Insurance in India General Insurance

1. THE INSURANCE INDUSTRY IN INDIA

AN OVERVIEW

With the largest number of life insurance policies in force in the world, Insurance happens to be a mega opportunity in India. Its a business growing at the rate of 15-20 per cent annually and presently is of the order of Rs 1560.41 billion (for the financial year 2006 2007). Together with banking services, it adds about 7% to the countrys Gross Domestic Product (GDP). The gross premium collection is nearly 2% of GDP and funds available with LIC for investments are 8% of the GDP. Even so nearly 65% of the Indian population is without life insurance cover while health insurance and non-life insurance continues to be below international standards. A large part of our population is also subject to weak social security and pension systems with hardly any old age income security A well-developed and evolved insurance sector is needed for economic development as it provides long term funds for infrastructure development and strengthens the risk taking ability of individuals. It is estimated that over the next ten years India would require investments of the order of one trillion US dollars.

2. HISTORICAL PERSPECTIVE
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The history of life insurance in India dates back to 1818 when it was conceived as a means to provide for English Widows. Interestingly in those days a higher premium was charged for Indian lives than the non - Indian lives, as Indian lives were considered more risky to cover. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge the same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. The General insurance business in India, on the other hand, can trace its roots to Triton Insurance Company Limited, the first general insurance company established in the year 1850 in Calcutta by the British. Till the end of the nineteenth century insurance business was almost entirely in the hands of overseas companies. Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the Provident Fund Act of 1912. Several frauds during the 1920's and 1930's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over the insurance business. The insurance business grew at a faster pace after independence. Indian companies strengthened their hold on this business but despite the growth that was witnessed, insurance remained an urban phenomenon. The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create the much needed funds for rapid industrialization. This was in conformity with the Government's chosen path of State led planning and development. The non-life insurance business continued to thrive with the private sector till 1972. Their operations were restricted to organized trade and industry in large cities. The general insurance industry was nationalized in 1972. With this, nearly
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107 insurers were amalgamated and grouped into four companies- National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC).

3. KEY MILESTONES

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 by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers along with provident societies were taken over by the central government and nationalized. LIC was formed by an Act of Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crore from the Government of India

4. INDUSTRY REFORMS
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Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.

5. PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA

The life insurance industry in India grew by an impressive 53.85%, with premium income at Rs. 9560.41 billion during the fiscal year 20011-2012. Though the total volume of LIC's business increased in the last fiscal year (2006-2007) compared to the previous one, its market share came down from 85.75% to 81.91%.

The 17 private insurers increased their market share from about 15% to about 19% in a year's time. The figures for the first two months of the fiscal year 2007-08 also speak of the growing share of the private insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent. With the opening up of the insurance industry in India many foreign players have entered the market. The restriction on these companies is that they are not allowed to have more than a 26% stake in a companys ownership.
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Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market and 19 private life insurance companies have been granted licenses. Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. Some of these products include investment plans with insurance and good returns (unit linked plans), multi purpose insurance plans, pension plans, child plans and money back plans. (www.wikipedia.com)

6. INSURANCE INDUSTRY CLASSIFICATION

INSURANCE
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LIFE INSURANCE

GENERAL INSURANCE

Fire Insurance Vehicle

Marine Insurance

Mediclaim

Motor

Life insurance Life insurance is a contract between the policy owner and the insurer, where the insurer agrees to pay a designated beneficiary a sum of money upon the occurrence of the insured individual's or individuals' death or other event, such as terminal illness or critical illness. In return, the policy owner agrees to pay a stipulated amount (at regular intervals or in lump sums). There may be designs in some countries where bills and death expenses plus catering for after funeral expenses should be included in Policy Premium. In the United States, the predominant form simply specifies a lump sum to be paid on the insured's demise. The value for the policyholder is derived, not from an actual claim event, rather it is the value derived from the 'peace of mind' experienced by the policyholder, due to the negating of adverse financial consequences caused by the death of the Life Assured. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; for example claims relating to suicide, fraud, war, riot and civil commotion. Fire Insurance
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Fire Insurance is one of the oldest forms of insurance and goes as far back as Marine insurance. Its origins are in the the age-old fear of fire and human failing to control fire. In the early development of industrial society fire was the main source of energy. No industrial activity or commerce was possible without fire and the need to insure the risk of uncontrolled fire became the integral part of society. Fire insurance is designed to provide for financial loss to property due to fire and few other related hazards. Fire insurance is governed by Tariff under the Tariff Advisory Committee (TAC). Marine Insurance Marine insurance has been defined as a contract between insurers and insured whereby the insurer undertakes to indemnify the insured in a manner and to the

interest thereby agreed, against marine losses incident to marine adventure. Section 2(13) A of Insurance Act 1938 defines it as follows: Marine insurance business means the business of effecting contracts of insurance upon vessels of any description, including cargoes freights and other interests which may be legally insured in or in relation to such vessels, cargoes, freights, goods, wares, merchandise and property of whatever description insured for any transit by land or water or both, and whether or not including warehouses risks or similar risks in addition or as incidental to such transit and includes any other risks customarily included among the risks insured in marine policies Health Insurance Health Insurance mainly covers two types of benefits: one is related to the reimbursement of medical expenses related to specific diseases and the other is related to the hospitalization. Globally, the health covers operate in two ways cashless and cash reimbursable ones. The health insurance has changed the way medicine is dispensed and sold in the most parts of the world. In India, its impact has yet to be felt. However, the introduction of the now famous Mediclaim policy made a huge difference to an ordinary citizens usage of insurance for medical cover purpose.
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Motor Insurance Motor Insurance is one of the largest non-life insurance business in the world. This is because it is statutorily mandated in most parts of world. All motor vehicles are required to be registered with road transport authorities and insured for third party liability. The basic premise is that motor vehicles could either cause injury or be a subject to damage and injury and thus require insurance. The Motor Vehicle Act of 1939 introduces compulsory insurance to take care of those who may get injured in an accident. The insurance of damage to vehicle is not mandatory Insurance provides: Protection to investor. Accumulation of savings. Channeling these savings into sectors needing huge long term investment.

Functions of insurance:

Provide protection: The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Insurance is actually a protection against economic loss, by sharing the risk with others.
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Collective bearing of risk: Insurance is an instrument to share the financial loss of few among many others. Insurance is a mean by which few losses are shared among larger number of people. All the insured contribute the premiums towards a fund and out of which the persons exposed to a particular risk is paid. Assessment of risk: Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. Risk is the basis for determining the premium rate also. Provide certainty: Insurance is a device, which helps to change from uncertainty to certainty. Insurance is device whereby the uncertain risks may be made more certain. Small capital to cover larger risk: Insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty. Contributes towards the development of industrie s: Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery. Means of savings and investment: Insurance serves as savings and investment, insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured's For the purpose of availing incometax exemptions also, people invest in insurance.

Insurance in India General Insurance

Source of earning foreign exchange: Insurance is an international business. The country can earn foreign exchange by way of issue of marine insurance policies and various other ways. Risk free trade: Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different types of policies under marine insurance cover.

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7. CONSUMER AWARENESS
Consumer awareness is the mainspring of demand creation which runs the wheels of industry any industry for that matter. To this demand curve, suppliers and service providers respond, by making available to consumers what they want, meeting their needs and expectations. This is the way two usages customer needs and customer satisfaction emerged. And these later travelled to domains of customer delight and customer ecstasy. Consumer awareness, thus, becomes the genesis for business entities. For life insurers to initiate, expand, grow and sustain by responding to larger and larger volumes of demand emerging with greater awareness, and setting in place supply chain management. For life insurers to penetrate significantly and forge ahead in the emerging market, enhancing consumer awareness becomes the prime focus of all activities. As also strength and competencies to compete for future How they go about Life insurers, both in public sector and private sector, should appreciate this moment of truth so to say and galvanize their energies and resources intelligently to bring about greater consumer awareness as a basic facilitator and an important constituent of business strategy. This will create synergy all across the organization. It should be appreciated that Consumer awareness provides a new frame of reference for value creation as also an opportunity for innovation. It is time to think out of In box and adopt novel strategies and measures to foster awareness. To mention a few:

launch awareness movement through various convenient people-oriented programs through media, corporate publicity, rural camps and popular communication channels including Radio, TV, Publicity Vans; awareness of products and services though visuals that trigger curiosity and manifest in terms of desire and later sale-purchase transactions; beyond these stages, to take up awareness of other aspects such as product, price, quality, service , convenience, status, pride, joy and ease;
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campaigns to educate rural and semi urban masses on the need for security that protects their livelihood, security for produce and belongings and create feel-good feelings; Engage NGOs with proven credentials and rural intermediaries. In summary, as life insurers (and similarly non-life insurers) get into such massive efforts to reach out to all and sundry, a new phenomenon will emerge to their delight viz., opening up promising avenues for creation of new markets the basic fundamental and prerequisite for sustainable growth. Market dynamics will rule and unfold a stage through a process of evolution new value creation the sum total of all innovations. Thereby a new phenomenon of co-creating unique value with customers will emerge as so brilliantly in his later path-breaking Title The Future of Competition: Co-creating Unique Value with Customers. Creating Consumer Awareness in Life Insurance Let conclude by putting across two wellknown propositions that underline consumer awareness: customer is business, business is people, people are customers satisfying a customer is everybodys business This phenomenon creating Consumer awareness

8. INSURANCE AWARENESS

INSURANCE AWARENESS (Issued in Public Interest) Why do you need to put your hard earned money in? UNIT LINKED INSURANCE PLANS like LIC ENDOWMENT plus, Money plus, Profit plus, Fortune plus, Bajaj Unit gain, SBI Unit plus etc? Term Insurance is the Cheap & Best form of Insurance recommended by Certified Financial Planners all over the world! Let Everyone Know about Term Insurance And Help them to avoid losing their hard earned money in ULIPs!
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Insurance in India General Insurance

9. INSURANCE AND ECONOMY

Indian economy is growing in reference to global market. Business of insurance with its unique features has a special place in Indian economy. It is a highly specialized technical business and customer is the most concern people in this business, therefore this business is able to spur the growth of infrastructure and act as a catalyst in the overall development of Indian economy. The high volumes in the insurance business help spread risk wider, allowing a lowering of the rates of the premium to be charged and in turn, raising profits. When there is a bigger base, the probabilities become more predictable, and with system wide risks balanced out, profits improve. This explains the current scenario of mergers, acquisitions, and globalization of insurance. Insurance is a type of savings. Insurance is not only important for tax benefits, but also for savings and for providing security. It can be serving as an essential service which a welfare state must make available to its people. Insurance play a crucial role in the commercial lives of nations and act as the lubricants of economic activities. Insurance firms help to spread the potentially financial consequences of risk among the large number of entities, to mobilize and distribute savings for productive use, facilitate investment, support and encourage external trade, and protect economic entities against external risk. Insurance and economic growth mutually influences each other. As the economy grows, the living standards of people increase. As a consequence, the demand for life insurance increases. As the assets of people and of business enterprises increase in the growth process, the demand for general insurance also increases. In fact, as the economy widens the demand for new types of insurance products emerges. Insurance is no longer confined to product markets; they also cover service industries. It is equally true that growth itself is facilitated by insurance. A
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well-developed insurance sector promotes economic growth by encouraging risktaking. Risk is inherent in all economic activities. Without some kind of cover against risk, some of these activities will not be carried out at all. Also insurance and more particularly life insurance is a mobilize of long term savings and life insurance companies are thus able to support infrastructure projects which require long term funds. There is thus a mutually beneficial interaction between insurance and economic growth. The low income levels of the vast majority of population have been one of the factors inhibiting a faster growth of insurance in India. To some extent this is also compounded by certain attitudes to life. The economy has moved on to a higher growth path. The average rate of growth of the economy in the last three years was 8.1 per cent. This strong growth will bring about significant changes in the insurance industry. At this point, it is important to note that not all activities can be insured. If that were possible, it would completely negate entrepreneurship. Professor Frank Knight in his celebrated book Risk Uncertainty and Profit emphasized that profit is a consequence of uncertainty. He made a distinction between quantifiable risk and non-quantifiable risk. According to him, it is non-quantifiable risk that leads to profit. He wrote It is a world of change in which we live, and a world of uncertainty. We live only by knowing something about the future; while the problems of life or of conduct at least, arise from the fact that we know so little. This is as true of business as of other spheres of activity. The real management challenges are uninsurable risks. In the case of insurable risks, risk is avoided at a cost.

1O. DISTRIBUTION OF INSURANCE

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PRODUCTS

Insurance in India General Insurance

Insurance has to be sold the world over. The Touch point with the ultimate customer is the distributor or the producer and the role played by them in insurance markets is critical. It is the distributor who makes the difference in terms of the quality of advice for choice of product, servicing of policy post sale and settlement of claims. In the Indian market, with their distinct cultural and social ethics, these conditions will play a major role in shaping the distribution channels and their effectiveness. In today's scenario, insurance companies must move from selling insurance to marketing an essential financial product. The distributors have to become trusted financial advisors for the clients and trusted business associates for the insurance Companies.

Different distribution channels in India A multi-channel strategy is better suited for the Indian market. Indian insurance market is a combination of multiple markets. Each of the markets requires a
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different approach. Apart from geographical spread the socio-cultural and economic segmentation of the market is very wide, exhibiting different traits and needs. Different multi-distribution channels in India are as follows

Internet: E-commerce sales through internet portals Worksite: Marketing arrangements with entities to sell insurance to their employees Direct: Sales through call centres and/or direct mailing Brokers: Representatives for buyers who deal with either agent or companies in arranging for coverage Corporate agents: Non-bank institutions involved in the sale of insurance products Banc assurance: Insurance products offered through banks Tied agents: Insurance companies aligned agency force In todays scenario, insurance companies must move from selling insurance to marketing an essential financial product. The distributors have to become trusted financial advisors for the clients and trusted business associates for the insurance companies. The most prominent channel of insurance distribution are: Agents: Agents are the primary channel for distribution of insurance. The public and private sector insurance companies have their branches in almost all parts of the country and have attracted local people to become their
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agents. Today's insurance agent has to know which product will appeal to the customer, and also know his competitor's products to be an effective salesman who can sell his company, the product, and himself to the customer. To the average customer, every new company is the same. Perceptions about the public sector companies are also cemented in his mind. So an insurance agent can play an important role to create a good image of company. Banks: Banks in India are all pervasive, especially the public sector banks. Many insurance companies are selling their products through banks. Companies which are bank owned, they are selling their products through their parent bank. The public sector banks, with their vast branch networks, are helpful to insurance companies. This channel of selling insurance is known as Banc assurance.

INSURANCE COMPANY ICICI prudential

ASSOCIATE BANKS ICICI bank, bank of India, Citibank, Allahabad bank, Federal bank, south Indian bank, Punjab and Maharashtra cooperative bank State bank of India Deutsche bank, Citibank, bank of Rajasthan, Andhra bank Vysya bank ABN amro bank, canara bank Union bank, Indian bank
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SBI life Birla sun life ING Vysya bank Aviva life insurance HDFC standard life

Insurance in India General Insurance

Met life

Karnataka bank, j&k bank

Source: - Hindu Business Line, January 08, 2007

Brokers: Now a days different financial institution are selling insurance. These financial institutions are known as brokers. They are taking some underwriting charges from the insurance companies to sell their insurance products.

Corporate agents: Corporate agency is a cross selling type of channel. Insurance companies tie-up with business houses in other industries to sell insurance either to their employees or their customers. Insurance industry, during the past 2 years has witnessed a number of such strategic tie-ups and alliances. Corporate agents have become a major force to reckon with in distributing insurance products. Such as- Bajaj Allianz tied up with Maruti Udyog and Ford for auto insurance and Tata AIG life has tied up with Tata tea, khaitans Williamson major and bridge foundation for selling rural policies. Internet: In this technological world internet is also a channel of selling insurance. This can be as direct marketing.

Other Distribution Methods Alternate distribution channels are needed for the following reasons: To increase insurance penetration in the country To differentiate on the basis of customer service; to retain and attract customers to expand business To increase insurance awareness and knowledge among people
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To satisfy the needs of more demanding customers To improve cost efficiency in insurance distribution Private players are exploring several alternatives to reduce the cost of replicating the distribution network of public sector insurance companies. While third-party distribution in fast-moving consumer goods is a possibility, the complexity of insurance products, especially given the low awareness levels, would necessitate direct selling. One potential channel is marketing through corporate employers, i.e., employers purchase products on behalf of the employees or at least support the marketing effort. The concept of worksite marketing, i.e., the sale of voluntary insurance products to employees at the worksite through payroll deduction has become common. Worksite marketing, which was once the realm of a few small companies, selling just a few products, has now stretched to large companies, offering a variety of worksite products.

11. CHANGING FACE OF INDIAN INSURANCE INDUSTRY

After the Insurance Regulatory and Development Authority Act have been passed there has been establishment of many private insurance companies in India. Previously there was a monopoly business for Life Insurance Corporation of India (L.I.C.) who was the only life-insurance company for the people till 2000. L.I.C.
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still holds 71.4% of the market share in 2006. But after the introduction of private life insurance companies there is a great competition in Indian market now. Everyone is trying to capture the fresh market here and penetrate it with aggressive marketing strategies. Today life-insurance is not only limited up to just life risk cover and maturity period bonuses but changed to greater return from the investments. With the introduction of the unit linked insurance policies these companies are investing the money in different investment instruments like shares, bonds, debentures, government and other securities. People are demanding for higher returns with the life risk cover and private companies are giving 30-40% average growth per annum. These life-insurance companies have every kind of policies suiting every need right from financial needs of, marriage, giving birth and rearing up a child, his education, meeting daily financial needs of life, pension solutions after retirement. These companies have every aspects and needs of our life covered along with the death-benefit. In India only 25% of the population has life insurance. So Indian life-insurance market is the target market of all the companies who either want to extend or diversify their business. To tap the Indian market there has been tie-ups between the major Indian companies with other International insurance companies to start up their business. The government of India has set up rules that no foreign insurance company can set up their business individually here and they have to tie up with an Indian company and this foreign insurance company can have an investment of only 24% of the total start-up investment. Indian insurance industry can be featured by: Low market penetration. Ever growing middle class component in population. Growth of customers interest with an increasing demand for better insurance products. Application of information technology for business. Rebate from government in the form of tax incentives to be insured.
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Today, the Indian life insurance industry has a dozen private players, each of which are making strides in raising awareness levels, introducing innovative products and increasing the penetration of life insurance in the vastly underinsured country. Several of private insurers have introduced attractive products to meet the needs of their target customers and in line with their business objectives. The success of their effort is that they have captured over 28% of premium income in five years. The biggest beneficiary of the competition among life insurers has been the customer. A wide range of products, customer focused service and professional advice has become the mainstay of the industry, and the Indian customers forms the pivot of each companys strategy. Penetration of life insurance is beginning to cut across socio-economic classes and attract people who have never purchased insurance before. Life insurance is also now being regarded as a versatile financial planning tool. Apart from the traditional term and saving insurance policies, industry has seen the entry and growth of unit linked products. This provides market linked returns and is among the most flexible policies available today for investment. Now products are priced, flexible, and realistic and sustain so people in better position to understand the risk and benefits of the product and they are accepting these innovative products. So it is clear that the face of life insurance in India is changing, but with the changes come a host of challenges and it is only the credible players with a long term vision and a robust business strategy that will survive. Whatever the developments, the future and the opportunities in this industry will surely be exciting. There are 12 private players in Indian life insurance market. 6 bank owned insurers: - HDFC standard life, ICICI prudential, ING Vysya, MetLife, OM Kotak, SBI life. 6 independent insurers: - Aviva, ANP sanmar, Birla sun life, Bajaj Allianz, Max New York life, Tata- Aig
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Insurance Market- Present The insurance sector was opened up for private participation four years ago. For years now, the private players are active in the liberalized environment. The insurance market have witnessed dynamic changes which includes presence of a large number of insurers both life and non-life segment. Most of the private insurance companies have formed joint venture collaborating well-recognized foreign players across the globe. There are now 29 insurance companies operating in the Indian market 14 private life insurers, nine private non-life insurers and six public sector companies. With many more joint ventures in the offing, the insurance industry in India today stands at a crossroads as competition intensifies and companies prepare survival strategies in a detariffed scenario. There is pressure from both within the country and outside on the Government to increase the Foreign Direct Investment (FDI) limit from the current 26% to 49%, which would help JV partners to bring in funds for expansion. There are opportunities in the pensions sector where regulations are being framed. Less than 10 % of Indians above the age of 60 receive pensions. The IRDA has issued the first license for a standalone health company in the country as many more players wait to enter. The health insurance sector has tremendous growth potential, and as it matures and new players enter, product innovation and enhancement will increase. The deepening of the health database over time will also allow players to develop and price products for larger segments of society.

12.CHANGING PERCEPTION OF INDIAN CUSTOMERS

Indian Insurance consumers are like Indian Voters, they are soft but when time is right and ripe, they demand and seek necessary changes. De-tariff of many
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Insurance Products are the reflection of changing aspirations and growing demand of Indian consumers. For historical years, Indian consumers were at receiving end. Insurance Product was underwritten and was practically forced onto consumers on a Take-it-As-itbasis. All that got changed with passage of IRDA act in 1999. New insurance companies have come into existence leading to open competition and hence better products for customers. Indian customers have become very sensitive to Coverage / Premium as well as the Products (read Risk Solution), that is given to them. There are not ready to accept any product, no matter even if that is coming from the market leader, should that product is not serving the purpose. A case in point is ULIP Product / Group Life and Credit Life in Life Insurance segment and Travel / Family Floater Health and Liability Insurance in the Non-life segment are new age Avatar. The new products are constantly being demanded by Indian consumers, which is putting huge pressures on Insurance companies (Read Risk Under-writers) and Brokers to respond. Customers are looking at Insurance for covering Pure Risk now which I have covered in my next section. Another good reason why we are seeing quick changes in the buying behavior of Insurance from mere Investment to risk mitigation is the cost of Replacement of Goods (ROG) or Cost of Services (COS).

Now Indian customers are aware of insurance industry and insurance products provided by companies. They have become more sensitive. They would not accept any type of insurance product unless it fulfills their requirements and needs. In historic days customers looking at insurance products as a life cover which can provide security against any unacceptable events, but now customers look at insurance products as an investment as well as life cover. So todays customers wants good return from the insurance companies. The Indian customers forms the pivot of each companys strategy.

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13. KEY SUCCESS FACTORS

In order to succeed in any of the business it is very necessary to make and follow the strategies. Strategies are very important for any of the business. Following are the general strategies, which are recommending to the insurance sector. One approach is to focus upon product quality, which will instill confidence in minds of the customers that they would be offered best product from out of the several available products. The other approach, is to focus on the customers need, would involve a heavy investment in developing relationships with policyholders. Under this approach, one can expect a range of products and services designed to give the customer what he specially desires. The third approach is of greater market segmentation under which the population should be divided into several homogeneous groups and product, and services would be targeted towards such selected markets. The effort would be to tie clients to their company- by customized combination of coverage, easy payment plan, risk management advice, and convenient quick claim handling. Porter Generic Strategies: One of the expert Michel porters has identified three internally consistent generic strategies, which can be used singly or in combination: overall cost leadership is clearly under stable. In a differentiation strategy, a company seeks to be unique in its industry along some dimensions that are widely valuable by the customer. May be the lowest cycle time for settling a claim under say, a med claim policy could be differentiating factor. In a cost focus, a company seeks a cost advantage in its target segment, while in differentiation focus; a company seeks a differentiation target. Marginal Different Product: Another strategy would be for the companies to design products that will make comparison-shopping difficult. They could offer a wide variety of covers with marginal differences and varying prices, whose terms and conditions are difficult to compare for consumers who may not have sufficient experience in purchasing insurance and who would find it difficult to make a clear choice. If the consumer is offered a unique policy, he will have no alternative coverage with which can be
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compared. Given the combination policy, which can offer protection against a number of losses, the consumer will find comparison even more difficult. Designing New Strategies: The existing insurance companies cannot be satisfied with concentrating on the consolidation of their existing markets, but have to achieve further growth and penetration. They must, therefore, concentrating on strengthening existing points of service, designing new channel of distribution, direct contact with their ultimate customers, and front line employee empowerment. They also need to refresh their marketing set up. The new comers, on the other hand give priority to tapping the market, left unexploited by the public sector companies. Move towards Rural Market: It is one of the most important suggestions; data says that rural market is still uncovered by this sector. We believe that the sector should move towards tie rural market. Insurance penetration can be achieved by tapping the neglected Rural Markets. There is vast potential for insurance growth in the rural sector. A recent survey by foundation for research, training and Education in insurance (FORTE) suggests that insurance can be sold profitably to rural communities in India. The survey reveals that There is distinct hierarchy of needs in rural areas. Rural people find security in groups the saving habit is very strong in rural areas. Average saving across the most important socio-economic strata comes to 30-35% of annual income or Rs.13, 500 annually, which is significant. There is high level of awareness about life insurance and fairly high-level about 36% already own life insurance. 51% of these who own life insurance would like to buy more. Amongst the savers, a significant percentage does not save through formal financial modes or institutions. Rural buyers of insurance prefer a half yearly mode of premium payment to coincide with the time of the harvest. Thus there are very much chances for any of the companies to work over this scenario. So we believe and suggest all the players to move towards the rural areas.
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Motivation of sales force: A life insurance company should constantly be involved in the process of motivating the sales force in the turbulent times. The following strategies are recommending; Building relationship is real perk. One should be sure to build in networking times for agents during the program-in addition to entertainment and education. Web should be frequently used for creating gift ideas. Hold sales contests in the forth quarter. It is the best times to motivates agents who wants to qualify for a trip. Consider a contrast within the contest for- top-tier producers; additional rewards for additional milestones that are met, such as air and guest room upgrades. Use of Internet: The present scenario is such that the products sold with the help of Internet. The technological advancement is such that force the companies to take such steps. Still the full-fledged use of Internet is not done in our country. As suggestion earlier the Internet based life insurance will help the companies to reduce the transaction cost and time. At the time it can improve the quality of service to its customers, which is the mission of the company. Marketing Tips of Advertise of Insurance Agency which most companies follow and by which customer are aware about their agency

Block line advertising in industry publications or trade journal s: Many companies like to advertise in the same areas. Business opportunity advertising: Think of local newspapers such as the Daily News Analysis (DNA), Times of India, and The HINDU etc. This is a very effective way to advertise and market agency, since the company needs to build brand name recognition.
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Television Ads: The most obvious and expensive forms of advertising is the television. Local Movie Theatres: A local audience and a family type atmosphere is a great way for marketing insurance business. Many types of insurance come into play here when an individual or the family are out watching the movie. All these things come into play when parents are out with their kids. Direct Mail Advertising: There are companies out there that will do direct mail by which people are aware. Advertising outdoors: Transit systems, bus benches, neon and electronic signs are becoming a great way for the agent to advertise. This is affordable, unlike television ads. And this targets the exact audience as most insurers provide insurance services to their local area. Stationary advertising: A very great way of advertising is right through business stationary and supplies. A nice way of showing good faith is giving customers a pen of insurance office name and contact information Website Advertising: A website tells customer about insurance agency and it a quick and easy reference for customers looking for quotes of any type of insurance such as, homeowners insurance, auto insurance, life insurance and many others Online advertising: Many insurance companies do online advertisement. As today in 21st centaury it is very important.

All Risks Insurance Policy

Scope of cover This policy broadly covers loss or damage to insured property by fire, riot and strike, terrorist activity, theft, accident, any of which arising from any fortuitous cause anywhere within the geographical limit stated.
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Sum Insured The basis of arriving at the sum insured will be the market value of the property. Premium Premium chargeable depends on nature of insured property, territorial limits (India or worldwide) and claims experience. Significant Exclusions The first 1% of the claim, subject to a maximum of Rs.5,000/- (hereinafter called 'Compulsory Excess'), shall be borne by the Insured.This Policy does not cover loss or damage arising from war and warlike operations, civil commotion, wear & tear, electrical breakdown, breakage of glass, theft from unattended vehicles, detention or confiscation by customs or other authorities and consequential loss. Excess 1% of the claim amount subject to maximum of Rs. 5000/- Higher voluntary excess qualifies for reduction in premium level. Main Extension Policy may be extended to cover electrical and mechanical breakdown on payment of additional premium.

Electronic Equipment Insurance Policy

Introduction Covers loss or damage to the contractor's property due to any cause that is accidental and external in nature. Scope of cover
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Insurance in India General Insurance

Cover operates when the insured property is at work or at rest or being dismantled for the purpose of cleaning/overhauling or during subsequent re-erection. The Policy broadly covers: Material damage to electronic equipment (which can include systems software) due to sudden and unforeseen events, under Section I Cost of external data media, including cost of reconstruction of data under Section II, as also increased cost of working under Section III. While Section I is compulsory, Section II and Section III are optional. Sum Insured Section I: New Replacement cost of the insured property including Freight, Erection cost, Customs Duty, if any. Section II: Cost of restoring the external data media by replacing lost or damaged data media by new material and lost information. Section III: Sum Insured should represent the hiring charges per hour for a substitute equipment for ensuring continued data processing for the period of indemnity specified, including personnel and transportation charges.

Premium Rate of Premium: 1 % For equipments valued more than Rs 1,00,000, a valid maintenance agreement is required to be in force, failing which 100 % loading is attracted. Significant Exclusions The Policy does not cover losses/ damages due to:
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Wear & tear War, wilful act or wilful negligence Aesthetic defects and consequential loss. Excess Policy is subject to compulsory excess. Excess depends upon value of equipment. Separate excess applies to Winchester Drive. Higher voluntary excess qualifies for reduction in premium level.

Home Insurance - Policy Details

Key Benefits Comprehensive cover available, which covers both structure and / or contents of your home Coverage up to 10 years for only structure, 5 years for only contents and 5 years for structure & content Cover against Fire and allied perils, Burglary & Theft and Optional cover for Terrorism and Additional expenses of rent for alternative accommodation. What is covered You can choose to buy insurance for only the building (structure) of your home, or only the contents (belongings) or both. The policy covers the losses to the structure and contents of your home due to any natural and man-made calamities.

What is not covered

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Insurance in India General Insurance

Willful destruction of property. Loss, damage and destruction caused by war, wear and tear etc. Losses if your home has been unoccupied for more than 30 days,without prior notice to the company. Cash, bullion, painting, works of art and antiques.

How to calculate the Sum Insured The home insurance policy insures the structure of your home for its reconstruction value (and not for market value). Reconstruction value is defined as the cost incurred to reconstruct the home if it is damaged. On the other hand, market value is a combination of cost of land, demand & supply scenario, etc. Claim Process Call us on our 24x7 Toll Free insurance helpline number 1800 2666. Provide relevant information, which includes your policy and other details regarding your claim. Consequently, your claim request is authenticated and is escalated to the company's claims department. The company's claims department validates and registers the request. The company appoints a surveyor within 48 hours. You will need to submit all the relevant documents to the surveyor. The surveyor submits the Final Survey Report (FSR) along with the documents within 7 days.

Fire Insurance
Every business has a specific set of requirements. Our range of business products is especially designed to meet your business needs across the commercial spectrum. It is pivotal to get adequate insurance cover for your business to mitigate risk.
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Fire and Special Perils Policy (Material Damage)

Scope of cover The Insurance Policy broadly covers losses due to: Fire, lightning, explosion and implosion Aircraft damage, riot, strike, malicious damage and terrorism Storm, tempest, flood and inundation Impact damage, subsidence Landslide/rockslide Bursting and/or overflowing of water tanks, apparatus and pipes Missile testing, leakage from automatic sprinkler installations and bush fire

Sum Insured Property can be insured on depreciated cost (market value) or replacement cost basis. In order to get full protection, insurance on reinstatement (replacement) basis is recommended. Premium Premium rate depends on construction of building and occupancy. Discount/ loading in premium is given based on past claims experience for risks exceeding
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Rs. 50 crores sum Insured at any location and installation of Fire Extinguisher Appliances. Significant Exclusions The Insurance Policy does not cover the first Rs.10,000 (or as applicable) of each and every claim. Losses arising out of war and allied perils, theft, willful act or gross negligence, loss of earnings, loss to bullion, documents, currency etc. for an amount exceeding Rs. 10,000, unless expressly stated. Excess 5 % of every claim resulting from Lightning, Storm, Tempest, Flood and Inundation, Subsidence and Landslide Main Extension Earthquake (Fire & Shock) Spontaneous Combustion Deterioration of stocks in cold storage Impact Damage due to own vehicles Omission to insure additions Architect, Surveyors & Consulting engineer's fees in excess of 3 % of claim amount Debris removal in excess of 1 % of claim amount

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EXAMPLE Insured: ABC

Address: Policy Period: 17/10/2013 to 16/10/2014 Occupancy : Risk Location address: Risk Description: Oil extraction Standard Fire & Special Perils Policy Description Total Fire Rate%0 Plant & Machinery including acccessories 44,000,00 and spares 0 0.350 Building including 31,000,00 Plinth & Foundation, 0 compound wall 0.350 Stock - Raw material, WIP, semi finished and finished goods, packing 2,000,000 material and other items related to insured's trade 0.350 77,000,00 Earthquake 0 0.05 77,000,00 STFI 0 0.125 Premium Service Tax 12.36% Total Premium 22

Premium 15,400 10,850

700 3,850 9,625 40,4 25 4,997 45,4

Coverage: Fire Lightning Explosion/Implosion, Aircraft Damage Riot Strike and Malicious Damage Storm, Cyclone, Typhoon, Tempest, Hurricane, Tornado, Flood, and Inundation Impact Damage, Subsidence and Landslide including Rockslide Bursting and/or overflowing of water tanks, apparatus and pipes Missile Testing Operations Leakage from Automatic Sprinkler/ Hydrant Installations, Bush Fire Add on Cover Earthquake Clause RIV,Designation of property clause, Local Authority Clause 34 Name of Financers: Excess : 5% of claim amount subject to a minimum of INR 10,000

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CONCLUSION

Insurance sector in India is one of the booming sectors of the economy and is growing at the rate of 15-20 per cent annum. One of the key service industries in India would be health and education. Insurance sector in India grew at a faster pace after independence. In 1956, Government of India brought together 245 Indian and foreign insurers and provident societies under one nationalized monopoly corporation and formed Life Insurance Corporation (LIC) by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5 crore. The (non-life) insurance business/general insurance remained with the private sector till 1972. There were 107 private companies involved in the business of general operations and their operations were restricted to organized trade and industry in large cities. The insurance sector in India has come to a position of very high potential and competitiveness in the market. Indians, have always seen life insurance as a tax saving device.

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BIBILOGRAPHY

WEBSITES REFFERED www.irdaindia.org www.licindia.in www.answers.com www.insuranceguru.com

REPORTS/ARTICLES REFFERED Asia Economy Watch India Infoline News Service Birla SunLife Insurance Companys Article

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