A PROJECT REPORT ON

STUDY OF DISTRIBUTION SYSTEM FOR BAJAJ ALLIANZ GENERAL INSURANCE COMPANY LIMITED.

SUBMITTED TO
KARNATAK UNIVERSITY DHARWAR JANUARY-2009

BY
RAKESH SHAHARE REG NO 06 MCBA 37 JAIN COLLEGE BBA BELGAUM

GUIDED BY
MR. PRASAD DESAI

DECLARATION
I,RAKESH R SHAHARE student of BBA FINANCE , REGISTRATION NO,06 MCBA 37 OF JAIN COLLEGE BELGAUM, hereby declare that this project report titled STUDY OF DISTRIBUTION SYSTEM FOR BAJAJ ALLIANZ GENERAL INSURANCE COMPANY LIMITED has been prepared by me, as for the partial fulfillment of ADMINSTRATION. I further declare that this project report has not been submitted earlier in any other university or institution for award of any degree or diploma. BACHEOLAR OF BUSINESS

Place: BELGAUM Date:01/02/2010

RAKESH SHAHARE

ACKNOWLEDGEMENT
It gives me immense pleasure to take this opportunity to thank all those people who have helped me in completing this project. I am immensely thankful to my project guide Mr. JOHN NORONHA (Senior Manager-Marketing) and Prof. GONDAKAR (INSTITUTE OF MANAGEMENT EDUCATION & RESEARCH) for having guided me towards the successful completion of my project. My profound gratitude to Mr. SHRINIVAS (Director, INSTITUTE OF MANAGEMENT EDUCATION & RESEARCH) for his constant encouragement and guidance. Finally, I would like to thank my friends, colleagues, who have always helped, encourage and inspired me. RAKESH SHAHARE JAIN COLLEGE BELGAUM Place-BELGAUM Date- 01/02/2010

CONTENTS
Serial No. 1 Chapter Headings Overview Industry Profile of Bajaj Allianz General Insurance Co. Ltd. Distribution channels of of the Insurance PAGE NO.

Insurance industries Research methodology Data Analysis and Interpretations Conclusions recommendations. Questionnaire Bibliography and

4 5

7 8

LIST OF GRAPHS:
GRAPH NO. 1 2 3 4 PARTICULAR Age of the people Annual income Do you have insurance policies From where do you buy insurance policy Why do you buy from particular source this PAGE NO.

6 7 8 9 10

Which of the service you feel is more important while buying insurance Which are the products you have Have you tried to buy products online Which is the correct place to buy insurance If Bajaj giving discount to buy online will you try for it

OVERVIEW OF THE INSURANCE INDUSTRY

Insurance is a contract binding an insurance company to compensate a beneficiary for the loss of life or loss or damage to property of a person insured. Benefits accrue due to an individual due to statutory obligation of the benefit provider to compensate for the expenses involved in health care, retirement plans of the beneficiaries by entering into a contract with the provider either singly or in groups by paying a predetermined premium at predetermined intervals. The process of Insurance and Benefit Management Business can be grouped under three main categories. These are Products, Processes and People.

History of Indian Insurance Market

(Life and Non-life). Insurance in India goes back to the time of The British. The first life insurance company to operate in India -the Oriental Life Insurance Company was established in 1818 in Calcutta. It was, however, a British Company. The first Indian insurance company, the Bombay Mutual Life Assurance

Society started its operations in1871. In 1956 the Indian life insurance industry was made up of 154 domestic life insurers, 16 foreign life insurers and 75 provident funds, and was still governed by the Insurance Act of 1938. In 1956 all life insurance companies were nationalized, the story of non-life insurance in India is no different. Though Lloyds Insurance pioneered general insurance way back in 1688, the first nonlife insurance company to set up shop in India was the Triton Insurance Company of Calcutta. In 1907, the first Indian general insurer, the Indian Mercantile Insurance Company started its operations. The New India Assurance Company Ltd. was incorporated in 1919. In 1972, the non-life insurance business in the country was nationalized and the GIC (General Insurance Corporation of India) was formed as a holding company with four Subsidiaries: The National Insurance, Oriental Insurance, United India

Insurance And the New India Assurance Company Ltd. Since then, insurance in India had a protective wall built around it, to keep it local players. Market. The above companies controlled the insurance industry for nearly 30 years or so.

Current Insurance Market Structure General Insurance business in India was under complete control of four Governments Insurance companies for nearly three decade. After much deliberation finally the market was opened for competition from December 2000 and also Government has de-linked four Public sector companies from holding company GIC to operate as independent company. In addition to four Public Sector insurance companies the Insurance Regulatory and Development Authority (.IRDA.) has issued licenses to the eight Private General Insurance Companies. List of non-life insurance companies operating in the market as on date. Bajaj Allianz General Insurance Co. Ltd. Pune Privately Held Cholamandalam MS General Insurance Co. Ltd. Chennai Privately Held HDFC Chubb General Insurance Co. Ltd. Mumbai Privately Held ICICI Lombard General Insurance Co. Ltd. Mumbai Privately Held IFFCO-Tokio General Insurance Co. Ltd. New Delhi Privately Held National Insurance Co. Ltd. Kolkata Public Sector New India Assurance Co. Ltd. Mumbai Public Sector Oriental Insurance Co. Ltd. New Delhi Public Sector Reliance General Insurance Co. Ltd Mumbai Privately Held Royal Sundaram Alliance General Insurance Co. Ltd. Chennai Privately Held Tata AIG General Insurance Co. Ltd. Mumbai Privately Held United India Insurance Co. Ltd. Chennai Public Sector

Indian Insurance Sector

Insurance has always been a politically sensitive subject in India. After 40 years of government protectionism of this massive sector, the new United Front government is touching dangerous yet interesting ground with their intentions of opening this sector to private Indian business houses, as well as international players. Insurance has always been a politically sensitive subject in India. Within less than 10 years of independence, the Indian government nationalized private insurance companies in 1956 to bring this vital sector under government control to raise much needed development funds. Since then, state-owned insurance companies have grown into monoliths, lumbering but the only alternative. They have been criticized for their huge bureaucracies, but still have millions of policy holders, as there is no alternative. Any attempt to even suggest letting private players into this vital sector has met with resistance and agitation from the powerful insurance employees unions. The Narasimha Rao government (1991-96), which unleashed liberal changes in Indias rigid economic structure, could not handle this political hot potato. Ironically, it is the coalition government in power today, which has declared its intention of opening up insurance to the private sector. Ironical because this government is at the mercy of support from the left groups, which have been the most vociferous opponents of any, such move

No policy initiatives have yet been announced, but the government has already clarified it will not privatize the existing insurance companies. But while the decision has been welcomed by the big companies who were planning to make a Trade unions and even some left supporters of the government have criticized foray into this lucrative business, the move. In some ways it was inevitable-all segments of the financial sector had been opened to private players and it was only a matter of time before insurance followed. The bigger private players claim that opening up insurance will give policyholders better products and service; the opponents of privatization argue that in a poor country like India insurance needs to have social objectives and newcomers will not have that commitment. Many international players are eyeing the vast potential of the Indian market and are already making plans to come in. But it will take some time before the intent translates into policy-the unions are not going to give up without a fight and in that they will get the support of some elements of the coalition government.

INSURANCE IN INDIA
The insurance sector in India has come a full circle from being an open competitive Market to nationalization and back to a liberalized market again. Tracing the Developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries.

A brief history of the Insurance sector

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

Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the Objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.

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

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.

Insurance sector reforms

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R. N. Malhotra, was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. The reforms were aimed at creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms In 1994, the committee submitted the report and some of the key recommendations Included: i) Structure Government stake in the insurance Companies to be brought Government should take over the holdings of GIC and its

down to 50% subsidiaries so that these subsidiaries can act as independent corporations All the insurance companies should be given greater freedom to operate ii) Competition

Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the industry

 No Company should deal in both Life and General Insurance through a single entity Foreign companies may be allowed to enter the industry in collaboration with the domestic companies Postal Life Insurance should be allowed to operate in the rural market Only one State Level Life Insurance Company should be allowed to operate in each state

iii)

Regulatory Body

The Insurance Act should be changed An Insurance Regulatory body should be set up Controller of Insurance (Currently a part from the Finance Ministry) should be made independent iv) Investments

Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50% GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time) v) Customer Service

LIC should pay interest on delays in payments beyond 30 days Insurance companies must be encouraged to set up unit linked pension plans Computerization of operations and updating of technology to be carried out in the insurance industry;

The committee emphasized that in order to improve the customer services and increase the coverage of the insurance industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of Rs.100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body.

The Insurance Regulatory and Development Authority (IRDA) Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDAs online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products, which are expected to be introduced by early next year.

Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. In the private sector 12 life insurance and 6 general insurance companies have been registered.

PROFILE OF BAJAJ ALLIANZ GENERAL INSURANCE CO. LTD.

Overview of Bajaj Allianz General Insurance Company Limited Bajaj Allianz General Insurance Company Limited is a joint venture between Bajaj Auto Limited and Allianz AG of Germany. Both enjoy a reputation of expertise, stability and strength Bajaj Allianz General Insurance received the Insurance Regulatory and

Development Authority (IRDA) certificate of Registration (R3) on May 2nd, 2001 to conduct General Insurance business (including Health Insurance business) in India. The Company has an authorized and paid up capital of Rs 110 crores. Bajaj Auto holds 74% and Allianz, AG, holds the remaining 26% Germany. In its first year of operations, the company has acquired the No. 1 status among the private non-life insurers. As on 31st March 2003, Bajaj Allianz General Insurance maintained its leadership position by garnering a premium income of Rs.300 Crores. Bajaj Allianz also became one of the few companies to make a profit in its first full year of operations. Bajaj Allianz made a profit after tax of Rs.9.6crores. Bajaj Allianz today has a network of 42 offices spread across the length and breadth of the country. From Surat to Siliguri and Jammu to Thiruvananthapuram, all the offices are interconnected with the Head Office at Pune. In the first half of the current financial year, 2008-09, Bajaj Allianz garnered a premium income of Rs. 405 crores, achieving a growth of 84% and registered a 52% growth in Net profits of Rs.20 Crores over the last year for the same period. In the financial year 2007-08, the premium earned was Rs.480 Crores, which is a jump of 60% and the profit zoomed by 125% to Rs. 21.6 Crores.

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

Mission
As a responsible, customer focused market leader, we will strive to understand the insurance needs of the consumers and translate it into affordable products that deliver value for money

A Partnership Based on Synergy

Bajaj Allianz General Insurance Company offers technical excellence in all areas of General and Health Insurance as well as Risk Management. This partnership successfully combines Bajaj Auto's in-depth understanding of the local market and extensive distribution network with the global experience and technical expertise of the Allianz Group. As a registered Indian Insurance Company and a capital base of Rs. 110 crores, the company is Fully licensed to underwrite all lines of general insurance business including health With management control by Allianz AG

Shareholders & Promoters

Bajaj Auto Limited Bajaj Auto Limited is the largest manufacturer of two and three-wheelers in India and also one of the largest manufacturers in the world. Bajaj Auto has been in operation for over 55 years. As a promoter of Bajaj Allianz General Insurance Company Ltd., Bajaj Auto has the following to offer: Vast distribution network. Knowledge of Indian consumers. Financial strength and stability to support the insurance business.

Allianz AG, Germany

Allianz AG is in the business of General (Property & Casualty) Insurance; Life & Health Insurance and Asset Management and has been in operation for over 110 years. Allianz is one of the largest global composite insurers with operations in over 70 countries. Further, the Group provides Risk Management and Loss Prevention Services. Allianz has insured most of the world's largest infrastructure projects (including Hong Kong Airport and Channel Tunnel between UK and France), further Allianz insures the majority of the fortune 500 companies, besides being a large industrial insurer, Allianz has a substantial portfolio in the commercial and personal lines sector, using a wide variety of innovative distribution channels.

Allianz AG has the following to offer Bajaj Allianz General Insurance Company Ltd.: Set up and running of General insurance operations New and improved international products One of the world's leading insurance companies More than 700 subsidiaries and 2 lac employees in over 70 countries worldwide Provides insurance to almost half the Fortune 500 companies Technology

Other similar businesses

The promoters have also incorporated a Life Insurance Company in India, called Bajaj Allianz Life Insurance Company Limited to provide life insurance solutions.

Top Management
The top management of Bajaj Allianz General Insurance consists of people having domain knowledge of insurance as well as specialists in their respective field. Kamesh Goyal is the CEO of Bajaj Allianz General Insurance Company Limited, who was elevated from his earlier position of COO. Sam Ghosh, who was the CEO of Bajaj Allianz earlier, has taken over as

Country Manager and is also the CEO of Bajaj Allianz Life Insurance Company Limited.

Why Bajaj Allianz?

The Bajaj Allianz Difference Business strategy aligned to clients' needs and trends in Indian and global Economy / industry internationally experienced core team, majority with local background Fast, decentralized decision making Long-term commitment to market and clients Trust At Bajaj Allianz, we realise that you seek an insurer whom you can trust. Bajaj Auto Limited is trusted name for over 55 years in the Indian market and Allianz AG has over 110 years of global experience in financial services. Together we are committed to provide you with time tested and trusted financial solutions that provide you all the security you need for your investments. And more

Underwriting Philosophy Our underwriting philosophy focuses on:

Understanding the customer's needs Underwriting what we understand Meeting the customer's requirements Ensuring optimal coverage at lowest cost

Claims Philosophy The Bajaj Allianz team follows a service that aims at taking the anxiety out of claims processing. We pride ourselves on a friendly and open approach. We are focused towards providing you a hassle free and speedy claims processing. Our claims philosophy is to: Be flexible and settle fast Ensure no claim file to be seen by more than 3 people Check processes regularly against the global Allianz OPEX (Operational Excellence) methodology Sold over 1 million since inception.. Customer Orientation At Baja Allianz, our guiding principles are customer service and client

satisfaction. All our efforts are directed towards understanding the culture, social environment and individual insurance requirements - so that we can cater to all your varied needs.

Experienced and Expert Servicing Team A team of experienced people who understand Indian risks and are supported by the necessary international expertise required to analyze and assess them drives us.

Superior Technology

In order to ensure speedy and accurate processing of your needs, we have established world class technology, with renowned insurance software, which networks all our offices and intermediaries

Using the Web, policies can be issued from any office across the country for retail products Unique, user friendly software developed to make the process of issue certificate) of policies and claims settlement simpler (e.g. online insurance of marine policy

Unique Forms of Risk Cover

Special PA cover for Amaranth Yatris Housing loan cover for people, who are suddenly unemployed Film insurance Event management cover Sports & Entertainment Insurance Package

Risk Management- Our Expertise Our service methodology is tried, tested and Proven the world over and involves:

Risk identification: Inspections Risk analysis: Portfolio review and gap analysis Risk retention Risk Transfer: To an insurer as well as reinsurer (as required) Creation of need based products Ongoing dialogue and proactivity

Products
Motor / Home Insurance Home Insurance Householder Package Fire Workmen's Compensation Plate Glass Burglary

Shop/Showroom Shopkeeper Motor Vehicle Dealer Package Health Insurance Health Guard Hospital Cash Critical Illness Personal Guard Travel Insurance Travel Companion Shubh Yatra Student Companion Pravasi Bharati Bima Yojna

Corporate Insurance Speciality Lines Aviation Marine Hull Insurance Project Insurance Freight Forwarders Port Liability Package Sports & Entertainment Insurance

Youre Employees Group PA Group HG Group CI Workmen's Compensation Group Travel Keyman Insurance

Distribution channels of Insurance industries

Overview With largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. Its a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 450 billion. Together with banking services, it adds about 7

per cent to the countrys GDP. Gross premium collection is nearly 2 per cent of GDP and funds available with LIC for investments are 8 per cent of GDP. Yet, nearly 80 per cent of Indian population is without life insurance cover, health insurance and non-life insurance continue to be below international standards. And this part of the population is also subject to weak social security and pension systems with hardly any old age income security. This itself is an indicator that growth potential for the insurance sector is immense. A well-developed and evolved insurance sector is needed for economic development as it provides long-term funds for infrastructure development and at the same time strengthens the risk taking ability. It is estimated that over the next ten years India would require investments of the order of one trillion US dollar. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain economic growth of the country. With a large capital outlay and long gestation periods, infrastructure projects are fraught with a multitude of risks throughout the development, construction and operation stages. These include risks associated with project implementation, including geological risks, maintenance, commercial and political risks. Without covering these risks the financial institutions are not willing to commit funds to the sector, especially because the financing of most private projects is on a limited or non- recourse basis. Insurance companies not only provide risk cover to infrastructure projects, they also contribute long-term funds. In fact, insurance companies are an ideal source of long-term debt and equity for

infrastructure projects. With long-term liability, they get a good assetliability match by investing their funds in such projects. IRDA regulations require insurance companies to invest not less than 15 percent of their funds in infrastructure and social sectors. International Insurance companies also invest their funds in such projects. Insurance is a federal subject in India. There are two legislations that govern the sector- The Insurance Act- 1938 and the IRDA Act- 1999. History The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the nonIndian lives as Indian lives were considered more risky for coverage. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. The first general insurance company- Titan Insurance Company Limited was established in 1850. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies. Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the provident fund Act of 1912. Several frauds during 20's and 30's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over insurance business. The insurance business grew at a faster pace after independence. Indian companies

strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon. The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and LIC was born. Nationalization was justified on the grounds that it would create much-needed funds for rapid industrialization. This was in conformity with the Government's chosen path of State lead planning and development. The (non-life) insurance business, however, continued to thrive with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly 107 insurers were amalgamated and grouped into four companies- National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC). Present Scenario The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Under the current guidelines, there is a 26 percent equity cap for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent. Premium rates of most general insurance policies come under the purview of the government appointed Tariff Advisory Committee.

INSURANCE IN INDIA The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed over a period of almost two centuries. A brief history of the Insurance sector The business of life insurance in India in its existing form started in India in the year1818 with the establishment of the Oriental

Non-Life Insurance Market In December 2000, the GIC subsidiaries were restructured as

independent insurance companies. At the same time, GIC was converted into a national re-insurer. In July 2002, Parliamant passed a bill, delinking the four subsidiaries from GIC. Presently there are 12 general insurance companies with 4 public sector companies and 8 private insurers. Although the public sector companies still dominate the general insurance business, the private players are slowly gaining a foothold. According to estimates, private insurance companies have a 10 percent share of the market, up from 4 percent in 2001. In the first half of 2002, the private companies booked premiums worth Rs 6.34 billion. Most of the new entrants reported losses in the first year of their operation in 2001.

Insurance costs constitute roughly around 1.2- 2 percent of the total project costs. Under the existing norms, insurance premium payments are treated as part of the fixed costs. Consequently they are treated as pass-through costs for tariff calculations. For Projects costing up to Rs 1 Billion, the Tariff Advisory Committee sets the premium rates, for Projects between Rs 1 billion and Rs 15 billion; the rates are set in keeping with the committee's guidelines; and projects above Rs 15 billion

are subjected to re-insurance pricing. It is the last segment that has a number of additional products and competitive pricing. Insurance, like project finance, is extended by a consortium. Normally one insurer takes the lead, shouldering about 40-50 per cent of the risk and receiving a proportionate percentage of the premium. The other companies share the remaining risk and premium. The policies are renewed usually on an annual basis through the invitation of bids. Of late, with IPP projects fizzling out, the insurance companies are turning once again to old hands such as NTPC, NHPC and BSES for business.

Re-insurance business Insurance companies retain only a part of the risk (less than 10 per cent) assumed by them, which can be safely borne from their own funds. The balance risk is re-insured with other insurers. In effect, therefore, reinsurance is insurer's insurance. It forms the backbone of the insurance

business. It helps to provide a better spread of risk in the international market, allows primary insurers to accept risks beyond their capacity settle accumulated losses arising from catastrophic events and still maintain their financial stability. While GIC's subsidiaries look after general insurance, GIC itself has been the major reinsurer. Currently, all insurance companies have to give 20 per cent of their reinsurance business to GIC. The aim is to ensure that GIC's role as the national reinsurer remains unhindered. However, GIC reinsures the amount further with international companies such as Swissre (Switzerland), Munich (Germany), and Royale (UK). Reinsurance premiums have seen an exorbitant increase in recent years, following the rise in threat perceptions globally.

Various channels for distributions:

1. Bank assurance 2. Agency Network 3. Broker network 4. Direct Marketing and Online marketing 5. Travel Agents What is Bank assurance? Bank assurance is the distribution of insurance products through a banks network. This channel has been successfully deployed internationally to distribute insurance products. In India, the concept caught on post insurance industrys privatization in December 1999.

There are basically four models of bank assurance viz.: - Distribution alliance between an insurance company and a bank; - Joint venture between a bank and an insurance company; - Merger between a bank and an insurer - Bank builds and sells its own insurance products. Most of the bank assurance operations fall in the first model. How does it help? - Every insurance company plans to grow quickly to reduce start-up costs and break even. Banks with their huge network and a large customer base provide insurers with an opportunity to increase their market penetration and premium income. - This channel allows an insurer to effectively tap the rural sector. Selling insurance through traditional methods in rural area is an expensive proposition. A tie up with a bank allows an insurance company to access large customer base at a low cost. - Through this channel, an insurance company can cash in on the existing pool of skilled professionals at a low cost. - Of late, banks have witnessed a decline in margins in their core lending business. This in turn has adversely impacted their income. Thus, bank assurance helps them to augment their income. - Bank assurance provides an opportunity to the bank staff to harness their sales skills and adapt to the changing business environment.

However, a relatively new concept, bank assurance has been a phenomenal success. From just being lending organizations, banks today have diversified and offer various financial services across the board. Bank assurance is beneficial to both the insurance company and the bank. Will bank assurance click? Banc assurance, the much talked about channel of insurance distribution through banks that originated in France and which has been a success story in Europe is yet to take off here. A number of insurers have already tied up with banks and some banks have already flagged off banc assurance through soft launches of select risk products. While reams have been written about the numerous benefits of banc assurance considering the wide scale availability of risk products it will enable, rules and regulations regarding the same are yet to fall in place. Fee based income: For banks, bank assurance would mean a major gain. Since interest rates have been falling and profit on off take of credit has been low all banks have been able to do is sustain them but not profit much. Enter bank assurance and fee-based income through hawking of risk products would be guaranteed. Unique strategies: Before taking the plunge, banks as also insurers need to work hard on chalking out strategies to sell risk products through this channel especially in an emerging market as ours. Through tie-ups some insurers plan to buy shelf space in banks and sell insurance to those who volunteer to purchase them. But unless banks set up a trained task force

that will focus on hard-selling risk products, making much headway is difficult especially with a financial product that is not so easily bought over the counter. Identifying Target audience: Besides, identifying the target audience is yet another important aspect. Banks have a large depositor base of corporate as well as retail clients they can tap. Talking of retail clients the lower end and middle-income group customers constitute a major chunk who have over a period of time built a good rapport with the bank staff and thus hold big potential for bank assurance.

Reduced costs: While products such as retirement planning will involve an elaborately worked out plan with the help of a financial advisor, simple products such as an accident cover in other words pure risk products will be sold through this channel enabling savings on solicitation costs of these products. So will insurers pass on a part of the gains on cost saving (saving on agent training etc) to customers? At present insurers is noncommittal on this one. Also there are no immediate plans to redesign products to suit the banc assurance channel but banks are gung-ho about cross-selling products. Legal issues: Conversely, the Insurance Regulatory Development Authority (IRDA) has adopted a cautious approach before Banc assurance is flagged off. While on the one hand it is an economical proposition to sell risk products through the numerous bank branches spread across the country the fact

that claim settlement disputes take an unusually long time in our country is one of the causes for worry. In such a situation will banks be in a position to fight for the cause of their clients is a major concern? Besides regulatory authorities for both - banks and insurance companies are different. Moreover, banks may have to part with confidential information about their clients. Now where should banks draw a line?

Agency Network
Insurance Agents An insurance agent is a person who sells insurance policies after training and certification. They sell three basic types of insurance, life insurance, property-liability and health insurance. The tasks:

Helping individuals or companies select the right policy for their needs. Planning for the financial security of individuals, families, and businesses, advise about insurance protection for an automobile, home, business, or other property

Preparing reports and maintain records

Helping a policyholder obtain settlement of an insurance claim.

Insurance agents have to undergo training. Initial stipends and pocket expenses form part of the initial packet to the agent in addition to the commission. The Authority or an officer authorized by it in this behalf shall, in the manner determined by the regulations made by it and on payment of the fee determined by the regulations, which shall not be more than two

hundred and fifty rupees, issue to any person making an application in the manner determined by the regulations, a license to act as an insurance agent for the purpose of soliciting or procuring insurance business. However in the case of an individual, he does not suffer from any of the relevant disqualifications and in the case of a company or firm, any of its directors or partners does not suffer from any of the said disqualifications. Any license issued immediately before the commencement of the Insurance Regulatory and Development Authority Act, 1999 shall be deemed to have been issued in accordance with the regulations, which provide for such license. A license issued under this section, after the date of the commencement of the Insurance Regulatory and Development Authority Act, 1999, shall remain in force for a period of three years only from the date of issue. The Authority may, if satisfied that undue hardship would be caused otherwise, accept any application in contravention of this sub-section on payment by the applicant of a penalty of seven hundred and fifty rupees. An insurance agent among other things must possess the requisite qualifications and practical training for a period not exceeding twelve months, as may be specified by the regulations made by the Authority in this behalf; and must pass such examination as may be specified by the regulations made by the Authority in this behalf. He must not violates the code of conduct as may be specified by regulations made by the Authority.

The Authority may issue a duplicate license to replace a licensee lost, destroyed or mutilated, on payment of such fee not exceeding rupees fifty as may be determined by regulations. Will Agents vanish from the scene? Educating the customers on the need for insurance in life is his first step. And before he could elaborate on the choice of covers available, will want to know the prospects exact requirements and future planning in order that the cover can be designed accordingly - an aspect that was not considered earlier. In other words, he plays a much bigger role than he did earlier, thanks to the opening of the sector. Ask for all information you desire and it will be supported with necessary calculations and analysis in a presentable easy-to-understand format. Be it working out presentations instantly, plan comparisons or the returns analysis on your insurance investment over a period of time - your agent can provide you with all this and a lot more. Moreover, you can also count on him for tips on the best picks from among the stocks or know a thing or two about investment in the best mutual funds around and he will only be glad to guide you. Enter customized policies and individuals have a lot more to choose from. The agent after taking into account the changing future needs of individuals suggests policies that can be the most apt. Insurance needs will be revised regularly and claim settlements will no more be drudgery. The insurance sector is witness to cut throat competition in the market, and insurance companies have realized the importance of prompt customer service. Insurance agents will no more be able to afford a laid back attitude. They will have to be on their toes catering to the growing customer needs and serving them always, for his future referrals will come from them.

And to top it all there are other intermediaries waiting in the wings to take the leap into insurance once they get the nod. So what will happen to agents? Will they become an extinct species? Will they die a natural death and will brokers and other intermediaries take the reigns in their hands? Agents are here to stay: According to the McKinsey report, a global business and economic publication, agents will continue to account for bulk of the insurance business and will be preferred over and above other channels. Other intermediaries such as brokers, the report states, will only be able to carve a niche market for themselves and the acceptability of such alternative channels will take time. Moreover, how far will the personalized services offered through banc assurance and corporate brokers be comparable to that of an insurance agent is a pertinent question. A few insurance companies are still awaiting banc assurance and brokers regulations to fall in place. While few insurers opine that selling insurance through agents is a costly affair, how successful will intermediaries such as banc assurance are successful is yet to be seen.

Brokers
Broker versus Agent An insurance broker differs from an insurance agent in that a broker is considered an agent of the Insured even though he or she may receive a commission from the insurance company A broker may sell the products of a number of insurers whereas an insurance agent has the Insurer as his principal and works in the interest of the Insurer and not the Insured

This role has been substantially lacking from Indian marketplace until licensing of insurance brokers

Client - Broker Relationship

INSURED / CLIENT

Relationship

INSURANCE BROKER

Transaction

INSURANCE COMPANY A INSURANCE COMPANY B INSURANCE COMPANY C

Insurer - Agent Relationship INSURANCE COMPANY INSURANCE AGENT INSURED / CLIENT

Relationship

Transaction

Direct Marketing
In India the penetration of insurance products is very low. Due to this the correct marketing plan becomes very important.

Country India Zimbabwe Malaysia Japan South Korea England USA

Premiums as Premiums per share of GDP capita in USD 0.62% 3.5 2.15% 2.19% 2.45% 3.79% 3.34% 4.64% 11 98 804 338.3 730 1167

Country

USA USD Assets of 21,330 Bank Assets of bn non-life USD Insuranc 2,280 bn e Co. (2003 figs)

India USD 326 bn USD 11 bn

Low insurance penetration

Increasing level of involvement

Low: Product development Easy to produce

Medium: Marketing Difficult to market

Choosing the right channel

RESEARCH METHODOLOGY

Title STUDY OF DISTRIBUTION SYSTEM FOR BAJAJ ALLIANZ GENERAL INSURANCE COMPANY LIMITED Purpose The old age buildings are now taken over by fancy and beautiful buildings of private insurance companies. With the permission to enter the foreign players in the Indian market with a joint venture with an Indian firm has changed the face of the Indian Insurance industry. People have lot of options now in front of them to choose among so many. With the newer technologies entering into the market the way the insurance is sold has also come to a change. The consumers are now king in the field and the insurance companies have to fulfill the needs of the consumers to survive in the market. But all these things have also made difficult for consumers to select the correct products in the market and purchase it. The innovative ways of distribution of the products has also helped in the penetration in the market. Aim The aim of this study is to find from the players present in the Insurance Market the future of the insurance companies and the areas to improve so as to give a better service to the customers.

Objective For a project to be successful, definition of objectives is the most important thing. The main objective of the project undertaken is: To market the insurance products To have a Competitive Analysis with other players in the industry To find out the USP of the private insurance companies in selling their products to the consumers.

Research Design

The research was Exploratory in nature as it dealt with describing the market and the buying behavior of consumers. The research was designed to discover the correct distribution channel in Bangalore and also the survey of the buyers to know about their perception, the psychological factors associated with the product, the benefits they are looking forth from the product. The research was carried out after dividing the market into segments. Sample Design

The first step in order to accomplish the task was to draw a sample. To serve this purpose, the sampling technique adapted was: Non Probability Sampling. For that purpose BSEL and Industrial areas at Bangalore was visited and maximum number of Stock Brokers and Industrialists were surveyed with an avowed objective of minimizing bias and maximizing the reliability of the data. Also, by adopting this

procedure it was ensured that the sample drawn would have the same composition and characteristics of the population.

Type of Universe

The customers were basically chosen randomly from the markets in Bangalore. The Universe comprised of the finite number of customers and it can be considered homogenous in nature largely. Size of the Sample

Since, the population was homogenous in nature largely, hence a sample size of 100 respondents were taken into account to achieve the objective of the study. Other prominent factors, kept in view while determining the size of the sample were size of the population, the number of questions in the schedule, the sampling procedure adopted and the time constraint. Thus a sample consisting of 100 respondents were chosen, which fulfilled the requirements of efficiency, reliability and flexibility.

DATA ANALYSIS AND INTERPRETATION Table 1:

Age of the people interviewed

Age

Number of People

Less than 25

22

Between 26 to 37 35 Between 36 to 18 45 Above 45 23

Graph 1
Age of the people interviewed

40 35 30 25 20 15 10 5 0
n ha t 25 et B 26 35 et B 36 45 ve bo A 45

Le

ss

Number of People
Inference: The sample is taken from almost all age group. 22% of the sample is from age group below 25 years of age, 37% of the sample is from 26 to 35 age group, 18% of the sample is from age group of 36 to 45 and 23% of the sample is from above 46 years of age.

Table 2:
Annual income of people interviewed

Income of people Less than 1 lakh Between 1 lakh to 2 lakh Between 2 lakh to 5 lakh More than 5 lakh

Number People 17 32 31 20

of

Graph 2
Annual income of people interviewed

35 30 25 20 15 10 5 0
1 B la et kh 1 -2 B La et k 2 M -5 h or La e th an kh 5 la kh
Annual income

Inference: I have tried to take the sample from all the income group. 17% of the sample is taken from less than 1 lakh income group, 32% of the sample is from lakh to 2 lakh income group, 31% of the sample is from 2 lakh to 5 lakh group and 20% of the sample is from more than 5 lakh income group.

Table 3:

Le ss

th

an

Do you have insurance policy?

Yes

82

No

18

Graph 3:
Do you have insurance policy?

90 80 70 60 50 40 30 20 10 0 Yes No
Bought insurance policy

Inference: Out of all the people interviewed, 82% of the people were having a general insurance product with them.

Table 4:
From where do you buy Insurance Policy?

Way of purchase Direct from company Through Agents Through Broker Through Website Through Bank

Number of People 15 48 21 02 14

Graph 4:
From where do you buy Insurance Policy?

50 45 40 35 30 25 20 15 10 5 0
Direct Agent Broker Website Bank

Way of purchase

Inference: 15% of the people buy their general insurance products directly from the company, 48% of the people buy from agents, 21% of the people through broker, 2% through website and 14% people from bank.

Table 5:
Why do you buy from this particular source?

Reason Easy to deal and access Easy availability Due to closeness More security Service at doorstep

Number of People 12 27 14 17 30

Graph 5:
Why do you buy from this particular source?

30 25 20 15 10 5 0
Easy to deal Easy availablity Closeness Security Service at doorstep

Reason

Inference: Most people have given service at doorstep as the main reason behind buying from their present source of purchase.

Table 6:

Which of the service you feel is more important while buying the insurance? Reason Home delivery Known salesperson Company and its background Security Claim settlement History Number of People 10 28 13 17 32

Graph 6:
Which of the service you feel is more important while buying the insurance?

35 30 25 20 15 10 5
ry on any rity ent e s liv er mp ecu lem de s p co s ett e s m sale o im H la c

Number of people

Inference: Most of the people give the priority to the claim settlement of the company. About 28% of the people gave priority to the known person.

Table 7:
Which are the products you are already having?

Products Mediclaim Personal accident Motor Insurance House Insurance Office Insurance Factory

% of people product 46 37 74 02 04 12

having

this

Graph 7:
Which are the products you are already having?

% o f p e o p le h a vin g t h is p ro d u c t M e d ic la im P e rs o n a l a c c id e n t M o t o r In s u ra n c e H o u s e In s u ra n c e O ffic e In s u ra n c e F a c t o ry

Inference: Out of people interviewed maximum people have already bought Motor insurance and Mediclaim insurance. This is because the motor insurance is compulsory and mediclaim is required because of the costly medical facilities in big cities.

Table 8: Have you tried to buy products online?

Yes No

03 97

Graph 8:
Have you tried to buy products online?

100 90 80 70 60 50 40 30 20 10 0 Yes Bought online No

Inference: Out of the people interviewed, 97% of the people have never tried to buy online. The main reason they give is that there is no one to help them when they are buying online. They dont feel satisfied to buy online.

Way of purchase Direct from company Through Agents Through Broker Through Website Through Bank

Number of People 23 49 15 03 10

Table 9:
Which is the correct place according to you to buy the insurance policy?

Graph 9:
Which is the correct place according to you to buy the insurance policy?

3 15

10

2 3 N u m b e r o f P e o p le

49 D ire c t fro m c o m p a T h ro u g h A g e n t s ny T h ro u g h B ro k e r T h ro u g h W e b s it e T h ro u g h B a n k

Inference: When asked about which according to them is the right place to buy insurance products, 49% of the people said that agents ar the correct source of purchase as they can give them idea about what is right and what is wrong.

Table 10: If Bajaj is giving any discount for buying online products will you try for it?

Yes

08

No

92

Graph 10:
If Bajaj is giving any discount for buying online products will you try for it?

100 90 80 70 60 50 40 30 20 10 0

Yes Response

No

Inference: On asking about if any discount is given to buy online, whether they would buy online, most of them said that they wont buy online. The main reason they gave was that on the sites the details are given is not sufficient to make a purchase.

CONCLUSIONS AND RECOMMENDATIONS

The Indian life insurance agent as a marketing professional has been a notable success. In fact, LIC has been selling all its insurance policies only through them. Much like Lloyds of London that transacts business only through its brokers, who are its members. However, the non-life insurance agent is nowhere near his life counterpart. He is often undertrained, mistrusted and not too successful. Even at LIC, there is a deep sense of dissatisfaction that the agents are not doing enough to meet the corporate goals of the organisation. The agents are interested in selling policies that earn them a decent commission; and they sell only those policies that benefit their earnings. The customer is the target of a business transaction rather than a person who needs counseling and professional advice on how his insurance needs are better structured and served. Little strategy in non-life In non-life insurance, which is highly technical in its scope and whose covers are up for sale annually, the agency structure, till recently, was regarded as a tool for earning commissions for the Development Officers, who formed the backbone of the marketing force. The agency structure was thus reduced to one of a benami agency, of either the Development Officers or the customers. With no strategy in mind on how to deal with this situation, the nationalised industry discouraged the development of an agency force, firstly by reducing its agency commission structure and secondly by restricting them from canvassing corporate business. Compared to the life insurance sector, the stand taken by the non-life sector may be seen as the very opposite. The setting up of the IRDA in 2000 has given the agents in the non-life sector a new stimulus. The IRDA has provided them a fresh professional

opportunity to be a part of the new distribution channel to widen the market. An agent is now required to be a professional he needs to undergo training in selected insurance topics for 100 hours and pass a qualifying examination. Are the insurers now delighted to have this new marketing talent? With the Development Officers in the public sector having been given the option to take early retirement, it is thought that the agency force will get another shot in the arm. What has been the experience of these new initiatives? How do the agents, now treated with some dignity and respect as professionals, feel about their new role in their marketing activities? Distribution channels are a vital part of insurance marketing. The downgrading of Development Officers has signaled that the public sector insurers believe that the agency force can be banked upon by them to promote insurance sales, particularly in the personal lines and rural sectors. There are repeated exhortations by the top insurance executives of their plans to recruit and build massive agency forces. Agents discomfiture While good marketing intentions have formed an integral part of their corporate plans, the implementation, i.e., building an effective agency force, has stopped short at recruitment. The raw material has remained raw, without undergoing the process of mentoring, without the sustained learning of covers it has to sell, without the agents gaining confidence in their ability to counsel and sell to customers those personal lines covers which test their knowledge and selling prowess. The agents are content to sell Motor and Health covers that need only contacts but no technical inputs or selling efforts as such. Selling personal lines insurance covers, at the best of times, is not an easy proposition. The Development Officers were a notable failure in promoting sales in this arena. Sales of

personal lines cover demand a grasp of what the coverage offers, its exclusions, the rating aspect, a professional approach to answering the objections and the clarifications that prospects

Seek, an understanding of the claims processing mechanisms and, above all, an intrinsic ability to sell by carrying conviction with the customer that he would be m o r e financially secure by insuring his assets and interests.

The future of the insurance industry The insurance industry is today witness to a massive transformation from its earlier days. From a humble beginning made in 1956 since the nationalisation of the industry and the birth of the Life Insurance Corporation, the industry today sees a deluge of multinational insurers all charging in to set up shop here considering the existent vast unexploited potential. Multinational partnerships: The winds of liberalisation have initiated vast changes in the functioning of the industry today. Increasing number of multinational partnerships with private insurers have paved the way for a radical shift in insurance selling - through a number of new distribution channels besides bringing about more awareness on the need for insurance and also stressing on the important role technology can play.

With major trade barriers gone, the Indian insurance industry is slowly opening itself from a protected environment to e-business, incorporating newer technologies in insurance, thanks to competition, that will hopefully bring forth a marked improvement in customer service, insurance marketing, risk management, claim settlement, underwriting etc in comparison to its earlier days. Faster decision making: Today, information dissemination is increasingly faster with the advent of information technology, which will largely help individuals gain access to every bit of information they would require, enabling faster decisionmaking. This is in stark contrast with the pre-liberalisation era wherein information sourcing was virtually non-existent except from the recruited agents of the insurance company. Policy servicing, an area that has long remained neglected will now receive a major thrust with insurance companies redefining strategies to weed out sluggishness and provide the policyholder with prompt service. Online policy servicing too will soon become the norm thereby cutting down on the unnecessary delays.

Information explosion: The oncoming technological revolution is all set to totally revamp the very concept of Knowledge management. Automating knowledge management will become the sole aim to increase productivity. Large databases of raw information on individuals' investment patterns can be fed into computers to enable faster segregation of information as per required categories.

Computerizing information can make a major difference to the general insurance industry wherein motor claim losses particularly have been hitting the roof. With an organized system of data collection and storage, data analysis and claim management system, keeping track of the claim applicants behavioral patterns becomes easy. Easier Claims settlement: Claims settlement that was hitherto a time consuming affair will see a marked difference in operations. With competition building and improved customer service becoming the new mantra the time taken for claim settlements will reduce considerably. World over underwriting risks, claims management, risk surveys etc are far more simplified thanks to technology. Insurance information companies technology are can slowly make realizing to the mass difference policy

business.

Consider

information being made available online. Tracking policy details, the premiums to be paid, premiums paid so far, the bonus percentage, maturity date of the policy and several such details can be accessed at the mere click of a mouse soon. Bank assurance: Moreover, in addition to the single distribution channel of selling insurance policies through a large network of agents, Bancassurance is gradually gaining prominence. Utilising the extensive network of banks for selling insurance will over a period of time bring about an increase in insurance density besides improving insurance penetration in rural areas wherein a large unexploited potential exists.

Improved customer service - the ultimate aim: The insurance industry, with competition hotting up is has woken up to ground realities and is in the process of implementing software solutions. Realising the unlimited power information technology holds, insurance companies have realised that strategic deployment of technology for integrating office operations, and gaining customer confidence through improved customer service is the need of the hour.

QUESTIONNAIRE
1. Name

2. From where do you buy the insurance policies? a. b. c. d. e. Direct from the Company Through agents Through Broker Through Website Through bank

3. Why do you buy from this source a. b. c. d. e. Easy to deal and access Easy availability Due to closeness More security Service at doorsteps

4. Which of the services you feel is more important while buying the insurance? a. b. c. d. e. Home delivery Known salesperson Company and its background Security Claim settlement background

5. Which are the products you are already having? a. b. c. d. e. f. Mediclaim policy Personal accident House Holders policy Office Package Policy Factory/Godown Policy Others, Please specify.

6. Have you ever tried to buy any products online? Yes No

7. Which is the correct place according to you to buy the insurance policy? a. b. c. d. e. Direct from the Company Through agents Through Broker Through Website Through bank

8. If Bajaj is giving any discount for buying online products, will you try for it? Yes Why. No

BIBLIOGRAPHY
WEBSITES WWW.IRDAINDIA.ORG WWW.TAC.ORG WWW.BAJAJALLIANZ.CO.IN WWW.INDIAINFO.COM BOOKS AND MAGAZINES 1. Business world 2. Business Today NEWSPAPERS

1. Economic Times 2. Financial Express 3. The Hindu 4. Business Standard