Services Marketing, LIC

Services Marketing, LIC
NATURE OF INSURANCE
Insurance means Spreading of Losses or Sharing of Risks: Life is full of risks. For property, there are fire risks; for shipment of goods, there are perils of sea; for human life there are risks of death or disability; so on and so forth. The risks are uncertain-may or may not occur. People facing common risks come together and give their small contribution to the common fund. While it may not be possible to tell before, which persons will suffer, but it is possible to tell how many persons on an average out of the group will suffer loss. If any case risk occurs, loss is made good out of common fund. In this way, common risk is shared by all. Insurance thus broadly be understood as the process of spreading of losses of an individual over the group of individuals or the process of sharing of risk by those who face common risk. People who suffer loss get relief because their loss is made good out of common fund. People who do not suffer loss get relief because they are free of any worry of loss. Following 2 example explain the above concept of insurance. Example-1 : In a village, there are 400 houses, each valued at Rs. 20,000. Every year 4 houses get burnt, resulting into a total loss of Rs. 80,000. If all the 400 owners come together and contribute Rs. 200 each, the common fund would be Rs. 80,000. This is enough to pay Rs. 20,000 to each of the 4 owners whose houses got burnt. Thus the risk of 4 owners is spread over 400 house-owners of the village. Example 2 : There are 1000 persons who are all aged 50 and standard lives. It is expected that 10 persons out of the group die during the year. If the economic value of the loss suffered by the family of each dying person is taken to be Rs. 20,000, the total loss would work out to Rs. 20,000/-. If
Puja, Rajat & Leena, PGP98-2000 1
each person of the group contributes Rs. 200/- a year, the Common Fund would be Rs. 2,00,000/- This would be enough to pay Rs. 20,000 to the family of each of the ten dying persons. Thus the risks in cases of 10 persons are shared by 1000 persons. Classification of Insurance Business : The insurance is broadly classified as (i) Life Assurance business, and (ii) General Insurance or Non-life Insurance Business. Life Insurance Business : It is the business of effecting contracts of Insurance upon human life, including any contract whereby the payment of money is assured on death (except death by accident only) or the happening of any contingency dependent on human life and any contract which is subject to the payment of premiums for a term dependent on human life and shall be deemed to include (a) The granting of disability and double or Triple Indemnity accident benefits, if so provided in the Contract of insurance. (b) The granting of annuities on human life, and (c) The granting of Superannuation Allowance and annuities payable out of any fund applicable solely to the relief and maintenance of persons engaged or who have been engaged in any particular profession, trade or employment or of the dependents of such persons. Non-Life Insurance or General Insurance : Even though conventional classification of General Insurance has been, in the past in the three branches (i) Fire Insurance, (ii) Marine Insurance and (iii) Miscellaneous (accident) Insurance, in modern times it is classified as follows :
Puja, Rajat & Leena, PGP98-2000
(i)Insurance of person Personal Accident and Personal Accident and Sickness Insurance are included under this classification. (ii) Insurance of Property buildings, machinery, aircrafts, steamers, stock of business, cash, securities come under the heading property and therefore Fire Insurance, Marine Hull Insurance, Marine Cargo Insurance, Burglary Insurance, Engineering Insurance, Crop Insurance and Aviation hull Insurance fall under this classification. (iii) Insurance of interest Fidelity guarantee insurance and the Guarantee Insurance fall under this classification. (iv) Insurance of Liability Public (third party) liability insurance, Professional Indemnities fall under this classification. Comparison of Life Assurance with other forms of Insurances : While the basic concept of insurance of spreading the loss over many, the basic principles of insurable interest and utmost good faith apply equally to all classes of insurance, Life Assurance differs from other forms of insurance in following way :
(i) Risk is certain under Life Assurance : Each person has to die sooner or later. Risk of death is certain under life Assurance. However, under non-life Insurances risk is not certain. There fore, the mathematical value of risk under life Assurance can be found our with more degree of accuracy. (ii) Life Assurance is a long term Contract : Since Life Assurance Contracts are long term contracts Service to the Policy holders assumes great importance. Investment of funds and interest yield are also, therefore, vital. Non-life Insurance are one year contracts. (iii) Difficulty in determining value of human life : It is not difficult to determine value of the subject matters of insurance under non-life insurances like properties, (iv) Contracts of Indemnity : while non-life Insurances are contracts of indemnity, Life Assurance and personal accident insurances are not. (v) Principle of Subrogation : Under non-life insurance, when the insurer makes good the loss, suffered by a person, he acquires the rights and remendies of that person. This does not apply to life Insurance. Insurer, Insured, Premium : Even though people who face common risk are ready to pay contribution for security, they are very busy in their own affairs. Somebody has to take responsibility of making arrangements of collecting the contributions and of making good the loss. The Life Insurance Corporation of India or General
Insurance Corporation of India take the responsibility and are called Ìnsurer. The person who pays monetary contribution for security is called the Ìnsured or Àssured Consideration paid by the Ìnsured or Àssured is called `Premium.
QUEING FOR THE INSURANCE PIE
Foreign firm
Already engaged: Allianz AG of Germany Prudential Life of UK American International Group of US Commercial Union of UK General Accident of UK Sun Life of Canada Chubb Corp of US ING Group Standard Life CIGNA of US Canada Life GIO Australia Holdings All State Guardian AXA Zurich Metlife of US AMP Looking for partners :Legal & General Manulife of Canada Royal & Sun AllianceYasuda Fire Tokio Fire & Marine Aegon Sumitomo Mitsui Marine GE Capita New York Life International Swiss Re Munich Re Indian partner Alpic Finance ICICI The Tatagroup The Hindustan Times group Bombay Dyeing The Aditya Birla group Kotak Mahindra Vysya Bank HDFC IL & FS Centurion Bank Sanmar Dabur Cholamandalam Finance CK Birla group MA Chidambaram group Likely with UTI Undecided Undecided Undecided Undecided Undecided Undecided Undecided Undecided Undecided Undecided Undecided Undecided
BRIEF HISTORY OF LIFE ASSURANCE IN INDIA

Origin of Insurance: The Idea of insurance was born out of a desire of the people to share loss of an individual by many. Originally it restricted to forms other than life assurance. It started with Marine Insurance, where the losses on account of perils of sea were shared by all who were engaged in trade. Reference to some forms of insurance, is found in the codes of Hammurabi, Manu (Manav Dharma Shastra). The word `Yogakshema is used in the Rig Veda suggesting that some form of community insurance was practiced by the Aryans in India over 3000 years ago. In India during Buddhist period burial societies existed which were mutual in their character and used to help a family by building a house, protecting the widow, marrying the girls. Origin of Life Asurance : Life Assurance was born in England when the first policy providing temporary cover for a period of 12 months was issued as easy as 1583 A.D. The Amicable Society started granting fluctuating sum on death since 1705 and a fix sum since 1757, With the development of mortality tables, the life Assurance acquired a scietific character. The Equitable Society founded in 1762 was the first Society established on scientific basis. In India, after failure of two British companies, the European and the Albert in 1870, which attempted writing business on Indian lives, first Indian Life Assurance Society was formed in the same year called Bombay Mutual Assurance Society Ltd. It was followed by the Oriental Life Assurance Company Limited in 1874, Bharat in 1896 and Empire of India in 1897. The Swadeshi Movement of 1905 provided impetus to the formation of several companies such as the `Hindustan Cooperative, the Ùnited India, the `Bombay Life, the `National. Further in the wake of freedom movement
number of companies such as the `New India, the `Jupiter the `Lakshmi emerged. The Government began to exercise a certain measure of control on Insurance business by passing the Ìnsurance Act in 1912. For controlling investment of funds, expenditure and management, a comprehensive Act was passed known as `The Insurance Act 1938. For controlling the affairs, the office of Controller of Insurance was established. The act was extensively amended in 1950. In the year 1955, approximately 170 Insurance Offices and 80 Provident Fund Societies had been registered for transacting Life Assurance business in India. There was, however, no full guarantees to the policyholders. The concept of trusteeship was lacking. Many insurance companies went into liquidation. There were malpractices in insurance business. For achieving the following purposes it was felt necessary to nationalize the insurance business in India. (i) (ii) (iii) (iv) (v) To provide security to the policyholders To utilise the funds for nation-building activities. To avoid cut throat competition To abolish mal-practices To spread the insurance message to the rural areas.
The first step in this direction was taken by the Government of India by issuing the Life Insurance (the Emergency provisions) Ordinance, 1956 on 19th January, 1956. The then Finance Minister, Shri C. D. Deshmukh mentioned the purpose of nationalisation as reaching the goal of socialistic pattern of society, rendering genuine service to the people in the rural area. The Life Insurance Corporation Act (Act XXXI of 1956) was passed by the
Parliament in June 1956 which came in force on 1 st July 1956. The Life Insurance Corporation of India came into existence on 1 st September 1956. Outstanding Advantages of Life Insurance : 1. It is superior to an ordinary saving plan : The risk of death is covered under insurance scheme but not under ordinary saving plan. In case of death full sum assured is payable unner insurance but under ordinary Saving Plan only accumulated amount is payable. 2. Insurance encourages compulsory saving and forces thrift : After taking insurance if the premium is not paid, the policy lapses. Therefore, the insured is forced to go on paying premium or in other words it is compulsory. A saving deposit can be withdrawn very easily but not the amount under insurance. 3. Easy settlement and protection against creditors : Once nomination or assignment is made, claim under insurance can be settled in a simple way. Under M. W. P. Act, the policy moneys become a kind of trust which cannot be taken by creditors. 4. It helps to achieve the purpose of the life Assured : If a lump sum amount is received in the hands of anybody, it is quite likely that amount might be spent unwise or speculative way. To overcome this risk, the Life Assured can provide that the claim amount be given in installments. 5. Ready marketability and suitability for quick borrowing : If policyholder is not in a position to pay the premium, he can surrender the policy for a cash sum. He can also take the loan for a temporary period to tide over the difficulty. Some times a life insurance policy is acceptable as security for a commercial loan. 6. Tax reliefs : by paying the insurance premia, the assured obtains great relief in Income tax, gift tax, wealth tax.
PR AND INSURANCE IN SERVICES MARKETING

The importance of an effective Pr organization and activity is all the more important in a service industry like insurance because of the special features such as abstract product, immediate sacrifice for contingent benefit, alien nature of concept, ignorance, illiteracy and superstition, etc. about which detailed observations have been made elsewhere. However, in our country, it appears that PR in insurance industry is perhaps a very neglected management function. Such neglect is bound to result in heavy costs in terms of adverse impact on growth rate, lesser consumer satisfaction, inadequate performance by the sales-force, and lower productivity and job satisfaction amongst employees. Since, however, these losses are not quantifiable and since the overall growth and progress of the industry are not unsatisfactory, they have, all these years, failed to attract such attention as is deserved, to the detriment of legitimate interests of PR and the long-term interests of the industry itself. Very little systematic and concerted effort towards PR practice appears to be done both by LIC and GIC. Some steps have, no doubt, been taken by both LIC and GIC from time to time to improve its PR and help its marketing. Appointment of Policyholders' Councils and Claims Review Committee as well as Divisionwise officers to look into Policyholders complaints indicate the industrys PR awareness and desire to help solve the customers problems to some small extent. However, it is no secret that PR-mindedness and vigilant efforts to establish good relations not only with customers but also other publics is badly lacking. As a small example, it can be pointed out that the guidelines issued by LIC chairman every year for the past few years hardly contain any views about how to establish good PR. Some more activities which need to be systematically undertaken include the following : Out of the various publics with which an average organisation has to deal, three, viz., employees, government and consumers are the more important
ones from the point of view of the insurance industry. PR objectives must be defined as well as long-range plans formulated and specific programmes to deal with these publics must be drawn up in a systematic manner and should become not only known to but fully accepted by various levels of management. A campaign for this purpose, i.e. creating better PRconsciousness amongst practicing managers should be undertaken on priority. Awareness must be created that good PR is not what a department or a few senior executives say or do but an essential ingredient of every managers job to be performed all the time. Better PR-mindedness is necessary in launching any new plans. Such awareness should include involving the internal PR organisation and, if necessary, an external PR consultant, sufficiently in advance of the proposed launch so that PR needs and angles can be taken into account right from incorporating desirable features in the plan, giving it an expressive instead of a prosaic name, creating favourable conditions for its introduction through strategic news-stories and sponsored articles, informing the field force at appropriate time so that the heavy burst of initial advertising and publicity does not find the field force unaware, uninvolved or unprepared, etc. Here, the example of LICs Money Back policy provides and example of both a success and a failure of PR effort. The name `Money Back which replaced the earlier Ànticipated Endowment shows and awareness of PR aspect of a product name. Both the phrases technically convey the same or nearly the same meaning. However, the first is using simple, every-day-usage words and is very easily understood and remembered. The second, on the other hand, would confuse an uninitiated layman and is, therefore, non-communicative. As against this positive achievement, it should also be noted that when the plan was launched, most of the offices, leave aside Development Officers and agents, did not have necessary tables of rates, detailed sales literature, etc. Moreover, no guidance was at any time provided to the sales force about how to promote the plan and successfully overcome the sales
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resistance in the market, which was bound to feel that LIC had withdrawn a popular and beneficial plan. It may also be mentioned here that all the new plans launched thereafter have been given catchy names like, e.g., Jeevan Saathi, Bima Sandesh instead of the prosaic and uncommunicative names which used to be given earlier but the practice of launching them haphazardly has improved only marginally. Similar PR-mindedness is also essential in conducting sales promotional activities such as competitions. Very often, competitions are merely declared but no systematic follow up to motivate participants and to keep them actively involved are taken. What is even worse is that results are declared and prizes awarded so late as to make the sales force quite indifferent to and skeptic about future competitions and also other sales promotion activities. Efforts to create institutional loyalty amongst average employees is far from adequate. Even the involvement of first-line managers in creating such loyalty and better productivity are not adequate. Managers at many levels do not think of themselves as management and merrily make excuses that they cannot do this thing or that due to lack of management support. A systematic programme of communication and interaction to improve this state of affairs does not appear to have been considered as a pressing need. Some retrograde steps have been taken, like, e.g., discontinuation of LIC NEWS LETTER which recognized achievements of individuals and offices helping to create a sense of achievement and loyalty. When noteworthy achievements of individual employees or teams on the sportfield get reported in the papers. They create a favourable image in the minds of public about the organization itself. Initiative has to be taken by the PR department to ensure its speedy dissemination and coverage. Some years ago, a blind employee of LIC won the national award as the best physically handicapped worker and the organization itself has also won national awards for employing orthopaedically as well as
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opthalmologically handicapped persons. Not much initiative was, however, taken to highlight these achievements. No proper training is received by staff in dealing face to face with consumers or properly communicating with them through correspondence. While use of standardized proformae for several types of written communications minimise the chances of inadequate or incorrect communication, even the format and wordings of such proformae can be improved with better awareness of PR needs and consumer psyche. If a given proforma contains several different items of advice which are meant to be conveyed to different policyholders out of which one or more specific actions are relevant to a given query or communication, sufficient care to correctly tick or otherwise mark such items is also quite often lacking, leading to consumer dissatisfaction. It also creates additional unproductive work for the office which has to deal with a given problem more than once due to lack of clarity of communication and/or clear understanding of the consumer query. The use of mass media such as newspapers, radio, TV, etc, is made almost exclusively for publishing advertisement but the tremendous scope for their use towards PR-oriented communications remains unexploited. Even such activities as press conferences, sponsored articles, ratio and TV interviews, panel discussions or talks which used to be organized earlier appear to have been given a go-by giving the media and discerning publics, a message of neglect and indifference. It is possible for first-line operating offices, properly directed by a vigilant and imaginative PR department, to invite local, press, radio and TV reporters to claim settlement functions or to brief them about interesting achievements, events, etc. and get good coverage for its activities to efficiently serve the consumers. The role of LIC and GIC investments in different areas can and should be projected more exhaustively in local and regional media. Human interest stories fo Gics role in saving a given enterprise from the effects of an unexpected, fortuitous calamity can also create a favourable image, if
projected locally. Use of new communication tools like FAX, Telex or teleprinters can be effectively made by a vigilant and competent PR department at the corporate office to disseminate relevant information to the Area/Divisional Officers without loss of time for supply simultaneously to regional and local papers. Since insurance, both life and general, constitutes and important economic activity in any country and further since, in our country, all insurance industry happens to be a national enterprise, it should not be difficult to introduce broad concepts of insurance knowledge in various school and college text books. It is also high time that insurance as a subject was introduced in the educational curricula at the appropriate level. In the recent past, some progress has been made in this direction through much more could and should have been done. Insurance is a subject of great social and community relevance. However, the involvement of insurance persons in our country in social and community life is comparatively very poor. No efforts on the institutional level appear to be made to train and encourage insurance persons to become important functionaries and active participants in the affairs of their respective communities. Even the Government PR, which has several dimensions for the success of insurance industry in our country, is spasmodic, unplanned and limited to a few top executives only. The organization as a whole seems to be tending to avoid rather than welcome opportunities to carry out an effective Pr. The efforts through regular supply of facts and figures and through personal briefings appears to be woefully inadequate or almost non-existent. It is essential that the industry makes use of competent PR professionals as consultants to organize its PR activity on a sound footing in the same
way as it used ad professionals for drafting and releasing its advertising communications The involvement of such PR consultants as well as its own internal PR organization in decision making at the front end of problems will certainly help improve matters. There is considerable scope and immediate need for improving the PR activities of insurance industry in our country at all levels and for creating greater awareness both of the need and scope for engaging in better liaison with all the publics more effectively and more systematically.
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INSURANCE MARKETING
While rural marketing has some distinct aspects of its own, marketing of insurance - both life and general - does not essentially differ from the marketing of other services. There-fore, efforts have been made throughout the book to explain those aspects relating to insurance that need special attention or emphasis, as and when the basic or general concept has been covered. This section primarily brings together at one place some of those points dealing with insurance marketing which have already appeared earlier under appropriate sections and briefly deals with some special features applying to the marketing of services in general and insurance in particular. Broadly, the special features of insurance marketing are as under: Marketing concept has not gained adequate acceptance: Even in other parts of the world, where marketing concept has gained wide acceptance in precept and practice in several fields, insurance industry has been one of the last to move towards its adoption and even today lags behind many other service industries including banks in its practice. Conditions in our country are no exception to this world experience. Thus, the marketing approach has not replaced the mainly sales-oriented activities in both life and general insurance. Views like `there is immense scope for the growth of insurance business in our country and we have not even touched the fringe of the potential' are freely e expressed to signify that what is needed is merely for the sales force and operational offices to `push' the existing products more vigorously. The adoption of a systems
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approach to marketing which includes careful study of external and internal environment including competition, assessment of market needs and development of products to satisfy the demands, developing suitable marketing mix for every identified market segment, and above all, imbibing the marketing approach and philosophy by the top level management's has not yet taken sufficiently deep roots. The statement that in our country both life and general insurance marketing enjoys a monopoly position is quite often made to signify that the commercial success for them can be taken for granted. However, this is far from the truth. It is true that if a person decides to insure his life, he may have to approach LIC or if a person decides to obtain comprehensive cover for his car or scooter, he will have to get it from one of the four subsidiaries of GIC. But, what is often lost sight of is that unless a prospect is reasonably satisfied that his claim will be paid promptly and fairly, he has the option of not insuring his life or obtaining Àct only' policy for his car or scooter and be his own insurer against death or serious damage to his vehicle, as the case may be. Whether he will buy his policy from LIC or GIC or be his own insurer will be decided in the final analysis by the successful marketing of their products by these Corporations which, in other words, depends upon their adopting a marketing approach in their operations.
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Selling of Insurance needs `creation of a demand': In our country, the need for insurance benefits is, most of the times, not sufficiently understood and appreciated. In both life and general insurance, the sacrifice (payment of premiums) is real and immediate, whereas the benefits are distant and contingent. With our cultural tendency towards fatalism coupled with paucity of incomes in an overwhelmingly large number of cases, there is a tendency to indefinitely postpone the buying of insurance. In respect of most of the individual, as distinguished from institutional, prospects, the salesman has to begin by convincing the prospect about the existence of the need before he can enter upon the process of selecting the requisite service. This can be contrasted with, say, the purchase of medical service in which case, the buyer is aware of the need and makes up his mind about purchasing the service without the prodding of the doctor or hospital concerned. The dependence of insurance marketing on sales-persons arises out of this. While dependence on sale forces may not be reduced in near future, efforts can and should be made to spread better awareness through advertising, publicity and public relations programmes. Market analysis and segmentation is not adequately undertaken: The progress of both GIC and LIC has been reasonably good from year to year and both the organisations have been content to operate the traditional markets in an unplanned manner. Sufficient steps to make a detailed analysis of the markets, to evolve proper marketing strategy for each one of the identified market segments and to establish adequate sales facilities in each of them in a systematic manner have hardly been undertaken. It is both possible and necessary to establish better pre-sale
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and post-sale servicing organisation. Without exaggeration, it can be said that both these institutions are selling insurance rather than marketing it. In the case of general insurance, while efforts are made to penetrate new segments of organisational markets through covers for oil rigs, satellites, etc., there is much scope to plan for better segmentation and penetration of individual customers' markets through improved promotion of existing covers and development of new coves to suit the changing market needs. Product development has not kept pace with changing market needs: An inevitable corollary of the failure to undertake market analysis and segmentation successfully in that the product development and
modification activity has also been in the low key. Most of the new plans introduced by LIC have not won sufficient market acceptance and support primarily because they have not gained acceptance of its own selling organization. While the experience of GIC in respect of plans like cattle or crop insurance is better, there is still scope for more concerted efforts to identify specific needs, devise plans to meet the requirements, undertake efforts to promote these plans systematically and open new markets for non-traditional business. There is scope to undertake motivational as well as marketing research for this purpose on a more regular, systematic basis. It appears that adequate use of the sales organization is not being made to obtain the market intelligence and to ascertain the market needs. Development of new products is done mainly on the basis of the impulsive perception of the management about what the market needs. This perhaps accounts more than anything else for the inadequate success of some of the new plans and covers introduced both by LIC and GIC from time to time.
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While discussing the role of market intelligence and assessment of the opinions of the sales force in development of new products, it must be admitted that by and large the sales organisations of both LIC and GIC do not possess adequate insight into the technical bases of developing plans or determining premium rates. Therefore, even if efforts were
conscientiously made to ascertain the needs of the market through the sales wings, there is every likelihood of such efforts proving unproductive and, in the bargain, giving rise to the criticism from the sales wing that though many worth-while suggestions were offered by them, they were not considered by the management sufficiently seriously. This does not, however, mitigate the need to evolve a better machinery to develop new products and modify existing ones, on the basis of assessed needs of the market segments. In the marketing of services in general and insurance in particular, the need for presale service is quite pronounced. While both GIC and LIC extend presale services to their institutional clients to some extent, no organizational machinery to provide them to their individual customers exists and they are forced to depend upon the agents/sales officers. As a part of their strategy to improve the àugmented product' it should be the endeavour of the industry to provide such services at their branch offices. Better attention to promotional inputs is needed: In respect of every component of the promotional mix, the accomplishments of the insurance industry leaves much to be desired. Detailed observations have been made in respect of each ingredient in the concerned chapters. Briefly, the scope for improvement can be summed up as under: a) Advertising: The overall long term objectives should be clearly defined and discussed between the top management and the concerned
department on the one side and between the top management assisted by the department and the advertising consultants on the other. A broad strategy has also to be worked out at the beginning of each year so that the advertising efforts do not become dispersed and uncoordinated. Efforts also need to be made to evaluate various campaigns as well as the effectiveness of the different media used to convey the various messages as, otherwise, much of the expenditure is likely to prove infructuous. For example, press advertising meant for rural markets may be ineffective in large tracts of our land where in the newspaper reading habit in rural areas is limited almost exclusively to reading them aloud publicly at a common meeting place like the Panchayat Office, advertisements getting omitted altogether during such public reading. Similar evaluation also needs to be made about the efficacy of fleeting media like radio and TV in covering information-heavy messages about, say, basic need for insurance, specific covers or plans and so on. b) Publicity: Adequate use of publicity is not being made either by the LIC or GIC though there is much scope to do so. The area, regional or divisional offices in case of GIC and zonal and divisional offices in case of LIC need to be trained and encouraged to make better use of local media to communicate more frequently and more systematically with their respective markets through progress reports, human interest stories, achievements in insurance as well as non-insurance fields like sports, civic life problems, etc. by its individual employees. c) Selling: There is an urgent need and good scope to improve the competence as well as involvement of the sales organisation in performing their duties. Many first line salesmen and sales-supervisors, viz., agents and Development Officers/ Inspectors lack in adequate knowledge about
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the product as well as practical training in systematic selling and become instrumental in creating consumer dissatisfaction by their errors of omission and commission. While efforts are made at the time of initiation to impart some basic training, the need for further training and re-training at periodical intervals should be satisfied by a proper action-plan more clearly defining the training objectives and methodology and improving the infrastructure facilities than heretofore. As an integral part of the strategy to gear up the sales-organisation, the role of the sales-force in providing both pre-sale as well as post-sale service must be high-lighted and enforced through education, persuasion and incentives. Better use of Marketing Information Systems to motivate and supervise the sales organisations can lead to an around improvement in the performance of salesmen. Other aspects of marketing orientation which can be profitably
implemented by the insurance organisations in our country include: Involvement of administrative staff in marketing objectives: At present, it appears that the administrative staff including officers at the various
operational offices does not feel sufficiently involved in the marketing objectives of the organisation. This is leading to avoidable consumer dissatisfaction and is likely to prove a serious handicap in exploiting the full marketing potential, unless speedy steps are taken to effectively remedy the situation. There are several manifestations of this lack of involvement which are seen almost every day. A policyholder paying a personal visit to an office goes from pillar to post in getting somebody to listen to his problem and help him to solve it. Replies to policyholders' letters do not provide sufficiently clear guidance in simple words but are often couched in jargon, abbreviations or technicalities, which may, no doubt, make it easier
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for the communicator to explain himself briefly, if not tersely, but fail to communicate effectively. Transaction-orientation must replace paper-orientation: When a customer visits, say, a bank or post office, there may be occasions when he feels unhappy about the delay that takes place in attending to his work such as getting a cheque encashed or a letter registered. However, by the time he leaves the premises of the bank or the post office, his job has been completed and the anger or unhappiness he felt gets substantially if not entirely subsided by the time he returns to his home or place of business. This is because most of the interactions that take place at the bank or the post office are transaction-oriented. As against this, except in case of payment of premium due, the customer's interface with LIC or GIC does not result in the completion of the transaction for which he approached but rather marks the beginning of some correspondence which finally results in the completion of some transaction at some future date. During the
intervening interval, the dissatisfaction of the consumer is quite likely to go on increasing. If this is to be avoided, more transaction-orientedness must replace the present tendency to `keep the field up to date'. This is not always possible because of the inherent difference between the types of transactions that take place at a bank or post office on the one hand and an insurance corporation's office on the other. However, looked at from the consumer's angle, it is difficult for him to readily appreciate the reason why LIC or GIC fails to solve his problem across the table. Every effort needs to be conscientiously and vigilantly made to give as much transactionorientation to its dealings by the insurance organisations as possible and to explain the likely time-lag and the reasons therefore. This also needs more active role to be played by the sales force, who can and should always be available to the consumers to provide guidance at their homes or offices
and minimise the need for the customers to approach the office directly. When any customer approaches the office after the initial guidance and help provided by the sales organisation, his communication is better likely to be complete so that it becomes possible for the organisation to solve his problem more easily and speedily. Apart from the involvement of the field personnel, the earnest desire and effort on the part of the administration to develop awareness of the need to provide more efficient and transactionoriented service is necessary for the successful marketing of insurance. More inter-action with the communities at every level should be encouraged : Both LIC and GIC are providing the economy with sizeable funds for long-gestation plans in addition to providing attractive return to the government on its investment. In fact, both LIC and GIC provide very good success stories in the public sector. This is more especially ture of LIC which is mobilising the common man's savings for long-term nationbuilding financial activities. During 1987-88, the latest year for which the figures are available, LIC's invisible surplus during the year amounted to Rs. 2130 crores, major part of which was invested in socially-oriented investments. However, when the banks lend a few thousand rupees to an individual to buy, say, an auto-rickshaw, this fact gets proclaimed to the people of the whole town through a suitable announcement displayed on the vehicle itself, where-as the facts about LIC's investments of several hundred crores in priority sectors as well as big and small commercial enterprises, are not adequately known even within its own organisation. This gives rise to a wrong impression about the role of both the insurance organisations. To counteract this situation, it is necessary that the line managers of these organisations should be encouraged to become as active as possible in the non-controversial aspects of community affairs in the areas where they work so as to make the presence of them-selves and
their organisations better felt. Greater thought should also be devoted by both GIC and LIC to find ways and means of projecting the positive side of their performance and the important role played by them on the national scene.
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THE ROLES OF MARKETING IN FINANCIAL SERVICES (IN INSURANCE)

Introduction As the role of the financial services sectors - banking, insurance, building societies, hire purchase, franchising, consumer credit, general household financial services and so on - continues to grow in the economies of most of the Far Eastern, Pacific Rim and Western nations, pressures are mounting for more effective marketing management of the financial services on offer. Despite the recession, which is affecting various industries in different countries with varying intensity, the financial services sector is continuing to grow in terms of turnover and profits and thus has a paramount impact on the other spheres of the economy. For these reasons, there is currently growing interest in applying marketing techniques and tools in financial services. This interest has generated a relatively large number of publications, from the International Journal of Bank Marketing in the UK to the Journal of Retail Banking in the USA, as well as many other journals and publications on services marketing. What are financial services? Financial services can be defined as àctivities, benefits and satisfactions, connected with the sale of money, that offer to users and customers, financial related value'. 1 Suppliers of financial services include the following types of institutions: banks, insurance companies, building societies, credit card issuers, investment trusts, stock exchanges, franchising and leasing companies, national saving (s) / giro bank (s), unit trusts, finance companies and so on.
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Marketing is becoming increasingly necessary in the competitive environment of today's financial services. Intensified rivalry from other institutions has caused financial institutions to think seriously about how they can compete effectively. This has led them to give increasing attention to marketing techniques. The financial institutions service two markets: corporate and retail customers, or, in `marketing language', financial services serve industrial markets and ultimate consumer markets. These two markets can be subdivided into five main types: the government / public sector, the private sector, the commercial sector, industry and the international markets. Within the financial services industry the two main sectors are banking (including building societies) and insurance. Competition in the Financial Services Market Although for many years financial services companies have differentiated their market (s) according to various demographic criteria, the competition in the industry has now become even more fierce. For example: There are many insurance companies offering special deals for older motorists. The Direct Line insurance company also offers competitive mortgages. Saga Holidays has entered the insurance market, offering special deals in the home and content insurance sectors; this company now claims to be the fastest-growing insurance company in the UK. Many financial services companies focus on over 60 year olds, because, apparently, these tend to make fewer claims on their household insurance policies (on average, only 10 per cent of people
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aged 50 and over claim on their house contents insurance in comparison with about 20 per cent of people under 30 years old). With the new regulations that came into force in mid 1994, financial services companies will have to disclose full information on the `true value' of the various long-term financial products that are being offered. This statutory regulation is likely to increase even further the current price and product differentiation competition in the financial services market. The Main Characteristics of Financial Services The financial services have the following characteristics. (1) Intangibility. Banking and insurance services, except in particular instances, meet a general rather than a specific need. Particular benefits from one rather than another institution are not readily apparent and therefore financial services are dependent on effectively getting their message across to the public and ensuring that their image and services are attractive. Indeed a service such as bank credit that cannot appeal to a buyer's sense of touch, taste, smell, sight or hearing places a burden on the bank's marketing organisation. Bank credit is represented by demand and time deposits, and loans. Since a bank is often selling an ìntangible' and not necessarily a physical product, it must tell the buyer what the service will do (that is, its `special' benefits). It is not always able to illustrate, demonstrate or display the services on offer, and therefore storage, transportation and inventory control are not relevant for the bank marketer. This is partly attributable to the relative absence of middle persons. As a result it severely limits the alternatives available to the financial services marketer and often necessitates the use of direct channels of distribution.
(2) Inseparability. Because of the simultaneous production and distribution of financial services, the main concern of the marketer is usually the creation of time and place utility; that is, that the services are available at the right place and at the right time. This implies that direct sale is almost the only feasible channel of distribution. But as will be seen later, one way of overcoming the inseparability factor is the use of credit cards, whereby the service is transferable. This particular factor affects pricing, because of the relatively high costs of offering this service to the customer (for example in insurance). (3) Highly individualised marketing system. When selecting channels of distribution, the goods marketer will usually have a marketing system that contains several established middle persons. More often than not, such systems are the most efficient. Unfortunately this is not always the case for the financial institutions with few traditional distribution channels. Hence the financial services are induced to locate branches of their outlets as conveniently as possible. In many bank transactions a client relationship exists between the buyer and the seller, as distinct from a customer relationship. This is especially true in the case of many corporate and trust accounts, although it now extends more and more to other retail customer as well. Where such a close personal and professional client relationship must exist, direct channels may be the only feasible choice, as elaborated in Chapters 8 and 9 for this book. (4) Lack of special identity. To the public, often one financial service is very much like another. The reason why a particular financial institution or branch is used is often related to convenience. Each organisation must find a way of establishing its identity and implanting this in the mind of the public. As the competing products are similar, the emphasis is on the
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`package' rather than the product. The `package' consists of branch location, staff, services, reputation, advertising and, from time to time, new services. As major competitors offer similar services, the emphasis will be on the promotional aspects rather than on the inherent uniqueness of a particular financial institutions' service. (5) Heterogeneity, or a wide range of products / services. Financial services organisations have to offer a very wide range of products and services to meet a vanity of financial and related needs from different customers in different areas. On the one hand they provide a special oneoff management service for industrial customers and on the other hand a retail service covering life insurance, money receipt, storage, supply and transmission. The implication is that only very seldom can a financial service be standardised. (6) Geographical dispersion. There has to be a branch network in any financial institution of size and scope, in order to provide benefits of convenience and to meet international, national and local needs. Therefore all services or promotions must have both appeal and wide application. (7) Growth must be balanced with risk. When selling banking or insurance products the financial institution is `buying' risk. There has to be a well controlled balance between expansion, selling and prudence. (8) Fluctuation in demand. The demand for certain categories of financial services - for example life insurance, do fluctuate significantly, according to the level of general economic activity. This factor puts extra pressures on the roles and functions of marketing in insurance organisations. (9) Fiduciary responsibility : The responsibility of any financial services organisation to guard the interests of its customers. This aspect is
important not just in banking and insurance, but also in other sectors of the financial services. (10) Labour intensiveness. The financial services sector is still highly labour intensive, which increases the costs of production and affects the price of financial products. Indeed personalised service versus automation is an important issue in financial services. Because of their relatively high personnel costs, as well as to enhance customers' convenience, financial services are increasing their use of technology. The Financial Services Management System Most financial services organisations have two types of objective : Flexible goals, for example increasing (or decreasing) deposits of certain kinds, increasing (or decreasing) loans of certain types, directing customers to certain types of product or services. Fixed objectives, for example profitability, a high return on investment, achieving certain market shares and growth rates, development of certain images achieving a spread of customer types in order to minimise risks and business fluctuations, and so on. A written statement of objectives is becoming increasingly necessary in all the financial services. Bearing in mind the need to maintain good business and public relations, the general financial services business objective is profits that are sufficiently high to protect depositors and shareholders. Depositors are of special importance since in building societies and the clearing banks they finance up to 95 per cent of assets. The return on investment required by the chief executive will influence the operational manager's targets, as will planned growth and size. The latter may not
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necessarily yield
economy,
but
can
sometimes yield
competitive
advantage. Lastly comes an increased market share, not only because an increased share of a market often brings competitive advantages, but usually the objective is a larger share of selected customer groups, and not of the total market. Customer behaviour, attitudes and segmentation. Marketing research that attempts to collect, investigate, analyse and interpret customers' attitudes and market developments, in each of the areas mentioned here, in order to contribute to the maximum attainment of objectives in the light of existing non-controllable factors. Product/service development and introduction. Branch management; location and distribution of financial services. Advertising, communication, promotions and publicity. Pricing of financial services. Defining marketing strategies, administering and controlling the marketing programme.
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INSURANCE IN SERVICES MARKETING

This is a quasi-collective service, or a `subsidy' created by customers who are subject to a certain risk to the few insured who are, in fact, affected by the occurrence of that particular risk. marketing has grown in importance in insurance, mainly due to growing competition in products and pricing. The importance of marketing has been boosted even more today by the industry's gigantic size. In the United States, for example, the total annual volume of corporate and personal insurance is around $300 billion, representing about 5 per cent of all business and family expenditures. The insurance companies' assets exceed $600 billion and about 1 per cent of the working population is employed in this industry. In the UK, unlike in the USA, a high proportion of the population is underinsured. One of the
reasons for this is that the marketing system for insurance is multi-faceted and includes both private and governmental (tax-supported) systems, and many risks and catastrophes are covered by the state social security system. However it is still an important and growing sector, with over -4 billion yearly in premiums for life assurance and annuities alone. Governments, through laws and regulations, create a `need' for insurance. In most countries it is now a legal requirement for motorists to have insurance cover for liability to third parties. The situation may also arise where individuals or institutions, such as commercial banks, require their customers to insure imported goods that are being paid for through a letter of credit. Building societies, hire purchase companies and principals in construction contracts also impose a requirement for insurance cover. Insurance contracts embody the principles of insurable interest and utmost
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good faith, the purpose of which is to eliminate the possibility that society will be prejudiced by the insurance product. Environmental factors and competition in the insurance market. A number of environmental and non-controllable variables have recently affected the insurance markets, as follows: Many insurance companies have incurred severe losses as a result of the large number of catastrophes, for example hurricanes and other natural disasters in the USA. Laws and regulations put forward by the European community have liberalised the insurance market throughout Europe, intensifying the fierce competition in these markets. These developments have led to many insurance companies opening subsidiaries in other member states and/or entering into strategic alliances with insurance companies in other European countries. Deregulation and increased competition have resulted in the launching of a number of direct insurance companies (for example Direct Line) that also offer cheaper home loans. This has increased even further the pressure on insurance companies to cut costs, mainly by cutting jobs. In 1994 the Norwich Union cut its direct sales force from 800 to 250. Many insurers call this process `rationalisation'. There are two major categories of insurance: general insurance (that is, property and liability insurance) and life insurance, which has several main subcategories.
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The need for insurance services arises because of the three types of system that create hazards and uncertainty. The social system creates hazards such as burglary, arson, riots, civil commotion, strikes or kidnapping. This leaves the individual or the institution in a state of financial uncertainty. The natural system relates to natural forces such as hurricanes, earthquakes, lightning, floods, storms, tempests and so on. The technical system (that is, that created by individuals and institutions within a society) can create the hazards of fire, explosion, pollution, radiation, contamination, breakdown, collision, impact and so on. Natural risks/hazards: fire hurricanes earthquakes floods storms Need satisfaction through marketing of insurance services Product development Social risks/hazards : burglary kidnapping arson riots strikes Insurance customer's needs and wants by private, industrial & commercial customers
Pricing
Promotion & advertising Technical risks/hazards : explosion pollution radiation collision impact Distribution & selling
The hazards generating the need for insurance marketing.
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There are three main factors affecting the insurance market in addition to the various factors generally affecting all other financial institutions. First, the impact of legislation and tax concessions. Legislative
requirements and restrictions can exert a considerable influence on the size and scope of the market. This influence can take several forms, ranging from control of the number of offices operating in the market to the types of contract written or even to the detailed policy conditions. Second, the size and distribution of the population and national income. The size of the population might be expected to have a particular direct influence on the market for insurance, and particularly life assurance. However this is not necessarily true, as other elements, such as the density and distribution of the population and demographic and socioeconomic factors, should be taken into consideration as well. When real incomes increase rapidly there is a tendency for personal consumption to increase. At the same time personal savings are channelled into traditional financial institutions such as banks and building societies, whilst some will be channeled to life assurance companies. This shows that there is a large potential market for life assurance when national income increases. However the major problem here is competition from other financial institutions and the effects of inflation. Third, competition. Aggressive competition and the increasing costs of service and administration have led, on the one hand, to the elimination of small unprofitable companies and, on the other hand, to difficulty in offering a personal service. Thus a trend has arisen for insurance companies to
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amalgamate in order to exploit economies of scale and to be able to invest heavily in computers and other ancillary equipment to: (1) calculate their costs accurately, (2) achieve lower operational costs and (3) expand their service capability. In order to combat competition, wider cover at little or no extra premium (pricing policy) is now being offered, for example, by direct selling over the counter or via mail order with more economically packaged contracts. Savings can also be affected (as noted above) by competition between banks and building societies, which provide both long-term and short-term saving facilities. Life assurance policies are a form of long-term saving, but as most savers usually prefer to hold cash or short-term assets, the life companies are at a disadvantage. Furthermore the severe bouts of inflation in recent years have increased the reluctance of the public to enter into long-term financial commitments. so insurance companies will have to find ways and means of drawing savers away from the traditional financial institutions, either by guaranteeing surrender values (that is, the amount of money refunded when policy holders cash in their policies) or allowing policy holders to borrow against the surrender value so that they know their money is not completely tied up. In order to deal with the marketing problems facing this sector, marketers in insurance companies employ a set of marketing tools and techniques.
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DIFFERENT SERVICES PROVIDED THROUGH CLAIMS COMMITTE

Claims Review Committee The corporation settles a large number of death claims every year. Only in case of fraud or suppression of material information, is a claim repudiated. The number of death claims repudiated is, however, very small. Even in these cases, an opportunity is given to the claimant to make a representation for consideration by the Review Committees at the zonal Office and the Central Office. As a result of such reviews. Depending on the merits of each case, appropriate sanctions are made. The Claims Review Committee at the Central Office has an outside member Justice S.C.Pratap, former chief Justice of the Andhra Pradesh High Court, which has helped in providing transparency to our operations and has resulted in greater satisfaction among the claimants, policyholders and public. The Claims Review Committees at zonal Offices have been reconstituted in 1998-99 with the induction of High Court/District Court Judges (Retd.), as a measure of empowering and providing transparency to the working of the claims Review Committee at the Zonal level. Grievance Redressal Machinery Policyholders Grievance Redressal Cells exist in all the offices of the corporation, headed by Senior Officers who can be approached by policyholders to get their grievances redressed, on any day but particularly on every Monday between 2.30 PM and 4.30 PM. All Branch Offices All Divisional Offices All zonal Offices Central Office Sr./Branch Manager Marketing Manager Regional Manager (Marketing) Chief/Exe. Director (Mktg. Customer Services)
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Hi-Tech Services To provide quicker and better services to our policyholders, approx. 97% of our total Branches have front end computerisation for giving on-line service to policyholders. In addition to this, New Delhi, Chennai, Bangalore and Mumbai have installed Metro Area Networking (MAN) and Interactive Voice Response System (IVRS). Through MAN policyholders in the cities can obtain their policy status and make premia payment to any of the Branches within the city, and any Branch of the city can handle their policy enquiries. Through IVRS policyholders can obtain on phone and by fax-on-demand various information about their policy e.g. loan quotation, paid-up value, revival quotation, accrued bonus statement etc. The phone numbers for IVRS are as follows: Delhi : 3329595/3329700 Bangalore : 2211435 Chennai : 8589830 Mumbai : 6187655
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LIC has a family of schemes for you and your family to meet various needs. I) Basic Life Insurance Plans: 1) Whole Life Assurance Plan: A low cost insurance plan where the Sum Assured is payable on the death of the life assured, whenever it occurs. 2) Endowment Assurance Plan: Under this plan, the Sum Assured is payable on maturity or on death of the life assured, if earlier. II) Term Assurance Plans: 1) Two Year Temporary Assurance Plan: term assurance for periods of upto 2 years is available under this plan. The sum assured is payable only on death of the life assured during the policy term. 2) Convertible Term Assurance Plan : the plan provides for term assurance for 5 to 7 years with an option to purchase a new Limited Payment Whole Life policy or an Endowment Assurance Policy at the end of the selected term provided the policy is in full force. 3) Bima Sandesh: This Term Assurance Plan provides for return of premiums paid, on the life assured surviving the policy term. 4) Bima Kiran: In addition to benefits available under Bima Sandesh plan, this plan provides Loyalty Addition, in-built accident cover and Free Term Cover after maturity, provided the policy is then in full force. III) Plans for Children: Various childrens Deferred Assurance Plans are available, viz., CDA, Jeevan Balya and Jeevan Kishore. Jeevan Sukanya is a plan specially designed for girls. The Childrens Money Back assurance Plan is specially designed to provide for childrens higher educational expenses with added attractions of Guaranteed Additions, Loyalty Additions and optional family benefit.
IV) Pension Plans: These plans provide for immediate or deferred pension for life. The pension payments are made till the death of the annuitant (unless the policy has provision of guaranteed period). We have pension/annuity plans like Jeevan Dhara, Jeevan Akshay, etc. which provide return of the purchase price on death of the annuitant. We have Jeevan Suraksha plan which provides pensionfor the spouse also and premium paid upto Rs. 10,000/- is exempted from income tax under Section 80 CCC(1). Jeevan Sarita a Joint-life-last survivor Annuity-cum-Assurance plan is available for the benefit of both husband and wife.
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SERVICE OF DIFFERENT POLICIES

1) Jeevan Griha (Double & Triple Cover): For people desirous of obtaining housing loan with the policy acting as collateral security and to ensure repayment of the loan in the event of the premature death of the borrower. 2) Mortgage Redemption: Suitable for borrowers as it ensures that the outstanding loan is repaid in the event of the borrowers death. 3) Bhavishya Jeevan: A Special Endowment plan ideally suited for professionals with a limited span of high income. 4) New Jana Raksha: Ideal for people with no regular income. It provides for death cover for a period of 3 years from the first unpaid premium, provided at least 2 full years premiums have been paid. 5) Double Endowment: this is an Endowment Assurance plan with double the sum Assured payable on maturity. 6) Fixed Term (Marriage) Endowment/Educational Annuity: A plan suitable for making provision for start-in-life, marriage or education of children. 7) Convertible whole Life: The policy is issued as a whole Life plan with an option to convert it into an Endowment Assurance at the end of 5 years. A plan suitable for those who cannot afford high premium in the initial years but have prospects of increased income within a few years. 8) Money Back Plan: Besides providing life cover during the term of the policy, the maturity benefits are paid in installments by way of survival benefits. 9) Jeevan Surabhi: A Money Back Plan where premiums are payable for a limited period, with periodical increase in insurance cover.
10) Jeevan Sathi: A double cover Joint Life Endowment Assurance plan for husband and wife. 11) Jeevan Chhaya: An ideal plan to provide for your childs higher education. 12) Jeevan Mitra: An Endowment Assurance plan with twice the sum assured payable on the death of the life assured during the policy term. 13) Jeevan Shree: A Limited Payment Endowment Assurance plan with attractive Guaranteed Additions at the rate of Rs. 75/- per thousand sum assured p.a. and Loyalty Additions. 14) Asha Deep II: The plan provides, besides death and maturity payments, benefits in case the life assured suffers from any of the four defined ailments. 15) Jeevan Aadhar: especially designed for handicapped dependants. This is a limited payment whole life policy with guaranteed additions at the rate of Rs. 100/- per thousand sum assured p.a. where the claim amount is paid partly in lumpsum and partly in the form of an annuity. Income Tax relief under Section 80DD is also available as per current IT Relues. 16) Jeevan Sanchay: This is a Without-Profit Money Back type plan with provision for Guaranteed Additions at the rate of Rs. 70/- per thousand sum assured p.a. and Loyalty Additions payable on maturity or earlier death. 17) Jeevan Sneha: A Money Back Plan exclusively for women. There is provision for Guaranteed Additions at the rate of Rs. 70/- per thousand sum assured p.a. and Loyalty Additions payable on maturity or earlier death. 18) Bima Nivesh: A single premium plan of assurance with compounding guaranteed additions at the rate of Rs. 85/- per thousand sum assured p.a. for first 5 years and Rs. 90/- per thousand sum assured p.a. for next 5
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years. The same premium is payable for a given policy term, irrespective of age at entry. 19) Jeevan Asha-II: The plan provides, besides death and maturity benefits, payment towards certain surgical procedures and periodical survival benefit payments. There is also a provision for guaranteed additions at the rate of Rs. 70/- per thousand sum assured p.a.
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Blue print of LIC services
Agent Customer
Development Officer
Branch Manager
Administration Processes the information
Agent gives policy to customers
Customer pays premium
On maturity or death, amount is paid
FINDINGS OF THE STUDY

The Life Insurance Company of India faces Gap 5. LIC is a monopoly in life insurance market. LIC is giving good services, but customers expect much more from them. Since, there are no other competitors in the market, so they are not fulfilling all the expectations of the customers. For example some customers expects better bonus rates & more exemptions on income tax benefits which Life Insurance Company are not providing. A few customers also expects at the door step service which is not being provided by LIC. Policy holders expects the policy amount to the paid within a weeks time after the date of maturity or after the death of the person, but LIC is not prompt enough to give back the policy amount. Thus it is clear that Gap 5 exists. Life Insurance Company also faces Gap 1. The managements perception of customers expectations does not match the customers expectations. LIC introduces different schemes periodically, without any market survey. They formulate different schemes, without knowing whether there are actually needed by the customers or not. The Management perceives that the schemes are very attractive & would be accepted by the customers. Not all the schemes are required by the customers, as a result there schemes are not very successful. Gap 2 also exists in Life Insurance Company. Due to lack of knowledge of the management as to what is required by the customers, therefore employees are not given proper guidelines & specifications to provide service to the customers. The service delivery by LIC is not very efficient and satisfactory, thus resulting in Gap 3. This is because of two reasons. Firstly, it is a semi government organization & it is a known fact that these organizations are not very efficient in providing services. Secondly, it is the only existing life
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insurance company & has monopoly in the insurance market, therefore they provide the services as per their whims & fancies. Life Insurance Company promises much more than what they can or they are providing. The customers are assured that they would get back the policy amount on the date of maturity or within 7 days of the death of the policy holder, but this does not happens as customers sometimes have to wait for a month or more to get back the amount. Thus Gap 4 also exists in Life Insurance Company.
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SUGGESTIONS AND RECOMMENDATIONS

1. As the customers of LIC are not satisfied with the services provided by them, therefore LIC should ensure prompt and efficient service delivery to its customers. 2. LIC introduces schemes and policies without conducting a market research. Therefore they should obtain feedback from the customers prior to the formulation of schemes as well as afterwards. 3. LIC should ensure that there is no delay in giving the policy amount to the customers and that it should be given on the maturity date or the time specified. 4. LIC should have a customer relation department wherein any problems that are faced by the customers are handled at that point of time. 5. LIC should lay down clear and specific guidelines and train the employees accordingly so that they can provide services as required by the customers.
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CONTENTS
Page No. Acknowledgement Introduction (Nature of Insurance, Brief History) Queing for Insurance Pie in India Brief History of Life assurance in India PR & Insurance in Services Marketing Insurance Marketing The Roles of Marketing in Financial Services (In Insurance) Insurance in Services Marketing Different Services Provided through Claims Committee Service through Different Policies Blue Print of LIC Services Findings of the Survey (Gaps) Recommendation & Suggestions Annexure 1 6 7 10 16 26 33 38 42 45 46 48
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ACKNOWLEDGEMENT
We are thankful to Mr. Pawan K. Verma, Sr. Divisional Manager for permitting us to carry on extensive study of LIC at Divisional Office. Jeevan Prakash. We acknowledge with thanks the valuable suggestions of Manager (OS), Mr. J.P. Khanduri (D.M.) and Mr. Vipin Anand, Marketing Manager who gave us inspiration for conducting the particular study. We are also thankful to Prof. Rajita Choudhuri for providing us an opportunity to carry out a study on Services Marketing in Insurance Sector (LIC). It is needless to say that any piece of creative work requires the involvement of a number of individuals, since it beyond the scope of our limitations to enlist each & very individual associated with this work who extended their co-operation in sharing unbiased views & feedback which helped to collect concrete data, Hence, we would express over sincere gratitude to all those who played contributory role directly or indirectly towards accomplishment of our report.
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INTRODUCTION
Insurance- what is it?
Man has always been in search of security and protection from the beginning of civilization. This urge in him to lead to the concept of insurance. The basis of insurance was the sharing of the losses of a few amongst many. Insurance provides financial stability and strength to the individuals and
organization by the distribution of loss of a few among many by many by building up over a period of time.
The legal definition of insurance is that, it is a contract between the insurer and insured whereby, in consideration of payment of premium by the insured the insurer agrees to make good any financial loss the insured may suffer due to consideration of an insurance peril. History of general insurance: As civilisation progressed the incidence of losses started of giving rise to the concept of loss sharing. The Aryans through their village cooperatives practiced loss of profits insurance. Mediterranean merchants also practiced it in the century 4th B.C. through the issue of bottomory bonds. The code of manu indicates that
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there was the practice of marine insurance carried out by the traders in India with those srilankans, Egypt and Greece. The earliest transaction of insurance as practiced today can be traced back to 14 th century A.D. in Italy when ships are only being covered. The insurance act of 1938 The act was passed in 1938 and was brought into force from 1 st July 1939. The act has been amended a number of times the most important being in 1950 and 1968. It applies to General Insurance Corporation of India and the four subsidiary companies subject to exception restrictions and limitations as specified by the central government. The important provisions of the act relate to the following1. Registration- every insurer is required to obtain a certificate of registration from the controller of insurance. The registration is required to be renewed annually. 2. Accounts and returns-an insurer is required to keep a separate of accounts of all the receipts and payments in respect of each class of insurance. Every insurer is required to prepare at the end of each year in the prescribed form Balance sheet Profit and loss account Revenue accounts for each class of insurance. The accounts are required to be audited annually by an auditor and printed copies and four copies submitted to controller of insurance within six months from close to an year. 3. Investments- every insurer ahas to invest only ion those investments approved under the provisions of the act. Returns in the prescribed form are to be submitted to the controller showing as at the end of each preceding year, investment made out of assets.
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4. Limitation on expenses of management- the act prescribes maximum limit of expenses of management including commission may be incurred by an insurer.
Essential features of general insurance All insurance contracts are governed by by principles of utmost faith and proximate cause. Insurable interestA person who wants to insure must have insurable interest in the property to be insured. The essentials of insurable interest are There must be a property capable of being insured. Such a property must be subject matter of insurance. The insured should have a legal relation to the subject matter insurable interest could arise in a number of ways such as: 1. ownership 2. mortgage 3. trustee 4. bailee 5. lessee
In fire insurance, the insurable interest must exit throughout the contract. It must exist: 1. At the inception i.e. while placing the property for insurance. period of insurance. 3. At the time of loss in event of fire / accident the insured should continue to have an interest in the property to claim the insurance money. 2. During the currency of the policy i.e. the interest should not cease during the
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In marine insurance the insurable interest must exist at the loss time. It need not necessarily be at the time of taking cover. In case of personal accident insurance a person has unlimited financial interest on his own life. How ever in practice suitable monetary benefits must be considered. There will be no contact of insurance in ht e absence of insurable interest that distinguishes from wagering contract. Indemnity The object of insurance is to place the insured in the same financial position as he was just before the loss. This principle prevents the insured from making a profit out of a loss and ensures public interest at large.
For example if a sofa is insured and then damaged the in company will see the depreciation of the sofa having been in use by the insurer. It wills not be true indemnity to pay the price of a new sofa as the insurer has enjoyed the benefits of a sofa.
For a building damaged by fire the measure of indemnity cost of repairing the building is the cost of repairs to it's prefer condition. For machinery is destroyed by fire the market value of such a machine after taking into consideration wear and tear and depreciation. In marine insurance the indemnity is " in the manner and to the extent agreed" by the insurers and the insured. It is so provided international he insurance act. In case of personal accident insurance policy it is not possible to place a value on life as such. Hence they are called benefit policies.
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There are four methods of indemnification: cash payment repair replacement reinstatement
Subrogation: Subrogation is a principle, which is applied to all the contracts of indemnity. It meant that after payment of the loss the insurer gets the right of taking all steps to recover any money in compensation from a third party. Subrogation is the right which an insurer gets after he has indemnified the loss to step into his shoes of the insured and avail himself of all the rights and remedies which the insured may have against their party in respect of the loss indemnified.
Contribution: Indemnity is also governed by the principle of contribution. The insurer is liable to contribute proportionately loss to the extent of its interest. If a property has been insured with more than one insurer in the event of the loss of the insured will get a proportionate part of the loss from each insurer so that the insured does not make a profit out of the settle claim. Utmost good faith In insurance contract the prepares is the only person who is deemed to have come to know of all the facts of the subject matter of insurance and the insurer is to completely rely on what the prepares has disclosed.
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The prepares therefore should furnish all material facts concerning the property proposed which would enable the insurance company to decide whether to accept or reject and decide appropriate terms and rates. The duty of disclosure of material facts continues throughout the contract and the insured should advise the insurance company wherever change occurs in the property insured. He need not disclose fats of following nature: facts which would diminish the risk of insured peril e.g. appointing a night watchman which are presumed to have known to the insurer e.g. large scale riots facts which are understandable from the disclosure already made
Proximate cause Propitious is exposed to various perils like fire, earthquake war, riot etc and policies of insurance covering various combinations of such perils can be procured. The insurers liability only rises only if the causes are not mentioned in the perils or excluded.
The contract of insurance It is a legal agreement between two parities and has to comply with the provisions of the Indian contract act of 1872. Contracts must have the following five essential elements so it can be enforced: Offer and acceptance- the person who wants to take up cover against particular peril offers his risk through a proposal form to the insurance company and not accepts the risk. Consideration- the premium paid is the consideration and on receipts of the premium by the insurance company the contract into force.
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Mutual consent ad idem- there should be a complete and unbiased agreement between the insurer and in insured regarding the terms of the contract. The intention of the insured should have been clearly understood by the insurance company and vice versa.
Capacity to contract to the parties- both the parties must be legally competent to enter into an agreement. An agreement with a mentally unsound person is not a valid contract. So also an agreement with minor insolvent and foreigner is not a valid contract.
Market strategies of National Insurance and its competitors

Insurance sector being a public sector in India, enjoys monopolistic powers. Anybody wants to get insurance whether life or non-life insurance has to take it from them only, hence it is not significant whether they do advertisement or not. But National Insurance and the other LIC and GIC insurance companies do extensive advertising through all medias to introduce their new policies to the general public. Advertising in television, magazines, newspapers are extensively done from them. Together with a very strong base of personal selling through number of agents and development officers. Together with all the above marketing procedures other mediums like organizing seminars and workshops are used.
The paper work

Paper work on different policies differs from policy from policy. It is not possible to mention formatives of all the policies. Paperwork in case of motor vehicles is as follows Name and address of the insured. Agents code number. Particulars of the vehicle.
Engine, chassis, registration number. Model of the vehicle. Period of insurance. Amount insured. Conditions of the policy. Amount of premium. Etc. Before issuing a policy a proposal form has to be signed by the insurer, which contains the basis of the contract.
Surveyor - his job, his background, the requirement for appointing a surveyor A surveyors job is to access the loss cause due to the clause mentioned in the insurance policy. In case of any loss a surveyor is deputed to ascertain the loss. A person has to have a professional qualification to be a surveyor, mostly: For motor vehicle mechanical engineer For fire insurance etc. charted accountant A person having the above qualification can get a certificate as a surveyor from the Controller of Insurance by passing through a proper screening process. The fees of surveyor licensee is Rs.250 only For assigning the losses both kinds of surveyors have to work hand in hand. The mechanical engineer assesses the technical claims and charted accountant assesses the accounts part of the claim. (P.S.: More has been mentioned on this issue in the later part of the project).
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THE INSURANCE SECTOR

The Insurance sector is a public sector in India and hence regulated by the autonomous body appointed by government of India. The 2 types of companies present in India in insurance sector are 1. Life Insurance Corporation of India There are no subsidiaries of LIC. The company is divided into different zones and branches controlled by its head office. 2. General Insurance Company There are four branches of general insurance company. They are New India Insurance Company National Insurance Company United India Insurance Company Oriental Insurance Company
Market share of different insurance companies LIC - LIC is an autonomous body governed by the Government of India. It has a monopoly power. Hence anybody who wants to take a life insurance can only make it from LIC. GIC GIC is also an autonomous body. Its is a controlling body and doesnt do business by itself. The total turnover of GIC through its different subsidiaries is around 9000 cr. Company wise it is as follows 1. New India 2700cr. 2. United India 2250cr. 3. National Insurance 1980cr. 4. Oriental Insurance 2070cr.
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Types of companies Different types of insurance companies in India are as follows 1. Life insurance corporation 2. Non life insurance companies 3. Employee state insurance companies It is an autonomous body controlled by the board of directors appointed by Government of India. It is compulsory under the Factories Act to give the insurance cover to all the workers working in a company if the total strength of workers is more than 8.
Type of policies Broadly their are two type of insurance policies in India 1. Life insurance policy 2. Non life insurance policy Under the above 2 types their could be number of policies. Some of them are as follows1. Life insurance policies a. Whole life policies this policy gives the low cost assurance plan. Provides for a fixed sum of money to the nominee on insureds death. This policy covers the life of the insured being amount payable after the maturity or death of the insured which ever is early. b. Endowment policies it is a very popular plan. Serves the dual purpose of family protection and old age provision. This kind of policy insures the life of the insured being amount payable after the death or as bonus starting after the lapse of the definite time and remaining amount with interest is paid after the maturity. c. Endowment time plan policies in this kind of policy the insurer starts getting the part payment after the lapse of the definite time
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period being the risk is whole insured and at maturity the part left is paid with interest or profit. d. Any life policy can be extended to personal accident coverage in case of death due to accident by paying the extra payment. 2. Non life insurance policies or General Insurance Broadly the non-life insurance policies can be divided into four types. Fire insurance Marine insurance Motor insurance Engineering insurance Miscellaneous insurance
Other policies, which come under miscellaneous head, are as follows: Office umbrella policy Multi peril policy for LPG dealers Personal accident insurance Rajrajeswari mahila kalyan bima yojna Group personal accident insurance policy Group mediclaim insurance policy Videsh yatra mitra Mobile phone insurance Duty insurance policy Cycle ricksaw insurance policy
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Special contingency policies Sports insurance Suhana safar Pager insurance policy Neon sign policy Gun insurance policy Plate glass insurance Television insurance policy Jewelers block insurance Aircraft hull/liabilities policy Critical illness insurance policy Wind mill insurance Birth right policy Doctors protection shield Package insurance for credit society Products liability insurance etc. etc.
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Rural insurance
Various insurance policies that come under rural insurance policy are as follows: --
Cattle insurance Poultry insurance Sheep and goat insurance Camel insurance Pig insurance Horse/mule/pony/donkey/yak insurance Duck insurance Kissan package insurance policy Package insurance for tribals Plantation/ horticulture insurance Tea plantation insurance Apple plantation insurance Beetelvine crop insurance Rose plantation insurance Bhagyashree child welfare Khalihan insurance package policy
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Insurance bio gas plant Insurance of fish in pond Animal driven cart/tonga insurance Dog insurance Elephant insurance Rabbit insurance Honeybee insurance policy Hut insurance Kissan agricultural pump set insurance Sericulture (silkworm) insurance Gramin accident insurance Revised jants personal accident insurance for enhanced S.I. Tertiary care insurance
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GENERAL INSURANCE COPRORATION OF INDIA A PROFILE

ORGANISATIONAL STRUCTURE Company National New India Oriental United India Total Regional office 19 21 18 22 80 Divisional office 254 352 274 322 1202 Branch office 681 788 680 777 2926
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RISK MANAGEMENT
The first phase of Risk Management is risk identification is really the key to the whole process. The risk manager begins by identifying all of the resources for which his organization is responsible. These resources or assets may be human, financial, material or environmental. exposures to loss. To assemble and maintain this information requires the risk manager to have thorough knowledge of the firms business activities and to develop an intelligence network among fellow employees that will continuously feed appropriate risk data. Methods used to identify risk include: regular meetings with managers and supervisors, site inspectors, surveys, examination of written contracts, analysis of financial reports, risk management committee meetings, insurance company loss prevention report, analysis of historical loss experience and a close awareness of operational developments within the specific industry. Risk identification requires perseverance, diplomacy, imagination and, above all, an awareness of changes taking place within the firm. Nearly all operational and procedural changes will in some manner increase risk, reduce risk or eliminate risk. The challenge for the risk manager is to be informed. The guru mantra for Risk manager is : Ask questions be nosey. The process of identification may be relatively simple or highly complicated, depending on the size and nature of the organization. For instance, in small company, identification may involve only a single plant and a single product. But in a large multinational firm, it could be a massive undertaking involving hundreds of divisions or subsidiaries located around the world. Risk identification can also be as simple as locating a cracked sidewalk that could trip a customer or employee, or as complex as determining what the firms liability could be for the negligence of a subcontractor. He then considers all of the potential
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Risk tends to fall into one of three categories: asset, income, or legal liability. Asset or property risk is highly visible and is usually easy to identify. These are loss exposures from fire or explosion, or from natural disasters, such as floods, hurricanes, earthquakes, tornadoes or mudslides. Crime, theft and vandalism are other forms of property risk, as are oil spills and plane crashes. Questionnaires and checklists have been developed to help risk managers locate property risks and trigger such questions as: Are fire regulations observed in areas where flammable materials are in use? , Is there sufficient security at the office?, What are the chances of an earthquake damaging the plant? The answers to these and other questions are critical to risk control. Income risks usually accompany property loss and may occur if business is interrupted due to an accident. For instance, if a plant burns down, the firm suffers an obvious property loss, the loss of income during rebuilding or transferring the plant must also be taken into account. To determine income risks, the manager must ask the right questions. If vital machinery breaks down long what will it take to replace it? What would happen if a power failure occurs? If a supplier of comp or other services is lost, how long would it take to find another? Finally, there are the legal liabilities. These risks are often hard to identify and potentially the most devastating. Consumer outlay resulting in compensatory data of crores of rupees are now in action; suits involving crashes or pharmaceuticals, awards could be as high as to crores of rupees. Legal costs create another burden. To discover legal liability exposures, the risk manager must What if? What if an employer falls down a flight of stairs of the company? What if someone driving the company car crashes into a school and children are killed? What if a product injures a consumer? What if the wastes dumped into a river exceed the pollution levels sanctioned by the government?
Sometimes it may seem that the manager is nothing but a pessimist, sees danger around every conscious moment, points out risks inherent in the products and the favoured procedures that have
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been around for years. However, unexpected can and often does happen. Corrective steps have to be taken regarding that.
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INSURANCE BILL
Current status
The IRA bill had been introduced in the Lok Sabha during the Vajpayee governments last tenure with the expected mixed reactions. Surprisingly, the Congress chose to keep mum on the issue. The left parties staged a walkout registering strong protest. While the eager international and domestic players have to continue waiting in the wings for the curtains to raise, the government has made another landmark announcement. It is expected to be introduced again during the ongoing winter session of the parliament. The Congress party has said that they are committed to supporting the bill and this definitely improves the likelihood of th bill getting the requisite majority both in the lower and the upper house. The Banking Regulation Act is to be modified to allow banks to become active players in the insurance sector. This comes as a major move and a precursor to the sweeping insurance reforms that have been opposed by the swadeshi bandwagon and the various labour unions operating in the insurance sector. The takeout of the amendment made to Section 6 (0) of the Banking Regulation Act, 1949 is this: the current act does not permit banks to handle insurance products. The proposed change will permit banks to either distribute or to market insurance products. In addition to this, banks will also be allowed entry to the insurance sector through the joint venture route and bank assurance. It is understood that only strong banks with three-year track records will be allowed to enter the business - entry is a strict no-no to the weaker banks. The Insurance Regulatory and Development Authority (IRDA) Bill provides for three levels of
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players - an insurance company, insurance broker and an agent. Banks will work as agents and brokers in this proposed structure. This is an attempt to make the insurance sector more dynamic - this is likely to happen as banks will use their formidable branch network to market and distribute the insurance products. This amendment could also forge alliances in the banking sector. Initial reports indicate that the State Bank of India and Bank of Baroda have expressed interest in entering into joint ventures. ING Barings who already has a 20% stake in Vysya Bank, plans to broadbase its alliance to add on insurancebased activities. This could be a timely move - one that will allow the domestic players to prepare for the competition ahead. It would also bring them on par with international players who are accustomed to operate in a liberalized environment. This is also a sensible move by the government to allay the fears of its more conservative and swadeshi-oriented allies and cement cracks, if any have appeared, given the BJP's new pro-liberalization avataar. A closer look at the amendment indicates that it is tantamount to creating stronger public sector monopolies with behemoths like SBI and BOB entering the fray. It is unlikely that the private sector banks would contemplate entering the business, as they may not have the requisite capital to meet the prescribed capital adequacy for the insurance sector. The government may have made a move that could be counter-productive in that the protests against entry of foreign players will only get more vociferous and strong with many more strong arms entering the rally. Political ramifications apart, what does this amendment mean to the consumer? Is her life made easier? Does she have more product offerings from a number of service providers who are vying for her attention? In other words, is the service any better? As an analyst and a consumer, the future looks bleak.
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The manner and style of operations of the public sector banks leaves a lot to be desired. In an industry where service quality at the moment of truth or the moment of service delivery is non-existent for the public sector players, one wonder what vibrancy will these players impart to the insurance business. It is likely to ensure that insurance continues its semi-comatose existence and fuddy-duddy image. The insurance agent as stereotyped currently is but the personification of a nationalised bank. Any marketing professional and every consumer will describe such a person as a semi-retired, balding, sloppy individual who drags his feet as he walks. One does not need psychographic tools to analyze the underlying opinion. One shudders to even conjure up images of insurance marketing in a nationalised bank branch. One has to search for a semblance of marketing in the existing set-up for student loans and housing finance. Business school aspirants and young couples will bear witness to this fact. I have recently been both and have strained my eyes searching for the proverbial needle in a haystack. Picture this: Pamphlets in two-colour (black and white!!), non-glossy paper would be indifferently placed in a plastic stand near the receipts counter. Over time, the stand and its contents will gather dust and be relegated to the extreme corner of the counter to make place for the local Bhatt's chai, wada pav/ kande bhajji. Needless to add, the counter will be seldom manned. If it is manned, on inquiry, you will get a curt response that all is mentioned in the pamphlet and the clerk, busy man that he is, does not have time off from collecting deposits and local BSES / MTNL payments. So much for marketing, the above scenario does not sum up to a case of sloppy selling. It is evident that the insurance industry needs to get its act together - and do it fast. The key areas for a changeover would be in the departments of marketing, distribution, new product development, product pricing and human resources development. New players too would do well to learn from past errors and concentrate on the above focus areas.
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Another issue that has cropped up is that of the clause defining the domestic partner. The domestic partner in a joint venture cannot be a subsidiary of a foreign company. This makes things difficult for British American Tobacco (BAT) to raise its stake in ITC to take it upto 51%. Simply put, this would make ITC a deemed foreign company in the joint venture. According to the finance ministry, mergers would not be stopped, but in the event of one, the insurance joint venture will have to be recast. A point to be noted is this - companies can be controlled by multinationals with a mere 20% - 30% stake. It is evident that even as the parliament sits down to discuss the opening up of the sector, it will open up a virtual Pandora's box of obstacles, minor and major, real and perceived - but all of which need to be addressed and put to rest.
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Impact of Privatization
New Change
With the entry of the multinationals, new systems and new methods of settlement of claims would be introduced, which are unknown to the local conditions, this change would certainly bring a change in the working of insurance sector in out country. General Insurance industry has created an awareness in the people that on payment of premium, claims are paid. But no effort is made to know under what circumstances the claims are paid. The insured who pays the premium of Rs. 10000 in the years, thinks of how to recover this amount some how by way of claim. This resulted in negative thinking of insurance activity. In this set up the private insurers have to work. Assessing the working of Private companies The background of private companies the private companies will come from two categories, viz., foreign multinationals and Indian business magnates. Indian companies will have the business of their group of industries, while the foreign companies will have to establish new relations. In either way they have to establish sufficient funds and securities to meet the contingencies, shortcomings; high incurred loss ratio, and exorbitant claims, the income would not be commensurate with the return for the investment. In course of a few years, they may have to decide their future. Their strengths the multinationals do have an advantage to bring with them rich experience, in settlement of claims, as is done in an organized way in their area. They will transform this experience in their staff locally appointed by picking up the best and training them suitable. When so much unemployment is abundantly available it will not be difficult for them to pickup the young
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employees and officers, at competitive salary. With help of computerization, they may have the minimum possible staff. Thus it will be helpful to them in having a lessor expense ratio, while the public sector has greater number of heads on its roll without an authority to remove, with the backing of strong trade union, they negotiate the pay structure every now and then. Their weaknesses unlike the public sector unit companies, these multinational will not be able to have their branches in every city and town, which would be too expensive for them to run the show. At the same time, they may operate from on center or place, in such a case it becomes difficult for them to control the business, their field personnel out to attend to the client in some nook and corner. Business and capability with the Tariff Advisory Committee to control rates, rules and regulations, and with the control of the IRA and the Governments attitude to serve to the needs of the people with social objective, will the multinationals be able to enter the Indian insurance market, which may be uneconomical for them? Legal forums over and above legal forums like the Consumer Protection Act and the Motor Accidents Claims Tribunal, and with the high trend of awards, these companies have to exist with the hope of survival in the long run. Solvency Indian public sector companies no doubt known for procedural, bureaucratic and lethargic work, there is a certainty of their existence and payment of claims, whereas the solvency of the private and foreign companies is not certain. However, strong and financially sound a company may be it owes its existence to certain legal formalities. If the shareholders decide to liquidate it may happen so. In USA many of the insurance companies liquidate voluntarily or compulsorily. If such a situation arises, what will happen. So
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the IRA should keep in mind such implications before the foreign or private insurers enter. The coming of private companies is certain, because it is a requirement of foreign aid. These companies in order to get profit for the investments they made will do only selective business, with their offices in important cities. They will pick up only such fieldworkers who give lucrative business and they will be paid well. Big industrial organisations and establishments will be granted insurance and the individuals, small businessmen and farmers will be paid higher rate of commission unofficially and the difference will be adjusted towards some accounts. Where the management wants a claim to be settled, it has to be so done by any means on the basis of certain bills. To maintain cost ratio, appointment of staff will be made from among the junior most on the lowest range of salary. They will be trained to suit to their taste. Conditions of service, working hours, pressure of work, will bot have any regard. Any body talks of union will be shown the gateway. A big client will have a good say. His claims would be settled more than satisfaction. Old dogmatic rules would also transform a change, in the spirit of competition and for better service. Thus, in course of time, people will definitely find a change in the working of insurance officials. Instead of the insured knocking the doors of the insurer, the insurer will knock the doors of the insured.
Potentiality of Insurance in Indian market Marketing inefficiency of general insurers has kept society in dark even when so many personal as well as commercial lines of insurance covers are available for them. Insurers have failed to identify the need of the individual risk factors and thereafter selecting proper market segments and developing demand of these needs
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by adopting proper marketing mix. There is great scope of commercial line of insurance as we are developing at a very fast rate but the potentiality and scope of personal lines of insurance is vast as this areas is still under-tapped. Product designing and pricing is also simple and growth of this portfolio is guaranteed in this country which has a base of 100 crore population, where there are about 25 crore dwellings, 20 crore schools, colleges and educational institutions and about 5 crore small and big shops. But despite this the Indian insurers share in personal line of business is very low or negligible. Despite the low penetration in personal line of insurance there are all good reasons to appreciate the magnitude of potential premium. There are enormous growth opportunities to Indian as well as foreign insurers once the sector is opened up as there is ample scope to introduce the new line of covers as per the changing needs and to increase the per capita share of the insurance by encouraging risk transfer by investing small portion of the savings of the individuals. The share of non life insurance is 0.6% of GDP as against 3 to 5 % in developed countries. By opening up the sector far more opportunities will be there in insurance and reinsurance market. After privatization of this sector presence of the foreign players will also increase the retention power in the country, otherwise, if we compare the present situation we will find that in Dabhol project, for instance, the Indian insurance players could hardly retain 2% of the total premium. Similarly for Reliance Patalganga project Indian Insurers share was not more than 2% of the total premium. The position is more or less same in all major projects. Therefore the insurers, in time to come, will have to change their attitude from selling of the product to marketing of the protection needs of the insured and for this what is required is : Effective product planning Suitable pricing Efficient promotion and physical distribution.
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Effective Marketing
Effective Product Planning Indian mindset is typically towards the general insurance subject. Insurance is generally considered non-productive and is low priority finance function in commercial sector and least bothered in personal risk coverage segment. This is when more than 20% population of the country belongs to insurable middle-class and working age covers 60% of the population. Insurance products are old and have not been revised as per the needs of the different segments. Life cycle of most of the products is on declining stage from last so many years, but even then no market researches encouraged to develop need for products for different segments. After privatization of the sector, insurance being thrown open to competition, it is expected that product planning will receive utmost importance and customers will have too many options to get the right product to protect against risks. Insurers, Indian and foreign will concentrate on key market movements with due focussing in areas of opportunities. More emphasis will be given by them either on developing certain type of products to suit Indian market or improving the existing products. GIC has already identified areas where change in products is required and identified areas which need to be activated and given a shape through
subsidiaries. These subsidiaries have improved certain existing products have also introduced certain products both in commercial area and also in personal lines of insurance. The process of product planning will improve further to suit the needs of the target group once the sector is thrown open for private and foreign multinationals. In time to come insurers will have to pay attention on this important P of marketing mix i.e. product planning so that the products may come closely nearer to the needs of the market and they may serve their protection needs.
Suitable Pricing After opening up of the insurance sector, pricing will also have key role in capturing market as most of the business will be out of the market agreements and tariff structured rates. Global giants will offer very low prices in order to capture the market and hence the right price will be the key to become market leader. The insurers, Indian as well as foreigners, however, will have to keep pricing and risk exposures under close monitoring, otherwise the results will be like marine rates subsidiaries of GIC started quoting recklessly on lower side than what others offered on lower side than what others instead of some formula of risk exposure and loss experience. The marine risk protection has been offered to certain important clients on portfolio basis almost free of cost. This situation, in long run, may be suicidal for many companies if products are not priced keeping in mind the profit margins and right price. Pricing should also be based on target consumers and market segment and the products should be sold at different prices. After opening of the sector insurers both Indian as well as foreign should avoid cutting prices fearing danger of competition. It is believed that in monopolistic conditions the market forces will drive rates of the different products. Price differentiation will be the key factor in marketing mix after privatization of insurance sector. Insurers will have to keep their own data bank to find out the right price of products. Price is an important drive force to convert the need into demand henceforth insurers will have to tactfully take care of this factor of marketing mix.
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Promotion and Physical Distribution As the world is getting increasingly globalised, study of any subject cannot be restricted to the local conditions. In order to tap the virgin Indian market in this sector we should study and analyze the factors contributing growth of insurance in other countries and how the distribution system and market placement functions in these countries. Non motor premium is slowly picking up all over the world and personal line of insurance is gaining momentum. The promotion and distribution system is also changing because of the change in the trend and new directions in the insurance sector. Insurers are turning from selling of product to marketing of insurance product and equal importance is now being given to Physical distribution and promotion of the product. marketing mix. In developed countries proper attention is not only paid to right products for different segments but an aggressive promotion and effective distribution system is also selected to market the general insurance products. As against international trend, Indian mindset is typical towards the general insurance subject. Insurance is generally considered non productive and is low priority finance function in commercial sector and least bothered in personal risk coverage segment. Awareness about the insurance products is very low and the marketing of the same is static. The main selling force i.e. the development officers work more for their incentives and less for the development of the product and industry. This wing cares least for personal lines of business. After a optimum level development officers are seen reducing their premium targets in one year and maintaining the incentives [which are based on growth of previous year figures only] in next few years. After privatization the present insurers and the new players in this field will have to constantly review the physical distribution system so that the insurance products may reach the insuring public effectively. Even at present the GIC is thinking to consider the system of corporate agency to promote the commercial line of business. In emerging scenario the role of brokers will also be very important and
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Physical distribution is a very important P of
hence the sound agency system will have to be produced by the insurers who wish to have leading share of the market. Product promotion is done basically on the felt need of the prospects. It is the last important P of marketing-mix. An effective promotion policy is key of marketing approach to retail any insurance product. The private insurers will employ non conventional methods of selling such as Tele-marketing, mail order forms, opening of point of purchase outlets such as airport/bus-stand/railway station counters for marketing personal line of insurance and will develop corporate agencies for commercial line of business. After developing a product at suitable price a sound marketing approach requires supportive promotion and distribution system to market the said insurance product. The insurance industry, over the last 26 years has developed a wide array of products. However, it is anybodys knowledge that not more than 40% of the products are in regular use. This would mean either that the products do not meet requirements of the target group or that the marketing personnel are not fully aware of the products and their availability. An effective promotion policy is key for success of any product. On the contrary if we look at the failure of few of the insurance products like Bhavishya- Arogya, Jan-Arogya we will find that though these products are good but there is no market segmentation and the promotional schemes are not attractive. Much has been spent on the advertisements to promote these products but no sales promotion efforts have been supported. The development officers are not interested to sell this low-commission and low incentive-based products and this, in toto, resulted early death of the products. In an environment which is going to emerge in the new millennium when the market will be thrown open to the private players having products of the global standards the winning team combination will require an effective marketing approach with suitable marketing mix to market the insurance products.
General insurance marketing in the changing scenario

Vision 2001- the changing scene
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Year 2000 is here. Technology is computers these days. We are shifting to highly customized distribution of services. The changing scenario is the changing scenario of competition. Let our remember that liberalization brings with it some interesting facts like improved quality of products in very competitive markets a number of distribution channels and economic liberalization that allows opportunities and challenges abounded in the areas of the financial services scene. Liberalization may also allow to a greater extent increased costs due to escalation in labor costs at least in line with inflation, higher commission rates to be allowed to the multifarious intermediaries, the increased cost of modern technology requiring huge capital investment without any savings in running cost. Communication with customer and hidden aspirations What we should be asking? What does the customer want from us?
Insurance must evolve from traditional role where we tell people what is best for them to a role where customer wants to have more independence and wants to have more independence and wants to have the facts to Kamei decision. The consumer has become more knowledgeable about financial matters. The greater degree of knowledge has resulted into more sophisticated population. Speaking from the customer point of view his aspirations would be 1. What type of presales professional advises is provided to him? 2. When is the policy contract defining mutual intentions correctly being delivered? 3. Whether there is an efficient system of settlement of claims in case there is an unfortunate loss? 4. Whether the customer is provided with an overall insurance awareness program which could help him to understand the insurance contract better?
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Increased customer sophistication will now encourage us to respond with a range of products and services designed to give the customer what he wants through multi lateral delivery system. Multi lateral delivery system that shall emerge incorporating the new sales channel like sales jointly with banks, sales by direct mail, customer service cells, purchase outlets etc. Saving linked long term insurance plans are likely to emerge and get a good response and agents brokers also may have more interest in view of substantial and consistent commission brokerage.
PROPOSED PRIVATE PLAYERS IN INDIA

A number of foreign Insurance companies have set up representative office in India and have also tied up with various asset management companies. They have either signed Memorandum of Understanding with Indian companies or are trying to do the same. A few of them have been around for the last four to five years. Some have carried out extensive research on the Indian Insurance sector. Others have set up liaison offices. All of them are waiting with bated breathe for the opening up of the sector and taking a bite of the great Indian Insurance pie.
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1) Mitsui marine and fire insurance company. Established in 1918 in the decade Japan rise as a new commercial industrial power on the eastern horizon. From than onward the company has underwent into number of changes and now acquired the present status of one of the leading Japanese company operating in all sectors of global market. With the premium income of US$5.4 billion, Mitsui Marine has got third ranking in Japanese market, which is the second largest non-life insurance market in the world.
2) ING insurance ING insurance is a sub holding company of ING Group. ING insurance incorporates more than 60 business units, employing more than 25,000 people in 27 country as well as representative offices in India, China and Brazil. ING insurance offers life insurance, pension, group insurance and general insurance to customers through a range of distribution channels. Total revenues of ING insurance in 1997 exceed US $23 billion (ING 92,000 crore).
3) Royal and Sun Alliance Its a new company with over 400 years combined experience. Royal insurance and sun Alliance insurance merged in 1996, creating one of the worlds largest truly international insurance Company. Each of these renowned organizations had built there secure and highly respected businesses over combine 400 years they did in 1710, the date the group was founded. These principles include an unparalleled commitment to expert underwriting; skilled risk improvement backed by financial strength, and reliable reputations for fair and promptly claims paying.
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Now, as Royal and sun Alliance, they are well placed to develop their international experience in the key market across the world. Our increased capacity and capability enhance our ability to serve the needs of clients however large or complex. 4) Allianz After being founded in 1890, within a few decades allianz became the largest insurance company in Germany. Over the past 15 years alliance had secured its place amongst the worlds top insurance Corporations. Today, allianz is more competitive, more customer oriented and more financially solid than ever before. Based on premium income allianz today is amongst the top largest composer insurance companies in the world and among the few AAA rated companies by standards and poors. Mainly the types of business they deal in are general insurance (engineering, property, marine, causality and miscellaneous) life and health insurance asset management. 5) Cigna Cignas history extends back 2007 years to be founding in 17792 of his oldest predecessors company, the insurance company of North America. Today, Cigna maintain a global network of sales and service offices and operates in 26 countries, staffed by approximately 45,000 employees worldwide. With assets of nearly US $115 billion, revenue of more than US $20 billion, and shareholders equity exceeding US $8 billion, Cigna ranks among the worlds leading providers of employee benefits including healthcare and retirement program insurance and related financial services. 6) Swiss Re The Swiss Reinsurance Company was founded in 1863 in the Zurich. Today, Swiss Re group is one of the worlds leading and financially stronger reinsurance, with roughly 8800 employees and gross premium written in 1998 of US $13.136 million. Swiss Re regularly receive triple AA @ rating from standards and poors and moods. With over 70
offices in more than 30 countries, Swiss Re is in an excellent position to offer its client added value: reinsurance cover, alternative was transfer (ART) instruments and a broad range of supplementary services for comprehensive risk management. The following tie-ups are already in place: INDIAN PARTNER Alpic Finance Tata CK Birla Group ICICI Sundaram Finance Hindustan Times Ranbaxy HDFC Bombay Dyeing DCM Shriram Dabur Group Kotak Mahindra Godrej Sanmar Group Cholamandalam SK Modi Group 20th Century Finance M A Chidambaram Vysya Bank INTERNATIONAL PATRNER Allianz Holding, Germany American Int. Group, US Zurich Insurance, Switzerland Prudential, UK Winterthur Insurance, Switzerland Commercial Union, UK Cigna, US Standard Life, UK General Accident, UK Royal Sun Alliance, UK Liberty Mutual Fund, US Chubb, US J Rothschild, UK Gio, Australia Guardian Royal Exchange, UK Legal & General, Australia Canada Life Met Life ING
Other proposed players in indian market 1. ING Insurance International B.V. 2. Mitsui Marine and Fire Insurance Company Ltd. 3. General Accident Insurance Plc. 4. Royal and Sun Alliance 5. Zurich Risk Management Services 6. Commercial Union 7. Chubb Group 8. Prudential Corporation Plc.
9. The Tokyo Marine and Fire Insurance Company Ltd. 10. Yasuda Fire and Marine Insurance Company 11. Eaglestaree 12. Lincoln National Corporation 13. ING Barings India Pvt. Ltd. 14. Guardian Insurance Services Pvt. Ltd. 15. Aetna International Inc. 16. Zurich Insurance Group 17. CIGNA 18. Allianz AG. 19. American International Group Inc. 20. The Sumitomo Marine and Fire Insurance Company Ltd. 21. TATA Finance Ltd. 22. Alpic Finance 23. IFCI 24. HDFC 25. Jardine Fleming India Ltd. 26. Global Trust Bank 27. State Bank of India 28. Bank of Baroda 29. IDBI 30. ICICI
Conclusion
The need of the hour is to inject professionalism in entire approach of non-life insurance market which includes continued focus on customers total quality performance, technical upgradation,
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adoption of latest information technology and to train the sales force so that a cadre of highly motivated marketing force may be prepared to create positive environment. The proper marketing mix will be required to understand the buyer behavior and the needs of various segments of the market and with the marketing excellence and sound marketing approach the vast potential insurance market will have to be tapped. With more competition and active market force, where players of global standard will compete with each other, there are all positive signs of growth in this sector.
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AWARENESS OF HEALTH INSURANCE PURCHASE OF HEALTH INSURANCE SHARE OF USERS COVERAGE OF FAMILY MEMBERS PRICING WOULD YOU BUY INSURANCE WITHOUT TAX SAVINGS HOW IS THE SERVICE LEVEL OF THE INSURANCE COS(QUITE LOW, LOW, MODERATE, HIGH, TOO HIGH) HOW MUCH IS THE PAPERWORK OF THE INSURANCE COS CLAIM PERIOD CLAIM PROCEDURE PAYMENT METHODS ADD ONS, RIDERS PRE-EXISTING DISEASES
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Tax Benefits Special mention must be made of the fact that LIC enjoys the special privilege of tax rebate in respect of premiums paid on policies in the name of spouse or children, major or minor, even married daughters. PPF was allowed the benefit in respect of minor children only. FA94 has extended level playing field to PPF, as well as ULIP and Dhanaraksha (retrospectively w.e.f. 1.4.94) by extending the same benefit as enjoyed by LIC to these accounts. Where a taxpayer discontinues an LIC policy before premiums for two years have been paid, all rebates allowed during earlier years shall be withdrawn and will be deemed to be the income of the year which the policy is discontinued. Money received under a Life or Accident Policy effected in personal or family interest would normally be capital receipts and therefore not taxable. No capital gains tax is payable in respect of such amounts. In the case of Life Annuity, the amount of annuity installments will be treated as Income from Other Sources. In the case of Annuity Certain, the interest potion of the annuity installments are treated as income. If Cash Option is exercised, the difference between the amount of cash option received and the total amount of premiums paid are treated as taxable income. Tax Concession Contributions by the individual (and not HUF) out of his income chargeable to tax to Jeevan Suraksha attracts deduction of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assesses account) upto Rs. 10,000 under newly formulated Sec. 80CCC. Rebate u/s 88 is not available. Fringe Benefits Apart from the benefit of risk coverage, LIC also provides loans to its policy holders at a rate 10.5%. The loan, being equal to 90% of the surrender value of the policy is provided after it has run for three years. The small savings schemes apart from having s smaller maturity period also provide another tangible benefit -- allowing you to participate in lucky draws run by state govts. as an incentive for investing. To avoid subsequent sharing, agents pass on 4050% of the premia for the first year.
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UNIT TRUST OF INDIA

Unit Trust of India is a statutory public sector investment institution set up in 1964 by an Act of Parliament. It mobilizes the savings of the community through the sale of its units under variety of Schemes and Plans. These savings are then invested in shares and debentures of Companies and other securities having growth potential for the benefit of the unit holders. Income from these investments, after meeting the expenses of the Trust and other provisions is distributed to the Unit holders as income/bonus/capital appreciation. What are Units? Units Trust sells Units to the public, each of which confers on the buyer a proportionate right in the beneficial ownership of the assets of that Scheme/Plan which mainly comprises of shares and debentures. units provide a medium through which a number of small investors combine management. Also the Unit trust in may Schemes offers to buy back (Repurchase) the units from the holders at prices determined under an approved formula. These advantages of experienced professional management safety, diversification of investment and liquidity are unique. Units of the Trust have been declared as trustee Securities within the meaning of the Indian Trust Act, 1882, as a result of which eligible trusts can also invest in units. Schemes & Plans Unit trust has been launching innovative Schemes and Plans to cater to the needs of all strata of society viz. childrens Schemes (CGGF98, CCCF and RUP), medical & insurance Plan (SCUP & ULIP), regular income Plan for women (GUP), pension Plan (RBP), regular monthly/deferred income Plans (MIPs & DIPs), balanced fund (US 64, US 95) growth schemes (Master share, Master Plus, Mastergain, Grand Master/US-92, EOF, PEF & IEF) & tax saving plans (MEPs & ULIP), Scheme for charitable and religious trust (CRTS) & Money Market Fund. 1. OPEN END SCHEMES a. Balanced Fund 1. Unit Scheme 1964 (US64)
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2. Unit Scheme 1995 (US95) b. Schemes for Children 3. Childrens Gift growth Fund 1986 (CGGD86)-Sale suspended w.e.f. 1.11.97. 4. Childrens Collage & Career Dunned (CCCF) 5. Rajlakshmi Unit Plan (II) (RUP (II)) c. Scheme for Women 6. Grihalakshmi Unit Plan (GUP) d. Schemes for post retirement benefits 7. Retirement Benefit Unit Plan (RBP) 8. Senior Citizens Unit Plan (SCUP)
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e. Schemes for Charitable Trusts and Societies. 9. Unit Scheme for Charitable & Religious Trusts and Register Societies-1981 (CRTS81). f. Growth Schemes 10. Master gain 1992 11 Grand Master 1993 12. Primary Equity Fund (PEF) g. Tax savings Schemes 13. Unit Linked Insurance Plan 1971 (ULIP71) 14. Master Equity Plans (MEPs) h. Money Market Fund 15. Master Market Fund(MMF) I. Feeder Scheme 16. Omni Plan II. Closed End Schemes a. Income Plan 17. Monthly Income Plans (MIPs) 18. Bhopal Gas Victims Monthly Income Plan (BGVMIP) 19. Deferred Income Plans (DIPs) 20. Institutional Investors Special Fund Units Xeheme (IISFUS) b. Growth Schemes 21. Mutual Fund Unit Scheme 1986 (Master share)
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22. Unit Scheme 1992 (US 92) 23. Master share Plus (Masterplus) 24. Master Growth Unit Scheme (Master growth) 25. Equity Opportunity Fund (EOF) 26. Index Equity Fund (IEF) 27. UTI Master Value Unit Plan-98. 28. UTI Master Index Fund 29. Institutional Investors Special Fund Unit Scheme98(II).
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TAX BENEFITS OF INVESTING IN THE DIFFERENT SCHEMES / PLANS / FUNDS OF UTI

The are attractive tax benefits available to the investors investing in the different Schemes / Plans / Funds of UTI as given below : Tax Concessions : For Individuals : Taxation of income and capital appreciation under the Schemes / Plans of UTI will be subject to prevalent tax laws. Income from the units under all Scheme / Plan of UTI enjoys deduction from income upto an overall limit of Rs. 15,00/- under section 80L of Income Tax Act, 1961. Gift Tax : As per the Gift Tax Act, 1958, the value of gifts made by a person upto Rs. 30,000/in a year is exempted from the Gift Tax. Units purchased under the CCCF, RUP and GUP can form part of whole or such gifts every year. Gift Tax exemption limit has been raised to Rs. 1 lakh in case of gift made to a female relative who is dependent on the tax payer for support and maintenance on the occasion of marriage of such relative. Units purchased under Grihalakshmi Plan can form part or whole of such gifts every year. Capital Gains Tax : Any long term capital gains arising out of the investment in the Schemes / Plans will be subject to treatment indicated under Sections 48 & 112 of the Income Tax Act, 1961.
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PNB MUTUAL FUND

Equity Growth Fund (EGF) 1995 Objective: The main objective of the scheme to provide a growth oriented investment opportunity as also tax benefits U/s 88 of Income Tax Act 196. However, major thrust would be on providing growth through capital appreciation. Tax Benefits : The following tax benefits are presently available : i. Any eligible applicant who has invested in this scheme shall be entitled to a deduction from the amount of income tax a sum of equivalent to 20% of the investment made under the scheme subject to a maximum investment of Rs. 10000 per anum. In other words 20% of the amount invested of maximum of Rs. 10000 i.e. Rs. 2000 could be deducted from the tax liability of the investor. ii. Dividend on units of REGF-95 will eligible for income tax deduction within over all limit of Rs. 10000 under Section 80L of the Income Tax Act, 1961. iii. Any capital gain arising from withdrawal of part or whole of the investment made under the scheme after the completion of one year will be considered as long-term capital gain and shall be tax accordingly under Section 112 & Section 48 of Income Tax Act, 1961. iv. No tax will be charged on gift of units held under the scheme provided the aggregate value of gifts made during a financial year (Including gift of units) does not exceed Rs. 30,000.
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ICICI TAX SAVING BOND

Investors can avail of rebate U/s 88 or tax benefits Us/ 54EA or 54 EB of the Income Tax Act, 1961, by investing in Bonds issued by a public financial institution for the purpose of deploying these funds towards infrastructure projects. The investor may choose any of the following Options in respect of subscription for Tax Saving Bond.
Option Tax Benefit under Sec. Issue Price (Rs.) Face Valuje (Rs.) Redemption Period Interest (%)** (Payable annually) Yield to Investor (%)** (Including Tax Benefits) 22.3 I 88 5,000/5,000/3 years 12.50 II 88 5,000/7,350/3 years 3 months @ Zero Coupon Bond (YTM : 12.6) 20.6 20* 14.2 40* 16.1 60* 18.0 80* 20.1 18.3 III 54 EA 5,000/5,000/3 years 12.50 IV 54 EB 5,000/5,000/7 years 13.00
* Percentage of Capital Gains in amount invested (assuming the amount invested is equal to sales consideration). ** Subject to TDS as per the ten prevailing tax laws. @ Tax Saving Bond Option II is in the nature of a Deep Discount Bond
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COMPARISON
LIC & ULIP The institution of life imsurances is a haven of security shielding a family against countless hardships (such as remaining hungry or being homeles) Life insurance is not an investment but a necessity, but only for those who need the cover. LIC policies have low returns ULIP gives opportunity to earn attractive, returns, ever when the life is covered. Any one, especially a taxpayer, who need life cover and who can afford to high premium, low cover policy, should first turn to ULIP where the cost of cover is lowest.
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NATIONAL SAVING SCHEMES
All the schemes of NSO, with the sole exception of PPF have one become insipid. Some great Visionary had created the basis concept of small savings. The schemes are attractive due to convince of post office as they are stretched over the length and breadth of our country , secondly safety : better than even nationalized banks and easily transferable. PPF and NSC are the best available and most recognized way in India to save tax. To Sum up if a person has low investment capacity or want to save a lesser amount of tax he must go for any individual scheme of LIC/GIC or National Saving scheme which provides 20% tax rebate on the investment made. But if a having investment is to made for saving then one mut go for the various ELSS (Equity Linked Saving Schemes) of different financial institutions available in the market as you get a rebate of 20% on the and also a good return.
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HISTORY OF INSURANCE
The insurance was in private hands before 1971 and was nationalised in 1972 with all private companies merged into General Insurance Corporation of India as the parent company with four subsidiaries as National Insurance Company Ltd. with Head Office at Calcutta, New India Assurance Company Ltd. with Head Office at Bombay, Oriental Insurance Company Ltd. with Head Office at New Delhi and United India Insurance Company Ltd. with Head Office at Madras. In 1993 the need for Private Insurance Companies and
Multinational Companies was felt and beginning of liberalisation process started. The Insurance Reforms Route April 1993 R N Malhotra Committee an Insurance Sector reforms and deregulation set up. January 1994 Malhotra Committee submits report to finance minister. January 1996 An interim insurance regulatory Authority set up through a resolution. September 1996 December 1996 August 1997 The IRA Bill introduced in the Parliament and referred to a standing committee The IRA Bill is withdrawn following opposition to foreign participation in the domestic
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Insurance Regulatory Authority Bill drafted
insurance sector. November 1997 June 1998 Union government gives greater autonomy to LIC, GIC and its four subsidiaries. Union Budget announces opening up of the insurance sector. The Likely Schedule January 1999 Notification of IRA is statutory authority and amendments LIC and GIC Acts. March 1999 April July 1999 IRA sets the procedure for filing applications. 3 month open window for receipt of
application. December 1999 2000 In principal approvals to be granted. Private Insurance products hit the market.
After a long wait, however, there was light at the end of the tunnel when the Union Cabinet first gave its nod for 26 per cent direct foreign equity in any insurance JV, and later allowed foreign institutional investors (FIIs) to hold 14 percent stake in such ventures effectively pushing up the foreign equity proportion to 40 per cent. That was music to the ears of Indian consumers who can expect to see a variety of insurance products may be an year from now. Feels N. N. Joshi, Chief Advisor to ING Insurance: if the notification giving the statutory status to the Insurance
Regulatory Authority (IRA) is issued by the end of January, 1999, then the licences could be coming by the end of the year.
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The Concerns Areas of concern remain though. Tax breaks, which are available to the existing players, is one such. Although tax incentives for insurance companies are quite common in other countries, they apply equally to all players, We hope that India will be no different, thinks Joshi of ING Insurance, Commercial Unions Sandy Davidson, however, was more confident and pointed out that since the government has assured a level playing field for all players private and government-tax breaks should apply to all players equally. Partnerships and Opportunities
Choosing the right partner has also been a critical issue, especially for the foreign insurance giants. While most players have already tied up with their partners, the prime parameters for selecting them has been compatibility and how well the two complement each other. When we tied up with Vysya Bank, we knew that we had complementary strengths. While we had the global expertise, Vysya has a good branch network, client-base and understanding of the domestic market, pointed out Yvo Metzelaar, Chief Representative of ING Insurance in India.
One aspect which no foreign insurer would comment upon was that the ability of the domestic partner to get the licence was a critical selection criteria. Thus, institutions like Industrial Credit and Investment Corporation of India. Housing Development and Finance Corporation and mega-groups like the Tatas and Birlas wee the obvious choice. But others have looked more closely at the synergies in operations. Whats there fore The Consumer For the Indian consumer, the foreign players promise better service and innovative products. Eches Sandy Davidson: Our products will be variable in the sense that each policy could be tailor-made to the specific requirements of the client. However, it is the health insurance segment which is likely to see the hottest competition and where the consumers will perceive the biggest difference in services between Indian and foreign companies. The reason for this are many. First and foremost, health insurance has become significant with people becoming more and more
health-conscious. But at the same time, the cost of healthcare is going up. Which creates a high potential for growth in this segment. The other prominent reason is that unlike a life policy, which, once bought, runs for years, a health or Medicare policy has to be renewed annually. Thus, companies like Prudential ICICI, ING Vysya, Commercial Union Hindustan Times, which are targeting the life segment, will find it difficult to sell policies to those who have recently bought one. Whereas, in the Medicare segment, all policy holders come
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back to the market every year., And last, but definitely not the least, the GIC and its subsidiaries have not been very aggressive in this segment. It has been only recently that they have introduced changes in their mediclaim policy. Capital Flows Although the line-up of foreign majors who want to set up shop in India is pretty impressive, they all realise that profit generation will take a long time. While Davidson expects that it will take
about five to seven years to break even, Metzellaars estimate was slightly higher at about six to eight years. In any case, most companies agree that the it is a long- term investment for them and the initial years will be really crunch time. On capital requirements, local players eyeing the insurance sector find the Rs. 100 crore minimum capital a bit high, but for international majors, it not a big amount. And with the initial stake restricted to just 26 per cent, it means they have to fork out only Rs. 26 crore while the Indian partner will have to pump in Rs. 74 crore. Davidson pointed out that Rs. 100 crore may be sufficient to start of with, but as the business grows, more funds will have to be ploughed in order to meet the capital adequacy requirements that the IRA may stipulate. And the cost of building network infrastructure will also be pretty steep.
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Insurance Cos start-up capital must be more than Rs. 100 cr. Stake of foreign co either by itself or through arm must not exceed 26% Companies interested in entering the insurance sector in India will need to bring in much more than the stipulated Rs. 100 crore as the initial capital would be utilised in the first couple of years on account of the stringent solvency margins, said Mr. B.K> Chaturvedie, special secretary for insurance in the finance ministry. Mr. Chaturvedie said with a start-up capital of Rs. 100 crore a life insurance company will be in a position to underwrite business up to only Rs. 3,000 crore. He said if this was the size of business that is attracting companies from all over the world it would turn out to be a very unprofitable proposition. In the case of non-life companies solvency margins are even more strict he said. He said com Thpanies with a long term interest would have to be in a position to invest much more than Rs. 100 crore. He added that only those companies with a long term interest would be allowed to operate. He said companies which have set up grand daughter companies should not blame the government when their
applications are rejected.
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The minister of state for finance, Mr. B Vikhe Patil, speaking at the concluding session of Ficcis insurance conference, said players can make use of cooperatives to spread insurance covers among the rural populace.
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INSURANCE: MYTH & REALITY

Foreign companies Market share in Asia Years Market Open Market Penetration 0-5 China Malaysia Taiwan Korea Japan Indonesi a 6-10 11+ 0-10% 11-20%
X X X X X X
X X X X X X
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CONTENTS
Page No. Acknowledgement Introduction (Nature of Insurance, Brief History) Queing for Insurance Pie in India Brief History of Life assurance in India PR & Insurance in Services Marketing Insurance Marketing The Roles of Marketing in Financial Services (In Insurance) Insurance in Services Marketing Different Services Provided through Claims Committee Service through Different Policies Blue Print of LIC Services Findings of the Survey (Gaps) Recommendation & Suggestions Annexure 1 6 7 10 16 26 33 38 42 45 46 48
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