Bachelor of CommerceBanking and insurance, Semester-VI 2006-07

Submitted by ASHISH MESTRY Roll no - 28



Project on “INNOVATIVE EYE OF INSURANCE” Bachelor of commerceBanking and insurance, Semester-VI

Submitted: In part fulfillment of the requirements for the award of the degree of Bachelor of Commerce Banking & Insurance.





This is to certify that Mr. ASHISH MESTRY Of B.Com – Banking & Insurance – Semester VI (2006 – 07) has successfully completed the project on “Innovative Eye of Insurance” under the Guidance of Mohonty Sir.

Project Guide


External examiner _________________

Internal Examiner

Course Co-Ordinate


DECLARATION I Ashish Mestry Student of B. Signature of the student Name of the student 4 .VI (2006-2007) hereby declare that I have completed on “Innovative Eye of Insurance” Wherever the data/information have been taken from any book or other sources the same have been mentioned in the Bibliography.Com – Banking and Insurance – semester. the project The information submitted is true and original to the best of my knowledge.

ACKNOWLEDGEMENT A student always collects some bouquets & brickbats while collecting information about the project he/she has undertaken. I am also thankful for the insight that I have gained through numerous discussions with him. I wish to express my gratitude to my guide “Mr. Vaidehi Daftardar. If there is a bouquet. Mohanty” who made me confident to choose this topic & helped me to get the information & also ahead with the preparation of the project. I would like to share them with those who have played a part in its making. course Cocoordinator Mr. I am grateful to our principal Mrs. Kedarnath for there support. I would express my indebtedness to my family member & friends for their constant support & for infusing me with enthusiasm to achieve the task on hand successfully. 5 .

Indian Insurance Industry 3. I II TOPIC PAGE NO Introduction Methodology III Contents of the Project 1. The Need for IT in Insurance 5. Privatization Helps Indian Insurance to Produce Innovative Product 4. Past & Present for Bright Future IV Case Study Insurance Industry Supports Soccer -FIFA World Cup 2006 IV IIV IIIV Conclusion Questionnaire Bibliography 6 . Innovations In Indian Insurance 7. Application of E-learning in the Insurance Sector 6. Concept of Insurance 2.INDEX CHAPTER NO.

The year 2007 is going to be another watershed year for the industry. Coming close on the heels of the entry of private players. to cover these risk Insurance is very important. The year 2000 was a landmark year in the history of Indian insurance industry. As technology & life style of the people change. As days goes needs & requirements of the people get change. INTRODUCTION Insurance plays an important role in general life. But the method or procedure of insurance need to be change. This is the reason I have chosen this topic. Insurance includes different-different products to fulfill the need of the people. 7 . Detariffication from January 1. it is going to be another significant development for the insurance industry. 2007 will totally change the complexion of the non-life industry. The industry was thrown open for the private players. it is necessary for innovation in insurance. A second wave of interest in the industry is already being talked about. Those who missed the bus in the year 2000 may try to step in now. Risk exist every where. This is very knowledgeable to do project on “INNOVATIVE EYE OF INSURANCE”.I.

The methodology for collecting data with reference to collecting data was taken forms the different articles. observations as well as published work & unpublished work. Thus methodology relied on both primary & secondary dada with the help of discussion.II. The different libraries of the colleges & institutions were great help. METHODOLOGY In order to conduct research an appropriate methodology becomes necessary. books & journals published by ICFAI’s & the relevant website. In this direction both primary & secondary data were attempted to be collected. 8 .

Chapter: 1 CONCEPT OF INSURANCE Definition of Insurance: Insurance is an institution. The asset would have been created through the efforts of the owner. The insurance is the elimination of the risk & replacement of certainty for uncertainty of loss. some of her/his need would be met. Insurance is a contract between the (Insurance Company) & the Insured (whose life or assets are covered) under which the insurer undertakes to compensate the insured for the loss arising from the risk insured against. those deriving benefits there from suffers Insurance is mechanism that helps to reduce such adverse consequences. which eliminates risk & which substitutes certainty for uncertainty. through an accident or other unfortunate event. 9 . being destroyed or made functional or loss of life. Categories of Insurance: Insurance has two broad categories: i) Life Insurance ii) General Insurance or Non Life Insurance. If the assets gets lost earlier. Insurance is the protection of the economic value of assets. in the hope that through the income generated there from or some other output.

Marin. Liability & Engineering insurances. when it could be expected that the income will be normally cease. Fidelity guarantee. Office Protection. Death will happen. Shopkeepers. 10 . crop. Jewellary Block. Such sectors are: Fire. House holders. pet dogs. but the timing is uncertain If it happens around the time of one’s retirement. Bankers blanket. since it is most important income earning capital & subject to vagaries of economic fluctuations. Accident may or may not happen. Motor. cattle etc.i) Life Insurance: Life Insurance covers the human life. It needs to be protected much before other assets. Personal Accident. While miscellaneous insurances are: Burglary. Baggage Lost. Sports. the person concerned could have made some other arrangement to meet the continuing needs ii) General Insurance Non-Life Insurance: In General Insurance there are 7 sectors where insurance is required in addition to other miscellaneous sectors which also are covered under insurance. flood. Executive Travel. Health. which the human capital generates.

There is also talk of introduction of body parts policies. The year 2007 is going to be another watershed for the industry. The future is uncertain. Insurance. Temples with hefty incomes are becoming attractive targets for insurance companies as the incidence of claims is low and the potential for premium is high. 11 . over the years. As a result. The insurance industry will have to play a vital role by providing health insurance and other insurance products for the poor. The entry of private players saw a spate of new products and services on offer in the insurance market. it is oft quoted. grown in stature to evolve as a full-fledged subject. Sabarimala and Guruvayur in Kerala are two examples that come to mind. the latest kid on the block is temple insurance. Insurance which originated in the 12th century AD as a concept has.Chapter No: 2 INDIAN INSURANCE INDUSTRY 1999-2000 was a landmark year in the history of Indian insurance industry. is the key to predict the future. The business environment today is volatile and fast changing. it is said. Insurance very aptly fills this slot. To cite an example. the Indian insurance market gave itself a face lift. is the art of the impossible and the science of the implausible. Intentional. The demands of the changing environment have prompted the insurance industry to mould its business in tune with the changing times.

Special medical insurance for students and group term cover for youth are also a case in point. it is going to be another significant development for the insurance industry. The convergence wave has caught up with the financial sector too. The industry was thrown open for the private players. Detariffication from January 1. product innovation to cap it all. The year 2007 is going to be eventful also in many other ways for insurance industry-providing event insurance for the World Cup Cricket 2007. greater business intelligence. 12 . The year 2007 is going to be another watershed year for the industry. increased M&A activity. The year 2000 was a landmark year in the history of Indian insurance industry. The boundaries among insurance. Mobile phone firms are offering group term insurance free for those in the age group of 18-35 years. adopting the best underwriting practices and of course. banking and securities are fast vanishing. A second wave of interest in the industry is already being talked about. The expected rise in the FDI ceiling adds to this interest. often at competitive rates much below those available directly from the insurer. Credit cards are increasingly offering various insurance products to subscribers. Those who missed the bus in the year 2000 may try to step in now. Coming close on the heels of the entry of private players. 2007 will totally change the complexion of the non-life industry.

Each foreign company needs to have a 26% equity capital to enter into the Indian insurance market. overall private insurance 13 . 15 life insurance and 11 non-life insurance companies are operating in the private sector. which lifted the entry restrictions for private insurance players. However. allowing foreign players to enter into the Indian market and start their operations in India.Chapter No: 3 PRIVATISATION HELPS INDIAN INSURANCE TO PRODUCE INNOVATIVE PRODUCT Privatization of Insurance Industry in India The entry of private players helps in spreading and deepening the operations in the Indian insurance sector which in turn results in restructuring and revitalizing of public sector companies. Many foreign companies have joined their hands with the Indian companies and started their operations in early 2001. Emergence of Private Insurance Players in India: The Government of India liberalized the insurance sector in March 2000. Now there is a proposal to increase the equity capital to 49%. The article looks at the business strategies of private insurance companies and the future expectations of the insurance industry. Currently.

there is ample scope for the growth of the life insurance sector in India. Previously. MetLife. But LIC's market share has drastically reduced in 2-3 years. Growth of Life Insurance: Before the private players entered into the market. LIC enjoyed over 98% of the market share in the early stage of liberalization and private players suffered losses in the first year of their operations. Therefore. competing in the same market. Lombard. LIC was the only dominant player in the public sector. as 80% of the Indian population is still not under the insurance coverage. The private sector players have seen 200% growth in the second year of liberalization. who is insured. and 80% of LlC's business procured by 20% of its illtrained agent future.companies have three rimes more products than the public companies. Risk coverage is only a secondary objective. Analysts found that the private insurance players have established their own identities in the Indian market in a short period of time. Aviva. According to a LIC survey in 1996. more than 40% of the insurance buyers felt that insurance is a means of savings. India has the world's top companies like AIG. Chubb. Customers are looking for innovative products 14 .. We can say that the Indian life insurance industry is still an underdeveloped one. insurance was considered as a savings instrument in India rather than a product which offers protection and security to the person. This has doubled their share from 3-4% in the first year itself. etc. New York Life. lNG. The current annual growth in the average insurance premium in India has been 8.2% compared with the global average of 3-4%.

They have visualized the life insurance as a tax saving device only. his second policy is most likely to be bought by the private insurance sector due to various reasons-more specifically because of flexibility and transparency.year period. this means that it has lost 22% of the market share and the private sector has gained 22% of the market share in a five. the average size of their policies is around Rs. But in the private sector. 80. But now LIC's market share is nearly 78%. private players are becoming an alternative to LIC.000 before liberalization.and are even ready to take insurance from private players. CEO of Om Kotak Mahindra Life. Flexibility and Transparency of Product: Previously. it was expected that LIC would loose just about 10% market share in the five-year period. According to Shivaji Dam. Even the customers have started to look for new and innovative products and are turning to the private sector. customers were insured with public insurance companies with no flexibility and transparency in the products. Increase in Market Share: When the sector was opened. 1. Increase in the Size of the Policy: The average size of a life insurance policy in the public sector was around Rs.1 lakh to Rs. now it has risen up to Rs. As the private players entered. If a customer's first policy is from LIC. 15 .000. 50.2 lakh which is bigger than the average of the industry. 1. the change has taken place in terms of offering flexibility and transparency.

25 cr in 2004-05.25%. writing the gross premium of Rs. 14.03 cr in 2000-01. are some of the innovative products of private players. 8. health insurance policies. the non-life insurance industry has seen 80% growth in these five years. Weather index-based crop insurance policies.Growth of Non-life Insurance: The general insurance industry has recorded a growth of 20% in the first five months of 2006-07. 5. Business Strategies: Innovative products. the eight private players together have about 35% of the market share.54% to Rs. 10.427 cr as compared to Rs. IRDA Chairman C S Rao said. smart marketing. 18. To retain their positions and to stand with the competition. the private players are looking for various methods and are 16 . liability products.087. The data compiled by IRDA states that the premium collected by 12 non-life insurance players during April-August 2006 is Rs.951.095.426 cr with an improved market share of 26. when compared to a growth of 16% in the financial year of 2005-06.668 cr in the corresponding period last year. and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers faster than expected. At present. 10..2%. The market share of public sector reduced to 74% in the financial year 2005-06 and premium collections rose 7% to Rs.74 cr regardless of the industry wide premium growth of 16. etc. Premium collections for the private sector grew by 52.6% when compared to the previous year's market share of 20. up from Rs.

Internet. The potential in smaller cities has been increased and these are becoming profitable with the rise in agricultural income. By using these approaches. The general way of selling insurance products are through agents and brokers. so companies are moving to smaller cities 17 . The private players perforce are looking for alternative channels to market their products as they are facing difficulty in training new agents with skill sets and this is also a time-consuming and costly activity. companies can effectively market their products and provide better service to the customers. For this. brokers and bancassurance are playing a greater role in distribution. In this. the employee has to pay for the products through a payroll deduction. The private players are mainly concentrating on bancassurance model. the insurance companies have tie-ups with the banks and sell their products to the bank's customers. In the bancassurance model. which is nothing but selling of financial products and other services to employees through workplace participation and is entirely on a voluntary basis. telemarketing and direct marketing.also following a variety of strategies. But the companies are now looking at a new distribution channel "Work-site marketing". Distribution Channels: The distribution channel is one of the best ways to increase the growth of the insurance industry. These distribution channels like corporate agents. they are concentrating on providing the service to rural and semi-urban sector. they are looking at delivery channels like call-centers. The private players are mainly concentrating on customer service. through this.

These distribution channels include corporate brokers.and towns which results in an increase in the growth opportunity for insurance companies. Whereas all the alternative distribution channels together have contributed 25-30% of sales in private insurance companies. Apart from the tie-ups with 18 . Stuart Purdy said that the bancasurance channel with tie-ups with four banks contributes almost 70% of the total sales of Aviva. • In order to strengthen its position further in India. over 90% of the life insurance schemes ill the world are sold through individual agents only. the Internet and corporate agents. • According to Anuroop Singh. bancassurance. According to a Fitch report on the insurance sector. • AMP Sanmar is following a different strategy when compared to other private players. Every private player is following different strategies to increase their market share and to get the rap position in the insurance industry. Bajaj Alliance Life Insurance Co. where it is tied up with transport finance companies and chit fund companies to sell its life policies on the back of fixed deposits and bonds. the bancassurance channel has contributed about 20% of the total insurance business in the financial year 2005. For example: • Aviva CEO. Ltd (MNYL). has introduced some aggressive strategies like introducing new products and tapping the rural markets. He also states that agents are the primary channel for selling insurance policies and MNYL have invested substantially in training the life insurance advisers. CEO and MD of Max New York Life Insurance Co.

private companies start tying up with manufacturers and dealers.65%. one of the top private players in India expects to bring in another Rs. • ICICI Prudential.000 branches across rural and semi-urban areas. • Birla Sun Life Insurance. They are concentrating on brokers. it has also introduced the new micro-insurance products and come out with a new capital guaranteed producer. eight non-insurance private players have the market share of 19. which have been successful. It has expanded the scope of its five-year old bancassurance partnership with Bank of India to tie-up with 10 RRBs sponsored by the bank across the country. Even IRDA is insuring its assets with the private insurer. Those 10 banks have nearly 1. The manufacturers and dealers are also concentrating on their non-core businesses. This will increase further. Already. the present growth in 19 . As per the recent market research report named "Indian Insurance Industry Forecast (2007 -09)" published by RNCOS. 150-200 cr of additional capital for its growth projections in and over the next two years. who can source products from a cross-section of Regional Rural Banks (RRBs). for expanding their operations. They are also looking at corporate agents to sell a range of company's products. • Tata AIG is looking at all modes of distributing the products. When it comes to General Insurance Products. is the No. which include some specific rural products and also expands ICICI Prudential's distribution. and solicit insurance on behalf of the insured. They even have tie-ups with HSBC and Thomas Cook in India.1 among the private insurance players in India from the past five years.

in the pricing of the products and the service they are providing. Private insurers have increased their efforts to increase consumer awareness about the benefits and importance of insurance and offer a variety of products and services. the customer is not only looking into the products. which are registered within and outside the country. service of the company. Nowadays. 20 . the competition has risen for the public sector companies. The report also states that currently insurance is growing at 13% compounded annual growth rate and expected to touch the mark of $9 bn by 2006. especially. Future Developments: The insurance industry in India is undergoing a major change.the non-life insurance sector is anticipated to continue in the years to come. the returns they are offering and the total protection. IRDA has been authorized to permit insurance companies to setup liaison offices in the country. they are also looking at price. IRDA has recently given permission to Bharti Enterprises to enter in to the life insurance business by joining its hands with French major AXA and becoming Bharti AXA Life Insurance Company. As the private players entered into the market. which occupies the 16th position in the life insurance segment. which helps them to grab the higher market share. if the foreign direct investment limit is raised to 49%. The competition has also increased among the private players and the main competition lies in a variety of products provided to customers. Several players are expected to enter India's rapidly growing insurance market in the next few years.

Conclusion: Already. Every life or non-life insurance company is looking for ways to expand their operations in India. Insurance companies are spending a huge amount to identify the needs of the customers and are providing a variety of products to attract them. 21 .Aviva's CEO Smart Purdy sees new players cornering over half the market. the insurance sector is recording a growth much more than what was expected. He also forecast the state player LIC loosing about 50% share over a span of 15 years or more. As more new players enter the fray there will be ample scope for growth and the industry will become highly competitive. With the entry of more private players. the competition has become very high in the life insurance segment. Banks life Punjab National Bank and Vijaya Dank are planning to enter into the life insurance segment and the IRDA is looking into their application. The top most public sector insurance players are also identifying new ways to satisfy the needs and will be competing with the private players in the near future.

This would reduce the paper work. Even though the use of information technology is not new to the insurance sector. claim processing. sales management etc. The most visible of these departments are accounting. improve efficiency of service delivery and provide competitive advantage to the insurance companies. With the arrival of private insurance players. and a sweepening impact on reducing the cost of various activities. Therefore the imperative for all insurers. The use and application of information technology in wide variety of insurers operations has now become strategic in the sense that it has direct impact on the productivity of resources. the competition has become more intense and an important role is being played by insurance sector. 22 .Chapter No: 4 THE NEED FOR INFORMATION TECHNOLOGY IN INSURANCE The rapid innovations in the field of information technology and communication technology have posed serious challenges for the insurance industry in India. yet we may find tight compartmentalization regarding the use of information technology in various departments of the insurance companies including the major players since last 50 years. especially LIC and GIC is to build up an efficient interface between the various departments and segments. policy issue and servicing.

Technologies for Insurance: There has never been a time when the effective use of information technology has been more crucial to the success of the insurance industry. The insurance markets are being revolutionized by technology at a high speed pace. IT and software solutions, allowing cross-border trade to become electronic and paperless, are increasingly on offer to importers, exporters, shipping companies and financial institutions. Following technological advancements can really enhance the performance of insurance companies. Database Management Systems: The principles of tracking and measuring responses can pay off for the conventional insurance industry. To find more clients, insurer needs to consider many factors, including lapsation, cash value, premium and competition. But the need to record and study the characteristics of persistency the length of time we retain policies, customers and agents is most important for insurance companies. In order to find out profitable combinations of households or clients, products and agents, a database with five to ten years history is of immense importance. Such historical retention was prohibitively expensive in the past. But the clear advantages of new PC (Personal Computer) and RISC (Reduced Instruction Set Computing) technology gives companies power to keep tens of millions of policies on a device with thousands of bytes of data per policy / client / agent. Analyzing a 10 year database is not effective.

Reviewing the database provides information on how many clients have actually migrated not just how many policies have lapsed or surrendered. Using database technology companies can get a comprehensive, performance, loyalty, and lost opportunity. Data Warehouse: Data warehousing technology is based on integrating a number of information systems into ‘one stop shopping’ database to achieve vision of making company national in scope, but regional in focus. Traditionally, the sale of policies and the claim settlement are two separate areas for the insurance companies. Data warehousing allows managing by profit levels with an integrated approach rather than by limiting losses. Data mining can be used as means to control costs and increase revenue resulting in enormous earning for effective users. Decision Support Systems: The path of business applications of computers, computer based information systems (CBIS), encompasses many stages including the very early applications like transactions processing systems (TPS) followed by the management information systems (MIS). The computer applications like decision support systems (DSS), expert systems (ES) and executive information systems (EIS) are still awaited in insurance business. Office automation (OAS) happens to be continuously ongoing, dynamic process for any business. Companies to utilize decision support systems by implementing data warehouses that pull information from existing legacy systems into a customer information database. Such decision support systems will equip the insurance managers with ability to allow for

customized products and services that are more in line with what customers want. Group Linking Software: Group-linking software enables sharing of information and particularly suits document heavy insurance business. Tracking of policy application shows how information that is input and accessed from a number of locations can increase efficiency. Imaging and Work-flow Technologies: The proposal forms may be scanned into an imaging system; data may be extracted for update to computer and for automated underwriting workflow may be implemented. Mapping: Insurers to meet different needs, such as identifying loss prone areas or geographic claim analysis, can use mapping technology. It helps the insurer to analyse the extent of its network i.e. the insurer can determine whether it has too many or too few agency force in a particular area. Call Centre Technology: Good customer service is a crucial element in gaining, maintaining and retaining profitable customer. Call centre concept based on interactive voice response services (IVRS) is gaining importance in this aspect. Employees based the primitive concept of call centre on an enquiry system providing information services to customers through telephone line answers.


who would like to exchange some information with other user at a remote location. Extranet is a network allowing the business to communicate with business partners like suppliers.The totally automated computerized exchange but lacks in flexibility i. on the electronic channel. regulations etc. 26 . Video Linking: A video linking facility between two remote units of an insurance company or between an insurer and a broker allows underwriters at one place and brokers at other unit to discuss risk inherent in a proposal face to face. only predefined queries are serviced. Finally an underwriting policy that limits the company’s exposure to catastrophic losses is implemented.e. can log into the computer of Internet provider via modem or an Internet access CPU (IAC). Any user. Cat Models: Catastrophic models use data from the recent spate of natural disasters that helps develop more predictions of insurer’s property exposures in future disasters. Internet is a global network of many computer networks. vendors. The Internet and online service providers are providing opportunities to create new forums that can be utilized by everyone worldwide. Using this data curious “what-if” scenarios of probable maximum loss (PML) using the best estimate available at an insurers exposures are tested. banners. Intranet is the network connecting different offices of the same business to permit the internal data within the business. Insurers can browse through many useful sites on the Internet.

Information technology can be integrated with almost all the P’s of marketing. There are numerous websites available which can help the prospective customers to compare the insurance products of various issuers and decide the product suited to his needs. yet following are the most important ones in respective functional areas.IT Applications in Functional Areas Even though the information technology in all the spheres of the insurance business. It may help in formulation and implementation of various marketing strategies including pricing. With the use of Internet the information about the products and pricing policies can be made available to the public in few seconds and much transparency in operations can be established. promotion and customization strategies. Also. It may start from the consumer acquaintance to an insurance product to claims settlement or further selling of new products or developing consumers for the products. Marketing: The scope for use of Information Technology in marketing function is tremendous. Customer Awareness: The use of Information Technology may be path breaking for the insurance companies since conventionally the awareness of the insurance products in India is low. Some of these areas are discussed below. the information about the new products changes in 27 .

investment planning etc. the information on various discounts and incentives can be provided at a much faster rate and lower rate.e.the existing ones and of course. right from the dissemination of information. documentation to policy administration and claim settlement. the LIC and GIC. tracking of brokers and agents 5) Complaints management / grievance handling 6) Intermediary analysis. and as well as in resource mobilization. The investments in the personnel and knowledge systems have helped private players companies build significant domain expertise. The service quality standards of the new private insurance players have posed a threat to the giants viz. portfolio management. 1) Market Research 2) Consumers targeting and segmentation 3) Customizations of products 4) Easy procedures like premium payments. Finance: Information technology can be effectively used for internal management viz. Accounting. Customer Services: The insurance being a service needs high concerns in terms of services. financial performance reporting etc. treasury management. claims settlements. Customer service requires maximum attention and should span the entire gamut of activities in the purchase of a product i. 28 .

transfers and dismissals 5) Valuation etc.Human Resource Management: Application of IT in Human Resource Management is obvious. The various applications of information technology in life and nonlife insurance companies broken into identifiable areas are given in annexure 30A. tracking with international norms and developments are the profound areas of IT applications. analysis of markets. Research and development: R & D has been made an easy task with the increasing use of IT. It can be effectively utilised in 1) Recruitment and selection 2) Training 3) Performance Apprisal 4) Promotions. Surveys and research on market potential. 29 .

• Adoption of latest technologies for competitive advantage. Technology Manager:  Evaluation and acquisition of new technologies in hardware. networking and packaged solutions. head and controlling offices on office automation and networks. software. maintain and implement insurance related application.IT Department In An Insurance Company Functions: The IT department in an insurance company performs the following functions: • Provision of hardware and software resources.  Recruitment and supervision of system and network engineers  Conducting of various training programmes Systems Manager: 30 . • Advise the top management on Business Process Re-engineering (BPR). • Training of employees – at operating. • Develop. • Maintenance of networks.

system analysis and programmers  Evaluation of studies Network Manager:  Network Administration  User administration. Systems analysis and design  Functional specifications  Development of application and user manuals  Assignment of work to project leaders.  Controlling and supervision of network administrators Operations Manager:  Maintenance of hardware  Job scheduling. systems security. e-mail etc. backups and file control  Assigning work to operators and DEOs  Training of users  Controlling of data flow 31 .

E-Learning is an ideal method of learning for agents who are in the field all the time. business groups and segments. resorting to e-learning is must to sharpen their knowledge and skills. tangible advantages of e-learning are: Faster. When the relevance of e-learning is assessed. claims management. possible at minimum cost. Consistency. These characteristics are linked to the advantage that can be gained from e-learning. etc. which are tech-savvy and have quickly embraced e-learning.Chapter No: 5 Applications of E-Learning In the Insurance Sector Employment in the insurance industry today requires multiple skills and needs constant learning and training. customer management. focused and economical learning with minimal lead time. The support 32 The most . policy management. timeliness and repetitive learning. have certain characteristics. so that the employees can work tactfully and be more productive to the companies. Some industries and markets. The business functional areas where the application of elearning can be highly useful include new business. reinsurance. To impart continuous and constant training to a large number of personnel employed by the insurance companies. it should be done in terms of the people who can adopt e-learning. Transcending geographical barriers.

It is well-known that computer education has been made compulsory at the School level so that every child should be computer literate.70 bn which shows a dramatic increase over the previous fiscal year. According to a study conducted by the Internet and Online Association of India (IOAI). 23 bn by the fiscal year 2006-07. Hence. Agents are the primary channels for selling insurance. This training has to be achieved cost-effectively. and online risk management tool can help corporate customers with increased risk prevention and risk control techniques resulting in reduced loss occurrences. handling. 5. The study estimates that this figure will reach Rs. the online consumer’s B2C transactions in India. Ebusiness is helping Indian organizations to integrate better with the global 33 . the customer has to be technology receptive. For example. The number of Internet users is also expected to increase by four times by March 2007. E-learning is an ideal method for agents who are spread across the country and are in the field all the time. settlement and self-service. partners and customers. Fro an insurance company to introduce online initiatives like marketing. amounted to Rs. training of agents is a high priority. etc. Business associates have an important role in the marketing and servicing of insurance. certification of agents and employees. during the fiscal year 2004-05. claims. E-learning is the most feasible and practical method to educate the customer and the business associate. Employment in the insurance industry today requires multiple skills and need constant learning and consequently the bottom line. Customer education can decrease the incidences of risk in many areas.functions include accounting. Training of such partners is essential for insurers to maintain excellent service levels to the customers. agents. The e-learning activity in the insurance industry covers all segments of people-employees.

• Learn and earn without losing customer facing time. • Ideal method to overcome inability and aversion to classroom session. employees must be educated with regard to various e-learning applications so that they. 34 . in turn. can help the public in general to get the required information and other details they are interested through the e-learning processes. giving the marketing edge. To encourage B2 insurance transactions. • High level of motivation. Business Benefits of E-Learning The benefits of e-learning can be categorized as follows: Benefits to Agents: • Reduced lead time to market new products. leading to good service and high customer retention. • Potential to move into an interactive mode for feedback and resolving customer • Update on regulatory changes or competitor information. Benefits of Employees: Employees have to be updated with all changes in the policy plans and processes to provide efficient post-sales service to their respective customers. • Continuous upgradation of education at their own pace helping their career path.

• Saving on lost revenue and productivity when people are away from workplace. • Multiple sessions on business and systems at minimal cost. • Avoiding gaps between the company and the fronting partner. • Reduce incidence of losses and claims. providing tangible and intangible benefits. • Increase knowledge and awareness about products and quicker and more efficient making. Customer Service-Challenges Ahead: 35 . Benefits to Business Associates: Business associates need constant training to be on the same frequency as that of the Parental company and it is not feasible to get that sort of training by way of traditional methods of classroom. Benefits to Customers: E-learning is the most feasible and practical method to educate the customer. • Consistency in work across the organization. • An educated customer is open to technological innovations and receptive to online tools that reduce customer service costs. What is ideally required is: • Better interface with customers.• High level of accuracy in work due to constant upgradation of skills and knowledge.

lower volumes of business. e-learning is a suitable model for the insurance industry as the requirements of the industry match closely with e-learning concepts. But a great deal need to be done in this regard. etc. the amount of premium towards the policy plans is quite high as compared to European and western countries. extensive efforts are made by the field staff of the insurance companies to sell the policies. this has not been happening. concepts and nuances of insurance. the policy plans are purchased and less amount is spent by the insurance companies in selling the policy plans. any amount of advertising would not be of much use. If insurance is such a strong risk management tool in the developed markets. there is a strong desire to improve the understanding of the common public about the needs. Fro a geographical perspective. Another reason is that in India the administrative expenses per policy plan are quite high as the lapsation ratio 36 . Customer service in its real sense would be deemed to have been achieved. The next step will be to assess suitability from a geographical and individual organizational perspective. investment-linked policies and other flexible options would follow as a matter of course. although a beginning has been made. whereas in India. Unless. e-learning is probably tougher to implement in the Asian region due to multiple languages. It is a well known fact that in India. Unfortunately.The greatest customer service can be accomplished only when the levels of awareness of insurance are raised in general. it is only because of the understanding that people possess about insurance. smaller budgets. The basic reason is that in other countries. when the awareness of people is taken to further heights from where other service like need-based products. Conclusion: To conclude.

the situation is just the opposite.of the policies is high. Considering the present status. The strategy is to have an optimal mix of multiple learning methodologies depending on the overall knowledge management strategy. in other advanced countries. we need to understand that e-learning is yet to be accepted as a complete replacement for classroom learning. the administrative and selling expenses can be brought down and the benefits can be passed on to the policyholders. policy plans are discontinued even before one year of their purchase. 37 . that is. However. it is rather a complementary measure. it keeps the administrative expenses low. Considering all these factors. if e-learning is practiced and companies are resorting more to B2C transactions.

armed with their MNC partners’ global expertise. besides rural thrust. Taking on LIC nationwide. As s part of these. Indian life insurance had been monopolized by LIC till the sector was opened up about three years back. Ever since insurance was nationalized in the fifties. LIC’s national network of 38 .Chapter No: 6 Innovations In Indian Insurance The opening of Indian Insurance market to private players has expanded the market & laid to experimentation in policy designs. spotting great potential for market expansion. many innovations have been tried out in insurance distribution. Aggressive pursuit of growth necessitated new initiatives-opting for affinity & point-of-sale channels. LIC operated nationally through its network of agents armed with tables & scheme details to promote insurance policy. which resulted in competition. Almost all major corporate groups ventured into this market. Economic liberalization brought in its wake multiple private players. Indian corporate groups ventured into the arena. The article focuses on these innovations. well-entrenched network of agents was going to be obviously a time-consuming exercise. As for general insurance the market was carved up among four government entities.

For insurance firms. When insurance is one of the many activities of the promoting corporate. with both regional and national banks finding eager insurance partners. leveraged the widespread. Cross-selling insurance at its bank branches did help ICICI Prudential in reaching out to a larger audience. HDFC Standard Life is a prime example for this. Being promoted by major corporate entities. banking. ICICI Prudential. these associations provided a good chance to establish their presence in different 39 . the entire group's businesses can be exploited. Being a competitor to this erstwhile monopoly player and succeeding in the market would mean effectively countering its field presence. ICICI bank expanded aggressively among private banks. Bancassurance opened up another distribution channel for the insurance companies. A spate of tie-ups followed. for example. Though all private players set up their own IRDA qualified agent networks. and mutual funds. Spanning housing finance. the parent group's wide network of more than 300 combined branches provided a great platform for making effective use of the network for its foray into insurance. securities. guided by its team of ‘Development Officers’ has been put in place over three decades. National presence of its Indian promoter ICICI. SBI Life also benefited from such a background. Their national reach was an obvious starting point to spread out. Rivaling that established network would definitely be a very long-term proposition. Indian companies had a majority stake (74 percent) in the private insurance companies. the private insurance players were quick to utilize their promoting company's retail presence. they encashed on other immediately available channels for distributing the policies.agents.

For Tata AIG. Selective partner (bank) choice did enable many insurance companies to advance their business interests and strengthen their national bas2. some insurance companies are entering into mutually exclusive agreements. marketers in some categories are resorting to providing insurance cover to their customers. In their bid to add value to their offerings. players are also benefiting from intense competition in other industries.25. A creative route it adopted was to tie up with Tata AIG. through an FMCG marketer. marketer of ayurvedic toothpaste brand Amar. Vardhaman Chemicals. by which the former doesn't entertain bancassurance with any other bank and the latter also doesn't distribute policies of any other insurance company. this was a new avenue. Besides their own initiatives.000 personal accident cover with its 200 gm pack. Vardhaman telt it wasn't enough to stir up interest in its brand. faces a well-entrenched rival Vicco Vajradanti. Om Kotak Mahindra has such a tie-up with Dena Bank. Pepsodent took a cue and tied-up with New India Assurance for dental insurance for its 40 . to offer Rs. Adding new variants (cinnamon and fennel seeds) and offering a wide basket of products from low to high price points.regions. Some regional banks such as Lord Krishna Bank (with ICICI Prudential and Bajaj Allianz) and Development Credit Bank (with Birla Sun Life and Tata AlC) entered into tie-ups with multiple insurance players. based on the bank with which they tied-up. The result of this channel's popularity: between 15 percent and 30 percent of aggressive insurance players' policy distributions are coming from this intermediary route. To extract greater commitment from their bank partners and extend support to them. Such agreements prohibit the partners from entering into a similar understanding with any other organization.

have tied-up with insurance providers. For luring more customers into this competitive business. the insurance company tie-up is a service enhancement to their customers that differentiates them from their competitors. HDFC Bank launched a new card (Health Plus) that was bundled with Mediclaim. Credit card holders represent an option in both directions distribution of policies and premium collections. and of course a fee.customers. ICICI Prudential partnered Visa. Post 9/11. a solution provider to travel industry. inherent risk in air travel has attained higher consciousness among tourists. In a bid to expand the net of potential customers. the former gets access to the network of even those banks with which it has no formal tie-ups. Insurance companies benefit through a wider reach for their products. companies explored new avenues. targeting students going abroad for their higher studies have also been designed. Such policies targeted at students not only cover their medical expenses 41 . For the service providers. which enjoys a big network of banks for collection of premiums. Travel houses. in their attempt to get travelers shed their inhibitions and take cover. LIC is even contemplating launching its own credit card. Insurance firms entered into arrangements with other service providers having a similar customer profile such as credit card companies. Visa gains through more utilization of its infrastructure. In this 111utually beneficial arrangement. Innovative short-term schemes such as insuring baggage. Galileo India. travel houses and telecom service providers. To utilize this channel better. was co-opted by Bajaj Allianz and ICICI Lombard.

Though Mediclaim did establish the base for insuring medical treatment costs. Personal accident and hospitalization charges are covered for BPL mobile's subscribers . with the latter tying up with National Insurance for a cover of Rs.thanks to an arrangement with Bajaj Allianz. Moreover. Chennai-based Apollo Hospitals and Hyderabad-based Care Hospitals have ventured into health insurance. Rural Thrust: Earlier. EDLI (Employees Deposit Life Insurance). its reach and popularity isn't what was expected of it. rural markets were looked at closely only when urban Indian market showed signs of stagnation or saturation for many categories. Insurance. Max New York provides a cover up to Rs 4 lakh.but also sponsor a family member's trip to be with the student on compassionate grounds.opening up another option for them. lClCl Lombard has a cover for Spice Telecom subscribers in Punjab. especially mobile players. also opened up an avenue for insurance companies. Telecom service providers. Thomas Cook is distributing Tata AlG’s travel related general insurance policy. options are available to cover fees in the event of sponsor's death. to Escotel's subscribers under its Club Royale scheme. however. It has designed a specific scheme. Hospitals are nowadays taking a proactive approach .1 lakh towards treatment expenses. Rural 42 . A new channel has been opened up by 531 Life.designing health insurance packages and approaching insurance players . through its understanding with EPF (Employees Provident Fund) Commissioner. through its subsidiary India Alive Tours. Many such policies also cover the risk of falling ill and the consequent medical treatment expenses abroad. is one category that's proving to be an exception.

penetration is being attempted along with urban spread. To provide cover to khadi weavers. Hiring outside agents for the first time. the institution and government contribute 87. It is expanding its portfolio of products by adding money back & single premium policies to its existing endowment ones. While A viva has partnered with Lakshmi Vilas Bank to reach out to rural SHGs (Self-Help Groups). the department is targeting a sevenfold increase in rural premium income within four year (it collected Rs. Many of these SHGs and NGOs aid villagers to pool their resources for everyone's benefit. the government owned KVIC (Khadi and Village Industries Commission) has launched Khadi Karigar Janashree Bima Yojana. as competition forces insurance firms to experiment.5 percent of the premium. has taken several initiatives to spread the insurance basket to rural populace. post office network is difficult to match. ICICI Prudential has tied-up with a spate of NGOs (BASIX. Distributed and promoted by more than 30 Khadi Board across the country. has drawn up aggressive plane to spread the insurance culture in rural pockets. 101 crore premium In 2002-03). Bajaj Allianz ventured to cover Amarnath Yatra pilgrims in association with J & K bank (one of its 43 . under sectoral targeting. the balance being the insured artisan's contribution. The government too. already operating its Rural Postal Life Insurance scheme. Innovations: Event-driven & focused target-oriented initiatives are forthcoming. To make up for lack of infrastructure in rural markets. players are entering into a spate of partnerships with groups operating there. Shepherd and CASPOR among others). The department of posts. When it comes to rural reach.

Already. ICICI prudential hit off a novel medium. Due this link. such covers have tremendous potential. ICICI prudential gains a foothold into homes of students some 300 schools nationwide for it Smart-Kid policy. With the growth in new channels & competition opening up more alternative intermediaries. The share of agents contribution to insurance companies sales will progressively come down. Jammu & Kashmir & Karnataka to provide insurance to their governments employees. Derek runs programs ‘KQ Schools Advantage’ that impart soft skills to student of schools that enroll themselves.bankassurance partners). Puri Rath Yatra. with Birla Sun Life crediting 24 percent of its insurance business to alternate channels. To reach out to parents for promoting their children’s policies. 44 . National Insurance has entered into agreements with the state government of Haryyana. alternate channels contribute about 20 percent as much as 25 percent for some players. quite common throughout the year in different parts of the country. It tie-up with Derek O’Brien (quizmaster of Borvita Quiz contest & Brand Equity Quiz ) to facilitate access to parents of children studying in selected schools in 25 cities. With large religious gatherings such as Kumbh Mela.

Insurance Industry India is a great market for all products. With diversified culture and preferences.Chapter No: 7 Past and Present for a Bright Future Technology plays a vital role in today’s market. consolidation. The insurance sector in India was valued at nearly US$10 bn in the year 2005 and is now growing at a greater pace. new 45 . diversified needs and changing trends. With a big giant called the LIC. Now with more number of insurance companies having proliferated the life insurance industry in India. time and other resources. there is a need for more innovative marketing scrategies. The article explains how business intelligence could help insurance companies to develop new and innovative products and attain competitive advantage. which by itself is a company formed by enforcing an act called the Life Insurance Corporation of India Act of 1956 is a huge consolidated entry. Business intelligence involves arrangement of data that is needed for taking strategic business decisions like launching a new product for an insurance company by investing huge amount. and increasing salary made India a successful market globally.

tax benefit and even good returns. sales performance. The insurance advisors or financial consultants or financial planners are now considered as true professionals.distribution networks like bancassurance. That political system in India is very skeptical about the fact that whether more participation by the multinational giants and more investment by them in the form of capital can actually question the ethic of the industry thereby destroying the local players and pave the way for videshi market in India again. insurance was just a risk-cover mechanism. People also looked at the insurance agent as a messenger of evil who threatens one by speaking about the perils of life and ask them to safeguard against such perils. etc. Current Transaction Data The insurance company also needs to understand its current stand and performance by analyzing the current data. like do we have enough cash reserves. premiums mobilized. When we had a monopoly era in the Indian Insurance market. how much can we allocate in marketing. Historical Data The insurance company needs to study historical data like its past performance. But it is true on our part to accept the new entries have actually changed the rules of the game in the insurance industry. claims obligation in a specific market. One such change that has made a huge positive impact in the minds of Indian consumers is the product innovation by the insurance companies. But now insurance plans are perceived more of an investment plan that gives risk cover. which is our successful 46 . brokers and more qualified agents for its consistent growth.

This is because we have various formats. 1. successful fund management. Necessary data is available in their websites in an unorganized form and such data are called as flat partner for distribution. Channel management system. Assume the 47 . HR management system. 3. research reports. etc. Sales management system. Once we have said that insurance is more seen as an investment plan it can also face competition from mutual fund companies and real estate companies also. One part of your processing of core operations is done directly by the insurance company and uses ORACLE as the database. like their portfolio performance. various names for data say your customer information can be client name in premiums administration system and customer name in sales management system and just customer with a flat file. Such information is available from the On-Line Transaction Processing (OLTP) systems like. Flat Files or Unorganized Data The insurance company also needs to collect necessary data from other companies. and do we have enough sales force to sell this product. threats and opportunities. Sources of any Data Warehouse We have certain problems or challenges rather when we try to take data from the sources directly. 2. The other major challenge is to retrieve data from multiple technologies.

which we will discuss operations are outsourced to another company and it uses DB2 as the database. and suffixing is available in these reporting tools also. So taking such issues in mind we form a centralized database. historical data. We now focus on the various types of reporting needed and remember these reports are developed by OLAP reporting tools such as Cognos. which stores all the necessary information from day 1 till date and all data from flat files to operational files. OLAP Reporting and the Options Available There are various options available that distinguishes an OLAP reporting tools from that of a normal reporting tool. But beyond that we have certain key options. 48 . or Crystal reports available in the market. It is an enterprise-wide repository of data and we call this giant database as a data warehouse and hence the sources of a data warehouse of an insurance company or any warehouse for the matter are operational databases. conditional formatting. external data like in newspapers and flat files. A query to retrieve data from ORACLE is totally different from a query to retrieve data from DB2. Assume that we have formulated a data warehouse for an insurance company (for the other issues in constructing a warehouse is beyond the scope of discussion in this article). These tools will use our data warehouse as their source of information. All the basic options of formatting. prefixing. Business Objects.

Score Carding Score carding is the advanced reporting wherein we try to analyze the key performance indicators of our business. Also you can drill up from the level to sales volume 2005 the uppermost level. What is the volume generated in the month of September by client X. Drilling Up and Drilling Down The OLAP reporting tool let us drill down from a level say sales volume in children insurance plan in 2005. 49 . a BI reporting tools gives an in-depth analysis of data. Drilling Across There are also means of drilling across in the same level like sales volume competitive analysis in 2004 and 2005. Thus. What is the sales volume generated in the month of September by channel X. These key performance indicators are kept in a table called fact tables in data warehouse and other information such as customer channel are kept in dimension tables. The key performance indicators is analyzed from the purview of multiple dimensional data and is called as multi-dimensional analysis. * * * * What is the sale volume generated by client X. Q1 of 2005. first week of January Q1 of 2005. What is the sales volume generated by channel X. January month of Q1 of 2005. One key performance indicator can be sales volume.

It also helps in complete analysis also called as 360degree analysis and a proper complete analysis results in effective decision. 24x7 – 360 Degree Analysis OLAP reporting tool can also be Web-enabled and this makes the employee of a company to access the corporate data anytime and from anywhere in the globe.Automated Generation of Reports A BI tool also allows automated generation of reports. 50 . Another study by Gautam and Ray done at The Ohio State University shows that implementation of Web intelligence and information technology results in a firm getting a competitive advantage. With business intelligence implemented companies of all nature have a better chance of winning a competitive edge. Conclusion Such advance options available in BI allows any company. Say if you want to see month-end premium collected reports you can format is with all your necessary data with the help of scheduler options can also schedule your report to run every month-end. in our case an insurance company to do all complex analysis with all necessary combinations of data and arrive at a better understanding on how the new product should be.

culminating with the final in Berlin on July 9.CASE STUDY EVENT INSURANCE Insurance Industry Supports Soccer Once every four years. According to FIFA. Overall. It marks the beginning of a very special sporting event-the quadrennial soccer tournament. comes the mother of all distractions. over 37 billion people (cumulative) watched the France 1998 tournament. the business of insurance is a great challenge. a major insurer for the tournament besides others. there will be 64 games is 12 different cities. According to Swiss Re. The numbers are expected to be much greater this year. the Soccer World Cup. the World Cup and the Olympic Games are the most heavily insured 51 . where 32 teams compete for the world’s most popular trophy. For every host of a major sporting event. they say. The possibility of insuring a mega event like the Would Cup against all risks including cancellation is quite remote. The presence of the insurance industry will be evident throughout the event as so many matches in the differing venues post both security and other risks. The organizers have covered a large number of risks-but there are limits.

FIFA is not likely to suffer any large loss as long as the event is rescheduled. For major sporting even such as the Would Cup 2006. Liability cover up to €140 mn was also purchased to cover damages.66 bn). The interest of FIFA and the local event organizers are not example. if the World Cup is rescheduled or held in a different location. The German organizers have purchased protection for postponement and for total cancellation/abandonment from a whole consortium of insurers. other traditional risks such as the organizers liability also have to be covered. such a huge sum cannot be left uninsured. However. The bond covers the marketing income that FIFA would have to refund if the matches in Germany were canceled due to natural calamities or terrorism. the large loss as long as the event ultimately takes place. a large proportion of the revenues are generated by television broadcasting rights. FIFA issued a catastrophe bond worth US $260 mn to cover the risk of cancellation. Accident covers have also been taken for indemnifying spectators in the event of their death or disability. The value of the cover is approximately €150 mn. Germany’s Federal Bureau of Criminal Investigation has classified 21 of the 64 matches as “high risk”. in 2003. There is also a great deal of anxiety with regard to security. The broadcasting rights alone will have an estimated value of CHF2bn ($1. if the event is 52 . The security problems range from hooliganism to outright terrorist threats. Both the local organizers and FIFA have purchased cover. The value of these rights could be a whopping CHF2 bn.sporting events. Naturally. Moreover. Additionally. It ranges from protection against the risk of a terrorist attack or cancellation due to some reason or the other.

one important aspect to be noted is that mega events like the FIFA World Cup are always covered by a whole group of insurers and re-insurers who share and distribute the risk. they may sustain a total loss. the German insurer is not only the event’s official insurer but also one of the major national sponsors. Each insured party therefore. the local organizers incur additional costs and if it is held in another location. it is no wonder Hamburg-Mannheimer Verisicerugs-AG. has his own needs for coverage. However. and the assessment is entirely exclusive.rescheduled. 53 . Against this backdrop.

cancellation. theft of the cup. On July 9. nimble foot work and deft little turns. African and Asian. The play has become an hotter over the years involving not merely elbows. Islamic and Christian. Football is a game in which a handful of fit men run around for ninety minutes watched by millions of people who could really use the exercise. threat of terrorism. infrastructure breakdown. Being such a high profile event it throws a myriad of risks. Football at one time was just a passion of Europe’s industrial working class. Right from the world cup soccer trophy made of solid 18 carat gold to an incident such as a carelessly installed flood light falling and injuring a player. liability. its craze has spread all over the world and the game has become an expression of a true global community. 2006 the day of the finals about one in every five persons on this earth will be glued to their television set. personal accident to the ticket holder. hard landings but also skillful and pleasing to the eye passes. black and white and every other possible human mix-as noted by the Time magazine. shoves. The article deals with the various risks and the steps taken by FIFA and the host country to insure these risks. over the head scissor kicks.The Risks of Insuring the 2006 FIFA World Cup The 2006 FIFA World Cup is a mega event. Today. toes. keens. bad weather. etc. The risks involved could be disruption. Billions of euros are at stake. 54 . The viewers would be as diverse as rich and poor. hooliganism. has to be insured. kicks. The event will be watched by millions of people all over the world.

I 55 . prize promotion.000 francs. It is beyond the scope of this article to cover all the risks. Its disappearance or loss would cost the insurer 350.440) if the ticket holder dies from an accident in any one of the stadiums where the World Cup matches are conducted. contingency and property insurance. The coverage includes the tournament’s organizers. absenteeism. Then come back and hit it again. Then hit it a third time-a tremendous whack. Hit the point once. It is made up of solid 18 carat gold. A man of many words. It is more about the world’s greatest sporting event from the perspective of risks involved and the steps being taken by the organizers to manage them.000). The insurance coverage also includes liability. It is just one of the numerous risks covered by the official insurers. Use a pile driver. don’t try to be subtle or clever. “No” Let us start with the Would Cup soccer trophy itself. For a purchaser of the World Cup ticket. team travel risks.This article is not about the pleasures of this spectator sport. hooliganism and the big risk of cancellation. In case. The exact premium amount the insurers will be paid to provide the cover has been closely guarded. Winston Churchill once noted that “If you have an important point to make. the insurance package is a personal accident cover that pays out 15. The trophy is not the lone risk. the sponsored car convoy (900 Hyundai cars) and also the spectators at the various stadiums. The risks involved are injury. an injury renders the victims invalid the payment would be 100. win bonuses. brand reputation.” The point one would like to make “Is it possible to conduct a mega event like the Quadrennial World up without insurance cover?” The answer would be an emphatic. Hamburg-Mannheimer.000 euros ($440.000 Swiss francs ($12.

Cancellation. The World Cup. 56 . As against the loss of few millions in gate sales. terrorism. found it in garden a week later. A mongrel dog. the big risks would arise from TV broadcasting. the World Cup’s biggest source of income. which will be a mega event. Brazil earned the right to keep it.propose to deal with the bigger risks viz. 2001 any big event has to operate in a changed world. After winning the trophy for the third time in 1970. These high profile strikes have sent shock waves around the world. September 2001 and thereafter. the cup was exhibition at Rio de Janeiro. To exemplify. the losses to the broadcaster can run into hundreds of millions. This time the cup disappeared forever. Called the Jules Rimet Cup and made of gold-plated silver. In 1983. For the insurer. As of today nothing can be much bigger than the FIFA World Cup 2006. epidemic and injury to the players. It was stolen at an exhibition in London in 1966. the original trophy. offers the potential to be a probable target for those who align themselves with the radical Islamic and other terrorist networks. the 1980 Olympic Games in Moscow which took place at the height the cold war was the costliest sports event for the insurance industry. was hidden in a shoe-box during World War II. terrorist organizations have caused mass casualties on innocent populations. The Big Risks: Post September 11. The trophy is Vulnerable to Theft One version of the trophy had disappeared in the 76-year history of the event.

To diversify such risks. for example. the insurer would have to cough up his loss of earnings for the rest of his career if the organizing committee is held liable for the accident. Nobody would even like to dream about the cancellation of such a major event but there could be risks that could threaten the event. Another big risk in the current soccer world cup emanates from liability insurance. The World Cup is a mammoth project in which the Germans have invested about 1. Topping the list.Broadcasters and others filed claims to the tune of €75 mn for the advertising revenue lost as the games were boycotted by most Western countries. a major insurer in the UK is a major terrorist attack or pandemic threat. installed floodlight falls and injures a player. the insurer Hamburg-Mannheimer is cooperating with Allianz AG.4 bn for a period of one month. If. Europe’s biggest insurer. a carelessly. as per AON. Absenteeism 57 .

According to estimates by a UK-based accounting firm. Influenza will be on top of the agenda. recently launched a new insurance policy allowing employers in the country to insure themselves against the sudden rise in applications for sick leave expected during this month’s World Cup.Unlike the last World Cup in Japan and Korea. Even the German Minister of Health started preparing for the World Cup 2004 itself. the local organizer and the corporate sponsors but also local hotels and the makers of commemoration mugs. The organizers have spent considerable years finetuning their security plans to prevent a possible terrorist attack. The company has choose to offer a new product for short absenteeism. British stand to lose 500 million pounds this June due to World Cup related sick leave and post-match sluggishness. t-shirts. The Institute is also on the look out for 58 . Dutch firms are insurance themselves against workers who stay away en masse. Sez Assurantie. This figure is expected to rise if England makes it to the final rounds. a Dutch insurance company. many of the matches this summer take place at the end of the 9-5 working day. footballs. sportwear and flags. The Robert Koch Institute insisted an enhanced nationwide infectious disease supervision campaign. This list will include not only FIFA. Experts reckon as many as one is seven men (and one in 20 women) might phone in ill / sick to watch or recover from match-related drinking the right before. Also on the priority list will be the H5N1 stain of avian flue given the recent epidemic across Europe. In spite of the cover the best protection against cancellation will be proper risk assessment and risk management. Whoever has a major financial stake in the event will take event cancellation cover.

The Risk of Cancellation: Probably. Fears also exist over troublesome crowd behavior mostly from European hooligans. the raging chorera epidemic in Angola as foodball teams and fans congregate in Germany from around the world. organizers. it is natural for the hosts and FIFA to make it a trouble free event. To protect against cancellation of the tournament. The World Cup bearing one of the world’s most high risk sporting event.other deadly diseases for example. FIFA had to seek cover elsewhere. It approached the financial markets to cover the risk. Fan Insures Himself A football fan has taken a £ I mn insurance policy to cover himself 59 . The bonds' principal will be paid back to the investors on September 2006. political risks and risks arising out of terrorism. It can come in the form of interruption or cancellation of matches due to terriorist threat. When insurers shied away from managing the entire range of risk from cancellation. in October 2003 it issued so-called catastrophe bonds worth $260 mn. local and associated business – will be the risk of cancellation. insurance companies have traditionally looked at factors like weather. According to expert in event risks. sponsors. the biggest risk to all the parties – fans. if the World Cup is successfully concluded. infrastructure breakdown or inclement weather.

The supporters are also under tremendous pressure and suffer because of their nation's performance. The fan will then have to provide medical evidence showing that he has suffered from severe mental tension to get his seven-figure claim amount.5 mn for 60 . The local German organizing committee has also gone the conventional way and paid €5 mn in premiums for a contingency insurance provided by Hareburg-Mannheimcr and backed by other insurers including AIG Europe. The insurance company is owned by the reinsurer Munich Re. He insured himself against psychological trauma. it is said.against the pain of seeing England defeated in the early stages of the World Cup. coaches and The pressure of the World Cup. The Primary Insurer Hamburg-Mannheimer Versicherungs-AG is the main insurer. HamburgMannheimer is said to have paid FIFA the soccer ruling body € 13. is not just on the players. The contract provides cover to the extent of €158 mn in case the World Cup is postponed and has to be held later in another country. The fan has paid £ I 05 for a World Cup All Risks Insurance policy through the insurance broker britishinsurance. The fan said he had taken out the policy to compensate for the agony of watching England lose in the early stages of the cup. If England is defeated in the first round of the competition the insurer will turn to five sports commentators to judge if its exit is premature. The policy however. does not cover the team's failure to march to the next round as a result of players being out due to metatarsal injuries.

as a reason for postponement of the tournament obviously is not covered. However.the rights of being the exclusive insurance provider for the World Cup in Germany. It insured the 2004 European soccer championship in Portugal. it insured the German national team at the European Championship 2000 and the World Cup 2002. For the FIFA World Cup in Korea/Japan in 2002. As is the wont in property and casualty insurance. The company is not only the tournament's official insurer but also one of the official suppliers/National sponsors to the 2006 FIFA World Cup. In case of terror-related claims. legal travel and electronic systems cover. Hamburg-Mannheimer Sports GmbH also offers tailor-made insurance solutions to professional teams besides organizing groups of major sports events. The range of services the insurer will be providing to the 2006 FlFA World Cup include organizers' third party insurance. financial liability insurance. The only option for [he stadium owners has been to buy 61 . terrorism. It also intends to cover the World Handball Championships in Germany in 2007. almost all the insurers have been excluding terror related claims from their coverage post September 11. not searching the fans properly to check if they arc carrying hidden bombs. Hamburg-Mannheimer is not new to event insurance. Hamburg-Mannheimer had provided the FIFA with a television contingency insurance. for example. accident. For instance. The insurer will not honor the claim if the committee acts carelessly. HamburgMannheimer only provides cover via the liability insurance it has sold to the German organizing committee.

terrorism-related property insurance from specialized insurers like Extremus Versicherungs-AG. The remaining stadiums have to do without cover for terrorismrelated damages. 62 . Five of the 12 World Cup stadiums are being insured for terror related property claims. Munich Re and Swiss Re. a Cologne-based terrorism-insurance venture set up in collaboration with insurers like Allianz.

there is a concern that this insurance would be beyond the means of some countries. This would ensure adequate compensation to clubs if their players are injured during the world cup or at other international tournaments. There are demands on FIFA to take a global insurance policy. However. The present regulations have put the insurance responsibility on the clubs. The regulations also say that the national team should ensure that the player is decently insured. 2006 World Cup will be a testing ground to establish a fund for the players that would cover all competitions. hamstring strains and injuries to the Achilles heels. Metatarsal injury is relatively common. The G 14 group of the elite European clubs has already initiated legal action against FIFA over this issue. The endeavor is to find a 63 . This sum is unlikely to appease the clubs. To obviate these risks few football ? associations take insurance to cover their players released for national duty This cover helps indemnify the clubs for the player's weekly wages and professed marker value if they return injured from the World Cup. When a player is' injured the club not only loses a player but also big money. as they feel it is a mere pittance compared to the $2. A few European sides and many developing nations have no such cover. It amounts to 15 mn Swiss francs/ $12. These clubs stand exposed should their players be injured while on national duty. Other frequent injuries include ruptures of the anterior cruciate ligament.5 mn or 5% of the tournament's prize pool.3 bn FIFA is expected to earn from this World Cup. FIF A has introduced a special insurance pool to cover the costs if a player is injured at the World Cup.The Injury to the Player Factor: Football is an injury prone game.

64 . one of the greatest shows of this decade is on a firm footing. Despite the risk factors. Thanks to the support of the insurance industry.mechanism that ensures that all players participating in international competitions are adequately insured. the wave of enthusiasm for the FIFA World Cup 2006 all over the world is awe -inspiring. Player versus player liability cover in the event a player injures another in a reckless tackle is also an issue but its cover is difficult to secure.

The strategy is to have an optimal mix of multiple learning methodologies depending on the overall knowledge management strategy. With business intelligence implemented companies of all nature have a better chance of winning a competitive edge. Considering the present status. it is rather a complementary measure.Conclusion The insurance sector is recording a growth much more than what was expected. The top most public sector insurance players are also identifying new ways to satisfy the needs and will be competing with the private players in the near future. 65 . As more new players enter the fray there will be ample scope for growth and the industry will become highly competitive. Insurance companies are spending a huge amount to identify the needs of the customers and are providing a variety of products to attract them. we need to understand that e-learning is yet to be accepted as a complete replacement for classroom learning. Every life or non-life insurance company is looking for ways to expand their operations in India.

the industry is going to grow rapidly. Given the potential India has. Given the potential India has. Growth in the life insurance sector is 66 . the industry is going to grow rapidly. Penetration levels would increase substantially in the coming years as greater savings and material development will necessitate more insurance buying. C S Rao. IAS (Retd.) says the insurance industry is expected-to have a great future in our country. Service and prices will be highly competitive enabling consumers to buy insurance for all their needs.INDIAN INSURANCE INDUSTRY Entering the Big League of Global Insurance In a candid interview to Insurance Chronicle IRDA Chairman. India is gaining a significant position in the emerging markets and it is a question of time before India can enter into the big league of global insurance. The detariffing of general insurance in 2007 is going to be the beginning of an important changeover in the history of general insurance in the country. Do you foresee any big change in the reinsurance industry in the country by that time? The insurance industry is expected to have a great future in our country. 1) What is your outlook for the insurance industry? Will 2007 mark India's entry into the big league of global insurance? Where do you expect the penetration: levels to be by 2010? At what rate is the insurance sector (life and non-life) expected to grow in the next 10 years.

In the non-life sector. Substantial increase in insurance would no doubt have an impact on reinsurance as the insurers have to hedge their risks.2007 deadline. volumes may even fall initially but it would be a question of time before the market forces stabilize and the sector expands.expected to increase substantially. Is the insurance market in the country ready for the detariffication scenario with effect from January 2007? The grapevine says that the regulator is not going to stick to the January 1. in a detariffed scenario. It is intended to be a consumer-friendly measure against the possibility of a very high premium for Motor Third Party Insurance or denial of cover in respect of vehicles having high claim ratios. There is talk about an insurance pool being created under the aegis of the regulator and GIC Re. I believe the industry is not only ready but is looking forward to it. Is it true? The road map to detariffing was announced as long back as 15 months ago and since then the insurance industry has been working towards getting ready for the whole exercise. 67 . 2. 3. Will it help ward off the apprehensions of the transporter community? The pool mechanism is under consideration.

I do not see any connection between this and decision making within the companies. Department of Expenditure and as Secretary Department of Revenue. 2007 to ascertain the solvency of the insurance companies. He later worked in the Finance Department at the State level in various capacities rising to the highest level of Principal Secretary to the State Government in the Finance Department. Can you throw some light on the reporting system to be introduced with effect from January 1. 68 . He was then called on to I head the Insurance Regulatory and Development Authority as its Chairman. India joined the Indian Administrative Service in 1967. the IRDA would step in to give the necessary directives. Insurance Regulatory and Development Authority. Will this initiative take away the freedom of decision making from insurance companies? Are the Indian insurance companies meeting the stipulated solvency norms or are they short of the fiat issued by IRDA? The reporting systems regarding solvency margins have always been there and it is not going to be different from January 1. He retired from the government after 36 years of service in the year 2003.2007. He worked as a generalist administrator and was involved in the implementation of various developmental activities at the district and State levels in the first decade of his years in the Administrative Service.4. Insurance companies are mandated to maintain the required solvency margins and where companies fall short of the stipulations. Chairman. He later moved to the Government of India and worked in the Ministry of Finance as Secretary. C S Rao.

What is the path the regulator is embarking upon for itself in the days ahead? Will it be more and more regulation? The regulator has never advocated more and more regulation. 6. selfregulation will go a long way in helping the industry develop in a professional way. Cases of market misconduct are dealt with by the regulator in terms of the provisions of the substantive legislation and applicable regulations. 69 . we have always been encouraging self-regulation which is reflective of a mature industry. etc. Considering the changes. I would advocate a right balance between regulation by the authority and self regulation by the industry.. In fact. perhaps the regulator could play a role to bring about a greater focus but in certain other areas such as market conduct of intermediaries. what is the action contemplated? In any industry.5. Has the regulator witnessed any questionable practices or market misconduct among the players in the country's insurance sector? If yes. In certain areas such as micro-insurance or health. the industry is going through in our country. I have always held that the industry should behave in a manner that does not give scope for regulatory intervention. the chances of market misconduct are always there.

Your statement regarding the above 55 years bracket in the context of health insurance has caused lot of disappointment to the older population of the country. the data build up over the last few years has taken place in a fairly organized manner not only among the private companies but also in the public sector companies. How do you react to this? As a regulator. 'What are the changes you 'Wish to see in the health insurance arena? The point I have always tried to make is that it is necessary for individuals to enter into health insurance schemes while they are young. As far as individual companies are concerned.7. 8. there is a need for creating a warehouse. To this end. the regulator has made some efforts in that the Tariff Advisory Committee (TAC) has been identified as a data repository and some initiatives for collection and collation of industry-wide data has been made in the areas of health insurance and motor insurance. It would amount to selection against insurers if individuals 70 . Pricing in the detariffed era is expected to be based on proper assessment of risk and the available data. What is the status of data mining in the insurance industry? Do we have a repository of accurate data to help scientific pricing of the products in the detariffed era? Data is available to some extent with individual companies though at the industry level. Coding and collection of data by the TAC for the products to be detariffed is being activated in cooperation with the insurers.

10. What are your views on bancassurance as a channel for marketing life and non-life insurance products? Bancassurance has been one of the emerging channels for marketing of life and non-life products. etc. Regulations/guidelines in this important area of non-life business are under consideration. I wish to see a lot more penetration of this class of business and a uniform approach by all insurers on matters relating to renewal. As the fastest growing portfolio of the non life insurance sector. portability. The regulator has been giving special attention to health insurance and has taken quite a few initiatives over the last couple of years. health insurance is likely to develop in a big way in the near future. 9. The regulator would be concerned with matters such as denial of a renewal or arbitrary loading of premium or if the underwriting guidelines are not fair and are discribinatory. Are you in favor of raising the FDI cap in the insurance industry from 26 to 49%? I believe that an increase in the FDI cap will not only bring in 71 . It is left to the insurance companies to follow their own underwriting guidelines when it comes to assessment of risks and acceptance of a new proposal. marketing of insurance products by banks has been a success story.decide to enter the schemes only when they are old and when they are more vulnerable to diseases. Given the infrastructure and wide networking banks have.

The KPN Committee was set up to look into the proposals of the Law Commission and supplement the m where necessary. The greatest advantage is that insurers cannot appeal against the orders of Ombudsman and are duty bound to implement them. insurance? 12. The insured. however. It will pave the way for a more competitive environment as it will enable the existing joint ventures to expand as well. This is a consumer 72 . As of now there is no appellate authority to whom one can appeal against the order of the Insurance Ombudsman? Do you think there is a need for one akin to' the Banking Ombudsman? The basic objective in creating the Institution of Ombudsman is to give a finality to litigation and thus provide relief to the insured. This is good in the larger interest of the nation as it will see an increase in investment in infrastructure and also have a tremendous impact on the growth of the industry. can pursue other legal courses available to him if he is not happy with the verdict of the Ombudsman. 11.the much needed capital into the insurance industry but also bring in international know-how and skills thus expanding the industry's capabilities. Can you throw some light on the move for a consolidated law on A comprehensive legislation for insurance is likely shortly. The Committee submitted its report after which IRDA has made certain comments and communicated the same to the government.

Insurance being a complex service. 13. The other is health insurance in which ate" several initiatives have been taken. The regulations on micro insurance brought out recently by the IRDA have been one of the major initiatives. What are the steps you would like to initiate to bridge this gap? Making insurance affordable and accessible to the rural masses is the common objective of the regulator and the industry. it is in the interest of prospects to take the advice of a professional before deciding to buy a product. Is this at the behest of the regulator and what does it connote? Yes. this caption was at the regulator's insistence. Caveat emptor is no longer the maxim of most 73 . What will be the insurance industry's role in this endeavor? There is a huge deficit in providing social insurance. There is a lot of talk about financial inclusion.friendly dispensation. The IRDA is also having the regulations relating to obligations of insurers towards the rural and social sector reviewed. 14. which is quite contrary to the case of most goods or services today. The idea also is to convey to prospects that "insurance" is solicited or sold rather than bought. One fact about which a prospective policyholder is always curious about is the fine print at the bottom of every promotion endeavor "Insurance is the subject matter of solicitation". Insurance for the masses is being given special focus and several initiatives have been taken on this front by regulator.

the career prospects in this field are tremendous. Today. 15. Contribution of the financial services to the national economy is substantial and here the contribution of the insurance industry is significant. both in life and the non-life sector. as far as insurance is concerned. there is a dearth of actuaries. Students would do well to seriously take to actuarial studies as it has a wonderful future. In the light of the growing insurance penetration do you see a great opportunity in the insurance sector from the career perspective? The insurance sector does offer great career opportunities. Insurance broking too is gaining significant position as a career opportunity. Thanks to wealth management. 74 . There are several lakhs of agents in the market today who have made selling insurance a full time career. However. Taking up a career as an insurance agent is yet another are that offers vast of the modern times. With the kind of potential that exists for the insurance industry in our country now. Survey and loss assessment is yet another opportunity in the insurance field one could look at. this is not the case. The insurance industry is growing so rapidly that the need for technical expertise is ever increasing. Take the demand for actuaries for instance. insurance products are inevitably included while selling a bouquet of financial products.

Bibliography Books Articles/Research Material Sites 75 .IIIV.

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