INSURANCE

Group Members
Rohit Aroskar (62)
Advait Bhalkar (65)
Chaitanya Chaudhary (67)
Ashutosh Choudhari (70)
Abhijeet Wairagade (76)
Shaikh Mohd. Azhar (93)
Nilesh Parkar (96)
Gulshan Shivhare (110)
Vijay Singh (113)
Dhananjay Tekade (117)

MMS –I (Section B)
Batch 2009 – 2011

Chetana’s R. K.Institute of Management & Research

Bandra, Mumbai-400051
 INDEX

BACKGROUND OF THE INDUSTRY..........................................................................................3

SWOT ANALYSIS OF INSURANCE SECTOR...........................................................................5

PEST ANALYSIS OF INSURANCE SECTOR.............................................................................7

REGULATORY BODY IN INDUSTRY: IRDA..........................................................................11

CURRENT SCENARIO IN INDUSTRY......................................................................................13

KEY PLAYERS WITH MARKET SHARE................................................................................15

FUTURE TRENDS: MARKET GROWTH.................................................................................17

BIBLIOGRAPHY...........................................................................................................................21

Page 2 of 21
 BACKGROUND OF THE INDUSTRY
1818 saw the advent of life insurance business in India with the establishment of the
Oriental Life Insurance Company in Calcutta. This Company however failed in 1834. In
1829, the Madras Equitable had begun transacting life insurance business in the Madras
Presidency. 1870 saw the enactment of the British Insurance Act and in the last three
decades of the nineteenth century, the Bombay Mutual (1871), Oriental (1874) and Empire
of India (1897) were started in the Bombay Residency. This era, however, was dominated
by foreign insurance offices which did good business in India, namely Albert Life
Assurance, Royal Insurance, Liverpool and London Globe Insurance and the Indian
offices were up for hard competition from the foreign companies.

HISTORY OF INSURANCE SECTOR

Some of the important milestones in the life insurance business in India are given in the
table 1.
Table 1: milestone’s in the life insurance business in India
 
Year Milestones in the life insurance business in India
 
1912 The Indian Life Assurance Companies Act enacted as the first
statute to regulate the life insurance business
1928 The Indian Insurance Companies Act enacted to enable the
government to collect statistical information about both life and
non-life insurance businesses
1938 Earlier legislation consolidated and amended to by the Insurance
Act with the objective of protecting the interests of the insuring
public.
1956 245 Indian and foreign insurers and provident societies taken over
by the central government and nationalised. LIC formed by an Act
of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs.
5 crore from the Government of India.
 
The General insurance business in India, on the other hand, can trace its roots to the
Triton Insurance Company Ltd., the first general insurance company established in the
year 1850 in Calcutta by the British. Some of the important milestones in the general
insurance business in India are given in the table 2.

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Table 2:  milestone’s in the general insurance business in India

Year Milestones in the general insurance business in India

 
1907 The Indian Mercantile Insurance Ltd. set up, the first company to
transact all classes of general insurance business
1957 General Insurance Council, a wing of the Insurance Association of
India, frames a code of conduct for ensuring fair conduct and
sound business practices
1968 The Insurance Act amended to regulate investments and set
minimum solvency margins and the Tariff Advisory Committee
set up.
1972 The General Insurance Business (Nationalisation) Act, 1972
nationalised the general insurance business in India with effect
from 1st January 1973.
107 insurers amalgamated and grouped into four companies viz.
the National Insurance Company Ltd., the New India Assurance
Company Ltd., the Oriental Insurance Company Ltd. and the
United India Insurance Company Ltd. GIC incorporated as a
company.
 

INDIAN INSURANCE MARKET – HISTORY

Insurance has a long history in India. Life Insurance in its current form was introduced in
1818 when Oriental Life Insurance Company began its operations in India. General
Insurance was however a comparatively late entrant in 1850 when Triton Insurance
company set up its base in Kolkata. History of Insurance in India can be broadly
bifurcated into three eras: a) Pre-Nationalisation b) Nationalisation and c) Post-
Nationalisation. Life Insurance was the first to be nationalized in 1956. Life Insurance
Corporation of India was formed by consolidating the operations of various insurance
companies. General Insurance followed suit and was nationalized in 1973. General
Insurance Corporation of India was set up as the controlling body with New India,
United India, National and Oriental as its subsidiaries. The process of opening up the
insurance sector was initiated against the background of Economic Reform process which
commenced from 1991. For this purpose Malhotra Committee was formed during this
year who submitted their report in 1994 and Insurance Regulatory Development Act
(IRDA) was passed in 1999. Resultantly Indian Insurance was opened for private
companies and Private Insurance Company effectively started operations from 2001.

SWOT ANALYSIS OF INSURANCE SECTOR

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STRENGTHS

Rural customers are a must

As per the regulator IRDA, all the companies incorporated should at least do 5% of its
business in the rural parts of the country. If not, the regulator would not allow the
company to function anywhere within the country. So this is a great advantage for not
only the rural population but also the newly formed companies since most of the revenue
could be earned from the rural India.

Use of IT
IT is bringing new dimensions to insurance sector. The Insurance companies are utilizing
the Information technology applications for better customer service, cost reduction, new
product design and development. New technology gives the policyholders / insured
better, wider and faster access to products and services.

WEAKNESS

New Insurers
The new insurers will have to invest a minimum capital of Rs. 100 crores. The normal
gestation period is of 5 years. The generation of profit normally starts in the sixth year.
Hence the new insurers have to lock up their capital for at least 5 years.

Outdated Products
Today, LIC has more than 60 products and GIC has more than 180 products to offer in the
market. But most of them are outdated, as they are not suitable to the needs of the
consumers. Hence old as well as new insurers have to offer innovative products to the
consumers and bringing more products would require good amount of capital
investment.

OPPORTUNITIES

Vast country
India is a vast country with more than 5, 76,000 villages having a population of at least
500-600 per village. The companies could recognize the fact that if it takes the whole zilla
as one, it would consist of a population more than 5000-10000. One zilla could give them a
good amount of business. The company could have this opportunity and tap it and reap
revenues.

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Job opportunities
Since the sector has opened up, many new companies have already started its operation
and few are just about to begin, Major areas of employment in this sector are the agents. A
company can appoint any number of agents anywhere within the country on commission
basis. Moreover, the professional staff and the peons and clerks’ appointment also
increase. Thus this sector has tremendous scope on employment.

THREATS

Lack of awareness
With limited range of products offered by LIC and GIC, there is chaos as far as the
consumers are concerned. The existing level of awareness of the consumers for insurance
products is very low. This is because only 62% of the population of India is literate and
only 10% are well educated. Even the educated consumers are ignorant about the various
products of insurance.

Lower profit margin

Increasing expenses and lower profit margins will hit hard on the smaller agencies and
insurance companies.

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 PEST ANALYSIS OF INSURANCE SECTOR
There are several forces at work in every sector and every industry of an economy. PEST
refers to different political, economic, social and political factors that affect a particular
industry. With regards to Insurance sector, these factors are as follows –

POLITICAL FACTORS

1. Malhotra Committee:-
Till the year 1993, the insurance sector accounted to just 2% of the GDP whereas the
world average was 8%. So, to improve the share of insurance, the government set up
Malhotra committee, headed by former finance secretary and RBI governor
R.N.Malhotra. The objectives of this committee are as follows –
1. To evaluate the Indian insurance industry and recommend its future direction.
2. To complement the reforms initiated in the financial sector.
3. To create more efficient and competitive financial system and recognising that
insurance is the important part of the overall financial system.

Key recommendations:–
1. Private companies with minimum paid up capital of Rs. 1 bn should be allowed to
enter the industry.
2. Foreign companies may be allowed to enter the industry in collaboration with the
domestic companies.
3. Only one state level life insurance company should be allowed to operate in each
state.

2. Privatisation:-
The introduction of private players in the industry has added to the colours in the dull
industry. The initiatives taken by the private players are very competitive and have
given immense competition to the one time monopoly of market, LIC. The new players
have improved the service quality of the insurance. As a result, LIC down the years has
seen a declining phase in its career. The market share was distributed among the private
players. Though LIC still holds 80% of the insurance sector, the upcoming nature of
these private players are enough to give more competition to LIC in the near future.

3. FDI in insurance sector:-

Then the issue came of the amount of FDI to be allowed by a foreign player in the
insurance sector. The government had allowed the private players to have foreign
equity upto just 26%. Efforts are going on to raise this to 49%. After the opening up of
the sector, a total of 18 private sector companies have entered the life insurance business
and all of them have entered with the foreign partner.

ECONOMIC FACTORS

1. Growing economy:-
By 2025, the Indian economy is projected to be about 60% the size of the US economy.
The transformation into the tripolar economy will be complete by 2035. With the Indian
economy only a little smaller than the US economy but larger than that of the Western
Europe.
Page 7 of 21
 India, which is now the fourth largest economy in terms of purchasing power parity,
will overtake Japan and become the third major economic power within 10 years.
All these facts or forecasts only drive at one point – India is booming as a market. The
global insurance industry has a big eye on India owing to its big opportunity. India is
the next big thing in the global insurance industry.

2. Bancassurance:-
Bancassurance means selling life insurance through bank branches and has also driven
life insurance business over the two years. Here’s why – first, bank’s deposits as a
percentage of total financial assets of thehousehold sector have gone down from about
46% in 1980 to about 30% now. This means that banks have to seek other avenues,
beyond just interest incomes, to remain profitable. Banks have found that selling life
insurance policies is the great way to make profits.

3. Tax benefits:-
Payment of insurance had also been included in the service tax net in 2004 budget. The
tax rebate under section 88 has now been replaced by section 80C. Under section 80C,
one can invest a sum of upto Rs. 1 lakh in investment avenues like NSC, PPF,
infrastructure bonds, life insurance and the same will be deducted from an individuals
taxable income. An individual can now allocate and enhance amount to insure himself
adequately and still get a tax benefit.

SOCIAL FACTORS

1. Life expectancy and mortality rate:-

The life expectancy is defined as the number of years for which a new born baby will
live in the prevailing mortality conditions of that particular year.
The mortality or the crude death rate refers to the number of deaths per 1000 people.
Both these factors are very important, as they are used to derive the premium of a
particular policy. All the insurance companies follow a set standard table refering to
which they decide upon the premium rates. This is generally prescribed by the
government. Following is the life expectancy and death rate in India:-

Table 3:  Life expectancy and death rate in India

1951 1981 2001

Life expectancy 36.7 54 64.6
Crude birth rate 40.8 33.9 26.1
Crude death rate 25 12.5 8.7
Infant mortality rate 146 110 70

2. Demographics:-
One of the major influences on the premiums or prices charged by the insurance
companies is on the basis of the demographics. Premium rates largely depend on the
age, sex of the individual insured. All the insurance policies have a different rate of
premiums to be paid. This is mainly due to the difference in the risk involved of
different individuals insured.

Page 8 of 21
 In the insurance industry, the companies have different premium rates for men and
women. This cannot be actually called as gender discrimination. As is said earlier, the
premium depends on the life expectancy in the particular country. Usually the women
are expected to live more than the men and the difference is 5 years and greater. Hence,
what the insurers argue is that the women are a relative less risk than the men. And
hence, the premium charge is more for men.

3. Improving standard of living:-

If by 2030, 50% of the Indian population reaches the level of middle class, Indian market
for insurance sector will reach the level of 600 million from conservatively estimated
present level of 100 million. Indian market is big enough by global standards for
vigorous development as the premium density is only 0.6% as compared to 3-5% for
developed markets.

4. Insurance offered by NGOs / Community based health insurance:-

Community based schemes are typically targeted at poorer populations living in
communities in which they are involved in defining contribution level and collecting
mechanisms, defining the content of the package, allocating the schemes, financial
resourses. These schemes are generally run by trust hospitals or non-governmental
organisations. The benefits offered are mainly in terms of preventive care, though
ambulatory and in-patient care is also covered. Such schemes tend to be financed
through patent collection, government grants and donations.

TECHNOLOGICAL FACTORS

1. Information technology:-
Computers were introduced in the mid 1960s and 1980s. The unit record machines
which were earlier used in 1950s were phased out and the entire process was
computerised. This brought about greater efficiency and quick service delivery. There
was a tremendous increase in the use of technology in the late 1990s.
Today, internet has completely changed the service delivery process. It also uses
distribution networks for selling insurance policies and for sending the premium notices
to policy holders through email.
LIC has commissioned a MAN (Metropolitan Area Network) connecting more than 75
branches in Mumbai. This enables the policy holders to pay their premiums, get their
status report, surrender the value quotation and loan quotation from any branch in the
city. These MAN centers were connected to each other by WAN (Wide Area Network).
This WAN designed for distributing processing without a central database. Each
division maintains the database of policy holders.
Many insurance companies have a tie up with commercial banks so as to enable policy
holders to use the facility of paying premiums to the bank ATMs.
Almost all the insurance companies have their own call centers which cater to the phone
based queries of policy holders.

Page 9 of 21
2. Electronic Clearance Service (ECS):-
Almost all the big organisations today provide the ECS facility to its customers. A policy
holder having an account in any bank which is a member of the local clearing house can
opt for ECS debit to pay premiums. The advantage here is that once the option is
exercised, the policy holder need not visit a branch for paying the premium or collecting
the receipts.

Page 10 of 21
 REGULATORY BODY IN INDUSTRY: IRDA

The Insurance Regulatory and Development Authority Act was introduced to

end the monopoly of State-owned companies and to invest in the Insurance Regulatory
Authority power to control the insurance sector.

The Insurance Regulatory and Development Authority (IRDA) is a national agency of

the government of India, based in Hyderabad. It was formed by an act of Indian
Parliament known as IRDA Act 1999, which was amended in 2002 to incorporate some
emerging requirements.

MISSION

Mission of IRDA as stated in the act is "to protect the interests of the policyholders, to
regulate, promote and ensure orderly growth of the insurance industry and for matters
connected therewith or incidental thereto."

EXPECTATIONS

The law of India has following expectations from IRDA –

1. To protect the interest of and secure fair treatment to policyholders;

2. To bring about speedy and orderly growth of the insurance industry (including annuity
and superannuation payments), for the benefit of the common man, and to provide long
term funds for accelerating growth of the economy;

3. To set, promote, monitor and enforce high standards of integrity, financial soundness,
fair dealing and competence of those it regulates;

4. To ensure that insurance customers receive precise, clear and correct information about
products and services and make them aware of their responsibilities and duties in this
regard;

5. To ensure speedy settlement of genuine claims, to prevent insurance frauds and other
malpractices and put in place effective grievance redressal machinery;

6. To promote fairness, transparency and orderly conduct in financial markets dealing

with insurance and build a reliable management information system to enforce high
standards of financial soundness amongst market players;

7. To take action where such standards are inadequate or ineffectively enforced;

8. To bring about optimum amount of self-regulation in day to day working of the

industry consistent with the requirements of prudential regulation.

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DUTIES, POWERS AND FUNCTIONS OF IRDA

Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of IRDA –

1. Subject to the provisions of this Act and any other law for the time being in force, the
Authority shall have the duty to regulate, promote and ensure orderly growth of the
insurance business and re-insurance business.

2. Without prejudice to the generality of the provisions contained in sub-section (1), the
powers and functions of the Authority shall include,

a) Issue to the applicant a certificate of registration, renew, modify, withdraw,

suspend or cancel such registration.
b) Protection of the interests of the policy holders in matters concerning assigning of
policy, nomination by policy holders, insurable interest, settlement of insurance
claim, surrender value of policy and other terms and conditions of contracts of
insurance.
c) Specifying requisite qualifications, code of conduct and practical training for
intermediary or insurance intermediaries and agents.
d) Specifying the code of conduct for surveyors and loss assessors.
e) Promoting efficiency in the conduct of insurance business.
f) Promoting and regulating professional organizations connected with the insurance
and re-insurance business.
g) Levying fees and other charges for carrying out the purposes of this Act.
h) Calling for information from, undertaking inspection of, conducting enquiries and
investigations including audit of the insurers, intermediaries, insurance
intermediaries and other organizations connected with the insurance business.
i) Control and regulation of the rates, advantages, terms and conditions that may be
offered by insurers in respect of general insurance business not so controlled and
regulated by the Tariff Advisory Committee under section 64U of the Insurance
Act, 1938 (4 of 1938).
j) Specifying the form and manner in which books of account shall be maintained
and statement of accounts shall be rendered by insurers and other insurance
intermediaries.
k) Regulating investment of funds by insurance companies.
l) Regulating maintenance of margin of solvency.
m) Adjudication of disputes between insurers and intermediaries or insurance
intermediaries.
n) Supervising the functioning of the Tariff Advisory Committee.
o) Specifying the percentage of premium income of the insurer to finance schemes for
promoting and regulating professional organizations referred to in clause.
p) Specifying the percentage of life insurance business and general insurance business
to be undertaken by the insurer in the rural or social sector.

Page 12 of 21
 CURRENT SCENARIO IN INDUSTRY

Liberalization and Globalization have allowed the entry of foreign players in the
Insurance sector. With the entry of private and foreign players in the Insurance business,
people have got a lot of options to choose from. To survive, the focus of the modern
insurers shifted to a customer-centric relationship.

India's economic development made it a most lucrative Insurance market in the

world. Before the year 1999, there was monopoly state run LIC transacting life business
and the General Insurance Corporation of India. In the wake of reform process and
passing Insurance Regulatory and Development Authority (IRDA) Act through Indian
parliament in 1999, Indian Insurance was opened for private companies. India offers
immense possibilities to Insurers since it is the world's most populous country having
over a billion people. At present there are fourteen companies each in Life and General
Insurance.

Private and Foreign entrants in the Insurance Industry made others difficult to
retain their market. Higher customer aspirations lead to new expectations and compel
him to move towards the insurer who provides him the best service in time.

FACTORS INVOLVED IN CURRENT MARKET SCENARIO

1. Information Technology:-

The Insurance companies are utilizing the Information technology applications for
better customer service, cost reduction, new product design and development and many
more. In the initial years IT was used more to execute back office functions like
maintenance of accounts, reconciling broker accounts, client processing etc. With the
advent of "database concepts", these functions are better integrated in an administrative
efficiency. The internet technology has enabled the Insurer to innovate new products,
provide better customer service and deeper and wider insurance coverage to them. At
present, Insurance companies are giving customers a distinct claim id to track claims on-
line, entertaining on-line enrollment, eligibility review, financial reporting, and billing
and electronic fund transfer to its benefit customers.

2. Product Innovation:-

Insurers are continuously innovating new products based on forward-looking

models. They have developed new products addressing the new challenges in society and
products to address the hazards from new environmental issues. Understanding the
customer better enable Insurance companies to design appropriate products, determine
price correctly and to increase profitability. Since a single policy cannot meet all the
Insurance objectives, one should have a portfolio of policies covering all the needs.
Product development is made possible by integrating actuarial, rating, claims and
illustration systems. At present, the Life Insurers are concentrating on the pension
schemes and the Non-Life Insurers on many innovative schemes of various realms and
thereby enriching their market share. Moreover, with increased commoditization of
insurance products, brand building is going to play a vital role.

Page 13 of 21
 3. Distribution Network:-

While companies have been successful in product innovation, most of them are still
grappling with right mix of Distribution Channels for capturing maximum market share
to build brand equity, building strong and effective customer relationships and cost
effective customer service. While the traditional channel of tied up advisors or agents
would be the chief distribution channel, insurer should innovate and find new methods of
delivering the products to customers. Corporate agency, brokerage, Bank assurance, e-
insurance, cooperative societies and panchayats are some of the channels, which can be
tapped by the insurers to reach the appropriate market segments. Now days, the urban
masses are tapped with the new techniques provided by Information Technology through
Internet. Rural masses are attracted by the consultative approach adopted by the Insurers.
Moreover, they attract the customers through telephone and mobile also.

4. Customer services:-

In the present competitive scenario, a key differentiator is the professional

customer service in terms of quality of advice on product choice along with policy
servicing. Servicing focus is on enhancing the customer's experience and maximizing his
convenience. This calls the effective CRM system, which eventually creates sustainable
competitive advantage and enables to build long lasting relationship.

5. Modern Marketing Approach:-

After doing market research and finalizing on segmentation, targeting and

positioning the strategy would focus on the marketing mix namely, Product, Price, Place
and Promotion. While determining the implementation methodology, the four
characteristics viz. Intangibility, Inseparability, Perish ability and Variability gives rise to
certain unique requirements that deserve careful attention while formulating the
marketing strategy for insurance. After implementation, the insurers should concentrate
on the effective control that would enhance their business.

In India Insurance is sold and not bought. The agents / Advisors by using various
strategies sell the product by convincing the customers. Moreover, they push Policies
with the highest premium to pocket a higher commission. The consultative approach to
selling is the modern approach, which helps customers and prospects to buy. A
consultant makes calls and sells just like any other sales person. The difference is in their
attitude, their approach and their commitment. Here, the customer is seen as a person to
be served and not a person to be sold. It helps the purchaser to make an intelligent
decision. The four-step process includes:

1. Need discovery.

2. Selection of the product.

3. Need satisfaction presentation.

4. Serving the sale.

Page 14 of 21
 KEY PLAYERS WITH MARKET SHARE
INTRODUCTION

Global integration of financial markets resulted from de-regulating measures,

technological information explosion and financial innovations. Liberalization and
Globalization have allowed the entry of foreign players in the Insurance sector. With the
entry of private and foreign players in the Insurance business, people have got a lot of
options to choose from. Radical changes are taking place in customer profile due to the
changing life style and social perception, resulting in erosion of brand loyalty. To survive,
the focus of the modern insurers shifted to a customer-centric relationship. The paper
focuses the current position of insurance industry.

LIBERALIZATION AND PRIVATISATION (HOW THE DIFFERENT

KEY PLAYERS CAME INTO MARKET?)

India's economic development made it a most lucrative Insurance market in the world.
Before the year 1999, there was monopoly state run LIC transacting life business and the
General Insurance Corporation of India with its four Subsidiaries transacting the rest. In
the wake of reform process and passing Insurance Regulatory and Development
Authority (IRDA) Act through Indian parliament in 1999, Indian Insurance was opened
for private companies.

Liberalization on the Insurance sectors has allowed the foreign players to enter the market
with their Indian partners. Most of the foreign Insurers have joined within the local
market. India offers immense possibilities to foreign Insurers since it is the world's most
populous country having over a billion people.

Insurance industry had ten and six entrants in life and non-life sector respectively in the
year 2000-2001. The industry again saw two and three entrants in the life and non-life
business respectively in the year 2001-2002. One additional entrant was made both in the
life and in non-life business in 2004 and 2005 respectively. At present there are fourteen
companies each in Life and General Insurance. The Funds earlier generated by the state
owned insurers have been diversified with other new insurers. We should wait and see
how the new players are going to boost up our economy.

COMPETITION

Private and Foreign entrants in the Insurance Industry made others difficult to retain their
market. Higher customer aspirations lead to new expectations and compel him to move
towards the insurer who provides him the best service in time. It becomes less viable for
them even to maintain the functional networks or competitive standards and services. To
survive in the Industry they analyse, the emerging requirements of the
policyholders/insurers and they are in the forefront in providing essential services and
introducing novel products. Thereby they become niche specialists, who provide the right
service to the right person in right time.

The following table shows the market share of life and non-life insurers
Page 15 of 21
 MARKET SHARE (%)  
 LIFE INSURERS  NON – LIFE INSURERS
1. LIC 76.07 1. New India 21.41
2. ICICI Prudential 6.91 2. National 17.11
3. Bajaj Allianz 4.75  3. United India 17.11
4. HDFC Standard 2.98 4. Oriental 17.02
5. Birla Sunlife 1.72 5. ICICI- Lombard 8.04
6. Tata AIG 1.66 6. Bajaj Allianz 6.15
7. SBI Life 1.46 7. IFFCO-Tokio 4.00
8. Max New York 1.28 8.  Tata-AIG 2.89
9. Aviva 1.08 9. ECGC 2.50
10. Kotak Mahindra Old Mutual 0.71 10. Royal Sundaram 2.17
11. ING Vysya 0.54 11. Cholamandalam 1.22
12. AMP Sanmar 0.46 12. HDFC-Chubb 0.89
13. Met Life 0.37 13. Reliance General 0.75
14. Sahara Life 0.03 14. Agriculture --
Insurance Co.
 Private total 23.93 Private total 27.35
 Public total 76.07 Public total 72.65
 Grand total 100.00 Grand total 100.00
 Source : www.irdaindia.org  

In the above table shows, the private players in the life insurance business have increased
their market share to 23.93 per cent. Among them ICICI prudential is ranked first in
capturing the market followed by Bajaj Allianz and HDFC Standard. In the General
Insurance sector the private players have captured 27.35 per cent. Among them ICICI-
Lombard is ranked first, followed by Bajaj Allianz and IFFCO-Tokyo.
The healthy competition in the sector enabled the State owned insurers of our mother
country to reduce its market share to 76.07 per cent and 72.65 percent in life and non-life
business respectively. Moreover, private insurers have planned to increase their market
share in the next five years. The public insurers have to enrich its approach to withhold its
share.

Page 16 of 21
 FUTURE TRENDS: MARKET GROWTH

With a huge population base and large untapped market, insurance industry is a big
opportunity area in India for national as well as foreign investors.

India is the fifth largest life insurance market in the emerging insurance economies
globally and is growing at 32-34% annually. This impressive growth in the market has
been driven by liberalization, with new players significantly enhancing product
awareness and promoting consumer education and information.

The strong growth potential of the country has also made international players to look at
the Indian insurance market. Moreover, saturation of insurance markets in many
developed economies has made the Indian market more attractive for international
insurance players. This research report will help the client to analyze the leading-edge
opportunities critical to the success of insurance industry in India. Based on this analysis,
the report gives a future forecast of the market that is intended as a rough guide to the
direction in which the market is likely to move.

-Total life insurance premium in India is projected to grow Rs 1,230,000 crore by 2010-11.

-Total non-life insurance premium is expected to increase at a CAGR of 25% for the
period spanning from 2008-09 to 2010-11.

-With the entry of several low-cost airlines, along with fleet expansion by existing ones
and increasing corporate aircraft ownership, the Indian aviation insurance market is all
set to boom in a big way in coming years.

-Home insurance segment is set to achieve a 100% growth as financial institutions have
made home insurance obligatory for housing loan approvals.

-Health insurance is poised to become the second largest business for non-life insurers
after motor insurance in next three years.

-A booming life insurance market has propelled the Indian life insurance agents into the
‘top 10 country list’ in terms of membership to the Million Dollar Round Table (MDRT) —
an exclusive club for the highest performing life insurance agents.

To grab the maximum market share, the companies are focusing on the following
aspects:-

Information Technology

Insurers are the earlier adopters of technology. Because of the Information revolution,
customers are free to choose from a wide range of new and innovative products. The
Insurance companies are utilizing the Information technology applications for better
customer service, cost reduction, new product design and development and many more.

Page 17 of 21
New technology gives the policyholders / insured better, wider and faster access to
products and services. The impact of Information Technology in Insurance business is
being felt at an accelerating pace. In the initial years IT was used more to execute back
office functions like maintenance of accounts, reconciling broker accounts, client
processing etc. With the advent of "database concepts", these functions are better
integrated in an administrative efficiency.

The real evolution is however emerged out of Internet boom. The Internet has provided
brand new distribution channels to the Insurers. The technology has enabled the Insurer
to innovate new products, provide better customer service and deeper and wider
insurance coverage to them. At present, Insurance companies are giving customers a
distinct claim id to track claims on-line, entertaining on-line enrollment, eligibility review,
financial reporting, and billing and electronic fund transfer to its benefit clan customers.

Product Innovations

Insurers are continuously innovating new products based on forward-looking models.

They have developed new products addressing the new challenges in society and
products to address the hazards from new environmental issues. Companies will need to
constantly innovate in terms of product development to meet ever-changing consumer
needs. Understanding the customer better will enable Insurance companies to design
appropriate products, determine price correctly and to increase profitability. Since a
single policy cannot meet all the Insurance objectives, one should have a portfolio of
policies covering all the needs. Product development is made possible by integrating
actuarial, rating, claims and illustration systems. At present, the Life Insurers are
concentrating on the pension schemes and the Non-Life Insurers on many innovative
schemes of various realms and thereby enriching their market share. Moreover, with
increased commoditization of insurance products, brand building is going to play a vital
role.

Distribution Network

While companies have been successful in product innovation, most of them are still
grappling with right mix of Distribution Channels for capturing maximum market share
to build brand equity, building strong and effective customer relationships and cost
effective customer service. While the traditional channel of tied up advisors or agents
would be the chief distribution channel, insurer should innovate and find new methods of
delivering the products to customers. Corporate agency, brokerage, Banc assurance, e-
insurance, cooperative societies and panchayats are some of the channels, which can be
tapped by the insurers to reach the appropriate market segments. Now days, the urban
masses are tapped with the new techniques provided by Information Technology through
Internet. Rural masses are attracted by the consultative approach adopted by the Insurers.
Moreover, they attract the customers through telephone and mobile also.

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Customer Education and Services

Insurance is a unique service industry. The key industry drivers are related to life style
issues in terms of perceiving insurance as a savings instrument rather than for risk cover,
need based selling, quality of service and customers awareness.

In the present competitive scenario, a key differentiator is the professional customer

service in terms of quality of advice on product choice along with policy servicing.
Servicing focus is on enhancing the customer's experience and maximizing his
convenience. This calls the effective CRM system, which eventually creates sustainable
competitive advantage and enables to build long lasting relationship.

MODERN MARKETING APPROACH:

Marketing strategies for insurance in the emerging scenario could be understood in terms
of the following steps:

Having done market research and finalizing on segmentation, targeting and positioning
the strategy would focus on the marketing mix namely, Product, Price, Place and
Promotion. While determining the implementation methodology, the four characteristics
viz. Intangibility, Inseparability, Perish ability and Variability gives rise to certain unique
requirements that deserve careful attention while formulating the marketing strategy for
insurance. After implementation, the insurers should concentrate on the effective control
that would enhance their business.

In India Insurance is sold and not bought. The agents/Advisors by using various
strategies sell the product by convincing the customers. Moreover, they push Policies
with the highest premium to pocket a higher commission. The consultative approach to
selling is the modern approach, which helps customers and prospects to buy. A
consultant makes calls and sells just like any other sales person. The difference is in their
attitude, their approach and their commitment. Here, the customer is seen as a person to
be served and not a person to be sold. It helps the purchaser to make an intelligent
decision. The four-step process includes:

1) Need discovery
2) Selection of the product
3) Need satisfaction presentation
4) Serving the sale

This approach to selling their products requires understanding of concepts and principles
borrowed from the fields of psychology, communications, and sociology and needs a lot
of personal commitments and self – discipline from the seller.

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The commitments referred are:

 Finding and understanding the needs of the customers.

 Partnering with the customers.
 Helping the customers to achieve his business and other objectives by the purchase
of the product or service.
 Believing that your products / services are a great fit with your customer's needs,
and
 Believing in yourself and your ability to help the customers in solving their
problems.

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 BIBLIOGRAPHY

1. http://www.economywatch.com

2. http://www.indianmba.com

3. http://business.mapsofindia.com

4. http://www.irda.gov.in

5. http://www.parisandpartners.com

6. http://www.scribd.com

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