Professional Documents
Culture Documents
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 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).
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.
Individual Death Claims Amount Paid (Rs in Crores) 9690.17 2946.49 9055.18 2733.49
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
Private Private
Public Sector Public Sector
Sector Sector
No. of Grievances reported during the year 17808 41802 15860 44828
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)
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
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.
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.
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.
Provides motor, health, travel, home, property, marine, liability, crop and other
specialty insurances products
23.5 million policies issued and 1.54 million claims settled in FY18
2015 Investment book size crossed Rs 100 billion (US$ 1.56 billion)
Joint venture between State Bank of India (SBI) and BNP Paribas Cardif
Assets Under Management (AUM) reached US$ 1,162.61 billion (US$ 18.02
billion) in FY18
2007 Gross Written Premium crossed Rs 5,000 crore (US$ 1.21 billion)
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
2010 Assets Under Management (AUM) crossed Rs 200 billion (US$ 4.37
billion)
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.
Industry - an outlook
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.
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.
* 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.
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.
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.
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,
- Life insurance coverage for atleast one person in 75% of the households
* 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:
"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.
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.
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?
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.
In order to file a death claim on a policy, you will need the following information:
□ Beneficiary's name
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
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.
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.
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.
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.
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.
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.
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.
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
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
Advantages of CRM
5. Direct contact with the customers, creates the potential customers’ existence.
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,
2. Most of the CRM failures based on the company policies and wrong
interpretation of the analysis of CRM.
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.