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Overview of Distribution Channels Of TATA AIG

The winds of liberalization initiated vast changes in the functioning of the industry today. Increasing number of multinational partnership with private insurers have paved the way for a radical shift in insurance selling- through a number of new distribution channels besides bringing about more awareness on the need for insurance and also stressing on the important role technology can play. In the developed markets, many insurers have a preferred mode of distribution (e.g., agents, brokers or bancassurance, DSA). In India, many players are hedging their bets because the need for scale outweighs considerations of focus and because non-agency distribution, which is presently operational for the last two years forms a basis for study. Tata AIG has a corporate agency channel, which handles its corporate agents and have tieups with 38 corporate houses. Insurers want to lower distribution costs by finding more efficient channels. The new private players are developing multiple channel models; many insurers use or plan to use several banks as distributors. Because most banks have strong regional bias, in this regards Tata AIG has agreement with HSBC( corporate agency distribution) through that it is doing both life insurance and general insurance business.. Because most banks have a strong regional bias, Insurers can use several banks without creating large overlap. Many larger banks are sourcing products from several insurers acting as manufacturers. An important distribution challenge facing insurers is the need to meet the rural and social sector legislative requirements stipulated in terms of market opening. For Tata AIG, it takes rural insurance as an opportunity and not an obligation. For achieving objective in rural area it has also tie with NGOs(Bridge stone for Karnataka and Kerala). In this project mainly focus is distribution channel of Life Insurance of Tata AIG and little bit of distribution of General Insurance of Tata AIG also. So as the whole topic of distribution can be known for the both

company of Tata AIG ( Life and General insurance). Gradually channels are incorporating day by day for the growth of business. In the span of two to three years Tata AIG achieve much more business growth what it expected at the time of entrance in Indian market. It happened because it has quality people, innovative management, be able to employ technology effectively besides having right products with effective and modern distribution channel.

Executive Summary
Project has been done in a logical way so that all the Chapters/parts have its own significance. In the very first chapter Background Of Insurance has been dealt. Where the main focus is on the Insurance industry. Tata AIG profile has been given in the Chapter Second (II). It contents all relevant information related with Tata AIG in general and focused form. Third and fourth chapter deals research plan and methodology in a very pragmatic way and concise form. Where we can see problem of research, objective of research and methodology to achieve project objectives. Problem of the research: Identification of distribution channel of Tata AIG in India Objectives of the research are following-

1) To find out various channel of Tata AIG operating in India (mainly Life Insurance little bit of General Insurance also). 2) To find out contribution in distribution of Agents and Other channel. 3) To find out contribution of new distribution channel as: (a) Corporate Direct Sales Associate (DSA) (b)Bancassurance Methodology:

The type of research used for our study was an exploratory research, as the objective of our research was to have in depth understanding of the sales agents and Executives. Qualitative analysis has been done through questionnaire. Distribution channel of Insurance has deal separately in the chapter five (V). Where consige information has given about the distribution agency of insurance Industries in India. Chapter six and seven comprises most vital part of the project. i.e. Questionnaire and analysis of Data. Questionnaire has been put in chapter VI where as Qualitative Analysis has been done very care fully to achieve objectives of research in the Chapter VII. Inferences are available in chapter VIII that has significance to achieve project Objective. Seven recommendations are given in chapter IX, for the development and progress of Tata AIG, based on the Analysis and Inference. Certain limitations have described in the chapter X. Where as conclusion is dealt in chapter XI. Secondary data sources has put up in Bibliography that is in chapter XII. Some relevant information has been also kept in annexure in the last part of my project. All these parts are collectively formed the whole project.

Topic Page

(I) Back ground of the Insurance sector (II) Tata AIG profile (III) Research plan (IV) Research methodology (V) Distribution Channel of insurance Industry in India (VI) Questionnaire (VII) Analysis 4

5 21 27 30 31 45 50

(VIII) Inferences 61 (IX) Recommendation (X) Limitation (XI) Conclusion (XII) Bibliography (XIII) ANNEXURES 66 67 68 69 70

Back ground of the Insurance sector
Insurance is over one and one-half centuries old in India. The First general insurance company, Titan Insurance Company Ltd., was established in 1850. Life insurance came to India from the U.K. in 1880, with the establishment of the Oriental Life Assurance Company in Calcutta. By 1938, the insurance market was buzzing with 176 companies--both life and non-life. In 1956, the Government of India recognized that malpractice had entered the management of the life insurance. Consequently, the life insurance industry was nationalized under the Life Insurance Corporation (LIC) of India. Although efforts were made to maintain an open market for the general insurance industry by amending the Insurance Act of 1938 from time to time, malpractice escalated beyond control. Thus, the general insurance industry was nationalized in 1972.

Political ScenarioUntil recently, India continued to be one of the few remaining countries of the world to remain insulated from the direct foreign investment in its insurance sector. However, things are changing now with the passage of Insurance Regulatory Development Act (IRDA) through Indian Parliament in late 1999. A much awaited and much debated act, it met with strong resistance from the political institutions of India and took almost six years to see daylight. Though first recommended by Malhotra Committee on Insurance Reforms in 1994, what emerges is a diluted form of the original recommendations. However in the long

awaited period of its passage, the issue was nationally debated and was finally 'depoliticized,' meaning that the reform path is 'irreversible.' IRDA, for the time being, prohibits 100% foreign equity in insurance. It requires the Indian promoter to invest either wholly in an insurance venture or team up with a foreign insurer, with a cap of 26% of equity for a foreign partner. The Indian promoter is permitted to divest only after 10 years to the Indian public, through a public offering of shares, at which time the equity structure will provide for equal participation between the Indian and foreign partner with a share of 26% each in the share capital. The underlying tone of the 26% cap for the foreign insurer is to ensure that financial interest substantially vests with the Indian promoter, permitting the foreign co-promoter a definite say in direction and management (By Indian Company Law, 26% is the minimum equity to move a resolution or vetoing a resolution in Board of Directors' Meeting). It is important to note that the 26% level is the bargained solution by the privatization proponents (read Government) in the face of stiff political resistance. The main two political poles of Indian politics the Congress Party and the Bharatiya Janata Party (BJP)- are both in favor of the reform. Only the extent of the reform and who-will-bell-the-cat-and-get-the- (dis) credit factor bar them in reaching a consensus for more sweeping reforms. The populist out-of-fashioned socialistic jingoism, masking these parties' rightist ideology, is fast losing its appeal to the masses. This will only hasten the reform process

Recent initiatives
Privatization is expected to foster competition, innovations and greater awareness on the need for buying insurance services and variety of products. The IRDA bill Passed by the parliament was an important development in the field of Insurance business. The IRDA Act marks an end to the monopoly of the government in the insurance sectors by opening it up to private players. It gives priority in the Utilization of the policyholders funds for development of society and Infrastructure sector. The features of the IRDA are:

* Removal of exclusive privilege of existing companies to do life and general insurance business. * An Indian insurance company is a company in which foreign equity shareholding shall not exceed 26% of equity shareholding and this includes holdings of NRIS, FIIS and overseas corporate bodies. * After the commencement the Indian promoters can hold more than 26% equity for 10 years the balance being held by non-promoter Indian shareholders. * On foreign promoters the maximum of 26% will always be operational. Thus they will not be allowed any equity holding beyond this ceiling. 6

* The IRDA will have all the powers that the controller of insurance had. * Minimum paid up equity capital of Rs.100crores for life and general insurance. And Rs.200crores for reinsurance. * Solvency margin fixed at not less than Rs.50crores for life and general insurance. * All companies to deposit Rs.10crores as security deposit. * Provision prohibiting investment of policyholders funds outside India and compulsory investment in society and infrastructure. *All companies have to provide rural insurance and policies to backward sections of society.

Views of IRDA:-

The new paradigm of consumer India in recent years calls upon us to re-write the marketing rules. The opinion of the market is a bold experiment and was necessitated by the public perception of a necessity to have a free availability if choice to customers. It works as considering of the following fact, IF THE RATE OF CHANGE INSIDE INSTITUTION IS LESS THAN THE RATE OF CHANGE OUTSIDE, THE DOWNSLIDE IS 7



IRDA is working very satisfactorily it makes and incorporates many regulation that are required for the insurance industry and company. Particular I would like to discuss one of the latest regulations Insurance Brokers and Insurance Consultants regulations, 2002. This would be most important for my project (Distribution Channels). It describes many terms that can give us proper knowledge and concept. Composite broker:- means an insurance broker who arranges insurance for clients with insurance companies and to whom the license has been granted by the Authority(IRDA) under regulation 12. Alt: means a person who is licensed under the regulation to carry on both direct broking and reinsurance broking. Direct general insurance broker: - means a person who is for the time being registered in respect of general insurance business but does not include broking of insurance business. Direct Life insurance broker:- means a person who is for the time being registered in respect of Life business but does not include broking of insurance business. Insurance broker:- means a person who for a consideration or otherwise arrange insurance for clients with underwriting insurance companies and to whom a license has been granted by the authority under regulation12 to act as an insurance broker. Insurance consultants:- shall mean a person , other than an insurance broker as as specified under categories I(direct general insurance broker), II( direct life insurance broker),III(a reinsurance broker & IV(composite broker) of regulation 3(2) who directly or indirectly represent or assists an insurer in negotiating or effectuating insurance, disseminating information relating to coverage rates, risk management and inspection of risk and assist the policy holder in matters relating to settlement of claims. Principal officer:- means (i) proprietor, in the case of a propriety concern;

(ii) Managing partner, in the case of a partnership firm; (iii) Director, who is responsible for the activities of the insurance broking in the case of a body corporate. Reinsurance broker:- means an insurance broker who arranges reinsurance for client insurers with insurance and reinsurance companies and to whom the license has been granted by the authority(IRDA) under regulation 12.

Function of direct general insurance broker and direct life insurance broker:The Function of both shall be to: (a) obtain detailed knowledge of the client business and philosophy; (b) maintain clear records of clients so that this can be explained to an insurer and other parties. (c) render advice based on technical matters, development in insurance and law; (d) maintain detailed knowledge of available market; (e) make selection and recommendation of an insurer and group of insurers; (f) negotiate with insurers on behalf of clients; (g) act promptly on instructions from a client and provide him written acknowledgement and progress reports; (h) collect and remit premiums and claims; (i) provide services such as insurance consultancy services, risk management services uninsured loss recoveries; (j) assist in the negotiation of claims; (k) maintain proper records of past claims.

The function of reinsurance broker:The function of reinsurance broker shall be to(a) obtain detailed knowledge of the insurers business and philosophy; (b) maintain clear records of insurance business to assist the insurer(s) or others;

(c) render advice based on technical data on the reinsurance covers available in the international insurance and reinsurance market; (d) maintain detailed knowledge of available market; (e) select and recommend of a rein surer and a group of reinsures; (f) negotiate with insurers on the insurers behalf; (g) act promptly on instructions from a insurer and provide it written acknowledgements and progress reports; (h) collect and remit premiums and claims; (i) assist in the negotiations and settlement of claims; (j) maintain proper records of past claims. (k) Exercise adequate care and diligence and establish respective responsibilities in the choice of overseas company brokers

Function of composite brokerThe function of a composite broker shall be those mentioned in above two.

Function of insurance consultant:An Insurance consultants, risk management consultant or any other nomenclature as may be approved by the authority shall mean a person, other than an insurance broker and excluding an insurance surveyor and loss authority shall mean a person, other than an insurance broker and excluding an insurance surveyor and loss assessors, who for a consideration or other wise offers insurance consultancy or related services to his clients and to whom a license has been granted by the authority under regulation 12.

Fresh norms on referral pacts (bank as a agent and broker) We have dealt full picture of distribution channel working in India in chapter (V) so not dealing here fully. But at least I have to give focus on new improvement of regulation recently given by IRDA regarding Bancassurance. In the new guide line issued on February 14 IRDA clear the point of view on bancassurance that the participating banks customers should be purely on a voluntary basis and it should appear prominently in all publicity materials distributed by the bank and also the insurer. 10

The insurers were asked to mention clearly in their contacts that the deal was between the insurer and the insured and not between the bank and insured. The referral arrangement between the bank and the insurer should not be constructed to have resulted into an agent principal relationship between the bank and the insurer. Apart from this there should not be any linkage either direct or indirect between the provision of banking services by the bank to its customers and use of insurance products, the regulator said the bank should not be permitted to enter into any similar arrangement with more than one life insurance company or more than one general insurance company. This is important to ensure that a bank does not act de facto as an insurance agent or an insurance broker without any license (This is a version of IRDA chairman, Mr. N. Rangachary)

Present scenario in the insurance sector Insurance agents are the main intermediaries in the Indian insurance market, but with liberalization brokers will be an additional channel for selling insurance products. Brokers are likely to play a major role in ensuring clients get insurance covers tailor made to suit their requirements at good terms. Fast growing middle class of 300m who can afford insurance. Increasing financial strength of middle class with disposable income. Narrowing gap between rural and urban populace in terms of access to information and services. More and more entrepreneurs in traditional and modern business areas. Increase in number of double income families leading to lifestyles and attitude changes Growth of rural market is at 4 times of urban markets. The potential of the Indian insurance market is huge with current life insurance penetration being only 1.9 of the GDP. Insurance market is set to touch 25billion by 2010 in India.(It was only 7.2billion in 98-99 survey. At that time Indias rank in annual premium was 23rd for Life insurance and contribution in GDP was merely 1.4%). Presently it is still lower then develops economy but increased to 2.61% of GDP in 2002. So immense opportunity cant be ignoring.



Table 12. --Worldwide Premiums/GDP Ratio Standards Country (Group) All Country Average G 7 Average Australia South Korea ASEAN Singapore Hong Kong China India Premiums/GDP Ratio 7.8 9.2 7.8 13.2 2. 4.3 3.5 1.2 1.2

Source: Swiss Re-Insurance Company Report, 1996

Present scenario of insurance premium(2002)

Country Name India United Kingdom United State Japan

Premium in % of GDP 2.61 15.78 8.76 10.92


Recently, Indias premiums in percentage of GDP is around 2.61, where as the figure stands quite high for other countries such as 15.78% for UK, 10.92% for Japan and 8.76% for US Source: August 2002. Insurance Chronicle (page 54)

MANAGERIAL ASPECTS. Management point of view when we look at any insurance organisation we will have to consider these following things as a growth drivers of organisation:1. Risk Management 2. Distribution Management 3. Customer Relationship Management 4. Product Development 5. Pricing Mechnism 6. Technology Management 7. Funds Management 8. Knowledge Management 9. Research 10. Corporate Governance In this project our focus is only 2nd driver, distribution channel.To cope with the changing time there is no single solution possible. Because system is becoming complex (environment and industry) due to change of market, consumers behavior and competitors point of view. Rural population is most promising market, for long terms point of view. As we know approx.65% population is still living in the village. Many of them have disposable income to purchase insurance product. So immense opportunity is there that can have to manage for business expansion and growth of sale. A hybrid system in which the rural and urban customers are serviced differently will hold the key to success in the Indian situation. Before going ahead we have to discuss here the key factor which plays important role in the Indian market.



1. Changing customer behavior. 2. Deregulation and government intervention(regulatory) 3. Competition- technology, distribution, networks, automation etc. 4. Technology innovation. 5. Client relationship and quality.


1. Determine customers financial requirements. 2. Design new services or update old ones. 3. Market services (at profit) to the customers. 4. Satisfy customers financial needs.



Marketing Mix
Product/service Development


Advertising and promotion


Conven tional product policy

Product variation

Premiu m -level Premium -net single Premium -gross annual preum -

Competitive factors


Tech nique

Direct Sales Force

Indirect Selling system


Cons umer Advt. Trade Advt.

Media Promoti onal tools Messag es

-Package deals -User of brand name - Tax allowance -service offered

-inflation Competitio n

Sales rep Insura nce By mail Broker s Own Case PartAgents time Assoc agents channel Profess ionals


The hazard and the need for Insurance marketing

Natural risk/hazards
Fire Hurricanes Earthquakes Floods Storms

Insurance Customers Needs and Need satisfaction Through marketing Insurance Services Product Development Promotion and Advertising Distribution and selling

Social risks/hazards; Burglary Kidnapping Arson Riots Strikes

Wants by Private Industrial And

Technical risks/ hazards: Explosion Pollution Radiation Collision Impact

Commercial Customers


There are two factors that make India an attractive market for most insurance companies. First, of course is the sheer size of the market. With a population of over one billion, out of which about 40-45% is the insurable population. India is clearly a market poised for growth. The insurance penetration as well as the size of the average cover is well below international average, again providing a great marketing opportunity for the insurance companies.


Second, till about two years back life insurance in India was synonymous to LIC has done commendable work, there is still a great deal of scope for bringing in innovative products and distribution channels to tap this market. Given the geographical spread of India, managing the distribution process is one of the biggest challenges that new player will have to overcome. There is one truth in marketing and that is Different Consumers Approach Buying Differently. This is true as seen from product preferences of other industries and is especially true for insurance in India. Studies have time and again shown that insurance is bought because of convenience, product features, product placement, safety of funds, advice and not the price. Insurance companies in India will have to develop appropriate channels to tap this huge market as the core of insurance business hinges on an efficient distribution system.

Facing the reality of a saturated home market, the US insurance companies must look outward and concentrate on the real growth economies like India and China. Since the gestation period of the typical insurance business is around ten years, it is high time to make their presence felt in India. The new players will have to prove their creditworthiness. It will be a time consuming and difficult task to win customers away from LIC and gain their trust. Their track record and brand value in overseas market will not help them much in getting immediate brand recognition in India. Though they may piggyback on the brand names of their local partner, in the long run, it is their persistent track record and creditworthiness, which will matter. So, being among the first will be a deciding factor in the success in this business. Already several companies have entered into the market and a dozen companies have joined with foreign partners (see table). The real growth in twenty-first century will come from the countries like India and China. Delay may doom future efforts to stake a claim in these high potential markets.

Note: The list of foreign players entering the Indian Insurance sector and their Indian partners:

The list of foreign players entering the

Foreign Insurer


Present Status


Indian Insurance sector and their Indian partners: Indian Partner Aditya Birla Group Sun Life, Canada Life

It is for 2000. Now many have taken license

Received License

Kotak Mahindra Finance HDFC

Old Mutual, South Africa Standard Life, UK

Life Life

Received License Received License, Commences Operation

Reliance ICICI

No Foreign Alliance Life, Non-Life and Received License Health for Non-Life Prudential, UK Life Received License, Commences Operation Not applied Received License Received License Received License Received License Applied for License Not Applied Not Applied

ICICI Max India Sundaram IFFCO Tata Group Vysya Bank Hero Group Cholamandalam Group

Lombard, Canada New York Life, USA Royal & Sun Alliance Plc, UK

Non-Life Life Non-Life

Tokio Marine, Japan Non-Life AIG, USA ING Insurance, Netherland Life and Non-Life Life

Zurich, Switzerland Life Undecided Life


Hindustan-Times Dabur Bajaj Auto Undecided Sanmar Group SBI S Kumars, J&K Bank Corporation Bank Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Citibank, India Undisclosed Videocon International

Undecided CGNU Life, UK Allianz Metlife, USA AMP, Australia Cardiff, France Undisclosed Undisclosed

Life Life Non Life Life Life Life Non-Life Life

Not Applied Not Applied IRDA Seeks more information Not Applied Not Applied Not Applied Finalizing Partner Finalizing Partner Finalizing Partner Finalizing Partner

Aegon, Netherlands Life and Pensions Cigna, USA Chubb, USA Life and Health

Property & Casualty Finalizing Partner Finalizing Partner Finalizing Partner Finalizing Partner Finalizing Partner Finalizing Partner Finalizing Partner

Yasuda Marine and Non-Life Fire, Japan Mitsui Marine and Fire Nationwide, USA Undecided Non-Life Life and Pensions Non-Life

GE Capital Services Life International, USA Talks on with BNP Non-Life Paribas, AXA, France


The players
Following the liberalisation of the insurance market at the end of 2000, the Insurance Regulatory and Development Authority (IRDA) has issued 11 life insurance licences and six non-life licences, as shown in Table:

Life insurance licenses

Allianz-Bajaj Life AMP Sanmar Birla-Sun Life HDFC-Standard Life ICICI-Prudential ING-Vysya Life MetLife Old Mutual Kotak Mahindra Life State Bank of India Life Tata-AIG Life Max New York Life

Non-life licences
Bajaj-Allianz General Insurance ICICI-Lombard IFFCO-Tokio Marine Reliance General Insurance Royal Sundaram Alliance Tata-AIG General Insurance.

Several other companies are in the process of, or are close to, applying for licences. From 2000 to 2002 many have got license so no of the players is increased in the above table. Market Share of Companies(In Life Insurance Private Sector ) Companies Max Newyork % 8.6 20

INGY Vysya AMP Sanmar Birla Sunlife HDFC Standard TATA AIG Aviva Allianz Bajaj SBI Om Kotak ICICI

1.7 0.6 12.7 12.6 6.9 1.4 4.9 8.3 3.6 38.7

Market Share of Companies(In Non Life Insurance Private Sector) Reliance Choromandalan IFFCO Tokio Royal Sun TATA AIG ICICI Lomford HDFC Chubb Bajqj Allianz (Source IRDA Feb 03) 14.3 0.7 15.9 13.9 16.8 16.1 0.5 21.8

Tata AIG Profile


Tata (Indian)+ AIG( American Insurance Group Inc.)= Tata AIG; It set up base in December 2000; Tata AIG General Insurance started its operations in April 2001; It has both Life and Non life insurance with a separate entity; Tata AIG Life insurance company has covered 4.4 lakh individuals in2002; Results has recorded 81.6 crore in the first year of operation( March 2002), become
top Life insurer among private players;.

Company sold around 11% of all life policies in the rural areas, thus fulfilling the
IRDA stipulated norms minimum of 5%;.

Network of branches in all the four metros and in Hyderabad, Bangalore, Pune,
Ahmedabad, Chandigarh & Guwahati;.

Sales force is close to 10,000; In it's first year of operations Tata AIG General Insurance issued more that
90,000 policies.
It is the first joint venture to offer gratuity and superannuation:

Tata AIG is a joint venture between the Tata Group and American International Group, Inc. (AIG). The Tata Group is the most respected industrial conglomerate in

India, with revenues of more than US $ 8.4 billion. The Group has long been a market leader in steel, commercial vehicles, electric power generation in the private sector and computer software. In recent times, it has promoted several new ventures in high growth areas of the economy such as financial services,

telecommunications, information technology, auto components, oil field services and process management systems. The Group has had a long association with India's insurance sector having been the largest insurance company in India prior to the nationalization of insurance. Tata-AIG General Insurance company is a joint venture between the Tata Group and American International Group, Inc (AIG), the leading US-based international insurance and financial services organisation and the largest underwriter of commercial and industrial insurance in America. Its member companies write a wide range of commercial, personal and life insurance products through a variety of distribution channels in approximately 130 countries and jurisdictions throughout the world. AIGs global businesses also include financial services and asset management, including aircraft leasing, financial products, trading and market making, consumer finance, institutional, retail and direct investment fund asset management, real estate investment management, and retirement savings products.
American International Group, Inc. (AIG) is the world's leading U.S.-based

international insurance and financial services organization, the largest underwriter of commercial and industrial insurance in the United States, and among the top-ranked U.S. life insurers. Its member companies write a wide range of general insurance and life insurance products for commercial, institutional and individual customers through a variety of distribution channels in approximately 130 countries and jurisdictions throughout the world. AIG's global businesses also include financial services, retirement savings and asset management. AIG's financial services businesses include aircraft leasing, financial products, trading and market making, and consumer finance. AIG has one of the largest retirement savings businesses in the United States and is a leader in asset management for the individual and institutional markets, with specialized investment management capabilities in equities, fixed income, alternative investments and real estate. AIG's common stock is listed on the New York Stock Exchange, as well as the stock exchanges in London, Paris, Switzerland and Tokyo


Tata AIG insurance will provide General and Life insurance solutions to individuals and corporates. The non-life insurance arm, Tata AIG General Insurance, will offer a complete range of automobile, homeowners, personal accident, travel, energy, marine, property, casualty and several specialized financial lines of insurance. Tata AIG Life Insurance products will include a broad array of life insurance coverage to both individuals and groups. For groups the company has Life products whereas for individuals, Tata AIG life has term products, endowment products as well as money-back products. For groups and individuals, various types of add-ons and options are available to give consumers flexibility and choice. The range of products will continue to grow throughout the year. Tata AIG General Insurance started its operations in April 2001. It has a well-established network of branches in all the four metros and in Hyderabad, Bangalore, Pune, Ahmedabad, Chandigarh & Guwahati. The Company has 24-hour central toll free number, which can be reached from all major cities and towns in India. Tata AIG General Insurance plans to expand its geographical reach to 5 more cities in current financial year. As far as Tata AIG is concerned, it set up base in December 2000 and began commercial operations in April 2001. India is the last frontier in the world for AIG before it begins to sell in outer space! And make Tata as partner. Tata is a big name in India and it has a fantastic brand name. Of the total equity investment of Rest 125 crore, 74 per cent has come from the Tatas. Tata AIG General Insurance Company Limited today announced that its gross revenues for the year ending 31st March 2002 are Rs. 81.6 crores. In it's first year of operations Tata AIG General Insurance issued more that 90,000 policies.

More focused information on Tata AIG

Tata AIG becoming the largest private Indian life insurer in its first year of operations.

Tata AIGs life and general insurance operations have touched the lives of over half a million Indians in their first year of existence. On the life side it covered over four lakh people through group and credit insurance and individual policies. Today it is the largest private Indian life insurance player in terms of lives covered (on the basis of yearly growth) Comparatively, LIC did 23 million policies last year. The market potential is huge and It is young. It has a long way to go Description of the Indian insurance market.

Insurance is a sunshine industry in India and its very exciting. The projections for the industry are that it will touch $ 50 billion in 20 years, with individual life insurance accounting for almost $ 40 billion of this huge pie. Over 300 million individuals in this


country do not have insurance. Even given that many of them cannot afford insurance, the potential is tremendous. The challenges Tata AIG faces.

Credit to to LIC, the awareness regarding insurance is strong among people, but there are problems. The peculiarity of this market is that people tend to buy policies to save tax, which is why the three months prior to the end of financial year are when most of our business is conducted; this is followed by nothing periods. But insurance also offers protection against death and disability, besides being a savings instrument. The challenge for Tata AIG is to change the mindsets of people through education about the need-based sale of life insurance. It has to convince people to park their hard-earned money in long-term insurance and savings. This will take time. It is using our trained agents and advisors to bring about this change in perception. Also, consumers were accustomed to having a single, dominant player for too long. With privatisation, plenty of companies have entered the fray and they are offering too much choice. This has resulted in the consumer getting confused and either making wrong decisions or making none at all. Hence it has focus on insurance education.

Differentiation of Tata AIG from its competitors. What sets it apart is experience and r innovative services and products, and the fact that it deliver what It promise. The Tata name has always stood for trust, stability and fair play, and AIG is, in market value, the world's largest insurance group. Our focus is on customer service and experiences. A lot of time and effort is invested in educating its agents, so that its customers get the right advice and guidance. Besides, the company offers the full range of insurance products: group, corporate, gratuity and superannuation. In fact, it is the first joint venture to offer gratuity and superannuation. It is strong in terms of product innovation. Take, for instance, the MahaLife Plan: the first policy of its kind in India, it offers a whole life insurance cover that doubles up as an annuity plan. And it generates guaranteed, tax-free income, besides paying cash dividends from the sixth year onwards. Its aim is to deliver good value to our customers. . EffortsTata AIG in rural India

Tata AIGs rural programme has accounted for around 11 per cent of all the life policies it sold in the year ended March 2002, as against the stipulated minimum of 5 per cent. Its aim was to create an asset for the rural poor in the form of hedging their economic loss in the event of an earning member of the family expiring.


The rural market is huge and it is growing aggressively. It has tailored products with smaller premiums to suit the needs of this market. It have a strong strategic alliance with the Bridge Foundation a micro-finance company dealing with non-governmental organisations in southern India to use its network to distribute its products. The company has undertaken a pilot programme in Tamil Nadu, and this has been extended to rural markets in Kerala and Karnataka.

More than two lakh employees spread across the country and plan to tap this huge base.

Tata companies and employees are one of its major focus areas. It is working with various Tata companies to understand and fulfill their life, general and pension needs; this will be an ongoing process. For the staff of Tata Group companies, It has crafted special products with reduced premium rates. It has piloted workside marketing, wherein a team of agents goes to the workplace and explains our products and advises people about them. This has been introduced in Tata Tea, Titan and Tata Engineering. About 25 to 30 per cent of its total business in 2002 came from Tata Group companies. Future plan of Tata AIG

It wants to maximize its penetration and expand its staff. Currently it is in nine cities: Mumbai, Delhi, Chandigarh, Kolkata, Chennai, Bangalore, Hyderabad, Kochi and Guwahati. It will, in the near future, be opening offices in Jaipur, Jamshedpur, Ahmedabad, Lucknow and Coimbatore. It will continue to focus on growing Its reach, with strategic expansion across geographies and channels. It expect two or three insurance companies to lead the market in terms of growth, aggression, size and perception; others might concentrate on niche areas. It wants to be the fastest-growing private insurance company in India, offering the best service and being the most profitable. Operation of Tata AIG

AIG has been a composite insurance company all along. The only thing that has changed over the years is the structure of its business. In 1981 life insurance comprised about 30 per cent of AIG's operations and non-life 70 per cent. Today 50 to 55 per cent comes from life and only 40 per cent from non-life (the rest is derived from financial services). AIG's life insurance division has been growing at an average of about 15 per cent. Strategy of Tata AIG for life Insurance and General Insurance.

There is no question of competing with LIC. It already has about 9 lakh agents and that number is likely to go up to 10 lakh by the end of the current fiscal. No company is allowed to poach on another's agents, least of all on LIC's. We only select freshers and, 26

five years down the line, we hope to have about 1 lakh agents. Right now we have about 5,000 agents, either undergoing training or already on the streets. Unlike the non-life segment, selling life insurance requires a more personal touch, which is why good agents are important in this business. In life insurance, policies are sold not bought. As of now about 60 per cent of our agents work on a part-time basis, but the ratio will come down to 50 per cent by the end of our fifth year [in operation]. All our agents earnings are commission-based. They make a 40 per cent commission in the first year on new business and 7.5 per cent in the next two years on renewable business. The commission rate declines to 5 per cent in the fourth year. The company is targeting a policy base of one million covering three million lives and an agency force of one-lakh agents in five years. As against others who have set targets of sum insured or premium income, Tata AIG strategy is to cover the maximum number of Indians among the new companies. Already the company together with its general insurance partner, Tata AIG General Insurance provides cover to close half a million individuals.

Innovative Products and services: Life Insurance I. Individual II. Corporate General Insurance I. Individual (a) (b) (c) (d) Motor Vehicle Accident and Health Overseas Travel Home

II. Corporate (a) (b) (c) (d) (e) Energy Accident and Health Property Marine Contingency 27

Research Plan

(1) Definition of problem Identification of distribution channel of Tata AIG in India

(2) Research objectiveObjective of my research is following4) To find out various channel of Tata AIG operating in India (mainly Life Insurance little bit of General Insurance also).. 2) To find out contribution in distribution of Agents and Other channel. 3) To find out contribution of new distribution channel as: (a) (b) Corporate Direct Sales Associate (DSA) Bancassurance

(3) Research parameters (a) Objective is sub divided into the following research parameters.


1) 2) 3) 4)

No of policy sold annually Type of policies The no of calls made The geographical area covered

(b) Selling technique. 1) 2) Understanding of product Facilities used by him whilst selling insurance

(c) Motivational factors- it comprises 1) 2) 3) 4) Training and development Performance appraisal Relation they share with the company Monetary benefit

(d) Expectation for future requirement. In part we build our relation and maintain the brand value. 1) Incorporates their perception of anticipated competition and their suggestions to Tata AIG and the competitors (private & public insurance company).

(4) Need for the study


To gain an insight on the functioning of the distribution of policy and contribution by agents, Corporate Direct Selling Associates (DSA) and other channels of Tata AIG Insurance that will aid the competitors in this sectors to devise an effective distribution strategy.

(5) Variables studied Respondents are followings 1) Insurance Advisors (Sells Agents) of Tata AIG 2) Middle level Executive 3) Consultants


Research Methodology

(1) Data collection Consists of primary data and secondary data. Primary data was collected by holding semi- structured and focused individual interviews of sales Agent, executive, Consultant and Personnel associated with Corporate Direct sales associate. For the primary data Interviewed 35 insurance personnel, out these 15 were Executives including Consultants, Executive (Managerial), and associated Executive from other tied organization. Where as secondary data was obtained by different records, magazines, newspapers, inter nets and various pamphlets of Tata AIG.

(2) Type of research The type of research used for our study was an exploratory research, as the objective of our research was to have in depth understanding of the sales agents. Since the research was qualitative, the need for formal and rigid questionnaire was not felt. However we covered a specific list of topics and sub areas. This was done in the form of Open-ended question, where the timing, exact wordings and time allocated to each question area was left at the interviewers discretion open structure ensured that inspected facts or attitudes could perused easily. (1) Sample size We have selected sample on the basis of performance of the premium collected by agent at least 25 policies per year. Other has been taken from the branch Manager and Consultant, branch Executives. All are taken randomly.


Distribution Channel of insurance Industry in India
The insurers must refine and exploit the market segment product distribution system linkage. This will lead to distribution system pluralism; many different distribution systems will be implemented across companies rather than across the industry. Distribution channels:Why it is needed.
1 Distribution - the key differentiator It has been two years since the Indian insurance market has opened up, and the new entrants into the market have set up shop in every major city. The public sector companies have already established themselves in the market. But there are multiple challenges faced by these insurance companies, of which two are critical: Designing of products suiting the market Using the right distribution channel to reach the customer

While the companies have been quite successful in dealing with the first of these challenges using the existing product features and leveraging the technical know-how of their partners, most are still grappling with the right channel mix for reaching potential customers. This paper discusses the distribution channels from the perspective of the socio-cultural ethos of the market and how these channels fit into it, along with where the various companies face challenges and bottlenecks. Whenever any debate arises about the intermediaries and distribution channels, the discussion veers to technology and its impact on distribution. However, the authors believe that the basic existential problems being faced by the channels in this market needs to be looked into first, and then the


question of enablers technology, tools, training, learning etc. -- is to be taken up. 2 Challenging Scenario demanding role transformation of intermediaries Insurance has to be sold the world over, and the Asian Market is no exception. The touch point with the ultimate customer is the distributor or the producer (as they are known in certain markets), and the role played by them in insurance markets is critical. It is the distributor who makes the difference in terms of the quality of advice for choice of product, servicing of policy post sale and settlement of claims. In the Asian markets, with their distinct cultural and social ethos, these conditions will play a major role in shaping the distribution channels and their effectiveness. In today's scenario, insurance companies must move from selling insurance to marketing an essential financial product. The distributors have to become trusted financial advisors for the clients and trusted business associates for the insurance companies. This calls for leveraging multiple distribution channels in a cost effective and customer friendly manner. For example, in the developed markets producers (brokers and agents) form the major channels of distribution, while the web as a complementary channel is catching up slowly. According to a Forrester survey, 88% of the Life insurance executives responding identified agents as the primary channel of distribution. 1


The distinction of channels in the developed markets is: personal distribution systems and direct response systems. Personal distribution systems include all channels like agencies of different models and brokerages, bancassurance, and work site marketing . Direct response distribution systems are the method whereby the client purchases the insurance directly. This segment, which utilizes various media such as the Internet, telemarketing, direct mail, call centers, etc., is just beginning to grow. 3 What should the companies look at? Basically companies have to take a look at the intermediaries they are using, whether it is optimal to use them, and what are the alternatives? The new companies have attempted appealing only to the middle, upper middle and elite classes in the major cities. Contrasted with Public sector insurance companies, with their offices across the country, the new companies have miles to go before they reach anywhere. They must overcome the mindset of the customer that life insurance is Life Insurance Corporation of India (LIC) and general insurance is General Insurance Corporation of India (GIC) if they hope to grow in the market. Meanwhile, the public sector companies are going to great lengths to revamp their image to look and feel more contemporary.


Both the public and new private sector companies are fighting their own battles from the perspective of customer perception management: Public Sector Companies Private Sector Companies

Identity is well established, but the Have to build their identity in a perception of " poor service providers" market where the public does not is a stigma. distinguish them. Products are not attractive and flexible enough but expensive. To retain their creamy layer clientele who are the most likely to be wooed by the new companies Remove the perception that anything that looks good is expensive Work against the people's mindset that they are not here for the long term

Retain and attract good intermediaries Attract intermediaries especially agents with the requisite qualifications and attributes who can market the company and the product. Match the aura created by the new companies in the urban market Run the risk of tapping an already insured market for repeat insurance instead of tapping new virgin pockets in the market

In this process all are targeting the same market --the existing pie is being cut up further, but no attempt is being made to increase the size of the pie. For example, while attempts are made to complete the quota of rural insurance in percentage terms, the rural market potential is yet to be tapped, as the new insurers are not able to attract the right kind of talent into their distribution force to address this. Intelligent segmentation of distribution channels to match the market segmentation is what will help the companies to move in this direction 4 Distribution Scenario in the Indian market In today's Indian insurance market, the challenge to insurers and intermediaries is twopronged: Building faith about the company in the mind of the client Intermediaries being able to build personal credibility with the clients

Traditionally tied agents have been the primary channels for insurance distribution in the Indian market; the public sector insurance companies have their branches in almost all parts of the country and have attracted local people to become their agents. The agents are from various segments in society and collectively cover the entire spectrum of society. A person who has lived in the locality for many years sells the products of the insurance company with a local branch nearby. This ensures the last mile touch point being closer to the customer. Of course, the profile of the people who acted as agents


suggests they may not have been sufficiently knowledgeable about the different products offered, and may not have sold the best possible product to the client. Nonetheless, the customer trusted the agent and company. This arrangement worked adequately in the absence of competition. In today's scenario agents continue as the prime channel for insurance distribution in India, as is the case in most markets, supported by call centers to a small extent. Almost all the new players follow this model primarily because the regulations for other channels are yet to be put in place. However there is great excitement in the industry over the impending broker regulations, and companies are planning possible channels in their enthusiasm to increase volumes. The belief that all these channels will grow and seamlessly integrate to bring in business seems a fallacy. What has emerged is a much more difficult and evolving market scene with existing players, more new players coming in, and global marketing practices and ideas being tested. But none of this has changed the fundamental character of the market, which we believe will take more time than expected

As the insurance market in India is liberalized, the pattern of distribution is likely to undergo some changes with new channels being introduced A quantum jump in insurance business in terms of premium, policies, lives covered, etc would necessitate a corresponding increase in the capacity of the distribution channels. The cost of effectiveness of certain channels would induce insurers to start using them. There are sectors of market for whom the agency channel may not be the most efficient and introduction of new channel will help to increase the penetration of insurance products. Creation of awareness and demand as a result of the increasing distribution channels. Dissatisfaction with the existing channels.

Key issue in increasing the number of policies sold would be;


The number of agents Public awareness Public perception of the need for protection and long term savings. Favourable tax treatment Professionalism of financial advisors Quality and range of products. Favourable tax treatment Profetionalism of financial advisors Quality and range of products.

The distribution channels would play an important role in meeting the increased volumes.Traditionally, the life insurers have been working primarily on the agency distribution force, while the general insurance business has depended primarily on the development officer. The private players are bringing with them international experience, new technology, new channels of distribution and of course, new products. The ground rules in the insurance business are being redefined. Even the existing public sector players are gearing up with matching strategies to face competition. Earlier there was only one distribution channel Tied Agent of LIC*Tied agents attached to development officers * Direct agents/career agents supervised by ABM(S)/BM/Sr.B.M

Branch Manager

Direct Agents Development officer Career Agents

(presently not in practice)

Agents Full time Part time

Changes in distribution pattern of life insurance after IRDA came into existence. FROM TIDE AGENTS TO




5 Focus on multiple distribution channels


Though a multi-channel strategy is better suited for the Indian market as well, it is important to keep in mind that this market is really a conglomeration of multiple markets. Each of the markets within this conglomeration requires a different approach. Apart from geographical spread the socio-cultural and economic segmentation of the market is very wide, exhibiting different traits and needs. Let us look at the various insurance distribution channels and the challenges faced by them from these perspectives.

5.1 Agents 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 looking 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. Unable to attract this segment, they have started easing recruitment conditions as against the stringent norms they had earlier, thereby diluting the process. While the public sector companies are able to attract agents, they continue to suffer from high attrition rates due to indiscriminate agent appointment. The most successful of these companies' tied agents are hardly of the elite variety of salesman. They are still the neighborhood do good -- the postman, the school teacher, and the shopkeeper -- who know the people and are themselves known in the community. The challenge here is the lack of knowledge of the competitive market and the inability to do intelligent comparisons with the competitor's products. Educating and training these agents is a serious challenge for the insurance company. The relevance of this kind of agent continues even today as agents are sought or contacted by families by word of mouth. Insurance companies are advised not to follow the path of FMCG's/credit card companies, believing that a suited and booted customer care consultant or financial consultant will necessarily appeal to the average Indian customer. This is the main distribution channel due to complexity of most insurance products (Endowment, Whole of life, Unit-linked). Social feature in the market is the considerable respect for age in Indian society and a belief that an older person knows better. A very young up-market agent who is a typical salesman may not appeal to a large segment of the middle class, which is looking for a solid trustworthy person from whom they can buy insurance. In this context it might be a rewarding exercise to recruit some older people (who have taken VRS from banks and other financial institutions) to sell some lines of products like pension plans, annuities etc.


Gender of agents is another relevant feature in the rural context that makes a difference, especially for the female population. Women to whom the customers can relate --e.g., nurses, gram sevikas -- can target the female segment of the population more effectively. What is applicable for the rural women and children health programs and population control programs is equally applicable for insurance selling also. Max New York Life has adopted a version of this strategy by appointing gram sahayaks to sell and service the rural customers. With this kind of segmentation of intermediaries the challenge for the insurance company lies in training and educating these people to become effective sales persons. But this in no way diminishes the benefits of intermediary segmentation. Advantage

Past experience as well as ability to deliver right advises. This channel can be expensive and it is a time consuming sales



Endowment, whole of life, Unit-linked, pension plans, annuities etc.

5.2 Banks Banks in India are all pervasive, especially the public sector banks. Can they also become the foremost channel for distribution of insurance? Perhaps in the future. The public sector banks, with their vast branch networks, are also plagued by a rigid unionized workforce and archaic systems, and lack vision of a broader service spectrum encompassing non-banking products. The newer banks are constrained by their lack of reach and meager branch strength. For banks to become a predominant channel for selling insurance will require a paradigm shift. But the encouraging fact for insurance companies waiting for bancassurance to take off is that bank branches are here to stay, and customers do want them. A customer survey by Deloitte Consulting in the western developed markets found that for banking activities, customers place high importance on having convenient branches in their banking relationships. This is good news for the Indian banks with their many branches, and also makes a strong case for taking up bancassurance.

Product- The major lines of business that can be sold through bancassurance successfully are term insurance, creditor insurance, and non-life products like Property, Motor and Personal accident, Homeowners comprehensive insurance etc. Process- (Distribution technique) In general distribution can be made through
a quick and convenient sale such as during loan application process. However bank may act as a source of financial planning advice therefore, the use of highly trained advisor is very important. The bank staff at all levels to be able to serve the customer properly must also support this advisor. In no case should the advisor be marginalized as an out-siderfrom the banks stand point. Simple straightforward product with the right amount of protection (e.g loan amount) sufficient. for Example the process may identify a need for life insurance, medical insurance as well as saving for education for child.


An example is SBI Life, has plan to take advantage from the brokers regulation to be put in place in order to move ahead aggressively with the bancassurance model. One of their major product lines is creditor insurance, and they have launched their first creditor insurance product, which covers the liabilities of the creditor in case of death of debtor. SBI Life is planning a similar product for home loan borrowers of State Bank of India. This model has high relevance in the Indian context with far-flung villages where the insurance potential is in volume and not in high per capita premiums. Some advantages and disadvantages are:

Advantages of bancassurance

Disadvantages of bancassurance

High credibility (as trustworthy Economic viability for the banks to caretakers of money) with the public take up as bancassurance is a volume business A ready customer base Training of people and lack of vision and awareness Useful for selling only certain lines of products Initial investment in systems and processes and people training

Low cost channel for selling simple vanilla products Extensive reach including the rural pockets

The strategy should be to use multiple banks according to their presence in different regions. Success would come by using bancassurance where it will be most effective i.e., selling simple, cheap products to the masses at a low cost. This awareness is growing and is evident from the fact that nearly every insurance company has partnered with one or many banks to implement bancassurance. 5.3 Brokers With the broker regulation 2002 come into effect this could be the next hope, especially for the urban market. This will be a new experience for the insurance customer, accustomed to brokers in financial services, real estate, and travel and tourism. For historical reasons the image that 'broker' carries in the minds of the customer is not very favorable. Thus the new breed of insurance brokers face the challenge of establishing credibility. The positives are that brokers in the urban arena can attract the elite and the upper middle class customer. Brokers represent the customer and will sell the products of more than one company. They seek to determine the best fit for the client and can effectively address the mind block faced by the public about the various companies. This is applicable in the case of life insurance for the high-end and corporate/group segment.


In the non-life segment, broking is not entirely new, as reinsurance brokers were arranging exotic covers. For individual customers also, with a wide range of competitive products, the broker can get a good deal. The corporate broking companies will have to play a prominent role. If NGOs based in rural areas can be attracted into the rural sector cooperatives arena, they stand a good chance of succeeding and can help the new players get a foothold in the rural market. These are the players with the potential to make the difference, as they have the trust of the people. We envisage scenarios like that in Bangladesh's micro lending growth and the milk co-operatives in Gujarat selling insurance in addition to milk production and distribution. It would be a new dawn in Indian insurance distribution! With the right impetus the Indian rural insurance scenario could be one with high business volume and tremendous growth potential.

ICICI Prudential Insurance and HDFC Standard Life Insurance have already partnered with NGOs to sell some low cost insurance in rural areas.

Product products for this channel must match the distribution technique
whole life policies and general insurance policies should be offer that enable the broker to offer a lot of choice and options to the client.

Process- (Distribution technique) Insurance brokers are organisations who

assess the complete insurance needs of client and then work out back to back policies with insurers to give a complete solution to the client. However, the challenge lies in establishing regulations that protect the customer and attract the right players into the brokerage market rather than creating another middlemen segment eroding the premium. 5.4 Work site marketing 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 polices and compensation packages, group products or work site products do have a definite market that cannot be ignored. Here the advantages would be: o o o o 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 credit cards and other financial products using this channel. If not an identical model a similar approach can be used for selling insurance.


5.5 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 autounderwriting 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.

Drect marketingProcess- Direct marketing if done properly can be a great source of

distribution It is a great way to reach a large population. Typically , Direct Mail(DM) or Telemarketing is used.It is important to target the right customer with the right affinity and message

Product- Product tend to be simple with simple underwriting, personal

accident policies, terms policies and other simple product tend to work better than complex participating or unit linked product.

Other distribution channelOther distribution channels that have promise are department stores/Post offices, Retail chain. Basically, these channels provide the convenient features and simple underwriting. These channels can also be used to generate leads for a more complex sale.

5.6 Invisible Insurer In this model, the insurance company or its representative is not the entity marketing the products. The insurance cover is sold by an automobile /credit card company as an add-on product leveraging the brand of the retailer. The risk is carried by the insurance company, which underwrites it. . Products like creditor insurance, automobile insurance, and credit card related insurance could be distributed using this channel. This model can be adopted in all market segments for the lines of business mentioned. It is already prevalent in some areas like credit card insurance and crop insurance for agricultural loans.


The new players are also attempting this model. The venture of Maruti into insurance by setting up two subsidiaries MIDS and MIBL to sell automobile insurance is a case in point. These firms will largely arrange insurance cover for Maruti's captive customer base. MIDS has been registered as a corporate agent with an exclusive arrangement with Bajaj Allianz General Insurance, while MIBL has linked up with state-owned National Insurance Company Limited. What makes these arrangements attractive is the low distribution cost and captive customer base. However, repeat business or renewal of business cannot be assured. In the life segment, group creditor insurance may be the most suitable product for this channel.

Essence The success of marketing insurance depends on understanding the social and cultural needs of the target population, and matching the market segment with the suitable intermediary segment. In addition a major segment of the Indian population has low disposable income, meaning that every penny won will be obtained after a lot of persuasion and the expected value for money is high. All intermediaries can't sell all lines of business profitably in all markets. There should be clear demarcation in the marketing strategies of the company from this perspective. Clients should also receive price differentials for using different channels. This is not a new concept, as the Public sector Property & Casualty companies are giving discounts in lieu of agency commission. The channel composition should not be homogeneous but should reflect the larger society. For example: Agents from different economic, social strata and different age and gender. Bancassurers ranging from multinational banks to micro credit lending agencies. Brokers stretching from corporates to NGOs to milk co-operatives

These intermediaries need to be empowered with the right learning, training and sales tools and technology enablers. Coupled with the right product mix, this will help the insurers to survive and flourish in this competitive market. Let us tell a story of a retired postal clerk who became a success story for selling postal savings and insurance in his village in Punjab in Northern India. The person is well known, who is a retired postal employee and took up agency for postal savings and insurance to supplement his meager retirement earnings. Today -- 10 years later -- he is one of the top agents selling postal savings and insurance in his village, assisted by his illiterate wife and grandson (a seven year old computer literate) doing all the administrative work from home on a small Personal computer using a package (developed by Local a programmer) to handle his client portfolio. The entire village population trusts him with the investment advices that he does out and has no qualms in handing over small amounts of cash to him for depositing in the


post office. He is their trusted customer care or financial consultant. This we feel is the essence of distribution of financial products in India. Another true story is related with Shree Lambother jha agent (chairman Club LIC, Bihar). 10 years ago when he was merely a student he decided to sell LIC policy in his village and nearby with bicycle and even without that. Now he is millionaire. Basically his approach is so good that people recognized him as a good solicitor regarding their insurance investment or disposable income. He always tries to make people aware of the policy and according to suitability suggest a policy taking convenience as a factor of consideration. He has done all these things in so ethical way that people have faith on him. Not only has he sold the product but he also serves the society by suggesting the utility of insurance product. He is a live example. He became a Brand in his area. He makes himself a member agent of distinguished chairman club from simple agent. Presently LIC has given all special facility at his home and his local office. He also has given employment (voluntary) of his two brothers for administrative work in his office and some time (peak month) field for premium collection. This shows that channel member should be aware about the requirement and need of the people and product of insurance both.

The players have started exploring new channels of distribution just the way the developed economies have done it in the past. Some of the new channels of distribution are marketing through a dedicated (a) Sales force (tied agents), (b) Corporate agents (DSA like), (c) Bancassurance, (d) Work-site marketing, (e) Independent financial advisors (individual qualified agents) telemarketing (DM), (f) Retail chains, (g) Internet, (h) NGOs, (i) Brokers etc. The mantra is innovation and diversification. Distribution is more crucial for the life insurer, which needs to have a mass retail base to minimize the chances of being adversely affected by any casualty. The companies are using different models each model has its pros and cons, the bancassurance model is cost-effective and is also quite efficient for market penetration. This is for the simple reason that since the banking and insurance industry share a common target 45

of financial services customers, the existing customer base of banks can be targeted rather than building a new one. Private players are currently following various permutations and combinations of the above mentioned distribution strategies and trying to grab the market share in the country. In span of little over a year, the private insurance companies have grabbed nearly 10% of the life insurance market and in general or in non life insurance sector the private players have captured around 9% of the market share.







(1) Why you select Tata AIG as an Agent? (a) For Monetary benefits (c) Commission (e) Interest in the sector (b) flexibility in Hours (d) easy of entry (f) nature of job

(2) What geographical area do you cover?


(3) What is your work timing?

(4) How many calls do you made in a day?

(5) What features / services of the company do you like for your convenience? (a) Trust in the company (b) Quick settlement of claims (c) Customize product (d) Customer friendly

(6) What are the operational hassles/ problems that you face? (a) Travel (d) Procedure (b) timing (c) phone availability

(e) paper work

(7) What are the facilities you are using or provided by the company? (a) Traveling allowances (b) telephone (c) computer (d) Day hour food (e) stationary

(8) Does Company provides knowledge of entire product range in its portfolio?

(9) Out of training & development programmes which are/is most effective? (a) 50 hours (b) 100 hours (c) others


(10) Does Tata AIG have performance appraisal system?

(11) Do you think it is essential?

(12) What is your yearly average Income?

(13) What factors would you consider while selecting the new Insurance Company. Please rank them on the basis of 1-10 point. FACTORS RANK1 (For Tata AIG) Trust Performance of company Security Salary structure Brand value Infrastructure support Perk/ allowances Flexible work timing Level of autonomy Others. RANK2 (For others)

(14) What are the reasons / factors for which you remain in this Organisation?


Rank them on the basis of 1-10 point. REASONS RANK1 (For Tata AIG) RANK2 (For others)

Monetary factors Job satisfaction Autonomy Easy of entry Flexible work hours Status Job security Commission base pay Perks/allowances Others

(15) What are the reasons /factors for which you are a part of this Tata AIG? RANK them on the basis of 1-7 basis point. FACTORS RANK1 RANK2

Trust Performance of the company Security Salary structure Brand name Job satisfaction



(16) Out of which most important factor for you in future is (a) Salary (c) carrier growth opportunity (b) pay package (d) others

(17) Do you think rules of game are changes mean mass distribution system in rural area is not obligation but opportunity?

(18) Do you think that corporate distribution agency associate is required due to complexity of Insurance products and competition?

(19) How is DSAs work for Tata AIG?

(20) Tata AIG have link with HSBC for mutual benefit .Do you agree that they are able to provide total financial solution to their clients.

(21) Plz gives your focus on new or multiple channels as well as traditional for Tata AIG.

(22) Plz introduce comprehensively about Tata AIG general insurance channel

(23) What is your suggestion for future distribution of Tata AIG?

(24) How you rate the performance of the company with respect to its channel and customer requirement.

(25) Have you had any problem with the company in the past? 50

(26) specify the single most important feature Tate AIG possessed that attracts the customer


Analysis of Research
After the interview of 20- agents and 15- officer we have many Information that can be classified in the following ways i.e. 1) On the basis of Age. Age No of Agents No. Of Executives Or Other 2 8 4 1 15 18-25 4 26-35 8 36-45 5 46 above 3 total 20

Analysis of this information make us clear that maximum no of Insurance advisor comes from age group 25-35. It has inference that Maximum agents are matured enough to deal and live in the organization.


When we look age group of officers we can find it easily that maximum come from matured and experienced age range i.e. 26-35. It has implication that company is administered by well experience young people. 2) On the basis of Education. Education level HSC Degree PG Professional Degree No of Agents No of Executives Consultants No Others Total 3 1 2 13 4 1 3 10 3 4 4 3 3 14 20 4 5 5 34 total

We can have many inferences from the above information as follows on the basis of Education. 50% of Agent comes from degree level, 20% from professional degree and rest from others 80% Executive comprises professional degree. 60% Consultant/ manager has professional degree and otherfrom, Degree, and PG. Other executive to whom I met have 60% professional degree. When we assess total staff (agents with officers) we can draw inferences that out of total, approximately 90% staff are graduate and above that. If we exclude Agents then 70% (0ut 0f 15, 10 have professional degree) is professional. It means company is mostly governed by professionals. Note Professional qualification means MBA/MCA/ BE/CA etc. Out of 35, a person has not given their opinion. 3) Geographical area they covered Area No of agent specific 4 not specific 2 whole city 10 total 20

Information from above table states that out of total, maximum (50%) covers whole city of Mumbai. 40% covers specific area (means, western, eastern suburban).


When we combine this information we can have more specific inferences. As Tata AIG have most dynamic& experience, professional young people with different geographical area covers and maximum has to facility to grow business in any area. 4) Working time When we analyse the question on the basis of timing, maximum agents have their flexible time. But officers and Managers have specific time generally 9am to 8 pm and more than that. Here we have to consider two types of agent one is part timers and others is full timers. So full timer gives maximum time and uses the facility of Tele phone in the Office. 5) Telephone call per day No of calls Agents 1-6 2 7-13 5 14-20 10 21- 27 3 total 20

Telephone call generally made by agents are maximum 14-20 calls / day. And time of calling depends on policy and person. 6) Feature of the company When I asked about the features of convenience, 90% has their (Out of the 34 persons) opinion in favor of Trust and customer friendly.

7) Operational hassles/problems Hassles No of Agent Executives travel 11 10 21 timing 1 1 2 1 phone availability 1 procedure paper work 3 1 4 4 2 6 total 20 14 34

Maximum operational hassles comes from traveling and after that paper work involved but weightage is almost low, Procedure is the third most problem in distribution of the services. Time and phone availability have very low contribution in operational problem. 8) Facility available for agents and Officers. When agents are asked about the facilities that are provided by the Tata AIG for him maximum has answered in the support of telephone, and very few have support regarding stationary. Some have given their view in the support of computer facilities. But they demanded more support of stationary and traveling allowances. 9) About Appraisal system 53

When we talk about performance appraisal system in Tata AIG they all have similar view that it has good performance appraisal system. Insurance advisors are judge by their performance to fulfilling their target weekly, monthly, annually basis. Many other things also they are considering in the process of performance appraisal. So this system is very effective to keep motivated of the channel force. 10) Knowledge about product and training. Company provides comprehensive knowledge about products to Insurance adviser and dealing staff so as they can do their work without any confusion. Staffs are trained by extensive training session (100 hours) and required test. They are also assessed time to time by the Organisation to maintain their knowledge and skills. Similar things are also available for the officer but in different way. They have to take care of the organization so they have go with a very hard extensive session of training. 11) Yearly earning. Insurance advisors average earning falls at the range of 1 lakh to 2 lakh per years but it depends on the advisors. There no limitation of their earnings if they have enough contact and selling skills. here consultant have no fixed income only salary is fixed but commission from Agents is not fixed. Due to commission they are always want to develop their business. Executive has some more fixed income than above two. Income depends on experience and position in the company. 12) Factors responsible to Select Tata AIG. When we analyse the factors that are responsible for the selecting Tata AIG for doing their job. Maximum has given their consent in the following way. For Executives. Trust >Brands> Salary structure >performance of company>Infrastructure support> level of autonomy> flexibility of Time hours>Perk and allowances>security>others. For Agents Trust >Brands> Perk and allowances> flexibility of Time> > Infrastructure support> performance of company> level of autonomy>security>others>salary structures Generally Agents and Executive have similar point of views of the 1 st two choices but they are different in other choices. For example Agents have given Perk and allowances their third choices. Fourth choice is infrastructure support where as last is salary. It is because they dot have salary structure. So maximum monetary benefit they can have possible only selecting of these choices.


Maximum executives have opinion for salary structure and Performance of the company with infrastructure support,in there Third, fourth, and fifth choices. Perhaps this choices are due to they dont have commission base advantages. 13) Factors that are responsible to get motivated to remain in Tata AIG. For Agents. Monetary factor> Status>Easy entry>Flexible work time >commission base pay>Perks/ allowances>Job satisfaction> autonomy> job security>others. For Executive Status>Job satisfaction>Monetary factory>Autonomy>Perks/allowances>Job security>Flexible work time>Easy to Entry> commission base pay>others. Differences of choices are due to their personal requirements. We can explain for Agents money is more valuable but for executive their status takes more weightage. Similarly we can go to the others. 14) Factors make you as a part of Tata AIG? Mainly trust and brand value of Tata AIG work here more than the other factors to remain as a part of this organization. This is fact Tata as a brand of quality, economic, and strong believe for perfection and AIG as International financial solution provider obviously, has good image and perception for the people. They are ranked as following way Trust>brand name>performance of the company>job satisfaction>salary structure>security>others. 15) Factor that can Influence the people in future. For the most influential factors responsible the people to remain in the Organisation can be arranged in the following way. Carrier growth Opportunity>pay package>Salary>Others. So for the future carrier growth has maximum weitage then others (for both of them). 16) Change in the distribution channel When we think about new change in the area of distribution. They have similar view but some agents have opinion to remain in Traditional way. They have their own logic, it has no substitute. Because, insurance is a product of selling not bringing. It requires personal relation and faith..


Executives have their opinions that Tata AIG has many distribution channels(traditional as well as new) but new multiple distribution channel is required due to maintaining sales growth and reducing the cost of delivery. Change is required because combined forces of increasing technological expertise, Transformation in the Industry and Innovative techniques working in the Indian market, the distribution system seems to be widening. In there view future customers will be multichannel . The insurers will have to offer all types of channel to the customer and it is the customer who will have the right to choose the channel suiting him/her. Future demand of high level of sophistication in providing our services to customer cant be ignore. So change in distribution channel is required. When we asked about corporate distribution angency, brokers, internet, bancassurance, direct marketing, they have answered, it requires due to complexity of product. They agree that these are new channels for Tata A IG. They have a corporate agency channel, which handles its corporate agents and have tie-ups with 38 corporate houses. In their opinion DSA provide a very wide reach in India. This is a very diversified channel. They are best served using similar approach- such as direct mail or Telemarketing. Recently it tied up with Bridge Foundation, an NGO that has an office in banglore for its rural initiative. NGOs are non-profit organisations working towards a social goal. Normally large NGO will work through several small NGOs and self-help groups (SHG) and deliver their service down to the grass roots of the rural society. The distribution has to happen at the grass root level through the SHG, as the average rural Indian finds a greats level of comfort and security in dealing in groups. The Rural population normally prefers monthly premium in line with the Micro-finance repayments that they are used to. They have given a live example, A pilot programme in Tamilnadu to use the Bridge Foundation network to market Tata AIG products has been extended to rural markets in Kerala and Karnataka. Backing of the Tatas home-breed of companies obviously helps. If the Tata AIG is now the only private insurance player, which can afford to go fishing the high volume, low-value rural segment of market, it is because the company has a head start over others in terms of captive customerbase in Tata family of companies This is one of the latest or new channels of Tata AIG for taping of rural population. 17) Tata AIG has a tie-up with HSBC (Bancassurance). For total financial solution and mutual benefit Tata AIG has a tie-up with HSBC. It is also looking at opportunities for tying-up with many more banks in India. This is multiple channel of distribution. Put simply, the Insurance distribution can be made during a loan application process. The use of a highly trained advisor with support from bank 56

is very Important in the bancassurance, this is very promising channel due to the large coverage banks have in India. When they were talking with me majority have opinion this is most viable channel for coming days. It has presently very little bit contribution due to lack of interest and experience. 18) New channel and Traditional channel of Tata AIG. In their (majority of Executives) opinion Tata AIG has follow an approach of having a balance between the traditional and new channels of distribution. Traditional means it distributes product through own agent and via consultants or its own agency and office branches. But in the latest channel of distribution or new distribution channel it operates through Bancassurance tie with HSBC Corporate Agents two or three are now available (cehtsum, ichandwata) etc. Non Governmental Organisation (Bridgestone for Rural mass distribution). Brokers (the latest tie with JLI Insurance Broking) Direct marketing it is started just now (by Direct mail, Telemarketing in this field it is searching to tie up with call center for effective exploited this channel). Internet it has already tie with rediffl wave sight. Out of new distribution Work Site and Retail Chain are left 19) Multiple Channel Yes many multiple channel activities are their as Bancassurance, corporate agents, NGOs, Brokers, Direct sales agents. It is operating channel referring to the selling of Insurance through a banks established distribution channels. Their concept is very clear about selling of insurance product. 20) Future distribution channel for Tata AIG. They have given their view on the future channel that will be most effective for Tata AIG would be Bancassurance and Direct Marketing.

21) Performance with respect to distribution.(restricted to Tata AIG life) When they are given their opinions on the weitage of performance of the different distribution channel of Tata AIG. If hundred (100) points is whole business then contribution of channel can be show as following way;

100 80 60 Agency (approx 60%)


40 20

Corporate Agents (33%) Bancassurance (4-5%) NGOs (1-2%) others (0-2%)

They have given 1st rank to the agents and Insurance Advisors or Traditional channel (only for Tata-AIG Life insurance) But opportunity of new modern channel cant be denied. After trained Insurance Advisor, they have given their 2nd rank Corporate Agent and farther as following way; Agency>Corporate Agents (DSA)> Bancassurance>NGOs>Brokers>Direct Marketing

22) when I asked about the distribution channel of Tata AIG general insurance they have given their focus on only three channel which is operational in Tata AIG general insurance. These are following: AGENTS DIRECT MARKETING BANCASSURANCE When we think their opinion of the works and kinds of the agents and channels we get many information.




KINDS OF AGENT Individual 58

Composite Insurance Agents means an insurance agent who holds a license to act as an insurance agent for a life insurer and a general insurer Corporate Agent a person other than an individual as specified in clause(I)

FUCTIONS OF AGENT An insurance agent would be required to solicit and procure new insurance business, in manner that is consistent with the interests of the policyholders and of the insurance company. For this purpose he would have to do the following

contact prospects for insurance; study their insurance needs; persuade them to buy; complete all formalities for proposal for new insurance, including filling up the proposal forms; collecting supporting documents and premium arranging inspectionif necessary, ensure that warranties and special conditions, if any are property explained to the insured Assist the insured in filling the proper documents and proofs for making a claim.

(II) DIRECT MARKETING; It is a ability to trigger a direct and measurable action through ane or more media channels that leads directly to a sale at a profitable cost. Typical direct marketing channels are




Select your customers

Toilor the product

Prepare the operation

Launch the campaign

Key to success for direct marketing Sell simple multiple products use multiple distribution channel develop product which meet specific consumer needs expect return to grow over time


At its most simple level bancassurance is the business of banks selling insurance. In concrete terms bancassurance, which is also known as Allfinaz constitutes a package of financial services that can fulfill both banking and insurance needs at the same time.

Simplest form Where bank provides database to the insurance companies and insurance companies pays certain base charges for each customer and commissions are paid on the basis of conversions. This is a quick model where bank needs no investment.


Strategic alliance Sharing of customer data Branding of insurers products to leverage the banks own brand Developing specific products exclusive to banks own customer Deployment of insurers staff within the bank Joint marketing strategy with complete risk management and financial services offers. Sharing of technical infrastructure. Why insurers should makes banks their agents? In our country 27 Public sector banks and about 200(196) Regional Rural Banks control 92% of the total branch net work. Insurance is a business where the reach of distribution is the key to success Customer have a trust relationship with banks Ready data base includes the depositors, credit cardholders, mortgage accounts, borrowers The available data can be minded and specific products can be sold to the appropriate segments Products that can be easily sold through banks:

Simple fire insurance covering property Auto insurance Personal accident insurance Health insurance.

23) Problem with the company They dont have any personal problem with the company. They are very satisfied with the company. 24) Single most important feature of Tata AIG is/are General view point of Its the most significant Feature that attract the customer is Tatas brand name and Trust. 61

After the analysis of questionnaire we have many Inferences that are sufficient to achieve the objective of research in our plan. It fulfill our 1st Objective To find out various channel of Tata AIG operating in India by describing all the available channel out of which we know the channel operating under Tata AIG.( mainly Life insurance and some about of general General insurance) How many channel presently is/ are working in Tata AIG. Is given below: In their (majority of Executives) opinion Tata will follow an approach of having a balance between the traditional and new channels of distribution. Traditional means it distributes product through own agent and via consultant or its own agency and branch offices. But in the latest channel of distribution or new distribution channel it operates through( For life insurance) (a) Bancassurance tie with HSBC (b) Corporate Agents two or three are now available (cehtsum, ichandwata) etc. (c) Non Governmental Organisation (Bridgestone for Rural mass distribution). (d) Brokers (the latest tie with JLI Insurance Broking) (e) Direct marketing it is started just now (by Direct mail, Telemarketing in this field it is searching to tie up with call center for effective exploit this channel). (f) Work-site (Tata tea, Titan etc.) (g) Out of new distribution channels, Post office, departmental stores and Retail Chain are the three channels which are still not functional.

(For general insurance) (a) Corporate agents (b) NGOs 62

(c) Bancassurance (d) Direct marketing(Direct mail, Telimarketing etc.) (e) Work -site

2nd Objective To find out various channel of Tata AIG operating in India has been also fulfilled by in the following way: (Below are only suitable for life insurance because most of the agents are from life insurance(10) , some are from general insurance(5) and few(5) are from both.

100 80 60 40 20 Agency (approx 60%) Corporate Agents (33%) Bancassurance (3-4%) NGOs (1-2%) others (2-4%)

They have given 1st rank to the agents and Insurance Advisors or Traditional Channel. But opportunity of new modern channel cant be denied. After trained Insurance Advisor, they have given their 2nd rank Corporate Agent and farther as following way; contribution of business has been seen by % that is share of business made by Distribution channel. Agency>Corporate Agents (DSA)> Bancassurance>NGOs>Brokers>Direct Marketing

3rd objective To find out contribution of new distribution channel as 63

(a) Corporate Direct Sales Associate (DSA) (b) Bancassurance It has been inferred, new channel offered by Tata AIG has presently less contribution. But Tata AIG has corporate agency which works and coordinates 38 different corporate. It is gradually tying itself with organization not only Tata concerns (Tata Tea, Titan, Tata Egg. etc) but also with others (Vipro just Rs 876 crore business covering Employee) Total corporates contributes 30-35% 0f business of Tata AIG, Contribution of bank Insurance has been not assessed confidently. Because Tata AIG has tag with HSBC but actual work is not going as expected as earlier. It is due to lack of operational experience and coordination. However its contribution cant be denied. Although we dont have exact data, however according to expert of the Organization. It would be most promising mass distribution channel and presently its contribution is 3-4% of the overall business of Tata AIG. Other Sub-Objective has been also solved by the analysis as follows: (a) Objective is sub divided into the following research parameters. (1) No of policy sold annually- every agent sold policies according their experience and contact generally 25-30 policies. (2) Type of policies-They are sold product mixed depends on agents whether from life or general insurance and both. (3) The no of calls made- Generally 14-20 per day (time depends on person or policies) (4) The geographical area covered- by 50% has not specific area, 25% has specific area, and rest 25% has both. They can move any where in the city or state. (b) Selling technique. (5) Understanding of product- Agents have comprehensive knowledge about the product that has been given by the organization time to time by training or other ways. (6) Facilities used by him whilst selling insurance- Regarding facilities offered by the Tata AIG, they have similar view that telephone is given fully at the office and some time computer, stationary are also provided but in limited way. There is no any traveling allowances and day our facilities. (c) Motivational factors- that comprises (7) Training and development- there is enough training facilities of 100 hours in house for any fresher and other test to making sales force up graded time to time.


(8) Performance appraisal-very active performance appraisal system is working here for both Agents and officer. Continuous assessments enable its staff get and keep motivated. (9) Relations they share with the company-They have strong relationship with the company, as message is very transparent from top to bottom with the same voice. They always feel that they are part and parcel of the company. Respect and belief is the vital motivational force. (10) Monetary benefit- employees as well as agent get motivated when they are received commission more than existing insurance company (LIC) with the same volume of business. The company time to time also gives award and other bonus. 40% on premium, after one year 7.5%, after two years 5%.( LIC 30% on premium). (d) Expectation for future requirement. In this part their answered that they haveto build their relation and maintain the brand value. There view about company mainly strong for their trust and brand value. They are believed in maintaining these with satisfying the wants of the customer with basic needs. Innovative modern channel with suitable product mixed will require to tap this opportunity. Many points are revealed by making inferences that required improvement or change. Changes are given in the next chapter(IX) of the recommendation.


These are the recommendations, which can help Tata AIG to become master in the field of Insurance.


Infrastructure facilities like that of adequate phone connection and computers, internets should be made available for the agents to make their data entries.



Regularly hold competitions and incentive scheme to motivate agents to strive for more (just like FMCG sectors)


One window from processing facilities and paperwork should be reduced to the minimum level.


Because most of the agent come due to brand value and status with monetary benefit. So they should provide lump-sump amount as a stipend and require respect.


The ambience of the office should be bright and contemporary so as to bring about a sense of pride to the agents to be a part of the organisation.


Nature of award should be changed. Like they should be given award in the form of some amount, post, leave, cold medals, abroad package etc.

(VII) At the time of maximum demand seasons (generally Dec-Mar) company should gives required traveling facilities to the agent.




There are many restrictions available in this project work also similar to the other t research oriented project work. Limitations cant be over ruled. It is the main factors that work to make our project useful or waste. Recommendations are more acceptable when influence of the factors is less. In this project these are the limitations. (I) Research work has been done in Mumbai so recommendation may differ from the other place of the country. Variation is expected due to population, business environment and culture of the particular region.


Secondary Data is obtained from different source. There is a possibility of occurrence of bias. So it can influence our inferences.


At the time of interviews precaution should be taken for unbiased point of opinion to the responders. But 100% perfection cant be possible. But in our project we consider all the data 100% right and whatever they have given that are directly consider for analysis.


They have given data in comparative form or percentage. It would be more perfect if we get the data in absolute (discrete or exact value) term.



Conclusion The insurance industry is in the throes of a silent revolution and the best part is that all of us are part of this revolution process, contributing to it and influencing shape of things to e merge. It will be quite interesting to see a plethora of distribution system taking shape and competing with each others. But we can be confident that in the insurance industry in India, for quite some time to come, the agency channel is going to dominate the scene, fro the simple reason that majority of customers would prefer a one-to one, eye ball sale, so far as their savings oriented risk and pension plans are concerned. Particular in rural areas this channel is going to hold greater sway as the rural marketing is still relationship-based where an insurance agent happens to be a family friend and it becomes difficult to distinguish him from the rest of the family. However, the new channels will very soon develop their own niche appeal. The market will also see the development of segment-specific and product specific channels. The Internet is going to be yet another prominent player in the distribution network because of its appeals, access and reach. The success of the insurer in the new environment, therefore, will depend upon his capacity to build up a network of distribution channels, thereby increase his market access and delivery capacity. At the same time, the expertise in channel mannegement and putting the network to more productive uses like research in customer relationship management etc. will be the factors deciding as to who among the many emerges as a market leader in the industry There is one truth in marketing that is different consumers Approach buying differently. Studies have time and again shown that insurance is bought because of convenience, product features, product placement, and safety of funds, advice, and not the price. Tata AIG makes their product to sale according to the nature of the distribution channel and demand of the market. It can fulfill the gap both the channel as well as demand of the Market.


Tata AIG has adopted the policy to established maximum possible innovative marketing channel through, well educated sales force, tie with different organisation and brokers firm with HSBC bank that enable it to provide full financial solution to its customer. We can expect from this organisation that it will lead the innovative process with quality of services that will help the Indian consumer to take advantage from insurance business.

Chapter XII

References: www.docuweb.ca/india/oppor.html (6/12/2002: This link no longer available.) www.bimaonline.com/cgi-bin/newkids/newkids.asp www. Tata.aig.com www.goggle.com www.icfaipress.org www.docuweb.ca/india/oppor.html

Business Standard Times of India Insurance Chronicle Chartered financial analyst.


Swiss Re-Insurance Company Report Economic Times Financial Express

A comparison across countries shows that India is ranked 23 in mobilizing savings in the form of insurance (see table 4 below). Table 1.--Shares of Life Insurance Premiums in Gross Domestic Savings(GDS) and Gross Domestic Product (GDP)- 1994 Life insurance premiums as a percentage of Rank Country 1. United Kingdom 2. South Africa 3. Japan 4. France G.D.S. 52.50 51.55 32.46 26.20 Life insurance premiums as a percentage of G.D.P. 7.31 10.32 10.10 4.91


5. USA 6. South Korea 7. Finland 8. Switzerland 9. Netherlands 10. Israel 11. Sweden 12. Australia 13. Canada 14. Zimbabwe 15. Ireland 16. Greece 17. New Zealand 18. Taiwan 19. Denmark 20. Spain 21. Germany 22. Norway 23. Belgium 24. Portugal 25. Austria 26. Chile 27. India 28. Italy 29. Malaysia

25.20 23.66 23.10 21.92 19.04 18.84 17.88 17.78 17.05 15.88 14.96 13.87 12.75 12.29 12.00 11.68 11.40 9.57 9.13 8.76 6.96 6.96 5.95 5.60 5.35 71

3.63 9.10 4.98 5.99 4.51 4.41 3.51 3.48 3.04 6.27 4.59 1.12 3.04 3.64 2.71 2.23 2.80 2.33 2.38 1.65 2.10 1.95 1.29 1.13 2.30

30. Singapore



Source: ENVOSCAN Information, Special Vol. 2, 1996-97 , LIC Table 7.--Global Life Insurance Premiums Regions/Country North America Latin America Europe Asia India World USD (billions) 689.2 653.0 32.9 647.1 3.0 2,105.8 Percentage 32.7 31.0 1.6 30.7 0.15 100.0

Source: Swiss Re-insurance Company, SIGMA Report No. 4, 1998. Areas of business Growth The Tata-AIG General Insurance company offers a complete range of insurance solutions ranging from motor vehicle, homeowners, personal accident, travel, energy, marine, property and casualty to several specialised financial lines of insurance. Location The company is based in Mumbai Contact: Ahura Centre, 4th Floor 82, Mahakali Caves Road Andheri (East) Mumbai 400 093 India. Tel: 00-91-22-693-0000 Fax: 00-91-22-830-5888 Email: customersupport@tata-aig.com Toll-free number (within India): 1600-119966


New private players at the time of opening market.

Joint Ventures / Foreign Partnerships
INDIAN Alpic Finance Tata CK Birla Grp. ICICI Sunderam Fin. HindustanTimes Royal Ranbaxy HDFC Bombay Dyeing Global Ins. DCM Shriram Dabur Kotak Mah'dra Godrej Sanmar Group Cholamand ITC SK Modi Group SK Modi Group Vysya Bank APPENDIX G U.S. Companies Allstate International Inc. 73 PARTNER INTERNATIONAL PARTNER Allianz Holding American Intl. Group Zurich Insurance Prudential Winterthur Insurance Commercial Union Cigna International Standard Life General Accident Aon Group RSA Liberty MF Chubb J. Rothchild GIO Guardian Eagle Star L&G QBE ING Insurance

The list of foreign players entering the Indian Insurance sector and their Indian partners: Indian Partner Foreign Insurer Specialization Life Present Status Received License

Aditya Birla Group Sun Life, Canada

Kotak Mahindra Finance HDFC

Old Mutual, South Africa Standard Life, UK

Life Life

Received License Received License, Commences Operation

Reliance ICICI

No Foreign Alliance Life, Non-Life and Received License Health for Non-Life Prudential, UK Life Received License, Commences Operation Not applied Received License Received License Received License Received License Applied for License Not Applied Not Applied

ICICI Max India Sundaram IFFCO Tata Group Vysya Bank Hero Group Cholamandalam Group

Lombard, Canada New York Life, USA Royal & Sun Alliance Plc, UK

Non-Life Life Non-Life

Tokio Marine, Japan Non-Life AIG, USA ING Insurance, Netherland Life and Non-Life Life

Zurich, Switzerland Life Undecided Life


Hindustan-Times Dabur Bajaj Auto Undecided Sanmar Group SBI S Kumars, J&K Bank Corporation Bank Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Undisclosed Citibank, India Undisclosed Videocon International

Undecided CGNU Life, UK Allianz Metlife, USA AMP, Australia Cardiff, France Undisclosed Undisclosed

Life Life Non Life Life Life Life Non-Life Life

Not Applied Not Applied IRDA Seeks more information Not Applied Not Applied Not Applied Finalizing Partner Finalizing Partner Finalizing Partner Finalizing Partner

Aegon, Netherlands Life and Pensions Cigna, USA Chubb, USA Life and Health

Property & Casualty Finalizing Partner Finalizing Partner Finalizing Partner Finalizing Partner Finalizing Partner Finalizing Partner Finalizing Partner

Yasuda Marine and Non-Life Fire, Japan Mitsui Marine and Fire Nationwide, USA Undecided Non-Life Life and Pensions Non-Life

GE Capital Services Life International, USA Talks on with BNP Non-Life Paribas, AXA, France


Before liberalisation, distribution was entirely via agencies. The objective of many of the new entrants is to implement multichannel strategies, including a significant bancassurance element. With approximately 100 banks in India, most of which have millions of customers, this approach is not surprising. Downward pressure on core banking business is forcing banks to increase non-interest income, and so to seek fee generation from the provision of other services such as credit cards, cash management services, mutual funds and insurance. Consequently, many banks are seeking to become distributors of insurance products, with several seeking also to become holders of equity in insurance joint ventures. A summary of the bancassurance tie-ups for life and non-life companies as at the end of November 2001 is shown in Table:

Life insurance licenses Non-life licences

LIC Corporation Bank (27% equity stake)/Oriental Bank of Commerce (9% equity stake)

Birla-Sun Life Citibank


HDFC-Standard Life Union Bank/Indian Bank

Dabur-CGU Canara Bank/Lakshmi Vilas/Bank/ABN Amro

ING-Vysya Life Vysya Bank (Joint venture)

MetLife J&K Bank (Joint venture)

Allianz-Bajaj Life Insurance Standard Chartered Grindlays

Tata-AIG Life Insurance Citibank

ICICI-Prudential ICICI Bank (Joint venture)

Non-Life Insurance Company



Tata-AIG General Insurance HSBC

Royal Sundaram Alliance Citibank/American Express/Standard Chartered Grindlays

ICICI-Lombard ICICI Bank (Joint venture)

With the exception of SBI Life, which will focus on exploiting the State Bank of Indias vast network of over 9,000 branches, the main distribution channel of the other companies is agencies. As at 30 June 2001, Tata-AIG was reported to have recruited 3,000 agents (both life and non-life). Over the same period, ICICI Prudential has built up a 2,000 strong agency force, while Max New York Life and HDFC Standard Life have both reported over 1,000 agents. The new entrants face the challenge of developing alternative distribution channels while still developing their agency forces. Such distraction may not be a problem in the short term, as the growth of bancassurance and broker distribution has been hindered somewhat owing to delays in legislative reform. Currently, banks seeking to distribute insurance products are required to be licensed as corporate agents. The current rules for corporate agency require all the directors of a company wishing to take up corporate agency (such as a bank) to undertake 100 hours of agency training and to pass an examination, a requirement which is clearly impractical. Some companies - for instance, HSBC - are tackling this problem by setting up distribution subsidiaries. In addition, brokers remain prohibited under the current legislation. The Insurance (Amendment) Bill 2001 proposes that the training requirement be applicable to specific employees rather than to all the companys directors, as is currently specified. Furthermore, the Bill will permit brokers to sell insurance. Once the Bill is passed, we expect bancassurance to grow rapidly, while the fledgling broker sector will also grow, but more slowly.