A STUDY OF NEW DISTRIBUTION CHANNELS IN INSURANCE SECTOR

SUMMER TRAINING PROJECT REPORT SUBMITTED TOWARDS PARTIAL
FULFILLMENT OF

MASTER OF BUSINESS ADMINISTRATION
( Af f i l i a t e d T o U . P . T e c h n i c a l . U n i v e r s i t y , L u c k n o w ) [2009-2010] Submitted By ARFANA YASMIN Roll No. 0911570019 Under the guidance of: External Supervisor Mr. RAKESH (Asstt.channel Manager), UNICON Internal Supervisor Mr . Manish Bhaskar Lecturer,AIM. Ghaziabad

ADVANCE INSTITUTE OF MANAGEMENT GHAZIABAD-201009

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PREFACE
“Learning categorize you and practicing on that learning specialize you.” Each and every theory being taught in academic institute can only become fruitful practically. The important of any academic courses would gain advantage and acceptance of true form; only through practical experience. Hence it is quite necessary to put theories as into task. This is made possible with summer training at any of good companies under the expert guidance of a competent person. All organization face change in their environment with resultant changes in their respective market and in their ability to satisfy their market. Each organization has to face new marketing problems and opportunities in their existing and potential market. The change trends and new skills being adopted by employees in such a systematic way by getting various training sessions which help them to make use of these new trends and technologies. This practical knowledge has made one thing clear in my mind that to keep on the zenith one has to keep himself changing with time. The report is outcome of the summer training in unicon investment solution.

This training is a part of curriculum of MBA program at the department of business administration of AIM,_GHAZIABAD. The main objective of this project is to find “new distribution channel in insurance sector “.

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ACKNOWLEDGEMENT
It’s with a great sense of satisfaction that I present my first real venture in practical computing in the form of project work. I am thank to the “UNICON” for giving me a great opportunity to do my summer training in their valuable industry and make the stage for practical exposure of my knowledge. I am deeply indebted to Mr. RAKESH (Assistant Manager) for providing this training and for his kind support and cooperation. I pay my respect and gratitude to my project guide Mr. MANISH BHASKAR for her constant help and guidance.

With Regards,
(ARFANA YASMIN)

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TABLE OF CONTENT
S.No. 1) 2) 3) 4) 5) 6) 7) 8) Contents Executive summary Introduction Company profile Distribution Channels Telcassurance Bancassurance Objectives of the study Research Methodology  Research Design  Data collection methods Analysis and Findings  List of Graphs  Analysis of Data  Findings Limitations of the Study Conclusion and Recommendations Appendices  Questionnaire Bibliography Page No. 6 7-8 9-20 21-35 36-39 40-63 64 65-67 65 66-67 68-73 68 69-72 73 74 75-76 77-80 78-80 81

9)

10) 11) 12) 13) 14)

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EXECUTIVE SUMMARY
The liberalization followed by growth of the Indian Insurance industry has opened wide opportunities for Service and Infrastructure sectors. This growth has to be properly channelised. Some of the major challenges which have to be addressed for channelising the growth of insurance sector are Product Innovation, Distribution Network, Investment Management, Customer Service and Education. The aim of this project is to have an in-depth knowledge of the booming Insurance sector in India and to study the various EMERGING DISTRIBUTION CHANNELS in insurance, which will help in increasing the penetration of Insurance in India and also reduces the cost of insurers. Firstly the Insurance industry as a whole has been studied with emphasis on various distribution channels. Then the emerging distribution channels in insurance industry have been discussed. Emphasis is given on the new distribution channels which are recently tried in India such as retail stores, telcassurance, and internet. Finally the recommendations and conclusions on the basis of my understanding and analysis about the Indian Insurance Sector have been made.

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INTRODUCTION
The road less trodden is not so much a choice but a necessity in journeys into the unknown. For an industry that is rediscovering itself and its markets, ventures into distant rural markets and even niche urban markets have been quite an experience. While agents are, and are likely to be, the predominant channel for selling life insurance and personal lines of non-life insurance, other means of reaching the customer also assume importance given the low levels of penetration of insurance in India. I have no doubt that everyone in the insurance industry would like to see the country reach the levels of financial security through insurance that more developed countries have. And I am sure that this aspiration is not only driven by commercial interests but also the aspiration for better social security and prosperity. For taking that kind of leap every effort counts and every new idea that can harvest a few thousand customers will help. One never knows which of these new channels will turn out to be a significant contributor of customers tomorrow! "It is not the strongest species that survives nor he most intelligent but the ones most responsive to change - Charles Darwin Think of insurance and the first thing that comes to mind is the pesky agent who won’t take no for an answer. He tempts you with tax benefits, scares you with the thought of dying and leaving your family on the streets or steps in to get your medical policy just in time for you to leave on that holiday abroad. Add to that your bank trying to sell you some insurance when you take a housing loan. Or when they find that you have surplus money in your account and could do with more life insurance! And soon brokers will get to the point where they will offer individuals a range of policies from different insurers and find us the one that fits just right. But these are the well known, by now, channels of reaching insurance as a product to the customer. The new ones that are emerging slowly present an interesting picture. Take the Internet for instance. Companies are willing to provide quotes for certain types of policies through their website. Not just Life policies or Motor, but Marine Cargo policies….. Go to a bank automatic teller machine (ATM) and you don’t come away with just cash. You are bombarded with questions on whether you would like insurance 6

policies… did you check that option? It’s right there below the internet hours! Call your bank’s phone banking service and, after telling you your balance or whatever it is you seek, they will try to interest you in a policy or two, or at least in playing host to an agent who is eager to come in and say his piece. Or these calls out of the blue asking if you are interested in insurance or a personal loan or housing loan in three days flat!? In the rural areas there is a different kind of intermediation emerging. The approach there is very community based. The local community’s thought leader has been roped in to spread the good word. They could be nongovernmental organisations (NGOs) working in education or microfinance in that area, or a company with consumer contact outlets – like one selling fertilisers or consumer goods of varying kinds, or buying the produce of the land for that matter. They take on the work of distributing insurance adding value to their customers and adding a fee based income to their own revenue streams. Some have met with good success and others are in the process of settling down to what is essentially a tremendous task. What does all this add up to? Other than more apparent marketing activity for a product that was mostly bought rather than sold? Other than being pursued for something that you sought out and tried to buy with great difficulty? Other than intermediaries more willing to tell you about the product than before when they just expected to get your signature on a mostly blank proposal form and run?! Marketers and market theory proponents say that it means better service. That it means better product definition and hence the development of more suitable products for the end customer. That it means that the insurer and his intermediaries work at efficient costs since someone else is always breathing down their necks. … But it can also mean a loss of privacy. Not just in a personal way, but also in that the confidentiality of your financial data is being shared with people you have not authorised for access. Even if it is the insurance company owned by your bank or represented by your bank. In future it could mean that your financial status could dictate your insurance premiums – as it does in many western countries now – and that your financial status is being shared without your consent or knowledge right now as you read this. Is this such a big change? Certainly! As big a change as having an insurance agent come to you to sell a policy is from the very early days of insurance when the board members of an insurer personally interviewed new applicants once in six months to decide whether to insure him or not! And in the pipeline are policies from your local post office and perhaps through your mobile phone! 7

COMPANY PROFILE
Unicon has been founded with the aim of providing world class investing experience to hitherto underserved investor community. The technology today has made it possible to reach out to the last person in the financial market and give him the same level of service which was available to only the selected few. They give personalized premium service with reasonable commissions on the NSE, BSE & Derivative market through our Equity broking arm Unicon Securities Pvt Ltd. and Commodities on NCDEX and MCX through our Commodity broking arm Unicon Commodities Pvt. Ltd. With their sophisticated technology you can trade through your computer and if you want human touch you can also deal through their Relationship Managers out of our more than 100 branches spread across the nation. They also give personalized services on Insurance (Life & General) & Investments (Mutual Funds & IPO's) needs, through our Insurance & Investment distribution arm Unicon Insurance Advisors Pvt. Ltd. Their tailor-made customized solutions are perfect match to different financial objectives. Their distribution network is backed by in-house back office support to serve our customers promptly.

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Unicon offers a unique feature of a single Screen Trading Platform of NSE , BSE & Derivatives. Unicon offers both Offline & Online trading platforms. You can Walk in or place your orders through telephone at any of our branch locations Online Trading Products : uniconPlus uniconSwift

uniconPlus Browser based trading terminal that can be accessed by a unique ID and password. This facility is available to all our online customers the moment they get registered with us.

uniconSwift Application based terminal for active traders. It provides better speed, greater analytical features & priority access to Relationship Managers.

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Unicon Provides expert advice to its clients for their investments in equity & debt markets through Mutual Funds.

Our experts advice you the best investment solutions that suit you and help you to reach your financial goals. We help you ascertain your risk profile & guide you with the right product mix which reduce your tax liability, increase your savings & enhance your wealth. Weather you have a conservative, medium or aggressive investment risk appetite, our experts would guide you to build a portfolio to optimize the return of interest.

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Unicon offers a unique feature of a single screen trading platform in MCX and NCDEX.Unicon offers both Offline & Online trading platforms. You can Walk in or place your orders through telephone at any of our branch locations

Online Commodity Internet trading Platform through UniFlex. Live Market Watch for commodity market (NCDEX, MCX) in one screen. 1. Add any number of scrips in the Market Watch. 2. Tick by tick live updation of Intraday chart. 3. Greater exposure for trading on the margin available 4. Common window for market watch and order execution. 5. Key board driven short cuts for punching orders quickly. 6. Real time updation of exposure and portfolio. 7. Facility to customize any number of portfolios & watchlists. 8. Market depth, i.e. Best 5 bids and offers, updated live for all scripts. 9. Facility to cancel all pending orders with a single click. 10.Instant trade confirmations.

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Unicon Depository Services offers dematerialization services as a participant in Central Depository Services Limited (CDSL), through its Depository operations. The company believes in efficient and costeffective and integrated service support to its brokerage business. Unicon Securities Private Limited, as a depository participant, will offer depository accounts for individual investors as well as corporates which will enable them to transact in the dematerialized segment, without any hassles. Depository offers a safe, convenient way to hold securities as compared to holding securities in paper form. Our service provides an integrated single platform for all our clients ensuring a risk free, efficient and prompt depository process. Facilities Offered by Unicon * De-materialization: You can submit your physical shares at the Unicon branch for dematerialization into electronic form. * Re-materialization:You can also request for Re-materialization which enables you to convert the dematerialized shares into physical form. * Transfer: Inter and intra depository services are available through which you can transfer shares. * IPO: You can apply for IPO using your demat account details and on allotment the securities are transferred directly to your demat account. 12

At Unicon you can invest in the Primary markets (Initial Public Offerings) online without going through the hassles of filling up any IPO application forms or any other paperwork. We shall make sure that you do not miss the opportunity to subscribe/invest in a good IPO issue by providing you an online IPO application form, transfer of funds online through secured payment Gateways of leading banks like ICICI, HDFC, AXIS bank. In addition to the above we shall provide you with the In-Depth analysis of the IPO issues which shall be hitting the Indian Markets in near future, IPO Calendar, analysis on the recent IPO listings, prospectus, offer documents and other IPO research reports so as to help you take an informed decision to invest in the IPO issues. Online IPO facility is open to all our registered clients at no cost whatsoever. All you need is the following to subscribe online to the IPO issues: • A trading account with Unicon • A Demat account with Unicon • An access to the net banking facility with the Banks through which Unicon has operational Gateway facility (ICICI, HDFC and AXIS Bank). • You must have signed a Power of Attorney (POA) agreement for applying in IPO’s online. 13

General Insurance
Unicon offers all products of General Insurance under one umbrella. Unicon comprises of a team of distinguished professionals from insurance, finance and other management disciplines who have vast business & managerial experience. Unicon team evaluates the client's business environment and studies the risk profile. based on the results of these evaluations, Unicon team then suggests the most cost effective , integrated insurance package that is perfectly suited to the client's risk profile. Unicon has a nationwide network of branches all over India, equipped with top quality infrastructure facilities, to provide you prompt & efficient service.

Life Insurance
Unicon offers you a Peace of Mind by offering various life insurance plans for your unique & specific needs. Our philosophy is that for every financial problem, there is a solution also. And we are here to give you complete financial solutions. At the same time we offer you very Prompt & Reliable Policy related service for enduring relationship. We offer a very wide range of products to fulfill your particular requirements. You can always have an access to our 83 Branch Offices situated at prime locations of the city, or you can call our Relationship Manager to guide on your Investments.

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Following is the glimpse of Life Insurance Plans: • Protection Plans • Investment Plans • Child Plans • Retirement/Pension Plans • Saving Plans • NRI Plans • Health Plans

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Unicon is a specialized property broking company. Our highly experienced and professional teams present retail, office, industrial and residential property opportunities to a broad base of clients. Whether it is a residential or commercial development, Unicon offers a total solution to our clients inclusive of market research, marketing strategy, interaction with the professional teams and sales or leasing of the property. Unicon’s professional team of consultants will assist you to identify suitable premises that satisfy your requirements. We will help you negotiate favorable leases and assist with the preparation of all documentation. “Whether you are looking for a home or a place to conduct business Unicon shall find you one” We provide customer focused transparent investment planning and solutions. We offer products which benefit your special status. PCG has a specialized advisory team which nurtures all your investment. We ensure that your investments work for you rather than you for them. Products offered:
• • •

Unicon Signature Account Nifty Tracker Unicon Trade Plus

• Unicon Wealth Planner

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Brief History of the Insurance Sector
The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.

Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 17

1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies’ viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. And the United India Insurance Company Ltd. GIC incorporated as a company.

INSURANCE SECTOR
The opening up of Insurance sector was a part of the on going liberalization in the financial sector of India. The changing face of the financial sector and the entry of several companies in the field of life and 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 be the GDP. Over the past three years, more than thirty companies have expressed interest in doing business in India. The IRDA (Insurance Regulatory Development Authority) is the regulatory authority, which looks over all related aspects of the insurance business. The provisions of the IRDA bill acknowledge many issues related to insurance sector. The IRDA bill provides guidance for three levels of players Insurance Company, Insurance brokers and Insurance agent. Life Insurance sector is one of the key areas where enormous business potential exists. In India currently the life insurance premium as a percentage of GDP is 1.3 % against, 5.2 per cent in the US. General Insurance is another segment, which has been growing at a faster pace. But as per the current comparative statistics, the general insurance premium has been lower than life insurance. General Insurance premium as a percentage of GDP was a mere 0.5 per cent in 1996. In the General Insurance Business, General Insurance Corporation (GIC) and its four subsidiaries viz. New India Insurance, Oriental Insurance, National Insurance and United India Insurance, are doing major business. The General Insurance Industry has been growing at a rate of 19 percent per year.

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The entry of several private insurance companies, particularly international insurance companies, through joint ventures, will speed up the process of insurance mobilization. The competition will unleash new schemes and benefits, which will give consumers a better Chance to save as well as insure. The regulatory system in India is relatively new and takes some more time to make the Insurance sector a perfectly competitive one. Insurance Regulatory Authority of India issued regulations on 15 subjects which included appointed. Actuary, actuarial report, Insurance agents, Solvency margins, reinsurance, registration of Insurers, and obligation of insurers to rural and social sector, investment and accounting procedure. The reform in Insurance in India is guided by factors like availability of a variety of products at a competitive price, improvement in the quality of customer services etc. Also the employment opportunities in the Insurance sector wil1 increase as major players set their business plans in India. The policy of the government to open up the financial sector and the Insurance sector is expected to bring greater FDI inflow into the country. The increase in the investment limit in this vital sector has generated considerable business interests among the foreign Insurance companies" Their entry wil1 certainly change the Insurance sector considerably.

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WHAT IS A DISTRIBUTION CHANNEL?
A channel of distribution or trade channel is the path or route along which goods move from producers to ultimate consumers or industrial users. In other words, it is the distribution network through which a producer puts his product in the hands of actual users. The channel of distribution includes the original producer, the final buyer and any middlemen-either wholesaler or retailer. The term middleman refers to any institution or individual in the channel which either acquires title to the goods or negotiates or sells in the capacity of an agent or broker. But facilitating agencies that perform or assist in marketing function are not included as middlemen in the channel of distribution. This is because they neither acquire title to the goods nor negotiate purchase or sale. Such facilitating agencies include banks, railways, roadways, warehouses, insurance companies, advertising agencies, etc. The following diagram (chart) is illustrative of the channel of distribution which may exist in a market.

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The above chart indicates that the number of middlemen may vary. If there is direct sale by the produce to the consumers then there is no middleman. But that is very rare. As the chart shows the producer may sell goods to retailer who may then sell the same to consumers. The producer may sell goods to wholesalers who may in turn sell to retailers and the retailer may sell to consumers. The fourth alternative channel of distribution is when any agent/dealer intervenes between the producer and retailers and acts as a middlemen. The agent is appointed by the producer for the sale of goods to the retailers. Another alternative channel is there when producer’s agent sells goods to wholesalers who sell to retailers. Agent/dealer is an independent person/firm buying goods and selling them to retailers. Agent/dealer may also sell to wholesalers who may then sell to retailers and goods are thus made available to consumers. In the channel of distribution there may be more than one agent/dealer and wholesaler. Channel decisions determine how the firm will reach its target markets. The choice and performance of the channel are major determinants of an organization’s success. Channel of distribution decisions are of vital importance to all types of firms, including producers, wholesalers, and retailers. A key factor in selecting a channel is economic performance- estimated revenue and cost flows over the planning horizon. Qualitative factors are also important in selecting channels of distribution. Given two channel alternatives that are similar in their estimated economic performance, selection may rest on the extent of management control that the firm could exercise in the two channels. The antitrust laws are of primary importance for channel selection decisions.

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Establishing the channel objectives and Constraints
The objectives include the desired level of customer service and the desired functions intermediaries should perform. Each producer develops his own objectives: Customer characteristics: Channel design is greatly influenced by customer characteristics. When trying to reach a large or widely dispersed customer population, long channels are needed. If customers buy small amounts frequently, long channels are needed because of the high cost of filling small and frequent orders. Middleman characteristics: Channel design reflects the strengths and weaknesses of different types of intermediaries in handling various tasks. For example, manufacturers’ representatives are able to contact customers at a low cost per customer because the total cost is shared by several clients. But the selling effort per customer is less intense than if the company’s sales representatives did the selling. Competitive characteristics: Channel design is influenced by competitors’ channels. Producers may want to compete in or near the same outlets carrying the competitors’ products. Product characteristics: Perishable products require more direct marketing because of the dangers associated with delays and repeated handling. Bulky products, such as building materials or soft drinks, require channel arrangements that minimize the shipping distance. Environmental characteristics: When economic characteristics are depressed, producers want to move their goods to market in the most economical way. Company characteristics: Company characteristics play in important role in channel selection. The company’s size determines the size of its markets and its ability to secured desired dealers. Its financial resources determine which marketing functions it can handle and which to delegate to intermediaries.

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Market characteristics: Geography is one factor; in most cases, the greater the distance between the producer and its market, the less expensive is distribution through intermediaries rather than through direct sales. Direct sales may be effective if a producer has relatively few large buyers, but for larger markets middleman are required.

AN INTERESTING FACET OF INSURANCE
Mark Twain, the great American humorist said in his speech on Accident Insurance, “There is nothing more beneficent than accident insurance. I’ve seen an entire family lifted out of poverty and into affluence by the simple boon of a broken leg. I’ve had people come to me on crutches, with tears in their eyes, to bless this beneficent institution. In all my experience of life, I have seen nothing so seraphic as the look that comes into a freshly mutilated man’s face when he feels his vest pocket with his remaining hand and finds his accident ticket all right.”

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Following are the factors that impact the selection of a channel:
Characteristics of Short Characteristics of Long Channels Channels Market factors Business users Geographically concentrated Consumers Geographically diverse

Extensive technical Little technical knowledge knowledge and regular and regular servicing not servicing required required Large orders Product factors Perishable Complex Expensive Small orders Durable Standardized Inexpensive

Producer factors Manufacturer has Manufacturer lacks adequate resources to adequate resources to perform channel perform channel functions functions

Competitive factors

Broad product line Channel control important Manufacturing feels satisfied with marketing intermediaries’ performance in promoting products

Limited product line Channel control not important Manufacturer feels dissatisfied with marketing intermediaries’ performance in promoting products

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4 I’s affected Insurance
Insurance has four major characteristics that greatly affect the marketing and distribution.
1. Intangibility:

Unlike products, services cannot be held, touched, or seen before the purchase decision thus, they should be made tangible to a certain extent. Marketers should ―tangibilize the intangible to communicate service nature and quality. This can be done through: •

Environment Uniforms Paperwork Brochures

• •

Insurance is a guarantee against risk and neither the risk nor the guarantee is tangible. Hence, insurance rightly come under services, which are intangible. Efforts have been made by the insurance companies to make insurance tangible to some extent by including letters and forms.

2. Inconsistency:

Service quality is often inconsistent. This is because service personnel have different capabilities, which vary in performance from day to day. This problem of inconsistency in service quality can be reduced through standardization, training and mechanization. In insurance sector, all agents should be trained to bring about consistency in providing service or, the insurance process should be mechanized to a certain extent. E.g.: the customers can be reminded about the payment of premium through e-mails and sms instead of agents. 25

3. Inseparability: Services are produced and consumed simultaneously. Consumers cannot and do not separate the deliverer of the service from the service itself. Interaction between consumer and the service provider varies based on whether consumer must be physically present to receive the service. In insurance sector too, the service is produced when the agent convinces the consumer to buy the policy and it is said to be consumed when the claim is settled and the policyholder gets the money. In both the above cases, it is essential for the service provider (agent) and the consumer (policy holder) to be present.

4. Inventory: No inventory can be maintained for services. Inventory carrying costs are more subjective and lead to idle production capacity. When the service is available but there is no demand, cost rises as, cost of paying the people and overhead remains constant even though the people are not required to provide services due to lack of demand. In the insurance sector however, commission is paid to the agents on each policy that they sell. Hence, not much inventory cost is wasted on idle inventory. As the cost of agents is directly proportionate to the policy sold.

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THE INTERNET CHANNEL

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The Internet is likely to be the most important of the new forms of distribution as the government is encouraging its use (for eg. Echoupal). It is already apparent that customers are using the new Internet technology in other business fields (e.g. bookselling, air ticketing etc.). However, insurers have been slow to get to this market. For example, the worldwide property and casualty market is estimated to be worth $l50bn but less than 1% of these insurance transactions are currently being conducted online. India is no exception to that, only iota of business is generated through this channel. This sluggishness is perhaps a little surprising as the simpler commoditized insurance products should sell quite well on the Internet. Arguably, other more tangible products such as clothing, furniture and sporting equipment may not sell so well because customers prefer to see them before making a purchase. A recent survey states that the biggest barriers to using the Internet is product complexity (62%), followed by need for paper signatures and regulatory restrictions (both 38%), security risks (32%), and cost of online development and integrating legacy systems (both 29%). The lead in selling insurance on the Internet appears to be coming from America, where start-up companies that cover the whole ‘quote-to-claim’ insurance process online now exist. For example, eCoverage.com is now writing motor business in 2 US states (backed by Japanese venture capital from Softbank) & GeneraLife.com is selling life assurance on the net. However European companies are following suit, such as ineas.com which has become the first European insurer to sell its products exclusively via the Internet, already operating in the Netherlands, France, Belgium and Germany. One way of analyzing the new business models suggests there are currently three emerging types of web site through which insurance business can be sold. 1. “Shop Fronts" - These are the insurance companies own websites, e.g. Direct Line. They are likely to have a short-term prominence but are expected to reduce in importance over time as customer requirements for price comparisons increase E.g. – www.icicilombard.com 2. “Product Aggregators" - These are brokerages which offer a range of comparable products. The website will aim to offer the 28

best price/value combination to consumers. Therefore, insurers quoting competitive premium rates are likely to acquire most business through this channel. Product Aggregators are expected to increase in importance in the long term because of the speed at which the consumer can get comparative quotes and the costs of advertising shop fronts. E.g. – www.bimaonline.com 3. “Portals” - These are websites that host content from multiple websites. They package content from third party providers, organize it to suit their target audience, and make their money via advertisement or commission On such a web site, an insurer may have to compete against other companies if it is not the only one advertising insurance. To get round this, portals may be developed by the larger insurers with brand and customer ownership as the major drivers. Overall, portals are expected to grow rapidly for the same reasons as product aggregators. E.g. www.bimaonline.com

THE INDIAN OPPORTUNITY
There are 38.5 million Indians online as of now and this number is set to grow to 100 million by 2007-08. Sky-rocketing at a CAGR of 125%, the online travel industry is expected to become a $2billion industry by 2008. The number of heavy internet users in India, the persons who spend long hours on the web, has grown to 38 per cent this year, as against barely 16 per cent in 2002. These heavy users are spending an average 8.2 hours per week on the internet, I-Cube 2007 report said. Their numbers are increasingly rising over the past few years: from 16 per cent in 2002 to 20 per cent in 2005 and to 38 per cent the total internet users in 2007 - resulting in a jump of 20 per cent over a 5-year period. In contrast, the number of 'light' users has dropped from 63 per cent in 2002 to a 28 per cent in 2007, which shows the older population spend more time on internet as against the younger lot who are considered to be more net-savvy. While, the school going children spend an average of 322.3 minutes a week on the internet, the college going students spend an average of 433.2 minutes per week and the older men spend an average of 580.5 minutes a week. 29

Working women spend 535.3 minutes per week while women nonworking women spend an average of 334.5 minutes each week. There will be 50 million internet users by March 2007. At present 25% of
the internet users in India are from small towns and this figure is estimated to increase further. 32 per cent active users of the Internet in India use it for sourcing information and research. Back in 2001, only 20 per cent used the Internet for searching information. E-mail as a killer application is on the downslide with only 46 per cent of subscribers using the Internet for e-mail, compared to 64 per cent in 2001.

The Factors considered by E-consumer while purchasing Insurance are. All e-consumers, whether corporate entities or individuals, will continue to select insurance based on the following four criteria: “Price” - This is usually the foremost consideration and is the principal driver behind shopping around. “Trust” - Here there are two elements. 1. Is it ‘secure’ to buy on the web / a particular website and 2. Buying from a “trusted” name may mean customers are happy not to research alternatives. “Convenience” - Although the customer retains his power to choose who to buy from, the pressures of the modem world will mean convenience buying becomes a threat to a “value” offering. i.e. a company’s “Service” - Service is particularly important when a product is purchased and when a claim is made. There is evidence from research performed by Forrester in the US that of these four criteria, price is predominant. According to their research, price has approximately 77% more impact on consumers’ insurance purchase decisions than brand. Price overshadowed all other purchasing criteria, including physical presence.

The Advantages of E insurance:
* Low cost: 30

The internet is made up of electrons, so there is not really anything physically to grab hold of like in a brick and mortar business. This considerably reduces the costs as you don't really need any materials or buildings, Just a computer with World Wide Web capabilities. Internet channel is the lowest cost distribution compared to others which are prevalent in insurance industry.
* Very fast:

It's made up of electrons so it's VERY fast. Click a link, and you could be looking at an Australian website, click another one and you could be in America. If you wanted to get information any other way from these countries, you may end up having to go there. The World Wide Web eliminates the need for this. Similarly it works in distribution you do not have to visit the insurer or call an agent for purchasing insurance while it is just a click away. * Global reach: For an insurer it means, you don't have to set up shop somewhere and sell to the locals. You can set up an online shop, and sell to anyone in the world. This means a huge increase in potential revenues and a fraction of the cost it would take for you to set up shops all over the world. In U.S.A. there are virtual insurers who don’t have the branch network. * Expenses: A major advantage to the insurer of selling through the new electronic channels is the scope for greater automation. Under the new channels, it is the customer who enters personal details directly onto the ‘web’, through computer, to obtain a quotation. If the customer accepts it, his data will be fed automatically to the insurer’s mainframe - using an updated version of the process called “Electronic Data Interchange (EDI)”. All administration such as sending out policy documents and setting up direct debits can then be processed electronically. As data is entered only once (and by the customer) there is a huge potential for reducing initial administration expenses. Expense savings will arise not just at the front end but also throughout the life of each policy and particularly when a claim is made. The level of savings will be dependent on the degree of each customer’s appetite for electronic 31

fulfillment. Savings and improvements in service will also follow from B2B initiatives as insurers increasingly empower distributors with end-to-end web enabled communication and processes. Commission is also expected to reduce through the use of B2B applications for commoditized products and move from being premium based to transaction and/or service based. Examples of the comparative level of savings expected are illustrated below:

Estimated Policy Origination Cost

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Estimated Policy Administration Cost

PROBLEMS OF INTERNET MARKETING IN INDIA In India Internet marketing faces a lot of problems. We can divide them into four categories. They are:-

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1] LEGAL & REGULATION PROBLEMS: - The first set of

problems emanate from the absence of legal and regulatory framework for e-commerce. E-documentation not yet legally admissible. Most of developed countries have embraced e-documentation as legal tender .In India it is not legally admissible. Current Indian laws does not provide for digital signatures, digital certification, electronic payment system and on line filing of statutory documents of now a physical signature is necessary for approving of an online order. Internet marketing also needs effective and trusted mechanisms for privacy and security. This has several dimensions like confidentiality, authentication, non-repudiation and certification.
2] ABSENCE OF TAXATION LAW: - In India, the government is yet

to come up with taxation laws for e-commerce systems.
3] INFRASTRUCTURAL PROBLEMS: - India does not have the

infrastructure needed for effective Internet marketing. The basic infrastructural problems are :LOW DENSITY OF TELEPHONE, PC’s, and INTERNET: - In India,

the telephone density, PC population and density of Internet access are too low to support viable e-business. The one who has access to Internet face a difficulty in logging onto the Internet because of poor quality of last mile connection.

NETWORK LIMITATION: - In India many companies do not INFRASTRUCTURAL BOTTLENECKS: -

have network of their own. Infrastructural bottlenecks at the delivery end will also hamper Internet marketing in India, delivery is not easy in India within 24 or 48 hours because of Indian roads and airways.

4] COMMERCIAL PROBLEMS: - Payment problem is one of the

significant problems in India .there is low density of credit cards, debit cards, and smart cards in India and those who have cards they cannot pay to international sellers due to some regulations.

TELCASSURANCE

(M-COMMERCE)

M-commerce or “mobile commerce” per se, is basically about buying and selling products and services through wireless handheld 34

telecom devices such as mobile phones and PDAs. It is an entirely new sales and promotion channel, which is seen as the enabler for an entire range of mobile Internet services, supporting payments for telecom, information, media and entertainment services that are available anywhere, anytime. Touted as the next-generation of e-commerce, m-commerce enables users to access the Internet without needing to find a place to plug in. It is one of the fastest growing e-business markets and will involve the development and design of a host of new applications, services, business models and technological solutions. In fact, it is seen as a complementary service option to both B2B and B2C e-commerce. According to market reports, the term m-commerce has recently not only achieved widespread recognition but is also becoming a highly visible symbol in the contemporary language of the information technology culture that has brought significant changes in the consumer era, along with profound changes in the terminology and technology of e-commerce. However, as content delivery over wireless devices becomes faster, more secure, and scalable, there is wide speculation that m-commerce will surpass wireline e-commerce as the method of choice for digital commerce transactions. The industries affected by m-commerce include financial services (insurance), involving mobile banking (when customers use their handheld devices to access their accounts and pay their bills) as well as brokerage services, in which stock quotes can be displayed and trading conducted from the same handheld device; telecommunications, in which service changes, bill payment and account reviews can all be conducted from the same handheld device; service or retail, as consumers are given the ability to place and pay for orders on-the-fly; and information services, which include the delivery of financial news, sports figures and traffic updates to a single mobile device. In late 90’s before the explosion in the prepaid package and reduction in tariffs, a very few part of the population owned a mobile phone. Latest surveys shows that a significant and growing number of people prefer to use a mobile phone in preference to a fixed line telephone. People find a mobile phone more convenient and flexible, and are able to control their usage through prepaid 35

vouchers. Over 97% of the UK population has access to either a fixed or mobile phone. 2.3m people live in homes without a fixed phone and of the members of the public without a fixed line, 55% use a mobile phone.” Since they have such a widespread use, mobile phones should be taken seriously as a new method of selling insurance. Indeed, some goods and services have already been purchased using them.

Growth drivers for m-commerce
Over the past few years, the mobile and wireless market has been one of the fastest growing markets in India where the mobile infrastructure is comparatively much better than the fixed-line infrastructure. The growth of underlying infrastructure is a large reason why we are seeing interest in m-commerce. There is a critical mass of people who are ready to embrace m-commerce, but the strong reason which could fuel the growth would be the organized retail industry which is showing positive signs and could be termed as the primary reason as to why we think m-commerce could be huge. Growth in the telecom sector makes the addressable market for mcommerce large at over 210 million. With the mobile subscriber base predicted to be over 500 million by 2010, m-commerce is an industry looking for exponential growth. As a personal device a mobile phone is constantly with the consumer. This is another important factor increasing the opportunity to transact. With a mobile phone, the issues of physical presence at an outlet, access to the Internet, amongst others are eliminated, giving the consumer the opportunity to transact anytime, anywhere. Mobile phones have greater penetration than the Internet in India. SMS has almost universal reach. Consumers are already comfortable using the mobile phone for services other than voice. The mobile phone, unlike a PC, is not required to have a live electrical connection to function. The natural progression of these trends leads to commerce via a device that is connected, on the person and offers convenience unmatched by any other channel.

The future of m-commerce

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Experts believe that m-commerce in India will reduce the friction in transactions associated with time, space and security. All products and services that are standardized or with a shared understanding can use m-commerce to greatly improve customer convenience and business volumes. It would also be driven by organized retail, entertainment, P2P transactions and trading. Besides, it would thrive on the backdrop of targeted marketing, coupons and comparative purchasing. There are all the reasons to believe that m-commerce would takeover Internet commerce in terms of the number of transactions. The number of m-commerce users would definitely outnumber Internet users and I predict more than 60 percent of the mobile users being involved with m-commerce in one way or the other over the next five years. We would also see lot of synergy between Internet and mobile commerce over coming days especially around banking and Internet based purchases. There is no doubt that in the coming years, m-commerce would be a significant channel. More than m-commerce, “m-payments” would have evolved. It would be interesting to watch whether it is the banks or the mobile operators who gain ground here.

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THE CASE OF BHARATI AXA LIFE INSURANCE
Bharti AXA Life Insurance Company, the private life insurance joint venture between Bharti Enterprises and AXA Group launch of its first 'Telcassurance' initiative by establishing presence in around 50 exclusive Airtel Relationship Centres (ARCs) covering Mumbai, Bangalore, Chennai, Kolkata and Hyderabad, including 20 ARCs in New Delhi. Says Mr Nitin Chopra, CEO, Bharti AXA Life Insurance, "We have launched 'Telcassurance' as a distribution channel to tap the vast potential that the 40 million Airtel customer base offers to our mass market business strategy. Our first initiative for this channel introduces to Bharti Airtel customers visiting ARCs, a range of life insurance services and access to quality advice on financial protection. The fact that these services are offered by a group company of their trusted telecom services provider will, I believe, encourage this vast and fast expanding consumer group to buy life insurance. This will help us achieve the dual benefit of extending life insurance to a potential and growing customer base while contributing to the overall penetration of insurance in the country." The company plans to establish its presence in around 250 ARCs by December 2007 to target the rapidly growing customer base of Bharti Airtel. "We aim to expand this coverage to 600-650 ARCs in the country by next year," adds Mr. Chopra. Bharti AXA Life's initiative at the ARCs covers branding, access to product literature and dedicated financial advisors, with the objective of lead generation and providing access to quality financial advice.

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BANCASSURANCE
Bancassurance symbolizes the convergence of banking and insurance. The term has its origins in France and involves distribution of insurance products through a bank's branch network. While bancassurance has developed into a tremendous success story in Europe, it is a relatively new concept in Australia and Asia. Most new insurers have entered into memorandum of understanding with banks to use their branches as outlets for marketing standard products. State Bank of India, Vysya Bank and J&K Bank already has joint ventures in life insurance. Vijaya Bank and Punjab National Bank are in the midst of finalizing life and non-life venture. The Insurance Act allows only those companies registered under the Companies Act to become corporate agents. This gives the new generation and the old private sector banks a head start over Public sector banks, which are technically not eligible to IRDA; IBA & RBI are in discussions to iron out the various issues, as public sector banks will play a key role in the distribution of products. In terms of Regulations issued by the Insurance Regulatory and Development Authority (IRDA) agent for insurance companies have to obtain licenses. Such licenses may be issued to individuals or to corporate bodies, like banks, firms, co- operative societies, etc. In case of corporate agents the license will be issued to person who is designated by the corporate bodies as ‘Corporate Insurance Executives’. In addition to corporate agent may avail the services of the ‘specified persons’, who will have to obtain certificates. This supplement is written for the benefit of those who are working in banks and seek to qualify for the licenses and certificates. The supplement is to be studied along with the main course, which is the basis of the training and examination for the individual agents. So far, there is no such supplement for other corporate agents in uniform manner. In the case of banks however there is

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likely to be such common issues. That is justified for special supplement.

Meaning & Definition
There are many definitions of bancassurance and, in essence it does depend upon the model used, and the stage of development. However, the definition of a fully developed model that is most commonly used is:
'Manufacturing and distributing cost effectively banking and

insurance products to a common customer base’ In its full holistic form it realises the full potential of the customer database of the bank to develop an excellent customer focused service for consumers, and the highest value on returns for the bank and insurer. It is not just about selling insurance products to bank customers but exploits the true synergies between, and respective strengths of the bank and insurer. Bancassurance is the term used to describe the sale of investment products in a bank. The word is a combination of "banc" and "assurance" signifying that both banking and insurance is provided by the same corporate entity. The usage of the word picked up as banks and insurance companies merged and banks sought to provide insurance, especially in markets that have been liberalised recently. It is a controversial idea, and many feely that it gives the banks too great control over the financial industry. It is no longer prohibited in USA after passage of Glass Stegalle Act in USA. Gramm-Leach-Bliley (GLB) Act further codified this. Bancassurance is a word coined in western world, when banks began to get involved in marketing of insurance business. The involvement took different forms in different countries. In some countries, the same institution would offer both banking and insurance products, seperately or together as customers may need, managing both in businesses themselves. This was possible when the institution is allowed to transact both insurance and banking businesses. This was permitted to certain countries. The product or services offered to the customer was the product of the bank and had in it, some elements of insurance. This was strictly banned in insurance.

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In practice, however, there are variations. One variation was that banks may offer both services combined, but having done the business, pass on the insurance part of funds to an insurance company, with whom it had an alliance or a business arrangement. Both of them may be under the same industrial group. For example when Unit Trust Of India offered Unit Linked Life Insurance Policies, it had an arrangement with Life Insurance Corporation to the extent of the term insurance component. The Peerless used to offer its account holder insurance cover on accidental death. This was done by the arrangement with general insurance company. Although marketed as one product, it was done under different business entities. The funds were accounted for and managed seperately by separate institution. The pattern of developing in India is that the bank markets the insurance product for fee. None of the banks services are modified or enhanced by the insurance service. Also the benefits offered are not in any manner modified or enhanced with the association of the bank. The product in no way is different from what any other agent of insurer may offer. The bank is also an agent of the insurer. Relevance of Bancassurance in the Indian financial sector I. Integration of the financial service industry in terms of banking, securities business and insurance is a growing worldwide phenomenon. The Universal Banking concept is evolving on these lines in India. II. Banks are the key pillars of India’s financial system. Public have immense faith in banks. III. Share of bank deposits in the total financial assets of households has been steadily rising (presently at about 40%). IV. Indian Banks have immense reach to households. Total of 65700 branches of commercial banks, each branch serving an average of 15,000 people. V. Banks enjoy considerable goodwill and access in the rural regions. 41

– There are 32600 branches in rural India (about 50% of total), and 14400 semi-urban branches, where insurance growth has been most buoyant. – 196 exclusive Regional Rural Banks in deep hinterland.
VI.

Banks have enormous retail customer base. – Total of 406 million accounts with aggregate deposits of Rs.700, 000 crore as at Sept 2000. – Share of `individuals’ as a category in bank accounts is steadily increasing. – Rural and semi-urban bank accounts constitute close to 60% in terms of number of accounts, indicating the number of potential lives that could be covered by insurance with the upfront involvement of banks.

VII. Banks world over have realized that offering valueadded services such as insurance, helps to meet client expectations. – Competition in the Personal Financial Services area is getting `hot’ in India. – Banks seek to retain customer loyalty by offering them a vastly expanded and more sophisticated range of products. VIII. Insurance distribution helps to increase the fee-based earnings of banks to a considerable extent. Internationally, insurance activities contribute significantly to banks’ total domestic retail revenues. IX. Fee-based selling helps to enhance the levels of staff productivity in banks. – This is vitally important to bring higher motivation levels in banks in India. X. Banks can put their energies into the ‘smallcommission customers’ that insurance agents would tend to avoid. – Banks’ entry in distribution helps to enlarge the insurance customer base rapidly. This helps to popularize insurance as an important financial protection product.

XI. Bancassurance helps to lower the distribution costs of insurers. – Acquisition cost of insurance customer through banks is low. Selling insurance to existing mass market banking 42

customers is far less expensive than selling to a group of unknown customers. – Experience in Europe has shown that bancassurance firms have a lower expense ratio. This benefit could go to the insured public by way of lower premiums.
XII.

Banks have an important role to play in the pension sector when deregulated. – Low cost of collecting pension contributions is the key element in the success of developing the pension sector. Money transfer costs in Indian banking are low by international standards. – Portability of pension accounts is a vital requirement, which banks can fulfill, in a credible framework.

THE INDIAN SCENARIO
In India, no company is allowed to transact both insurance and banking business. They are kept separate. In fact, even a company registered as an insurer has to choose between a life and non-life business. It cannot do both. Therefore the banks in India Cannot have the advantages which are available in the European Context. There are joint ventures in India between banks and foreign insurers. State Bank Of India, HDFC, ICICI, and Vysya Bank are examples. But apart from a greater willingness to help each other, the joint venture will not give either party a greater advantage in oher;s business. The joint venture is an entirely independent unit operation, with separate personnel and funds and subject to different regulations. The only way in which the bank can be associated with insurance business in india by becoming a corporate agent, for a remuneration. The bank can do so for a paricular lifr insurer. The bank cannot develop any insurance products. It can ofcourse make suggestions on the basis of its intimate contacts with the customers. Since 2000 many banks and isures have to agreed to arrangements for mutual benefit. The LIC has tied with more than one bank, so also have other Insurers. For more than a hundered years insurance business had been sold through insurance agents and their supervisors. This sytem had not 43

been very satisfactory. The LIC inherited this system. The efforts to make the agents more professional had not yield very satisfactory results, despite incentives and training programmes. Manyof them continued to treat the agency busiess casually, as just source of additional income. The turn over had been high and the effort of replenishing the strength, costly. The banks have skilled staff, to whom procurement of insurance can be assigned as a duty.

Opportunities and Challenges
An endeavor is made to identify and deliberate upon some key opportunities and challenges relevant to the emergence of bancassurance in India. It is proposed to consider each of the opportunities and associated challenges together to give a perspective to the subject under discussion. The biggest opportunity perceived by all players in the field is vast untapped an undeserved population. It is the fact that the penetration of the insurance sector in the rural and the semi-urban areas is low. The challenge of tapping this vast market is in inculcating savings habit as a provision for the future. Looking at the level of poverty, the availability of surplus funds for investing for future economic security and the propensity to save are very nominal. Success lies in evolving novel products and schemes and linking them to the existing relationship of the customers with the banks. Wide coverage of geographical areas and availability of banking services through branch network, especially of the PSBs, is another potential source of great opportunity to sell insurance products through banks. However it is observed that there is a faster growing awareness and demand among bank customers for prompt and cost effective service and also remote access to their accounts. In spite of the hype created total branch mechanization (TBM) and full computerization of branches, this is mostly in metro and urban centers. The rural and semi- urban branches still functioning using manual operation systems. Complete integration of branch network and operations using the communication infrastructure and maintaining it through appropriate software, the difficulty of hiring of professionals from both the sectors with a high comfort level in hitech environment and establishing call centers. In the mean time 44

the challenge lies in setting up distribution procedures consistent with the manual systems in most banks. The opportunity to augment fee-based income is another alluring factor, which has impetus to the concept of bancassurance in India, especially in a regime of falling interest rates and low levels of credit off-take. Banks need to take a careful assessment of all costs involved, including hidden and creeping costs to arrive at the net benefit. Initial infrastructure set up cost training and orientation costs, communication and lead conversion costs, employee productivity and breakeven level of business and such other issues need to be gone into thoroughly. In short, an in-depth analysis of the value chain should be done in order to draw valid inferences and assure oneself of the real income through fee/ commission in selling insurance products. The insurers see leverage of existing assets of banks, mainly vast and valuable customer database as a great opportunity. While this is true to some extent, the existing database is not available to the insurers in a ready to use form. There was never a conscious effort made by the bankers towards effective client segmentation, evolving of neither proactive customer acquisition policy nor creation of an institutionalized information pool. Most of information on customers and cultivation of relationship with clients has been at a personal level. Thus immediate challenge posed is to recast the available database and create customercentric access records for efficient exploitation of this opportunity. Another area that could be of interest for bankers to sell insurance is exploiting the corporate customers and tying up for insurance of the employees of corporate clients, which could be an avenue with the easy access. In most cases of corporate accounts bank take up an activity of salary disbursement of employees, offering of personal loan facilities. Where employee base of the corporate client is quite sizeable, the economics work out favorably to open extension counters at the factories and work place and these would be better equipped to sell insurance because of the exclusivity of its operations, good relationship with the employees and close the liaison with the top management. Leveraging the availability of large pool of professional in banks presents itself as an opportunity to insurers in selling their products 45

through banks. However it has been the experience elsewhere in the world that there is need felt for adequate training of the employees in view of vast differences in work culture. Reluctance to learn on one hand and inability to sell complex insurance products on the other two are important aspects of challenge from the human resource angle. Bringing relevance, motivation and skill development at a operational level at a bank branches is a key challenge that needs considerable attention to ensure the success of bancassurance. One irritant in respect of utilizing the existing bank staff is remuneration and compensation schemes. A rational, transparent, well defined and productivity linked package has to be agreed upon and put it in place with quantitative distribution of amount payable to all persons involved in the chain. While the above points are from the macro level view, there are some micro aspects that need to be focused upon. Many banks have seized the opportunity to partner with insurers seeing the apparent benefits, but to translate into reality the challenge is creating an environment of top- level involvement of bank managements. There is a lot of fanfare and media coverage while entering into partnerships, but the same enthusiasm and direction from top to sustain the tempo may be lacking. Resolving possible conflicts of interest, establishing credible service level agreements between the banks and the insurer, parking of funds and their management, and other similar kinks need to be straightened to ensure mutually enriching relationships.

PROS AND CONS OF BANCASSURANCE
The reforms in the insurance sector leading finally to the opening of the insurance sector for private participation have brought in its wake major changes not only in the design of the products available in the market but also the manner in which they are marketed. We have today a host of products coupled with a large number of intermediaries who market them. The emergence and spread of bancassurance has been one of the most significant developments in the retail financial services sector in India. Many banking institutions and insurance companies have 46

found bancassurance to be an attractive - and often profitable complement to their core businesses. While less than two per cent of total premiums are generated through this channel, there are expectations that bancassurance will grow to register a dominant share in the widening insurance market during this decade. World over, while both life and non-life companies seek to engage bank branches, non-life products have featured less prominently in bancassurance distribution. The major reason is the complementary nature of life insurance and banking products. Both are in the nature of savings accumulation, one short-term and the other longterm. The enormous trust that the banks command in the minds of public is an important reason why insurance companies seek to enter into wide ranging banking partnerships. The banks, in turn, find that the customers appreciate the provision of integrated financial services at the bank’s branches, which in turn builds better customer loyalty and retention levels. The insurance companies and the banks together find that their collaboration at providing a package of financial services not only benefits customers but also maximizes their profits. The early bancassurance distribution arrangements in India are taking off under two categories:Distribution alliances by way of corporate agency and insurance broking relationships, and referral arrangements. Pure distribution arrangements provide both banks and insurance companies with additional sales potential with minimum of investment. The referral form of distribution is an arrangement, whereby the bank passes on business leads to career agents of the insurance company with which it has a tie-up. Unlike the referral arrangement, an agency relationship has the merit of grooming the bank staff to sell insurance products after receiving proper training in accordance with the syllabus prescribed for the purpose. The regulations restrict banks to enter into corporate agency arrangement with only one life insurer and one non-life insurer. Banks becoming a corporate agent need to designate a senior executive to be the nodal point with responsibility to account for adherence to the terms of the insurance regulation. From a regulatory perspective, we would prefer that insurance companies

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go in for a more formal corporate agency model rather than the referral model. In India, there are 75 branches per million inhabitants and banks have expertise on the financial needs, saving patterns and life stages of the customers they serve. Clearly, that's something insurance companies -- both private and state-owned -- would find nearly impossible to achieve on their own. Banks also have much lower distribution costs than insurance companies and thus are emerging as the ideal distribution channel. Tying up with banks is the logical route for insurers to take for achieving extensive geographical spread and countrywide customer access at minimum cost. Until the entry of private insurers, state-owned insurance entities relied solely on the tied agency force and their own employees. But agents and employees have their limitations. After a while, the less aggressive ones see their sources and contacts dry up, and growth in the sale of new policies decreases. Distances handicap even those with a sales drive. Here banks excel. They have a captive and growing customer base they can exploit to cross-sell products. The concept of universal banking-- one stop financial services supermarket -- which originated in Europe is slowly beginning to evolve in the Indian scenario by offering the prospect of low-cost one-stop shopping for all of a business's financial services. To sellers there's the prospect of scale economies and cross marketing. Bancassurance will help cut overlapping costs and try to gain economies of scale and scope and, thereby, driving down unit costs in the fashion of the vertically integrated 20th century corporation. With a low-cost structure, the banks can leverage on a costeffective bundle of business financial services, including cash management, lending, capital markets, risk management, retirement savings, and all types of commercial and personal lines of insurance. Bancassurance has the potential to be an effective distribution channel in India, especially because of extensive network, built over the years. Insurance companies have to take advantage of the customers’ long-term trust and relationships with banks. The association is a mutually profitable one, where the bank can widen its range of products on offer to customers and earn more, while the insurance company gains by getting constant visibility at the

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bank branches, and also the security of receiving premium payments on time. The advent of the e-economy has also radically challenged traditional principles of corporate strategy, including how value is created and the basis of competition. Today, creating value is about scale in the formation and management of strategic alliances. A bundled package of commercial financial services from a financial conglomerate, for example, is likely to benefit small and middlemarket businesses most. Large corporations already enjoy enormous buying power and can afford at least some internal staff that is experts in each of the intricate areas of financial services. The products that are likely to sell through bancassurance are simple vanilla products. There is an element of complementarily in banking and insurance products. The various schemes for disbursing credit are likely to generate a demand for insurance cover, and availability of insurance cover in turn will facilitate disbursement of credit in risk prone activities. The insurance companies need to introduce simple products that can be sold overthe-counter at the banks. Both Banks and insurance companies have rural and social obligations to meet as prescribed by their respective regulators. The Banks and insurance companies can work together in this area and it is possible that the banks while meeting their obligations in terms of lending requirements to the rural and social sectors can complement the efforts of the insurers in meeting the latter’s obligations too. Such relationships will also help in synergizing the strengths and capabilities of every insurer and the banks, which with their network in the rural areas offer a perfect opportunity. The bancassurance model also addresses the problems of individuals and small and medium sized establishments by providing a variety of financial services under one roof. The convergence of financial services reduces the operational costs of the banks and insurers, which can be passed on to the customer without materially affecting their own margins. However large customers continue to value diverse and objective advice, and use different banks, payroll companies, insurance companies, and tax and legal firms. This enables gaining fresh perspectives from all of them because they fear that with a bundled package their interests would be subordinated to those of the

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provider. This category of customers is bound to be outside the scope of bancassurance. Financial services and information technology have undergone rapid and massive changes in all aspects of their business: product and services, sectoral structure, market segmentation, competitive environment. Today Information Technology has changed the nature of financial markets and financial transactions. The pace and reach of change are unlikely to slowdown in the foreseeable future. While the Banks and capital markets have adapted to these changes, can insurance companies cope with this change? By and large, insurance companies have been conservative users, putting heavy emphasis on proven reliability and toughness of IT applications. Major applications decisions and development processes are often ponderous and time-consuming. While insurance companies accept the significance of information technology in their business, they remain undecided in their attitude towards it: is at a tactical tool or strategic lever? Is it a core business? Does technology offer sustainable competitive advantage? Is it a means of differentiation among between banks and insurance companies? On the other hand, bancassurance is a network business, whose value increases with the number of users and wider reach, which implies at least some degree of inter-operability. Hence the need for co-operative systems and networks: financial institutions have been remarkably successful in developing and managing such systems and networks. There is no denying that there are significant issues relating to software and systems integration for bancassurers. The transition from closed legacy systems to open new technology is not complete, and integration of parallel legacy systems is complex. The existing institutions are adapting to the new environment while the new entrants are coming up with the state of art technology and hence will have no difficulty in adopting the bancassurance model. The emergence of banks as promoters of insurance companies and the distribution of insurance products through corporate agency model by the promoter banks also raises concerns about the potential concentration of economic power and the ability of the regulators to manage risk. A more ubiquitous concern in future is the potential for "systemic risk" in the economy. This is an area that requires constant monitoring by the regulators.

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Social, environmental and ethical concerns are increasingly recognised as a source of both risk and opportunity. Clear procedures need to be established to include such concerns as part of the review process of the insurers while examining bancassurance partnerships. Banks also need to have clear and detailed procedures to protect the integrity of their customer’s data and to give customers the choice as to the level of privacy they wish to enjoy. As intermediaries, insurers are taking on new financial risks. Insurers investing in credit derivatives effectively take on bank credit risks. Insurers, who underwrite professional indemnity policies for bank directors and officers, effectively assume banks' operational risks. Insurance company managers must keep abreast of these developments. They must understand how their companies' risk profiles have changed, and how new activities can have opposing effects on both sides of the balance sheet. All insurance industry professionals need to become more astute a assessing risks, and competency needs to be upgraded at all levels in the company. Regulators must also keep pace. In supervising individual insurers, regulators need to look beyond insurance risks and protecting policyholders. From a broader systemic perspective, greater engagement of insurers in financial markets raises important questions concerning their impact on financial stability. How well are insurers managing this new portfolio of risks? These are issues that will continue to engage the attention of the regulator. In addition to the larger issues raised about the conglomerates, there are also a number of operational issues that have to be addressed for a successful experiment in bancassurance. While banking is a short-term business, life insurance is a long-term relationship with the client. The insurers and bankers have to understand and appreciate each other’s prospective and work together to make a success of the business of selling insurance. Unless the operational details are worked out and the Bank staff trained adequately, it would be difficult to ensure a coordinated action at the field level. It is not enough that there is commitment to the model at the higher management level. It should percolate to the lower levels.

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The large untapped potential for insurance exists in the rural areas and the branch network in those areas is primarily under public sector management. The success of the model would, therefore, largely depend on the attitude of the employees of the public sector undertakings. Are they likely to look at it as an opportunity or as an imposition? What should be done to motivate them to sell insurance products? How do we devise a system of incentives for those who participate in this programme? The effectiveness of the programme will depend upon how successfully this issue is addressed. The credibility of the model comes into question if there is misselling. A cordial banker-customer relationship that has developed over the years would turn hostile if due to ignorance or oversight the full implications of an insurance policy are not fully explained by the banker or understood by the customer. There is, therefore, need for great caution in selecting the products for sale through this medium. In addition, those in charge of sales should be trained adequately to avoid any miscommunication. As indicated earlier, the number of policies sold through bancassurance model is modest as of now. I have no doubt that it has the potential to be an effective distribution channel because of the extensive network, vast customer base and the desire to maximize revenues from other sources to make up for soft interest regime. I am equally confident that bankers and insurers would together address and overcome the difficulties that arise in this partnership and serve the interests of their institutions while extending the benefits of insurance to the large sections of population which need this facility and but are presently outside its reach.

COOPERATIVES
(NGO’S, SHG & MFI’S)
For large companies to tap vast markets at the bottom of the pyramid (BOP), quality products and services have to be specially designed and developed or selectively altered and made available at a lower cost. Serving BOP customers is a profitable opportunity for corporations. It is also as a social imperative as two-thirds of the human population belongs to bottom of the economic pyramid. The Insurers have targeted only customers at the upper end of the economic pyramid and have ignored BOP customers assuming that they are inaccessible and unprofitable. Now they are viewing BOP 52

markets as an unexploited opportunity and take proactive initiatives to fulfill the needs and wants of low income consumers. Moreover, through this Insurers can curtail poverty and improve the living conditions of the world’s poorest population. Also in India all insurers have to achieve their specified business from rural sector. These are known as social norms and IRDA is very watchful on this. Recently IRDA has announced that the percentage of business from rural area has to be increased, hence it is likely that target of social norms will be revised upward soon. In such a scenario cooperatives (as a distribution channel) can be very successful. We have witnessed the interest of insurers is increasing in bottom of pyramid.

Advantages of a co-operative/mutual insurance
Organisations in the social economy such as co-operatives, mutuals and voluntary associations may be formed because the state does not provide sufficient quality or quantity of a particular service such as health, care and education. Consumer co-operatives generally emerge when existing services either are not accessible or not available. Consumer co-operatives, such as an insurance cooperative, are considered as an extension to the individual members’ household economy. They aim to improve the conditions for the consumer and the economy of the household (which includes time, knowledge, self-sufficiency and money). The consumer co-operative will assist the households to organise and solve their problems through education, dialogue and improved access to services and products available.

Identifying the needs of the poor
Co-operative and mutual insurers are in a better position to identify the needs of their customers and community due to the closer links through trade unions, credit unions, agricultural and consumer cooperatives. The resulting increased awareness and understanding enables a more personalised, flexible and appropriate service. Cooperative insurance companies operate for the benefit of their members and provide affordable premiums, fast and efficient service and responsive product development. They offer stability through a clear community-minded mission and facilitate member involvement in distribution, promotion and 53

product development to the benefit of all consumers in the community. The cooperatives can take a long term, sustainable approach to management of the insurance scheme in the best interest of the member without needing to satisfy the short-term return requirements of shareholders, as the owners and members are the same. Stock companies are faced with a conflict of interest when the customer’s requirements do not provide sufficient profits or return on investments, which is one of the reasons why established insurers steer away from high-risk low-income communities and concentrate on the middle/high class customers demanding ‘off the shelf ’ products. Co-operative insurers dedicate substantial resources to research, health promotion and loss prevention as the policyholders’ best interest is served by preventing losses. There is an obligation to focus on all potential customers and not just the profitable ones, they have a duty to provide where there is a need, and the need for protection is the greatest by the poorest.

Trust
In an environment where regulation is weak and corruption is high there is very little trust in any institution. This is more of a problem in the informal sector where the poor have no rights at all and are constantly manipulated. Co-operatives are more trustworthy, less likely to engage in opportunistic behaviour and exploit the consumer. The co-operative structure makes it easier to win the trust of the members, particular in the face of market failure and it is better placed to tap into member’s know-how, loyalty and ideas. The strong community relationship, good user networks, member involvement and democratic process encourage a growing feeling of trust and building of social capital to develop a better society. Trust is a major advantage of the co-operative and it encourages a greater number of transactions and commitment from the members to act in the best interest of their organisation and improve its economic efficiency.

Morale hazard, adverse selection and fraud
Mutual insurance policies are participating policies, where policyholders share the profits or losses earned by the insurer. This reduces the risks borne by the insurer and decreases motivation for morale hazard and fraud by the policyholder. Peer pressure from within established social groups can encourage members to avoid 54

morally hazardous behaviour, particularly in small groupings and communities. In community-based schemes, each policyholder is an owner of the scheme and elects a group of policyholders to manage the operations, usually on a volunteer basis. This enables poor households to retain control and ownership. Due to lack of credible information in developing countries, particularly in the informal sector there is a need and reliance on local knowledge to underwrite policies correctly and verify claims. Insurance provided through an established co-operative body means that risks are considerably reduced as each society has close knowledge and supervision of the member and his/her risks. This existing trusted relationships and solidarity with members provides the opportunity to build a stable policyholder base. This is important when incomes of participants grow at different rates and richer participants who find they are giving more tend to leave the group. Membership-based organisation thrive when the members come from a specific loyalty or occupation as fear of future exclusion from the scheme and the accompanying social network keeps participation high. Co-operative insurers are less likely to manipulate the poor and participate in underhand selling tactics such as over-pricing, misleading advertisements and excessive management costs. There is less likelihood of the manager taking advantage of asymmetric information and failing to enforce obligations as the policyholder is the owner and henceforth the employer of the manager. The ownership of co-operatives by consumers, workers or suppliers means that it is easier for them to monitor the performance of the company and its employees on a regular basis. Co-operatives involve their members not only in corporate governance but also in the day to day running of the scheme.

Education
Co-operatives and mutuals have a long-standing affiliation with the poor and have the expertise and means of communicating the needs and benefits of insurance. The nature of insurance is based on the concept of mutuality, risks is shared by the many to protect the few, the poor are used to this concept as they are familiar with traditional mutual self-help mechanisms. As members are owners of the scheme and ultimate beneficiaries of its success they have a

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strong incentive to educate themselves and learn about their own business.

Empowerment
Co-operatives empower individuals by providing them with the opportunity to participate in decisions that impact their livelihoods. It gives the poor a voice, gives them a choice, and a chance to find solutions to their specific social and economic needs. Policyholders have representations on special advisory committees dealing with company performance, products and claims, enabling members to take direct control over decision making and on the quality, type and delivery of service. The co-operative structure allows the poor to have more bargaining power, benefit from economies of scale and negotiate better deals for themselves. Success of the insurance scheme would enable the co-operative to reduce the inequality and disadvantage of members, staff and the wider community.

Costs and price
Co-operatives do not operate under a profit motive, surpluses are reinvested or paid back to members, keeping costs and premiums down. Community involvement reduces the costs of labour and resources needed for information collecting, educating, marketing and monitoring policyholders. The Co-operative structure enables lower costs by offering insurance to large affiliated groups, many farmers in developing countries belong to at least one co-operative society that provides them with credit, marketing, equipment or farming methods. These societies are a natural and cost-effective distribution channel for insurance particularly in remote areas and lower income groups in towns and cities. Co-operatives make more effective use of the resources of their members and the economic-efficiency of the organisation as surpluses are returned to the members in the form of dividends, lower premiums, loss prevention activities or additional coverage.

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Weaknesses in the co-operative structure
Capital Mutuals principally rely on retained earnings to expand their capital base, they are unable to raise capital by issuing equity. This restricts their ability to undertake large and long term investments, preventing them from entering into new lines of business, regions or making acquisitions. At or near the subsistence level, the poor have little available for saving and whilst these can be mobilised, to depend on them to provide the required capital is unrealistic in the short term. Accountability Offering insurance through co-operatives or credit unions as member benefit schemes surpasses regulatory requirements. Without the legal requirement of audited financial statements and performance reports, there is a greater need for internal mechanisms and transparency to ensure sufficient controls and checks are in place. Additionally, without the incentive of stock options to guide managers’ objectives and insufficient board control and expertise there is a greater possibility of fraudulent activity by company officers. Lack of control on managers also leads to members needs being ignored in product development and a lack of motivation to open membership to other groups. The co-operative can become an inward looking and stagnant organisation, it can also become a tool for government manipulation and propaganda. Access to services requires permission from group leaders, who may abuse their privileged position to favour certain parties, be tempted to steal funds and exclude the poorest in the community. Mutuals, therefore, tend to concentrate more on lines of business that require limited management discretion and with less underwriting risks which may be to the detriment of the needs of the policyholder. Technical expertise Group leaders are not insurance professionals or managers and are unable to manage the scheme effectively and efficiently. 57

Managerial salaries in co-operatives tend to be lower than in the private sector and therefore cannot attract qualified personnel and modern technology. Limited experience in collecting and analysing data makes it difficult to design suitable coverage, establish premiums and set up adequate claims reserves. There is an overwhelming need by co-operatives in developing countries for technical assistance and financial support to enable them to manage their insurance schemes. Size As the organisation grows it tends to lose its co-operative identity and also its closeness with its members needs. Conversely, the organisation can also become inward looking and become an exclusive group, which prohibits new members and stifles innovation and progress.

Delivering insurance to the poor
An insurance scheme for the poor which is affordable, adequate and sustainable is difficult to achieve due to lack of financial capital, technical resources, adequate numbers, trusts, regulatory requirements, transparency and accountability. The road to achieving a comprehensive insurance scheme is full of pitfalls and must be undertaken cautiously and carefully with good corporate governance at the heart of each step. The appropriate form for servicing the poor and one that has been used for centuries is that of a co-operative. A good co-operative will serve the needs of members, providing flexible, affordable and appropriate products. As the scheme belongs to the poor it will minimise fraud and moral hazard, and encourage participation.
There are generally four models of distribution of insurance in rural areas.

1. 2. 3.
4.

Partner Agent Model Community Based Model Full Service Model Provider Model.

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1. The Partner-agent model of insurance distribution

Partner

Agent
Product sales

Product Manufacturing
Product servicing Service provider

Policy holder

• Commercial or public insurers together with MFIs or NGOs Collaboratively develop the product. • The insurer absorbs the risk • MFI/NGO markets the product through its established distribution network. • Lowers the cost of distribution and thus promotes affordability. • Agent can be any one of NGO, SHG or MFI. Win-win situation: the distribution potential of the MFI with the institutional capacity of an established insurer.

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2. COMMUNITY BASED MODEL Local communities, MFIs, NGOs and/or cooperatives Develop and distribute the product, manage the risk pool and absorb the risk. Similarly to insurance cooperatives, there is no involvement on the part of commercial insurers.

THE CASE OF VIMO SEWA
Vimo SEWA is one of the most famous CHIs in India. However, it cannot be said to be representative of CHIs in India for various reasons. For one, it is much larger than most of the CHIs in India. Secondly it is more professionally managed as compared to other CHIs that are dependent on volunteers. Due to the large size of its membership, direct participation of the members in the management of the scheme is not possible. However, Vimo SEWA is committed to ensuring that the needs and interests of members guide the scheme design and implementation. Community participation in Vimo SEWA governance occurs in two ways. First, the governing body is made up of representatives of the member community (including insurance members). Major decisions such as premium and coverage amounts and expansion of the scheme to new geographic areas are taken in consultation with, and after approval by, the elected representatives. Second, members of the insurance programme actively express their feedback and their needs vis à vis the scheme to the workers who market and service the scheme. These inputs are incorporated into the design of the scheme to the extent possible. Yet another mechanism for community participation in the scheme is the Claims Committee which scrutinizes and approves claims that are submitted. The med claim committee, which scrutinizes and decides on each health insurance claim submitted, is made up of SEWA aagewans representing different trades practiced by SEWA members. This mechanism ensures community participation and transparency in the claims decisions. 61

Vimo SEWA has been offering an integrated insurance package to its members since 1992. The primary aim of the insurance, viz, to protect SEWA’s members from risky events and associated financial losses, has stayed the same over the years. The operational aspects of the scheme have changed with time, always in response to the needs of the members. For instance, Vimo SEWA de-linked from the insurance companies for a few years because members were not being satisfactorily served by the insurance companies. However, once it was able to negotiate better servicing, it linked up again with the insurance companies, thus shifting the risk from the member-based union to the insurance company. In terms of risks covered, the package has enlarged its coverage to the husbands and children of members because that is what the member demanded. Coverage amounts have also been increased to offer better protection to SEWA’s members; this has been possible in part due to the improvement of SEWA’s negotiating power vis a vis the insurance companies. 3. FULL SERVICE MODEL • Commercial or public insurers provide the full range of insurance services. - Product development - Product distribution - Risk absorption E.g.- TATA-AIG sells micro insurance with this model.
DISADVANTAGES OF FULL SERVICE MODEL

• Reduces processing time and allows for strong controls throughout the system • Lack of sparring • Distribution, particularly in rural areas may be cost-ineffective • Disadvantage of the ‘power balance’: the small client versus the big firm. 62

4. PROVIDER MODEL The service provider and insurer are same. Like hospitals provide policy to individuals. This model is not much practiced in India hence not discussed.

In India Partner agent model and Full service model are of primarily used by insurers to reach rural customer.

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OBJECTIVES OF STUDY:
This study has following objectives:  To know the distribution pattern among investors.  To know how e-commerce can influence the investor’s of insurance.  To know the features the investors look for in insurance product.
 To know the distribution preference of investors.

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RESEARCH METHODOLOGY
1. GEOGRAPHICAL AREA OF RESEARCH: GHAZIABAD NOIDA 2. SAMPLE UNIT: Satisfaction level measurement of customers at service station. 3. SAMPLE SIZE: sample size for the survey is 45 respondents 4. CRITERIA: all kind of persons 5. METHODOLOGY INTERVIEW: Intercept followed by face-to-face.

Research Design:
It is the plan, structure of investigation conceived so as to obtain answer to research question and to control variance. It is the specification of methods and procedures for acquiring the information needed. It is concerned with:  Overall operational pattern  Framework of the project  Stipulates what information is needed

The first step that undertakes in the report was the selection of research. The research design, which was adopted for the study, was exploratory and descriptive in nature. At first exploratory research was conducted to define know the problem well and the descriptive research was conducted.

The two types of research are as follows:
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 Exploratory research

-It is to generate new ideas. In this

respondent should be given sufficient freedom to express themselves. Eg: - In a business where sales have been declining for the past few months, the cases exploratory research used to be conducted.

 Descriptive research: They are well structured. It can be complex,

a high degree of scientific skill on the part of the demanding a high degree of scientific skill on the part of the researcher. It can be taken in certain circumstances. When the researcher is interested in knowing the characteristics of certain groups such as age, sex, educational level, occupation or income, a descriptive study may be necessary.

Cross-sectional studies: It is concerned with a sample of
elements from a given population. Data on a number of characteristics from the sample elements are collected and analyzed.

• It has a wider scope. • Detailed information can be obtained. • It is economical.
• It takes less time.

 Data collection
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 Primary data  Secondary data

Primary data
 Observation method, and  Questionnaire  Unstructured interview

Secondary data
 Fact sheet of particular fund  Internet  Newspaper  Magazines  Others

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PRIMARY DATA:
Observation method: This is one of the most reliable sources of collecting primary information. During two months summer internship program, I have collected too much information from customers about the product. Most of the customers rely on 100% insurance based product, and the rest are looking for debt as well as government security based product. Whereas, I have told the person about the insurance those who are looking for equity-based product from conservative point of view. It is sure that insurance is the subject to market risk. But risks are diversified in the insurance; the customers are shown the asset allocation and the performance of the particular fund so that they can understand that risk is less than the shareholders. Questionnaire For this study data are collected with the help of questionnaire. For that perpose research is conducted between 100 respondents. Unstructured interview For this study an unstructured interview is also done with bank managers of Punjab National Bank, Vijaya Bank and Indian Overseas Bank.

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ANALYSIS OF DATA
List of Graphs: Type of Policy  Source  Persons having Bank A/C  Kind of Computer  Internet Connection  Factors for purchasing Insurance  Grid Analysis

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Q.1. What kind of insurance policy do you have?
70 60 50 40 30 20 10 0 life genral both 15 35 life general both 70

Q.2.From where do you purchase it?
retail outlets ngo\m fi 3% 6%

bank 18%

agent 40%

cellphone 4%

internet 15%

broker 14%

agent cellphone retail outlets

broker bank

internet ngo\mfi

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Q.3. Do You have a bank account?
100 90 80 70 60 50 40 30 20 10 0 yes no 5 yes no 95

Q.4. Do you have a) personal computer b) laptop c) PDA?
45 40 35 30 25 20 15 10 5 0 pc laptop pda 25 20 pc laptop pda 45

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Q.5. Do you have internet connection?
53 52 51 50 49 48 47 46 45 44 YES NO 47 YES NO 53

Q.6. Which is the foremost factor in your consideration when you choose the channel for purchasing insurance? a) Trust c) Affordability b) Convenience d) speed

spped

85

affordability

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convenience

45

Q.7. Grid analysis.
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trust

0

20

40

60

80

100

72

70 65 60 54 50 45 40 35 30 25 20 15 10 0 A agent bank B broker ngo\mfi 10 5 0 C internet retail outlet 0 D cellphone 20 15 8 5 0 7 30 65

FINDINGS:
For new distribution channels to develop, changes in legislation would be needed: A. amendment of s.6 of the Banking Act to allow banks to distribute insurance B. amendment of Insurance Act to permit entry of insurance brokers and corporate agents C. promulgation of e- commerce laws for internet to be used for insurance sales rather than only for promotion. The guiding principle should be that it is only in cases where market forces, self regulation, and interaction with customer bodies are likely to be insufficient that rules, regulations, and legal measures should be adopted.

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LIMITATIONS OF STUDY
This study has following limitation with it: • Sample size is limited to 100 educated agents and insurance holders. • Sample size may not adequately represent the national market. • Overall scenario cannot be predicted due to recent changes in IT sectors due to rupee appreciation. • Since insurance is very big market in India due to that many laws related to insurance are remain untouched in this study.

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CONCLUSION AND RECOMMENDATIONS
The new electronic market place will increase competition and hence force changes in the way that insurance business is conducted. The fact that consumers will be able to easily compare quotes from different companies will mean that insurers will have to differentiate their products and introduce brand names that capture the customer’s imagination. The expense savings brought about through greater automation will be passed onto the consumer in the form of lower prices. However, consumers will not buy on price alone, they will also buy on convenience and from trusted names. Trust may be developed through the improving levels of service possible in the new e-world such as 24 hour call centre assistance. 75

Advances in data collection techniques such as data mining may mean better risk assessment and hence that less capital is required to back insurance companies. This could lead to the set up of virtual insurers by venture capitalists and affinity groups. Advances in data collection will also mean that actuarial modelling becomes increasingly sophisticated with it covering will need to be more forward looking customer behavior as well as profitability. Actuarial education in light of these developments. Se which organisations will succeed? Will it be those who invest in the latest technology or those who build their own entry barriers for other players? Which will be more important, commercial intent and positioning or customer service and management attitude? For answers to these questions, we will need to wait and see. A. integrity- the information which is given to a client at any stage should be complete, accurate, and comprehensive so that the potential customer can make a well informed, balanced decision B. competence- ability of the company and its representatives to explain the product/ service C. confidentiality- of client information D. complaints handling- in an expeditious and fair manner E. compliance- ensuring that the company lives by the rules it has set for itself F. Self regulations- there should be a set of industry rules and regulations that ensure enforcement G. fair competition- a level playing field which ensures that all companies follow the above norms I believe that these norms should govern all the interactions, which take place between the customer and the insurance company irrespective of the manner of distribution.

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“IN FUTURE INSURANCE WILL BE BOUGHT NOT SOLD”

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SURVEY QUESTIONNAIRE
Name: ____________________ Age: ________ Occupation: ________________________________ Address:___________________________________________ __________________________________________________ Contact no. ____________________ Q.1 What kind of insurance policy do you have? a) ………………………………………………………. b) ………………………………………………………. Q.2. From where do you purchase it? Tick the right choice. a) Agent ……. b) bank……. c) Broker …….. d) Internet ……… e) Retail outlet……. f) cell phone……. g) Cooperatives …….. Q.3. Do you have a bank account? Yes\No …………… Q.4. Do you have a) personal computer b) laptop c) PDA? ………………………………………………………… Q.5. Do you have internet connection? YES \ NO …………………….. Q.6. Which is the foremost factor in your consideration when you choose the channel for purchasing insurance? a) b) Trust ……………… Convenience ……… c) Affordability ………… d) Speed ………………...

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Q.7. Mark the answer in appropriate field? channel I currently purchase through this channel Not currently I will consider Use this if it is channel but available would do so happily I would never buy through this channel

Agent Broker Internet Cell phone Bank NGO\MFI\ SHG Retail outlets

SIGN. _________________ DATE _________________

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BIBLIOGRAPHY
BOOKS: coughlan T. Anne- SALES CHANNELS – (Prentice Hall Publication)  Bodla, B.S- Insurance fund, environment & procedure –(Deep & Deep Publication)  Gupta, P.K- Fundamentals of insurance – (Himalaya Publication House) MAGAZINES/ JOURNALS: Insurance Post  Asia insurance review  IRDA journal – JUNE 2007  Papers of Dr. Rowland T. Moriarty  Economic Times WEBSITES: www.bimaonline.com  www.irdaindia.com  www.bajajallianz.com  www.icicilombard.com  www.moneycontrol.com  www.microfinancegateway.com

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