 Introduction

 The offer
 Industry analysis
 Players
 Key functions
 Market mixes
 Future challenges
 “Peoples don’t want to communicate with an
organisation or a computer. They want to talk
to real, live responsive, responsible person
who will listen And help them get
satisfaction.”

_The Michelson,

State farm insurance

 The Indian insurance industry, ever since it
came into existence, has been dominated by
the public sector, Life Insurance Corporation
of Indian (LIC) and General Insurance
Corporation of Indian (GIC) being the
predominant players in life and non-life
insurance.
 In order to tap the vast insurance potential and
to mobilize long-term savings, reforms for
revitalizing and restructuring of the public
sector companies and opening up the sector to
private players were the need of hour.
 In2000, the government decided to
liberalize the sector and, giving in to
global pressures, allowed foreign
players to enter the Indian insurance
market. It allowed foreign equity
participation of up to 49% in the
insurance business.
Insurance is a hedge against
future risks. Thus a life insurance
is a contract between an insurer
and a customer (the
insured/assured) that if the
customer expires within the
contractual period after buying a
policy. Then the beneficiary gets
the sum assured.
Similar is it for properties, health
etc. Insurance as a concept was
born when a raging fire destroyed
a major portion of London in the
year 1666. Lloyd’s of London the
famous insurer, was conceived in
a coffee house. The concept of
insurance –life, marine, fire etc. –
propelled entrepreneurial desire
as well as risky trading.
 There are two types of insurance:
 Life: insuring the lives of people
 Non-life or general insurance: Which
include insurance of properties
against theft, breakage, fire, marine,
earthquakes, accident and health.
 There are some basic differences between the two
types of insurance. These differences have enormous
implications in the service offer design,
segmentation, targeting, positioning, marketing,
pricing, communication etc. These differences are:

 Premiums paid in life insurance satisfy versatile

needs: savings, investments, risks. Non- life
insurance premiums mostly have risks connotation.

 policy is pure risk-based, also called term insurance.

In the latter’s case the assured does not get any
return on maturity and the premium is considerably
lower. In contrast, there are no returns in non-life
insurance. The insured is covered only for the risk.


 Initially, insurance was seen as a complex product

with a high advice and service component. Buyers
preferred a face-to-face interaction and placed a high
premium on brand names and reliability.
 As products become simpler and awareness increased,
they become off-the-shelf commodity products. Sellers
moved to remote channels such as the telephone or direct
mail. Insurance began to be sold by the various
intermediaries, not necessarily only by insurance
companies. This trend will be seen happening indicating
a further rise in the product-service continuum and the
key element would be distribution.
The insurance industry is divided
into
INSURANCE
INDUSTRY

LIFE NON-LIFE
 Structure of the insurance industry
 Life insurance
 Existing structure
MINISTRY OF LIC AGENTS
FINANACE

BROKERS CONSUMERS

NEW AGENTS
IRDA ENTRANTS
 Actuaries

Ministry of Agents
GIC subsidiaries
finance

consumer

Surveyor

 In both, the pre-nationalization and the post-
nationalization period, only agents were
operating in the Indian insurance market. Now,
the government has introduced brokers subject to
an amendment to the Insurance act, 1938. A
broker is not tied to any particular insurance
company. He can sell the products of all
companies. And hence, his option to the customer
would be impartial. Also, a broker is supposed to
have more expertise and better infrastructure to
service the policy holders. Thus, the introduction
of brokers would benefit policyholders.

The insurance industry in India is
Rs.400 billion business, and together
with banking services, adds about 7% to
India’s GDP. The gross premium
collection is about 2% of GDP and has
been growing by 15%-20% per annum.
India also has the highest number of life
insurance policies in force in the world,
and total invisible funds with the LIC are
almost 8% of GDP.
 LIC has Rs. 6,128 billion of business in
force and a life fund of Rs. 1,540 billion,
with over 100 million policies in force
during the year ended March 31, 2000.
LIC has over 2,000 branches in India and
approximately 800,000 agents in the
country.
 Non-life insurance in India was so far
provided by GIC and its four subsidiaries
viz. New India Assurance, Oriental
Insurance, National Insurance and
United India Assurance.
 The Tata Group  AIG
 ICICI  Prudential
 HDFC  Standard life
 SPIC  MetLife
 ILFS  Cigna
 Max India  New York life
 20th century  Canada life
 Vysya bank  ING
 Cholamandalam  Axa
 SBI  Alliance capital/Cardiff
 IDBI  Principal
 Bajaj  Allianz
 everyinsurance company would have the
following key functional are which can
be divided into internal and external:

 Underwriting
 Claims management
 Investment

 Customer management
 Distribution channel
 The Indian insurance industry is
characterized by tough competition from
both public-sector companies which hold
almost 98% of the market share and also
from other private insurance company.
 Competition may be said to spam four
stages in the life of a product/service. The
company at the STAGE I face barriers to
entry as many approvals and criteria need
to be met before it can be established.
 In STAGE II, it faces operational bottlenecks
due to lack of expertise and required skills.
The company may face competition from the
public sector due to lack of an efficient
distribution network. Here the scarce
resources in the expertise in terms of
marketing and distribution
 STAGE III is ideally where the company faces
stiff competition from form other insurance
companies, the products almost being same.
 In STAGE IV, the competition is in terms of
creating brand awareness and loyalty.
These four stages may be represented as:-
SCARCE RESORCE
 The three main factors used to determine the
premium rates under a life insurance plan are
mortality, expenses and interest. Significant changes
in any of these factors normally entail revision of
premium rates.

 While companies have been successful in product

innovation, most of them are still grappling with the
right mix of distribution channel for:
 a. Capturing maximum market share to build brand
equity.
 b. Building strong and effective customer
relationship.
 c. Cost-effective customer service.
 While the traditional channel of tied-up
advisor or agents would be the chief
distribution channel, insurers should
innovate and find new method of delivering
the product to customers. Corporate
agency, brokerage,e-insurance, co operative
societies and panchayats are some of the
channels which can be tapped by the
insurers to reach the appropriate market
segments.
The major issues to be addressed
in insurance FOS management are
high attrition, lack of motivation
and product knowledge .these
issues can effectively be tackled
by continuous training,
performance-linked reward
systems and career counselling.
 Stage 1

insurer Customer
 Stage 2

insurer A

Insurer B Customer

Configures Customer

Insurer C package

Insurer D
 Stage 3

New product configured based on customer needs

Insurer A

New
A.M.C B customer
product

Bank C
 Different players in the insurance market are
adopting various channels of distribution.
1. Aggregators and portals:- e.g. Inswab and
Quotesmith
2. Financial portal:- e.g. Charles Schwab, Yahoo
Finance
3. Direct insurers:- Directline, Geico Direct
4. Traditional insurers using electronic chanels:- e.g.
aigdirect.com, Zurich direct
5. “One stop shop” financial services:- Citigroup, GE
Financial network
With privatization of the insurance industry,
government has taken a bold step forward.
The benefits can be manifold.
 Opening of the sector to private firms will
faster competition, innovation, and variety
in product. It would also generate greater
awareness of the need to buy insurance as a
service and not merely for tax exemption,
which is what is currently done.
 Potential private entrants can expect to
score in the areas of customer service,
speed and flexibility.
 Will lead to exploration of new distribution
and marketing channels .
 By tapping such underserved niches, new
entrants can expand the insurance market
substantially.
 Health insurance is another segment with
great potential that can be tapped because
the existing Indian products are
insufficient.
 Insurance premium can decrease due to
severe competition, thus benefiting the
customer.