http://www.managementparadise.

com/forums/upload-download-banking-
insurance-projects-notes/15367-project-insurance.html

SECTION I: KNOWLEDGE OF THE INSURANCE INDUSTRY

INTRODUCTION
Insurance industry has always been a growth-oriented industry globally. On the Indian scene too, the
insurance industry has always recorded noticeable growth vis-à-vis other Indian industries.
The Triton General Insurance Co. Ltd. was the first general insurance company to be established in India
in 1850, which was a wholly British-owned company. The first general insurance company to be set up
by an Indian was Indian Mercantile Insurance Co. Ltd., which was established in 1907. There emerged
many a player on the Indian scene thereafter.
The general insurance business was nationalised after the promulgation of General Insurance Business
(Nationalisation) Act, 1972. The post-nationalisation general insurance business was undertaken by the
General Insurance Corporation of India (GIC) and its 4 subsidiaries:
1. Oriental Insurance Company Limited;
2. New India Assurance Company Limited;
3. National Insurance Company Limited; and
4. United India Insurance Company Limited.
Towards the end of 2000, the relation ceased to exist and the four companies are, at present, operating
as independent companies.
The Life Insurance Corporation (LIC) was established on 01.09.1956 and had been the sole corporation
to write the life insurance business in India.
The Indian insurance industry saw a new sun when the Insurance Regulatory & Development Authority
(IRDA) invited the applications for registration as insurers in August, 2000. With the liberalisation and
opening up of the sector to private players, the industry has presented promising prospects for the
coming future. The transition has also resulted into introduction of ample opportunities for the
professionals including Chartered Accountants.
The Indian Insurance industry is featured by the attributes:
Low market penetration;♣
Ever-growing middle class♣ component in population.
Growth of consumer movement with an increasing♣ demand for better insurance products;
Inadequate application of♣ information technology for business.
Adequate fillip from the Government♣ in the form of tax incentives to the insured, etc.
The industry formations need to keep vigil on these characteristics of the Indian market and formulate
their strategies to entail maximum contribution to the output of the sector.
The Indian life and non-life insurance business accounted for merely 0.42 percent of the world's life and
non-life business in 1997. The figures of the basic parameters of the industry's performance viz.
Insurance Density and Insurance Penetration also are evident of the hitherto existing low-yield Indian
market conditions.
The term "Insurance Penetration" broadly measures the contribution of the insurance industry in relation
to a nation's entire economic productivity. The figure of premium vis-à-vis the GDP of 1999 stood at
0.54 percent for non-life insurance business and 1.39 percent for the life insurance business. The term
"Insurance Density" reflects the Insurance purchasing power. The premium per capita in India amounted
to US $ 2.40 for non-life insurance and US $ 6.10 for life insurance in 1999 but with the deregulation of
the sector, a sea change in the scene is most likely.
The insurance sector in India has come a full circle from being an open competitive market to

nationalisation and back to a liberalized market again. Tracing the developments in the Indian insurance
sector reveals the 360-degree turn witnessed over a period of almost two centuries.

A BRIEF HISTORY OF THE INSURANCE SECTOR

The business of life insurance in India in its existing form started in India in the year 1818 with the
establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in
the life insurance business in India are:

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance
business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical
information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of
protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central government and
nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5
crore from the Government of India. The General insurance business in India, on the other hand, can
trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in
the year 1850 in Calcutta by the British.

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

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general
insurance business.

1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct
for ensuring fair conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the
Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance
business in India with effect from 1 st January 1973. 107 insurers amalgamated and grouped into four
companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the
Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a
company.

STRUCTURE OF THE INSURANCE INDUSTRY

The structure of the insurance industry comprises of the Operating department, Administrative
department and the finance department. The Operating Department generally performs the basic
functions pertaining to the designing of products, marketing thereof, servicing the insured, the the

the insured, management of portfolio, etc. The Administrative Department looks after the day-to-day
affairs of the company. The Finance Department backs the operations and administration of the
company by accounting for the transactions, streamlining the flow of funds, materializing the
management decisions, etc.

The Administration Department as well as the Finance Department, usually, functions through in-house
setup. The Finance Department functions in the areas of accounting, financial and management
reporting, budgeting and controlling, etc. and thus renders enormous scope for finance professionals.
The new entrants in the insurance sector are likely to call for the services of the Chartered Accountants
for their financial setup requirements. The Chartered Accountants have engaged themselves in the audit
of Insurance Companies since long. With the transition in the insurance sector, the horizons for their
contribution have broadened. There has, emerged a king-size pool of opportunities that the Chartered
Accountants can explore and apply their professional wisdom and experience to.

BASIC FUNCTIONS OF THE INSURANCE INDUSTRY

1. Risk Perception and Evaluation:

The fundamental function of an insurer is to provide a cover against the detriment caused to the insured
due to the happening of certain specified and agreed events. Thus, prior to providing such umbrella
through a product, the insurer has to assess the risk involved in the transaction. The insurer has to
identify the element of risk prevalent in the concerned industry or a particular unit. The perception of
risk requires the study of variables through various methods including the application of scientific and
statistical techniques and correlation thereof with the industry or unit under study in light of their basic
environmental and infra-structural characteristics. After the identification and categorisation of the risks
perceived, the probability of happening of the loss-causing events and the severity of the loss has to be
assessed.

2. Designing the Insurance Product:

On the basis of the risks perceived, the insurer develops a product to cover the stipulated risks. While
designing an insurance product, an insurer decides its cost to be charged from the insured in the form of
premium, reduction thereof in certain cases like not lodging any claim during the previous covered
period(s), suggesting the implementation of risk-mitigating measures, etc. The features of a product
should be flexible enough to provide for the determination of premiums, rebates, additional premiums,
etc. depending upon the risk benchmarks as determined.

3. Marketing of the Product:

The core function of the marketing force of an insurance company is to generate awareness about the
insurance products among the target market. But in the Indian scenario, where the insurance
penetration is too low as compared to the other nations, the marketing force needs to perform the pro-
active role in developing an insurance culture. It is through the efficiency of the sales force of an
insurance company that the desirability and the success of a product are determined.

In Indian insurance market, the function is, basically performed by the agents. The persons desiring to
function as insurance agents have to obtain license to act as such from the IRDA or an officer authorised
by the Authority in this behalf. The agents approach the prospective buyers and apprise them of the
basic features of the products. In order to dispense with the functions, the agents need to possess
adequate knowledge of the insurance industry, products and the modalities attached therewith. Further,
the marketing personnels should be adequately backed by the back-office setup.

4. Selling of the Products:

The term selling in the context of insurance industry connotes the issuance of policies to the applicant
proposer. The non-life insurance policy basically embodies the covenant between the insurer and the
insured wherein the former agrees to indemnify the latter for the loss caused to him on the happening of
the certain agreed events up to a specified limit. The life insurance policy generally contains the
agreement whereby the insurer agrees to pay to the insured or the beneficiary of the policy an agreed
amount on the expiry of the term of the policy or in the event of the death of the insured respectively.
The additional benefits in the shape of Riders viz. Accidental Death Benefit, Double Sum Assured, Critical
Illness benefits, Waiver of Premiums, etc. can also be appended with the policy on the payment of an
additional premium.
In Indian industry, the function is, generally performed by the insurer. In addition, the insurance
companies depute their Direct Selling Representatives to look after the function. They receive the
proposal documents, vet them and issue policies to the proposers.

5. Management of Portfolio:

The management of the portfolio includes the assessment of requirement of funds, identification of
various sources of finance, the evaluation of the sources in the light of their cost, availability, timing,
etc., reconciling the features of various sources with the needs of the company and the selection of
appropriate conjunction of sources. The insurer possesses huge amount of funds, which need proper
management. The management of the portfolio of an insurance company requires the identification of
investment avenues, evaluation thereof and the selection of the most appropriate mix of alternatives
where the funds of the company can be invested. The selection requires the knowledge of finance
related functions and techniques apart from the in-depth know of the patterns of requirement of funds in
the company as well as in the industry as a whole.

INSURANCE INDUSTRY: CLASSIFICATION

Fire Insurance Marine Insurance Mediclaim Motor Vehicle

SOME PLAYERS IN THE INDUSTRY:

Life Insurance General Insurance

Life Insurance Corporation of India. General Insurance Corporation of India.
1. Oriental Insurance Company Ltd.
2. New India Assurance Company Ltd.
3. National Insurance Company Ltd.
4. United India Insurance Company Ltd.
New Entrants
ICICI Prudential Life Insurance Ltd. Bajaj Alliaz General Insurance Company Ltd.
Tata AIG Life Insurance Corporation Ltd. Reliance General Insurance Company Ltd.
ING Vysya Life Insurance Corporation Ltd. Tata AIG General Insurance Company Ltd.
Om Kotak Mahindra Life Insurance Corporation Ltd. Royal Sundaram Alliance Insurance Company Ltd.

INSURANCE SERVICE: ITS USERS

The formulation of creative marketing decisions is not possible unless the different categories of users
using the services of insurance industry are known. The general users assign due weightage to their own
interest whereas the industrial users assign an overriding priority to the interests of their organizations.
The emerging changes in the socio-economic conditions and governmental regulations influence the
interests of both the category of users. It is against this background that an in-depth study of users is
found significant to the insurance industry.

An individual or an institution, a person or a group of people availing the services is termed to be the
actual users of the insurance industry. On the other hand both the categories of prospects having the
potentials, bearing the willingness but not using the service right now are termed as “potential
users/prospects”. The services are made available by the Life Insurance Corporation of India and the
General Insurance Corporation and other private insurance companies are used by both categories of
users.

The need and requirement can’t remain static. The business environmental conditions influence the
process of change. The professionals engaged in servicing the insurance organizations bear the
responsibility of understanding the changing level of expectations of the different categories.

SECTION II

INSURANCE POLICY: THE TOTAL PRODUCT CONCEPT

 
Theodore Levitt propounded the Total Product Concept (TPC), which implied that a product had three
levels of features and the consumption was in totality.

LEVEL¬ 1:

Core Product:
In the Insurance Industry the core product is the policy that provides protection to the consumers
against the risks. This is the main reason for which the Insurance Company is in existence. It provides
protection by way of various riders viz. Accidental Death Benefit, Double Sum Assured, Critical Illness
benefits, Waiver of Premiums, etc.
On the basis of the risks perceived, the insurer develops a product to cover the stipulated risks. While
designing an insurance product, an insurer decides its cost to be charged from the insured in the form of
premium, reduction thereof in certain cases like not lodging any claim during the previous covered
period(s), suggesting the implementation of risk-mitigating measures, etc. The features of a product
should be flexible enough to provide for the determination of premiums, rebates, additional premiums,
etc. depending upon the risk benchmarks as determined.

LEVEL 2:¬

Formal Product:
When the customers expectations grows synchronized with increased competition the marketer offers
some tangibility to the existing core product to differentiate itself from the competitors.

1. Brand:
In order to distinguish itself from the competitors, the Insurance Company gives a brand name to its
policy. This brand name gives an identity to the product (policy) offered by the insurance company.
Thus ICICI Prudential Life Insurance has brands viz ICICI Pru Smart Kid, ICICI Pru Save ‘n’ Protect,
ICICI Pru LifeLink, etc.

2. Attributes:
Just giving a brand name to the policy may not be enough for the insurance company to distinguish its
offerings. The product offering must also have attributes that will attract the consumers to take the
policy. The attributes must suit and satisfy the needs wants and desires of the various types of
consumers that the company is targeting at.
Thus ICICI’s investment plans suit the consumers who want to secure their family through insurance or
invest money for growth. And its retirement plans suit the ones who want to enjoy their fruits of labor
after retirement or want to go for a dream vacation.

3. Instruction Manual:
To make the service consumption easier for the consumers, the instruction manual with the policy
becomes very important. The instruction manual gives an overview to the consumers as to how to go on
with the filling of the application form. It also gives information about the various formalities that have
to be adhered to at the time of submission of the application form.

LEVEL¬ 3:

Augmented product:
With further expectation of the consumer – again synchronized with intense competition – marketers
offer more and more intangible features.

1. Post-sales service:
The insurance company must not consider it as the end of the service providing the consumer has taken
once the policy. The functions of an insurance company include the provision of the Post-sales services
to the consumer. Among the services rendered by the insurance company is the service of processing
and release of claims. The insurance company needs to verify the accuracy of the facts presented in
relation to the insurance claim and the documents produced in support thereof.

2. Delivery points:
The delivery points can be the branches that the insurance company has at the discretion of the of the
consumers’ location. The delivery points can also be mobilized with the presence of the insurance
agents. The agents can cover a wide area and get in contact with the consumers to provide the service
to him.

3. Customer education and training:

The customer education and training is very important for the insurance company. The agents play a
vital role in this context. The customer can be educated on various benefits that can be accrued in his
future life by taking a policy. This is where the agents’ communication skills come into the picture. The
insurance company has to play an active role in enabling the agents to impart the best customer
education through appropriate training given to the agents.

4. Customer complaint management:

Customer complaints management with regards to delay in discharge of claims must be effectively
handled by the insurance company to have competitive edge over its competitors. The complaint
management will help the company to get the consumers closer to the organization as the consumers
feel that their grievances are taken care of.
Thus LIC has an online feedback system where the consumers of the policy can register their
grievances.

5. Payment options:
The insurance company can offer payment options to the consumers with regards to payment of
premium – the mode of payment and the period within which the premium amount has to be paid.

SECTION III: WORKING OF THE INSURANCE INDUSTRY

INSURANCE INDUSTRY: THE PHILOSOPHICAL GOAL.

Channelising
The Insurance Company collects money in the form of premium from individuals (A, B, C & D). The
money collected from people is used to meet one person’s calamity.

The Insurance Company enters into the process of channelising by disbursing the amount collected into
the command economy. Thus a significant part of the activities of the insurance industry of an economy
entails mobilization of domestic savings and its subsequent disbursal to investors.

The main risk faced by the insurance company is when all the insurers claim for the reimbursement at
the same time. This situation is very rare to occur, and is one of the major threat that the insurance
company faces in its business operations.

SECTION IV: MARKETING MIXES IN THE INSURANCE INDUSTRY

PRODUCT MIX

The formulation of product mix for the insurance business makes it significant to take a look at the
services and schemes of insurance organisations. The product portfolio is known and the process of
formulating a package should be known. It is natural that the users expect a reasonable return for their
investments. It is quite natural that the insurance organisations want to maximise profitability. Both of
these dimensions are found interrelated.

It is well known that the key objectives of insurance business are mobilisation of savings and
channelisation of investments. This makes it essential that insurance business is made lucrative so that
the users /potential users get incentives to buy a policy or to invest in the insurance organisations. The
insurance organisations also need to promote the underwriting activities, which would activate the
process of arresting the regional imbalance. In the context of formulating the product mix, it is essential
that the insurance organisations promote innovation and in the product portfolio include even those
services and schemes which are likely to get a positive response in the future.

The corporate objectives indicate that the insurance organisations are required to be careful, especially
while launching a new policy. The policies should not only generate enough premium but it is also
important that the policies cover persons working in the informal sector, serving as porter, working as
manual labourers, or engaged in farm sector. It is the need of the hour that the insurance organisations
make their service internationally competitive. This makes a strong advocacy in favour of innovative
product mix strategy for the public sector insurance organisations. Thus the formulation of product mix
should be in face of innovative product strategy. Strategies of foreign and private insurance companies
should be taken into consideration while initiating the innovative process.

The formulation of product strategy should assign due weightage to the rural segment emerging as a big
profitable segment especially in the 21st century. The policies and schemes should have rural orientation
so that backward and neglected regions of the country get priority attention and the regional imbalance
is minimised.

In this context, it is also pertinent that the insurance organisation make possible welfare orientation and
include in the product portfolio even those policies and schemes which become instrumental in
safeguarding the interest of the weaker sections of the society.
The formulation of package is also found important. Designing a package on the basis of the needs and
requirements of the concerned segment would make the product mix more competitive.

The partially tapped or totally untapped profitable segments of the future should be identified and
tapping the potentials optimally is also important.

A sound product portfolio is the need of the hour and therefore the regulatory barriers or constraints in
activating the innovation process should be minimised.

Product Planning & Development

The purpose of insurance business is to generate profits besides subserving the social interests. The
present business is likely to be more competitive.
Product is like a stage on which the entire drama of successful marketing is acted. It is like an engine
that pulls the rest of the marketing programmes. It is in this context that the product management in an
insurance organisation needs an intensive care.
Yesterday, the policyholders had limited hopes and aspirations but today they expect more and they
would even like something more tomorrow. This focuses on the fact that strategic decisions are
influenced by the environmental conditions.
The product development needs a new vision, a new approach and a new strategy. Till now the public
sector insurance organisations have made possible an optimum utilisation of their marketing resources
especially in rural areas where tremendous opportunities are available. Thus they should assign due
weightage to the development services /schemes which cater to changing needs and requirements of
the rural segment.
In the development of product, the corporate investments need due priority.
Channelising the corporate investments influences the rate of profitability of insurance companies and
also contributes considerably to the socio-economic transformation process.

Thus the product planning and development should:

Give due weightage to the socially and economicallyθ backward classes
Maximise the mobilisation of savings by offering lucrativeθ schemes.
Assign due weightage to interests of investors.θ
Maintainθ economy in business by promoting cost effectiveness.
Act as a trustee ofθ policyholders.
Keep in mind the emerging trends in businessθ environment.
Improve the quality of customer / userθ services.

PROMOTION MIX

With the advent of private players in the insurance, companies resort to rampant promotion. Promotion
mix for this sector is as follows:

Advertisement
Advertisement can be done through the telecast media, broadcast media and print media. Insurance
companies have been making optimal use of all the three kinds. Use of World Wide Web, as media is
almost negligible and will not be very frequent in the near future considering the fact that the majority
of customer base of these companies is not yet exposed to the Internet. The telecast media has been
the most effective of all in case of the insurance sector. Most of the companies have their separate
advertising section to take care of this aspect. An important consideration while making the decision as
to the selection of the media is budgetary constraint. Since the insurance companies work on a large
scale, usually this constraint does not stand as an obstacle.

Publicity
It is a device to promote business without making any payment and therefore it could be also called as
unpaid form of persuasive communication bearing a high rate of sensitivity. Developing
rapport with the media is an important aspect of publicity. This makes it essential that the PR officers
working in the insurance organisations maintain contacts with the media personnel, organise press
conference, and offer small gifts and momento to them. These days LGD marketing is gaining popularity
the world over. It also can be applicable here. At the apex and regional levels, the PRO’s bear the
responsibility of projecting positive image of the organisation. Thus it is necessary to select suitable
personnel for this. They should be in particular taught to deal with people, simple things like talking,
greeting etc.

Sales Promotion
Incentives to the end users for taking the policy play an important role in promoting the insurance
business. Since the insurance business is also related to achieving of a particular target, it is pertinent
that the policymakers assign due weightage to the same. The offering of small gifts during a particular
period, the rebate, discount, bonus can increase business of organisation by leaps and bounds. Besides,
there can be gifts for the insurance agents also.

Personal Selling
Personal selling in case of the insurance organisations is quite important considering the existence of the
insurance agents spread at all levels. Selection of these agents, their training is responsibility of the
organisation. There is difference in urban and rural market. Rural customers might be uneducated /
uninformed etc. compared to the urban customer. Hence the organisations will have to make selections
of the rural and urban agents accordingly.

Word of Mouth Promoting.

The word – of- mouth communications result into wider publicity, which substantially sensitise the
process of influencing the impulse of users/prospects of the insurance services. The satisfied group of
customers, opinion leaders, the social reformists, the popular personalities act as word of mouth
communicators. The advertisement slogans may be insensitive, the publicity measures may be
ineffective but the positive feelings of friends and relations communicated cannot be ineffective. This
makes it clear that the most important thing in the promotion of any business is the quality of services.

Telemarketing
With the development of satellite communication facilities and with the expansion of the television
network, we find telemarketing gaining popularity the world over. The insurance organisations in general
need to promote telemarketing. The foreign insurance companies have been assigning due weightage to
this and in India this is beginning to gain importance with the advent of competition in this sector. The
telemarketer is supposed to be well aware of the telephonic code so that the task of satisfying the
customers/their queries will not consume much of time.

World Wide Web

In banking as well as insurance, more and more importance is being given to online contact facilities
whereby complaints/comments could be sent through an email. Email is fastest written mode of
communication and since it has been recognized legally, its use to clear doubts has been in full swing.

PRICE MIX

In the insurance business, the pricing decisions are concerned with the premium charged against the
policies interest charged for defaulting the payment of premiums & credit facilities, commission charged
for underwriting & consultancy services. The formulation of pricing strategies becomes significant with
the viewpoint of influencing the target market or prospects. To be more specific in the Indian context
where the disposable income in the hands of prospects is found low, the increasing inflationary pressure
has been instrumental in contracting the discretionary income, the increasing consumerism has been
making an assault on the saving potentials of masses, it is pertinent that the insurance organizations in
general & public sector insurance organizations in particular adopt such a strategy for pricing that makes
it a motivational tool & paves the ways for increasing the insurance business. Of course, a motivational
pricing strategy is required to be given due weightage. This necessitates a new vision for setting
premium structure & paying the bonus & charging the interest.
The strategy may have a new vision in the sense that the insurance organizations prefer to make a mix
of high & low pricing strategy. The motive is to make the premium structure commercially viable so that
the insurance organisations succeed in having a sound product portfolio besides fuelling development
orientation. The pricing decisions make it essential that the insurers keep in their minds the nature of
policy vis-à-vis the segment to which the prospects belong.

In the tangible products, cost of production is taken as the basis for fixation of prices. Even in the
insurance business, it is found to be an important consideration & a dominating base. This makes the
cost of insurance a decisive factor for charging premium. The important bases for determining the cost
are rate of death, rate of interest & the expenses incurred on the insurance business. The mortality table
helps the determination of death rate. It is to predict future mortality. The best method of construction
of mortality table is to select a large number of persons at attained age, which is meant age close to the
birth rate. The second important element is the rate of interest. On the basis of mortality rate, it is
estimated that when & how much amount is to be received as premium & would be paid as claims but
on the basis of interest rate, it is estimated that how much interest can be earned by investing the
insurance funds. The last element is cost which focuses on different types of expenses. There are certain
expenses, which incurred at the time of inception of the policy. This necessitates determination of the
nature of expenses. The determination of expenses according to occurrence & equal distribution of the
expenses every year for equitable distribution of loading are found significant to make possible a
sound management of expenses.

The process of rate of fixation in the insurance organizations is not so scientific & identifies the cases of
moral hazard. It is easier to identify the physical hazard but the task of identifying the moral hazard is
found difficult. The premium charged is to be made rational to cater to the payment of claims on a
priority basis including the catastrophic losses, management expenses & margin of profit. It is essential
that various related to both the hazards are estimated in a scientific way. The actual process of rating
consists of three steps, e.g. classification, discrimination & scheduling.

 
The price mix decisions are:

Making possible cost of effectiveness¬

¬ Restructuring of premium
Due priority to profit generating¬ investments.
Rationalizing or optimizing the social costs¬
Paving¬ avenues for channelising the productive investments
Assigning dude¬ weightage to the policies meant for the socially & economically backward classes
Making the ways for maximizing profit¬

PLACE

The first component of the marketing mix is related to the place decisions in which our focus would be
on the two important facets – managing the insurance personnel and locating a branch. The
management of agents and insurance personnel is found significant with the viewpoint of maintaining
the norms for offering the services. This is also to process the services to the end user in such a way
that a gap between the services- promised and services – offered is bridged over. In a majority of the
service generating organizations, such a gap is found existent which has been instrumental in
aggravating the image problem. The policy makers make provisions; the senior executives specify the
standards and quality and the branch managers with the cooperation of the front-line staff and others
bear the responsibility of making available the promised services to the end users. The public sector
insurance organizations have failed in both the areas. The agents, rural career agents, the front-line
staff and even a majority of the branch managers have become a party gap.

The transformation of potential policyholders to the actual policyholders is a difficult task that depends
upon the professional excellence of the personnel. The agents and the rural career agents acting as a
link lack professionalism. The front-line staff and the branch managers are found not assigning due
weightage to the degeneration process. The insurance personnel if not managed properly would make all
efforts insensitive. Even if the policy makers make provision for the quality upgradation, the promised
services hardly reach to the end users. This makes it significant that the insurance organizations in
general and the public sector insurance organizations in particular keep their minds in changing the
expectations of customers and the prospects. The behavioral profile of insurance personnel is studied in
a right fashion and the changes required due to the changing perception of expectation are incorporated.
It is essential that they have rural orientation and are well aware of the lifestyles of the prospects or
users. They are required to be given adequate incentives to show their excellence. While recruiting
agents, the branch managers need to prefer local persons and by conducting refresher courses to brush
up their faculties to know the art of influencing the users/prospects. In addition to the agents, the front-
line staff also needs an intensive training programme. This makes it essential that the branch managers
organize an ongoing training programme, which focuses on behavioral management.

Another important dimension to the Place Mix is related to the location of the insurance branches. While
locating branches, the branch manager needs to consider a number of factors, such as smooth
accessibility, availability of infrastructural facilities and the management of branch offices

and premises. In addition it is also significant that the branch managers assign due weightage to the
safety provisions. The management of offices makes it significant that the branch mangers are particular
to the office furnishing, civic amenities and facilities, parking facilities and interior office decoration.

Thus the place management of insurance branch offices needs a new vision, distinct approach and an
innovative style. This is essential to make the work place conducive, attractive and proactive to the
generation of efficiency. The motives are to offer the promised services to thee end users without any
distortion and making the branch offices a point of attraction. The branch managers need professional
excellence to make place decisions productive.

PEOPLE

People are most important component of marketing mix for the insurance industry. Sophistication in the
process of technological advances makes the ways for the personnel in such a way that an organization
succeeds in making possible a productive utilization of technologies used or likely to be used.
Professional qualification requirements change as technological develops & evolves. The use of
computers microcomputers, fax machines, sophisticated telephonic service, e-mailing, intra-net service
have been found throwing a big impact on the perception of quality of service. This makes it essential
that the insurance organizations also think in favour of developing personnel in line with the
development and use of information technologies.

The front-line-staff as well as the branch managers are required to be given the training facilities so that
they in position to make possible an effective use of the technologies. The insurance organizations bear
the responsibility of developing the credentials of their employees. In this context, it is also significant
that they think about the behavioral profile of insurance personnel. It is pertinent that the employees
are well aware of the behavioral management. They know & understand the changing level of
expectations of users & make sincere efforts to fulfill the same. In this context, it is also significant that
the senior executive while recruiting, training & developing the insurance personnel make it sure that
employees serving the organization have a high behavioral profile in which empathy has been given due
place. The psychological attributes become significant with the viewpoint of influencing the prospects or
retaining the users. It is in this context that the insurance companies need a rational plan for the
development of insurance personnel.

PHYSICAL EVIDENCE

Physical evidence includes facility design, equipment, signage, employee dress, tangibles, reports &
statements.

¬ Signage:
Signage personifies the insurance company. It gives an identity by which users recognize the company.
A signage depicts the company’s philosophy & policy.

Following are the some of the examples

Tangibles:¬
Insurance companies give their customers & agents various tangible items like pens, letter pad,
calendars etc. such things try to reduce the intangibility characteristics of this industry.

Statements:¬
The statements are the punch lines, which deeply depicts the vision & attitude of an insurance company
towards its users/potentials. It also indicates their business motive.

PROCESS

Flow of activities: Since major activities are conducted through the agents, the agents are given training
and refresher courses etc. There are branches of insurance organizations where these agents go for
processing of proposals/claims etc.

Standardization: The proposal/claim forms and other formalities are standardized in case of each branch
of an organization. Standardization here implies procedural standardization. But the processing may
differ from case to case in case of claims.

Customization: As stated earlier, each case has its own peculiarities. Hence amount of premium,
proceedings of a claim etc. are quite subjective.

Number of steps: Clients of an insurance company differ from an insurance policy – holder to a larger
conglometeer. Number of steps in case of each group will definitely differ. However in case of individual
customer, the agents handling the proceedings. Thus the actual customer, the agent handles the
proceedings. Thus the actual customer is not involved in proceedings for a majority of steps. In case of
the corporate, usually separate officer are appointed to take care of each case. Standardization reduces
many steps as well as the time taken.

Simplicity: Use the national language/regional language, customer friendly forms and instruction
manuals, segregation of various department into counter etc has made entire process quite simple.

Complexity: Insurance works on ‘spread of risk’ principle. The companies have to use others’ money and
hence they arte very careful not only while processing the claims but also while accepting the proposals
in the first place. Because of some stringent norms, the process of obtaining and furnishing documents,
proofs etc becomes complex; but it has been quite simplified by the existence of the agents.

Customer Involvement: Customers involvement in case of insurance organization is quite limited. The
insurance agent acts as PROs for the company, they perform majority of the necessary formalities. The
customers are only involved in case of formalities like medical examinations, interviews etc. but the
organizations make it a point to let the customers express their concerns through the customers
complaint cell and mail/email contacts.
SECTION V: SOME PLAYERS

ICICI PRUDENTIAL LIFE INSURANCE LTD.

ICICI Prudential Life Insurance was established in 2000 with a commitment to expand and reshape the
life insurance industry in India. The company was amongst the first private sector insurance companies
to begin operations after receiving approval from Insurance Regulatory Development Authority (IRDA),
and in the time since, has taken several steps towards its realizing its goal.

The company's wide range of products, distribution strengths and powerful brand has driven its growth
across a cross-section of people and cities. On June 30, 2002, the company crossed the 150,000 policies
milestone with a premium income of over Rs. 165 crores and a total sum assured in excess of Rs. 4,100
crore to establish itself as the No. 1 private life insurer in the country.

VISION
The vision is to make ICICI Prudential Life Insurance Company the dominant new insurer in the life
insurance industry. This it hopes to achieve through our commitment to excellence, focus on service,
speed and innovation, and leveraging our technological expertise. The success of this organization will
be founded on its strong focus on values and clarity of purpose. These include:
• Understanding the needs of customers and offering them superior products and service
• Leveraging technology to service customers quickly, efficiently and conveniently
• Developing and implementing superior risk management and investment strategies to offer stable
returns to their policyholders
• Providing an enabling environment to foster growth and learning for their employees
• And above all building transparency in all its dealings.
PRODUCTS OFFERED

SAVINGS PLAN
• ICICI Pru SmartKid - a superior way to guarantee child’s future no matter what the uncertainty.
• ICICI Pru LifeTime - a complete market-linked insurance plan that adapts itself to changing protection
and investment needs, throughout a lifetime.
• ICICI Pru Save'n' Protect - a traditional endowment savings plan that offers both high returns and
protection.
• ICICI Pru CashBak - an endowment savings plan that allows one to get back substantial survival
benefits without having to wait till the maturity date.

PROTECTION PLAN
• ICICI Pru LifeGuard - a low cost-high protection plan that offers protection over a specified period.

RETIREMENT PLAN
• ICICI Pru ForeverLife - a deferred annuity plan that helps one save for retirement while providing life
insurance protection.

• ICICI Pru LifeLink Pension - a single premium plan that allows one to park a lump sum amount for a
secure future.
• ICICI Pru LifeTime Pension - a plan that gives one the twin benefit of market-linked annuity and life
insurance cover.
• ICICI Pru ReAssure - a plan that helps to invest money prudently and safely and offers the benefit of a
regular income while providing life insurance protection.

INVESTMENT PLAN

• ICICI Pru LifeLink - an investment plan that gives the flexibility of choosing your investment options
while keeping you insured for life.
• ICICI Pru AssureInvest - a single premium endowment plan that gives potentially high returns coupled
with insurance protection.

Each of these policies cater to different segments of the consumers who take the policy to satisfy the
needs, wants and desires that are different from each other.

BAJAJ ALLIANZ GENERAL INSURANCE COMPANY LIMITED

INTRODUCTION
Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj Auto Limited and
Allianz AG of Germany. Both enjoy a reputation of expertise, stability and strength. Incorporated on
19th September 2000 Bajaj Allianz General Insurance Company received the Insurance Regulatory and
Development Authority (IRDA) certificate of Registration (R3) on May 2nd, 2001 to conduct General
Insurance business (including Health Insurance business) in India. The Company has an authorized and
paid up capital of Rs 110 crores.
In less than twelve months of operation, the company has assured numero uno position among the
private non-life insurers. As on 31st March 2002, Bajaj Allianz General Insurance Co.Ltd completed a
premium income of Rs.142 Crores and already has a network of 31 offices across the length and breadth
of the country.

VISION
• To be the first choice insurer for customers
• To be the preferred employer for staff in the insurance industry.
• To be the number one insurer for creating shareholder value

BUSINESS FOCUS
The business focus is to position themselves as a leading corporate & retail insurance company catering
to the needs of our customers.
At Bajaj Allianz General Insurance, the guiding principles are customer service and client satisfaction. All
efforts are directed towards understanding the culture, social environment and individual insurance
requirements of the customers so that they can cater to their varied needs.
They are working closely with leading intermediaries including corporate agents; motor dealers; agents;
banks; associations and other intermediaries to focus on the corporate and retail business.
Bajaj Allianz General Insurance leverages the customer base and expertise of Bajaj Auto Ltd and Allianz
AG.

They are technology driven and strive to set up world-class technological infrastructure. This will include
a renowned insurance software; networking of all offices and intermediaries as well as the ability to
interface with customers via all media.

PRODUCTS

Tariff Products
• Fire Insurance
• Consequential Loss (Fire) Insurance
• Industrial All Risk
• Motor (includes private cars, two wheelers and commercial vehicles)
• Workmen’s Compensation
• Engineering (includes Contractors Plant and Machinery, Electronic equipment, Machinery Loss of
Profits, Machinery, Boiler Explosion, Machinery Breakdown, Deterioration of stock)

Non-Tariff products
• Health Guard
• Personal Accident
• Burglary
• Money
• Plate Glass
• Public Liability
• House Holders
• Overseas Travel
• Hospital Cash
• Office Package

Risk Management Services

The gamut of risk management services includes:
• Risk Analysis, Grading & Control.
• Accident Investigations
• Hazard and Operability Studies
• Safety Audit
• Disaster Management Planning

SECTION VI: RECENT TRENDS & OPPURTUNITIES

IN THE INSURANCE INDUSTRY

NEW RISK HORIZONS

Business is becoming increasingly vulnerable due to wide variety of risk particularly after September 11,
2001 disaster in which twin towers located in the hearts of New York city were crashed by terrorist
attack resulting in loss of 6,000 human lives as well as financial loss to the extent of $45 billion. The
impact of this terrorist attack has created new horizon of risk to the business world today.

However, rapid changes in the global economy, development of technology and e- business already
gathered momentum. Increased dependency on technology has originated new risks that have resulted
in well-published incidents.

Computer hackers obtaining credit card information from Visa and Power – Gen, the love Bug Virus,
cyber extortion, web content liability, professional errors and omission, computers and other crimes and
activities such as terrorism, kidnapping and company’s executive and extortion of money, commercial
liability etc have significant impact on business resulting in extreme financial loss, commercial
embarrassment or regulatory implications.

Corporate insurance/risk managers, under the circumstances, have to demand increasingly complex
insurance products. They have to be more attentive and knowledgeable about emerging risks, how those
risks are managed effectively and efficiently, and how they could ultimately affect a company’s financial
situation and therefore its position in the marketplace. In short, how such risks are managed and can
give to an insured a competitive advantage.

In the changing times, adoption of e- commerce into business models, the integration of web – based
communication and data transfer capabilities into the business operations, and leveraging of advanced
network and technology architecture for maximum benefit are the new horizons of the risks. For the
corporate insurance/risks manager, these new exposures – cyber – risks – can lead to cyber losses,
widening the interpretation of what constitutes insure property damage, particularly as it relates to
information technology and data.

All the while, organizations are under tremendous pressure to reduce expenses and increase profit
margin, and cannot afford to suffer a property loss of business interruption due to any cause (risk). How
a company identifies, quantifies, qualifies and manages these new risks exposures, in addition to the
well – known traditional risks, is becoming an important factor in creating shareholders value. This often
means changing the way. Everyone in the organization have to think about risk.

Insurance managers are seeing price levels (premium) continue to rise – albeit modestly- in today’s
primary commercial property and reinsurance markets. They are
demanding that insurers improve their risk assessment and quantification offerings so that an insured
may avail the benefit in cost (premium rate) on account of well – managed risk.

The good news for insurance managers is that as the economy evolves, insurers are increasingly
matching that evaluation with new products, service and capabilities due to opening up the insurance
market to the private players.

Insurers who are truly listening to their customers and striving to be more in tune with their needs are
responding to the fast changing corporate insurance and risk management landscape. They are listening
to their customers. They are making fresh approaches to address the new challenges faced by insured
organization by designing the new products as per the need. Insurers are providing value-added
services to insured to protect the value created by the business.

Insurers are increasingly required to develop and expand their information technology platforms to
ensure that the vast amount of data they collect about their customers. Insurance/risk portfolio can
easily and seamlessly be transformed into valuable risk management information. To help their
customers, insurers should make better-informed decisions. They must be able to swiftly deliver this
data to their customers (insured) anywhere in the world. Insurers are also discovering that risk
assessment have to be customized to meet policyholders’ new exposures and needs. The insurance
industry is stepping up and addressing these challenges in several different ways.

LOOKING AHEAD

There is presently building in India an upsurge in consumer awareness, putting immense and
unavoidable pressure on the insurance industry. A lifting of the bar on composite insurance, where
companies are allowed to do only life or non-life business today, can also be expected. Instead of
categorizing insurance by class, the focus may shift more to the period for which the cover was offered
and the risk underwritten. Already there is demand for permitting the industry to underwrite pure risk
and leaving investment decisions to policyholders.

With the entry of competition, the rules of the game are set to change. The market is already beginning
to witness a wide array of products from players whose number is set to grow. In such a scenario, the
differentiators among the different players are the products, pricing, and service. Meanwhile, the profile
of the Indian consumer is also evolving. Consumers are increasingly more aware and are actively
managing their financial affairs. Today, while boundaries between various financial products are blurring,
people are increasingly looking not just at products, but also at integrated financial solutions that can
offer stability of returns along with total protection.

To satisfy these myriad needs of customers, insurance products will need to be customized. Insurance
today has emerged as an attractive and stable investment alternative that offers total protection — Life,
Health and Wealth. In terms of returns, insurance products today offer competitive returns ranging
between 7% and 9%. Besides returns, what really increases the appeal of insurance is the benefit of life
protection from insurance products along with health cover benefits.

Consumers today also seek products that offering flexible options, preferring products with benefits
unbundled and customizable to suit their diverse needs. The trend in developed economies where people
not only live longer and retire earlier are now emerging in India. Where once the fear was one of dying
too early, now, with increasing longevity, the fear also is one of living too long and outliving one's
assets. With the breakdown of traditional forms of social security like the joint

family system, consumers are now concerning themselves with the need to provide for a comfortable
retirement.

This trend has been further driven by the long-term decline in interest rates, which makes it all the more
necessary to start saving early to ensure long term wealth creation. Today's consumers are increasingly
interested in products to help build wealth and provide for retirement income.

This all adds up to major change in demand for insurance products. While sales of traditional life
insurance products like individual, whole life and term will remain popular, sales of new products like
single premium, investment linked, retirement products, variable life and annuity products are also set
to rise. Firms will need to constantly innovate in terms of product development to meet ever-changing
consumer needs. However, product innovations are quickly and easily cloned. Pricing will also not vary
significantly, with most product premiums hovering around a narrow band.
In this competitive scenario, a key difference will be the customer experience that each life insurance
player can offer in terms of quality of advice on product choice, along with policy servicing, and
settlement of claims. Service should focus on enhancing the customer experience and maximizing
customer convenience. Long-term growth in the business will depend greatly on the distribution
network, where the emphasis must evolve from merely selling insurance to acting as financial advisors,
helping customers plan their finances depending on life stage and personal requirements. This calls for a
strong focus on training of the distribution force to act as financial consultants and build a long lasting
relationship with customer. This would help create sustainable competitive advantage not easily
matched.

RURAL-URBAN MIX
It must be borne in mind that India is a predominantly rural country and will continue to be so in the
near future. New players may tend to favor the "creamy" layer of the urban population. But, in doing so,
they may well miss a large chunk of the insurable population. A strong case in point is the current
business composition of predominant market leader – the Life Insurance Corporation of India. The lion's
share of its new business comes from the rural and semi-rural markets. In a country of 1 billion people,
mass marketing is always a profitable and cost-effective option for gaining market share. The rural
sector is a perfect case for mass marketing.
Competition in rural areas tends to be "kinder and gentler" than that in urban areas, which can easily be
termed cutthroat And the generally smaller policy amounts in rural areas would be more than offset by
the higher volume potential in these areas in contrast with

urban areas. Identifying the right agents to harness the full potential of the vibrant and dynamic rural
markets will be imperative.
Rural insurance should be looked upon as an opportunity and not an obligation. A smaller bundle of
innovative products in sync with rural needs and perception and an efficient delivery system are the two
aspects that have to be developed in order to penetrate the rural markets.

CONCLUSION

Competition will surely cause the market to grow beyond current rates, create a bigger "pie," and offer
additional consumer choices through the introduction of new products, services, and price options. Yet,
at the same time, public and private sector companies will be working together to ensure healthy growth
and development of the sector. Challenges such as developing a common industry code of conduct,
contributing to a common catastrophe reserve fund, and chalking out agreements between insurers to
settle claims to the benefit of the consumer will require concerted effort from both sectors.
The market is now in an evolving phase where one can expect a lot of actions in coming days. The
current impediments for foreign participation – like 26% equity cap on foreign partner, ill defined
regulatory role of IRDA (Insurance Regulatory development Authority- the watchdog of the industry) in
pension business etc.—are expected to be removed in near future. The early-adopters will then have a
clear advantage compared to laggards in gaining the market share and market leadership. The will need
to make sure right now that all their infrastructure is in place so that they can reap the benefit of an
"unlimited potential."