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TRADITIONAL AND MODERN

INSURANCE DISTRIBUTION
CHANNELS IN INDIA
Presented By :
Monika Agarwal -01
Harsh Vardhan Jain -24
Ankit Lakhotia-33

Evolution of Indian Insurance Sector
Before 1956
The life
insurance
sector was
made up of
154 domestic
life insurers,
16 foreign life
insurers and
75 provident
funds
1956-72
All life insurance
companies were
nationalized to
form LIC in 1956 to
increase
penetration and
protect policy
holders from
mismanagement
The non-life
insurance business
was nationalized to
form GIC in 1972
1993-99
Malhotra
Committee
recommended
opening up the
insurance sector to
private players
IRDA, LIC and GIC
Acts were passed in
1999, making IRDA
the statutory
regulatory body for
insurance and
ending the
monopoly of LIC
and GIC
2000 0nwards
Post liberalization, the
insurance industry
recorded significant
growth; the number of
private players increased
to 44 in 2012
Customers are more
conscious of the benefits
of insurance and its
importance for a secure
future
The industry has been
spurred by product
innovation, vibrant
distribution channels,
coupled with targeted
publicity and promotional
campaigns by the insurers
Current Market Share & Potential Market
Growth
Traditional Channels
Individual Agents
More than 70% of the business today is carried out through insurance agents.
The system of agents is a major source of both presales and post sales services to customers.
Brokers
Insurance Brokers are professionals who
Assess risk on behalf of a client
Advice on mitigation of that risk
Identify the optional policy structure
Carry out work preparatory to insurance contracts




Corporate Agents
IFAs ( Independent Financial Advisors) are authorized agents of insurance companies
having tie-ups with more than one insurance company.
IFA assembles different financial products in accordance with customer needs and
provide value added products by creating customized insurance products.

Worksite Marketing
Under this strategy, insurers send team to a target group and explain the products ,
either individual or group, that are suitable to them at their place of work on a
voluntary, payroll-deduction basis.
Insurance company will be able to sell insurance products particularly pension and
health plans, through this channel.

SWOT Analysis of Agency Distribution
Channel
Well Trained Staff
In-depth Knowledge of the industry
Comprehensive Customer Insight
STRENGTHS
A Limited Number of people inhabiting small towns
The high costs of switching current insurance consumers from a competing firm to
height
Struggle to stay ahead on the technological front in a small, rural community
WEAKNESSES
Participation within a growth industry
Increased sales through an expansion of current service offerings
As the company continues to grow, the ability to decrease the fixed costs over a
growing customer base
OPPORTUNITIES

Competition from local brokerages that respond to a high superior offerings
A significant slump in the economy that will have a correlated effect on the
industry
A series of huge, unexpected, distressing events that put significant strain on the
financial health of the insurance industry as a whole
THREATS
MODERN CHANNELS
BANCASSUARANCE
Distribution of insurance products through a banks distribution channel.
A tool for increasing their market penetration and premium turnover.
A success story in Europe , a new concept in Asia.
Introduced in India when the insurance industry was opened up for private players.
In India , a Bank can tie up with one life insurance and one general insurance company
as mandated by IRDA regulation
Useful for selling only certain lines of products.

SWOT Analysis of Bancassurance
Most suitable for personal line products
2
nd
largest middle market segment in the world
Huge pool of skilled professionals
Just need to be relocated no extra manpower required at any level
A big collection of personal line products already lined up
No or little R & D effort required at the outset
STRENGTHS
Internal essential for operating offices
Inflexibility of products
Middle class overburdened no money left after tax
Lack of goodwill by banks as well as insurance companies
Ratings not based on sound actuarial principles
Tariffs- inflexible
No incentive for the people to go for insurance tax exemption for all bancassurance

WEAKNESSES
Banks enormous database
Homogeneous groups can be churned out of the database to develop and market products
Almost all companies have done just distribution of insurance products for nearly 5-10 years
before going into risk carrying business
OPPORTUNITIES
Requires change in approach ,thinking and work culture on the part of everybody concerned
Resistance to change due to any relocation
Lower rate of return on investment
Unholy alliances may lead to rate cutting and bancassurance may never break again
Lower profits may lead to insolvency or liquidation despite regulatory regime

THREATS
MICRO-INSURANCE
The protection of low income households against specific perils , in exchange for premium payments
proportionate to the likelihood and cost of the risk involved

The huge untapped market for insurance rural and social sector

Provides opportunity to the insurance companies to meet their social responsibility as well as secure a
strong footing in the rural market

Active distribution channels- NGOs, MFIs, SHGs, micro agents , Cooperative Banks , RRBs and post offices.

Most of the MFIs have limited ability to process the insurance claims as they try to customize the insurance
products in order to simply process involved





Alternate Channels
The new alternative channels are still to be used in full swing
The traditional and modern techniques still result in 86% of the policy sales

DIRECT MARKETING
A new method adopted
No intermediaries
Insuring companies directly contact the customers
A separate department has been set up and officers have been appointed to solicit
insurance business
Cost effective method



INTERNET
The policies are not anymore complex to understand
Information is available over the internet making it easier for the insuring companies to reach
the masses
Security is still an issue in India and insurance is still sold after face to face persuasion

TELASSURANCE
Telephones are used to approach buyers and sell then products and services directly
Reasons for being popular is
Cost efficient
Space efficient
Time efficient
In India it is still in its infancy stage






SHOPPASSURANCE
Indian retail market is the most fragmented in the world
Organised retail channel is around 3% of total retail business
Organised sector is expected to grow at 30% per annum
Hence, retail channel can be a very viable distribution channel

PROPOSED INNOVATIVE ALTERNATIVE CHANNELS
FOR SELLING INSURANCE PRODUCTS

1. LIFE INSURANCE PRODUCTS
SELLING THROUGH PHARMACEUTICAL AGENCIES
To tap the huge potential market at a very low cost
Utilization of their well built network and contacts

SELLING THROUGH ANGANWADI WORKERS
Huge untapped market rural and social sector
A total of 11.71 lakh anganwadi workers
To meet social responsibility as well as to secure a strong footing in the rural market



2. NON LIFE INSURANCE PRODUCTS
SELLING THROUGH ELECTRICITY DEPARTMENT
To provide protection against fire insurance
A small monthly premium can be charged with the electricity bill to cover
for the fire insurance
SELLING THROUGH PETROLEUM GAS AGENCIES
Collection of small monthly premiums provide protection against fire
caused due to leakage of petroleum gas.
SELLING THROUGH CABLE/DTH OPERATORS

BENEFITS OF ALTERNATE DISTRIBUTION
CHANNELS
BENEFITS TO INSURERS BENEFITS TO CUSTOMERS
Lesser procurement cost Low premium because of reduced
distribution cost
Easy access of customer base Convenient in payment
Known customer and therefore easy
risk assessment
Conveniently getting all financial needs
under one roof
Channel diversification Double assurance / credibility
Increase in market penetration Easy and automatic renewal
Extensive customer reach Refined quality service

Increase in volume of business Getting better service
Key Attributes of Various Distribution
Channels
New Policy Contribution
Total Premium Contributions