Professional Documents
Culture Documents
Table of Contents
Executive Summary.......................................................................................................2
HISTORY OF INSURANCE.........................................................................................5
INSURANCE IN INDIA.............................................................................................10
Insurance......................................................................................................................11
LIFE INSURANCE......................................................................................................13
METLIFE PO L I C I E S ..............................................................................................17
INSURANCE AS INVESTMENT..........................................................................23
Literature Review.........................................................................................................25
Life Insurance Companies Are Consistently Coming up With More New Policies....27
OBJECTIVESOF THE STUDY..................................................................................29
RESEARCH DESIGNAND METHODOLOGY.........................................................31
METLIFE PROFILE....................................................................................................34
MetLife`S ACHIEVEMENTS....................................................................................41
Chart showing Market Share of ULIPS in Kashmir region.........................................44
Growth Ranking 2008..................................................................................................45
Financial Status of MetLife..........................................................................................46
From balance sheet............................................................................................46
BANCASSURANCE...................................................................................................48
Banks as Referral Agent of an insurance company..................................................58
Insurance products distribution by banks as Corporate Agents...............................59
INCORPORATION OF METLIFE AS A JOINT VENTURE WITH J&K BANK...61
Introduction to Reinstatement......................................................................................66
Reinstatement of Policies without CI Rider.............................................................67
Data Analysis and Interpretation..................................................................................71
RESEARCH FINDINGS.............................................................................................86
CONCLUSIONS:.....................................................................................................95
Suggestions...............................................................................................................97
ANNEXURE................................................................................................................99
Glossary..................................................................................................................100
QUESTIONNAIRE................................................................................................104
Bibliography...............................................................................................................107
Bibliography
Executive Summary
MetLife India Insurance Co. Pvt. Ltd. Is one of the largest, strongest
and most respected financial organizations in USA. It was incorporated
in India on April 11, 2001 as a joint venture between MetLife
International Holdings Inc., The Jammu & Kashmir Bank, M. Pallonji
and Co. Pvt. Ltd. And other private industries. The mission of the
company is to provide 5 million customers in India world class
solutions for financial security and in the process add significant value
to its shareholders, associates and society by 2010.
In order to facilitate its mission the need of the company was to analyze the
factors responsible for lapsed Policies, and go for the revival of the same. Keeping in
view the need of the company I took it as my Research Problem and developed the
Questionnaire with the HR Department. To facilitate this process firstly I approached
FA’s of various branches of J&K Bank and discussed the matter with them. After
seeing their positive response towards the same problem as discussed above the
details of customers was made and were approached personally with the prior
appointment at a convenient place of the client at a suitable time and day.
The Research was conducted in Srinagar City. As this is a Exploratory
Research different branches of J&K Bank were allotted to me to discuss the cases of
Lapsation with the Insurance Managers/CSO for the smooth conduct of the Survey.
About 50 customers were contacted at various J&K Bank branches and at Head Office
Of MetLife India Insurance .
1) To rectify the errors in the system which led PSP’s and Monthly’s
to appear in the lapsed list.
2) To find the discrepancy in the data for the rest of the modes.
After analyzing the respondent’s views about the company a feedback were available
to the company which proved to be helpful for the company in knowing the various
strengths and the weaknesses. After knowing the company got a knowledge of the
different fields where it should work if it wants to achieve the sky heights in the
industry. Before this research it was seen that the company was good in introducing
new customers to the organization. But a company cannot be successful if it focuses
on new business only which was practiced in MetLife. The retention rate at the
MetLife was not followed upto that extent as it was needed, this was seen after the
research was conducted inspite the reinstatement guidelines followed by MetLife
were good.
The research was also helpful to the company as various policies were reinstated
and the customers also feel that their investment decision made by them were not
wrong because the company is putting its efforts to get the referrals from the
customers. The company is not keeping the customers interest away after they invest
but the continuously remain in touch with them and make the various departments
customer friendly which makes the image of the company as a customer focused
company. To be a customer friendly is a very good thing for the organization.
The study revealed that wrong selling was made by J&K Bank by the influence of
Advance Managers. This was the prime cause
It was revealed that the various policies lapsed because they were not given proper
knowledge about the product, they purchased those products whose premium was not
afforded by them but the commission received by the financial advisors and the
channel sales officers was more from others due to which they advised them to buy
those products.
Limitation of Research:
The main limitation of the research that I feel was Shortage of time. This research
was of vast nature and six weeks time was very little for its complete study. Customer
satisfaction level cannot be fully analyze on the basis of 50 customers only, MetLife
globally perform surveys and this survey will just serve as a part of that in Kashmir
region.
HISTORY OF INSURANCE
ORIGINS
With the marine route being the bedrock of trade and commerce
in those days, the practice of bottomy evolved, and spread. With the
growth of towns and trade in Europe, medieval guilds (groups
organized on the basis of some common objectives, like traders) pooled
in money to protect their members from loss by fire and shipwreck, to
pay ransom if they were captured by Pirates, and to provides burial and
support in sickness and poverty. By the middle of the 14 t h century, as
evidenced by the earliest known insurance contract (Genoa, 1347).
Marine insurance was common among maritime nations of Europe.
NATIONALIZATION
Post-independence, discontent against insurers reached a pitch.
Business was chaotic, foreign insurer were leaving the country and
Indian insurers driven by greed and business considerations weren’t
earning much credibility. The cry for nationalizing insurance grew
louder. A move that insurers were of course opposed to.
PRIVATISATION
Under state controls, the insurance sector, both life and non-life
grew steadily. Still, Indians are not adequately insured and lag behind
INSURANCE IN INDIA
Insurance
Definition and Meaning
MEANING OF INSURANCE
and conditions agreed to are stated in the contract which is known as insurance policy.
In this way, the risk of loss is transferred from the insured to the insurer. Insurance
has nowadays become so popular that practically everything from a pin to a giant
structure can be insured against a possible risk.
Like any other contract, the contract of insurance must also satisfy the
following conditions:
1 There must be an agreement between the two parties, the insurer and the
insured.
2 The agreement called insurance policy must be in writing.
3 The parties to the agreement must give their free consent to all terms ad
conditions of it.
4 The parties must be competent to enter into contract
5 There must be mutual consideration
6 The object of the contract must be lawful.
LIFE INSURANCE
Proof of Death: This is the first step in the procedure of getting the
amount claim. The proof of death has to be furnished to the insurance
company if the policy has become due owing to the death of the
assured. A certificate given by doctor who has treated the assured
before his death is a satisfactory proof of his death or the certificate
issued by the Municipality can also be a satisfactory proof of death.
The necessary documentary evidence of death must be submitted to the
insurance company.
Proof of title: The person who lodges a claim with the insurance
company have to establish own legal title to the amount of the policy.
Establishing legal title to the amount of the policy is necessary
especially when no nominee is named in the policy.
The first and the most important step towards ‘doing better’
involves being financially being financially literate, and having, at the
least, an elementary understanding of life insurance is all about. This
means being aware of the various types of insurance products on offer
in the market, as well as having the ability to understand one’s life
insurance needs and find appropriate fits.
METLIFE PO L I C I E S
TERM PLANS
Term plans are the purest form of insurance. These are no-frills
policies that cover only the risk of your death. In the event of your death
during the policy term, your nominee receives the cover amount. In
insurance parlance holders, mutual funds to unit holders, automobile
ENDOWMENT PLANS
While term plans cover just the risk of death, endowment plans
also offer return on the premiums paid by you. So, if you die during the
policy term, your nominee gets the sum assured plus some returns; if you
survive the policy term, you still gets back the sum assured and returns.
As much as this money if you live "Philosophy is an enticing
proposition, it comes at a price; high premiums, which drag down the
returns from endowment plans, to barely 4-6 percent a year.
WHOLE-LIFE PLAN :
which can serve as a useful income stream during your later years, if
you so desire.
But do you really need life cover through your time? Typically,
your life insurance needs start taper off after the age of 50. Your
children are earning and probably in need of life cover themselves.
cover and to meet its own administrative expenses (this figure drops
gradually through the plan term, tapering off at around 5 percent). The
balance 80 per cent in the first year (more in the subsequent years) is
invested in an investment plan of your choice, and your are allocated
unit, based on the prevailing net asset value (NAV) of the plan you
have opted for. Just like in a mutual fund.
PENSION PLANS
Pension plans differ from the five types of insurance plans
mentioned above in a fundamental way: not all of them offer life cover.
So, why are we talking about them here? Because pension plans feature
among the bevy of products offered by insurers and are pitched as
retirement planning schemes, similar to other investment- based
insurance plans.
INSURANCE AS INVESTMENT
plans to get their lives insured, save on tax, build a retirement corpus,
and fund their children’s education and among other things. But are
they maximizing their returns, or can they do better, without
compromising on the life insurance benefits? In other words, do life
insurance plans make good investments?
The answers to these questions are not straight forward, given
the number of factors that influence returns on your investments. These
include the impossibility of predicting interest rates and tax rates over
twenty years or more-tenures typically of insurance contracts .Yet, with
some realistic assumptions, it is possible to assess if endowment plans
make good investments.
would increase further if the premium differential was able to earn the
historical returns debt funds and equity funds has been known to give
over such long periods.
THE ROAD AHEAD
Returns from endowment plans have fallen sharply; between 1999
and 2005, bonus rates have dropped from 9 percent of sum assured to 4
percent and these could drop even further
FALLING RETURNS
There are guidelines on where life insurer can invest the money they
collect by way of premiums from you on endowment plans. Around 90
per cent of it is to be invested in safe debt instruments, leaving just 10
percent for the high yielding asset class that is equities. It follows that
profits of insurers will closely track returns from debt paper.
Literature Review
This study was a modest attempt to analyze the causes for lapsation
after privatization on the basis of the experiences of the functionaries
like branch managers, development officers, Agency managers and
insurance agents (CSO’s) who are the core marketing staff for MetLife
India Ins. Co. Pvt. Ltd. After privatization significant progress has
taken place in Indian insurance sector especially in life insurance
business. However still lot of potential for life insurance consumption
is available in India as the India's Life Insurance penetration and
density is low when compared to Asian average or world average. In
spite of rapid progress the sector is suffering with high rate of
lapsation of policies. This study reveals that forced selling of policies
without caring for matching of MetLife products with requirements of
the policy holders plays a vital role in lapsation of policies in the first
year of policy life. This is happening due to the fact that beneficiaries
are unaware about the insurance products and their comparative merits
and limitations. In addition the services after sale of policies are not as
per the requirements of the policy holders. Hence there is a need to
organize special training camps to agents and awareness camps to
In her study Misbah has clarified that For the purpose of identifying
prime causes for lapsation, the perceptions of the core functionaries in
the marketing network of MetLife are ascertained by canvassing
questionnaire. They include Branch managers, Area Managers, Sales
Managers, Development Officers and Agents. For the purpose stratified
random sampling is applied in selecting sample of Branch managers
(BMs), Development Officers (Dos) and Banca Agents. The study is
confined to the city of Srinagar. The findings include awareness levels
of the customer (about personal risks, insurance and insurance product
knowledge), product mismatch (lack of need based selling/ forced
selling/ wrong selling), incompetent services (by agent and MetLife),
financial problems of customers (due to insufficient income, inflation,
lack of financial planning ), Competition (with other financial
institutions and other investments with higher returns).
In his study Irfan Ali has listed that purchase of insurance more than
affordability, purchase of wrong type policies, purchase of expensive
policies etc are some of the causes for lapsation. He has included the
Srinagar city as epicenter, since Srinagar is the best site of Kashmir
valley for successful business. Presently he is the Area manager of
Sales Department; this is the result of his sincere efforts towards the
mission of organization. The conclusion and recommendations were
very helpful to the management. He has reinstated almost 100 (one
hundred) lapsed policies.
Now days there are so many ways where we can save our earnings and invest for the
future. Investing in life insurance policy is one of the foremost way of doing that.
MetLife has got so many products from which we can benefit ourselves. They are the
whole term life insurance policy, the mortgage policy, the health insurance policy, the
universal life insurance policy and many more. All the products offered by MetLife
are very good, we can benefit ourselves from them if we in invest according to our
requirements. MetLife offers various products for various life stages, it has got wealth
accumulation plans, retirement, child care plans. So we should invest according to our
need. Before investing in life insurance we should consult various persons like
friends, family members etc. especially we should consult the customers of that very
company in which we want to invest. We should inquire various important things
from which reinstatement is one. We should always take decisions keeping in view
both the aspects ie; could be, could not be. If somehow your policy gets lapsed then
reinstatement is the obvious tool to change its states. Hence reinstatement is a
compulsory thing which we should take care of. From the track record it is confirm
that MetLife is using this tool with good technique.
are quite different from others, they are more customer focused. Policies at may be
reinstated after termination. Payment of past due premiums is required. MetLife
require an application and evidence you are insurable under their underwriting rules
then in effect. Reinstatement takes effect on the date Metlife approve the application
of reinstatement. If MetLife do not decline reinstatement in writing within 45 days,
the policy will be reinstated on the 45th day after date of the conditional receipt will
give you in exchange for your payment of all premiums due.
make sure that you are satisfied with the reinstatement procedure so that in will not
prove costly to you
1) To rectify the errors in the system which led PSP’s and Monthly’s
to appear in the lapsed list.
2) To find the discrepancy in the data for the rest of the modes.
RESEARCH DESIGN
A conclusive Research was adopted to conduct the study in two stages. Firstly, to
know the factors responsible for the lapsed policies, discrepancies in the data of SA,
A and Q and to rectify the errors in PSP’s and monthly’s. Secondly, to go for the
revival of the policies.
In order to realize the objective of the study, primary data was collected through
“SCHEDULE” besides the use of Secondary data.
Sampling Plan
The population of interest was the policy holders of Kashmir valley whose policies
has gone lapsed. Three branches of J&K bank were selected for the sample. All the
55customers were contacted whose policies fall in lapsed list. The customers were
approached at their respective residences, business establishments or at the concerned
bank branches. Some of the customers were contacted telephonically.
Sample size
Monthly = 10 respondents
Quarterly = 7 respondents
Semi-annually = 15 respondents
Annually = 23 respondents
DATA COLLECTION
Data Source:
Primary as well as secondary were used
Primary data has been collected from the survey conducted through
systematic gathering of data from structured sample of customers
through questioner
Secondary data comprised mainly of management books and
various websites.
The report mainly consists of primary data gathered through the
schedule of questions asked to the respondents directly.
Research instrument
In order to facilitate respondents’ expression a semi structured non
disguised type of schedule of questions was used containing the
relevant questions as per the reason of their non continuing of the
policies. The same was done with the FA’s of the J&K bank.
INTERVIEWING PROCESS
The survey was conducted through interviews with the FA’s and
customers were asked the reason of lapsed policies and the interviewer
noted down the responses. This ensured high response rate and
eliminated wrong irrelevant responses.
Pilot survey
The schedule was pre tested for errors and ease of understanding. The errors thus
determined were eliminated. The understanding issues were also eliminated to the
extent they could be without any effect on the intended purpose of the query.
This brought some changes in the schedule regarding phrasing, order, and
number of Queries that were made on time.
Statistical tools
Microsoft Excel was used for tabulation of data, percentages are drawn
for generalizing the study and graphs are used for having better
pictorial representation.
METLIFE PROFILE
VISION
OUR MISSION
100 million customers by 2010. To help reach that goal, MetLife plan
on launching innovative products in the near future, this will act as a
PRODUCTS OF METLIFE
1. MET 100
2. MET SUKH
8. MET BHAVISHYA
MetLife`S ACHIEVEMENTS
➢ MetLife enjoyed a golden performance on May 15, 2009 (New York) - At the
15th Annual FCS Annual Portfolio Awards, the Financial Communications
Society (FCS): four awards, all Gold trophies, plus the Best-in-Show
Multicultural award for its "South Asian Brand Television Campaign," created
by IW Group. The award was sponsored by Forbes. MetLife also won Gold in
the new ROI category, which recognized the success of marketing campaigns
for their stated return on investment.
➢ MetLife’s corporate vision – to build financial freedom for everyone – guides
the company’s response to people’s growing need for first-rate financial
products and services through various life stages and economic cycles.
MetLife’s trusted brand, capital strength, and existing relationships with
insurance businesses for $12 billion. Completed on July 1, 2005, the Travelers
acquisition made MetLife the largest individual life insurer in North America
based on sales, the second largest provider of retail annuities and the largest
provider of institutional annuities.
➢ Working Mother magazine honoured MetLife in 2005 by naming the company
one of the "100 Best Companies for Working Mothers," for the seventh
consecutive year. In 2005, the company was named to Diversity Inc.’s list of
the Top 50 Companies for Diversity. In early 2006, MetLife was also named
to the National Association for Female Executives’ annual list of Top 30
Companies for Executive Women.
➢ In 2006, MetLife appointed C. Robert (Rob) Henrikson chairman of the board
of directors, president and chief executive officer of MetLife, Inc. Henrikson
was appointed CEO on March 1, 2006 and chairman of the board on April 25,
2006.
➢ Henrikson has been the architect of an aggressive growth strategy that
included double-digit organic growth, the divestiture of non-core businesses,
and an M&A strategy which resulted in market leadership in all of MetLife’s
core product lines. Before it was commonly talked about, Henrikson
recognized the opportunities presented by the changing demographics in a
global marketplace and set the company on a course for continued success by
developing innovative products and services and strengthening the company’s
distribution power in the U.S. and 16 markets in Asia Pacific, Latin America
and Europe.
➢ Today, a time when consumers are feeling a greater financial burden than ever
before, MetLife is helping millions of customers create their own personal
safety net. At no time in the company’s history has MetLife been as well
positioned to capitalize on its history, its reputation for security and stability,
and its innovative products and services as it is today.
➢ In the future, MetLife will continue to grow its business with focus, innovation
and profitability. This will be accomplished by drawing on the reservoir of
history that has produced an enduring set of corporate values based on more
than 138 years of integrity, social responsibility, strong leadership and
financial strength.
➢ Largest life insurer in the US with approximately $3.4 trillion of life insurance in
force1
➢ Serves 70 million customers and experiences the existence of over 140 years in
the industry
➢ Ranked 39 on the FORTUNE 500 listing
➢ Ranked 6th In Fortune Magazine 2009 List of “America’s Most Admired
Companies”
➢ Named by Forbes magazine as “The Best Managed Insurance Company in
America (2008)”
➢ 3rd Runner up in customer loyalty survey Conducted by Business Standard & AC
Nielson in 2008
Inference :
that is Bajaj Allianz, ICICI Prudential and MetLife. So, MetLife have
an edge over others and should continue the same in the market.
S B I L if e 103%
R e lia n c e L if e 91%
M e t L if e 88%
B ir la S u n lif e 82%
O m K o ta k 73%
S ahara 57%
M ax Ne w Y ork 51%
T a ta A IG 39%
H D F C S ta n d a r d 37%
S h r ir a m L if e 37%
IN G V y s y a 21%
IC IC I P r u d e n t ia l 21%
B a ja j A llia n z 1%
A v iv a 0%
D L F P r a m eNr icA a
A e g o n R e ligN aA r e
C a n a r a H S B C NOA B C
ID B I F o r t is L ifN eA
F u t u r e G e n e rNaAli
B h a r a ti A x a LNifAe
BANCASSURANCE
BANCASSURANCE
Benefits to bank
Bank Assurance has been successful for selling insurance products due
to:
• Easy accessibility
• Customer trust on bank
• Frequent interaction with the customer
• Quick service
• Improved sales
• Reduced cost of
There are three factors driving banks in India to look at entry into the
insurance sector:
It is relevant to note that the factors that have pushed banks abroad into financial
convergence by way of Banassurance are not entirely the same as in India. In
continental Europe, well established Banasurance programmes contributes 20 to 30 %
of the retail banking profits. The main driving force in their case has been to establish
synergy with insurance to secure an additional and more stable stream of income.
Banks have sought to leverage their extensive customer base and sell a range of
financial services to increase customer retention. Another motive for banks overseas
has been to reduce the risk based capital requirement for the same level of revenue.
retail banking became intensely competitive from electronic commerce, banks needed
to quickly take up customer- centric business model, and Banc assurance emerged an
important activity to aid banks ”based on their segmentation knowledge, develop
pricing strategies and channel offerings for every single customer that are customized
to the fullest possible extent”.
Banks in India at the present stage are not driven by such a customer segmentation
approach before embarking on a new sector such as Insurance. At the same time, the
three factors mentioned above are becoming important. While Indian banks have
recorded an increase in net interest income spread) in the recent past, this is largely
due to containment of interest expenditure in a softer interest regime witnessed at
present. The ratio of spread earning foreign banks, as yields on assets have declined
more than proportionately vis-à-vis the cost of liabilities.
The net interest margin of the banks in India (as a percentage of total assets)
was 2.85 % in 2001, which came down to 2.57 % in 2002. It is still higher than more
competitive markets, such as UK (2.02 %), France (1.03 %), and Germany ( 0.8 %),
and it can be expected that the margin would shrink to international levels as the
competitive condition intensify.
The second factor driving banks into insurance sector, viz. deploying staff ( most
clerical) rendered surplus by the ongoing technology initiative, is a unique factor in
India. Employee costs for Indian Banks have been high, especially for public sector
banks at about 20 % of total expenses. The core banking initiatives undertaken by a
number of banks will substantially streamline the transaction processing and back
office operations, resulting in the need for major re-shuffle of personnel. As per an
estimate, at least 20% of the clerical staff members engaged in these functions would
need to be diverted for other work, and several banks are proposing to utilize them to
undertake simple marketing or loan recovery initiative.
In this context, a related question is whether the ongoing IT initiatives in banks are
clearly planned with a view to quickly benefit from cross selling financial products to
their vast customer base. A World Bank Review team that visited India in February
2001 to follow up the implementation of the Financial Sector Development Project
had commented that the IT initiatives of Indian banks are not being driven by business
or customer needs. The team found an undue focus on the hardware part of the
technology without a corresponding attention being paid to the productivity aspect.
This is an important observation that underlines the need to target the technology
spend in banks to draw more value from customer, a key difference that characterizes
the initiatives of banks abroad towards the convergence process.
The third factor encouraging banks into insurance, viz. the urge to provide a
broader range of products to customers, is an outcome of increasing competition in
the banking industry. Banks have realized the importance of introducing new products
and services which enhance the standing of the banks among customers. Introducing
of new products brings publicity to banks and helps enhance their reputation among
the peers.
It is, however, important to recognize that banks in India tend to launch new
products or services without having doing adequate homework. Banks in developed
markets offer new services such as selling insurance products based on a deep study
and research of customer behavior and their expectations, and extensive cost/benefit
analysis. Product launches are preceded by a clear goal setting for the marketing team
to achieve minimum levels of business. Marketing budgets are set, and the benefits
flowing from the initiatives are closely monitored. On the other hand, most banks at
home do not draw a clear roadmap for implementing new products, or set up a proper
system to evaluate the benefits of new products at regular intervals. This is an
important issue in the convergence process, which needs serious attention from the
top level in the banks to achieve expected results.
India is one of the select countries that have provided a regulatory baking to the
coming together of banking and insurance at a fairly stage of opening up the insurance
sector. The banking regulator has divided the initiatives of banks to enter into the
insurance business under three broad categories:
Banks aspiring to take only distribution of insurance products without any form of
risk participation. Such banks are freely permitted to do subject to certain filling
requirements.
a) Bank proposing to take strategic equity stake in insurance ventures up to
10% of the equity capital of the insurance venture. Such initiatives are
allowed in the case of strong banks with good profit record
b) Banks seeking to form insurance joint ventures with up to 50% equity
stake (and exceptionally up to 74%). This is allowed by the central bank in
the case of very strong banks having a minimum net worth of not less than
500 crores, capital adequacy ratio of not less than 10%, good profit record
and low level of impaired loans.
The Indian regulations concerning bank’s entry into insurance sector compare
favorably with several other Asian countries. Thailand, for example allows banks to
hold a maximum of only 10% of shares in insurance companies, while Taiwan allows
only 5 %.
The model that allows pure distribution of insurance products through bank branches
is catching up in India, with more than 20 banks announcing distribution arrangement
for life and non life insurance products.
Referral Model:
There are two distribution models practiced here: the ‘referral’ arrangements and the
‘corporate agency’ arrangement. The referral arrangement refers to process whereby
insurance company secures customer leads from the bank branch manager, by placing
an insurance agent at the bank premises other means. It is a form of uncommitted
relationship under which banks provide physical infrastructure to insurance
companies within their select branches and earn a fee for each referral made by him.
The insurance regulator has prescribed rules to restrict the referral model from
becoming a major alternative to the more serious and binding corporate agency
arrangement.
Corporate Agency:
Under the Corporate Agency Model, a bank becomes the authorized agent of an
insurance company (life and non life) to distribute its products actively to customers.
In the process, the bank agrees to undertake certain responsibilities. Corporate agency
is a committed form of relationship that requires the bank staff involved in insurance
selling to be trained and qualified for the purpose and the bank assuming
responsibility to oversee that the sales activity is pursued as per the Insurance
Regulations. In particular, the bank staff is expected to follow the standards of
customer service prescribed the regulator.
Under both Referral and Corporate Agency arrangements, a bank is allowed to tie up
on exclusive basis with one life insurer and one non-life insurer. In other words,
multiple tie-ups with several insurance companies is not allowed, so that bank can
develop the required expertise by aligning with one firm. Banks aspiring to distribute
products of more than one insurance company are required to take license as a broker
and set up a separate firm owned by the bank
As at March 2003, the regulator has approved strategic equity stake by four banks in
Insurance companies. A strategic alliance may enable the bank partner to cooperate in
developing insurance products suited to the bank distribution, and possibly in sharing
customer information. The regulator has also approved full fledged joint venture
arrangement in the case of four banks, with equity stake ranging from 26% to 74%.
level. The task involved in making the frontline bank staff become competent
insurance sales person and in the process overcoming several cultural and mindset
barriers is somewhat indeed in our environment..
In the case of a bank assuming strategic equity stake without assuming risk
participation in the insurance business, the key issue is what propels the bank to opt
for this arrangement: whether it is proposed as a prelude to a more integrated form of
entry, or an arrangement of convenience. In strategic stake relationship[s, the bank
tends to remain a minority partner, thereby being unable to being about an alignment
of its own interests with the insurance venture. Since the bank will be sharing equity
partnership in the insurance firm with other minority and major holders, the inter se
relationship issues would also assume importance.
In a joint venture structure, both the partners are usually involved in setting up a new
company as a green field operation, and the issues here are deeper. The decision of the
bank to enter into a joint venture should be based on extensive discussions and
negotiation between the bank and the insurance partner. A joint venture is a long term
arrangement that should be well thought out and should work out in the mutual
interest of both parties. There should be a strong commitment on the part of both the
parties to create a truly partnership – based organization that reflects the virtues of
both. Since bank- sponsored insurance ventures tend to draw more value from the
bank partner than from the insurance partner at least in the early stages, the needs and
expectations of both have to be balanced to create a participatory arrangement.
An important issue for bank-sponsored insurance joint ventures in India is the higher
level of equity ownership that the bank is required to take up in the early stages in
accordance with the ownership rules in force, and the timing and manner of diluting
the bank’s stake in the period ahead. Experience shows that the Indian banks are not
adept at looking at equity ownerships with the eyes of an investor. A shrewd investor
always spots opportunities for diluting the stake partly or fully at the right time with a
view to book capital gains; Indian banks tend to carry on with the original level of
equity holding irrespective of the performance of the invested entities until the
regulatory authority directs them to disinvest. This is the case in respect of the asset
management companies and other outfits set up by public sector banks, which
continue to remain under their dominant ownership until the central bank directs them
to lower the ownership levels, or totally exit from the business.
It is too early to assess the performance of the relationship[ between banks and the
insurance companies in India under the arrangements currently in force. Experience in
other countries suggests that not all Banassurance models have been successfully
everywhere. Quite a few of them have succumbed to problems encountered during the
implementation phase.
Business risk
A bank may also run the risk of adverse impact on the banking relationship with a
customer following a dispute between the customer who has bought an insurance
product from the bank, and the insurance company. This could arise in distribution of
non—life insurance products, such as property insurance cover, or marine cargo
cover. Any dispute in claim settlement could spill over to the banker-borrower
relationship. For example, non settlement of a claim under a fire insurance policy may
result in the loan becoming a non-performing asset, with the client seeking to take the
bank to task for selling a policy on which the settlement is not forthcoming.
Strong customer education at the timer of distributing the insurance policy by
stressing the respective role of the bank and the insurer, and clear description in
product literature about the insurance responsibility for claim settlement would help to
mitigate the risk.
In our context, as earlier stated, the Indian regulations apply the exclusivity principle
in distribution arrangements between a bank and an insurer, which could add to the
dimension of the risk. Since a bank is allowed to tie up with only one insurer, it will
be obliged to place the business relating to all its clients with the insurance company
concerned. The capabilities of the latter to service the needs of the large number of
bank clients would become a critical factor.
1. A Corporate Agent cannot be an agent for more than one Life Insurance or one
non- life Insurance company at the same time.
2. Every bank aspiring to become a corporate agent should designate an officer
as the ‘Corporate Insurance Executive’ (CIE). CIE’s are generally a director or
a senior officer who shall be overall in-charge of the function of corporate
agency.
3. Only Specified Persons (SPs) in a corporate agent shall solicit and procure
insurance business.
4. Both CIE’s and SP’s should undergo the practical training of 100 hours and
pass the test conducted for Corporate Agents by IRDA before they are given
the license. IRDA has prescribed those employees possessing CAIIB
qualification, or marketing, Chartered accountancy, cost accountancy, MBA
qualification or such specified qualifications, need to undergo only 50 hours of
training before taking the mandatory test.
5. The insurer shall issue a license to the bank as the Corporate Agent, which
shall be valid for a period of three years and could be renewed thereafter.
There is a token fee of Rs 250 for issuing the license.
6. A Corporate Agent is entitled for commission remuneration as provided in the
Insurance Act, 1938 which ranges from a minimum of 2%for single premium
policies and 40 % for policies with regular premium mode.
7. The bank as a Corporate Agent shall be responsible for all acts of CIE and
SPs. It shall ensure that only trained, skilled and authorized persons in the
bank solicit or procure insurance business.
8. The corporate agent shall not force any person to buy an insurance product.
The employee selling the products shall give adequate pre-sales and post-sales
advice to the insurer, and render all possible help and cooperation to an
insured in completion of all formalities and documentation in the event of a
claim. The Sp’s should explain to the prospect the nature of information
required in the proposal form by the insurer and also the importance of
disclosure of material information.
9. The corporate agent shall bring to the notice of the insurer any adverse habits
of the prospect, and not induce a prospect to submit wrong information.
10. The corporate agent shall not offer different rates, advantages, benefits other
than those offered by the insurer.
11. The corporate agent shall not have portfolio of insurance business from one
person or organization in excess of fifty percent of total premium procured in
nay year.
Our Banc assurance partner in life insurance is MetLife India, which is a joint
venture of MetLife International Holdings Inc, the No 1 Life Insurer of USA, J&K
Bank, M. Pallonji & CO and private equity investors with the following capital
structure
The initial authorized share capital of the joint venture company was Rs 110
crores divided into 11. 00 Crores equity shares of Rs 10/- each. However the joint
ventures will require approximately Rs 450 Crores of capital over six years from the
date the joint venture company was duly registered. In October 2003 the joint venture
partners contributed additional share capital of Rs 50.00 crores out of which the
bank’s contribution was 12.50 crores thereby raising the Bank’s share to Rs 40.00
crores.
MetLife India formally launched its operation in J&K State on 7th of March 2002 at
Srinagar with a small range of products namely Met Sukh ( Money Back Policy), Met
Shanti (Endowment Policy) and Met 100 ( Whole Life Product). The product range
was enhanced by introducing some new products as per the insurance needs of
customers.
In addition to the above products Metlife India has recently launched a pension
product namely Met Pension.
The bank has been selling the insurance products of MetLife India as theirCorporate
Agents w.e.f. 23.06.03. MetLife India sold about 10000 policies with Annualized
premiums of Rs 1027.62 Lacks through our branches . Bank earned a commission
income of Rs 263.93 Lacks during the said period. The quantum of life insurance
business mobilized by J&K bank during the year 2002-03 constitutes about 38% of
the total business done by MetLife India through the country during the said period.
The bank while using its 520 branch distribution channels for sales of MetLife India
products provided a ready made infrastructure to Metlife India thereby reducing the
time and cost in establishing a distribution network for the company’s products.
Commission is paid on the following rates to Bank by MetLife
Bank in association with its Bancassurance partner i.e MetLife India has been
providing fast and competent insurance services to its customers and earned their
loyalty. Employee productivity of the bank has also increased as its customers buy the
insurance products of their choice in less time at one shop. Presently the bank has got
about 200 trained/licensed Insurance Managers and about 400 Clerks ( having product
knowledge) whose services are utilized in prospecting the insurance customers for
Bancassurance business throughout the country.
Objective
To generate fee income for the Jammu & Kashmir Bank of Rs 40 Crores by the 7th
year of operation.
Assumptions
1) Insurance income will pay Jammu & Kashmir Bank 40% Commission subject
to regulations
2) Reimbursement of expenses incurred by the bank will be determined. Average
premium per policy Rs 5000
Products
3) Traditional Life Products similar to that of LIC
4) Endowment
5) Money Back
Strategy is to price similar to LIC to achieve expense loading, thereby giving
better value to the customer
Other Products
6) Credit Insurance
7) Capital Repayment
Operational Plan
8) Identify JKB branches and employees who will be designated for insurance
sales.
9) Put them through IRDA agent licensing for composite licenses ( both for life
and non life)
10) Additional training to gain prospecting and selling skills
11) Marketing and sales support to be provided by MetLife India Insurance
Sayeem Rafiq Regd No. 10807184
MetLife India Insurance Company Ltd P a g e | 63
Company
12) Products sold through JKB branches to be Co-branded.
Underwriting
13) MetLife will install electronic underwriting software at all designated branches
of Jammu & Kashmir Bank
14) It is anticipated that approximately 85% of all applications will be
electronically underwritten
15) MetLife offices will issue policies and courier them to Jammu & Kashmir
Bank Branches
Policy Holder Services
16) The IT architecture will facilitate providing customer service from Jammu &
Kashmir Bank branches.
17) MetLife will also consider establishing a call centre for Jammu and
Kashmir Bank Customer.
Additional Support
18) MetLife will enjoy special advisors ad station them in Jammu & Kashmir
Bank to support the sales efforts of J&K Bank employees.
19) MetLife will open dedicated offices in Jammu & Kashmir to provide pre and
post sales support to Jammu & Kashmir Bank.
20) These dedicated offices will also have full-time courier agents to develop the
markets in Jammu & Kashmir.
21) These offices would also support the rural branches of J&K Bank to generate
business from rural areas to comply with IRDA regulations.
22) Continue Interactive process between MetLife India Insurance Company and
Jammu & Kashmir Bank.
23) Identify branches and employees for licensing training
24) MetLife India will identify dedicated ban assurance coordinators
25) Joint effort to help Jammu & Kashmir Bank secure corporate agency License.
26) Discuss and finalize distribution agreement
27) Jammu & Kashmir Bank to send IT Director to MetLife to understand IT
architecture of J&K Bank as well as MetLife India
Introduction to Reinstatement
Collectible Premium +
Collectible Premium + Interest +
Interest + Revised DGH +
Revised DGH + Medical as per
271st – 1094th Day Medical as per New Medical
New Medical Grid depending on
Grid depending on Current
Current age and Sum at Risk
age and Sum at Risk
More than 1094 Days Decline Request Decline Request
Reinstatement process refers to restore the policy after the insurance policy has
lapsed.
➢ Policies which are lapsed for >1094 days cannot be reinstated (Subject to
product-wise features)
➢ Medicals are subject to SUC check as per the underwriting guidelines. The
rules with respect to reinstatement of each product is available in the Terms
and Conditions
➢ The Lapsation notices are sent to the customers on a frequency of T+7 days,
where T= Lapsation Date. Subsequently, they are also informed through SMS
and Phone call about the policy lapse status
➢ Lapsation Notices are sent for all frequencies and modes of payment
➢ The Lapsation Notices are dispatched on a once a week basis (for all the cases
for which the date (T+7) if falling within the period)
➢ Interest Waiver Request can be raised with the Remittance Team for waiving-
off the interest. Remittance team will approve/decline the waiver request as
per applicable timelines
➢ Whether the quote is still valid (i.e. not expired) has to be checked
➢ If the reinstatement quote is valid, then ensure that the payment is received in full
and in line with the amount reflected in the quote (including collectible premium
and interest as applicable)
➢ If the existing quote or available quote is not available has expired the branch user
has to log-in a fresh reinstatement quote in the system. The quote will provide
details of the outstanding amount payable for reinstating the policy. Provide the
quote to the customer and ensure that only the full amount is accepted towards
reinstatement of the policy
➢ Ensure that the payment and / or DGH requirement (if applicable) is fulfilled. In
case if the Medicals are required, Branch Operations to coordinate and set up an
appointment with the customer for the medicals tests and also provide the
“Medical Authorization Letter” to the customer.
In order to gear up in the entire valley MetLife in association with J&K Bank should
make proper plans to use these tools so that more and more people should come to
The major factor that MetLife became part of the respondents was
The Goodwill that J&K Bank has created. Also the loyalty of the
customers towards the bank was another factor to go for a
MetLife Policy. Other reason being its high returns on policies,
variety it provides and tax rebates.
secure and only few customers are not sure about their investments. So
regular feedback from the customers and should take steps that can help
them
Most of the customers pay their premium through their bank accounts.
They feel it easy to pay their premiums through Bank by activating
SIM. At the end of the each month the said amount is automatically
debited from his account.
Cheques are also given by some customers and few of the customers
pay through cash. The payment of Premium through Cash mode is very
low because people feel insecure to carry cash along with them
20% respondents contact MetLife head office in case they don’t Head
office sometimes receive their premium receipts
Though most of the customers policy has never been lapsed but there
are many whose policy has been lapsed either once, twice or many
times. This lapsation creates a problem for both the cus
tomers. and MetLife people Customers need to re activate their policy
in such case by paying interest along with the premium amount. And
MetLife staff needs to to do all cumbersome calculations involved in
lapsation for customers and give them details regarding their policy.
Major reason for this being that they were less educated and had no
knowledge about computers.
Thus As 25% customers find the need of such online systems so
MetLife should not ignore them and should develop such a system
which will help customer to check their details anywhere at anytime
and get all necessary information regarding their policies and also
regarding MetLife. Also they should motivate the customers who are
against to such systems to use such features, and if they feel any
problem MetLife should provide assistance in all manners to introduce
electronic Business as it is time saving , and faster than normal
procedures.
5% respondents say that they are always informed by Metlife about new products.
7% respondents say that they are usually informed by Metlife about new products.
8% respondents say that they are sometimes informed by Metlife about new products.
80% respondents say that they are never informed by Metlife about new products.
Majority of the respondents say that they are not informed by MetLife
regarding their new products. Metlife should inform their Customers
about their new products They should send such information notices to
customers and also Cso’s should provide such information to customers
who visit them or who are in touch with the CSO. This will create a
feeling among customers that they are being cared and will keep
customers satisfied which will finally result in the increase in sales.
Most of the customers receive the receipt after paying their premium.
But there are some who sometime receive or don’t receive at all. This
again focuses on the service .MetLife should try their best to improve
their services and should give proper receipts while accepting premium
from customers. Premium receipt is an important document for
customer as well for MetLife. If there had been on-line system then this
issue might not have been so important, so on-line system is
recommended in Kashmir Valley particularly.
80% respondent mentioned that they received the receipt/ ticket No.
raised.
20% respondent said that they did not receive the receipt due to lack of
time/ busy schedule.
RESEARCH FINDINGS
“THE PERSISTENCY
IN LIFE INSURANCE INDUSTRY”
Persistent means to continue to exist and the equality of being persistent is called
Persistency. In Insurance terminology, it is to get renewal premiums continuously,
without a break.
If suppose there are 95% policies which are getting renewal premium
continuously, it means there is 95% persistency. The rest of the 5% policies, which
are not continuing are termed as Lapsed.
In general, a period during which something that should happen does not
happen is called Lapse. In Insurance terminology, if the policy holder does not pay
his/her premium on the due date or even after a grace period of one month, the policy
gets lapsed.
There were almost 481 Lapsed Policies in MetLife India, Kashmir division. The
graphical representation of all the policies as per the tables are shown as:
PRODUCT
Mode
GRAPHICAL REPRESENTATION
Districts
GRAPHICLA REPRESENTATION
1 To rectify the errors in the system which led PSP’s and Monthly’s to
appear in the lapsed list.
2 To find the discrepancy in the data for the rest of the modes.
3 To know the factors responsible for the lapsed policies.
4 The most important was to go for the revival of the policies.
After delving deep and rectifying the errors in the system it was found that almost
all the 200 policies in which PSP’s were 138 and Monthly’s were 60 were still on
the stand. The problem cropped up because:
By day by day, the FA’s are becoming more experienced and the system of service is
getting improved and the MetLife have entered into the maturity stage of growth. The
communication barriers are getting less and less with time and MetLife is moving
Apart from PSP’s and Monthly’s there were almost 283 policies which fall in
the category of semi-annual, annual and monthly mode of premiums. I was given by
the MetLife almost 50 Customers.
My second objective to clear the discrepancies was solved just after meeting the
concerned FA’s.
My third objective to know the factors responsible for the lapsed policies was
collected from the FA’s as well as from the customers after having a detailed talk
with them. The summarized list of factors is as follows:
1 A large number of policies have been sold under the influence of the
advance managers. The parties who have made policies have treated
their first premium as loan charges. As soon as their amount of the loan
was disbursed, they discontinued their policies.
2 A Good number of policies have been miss sold as the policies with
heavy premiums does not become possible for the customers to continue.
3 At the time of policy bond the customers were not aware of MetLife they
had been under this impression that their policies are with the bank.
After coming to know the actual reality I.e. MetLife is foreign company,
they stopped to pay the premium. They believe MetLife being a foreign
company can windup any time by which we will loose our hard earned
money.
4 Lack of staff attached to FA’s of J&K bank. The FAs are more involved
in closing the new sales and they don’t get much time for the revival of
policies
5 Need based selling has not been done as customers now are comparing
the returns of Bank with insurances they do not take the risk factor into
the consideration
6 The FAs are going through the role conflict. Because, they were serving
as managers in J&K Bank, they had different position and status. But
after deputing them as FAs in MetLife they were asked to perform a job
of insurance agent; which according to them is much inferior to their
earlier positions. With the result they do not want to be after the
customers.
7 It had been a wise decision if the manager would have been deputed as
per their choices because as far as insurance and making of a sale is
concerned, there should be a high degree of rapport with the customers
because customers go for policies on personal liaisons.
8 As far as advertising and marketing is concerned MetLife is less visible.
Therefore, there is less awareness among the masses in Jammu &
Kashmir about MetLife.
9 The majority of population in Kashmir is Muslims; their religious belief
is in conflict with the very concept of Insurance.
10 It is well said the first impression is last impression. Due to delays in the
policy bonds, bad impression was engraved in the minds of the
customers.
11 There is a big gap between the expected services and the perceived
services. Due to poor services offered by MetLIfe, a majority of policies
has gone lapsed.
12 There are unknown negative tendencies among the certain customers
for non continuing their policies.
13 In certain cases there were financial losses due to which they could not
a single premium in MetLife switch over their policies and go for the
new policies in other companies. They feel that the choice of the
products is very less in MetLife.
27 After paying the premium a number of customers have never received
any sought of receipt. This has created a lack of trust and doubt among
them. They feared to deposit the further premiums. They had made their
minds until and unless they won’t receive the receipts of the paid
premiums, they won’t pay the new premiums.
The last objective which was to work on the front line sales job was to motivate
the customers for continuing the policies. After die hard efforts I was able to
revive 47 Policies (awaited list of about 13 customers ) with a premium of about
6 lacks. The average premium per policy is Rs 12,000 i.e.
= Rs 6 Lacks / 47
= Rs 12,000
CONCLUSIONS:
Suggestions
12) MetLife should update their customers about their new products
and their CSO’s should also provide such information to
customers.
13) The list of lapsed policies should be given to FAs after every
month.
ANNEXURE
Glossary
TERMS USED IN INSURANCE & LIFE INSURANCE
Income Statement
QUESTIONNAIRE
10 Would you like to pay your premium and check your policy
status on- line?
Yes
No
Can’t Say
13.
1. You receive reminder when you don't pay your premium on
due date:
Usually
Never
Sometimes
Always
Can’t Say
No
17. Any suggestions:
______________________________________________________
______________________________________________________
______________________________________________________
___________________________________________________.
Bibliography
• http://www.metlife.co.in/
• http://www.allbankingsolutions.com/insuresub3.htm
• http://www.indianmba.com/Occasional_Papers/OP85/op85.html
• http://ww.smashits.com/video/snoop/12802/indian-insurance-
sector-at-boom.html
• http://business.mapsofindia.com/india-insurance/market.html
• http://www.business-standard.com/india/news/market-sharepsu-
players-in-mf-industry-falls/362390/
• http://prasathr.sulekha.com/blog/post/2006/09/insurance-
industry-in-india.htm
• http://www.financialexpress.com/news/metlife-wont-take-tarp-
money/446796/
• http://www.business-standard.com/india/news/metlife-
strengthens-its-customer-service-platform/328282/
• D.R. Cooper P.S. Schindler, Business Research Methods-9 t h
edition, Tata McGraw-Hill companies, 2008
• IRDA journal Aug. 2008, vol.-VI, no.8, “lapsation in
life insurance , the No-Win”.
• Ms. Misbah (2008), project work on “customer
satisfaction at MetLife Insurance, Srinagar city”