Summer Internship Project Report

Marketing Mix of IDBI Federal Life Insurance Co. Ltd.

Submitted in Partial Fulfillment of the requirements of the

Summer Internship

To

Mr. Manas Das

(Branch Head, Pitampura, New Delhi)

On 30th May 2017

BY

Ankit khandekar

(PGP16067)

Post Graduate Diploma in Management

IIM Kashipur
CERTIFICATE
This is to certify that the work titled “Marketing Mix of IDBI Federal Life Insurance Co.
Ltd.” submitted by Ankit Khandekar in partial fulfillment of the Summer Internship from IDBI
Federal Life Insurance Co. Ltd has been carried out and completed under my supervision. This
document has been submitted after the completion of the requirement gathering phase of the
project.

Approved By:

Signature ……………………..

Name : Mr. Manas Das

Designation: Branch Head, Pitampura

Date ……………………..
DECLARATION (FROM STUDENT)

I, Ankit Khandekar, hereby declare that the project work entitled “Marketing Mix of IDBI
Federal Life Insurance Co. Ltd.” submitted towards partial fulfillment of requirements for the
award of Post Graduate Program in Management is my original work and the dissertation has
not formed the basis for award of any degree, associate ship, fellowship or any similar title to
the best of my knowledge.

Place: (Signature of Student)

Date:
(Name of the student)
ACKNOWLEDGEMENT
I hereby take this opportunity to thank all those who have helped me using some way or the
other in the successful completion of this project work. The guidance and support of many
people has been immense throughout my internship.

I extend my heartiest gratitude to my mentor, Mr. Manas Das, Branch Head, Pitampura Branch,
IDBI Federal Life Insurance Company to grant me the permission to undertake the project and
be a part of this esteemed organization. I also express profound gratitude towards him for
providing his valuable guidance throughout the endeavor. The inputs he has given at various
stages have been extremely useful in structuring and carrying out the project.

I also express my heartfelt thanks to the entire team at IDBI Federal Life Insurance Company,
Pitampura, New Delhi for giving valuable insights during the course of this project.
Contents
CERTIFICATE .................................................................................................................................................. 2
DECLARATION (FROM STUDENT) .......................................................................................................... 3
ACKNOWLEDGEMENT ................................................................................................................................... 4
ABSTRACT...................................................................................................................................................... 6
OVERVIEW OF INSURANCE INDUSTRY .......................................................................................................... 7
INTRODUCTION OF IDBI FEDERAL LIFE INSURANCE CO. LTD. ..................................................................... 14
NATURE OF BUSINESS ................................................................................................................................. 18
MISSION, VISION AND VALUES ................................................................................................................... 21
Products of IDBI Federal Life Insurance Co. Ltd.: ........................................................................................ 22
SIZE OF THE COMPANY ............................................................................................................................... 29
SWOT ANALYSIS .......................................................................................................................................... 30
PORTER’S FIVE FORCE MODEL .................................................................................................................... 31
MARKETING MIX OF IDBI FEDERAL LIFE CO. LTD. ....................................................................................... 32
ROLE OF MARKETING MIX ELEMENTS IN MARKETING INSURANCE SERVICES IN INDIA ............................ 45
COLLECTION OF DATA ................................................................................................................................. 46
SAMPLE DESIGN .......................................................................................................................................... 48
SOME FINDING, SUGGESTION AND RECOMMENDATION .......................................................................... 52
REFERENCES ................................................................................................................................................ 54
ABSTRACT
The Government of India created history on October 24, 2000 once again by bringing back
insurance business to private companies which had been abolished thirty four years back. The
opening of the sector has been facilitated through IRDA. Today, organizations are competing in
complex business environment characterized by continuous change in economic, social, politico-
legal and regulatory factors. The insurance sector along with other elements of the marketing as
well as financial infrastructure has been touched and influenced by the process of liberalization
and globalization process in India. Today, customer is the king of the market. The life insurance
companies deals in intangible product. With the entry of private players, now the competition is
becoming intense. In order to satisfy the customer well, every company is trying to implement
marketing mix programmed very well. The marketing mix is one of the most fundamental
concepts associated with the marketing process. Keeping this in mind, present study is designed
to analyze the marketing mix in Life Insurance in India. The population for the research
comprises all the employees of public life insurance company as well as private life insurance
companies in India. A sample of 95 employees is drawn on the bases of convenient sampling.
The data is collected using a well-structured (3 point scale) questionnaire. The responses
regarding the 7 dimensions of marketing mix are measured with the help of descriptive as well as
statistical analysis. Seven dimensions are converting into three factors after applying Factor
Analysis through Principal Component Analysis. Efforts are made to represent people from
different age group, gender, qualification, hierarchy and type of the organization.
OVERVIEW OF INSURANCE INDUSTRY
The insurance industry of India consists of 51 insurance companies of which 24 are in life
insurance business and 28 are non-life insurers. Among the life insurers, Life Insurance
Corporation (LIC) is the sole public sector company. Apart from that, among the non-life
Insurers, there are six public sector insurers. In addition to these, there is sole national reinsurer,
namely, General Insurance Corporation of India. Other stakeholders in Indian Insurance market
include Agents (Individual and Corporate), Brokers, Surveyors and Third Party Administrators
servicing Health Insurance claims.

Out of 27 non-life insurance companies, 4 private sector insurers are registered to underwrite
policies exclusively in Health, Personal Accident and Travel insurance segments. They are Star
Health and Allied Insurance Company Ltd, Apollo Munich Health Insurance Company Ltd, Max
Bupa Health Insurance Company Ltd and Religare Health Insurance Company Ltd. There are
two more specialized insurers belonging to public sector, namely, Export Credit Guarantee
Corporation of India for Credit Insurance and Agriculture Insurance Company Ltd for Crop
Insurance.

Market Size

During April 2015 to February 2016 period, the life insurance industry recorded a new premium
income of Rs 1.072 trillion (US$ 15.75 billion), indicating a growth rate of 18.3 per cent. The
general insurance industry recorded a 14.1 per cent growth in Gross Direct Premium
underwritten in FY2016 up to the month of February 2016 at Rs 864.2 billion (US$ 12.7 billion).

India's life insurance sector is the biggest in the world with about 360 million policies which are
expected to increase at a Compound Annual Growth Rate (CAGR) of 12-15 per cent over the
next five years. The insurance industry plans to hike penetration levels to five per cent by 2020.

The country’s insurance market is expected to quadruple in size over the next 10 years from its
current size of US$ 60 billion. During this period, the life insurance market is slated to cross US$
160 billion.

The general insurance business in India is currently at Rs 78,000 crore (US$ 11.44 billion)
premium per annum industry and is growing at a healthy rate of 17 per cent.

The Indian insurance market is a huge business opportunity waiting to be harnessed. India
currently accounts for less than 1.5 per cent of the world’s total insurance premiums and about 2
per cent of the world’s life insurance premiums despite being the second most populous nation.
The country is the fifteenth largest insurance market in the world in terms of premium volume,
and has the potential to grow exponentially in the coming years.
Growth

The Indian life insurance industry has begun to recover and is likely to report 12-15% growth in
financial year (FY) 2016-17, according to an ICRA paper analyzing the performance of nine life
insurance companies in India, one in the public sector and eight in the private sector. Together,
they represent over 87% of the total annualized premium equivalent (APE) of the life insurance
industry during first nine months (April-December) of FY16.

The companies analyzed are: Life Insurance Corporation of India (LIC), ICICI Prudential Life
Insurance Corp. Ltd, Bajaj Allianz Life Insurance Co. Ltd, SBI Life Insurance Co. Ltd, Birla
Sunlife Insurance Co. Ltd, Max Life Insurance Co. Ltd, Reliance Life Insurance Co. Ltd, Kotak
Mahindra Old Mutual Life Insurance Ltd, and HDFC Standard Life Insurance Co. Ltd.

During the period, the industry APE grew 6% year-on-year (y-o-y), as against a contraction of
9% y-o-y in FY15 to stand at Rs.37,300 crore (it was Rs.35,000 crore in the first nine months of
FY15). The growth for private companies was 13% y-o-y during the period. LIC witnessed an
improvement to 1% y-o-y during April-December FY16 from a contraction of 24% in FY15.

During the last few quarters, LIC reported poor APE performance following the contraction in its
regular premium collections and the weakness in its unit-linked insurance plan (Ulip) portfolio
against the backdrop of an upbeat domestic stock market. In FY15, the regular segment
contracted by 27% y-o-y and reported volumes of Rs.23,000 crore. However, in first nine months
of FY16, contraction in the regular premium segment reduced to 4% y-o-y.

LIC’s regular premium segment contracted 4% y-o-y during the reported period, while that for
the private companies analyzed grew by 12% y-o-y during this period. Industry APE drew
adequate support from declining LIC contraction rates and marginal improvement in the regular
premium growth rate for private companies (29% y-o-y in first nine months of FY16, as against
25% in FY15).

In line with the trend witnessed during the past few years, especially since the regulatory changes
of September 2011, the proportion of single premium in the total new business premium
generated by the industry continued to rise in the first nine months of FY16. It rose to 63%
during the stated period from 58% both in FY15 and April-December FY15.

But contrary to the trend of maintaining the single-premium proportion stable at around 30%
during the past few years, private companies reported an increase in the proportion to 34% in the
said period of FY16, as against 31% in the year-ago period. The increase followed the sharper
focus that they brought to the single-premium segment. LIC, on the other hand, continues with
its historical trend of growing its new business mix in favor of single-premium products. As of
December 2015, single premium accounted for 75% of LIC’s total new business, versus 70% in
December 2014.
Private insurers, who till last year had not paid much attention to the single-premium segment,
have turned more aggressive.

Single-premium collections for them grew at a faster pace (29% y-o-y), compared with LIC
(24% y-o-y), enabling industry collections in the segment to rise 25% y-o-y in this period.

The regular-premium segment has remained on a marginally lower growth trajectory. For private
insurers, this segment grew 12% y-o-y during the period, while for LIC it contracted 4% y-o-y
(contraction of 27% in FY15). Consequently, for the overall industry, the growth rate in the
regular premium remained at the sub-5% levels in 9M FY16 (as against a contraction of 10% y-
o-y in FY15).

LIC’s regular premium segment contracted 4% y-o-y during the reported period, while that for
the private companies analyzed grew by 12% y-o-y during this period. Industry APE drew
adequate support from declining LIC contraction rates and marginal improvement in the regular
premium growth rate for private companies (29% y-o-y in first nine months of FY16, as against
25% in FY15).

In line with the trend witnessed during the past few years, especially since the regulatory changes
of September 2011, the proportion of single premium in the total new business premia generated
by the industry continued to rise in the first nine months of FY16. It rose to 63% during the
stated period from 58% both in FY15 and April-December FY15.
But contrary to the trend of maintaining the single-premium proportion stable at around 30%
during the past few years, private companies reported an increase in the proportion to 34% in the
said period of FY16, as against 31% in the year-ago period. The increase followed the sharper
focus that they brought to the single-premium segment. LIC, on the other hand, continues with
its historical trend of growing its new business mix in favor of single-premium products. As of
December 2015, single premium accounted for 75% of LIC’s total new business, versus 70% in
December 2014.

Private insurers, who till last year had not paid much attention to the single-premium segment,
have turned more aggressive.

Single-premium collections for them grew at a faster pace (29% y-o-y), compared with LIC
(24% y-o-y), enabling industry collections in the segment to rise 25% y-o-y in this period.

The regular-premium segment has remained on a marginally lower growth trajectory. For private
insurers, this segment grew 12% y-o-y during the period, while for LIC it contracted 4% y-o-y
(contraction of 27% in FY15). Consequently, for the overall industry, the growth rate in the
regular premium remained at the sub-5% levels in 9M FY16 (as against a contraction of 10% y-
o-y in FY15).

Investments

The following are some of the major investments and developments in the Indian insurance
sector.
 The Insurance sector in India is expected to attract over Rs 12,000 crore (US$ 1.76 billion) in
2016! as many foreign companies are expected to raise their stake in private sector insurance
joint ventures.

 QuEST Global, a pure-play engineering and Research and Development (R&D) services
provider, has raised investment of around Rs 2,396 crore (US$ 351.54 million) from leading
global investors Bain Capital, GIC and Advent International for a minority stake in the
company.

 Foreign Direct Investment in the insurance sector stood at US$ 341 million in March-
September, 2015, showing a growth of 152 per cent compared to the same period last year.

 Insurance firm AIA Group Ltd has decided to increase its stake in Tata AIA Life Insurance
Co Ltd, a joint venture owned by Tata Sons Ltd and AIA Group from 26 per cent to 49 per
cent.

 Canada-based Sun Life Financial Inc plans to increase its stake from 26 per cent to 49 per
cent in Birla Sun Life Insurance Co Ltd, a joint venture with Aditya Birla Nuvo Ltd, through
buying of shares worth Rs 1,664 crore (US$ 244.14 million).

 Nippon Life Insurance, Japan’s second largest life insurance company, has signed definitive
agreements to invest Rs 2,265 crore (US$ 332.32 million) in order to increase its stake in
Reliance Life Insurance from 26 per cent to 49 per cent.

 The Central Government is planning to launch an all-in-one insurance scheme for farmers
called the Unified Package Insurance Scheme (Bhartiya Krishi Bima Yojana). The proposed
scheme will have various features like crop insurance, health cover, personal accident
insurance, livestock insurance, insurance cover for agriculture implements like tractors and
pump sets, student safety insurance and life insurance.

 Government launched a special enrolment drive, Suraksha Bandhan Drive comprising of sale
of gift cheques and launch of deposit schemes in bank branches, to facilitate enrolment under
Pradhan Mantri Suraksha Bima Yojana (PMSBY) and Pradhan Mantri Jeevan Jyoti Bima
Yojana (PMJJBY).

Government Initiatives

The Government of India has taken a number of initiatives to boost the insurance industry. Some
of them are as follow:

 Foreign investment will be allowed through automatic route for up to 49 per cent subject to
the guidelines on Indian management and control, to be verified by the regulators.
 Service tax on single premium annuity policies has been reduced from 3.5 per cent to 1.4 per
cent of the premium paid in certain cases.

 Government insurance companies to be listed on the exchanges

 Service tax on service of life insurance business provided by way of annuity under the
National Pension System regulated by Pension Fund Regulatory and Development Authority
(PFRDA) being exempted, with effect from 1 April 2016.

 The Insurance Regulatory and Development Authority (IRDA) of India has formed two
committees to explore and suggest ways to promote e-commerce in the sector in order to
increase insurance penetration and bring financial inclusion.

 IRDA has formulated a draft regulation, IRDAI (Obligations of Insures to Rural and Social
Sectors) Regulations, 2015, in pursuance of the amendments brought about under section 32
B of the Insurance Laws (Amendment) Act, 2015. These regulations impose obligations on
insurers towards providing insurance cover to the rural and economically weaker sections of
the population.

 The Government of India has launched two insurance schemes as announced in Union
Budget 2015-16. The first is Pradhan Mantri Suraksha Bima Yojana (PMSBY), which is a
Personal Accident Insurance Scheme. The second is Pradhan Mantri Jeevan Jyoti Bima
Yojana (PMJJBY), which is the government’s Life Insurance Scheme. Both the schemes
offer basic insurance at minimal rates and can be easily availed of through various
government agencies and private sector outlets.

 The Uttar Pradesh government has launched a first of its kind banking and insurance services
helpline for farmers where individuals can lodge their complaints on a toll free number.

 The select committee of the Rajya Sabha gave its approval to increase stake of foreign
investors to 49 per cent equity investment in insurance companies.

 Government of India has launched an insurance pool to the tune of Rs 1,500 crore (US$
220.08 million) which is mandatory under the Civil Liability for Nuclear Damage Act
(CLND) in a bid to offset financial burden of foreign nuclear suppliers.

Industry outlook

As of the first half (April-September) of FY16, domestic life insurance companies remained well
capitalized, partly because of the low growth in gross premium collections. The capitalization
levels are comfortable, despite deteriorating profitability matrices largely on account of the large
cushion of capital available—over and above the minimum regulatory requirement.
After the passage of the Insurance Laws (Amendment) Bill, 2015, which sets a higher cap on
foreign investment in insurance joint ventures (JVs), nearly all foreign JV partners have shown
interest in increasing the equity stake in their respective JVs.

The announcements made so far suggest Rs.10,000 crore deals have been executed or are in their
final stages of execution in the life insurance industry. But a significant part of the capital may
go to the Indian JV partners concerned as they look to monetize their investments. In most of
these deals, the post-money valuation of the JV stands between 1.0 times and 4.0 times their
FY15 Gross Premium Written. If one were to use another multiple, such as Price/Net Worth, the
range would stand substantially wider between 6.0 and 7.0 times.

Road Ahead

India's insurable population is anticipated to touch 750 million in 2020, with life expectancy
reaching 74 years. Furthermore, life insurance is projected to comprise 35 per cent of total
savings by the end of this decade, as against 26 per cent in 2009-10.

The future looks promising for the life insurance industry with several changes in regulatory
framework which will lead to further change in the way the industry conducts its business and
engages with its customers.

Demographic factors such as growing middle class, young insurable population and growing
awareness of the need for protection and retirement planning will support the growth of Indian
life insurance.
INTRODUCTION OF IDBI FEDERAL LIFE INSURANCE CO. LTD.
Details of the Company

IDBI Federal Life Insurance Co Ltd is a joint-venture of IDBI Bank, India’s premier
development and commercial bank, Federal Bank, one of India’s leading private sector banks
and Ageas, a multinational insurance giant based out of Purpose. In this venture, IDBI Bank
owns 48% equity while Federal Bank and Ageas own 26% equity each. . Having started in
March 2008, in just five months of inception, IDBI Federal became one of the fastest growing
new insurance companies to garner Rs 100 Cr in premiums. Through a continuous process of
innovation in product and service delivery IDBI Federal aims to deliver world-class wealth
management, protection and retirement solutions that provide value and convenience to the
Indian customer. The company offers its services through a vast nationwide network of 3014
partner bank branches of IDBI Bank and Federal Bank in addition to a sizeable network of
advisors and partners. As on 31st March 2015, the company has issued over 8.35 lakh policies
with a sum assured of over Rs. 53,918Cr. IDBI Federal Life Insurance has total assets under
management of 4,893 crore and a robust capital base of over 800 crores, as on March 31, 2016.

IDBI Federal today is recognized as a customer-centric brand, with an array of awards to their
credit. They have been awarded the PMAA Awards (2009) for best Dealer/Sales force Activity,
EFFIE Award (2011) for effective advertising, and conferred with the status of ‘Master Brand
2012-13’ by the CMO Council USA and CMO Asia.

Details of the Associates

IDBI Bank

IDBI Bank Ltd. is a Universal Bank with its operations driven by a cutting edge core Banking IT
platform. The Bank offers personalized banking and financial solutions to its clients in the retail
and corporate banking arena through its large network of Branches and ATMs, spread across
length and breadth of India. We have also set up an overseas branch at Dubai and have plans to
open representative offices in various other parts of the Globe, for encasing emerging global
opportunities.

As on March 31, 2011, the Bank had a network of 816 Branches and 1372 ATMs. The Bank's
total business, during Fey 2010-11, reached Rs. 3,37,584 Crore, Balance sheet reached Rs.
2,53,377 Crore while it earned a net profit of Rs. 1650 Crore (up by 60%).

IDBI Bank Ltd. is today one of India's largest commercial Banks. For over 40 years, IDBI Bank
has essayed a key nation-building role, first as the apex Development Financial Institution (DFI)
(July 1, 1964 to September 30, 2004) in the realm of industry and thereafter as a full-service
commercial Bank (October 1, 2004 onwards). As a DFI, the erstwhile IDBI stretched its canvas
beyond mere project financing to cover an array of services that contributed towards balanced
geographical spread of industries, development of identified backward areas, emergence of a
new spirit of enterprise and evolution of a deep and vibrant capital market. On October 1, 2004,
the erstwhile IDBI Bank converted into a Banking company (as Industrial Development Bank of
India Limited) to undertake the entire gamut of Banking activities while continuing to play its
secular DFI role. Post the mergers of the erstwhile IDBI Bank with its parent company (IDBI
Ltd.) on April 2, 2005 (appointed date: October 1, 2004) and the subsequent merger of the
erstwhile United Western Bank Ltd. with IDBI Bank on October 3, 2006, the tech-savvy, new
generation Bank with majority Government shareholding today touches the lives of millions of
Indians through an array of corporate, retail, SME and Agri products and services.

Headquartered in Mumbai, IDBI Bank today rides on the back of a robust business strategy, a
highly competent and dedicated workforce and a state-of-the-art information technology
platform, to structure and deliver personalized and innovative Banking services and customized
financial solutions to its clients across various delivery channels.

As on March 31, 2013 IDBI Bank has a balance sheet of Rs. 3,22,769 Crore and business size
(deposits plus advances) of Rs 4,23,423 Crore. As a Universal Bank, IDBI Bank, besides its core
banking and project finance domain, has an established presence in associated financial sector
businesses like Capital Market, Investment Banking and Mutual Fund Business. Going forward,
IDBI Bank is strongly committed to work towards emerging as the 'Bank of choice' and 'the most
valued financial conglomerate', besides generating wealth and value to all its
stakeholders. Industrial Development bank of India (IDBI) was constituted under Industrial
Development bank of India Act, 1964 as a Development Financial Institution and came into
being as on July 01, 1964 vide Go I notification dated June 22, 1964. It was regarded as a Public
Financial Institution in terms of the provisions of Section 4A of the Companies Act, 1956. It
continued to serve as a DFI for 40 years till the year 2004 when it was transformed into a Bank.
In response to the felt need and on commercial prudence, it was decided to transform IDBI into a
Bank. For the purpose, Industrial Development bank (transfer of undertaking and Repeal) Act,
2003 [Repeal Act] was passed repealing the Industrial Development Bank of India Act, 1964. In
terms of the provisions of the Repeal Act, a new company under the name of Industrial
Development Bank of India Limited (IDBI Ltd.) was incorporated as a Govt. Company under the
Companies Act, 1956 on September 27, 2004. Thereafter, the undertaking of IDBI was
transferred to and vested in IDBI Ltd. with effect from the effective date of October 01, 2004. In
terms of the provisions of the Repeal Act, IDBI Ltd. has been functioning as a Bank in addition
to its earlier role of a Financial Institution.

Federal Bank

Federal Bank Ltd is engaged in the banking business. The Bank operates in four segments:
treasury operations, wholesale banking, retail banking and other banking operations. Treasury
operations include investment and trading in securities, shares and debentures. The Bank's
products and services include working capital, term finance, trade finance, specialized corporate
finance products, structured finance, foreign exchange, syndication services and electronic
banking requirements. Federal Bank Ltd was incorporated on April 28, 1931 with the name
Travancore Federal Bank Ltd. The company was established with an authorized capital of rupees
five thousand at Nedumpuram, a place near Tiruvalla in Central Travancore under the
Travancore Company's Act. The Bank was founded by K.P.Hormis. They started business of
auction -chitty and other banking transactions connected with agriculture and industry. In May
18, 1945, the registered office of the Bank was shifted to Aluva. They opened their first branch at
Aluva and commenced operations. In the year 1946, they opened their second branch at
Angamally. In March 24, 1947, the name of the Bank was changed to Federal Bank Ltd. In April
1947, they opened their third branch of the Bank was at Perumbavoor. In July 11, 1959, the Bank
was licensed under Sec.22 of the Banking Companies Act, 1949. The Bank floated several kuries
one after another. They also introduced several new deposit schemes during the same period. In
the year 1964, the Bank took over the assets and liabilities of the Chalakudy Public Bank Ltd,
The Cochin Union Bank Ltd and The Alleppey Bank Ltd. In the year 1965, the St.George Union
Bank Ltd was amalgamated merged with the Bank. In the year 1968, The Marthandom
Commercial Bank Ltd was amalgamated with the Bank. In the year 1970, the Bank became a
Scheduled Commercial Bank. In the year 1973, the Bank became an Authorized Dealer in
Foreign Exchange and the International Banking Department of the bank was started functioning
from Mumbai. In the year 1975, the Bank opened 53 branches. In the year 1976, they opened 42
branches. In the year 1982, the Bank shifted the International Banking Department to Cochin as
part of consolidation and centralization of activities.

As part of the organization redesigning recommended by National Institute of Bank Management

(NIBM), the Agricultural Finance Department was set up in head office in November 1984. In
July 1985, the Bank set up Personnel and Industrial Relations Department. Also, they installed
the first Advanced Ledger Posting Machine (ALPM-a Wipro banker) at Br.Aluva-Bank Junction
branch. In the year 1987, they inaugurated the administrative building complex. In the year 1989,
the Bank entered into the Merchant Banking Operations. In March 1994, the Bank came out with
the public issue. In February 17, 1997, the bank inaugurated their first ATM at Ernakulum North.
In the year 2000, the Bank started their Any Where Banking (ABB) at Bangalore connecting all
branches located in the Bangalore metro. They launched Depository Services in association with
NSDL. Also, they commenced Internet Banking under the name of 'Fed Net' with software
support from Infosys Technologies Ltd. They entered into marketing pacts with some
commercial agencies for their E-commerce business. In the year 2001, the bank made a tie up
with Escortel Communications to launch mobile banking services using SMS technology. Also,
they launched a new deposit scheme christened as 'Suraksha' for senior citizens. The bank
became a member of INFINET, the financial network supported by RBI. In February 2002, they
set up full-fledged systems for the RBI's Negotiated Dealing Systems (NDS) at the Funds &
Investment Branch in Mumbai, enabling online trading in securities. In the year 2003, the Bank
unveiled the Anywhere Banking that provided the convenience of doing transactions from 300-
plus interconnected branches.
 In the year 2004, the Bank obtained the level of 100% interconnectivity among all their
branches. Also, they launched an Equity Subscription Scheme, a new retail product for financing
the IPOs and public issue applications of their own customers. The Bank joined hands with
ICICI Prudential Life Insurance Company Ltd for premium collection through their branches and
introduced new Fed e-Pay services. In the year 2005, JRG Securities Ltd forged an alliance with
the Bank for providing loans for subscribing to initial public offers (IPOs). The bank emerged as
the first bank in India to offer Real Time Gross Settlement (RTGS) across all of their branches.
In September 2, 2006, Ganesh Bank was amalgamated with the Bank and the 32 branches of
erstwhile Ganesh Bank of Kurundwad Ltd were successfully integrated to bank's network.
During the period of 2006-07, the Bank entered into a joint venture agreement with IDBI Ltd &
Fortis Insurance International N V for incorporating a Life Insurance Company under the name
of IDBI Fortis Life Insurance Company Ltd. During the year 2007-08, the Bank opened their
Representative office at Abu Dhabi, Capital of UAE for the gateway of the bank to the whole of
Middle East and also as an interface between their existing customers of GCC countries and its
Branches /Offices in India. In March 2008, the Bank's joint venture life insurance company,
IDBI Fortis Life Insurance Company Ltd commenced their operation. During the year 2009-10,
the Bank opened 60 new branches and 115 new ATM centres. During the year 2010-11, they
opened 71 new branches and 73 new ATMs. As on March 31, 2011, the total number of branches
and ATMs of the Bank increased to 743 and 805 respectively, as against 672 and 732 in the last
financial year. As of March 31, 2011, the Bank had two A category branches and 78 branches
designated as B category for handling the foreign exchange business.

Ageas

Ageas is an international insurance group with a heritage spanning more than 180 years. Ranked
among the top 20 insurance companies in Europe, Ageas has chosen to concentrate its business
activities in Europe and Asia, which together make up the largest share of the global insurance
market.

These are grouped around four segments: Belgium, United Kingdom, Continental Europe and
Asia and served through a combination of wholly owned subsidiaries and partnerships with
strong financial institutions and key distributors around the world. Ageas operates successful
partnerships in Belgium, UK, Luxembourg, Italy, Portugal, Turkey, China, Malaysia, India and
Thailand and has subsidiaries in France, Hong Kong and UK.

Ageas is the market leader in Belgium for individual life and employee benefits, as well as a
leading non-life player through AG Insurance. In the UK, Ageas has a strong presence as the
fourth largest player in private car insurance and the over 50’s market. Ageas employs more than
13,000 people in the consolidated entities and over 20,000 in the non-consolidated partnerships
and has annual inflows of more than EUR 21 billion.
NATURE OF BUSINESS
 Channel Agency

 Bankassurance

 Direct Marketing

Milestones

 2006:-

o IDBI signs MoU with Fortis

o IDBI - Tripartite MOU with Federal Bank & Forties Insurance

o International

o IDBI, Federal Bank and Fortis Sign Joint Venture Agreement To

o Establish A New Life Insurance Company In India

 2009:-

o IDBI Federal Life launches new plan for senior citizens.

o IDBI Fortis redefines endowment & money back with Incomesurance™

o IDBI Fortis launches Termsurance™ Protection Plan

o IDBI Fortis bags bronze Dragon at 'PMAA 2009'

o IDBI Fortis Life Insurance uses an interactive application to help users easily
calculate their taxes

o IDBI Fortis launches Incomesurance™ Immediate Annuity

o IDBI Fortis launches Retiresurance™ Pension Plan

o 'IDBI Fortis' Boss-Ka-Boss bags PRCI Award

o IDBI Fortis announces Rs 250cr capital infusion.

 2010:-
 o IDBI Federal launches brand new campaigns!

o IDBI Federal introduces a cover for loans, Loansurance®

o IDBI Federal launches Wealthsurance Milestone Plan

o IDBI Fortis Life Insurance is now IDBI Federal Life Insurance

 2011:-

o IDBI Federal heralds the New Year with Childsurance

o IDBI Federal unveils 3-in-1 Lifesurance Savings Plan

o IDBI Federal launches insured wealth plan

o IDBI Federal pioneers Medical Test-free Term Plan for Seniors

o IDBI Federal launches unit linked Pension Plan

o IDBI Federal targets HNIs with Wealthsurance Premier

o IDBI Federal launches Retiresurance Guaranteed Pension Plan

o IDBI Federal-Samhita financial literacy drive a big hit in MP

 2012:-

o IDBI Federal launches a plan with double life cover and no medicals

o IDBI Federal makes its online debut

o IDBI Federal Bondsurance™ plan offers attractive guaranteed Tax-Free Returns,

Life Cover

o IDBI Federal and IDBI Bank reaches out to Surli through Termsurance Grameen
Suraksha

 2013:-

o IDBI Federal breaks-even in Five years; posts maiden profit of Rs 9.24 crore

o IDBI Federal in association with Phoenix Foundation organises a trek for the
physically challenged.
 2014:-

o IDBI Federal launches 7 new plans

o IDBI Federal backs home grown talent; elevates Vighnesh Shahane as CEO.
MISSION, VISION AND VALUES
VISION

To be the leading provider of wealth management, protection and retirement solutions that meets
the needs of our customers and adds value to their lives.

MISSION

To continually strive to enhance customer experience through innovative product offerings,

dedicated relationship management and superior service delivery while striving to interact with
our customers in the most convenient and cost effective manner.

To be transparent in the way we deal with our customers and to act with integrity.

To build quality man force in order to achieve our mission.

VALUES

Transparency: Crystal clear communication to our partners and stakeholders.

Value to Customers: A product and service offering in which customer perceives value.

Rock Solid and Delivery on Promise: This translates into being financially strong, operationally
robust and having clarity in claims.

Customer-friendly: Advice and support in working with customers and partners.

Profit to Stakeholders: Balance the interests of customers, partners, employees, shareholders and
the community at large
Products of IDBI Federal Life Insurance Co. Ltd.:
IDBI Federal provides many products which cater to the needs of the Indian customers. IDBI
Federal products:-

 WEALTHSURANCE

 INCOMESURANCE

 LIFESURANCE

Wealthsurance:

is a simple unit linked plan that helps you take your first step towards wealth creation and that
too, with ease. What’s more, the life cover with this plan provides financial protection to your
loved ones.

Eligibility Minimum/
Criteria Maximum

Age at entry Minimum • 1 month (subject to minimum maturity age)

Maximum • 65 years (subject to maximum maturity age)

Maturity age Minimum • 18 years

Maximum • 75 years

Policy term Fixed options • 10 years, 15 years and 20 years

Premium Fixed options • 10 years and in multiples of 5 thereafter

payment term

Premium Minimum • Rs. 15,000 p.a.

Maximum • Rs. 25,000 p.a.

Premium Fixed • Annual

payment mode
Sum assured Fixed 10 times the annual premium

1. Choose your premium amount: You can select any amount, from as low as Rs.15,000
to Rs.25,000 as your annual premium.

2. Choose how you would like to manage your investments : You can benefit by opting
for the Systematic Allocator or you can choose to manage your investments by yourself.
Please refer to the graph below for working of Systematic Allocator.

3. Choose your policy term (PT): Choose the duration for which you would like to stay
invested in the plan as per the available options.

4. Choose your premium payment term (PPT): Choose the duration for which you would
like to pay premiums. There are 6 combinations of PPT and PT available in this plan as
below.

Limited Pay Regular Pay

PT PPT PT PPT

15 10 10 10

20 10 15 15

20 15 20 20

How does systematic allocator works?

Systematic Allocator helps you achieve a balance between growth and safety on your
investments. As your policy comes closer to maturity, Systematic Allocator automatically
rebalances your investment to reduce the level of your investment risk. At the commencement of
your policy, a significant portion of your funds is invested in the Equity Growth Fund (high risk
fund) in order to increase the probability of higher returns. When your policy approaches
maturity, Systematic Allocator gradually reduces the exposure to Equity Growth Fund and shifts
funds to Income Fund (low risk fund). This helps reduce your investment risk related to equities.
The graph below represents the change in proportion of investment in Equity Growth Fund and
Income Fund with respect to the residual time to maturity.
Main Features:

 Systematic Allocator to help you build wealth with ease

You have two options of managing funds in Wealthsurance Suvidha. You can either manage the
funds yourself or opt for Systematic Allocator. If you opt for Systematic Allocator, you will
enjoy a balance between growth and safety. In the early policy years, your investment will have a
higher exposure to equity. This will help your investments have the potential to earn you higher
returns. As the policy approaches maturity, your investment will be automatically rebalanced to
reduce the exposure to equity. This ensures that your investment is protected from the ups and
downs of the equity markets.

 Option to choose how long you want to stay invested

With Wealthsurance® Suvidha, you can choose the policy term (PT) which is the duration for
which you want to stay invested. In addition, you can also choose how long you want to pay your
premiums by choosing the premium payment term (PPT) most suited to your needs. Please refer
to the product brochure for combinations of PT and PPT available.

 Guaranteed loyalty additions to boost your wealth

At the end of the 10th policy year and every 5 years thereafter, you get guaranteed loyalty
additions to boost your wealth.

 Financial protection against uncertainty

In case of an unfortunate death during the policy term, your nominee gets the death benefit
which is the sum assured or the fund value at that time, whichever is higher. At any time during
the policy term, the death benefit will be more than 105% of all premiums paid.
  Partial withdrawals for emergency fund requirements

In case of a financial emergency, you can make partial withdrawals from your funds any time
after the 5th policy year. For more information on partial withdrawals, please refer to the product
brochure.

 Two tax benefits

The premiums you pay under Wealthsurance® Suvidha are eligible for tax benefit under Sec
80C of the Income Tax Act, 1961. The maturity benefit and death benefit are also tax free under
Sec 10(10D).

 Flexibility to switch funds and investment options

You can switch your investment option between Systematic Allocator and managing your funds
by yourself. Also, if you are managing your funds yourself, you can also switch from one fund to
the other.

 Option to surrender

Wealthsurance® Suvidha also provides the feature of surrendering the policy free of charge after
the 5th policy year. A surrender amount equal to the fund value as on date will be paid out.
Discontinuance charge will be applicable for policies surrendered within the first 5 years of the
term.

 Exclusive funds for loved ones

By endorsing your Wealthsurance® Suvidha policy under the Married Women’s Property Act,
1874, you can create an exclusive fund for your loved ones which is legally protected from
creditors and claimants.

Incomesurance:

is a money-back plan that gives you the confidence of guaranteed income. You pay for 7 years
and start reaping the benefits from the 8th year onwards with the annual payouts ranging from
126.66% to 143.23% of premiums paid. Additionally, you can also guarantee a secure future for
your family even when you are not around.

Criteria Minimum Maximum

Age at Entry (as on last birthday) 10 years* 50 years

Age at Maturity (as on last 24 years 64 years

birthday)

Premium Amount Rs 35,000 annually Rs. 20,00,000 annually

Policy term Fixed – 14 years

Premium payment Term Fixed – 7 years

Premium Payment Mode Annual

Lifesurance:

Lifesurance is a fixed term non-linked participating plan that provides you the twin benefits of
long-term savings and life cover. With Lifesurance Savings, your small savings will help you
realise the big dreams that you have for yourself and your family. This plan also offers you the
benefit of life cover that will provide financial security to your family in your absence.

Age at entry (last Min 18 years

birthday) Max 55 years

Age at maturity (last birthday) 75 years

Policy terms and premium Policy Premium payment term(s) available

payment terms available term(s)

10 years Only 5 years premium payment term is

allowed

15 , 20, 25 Min: 5 years

years Max: Equal to policy term

Premium payment frequency Yearly, half yearly, quarterly and monthly

Premium Min Yearly Rs. 10,000, Half Yearly Rs. 5,000, Quarterly
Rs. 2,500 and Monthly - Rs. 1,000

Max No limit (subject to underwriting

Maturity sum Min Depends on age, premium payment and policy term
Insured
Max No limit (subject to underwriting)

Main features:

 Lump sum payout at Maturity

At maturity, you receive maturity sum insured (guaranteed from the day of commencement of
the policy), plus vested guaranteed additions, plus vested reversionary bonuses, plus interim
bonus and terminal bonus (if any).*

 Guaranteed Additions to safeguard your savings

Lifesurance gives you the benefit of guaranteed additions that safeguards your investment. In the
first 5 years of the policy, you get guaranteed additions at the rate of Rs. 50 per Rs. 1,000 of
maturity sum insured, for each full annual premium paid when due.

 Bonuses to boost your savings

From the 6th policy year, your Lifesurance policy will receive reversionary bonus which will be
accrued to your policy at the end of each policy year. If your policy has any terminal bonus, it
will be paid out at maturity or on death.

 Flexibility to plan for your needs

You have the freedom to choose the right combination of policy term and premium payment
term as per your needs.

 Double Protection – Accidental Death Benefit

Your nominee will get an additional payout in the unfortunate event of an accidental death
during the premium payment term.

 High Sum Insured Rebate

Lifesurance offers attractive premium discounts, if you opt for a maturity sum insured of Rs. 10
lac and above.

 Advantage Women

Lifesurance offers an additional premium discount for female lives. The premium payable for a
female policyholder will be equivalent to the premium for a corresponding 3 year younger male
policyholder.

 Exclusive funds for loved ones

By endorsing your LIfesurance policy under Married Women’s Property Act, 1874, you can
create an exclusive fund for your loved ones which is legally protected from creditors and
claimants.

 Loans

The policy has loan provision of upto 85% on the policy’s surrender value.

 Tax Benefits

Lifesurance allows you to enjoy deductions under section 80C(of the Income Tax Act,1961) on
all premiums paid. The maturity benefit and the death benefit are also tax-free under section
10(10D).(of the Income Tax Act,1961)
SIZE OF THE COMPANY
In terms of manpower

The Company has a strong and committed team of 2,283 employees as of March 31, 2015 and
over 10,000 agents who are working for the company.

In terms of Turnover

The size of the company in terms of turnover is approximate 1000 crore.

The company achieved its break even in just 5 years and is making huge profits.

Market Share

Market Share of all life insurance companies in India after FY 2016 is represented by the pie
chart. IDBI Federal Life Insurance Co. Ltd, has a market share of 0.42%.

Market Position
SWOT ANALYSIS
Strength

Reduced work force and reduced operational costs are the strengths of IDBI federal Life
Insurance. This helped them reach their break even in just 5 yeras which is a feat achieved by
any company in the insurance sector for the first time.

Weakness

There is constant comparison with LIC and hence there is low brand awareness. This is a big
weakness and people should be educated about the fact that IDBI is also majority part held by
government.

Opportunities

Penetration in rural areas is low. By moving over there in the preliminary stages it can outrun
the others especially ICICI Prudential.

Can increase awareness that it is also a government organization and that will help in
increasing the goodwill and trust quotient in the customers.

Threats

Increase in man power costs and a change in tax regime are going to increase the operational
costs and is also going to call for some new methods of customizing the products so that the
benefits does not decrease.

From the above analysis we can easily say that IDBI should position itself as government
organization customizing products for the rural rich populace. That way it can not only
compete with LIC and be ahead in the race but also iICICI prudential with which it is playing a
catching up game right now.

One of the main reasons for the success of ICICI prudential in spite of that being a private
organization has been that it has penetrated the rural market well, and have used multiple
channels to sell their products.
PORTER’S FIVE FORCE MODEL
 Threat of New Entrants: The insurance industry has been budding with new entrants
every other day. Therefore the companies should carve out niche areas such that the
threat of new entrants might not be a hindrance. There is also a chance that the big
players might squeeze the small new entrants.

 Power of Suppliers: Those who are supplying the capital are not that big a threat. For
instance, if someone as a very talented insurance underwriter is presently working for a
small insurance company, there exists a chance that any big player willing to enter the
insurance industry might entice that person off.

 Power of Buyers: No individual is a big threat to the insurance industry and big
corporate houses have a lot more negotiating capability with the insurance companies.
Big corporate clients like airlines and pharmaceutical companies pay millions of dollars
every year in premiums.

 Availability of Substitutes: There exist a lot of substitutes in the insurance industry.

Majorly, the large insurance companies provide similar kinds of services – be it auto,
home, commercial, health or life insurance.

With the size of world's population reaching gigantic proportions, global insurance is also
gaining in stature. Private as well government insurance agencies around the world are running
for insuring lives of millions (and in the process insuring their own businesses more).

In fact, the insurance industry is a key component of the world economy today owing to its
premiums, its investment and, above all, the social and economic role it plays in covering
personal and business risks.
MARKETING MIX OF IDBI FEDERAL LIFE CO. LTD.
The Insurance business deals in selling services and therefore due weight-age in the formation
of marketing mix for the Insurance business is needed. The marketing mix includes sub-mixes
of the 7 P's of marketing i.e. the product, its price, place, promotion, people, process &
physical attraction.

The above mentioned 7 P's can be used for marketing of Insurance products and banking
services, in the following manner:

Product

A product means what we produce. If we produce goods, it means tangible product and when
we produce or generate services, it means intangible service product. A product is both what a
seller has to sell and a buyer has to buy. In Insurance it can be categorized in two broad
categories: Life and Non-Life Insurance.

Life insurance is a contract between an insurance policy holder and an insurer, where the
insure promises to pay a designated beneficiary a sum of money (the “benefits”) upon the death
of the insured person. Depending on the contract, other events such as terminal illness or
critical illness may also trigger payment.

It is universally acknowledged as a tool to eliminate risk, substitute certainty for uncertainty

and ensure timely aid for the family in the unfortunate event of the death of the breadwinner.
Life insurance helps in two ways: dealing with premature death which leaves dependent
families to fend for themselves; and old age without visible means of support.

Kinds/ Types of Life Insurance Policies

Term Insurance: You can choose to have protection for a set period of time with Term
Insurance. In the event of death or Total and Permanent Disability if the benefit is offered),
your dependents will be paid a benefit. In Term Insurance, no benefit is normally payable if the
life assured survives the term.

Whole Life Insurance: With whole life insurance, you are guaranteed lifelong protection.
Whole life insurance pays out a death benefit so you can be assured that your family is
protected against financial loss that can happen after your death. It is also an ideal way of
creating an estate for your heirs as an inheritance.

Endowment Policy: An Endowment Policy is a savings linked insurance policy with a specific
maturity date. Should an unfortunate event by way of death or disability occur to you during
the period, the Sum Assured will be paid to your beneficiaries? On your surviving the term, the
maturity proceeds on the policy become payable.
Money back plans or cash back plans: Under this plan, certain percent of the sum assured is
returned to the insured person periodically as survival benefit. On the expiry of the term, the
balance amount is paid as maturity value. The life risk may be covered for the full sum assured
during the term of the policy irrespective of the survival benefits paid.

Children Policies: These types of policies are taken on the life of the parent/children for the
benefit of the child. By such policy the parent can plan to get funds when the child attains
various stages in life. Some insurers offer waiver of premiums in case of unfortunate death of
the parent/proposer during the term of the policy.

Annuity (Pension) Plans: When an employee retires he no longer gets his salary while his need
for a regular income continues. Retirement benefits like Provident Fund and gratuity are paid
in lump sum which are often spent too quickly or not invested prudently with the result that the
employee finds himself without regular income in his post - retirement days. Pension is
therefore an ideal method of retirement provision because the benefit is in the form of regular
income. It is wise to provide for old age, when we have regular income during our earning
period to take care of rainy days. Financial independence during old age is a must for
everybody.

Unit Linked Insurance Policy (ULIPs): Unit Linked Insurance Policies (ULIPs) offer a
combination of investment and protection and allow you the flexibility and choice on how your
premiums are invested. In Unit Linked Plans, the investment risk portfolio is borne by you as
you ate the investor. Typically, the policy will provide you with a choice of funds in which you
may invest. You also have the flexibility to switch between different funds during the life of
the policy. The value of a ULIP is linked to the prevailing value of units you have invested in
the fund, which in turn depends on the fund’s performance. In the event of death or permanent
disability, the policy will provide the Sum Assured (to the extent you are covered) so that you
can take comfort in knowing that your family is protected from sudden financial loss.

A ULIP has varying degrees of risk and rewards. There are various charges applicable for Unit
Linked Policies and the balance amount out of the premium is only invested in the fund/funds
chosen by you. It is important to ask your insurer or agent or broker questions to understand
the sum total of charges that you have to incur. It is important to assess your risk appetite and
investment horizon before deciding to buy a ULIP policy. You must also read the terms and
conditions of the policy carefully to understand the features of the policy including the lock-in
period, surrender value, surrender charges etc.

All the types of plans mentioned above can be offered under ULIP plans.

Benefits of life Insurance

Superior to any other savings plan: Unlike any other savings plan, a life insurance policy
affords full protection against risk of death. In the event of death of a policyholder, the
insurance company makes available the full sum assured to the policyholders’ near and dear
ones. In comparison, any other savings plan would amount to only the total savings
accumulated till date. If the death occurs prematurely, such savings can be much less than the
sum assured which means that the potential financial loss to the family is sizable.

Brings compulsory savings: A savings deposit can easily be withdrawn. The payment of life
insurance premiums however is considered to be of great and that cannot be trespassed. It is
viewed with the same seriousness as the payment of interest on a mortgage. Thus, life
insurance policy in effect brings about compulsory savings.

Easy settlement and protection against creditors: A life insurance policy is the only financial
instrument the proceeds of which can be protected against the claims of creditor of the assured
by effecting a valid assignment of the policy.

Administering the legacy for beneficiaries: Speculative or unwise expenses can quickly cause
the proceeds to be squandered or wasted. Several policies have foreseen this possibility and
provide for payments over a period of years or in combination of installments and lump sum
amounts.

Ready marketability and suitability for quick borrowing: A life insurance policy can, after a
certain time period (generally three years), be surrendered for a cash value. The policy is also
acceptable as a security for a commercial loan, for example a home loan or a student loan. It is
particularly advisable for housing loans when an acceptable LIC policy may also cause the
lending institution to give loan at lower interest rate.

Disability benefits: Death is not the only hazard that is insured; many polices also include
disability benefits. Typically, these provide for waiver of future premiums and payment of
monthly installments spread over a certain time period.

Accidental death benefits: Many policies can also provide for an extra sum to be paid (typically
equal to the sum assured) if death occurs as a result of accident.

Pricing

Pricing in financial services is not an easy task as it has to see beyond the mere exercise of
‘cost-plus’ or similar other models that are normally associated with costing in the domain of
tangible goods. The complication takes a further step up in insurance where it is only a
‘promise to perform in future’ that is sold. The players thus have the onerous task of getting
into the assessment of the several variables that together comprise the raw material for the
contract that promises the delivery of performance on a future contingent event. The exercise is
further replete with different variables for different classes of insurance; and thus poses a huge
challenge in bringing objectivity in the ultimate pricing of a product. For example: the
mortality tables form the basic crux of pricing in a life insurance contract and it is one’s guess
as to how difficult it is to generate mortality statistics at short intervals, considering the
enormity of the exercise, as also the inventions in the domain of medicine and the technology
associated with it. If the prices are based on mortality tables which are very ancient, would it
not amount to charging a premium that is not really commensurate with the risk? Insurers
should, in such a situation, compensate the policyholders suitably in order to justify the
premiums.

Similarly, in various segments of non-life class, insurers should be aided by the statistics and
data of the details pertaining to the risks that are to be priced suitably. Further, it should also be
ensured that the prices are charged at some standardized levels rather than proposing huge
discounts on the basic prices in order to muster higher levels of business. Apart from leading to
a mad race for business among the several players, such under-cutting of prices renders a
certain undesirable gracelessness to the entire value chain. There is need also for arriving at the
prices based on all factors that go into underwriting the risk. Insurers should ensure to generate
operating surpluses rather than having to depend on investment income to offset the losses
incurred in regular business. For one thing, such tendencies smack of lopsided business
priorities; and for another, it is too risky to depend on extraneous factors in a highly volatile
economic scenario.

Pricing in Life Insurance

The three main factors used for determining the premium rates under a life insurance plan are
mortality, expense and interest. Significant changes in any of these factors normally entail
revision of premium rates.

Mortality: The average rate of mortality is one of the main considerations when deciding upon
the pricing strategy. In a country like South Africa which is unfortunately plagued by a host of
diseases especially like AIDS, the threat to life is very important. The price of the installments,
its frequency and its premium charges are all decided accordingly.

Expenses: the cost of processing, the kind of infrastructure costs involved and the payment
made to the agents, reinsurance companies as well as the registration etc. are all incorporated
into the costs of the installments and premium sum and forms the integral part of the pricing
strategy.

Interest: The interest rate is one of the major factors, which determines people’s willingness to
invest in insurance issues. If the interest rate provided by the banks of other financial
instruments is much greater than the perceived returns from the insurance premiums then the
people would not be willing to put their funds in this sector.

The elements that go into the making of the price are:

1. Claims cost – this includes claims paid along with settlement expense, estimate for
outstanding claim, and provision for reserves for IBNR (Incurred but not reported) and IBNER
(Incurred but not enough reported).

2. Business acquisition cost – this includes commission, brokerage and business development
cost, etc.

3. Management expenses – this includes salaries, rent and such other expenses essential for
running an organization.

4. Profit – return on the cost of capital. The premium part that takes care of only claims cost is
called pure / risk premium. This part is then sufficiently loaded to take care of other elements
to arrive at the final premium. Apart from this contingencies like risk of catastrophe /
conflagration should also be kept in mind along with reinsurance support and cost thereof.
While pricing, the following commercial aspect cannot be ignored:

1. Inflation - claim cost may rise due to fall in the value of money

2. Interest rate - change in interest rate will directly affect investment income

3. Exchange rate - in present day globalised set-up, exchange rate will have obvious bearing on
insurance transactions

4. Price competition from other players - insurance companies have to do the balancing act
between offering competitive price and its adequacy

Therefore, full Premium that should be charged = Risk Premium (inclusive of margins for large
loss) + Management Expenses + Commissions + Profit margin + Cost of regulatory capital +
Cost of conducting Social Business + Cost of Commercial Motor TP Pool - Credit for
investment income + Margin for adverse deviation

Place (Distribution)

This component of the marketing mix is related to two important facets: i) Managing the
insurance personnel, and ii) Locating a branch.

The management of agents and insurance personnel is found significant with the viewpoint of
maintaining the norms for offering the services. This is also to process the services to the end
user in such a way that a gap between the services- promised and services -- offered is bridged
over. In a majority of the service generating organizations, such a gap is found existent which
has been instrumental in making worse the image problem.

The transformation of potential policyholders to the actual policyholders is a difficult task that
depends upon the professional excellence of the personnel. The agents and the rural career
agents acting as a link, lack professionalism. The front-line staff and the branch managers also
are found not assigning due weight-age to the degeneration process. The insurance personnel if
not managed properly would make all efforts insensitive. Even if the policy makers make
provision for the quality upgrading the promised services hardly reach to the end users. It is
also essential that they have rural orientation and are well aware of the lifestyles of the
prospects or users. They are required to be given adequate incentives to show their excellence.

While recruiting agents, the branch managers need to prefer local persons and provide them
training and conduct seminars. In addition to the agents, the front-line staff also needs an
intensive training program to focus mainly on behavioral management.

Another important dimension to the Place Mix is related to the location of the insurance
branches. While locating branches, the branch manager needs to consider a number of such as
smooth accessibility, availability of infrastructural facilities and the management of branch
offices and premises. In addition it is also significant to provide safety measures and also
factors like office furnishing, civic amenities and facilities, parking facilities and interior office
decoration should be given proper attention.

Thus the place management of insurance branch offices needs a new vision, distinct approach
and an innovative style. This is essential to make the work place conducive, attractive and
proactive for the generation of efficiency among employees. The branch managers need
professional excellence to make place decisions productive.

The distribution channels in case of insurance services are as follows:

 Agents

An insurance agent is a person who holds a license to act as an insurance agent for a life
insurer or a general insurer.

“Composite insurance agent” means an insurance agent who holds a license to act as an
insurance agent for a life insurer and a general insurer.

“Corporate Agent” means a person other than an individual, a firm or a company formed
under the Companies Act, 1956.

Role of Insurance Agent: Today's insurance agent has to know which product will appeal to the
customer, and also know his competitor's products in the same space 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. The new companies are for educated, aware individuals with
marketing flair, an elite group who can be attracted only with high remuneration and the lure of
a fashionable job, all of which may not be possible in this business with its price pressures and
the complexity of selling insurance.

The agency system is predominant in India as historically face-to-face contact was considered
essential in selling an insurance product. The major business of the insurance industry comes
through agency channel and is the most important channel of distribution for insurance
services.

The merits of agent advisors are:

They usually enjoy personal credibility with customers.

They provide various pre-sales and post sales services to customers.

Due to personal contact, agents can provide valuable feedback about the need and expectation
of consumers. This helps insurers to develop new products.

 Telemarketing, Direct Mail and Face to Face Sales

Initially, insurance was seen as a complex product with a high advice and service component.
Buyers prefer face to face interaction and place a high premium on brand names and reliability.
Direct telephone calls from the insurance agents or brokers are common these days for buying
an insurance plan. Direct mail can also be used as a distribution channels for insurance
companies.

The major advantage of telemarketing is that it involves human interaction, which facilitates
two-way communication and gives immediate feedback. Moreover, a telemarketing agent can
handle a large number of customers in a day, which makes it a cost effective and productive
marketing medium.

Direct selling continues to be the dominant channel of distribution for group business, with a
share of 90.66 per cent of premium during 2015-16. The corresponding share in the previous
year was 87.46 per cent.

 Internet

Though India is joining the fast growing breed of net users, using net for transactions has not
yet caught up. Though a few banks provide online banking, the usage is still a small fragment.
The insecurity associated with transactions over the net is still an inhibiting factor. At present
most of the insurance companies have product information and/or illustrative tools on the web.

We do not see the web evolving into a means for direct selling of insurance in the current
scenario. In the Indian market, where insurance is sold after considerable persuasion even after
face-to-face selling, the selling over the net, which must be initiated by the client, would take
some more time. While the technology capability is there, improvements in bandwidth and
infrastructure are needed. Also needed are simpler products where auto-underwriting is
feasible. Automobile insurance, one of the segments of insurance purchased "off the shelf" in
India, would be the ideal segment to start with. On the life side, term assurance for standard
lives with simplified underwriting is a possibility.

These channels by themselves will not be able to overcome the mindset of the people, but
rather can only be enablers for the human channels. Given the rapid use of internet users and
mobile phone subscribers, internet marketing will likely become a very significant channel in
india.

 Mobile

While face-to-face remains the primary form of interaction for most insurance customers,
mobile has become vital in the drive to meet customer needs in terms of access, with a growing
number of customers using their mobile phones to engage with insurers. In fact, mobile is
becoming the channel of choice for a number of customer interactions, especially on the
research and servicing side, so insurance executives are exploring different ways in which
mobile can play a role throughout the insurance value chain.

There Are Many Reasons for Insurers to Invest in Mobile Distribution Channels

Overall, though, insurance executives see mobile as an important access point for supporting
overall customer experience, rather than just viewing it as another sales channel.

The most often cited reasons for investing in mobile are customer demands for
anytime/anywhere/any device service, keeping up with the competition, the need to reduce
customer service costs, the increasing use of mobile devices in general, and the desire to boost
cross-selling/up-selling. There are various drivers of change in each of those areas. For
example:

 Anytime/anywhere/any device service. Customers today are seeking high-quality

anytime (24X7), anywhere (face-to-face, voice, Internet), and any device (PC,
smartphone, tablet) access for their research, purchase, and service interactions.
 Keeping up with the competition. To maintain and increase market share in an intensely
competitive market, insurers need to provide the mobile options increasingly being
demanded by their existing and prospective customers. Mobile functionality is
beginning to influence insurance shopping decisions, and an increasing number of new
shoppers are asking for it.
 Reducing customer service costs. Compared with face-to-face, phone, and Internet/PC
channels, Mobile is a cheaper way to reach customers. Insurance companies can also
reduce their customer service costs by increasing the use of self-service options among
mobile consumers, thereby deflecting customer service interactions from branches or
call centers.
 Increasing mobile usage. Today, a large number of customers have access to mobile
networks, and the smart phone share of the total mobile audience is growing rapidly.
  Boosting cross-selling/up-selling. Consumers are more likely to check cross-sell
recommendations, pre-approved online discounts, and integrated product offerings on
their mobile phones than via any other channel, due to the speed, convenience and ease
of access.
 Bancassurance

Bancassurance – a term coined by combining the two words bank and insurance (in French) –
connotes distribution of insurance products through banking channels. Bancassurance is an
established and growing channel for distribution of insurance products, though its penetration.
As a distribution strategy involves selling insurance products via branch network of banking
organisations. The tie-ups between the insurance companies and banks are doing reasonably
well in India, through different types of Bancassurance models. One of the drivers for the
growth in insurance sector is the contribution of the private sector of the banking industry. The
private life insurers have been instrumental in building strong relationships with established
banks for Bancassurance. Cooperative banks and regional rural banks are seen as a cost-
effective vehicle for insurers to tap into rural communities and fulfill their rural sector
obligations.

Bancassurance – A Win-Win Strategy

• Benefits to Banks

– Improvement in profitability/productivity

– Increase in customer loyalty

– Increase in Return on Assets without increasing Assets

– Increase in shareholders’ value

– Better utilization of manpower, branch network

– Creation of sales-oriented culture

• Benefits to Insurance Companies

- Lower cost of customer acquisition

– Penetration in untouched territory

– Increase in volume and profit

– Improved brand equity

• Benefits to Customers
– One stop shopping for all financial services

– Lower cost of insurance

– Hassle-free post-sales services

– New products/services

 Worksite Marketing

Another potential channel that reduces the need for an owned distribution network is worksite
marketing. Worksite or workplace marketing is the distribution of financial products at the
workplace, paid for by employees, but facilitated and endorsed by the employer. The success
of worksite marketing depends on the education of producers and customers, as well as
employer cooperation and the cost effectiveness of products and enrolment process.

This area needs to be tapped, as in any country one of the biggest markets is through the
worksite. With changes in human resources management policies and compensation packages,
group products or work site products do have a definite market that cannot be ignored. Insurers
can market pensions, health insurance and even general covers through employers to their
employees.

Here the advantages would be:

 Captive customer base

 Potential to sell individual insurance and group insurance
 High trust factor
 High hit ratio for the intermediaries

The challenges would be the cost effectiveness, product customization and efficient post sales
servicing, which would determine continued business. Technology has a key role to play in
worksite marketing to ensure cost benefits. Banks and financial institutions have been
successfully marketing.

 Use of Social Media as a Distribution Channel

Social media platforms such as Facebook, LinkedIn, and Twitter have witnessed rapid growth
over the last few years. Social media is now acknowledged as a growing phenomenon for the
insurance industry. Customers increasingly use social media platforms to obtain sales-related
advice from their friends, family and other contacts, and gain feedback on various products and
services, including those in the insurance domain. They also expect insurance companies to
have a presence on social networking sites. Customers are also having some of their insurance
related queries resolved by sharing their concerns publically on these platforms, pushing
companies to respond.
The initial focus of insurers’ social media strategies has been aimed at low-level
communication and marketing of new products and services. While many insurers now relate
social media to a mass marketing tool, there are many other applications as well including:
gaining customer feedback; resolving queries in real-time; providing product updates; and as
an information source for insight generation and fraud investigation. Social media platforms
along with the online channels can also help remove geographical limitations that agents face
when serving their clients.

Promotion

It includes the various ways of communicating to the customers of what the company has to
offer. It is about communicating about the benefits of using a particular product or service
rather than just talking about its features. The insurance services depend on effective
promotional measures, so as to create impulsive buying. The insurance services depend on
effective promotional measures. In a country like India, the rate of illiteracy is very high and
the rural economy has dominance in the national economy. It is essential to have both personal
and impersonal promotion strategies. In promoting insurance business, the agents and the rural
career agents play an important role. Due attention should be given in selecting the
promotional tools for agents and rural career agents and even for the branch managers and
front line staff. They also have to be given proper training in order to create impulse buying.

Various techniques that can be used for effectively promoting insurance services are:
Advertisements, Public Relations & Publicity, Direct Marketing, Sales promotion techniques,
Personal Selling and Internet Marketing.

Advertising and Publicity, organization of conferences and seminars, incentive to

policyholders are impersonal communication. Arranging exhibitions, participation in fairs and
festivals, rural wall paintings and publicity drive through the mobile publicity van units would
be effective in promoting the products of insurance, both life and non-life.

People

All human actors who play a part in service delivery and thus influence the buyers'
perceptions; namely, the firm's the customer, and other customers in the service environment

In the marketing of Insurance services, role of people is important. The front-line staffs, the
branch manager, agents, intermediary staff and other customers are people who play an
important role in the service delivery. The most important role in marketing of insurance
service is that of the insurance agent who has a face to face interaction with the customers.

Understanding the customer better allows designing appropriate products and services for the
customers. Being a service industry which involves a high level of people interaction, it is very
important to use this resource efficiently in order to satisfy customers. Effective selection and
training of all types of staff is important. With regard to the selection of such staff, the services
marketer must ensure that as a part of the selection process, care is taken to evaluate the extent
to which the employees have the necessary skills, characteristics and attitudes to interact with
customers effectively. Training, development and strong relationships with intermediaries are
also the key areas to be kept under consideration.

Training the employees, use of IT for efficiency, both at the staff and agent level, is one of the
important areas for increasing their efficiency.

Process

Process is the actual procedures, mechanisms, and flow of activities by which the service is
delivered – this service delivery and operating systems.

Process decisions involve determining the processes and procedures to be used in service
product delivery, including systems and technologies which will be used to support these. The
process should be customer friendly in insurance industry. The speed and accuracy of payment
is of great importance. The processing method should be easy and convenient to the customers.
Installment schemes should be streamlined to cater to the ever growing demands of the
customers.

IT & Data Warehousing will smoothens the process flow. IT will help in servicing large
number of customers efficiently and bring overhead. Technology can either complement or
supplement the channels of distribution cost effectively. It can also help to improve customer
service levels. The use of data warehousing management and mining will help to find out the
profitability and potential of various customers product segments.

Physical Evidence

Physical evidence is the environment in which the service is delivered, and where the firm and
customer interact, and any tangible components that facilitate performance or communication
of the service.

The physical evidences include signage, reports, punch lines, other tangibles, employee‘s dress
code etc. Evidence is a key element of success for all insurance companies. Physical evidence
can be provided to insurance customers in the form of policy certificate and premium payment
receipts. The office building, the ambience, the service personnel etc. of the insurance
company and their logo and brand name in advertisements also add to the physical evidence.

The physical evidences that can be used in the insurance industry are:

 Color Combinations
 Dress of Staff
 Policy certificate and premium payment receipts
 Building/Infrastructure
 Signage and Logos
 Slogans
 Cartoon Characters
 Past Success Stories (Non-Life)
 Achievements and Market Position, etc.
ROLE OF MARKETING MIX ELEMENTS IN MARKETING INSURANCE
SERVICES IN INDIA
Objective of the study:

1. To understand various promotional mix strategies undertaken by life insurance companies.

2. To investigate whether there is any association between genders and advertising recall.

3. To find out the relationship between customers subscribing to life insurance and the utility
of life insurance products based on the brand image of the life insurance product.

The Need of Study:

1. There is a need to understand the importance of promotional mix adopted by life insurance
companies in India.

2. The companies are designing various marketing strategies with help of promotional tools
and try to create awareness for insurance products.

3. There is a need to select right mix of promotional activities to suit customer needs from
insurance companies at particular time and to use it correctly to achieve result.

4. The insurance companies are developing and implementing brand image and trying to
stimulate their target audience to buy their products or services.

5. Due to various measures taken by insurance sector, the customer is largely affected. It is
important to find out the extent of impact on customer and his reaction due to such measures.

6. There are fluctuations in brand building plan of life insurance companies to create customer
experience s and there is need to find out the effect of promotional strategies and to study how
they help to increase positive response of their customers.
COLLECTION OF DATA
Data classified information source into primary and secondary data.

Primary data is collected by researcher with the help of executing the questionnaires. As
mentioned the objective of this research based on to prove or disprove the effect of
promotional strategies in life insurance which is considered as one of the fast growing sectors
in India. Researcher thought it proper to get primary data from life insurance companies as
well as consumer of life insurance. Collection of the primary data is done by executing the
questionnaires. The surveyor and the respondents (insurance companies and insurance
consumer) do come in contact with each other if this method of survey is adopted. Therefore it
has been decided to use the questionnaire as best tools for collecting primary data from life
insurance companies and respondent. The questionnaire has been designed to get more
accurate response and information based on the facts from both the parties.

Questions such as:

 Open-ended questions
 Dichotomous questions
 Multiple-choice questions
 Scaled questions
 Researcher circulated a 200 number of questionnaires to the various types of
consumers.

Secondary data was collected with the help of sources mentioned as following: The secondary
data from other free flow information sources like, insurance consultant and Sales managers in
insurance field/besides a large number of books, magazines, articles, newspapers and other
periodicals/etc.

The secondary data could be obtained internally, within the life insurance companies or
externally outside the life insurance companies Internal sources were classified under four
broad categories-

 Insurance Sales forces reports

 insurance agents
 Insurance Internal experts

The external secondary data is not generated by the life insurance companies hence it is
obtained from outside sources, mentioned below:

 Various books which are more emphasized on marketing ,promotional strategies,

advertising, service marketing
 Journals and magazines related to the topic
 Various websites
 IRDAI publications, etc
SAMPLE DESIGN
Since the promotional strategies would be the same in all cities in India. The sample was
chosen from the customers, who expressed an interest in participating.

SAMPLE SIZE: Researcher decided to distribute the 200 questionnaires for consumer of life
insurance companies and employees of life insurance companies to achieve the objective of
research.

Objective 1: To understand various promotional mix strategies undertaken by life

insurance companies. The following results after applying SPSS software. The different
frequencies for each element of promotional mix strategies adopted by life insurance
companies are given below.

Promotional mix
strategies adapted
by insurance Highest Score Rank Percentage
company
Advertising in
electronic and print 5 5 50%
media
Advertising
campaign 5 4, 5 50%
PR and publicity 8 5 80%
Personal selling 5 4, 5 50%
Sales promotion 9 5 90%
Direct marketing 8 4 80%
Telemarketing 5 4, 5 50%
Word of mouth 9 5 90%
Combination of all 5 4, 5 50%
strategy
Inference:

It has been noticed that life insurance companies in India have given the highest score to
following promotional strategies undertaken by them:

Sales promotion – 16%

Word of mouth – 16%

Public Relations and Publicity – 14%

Direct Marketing – 14%.

Objective 2: To investigate whether there is any association between genders and

advertising recall Test statistic:

Test statics: As the variables of interest, that is gender and the advertisement recall where
categorical variables Chi square test was applied.

Observation: The test is significant with chi square value of 26.252 and P value .001 at 5 %
level of significance.

Conclusions: There is an association between the gender of the respondent and advertisement
recall.

Inference: The message in advertisement must be more gender specific as there is relationship
between gender and the advertisement.

Objective 3: To find out the relationship between customers subscribing to life insurance
and the utility of life insurance product based on the brand image of the life insurance
product.

The Researcher after analyzing the data came to know that the brand image of Life Insurance
Company has an association with protection for the family as well as pension provision.

Test Statistic: As variable of interest, that is brand image of the life insurance company and
the protection for family where categorical variables „chi square test was‟ applied. As variable
of interest, that is brand image of the life insurance company and the pension provision where
categorical variables, chi square test were applied.

Observations:

Protection for family: The test is significant with chi square value of 40.750 and p value .024
at 5 % level of significance.

Pension provision: The test is significant with chi square value of 42.271 and p value .023 at
5 % level of significance.

Conclusions: There is an association between brand image of the company, protection for the
family of the insured his/her pension provision.

Interpretations: The insurance companies should concentrate more on creating brand image
of company by emphasizing more on protection for the family of the insured. The brand image
of Life Insurance Company has important value from the view point of to the customer of life
insurance product; hence, while delivering message to the target audience the life insurance
companies should pay the most attention to its special feature of pension provision.
SOME FINDING, SUGGESTION AND RECOMMENDATION
Findings:

It is quite obvious that the LIC‟s decision to drive its premiums growth on the strength of
unit link products (ULP) .the group business has also witnessed some churning as the market
has become more competitive. It is observed that this has been time for the term business.
Today group products are offered all the life insurers. It is observed that none of the new
insurers have been able to generate surplus on their revenue account. On the contrary the
cumulative losses of the private insurers have increased considerably. It is observed that the
LIC of India continued to earn profits from operations, with a small decline in the volume of
profit, which is a result of re-entry of the private players.

it is observed that so as to satisfy customers expectations the insurance companies came up

with many attractive insurance plans such as pension products, unit link policies, providing
certain top-up facility ,riders tailored products, bundled products, mutual funds with life
insurance policies.

It is observed in India and Iran that the agents are plying vital role to equip the customers
with the knowledge of many insurance products, credibility of insurance company, financial
solvency of the company and also occupying good insurance businesses, on the basis of the
training and education imported by the insurance companies to them from time to time.

It is observed that out of eight promotional mix strategies in India “sales promotion” and
“word of mouth” ranked number one with highest score which is followed by “Public
Relation” and “Direct Marketing” ranked second and remaining all other strategies ranked
third by scoring equal.

It is also observed that the promotional strategies adopted by the insurance companies in
India captured more percentage (i.e. 16 %) in the case of sales promotion and word of mouth
and comparatively low percentage (i.e. 14 %) in the case of Public Relation and Publicity and
direct marketing.

It is observed the family protection is given utmost priority than long term saving by the
customers.

Suggestion:

The foreign insurance companies have high quality public relation department but in public
sector of insurance companies in Iran and India, public relation activities of world class are not
observed, which makes their task of publishing insensitive. In this context it is suggested that
overriding priority need to be given to this dimension of promotion.

It is suggested that, incentives to the end user for taking a policy need to be given. Such
incentives would help to increase the insurance business. Implementation of innovative idea in
sales promotion will help the insurance companies to establish the growth of the business of
insurance companies.

The insurance companies need to recruit efficient personnel who can discharge their
functional responsibility in right fashion. Even sophisticated technology should be used by
insurance companies on priority basis.

As the people are interested more in pension plan and security, which research has already
proved, it is suggested that the insurance companies should come up with excellent plans
which will delight their customers and satisfy their above expectations.

Recommendations:

It is suggested that considering an association between gender of the respondent and

advertisement recall, effort need to be directed to apply innovative promotional mix so as grab
more insurance business by right mix of promotional mix.

As Indian customer of insurance prefers family protection, long term saving and tax saving,
the insurance companies are suggested to mold their promotional strategies on the basis of
above priorities.

The insurance companies need to recruit efficient personnel who can discharge their
functional responsibility in right fashion. Even sophisticated technology should be used by
insurance companies on priority basis.
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