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Insurance Sector in India

Insurance industry in India has seen a major growth in the last decade along with
an introduction of a huge number of advanced products. This has led to a tough
competition with a positive and healthy outcome.

Insurance sector in India plays a dynamic role in the wellbeing of its economy. It
substantially increases the opportunities for savings amongst the individuals,
safeguards their future and helps the insurance sector form a massive pool of
funds.

With the help of these funds, the insurance sector highly contributes to the capital
markets, thereby increasing large infrastructure developments in India.

The Indian Insurance Sector

The Indian Insurance Sector is basically divided into two categories – Life
Insurance and Non-life Insurance. The Non-life Insurance sector is also termed as
General Insurance. Both the Life Insurance and the Non-life Insurance is governed
by the IRDAI (Insurance Regulatory and Development Authority of India).

This government organization thoroughly monitors the entire insurance sector in


India and also acts like a custodian of all the insurance consumer rights. This is the
reason all the insurers have to abide by the rules and regulations of the IRDAI.

The Insurance sector in India consists of total 57 insurance companies. Out of


which 24 companies are the life insurance providers and the remaining 33 are non-
life insurers. Out which there are seven public sector companies.
Life insurance companies offer coverage to the life of the individuals, whereas the
non-life insurance companies offer coverage with our day-to-day living like travel,
health, our car and bikes, and home insurance. Not only this, but the non-life
insurance companies provide coverage for our industrial equipment’s as well. Crop
insurance for our farmers, gadget insurance for mobiles, pet insurance etc. are
some more insurance products being made available by the general insurance
companies in India.

The life insurance companies have gained an investment prospectus in the recent
times with an idea of providing insurance along with a growth of your savings.
But, the general insurance companies remain reluctant to offer pure risk cover to
the individuals.

Let us look at the Performance Highlights of the Indian Insurance Industry:

Life Insurance Performance:


Life Insurance Business Performance: 2015-16 2014-15

Public Sector Private Sector Public Sector Private Sector

Premium Underwritten (Rs in Crores) 266444.21 100499.02 239667.65 88433.49

New Policies Issued (in Lakhs) 205.47 61.92 201.71 57.37

Number of Offices 4892 6179 4877 6156

Benefits Paid (Rs in Crores) 141201.05 60565.05 144125 67054

Individual Death Claims (Number of Policies) 761983 114697 755901 121927

Individual Death Claims Amount Paid (Rs in Crores) 9690.17 2946.49 9055.18 2733.49

Group Death Claims (Number of lives) 247504 297833 273794 192989


Life Insurance Business Performance: 2015-16 2014-15

Group Death Claims Amount Paid (Rs in Crores) 2494.03 2303 2037.27 1483.55

Individual Death Claims (Figures in percent of policies) 98.33 91.48 98.19 89.4

Group Death Claims (Figures in percent of lives covered) 99.69 94.65 99.64 91.2

No. of Grievances reported during the year 64750 139951 80944 198048

Grievances resolved during the year 64750 145125 80944 193119

Grievance Resolved (in percent) 100 103.69 100 97.51

Non-Life Insurance Performance:

Non-Life Insurance Business Performance: 2015-16 2014-15

Private Private
Public Sector Public Sector
Sector Sector

Premium Underwritten (Rs in Crores) 47691 39694 42549.48 35090.09

New Policies Issued (in Lakhs) 8414 2389 8207 2200

Number of Offices 4892 6179 4877 6156

Net Incurred Claims (Rs in Crores) 38104.27 21764.44 31567.75 19430.46

No. of Grievances reported during the year 17808 41802 15860 44828

Grievances resolved during the year 17718 42493 16105 43318

Grievance Resolved (in percent) 99.49 101.65 101.54 96.63


Stand Alone
Health
2015-16 2014-15
Insurance
Companies

U/W U/W
Gross Direct Net earned Profit / Net Gross Direct Net earned Profit / Net
Premium (Rs premium (Rs Loss incurred Premium (Rs premium (Rs Loss Incurred
in Crores) in Crores) (Rs in claim ratio in Crores) in Crores) (Rs in claim ratio
Crores) Crores)

Star Health and


Allied 2007 1513 N.A. 53.81% 1469 1017 N.A. 63.96%
Insurance

Apollo Munich
Health 1022 774 N.A. 64.61% 803 655 N.A. 60.03%
Insurance

Max Bupa
Health 476 393 N.A. 59.53% 372 315 N.A. 55.16%
Insurance

Religare Health
503 287 N.A. 57.25% 275 154 N.A. 61.13%
Insurance

Cigna TTK
Health 143 70 N.A. 78.66% 21 6 N.A. 64.33%
Insurance

Specialised 2015-16 2014-15


Insurer in
Agriculture
Gross Net earned U/W Net Gross Direct Net U/W Net
Direct premium Profit / incurred Premium (Rs in earned Profit / Incurred
Premium (Rs in Loss claim Crores) premium Loss claim
(Rs in Crores) (Rs in ratio (Rs in (Rs in ratio
Crores) Crores) Crores) Crores)
Agriculture 3521 1862 61.66 99.66% 2740 1598 Loss 108.47%
Insurance 158
Co. Ltd.
Specialised 2015-16 2014-15
Insurer in export
credit insurance
Gross Net U/W Net Gross Net U/W Net
Direct earned Profit / incurred Direct earned Profit / Incurred
Premium premium Loss claim Premium premium Loss claim
(Rs in (Rs in (Rs in ratio (Rs in (Rs in (Rs in ratio
Crores) Crores) Crores) Crores) Crores) Crores)
Export Credit 1321 979 Loss 102% 1362 1019 Loss 114%
Guarantee 250 291.91
Corporation of
India Limited

Source: Annual Report (2015-16 & 2014-15)

The Past of Insurance Sector In India

In the history of the Indian insurance sector, a decade back LIC was the only life
insurance provider. Other public sector companies like the National Insurance,
United India Insurance, Oriental Insurance and New India Assurance provided
non-life insurance or say general insurance in India.

However, with the introduction of new private sector companies, the insurance
sector in India gained a momentum in the year 2000. Currently, 24 life insurance
companies and 30 non-life insurance companies have been aggressive enough to
rule the insurance sector in India.

But, there are yet many more insurers who are awaiting for IRDAI approvals to
start both life insurance and non-life insurance sectors in India.
The Present of Insurance Sector In India

So far as the industry goes, LIC, New India, National Insurance, United insurance
and Oriental are the only government ruled entity that stands high both in the
market share as well as their contribution to the Insurance sector in India. There are
two specialized insurers – Agriculture Insurance Company Ltd catering to Crop
Insurance and Export Credit Guarantee of India catering to Credit Insurance.
Whereas, others are the private insurers (both life and general) who have done a
joint venture with foreign insurance companies to start their insurance businesses
in India.

Life Insurance Companies:

Private Sector Companies

 Aegon Life Insurance Co. Ltd.


 Aviva Life Insurance Co. India Ltd.
 Bajaj Allianz Life Insurance Co. Ltd.
 Bharti AXA Life Insurance Co. Ltd.
 Birla Sun Life Insurance Co. Ltd.
 Canara HSBC Oriental Bank of Commerce Life Insurance Co. Ltd.
 DHFL Pramerica Life Insurance Co. Ltd.
 Edelweiss Tokio Life Insurance Co. Ltd
 Exide Life Insurance Co. Ltd.
 Future Generali India Life Insurance Co. Ltd.
 HDFC Standard Life Insurance Co. Ltd.
 ICICI Prudential Life Insurance Co. Ltd.
 IDBI Federal Life Insurance Co. Ltd.
 IndiaFirst Life Insurance Co. Ltd
 Kotak Mahindra Old Mutual Life Insurance Ltd.
 Max Life Insurance Co. Ltd.
 PNB MetLife India Insurance Co. Ltd.
 Reliance Life Insurance Co. Ltd.
 Sahara India Life Insurance Co. Ltd.
 SBI Life Insurance Co. Ltd.
 Shriram Life Insurance Co. Ltd.
 Star Union Dai-Ichi Life Insurance Co. Ltd.
 Tata AIA Life Insurance Co. Ltd.

General Insurance Companies:

Private Sector Companies

 Aditya Birla Health Insurance Co. Ltd.


 Bajaj Allianz General Insurance Co. Ltd.
 Bharti AXA General Insurance Co.Ltd.
 Cholamandalam General Insurance Co. Ltd.
 Future Generali India Insurance Co.Ltd.
 HDFC ERGO General Insurance Co. Ltd.
 ICICI Lombard General Insurance Co. Ltd.
 IFFCO-Tokio General Insurance Co. Ltd.
 Kotak General Insurance Co. Ltd.
 L&T General Insurance Co. Ltd.
 Liberty Videocon General Insurance Co. Ltd.
 Magma HDI General Insurance Co. Ltd.
 Raheja QBE General Insurance Co. Ltd.
 Reliance General Insurance Co. Ltd.
 Royal Sundaram Alliance Insurance Co. Ltd
 SBI General Insurance Co. Ltd.
 Shriram General Insurance Co. Ltd.
 TATA AIG General Insurance Co. Ltd.
 Universal Sompo General Insurance Co.Ltd.

Health Insurance Companies

 Apollo Munich Health Insurance Co.Ltd.


 Star Health Allied Insurance Co. Ltd.
 Max Bupa Health Insurance Co. Ltd.
 Religare Health Insurance Co. Ltd.
 Cigna TTK Health Insurance Co. Ltd.

This collaboration with the foreign markets has made the Insurance Sector in India
only grow tremendously with a high current market share. India allowed private
companies in insurance sector in 2000, setting a limit on FDI to 26%, which was
increased to 49% in 2014. IRDAI states – Insurance Laws (Amendment) Act,
2015 provides for enhancement of the Foreign Investment Cap in an Indian
Insurance Company from 26% to an Explicitly Composite Limit of 49% with the
safeguard of Indian Ownership and Control.

Private insurers like HDFC, ICICI and SBI have been some tough competitors for
providing life as well as non-life products to the insurance sector in India.
The Future Of Insurance Sector In India

Though LIC continues to dominate the Insurance sector in India, the introduction
of the new private insurers will see a vibrant expansion and growth of both life and
non-life sectors in 2017. The demands for new insurance policies with pocket-
friendly premiums are sky high. Since the domestic economy cannot grow
drastically, the insurance sector in India is controlled for a strong growth.

With the increase in income and exponential growth of purchasing power as well
as household savings, the insurance sector in India would introduce emerging
trends like product innovation, multi-distribution, better claims management and
regulatory trends in the Indian market.

The government also strives hard to provide insurance to individuals in a below


poverty line by introducing schemes like the

 Pradhan Mantri Suraksha Bima Yojana (PMSBY),


 Rashtriya Swasthya Bima Yojana (RSBY) and
 Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY).

Introduction of these schemes would help the lower and lower-middle income
categories to utilize the new policies with lower premiums in India.

With several regulatory changes in the insurance sector in India, the future looks
pretty awesome and promising for the life insurance industry. This would further
lead to a change in the way insurers take care of the business and engage
proactively with its genuine buyers.
Some demographic factors like the growing insurance awareness of the insurance,
retirement planning, growing middle class and young insurable crowd will
substantially increase the growth of the Insurance sector in India.
LIFE INSURANCE IN INDIA
Introduction
The insurance industry of India consists of 57 insurance companies of which 24 are
in life insurance business and 33 are non-life insurers. Among the life insurers,
Life Insurance Corporation (LIC) is the sole public sector company. Apart from
that, among the non-life insurers there are six public sector insurers. In addition to
these, there is sole national re-insurer, namely, General Insurance Corporation of
India (GIC Re). Other stakeholders in Indian Insurance market include agents
(individual and corporate), brokers, surveyors and third party administrators
servicing health insurance claims.

Market Size
Government's policy of insuring the uninsured has gradually pushed insurance
penetration in the country and proliferation of insurance schemes.
Gross premiums written in India reached Rs 5.53 trillion (US$ 94.48 billion) in
FY18, with Rs 4.58 trillion (US$ 71.1 billion) from life insurance and Rs 1.51
trillion (US$ 23.38 billion) from non-life insurance. Overall insurance penetration
(premiums as % of GDP) in India reached 3.69 per cent in 2017 from 2.71 per cent
in 2001.
In FY19 (up to October 2018), premium from new life insurance business
increased 3.66 per cent year-on-year to Rs 1.09 trillion (US$ 15.46 billion). In
FY19 (up to October 2018), gross direct premiums of non-life insurers reached Rs
962.05 billion (US$ 13.71 billion), showing a year-on-year growth rate of 12.40
per cent.
Investments and Recent Developments
The following are some of the major investments and developments in the Indian
insurance sector.

 As of November 2018, HDFC Ergo is in advanced talks to acquire Apollo


Munich Health Insurance at a valuation of around Rs 2,600 crore (US$
370.05 million).
 In October 2018, Indian e-commerce major Flipkart entered the insurance
space in partnership with Bajaj Allianz to offer mobile insurance.
 In August 2018, a consortium of WestBridge Capital, billionaire investor Mr
Rakesh Jhunjunwala announced that it would acquire India’s largest health
insurer Star Health and Allied Insurance in a deal estimated at around US$ 1
billion.
 In September 2018, HDFC Ergo launched ‘E@Secure’ a cyber insurance
policy for individuals.
 Insurance sector companies in India raised around Rs 434.3 billion (US$ 6.7
billion) through public issues in 2017.
 In 2017, insurance sector in India saw 10 merger and acquisition (M&A)
deals worth US$ 903 million.
 India's leading bourse Bombay Stock Exchange (BSE) will set up a joint
venture with Ebix Inc to build a robust insurance distribution network in the
country through a new distribution exchange platform.
Government Initiatives
The Government of India has taken a number of initiatives to boost the insurance
industry. Some of them are as follows:

 In September 2018, National Health Protection Scheme was launched under


Ayushman Bharat to provide coverage of up to Rs 500,000 (US$ 7,723) to
more than 100 million vulnerable families. The scheme is expected to
increase penetration of health insurance in India from 34 per cent to 50 per
cent.
 Over 47.9 million famers were benefitted under Pradhan Mantri Fasal Bima
Yojana (PMFBY) in 2017-18.
 The Insurance Regulatory and Development Authority of India (IRDAI)
plans to issue redesigned initial public offering (IPO) guidelines for
insurance companies in India, which are to looking to divest equity through
the IPO route.
 IRDAI has allowed insurers to invest up to 10 per cent in additional tier 1
(AT1) bonds that are issued by banks to augment their tier 1 capital, in order
to expand the pool of eligible investors for the banks.
ICICI LOMBARD GENERAL INSURANCE

 Fourth largest non-life insurance company in India as in FY18

 Provides motor, health, travel, home, property, marine, liability, crop and other
specialty insurances products

 253 branches as of March 2018

 23.5 million policies issued and 1.54 million claims settled in FY18

 Gross Written Premium of Rs 126 billion (US$ 1.96 billion) in FY18


Currently a leading private general insurer in India, ICICI Lombard was started in
2001 as a joint venture between ICICI Bank and Fairfax Financial Holdings. Over
the years, it has grown rapidly along with India’s insurance industry. In FY18, it
became the fourth largest non-life insurance company in the country and issued
23.5 million new policies. Its Gross Direct Premium Income (GDPI) has grown as
a CAGR of 13.9 per cent between FY08-18 to reach Rs 123.57 billion (US$ 1.92
billion).
For FY19 (up to October 2018), the company had 8.90 per cent share in gross
direct premium underwritten in India’s non-life insurance sector. In H1 FY19, the
company earned GDPI of Rs 73.05 billion (US$ 1.04 billion).
Company Website: www.icicilombard.com

ICICI Lombard – Nibhaye Vaade


2017 Became a listed company, GDPI crossed Rs 100 billion (US$ 1.54
billion)

2016 First general insurance company in India to issue subordinated debt

2015 Investment book size crossed Rs 100 billion (US$ 1.56 billion)

2014 Number of policies issued surpassed 10 million

2010 Settled over 5 million claims

2006 Crossed Gross Direct Premium Income (GDPI) of Rs 10 billion (US$


220.61 million)

2004 Became India’s largest private sector general insurer


2001 Commenced non-life insurance operations
SBI LIFE INSURANCE

 One of the leading private life insurers in India

 Joint venture between State Bank of India (SBI) and BNP Paribas Cardif

 Multi-channel distribution network with 108,261 agents as of March 31, 2018

 Assets Under Management (AUM) reached US$ 1,162.61 billion (US$ 18.02
billion) in FY18

 5.98 per cent share in new business in FY19 (up to September)

 1.33 million claims settled in FY18


SBI Life Insurance was established in 2000 as a joint venture between the State
Bank of India (SBI) and BNP Paribas Cardif and has become one of the leading
life insurers in the country. The company has a range of life insurance and pension
products which include individual and group products to cater to the insurance
needs of diverse customer segments.
Gross Written Premium of SBI Life has increased at a 25.4 per cent CAGR
between FY15-18, to reach Rs 253.54 billion (US$ 3.93 billion). It had a 6.09 per
cent share in new business in FY19 (up to October).
Company Website: www.sbilife.co.in

SBI Life Insurance – With Us, You’re Sure


2017 Assets Under Management (AUM) crossed Rs 1 trillion (US$ 15.52
billion) in FY18, Successful IPO

2016 Record renewal premium collection

2015 Record growth year

2012 Assets Under Management (AUM) crossed Rs 50,000 crore (US$


9.35 billion)

2010 More than 500 branches

2007 Gross Written Premium crossed Rs 5,000 crore (US$ 1.21 billion)

2004 Launched unit linked products


2001 Approval received from IRDAI to commence business

2000 Incorporated as a joint venture with BNP Cardiff


HDFC STANDARD LIFE INSURANCE COMPANY

 Leading private sector life insurers in India

 6.75 per cent share in new business in FY19 (up to September)

 Sold 1.05 million new policies in FY18

 414 branches and more than 11,200 partner branches

 Assets under management worth Rs 1,066 billion (US$ 16.54 billion) in FY18
HDFC Standard Life Insurance Company was established in 2000 as a joint
venture between Housing Development Finance Corporation Limited (HDFC Ltd)
and Standard Life Aberdeen. It was the first private company to get a license from
the Insurance Regulatory and Development Authority in 2001. Today, it is the
leading private life insurer in India. As of March 2018, the company was providing
34 individual and 11 group insurance products. After strong period of growth, the
company completed its initial public offer (IPO) in 2017.
Between FY14-18, total premium earned by the company increased at a CAGR of
18 per cent to reach Rs 235.64 billion (US$ 3.66 billion). Currently the company
has the largest share in new business among private life insurers. It had a 6.87 per
cent share in new business in FY19 (up to October).
Company Website: www.hdfclife.com

HDFC Life – Sar utha ke jiyo!


2017 AUM crossed Rs 900 billion (US$ 13.82 billion), completed
successful initial public offer (IPO)

2014 Dividend declared by the company for the first time

2012 Company turned profitable

2011 Incorporated the Subsidiary, HDFC Pension

2010 Assets Under Management (AUM) crossed Rs 200 billion (US$ 4.37
billion)

2007 Crossed 500,000 policies

2004 Launched unit linked funds


2003 Crossed 100,000 policies

2001 First private life insurer to receive license from Insurance Regulatory
and Development Authority
Introduction

Last one decade of reforms in India have started yielding the results in the
Indian economy. The Government's resolve to push the reforms measures further,
less bureaucratic hurdles, absence of red tapism, investors' friendly business
environment all put together have given tremendous boost to the industries in
terms of FDI and investments from Fils. Though the impact is felt in all the sectors,
service sector is the one which is most benefited out of all those reforms and the
contribution of service sector to the GDP of the country has grown manifold. New
economy organizations are spreading their wings into service industry like
banking, financial services, insurance, communication, entertainment, telecom and
so on. And no wonder why India is considered to be the most preferred nation in
the world for Business Process Outsourcing (BPO). The service industry in India
has achieved a phenomenal growth in the recent past and among them, Insurance is
one sector, which has witnessed high decibel growth. Thanks to the investor
friendly regulator in the name of Insurance Regulatory Development Authority
(IRDA). The growth the market has achieved in terms of 18-20% in life insurance
and 15-17% in non-life insurance stands testimony to that.

In this scenario, it becomes necessary to understand the paradigm shift that


taking place in marketing ofthe insurance products and the strategies adopted by
the players in the market. History Looking back at the history, the ride had not
been so smooth to the public sector players like LIC, GIC and its subsidiaries. For
a long time, the insurance policies are not bought but sold in the country because
ofso many odd reasons like low awareness level, aversion towards the products as
such, superstitious beliefs and less diversed product portfolio. The monolith in the
life insurance sector, Life Insurance Corporation ofIndia had been basking on its
past glory and enjoying the monopolistic situation in the market. Even the General
Insurers like GIC and its subsidiaries were able to reach the people with very few
products out of many products in their kitty offering little or no options to the
customers. The rules of the game have started changing with the introduction of
reforms towards liberalization and privatization. Infact private sector participation
in insurance is not new in the Indian context. In 1956, when the Government
ofIndia nationalized the business oflife insurance, there were 245 private insurance
companies operating in the country. And sixteen years later, when the same
happened to General insurance, there were 106. But the seeds were sown as far
back as 1993, when the Malhotra Committee headed by former Finance Secretary
and Ex-RBI Governor R.N.Malhotra was created to recommend the directions the
Indian industry should take. By 1994, the Committee was ready with its report.
The salient suggestions included those on the structure of the industry,
competition and the necessity and role of a regulator. The Committee also
recommended the opening up of the industry to private sector to increase the reach
of the insurance products. Essentially Malhotra was laying the foundation for the
creation ofregulation and the liberalization process. In April 2000, Insurance
Regulatory Development Authority (IRDA) came into being as a statutory body to
regulate the industry and to keep a hawk's eye on the private players. The mission
of IRDA is "to protect the interests ofthe policyholders, to regulate, promote and
ensure orderly growth ofthe insurance industry and for matters connected therewith
or incidental thereto". What happened after April 2000 is well known in terms of
new entrants in the field, the market growth rate and the achievements ofnew
players with in a short span oftwo to three years.

Industry - an outlook

Insurance is estimated to be Rs.400 billion business in India and the gross


premium collection is about 2% of GDP growing between 15% and 20% per
annum. India also has the highest number of insurance policies in force in the
world and the total investible funds with LIC alone are almost 8% ofGDP. Yet,
more than three-fourth of India's insurable population has no life insurance cover.
Considering that only about 65million out of 250 million people are covered by life
insurance, the potential is quite evident

Switzerland is the world's largest per capita insurance spender ($ 4663 per
inhabitant), ahead ofJapan ($4132 per inhabitant) and far ahead of(200% more)
North America, and even further ahead of (250% more) Western Europe. In India,
the per capita premium is Rs.490, which is less than 1% than the per capita
premium collected in developed nations like UK. India has a savings rate of 22%
but less than 5% of it is spent on insurance. The General insurance market is about
Rs.l 1000 crores and with the expected growth in the Indian economy and new
players moving in, the market for general insurance is expected to grow at 18% per
annum. Over the las* ten years, the compounded average growth rate for the
industry works out to more than 15%. The five major categories - fire, marine
(hull), engineering, motor (both owner-driven and third party) and workers
compensation (clubbed either with engineering or miscellaneous) comprised
62.41% ofnon-life business in the year 1999-2000.
Strategies adopted by the players in the market

Gone are the days when the customers were forced to take up the kind of
products whatever coming from LIC's and GIC’s stables. But now, the customer
has been portrayed as the king and to his delight, the products are redesigned and
customized suiting his need taking into account his paying capacity and multiple
benefits. To much ofhis embarassment, he has also got an option ofwithdrawing
his offer within a period of 15 days (free-look period) if he is not satisfied with the
policy features. The following strategies were adopted by the players in the market.

Shift in the product portfolio

Earlier the entire industry was revolving around investment and savings
oriented plans. As the interest rates are moving southwards, all the players are
deliberately focusing on selling pure risk covers in an effort to capture the new
customers. The premium on such products is low as it covers only the risk aspect
and does not factor in investments or savings. Even the market leader LIC has
withdrawn some of the products, which are positioned, on the assured returns
platform. Though the share of the term plans in the product portfolio is quite
negligible, the shift towards the term products is already visible. Typically a term
plan does not provide anything by way of maturity, unlike money back or
endowment policies. Globally, close to a third ofthe policies fall into this category
must be an encouraging news to the players.

Unit linked products are also gaining momentum in this country. Om Kotak
and Birla Sun Life have launched unit linked schemes focusing on equity, debt and
gilt edged stocks. These schemes are expected to yield better returns when
compared to normal insurance schemes. As the awareness level about these unique
products is much lower, the companies resort to educate the customers about the
salient features of the products.
Value For Money (VFM)

The sea change since the sector opened up has been on the way the basic
products have been packaged innovatively, often tailor made to provide a bundle of
benefits to the customers. This is possible through the introduction of riders, which
have added value to the risk cover at minimal oast. Riders are nothing but add-ons
coming along with the base policies for a slightly additional premium. Riders have
become the major instruments for the organizations to lure the customers away
from the competitors. The removal of30% cap on the premium ofthe base policy
for the health riders alone has come as a shot in the arm for many players since this
is used as an Unique Selling Proposition by many private players vis a vis the LIC.
Later, LIC has also started announcing riders along with the main policies dancing
to the tune ofthe market forces. This could see many non-life players going out
ofthe business as life insurers offer a plethora of personal line products as add-ons.
Riders can also be availed by the existing policyholders.

Tapping the Niche Markets

Private insurers are concentrating much on designing attractive products by


investing heavily on research, studying life expectancy and health statistics across
age groups, income levels, professionals and regions on their own instead of
relying on data with state insurers. The products are designed with a technical team
of actuaries and a product development team working closely together to target the
niche market. The innovations for the niche markets are abound and to name a
few.....

MetLife India Insurance Company has recently launched a Charitable Trust


Policy in Kolkata, which has evoked a lot of interest especially among the
Marwaris business community who want to set up a temple in their name after
their death. Similarly a Buy & Sell Agreement cover from the same company
permits a business enterprise to take out a life plan on each ofits partners, to ensure
that the firm continues.

* The other segments, which have attracted almost all the players, are the
women and the children segments. Though the State insurer has had a chunk of
products sufficiently for a longer time, it faces stiff competition from the private
players in these segments. * Tata AIG has offered a specialized life insurance
package where the insured and the employers ofthe insured have a say in it.
Termed as Worksite Marketing, AIG, which has adopted this practice in different
places across the world, is spreading the concept in India too. Worksite Marketing
is a distribution method used to offer voluntary insurance products (employee
benefits) to employees at their place of work with the sponsorship or backing
oftheir employer, traditionally done on a deduction from the payroll. The
policyholder carries the policy with himselfthroughout his life, even ifit happens to
change the organizations.

Tata AIG General Insurance, for the first time in the country, has launched a
specialized product for Accountants (after tasting the success with specialized
products such as Directors and Officers policy in India) in its bid to segment the
market for professional indemnity policies. The policy has been designed with the
assistance from Bombay Chartered Accountants Society. This policy covers claims
pertaining to professional negligence, wrongful acts committed in the performance
of duties. It also provides for coverage of all legal expenses incurred in defending
such claims.

Any other way to promote non-smoking? Or to reward those who give up


smoking? Om Kotak Mahindra has taken an initiative by offering a term insurance
plan - a pure protection product - to non-smokers at much cheaper price. As against
an annual premium ofRs.2400 on a Rs.10 lacs policy for a 10 year term for a 30
year old under the preferred term plan, the regular term premium works out to
Rs.3400 for a similar cover. Though there are apprehensions in the industry circle
about the success of the policy, the intention of the company is quite appreciated.

Even the unborn child's future can be safeguarded now. The offspring can be
insured against unfortunate congenital defects. State owned General Insurers have
started aggressively marketing these kinds of products.

Thrust to the rural markets

Thanks to the norms stipulated by the regulator IRDA, all the players have
turned their eyes towards the rural market. Towards ensuring equitable distribution
of insurance policies in every nook and cranny of the country, IRDA stipulates the
rural obligations to be met by the players over the years. The rural obligation on
part of the new private insurance companies is incremental in nature. It goes from
5% to 15% over the period of 5 years for life insurance and from 2% to 5% in case
of general insurance. IRDA has also defined what it meant by rural.

1. The place should have a population of less than 5000


2. Secondly, the density of the population should be less than 400
persons per square kilometer.
3. 75% of the male population should be engaged in agricultural pursuit.

Of die 11 private sector life insurers, 10 companies substantially performed in the


rural sector with the %age of policies issued in the rural sector standing higher than
5% level mentioned. Most of the nan-life insurers achieved the base level of 2%
gross premium from rural sector. Since the penalty for not adhering to the
obligation includes Rs.5 lacs penal fee and upto 3 years of imprisonment of the
Chief of the organization, all the companies are flocking the rural market. The
challenge lies in reaching the critical mass with the redesigned products. And the
organizations have been fairly successful in their efforts. For instance, Qm Kotak
Life Insurance is successful in selling the single premium policy in rural market.
Reaching the doorsteps of the villagers through non-conventional channels like
Regional Rural Banks (RRBs), Co-operative banks, Self-Help Groups (SHGs),
ITCs e-choupal is also being tried by the players.

Tapping unconventional distribution channels

Nevertheless all the players depend heavily on their agents force to reach out (LIC
has reached a figure of 8,50,000 agents and planned to increase it to 1 million by
this year), they are trying out other distribution channels also like banks and
corporate agencies in addition to the channels mentioned above. The following
table shows the strategic alliances the insurers have entered into to distribute their
products.
Cause Related Marketing (CRM)

Cause Related Marketing has become the order of the day in Insurance industry.
By creating a goodwill about the organizations, the insurers are making an attempt
to change the negative attitude of the people towards insurance products. For
instance, Towards serving the society in a better way, LIC has adopted a novel
way through its Bima Grams policy. Accordingly, LIC pays 25% of the premium
collected from the villagers or Rs.25000 whichever is lesser for undertaking
developmental work in the villages provided,

- The population of the village is between 1000 and 5000

- Life insurance coverage for atleast one person in 75% of the households

- Acquisition of 100 new policies in a single year

* Birla Sun Life Insurance has adopted 332 villages around Renukoot and actively
involved in improving the lives of the residents

Conclusion

Observing the trends the industry has been moving for the last two years, the
commitment of the players to take the business forward is quite apparent. With the
increase in awareness level about the insurance and the products, the day is not far
off all the insurable population in the country would have been brought under the
insurance net. The Governments resolve to continue with the reforms coupled with
investor friendly IRDA's regulations will surely take the business far.
FAOs:

How Much Life Insurance is needed?

"Life Insurance Needs," means the amount of life insurance death benefits (pure
life insurance protection) that is needs upon a person's death. There are a range of
life insurance products to choose from, such as term life insurance, whole life
insurance, variable life insurance, universal life insurance, and variable universal
life insurance. Choosing amongst different products is not the main concern here.
The main concern is the amount of life insurance death benefits you needs,
regardless of the type of product you choose.

Is it the rule of thumb that you need life insurance coverage equaling 4 to 6 times
your income?

Yes. However, needs vary based on family status, savings and lifestyle. You
should review your coverage on those terms.

What about buying life insurance for a spouse or children?

Generally, that should not be done in lieu of buying appropriate amounts of life
insurance on the family breadwinners).

It is extremely important that you protect the earning capacity of the primary
breadwinner, if possible, with the right amount of life insurance before considering
life insurance on children or spouse. In a dual-income household, it is important to
protect the earning capacity of both spouses. Life insurance for a non-wage earning
spouse is often recommended for help in paying for household services lost if that
spouse dies.
Should Ibuy term insurance or cash value life insurance?

Term life insurance pays out in the event of death. Cash value, which is more
costly, has a cash amount you can withdraw before death. Which one is for you
will depend on your circumstances. First answer an insurance question - how much
life insurance should you buy? Then look at the financial aspect - what type of
policy should you buy? The amount of life insurance you need may be so large that
the only way you can afford it is by buying term insurance, which carries a lower
premium than cash value policies. If your ability (and willingness) to pay life
insurance premiums is such that you can afford the desired amount of life
insurance under either type of policy, you can consider the financial decision -
which type of policy to buy. If you view life insurance as an investment, you'll
want to study rates of returns. If it's protection, then your purchase is a matter of
what you can afford and want to spend.

Does term insurance provide protection for temporary needs?

Yes. Term insurance is ordinarily purchased to provide temporary coverage for a


known period of time. Term insurance generally provides a lower initial cost.
Are there advantages to buying life insurance at a early age rather that waiting until
after marriage or children?

Yes. The premiums are lower when you are younger.

Is permanent insurance initially more expensive than term insurance?

Yes. While it is true that the initial premium can be higher than that of term
insurance, there are additional features and benefits built into permanent life
insurance that make it a greater value for the money spent.

What is an annuity?

Annuities are tax-deferred investments that guarantee you regular payments at


some future time, usually retirement

Why Do People Typically Choose Annuities?

1 .To accumulate long-term savings.

2. To provide guaranteed life-long income.

3. To supplement other retirement savings.

4. To increase income in retirement.

5. To take advantage of tax deferral options.

If I decide to take out life cover will I need to go for a medical?

Once your application has been submitted to the insurer it will be assessed by a
medical underwriter. The life insurance provider will either accept your application
immediately, or they could request a medical report from your General
Practitioner. You may also be asked to attend a medical examination, which will be
paid for by the insurer.
What are my different options for paying premiums?

Depending on which Prudential product you own, you may be able to pay your
premiums on a monthly, quarterly, semi-annual or annual basis. You may also be
able to have your premiums deducted directly from your paycheck.

What do I need in order to file a death claim?

In order to file a death claim on a policy, you will need the following information:

□ Policy number and, if available, the policy itself or Certificate of Insurance

□ Date of insured's death

Certified copy of the insured's death certificate

□ Date of insured's birth

□ Insured's mailing address

□ Beneficiary's name

□ Beneficiary's relationship to the insured

□ Beneficiary’s date of birth

If the beneficiary is also deceased, you will need:

A Certified copy of the beneficiary’s death certificate

How may I reinstate a lapsed polity?

Determine how long it has been since your policy has lapsed. The lapse notice will
indicate the amount of premiums missed and the date(s) on which they were due.
Customer relationship management (CRM)
Introduction

Customer relationship management (CRM) is a system for managing a


company’s interactions with current and future customers. It often involves
using technology to organise, automatic and synchronise sales, marketing,
customer service and technical support. [1] CRM, uses the benefit of data
management that allows data resources to work as a single integrated database.
Origin of the term CRM can be traced back in the earlier 1990’s, when the
concept of marketing changed from transactional to rational. CRM is intended
for building long-term relationship. CRM is often considered as database
marketing primarily linking marketing of the organisation with the database of
the customers. Some theorists have been considering it, as an exercise for
customer retention as many theories and studies have been emphasising on the
rationale for keeping the customers. This requires a variety of techniques,
especially post-sale initiatives, to keep the customers for life. This was believed
to be a mechanism to keep the existing customers happy so that they remain
with the organisation and may, if possible, generate positive referral for the
company’s products and services. It was believed that application of IT can be
an effective tool to develop one-to-one relationship that integrates database with
company’s marketing strategy that may focus on leveraging the existing
customer base. Selling policies to new customers is expensive one compared to
existing customer. Successful CRM should give insurers the ability to measure
customer value, and improve the customer’s service perceptions while reducing
servicing costs.
Definition of CRM

Customer Relationship Management is a comprehensive strategy and process of


acquiring, retaining and partnering with selective customers to create superior
value for the company and the customer. It involves the integration of
marketing, sales, customer service, and the supply-chain functions of the
organisation to achieve greater efficiency and effectiveness in delivering
customer value. [2]Similarly, CRM is marketingoriented towards strong, lasting
relationships with individual accounts.[3] Based on the understanding available
of Customer Relationship Management, it can be defined as “Customer
Relationship Management is a continuously updated process of identifying
relative value of customers and designing customised company interaction to
delight them so that they do not jest remain with the company profitably but
also be the company’s ambassador. Full involvement and empowerment of
employees and appropriate technology are two essentials for successful CRM”.

Need for CRM

Globalisation is a boom in Electronic world to help the field of CRM to contact


customers directly. A firm can easily interact with its customers at low cost.
CRM is one to one, communication from the firm and its customers. Firms must
shift from the old paradigm of mass production to the new paradigm of mass
customerisation to meet the exact demands of the customer. The last 15 years
have witnessed an explosion of growth of opportunities for service sector
organisations. Today, more and more service sector companies have a chance to
walk on the competitive edge and prove their abilities on par if not better than
other players in the field. The present trend is in for of good customer
relationship management. The successes of a service sector organisations today,
depends on its ability to serve the customer for ‘ever’ and also making a
number of service available to the customers hence there is a need to study the
impact of CRM on business prospectus. In this background, CRM becomes
imperative.

Importance of CRM

A satisfied customer in 10 years will bring 100 more customers to the company.
It costs 7 times more to attract a new customer than to serve an old one. 20% of
the company’s loyal customers account for 80% of its revenues. (Pareto’s
principle). The chances of selling to an existing customer are 1 in 2; the chances
of selling to a new customer are 1 in 16. Customers tell eight friends about a
satisfying experience and 20 friends for a negative experience. It is easier to
influence existing customers to buy 10% more than increase the customer base
by 10%. Eighty per cent of successful new product and service ideas come from
existing customers. Repeat customers cost one-fifth less than new customers
and can substantially increase profits.

Ways to keep customers

1. Every part of the company’s marketing effort should be geared towards


building lifetime relationships.

2. People want to do business with friendly people. To have effective relations a


friendly attitude must permeate in the organisation.

3. Information technology developments should be positively used to serve the


customers.

4. The company should always be flexible to bend its rules and procedures in
the client’s favour.
5. The company should communicate with its customers even when it is not
trying to sell something. 6. The company can communicate and develop
stronger customer bonding by providing financial and social benefits.

7. The company should try to know all its customers including their lifestyles,
hobbies, likes and dislikes etc.

8. The company should make it a point to deliver more than what is promised.

CRM In Insurance

With the increase in the number of insurance companies in the market and
consumers becoming more aware of different policies. Insurance companies
have realized the importance of CRM. The cost of attracting a new customer is
five times more than that is incurred to make an existing customer happy.
Therefore, to survive in the market, insurance companies need to implement
CRM in their organizations. This is the key to success in the industry. The
organizations can succeed who have been able to build a base of their loyal
customers, because a loyal customer advocates the companies’ products much
better than the organization itself. The basic existence of the organisation lies in
the hands of its customers. It can be easily concluded that for success, it is
necessary to implement CRM in the right manner.

Insurance companies available in India

1. Life Insurance Corporation of India

2. SBI Life Insurance Co. Ltd

3. Tata AIG General Insurance

4. New India Assurance


5. Oriental Insurance

6. ING Vysya Life Insurance

7. Shriram Life Insurance

8. ICICI Prudential Life Insurance

9. HDFC Standard Life Insurance


10. Bajaj Allianz General Insurance

11. IFFCO TOKIO General Insurance

12. ICICI Lombard General Insurance

13. Birla Sun Life Insurance

14. Aviva Life Insurance

15. Max Life Insurance

16. MetLife India Insurance

17. Reliance Life Insurance

18. Sahara India Life Insurance

19. Om Kotak Mahindra Insurance Company

20. Agriculture Insurance Company of India Ltd

21. Amsure Insurance

22. ANZ Insurance

23. Cholamandalam General Insurance

24. Employee’s State Insurance Corporation

25. Peerless Smart Financial Solutions

26. Royal Sundaram Alliance Insurance India

27. Export Credit Guarantee Corporation of India Ltd.


Importance Of CRM In Insurance Sector

Many customers of Insurance companies are not aware of the policies and
services to be rendered by the company. So there should be a relationship
between the customer and the company. CRM helps the organisation to
knowledge the customers on behalf of the organisation. Then only they become
loyal to the organisation. Most insurers understand the CRM business
proposition and have undertaken significant initiatives, there has been limited
success to date.

Premium related services rendered by CRM

Life insurance premium has to be paid by the policy holder for a period of 5
years to 30 years. This period is depending on the term of the policy taken. In
order to pay the premium in time, the company follow some CRM tools to help
the customer. Customer service in insurance organizations is with strange
constraints, which may not be very relevant in the other areas of services
organizations. In some cases, it can go up to an entire life time of the client, if
he or she is looking at backing up the risk coverage during the active working
period with a reasonable and decent pension package.

Premium payment reminders

Sending reminders to the customers by mail is the oldest method followed by


the organisation. Nowadays the insurance companies send reminders through e-
Mail, SMS as per their customer’s wish. The companies provide the facility to
the customers to remit the premium not only in their office branches but also
through new mode of payments such as service centres, net banking, mobile
apps and bank accounts. Providing such user friendly services, the customers
feel the service experience better.

Grace Period

The grace period for insurance policy means giving extra time to pay their
premium, generally, 30 days for quarterly, half yearly and annual mode. For
monthly payment mode, 15 days given as grace period. If the policyholder fails
to pay the premium within the grace period, the policy will automatically lapse
which means the policyholder no longer has the life protection of the policy.
Providing grace period is also one of the CRM tool.

Premium related services rendered by CRM

There are some other services also provided by the Insurance companies using
CRM as a tool.

Duplicate policy

If the original policy is lost, it is not easy to get a duplicate policy. Because
there is a chance of misusing the original policy against the company. So the
company take several precautious measures before issuing a duplicate policy. A
duplicate policy confers on its owner the same rights and privileges as the
original policy. Issuing duplicate policy is also one of the CRM tool.

Alterations in policy

Nowadays a policy can be altered so easy. Topup facilities for sum assured are
available. Like that, the reduction of sum assured also available. Mode of
payment of premium also changeable like monthly mode into quarterly or
annually. Alterations in policy include conversion of whole life policy into
endowment plan, alteration from without profit plan to with profit plan,
correction in name, settlement option of payment of sum assured by
instalments, grant of accident benefit, and etc. However, no alteration is
permitted within one year of the commencement of the policy with some
exceptions.

Policy transfer and change of address

Life insurance contract is long term process. So the address change of policy
holder is inevitable. CRM helps the customer to apply and getting change in the
address. As a result of address change, the policy records also to be get
transferred from one branch to another. Today, all the branches are inter-
connected through networking facility. So, the transfer of policy record from
one branch to another is not necessary.

Maintenance of records

A policy holder may make modifications in the policy any time during the
policy period. So it is vital to update and maintain the records of the policy
holders. In early days, the policy holders have to contact their branches for
every detail they want. But today, using effective CRM, it is easy to get any
information they want.

Revival of policy

All life insurance companies provide the service of revival of the lapsed
policies. Arrears of the unpaid premium with interest should be paid to revive
the policy. If a revival of the policy is effected within 6 monthly from the due
of first unpaid premium, no personal statement regarding health is required and
the policy is revived on collection of delayed premium with interest. Providing
such facility of revival gives policyholder the opportunity to bring the customer
upto date and avail the benefits of the insurance policy.

Assignment and Nomination

A life insurance policy is easily assignable to another person. If a policy owner


wants to donate his life insurance policy to some other person, he can easily
transfer his ownership rights of the policy. But once the transfer is made, if the
assignor wants to cancel it, then the assignee would re-assigned it to the
assignor. Life insurance policies insist their customers for nomination. Even
though nomination is done at the time of purchasing the policy, nomination can
also be made thereafter by means of an endorsement on the policy itself.
Change and cancellation of nomination may be made any number of times by
the life assured before the date of maturity of the policy.
Settlement related services

These are the essential services rendered by life insurers to their customers. A
policyholder can terminate the contract whenever he wishes to, for any reason.

Surrender of a policy

Insurance companies provide policyholders the option of surrendering their


insurance policies. Minimum three years, the premium have to be paid, the
policyholder can surrender the contract for a guaranteed surrender value. In
case of surrender, generally the policy has to be cancelled.

Paid up assurance

At least three years, the premium has to be paid and subsequent premiums are
not paid, the policy will not lapse but will be converted into a paid-up
assurance. The amount of claim will be available either on maturity of the
policy or on death whichever is earlier.

Claims settlement

The settlement of claim is an important aspect of service to the policyholders.


Life insurance companies have to give emphasis on expeditious settlement of
maturity as well as death claims. They should provide proper guidance to their
customers on the procedure for registering a claim and early settlement thereof.
IRDA given regulatory guidelines to insurance companies to make a speedy
claim settlement. Introduction of CRM systems helps in web based loss filing
and checking the claim status.
Results Of CRM

CRM delivers a deal of functional, process-based tools to help employees be


more productive in selling, marketing and servicing key stakeholders. The first
level of CRM impact is the improved speed, accuracy and efficiency of internal
processes or improved productivity of individuals in which labour and
paperintensive processes are streamlined. The second level of impact is
measured when payer becomes easier to do business with, both from an agent
and consumer perspective. The third and most profound level of impact is when
the ‘sweet spot’ of optimal business profitability is revealed. When the right
mix of products, markets, sales model and agents is identified, the company
have all the elements required to make smarter and more strategic business
decision. A CRM system should facilitate customization by making it easy to
change the way in which customer data is organized and used.

Advantages of CRM

CRM is the process of acquiring, retaining and growing profitable customers. It


requires a clear focus on the service attributes that represent value to the
customer that create loyalty. Customer relationship management has several
advantages:

1. Company can easily find the needs of the customers.

2. It can easily to target specific customers by focusing on their needs.


3. I makes easier to track the effectiveness of a given campaign.

4. It gives knowledge about the customer who is loyal to the product.

5. Direct contact with the customers, creates the potential customers’ existence.

6. Marketing of a product is based on customer-oriented not price oriented.

7. As per the customers’ wish, a product is manufactured and marketed.

8. It prevents overspending on low-value clients or under-spending on high


value ones.

9. It speeds up the time to develop and market a product.

10. CRM reduces advertisement costs.

11. Product quality to be increased.

12. Volume of sale is to be raised.

13. It improves the use of the customer channel, thus making the most of each
contact with a customer.
Factors responsible for the Failure of CRM in Insurance

Management strongly believe that CRM is the only source to solve all their
problems relates to marketing. It is after the initiatives begin to unfold and
become tangible that the management realises the gaps in their expectations
same of the cases for failure are,

1. Business use CRM as a technology, not as a marketing practice. Due to


automation of obsolete processes and, people believing that technology alone
can change results without having to what they really do or what they really
believe.

2. Most of the CRM failures based on the company policies and wrong
interpretation of the analysis of CRM.

3. Remaking a company to be genuinely customer-centric is new and uncharted


territory and as with anything new, there is always resistance to change. Change
often forces people to regress to what they know and protect what they have
always been comfortable with.

4. If a company wants to apply CRM technique, then it should rely on its


analysis. There is a failure in understanding what CRM is all about. Some
regard its all about technology and they fail to align technology with strategy.
Some think it’s all about targeting customers and customer groups for special
offers. They see it as a simple matter of capturing names and addresses and
linking thisto customer transactions to cross-sell and up-sell.

5. Poor planning of a company’s interaction with customers and increases the


chances of addressing wrong issues.

6. Poor understanding of CRM, can’t fulfil its goal.


7. Many companies don’t educate its staff to execute CRM techniques and can’t
educate its customers how to use CRM. There is lack of CRM skills. Many
companies are creating sophisticated customer research methodology
techniques without realizing that such sophisticated tools required sophisticated
users and the users need training.

8. In most cases, CRM requires huge budget allotment.

9. Lack of internal, enterprise-wide data integration has made it exceedingly


difficult to develop a comprehensive view of customers.

CRM In India

The insurance industry in India has come a long way since liberalization of the
sector. Opening up of the sector has stiffened the competition, making it
necessary for the providers to shift from traditional policy based sales structure
to customized sales structure. An industry which thrives to sell ‘intangible’
needs to understand and serve its customers by setting ever-improved standards.
CRM in India is still in its infancy. The CRM market in India is likely to grow.
The insurance sector is expected to witness very high spending initiatives on
deployment of CRM solutions. Indian insurance companies have to gear up the
new initializes of CRM. G.N. Bajpai, the then Chairman of LIC emphasized the
growing importance of customer relationship management and said that
companies will have to transform CRM to value-based client relationship. Now,
it is in the interest of stakeholders of the insurance industry to enable
convergence that evolves around core competencies and maintain an
appropriate balance between the business model, human resources and
technology.

Conclusion
To achieve successful CRM, a company should understand what is and why it
is beneficial to customers in order to retain them for long time. Customers give
priority only to satisfy their needs. The success rate of the CRM depends on the
quality of CRM. Many infrastructural changes are required for industry
deployments to be successful. These changes include updating administration
systems, consolidating back offices, integrating front-end channels with back-
end systems, moving customer information to front-end channels and dealing
with data issues. The future of CRM is very hopeful in insurance sector.

The implementation of Customer Relationship Management (CRM) in


insurance companies. Thus, we reviewed several specialized papers addressing
regional and international solutions for customer relationship management. We
focus on strategies used in sales management with reference to the standards of
customer service and the models used in customer relationship management.
The aim of the authors is to present the benefits resulting from the application
of new technologies, thus estimating the pace of change, the new opportunities
and the need for flexibility in the relationship with customers. Along with the
technological component the human component is also present in order to
ensure the successful implementation of CRM.

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