Professional Documents
Culture Documents
Executive Summary
which is the Surat S.B.U of Iffco Tokio General Insurance Co. Ltd.
Iffco Tokio General Insurance Co. Ltd. is one of the leading player in
general insurance industry among the private players. It is increasing its market
share day by day.
Introduction Of industry
Introduction
The Indian insurance industry is segmented into two distinct markets: the
life insurance market and the non-life, or general, insurance market. The General
insurance business in India can trace its roots to the Triton Insurance Company
Ltd., the first general insurance company established in the year 1850 in Calcutta
by the British. Some of the important milestones in the general insurance
business in India are:
• 1907: The Indian Mercantile Insurance Ltd. set up, the first company to
transact all classes of general insurance business.
• 1957: General Insurance Council, a wing of the Insurance Association of
India, frames a code of conduct for ensuring fair conduct and sound
business practices.
Regions/
Country USD (billions) Percentage
North America 689.2 32.7
Latin America 653.0 31.0
Europe 32.9 1.6
Asia 647.1 30.7
India 3.0 0.15
World 2,105.8 100.0
The Indian insurance sector will register a high growth rate in the future
years to come, says the report prepared by Fitch Ratings. This will be due to the
innovative products, better distribution network, better services coupled with
other never-before changes that have taken place in the insurance sector. The
report laid stress on branding, customer service and tailor made products that will
assume importance besides information technology that will become vital to bring
down costs in the future. Also data warehousing, ensuring effective cross selling
will grown in importance to exploit the largely unexploited market.
Regulations
In India Insurance is a federal subject. The primary legislation that deals
with insurance business in India is:
Insurance Regulatory Authority
On the recommendation of Malhotra Committee, an Insurance Regulatory
Development Act (IRDA) passed by Indian Parliament in 1993. Its main aim was
to activate an insurance regulatory apparatus essential for proper monitoring and
control of the Insurance industry. Due to this Act several Indian private
companies have entered into the insurance market, and some companies have
joined with foreign partners. In economic reform process, the Insurance
Companies has given boost to the socio-economic development process. The
huge amount of funds that are at the disposal of Insurance Companies are
directed as desired avenues like housing, safe drinking water, electricity, primary
education and infrastructure. Above all the policyholders gets better pricing of
products from competitive insurance companies.
Liberalization
The opening up of Insurance sector was a part of the ongoing
liberalization in the financial sector of India. The domain of State-run insurance
companies was thrown open to private enterprise on December 7, 1999, with the
introduction of the Insurance Regulatory and Development Authority (IRDA) Bill.
The opening up of the sector gave way to the world known names in the industry
to enter the Indian market through tie-ups with the eminent business houses.
What was once a quiet business is becoming one of the hottest businesses
today.
Post liberalization
The changing face of financial sector and the entry of several companies
in the field of non-life Insurance segment are one of the key results of these
liberalization efforts. Insurance business by way of generating premium income
adds significantly to the GDP. Despite the fact that the market is vast in India for
the Insurance business, the coverage is far less compared with the international
standards. Estimates show that a meager 35-40 million, out of a population of
950 million, have come so far under the umbrella of the insurance industry. The
potential market is so huge that it can grow by 15 to 17 per cent per annum. With
the entry of private players, the Indian Insurance Market may finally be able to
make deeper penetration in to newer segments and expand the market size
manifold. The quality of service will also improve and there will be wide range of
product catering to the needs of different customers. The pace for claims
settlement is also expected to improve due to increased competition. The general
insurance market in India is likely to be risky in the initial stages, but this will
improve in the next three to five years Therefore, it may be advantageous to be a
second-round entrant. In the general insurance market the need to build trust
over time is less important than in the life market because the risk assessment
systems and data that are the key to success in the general insurance market
are significantly underdeveloped in India even today
Market Players
General Insurers:
GIC had four subsidiary companies, namely (with effect from Dec'2000, these
subsidiaries have been de-linked from the parent company and made as
independent insurance companies.
1. The Oriental Insurance Company Limited
2. The New India Assurance Company Limited,
3. National Insurance Company Limited
4. United India Insurance Company Limited.
Private players
Bajaj Allianz
Bajaj Allianz General Insurance Company Limited is a joint venture
between Bajaj Auto Limited and Allianz AG of Germany. Both enjoy a reputation
of expertise, stability and strength. The venture Bajaj Auto holds 74 per cent of
the paid up equity capital of Rs 110 crore, while the remaining 26 per cent is held
by Allianz.
Royal Sundaram
Royal Sundaram, a joint venture between Sundaram Finance of Chennai,
India and Royal & SunAlliance of UK, is built upon values of truth, trust,
teamwork, people commitment and professionalism.
Introduction Of Company
opened up call centers with a universal toll-free number that can be accessed
throughout India.
The Tokio Marine & Fire Insurance Co.Ltd. has over one hundred and
twenty years of experience in general insurance business and is the largest and
oldest general insurance company of Japan. It is a member of the large and
highly diversified Mitsubishi group comprising of over 1500 companies. The
company is rated 'AA' (strong financial security characteristics) by the
international rating agency Standard & Poor's. Tokio Marine has been
continuously serving as one of the important reinsurance companies to the
nationalized Indian Insurance market. Main aim of the company are as follows.
Total 1000
Indian partners:
During mid- sixties the Co-operative sector in India was responsible for
distribution of 70 per cent of fertilizers consumed in the country. This Sector had
adequate infrastructure to distribute fertilizers but had no production facilities of
its own and hence dependent on public/private Sectors for supplies. To
overcome this lacuna and to bridge the demand supply gap in the country, a new
cooperative society was conceived to specifically cater to the requirements of
farmers. It was a unique venture in which the farmers of the country through their
Indian Potash Limited (IPL) remained as the sole agency for import,
handling, distribution and sales promotion of Potassic Fertilizers in the country
from 1970 to 1992 when import of Potassic Fertilizers was decontrolled and
decanalised. However, the company continues to be one of the three state
Trading Enterprises and is also entrusted with the responsibility of maintaining
buffer stocks on behalf of Ministry of Chemicals & Fertilizers for decontrolled
fertilizers.
Foreign Partners:
• MILLEA ASIA:
Millea Asia Pte. Ltd considers the Asian market as top priority area and
has assumed the role of regional management head quarters and as a technical
support center for the Asian subsidiaries / affiliates like ITGI. Management skills
and insurance technical knowledge is centered at this management entity and
shared with and transferred to ITGI for the betterment in all respects.
ITIS would, to its marketing team offer an excellent pathway and a fast
track growth by rewarding the high performers and thus stimulating growth.
The products under the Retail Lines cater to the insurance needs where
the insured is an individual or small/medium unit.
• Home
• Trade Protector
• Office Protector
• Critical Illness
• Surgery Protector
• Personal Accident
Mission:
To win the trust of individuals, trade, industry and commerce and protect
citizens, corporates, cooperatives and international investors in India.
Vision:
Products:
• All risk
• Critical illness
• Group medishield
• Industry protector
• Motor commercial
• Office protector
• Professional indemnity
• Surgery protector
• Trade protector
Earned
9.67 0.94 3.66 0.02 26.17 2.79 39.50 3.75
Premium
Interest 0.52 0.18 0.56 0.03 1.89 0.38 2.97 0.59
Total 10.19 1.122 4.22 0.05 28.06 3.17 42.47 4.34
• Business growth
For ITGI, business in fire policy premium was Rs. 103.52 Crores in 02-03
as compared to Rs. 36.14 Crores in 01-02, business in marine policy premium
was Rs. 18.42 Crores in 02-03 as compared to Rs. 3.34 Crores in 01-02, in misc.
policy premium was Rs. 91.39 Crores in 02-03 as compared to Rs. 31.02 in 01-
02.
SHAPE \* MERGEFORMAT
• UNDERWRITING:
3. We ensure constant touch with our clients so that all additions, deletions
and modifications are inserted in the policy without any time gap to ensure
its relevancy at the time of claim.
5. We ensure that receipt & policy copy with suitable endorsements reaches
to our customers within 48 hours.
• CLAIMS:
2. We enter into a written MOU for binding our commitment for the prompt
settlement of the claim into a legal contract. This MOU binds us legally to
abide by our commitment.
3. We carry out simulation testing for surveyors to ensure that there time and
quality is as per our expectations
5. We are a company which is totally IT driven. Our all offices in the country
are connected by WAN and each office has the accessibility of the policy
underwritten by any of the offices in the entire country. This is very helpful
in servicing in case the accident/loss takes place in the city other than
where the underwriting office is situated. Hence all your motor/ marine
claims can be settled then & there only in case the accident takes place
outside city & you so desire.
6. We are having a unique concept of CALL CENTRE. The call center shall
be accessible from any part of the country through a toll free number. The
product related information’s, claims intimations, claims progress & other
insurance related information’s could be had through it.
• Definition:
By taking life insurance a person can have peace of mind and need not
worry about the financial consequences in case of any untimely death.
By the passing of the IRDA Bill, the Insurance sector has been opened
up for private companies to carry on Insurance business. Click on the following
link for the list of insurance companies operating in India.
• INSURANCE BUSINEES:
Motor Insurance is a Tariff Business as per Motor Vehicle Act, 1988. The Act
was repealed in the year 1988 and has some amendments in November 1994 &
later on premium was revised in July, 2002.
It is advisable for vehicle owners to take comprehensive policy, which covers the
risk of vehicle, third party liability as well as personal accident of driver, driver-
owner and passengers.
Exclusions :
The cover under this policy is similar to the cover under Private Car Policy. But
the following losses are not covered :
General
Fire insurance policy is suitable for the owner of property/ financial interest
who holds the property (movable or immovable) such as building, plant &
machinery, furniture, fixture & fittings and other contents, stock & stock in
process along with goods held in trust or in commission including stocks at
suppliers/ customer’s premises, machinery temporarily removed from the
premises for repair.
Perils covered
Fire
Lightning
Explosion/ Implosion
Aircraft damage
Riot, Strike, Malicious Damage
Storm, Tempest, Hurricane, Tornado, Flood & Inundation
Impact damage
Subsidence & Landslide including Rockslide
Bursting & Overflowing of Water Tanks, apparatus and Pipes.
Missile Testing operations
Leakage from Automatic Sprinkler Installation
Bush Fire.
Additional Covers
Level of Coverage :
Sum Insured option on either Market Value (i.e. new replacement cost
less depreciation for wear & tear & use) or Reinstatement Value basis
(i.e. Local Authority Clause for covering additional cost to comply with
regulations affecting immovable property).
In respect of stocks, you can opt for various alternative Clauses to take
care of fluctuating stocks at one place or at different places and also
for seasonal variations of stocks by way of Floater Policy, Declaration
Policy or Floater Declaration Policy which considerably reduces your
premium outgo while providing full protection level.
Exclusions :
Excess :
EXCESS DESCRIPTION
5% of each claim or Rs. 10,000/- If loss due to operation of lightning,
whichever is higher. subsidence & landslide, earthquake-fire
& shock, storm/ tempest/ flood/
inundation, etc.
A flat rate of Rs. 10,000/- If loss happened due to perils, other
those mentioned above, covered under
the policy.
A flat excess of Rs. 10,000/- In case loss, destruction or damage to
bullion, unset precious stones, curious,
work of art (unless specifically covered)
due to insured perils.
Miscellaneous Insurance.
Perils Covered :
ITGI policy provides protection against loss or damage to insured property due to
burglary and housebreaking, i.e,
Theft following upon an actual, forcible and violent entry to or exit from the
insured premises, and
Also damage to the premises themselves by burglars during such
incidents.
Level of Coverage :
The Sum Insured should be fixed on current market prices for stocks.
Other items such as furniture, fixture, equipments, etc, it can be fixed
either on Market Value (i.e. new replacement cost less depreciation), or on
Reinstatement Value basis.
To cover the fluctuating stocks at one place or at many places or
variations due to seasonality, options are from Floater, Declaration or
Floater Declaration Polices.
Option for First Loss Policy where Sum Insured chosen is a percentage of
the full value of property in respect of stocks of bulk nature, where it is
impossible for the entire stocks/ contents to be burgled at one time.
Exclusions :
Section 3 : Money
Covers loss to Money. Money shall mean & include cash,
bank drafts, bank & currency notes, current coins, cheques,
postal orders, money orders and current postage stamps
which must be in the personal custody of the insured or his/
her authorised representatives and is being carried for
business purpose.
Premium Rating :
Rs. 5 per mille on the Sum Insured.
Coverage :
Loss of Money due to accident or misfortune whilst in
direct transit
1) from or to insured premises.
2) Between any collection/ payment centre and Bank.
Loss of Money due to house breaking, robbery,
dacoity, hold-up whilst in
1) Insured premises during business hours.
2) Locked safe or strong room, locked steel almirah/
standard cash box inside the insured premises
outside business hours.
Exclusions :
Shortage of money due to error or omission.
Loss of money entrusted to any person other than the
Insured or authorised representatives.
Loss from any unattended vehicle, transits outside the
limits of the city/ town where the insured premises are
located, etc.
Excess :
SCOPE OF COVER:
LIMIT OF LIABILITY
The liability of the company in respect of all claims admitted during the
period of Insurance shall not exceed the Sum Insured per Insured person as
mentioned in the Schedule.
EXCLUSIONS:
THE company shall not be liable to make any payment under this policy in
respect of any expended whatsoever incurred by any Insured Person in
connection with or in respect of:-
a) All diseases injuries which are in pre- existing condition when the cover
incepts for the first time.
b) Any disease other than those stated in clause c) below, contracted by the
insured person during the first 30 days from the commencement date of
the policy. This exclusion shall not however, apply in the opinion of panel
of medical practitioners constituted by the company for the purpose, the
insured person could not have known of the existence of the disease or
any symptoms or complaints thereof at the time of making the proposal for
insurance to the company. This condition shall not however apply in case
of the insured person having been covered under this scheme or group
insurance scheme with any of the Indian insurance companies for a
continuous period of preceding 12 months without any break.
c) During the first year of the operation of the policy, the expenses on
treatment of diseases such as Cataract, Benign Prostetic Hyperthrophy,
Hysterectomy for Menorrahagia or Fibromyoma, Hemia, Hydrocele,
Congenital Internal Disesase, Fistuainanus, piles, Sinusitis and related
disorders are not payable. If these diseases are pre- existing at the time of
proposal they will not be covered even during subsequent period of
renewal too.
d) War and Nuclear Risks:
e) Circumcision unless necessary for treatment of a diseases nt excluded
hereunder or as may be necessitated due to an accident, Vaccination or
inoculation or change of life or cosmetic or aesthetic treatment of any
description, plastic surgery other than as may be necessitated due to an
accident or as a part of any illness.
f) The cost of spectacles and contact lenses, hearing aids.
g) Dental treatment or surgery of any kind unless requiring hospitalization.
h) Convalescence, general debility, Run- down condition or rest cure,
congenital external disease or defects or anomalies, sterility, venereal
disease, internal self- injury and use of intoxicating drugs/ alcohol.
In case the insured Person who is covered under Medi- shield Policy has
to go abroad for 15 days and accordingly he buys an Overseas Mediclaim Policy
for that 15 days and submits the proof of Overseas MEDISHIELD Policy to the
company. In that event the period of Insurance in respect of that insured Pesron
will be extended by 15 days. Alternatively if the Insured person is part of family
and / or Group and the period of Insurance is to be same for everyone in the
family, then in that case the pro-rata premium for the period when he was abroad
will be available as Refund credit to that Insured Peron and it can be adjusted
against next years renewal premium. However, there will not be Cash refund of
the Premium.
BONUS/MALUS:
b) INDEMNITY PERIOD:
3. COST OF TRAVEL
a) Cost of Travel for any relation, friend, colleague or any other
nominated person: the Maximum liability would be restricted to Rs.
15,000/- or actual expenses whichever is lower in any one period of
Insurance. The prescribed rate would be Rs. 30/- per Insured person.
b) Cost of Travel for Insured Person: The maximum liability of the
Company would be restricted to Rs. 7500/- or actual Expenses whichever
is lower in any one period of insurance. The prescribed rate would be Rs.
15 per person.
Discount available
In the Premium
Objective of Project
• The project is prepared for the partial fulfillment of the M.B.A programme
This project includes general detail about insurance industry, company details
different player in the market, product detail, & some detail of IRDA bill which has
been covered in the first part.
Now in second part I m presenting the different marketing channel & how they
can be integrated to have good results for the company.
Channel of Distribution:
Till few years back, the only mode of distribution of insurance products
was through Agents. While agents continue to be the predominant distribution
channel, today a number of innovative alternative channels are being offered to
consumers. A substantial shift in the distribution of insurance in India is expected.
Many of these changes will echo international trends. Worldwide, Insurance
products move along a continuum from pure service products to pure commodity
products initially, insurance is seen as a complex product with a high advice and
service component. Buyers prefer a face-to-face interaction and place a high
premium on brand names and reliability. As products become simpler and
awareness increases, they become off-the-shelf, commodity products. Sellers
move to remote channels such as the telephone or direct mail. Insurance is sold
by various intermediaries, not necessarily insurance companies. Some of them
are brokers, the internet and direct marketing. Banks and finance companies will
emerge as an attractive distribution channel for insurance. This trend will be led
by two factors which already apply in other world markets. First, banking,
insurance, fund management and other financial services will all form a set of
services rather than disparate ones.
Second, banks and finance companies are being driven to increase their
profitability and provide maximum value to their customers. Therefore, they are
themselves looking for a range of products to distribute. Though it is too early to
predict, the wide spread of bank branch network in India could lead to
bancassurance emerging as a significant distribution mechanism.Insurers in
India should also explore distribution through non-financial organizations. For
example, insurance for consumer items such as refrigerators can be offered at
the point of sale. This piggybacks on an existing distribution channel and
increases the likelihood of insurance sales. Alliances with manufacturers or
retailers of consumer goods will be possible. With Increasing competition, they
are wooing customers with various incentives, of which insurance can be one.
Another potential channel that reduces the need for an owned distribution
network is worksite marketing. Insurers will be able to market pensions, health
insurance and even other general covers through employers to their employees.
These products may be purchased by the employer or simply marketed at the
workplace with the employer’s co-operation. Pricing India is a very price sensitive
market. However, 65 per cent of the business is in tariff, where pricing is still
determined by the government, which decides the rates, terms & conditions for
various businesses like Fire, Motor, Engineering, Workmen compensation
insurance etc. It is going to change over the next few years. In non-tariff products
like personal accident, Burglary, Cash-in-transit, marine transit etc. There is a lot
of pressure on pricing. Although the insurers are free to quote the rates,
companies will have to be reasonable while determining a pricing structure
because, across the globe, there are instances of companies going bust while
playing the game of undercutting state-run companies.
One of the most significant changes in the financial services sector over
the past few years has been the growth and development of bank & insurance.
Banking institutions and insurance companies have found bank & insurance to
be an attractive and profitable complement to their existing activities. The
successes demonstrated by various bank & insurance operations particularly in
Europe have triggered an avalanche of mergers and acquisitions across
continents and efforts are on to replicate the early success of bank & insurance
in other parts of the world as well.
Distribution is the key issue in bank & insurance and is closely linked to
the regulatory climate of the country. Over the years, regulatory barriers between
banking and insurance have diminished and have created a climate increasingly
friendly to bank & insurance. The passage of Gramm-Leach Bliley Act of 1999 in
US and IRDA Bill in India in 2000 have stimulated the growth of bank &
insurance by allowing use of multiple distribution channels by banks and
insurance companies.
bank & insurance experience in Europe as well as in other select countries offers
valuable guidance for those interested in insurance distribution through the
banking channel in developing markets. Many banks and insurers are looking
with great interest at building new revenue through bank & insurance - including
large, traditional companies that wouldn't have considered such an approach
about a decade ago. Of particular interest, many believe, is the potential for bank
& insurance in developing economies such as those of Latin America and
Southeast Asia.
-Career Agents
-Special Advisers
-Salaried Agents
-Direct Response
-Internet
-e-Brokerage
Career Agents:
Many bank & insurance, however avoid this channel, believing that agents
might oversell out of their interest in quantity and not quality. Such problems with
career agents usually arise, not due to the nature of this channel, but rather due
to the use of improperly designed remuneration and/or incentive packages
Special Advisers:
Clients mostly include affluent population who require personalised and high
quality service. Usually Special advisors are paid on a salary basis and they
receive incentive compensation based on their sales.
Salaried Agents:
Having Salaried Agents has the advantages of them being fully under the
control and supervision of bank & insurance. These agents share the mission
and objectives of the bank & insurance. Salaried Agents in bank & insurance are
similar to their counterparts in traditional insurance companies and have the
same characteristics as career agents. The only difference in terms of their
remuneration is that they are paid on a salary basis and career agents receive
incentive compensation based on their sales. Some bank & insurance,
concerned at the bad publicity which they have received as a result of their
career agents concentrating heavily on sales at the expense of customer service,
have changed their sales forces to salaried agent status.
Platform Bankers:
Platform Bankers are bank employees who spot the leads in the banks
and gently suggest the customer to walk over and speak with appropriate
representative within the bank. The platform banker may be a teller or a personal
loan assistant and the representative being referred to may be a tarined bank
employee or a representative from the partner insurance company.
Platform Bankers can usually sell simple products. However, the time
which they can devote to insurance sales is limited, e.g. due to limited opening
hours and to the need to perform other banking duties. A further restriction on the
effectiveness of bank employees in generating insurance business is that they
have a limited target market, i.e. those customers who actually visit the branch
during the opening hours.
In many set-ups, the bank employees are assisted by the bank's financial
advisers. In both cases, the bank employee establishes the contact to the client
and usually sells the simple product whilst the more affluent clients are attended
by the financial advisers of the bank which are in a position to sell the more
complex products. The financial advisers either sell in the branch but some
banks have also established mobile sales forces.
If bank employees only act as "passive" insurance sales staff (or do not
actively generate leads), then the bank & insurance potential can be severely
impeded. However, if bank employees are used as "active" centres of influence
to refer warm leads to salaried agents, career agents or special advisers,
production volumes can be very high and profitable to bank & insurance.
Direct Response:
Internet:
E-Brokerage:
One last method for developing bank & insurance eyes involves "outside"
lead generating techniques, such as seminars, direct mail and statement inserts.
To make the overall sales effort pay anticipated benefits, insurers need to
also help their bank partners determine what the “hot buttons” will be for
attracting the attention of the reader of both direct and e-mail. Great opportunities
await bank & insurance partners today and, in most cases, success or failure
depends on precisely how the process is developed and managed inside each
financial institution. This includes the large regional bank and the small one-unit
community bank.
Distribution Models
Specialist Model:
The “financial planning” model is the only “team” approach. This method
offers each customer and prospect a full financial planning package addressing
all of the individual's financial concerns, risk tolerances and location in the cycle
of life. This process is beneficial for the customer, the bank and the insurer, as
the customer is viewed “outside the numbers”. bank & insurance convey the
message that they want to know all about the customer in relation to their current
and future financial needs and want to assist them on all those aspects of their
life.
withdrawing part of his savings to purchase his first car. Knowledgeable bank
representatives or platform bankers would immediately understand the
requirement for the car insurance and may be personal accident insurance.
These bank staff functioning now as financial services representatives can
provide such sound practical advice, i.e., an insurance product to fit customer
current and future needs.
Brand equity.
The strategy should leverage the bank's brand equity with consumers.
Consumers throughout the world rate bankers higher than insurance agents in
terms of such criteria as objectivity of advice and product knowledge. A
rationalized bank & insurance strategy will build on the superior brand equity of
banks by integrating insurance into the bank product portfolio and distribution
infrastructure. For many customers, banks can become the primary providers of
financial services by supplying personal risk management along with more
traditional banking services. Lloyds TSB has been using its own brand name for
a long time and have only recently indicated rebranding after acquiring Scottish
Widow. Halifax and Abbey National continue to use their own brand names
despite acquiring Clerical Medical and Scottish Mutual.
2) It should work as a single shop for all financial requirements for the bank
customer
5)It should strive for congruence between product characteristics and channel.
One of the key economic advantages of bank & insurance is the savings
achieved through efficient utilization of the bank's existing distribution channels.
At some point in the development of a bank & insurance operation, the marginal
cost of adding one more customer becomes negligible. bank & insurance can
reduce significantly the costs of agent recruitment, selection and conservation.
These savings can be passed on to consumers through lower premiums, or the
bank can maintain the premiums at market level in order to increase profitability.
Because the lower and middle segments of the life market are not price-
sensitive, the second option is often more desirable.
Technology.
Culture.
In any given situation, one of the four value drivers may greatly outweigh the
importance of the others. In some cases, solving the cultural problem may loom
especially large, while in others building an effective technology platform may be
paramount. bank & insurance will need to consider all four, however, to achieve
successful balance.
Bank & insurance has blossomed across Europe with penetration rates
ranging from 20 percent of pensions and life premiums in Germany to 73 percent
in spain, according to Data monitor. In the UK, around 10 percent of life
insurance premium income is generated regularly through bank & insurance
channel.
The success of bank & insurance in European countries to date and its
projected future growth are eagerly trumpeted by investment bankers, particularly
to clients considering entering the market. In their view, bank & insurance is one
of the primary beneficiaries of the global movement toward liberalization and
subsequent integration of financial services. Clearly, the concept of one-stop
shopping, or allfinanz, is more advanced in some European markets where the
process of integration of financial services is further along.
The business model for bank & insurance in Europe does not necessarily
transfer to the regulatory and economic environment of a developing market. To
succeed in emerging markets, bank marketers will have to develop unique
strategies consistently attuned to local customer expectations and consistent with
bank distribution capabilities. The biggest challenge is determining how to reach
the middle and lower-middle economic classes, which comprise the largest group
of bank customers in such countries.
consumers. Agents typically target the affluent because the average revenue per
customer is sufficient to support the fixed and variable costs of the distribution
system. The agency channel thus perpetuates itself: commissioned agents sell to
affluent customers because they generate enough revenue to make it profitable
to sell to other affluent customers. Because agents are the insurance company's
true customers, insurers provide them with products suitable for sale to the
affluent.
A customer and channel driven bank & insurance strategy finds and
engages buyers where they are found. No attempt is made to impose a
preconceived product driven strategy. Traditional life insurers are often trapped:
they create a product with features attractive to agents (such as high
commissions), and then let the agents find appropriate target markets. This is a
type of "top-down" product development approach. However, the bank channel
requires an analysis of the market that starts at the bottom, with the customers,
and works up.
The type of distribution channels that a company uses affects the design
and pricing of its products, as well as the way in which the products are promoted
and perceived in the marketplace. Some bank & insurance started out by selling
simple products which could be sold in large volumes but which usually had low
margins to cover expenses and profits. If we compare how products and
distribution are related to the profits of an organization, we will come to the
conclusion that the more complex the products sold are, the higher the required
margins will need to be.
Many banks entered bank & insurance with a defensive strategy in their
attempt to avoid market share erosion by insurance companies. Very soon,
though, they realized that they could gain market share if they expanded their
product range, developed a sales culture within their organizations, created a
multi-channel distribution structure and exploited the potential of the customer
information that can enable the identification of customer needs.
The managers of banks and of life insurance companies can come from
quite different cultures. There may be differences in the way of thinking and
business approaches of bankers and managers of insurance companies. These
differences create a communication and implementation problem in bank &
insurance operations. Banks are traditionally demand-driven organizations with a
reactive selling philosophy. Life insurance organizations are usually need-driven
and have an aggressive selling philosophy.
It has been observed that this friction at the level of bank employees and
life insurance salespeople arises from differing philosophies towards selling, the
jealousies of bank employees regarding remuneration of life sales staff and fears
of "cannibalization" of deposits, e.g. the bank employee fears that the
salesperson encourages withdrawal of bank deposits, putting the bank
employee's job in greater jeopardy. As a result the team spirit is negatively
influenced and, since this is a crucial factor for the success of any operation, it
has to be confronted.
However, conflicts may arise among the various channels and also within
channels under a multi-channel system. To avoid this it is necessary to ensure
the following:
4) The goals of every partner in the distribution process can be fulfilled by the
process
5) The specific role and performance expectations of each channel member are
clearly stated, understood and accepted
Bibliography
• www.itgi.org
• www.irdaindia.org
• www.indiainfoline.com
• S. Balachandran, IC 34 General Insurance. Mumbai