PROJECT REPORT

ON

“THE CHANGING SCENARIO OF INSURANCE”

At

SUBMITTED TO:
Mr. ASHISH CHANDRA

SUBMITTED BY:
YASH BANSAL
05115903909

RUKMINI DEVI INSTITUTE OF ADVANCED

STUDIES
ACKNOWLEDGEMENT

I YASH BANSAL student of RDIAS [Rukmini Devi Institute of

Advanced Studies], have done a project on TATA AIG Life

Insurance Co. Ltd. with the help of able people who have guided me

at every moment of crisis. First of all I owe my everything to my

Director Sir & to all my Professors at RDIAS, who helped me a lot in

developing a right attitude, a competitive spirit, a sense of

responsibility and commitment to work hard. I truly admire their

competence & dedications. I give sincerely thanks to Mr. ASHISH

CHANDRA who guided me through out the project with his

knowledge and skill.

Secondly, I would like to thank my parents & my colleagues.

In the need, I would like to thank that my supreme authority which

rests above all-THE ALL MIGHTY God who has blessed me with

opportunity to work with such a good people. I sincerely pray to God

to give me courage and will to work harder & harder all through my

life.

YASH BANSAL
PREFACE

This project reports on THE CHANGING SCENARIO OF

INSURANCE at TATA AIG

This project report gives the needed beneficial practical knowledge

and could help anyone to know the history and uses of the products

being promoted by the company.

This project is based on the qualitative data and it help to discover

new relationship. So this project is based on the exploratory

research.

In this project primary data is qualitative in nature. Along with this

data a lot of secondary data is also used.

EXECUTIVE SUMMARY
In today’s competitive and dynamic world, with every business
providing the same kind of product or service, only that firm
which comes up with an innovative idea can hope to survive in the
long run, by attracting and luring customers.

Insurance, sure is an upcoming sector but with the privatization of

the same, selling insurance products has become tough due to the
competition angle attached to it.

It is usually said that if you can sell insurance, you can sell anything
in the world including garbage. The reason behind this concept is
the hesitant and unaware population, who simply run away at the
mere mention of its name.

Providing insurance to a huge population such as ours encompassing

different strata of society has indeed been a formidable task for
the last few decades. WHO statistics put the insurance access in
India at around 65 percent. The remaining 35 percent do not have
any access at all. Governments in most parts of the world, developed
or otherwise, realize the limitations when it comes to providing
Insurance per se or its financing aspects. In a globalize market-
driven economy, it becomes imperative for each country to look for
the solutions and structure them to suit the domestic needs. While
there will be various factors both external and internal influencing
this search, there is no doubt that public and private healthcare
providers and financers will have to keep the customer in focus when
formulating a well thought out and highly integrated approach to
cover all sorts of requirements.

It is true that in managing healthcare, the pre-payment route

through insurance schemes rather than out-of-pocket payments are
preferable and a fairer form of revenue collection. But there are
loopholes in the present indemnity-based insurance products
offered by the public sector units and pricing of products are
mostly non-scientific. It is well known that Mediclaim is a loss-
making proposition with claim ratios being as high as 130 percent.
The opening up of the health insurance sector to private is seen as
one that will provide better solutions. Insurance concepts in
healthcare are changing from managed care to defined care and
there is no doubt that the private insurers can provide the
customers with a wide variety of products. But health insurance is
still in a limbo at the moment in absence of any clear-cut guidelines
from the IRDA.

Pricing is the key issue and major international players already

present in India are sort of waiting in the wings to see what and how
their competitors go about their strategies.
COMPANY PROFILE
It is one of the largest financial investments in India.
Broad spectrum of financial solutions for corporate and retail
customers.
Assets in excess of Rs. 106600 cr.
Better than sovereign rating.
It is trusted by millions of Indians over the years.

Shares In Market
74%-TATA Group
26%-AIG Group

VISION

To be India's most preferred General Insurance Company.

PURPOSE

To create unmatched value for our customers, employees, business

partners and shareholders by delivering remarkable service that is
consistent, fair and transparent.

VALUES
• Customer First: Anticipate their priorities. Exceed their
expectations.
• Integrity: We must conduct our business fairly, with honesty
and transparency. Everything we do must stand the test of
public scrutiny.

• People: We must work cohesively with our colleagues across

the Group and with our customers and partners around the
world, building strong relationships based on tolerance,
understanding and mutual cooperation. Strive to develop
diverse talent and reward excellence.

• Performance: We must constantly strive to achieve the

highest possible standards in our day-to-day work and in the
quality of the goods and services we provide.

• Passion: We must be excited about what we do. We must have

a strong internalized drive to meet goals. Relentless
determination to solve customer problems.
 AREAS OF SPECIALISATION

Premature Death

1 out of 4 people don’t reach the age of 60.

 You are providing your family with a lifestyle.
 This lifestyle is dependent on your continued income
generating capability.
 If this income were to stop unfortunately, how would your
family meet its financial requirements?
 My responsibility is to help you protect your family financially
in event something unfortunate happens…

Living too long

7 out of 10 people endure retirement instead of enjoying

it.
 Do you want financial independence post retirement?
 Imagine living beyond your working years on a depleted income.
 However, you would want to maintain your some living
standards and be financially independent.
 My responsibility is to help you secure a financially stable
future post retirement.

Children Future
To get a premier MBA degree in year 2010 will cost Rs.
14 lakh.
 It is your responsibility to provide your children with best
possible education they can have.
 Do you want to compromise on their future?
My responsibility is to help you build financial assets for your
children’s future.
OBJECTIVES OF THE STUDY

The objectives of this project are as follows:

 To learn and understand the distribution aspect of insurance

products.

 To identify the insurance needs of the Indian population with

respect to their emotional, physical and financial conditions.

 To match the needs of the population with the products in

hand or else design a new product.
RESEARCH METHODOLOGY

The research is carried on in a proper planned and systematic

manner. This methodology includes:

 Familiarization with the concept of insurance and its various

terms.

 Thorough study of the information collected.

 Conclusions based on findings.

WHEN WAS INSURANCE STARTED….
Almost 4,500 years ago, in the ancient land of Babylonia, traders
used to bear risk of the caravan trade by giving loans that had to be
later repaid with interest when the goods arrived safely. In 2100
BC, the Code of Hammurabi granted legal status to the practice.
That, perhaps, was how insurance made its beginning.

Life insurance had its origins in ancient Rome, where citizens

formed burial clubs that would meet the funeral expenses of its
members as well as help survivors by making some payments.

As European civilization progressed, its social institutions and

welfare practices also got more and more refined. With the
discovery of new lands, sea routes and the consequent growth in
trade, Medieval guilds took it upon themselves to protect their
member traders from loss on account of fire, shipwrecks and the
like.

Since most of the trade took place by sea, there was also the fear
of pirates. So these guilds even offered ransom for members held
captive by pirates. Burial expenses and support in times of sickness
and poverty were other services offered. Essentially, all these
revolved around the concept of insurance or risk coverage. That's
how old these concepts are, really.

In 1347, in Genoa, European maritime nations entered into the

earliest known insurance contract and decided to accept marine
insurance as a practice.
The first step….
Insurance as we know it today owes its existence to 17th century
England. In fact, it began taking shape in 1688 at a rather
interesting place called Lloyd's Coffee House in London, where
merchants, ship-owners and underwriters met to discuss and
transact business. By the end of the 18th century, Lloyd's had
brewed enough business to become one of the first modern
insurance companies.

Insurance and Myth...

Back to the 17th century. In 1693, astronomer Edmond Halley
constructed the first mortality table to provide a link between the
life insurance premium and the average life spans based on
statistical laws of mortality and compound interest. In 1756, Joseph
Dodson reworked the table, linking premium rate to age.

Enter companies...
The first stock companies to get into the business of insurance were
chartered in England in 1720. The year 1735 saw the birth of the
first insurance company in the American colonies in Charleston, SC.

In 1759, the Presbyterian Synod of Philadelphia sponsored the first

life insurance corporation in America for the benefit of ministers
and their dependents.

However, it was after 1840 that life insurance really took off in a
big way. The trigger: reducing opposition from religious groups.
The growing years...
The 19th century saw huge developments in the field of insurance,
with newer products being devised to meet the growing needs of
urbanization and industrialization.

In 1835, the infamous New York fire drew people's attention to the
need to provide for sudden and large losses. Two years later,
Massachusetts became the first state to require companies by law
to maintain such reserves. The great Chicago fire of 1871 further
emphasized how fires can cause huge losses in densely populated
modern cities. The practice of reinsurance, wherein the risks are
spread among several companies, was devised specifically for such
situations.

There were more offshoots of the process of industrialization. In

1897, the British government passed the Workmen's Compensation
Act, which made it mandatory for a company to insure its employees
against industrial accidents.

With the advent of the automobile, public liability insurance, which

first made its appearance in the 1880s, gained importance and
acceptance?

In the 19th century, many societies were founded to insure the life
and health of their members, while fraternal orders provided low-
cost, members-only insurance.

Even today, such fraternal orders continue to provide insurance

coverage to members as do most labour organizations. Many
employers sponsor group insurance policies for their employees,
providing not just life insurance, but sickness and accident benefits
and old-age pensions. Employees contribute a certain percentage of
the premium for these policies.
INSURANCE IN INDIA
The insurance sector in India has come a full circle from being an
open competitive
Market to nationalization and back to a liberalized market again.
Tracing the
Developments in the Indian insurance sector reveals the 360-degree
turn witnessed over a period of almost two centuries.

A brief history of the Insurance sector

Insurance in India can be traced back to the Vedas. For instance,
yogakshema, the name of Life Insurance Corporation of India's
corporate headquarters, is derived from the Rig Veda. The term
suggests that a form of "community insurance" was prevalent around
1000 BC and practiced by the Aryans.

Bombay Mutual Assurance Society, the first Indian life assurance

society, was formed in 1870. Other companies like Oriental, Bharat
and Empire of India were also set up in the 1870-90s

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 theTriton Insurance Company Ltd., the first
general insurance company established in the year 1850 in Calcutta
by the British.

Some of the important milestones in the general insurance business

in India are:

1907: The Indian Mercantile Insurance Ltd. set up, the first
company to transact all classes of general insurance business.
1957: General Insurance Council, a wing of the Insurance
Association of India, frames a code of conduct for ensuring fair
conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set

minimum solvency margins and the Tariff Advisory Committee set
up.

1972: The General Insurance Business (Nationalization) Act, 1972

nationalized 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.
Insurance sector reforms
In 1993, Malhotra Committee, headed by former Finance Secretary
and RBI Governor R.N. Malhotra, was formed to evaluate the Indian
insurance industry and recommend its future direction.
The Malhotra committee was set up with the objective of
complementing the reforms initiated in the financial sector.
The reforms were aimed at “creating a more efficient and
competitive financial system suitable for the requirements of the
economy keeping in mind the structural changes currently underway
and recognising that insurance is an important part of the overall
financial system where it was necessary to address the need for
similar reforms…” In 1994, the committee submitted the report and
some of the key recommendations
included:

i) Structure
 Government stake in the insurance Companies to be brought
down to 50%.
 Government should take over the holdings of GIC and its
subsidiaries so that these subsidiaries can act as independent
corporations.
 All the insurance companies should be given greater freedom
to operate.

ii) Competition
 Private Companies with a minimum paid up capital of Rs.1bn
should be allowed to enter the industry.
 No Company should deal in both Life and General Insurance
through a single entity.
 Foreign companies may be allowed to enter the industry in
collaboration with the domestic companies.
  Postal Life Insurance should be allowed to operate in the rural
market
 Only one State Level Life Insurance Company should be allowed
to operate in each state.

iii) Regulatory Body

 An Insurance Regulatory body should be set up
 Controller of Insurance (Currently a part from the Finance
Ministry) should be made independent

iv) Investments

 Mandatory Investments of LIC Life Fund in government

securities to be reduced from 75% to 50%
 GIC and its subsidiaries are not to hold more than 5% in any
company (There current holdings to be brought down to this
level over a period of time)

v) Customer Service
 LIC should pay interest on delays in payments beyond 30 days
 Insurance companies must be encouraged to set up unit linked
pension plans
 Computerization of operations and updating of technology to
be carried out in the insurance industry

Hence, it was decided to allow competition in a limited way by

stipulating the minimum capital requirement of Rs.100 crores. The
committee felt the need to provide greater autonomy to insurance
companies in order to improve their performance and enable them to
act as independent companies with economic motives. For this
purpose, it had proposed setting up an independent regulatory body.
The Insurance Regulatory and Development
Authority (IRDA)

Reforms in the Insurance sector were initiated with the passage of

the IRDA Bill in Parliament in December 1999. The IRDA since its
incorporation as a statutory body in April 2000 has fastidiously
stuck to its schedule of framing regulations and registering the
private sector insurance companies.
The other decisions taken simultaneously to provide the supporting
systems to the insurance sector and in particular the life insurance
companies were the launch of the IRDA’s online service for issue
and renewal of licenses to agents.
The approval of institutions for imparting training to agents has also
ensured that the insurance companies would have a trained
workforce of insurance agents in place to sell their products, which
are expected to be introduced by early next year.
Since being set up as an independent statutory body the IRDA has
put in a framework of globally compatible regulations. In the private
sector 12 life insurance and 6 general insurance companies have
been registered.
 ALL ABOUT INSURANCE

DEFINITIONS

GENERAL DEFINITION:
In the words of John Magee, " Insurance is a plan by themselves
which large number of people associate and transfer to the
shoulders of all, risks that attach to individuals. "

FUNDAMENTAL DEFINITION:
In the words of D.S.Hansell, “Insurance accumulated contributions
of all parties participating in the Scheme. "

CONTRACTUAL DEFINITION:
In the words of Justice Tindall,"Insurance is a contract in which a
sum of money is paid to the assured as consideration of insurer’s
incurring the risk of paying a large sum upon a given contingency."

CHARACTERISTICS OF INSURANCE
 Sharing of risks
 Cooperative device
 Evaluation of risk
 Payment on happening of a special event
 The amount of payment depends on the nature of losses
incurred.
 The success of insurance business depends on the large
number of people insured against similar risk.
 Insurance is a plan, which spreads the risk and losses of few
people among a large number of people.
 The insurance plan is a plan in which the insured transfers his
risk on the insurer.
FUNCTIONS OF INSURANCE

PRIMARY FUNCTIONS

1. Provide protection: - Insurance cannot check the happening

of the risk, but can provide for the losses of risk.

2. Collective bearing of risk: - Insurance is a device to share

the financial losses of few among many others.

3. Assessment of risk: - Insurance determines the probable

volume of risk by evaluating various factors that give rise to
risk.

4. Provide Certainty: - Insurance is a device, which helps to

change from uncertainty to certainty.

SECONDRY FUNCTIONS:

1. Prevention of losses: - Insurance cautions businessman and

individuals to adopt suitable device to prevent unfortunate
consequences of risk by observing safety instructions.

2. Small capital to cover large risks: - Insurance relives the

businessman from security investment, by paying small amount
of insurance against larger risks and uncertainty.

3. Contributes towards development of larger industries.

OTHER FUNCTIONS:
It is a means of savings and investment.
NEED ANALYSIS
First let us look at why one needs insurance and then we will study
various needs of the customers.

WHY WE NEED INSURANCE?

We all hope to live a full life till a ripe old age. To do the very last
for our parents and watch our children stand on their own feet.

But, what if fate cuts life short? Who would pay for our children’s
education? Their marriage? Ensure life’s continuity for them.

Why not plan for life’s adversities?

What if a sudden disability or illness puts us out of action? If we

were unable to attend office for a while, who would take care of all
the medical expenses? Who would pay the mounting household bills?

Should these adversities occur, are we equipped to face the

situation? Where would we get the money to face the crisis? Would
life continue smoothly for our children?

Why not plan to protect and provide for them?

Since we have no control over life’s ebbs and flows, why not do
something over which we do not have control – plan for life’s
contingencies.
DO I NEED INSURANCE?

HUMAN LIFE CONCEPT

Your life is your most valuable asset. This is easily proved if we were
to assign a monetary value to your life; this value depends on your
income- earning potential or your Human Life Value.

Your income supports your family. Helps them to get the most out of
life. Month after month, year after year, you and your dependents
live the best way you can use the money you earn. This money
enables your household to run smoothly, your children to college,
takes care of the medical bills, your vacations and helps maintain
your lifestyle.

On the basis of your income or earning potential, we can calculate

your Human Life Value. A simple rule of thumb to compute it as
follows: multiply your present annual income by the number of years
until you plan to retire.

This does not take in factors such as inflation or an increase in your

income over time. Therefore, your Human Life Value is a great deal
higher than the amount calculated above.

What if an unfortunate incident happens in your life and you were

unable to work? Your income would stop. Your family is then, at a
risk of losing all your future income. The potential cost of losing
your income is too great to ignore.
PROTECTING YOUR MOST VALUABLE ASSET
If something were happen to you, here are a few possible ways of
dealing with the financial implications:

1. Draw from your savings: But how long would the funds last? A
lifetime of savings could be used up in a few months.
2. Borrow from others: Who will lend you the money? Even family
and friends can only help to an extent. And anyway, this would
only be a short-term solution.
3. Sell your assets: What price will you get for your assets?
Would you like to sell your home? Your car?
4. Transfer the risk to an insurance company.

We recommend that you transfer the risk to an insurance company.

It’s cheaper, safer and smarter in the long run.

If you insure the risk, your money outflow is actually miniscule. For
the sake of illustration, an annual premia payout of approx. Rs. 25
for 15 years guarantees your family will receive Rs. 1000 – if
something happens to you in that situation a small price to pay for
providing peace of mind to your family. A smaller sum is payable for
transferring the risk of disability.

Another advantage of transferring the risk is that you remove the

uncertainty.

So do take care to protect your most valuable asset…..your life!

WHAT IF I ALLREADY HAVE INSURANCE?

They say that the only thing permanent in life is change. You have to
adjust to life’s changes and accordingly provide for protection of
your family and make prospects for unforeseen circumstances. The
amount of protection and prospect you require depends on your life
stage.

You should re-evaluate your needs for protection and make provision
whenever there is a change in your life stage.

While your protection needs may be comparatively less when you are
single, they increase when you have children. Re-evaluate your
insurance needs at the following life stages:

 Your marriage
 The birth of a child
 Schooling of a child
 Marriage of a child
 Retirement
CHANGES IN YOUR LIFENEEDS:
Your provision needs may suddenly increase should such a
circumstance happen:

 Taking care of an ailing child

 Taking care of an aged relative
 Fighting an illness
 Buying a bigger house, etc.

CHANGES IN YOUR LIFESTYLE:

Your insurance needs change with changes in your lifestyle. You may
like to increase your cover when:

 There has been a steady rise in your income, or

 You have received a sudden windfall and you can put it aside as
tax-deferred savings for retirement.
NEED FOR HEALTH INSURANCE
Providing quality healthcare to a huge population such as ours
encompassing different strata of society has indeed been a
formidable task for the last few decades. WHO statistics put the
healthcare access in India at around 65 percent. The remaining 35
percent do not have any access at all. Government in most parts of
the world developed or otherwise, realizes the limitations when it
comes to provide healthcare per se or its financing aspects. In a
globalize market-driven economy, it becomes imperative for each
country to look for the solutions and structure them to suit
domestic needs. While there will be various factors both external
and internal influencing this search, there is no doubt that public
and private healthcare providers and financers will have to keep the
patient or customer in focus when formulating a well thought out
and highly integrated approach to cover all sorts of requirements.

Pricing is the key issue and major international players already

present in India are sort of waiting in the wings to see what and hoe
their competitors go about their strategies. There is no doubt that
private medical insurance is bound to be dearer than the existing
public sector health policies. And therein lies the problem for the
new entrants who are at a disadvantage as the incumbent players
are providing comprehensive coverage at low and unviable premiums.
The new entrants should ideally not compete with existing Mediclaim
policies, use a better USP than pricing and design new products
suited to the Indian background and succeed in building a sure but
steady market. There is a room for everyone provided there is a
simplicity and transparency, insurers are neutral and willing to
control unnecessary healthcare delivery costs to be patients and
make claim procedures simple.
CHILDREN’S HEALTH INSURANCE PROGRAM
The health care needs of Indian children are compelling. The Indian
population has a greater proportion of children (33 percent younger
than age 15, compared with 22 percent for the U.S population of all
races) and a higher birth rate (26.6 live birth per 1,000 population,
compared with 15.9 per 1,000 for U.S all races).

However, teen pregnancy is much higher, with 45 percent of Indian

mothers under age 20 at the birth of their first child, compared
with 24 percent of U.S mothers of all races. In addition, a much
greater proportion of Indian people continue to live below the
Federal poverty level (1990 Census shows 31.6 percent of Indians
residing in the 35 states with Indian reservations had income below
the federal Poverty level- a rate 2.4 times the comparable rate for
Americans of all the races).

Very few Indian people have access to or can afford private health
insurance. Many people on reservations depend upon HIS-funded
health care. HIS per capita spending is only one third the amount
spent on health care by the average American. HIS direct care, and
HIS-funded Tribal and urban Indian health programs provide mostly
primary health care services. HIS funds used to pay other health
care providers for specialty care are extremely limited, estimated
to meet only about 60 percent of the need for such services.

Approximately half or more of Indian people live off reservations in

other rural and urban areas and often lack access to affordable,
culturally approximate care. HIS is able to fund 33 urban Indian
programs for a total of only about $25 million. Thus, CHIP presents
a unique opportunity to maximize the potential for Federal and
State funds to help fill some of the large gaps in health care for
uninsured, low-income Indian children by expanding the provision of
child health assistance in an effective and efficient manner.
ONSET OF INSURANCE
Liberalization and globalization of economy has created enormous
pressure on Indian companies to change. In order to survive and
grow in the fast changing competitive market, a paradigm shift is
needed for Indian firms. It has become inevitable for Indian
companies to be competitive by focusing on customer, competition
and competencies, the three important aspects of modern business.
However, it requires tremendous effort, cultural transformation and
change in the outlook for Indian companies to emulate this paradigm
shift.

Indian business and industry are no doubt under enormous pressure

owing to the impact of liberalization and globalization of the Indian
economy. However, the rise of Islamic fundamentalism showing its
ugly head in the terrorist attacks on the US followed by the US war
against Al-Qaeda in Afghanistan has worsened the situation. The
tremors of Indo-Pak war have only added to the complexity of the
already subdued business environment in India as well as across the
Globe. Now, with the Allied forces again involved in a war with Iraq
with no indication regarding the timing of the outcome, further
problems can only be expected.

On the other hand, our northern neighbor, China, has stolen a clear
march over us in the realm of industrial growth. It has set up such
huge manufacturing facilities, which have resulted in very low cost
per unit. Political governance in that country is much disciplined too.
The process of liberalization in China started in 1979 has been
steadily maintained. As a result of all this China accounts for 4% of
global trade while we are less than 1%. They have received FDI
flows of over US $42 bn in the year 2001-02, while India could get
only about US $2.5 bn.
INDIAN INSURANCE SECTOR

At the turn of the century, the Indian insurance sector, once the
domain of state-run insurance companies was open to private
enterprise. Closed to foreign competition since nationalization in
1956, the life insurance industry had been protected from
competitive pressures. Now, with the re-opening of the sector,
several new players have entered the scene.

The Insurance sector opened up to private competition on December

7, 1999, with the introduction of the Insurance Regulatory and
Development Authority (IRDA (bill.

The business of insurance is not new to India. It is been around for

over a century. With the opening up of the sector, leading
multinational entered the Indian market through partnerships with
eminent Indian business houses. What was the quite business is
becoming one of the hottest businesses today.
THE GREAT INDIAN INSURANCE MARKET
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 averages, again providing a great marketing
opportunity for the insurance companies. The share of Indian
insurance in the global market stood around 0.41% in 2000. When
calculated as premiums in percent of GDP, the figure stands around
2.32, whereas countries like United States and Japan have 8.76 and
10.92 respectively. However, despite its teeming more than one
billion population, India still has a low insurance penetration of 1.95
percent, 51st in the world. Despite the fact that India boasts a
saving rate of around 25 percent, less than 5percent is spent on
insurance. These figures indicate the extent of untapped potential
of the Indian insurance market.

Second, till about four years back life insurance in India was
synonymous to LIC, which did most of the category building effort.
While 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.

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.
TATA GROUP
The Tata Group companies operate in seven business sectors:
Communications and Information Technology, Engineering, Materials,
Services, Energy, Consumer Products and Chemicals. The Group was
founded by Jamsetji Tata in the mid 19th century, a period when
India had just set out on the road to gaining independence from
British rule. Consequently, Jamsetji Tata and those who followed
him aligned business opportunities with the objective of nation
building.

The Tata Group is one of India's largest and most respected

business conglomerates, with revenues in 2007-08 of $ 62.5 billion
(Rs. 251,543 crore). Tata companies together employ some 350,000
people. The Group's 27 publicly listed enterprises have a combined
market capitalization of some $ 60 billion and a shareholder base of
3.2 million. The major Tata Companies are Tata Steel, Tata
Consultancy Services, Tata Motors, Tata Chemicals, Tata
Communications, Tata Power, Indian Hotels and Tata Tea. The Tata
Group has operations in more than 85 countries across six
continents, and its companies export products and services to 80
countries.

American International Group, Inc. (AIG)

American International Group, Inc. (AIG) is a leading international
insurance organization with operations in more than 130 countries
and jurisdictions. AIG companies serve commercial, institutional, and
individual customers through one of the most extensive worldwide
property-casualty networks of any insurer. In addition, AIG
companies are leading providers of life insurance and retirement
services around the world. AIG common stock is listed on the New
York Stock Exchange, as well as the stock exchanges in Ireland and
Tokyo.
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Insurance sector to drive Indian CRM market

After telecom and banking, it’s the turn of insurance companies to
deploy customer relationship management (CRM) solutions. As
competition intensifies, insurers are trying every trick in the book
to retain existing customers, with a wide range of services driving
the market for CRM applications in the process, says Akhtar Pasha

While the insurance sector is seeking to maintain a balance between

acquiring customers and developing existing ones, customer
acquisition is vital, as no retention strategy will entirely stem
customer defection. Today, the focus is on selling more products to
existing customers to improve profitability. Customer-focused
strategies require CRM (customer relationship management) to help
acquire customers thorough various touch points and translate
operational data into actionable insights for proactively serving
customers.

While the CRM market in India is still nascent, bigger players such
as ICICI Prudential Life Insurance Company are adopting it in a big
way. Anil Tikoo, head-IT at ICICI Prudential Life Insurance
Company says, “As a forward looking company, we see CRM playing a
significant role in acquiring new customers. CRM lets us obtain
granular details about our customers, helping us to design better
products, improve service levels and reduce operational costs.” CRM
has helped ICICI Prudential Life capture five lakh customers
through effective event-based marketing and lead tracking to
cross- and up-sell products.

Tarun Pandey, application manager at Aviva Life Insurance Company

India adds, “CRM helps us categorise and segment customers and
align our products that best suit them.” Aviva says that CRM is
helping them expand into rural areas. Aviva caters to close to
100,000 customers with its CRM solution.

Spending on CRM is up
Insurance firms spend close to 12 percent of their IT budgets on
CRM software and services. The cost includes operational CRM and
spending on BI tools. Industry pundits believe that insurance firms
are looking for CRM initiatives with budgets ranging from Rs 50 lakh
going right up to Rs 3 crore. The sector is busy compiling data on
individuals, including their purchasing patterns and buying
preferences of policies, pension plans and the like. In many cases,
policy renewal marketing to existing customers remains an
unsophisticated exercise, often amounting to little more than a
request to renew, with no attempt at putting a value proposition
before the customer. With a little help from CRM software,
insurance firms can sell multiple insurance policies and pension plans
to the same customer.

The opportunity is huge

Within the financial services sector, IT investment in insurance is

expected to grow the fastest with a CAGR of 35 percent in the
five-year forecast period (2001-02 to 2004-05). Other sub-
verticals of the financial services sector are expected to grow at a
CAGR ranging from 21 to 25 percent.

According to a report from Indian Infoline (January 2004), India

has the highest number of life insurance policies in force in the
world. The industry is pegged at Rs 400 billion in India. Gross
premium collections stand at 2 percent of the GDP and this has been
growing by 15 to 20 percent per year from the Life Insurance
Corporation of India (LIC) and other government-owned insurers.
Privatisation has led to new players entering this market and it is
expected to grow at a rapid pace.

Business drivers for CRM

Margins are under pressure: A couple of years ago, LIC dominated
the insurance market with the help of its sales force and channels
and margins were reasonably high. All of them have equally strong
international and local partners; all are focusing upon similar
geographies and target audiences. The new firms selling life
insurance and non-life insurance [pensions, insurance as saving, etc]
have failed to emulate the LIC model because margins are getting
squeezed. There are several pain areas that new insurance firms
face—acquiring new customers, retaining them, cross-selling
products and controlling rising costs while providing comprehensive
support.

“The convergence of four factors—protection, saving (investment

option), loans and pension—have compelled insurance companies to
align with banks in reaching out to a larger audience,” says Tikoo.
This trend has led to another—insurance companies are joining
hands with banks by becoming channel partners for insurance. Tata
AIG has a marketing alliance with HSBC, Birla Sun Life has one with
Citibank and IDBI and LIC ally with Corporation Bank, while Kotak
Life Insurance has an arrangement with Kotak Bank. This strategy
helps insurance firms increase their footprint to cover a larger part
of the customer base in the 20-30 years demographic. CRM helps
connect a bank’s high net worth customers with insurance firms.

• Customer expectations are rising: Customers, faced with a

dizzying array of insurance products expect customised
offerings, value, ease of access, and personalisation from
insurers. At the same time, they don’t want to pay a premium
for these services. High customer expectations and lower exit
barriers could lead to increased customer attrition.
USING ANALYTICAL CRM INSURANCE
COMPANIES CAN ENHANCE
 Cross – and up-selling capability to provide market
opportunities within an existing customer database.
 Predictive capability to determine customer behaviour.
 Information regading customer retention or attrition helps
determine the likelihood of policy lapses and helps identify
customers worth targeting for retention campaigns.

• Customer segmentation that leverages data to create accurate

categories for use in marketing strategies.

 Market automation that combines analytics with campaign

management functionality to help drive a more effective and
efficient marketing campaign.
Future Prospects
Job opportunities are likely to increase manifold. The number of
people working in the insurance sector in India is roughly the same
as in the UK with a population that is 1/7 India's; the US with a
population 1/4 the size of India has nearly 4 times the number. In
the emerging markets, the picture is no less encouraging. In S
Korea, the no of full time employees more than doubled over a ten
year period. Thailand added 50 per cent more jobs in four years.

The liberalization of the insurance sector promises several new jobs

opportunities for those employed in the finance sector who are
equipped with degrees in finance. Finance professionals who had
witnessed a slump in the job market would be a much-relieved lot to
hear about the privatization of the insurance sector.

There could be a huge inflow of funds into the country. Given the
industry's huge requirement of start-up capital, the initial years
after opening up are bound to see a strong inflow of foreign capital.
Moreover, given that the break-even, typically, comes much later
than in the case of other sectors, odds are that the first
remittance of dividend will not happen before a good 10-15 years.

In the areas of reinsurance, huge capacity is likely to be created

with players like Swiss Re and Munich Re keenly observing the
unfolding saga of liberalization of insurance industry in India. Not
only the outward reinsurance will reduce, it is bound to attract
inward reinsurance from the neighboring countries and regions. If
the regulator is forward looking and legislature is supportive, this
trend may well lead to the creation of a Lloyds like market for the
direct as well as reinsurance businesses.
Another effect of de-regulation will be that, projects, especially
mega-projects where one needs the capacities of the international
re-insurance market, will get exposed to international trends to an
even greater extent than is the case today. This will affect rates
too. Areas like the personal lines segment, where we also expect to
see substantial growth as also new types of covers, would usually not
be affected by international trends in the same way as, there is
much less need for global re-insurance support.

Another potential channel that reduces the need for an owned

distribution network is worksite marketing. Insurers will be able to
market pensions, health insurance and even other general covers
through employers to their employees. These products may be
purchased by the employer or simply marketed at the workplace
with the employer’s co-operation.

Worldwide interest in E-commerce and India's predominant position

in information technology and software development is also likely to
be a major factor in the marketing of insurance products in the
immediate future. The internet account is increasing in arithmetic
progression and the trend has already been set by some of the
leading insurers and insurance brokers worldwide.

Finally, some potential Indian entrants into insurance hope to ride

their existing distribution networks and customer bases. For
example, financial organizations like TATA AIG,ICICI or Kotak
Mahindra intend to tap the thousands of customers who already buy
their deposits, consumer loans or housing finance. Other hopeful
entrants anticipate specific alliances such as with hospitals to
provide health cover.
LIMITATIONS OF THE PROJECT

By working on this project, I gained a lot of knowledge about the

insurance sector in INDIA. However, there were many limitations or
problems that I faced while working on this project. The following
are the limitations:

 I had to rely only on the primary data.

 Most of the contents / data I collected were difficult to

understand because they were new for me.

 I was a stranger in the city of marketing and it was tricky and

time consuming to understand the mysteries of it.

 Marketing is more creative and innovative field and its usage

and study are brain squashing.

 Convincing the people to invest in a new product that affect

their lives was a tough job.

 The answers of the customers could have been biased.

 Some of the customers were not able to devote heir attention

in listening to the new products and they did not trust us.
BIBLIOGRAPHY

. Material Provided By TATA AIG Life Insurance.

. www.tataaig.com

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