Tara baap ni gand.docx
-
Upload
chiragpanchal -
Category
Documents
-
view
223 -
download
0
Transcript of Tara baap ni gand.docx
-
8/9/2019 Tara baap ni gand.docx
1/60
Tara baap ni gand
Introduction:
The Indian insurance industry after the privatization of the insurance
sector in 2000 has witnessed the entry of various private and foreign insurance companies
.Due to privatization the competition in the insurance sector has became severe and in
order to attract the customer and to retain them with the company the insurance
companies has brought a huge number of innovation in the insurance industry.
The innovation was both in the product range as well as in distribution
channel and marketing strategy. A number of new products are introduced by the
insurance companies to attract the customers which are eplained in detailed in this
pro!ect further. The size of the Indian insurance market is very big as the crores and
crores of people are uninsured and the penetration of the life insurance is also very low.
"ith a view to increase the awareness and to provide knowledge to the potential
customers the insurance companies have also innovated various distribution and
marketing channels such as banc assurance # broker#agency#etc#which are also eplained
in the pro!ect.
-
8/9/2019 Tara baap ni gand.docx
2/60
INSURANCE SECTOT REFORMS
In $%% 'alhotra committee# headed by former finance secretary and ()I gocverner#
(.* 'alhotra was formed to evaluate the Indian insurance industry and recommended its
future direction.
The committee was set up with an ob!ective of completing the reforms in the Indian
financial sector. The reforms was aimed at +creating a more efficient and competitive
financial system suitable for the re,uirements of the economy keeping in mind the
structural changes currently underway and recognizing that insurance is an important part
of the overall financial system where it was necessary to address the need for similar
reforms.
PURPOSE:
a- To make recommendation for changing structure of insurance industry# for changing
general policy frame work etc.
b- To take specific suggestion regarding I/ and I/ with a view to improve functioning
of I/ and I/.
c- To make recommendation on regulation and supervision of the insurance sector in
India.
d- To make recommendation on the role and functioning of surveyors# intermediaries#
like agent etc. in the insurance sector.
e- To make recommendation on any other matter which are relevant for the development
of the insurance industry in India1
-
8/9/2019 Tara baap ni gand.docx
3/60
Recommendations
In$%%3# the committee submitted the report and give the following recommendations now
in the point form
Structure:
4 overnment stake in the insurance companies to be brought down to 506.
4 All the insurance company should given greater freedom to operate.
Competition:
4 7rivate company with a minimum paid up capital of (s $ billon should be
allowed to enter in the industry.
4 *o company should deal in life and general in single entity.
4 The insurance act should be changed.
4 An insurance regulatory board should be operate.
Customer Service:
4 I/ should pay interest on delays in payments beyond &0days.
4 Insurance companies should be encouraged to set up unit linked plan.
4 /omputerization of operations and updating of technology to be carried out
in the insurance industry.
8verall the committee strongly felt that in order to improve the customer
service and increase the coverage of the insurance industry should be opened
up to competition. )ut at the same time# the committee felt the need to eercise
caution as any failure on the part of new players could ruin the public
confidence in the insurance industry.
-
8/9/2019 Tara baap ni gand.docx
4/60
PRIVITIZATION OF INSURANCE SECTOR
Insurance Services
Insurance investors developed economies, particularly from Western
Europe and the US nd Indian market as having greater growth
potential than their domestic markets. Therefore, a high level of
interest eists for these companies to ac!uire insurance concerns.
"any international players are eyeing the vast potential of the Indian
market and are already making plans to enter.
The entry of the foreign players in the sector with more nancial
resources# $etter eperience and lower operational costs will have an
advantage over the Indian companies involved in the $usiness. The
$igger private players claim that opening up insurance will give
policyholders $etter products and service, the opponents of
privati%ation argue that in a poor country like India insurance needs to
have social o$&ectives and newcomers will not have that commitment.
'etter eperience provides them with the wherewithal to have a $etter
product mi and more operational (ei$ility. "oreover, they will
operate with a lean sta) and lower operational cost. The domestic
-
8/9/2019 Tara baap ni gand.docx
5/60
insurance industry will as a result, have to face a greater competition.
'ut the resources with the foreign players are limited, as they can
invest up to *+ percent of the e!uity of their &ointventure with Indian
rms. This is a great hindrance for them to perform at their optimum
level. I-/ is working out to gradually dismantle the tari) structure.
0ot much threat is perceived as to any price war since the new
companies will stress more on the nonactuarial product di)erentiation.
1owever, the Indian Insurers due to their etensive $ranch networking
and longstanding association with the client still have an advantage.
2urther, insurance products can $ecome competing investment
product vis3vis other saving, etc. /lready 4I5 has launched E!uity
linked Indeed Insurance 6olicies, which have $een received !uite well.
The new players are epected to $ring in spate of such products.
Insurance is viewed as a ta saving instrument rather than protecting
one7s own kith and kin from the vagaries of the future. The rush for
insurance policies to save ta $ills can $e seen at the end of the
nancial year. With the entry of private and glo$al players like 125
Standard 4ife, 85T5I 6rudential, 9otak "ahindra 5lu$ Insurance,
1industan Times 5ommercial Union to name a few, the insurance
industry is going to provide many &o$s and is going to witness
-
8/9/2019 Tara baap ni gand.docx
6/60
phenomenal growth.
I!ERAISATION OF INSURANCE MAR"ETS
Meaning:
A liberal insurance market is one in which the market# sub!ect only to economically
!ustifiable government restrictions# determines9 who should be allowed to sell insurance#
what product should be sold# how product should be sold# and the prices at which the
product should be sold.. In turn market access issues encompass prudential regulation.
:econd and fourth items commonly deal with issues such as product# price# and market
conduct regulation. All four items subsume competition regulation.
7re;conditions for iberalization
a- :ound competitive law.
b-
-
8/9/2019 Tara baap ni gand.docx
7/60
a- ack of knowledge on part of insured.
b- Insurance is a complicated# technical sub!ect.
c- Intensity of price discrimination is high when there is competition.
#$at are Unit%in&ed Insurance P'ans( >nit;linked insurance plans# >I7s#
are distinct from the more familiar ?with profits@ policies sold for decades by the ife
Insurance /orporation. "ith profits@ policies are called so because investment gains
profits- are distributed to policyholders in the form of a bonus announced every year.
>I7s also serve the same function of providing insurance protection against death and
provision of long;term savings# but they are structured differently. In ?with profits@
policies# the insurance company credits the premium to a common pool called the ?life
fund#@ after setting aside funds for the risk premium on life insurance and management
epenses. I7 too# the insurer
deducts charges towards life insurance mortality charges-# administration charges and
fund management charges. The rest of the premium is used to invest in a fund that invests
money in stocks or bonds. The policyholder@s share in the fund is represented by the
number of units. The value of the unit is determined by the total value of
all the investments made by the fund divided by the number of units. If the insurance
company offers a range of funds# the insured can direct the company to invest in the fund
of his choice. Insurers usually offer three choices B an e,uity growth- fund# balanced
fund and a fund which invests in bonds. In both ?with profits@ policies as well as unit;
linked policies# a large part of the first year premium goes towards paying the agents@
-
8/9/2019 Tara baap ni gand.docx
8/60
commissions
>nit;linked insurance plans# >I7s# are distinct from the more familiar ?with profits@
policies sold for decades by the ife Insurance /orporation. ?"ith profits@ policies are
called so because investment gains profits- are distributed to policyholders in the form of
a bonus announced every year. >I7s also serve the same function of
providing insurance protection against death and provision of long;term savings# but they
are structured differently. In ?with profits@ policies# the insurance company credits the
premium to a common pool called the ?life fund#@ after setting aside funds for the risk
premium on life insurance and management epenses. I7 too# the insurer deducts charges towards life
insurance mortality charges-# administration charges and fund management charges. The
rest of the premium is used to invest in a fund that invests money in stocks or bonds. The
policyholder@s share in the fund is represented by the number of units.
The value of the unit is determined by the total value of all the investments made by the
fund divided by the number of units. If the insurance company offers a range of funds#
the insured can direct the company to invest in the fund of his choice. Insurers usually
offer three choices B an e,uity growth- fund# balanced fundand a fund which invests in
bonds. In both ?with profits@ policies as well as unit;linked policies# a large part
of the first year premium goes towards paying the agents@ commissions
Uni)ue *eatures
-
8/9/2019 Tara baap ni gand.docx
9/60
$. >nit linked plan to give you efficient earnings in the long term.
$. Three investment fund options protector# builder and enhancer# with the freedom to
switch between funds any time during the policy tenure.
$. =leibility to make additional lump sum investments top ups - to increase the savings
portion of your policy
$. 'inimum guaranteed returns of &6 pa. 8n your premium net of all policy fee and
charges the entire upside on the performance of the fund is passed on to you
$. 8ption to make ta free withdrawal from your fund anytime after three years
$. oan against your policy or surrender of the policy without penalty after a policy year
$. Cary the face amour during the premium paying period depending on your life insurance
re,uirements.
2. /onvenient premium payment option singe pay# short pay or regular pay
#$ic$ is better+ unit%'in&ed or ,-it$ pro*its.(
The two strong arguments in favour of unit;linked plans are that B the investor
knows eactly what is happening to his money and two9 it allows the investor to choose
the assets into which he wants his funds invested.
-
8/9/2019 Tara baap ni gand.docx
10/60
A traditional ?with profits#@ on the other hand# is a black bo and
a policyholder has little knowledge of what is happening. An investor in a >I7 knows
how much he is paying towards mortality# management and administration charges.
e also knows where the insurance company has invested the money. The
investor gets eactly the same returns that the fund earns# but he also bears the investment
risk
Are UIPs simi'ar to mutua' *unds( In structure# yes9 in ob!ective# no. )ecause
of the high first;year charges# mutual funds are a better option if you have a five;year
horizon. )ut if you have a horizon of $0 years or more# then >I7s have an edge. To
eplain this further a >I7 has high first;year charges towards ac,uisition including
agents@ commissions-. As a result# they find it difficult to outperform mutual funds in the
first five years. )ut in the long;term# >I7 managers have several advantages over
mutual fund managers. :ince policyholder premiums come at regular intervals#
investments can be planned out more evenly. 'utual fund managers cannot take a similar
-
8/9/2019 Tara baap ni gand.docx
11/60
long;term view because they have bulk investors who can move money in and out of
schemes at short notice. The transparency makes the product more competitive. :o if you
are willing to bear the investment risks in order to generate a higher return on your
retirement funds# >I7s are for you. Traditional ?with profits@ policies too invest in the
market and generate the same returns prevailing in the market. )ut here the insurance
company evens out returns to ensure that policyholders do not lose money in a bad year.
In that sense they are safer. >I7s also offer fleibility. =or instance# a policyholder can
ask the insurance company to li,uidate units in his account to meet the mortality charges
if he is unable to pay any premium installment. This eats into his savings# but ensures that
the policy will continue to cover his life )ut in the long;term# >I7 managers have
several advantages over mutual fund managers. :ince policyholder premiums come at
regular intervals# investments can be planned out more evenly. 'utual fund managers
cannot take a similar long;term view because they have bulk investors who can move
money in and out of schemes at short notice.
Advantages o* UIPS to insurers:Insurers love >I7s for several reasons. 'ost
important of all# insurers can sell these policies with less capital of their own than what
-
8/9/2019 Tara baap ni gand.docx
12/60
-
8/9/2019 Tara baap ni gand.docx
13/60
government securities have fallen below E per cent# which has made the insurers slash
payouts.
According to the I(DA# a company offering unit linked plans must give the investor an
option to choose among debt# balanced and e,uity funds. If you opt for a unit;linked
endowment policy# you can choose to invest your premiums in debt# balanced or e,uity
plans. If you choose a debt plan# the ma!ority of your premiums will get invested in debt
securities like gilts and bonds. If you choose e,uity# then a ma!or portion of your
premiums will be invested in the e,uity market. The plan you choose would depend on
your risk profile and your investment need.
The ideal time to buy a unit;linked plan is when one can epect long;term growth ahead.
This is especially so if one also believes that current market values stock valuations- are
relatively low. :o if you are opting for a plan that invests primarily in e,uity# the buzzing
market could lead to windfall returns. owever# should the buzz die down# investors
could be left stung.
If one invests in a unit;linked pension plan early on# say 25# one can afford to take the
risk associated with e,uities# at least in the planFs initial stages. owever# as one
approaches retirement the ,uantum of returns should be subordinated to capital
preservation. At this stage# investing in a plan that has an e,uity tilt may not be a good
idea.
/onsidering that unit;linked plans are relatively new launches# their short history does
not permit an assessment of how they will perform in different phases of the stock
market.
-
8/9/2019 Tara baap ni gand.docx
14/60
-
8/9/2019 Tara baap ni gand.docx
15/60
compromising on the much more important security cover for yourself and your family1
If returns are your aim don@t you think you should be opting for other investment avenues
rather than risk your risk cover."hile this is not to dissuade you from purchasing unit
linked covers it would be in your interest to take a peek at the ?market linked returns@ you
can epect. And if you think that the entire premium you pay is invested in avenues
chosen by you to maimize returns you could be wrong.E0penses during t$e *irst /ear:
A substantial amount is deducted from your premium income by the insurance company
towards various charges reducing the investible amount considerably. In the first year
Allianz )a!a! through its >nit ain :7 7lus claims to allocate $00 percent of the single
premium you
Invest but cancels units on a monthly basis towards various charges from your fund.
Accordingly Gotak :afe Investment 7lan allocates HE6 and ife time of I/I/I 7rudential
ife allocates H0 percent for amounts less than (s 50#000 and H2 percent for those above
(s 50#000 towards investments.
Administration e0penses:
The fund epense is the highest in the first year. I/I/I 7ru ife charges administration
epenses of 20 percent of the premium for amounts below (s 50#000 and $H percent for
amounts over (s 50#000 in the first year while it is percent for amounts upto (s 20#000
in case of Gotak :afe Investment plan.Again there are annual administrative charges that
are as high as $.25 percent per annum of net assets on ife ink of I/I/I 7ru ife and on
>nit ain :7 7lus of Allianz )a!a! ife Insurance
-
8/9/2019 Tara baap ni gand.docx
16/60
#i'' unit 'in&ed ris& products continue to ru'e: %
>nit linked risk plans are doing roaring business agreed but if the recent reports are any
indication a shake up is on the cards. The mutual fund industry is all set to get aggressive
to counter competition from the insurance industry@s unit linked risk products. =or mutual
funds the unit linked insurance products launched by life insurance companies are an
encroachment on their territory. /onsider this Around H0 per cent of the premium
income of life insurers has come in through unit;linked plans in 2003 thanks to the boom
in the e,uity markets.
This means mutual fund companies are losing out on a huge market that would have
otherwise been theirs. To put an end to such a situation they are toying with the idea of
aggressively publicizing its products through celebrity endorsements which mutual funds
feel will give a never;before fillip to its unit linked schemes.
>nit linked insurance products launched have been doing brisk business and insurers
have been coming out with several such products with slight variations to suit the
changing needs of the customers. These products are investment avenues that provide
market related returns to the investor with an element of insurance thrown in. =or the
customer the attraction of market related returns with insurance is an attractive option. 8n
the contrary though mutual fund companies also have unit;linked products what is absent
is the insurance cover.
-
8/9/2019 Tara baap ni gand.docx
17/60
)ut the grouse of mutual funds is that they have to adhere to stringent regulations that are
absent for insurance companies when the products are almost similar. "hile for insurance
companies it is not mandatory to disclose the various epenses related to unit linked risk
products such as epense ratio and brokerages among others# for mutual fund companies
it is mandatory. The Association of 'utual =unds will soon be setting up a committee to
work out an advertising strategy after which it plans to approach :
-
8/9/2019 Tara baap ni gand.docx
18/60
market by the insurer in select funds depending on the risk level chosen by the customer.
'ind you# this is after deducting administration charges and management epenses that
may vary from one fund to the other.
C$oice o* Funds:
The customer has the option of choosing from debt# balance and e,uity funds. If the
individual chooses a debt fund# a ma!or part of his premia is invested in debt securities
like gilts and bonds. )ut if it is e,uity# a ma!or portion goes towards investments in the
stock market. :o depending on the risk profile the individual may choose his investment
option.
#$at do unit%'in&ed products actua''/ o**er in terms o* va'ue%addition(
"hen you are looking at a long;term plan# there are always factors that will change from
time to time to meet any challenges. Also# plans change so that the company can offer
some amount of customization. Among other things# we offer to add the cover to the
policy# add riders when necessary# and change the investment structure. "e also let
customers choose from different fund options on the investment without compromising
on the basic product.
-
8/9/2019 Tara baap ni gand.docx
19/60
"hile all these options do come with caps to follow the regulatory framework# they
definitely offer value;addition to the customer. And# with the *AC net asset value- of the
fund calculated at the end of the day# the customer knows the value of his funds. I must
add that that in case of death# the beneficiary gets the sum assured or the *AC of the
fund# whichever is higher. :o# there is no reduction in protection in these plans.
Is the investment risk left to the customer who buys unit;linked plans1 =or any
investor# the idea is to maimize returns. "ise customers know that the era of guaranteed
returns is over. The fall in interest rates in the past $H months is indication enough of
what lies ahead. "hat unit;linked products offer is a long;term investment option where
returns are far more real and there is no compromise in the protection that the policy
offers.
In the guaranteed returns regime# the guaranteed component was met by paying lower
interest rates to those who did not have any guarantee on their plans. /ompared to this#
unit;linked plans offer greater value to the customer. Jes# to an etent the risk is in the
hands of the customer. owever# the fleibility to opt for funds means that the customer
can benefit as well. And finally# the returns that these products offer are bound to be
relatively higher than what similar traditional plans offer.
In order to cater to customers with very low risk appetite we also offer a unitised# with;
profit plan across our products# where the bonus rate is declared in advance for the year.
This is a conservative approach but it has its takers. "ith this
"hat has been the performance of unit;linked plans in other emerging markets1In a
country like 7oland# where the markets were opened a little over a decade ago# we are
today the largest private insurance company. The demand for our unit;linked products is
-
8/9/2019 Tara baap ni gand.docx
20/60
high. "orldwide# the growth of these products is high when compared to traditional
products# an indication of where the market is headed.
There are a few people who view unit;linked plans as pure investment products that offer
little cover. )ut this is a myth and customers realize this when the benefit of these plans is
eplained to them.
"ith investment options regulated# one has to be prudent with the money that is
contributed for the product and has to add value for the business to be successful. I feel
that both developed and developing markets understand the great value proposition that
unit;linked insurance plans offer. Another factor that tilts the balance in favour of such
products is the ta treatment that the accumulated account attracts. It@s ta;free# unlike a
mutual fund or any other investment# where the gains are taed.
Riders
(iders are the additional benefits the company offers to the customer in addition to the
life coverage. The customer has to pay additional premium to get this benefit. owever
the benefit of rider is optional# the client has full power to take or leave the riders.
There are five riders normally provided by the insurance companies and they are#5 riders;
terms riders# ADKD rider# critical;illness# critical illness pus or critical illness woman
-
8/9/2019 Tara baap ni gand.docx
21/60
rider. I can add or delete them only after the $ stpolicy year- as my needs change
Jou can further customize your birla sun life insurance plan by adding riders to base plan
at a marginal etra cost.
$- Accidental death and dismemberment benefit rider. It provides $006 of coverage in case
of death due to accident9 loss of more than one limb or sight in both the eyes or in case of
loss of one limb and loss of sight in one eye 506 coverage in case of loss of one lib or
sight in one eye.
2- Term rider it provides additional amount of cover in the event of death of the life
insured.
&- /ritical illness rider it provides a cover in the event of life insured being diagnosed as
suffering from any of seventeen illnesses specified under the critical illness plus rider.
3- /ritical illness woman rider it provides a cover against several critical illness including
woman specific illnesses# pregnancy complication and congenital anomalies in a newborn
child.
5- "aiver of premium this rider waives payment of future premiums on the happening of
any of the unforeseen events as covered under this rider.
=or rider deletion I am re,uired to give a written intimation along with the policy
documents. =or rider addition# my certificate on insurability and the receipt of payment of
rider premium will be needed ride addition is sub!ect to underwriting condition-
-
8/9/2019 Tara baap ni gand.docx
22/60
Mar&eting strategies: %
)irla sun life has adopted various marketing strategies to market its product. The
company has adapted to main strategies two main ways
.
12 Corporate agent:
'arketing through corporate agents is the traditional ways of marketing the
insurance products. )irla sun life also has huge number of agent spread all
over the country.
32 !anc assurance: %
-
8/9/2019 Tara baap ni gand.docx
23/60
)anc assurance is also a modern method of marketing insurance product in the
market. It is done in three ways. In banc assurance is a coming together of a bank and
insurance company to market the insurance product. The banks provide its customer data
or sell the insurance product to its customer.
$- Loint venture
2- /orporate agent
&- /ustomer base
E**ective !anc assurance mode'
There are broadly three banc assurance models in operation globally
4 Distribution alliance
4 Loint venture between bank and insurer
4 'erger between banks and insurer
In !oint venture bank and insurance company form a separate insurance company as in
the case on I/I/I prudential life insurance1
in corporate agent module a bank act as an agent of the insurance company and sell
products to its customers . The bank gets commission for its service as in the case of I/
-
8/9/2019 Tara baap ni gand.docx
24/60
and /orporation bank
in customer base the bank allow to sue its customer data and its premises to insurance
company to sell its products.
)irla sun life insurance /ompany has tied up with three bank to market its products
.they act as a corporate agent of the bank.
$- /ITI )A*G
2- ID)I )A*G
&- GA(>( CJ:JA )A*G
Among these three banks citi bank is the most active agent of the company .the company
also give various benefit to the customer of the citi bank. =or e.g.; if a normal customer
is above the age of 35 or the policy amount eceed the amount of rs$5lacs then he is
re,uired to submit ='(=> '
-
8/9/2019 Tara baap ni gand.docx
25/60
services as distribution channels for insurance products through their branch network. In
terms of present regulatory frame work banks have taken up corporate agency for
marketing insurance products for an agreed referral feeMcommission.
)anc assurance in India is very much in its infancy. There are a wide variety of banks#
which are very different9 both in make up# culture# geographic spread and working
practices. There are wide number of approaches and models that can be adopted for banc
assurance# many of which are dependent on this attributes# as well as the insurance
partner views and competencies# and also the nature of relationship between the bank and
insurer;whether one of e,uity sharing company structure# or of a profit share nature or
purely a distribution management.
The effective banc assurance model is the one# which helps# in pushing sales as well as
satisfying customer needs and helping banks to become a ?8ne stop shop@. As a )anc
assurance model# if the bank is using distribution agreement model# it should# go in for an
eclusive agreement with an insurance company of repute. The reason being# while
signing up with multiple insurers you end up looking like a broker who is not committed
to ?brand@ or a ?product@ or a particular level of ?service@# which is so vital for the growth
of )anc assurance. )y signing an eclusive agreement with the insurer# the bank can put
the stamp of its own ?)rand@ on the product without actually taking any risk. The bank
will thus be identified with the product it is selling and will be able to convince the
customer in a much better way. owever# if the insurance market is not mature and there
-
8/9/2019 Tara baap ni gand.docx
26/60
-
8/9/2019 Tara baap ni gand.docx
27/60
T4E #OR"IN5 OF !ANCASSURANCE
The distribution channel today for insurance products is widening. Increase in
distribution channels among others has also seen the concept of )anc assurance taking
roots in India# which is emerging to be a viable solution to mass selling of insurance
products. A popular concept in the "est# )anc assurance put in simple terms means
selling insurance products through banks.
Wide network of branches
The Insurance (egulatory Development Authority I(DA- has permitted banks to venture
-
8/9/2019 Tara baap ni gand.docx
28/60
into marketing insurance products on a risk participation basis. )anks need to possess at
least 500 crores of net worth and capital ade,uacy of a minimum of $0 per cent to make
an entry. :ince banks have wide number of branches# distribution will be smoother.
/orporate clients
)anks can utilize their eisting clientele# which includes corporate as well as retail clients
to market insurance products. Depending on the relationship with its clients it would
become easier to influence tile insurance purchase decisions of its clients. /ustomers too#
having banked with a particular bank for a long period repose a sense of trust and faith in
the bank.
/ustomer database
/ustomer database ; raw information on the customers spending habits# investment
purchase# can prove to be a goldmine. :uch information channelised in the right manner
can help work out marketing strategies and arrive at result;oriented decisions targeting
prospects.
-
8/9/2019 Tara baap ni gand.docx
29/60
7ersonalized :ervice
:ince banks have direct contacts with customers# the service area can be tackled easily.
/ustomers# other than their day;to;day financial re,uirements can also get assistance for
premium payment# surrender# transfer of policies and many more.
Rural penetration
7enetration into the rural areas is easier for banks. aving been accustomed
to the customersF choices# banks are in a better position to understand the needs of the
customers and sell tailor made policies.
Cross-selling products
)anks in their normal course of functions lend finance in the form of loans for cars or for
buying a house. They can combine insurance products and sell as a package. In the
current scenario banks can cross sell their products along with the insurance products.
=ee based service
Insurance products can be sold as a fee based service. in which some broker charge
commission to policyholder against the insurance product # such as# selling of insurance
-
8/9/2019 Tara baap ni gand.docx
30/60
policy# different types of scheme >I7:# endowment# personal accident# whole life#
money back policy and !oint life policy - etc.
Loint life policy is much suitable for fee based services to the insurance agents in the
insurance sectors. And now# in >I7: are most benefited to insured persons as well as
insurer@s agents.
C$eaper t$an agents
)anc assurance may work out to be cheaper compared to companies appointing agents
for selling insurance products. This is particularly considering the banks wide network
and the reach they have compared to the agents.
NIntegration of )anks and Insurance /ompanies is ikely to have a onger ImpactN
Insurance companies have been very slow to use the "eb# for eample# and their web
pages are among the poorest designed in the financial services industry in the >:. =rance#
/anada has picked up banc assurance very fast whereas >:# Lapan has not. TheyFve
lagged behind in the >: for a number of reasons. /onsumers donFt see banks as a primary
source for insurance.
/onsumers do not have a lot of confidence in banksF financial epertise outside of loans
and deposits. There are well;developed distribution channels for insurance that are
-
8/9/2019 Tara baap ni gand.docx
31/60
effective. )anks thought they could get Neasy salesN by cross;selling insurance# forgetting
that
4 They are not good cross;sellers#
4 The level of training re,uired to sell insurance and the licensing re,uirements are far
heavier than what theyFre used to for selling other products# and
4 The banks have not# in most cases# put a strong emphasis on insurance sales.
Annuities# somewhat# more than other products.
The time taken to over come the sluggishness can also because of the reason that
functioning of banks and insurance companies are different from each other.
8n the other hand# this integration of banks and insurance companies is likely to have a
longer impact. 8ver time# they will integrate increasingly as public perceptions change
and banks put more effort behind it. The insurance companies are trying the idea of
selling banking services. :ome banks and insurance companies fear that this will lead to
higher growth and revenues but for those companies# which have not opted for banc
assurance# it will be an end.
I think it will be easier for the insurance companies to offer banking services than it will
be for the banks to offer insurance products. The insurance companies are more under
-
8/9/2019 Tara baap ni gand.docx
32/60
threat from industry consolidation and cost pressures within their own industries than
they are from bankMinsurance company combinations at this point. The dream was that
the banksF customer;bases would be Nripe for pickingN# but the banksF sales and marketing
teams have not figured out how to make it work.
N=or )anc assurance to be successful# the savings made on the distribution may have to
be passed on to the customer. Insurance companies need to design products specifically
for distributing through banks.N
8n usefulness of )anc assurance lobally# there is a trend of convergence of all
personal finance services including insurance. In this scenario# it is possible for banks
to distribute some of the insurance products to their customers. It is possible for banks
to cross;sell insurance to their customers. Thus# the eisting distribution network and
the eisting customer;base of the banks are utilized for selling insurance. There will
be savings in distribution cost as well as customer ac,uisition cost. These savings will
be passed on to insurance seekers.
4 8n new pricing issues 'arketing# especially the pricing may be the key issue. =or
banc assurance to be successful# the savings made on the distribution may have to be
passed on to the customer. Insurance companies need to design products specifically
for distributing through banks. Trying to sell traditional insurance products may not
work.
-
8/9/2019 Tara baap ni gand.docx
33/60
4 8n the success factors The concept will succeed# as the customer is ultimately the
same. owever# it may not work for traditional insurance products. It is right that the
functioning of banks and insurers is different. *ew products need to be designed
keeping in mind the functioning of banks and the needs of bank customers.
4 8n the measures of strategies to be taken up by companies /ompanies not opted for
)anc assurance could consider approaching or identifying the customers through
other channels. =or eample# a customer approaching a bank for home loan can be
offered ouseholder insurance policy through )anc assurance. owever# other
insurers through a real estate developer or a real estate broker can offer the same
customer a ouseholder insurance policy.
4 8n level of success in India In India# the level of success could be high. 'any banks
have entered the insurance sector through !oint ventures and others have formed
alliances with )anks. These new companies will try to eploit the branch networks of
the banks. =or eample# :tandard /hartered bank has already started selling personal
accident covers of (oyal :undaram Alliance Insurance /ompany to its credit card
holders.
-
8/9/2019 Tara baap ni gand.docx
34/60
4 8n the competition between I/ and :)I It is too early to comment. The strength of
I/ is their agent network. I/ is said to have over eight lakh agents. The strength of
:)I is their branch network. Traditionally# life insurance is best sold through agents#
while bank branches only supplement.
Other marketing and distributin channe!s
Internet
Though India is &oining the fast growing $reed of net users, using
net for transactions has not yet caught up. Though a few $anks provide
online $anking, the usage is still a small fragment. The insecurity
associated with transactions over the net is still an inhi$iting factor. /t
present most of the insurance companies have product information
and#or illustrative tools on the we$.
We do not see the we$ evolving into a means for direct selling of
insurance in the current scenario. In the Indian market, where
insurance is sold after considera$le persuasion even after facetoface
selling, the selling over the net, which must $e initiated $y the client,
would take some more time.
While the technology capa$ility is there, improvements in
$andwidth and infrastructure are needed. /lso needed are simpler
products where autounderwriting is feasi$le. /utomo$ile insurance,
one of the segments of insurance purchased :o) the shelf: in India,
would $e the ideal segment to start with. ;n the life side, term
-
8/9/2019 Tara baap ni gand.docx
35/60
assurance for standard lives with simplied underwriting is a
possi$ility.
These channels $y themselves will not $e a$le to overcome the
mindset of the people, $ut rather can only $e ena$lers for the human
channels.
Electronic Channels:
In the last decade, numbers of technological advances have taken
place due to immense use of EDI (Electronic Data Interchange)
LIC on Internet:
They have their own site, which is very informative. They display
information about them and its subsidiaries, the product they offer. The
addresses/e-mail Ids of their zonal offices, zonal training centers,
management development centers, overseas branches, Divisional offices
-
8/9/2019 Tara baap ni gand.docx
36/60
and also all Branch offices with a view to speed up the communication
process.
SMS:
SMS through mobile phone is recently new technology introduced by the
LIC to promote their product.
Advertising:
It is a paid form of non-personal communication. It is used to create
awareness and transmit information in order to gain a response from the
target market. Forms of advertising are as follows:
o News Papers and Magazines:
LIC give ads in the news papers and magazines round the year to
continue its brand image and also when new products are introduced.
Normally its ads are published inTimes of India.
o Electronic media:
Insurance companies also advertise its services in theElectronic
media like:
Internet (Websites):
-
8/9/2019 Tara baap ni gand.docx
37/60
Companies like LIC (www.licindia.com), ICICI
(www.iciciprudential.com)all have websites from which people can get
the information about their products, prices, various schemes, and lots
of other information. People can also purchase the product through this
website.
Television:
Companies likeLIC, Met Life India,advertise on television to make
people aware of their products and services.
Radio:
ICICI Prudentialadvertises on 92.5 red Fm.
Punch lines and logos:
It helps to create awareness about the brand among the target
audience. It also helps the company to convey its message to the
customer.
http://www.licindia.com/http://www.iciciprudential.com/http://www.iciciprudential.com/http://www.licindia.com/ -
8/9/2019 Tara baap ni gand.docx
38/60
6isabi'it/ Insurance2
'ost of us insure our lives# effectively insuring that we will be able to provide income for
our families in event of our untimely death since we believe that we are doing something
reasonable to prevent any undue financial burden from affecting the lives of our loved
ones. Jet# most of us never insure a part of us that is much more important.
*ot only can a disabled person not work but he or she has to undergo etensive medical
-
8/9/2019 Tara baap ni gand.docx
39/60
regimes while still incurring the daily costs of living. And health insurance is not enough
to circumvent the perils associated with permanent disability. A recent study conducted
abroad found that although %E percent of seriously ill people had medical insurance over
a third of them lost everything that they owned and maintained owing to their disability.
After all# a disabled person still needs to eat and drink like the rest of normal human
society. iven the fact that he or she is disabled now re,uires etra care from the family
or paid professional help that eventually uses up the funds much beyond what they might
have earned. 7eople may be put off by the price of disability insurance but the only
reason why the policy premiums are higher is because there is a much greater chance of
you actually needing the policy
'ost of the Indian insurance policies have an in;built disability clause. :o the net time
any agent tries to sell you a life insurance policy# do in,uire more about the disability
clauses.
Also# check out the definition of ?disabled@ in the policy that the agent offers since you
must be insured for your chosen occupation. At times# a disability may stop you from
working at your current !ob but still lets you perform other activities. Do verify if there is
coverage offered for partial disability since it could be the moot point between over;
taing yourself and worsening your condition and being able to achieve the needful by
performing whatever amount of work seems prudent.
4 Also# look for a policy that holds a guarantee and is non;cancelable. uaranteed policies
are policies where the payment stays fied. *on;cancelable policies stay in effect
regardless of whatever that might happen and as long as the premium is paid from time to
time.
-
8/9/2019 Tara baap ni gand.docx
40/60
4 =inally# the last option to map is to calculate how much actual cover you may be having
currently or might need in the times to come. An insurance cover of (s.$ lakh may have
been ade,uate when you started working and earned (s.&000 per month. )ut it sure will
be insufficient now that you have risen up in the world and your salary has risen to over
(s.20000M; month.
Geep your interests in mind while choosing the insurance policy and you will never
regret it. After all# in the materialistically inclined times where we subsist# self;
centredness is the only truly !ustifiable prerogative in life
7lease go through this list. It is designed as the starting point to help you make the right
choice while purchasing a life insurance policy. Answer the ,uestions with your policy in
perspective and eliminate any conflicting doubts that might arise.
4 Is your life insurance so arranged that the proceeds stand eempted from the claims of
creditors# in case you have any1 "ill it stand against any !udgment passed by a court of
law1
4 If and when desired# will the cash values of the insurance policy result in the largest
possible income for yourself1
4 In case# you have named your children as beneficiaries# do all of them participate1 In case
your children are minors# can your epenses be correctly and swiftly li,uidated1
-
8/9/2019 Tara baap ni gand.docx
41/60
4 In case of an unepected emergency# will the settlement provision prove sufficiently
fleible1 8r will your benefactor@s interests be !eopardised1
4 Are all beneficiary designations correct and complete1 Do your beneficiaries need to be
altered due to new family circumstances1
4 Is there a chance of your current life insurance policy being sub!ect to probationary
delays or unnecessary additional epenses1
4 Do your grandchildren# if any obtain e,ual shares in your estate1
4 Are the beneficiary clauses formulated in a way that they perform your last wishes to
their fullest# with no violation whatsoever1
4 "ill your spouse be guaranteed the most favourable income from the insurance proceeds1
4 Is the etent to which your life insurance policy providing income absolutely clear in
your mind1
4 /an your spouse outlive the income provided1
4 Is your insurance policy arranged in a manner to create an income for your child@s
educational and marriage ependiture1
4 :houldn@t you provide a cash fund for your spouse@s last epenses1
4 ave you taken full advantage of the best possible eemptions from ta1
4 Is the insurance policy so arranged that your spouse will be provided with similar income
advantages as yourself# if he or she outlives you1
-
8/9/2019 Tara baap ni gand.docx
42/60
-
8/9/2019 Tara baap ni gand.docx
43/60
=or instance# if you are contributing (s. a month for meeting your family@s needs#
you must have a life insurance cover of around (s.& lakhs. In case of the policy holder@s
death the family can invest this amount in some absolutely safe investment avenue such
as government bonds# which pay $26 interest. The annual interest of (s.&E#000.
Additionally# the insurance portfolio could also include polices specifically earmarked for
the education and marriage of your children.
Income replacement is another approach to determine how much insurance one needs.
There are ways to figure it9 two are discussed below
$. :eventy;five percent solutions :ome observers believe that a family# particularly a young
one# needs about 5 percent of the take;home pay the insured would have received until
age sity;five.
2. =ive times solution A second income replacement formula is to buy insurance e,ual to
five times your annual income less any insurance e,ual to five times your annual income
less any insurance already held. :uppose your annual income is (s.25# 000. 'ultiply this
by E and it e,uals (s.$#50#000. *ow if you have (s.25#000 in;group life insurance# you
need an additional (s.$#25#000 (s.$#50#000 minus (s.25#000- of life insurance.
-
8/9/2019 Tara baap ni gand.docx
44/60
!usiness insurance:%
)usiness insurance is a type of insurance which is taken out by the business concerns.
-
8/9/2019 Tara baap ni gand.docx
45/60
for much for the success of the )usiness "ho cannot be easily replaced by virtue of their
long eperience.
A "e/ Person is:
4 Gey
-
8/9/2019 Tara baap ni gand.docx
46/60
4 7rovide funds to recruit# hire# and train suitable replacement
4 Assure customers# creditors and employees of the continuity of the business
4 7ay a death benefit to the Gey 7erson@s family
4 (eduction in profits
4 ostile Takeovers
T$e bene*its o* &e/ men insurance to particu'ar business concern are as *o''o-s:
4 (eplace loss of profits
4 7rovide funds to recruit# hire# and train suitable replacement
4 Assure customers# creditors and employees of the continuity of the business
4 7ay a death benefit to the Gey 7erson@s family
4
-
8/9/2019 Tara baap ni gand.docx
47/60
; 8n what basis can key person insurance be given1
; oldings
; /ontribution To 7rofits K 7rofile
; Documentsoldings
; In case of an entity# the key person should not hold9
; more than 506 individually# and
; more than 56 !ointly with his family
; =amily includes spouse and minor children O when a minor becomes a ma!or# then heM
she is not a part of the family for this purpose-
; The above are more of a convention and not a rule or law.
; /ontribution to the 7rofits K 7rofile
; Puantum of Insurance will depend on the key person@s contribution to the concern@s
profits keeping in mind
; is Pualifications
;
-
8/9/2019 Tara baap ni gand.docx
48/60
; Individual Gey person@s cover limit
; >p to H times of the annual compensation of key person.
; Assume that the Gey man@s annual compensation is (s. $2 akhs and commission Q $6
of the 7AT.
; & Times of Average 7)DT for the last & years R 2H0 S 250 S 200 & R &0
&
; 5 Times of Average 7rofit before Taes R 220 S $%0 S $30 5 R %$
; for the last & years &
; H times of the annual compensation R $2 S $6 of $&%.5- H R $0
; of key person
; The cover for all the key persons in the concern will be limited to &0 lakhsKindividual
Gey person@s cover limit will be $0 lakhs.
; "here do you get the information on 7)T K 7)DT 1
!a'ance S$eet7 P 7 Statement:
; forming a part of the /ompany@s Annual (eport
; )alance :heet
-
8/9/2019 Tara baap ni gand.docx
49/60
; 7resents the snapshot of the company@s financial
; 7osition and reflects the sources and application of funds.
% 6ocuments Re)uired :
; /opy of 'emorandum and Articles of Association
; /opy of (esolution of )oard authorizing such insurance
; /opy of audited accounts for the last & years
; Gey person Puestionnaire
; I. T. returns of the Gey person for the last & years
P'ans 7 Po'ic/ Procedures:
; =lei :ave 7lus# =lei ife ine# /lassic ife and Term 7lan can be given
; Term and /I riders can be added
; /oncern being the owner of the policy# nomination is not possible.
; Assignment can be made in favour of the key person# in case of the key person leaving#
can also be assigned in favour of
; new employer
; Ta Treatment
; )usiness concern# being the owner# can claim the premium paid as )usiness ependiture
under :ec & of the I. T. Act. O /ircular *o E2 dated $Hth =eb $%%H.
;
-
8/9/2019 Tara baap ni gand.docx
50/60
; 7olicy proceeds received will not be eempt under :ec. $0$0D-s of the I.T. Act.
; 7olicy proceeds received by the concern to be treated as business income and taed under
:ec. 2H of I. T. Act.
; key person insurance-
; In case of Assignment in favor of key person# :.C. to be treated as per,uisite. If :.C. Is
paid for by the key person# no immediate ta liability for the key person# but purchase
price to be treated as business concern@s revenue and taed accordingly.
Ta0 Treatment
)usiness concern# being the owner# can claim the premium paid as )usiness
ependiture under :ec & of the I. T. Act. O /ircular *o E2 dated $Hth =eb
$%%H.
-
8/9/2019 Tara baap ni gand.docx
51/60
4 /oncern is indemnified in case of sudden death of the key person.
4 /orporate ta saving
4 A tool for retention of key person
4 7olicy can be gifted to the key person as a recognition
4 7olicy can be used as a collateral security
4 "ithdrawals from the policy possible to meet any emergency
This is the various advantages which the company provide to its employee in
turn of the services# given to them as a customer made by his employee. Gey 'an
insurance gives a chance of confidence to the company as well as to the employee# to
work hard and ac,uire success in the business.
PARTNERS4IP INSURANCE
-
8/9/2019 Tara baap ni gand.docx
52/60
According to section 3 of 7arternership is +The relationship between the people who
has agreed to share the profit of business carried on by all or any one of them acting
for all.7artership Insurance is their# where two or more persons come together and get
their sharing M business profit# which they ac,uire through trade# and invest in the
insurance as policy performance for future predictability# safety and security purpose.
In simple words it is a type of insurance taken by a partnership firm on the lives of
partners.
#$at is t$e ob8ective(
$. It allows predictability# safety and security to the partnership firm.
2. It is useful to protect their business from the various factor of risk.
&. It provides the central trustMmutual understanding from beginning process to ending
process towards partnership firm.
$. To enable the partnership firm M remaining partners to buy the deceased partner@s share
without disturbing the firm@s financial position.
Insurab'e Interest:
-
8/9/2019 Tara baap ni gand.docx
53/60
A partnership firm has an insurable interest in the lives of its partners to the etent
of purchase money capital and goodwill - re,uired to be paid in respect of share of
each partner
9ua'i*/ing Conditions:
$. If partners are so related that one partner is the sole legal heir of the other partner# then
partnership insurance cannot be considered
$. All partners must be insured unless they are uninsurable on medical or age grounds
$. The partnership deed should contain a clause that the partnership is revocable definitely
in the case of demise of a partner
6ocuments Re)uired:
*ormal medical re,uirements for individual partner@s application
/opy of original and supplementary partnership deed
/onsent letter to place an endorsement on the policy
/opy of I.T. returns for the last & years.
-
8/9/2019 Tara baap ni gand.docx
54/60
/opy of Audited accounts for the last & years.
Po'ic/ Procedures:
7olicy to be endorsed stating that in case of dissolution of firm for reason
other than death of partner# the policy will either be surrendered or absolutely
assigned in favor of the insured partner. The following are the points to be
considered
$. =irm being the owner of policy# nomination is not possible
2. Assignment# ecept in case of dissolution of firm not allowed
Ta0 Treatment:
4 Insurance premium paid by the firm to be treated as business epense under :ec. & of
Income Ta act
4 7olicy proceeds will be treated as income of the firm
!ene*its o* Partners$ip Insurance:
Takes care of financial insecurity in the event of a partner@s death.
7romotes a firm@s life
Ta benefits to the firm
=inancial stability.
:urvival benefit.
'utual understanding.
EMPOER%EMPOEE SC4EME
-
8/9/2019 Tara baap ni gand.docx
55/60
"hat is
-
8/9/2019 Tara baap ni gand.docx
56/60
books
4 7remium paid by the employer to be treated as per,uisite in the hands of
employee under :ec. $ of I. T. Act.
4
-
8/9/2019 Tara baap ni gand.docx
57/60
and the ma!ority of the population below poverty lines. The insurance company with
a view to target this section of the society# has designed the product which the poor
people will be capable to purchase.
In micro insurance the face value of the policy will be very low i.e. is
(s25000 and the premium will be payable on weekly basis instead of
monthly#,uaterly#or yearly basis .the premium of the 25#000 on weekly will be (s$50
only which the poor people can afford. In this way the insurance will be able to cover
this section of the section which consists of the biggest part of the market. The I/
has already introduce micro insurance in the market before 2 months
Conc'usion:%
In the end we reach to the conclusion that the insurance industry has witnessed
a huge amount of innovation after the privatization of the insurance sector. the
privatization has facilitated the entry of foreign and private players to the industry#
-
8/9/2019 Tara baap ni gand.docx
58/60
due to which the competition in the insurance market has became very severe and in
order to attract the customer and to retain the customer the insurance company has
introduce various new product. Again the ma!ority of the potential customers are
unaware of the insurance companies and with a view to increase the aware the
insurance companies has innovated the new marketing channels.
Again the e need of the customer in the present world has increase a lot due to
increasing uncertainty in the present world. And to meet their re,uirement of the
insurance the companies are designing multi benefit products.
CONTENT
-
8/9/2019 Tara baap ni gand.docx
59/60
-
8/9/2019 Tara baap ni gand.docx
60/60