTER
QUARTER MARCH
MARCH 2009(RS. 000’)
2010(RS.000’)
SOURCES OF FUND
SHARE 2000,000 16,25,800
PENDING ALLOTMENT 750,000 -
RESERVES AND SURPLUS 589,134 274,200
FAIR VALUE CHANGE 1709 1070
ACCOUNT
BORROWINGS - -
APPLICATION OF FUND’S
INVESTMENT’S 2,631,213 1,159,990
LOANS
FIXED ASSETS 317,835 282,453
DEFERRED TAX ASSETS
CURRENT ASSETS
Cash and Bank Balances 284,357 56,587
Advances and Other Assets 428,279 159,387
Sub-Total (A) 712,636 215,974
CURRENT LIABILITIES 1,256,523 308,513
MISCELLANEOUS
EXPENDITURE
DEBIT BALANCE IN PROFIT 2,135,758 712,742
AND
50
TOTAL 3,340,843 1,901,070
COMPUTATION OF RATIOS:-
LIQUIDITY RATIOS:-
51
SOLVENCY RATIOS:-
1. DEBT – EQUITY RATIO= LONG TERM
DEBT/ EQUITY
DEBT 0
EQUITY 2000
DEBT EQUITY RATIO 0
52
3.TOTAL LIABILITY TO TOTAL ASSETS
RATIO= TOTAL LIABILITIES/TOTAL
ASSETS
TOTAL LIABILITY 11469.62
TOTAL ASSETS 2949
TOTAL LIABILITY TO 3.88
TOTAL ASSETS
RATIO
PROFITABILITY RATIOS:-
1. NET PROFIT RATIOS= NET PROFIT /
NET SALES * 100
NET PROFIT 2135.7
NET SALES 416.6
NET PROFIT RATIO 51.2
CONCLUSION
So, one of the major outcomes from the project was how to
interact with the customers and distributors (bankers) effectively.
This project gave an experience on how to deal with distributors,
53
being bankers in this case. Personal emphasis were given to bank
people so as to convince them that the tie-up with Bharti AXA
General Insurance will be lucrative for both company and bank.
The project even involved interacting with existing and
prospective customers. Customers generally have a wide range of
queries which have to be answered patiently and convincingly, as
a consequence that will satisfy the customer. So to deal with
customers is a fine art which has been learned from this project.
REFERENCE
S
54
WEBSITES:-
• http://www.ibef.org
• http://economictimes.indiatimes.gov.in
• http://www.pbcooperatives.gov.in
• http://www.irdaindia.org
• http://banknetindia.com
• http://bhartiaxa.org
55
• THE WIDENING SCOPE OF INSURANCE” by Dr. C.
Rangarajan, Chairman Economic Advisory Council to the
Prime Minister
• BANCASSURANCE- AN EMERGING CONCEPT IN INDIA”
by Naveen Sethi
ANNEXURE
QUESTIONNAIRE
56
NAME:
AGE:
OCCUPATION:
57
a) Yes
b) No
iii. Do you hold a motor vehicle insurance policy?
a) Yes
b) No
iv. If you hold some other non-life policy, please mention
________________________________
58
THANK YOU
59