1 | Page

2015

[Year]

ACH IN ADVISOR RECRUITM

Under the Guidance of
Mr.Tushar Roy and Mrs.Suchitra Dey

Submitted by:
Nishi Kant-14E008
Pradipto Roy-14E009
EPIRM Batch 07,IIRM

Table of Contents
Indian Economic Scenario........................................................................6-13
Indian Life Insurance Sector.................................................................................... 13-16
Micro & Macro Environment................................................................................. 16-19
Agency
Problem Effecting Agency........................................................................................ 20-24
Job Profile of An Agent.......................................................................................... 24-30
Recruitment of Advisor
Segmented
Approach
31-35
Banks Can Act as a
Broker
36-37
Impact of New IRDAI
Regulations
37-38
Bibliography
39

ACKNOWLEDGEMENT

As a part of curriculum at the IIRM, the assignment aims to

know the SEGMENTED APPROACH IN ADVISOR
RECRUITMENT IN AGENCY CHANNEL. So I take this
opportunity to express my sincere gratitude and thankfulness to
IIRM and ICICI PRUDENTIAL as part of EPIRM. I got
chance to study about insurance companies as a part of this
assignment.
I would like to thank Mr. Tushar Roy and Mrs.Suchitra Dey,
HR of ICICI PRUDENTIAL, for taking time out of his busy
schedule and guiding me in every possible way, to proceed
with my work. He has been a constant source of inspiration
throughout my assignment.
Last but not the least I would like to express my gratitude to all
those who have in one way or the other interacted with me and
shared their knowledge to complete this assignment.

DECLARATION

I hereby declare the project work entitled SEGMENTED

APPROACH IN ADVISOR RECRUITMENT IN
AGENCY CHANNEL. submitted to IIRM is a record of
original work done by me under the guidance of Mr.
Tushar Roy and Mrs.Suchitra Dey, HR of ICICI
PRUDENTIAL and this project has not formed the basis of
award or similar project if any.
The content of this project reflex that the work had been
done by us, during the internship program from 21.01.15 to
16.02.15.
Thanking You
Nishi kant, Roll-14E008
Pradipto Roy, Roll-14E009
EPIRM Batch-07

PREFACE
As a part of EPIRM curriculum in order to gain a practical knowledge
in the field of insurance we are required to make a report on
SEGMENTED APPROACH IN ADVISOR RECRUITMENT IN
AGENCY CHANNEL.
The basic aim behind doing this project is to get knowledge of
RECRUITMENT IN AGENCY CHANNEL.
Doing this project report helped us to enhance our knowledge regarding
recruitment of advisors in agency channel and undergone many
experiences in this concept. Through this report we come to individual
thought process and devotion towards the work.

Indian economic scenario:

Indian Economy Overview

Introduction
India has become one of the most attractive destinations for investment owing to favorable
government policies and reforms in the past few months. The approval of foreign direct investment
(FDI) in several sectors had allowed investments to pour into the economy. According to the data
provided by Department of Industrial Policy and Promotion (DIPP), the cumulative amount of FDI
inflows in the country in the period April 2000-September 2014 was US$ 345,073 million.
Growth in India is expected to rise to 5.6 per cent in 2014 and pick up further to 6.4 per cent in 2015
as both exports and investment will increase, according to the World Economic Outlook (WEO) report
released by International Monetary Fund (IMF).
Sectors projected to do well in the coming years include automotive, technology, life sciences and
consumer products. Engineering and research and development (ER&D) export revenue from India is
expected to reach US$ 37-45 billion by 2020, from an estimated US$ 12.4 billion in FY14, according
to Nasscom.
Furthermore, the US$ 1.2 trillion investment that the government has planned for the infrastructure
sector in the 12th Five-Year Plan is set to help in further improving the export performance of Indian
companies and the Indian growth story, which will consequently improve the overall Indian economy.

Market size
Indian markets grew by 19 per cent in the first half of FY15, the best performance by any market
during this period, globally. The rise was primarily due to strong inflows from foreign institutional
investors (FIIs). As of September 26, FIIs had invested Rs 61,024 crore (US$ 9.86 billion) this
financial year, while mutual funds had put in Rs 15,298 crore (US$ 2.47 billion) during the same
period, according to Securities and Exchange Board of India (SEBI) data.
Foreign exchange (Forex) reserves increased by US$ 60.5 million to reach US$ 319 billion in the
week ended August 29, 2014, according to data released by the Reserve Bank of India (RBI). Also,
foreign currency assets rose by US$ 75 million to touch US$ 291.39 billion.
India has contributed 10.25 per cent of the overall 3.9 per cent rise in the global market capitalization
(market cap) this year, which has made it the second-highest contributor in the world. The valuation of
Indian equities remains attractive, with a market cap-to-gross domestic product long-period average of
72 per cent.

Indian employees are expected to see a salary hike of 10.8 per cent in 2015, according to the Towers
Watson 2014-15 Asia-Pacific Salary Budget Planning Report. The report indicated that due to
increased economic growth, Indian employees at both ends of the hierarchy - top management and
blue collar staff - are likely to see the highest comparative pay increase in 2015.

Players and market share

As at end-September 2011, the total number of insurance companies in India was 49; the life
insurance industry consisted of 24 players, i.e., one public insurer and 23 private insurers, while the
non-life insurance industry consisted of 25 players 6 public insurers, 3 standalone health insurers,
one reinsurer and 15 private insurers. Edelweiss Tokio Life Insurance Company Limited, which was
granted registration in 2011, was the latest entrant in the life insurance sector. Religare Health
Insurance Company Limited made a quiet entry
In the health insurance sector in June 2012. Magma HDI General Insurance Company Limited and
Liberty Videocon General Insurance Company, are the latest entrants in the non-life sector, and are
due to start operations in 2012.
Based on total premium income, the Life Insurance Corporation (LIC) was the market leader in the life
insurance sector with a market share of 69.78% in FY11. As at end-November 2011, ICICI Prudential
Life insurance was the largest private sector player with a market share 1 of 6% followed by HDFC
Standard Life Insurance at 4.6% and SBI Life Insurance at 3.5%. Based on total premium
underwritten, the public sector non-life insurers held a market share 2 of 59.07% in FY11 New India
Assurance at 16.67%, United India Insurance at 14.98%, National Insurance at 14.61% and Oriental
Insurance at 12.82%. As at end-March 2011, ICICI Lombard continued to be the private sector market
leader with a market share of 9.99%.

Life insurance industry in India

According to Swiss Re, Indias life insurance market was ranked at number 9 among 156 countries in
terms of premium in FY11; Indias total premium adjusted while the total global premium grew by
3.2%. The sector has grown at more than 24% CAGR over the last 10 years. The number of policies
issued, declined at a rate of 22.61% to 48.2 million in FY11 from 53.2 million in FY10.
The total premium underwritten by the life insurance sector was INR2, 916 billion in FY11 as
compared to INR2, 655 billion in FY10, exhibiting a growth of 9.85% down from the 19.69%
Premium, which is a measure of new business secured, underwritten by the life insurers during
FY11 was INR1, 264 billion as compared to INR 1, 098.94 billion in FY10 registering a lower
growth of 15% in FY11 as compared to 25.84% in FY10. In terms of linked and non-linked
business during the year 201011, 37.38% (as compared to 43.52% in FY10) of the total premium
was underwritten in the linked segment while the balance 62.62% of the business was in the nonlinked segment (as compared to 56.48% in FY10).

Market share of major companies in terms of total life insurance premium collected
LIC is the market leader, with 72.7 per cent share in FY13, followed by ICICI Prudential, with 4.7 per
cent share.

Current Indian Economic Scenario

Introduction
India has become one of the most attractive destinations for investment owing to favorable
government policies and reforms in the past few months. The approval of foreign direct investment
(FDI) in several sectors had allowed investments to pour into the economy. According to the data
provided by Department of Industrial Policy and Promotion (DIPP), the cumulative amount of FDI
inflows in the country in the period April 2000-September 2014 was US$ 345,073 million.
Growth in India is expected to rise to 5.6 per cent in 2014 and pick up further to 6.4 per cent in 2015
as both exports and investment will increase, according to the World Economic Outlook (WEO) report
released by International Monetary Fund (IMF).
Sectors projected to do well in the coming years include automotive, technology, life sciences and
consumer products. Engineering and research and development (ER&D) export revenue from India is
expected to reach US$ 37-45 billion by 2020, from an estimated US$ 12.4 billion in FY14, according
to Nasscom.
Furthermore, the US$ 1.2 trillion investment that the government has planned for the infrastructure
sector in the 12th Five-Year Plan is set to help in further improving the export performance of Indian
companies and the Indian growth story, which will consequently improve the overall Indian economy.
Market size

Indian markets grew by 19 per cent in the first half of FY15, the best performance by any market
during this period, globally. The rise was primarily due to strong inflows from foreign institutional
investors (FIIs). As of September 26, FIIs had invested Rs 61,024 crore (US$ 9.86 billion) this
financial year, while mutual funds had put in Rs 15,298 crore (US$ 2.47 billion) during the same
period, according to Securities and Exchange Board of India (SEBI) data.
Foreign exchange (Forex) reserves increased by US$ 60.5 million to reach US$ 319 billion in the
week ended August 29, 2014, according to data released by the Reserve Bank of India (RBI). Also,
foreign currency assets rose by US$ 75 million to touch US$ 291.39 billion.
India has contributed 10.25 per cent of the overall 3.9 per cent rise in the global market capitalisation
(market cap) this year, which has made it the second-highest contributor in the world. The valuation of
Indian equities remains attractive, with a market cap-to-gross domestic product long-period average of
72 per cent.
Indian employees are expected to see a salary hike of 10.8 per cent in 2015, according to the Towers
Watson 2014-15 Asia-Pacific Salary Budget Planning Report. The report indicated that due to
increased economic growth, Indian employees at both ends of the hierarchy - top management and
blue collar staff - are likely to see the highest comparative pay increase in 2015.
Key developments/investments
In the past few months, there have been quite a few investments in several sectors of the Indian
economy. This has led to some major changes and developments in the country. Some of these major
developments/investments are as follows:

Venture capital (VC) investments in India have already breached the billion dollar mark this
year. There were 189 early-stage deals in the first nine months of 2014 worth US$ 1.09 billion,
according to Ernst & Young (EY).

India's drugs and pharmaceuticals industry is expected to grow at a compound annual growth
rate (CAGR) of 14 per cent to reach a turnover of Rs 2.91 trillion (US$ 47.05 billion) by 2018.
This growth is aided by the rapidly growing domestic market and the newly emerging export
opportunities.

The output of eight core sector industries in India grew by 5.8 per cent in August 2014 as
compared to 2.7 per cent in July 2014, on the back of good expansion in steel, coal, cement
and electricity generation. The eight industries constitute 38 per cent of the Index of Industrial
Production (IIP).

The total approximate earnings of Indian Railways during the period April 1-September 30,
2014 were Rs 73,403.67 crore (US$ 11.87 billion) compared to Rs 65,525.85 crore (US$ 10.59
billion) during the same period last year, which is an increase of about 12.02 per cent.

Private equity (PE) giant Surbana plans to invest around Rs 300 crore (US$ 48.51 million) in
the food park promoted by Keventer Group in Bengal, making it the biggest FDI in the food
processing sector in India.

10

Indian firms are expected to raise US$ 13-14 billion through global bonds in 2014 on the back
of improved economic outlook and reforms to ease the raising of funds aboard, according to
Moody's. The oil and gas, metals and mining, and telecommunications sector issued 67 per
cent and 76 per cent of the foreign currency bonds from Indian non-financial companies in
2013 and 2014, respectively.

Government Initiatives
India has become a promising investment destination for foreign companies looking to do business
here. Mr Narendra Modi, Prime Minister of India, has launched the 'Make in India' initiative with the
aim to give the Indian economy global recognition. This initiative is expected to increase the
purchasing power of the common man, which would further boost demand, and hence spur
development, in addition to benefiting investors.
The steps taken by the government in recent times have shown positive results as India's gross
domestic product (GDP) at factor cost at constant (2004-05) prices for Q1 of 2014-15 is estimated at
Rs 14.38 trillion (US$ 232.63 billion), as against Rs 13.61 trillion (US$ 220.12 billion) in Q1 of 201314, registering a growth rate of 5.7 per cent.
Based on the recommendations of the Foreign Investment Promotion Board (FIPB), the Government
of India has approved 14 proposals of FDI amounting to Rs 1,528.38 crore (US$ 247.19 million)
approximately. Out of the 14 approved proposals, six of them belonged to the pharmaceutical sector
which was the highest number of approvals for any sector.
Road Ahead
Only India is anticipated to witness better growth momentum among the BRIC bloc whereas other
member countries are expected to see stable growth momentum, according to Organisation for
Economic Cooperation and Development (OECD).
India could become the world's seventh biggest nation in terms of private wealth, with a 150 per cent
increase in total, from US$ 2 trillion in 2013 to US$ 5 trillion in 2018, as per a recent study by the
Boston Consulting Group (BCG).
Furthermore, the new 'Make in India' initiative is expected to be a vital component in India's quest for
achieving wholesome economic development

Factors for Growth

Growth Drivers
India has emerged as a strong economy over the years. The recent global financial and economic crisis
had an impact on Indias economic growth momentum during FY09. However, the economy has been
remarkably resilient against shocks such as turmoil in the global and domestic financial markets,
severe drought conditions and hardening international crude oil prices, sustaining its GDP growth. It
has managed to escape relatively unscathed from the global economic turmoil owing to strong

11

fundamentals, which would continue to drive its growth. Thus, it is important to undertake integrated
efforts to further strengthen these fundamentals and fulfill the aspiration of achieving a strong growth
in future.

Strong growth can only be achieved through realization of full-growth potential of some key growth
areas. This section seeks to identify potential growth drivers that could stimulate growth and drive the
Indian economy on a high and sustainable growth path. In this endeavor we begin by identifying
substantial investments in physical, growth drivers social and agricultural infrastructure as the key
growth drivers which will enable the economy to achieve inclusive growth. Although we expect
these three factors to contribute significantly in Indias growth story during the current decade (201120), the role of other factors (such as technological progress, improvement in productivity and Indias
young demography, etc) should not be underrated. Further, Government of India (GoI) and the private
sector need to undertake necessary integrated efforts to strengthen these growth drivers and achieve
high GDP growth. The following section elucidates future growth drivers of Indias economic growth.
Investment in physical infrastructure
Sustained increase in infrastructure is expected to be one of the crucial factors for sustaining strong
growth during the current decade. Significant investment in physical infrastructure will also lead to
employment generation, increased production efficiency, reduction in cost of doing business and
improved standard of living.
According to D&Bs estimates, infrastructure investment (as measured by Gross Fixed Capital
Formation) is expected to surge to 12.1% of GDP by FY20 from 7.0% of GDP in FY11. Rising
demand for infrastructure facilities, given the rapid growth in urbanization, bulging of the middle
class and an increasing working-age population, would engender substantial increase in infrastructure
investments during the current decade.

12

Apart from development of infrastructure facilities in existing cities/towns, increased focus is

expected on infrastructure development in new townships/rural areas. Regional-urban development
plans will be made to identify new growth corridors. D&B expects a substantial rise in rural
infrastructure development, which will provide further impetus to economic growth in rural areas, in
turn resulting in significant reduction in poverty. Increased investment in rural infrastructure will
benefit the rural population through higher income, rise in employment opportunities, and lower cost
of basic goods due to improvement in transportation facilities. Nonetheless, improvement in rural
infrastructure will need to be properly targeted to benefit the rural poor.

13

Growing economy and purchasing power

The demand for insurance products is likely to increase due to the exponential growth of
household savings, purchasing power, the middle class and the countrys working population.
The working population (2560 years) is expected to increase from 675.8 million in 2006 to
795.5 million in 2026. Increased incomes are expected to result in large disposable incomes,
which can be tapped and the insurance sector in particular.

Working population and GDP comparison estimation till 2026

Working population assessment and GDP per capita till 2026
Number

INR

800

120

700

630

600
500
400
300
200

399

18.28

449

507

571

69.56

676
100.68

49.32
24.08

2001

80
60

34.56

40
20

100
0

100

2006

25-60 (in millions)

2011

2016

2021

2026

Projected GDP per capita in '000s

Source : CMIE Cencus of India, 2001.

Indian Life Insurance Sector:-How it is poised?

The dawn of a new year is upon us, and as usual, the contemplation of the year that was, and
hopes for the year that will be are in full swing. When considering the competitive, thus
lucrative Indian life insurance market, the emerging trends for 2015 are very encouraging. A
latest prediction notes that Indias overall insurance sector is poised to grow at a phenomenal
rate in 2015, even eclipsing the countrys much commented upon economic growth rate.
Insurance in India isnt a new fad- big multinational insurance companies have been here
since a long while, as well as reputed Indian conglomerates have jumped into the fray by
opening their own general insurance concerns. In particular, the erstwhile low penetration
rates that are attributed to the Indian life insurance sector will be replaced by brisk business
opportunities, improved awareness and ready adoption.
Key Life Insurance Indicators in 2015
Currently, India is the worlds 12 th largest life insurance market, while holding the
distinction of being the 4th largest in the Asia-Pacific region. In 2015, the aggressive
growth in this sector will reflect in Indias move up the scale, overtaking South Korea
to emerge as the 3rd largest life insurance market in the Asia-Pacific region, right on
the heels of leaders China and Japan.
The factors contributing to this flash growth include an increment in the countrys
population, expected tax benefits, the rise of Indias middle class population with their
enhanced disposable incomes, heightened awareness for the need for life insurance

14

and most importantly, the predicted robust economic growth as expected under the
new regime at the centre.
Life insurance companies are constantly adapting and listening to what the Indian
customer wants. The common request for a long time has been the need for insurance
products that offer assured income in the form of annuities, a request that has already
been implemented upon by the said life insurance companies. These measures are
expected to generate a new-found interest in life insurance products, especially
amongst Indias youth brigade.
New, innovative products and methodologies that deviate away from the core life
insurance objective to include other beneficial features are bound to be the icing on a
very lucrative cake in 2015. Distribution channels like Bancassurance are bound to
rule the roost.
Economic, political, social and demographic conditions are expected to contribute
towards very open and confidence building market conditions wherein the existing
and incoming life insurance companies are expected to thrive and flourish. The
impetus in terms of the Foreign Direct Investment (FDI) is going to give the sector
extra wings to confidently achieve this goal.

Things to Watch Out in 2015

Key growth segments within the Indian life insurance sector- little initiatives that
contribute to the overall cause.
IRDA and its proposal to increment the FDI in the private insurance companies from
the current 26% to a more substantial 49%. This will help these companies improve
their market penetration levels, especially in the Indian rural sector that is largely
untapped at this point.
The fundamental improvements in the government rules and regulations that govern
the Indian life insurance sector.
The constant realignments and innovations inside the sector itself, as quick responses
to customer demands, changing economic conditions, product strategy and response
to competition from fellow life insurance companies.
How Are Life Insurance Companies Adapting?
Conscious of Costs (Work with less, Make every rupee run a mile) The recent
economic burnouts have been a stern teacher and the Indian life insurance companies
are finally seeing the bigger picture. Most of these companies have now posted fresh
adherence to the quality that tags alongside their operational and promotional spends,
thus, 2015 is going to be all about working with less yet driving great quality out of it.
Improving and Maintaining the Confidence of Stakeholders- Whilst the changing
political scenarios in India have filled most investors with a renewed confidence as far
as investing in this land of opportunities goes, 2015 will witness a ramped up interest
amongst life insurance companies to repay the faith that has been bestowed upon
them. With the prospect of increased FDI, it pays to play a good host and protg.
Customer Reach (Going where no life insurance company has gone before)- 2015
is going to be all about finding new customers and holding dearly onto the existing
patrons by offering them amazing service and an improved arsenal of products. With
improved penetration levels, the battle lines will be drawn and self-promotion will hit
a frenzied level.
Thus, the incoming year is bringing in a truckload of opportunities and benefits- both for the

15

expectant Indian life insurance companies and the public at large that the former wishes to
serve. While improved awareness on the part of the common man will be a decisive factorthe bottom line remains that 2015 will likely be listed as a bumper year in the annals of the
Indian life insurance sector.

16

Key developments/investments
In the past few months, there have been quite a few investments in several sectors of the Indian
economy. This has led to some major changes and developments in the country. Some of these
major developments/investments are as follows:

Venture capital (VC) investments in India have already breached the billion dollar mark
this year. There were 189 early-stage deals in the first nine months of 2014 worth US$ 1.09
billion, according to Ernst & Young (EY).

India's drugs and pharmaceuticals industry is expected to grow at a compound annual

growth rate (CAGR) of 14 per cent to reach a turnover of Rs 2.91 trillion (US$ 47.05 billion) by
2018. This growth is aided by the rapidly growing domestic market and the newly emerging
export opportunities.

The output of eight core sector industries in India grew by 5.8 per cent in August 2014 as
compared to 2.7 per cent in July 2014, on the back of good expansion in steel, coal, cement and
electricity generation. The eight industries constitute 38 per cent of the Index of Industrial
Production (IIP).

The total approximate earnings of Indian Railways during the period April 1-September
30, 2014 were Rs 73,403.67 crore (US$ 11.87 billion) compared to Rs 65,525.85 crore (US$
10.59 billion) during the same period last year, which is an increase of about 12.02 per cent.

Private equity (PE) giant Surbana plans to invest around Rs 300 crore (US$ 48.51
million) in the food park promoted by Keventer Group in Bengal, making it the biggest FDI in
the food processing sector in India.

Indian firms are expected to raise US$ 13-14 billion through global bonds in 2014 on the
back of improved economic outlook and reforms to ease the raising of funds aboard, according to
Moody's. The oil and gas, metals and mining, and telecommunications sector issued 67 per cent
and 76 per cent of the foreign currency bonds from Indian non-financial companies in 2013 and
2014, respectively.
Government Initiatives
India has become a promising investment destination for foreign companies looking to do
business here. Mr Narendra Modi, Prime Minister of India, has launched the 'Make in India'
initiative with the aim to give the Indian economy global recognition. This initiative is expected
to increase the purchasing power of the common man, which would further boost demand, and
hence spur development, in addition to benefiting investors.
The steps taken by the government in recent times have shown positive results as India's gross
domestic product (GDP) at factor cost at constant (2004-05) prices for Q1 of 2014-15 is

17

estimated at Rs 14.38 trillion (US$ 232.63 billion), as against Rs 13.61 trillion (US$ 220.12
billion) in Q1 of 2013-14, registering a growth rate of 5.7 per cent.
Based on the recommendations of the Foreign Investment Promotion Board (FIPB), the
Government of India has approved 14 proposals of FDI amounting to Rs 1,528.38 crore (US$
247.19 million) approximately. Out of the 14 approved proposals, six of them belonged to the
pharmaceutical sector which was the highest number of approvals for any sector.
Road Ahead
Only India is anticipated to witness better growth momentum among the BRIC bloc whereas
other member countries are expected to see stable growth momentum, according to Organization
for Economic Cooperation and Development (OECD).
India could become the world's seventh biggest nation in terms of private wealth, with a 150 per
cent increase in total, from US$ 2 trillion in 2013 to US$ 5 trillion in 2018, as per a recent study
by the Boston Consulting Group (BCG).
Furthermore, the new 'Make in India' initiative is expected to be a vital component in India's
quest for achieving wholesome economic development.
1. Micro and Macro environment:Macro Economics.
a. Concerned with the whole economy.
b. Analysis the relationship and behavior of economic aggregates like national income, total
consumptions, savings, investments, employment, price level etc
Growth of gross domestic product (GDP) at factor cost at constant 2004-05 prices declined from
8.9 per cent in 2010-11 to 6.7 per cent in 2011-12 and further to 4.5 per cent in 2012-13. Among
the factors that contributed to the slowdown included structural constraints viz. delays in
projects, bottlenecks in environmental approvals and land acquisition, elevated inflation and
external imbalances, in addition to uncertain global economic situation. There was a marginal
improvement in 2013-14 with GDP growing at 4.7 per cent. The phase of sub 5 percent growth
in the last two years is characterized by a moderation in services growth and a protracted
slowdown in industry. Higher growth in agriculture on the back of a steady monsoon and robust
growth in financial and business services helped the modest uptick in growth in 2013-14.
Macroeconomic stabilization in 2013-14 had to balance the concerns of containing elevated
inflation and promoting growth. It also involved managing a volatile external situation
characterized by a sharp depreciation of the Rupee witnessed till the second quarter (Q2) of
2013-14. While the balance of payment situation has improved to an extent, achieving higher
growth by raising investment level and price stability along with fiscal consolidation will be
major priority areas in 2014-15. The turnaround in the external situation (characterized by a

18

decline in the current account deficit to 1.7 per cent of GDP in 2013-14 from 4.7 per cent in
2012-13 and gradual strengthening of the Rupee in the second half of 2013-14) and improvement
on the fiscal front (with the fiscal deficit to GDP ratio declining from 4.9 percent of GDP in
2012-13 to 4.5 per cent in 2013-14) augur well for macroeconomic stabilization. During 201314, the monetary policy stance of the RBI was driven by the imperatives of keeping inflation in
check and supporting growth revival while managing a complex external economic situation.
With moderation in overall headline inflation, as per the Wholesale Price Index (WPI), during
2012-13 and during the first two quarters of 2013-14, there was a reduction in the repo rate by 25
basis points in May 2013. On the face of growing uncertainties in global financial conditions,
monetary easing was paused in June 2013 and subsequently tightened to contain inflation.
Headline WPI inflation averaged 5.98 per cent during 2013-14 as compared to 7.35 per cent in
the previous year. In the Second Bi monthly Monetary Policy Statement 2014-15 (June, 2014),
the RBI, inter-alia, kept the policy repo rate under the Liquidity Adjustment Facility (LAF)
unchanged at 8 per cent.

2. Internal & External Environment and Macro Environment Forces.

Nature of business environment.

Suppliers.

Customers.

Business partners.

Competitors.

Regulatory Agencies.

3.

Emerging Indian Scenario

Economic Reforms and Indian Industry.

Liberalization.

Globalization.

Privatization.

Global Economy:-

19

Recovery is on track in 2014, though tightening financial conditions and the divergence in
inflation pose risks
Since the January 2014 monetary policy statement, global growth outlook remains broadly
unchanged though weaker initial data to some extent cloud optimism. Global economic activity
had strengthened in H2 of 2013. On the current reckoning, global growth is likely to be in the
vicinity of 3 per cent in 2014, about a percentage point higher than in 2013. The expansion
in global output is expected to be led by advanced economies (AEs), especially the US.
However, downside risks to growth trajectory arise from ongoing tapering of quantitative easing
(QE) in the US, continuing deflation concerns and weak balance sheets in the euro area and,
inflationary pressures in the emerging market and developing economies (EMDEs). Weakening
growth and financial fragilities in China that have arisen from rapid credit in recent years pose a
large risk to global trade and growth.
Growth also picked up in the EMDEs during H2 of 2013, but the momentum looks weaker than
in the AEs and it faces new risks. Improved EMDE growth emanated largely from external
demand on the back of currency depreciation in these countries. Going forward, drag on its
sustainability may emerge from tightening monetary and financial conditions that can intensify
further in case of a faster-than- anticipated withdrawal of monetary accommodation by the AEs.
Recent sovereign rating downgrade for Brazil and downward revision in rating outlook for
Russia has also added to the growth risks for EMDEs.
Global inflation remains benign with activity levels staying below potential in the AEs as well as
in some large EMDEs and a softer bias for global commodity prices continuing into 2014.
However, inflation in many EMDEs remains high, though actions in tightening monetary policy
and slack in output are expected to help generate some disinflationary momentum. The divergent
trends in inflation between AEs and EMDEs pose an added risk to global growth.
After the unexpected shock from the May 2013 tapering indication by the US Fed, global
financial markets have weathered the initial dose of actual tapering of the quantitative easing
(QE) quite well. However, the global interest rate cycle has just begun to turn. Moreover, a large
part of the withdrawal of monetary accommodation by AEs remains to play out. Consequently,
capital flows to EMDEs could remain volatile, even if they do not retrench. Also, with corporate
leverage rising in many EMDEs, capital flow volatility could translate into liquidity shocks
impacting asset prices.

POPULATION ACCORDING TO AGE:

20

Age
structure:
years:
(male
187,016,401/female
0-14
28.5%
15-24
years:
18.1%
(male
118,696,540/female
25-54
years:
40.6%
(male
258,202,535/female
55-64
years:
7%
(male
43,625,668/female
65 years and over: 5.8% (male 34,133,175/female 37,810,599) (2014 est.)

165,048,695)
105,342,764)
243,293,143)
43,175,111)

Population Pyramid:
A population pyramid illustrates the age and sex structure of a country's population and may
provide insights about political and social stability, as well as economic development. The
population is distributed along the horizontal axis, with males shown on the left and females on
the right. The male and female populations are broken down into 5-year age groups represented
as horizontal bars along the vertical axis, with the youngest age groups at the bottom and the
oldest at the top. The shape of the population pyramid gradually evolves over time based on
fertility, mortality, and international migration trends.

21

4. What is agency?
An agent is a person who advices the family for insurance planning and prevents the
family on the happening of any contingency in unexpected death of breadwinner. An agency is a
place where the agent works.
Fiduciary relationship between two parties in which one (the 'agent') is under the control of (is
obligated to) the other (the 'principal'). The agent is authorized by the principal to perform certain
acts, for and on behalf of the principal. The principal is bound by the acts of the agent, performed
in carrying out entrusted duties and within the scope of agent's authority. An agency can be
created by:-

22

(1) express agreement, whether oral or written,

(2) implication, based on the custom or practice of the trade,
(3) conduct of the principal. Under the legal doctrine of estoppel, the principal is prohibited from
denying the existence of a properly constituted agency. Creation of agency is essential to
commercial and financial transactions, because an organization (as a legal entity) can function
only through its agents.
Report bats for insurance agency channel revamp:Insurance agents in India lack the necessary skills to give the right advice to clients, according
to a report by KPMG and Bengal National Chamber of Commerce and Industry. The report,
Insurance Industry Road Ahead, said insurers should take the initiatives to revamp the
agency channel to become cost-effective and identify alternative networks that complement
the existing channels. It says inefficient agent recruitment process leads to high attrition
among agency managers and agents. Some agents lack the skill to provide sound financial
advice and, accordingly, there is a lot of mis-selling in this channel. The overall stickiness of
this sales force needs to be increased to ensure a more sustainable model, the report noted.
The internet is an important area of growth for insurers, according to the report. It estimated
that by 2020, the internet will constitute 15-20 per cent of gross direct premium in personal
line products, denting the criticality and bargaining power of other channels. The report says
using the mobile banking platform to offer insurance solutions is a cost-effective method to
tap
a
large
market.
Economic growth, socio-economic drivers, greater market penetration, rising prices of
underlying assets, and increase in healthcare costs would significantly drive the growth of
general insurance sector in the medium to long term, the report said. It added the growth
might be supported by a focus on profitability by public and private sector insurers, resulting
in lower propensity for price wars. The report added the general insurance sector was
expected to grow at a compounded annual rate of 16 per cent from Rs 57,964 crore in FY12 to
approximatelyRs.194,000crorebyFY20.
The report also raised concerns about low penetration of micro-insurance and said that microinsurance (life, disability and health) coverage of the economically-disadvantaged sections of
Indian society is dismally low. It will remain so, until the regulators and insurers bring in policy
changes
and
go
beyond
the
traditional
distribution
models,
it
said.
In terms of bancassurance, it said that banks have started facing a conflict of interest with
insurance
products
substituting
banking
products
such
as
term
deposits.
It showed the insurers have not been able to successfully mine the bank customer database for
sale of new business, especially of public sector banks that are still on the anvil of technology
transformation.

23

While these initiatives would enable long-term industry growth, the role of the regulator in
providing an enabling environment to achieve profitable growth in the near to medium term
cannot be undermined.

Innovative Channels
"Spreading the tentacles to the longest length and the remotest corner" is the mantra of Insurance
players. To reach this objective, their distribution channel strategies have taken different 'avatars'
like
Corporate agents, Bancassurance and Retailassurance etc.
A peep into each of the above would help in understanding them better.
Corporate Agents
Corporate agency is a cross selling type of channel. Insurance companies tie-up with business
houses in other industries to sell insurance either to their employees or their customers.
Insurance industry, during the past 2 years has witnessed a number of such strategic tie-ups and
alliances. Corporate agents have become a major force to reckon with in distributing insurance
products.
The following table throws light on the extent of utility of corporate agents.

Table.1.

Corporate

Insurance
provider
TATA AIG General

agencies

(Life

&

Non

Corporate agent

Type of Insurance

CEAT

Personal accident insurance cover

scheme on two wheeler tyres.

HPCL

Motor insurance at petrol fitting

statutory

life):

24

Thomas Cook
Bajaj
General
HDFC
life

Travel Care a travel insurance

Allianz Maruti Udyog, Hyundai &

Auto Insurance
Ford
Standard

JRG Financial Services

Marketing of life insurance &

pension products

AMP Sanmar

Trade wings (a travel

agency),
Dhandapani Marketing
Group
policies
& Karvy Consultants.

TATA AIG Life

Tata
Tea,
Khaitan's
Williamson Major, Bridge Rural Policies
foundation

of

life

insurance

Bancassurance
Simply put, Bancassurance means distribution of insurance products through banks. This mode
of selling risk products through banks is fast gaining ground. Almost all insurance players have
married to one or more banks for wider reach and increased trust. Bancassurance may sell
insurance as customised solutions or in the form of bundled products along with bank products.
Even though banks are considered as one among the corporate agents, bancassurance has gained
a great importance that it needs to be discussed separately.
The importance can be understood from the fact that even SBI life is associating with public,
private sector and co-operative banks for providing life insurance to the account holders, in spite
of being an offshoot of Indian's largest bank.
Last year's amendment in the Insurance bill allowed bancassurance to piggy back on nearly
66,700 bank branches with over 18 crore accounts. Also, there are advantages of speedy reach to
market and lower infrastructure costs. Banks get 7-15% commission. While bancassurance's
share in insurance is 50% in Europe, 20% in US; in India we are utilising <5% of the total
number of bank branches. ICICI prudential is the topper in bancassurance with 15% and with a
contribution of Rs.470 crore.
Bancassurance is poised to become a key determinator / differentiating factor in the Insurance
industry. With banks are all set to encourage their staff to sell policies, with enough training, this
will take of to great heights.
Realising the importance of bancassurance, both life and non-life insurance companies have
started piggy backing on banks for pushing their policies.
The present status of bancassurance can be understood from the following display.

25

Table.2.

Bancassurance:

Win-Win

Relationships

Insurance Company

Partner Banks

ICICI Prudential

ICICI Bank, Bank of India , Citibank , Allahabad Bank,

Federal Bank , South Indian Bank, Lord Krishna Bank,
Punjab and Maharashtra Co-Operative Bank.

SBI Life

SBI, associate banks

Development Credit Bank , Deutsche

Birla Sunlife Insurance Citibank, Bank of Rajasthan, Andhra
Catholic Syrian Bank, Bank of Muscat
ING Vysya Life

Vysya Bank

Aviva Life Insurance

ABN
Amro,
Lakshmi
American Express, Canara Bank

Royal
Alliance

Vilas

Bank,
Bank,

Bank,

Sundaram Standard Chartered, ABN Amro, American Express,

Citibank

United India Assurance Indian Bank, South Indian Bank, Andhra Bank
HDFC Standard Life
Life
Corporation
MetLife

Union Bank, Indian Bank

Insurance Corporation
Bank,
Central
Bank,
Punjab, Andhra Bank, Nedungadi Bank

Bank

of

Karnataka Bank, Dhanalaxmi Bank, J&K Bank

Retailassurance
'Insurance Products are being sold at retail outlets'. This news should convey the message that
Indian Insurance industry is really boiling. Not only the Insurance players but also their
distribution partners are very much interested in this kind of game plan. The office of the Chief
Post-Master General, Chennai has mooted the idea of selling some of the insurance products
through Post Offices. With 1.53 lakh post offices in the Country, more than twice the number of
bank branches, it can really be a channel with very great potential. Medicine shoppe, a pharma
chain store group and Bajaj Allianz have tied up to provide free insurance cover of Rs.2/- on
every purchase of pharma products worth Rs.1/-. This scheme is open to 5-25 years age group,
and distributed through its 40 outlets.

26

Also insurance selling has gone the 'corner shop' way, with TATA AIG's plans to sell the
policies at petrol bunks.
Conclusion:
It is certain that Indian Insurance players along with their foreign partners are trying to grab the
under explored Indian market. Though these are few innovations in the marketing Channels of
Indian Insurance Industry, it is expected that they will try more innovative Channels as the
industry grows. Innovatively, SBI life has offered group insurance to the employees of public
sector companies, including their spouses. Also similar covers were offered to even the state
Governments for their liabilities. Given the aggression with which they progress, surely these
innovations are going to be a big hit and a metamorphosis of Indian Insurance sector is very
much on its course.

JOB PROFILE OF AGENT.

1. Prospecting:- the work is to find the prospect whom the agent can convince.
2. Need Analysis:- the second work is to find the need of the customers, analyze what he wants, and
give them the product needed for selling.
3. Close the sale :-in closing the sale the agent must ask for the order keeping in mind the customer
satisfaction .
4. After sale service:- this is the last step which the agent should do in order to retain the customer.
The after sale service is needed to show that the company cares for you and customer should not
feel himself neglected.

Attributes.
1.
2.
3.
4.
5.
6.

Should be outgoing and love to meet people.

Should be ambitious to start your own business.
Should possess good communication skill.
Have a lot of perseverance.
Work hard with lot of devotion and dedication
Accept rejection as stepping stone.

About MDRT
Founded in 1927, the Million Dollar Round Table (MDRT), The Premier Association of
Financial Professionals, is a global, independent association of more than 42,000 of the world's
leading life insurance and financial services professionals from more than 470 companies in 71
countries. MDRT members demonstrate exceptional professional knowledge, strict ethical

27

conduct and outstanding client service. MDRT membership is recognized internationally as the
standard of excellence in the life insurance and financial services business.
Mission
To be a valued, member-driven, international network of leading insurance and investment
financial services professionals/advisors who serve their clients by exemplary performance and
the highest standards of ethics, knowledge, service and productivity.
History
In 1927, 32 extraordinary life insurance producers, each of whom had sold at least $1 million of
life insurance, dreamed of a forum dedicated to fostering a high-standard, professional approach
to life insurance sales and service. Founded on the belief that growth is a result of exchanging
ideas, the concept was: "To receive, individuals must give."
Out of this dream emerged MDRT an international, independent association that represents the
world's best sales professionals in the life insurance-based, financial services industry.
MDRT, a positive influence in the life insurance industry, has developed a rich tradition of
sharing knowledge for the benefit of clients, prospects, producers and companies.
Code of Ethics
MDRT members should be ever mindful that complete compliance with and observance of the
Code of Ethics of the Million Dollar Round Table shall serve to promote the highest quality
standards of membership. These standards will be beneficial to the public, and the insurance and
financial services profession.

Strategic Plan
MDRT has a strategic plan that it follows when developing new programs and benefits for its
members. The strategic plan contains nine goals and objectives to guide the organization in
helping its members better serve their clients and learn from one another.
Executive Committee
MDRT is governed and managed by a five-member Executive Committee duly elected each year
by the MDRT membership.

28

Court of the Table and Top of the Table

Court of the Table and Top of the Table serve as additional incentives for members to increase
their levels of production. Court of the Table members must earn three times the MDRT base
production requirement, and Top of the Table members must earn six times the base production
requirement. Both Court of the Table and Top of the Table members can take advantage of
additional member benefits provided exclusively to them.
Annual Meeting
The MDRT Annual Meeting has been described as a one-of-a-kind event, unrivaled in the world
of business. Every year, approximately 6,000 of the world's top producers gather in a spirit of
camaraderie for one of the greatest gatherings of financial services professionals in the world.
Annual Meeting attendees are exposed to some of the finest and most innovative sales ideas in
the life insurance-based, financial services business. The meeting offers about 100 speakers
during its motivational Main Platform presentations, educational Focus Sessions and insightful
breakfast and evening sessions. And, perhaps most importantly, members can network with other
top financial services professionals from around the world, building friendships that last a
lifetime.
Top of the Table Annual Meeting
The purpose of the Top of the Table Annual Meeting is to provide an annual educational meeting
for the exchange of advanced sales ideas and for the development of interpersonal relationships
among leading financial producers who are Top of the Table members. During the four-day
meeting, about 40 professional, non-member and Top of the Table member speakers discuss
subjects of vital concern to those in the life insurance and financial services industry.

MDRT Experience
The purpose of this event is to bring MDRT's Annual Meeting experience to producers in other
countries. This event, modelled after MDRT's prestigious Annual Meeting, delivers cutting-edge
sales techniques and ideas, technical information and motivational concepts for those in the life
insurance and financial services business. The MDRT Experience is open to both MDRT
members and non-members.
MDRT Foundation

29

The MDRT Foundation is the philanthropic arm of MDRT. Since its formation in 1959, the
MDRT Foundation has granted more than USD 28 million to charitable organizations serving
people
in
67
countries
and
all
50
U.S.
states.
The MDRT Foundation awards grants to charitable organizations that are empowering people in
need in MDRT member communities worldwide. The grants given by the MDRT Foundation are
distributed to organizations in which members have a vested interest. Grant recipients have either
been endorsed by an MDRT member or receive money in honor of a member's volunteerism.
Benefits of agency.
1.
2.
3.
4.
5.

Agency is considered highly paid profession in the world.

Start business with less capital.
Freedom to start your own working hours.
Your work gets easier and less demanding as business grow.
We can pass on this business to next generation.

Market potential.
1.
2.
3.
4.

Least insured market in the world.

Out of total insurance population 40% are covered.
These 40% are not adequate covered.
Only these 20% brings 80 % business.

Growth Potential.
1.
2.
3.
4.
5.
6.
7.

Low insurance penetration.

Low insurance density.
Low share of world premium.
High per capita savings.
Increase in working population.
Higher consumer awareness.
Growth in personal income.

a. Low insurance penetration.

1. Insurance premium is measured by premium as % of GDP.
2. We will know to come to know about the potential when we compare difference in penetration
level.
Penetration Level of insurance .

30

TAIWAN
SOUTH AFRICA
HONGKONG
JAPAN
U.K
SOUTH KOREA
DENMARK
SWITZERLAND
SINGAPORE
INDIA

15.03%
11.56%
11.02%
9.17%
8.44%
6.87%
6.62%
5.25%
4.43%
3.17%

Source:Swiss RE

Low insurance density.

1. Insurance density is ratio total population
2. Compare the difference in insurance density in India with that of other countries is insurance
potential.

Country
JAPAN
SWITZERLAND
SINGAPORE
U.S.A
INDIA
TAIWAN
SWEDEN
Source :swiss RE

density
4142
4121
2471
1808
42
3107
2865

HIGH PER CAPITA SAVINGS.

Indian people are good savers. Group household savings is 8% of GDP for the year 11-12
Share of insurance premium is 19.9% of gross household savings.

31

Savings pattern.
83% for emergency.
81% for child education.
69%of old age.
63% for future expenses, marriage, birth and social ceremonies.

e) Increase in working population.

1. 40 % of Indian population young at present age group 20-49 years. This is expected to grow
65% by 2020.
2. Indias working population will increase by 136 million in 2020.

f) High consumer awareness.

Splitting of joint families, absence of social security scheme and opening of insurance sector has
contributed to increase awareness by life insurance.
g) Strong brand.
1. The agent gets associated with leading life insurance Company of the world. The people
connected to this brand are huge and identify life insurance.
2. Brand value of ICICI is 90,000 cr
Market potential.
companies
LIC
23 companies
total
Source:SwissRE

1st year premium

90124
29517
1,19,641

Market share
75.33%
24.67%

Market potential summary.

1.
2.
3.
4.
5.

The best insured life insurance population.

Paucity of professional agents.
Low insurance penetration and density.
Young working people.
Rising insurance awareness

No of policy
3,45,11,781
63,61,536
40,87,3317

Market share
84.44%
15.56%

32

6. Burgeoning higher and middle class.

7. Strong brand image in India.

INTERMEDIARIES USED BY ICICI

1. CORPORATE AGENT:- Similar to individual companies except that those are the companies
and their representatives selling insurance product instead of individual agent.
2. BANCASSURANCE:- Banks have huge customer base and recommend appropriate financial
product. Here the banks itself chooses an insurance player and its brokers/wealth managers to
pitch relevant products.

3. AGENCY:- An agent is the pillar of any insurance industry .his sole responsibility is to pitch
products from multiple companies but now a rule from governing body IRDA is coming up with
the rule that an agent will be responsible to sell product of 1 (one) company only.

Segmented Approach.

Segments:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Businessmen
Housewives
Corporate offices.
Pharmacists.
NGOs.
Doctors.
Engineers
Advocates
Chartered accountants

33

10. Company secretaries

11. Celebrities-bollywood
12. Estate agents
13. Artists

Who is an insurance advisor?

a.
b.
c.
d.
e.

Backbone of insurance company

They get certain commission on the policy they sell
ICICI pru has 2, 10,000 advisors.
Identify future clients
Provide service to clients

How the insurance advisors are recruited?

a.
b.
c.
d.
1.
2.

Fill the recruitment form and one has to pay 1000 Rs in favour of ICICI PRU.
Has to pass test conducted by IRDA.
Awarded a license to insurance advisor and their training starts.
There are two types of training.
Classroom training
Online training.

RECRUITMENT OF ADVISORS IN ICICI PRUDENTIAL:

1.

AGE- 18 YEARS.

2. HAVE PASSED ATLEAST 12TH STANDARD OR EQUIVALENT EXAMINATION IF

APPOOINTED WITH A POPULATION OF 5000 OR MORE/ 10 TH STANDARD
EQUIVALENT.
3. ONCE APPLICATION IS FILED TRAINING OF MANDATORY 50 HRS IS NEEDED TO
HAVE TO APPEAR FOR PRE RECRUITMENT THAT IS CONDUCTED BY IRDA
AUTHORIZED EXAMINATION BODY.

4. MANDATORY INDUCTION PROGRAME AFTER PASSING PRE RECRUITMENT EXAM.

34

Remuneration
1. The remuneration will be paid to you in the form of commission as percentage of premium
collected through polices sold by you.
2. It is not one time commission sold by you.
3. It provides you royalty income through the term of the policy. As long as the policyholder pays
the premium you will get the commission.
4. Moreover this commission is hereditary i;e it will be paid to your nominee even after your death
RECRUITING AGENTS.

The methods involved are:1. PROSPECTING

2. BY DOING ACTIVITIES.
3. RESEARCH METHODOLOGY

B.O.P(BUSINESS OPPORTUNITY PRESENTATION)

1.
a.
b.
c.
d.

PROSPECTING:Exploring natural market.

Exploring existing market
Cold telecalling/referral
Personal observation.

2. BY DOING ACTIVITIES.
1. KITTY PARTY.. HOSEWIVES/FEMALE AGENT.
2. SEMINARS FOR PROFESSIONAL. DOCTORS, PROFESSIONAL.
3. CLUB RECREATIONAL GATHERING
CLUB/MEMBER INCLUDES
WORKING PROFESSIONAL.
4. MALL WALKATHON------------------------------------ YOUNGSTER, HOUSEWIVES.
5. RESIDENTIAL SOCIETY ACTIVITY HOUSEWIVES.
6. FISH BOWL HOUSEWIFES, PROFESSIONAL, STUDENT.
7. PROFESSIONAL AND STUDENT WHO ARE LOOKING FOR EARNING OPPORTUNITY.
8. SMS CAMPAIGN.
TARGET SEGMENTS DEPENDING ON
DATABASE COLLECTED.

35

3. RESEARCH METHODOLOGY:1. PRIMARY DATA COLLECTION.

2. SECONDARY DATA COLLECTION.

1. PRIMARY DATA COLLECTION- Primary data is collected for first time and not done by others
previously.
a. Direct market survey.
b. Questionnaire.
c. Personal meeting.
d. Telephonic interviews.

2. Secondary Research:- Data is borrowed from various sources like newspaper, book, institution,
internet, company.
a. College library.
b. Newspaper, internet, magazine.

3. SAMPLING METHOD.
4. SIMPLE RANDOM SAMPLING METHOD.
5. QUOTA SAMPLING METHOD:-BIASED QUESTION.

SECONDARY DATA:A.
B.
C.
D.

TELE CALLING
COLD CANVASSING.
PAMPHLET DISRIBUTION.
POSTAGE(INNOVATIVE METHOD)

36

Problems affecting agency.

DEFINITION of Agency Problem

A conflict of interest inherent in any relationship where one party is expected to act in another's
best interests. The problem is that the agent who is supposed to make the decisions that would
best serve the principal is naturally motivated by self-interest, and the agent's own best interests
may differ from the principal's best interests. The agency problem is also known as the
"principalagent problem."

In corporate finance, the agency problem usually refers to a conflict of interest between a
company's management and the company's stockholders. The manager, acting as the agent for
the shareholders, or principals, is supposed to make decisions that will maximize shareholder
wealth. However, it is in the manager's own best interest to maximize his own wealth. While it is
not possible to eliminate the agency problem completely, the manager can be motivated to act in
the shareholders' best interests through incentives such as performance-based compensation,
direct influence by shareholders, the threat of firing and the threat of takeovers.
Apart from this many problems arise due to:

1. Comprehensive product knowledge: Greater consumer choice can mean that products are better
tailored for individual needs -- but it can also raise the possibility of consumer confusion. To help
clients make informed decisions, agents must be able to educate them so that they feel
comfortable.
2. Misrepresentation: To help avoid unintentional misrepresentation, remember to respond to
consumer questions accurately and clearly, in language that the consumer will understand. If a
70-year-old man with an eighth-grade education asks you questions and you respond in a level of
detail that is over his head, you could subject yourself to accusations of misrepresentation.
3. Non-Disclosure of material facts: Failure to disclose may not only erode trust with your clients,
but it can also lead to E&O claims or regulatory action. The contract your customer signs is a
legal document, which is designed to protect all parties, including the customer and you. While it
is tempting to hold a customer responsible for what they are signing -- a contract that is new to
them but one that the agent knows quite well -- it is the ethical agent's responsibility to honor the
trust that a client has put in them and to protect that client.

37

4. Single-product sales vs. overall strategy: To recommend the right product for the right individual,
it is critical to gain a comprehensive picture of the prospect's history, lifestyle, attitudes, and
resources. If you walk into a presentation with one product you're planning to sell, then you are
simply selling a product -- not necessarily a solution. Just as a doctor can't prescribe medicine
without a diagnosis, an agent can't make a product recommendation without understanding what
a client is trying to accomplish.
5. Keeping up with compliance: The seemingly endless layers of compliance procedures and
paperwork involved in the sale of a simple product can be an understandable source of great
frustration for many agents. A solid foundation of compliance, however, confirms your ethical
business practices to the companies whose products you represent, as well as to your peers,
professional associates, prospects, and clients -- which translates into a greater business
opportunity. Compliance is all about providing protection for the customer, the company you
represent, and your agency.

BANKS CAN ACT AS A BROKER--RBI

Seeking to increase insurance penetration in the country, the Reserve Bank today allowed banks
to act as brokers for insurers, set up their own subsidiaries and also undertake referral services
for multiple companies.
Banks may undertake insurance agency or broking business departmentally and/or through
subsidiary,, RBI said in the guidelines for entry of banks into insurance business. The banks
have also been allowed to set up subsidiaries and joint venture companies for undertaking
insurance business with risk participation, it said. They can also act as corporate agents without
seeking prior approval from the RBI. However, they will have to comply with IRDA guidelines.
Under existing bancassurance guidelines, a bank can act as a corporate agent and sell policy of
only one life insurer and one non-life insurance company. The new guidelines allow banks to act
as brokers permitting them to sell insurance policies of different insurance companies. The
guidelines follow an announcement made by the former Finance Minister P Chidambaram in
2013-14 Budgets.
Banks will be permitted to act as insurance brokers so that the entire network of banks
branches will be utilized to increase the penetration of insurance, the Budget had said. There are
about 87 commercial banks in the country with 1.2 lakh branches across the country. There are
52 insurance companies operating in India; of which 24 are in the life insurance business and 28
are in general insurance business. In addition, GIC is the sole national reinsurer. There has been a
long pending demand from the insurance industry to allow banks to act as insurance brokers.
Regulator IRDA has already issued guidelines in this respect.

38

According to the RBI guidelines, banks are not allowed to undertake insurance business with risk
participation departmentally and may do so only through a subsidiary/JV set up for the purpose.
Banks which satisfy the eligibility criteria (as on March 31 of the previous year) may approach
RBI to set up a subsidiary/joint venture company for undertaking insurance business with risk
participation, it said. Elaborating on the condition for setting up subsidiary/joint venture
company, it said, the net worth of the bank should not be less than Rs 1,000 crore and the CRAR
of the bank should not be less than 10 per cent. The level of net non-performing assets should be
not more than 3 per cent, it said, adding the bank have made a net profit for the last three
continuous years. The track record of the performance of the subsidiaries, if any, of the
concerned bank should be satisfactory, it said.
It may be noted that a subsidiary of a bank and another bank will not normally be allowed to
contribute to the equity of the insurance company on risk participation basis, it said. For banks
undertaking insurance broking through a subsidiary or JV without risk participation, the net
worth of the bank should not be less than Rs 500 crore after investing in the equity of such
company.
RBI approval would also factor in regulatory and supervisory comfort on various aspects of the
bancassurance functioning such as corporate governance, risk management, etc, it said. For
setting up JV, a comprehensive board approved policy regarding undertaking insurance
distribution, whether under the agency or the broking model should be formulated and services
should be offered to customers in accordance with this policy. The policy will also encompass
issues of customer appropriateness and suitability as well as grievance redressal.
It may be noted that as IRDA Guidelines do not permit group entities to take up both corporate
agency and broking in the same group even through separate entities, banks or their group
entities may undertake either insurance broking or corporate agency business, it said.
It must be ensured that no incentive (cash or non-cash) should be paid to the staff engaged in
insurance broking services by the insurance company, it added. Violation of the above
instructions will be viewed seriously and will invite deterrent penal action against the banks.

Impact of New IRDA Regulations

IRDA is a statutory body that regulates the insurance sector in India, to protect the interests of
policyholders, while ensuring growth of the insurance industry.

39

Life is unpredictable and loss of life can negatively affect families and everyone involved,
especially if the deceased happens to be the sole bread winner. Life insurance provides financial
security and protection against loss of income that would result if the insured passed away.
IRDA has set out new regulations pertaining to non-linked insurance policies (also known as
traditional policies) to benefit policyholders. They were formulated with an aim to improve and
standardize insurance processes and for protecting the interests of insurance customers.
The regulatory changes encompass multiple areas including changes in structure for minimum
death benefit, surrender value payment, use of latest mortality tables and commission structures.
IRDA was constituted and established by an Act of Parliament of India called the Insurance
Regulatory and Development Authority Act, 1999. IRDA is the watchdog and controller of the
insurance industry in India and it works to bring better regulations for the welfare of
policyholders.
Earlier in the year 2010, IRDA revised the regulations applicable to the Unit-linked Insurance
Policies (ULIP). Important points in the regulations were:
Lock-in period of the products increased to 5 years from 3 years
Minimum premium payment term increased to 5 years
Insurance cover made compulsory for all insurance products
Maximum limit on expenses was introduced. Prior to the regulations, policyholders
were subjected to huge losses due to heavy expenses
These regulations changed the face of the ULIP insurance market and IRDA has now formulated
a new set of regulations for NLIPs.
IRDA, in its Gazette notification on 16th February 2013, has stipulated a number of pathbreaking changes in the guidelines for designing a traditional life insurance product. These
guidelines require that existing products of life insurers which are non-compliant cannot be
marketed post the deadline stipulated by IRDA, that is, 30th September 2013. Products launched
in accordance with the new guidelines are to be marketed with effect from 1st September 2013.
However, IRDA has revised this deadline to 31st December 2013. Hence, insurers are now
required to launch products that comply with the revised guidelines on or before 1st January
2014. IRDAs new guidelines will certainly impact the Indian insurance industry since NLIPs are
the most popular insurance products sold in India. Most policies sold by the Life Insurance
Corporation of India (LIC), a government-owned insurer, are NLIPs.
In India, the number of people who have insurance cover is meager and there is huge potential
for growth in the industry. Considering the growth of Indias population, we can safely assume
that every citizen of the country may need to factor in at least one life insurance policy into their
financial goals.

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Keeping all this in mind, IRDA has created a set of new guidelines that may provide impetus for
growth of insurance business in India and increase penetration of the life insurance business.

Bibliography
1. www.economictimes.com
2. *http://taxguru.in/finance/predictions-indian-lifeinsurance-sector-2015.html#sthash.kdA6BKGv.dpuf
3. www.irdai.com
4. www.iciciprulife.com
5. www.sebi.com
6. www.agentrecruitment.com

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7. www.licindia.com