Professional Documents
Culture Documents
The insurance industry has come a long way since the time when businesses were tightly regulated and concentrated in the hands of a few public sector insurers. Following the passage of IRDA act in 1999, India abandoned public sector exclusively in the insurance industry in favor of market driven competition. This change has brought about major changes in the industry. The inauguration of new era of insurance development has seen the entry of international insurers the proliferation of innovative products and distribution channels and rising of supervisory standards. Range of different products is launched frequently to cater to the different segments of the market. At the same time changes are also witnessed in the distribution channels. Traditional agents were supplemented by other channels including Internet and Bancassurance. These developments are instrumental in propelling business growth. Bajaj Allianz is one of the most renowned insurance organizations of India. The organization realized the scope and potential of exploring almost all the insurance sector. Bajaj Allianz has also taken advantage of Bancassurance channel of distribution and has capitalized the benefits. It has entered into tie ups with many private and public sector banks. My scope of study during the project was in the Bancassurance channel of the company. Attitude survey of the customers is also done along with strategically evaluating the position, footfall at the bank branches and many other aspects. The study although is limited to the tie up with the UBI but the insights gathered from the interaction with the customers, bank managers and employees is representative of the scenario of the Bancassurance at the public sector banks. The main focus was on selling of the health insurance policies to the walk in customers of the bank. In the course of it I had tried to analyze the potential of health insurance policies in the UBI branches of India as a whole. And have given the projections for the next three years in conservative and aggressive case scenario. The methodology adopted has been kept very flexible for the sake of simplicity.
INTRODUCTION
A contract of insurance is that of utmost good faith or Uberrimae Fides, which means that it is the duty of the proposer to make a full disclosure of all the facts to the insurer and in the event of failure to disclose material facts, the contract can be held to be void ab initio. The insurer is in the position of a trustee as it manages the common fund, for and on behalf of the community of policyholders.
The business of insurance is to (a) Bring together persons with common insurance interests, (b) Collect the share or contribution (called premium) from all of them, and (c) Pay out compensations (called claims) to those who suffer loss. In India, insurance business is conducted as life and non-life (general).
Life Insurance products : Life Insurance means some guarantee to the life. These are products which act as a kind of investment for the policy holder. The insurance policy have a fixed tenure over which the policy holder pays the premium, at the time of
maturity he gets back the insured amount which is equal to the premium he paid compounded at some rate. The insured amount is reimbursed only at the maturity time and not before that.
General Insurance products : The non life insurance is also called general insurance. General insurance, as the name suggests, covers all other aspects of economic activity, assets/ property, vehicle, and certain personal insurance like Health & personal accident to name a few . They basically compensate against financial loss that may arise to property, Vehicle, self, accidental death etc due to unforeseen reasons, though it does not cover loss arising out of speculation or business/ trade related losses. The business of General insurance is related to the protection of the economic values of the assets. Insurance companies are called insurers.
Principle of Utmost Good Faith or Uberrimae Fides- This means that it is assumed that the information disclosed in the proposal form is correct. If found to be incorrect the contract would be void ab initio.
Principle of Insurable Interest- It means that the proposer must have a stake in the continuance of the subject matter insured and could suffer a loss if the risk occurs.
Concept of Underwriting- The process of verifying the level of risk in each new entrant and determining the terms of underwriting. admission is called selection or
Principle of Indemnity- Insurance is meant to compensate losses and the mechanism of insurance cannot be used to make a profit. This is the principle of indemnity as a claim cannot exceed the amount of loss incurred.
Principle of Affordable Premium- If the likelihood of an insured event is so high, or the cost of the event so large, that the resulting premium is large relative to the amount of protection offered, it is not likely that anyone will buy insurance, even if on offer. Further, as the accounting profession formally recognizes in financial accounting standards, the premium cannot be so large that there is not a reasonable chance of a significant loss to the insurer. If there is no such chance of loss, the transaction may have the form of insurance, but not the substance.
HISTORY OF INSURANCE
Insurance sector in India is one of the booming sectors of the economy and is growing at the rate of 15-20 per cent annum. Together with banking services, it contributes to about 7 per cent to the country's GDP. The origin of life insurance in India can be traced back to 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. In 1912, insurance regulation formally began with the passing of Life Insurance Companies Act and the Provident Fund Act. By 1938, there were 176 insurance companies in India. But a number of frauds during 1920s and 1930s tainted the image of insurance industry in India. In 1938, the first comprehensive legislation regarding insurance was introduced with the passing of Insurance Act of 1938 that provided strict State Control over insurance business. Insurance sector in India grew at a faster pace after independence. In 1956, Government of India brought together 245 Indian and foreign insurers and provident societies under one nationalized monopoly corporation and formed Life Insurance Corporation (LIC) by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.5 crore. The (non-life) insurance business/general insurance remained with the private sector till 1972. There were 107 private companies involved in the business of general operations and their operations were restricted to organized trade and industry in large cities. The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from January 1, 1973. The 107 private insurance companies were amalgamated and grouped into four companies: National Insurance Company, New India Assurance Company, Oriental Insurance Company and United India Insurance Company. These were subsidiaries of the General Insurance Company (GIC). In 1993, the first step towards insurance sector reforms was initiated with the formation of Malhotra Committee, headed by former Finance Secretary and RBI Governor R.N. Malhotra. The committee was formed to evaluate the Indian insurance industry and Insurance sector in India was liberalized in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for
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private players and allowing foreign players to enter the market with some limits on direct foreign ownership. There is a 26 percent equity cap for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent. The opening up of the insurance sector has led to rapid growth of the sector. The potential for growth of insurance industry in India is immense as nearly 80 per cent of Indian population is without life insurance cover while health insurance and non-life insurance continues to be well below international standards recommend its future direction with the objective of complementing the reforms initiated in the financial sector. Insurance industry in India is governed by Insurance Act, 1938, the Life Insurance Corporation Act, 1956 and General Insurance Business (Nationalization) Act, 1972, Insurance Regulatory and Development Authority (IRDA) Act, 1999 and other related Acts. The origin of life insurance in India can be traced back to 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. In 1912, insurance regulation formally began with the passing of Life Insurance Companies Act and the Provident Fund Act. The insurance sector in India has come a full circle from being an open competitive market to nationalisation and back to a liberalised market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries. The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.
1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are:
1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973. 107 insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company Ltd. GIC incorporated as a company.
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0 1 2 3 4 5 6
There are 3 types of players in the insurance market. Public sector undertakings (PSUs) The HO of four public sector insurers is located in the 4 major cities. The four major PSUs currently operating in the Indian general insurance market: National (Calcutta); Oriental (Delhi); United India (Madras); New India (Bombay). In practice, the PSUs tend to focus their efforts on maintaining a strong status and market position within their local region rather than competing with one another. New India is the most successful of the PSUs.
The PSUs have the following common challenges: Sales focus Poor systems Poor claims paying record Staff leakage Exposure to motor business
PSU
2 5 10 4 3 2 27
Motor OD Fire PA & Health Motor TP Miscellaneous Engineering Marine Cargo Maine Hull
14 19 14
Liability Aviation
Private companiesJV Fast growing private companies are growing fast are generally run by experienced Indian managers and are strongly supported by foreign expertise. They are steadily building their customer base and, over time, they are expected to acquire an ever larger share of the market their share currently stands at 34.6%. Interviews in both London and India revealed that the new private insurers collectively exhibited a number of strengths, these included: Small and flexible Good staff, system, processes and data
Fig. 3. Showing the breakup of the type of policies sold by private companies.
Private Companies
1 4 7 8 5 16 23 3 3 30
Motor OD Fire PA & Health Motor TP Miscellaneous Engineering Marine Cargo Maine Hull Liability Aviation
Foreign players Foreign insurers participation in the Indian non-life insurance businesses currently restricted to a 26% stake in a joint-venture vehicle with an Indian company. Even with this relatively low level of foreign participation, many of the worlds largest insurers (such as AIG, Allianz and RSA) have already entered the market. Despite their disadvantaged position, foreign capital providers have been able to influence strategy, product focus and speed of growth. As a result of this influence, there are growing differences between private companies.
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Fig .4. Showing the sector wise and company wise percentage of insurance business done.
12.3 6.9 4.8 3.3 3 2.3 1.2 0.8 2.4 0.1 2.4
Fig. 5. Showing the product category wise breakup between public sector and private sector.
35 30 25 20 15 10 5 0 30 27 23 19 16 14 14 10 5 8 5 7 44 33 23 21 PSU Private
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The future of the insurance can be considered very bright for some while dull for others. But in distant future definitely it is going to last long. The industry will keep growing as insurance has become the essential part of ones attitude of decreasing the dispersing risk and giving away the burden to insurance company. Fig.6. Showing the class wise projection for 2010.
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DISTRIBUTION CHANNELS
Traditionally, insurance products were promoted and sold principally through agency systems only. The reliance of insurance industry was totally on the agents. Moreover with the monopoly of public sector insurance companies there was very slow growth in the insurance sector because of lack of competition. The need for innovative distribution channels was not felt because all the companies relied only upon the agents and aggressive marketing of the products was also not done. But with new developments in consumers behaviours, evolution of technology and deregulation, opening up of the insurance sector and increased competition has speeded up the development of new distribution channels rapidly in recent years. The various distribution channels are: Career Agents: Career Agents are full-time commissioned sales personnel holding an agency contract. They are generally considered to be independent contractors. Consequently an insurance company can exercise control only over the activities of the agent which are specified in the contract. Special Advisers: Special Advisers are highly trained employees usually belonging to the insurance partner, who distribute insurance products to the bank's corporate clients. The Clients mostly include affluent population who require personalised and high quality service. Usually Special advisors are paid on a salary basis and they receive incentive compensation based on their sales. Salaried Agents: These are similar to career agents, the only difference is in terms of their remuneration is that they are paid on a salary basis and career agents receive incentive compensation based on their sales. Bank Employees / Platform Banking: Platform Bankers are bank employees who spot the leads in the banks and gently suggest the customer to walk over and speak with appropriate representative within the bank. The platform banker may be a teller or a personal loan assistant. A restriction on the effectiveness of bank employees in
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generating insurance business is that they have a limited target market, i.e. those customers who actually visit the branch during the opening hours. Corporate Agencies and Brokerage Firms: There are a number of banks who cooperate with independent agencies or brokerage firms while some other banks have found corporate agencies. The advantage of such arrangements is the availability of specialists needed for complex insurance matters and through these arrangements the customers get good quality of services. Direct Response: In this channel no salesperson visits the customer to induce a sale and no face-to-face contact between consumer and seller occurs. The consumer purchases products directly from the bancassurer by responding to the company's advertisement, mailing or telephone offers. This channel can be used for simple packaged products which can be easily understood by the consumer without explanation. Internet: Internet banking is already securely established as an effective and profitable basis for conducting banking operations. Banc assurers can feel confident that Internet banking will also prove an efficient vehicle for cross selling of insurance savings and protection products. Functions requiring user input (check ordering, what-if calculations, and credit and account applications) should be immediately added with links to the insurer. Such an arrangement can also provide a vehicle for insurance sales, service and leads. E-Brokerage: Banks can open or acquire an e-Brokerage arm and sell insurance products from multiple insurers. The changed legislative climate across the world should help migration of Bancassurance in this direction. The advantage of this medium is scale of operation, strong brands, easy distribution and excellent synergy with the internet capabilities. Outside Lead Generating Techniques: One last method for developing Bancassurance eyes involves "outside" lead generating techniques, such as seminars, direct mail and statement inserts. Great opportunities await Bancassurance partners today and, in most cases, success or failure depends on precisely how the process is developed and managed inside each financial institution.
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ABOUT BAGIC Parent companies: Bajaj Auto and Allianz SE Bajaj Auto
The Bajaj Group is amongst the top 10 business houses in India. Its footprint stretches over a wide range of industries, spanning automobiles (two-wheelers and three-wheelers), home appliances, lighting, iron and steel, insurance, travel and finance.
The group's flagship company, Bajaj Auto, is ranked as the world's fourth largest twoand three- wheeler manufacturer and the Bajaj brand is well-known across several countries in Latin America, Africa, Middle East, South and South East Asia. The present Chairman of the group, Rahul Bajaj, took charge of the business in 1965. He is one of India's most distinguished business leaders and internationally respected for his business acumen and entrepreneurial spirit.
Forth largest 2 & 3 wheeler manufacturer in the world 21 million+ vehicles on the roads across the globe. Bajaj Auto finance one of the largest auto finance cos. in India The turnover of the company stands at Rs. 46.16 billion.
Allianz SE
The Allianz Group is one of the leading integrated financial services providers worldwide. On the insurance side, Allianz is the market leader in the German market and has a strong international presence
In 2006 Allianz SE, the parent company, Allianz SE is headquartered in Munich, Germany.
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Allianz SE shares are traded on all German stock exchanges as well as in London, Zurich, Paris and Milan. 11th largest corporation in the world Allianz became the first German financial services provider to have its shares listed on the New York Stock Exchange, where they have been trading in the form of American Depositary Receipts (ADR). Allianz is also one of the world's largest asset managers, with third-party assets of 703 billion euros under management at year end 2008. The first company in the Dow Jones EURO STOXX 50 Index to adopt the legal form of a Societas Europaea, which is a new European legal form for stock corporations. 50% of global business from Life Insurance, close to 60 million lives insured globally Established in 1890, 110 yrs of Insurance expertise More than 70 countries, 155,000 employees worldwide and 75 million customers In fiscal 2008 the Allianz Group achieved total revenues of over 92.5 billion euros Insurance to almost half of the Fortune 500 companies.
BAJAJ ALLIANZ
Bajaj Allianz Life Insurance Company Limited Bajaj Allianz Life Insurance Co. Ltd. is a joint venture between two leading conglomerates- , Bajaj Auto, one of the biggest 2 and 3 wheeler manufacturers in the world and Allianz AG, one of the world's largest insurance companies.
Bajaj Allianz Life Insurance Is the fastest growing private life insurance company in India. Currently has over 3,00,000 satisfied customers
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We have customer care centers in 155 cities with 28000 Insurance Consultant providing the finest customer service. One of India's leading private life insurance companies
As on 31st March 2008, Bajaj Allianz General Insurance maintained its premier position in the industry by garnering a premium income of Rs. 2578 crore achieving a growth of 43 % over the last year. Bajaj Allianz has made a profit before taxes of Rs. 167 crore became the first company to cross the Rs.100 crores mark in profit after tax by generating Rs. 105 crores.
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In the first quarter of 2008-09, the company garnered a gross premium of Rs.733.53 crores against Rs.573.73 core last year for the same period registering a growth of 28%.
Bajaj Allianz has received "iAAA rating, from ICRA Limited, an associate of Moody's Investors Services, for Claims Paying Ability.This rating indicates highest claims paying ability and a fundamentally strong position.
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b) Corporate Agency The other form of non-risk participatory distribution channel is that of Corporate Agency, wherein the bank staff as an institution acts as corporate agent for the insurance product for a fee/commission. This seems to be more viable and appropriate for most of the mid-sized banks in India as also the rate of commission would be relatively higher than the referral arrangement. This, however, is prone to reputational risk of the marketing bank. There are also practical difficulties in the form of professional knowledge about the insurance products. This could, however, be overcome by intensive training to chosen staff, packaged with proper incentives in the banks coupled with selling of simple insurance products in the initial stage. This model is best suited for majority of banks including some major urban cooperative banks because neither there is sharing of risk nor does it require huge investment in the form of infrastructure and yet could be a good source of income. This model of bancassurance worked well in the US, because consumers generally prefer to purchase policies through broker banks that offer a wide range of products from competing insurers.
c) Insurance as Fully Integrated Financial Service/ Joint ventures Apart from the above two, the fully integrated financial service involves much more comprehensive and intricate relationship between insurer and bank, where the bank functions as fully universal in its operation and selling of insurance products is just one more function within. This includes banks having wholly owned insurance subsidiaries with or without foreign participation. The great advantage of this strategy being that the bank could make use of its full potential to reap the benefit of synergy and therefore the economies of scope. This may be suitable to relatively larger banks with sound financials and has better infrastructure. As per the extant regulation of insurance sector the foreign insurance company could enter the Indian insurance market only in the form of joint venture, therefore, this type of Bancassurance seems to have emerged out of necessity in India to an extent. There is
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great scope for further growth both in life and non-life insurance segments as GOI is reported have been actively considering to increase the FDIs participation up to 49 per cent.
II. Product based classification (a) Stand-alone Insurance Products In this case bancassurance involves marketing of the insurance products through either referral arrangement or corporate agency without mixing the insurance products with any of the banks own products/ services. Insurance is sold as one more item in the menu of products offered to the banks customer, however, the products of banks and insurance will have their respective brands too. (b) Blend of Insurance with Bank Products This method aims at blending of insurance products as a value addition while promoting the banks own products. Thus, banks could sell the insurance products without any additional efforts. In most times, giving insurance cover at a nominal premium/ fee or sometimes without explicit premium does act as an added attraction to sell the banks own products, e.g., credit card, housing loans, education loans, etc. Many banks in India, in recent years, has been aggressively marketing credit and debit card business, whereas the cardholders get the insurance cover for a nominal fee or (implicitly included in the annual fee) free from explicit charges/ premium. Similarly the home loans / vehicle loans, etc., have also been packaged with the insurance cover as an additional incentive.
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III. Bank Referrals There is also another method called 'Bank Referral'. Here the banks do not issue the policies; they only give the database to the insurance companies. The companies issue the policies and pay the commission to them. That is called referral basis. In this method also there is a win-win situation every where as the banks get commission, the insurance companies get databases of the customers and the customers get the benefits.
Activity
Sales
Policy administration
Claims
Insurers staff
Insurers system
Key success factors Bancassurance is fully embedded in the strategy of the Bank Think Group Integrated Distributor - Manufacturer Bancassurance model Customer Centric
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Integrated Marketing Suitable Products & Natural Fit Maximize sales-capacity Suitable Commission/Remuneration structures Integrated Performance Management at the Point of Sale Suitable end-to-end processes & top quality service delivery Cost Leadership Best Value-For-Money Product & Service Packages
product in harmony with bank activities (daily bank , lending, saving and interest)
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Benefits of Bancassurance To the bank The period of 1990 witnessed stiff competitions between the financial institution and profit margins for the banks began to shrink. A need for a new business was felt and Bancassurance could be viewed as a rescue. Bancassurance came as a way of creating new revenue flow and diversifying business activities. Bancassurance helps a bank become a sort of supermarket a one stop shop for financial services where all financial and insurance needs of a customer could be addressed. Broadening the product range makes bank more attractive and thus increases customer satisfaction and loyalty. Distribution costs in such a model are marginal as the existing network and present employees are utilized to carry out the activities. The benefits of Bancassurance to the bank could be summed up as additional stable stream of fee based income leveraging the customer base Full utilization of existing network and employees cross selling extended financial services offering customer centric and life cycle management higher revenues without any additional investment
To the insurance company Through this distribution method the insurance company significantly extends its customer base by getting access to the banks client base. They can now reach the customer which was otherwise difficult to approach. Diversification reduces the risk of too much dependence on a single distribution channel. Insurance company could leverage on the trustworthy image of the bank. The inherent cost of distribution is too low as compared to the conventional sales representative method. A new insurance company could easily establish itself in the market with the help of a locally established bank.
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Benefits of Bancassurance to Insurance Company are: customer base of the bank is readily available ready revenue of asset business cost of distribution is fair widening the product range consumer confidence in banks economies of scale Rural penetration
To the customer Customer enjoys great access to all financial services from a bank that offers both banking as well as insurance products. Since the cost of distribution is low so the customer ultimately gets the product at a cheaper price. Payment of premium is also simplified as premium is collected directly from the bank account. Following are the benefits to the customer: All insurance solutions under one roof Free Professional advice Solution based on buyers need E-insurance enablers Complementary to other bank products Customers get the benefit of professional & unbiased advice Customer gets the facility of a financial hyper mart.
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Health insurance is critical, especially to those living in areas where the costs of hospitalization are high. Most developed nations offer government subsidized medical care, which makes it less critical to have health insurance.
In the US, however, medical care is extremely expensive, and is not paid for by the government. Therefore, it is wise for all Americans living in the US to have good health insurance policies. This will protect them from the possibility of massive financial burden which could result in the garnishing of wages and even bankruptcy. Health insurance can be bought on an individual basis or on a group basis. Health insurance bought on a group structure usually is through an employer, as many employers provide health insurance coverage to their employees. Indian health insurance sector have immense potential and scope for growth and revenue generation. The healthcare industry is expected to increase from its current size to 29.6 billion by 2012. By 2012 the revenue from the healthcare sector is expected to reach 6.5-7.2 % of the GDP.
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CONSERVATIVE APPROACH The bank branches across India have been divided scale wise and the location wise further on. The ticket size is the value of the policy. The ticket size varies from Rs. 1000 to Rs. 3500. Number of policies expected to be sold per branch ranges from 2 to 5 depending on the location. Renewal rate is taken to be 80%.
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Commission to bank is 25 %
See Table 1 Projections: I year: Total insurance business of Rs. 110580000 cr. could fetch revenue of Rs. 27645000 II year: Total insurance business of Rs. 199044000 cr. could fetch revenue of Rs. 49761000 cr. to the bank III year: Total insurance business of Rs. 269815200 cr. could fetch revenue of Rs. 67453800 cr. to the bank. Fig. 8. Showing the projections for Conservative Approach
300000000 250000000 200000000 150000000 100000000 50000000 0 I II III 49761000 27645000 110580000 67453800 199044000 Insurance Revenue Banks income 269815200
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AGRESSIVE APPROACH While considering the aggressive approach we will assume that bank branch employees one dedicated employee per branch who will work for the insurance business of the bank. The ticket size is the value of the policy. The ticket size varies from Rs. 1000 to Rs. 4000. Number of policies expected to be sold per branch ranges from 3to 10 depending on the location. Renewal rate is taken to be 90%. Commission to bank is 25 %
See Table 2 Projections: I year: Total insurance business of Rs. 214980000 cr. could fetch revenue of Rs. cr. 53745000 II year: Total insurance business of Rs. 408462000 cr. could fetch revenue of Rs. 102115500 cr. to the bank III year: Total insurance business of Rs. 582595800 cr. could fetch revenue of Rs. 145648950 cr. to the bank.
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Fig. 10. Showing the comparison of banks income between conservative and aggressive approach
160000000 140000000 120000000 100000000 80000000 60000000 40000000 20000000 0 I II III 53745000 49761000 27645000 67453800 Conservative approach Aggressive approach 102115500 145648950
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Comparison:
Feature
Bajajs USSY
ICICI
National Insurance
Coverage amount
Rs 1 lac to Rs 5 Rs 2 lac to Rs. 4 Rs 2 lac to Rs 5 lac (in multiples lac (in multiples lac (in multiples of 1 lac) of 1 lac) of 50000) Covered from 4th continuous claim free year 5 yrs to 60 yrs 3 month to 65 yrs
Waiting period for Covered from 5th pre-existing diseases Age continuous year of taking the policy 3 months to 55 yrs
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of 1400
3500
Hospitals registered as
authorities
practitioner.
10 % in No sublimit
compulsory
Pre hospitalization 60 days coverage Post hospitalization 90 days coverage Time limit for 1 year 2 years
15 days
30 days
1 year
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Findings: The premium rate is too competitive. Bajajs premium is slightly above that of national insurances but much more than that of ICICI Lombard ICICI offers family package for 2 years which releases a person from the burden of renewing the policy very next year and ensures business for two years for the company. National insurance have the advantage of getting insurance of employees of public sector firms like KMC, etc. Although pre hospitalization and post hospitalization coverage days are more for Bajaj but the number of hospitals which are empanelled with national insurance is much more than Bajajs. Bajaj has got a very diverse product range. Bajajs products as rich in features and there are various such products which gives benefit of multiple products under one policy at a very reasonable price.
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METHODOLOGY
The methodology adopted for conducting the project is basically Face to face interaction with the customer. Informal interviews with the branch managers. Interacting with in-house agents and corporate agents. A small survey was conducted to ascertain the customer profile of the bank and to know their preferences. It also helped to find out the loopholes in the marketing strategy of the company. This activity was done on some of the major branches of UBI.
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Available
Available
No
proper No
proper No
proper
arrangement
arrangement
arrangement
Reasonable
Very few
Very few
Very few
Other observations were: No proper attention is paid on creating awareness amongst the customers by display of posters and banners At some branches the footfall is heavy but a company representative is not present. Not much help is done by the bank employees
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Lesser awareness regarding general insurance The tendency of inclination towards the life insurance policies is very clearly visible in the attitude of people. Many at times fail to understand the importance of having a general insurance policy and see it at wastage of money. Awareness has to be increased regarding the importance of general insurance. People should be convinced to take general insurance as a supplement to life insurance. It could also be made more attractive by increasing the incentives attached. Incentives could be not only in the form of monetary benefit but otherwise as well.
Competitors eating out share The competition in the market is intense. Various companies are there with competitive products. The company should have a unique selling preposition with it to attract the customer in this competitive scenario. The company should try to win over the customer not on the basis of price war but actually on the basis of some add on benefits in the policy which should have an edge over the competitors products.
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There should be proper focus on the market segmentation Proper attention should be paid to smartly do the market segmentation to find out the potential market in it. Differential strategies should be adopted for different segments. There are three categories of customer segments namely low income segment, middle income segment and high income segment. The main focus should be on the middle income segment owing to its capacity to pay and risk aversion attitude. High income group have high level of awareness as they have access to large amount of data still it could serve as a big potential on the basis of the USP of the company.
Customers resistance to bear the medical examination charges for mediclaim policies. Most of the medical policies require an individual to have a medical checkup done. Although this is of utmost for the business, but if customers are avoiding the product due to this then the problem needs to be addressed Company could offer medical checkup with the empanelled hospitals at concessional rates. This will also ensure fair idea of the customers actual health and help the underwriters to decide the coverage amount in a better way.
Challenge of culture and speed Bank employees are traditionally low on motivation. Lack of sales culture itself is bigger roadblock than the lack of sales skills in the employees. Banks are generally used to only product packaged selling and hence selling insurance products do not seem to fit naturally in their system.
The challenge of timely resource deployment by the Bank Human Resource Management has experienced some difficulty due to such alliances in financial industry. Poaching for employees, increased work-load, additional training, maintaining the motivation level are some issues that has
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cropped up quite occasionally. So, before entering into a Bancassurance alliance, just like any merger, cultural due diligence should be done and human resource issues should be adequately prioritized.
The challenge of technology and service synergies The most common obstacles to success of Bancassurance are poor manpower management, lack of a sales culture within the bank, no involvement by the branch manager, insufficient product promotions, failure to integrate marketing plans, marginal database expertise, poor sales channel linkages, inadequate incentives, resistance to change, negative attitudes toward insurance and unwieldy marketing strategy.
Resistance to change Success of a Bancassurance venture requires change in approach, thinking and work culture on the part of everybody involved. The work force at every level are so well entrenched in their classical way of working that there is a definite threat of resistance to any change that Bancassurance may set in. Any relocation to a new company or subsidiary or change from one work to a different kind of work will not be easily acceptable by the employees.
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RECOMMENDATIONS:
The employees of the bank should be incentivized properly and motivated to recommend the high end customers to take policies from us. Awareness has to be increased regarding the importance of general insurance. People should be convinced to take general insurance as a supplement to life insurance. It could also be made more attractive by increasing the incentives attached. Incentives could be not only in the form of monetary benefit but otherwise as well. The company should have a unique selling preposition with it to attract the customer in this competitive scenario. The company should try to win over the customer not on the basis of price war but actually on the basis of some add on benefits in the policy which should have an edge over the competitors products. There are three categories of customer segments namely low income segment, middle income segment and high income segment. The main focus should be on the middle income segment owing to its capacity to pay and risk aversion attitude. High income group have high level of awareness as they have access to large amount of data still it could serve as a big potential on the basis of the USP of the company. Company could offer medical checkup with the empanelled hospitals at concessional rates. This will also ensure fair idea of the customers actual health and help the underwriters to decide the coverage amount in a better way. There should be a proper well integrated IT support from the bank which could provide the information of the current policies held by its account holders and the renewal dates of the same. Proper focus should be there on the renewals of the policy. Renewal should be considered as important as a fresh policy. Online issuance of policy could be introduced for all the policies
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The employees of the banks who are selling insurance products must be given proper training so that they can answer to any queries of the customers and can provide them products according to their needs.
A formal and standard agreement between these banks and the insurance companies should be taken up and drafted by a national regulatory body. These agreements must have necessary clauses of revenue sharing. In case of possible conflicts, the bank management and the management of the insurance company should be able to resolve conflicts arising in future.
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LIMITATIONS OF STUDY
Due to the restriction of time I had to limit my study to UBI only and could not extend it to other public sector tie ups. Some problem was also faced while interacting with less educated customer as language was a barrier. Moreover many people had an attitude to avoid insurance agents so were reluctant to talk let alone buy a policy.
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BIBLIOGRAPHY
www.wikipedia.com
www.bajajallianz.co.in www.thehindubusinessline.com Newspapers The times of India The Hindu Economic Times
Magazines-
Company Broachers
44
TABLES
Table 1 CONSERVATIVE APPROACH
Particulars No. of policies per Number of Branches 74 16 35 8 Scale I Location Rural SU Urban Metro Ticket Size 1000 1000 2000 3000 branch per month 2 2 4 4 No. of policy per annum 24 24 48 48 Annual Target per branch 24000 24000 96000 144000
First year
Second year
Third year
No. of policies 3197 691 3024 691 Amount 3196800 691200 6048000 2073600
No. of policies 4333 937 4099 937 Amount 4333440 936960 8198400 2810880
471 94 149 59
II
2 4 5 5
24 48 60 60
III
2 5 5 5
24 60 60 60
4 6 22 26
IV
3 5 5 5
36 60 60 60
Urban Metro
3000 3500
5 5
60 60
180000 210000
120 960
216 1728
293 2342
27645000
49761000
67453800
45
471 94 149 59
II
3 5 6 7
36 60 72 84
III
4 6 8 9
48 72 96 108
4 6 22 26
IV
4 6 8 10
48 72 96 120
Urban Metro
3500 4000
8 10
96 120
336000 480000
192 1920
365 3648
520 5203
53745000
102115500
145648950
46
47
Individua l
3 Lac
4 Lac
2 Lac
3 Lac
4 Lac
2 Lac
3Lac
4 Lac
La La c c
4 Lac
La La c c
4 Lac
163 188 33 0 41 4 78 6
220 254
381
571
428
493
742
526
606
912
28 33 9 3
502
36 41 1 5
626
276 307
460
642 1,22 3
512
572
812 1,39 3
610
685
983
33 37 5 7
540
40 45 3 5
662
491 546
874
884
986
982
1,09 1,56 54 60 9 4 0 4
860
58 66 9 2
952
669
96 1,07 1,49 1,06 1,18 1,66 1,15 1,29 1,83 63 71 1,01 67 76 1,09 3 0 8 1 3 8 9 5 9 7 2 1 7 0 0
FAMILY FLOATER HEALTH INSURANCE POLICY PREMIUM TABLE (12 months EMI without any extra charges#) Monthly Premium for 2 Year plans in Rupees Plan Details Plan G Plan 2 Adults 2 3 4 H Plan I Plan J Plan K Plan L
Individu al 3
Age of 2
48
senior La Lac Lac Lac Lac Lac Lac Lac Lac most family memb er 5 - 18 29 yrs. 3 338 1,02 8 1,15 5 1,33 5 c
1,12 7 1,19 1
19 - 35 39 yrs. 7
771 888
947
1,09 1,64 1 1
36 - 45 49 yrs. 7
921
46 - 55 93 1,03 1,49 1,66 2,32 1,68 1,87 2,64 1,86 2,08 2,97 1,02 1,14 1,63 1,11 1,25 1,80 yrs. 56 - 60 yrs. 4 7 4 0 4 0 4 7 5 7 1 6 8 4 8 8 9
1,33 1,92 2,14 2,99 2,12 2,36 3,33 2,31 2,59 3,67 1,27 1,42 2,02 1,35 1,52 2,18 8 6 0 6 2 5 7 7 0 8 5 5 3 4 0 0
49
50
3,50,000 4,00,000 4,50,000 5,00,000 51 to 55 years Sum Insured (Rs.) 2,00,000 2,50,000 3,00,000 3,50,000 4,00,000 4,50,000 5,00,000 56 to 60 years Sum Insured (Rs.) 2,00,000 2,50,000 3,00,000 3,50,000 4,00,000 4,50,000 5,00,000
Self
Spouse
1st Child
2nd Child
2 Adults + 2 Kids
2Adults + 1 Kid
40% 4485 5436 6386 7258 8129 9001 9873 1794 2174 2554 2903 3252 3600 3949
20% 897 1087 1277 1452 1626 1800 1975 8073 9785 11495 13064 14633 16202 17771 7176 8698 10218 11612 13007 14402 15796
Self
Spouse
1st Child
2nd Child
2 Adults + 2 Kids
2Adults + 1 Kid
40% 5127 6236 7346 8375 9406 10436 11466 2051 2495 2938 3350 3762 4175 4586
20% 1025 1247 1469 1675 1881 2087 2293 9228 11226 13223 15076 16931 18785 20638 8203 9978 11754 13401 15049 16698 18345
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