Professional Documents
Culture Documents
Access to this document was granted through an Emerald subscription provided by emerald-srm:393177 []
For Authors
If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about
how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/
authors for more information.
About Emerald www.emeraldinsight.com
Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than
290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional
customer resources and services.
Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and
also works with Portico and the LOCKSS initiative for digital archive preservation.
Krishnaveni Muthiah is an Mr Laksh, an insurance agent of the Life Insurance Corporation of India, takes stock of his
Associate Professor at the business interests in the field of life insurance in India, and contemplates on what would be
PSG Institute of the business model adopted by the various players including the foreign firms, which have
Management, PSG College entered the field through joint ventures. The decisions and path developed by them will
of Technology, Peelamedu, determine the business field for him to play on. The insurance scenario in India and its new
Downloaded by RMIT University At 08:08 04 March 2016 (PT)
DOI 10.1108/20450621111187326 VOL. 1 NO. 4 2011, pp. 1-17, Q Emerald Group Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
Till October 2008, the market registered new business of worth Rs 39,000 crores. Also, more
than 80 per cent of the business in the Indian insurance sector is driven by Unit Linked
Insurance Products (ULIP) (www.rncos.com/Blog/2009/01/India-ULIPs-Expected-to-Get-
10-15-Cheaper.html).
the performance of the country’s largest life insurer, Life Insurance Corporation of India, in the
southern districts. The Madurai division, comprising six districts, has recorded a negative
growth of 12.5 per cent for the fiscal 2008-2009 with respect to number of policies issued
according to Senior Divisional Manager, S. Chandrasekar, as reported in April 2009. While the
targets for the fiscal was 5.49 lakh policies and Rs 765 crore in first premium, the division
achieved 4.40 lakh policies (80.19 per cent) and raised Rs 372.16 crore (48.6 per cent).
A huge dip in the issue of unit-linked insurance plans (ULIP) was a major reason. In 2008-2009,
ULIPs constituted only 24.72 per cent of policies issued and yet comprised 57.31 per cent of
the first premium raised. In the preceding fiscal, ULIPs constituted 64.7 per cent of policies
issued and 93.1 per cent of the first premium raised. While the average minimum investment
for conventional policies in the last fiscal was Rs 5,000, it was around Rs 10,000 for ULIPs
(www.hindu.com/2009/04/15/stories/2009041559560300.htm).
j j
PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 1 NO. 4 2011
Market that had actually emerged to be present
The Indian Government privatizing its insurance industry by passing the IRDA Bill (1999) and by
all the major changes the actual impact was felt only in major urban areas, while the vast majority
of the rural population was excluded from the insurance sector (www.prlog.org/10160537-
recession-will-not-decelerate-indian-insurance-industry-growth-rncos.html). This sector with
all the progress achieved post-IRDA, can still be considered nascent and in infancy (www.
indianinsurance.com/forums/showthread.php?p¼914).
Untapped market
A new research report, ‘‘Booming insurance market in India (2008-2011)’’ from RNCOS,
says that the Indian insurance industry will show upward trend in future as it has displayed in
the last few years owing to large population and vast untapped market. The Indian insurance
market has joined the league of the fastest growing insurance markets in the Asian region,
with the total insurance premium projected to grow at a CAGR of more than 50 per cent
between 2008-2009 and 2010-2011. India has more favorable environment for insurance
expansion as the country has low insurance penetration (www.prlog.org/10160537-
recession-will-not-decelerate-indian-insurance-industry-growth-rncos.html).
Rs 2,000 billion in next two years from current level of Rs 500 billion. The ASSOCHAM found
that there are 124 million rural households. Nearly 20 per cent of all farmers in rural India own
Kissan credit cards. The 25 million credit cards used till date offer a huge database and
opportunity for insurance companies. An extensive rural agent network for sale of insurance
products could be established. The agent can play a major role in creating awareness,
motivating purchase and rendering insurance services (http://myiris.com/newsCentre/
storyShownew_opt.php?fileR¼ 20090515111651198&secID¼ fromnewsroom&secTitle¼
From%20the%20News%20Room&dir¼ 2009/05/15). The Associated Chambers of
Commerce and Industry of India has clocked out the fact that during this period, private
players in the industry will see a growth of about 140 per cent, owing to the adoption of the
aggressive marketing techniques in comparison to the growth rate of 35-40 per cent
achieved by the state owned insurance companies (www.scribd.com/doc/4996143/
OVERVIEW-OF-INSURANCE-SECTOR-INDIA).
j j
VOL. 1 NO. 4 2011 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3
insurance companies to extend their activities to rural and well-identified social sector in the
country (IRDA 2000). As a result, increasingly, micro-finance institutions (MFIs) and NGOs are
negotiating with the for-profit insurers for the purchase of customized group or standardized
individual insurance schemes for the low-income people. Although the reach of such
schemes is still very limited – anywhere between five and ten million individuals – their
potential is viewed to be considerable. The overall market is estimated to reach Rs 250 billion.
The IRDA defines rural sector as consisting of:
B a population of less than 5,000;
B a density of population of less than 400 per square kilometer; and
B more than 25 per cent of the male working population is engaged in agricultural pursuits.
The categories of workers falling under agricultural pursuits are: cultivators, agricultural
laborers and workers in livestock, forestry, fishing, hunting and plantations, orchards and
allied activities. The social sector as defined by the insurance regulator consists of:
B unorganized sector;
B informal sector;
B economically vulnerable or backward classes; and
B other categories of persons, both in rural and urban areas.
Downloaded by RMIT University At 08:08 04 March 2016 (PT)
The inventory of micro-insurance lists 51 schemes (Rajeev and Basudeb, 2005) that are
operational in India. Most schemes are still very young, having started their operations in the
last few years. Of the 39 schemes for which this information is available, around 24 schemes
came up during the last four years and about seven schemes have operated for a decade.
The schemes with available information cover 5.2 million people. 66 per cent micro-
insurance schemes are linked to micro-finance services. 21 per cent are implemented by
community-based organizations and 12 per cent by health care providers. Life and health
based insurance are highly demanded, 59 and 57.5 per cent on the overall, respectively. 25
out of the 37 per cent receive external funds to initiate the schemes, 20 out of the 32 schemes
got technical external assistance who manage the insurance activities.
Out of the listed insurance products (Rajeev and Basudeb, 2005), 55 per cent cover only a
single risk. The other products provide covering of risks as a package. The available
products cover a wide range of risks. However, the broad majority of the insurance products
cover life (52 per cent) or accident-related risks. Most life insurance products (23 out of 42)
are addressed to individuals. Most life insurance products (55 per cent) have been
designed to cover an extended contract duration ranging from three to 20 years. Out of
42 life insurance products, 23 are pure risk products. The other 19 products propose various
types of maturity benefits. Out of the total 12 health products, seven products propose the
reimbursement of hospitalization expenses while the other five have chosen to narrow down
the coverage to some specific critical illness.
Delivery models
One of the greatest challenges for micro-insurance is the actual delivery to clients. Methods
and models for doing so vary depending on the organization, institution and provider
involved. Any institution has to be thorough and careful when making policies, otherwise
micro-insurance could do more harm than good. In general, the main methods for offering
micro-insurance (Churchill, 2006; ALLIANZ AG, GTZ and UNDP, 2006) are, the partner-
agent model, the full-service model and the community-based model. Each of these models
has their own advantages and disadvantages.
Partner agent model: a partnership is formed between the micro-insurance scheme and an
agent (insurance company, MFI, donor, etc.), and in some cases a third-party healthcare
provider. The micro-insurance scheme is responsible for the delivery and marketing of
products to the clients, while the agent retains all responsibility for design and development.
j j
PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 1 NO. 4 2011
In this model, micro-insurance schemes benefit from limited risk, but are also disadvantaged
in their limited control.
Full service model: The micro-insurance scheme is in charge of everything; both the design
and delivery of products to the clients, working with external healthcare providers to provide
the services. This model has the advantage of offering micro-insurance schemes full control,
yet the disadvantage of higher risks.
Community-based/mutual model: the policyholders or clients are in charge, managing and
owning the operations, and working with external healthcare providers to offer services. This
model is advantageous for its ability to design and market products more easily and
effectively, yet is disadvantaged by its small size and scope of operations.
Micro-life insurance
Life insurance covers the policy holder and his/her family on the event of death and disability.
It is an important measure of financial security for low-income households and the insurance
product currently most widely available. Of all insurance types, life cover is, relatively
speaking, the least difficult to provide, because:
B It is one of the most demanded forms of cover;
B It is relatively easy to price compared to other types of insurance;
B It is mostly resistant to problems of fraud and moral hazard;
Downloaded by RMIT University At 08:08 04 March 2016 (PT)
B It is not dependent, unlike many types of health insurance, on the existence and efficient
functioning of other infrastructure like clinics or hospitals; and
B It is a relatively low-risk product for the provider.
Low-income people consistently find demand for risk management tools that could help
them cope with financial issues related to the death of a breadwinner. In these cases, this
market is looking for:
B funds to help the remaining family carry on;
B funds to assist with the funeral and the related ceremonies and customs; and
B coverage for the outstanding balance of a loan, if indebted.
Life micro-insurance (and retirement savings plans) provides coverage against the financial
consequences of old age or of the death of a breadwinner.
j j
VOL. 1 NO. 4 2011 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5
DLF Pramerica Life Insurance Company Limited:
B Sarv Suraksha – Life.
ICICI Prudential Life Insurance Company Limited:
B Sarv Jana Suraksha – Life.
IDBI Federal Life Insurance Company Limited:
B Group Micro-insurance Plan – Life.
ING Vysya Life Insurance Company Limited:
B Saral Suraksha – Life.
B Generic Group Term Insurance for Social Sector – Life.
Life Insurance Corporation of India (LIC):
B Aam Aadmi Bima Yojana – Life.
B Jeevan Madhur – Life.
B Jeevan Mangal – Life.
B Janshree Bima Yojana – Life.
Met Life Insurance Company Limited:
Downloaded by RMIT University At 08:08 04 March 2016 (PT)
j j
PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 1 NO. 4 2011
investment performance as it manages its way through the financial downturn (www.
webnewswire.com/node/450133).
The challenges in marketing of insurance in the present scenario may be perceived as: poor
comprehension of insurance in terms of the key benefit and the process, lack of promotion,
education and information in our rural sector, weak distribution channels, inaccessibility of
the agent, cost of reaching individual client may be relatively high compared to the existing
commission structure, cumbersome processes, stoic belief in fate coupled with apathetic
attitude and language barriers.
Inclusive growth is now recognized as a necessary condition to ensure long-term
sustainability of growth in India. Bringing in financial inclusion for the poor, rural and socially
disadvantaged sections of the society is now a major thrust area for policy interventions. The
vulnerability of this category of households is very high to various risks related to their lives
and livelihood activities. Therefore, making insurance services available to them becomes a
key strategy to ensue ensure that sustainable social protection is offered to these
households. The rural and social sector obligations and the micro-insurance regulations
from IRDA are definitely the important steps in the direction of ensuring financial inclusion
and social protection for the poor. While enabling regulations are in place and several
insurance companies are in operations in India, there is still a need for innovation in products
and distribution system/channels for ensuring the penetration of micro-insurance to the
masses that need it. And along the way, there is also the challenge of educating the vast
majority of population on insurance that has to be addressed.
Downloaded by RMIT University At 08:08 04 March 2016 (PT)
The rural and social sector obligations and the micro-insurance regulations from IRDA are
definitely the important steps in the direction of ensuring financial inclusion and social
protection for the poor. While enabling regulations are in place and several insurance
companies are in operations in India, there is still a need for innovation in products and
distribution system/channels for ensuring the penetration of micro-insurance to the masses
that need it. And along the way, there is also the challenge of educating the vast majority of
population on insurance that has to be addressed.
j j
VOL. 1 NO. 4 2011 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7
B The marginal error in pricing micro-insurance policies in the absence of historical data
would not seriously affect the insurance companies as the financial value of the risk in
micro-insurance policies is very marginal compared to the traditional high value
insurance companies. This marginal risk too can be mitigated by taking a conservative
approach to pricing of the micro-insurance policies in the inception years and in reviewing
the price, based in actual claims experience in subsequent years.
Reinsures are also beginning to recognize the potential of micro-insurance, in order to
expand the overall insurance market size. Munich Re and Swiss Re and GUC of India are
examples of reinsures, who have been actively studying and promoting micro-insurance in
the Indian insurance market. The willingness and the interest of these reinsurers provide an
opportunity to local insurance companies to enter into the micro-insurance market, by
ceding a portion of micro-insurance risks to global reinsurers. Reinsurers would be in a
position to absorb the risks in micro-insurance programmes is still in a nascent stage.
Even though large numbers and low premiums are the unique selling points of
micro-insurance, increasing awareness, providing customised product, lowering
transaction costs and efficient distribution channels (see the Exhibit) remain the major
challenges. India has one of the most dynamic micro-insurance sectors among all the
developing countries. According to UNDP, the micro-insurance market in India is
approximately 90 per cent of the total population. However, this industry is young and
market has not been tapped yet (http://microinsurancemap.com/mri/min.html). Out of the
Downloaded by RMIT University At 08:08 04 March 2016 (PT)
total low income households in the country only 2 per cent have been covered by
micro-insurance.
A2. What is the ‘‘new segment’’ for business development portrayed in the above case?
A3. In the identified ‘‘new business segment’’ what is the top most priority issue?
A4. What are the other issues to be decided upon in the ‘‘new business segment’’?
A5. In the top most priority issue, what are the various alternative courses of action available?
A6. For the other issues identified, what would be your ‘‘plan of action’’?
A7. Why is Mr Laksh bothered about the business scenario for the insurance firms?
B1. What are the stages in the ‘‘planning process’’ for business across the borders?
B2. What are the various factors that have to be taken into account while screening the
environment for entry/expansion?
B3. Having identified the environment (host country factors) issues, what is the next step in
the ‘‘planning process’’?
B4. In this case situation, highlight the existing host country factors for a MNC which wants to
expand on its life insurance business?
Keywords:
C1. In this case identify the ‘‘adaptation measure’’ in the ‘‘marketing mix’’ to suit the Indian
International marketing,
situation for life insurance. For each of your decision, support it with ‘‘argument’’ on why
Micro life insurance,
you say so?
India,
Bottom of the pyramid, C2. Relate how answers to questions A5 and A6 relate to the theoretical phenomena of
Multinational operations, ‘‘adapting the marketing mix to target markets’’?
International business
j j
PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 1 NO. 4 2011
References
ALLIANZ AG, GTZ and UNDP, ‘‘Microinsurance: demand and market prospects – India’’, pp. 25-30,
Public Private Partnership, August, available at: www.sggwrites.com/docs/GuthridgeGould_11_
Microinsurance%20India.pdf
Chandrasekhar, C.P. and Ghosh, J. (2009), ‘‘The global crisis and Indian finance’’, March, available at:
www.blonnet.com/2009/03/10/stories/2009031050830900.htm
Churchill, C. (Ed.) (2006), Protecting the Poor: A Microinsurance Compendium, ILO, Geneva, available
at: http://en.wikipedia.org/wiki/Microinsurance
Rajeev, A. and Basudeb, G.-K. (2005), ‘‘Micro-insurance in India: trends and strategies for further
extension’’, Working Paper No. 162, Indian Council for Research on International Economic Relations,
June, available at: www.icrier.org/pdf/wp162.pdf; www.nabard.org/pdf/report_financial/Chap_XI.pdf;
www.irda.gov.in/ADMINCMS/cms/frmGeneral_NoYearList.aspx?DF¼RL&mid¼ 26.1
Bibliography
Recommended reading
Cateora, P.R. and Graham, J.L. (2006), International Marketing, 12th ed., Tata Mcgraw-Hill
Publishing Company, New Delhi, pp. 312-38.
Hill, C.W.L. and Jain, A.K. (2008), International Business – Competing in the Global
Marketplace, 6th ed., Tata McGraw-Hill Ltd, London, pp. 113-53, 732-69.
Downloaded by RMIT University At 08:08 04 March 2016 (PT)
j j
VOL. 1 NO. 4 2011 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9
http://bajajallianz.com/Corp/life/micro-alp-nivesh-yojana.jsp
http://bajajallianz.com/Corp/life/micro-jana-vikas-yojana.jsp
http://bajajallianz.com/Corp/life/micro-saral-suraksha-yojana.jsp
Partnership model
As the name implies, this model involves a partnership between an insurer and an agent that
provides some kind of financial service to large numbers of low-income people. This could
be a micro-finance organization, an NGO, or a business that supplies precuts to large
numbers of low-income people, such as a fertilizer supplier. This party is an agent, selling
insurance policies to the clients on behalf of the insurance provider (usually) in exchange for
a commission or fee. The insurance provider utilizes the established distribution channels of
this agent and its financial transactions with low-income groups, which would otherwise be
too costly to set up.
The partnership model uses the comparative advantage of each partner so that each can
focus on its core business: the insurance provider is responsible for designing and pricing
the product, the final claims management and the investment of reserves, and absorbs all
the insurance risks. In addition to selling the policies, the agent offers its infrastructure for
product servicing such as marketing the product, premium collection, and assists in claims
management.
j j
PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 1 NO. 4 2011
B Uses legally recognized insurance companies that have adequate reserves, adhere
to capital requirements, employ certified insurance professionals and operate under
the insurance law.
B Insurer has access to reinsurance.
B The overhead costs of both the organizations, the agent and the insurance company,
are reduced: the agent can use its infrastructure for collecting premiums, etc.; the
insurer provides the expertise on product development, etc.
B It reduces the need to build the capacity of agents such as NGOs and MFIs to sell
insurance because the insurer can do some of this.
activities.
Agency model
In this model, the insurer uses its normal agency office and sells micro-insurance products
directly. The client comes to the agency office for sales and servicing of the product.
Micro-agent model
While the partnership model is relatively common, the micro-agent model described below is
unique. The central building blocks of the model are Rural Community Insurance Groups
(CRIGs) supervised by rural organizations such as churches, NGOs or MFIs. CRIGs are a
partnership firm formed of five women from a self-help group. The leader of the CRIG is
licensed as an agent. The CRIG is a de facto brokerage firm (in the technical, not the legal
sense of the term). All CRIGs in the same geographic area meet in a single centre, usually
organized with the assistance of the rural organization, and receive training and assistance
from the insurance firm. This practice reduces training costs.
j j
VOL. 1 NO. 4 2011 EMERALD EMERGING MARKETS CASE STUDIES PAGE 11
B Sustainability: because the position is a commercial one with financial incentives, it is
believed that it will last in the long term, facilitating the sale of long-term products. As
mentioned under the partner-agent model, NGOs and MFIs are often dependent on
the goodwill and public recognition of aid flows, and so their long-term existence is
precarious. Chances are good that CRIGs, being registered firms, will survive, in the
event of a member or leader dropping out. The leader could be replaced by another
from the community, thus mitigating the risk of orphaned policies.
B In the event that a CRIG disbands, the orphaned policies can be taken over by
another CRIG that operates under the same NGO.
Corresponding author
Krishnaveni Muthiah can be contacted at: muthiahkrishnaveni@gmail.com
j j
PAGE 12 EMERALD EMERGING MARKETS CASE STUDIES VOL. 1 NO. 4 2011