A Project Study Report On MAX-NEW YORK LIFE INSURANCE

A Study on Agency Business Model and Competitive Strategies of Insurance Companies in Udaipur

Submitted in partial fulfillment for the Award of degree of Master of Business Administration

Submitted By: Submitted TO BHAWNA RAO MBA PART II 1 DR.MAHIMA BIRLA

CERTIFICATE

This is certify that the project work done on Agency business model of insurance companies competitive strategies submitted to MAX-NEW YORK LIFE INSURANCE LTD. UDAIPUR for the partial fulfillment of requirement of award of MBA programme. This benefited work is carried out by at MAX-NEW YORK LIFE INSURANCE LTD , Udaipur (Raj). DATE PLACE::BHAWNA RAO MBA YEAR [07-09 ]

PACIFIC INSTITUTE OF MANAGEMENT, UDAIPUR PREFACE

The liberalization of the Indian insurance sector has been the subject of much heated debate for some years. The policy makers where in the catch 22 situation wherein for one they wanted competition, development and growth of this insurance sector which is extremely essential for channeling the investments in to the infrastructure sector. At the other end the policy makers had the fears that the insurance premia, which are substantial, would seep out of the country; and wanted to have a cautious approach of opening for foreign participation in the sector. As one of the rare occurrences the entire debate was put on the back burner and the IRDA saw the day of the light thanks to the maturing polity emerging consensus among factions of different political parties. Though some changes and some restrictive clauses as regards to the foreign participation were included the IRDA has opened the doors for the private entry into insurance. Whether the insurer is old or new, private or public, expanding the market will present multitude of challenges and opportunities. But the key issues, possible trends, opportunities and challenges that insurance sector will have still remains under the realms of the possibilities and speculation. What is the likely impact of opening up Indias insurance sector?

The large scale of operations, public sector bureaucracies and cumbersome procedures hampers nationalized insurers. Therefore, potential private entrants expect to score in the areas of customer service, speed and flexibility. They point out that their entry will mean better products and choice for the consumer. The critics counter that the benefit will be slim, because new players will concentrate on affluent, urban customers as foreign banks did until recently. This seems to be a logical strategy. Start-up costs-such as those of setting up a conventional distribution network-are large and high-end niches offer better returns. However, the middle-market segment too has great potential. Since insurance is a volumes game. Therefore, private insurers would be best served by a middle-market approach, targeting customer segments that are currently untapped.

ACKNOWLEDGEMENT

Intention, dedication, concentration and work are very much essential to complete any task. But still it needs lot of support, guidance, co-operation of people to make it successful. I express my deep sense of indebt ness towards Mr. HARISH PANERI for their precious time and valuable suggestions given. I also offer my sincere thanks to all the respondents who spared their valuable time for survey and specially Faculty member Dr.Mahima Birla pacific Institute of management, who gave me his invaluable suggestion for preparing this report. At last but not least I also thanks to entire customer interviewed for their kind cooperation.

(Signature of Student)

BHAWNA RAO MBA(07-09)

EXECUTIVE SUMMARY
In todays corporate and competitive world, I find that insurance sector has the maximum growth and potential as compared to the other sectors. Insurance has the maximum growth rate of 70-80% while as FMCG sector has maximum 12-15% of growth rate. This growth potential attracts me to enter in this sector and MAX

NEW YORK Life

Insurance Company Ltd has given me the opportunity to work and get experience in
highly competitive and enhancing sector. The success story of good market share of different market organizations depends upon the availability of the product and services near to the customer, which can be distributed through a distribution channel. In Insurance sector, distribution channel includes only agents or agency holders of the company. If a company like RELIANCE LIFE INSURANCE, TATA AIG, etc has adequate agents in the market they can capture big market as compared to the other companies. Agents are the only way for a company of Insurance sector through which policies and benefits of the company can be explained to the customer.

Contents
Sr. No. 1. 1.1 1.2 1.3 1.4 2. 2.1 2.2 2.3 2.4 2.5 3. 3.1 3.2 3.3 4. 4.1 4.2 4.3 4.4 4.5 5. 6. 6.1 6.2 6.3 6.4 6.5 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Subjects Covered Project Proposed Objective of the project Methodology Sampling Limitations Introduction Definition of insurance Functions of insurance Definitions of life insurance Role of life insurance Importance of life insurance Agency business model Insurance agencies Functions of agency manager Operational work of insurance agency Indian insurance industry History IRDA Changing perception of customers Changing face of Indian life insurance industry Possibilities Global insurance industry Functioning of insurance industry Insurers business model Investment management Key ratios and terms Requirements of an insurance risk Various types of insurance products Insurance and economy MAX NEW YORK LIFE Insurance company Distribution of insurance product Effective marketing strategies for insurance companies Competitors of MAX NEW YORK LIFE Comparison of ULIP products Data analysis and Interpretation Finding and conclusion Recommendations Questionnaire Pages 9 - 10

11 - 15

16 - 18

19 - 26

27 - 28 29 - 34

35 - 36 37 - 44 45 - 47 48 - 52 53 - 61 62 - 67 68 - 94 96 97 98 100

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References

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1. Project proposed
Agency business model of different insurance companies- competitive strategies. Different agencies of different insurance companies are having some strategies to survive in the market. Their strategies may be in the form of: How they target their customers. How they make their advisors active. How they make their operational and sales department effective. How they promote their employees.

How they handle the conflict in agency.

Objective of the project: - Main objective of the project is to find out the
strategies of different insurance agencies and evaluate them.so it is very essential to a company to innovate their marketing strategies in terms of Recruiting their advisors To make their advisors active Well educated and capable employee in the agency Marketing of their products Deployment of their products Targeting the right and potential customers Differentiating from other companies Future plan of the company

This study consists of to find out the marketing strategies of different insurance companies which are the competitors of MAX-NEWYORK Life insurance. This research requires the interview of branch managers of different insurance companies and find out their branches are working in terms of above mentioned factors.

Methodology
Research is totally based on primary data. Secondary data can be used only for the reference. Research has been done by primary data collection, and primary data has been collected by meeting with the branch and agency manager of different insurance agencies and branches in udaipur. Data collection has been done through by giving structured questioner. Research has been done after 10 branch managers or agency manager. This study will be based on judgment

sampling and this research is skewed to organization level. This is an exploratory type of research. And this research needs further study also Research is a kind of pilot study.

Sampling
Sample size has been taken by judgment sampling. Judgment sampling is a process in which the selection of a unit, from the population is based on the pre judgment. This research requires the survey of different insurance agencies in Udaipur city. So research concentrates on the branch or agency manager of different insurance companies. So the selection of unit for this research has been judged by the researcher. Sample size for this research is 15.

Limitations:
Time limitation Research has been done only in Udaipur. Companies did not disclose their secrets data and strategies. Possibility of Error in data collection. Possibility of Error in analysis of data due to small sample size.

2. Introduction
The story of insurance is probably as old as the story of mankind. Tendency of a human being to secure themselves against loss and disaster has been from the starting of world. They sought to avert the evil consequences of fire and flood and loss of life and were willing to make some sort of sacrifice in order to achieve security. Though the concept of insurance is largely a development of the recent

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past, particularly after the industrial era past few centuries yet its beginnings date back almost 6000 years as per records. Insurance business is divided into four classes: Life Insurance Fire Marine Miscellaneous Insurance.

Insurance provides:
Protection to investor. Accumulation of savings. Channeling these savings into sectors needing huge long term investment.

Functions of insurance:
Provide protection: The primary function of insurance is to provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Insurance is actually a protection against economic loss, by sharing the risk with others. 11

Collective bearing of risk: Insurance is an instrument to share the financial loss of few among many others. Insurance is a mean by which few losses are shared among larger number of people. All the insured contribute the premiums towards a fund and out of which the persons exposed to a particular risk is paid.

Assessment of risk: Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. Risk is the basis for determining the premium rate also.

Provide certainty: Insurance is a device, which helps to change from uncertainty to certainty. Insurance is device whereby the uncertain risks may be made more certain.

Small capital to cover larger risk: Insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty.

Contributes towards the development of industries: Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to sick industrial units which have insured their assets including plant and machinery.

Means of savings and investment: Insurance serves as savings and investment, insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured's For the purpose of availing income-tax exemptions also, people invest in insurance.

Source of earning foreign exchange: Insurance is an international business. The country can earn foreign exchange by way of issue of marine insurance policies and various other ways. 12

Risk free trade: Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different types of policies under marine insurance cover.

Life insurance: Life insurance is a contract under which the insurer (Insurance Company) in Consideration of a premium paid undertakes to pay a fixed sum of money on The death of the insured or on the expiry of a specified period of time Whichever is earlier. In case of life insurance, the payment for life insurance policy is certain. The Event insured against is sure to happen only the time of its happening is not known. So life insurance is known as Life Assurance. The subject matter of insurance is life of human being. Life insurance provides risk coverage to the life of a person. On death of the person insurance offers protection against loss of income and compensate the titleholders of the policy.

Roles of life insurance:

Life insurance as an investment: - Insurance products yield more than any other investment instruments and it also provides added incentives or bonus offered by insurance companies.

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Life insurance as risk cover: - Insurance is all about risk cover and protection of life. Insurance provides a unique sense of security that no other form of invest can provide.

Life insurance as tax planning: - Insurance serves as an excellent tax saving mechanism too.

Importance of life insurance: Protection against untimely death: - Life insurance provides protection to the dependents of the life insured and the family of the assured in case of his untimely death. The dependents or family members get a fixed sum of money in case of death of the assured. Saving for old age: - After retirement the earning capacity of a person reduces. Life insurance enables a person to enjoy peace of mind and a sense of security in his/her old age. Promotion of savings: - Life insurance encourages people to save money compulsorily. When life policy is taken, the assured is to pay premiums regularly to keep the policy in force and he cannot get back the premiums, only surrender value can be returned to him. In case of surrender of policy, the policyholder gets the surrendered value only after the expiry of duration of the policy. Initiates investments: - Life Insurance Corporation encourages and mobilizes the public savings and canalizes the same in various investments for the economic development of the country. Life insurance is an important tool for the mobilization and investment of small savings. Credit worthiness: - Life insurance policy can be used as a security to raise loans. It improves the credit worthiness of business. Social Security: - Life insurance is important for the society as a whole also. Life insurance enables a person to provide for education and marriage of

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children and for construction of house. It helps a person to make financial base for future. Tax Benefit: - Under the Income Tax Act, premium paid is allowed as a deduction from the total income under section 80C.

3. Agency business model

In India insurance is sold through mainly four channels. Through branch Through agency Through financial institution Through banks

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Independent agency system means of selling and servicing property and casualty insurance through agents who represent different companies. The agents own the records of the policies they sell. Insurance is now governed by a blend of statutes, administrative agency regulations, and court decisions. State statutes often control premium rates, prevent unfair practices by insurers, and guard against the financial insolvency of insurers to protect insured. In most states, an administrative agency created by the state legislature devises rules to cover procedural details that are missing from the statutory framework. To do business in a state, an insurer must obtain a license through a registration process. This process is usually managed by the state administrative agency. The same state agency may also be charged with the enforcement of insurance regulations and statutes. Administrative agency regulations are many and varied. Insurance companies must submit to the governing agency yearly financial reports regarding their economic stability. This requirement allows the agency to anticipate potential insolvency and to protect the interests of insured. Agency regulations may specify the types of insurance policies that are acceptable in the state, although many states make these declarations in statutes. The administrative agency is also responsible for reviewing the competence and ethics of insurance company employees.

Insurance agencies:
Insurance agency can be defined as a group of insurance agents or advisor. These agents or advisors create a distribution channel to sell the different insurance products. These advisors are the strongest distribution channel for an insurance agency. An advisor or agent works as a third party or intermediate between insurance company and customers. All the advisors in an agency work as a team. Main work of insurance advisor or agent is to promote and sell different insurance products of company. 16

Functions of agency manager:

a person who governs a group of insurance advisors is known as agency manager. Success of an agency manager depends on the success of their advisors. work of agency manager is to control the advisors in an efficient way. Agency manager is like a creature of two wings. He has to recruit advisors as well as to give sales to the insurance company. To recruit advisors. Make them aware of different insurance products. To give them training session. To motivate them for efficient work. To get maximum and efficient work from their advisors.

Operation work of insurance agency (MAX-NEWYORK Life): Every industry has an operational department which supports the market division. Front office partners (independent agents) Develop insurance products CUSTOMERS Fulfill and service product Back office provider Distribute product BUSINESS PARTNERS Claims Regulatory institutions Plan and manage company

In the reference to the MAX-NEWYORK Life insurance, development of insurance products, distribution, planning services products and claims are taken care by the head office. Back office providers are those persons who take care of the operational part of the organization and front office providers are the people who brings sell to the organization. Back office has its own hierarchy which is connected to head office, and every policy has to be processed to head office. Unit for the operations is known as processing centre, and processing centre within the city is known as mini processing centre. Proposal forms come through

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front office and the verification of the proposal is done by manually which is known as scrutiny. After scrutiny the operational staff enters it in MAXNEWYORK Life website, which is done online. the entry of a proposal is done in a sequential order starting with scrutiny, inwards, proposal wise inwards, cashier entry, cashier entry approval, data entry and finally outwards. After finishing all these operations policy issues from the head office of the state.

4. Indian insurance industry

History:
Life insurance came to India from England in 1818 when oriental life insurance company started in Calcutta by Europeans. After this many insurance companies had been started in India. But these companies were looking after only the needs of European community established in India. Indian people were not being insured by these companies. First Indian life insurance company came as

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Bombay mutual life insurance assurance. Second company was Bharat insurance company came in 1896. After this the united India in madras, national Indian and national insurance in Calcutta and the co-operative assurance in Lahore were established in 1906. To regulate Indian insurance business first insurance act came in 1912 as life insurance company act and provident fund act. These acts consist of premium rates tables and periodical valuations of companies. In the first two decade of 20th century many life insurance companies were started. So the insurance act came in 1938 to governing life and non life insurance companies and to provide strict state control. In 1956 the life insurance business in India was nationalized. In 1956 life insurance corporation of India (LIC) was created to spreading life insurance much more widely particularly in rural areas. In that year LIC had 5 zonal offices, 33 divisional offices and 212 branch offices. In 1957 the business of LIC of sum assured of 200crores, 1000crores in 1970, and 7000crores in 1986.

Indian regulatory development authority:

In 1999, the Insurance Regulatory and Development Authority (IRDA) was constituted as an autonomous body to regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance customer satisfaction through increased consumer choice and lower premiums, while ensuring the financial security of the insurance market. The IRDA opened up the market in August 2000 with the invitation for application for registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000 onwards framed various regulations ranging from registration of

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companies for carrying on insurance business to protection of policyholders interests. Role of IRDA: Protecting the interests of policyholders. Establishing guidelines for the operations of insurers, and brokers. Specifying the code of conduct, qualifications, and training for insurance intermediaries and agents. Promoting efficiency in the conduct of insurance business. Regulating the investment of funds by insurance companies. Specifying the percentage of business to be written by insurers in rural sectors. Handling disputes between insurers and insurance intermediaries.

Changing perception of Indian customers:

Indian Insurance consumers are like Indian Voters, they are soft but when time is right and ripe, they demand and seek necessary changes. De-tariff of many Insurance Products are the reflection of changing aspirations and growing demand of Indian consumers. For historical years, Indian consumers were at receiving end. Insurance Product was underwritten and was practically forced onto consumers on a Take-it-As-itbasis. All that got changed with passage of IRDA act in 1999. New insurance companies have come into existence leading to open competition and hence better products for customers. 20

Indian customers have become very sensitive to Coverage / Premium as well as the Products (read Risk Solution), that is given to them. There are not ready to accept any product, no matter even if that is coming from the market leader, should that product is not serving the purpose. A case in point is ULIP Product / Group Life and Credit Life in Life Insurance segment and Travel / Family Floater Health and Liability Insurance in the Non-life segment are new age Avatar. The new products are constantly being demanded by Indian consumers, which is putting huge pressures on Insurance companies (Read Risk Under-writers) and Brokers to respond. Customers are looking at Insurance for covering Pure Risk now which I have covered in my next section. Another good reason why we are seeing quick changes in the buying behavior of Insurance from mere Investment to risk mitigation is the cost of Replacement of Goods (ROG) or Cost of Services (COS). Now Indian customers are aware of insurance industry and insurance products provided by companies. They have become more sensitive. They would not accept any type of insurance product unless it fulfills their requirements and needs. In historic days customers looking at insurance products as a life cover which can provide security against any unacceptable events, but now customers look at insurance products as an investment as well as life cover. So todays customers wants good return from the insurance companies. The Indian customers forms the pivot of each companys strategy.

Investment of Indian household savings (as a % in different sector)

CORP. BANKS BANK DEPOSITS

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2% 39%

SHARES AND DEBENTURES MUTUAL FUNDS NBFCS GOVT. BONDS INSURANCE PF/ RETIRE FUNDS CURRENCY
Source: - www. avivaindia.com

1% 2% 3% 13% 13% 21% 6%

Changing face of Indian insurance industry:

After the Insurance Regulatory and Development Authority Act have been passed there has been establishment of many private insurance companies in India. Previously there was a monopoly business for Life Insurance Corporation of India (L.I.C.) who was the only life-insurance company for the people till 2000. L.I.C. still holds 71.4% of the market share in 2006. But after the introduction of private life insurance companies there is a great competition in Indian market now. Everyone is trying to capture the fresh market here and penetrate it with aggressive marketing strategies. Today life-insurance is not only limited up to just life risk cover and maturity period bonuses but changed to greater return from the investments. With the introduction of the unit linked insurance policies these companies are investing the money in different investment instruments like shares, bonds, debentures, government and other securities. People are demanding for higher returns with the life risk cover and private companies are giving 30-40% average growth per annum. These life-insurance companies have

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every kind of policies suiting every need right from financial needs of, marriage, giving birth and rearing up a child, his education, meeting daily financial needs of life, pension solutions after retirement. These companies have every aspects and needs of our life covered along with the death-benefit. In India only 25% of the population has life insurance. So Indian life-insurance market is the target market of all the companies who either want to extend or diversify their business. To tap the Indian market there has been tie-ups between the major Indian companies with other International insurance companies to start up their business. The government of India has set up rules that no foreign insurance company can set up their business individually here and they have to tie up with an Indian company and this foreign insurance company can have an investment of only 24% of the total start-up investment. Indian insurance industry can be featured by: Low market penetration. Ever growing middle class component in population. Growth of customers interest with an increasing demand for better insurance products. Application of information technology for business. Rebate from government in the form of tax incentives to be insured.

Today, the Indian life insurance industry has a dozen private players, each of which are making strides in raising awareness levels, introducing innovative products and increasing the penetration of life insurance in the vastly underinsured country. Several of private insurers have introduced attractive products to meet the needs of their target customers and in line with their business objectives. The success of their effort is that they have captured over 28% of premium income in five years.

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The biggest beneficiary of the competition among life insurers has been the customer. A wide range of products, customer focused service and professional advice has become the mainstay of the industry, and the Indian customers forms the pivot of each companys strategy. Penetration of life insurance is beginning to cut across socio-economic classes and attract people who have never purchased insurance before. Life insurance is also now being regarded as a versatile financial planning tool. Apart from the traditional term and saving insurance policies, industry has seen the entry and growth of unit linked products. This provides market linked returns and is among the most flexible policies available today for investment. Now products are priced, flexible, and realistic and sustain so people in better position to understand the risk and benefits of the product and they are accepting these innovative products. So it is clear that the face of life insurance in India is changing, but with the changes come a host of challenges and it is only the credible players with a long term vision and a robust business strategy that will survive. Whatever the developments, the future and the opportunities in this industry will surely be exciting. There are 12 private players in Indian life insurance market. 6 bank owned insurers: - HDFC standard life, ICICI prudential, ING Vysya, MetLife, OM Kotak, SBI life. 6 independent insurers: - Aviva, ANP sanmar, Birla sun life, Bajaj Allianz, Max New York life, Tata AIG. Major international insurers are- Prudential and Standard life from UK, Sun life of Canada, AIG, MetLife and New York life of the US.

Increasing growth since liberalization:

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YEAR FY03 FY04 FY05 FY06 FY07

LIC (in bn rs.) 110 120 130 140 240

PRIVATE PLAYER 10 20 40 60 160

Source: - Insurance Industry (ICFAI publication book)

Possibilities for insurance companies in India:

Further deregulation of the market. Greater concern for the customers. Newer products and services. Competition and quality consciousness. Cost effective operations. Restructuring of the public sector. Consolidation of domestic insurance markets. Technology driven shift in product design. Actual operations and distribution. Convergence of financial services.

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5. Global insurance industry

Globally, insurers increasingly are pressured by the demands of their clients. The development of global insurance industry over the past few years was influenced by booming stock markets which enabled considerable capital gains to be made in non life business. Increase in insurers equity capital increased underwriting capacity, while demand did not develop at the same pace, resulting in decrease in insurance policies prices. The stock market boom of the past few years led to demand for unit linked insurance products. The global insurance industry is growing at rapid pace. Most of the markets are undergoing globalization. Lot of mergers and acquisition are taking place in the insurance world. The rapidity in the industry, technological improvement has resulted in pressures on a few economic parameters. The world insurance industry is at peak of its globalization process. Global insurance market is increasing by an average of six percent per year since 1990. Insurance companies have collected $2443.7 billion premium world wide according to the global development of premium volume in 144 countries in 2005. $1521.3 has been generated as life insurance premium and $922.7 as non life insurance premium. The US accounted for 35% of global life and non life premium, Japan had global share of 21%, and UK was having 10% of global share.

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Influence on Indian insurance industry:

In this era of globalization, insurance companies face a dynamic global environment. Dramatic changes are taking place owing to the internationalization of activities, appearance of new risk, new types of covers to match with new risk situations, and unconventional and innovative ideas on customer services. Low growth rates in developed markets, changing customers needs, and the uncertain economic conditions in the developing world are exerting pressure on insurers resources and testing their ability to survive. Now the existing insurers are facing difficulties from non-traditional competitors those are entering the retail market with new approaches and through new channels. India has a rapidly growing middle class and this section can afford to buy insurance products. This shows the attraction that the Indian market holds for foreign insurers who have been putting pressure on developing countries as well as on India to open up its market.

Life insurance penetration as a % of GDP

United kingdom Japan Korea United states Malaysia India China Brazil Source: - www.indianinsuranceresearch.com 8.9% 8.3% 7.3% 4.1% 3.6% 3.0% 1.8% 1.3%

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6. Functioning of insurance industry:

Insurers business model:
Profit = earned premium + investment income - incurred loss - underwriting expenses Insurers make money in two ways: (1) through underwriting, the processes by which insurers select the risks to insure and decide how much in premiums to charge for accepting those risks and (2) by investing the premiums they collect from insured. The most difficult aspect of the insurance business is the underwriting of policies. Using a wide assortment of data, insurers predict the likelihood that a claim will be made against their policies and price products accordingly. To this end, insurers use actuarial science to quantify the risks they are willing to assume and the premium they will charge to assume them. Data is analyzed to fairly accurately project the rate of future claims based on a given risk. Actuarial science uses statistics and probability to analyze the risks associated with the range of perils covered, and these scientific principles are used to determine an insurer's overall exposure. Upon termination of a given policy, the amount of premium collected and the investment gains thereon minus the amount paid out in claims is the insurer's underwriting profit on that policy. An insurer's underwriting performance is measured in its combined ratio. The loss ratio (incurred losses and loss-adjustment expenses divided by net earned premium) is added to the expense ratio (underwriting expenses divided by net 28

premium written) to determine the company's combined ratio. The combined ratio is a reflection of the company's overall underwriting profitability. A combined ratio of less than 100 percent indicates underwriting profitability, while anything over 100 indicates an underwriting loss. Insurance companies also earn investment profits on float. Float or available reserve is the amount of money, at hand at any given moment that an insurer has collected in insurance premiums but has not been paid out in claims. Insurers start investing insurance premiums as soon as they are collected and continue to earn interest on them until claims are paid out. . Naturally, the float method is difficult to carry out in an economically depressed period. Bear markets do cause insurers to shift away from investments and to toughen up their underwriting standards. So a poor economy generally means high insurance premiums. This tendency to swing between profitable and unprofitable periods over time is commonly known as the "underwriting" or insurance cycle. Finally, claims and loss handling is the materialized utility of insurance. In managing the claims-handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages.

Investment management:
Investment operations are often considered incidental to the business of insurance, and have traditionally viewed as secondary to underwriting. In the past risk management was the most important part of business, whereas today the focus has shifted to fund management. Investment income is a large component of insurance revenues, skilful and careful management of funds. Insurance is a business of large numbers and generates huge amount of funds over time. These funds arise out of policyholder funds in the case of life insurance, and technical and free reserves in the non-life segments. Time lag between the procurement of premium and the payment of claim provides an interval during which the funds

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can be deployed to generate income. Insurance companies are among the largest institutional investors in the world. Assets managed by insurance companies are estimated to account for over 40% of the worlds top ten asset managers. Returns on investments influence the premium rates and bonuses and hence investment income will continue to be an important component of insurance company profits. In life insurance, benefits from insurance profits accrue directly to policy holders when it is passed on to him in the form of a bonus. In non life insurance the benefits are indirect and mostly by the creation of an investment portfolio. Investment income has to compensate for underwriting results which are increasingly under pressure. In the case of insurance, the difference between revenue and the expenses is known as operating surplus. Revenue =premium. Expenses =sum of claims + commission payable on procurement of business + operating expenses. Operating surplus =revenue-expenses. Net investment income includes income from trading in and holding stock market securities including government securities, special deposits with the central government, loans to several public utilities and service providers in state government. Insurance premium collected is converted in a pool of fund then divided in to four expenses. To pay the expenses of the management. To pay agency commission. To pay for the claims. Surplus money will be invested in govt. securities.

Requirements of an insurance risk

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Insurance normally insure only pure risks .However, not all pure risk is insurable .certain requirements usually must be fulfilled before a pure risk can be privately insured .From the view point of the insurer, there are ideally six requirement of an insurable risk There must be a large number of exposure units The loss must be accidental and unintentional. The loss must be determinable and measurable. The loss should not be catastrophic.
The chance of loss must be calculable.

Comparison of Insurance with other Similar Factors

(1)

Insurance and gambling compared

Insurance is often erroneously confused with gambling .There are two important differences between them .First ,gambling creates a new speculative risk ,while insurance is a technique for handling an already existing pure risk .thus ,if you bet Rs 300 on a horse ,a new speculative technique is created ,but if you pay Rs 300 to an insurer for fire insurance ,the risk of fire is already present and is transferred to the insurer by a contract. No new risk is created by the transaction. The second difference between insurance and gambling is that gambling is socially unproductive, because the winners gain comes at the expense of the loser .In contract; insurance is always socially productive, because neither the insurer nor the insured is placed in a position where the gain of the winner comes at the expense of the loser. The insurer and the insured have a common interest in the prevention of a loss. Both parties win if the loss does occur .Moreover, consistent gambling transaction generally never restore the losers to their former financial

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position .In contract ,insurance contracts restore the insureds financially in whole or in part if a loss occurs

(2)

Insurance and hedging compared

The concept of hedging is to transferring the risk to the speculator through purchase of future contracts .An insurance contract, however, is not the same thing as hedging .Although both technique are similar in that risk is transferred by a contract, and no new risk is created, there are some important difference between them. First, an insurance transaction involves the transfer of insurable risks, because the requirement of an insurable risk generally can be met .However, hedging is a technique for handling risks that are typically uninsurable ,such as protection against a decline in the price agriculture products and raw materials. A second difference between insurance and hedging is that insurance and hedging is that insurance can reduce the objective risk of an insurer by application of the law of large numbers. As the number of exposure units increases, the insurers prediction of future losses improves, because the relative variation of actual loss from expected loss will decline .thus, many insurance transactions reduce objective risk. In contract, hedging typically involves only risk transfer , not risk reduction .The risk of adverse price fluctuation is transferred because of superior knowledge of market conditions .The risk is transferred, not reduced, and prediction of loss generally is not based on the law of large numbers.

Various types of life insurance policies:-

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Endowment policies: This type of policy covers risk for a specified period, and at the end of the maturity sum assured is paid back to policyholder with the bonuses during the term of the policy.

Money back policies: This type of policy is for periodic payments of partial survival benefits during the term of the policy as long as the policy holder is alive.

Group insurance: This type of insurance offers life insurance protection under group policies to various groups such as employers-employees, professionals, co-operatives etc it also provides insurance coverage for people in certain approved occupations at the lowest possible premium cost.

Term life insurance policies: This type of insurance covers risk only during the selected term period. If the policy holder survives the term, risk cover comes to an end. These types of policies are for those people who are unable to pay larger premium required for endowment and whole life policies. No surrender, loan or paid up values are in such policies.

Whole life insurance policies: This type of policy runs as long as the policyholder is alive and is covered for the entire life of the policyholder. In this policy the insured amount and the bonus is payable only to nominee on the death of policy holder.

Joint life insurance policies: These policies are similar to endowment policies in maturity benefits and risk cover, but joint life policies cover two lives simultaneously such as married couples. Sum assured is payable on the first death and again on the death of survival during the term of the policy.

Pension plan: a pension plan or annuity is an investment over a certain number of years but does not provide any life insurance cover. It offers a guaranteed income either for a life or certain period.

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Unit linked insurance plan: ULIP is a kind of insurance plan which provides life cover as well as return on premium paid over a certain period of time. The investment is denoted as units and represented by the value called as net asset value (NAV).

7. Insurance and economy

Indian economy is growing in reference to global market. Business of insurance with its unique features has a special place in Indian economy. It is a highly specialized technical business and customer is the most concern people in this business, therefore this business is able to spur the growth of infrastructure and act as a catalyst in the overall development of Indian economy. The high volumes in the insurance business help spread risk wider, allowing a lowering of the rates of the premium to be charged and in turn, raising profits. When there is a bigger base, the probabilities become more predictable, and with system wide risks balanced out, profits improve. This explains the current scenario of mergers, acquisitions, and globalization of insurance. Insurance is a type of savings. Insurance is not only important for tax benefits, but also for savings and for providing security. It can be serving as an essential service which a welfare state must make available to its people. Insurance play a crucial role in the commercial lives of nations and act as the lubricants of economic activities. Insurance firms help to spread the potentially financial consequences of risk among the large number of entities, to mobilize and distribute savings for productive use, facilitate investment, support and encourage external trade, and protect economic entities against external risk.

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Insurance and economic growth mutually influences each other. As the economy grows, the living standards of people increase. As a consequence, the demand for life insurance increases. As the assets of people and of business enterprises increase in the growth process, the demand for general insurance also increases. In fact, as the economy widens the demand for new types of insurance products emerges. Insurance is no longer confined to product markets; they also cover service industries. It is equally true that growth itself is facilitated by insurance. A well-developed insurance sector promotes economic growth by encouraging risktaking. Risk is inherent in all economic activities. Without some kind of cover against risk, some of these activities will not be carried out at all. Also insurance and more particularly life insurance is a mobilizer of long term savings and life insurance companies are thus able to support infrastructure projects which require long term funds. There is thus a mutually beneficial interaction between insurance and economic growth. The low income levels of the vast majority of population have been one of the factors inhibiting a faster growth of insurance in India. To some extent this is also compounded by certain attitudes to life. The economy has moved on to a higher growth path. The average rate of growth of the economy in the last three years was 8.1 per cent. This strong growth will bring about significant changes in the insurance industry. At this point, it is important to note that not all activities can be insured. If that were possible, it would completely negate entrepreneurship. Professor Frank Knight in his celebrated book Risk Uncertainty and Profit emphasized that profit is a consequence of uncertainty. He made a distinction between quantifiable risk and non-quantifiable risk. According to him, it is non-quantifiable risk that leads to profit. He wrote It is a world of change in which we live, and a world of uncertainty. We live only by knowing something about the future; while the problems of life or of conduct at least, arise from the fact that we know so little. This is as true of business as of other spheres of activity. The real management challenges are uninsurable risks. In the case of insurable risks, risk is avoided at a cost.

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8. MAX-NEW YORK LIFE INSURANCE

Overview
Max New York Life Insurance Company Ltd. is a joint venture between New York Life; a Fortune 100 company and Max India Limited; one of India's leading multibusiness corporations. The company has positioned itself on the quality platform. In line with its vision to be the Most Admired Life Insurance Company in India, it has developed a strong corporate governance model based on the core values of excellence, honesty, knowledge, caring, integrity and teamwork. The strategy is to establish itself as a Trusted Life Insurance Specialist through a quality approach to business.

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Incorporated in 2000, Max New York Life started commercial operation in 2001. In line with its values of financial responsibility, Max New York Life has adopted prudent financial practices to ensure safety of policyholder's funds. The Company's paid up is Rs. 1,782 crore. Having set a Best in Class Agency Distribution Model in place, the company is spearheading a major thrust into additional distribution channels to further grow its business. The company has multi-channel distribution that includes the agency distribution, partnership distribution, bancassurance, distribution focused on emerging markets and alliance marketing through employed sales force. The company currently has 33 bancassurance relationships, 14 corporate agency tieups and direct sales force at 14 locations. Max New York Life has put in place a unique hub and spoke model of distribution to deepen rural penetration. The company has 133 (13 hub office, 120 spoke offices) offices dedicated to emerging markets in Punjab and Haryana. Max New York Life offers a suite of flexible products. It now has 36 products covering both life and health insurance and 8 riders that can be customized to over 800 combinations enabling customers to choose the policy that best fits their need. Besides this, the company offers 6 products and 7 riders in group insurance business. The company currently has more than 15,626 employees

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Today, India sits as the cusp of greatness both in its potential and in its achievements. Some argue that it has already crossed that threshold and is destined for greatness no matter what. MNYL believes that there are examples of this greatness all around and is proud to chronicle it for our collective inspiration. MNYLs philosophy of Karo Zyaada ka Iraada is a salute to all those who happily challenge status quo and push the boundaries in the search and in the creation of a bigger, brighter tomorrow. The dream of a larger good is no longer confined to a limited few. MNYL intends to awaken todays India to re-look at itself, its realities and the possibilities and new ways to progress through its new business philosophy. Karo Zyaada ka Iraada appears at a time when we as a people have realized that wed be happier if we could articulate and then live our ambitions.

Fact Sheet
Founded Started Operations Headquarters World Wide Web Address Chairman Managing Director & CEO Paid-Up Capital 2000 April 2001 New Delhi, India http://www.maxnewyorklife.com/ Analjit Singh Rajesh Sud Rs. 1,782 crore

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Employees Number of Products (Individual) Number of Riders/Options (Individual) Product Combinations Possible (Individual) Number of Products (Group) Number of Riders/Options (Group) Number of Offices Number of Offices Dedicated To Rural Business Number of Cities MDRTs

15,626 36 8 Over 800 6 7 578 133 (13 hub offices, 120 spoke offices) 375 343 (for calendar year 2007)

Max India Ltd.

Founded in 1985, Max India Limited is a Public Limited company listed on the NSE and BSE of India with over 26,000 shareholders. Today, Max India Limited is a multi-business corporate, driven by the spirit of Enterprise, focused on Knowledge, People and Service oriented businesses of:

Healthcare (Max Healthcare) Life Insurance (Max New York Life Insurance) Clinical Research (Neeman Medical International)

Max also Maintains Interests in:

Specialty Plastic Products for the packaging industry (Max Speciality Products) Healthcare Staffing (Max Health Staff)

Prominent shareholders are Mr. Analjit Singh and a leading private equity firm, Warburg Pincus which accounts for 28.7% of the total shareholding. The balance 39

shareholding is held by the public and Institutional Investors. Till 1999, The Companys Main Interests and Partnerships were the following: Business

Bulk Active Pharmaceuticals Electronic Component Distribution Mobile Telephony V-SAT Communications Plating Chemicals Information Technology

Partners

DSM Gist Brocades Motorola, USA Avnet Inc., USA Hutchison Telecom Ltd. Hong Kong Comsat Investment Inc., USA & Lockheed Martin, USA Atotech, Germany Mind Crossing, USA

In 2000, the Company reinvented and restructured itself to focus on the businesses of Life under the them, LifeOur Focus. Max New York Life Insurance, founded as a Joint Venture between Max India Limited and New York Life, a Fortune 100 company, is one of the leading private life insurers in India.

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Max Healthcare, a subsidiary of Max India Limited is Indias first provider of comprehensive, standardized, seamless, and integrated world-class healthcare services. Neeman Medical International (NMI) is an International Clinical Research provider operating across three locations spanning North America, Asia and Latin America. Each location is backed by comprehensive infrastructure and highly skilled and experienced personnel.

New York Life LLC

New York Life Insurance Company,(http://www.newyorklife.com/) a Fortune 100 company founded in 1845, is the largest mutual life insurance company in the United States and one of the largest life insurers in the world. Headquartered in New York City, New York Lifes family of companies offer life insurance, annuities and long-term care insurance. New York Life Investment Management LLC provides institutional asset management and retirement plan services. Other New York Life affiliates provide an array of securities products and services, as well as institutional and retail mutual funds. The mission of New York Life is to maintain its superior 'financial strength', adhere to the highest standards of 'integrity' and demonstrate 'humanity' by treating its customers, agents and employees with compassion, consideration and respect. New York Life is one of the largest and strongest life insurance companies in the world with more than USD$215 billion assets under management and has received among the highest ratings for financial strength from the life insurance industry's principal rating agencies: A.M. Best (AA+), Standard & Poor's (AA+), Moody's (Aa1), Fitch (AAA). According to Moody's, "New York Life's rating reflects the company's good quality investment portfolio, ample liquidity, and sound capitalization, as well as the good growth potential of its international business.

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As a leader in the insurance industry, New York Life continues to bring to its operations new management concepts, advanced technologies, new distribution and training systems and innovative insurance products.

Achievements and Awards

Some of the Industry Firsts

First company to provide Freelook period of 15 days to the customer. This was later made mandatory by the regulator First company to start toll free line for agent services First and the only life insurance company in India to implement Lean methodology of service excellence in service industry First life insurance company in India to provide various services to the agents and customers over phone First Indian life insurance company to start service center at the regional level First life insurance company in India to be awarded ISO 9001:2000 certification

Awards

Among the top 25 companies to work for in India, according to Businessworld 2003 Great Workplaces of India Among the top five most respected insurance companies in India as per Businessworld 2004 & 2006 survey Won Indo-American Corporate Excellence Award for Best Indo-US company in Financial Services Category in 2006 42

Received Best Six Sigma Project award at Sakal Six Sigma Excellence Awards 2006 Among top 3 in Asia Life Insurance Company of the Year Award 2007 instituted by Asia Insurance Review Received the Amity Corporate Excellence Award 2007 Received the Outlook Money Award for being among the best new insurers in the country.

First life insurance company to be awarded CII-Exim Bank Commendation Certificate for Strong Commitment to Excel - 2008.

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9. Distribution of insurance products

Insurance has to be sold the world over. The Touch point with the ultimate customer is the distributor or the producer and the role played by them in insurance markets is critical. It is the distributor who makes the difference in terms of the quality of advice for choice of product, servicing of policy post sale and settlement of claims. In the Indian market, with their distinct cultural and social ethics, these conditions will play a major role in shaping the distribution channels and their effectiveness. In today's scenario, insurance companies must move from selling insurance to marketing an essential financial product. The distributors have to become trusted financial advisors for the clients and trusted business associates for the insurance Companies. Challenges for insurance companies and intermediaries in India Building faith about company in the mind of clients. Building personal credibility with the clients.

Different distribution channels in India:A multi-channel strategy is better suited for the Indian market. Indian insurance market is a combination of multiple markets. Each of the markets requires a different approach. Apart from geographical spread the socio-cultural and economic segmentation of the market is very wide, exhibiting different traits and needs. Different multi-distribution channels in India are as follows

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Agents: Agents are the primary channel for distribution of insurance. The public and private sector insurance companies have their branches in almost all parts of the country and have attracted local people to become their agents. Today's insurance agent has to know which product will appeal to the customer, and also know his competitor's products to be an effective salesman who can sell his company, the product, and himself to the customer. To the average customer, every new company is the same. Perceptions about the public sector companies are also cemented in his mind. So an insurance agent can play an important role to create a good image of company.

Banks: Banks in India are all pervasive, especially the public sector banks. Many insurance companies are selling their products through banks. Companies which are bank owned, they are selling their products through their parent bank. The public sector banks, with their vast branch networks, are helpful to insurance companies. This channel of selling insurance is known as Banc assurance.

INSURANCE COMPANY ICICI prudential

ASSOCIATE BANKS ICICI bank, bank of India, Citibank, Allahabad bank, Federal bank, south Indian bank, Punjab and Maharashtra cooperative bank State bank of India Deutsche bank, Citibank, bank of Rajasthan, Andhra bank Vysya bank ABN amro bank, canara bank Union bank, Indian bank Karnataka bank, j&k bank

SBI life Birla sun life ING Vysya bank Aviva life insurance HDFC standard life Met life

Source: - Hindu Business Line, January 08, 2007 Brokers: Now a days different financial institution are selling insurance. These financial institutions are known as brokers. They are taking some

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underwriting charges from the insurance companies to sell their insurance products. 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. Such as- Bajaj Allianz tied up with Maruti Udyog and Ford for auto insurance and Tata AIG life has tied up with Tata tea, khaitans Williamson major and bridge foundation for selling rural policies. Internet: In this technological world internet is also a channel of selling insurance. This can be as direct marketing.

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10. Effective marketing strategies

Now the Indian consumer is knowledgeable and sensitive. Consumers are increasingly more aware and are actively managing their financial affairs. People are increasingly looking not just at products, but at integrated financial solutions that can offer stability of returns along with total protection. In view of this, the insurance managers need to understand more about the details that go into the introduction of insurance products to make it attractive in this competitive market. So now days an insurance manager requires leadership, commitment, creativity, and flexibility. "Every family in every village in the country should feel safe and secure". This vision alone will help to bring the new ideas to the insurance manager. Financial, marketing and human resource polices of the corporations influence the unit mangers to make decisions. Performance of insurance company depends on the effectiveness of such policies. Insurance corporations formulate and revise these policies from time to time to ensure that the performance of the managers is best for the organization. In the competitive market, insurance companies are being forced to adopt a strictly professional approach in marketing. The insurance companies face the challenge of changing the uninspiring public image of the industry. Some of the important marketing elements are Marketing mix. The importance of relationship. Positioning. Value addition. Segmentation.

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Branding. Insuring service quality. Effective pricing. Customer satisfaction research.

The growth of insurance sector is governed largely by factors external to it. The following factors influence the market and demand of product Government policies. Growth in population. Changing age profile. Income wise distribution of the population. Level of insurance awareness. The pricing of the policies. The economic climate of the country. The aversion to risk. Social and political features of the country. Growth scenario in the world.

Different companies adopt different approaches in their marketing strategies. One approach is focus upon product quality which can give confidence in the mind of customers that they are offered by best featured products. And other approach is focusing on customers needs, which involve a heavy investment in developing relationships with policyholders. Under this approach customer can expect a range of products and service offered to him. Third approach is market segmentation under which the population can be divided into several homogeneous products and groups, the effort should be tie clients to the company by customized combination of coverage, easy payment plans, risk management advice, and convenient and quick claim handling. An insurance product can be classified in three phases:

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Core product: In insurance industry the core product is the policy that provides protection to the customers. Expected product: Because of competition customers start to expect more from an insurance product. Then insurance companies provide some tangible attributes in their product to differentiate from competitors, such as Brand Some additional features in existing product By providing instruction manual with the policy.

Augmented product: An insurance company can provide different types of services to differentiate their products Post sales services. Branches in different places for customers. Customer complaint management. Payment option convenient to customers.

The entry of private players and their foreign partners has given domestic players a tough time, because the opening up of the sector has not brought in only foreign players, but also professional techniques and technologies. The present scene in India is such that everyone is trying to put in the best efforts. There are marketing strategies more for survival than growth. But the most important gift of privatization is the introduction of customer-oriented services. Utmost care is being taken to maximize customer satisfaction.

Success of an insurance company depends on four important functions: Identification of markets: Identification of markets means need to understand the trends in culture and businesses constantly, through conducting research and analysis. Insurance companies can take this job on their own or

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assign it to an external agency. Relying on an external agency can be risky due to the questionable loyalty of the agents. Assessment of risks (of the insured and the insurance corporation) and estimation of losses: Efficiency of actuaries and assessors of the insurance policies in fixing premiums and settling claims is foremost an important area for achieving overall efficiency in operations. The quality of assessing the risk and estimation of losses has the largest claim on the performance of an insurance company. Well trained, experienced and expert hands are needed for the operations. Penetration into and exploitation of markets: Market penetration or exploitation of a company can be identified with the growth in number of policies in each type of insurance, growth rate in earnings or turnover, companys market share, increase in number of branches and divisions etc. Efforts of the company as a whole and that of the divisions and branches are assessed to measure the effectiveness. Control over investment and operating costs: Control over resources such as men, machines, and materials at each level of the organization provides measures of efficiency of a unit as well as the organization. Investment control and expense control are dealt separately and the effectiveness of managements decisions at various levels is to be assessed separately To find best prospects: Allocating marketing strategies against market potential. Estimating potential for specific products within local markets. Identifying high opportunity areas. Measuring agency performance relative to market potential. Optimizing your agency network against market potential.

Attributes to develop marketing strategies: 50

 held.

Channel data: - Useful to know future buying preferences, learning about products and purchase channels. Consumer attitudes. Consumption data: - Useful to evaluate annual premiums, number of annuities owned, value of annuities, and with which company the current policy is

Effective strategies for insurance agents: Learn how to construct a mental image for success. Learn how to find a proper perspective and how to turn off all the signals that cause people not to buy from you. Learn how to get and set more appointments. Learn how to convert a new lead into sales. Learn how to act when you meet a client for the first time. Learn how the order in which you explain the types of policies can double your income. Take Easy steps to avoid delays in issuing policies.

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11. Competitors of MAX-NEWYORK life insurance

ICICI prudential: ICICI prudential insurance is a joint venture of ICICI bank and prudential plc a leading financial service group in the UK. Total capital stands for Rs. 37.72 billion, with ICICI Bank holding a stake of 74% and Prudential plc holding 26%. ICICI begin their operations in December 2000 after receiving approval from IRDA. Now ICICI prudential is having over 1000 offices, over 270000 advisors and 21bancassurance partners. ICICI Prudential was the first life insurer in India to receive a National Insurer Financial Strength rating of AAA from Fitch ratings. ICICI prudential is working on the base of five core values Integrity Customer first Boundary less Ownership Passion

Key features: Understanding the needs of customers and offering them superior products and service. Leveraging technology to service customers quickly, efficiently and conveniently. Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to policyholders.

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Providing an enabling environment to foster growth and learning for employees.

HDFC standard life insurance: HDFC Standard Life Insurance Company Ltd. is one of India's leading private insurance companies. It is a joint venture of Housing Development Finance Corporation Limited, India's leading housing finance institution and a Group Company of the Standard Life in UK. HDFC as on March 31, 2007 holds 81.9 per cent of equity venture. Gross premium income of the HDFC for the year ending March 31, 2007 was Rs. 2, 856 crores and new business premium income was Rs. 1,624 crores. The company has covered over 8, 77,000 lives year ending March 31, 2007. HDFC standard is having 1000 advisors in 11 towns. Key features: Creating corporate agents through HDFC bank in India. Creating agents to provide total financial consultancy. Introducing low cost group schemes for companies and NGOs.

Reliance life insurance: Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the Reliance - Anil Dhirubhai Ambani Group. Reliance Capital is one of Indias leading private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital has interests in asset management and mutual funds, stock broking, life and general insurance, proprietary investments, private equity and other activities in financial services. Reliance Capital Limited (RCL) is a Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India under section 45-IA of the Reserve Bank of India Act, 1934. Aviva life insurance: Aviva is UKs largest and the worlds fifth largest insurance Group. It is one of the leading providers of life and pensions products to Europe and has substantial businesses elsewhere around the world. Aviva has a joint venture of Dabur, one of India's oldest, and largest Group of companies. And 53

country's leading producer of traditional healthcare products. In accordance with the government regulations Aviva holds a 26 per cent stake in the joint venture and the Dabur group holds the balance 74 per cent share. Aviva has 193 Branches in India (including rural branches) supporting its distribution network. Through its Banc assurance partner locations, Aviva products are available in more than 2,795 locations across India. Aviva has a sales force of over 30000 financial planning advisors. Key features: Through the Financial Health Check (FHC) Avivas sales force has been able to establish its credibility in the market. The FHC is a free service administered by the FPAs for a need-based analysis of the customers long-term savings and insurance needs. Depending on the life stage and earnings of the customer, the FHC assesses and recommends the right insurance product for them.

Introduced the concept of Banc assurance in India. Products to provide customers flexibility, transparency and value for money. Differentiation in fund management operations.

MetLife insurance: MetLife India Insurance Company Limited is an affiliate of MetLife, Inc. and was incorporated as a joint venture between MetLife International Holdings, Inc.and The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and other private investors. MetLife is one of the fastest growing life insurance companies in the country. It offers a range of innovative products to individuals and group customers at more than 600 locations through its bank partners and company-owned offices. MetLife has more than 32,000 Financial Advisors. It has approximately 70 million customers all over world. MetLife is working on the base of six core values Innovation 54

Long term relationship Customer centered and result focused vision Creating high performance organization Working with integrity, fairness and financial prudence Partnering with internal and external customers

Max New York life insurance: Max New York Life Insurance Company Ltd. is a joint venture between New York Life, a Fortune 100 company and Max India Limited, one of India's leading multi-business corporations The Company's paid up capital is Rs. 907.4 crore. Max New York life is working on the base of six core values Excellence, Honesty, Knowledge, Caring, Integrity

The Company practices a lot of importance on its selection process of insurance advisors which comprises four stages - screening, psychometric test, career seminar and final interview. 337 agent advisors have qualified for the Million Dollar Round Table (MDRT) membership in 2007 and Max New York Life has moved up to 21st rank in MDRT global list. Key features: Max New York Life has adopted prudent financial practices to ensure safety of policyholder's funds. Investing significantly in its training programme and each agent is trained for 152 hours as opposed to the mandatory 100 hours stipulated by the IRDA before beginning to sell in the marketplace. Using a five-pronged strategy to pursue alternative channels of distribution which include the franchisee model, rural business, direct sales force involving 55

group insurance and telemarketing opportunities, banc assurance and corporate alliances. Bharti Axa life insurance: Bharti Axa life insurance is a joint venture between Bharti, one of Indias leading business groups with interests in telecom, agri business and retail, and Axa world leader in financial protection and wealth management. The joint venture company has a 74% stake from Bharti and 26% stake of Axa. The company started its operations in December 2006. Now company is having over 5200 employees across over 12 states in the country. Company is working on the base of five core values Professionalism Innovation Team Spirit Pragmatism Integrity

Key features: growth. Leveraging Bharti's local knowledge, infrastructure and customer base. Delivering high levels of shareholder return. Building long term value with business partners by enhancing the proposition to their customers. Retaining the best talent in India. Using multi-distribution, multi product platform techniques. Adapting AXA's best practices as a sound platform for profitable

Tata AIG life insurance: Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint venture company of the Tata Group and American International Group, Inc. (AIG). The Tata Group holds 74 per cent stake in the insurance venture with AIG holding the balance 26 percent. Tata AIG Life provides insurance solutions

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to individuals and corporate. Tata AIG Life Insurance Company started to operate its business in India on April 1, 2001. Tata AIG is having 3000 advisors all over India.

Key features: Establishing direct mailers; call-centers in 60 centers. Creating awareness workshops in housing societies. 15-day trial period with refund, premium payment through credit card.

Bajaj Allianz life insurance: Bajaj Allianz life insurance company ltd. Is a joint venture of Allianz AG, one of the worlds largest insurance companies and Bajaj auto, one of the biggest two and three wheeler manufacturing companies in the world. Company is having over 440000 satisfied customers in India. Company is having 550 branches across the country and over 60000 advisors. Key features: Tying up with seven regional rural banks sponsored by Syndicate Bank to tap the rural market. Introducing micro-insurance products and coming out with a new capital guarantee product. Expanding its agency force from 1.60 lakh to 2 lakh and the branch network will also be increased from 900 to 1400. ING Vysya life insurance: ING Vysya Life Insurance Company Limited a part of the ING group the worlds largest financial services provider entered in the private life insurance industry in India in September 2001.ING Vysya Life is currently present in 246 cities and has a network of over 300 branches, staffed by 7,000

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employees and over 51,000 advisors, serving over 5.5 lakh customers. ING Vysya Life has a diversified distribution channels,. While Tied Agency remains the strongest channel, the Alternate Channels business within ING Vysya Life is one of the fastest growing distribution channels. ING Vysya Life has strengthened its position as the unparallel leader in the life insurance industry in cooperative banks tie ups. The company currently has tie ups with 130 cooperative banks across the country. The Alternate Channels division has Banc assurance, ING Vysya Bank, Corporate Agents and SMINCE. ING Vysya is working on the base of five core values Professionalism Entrepreneurial Trustworthy Approachable Caring

Birla sun life insurance: Birla Sun Life Insurance Company Limited (BSLI) is a joint venture between the Aditya Birla Group and the Sun Life Financial Services of Canada. It started operations in March 2001 after receiving its registration license from IRDA in January 2001. Company is having more than 45 branches across India. Key features: Focus on unit linked insurance products supported with protection products to maintain leadership in product innovation. Use of multi distribution channels- Direct Sales Force, Alternate Channels and offering convenient channels of purchase to customers. Web-enabled IT systems for superior customer services and issuing policies on the internet. High degree of transparency in all business practices and procedures. Working on operational Business Continuity Plan. 58

Market share of different insurance companies:

ICICI Prudential HDFC Standard SBI Life Bajaj Allianz Aviva life insurance MetLife insurance Reliance life insurance Birla sun life insurance Max new York life insurance Bharti AXA life insurance Tata AIG ING Vysya Kotak Mahindra Source: - www.irdaindia.org

9.1% 2.4% 3.0% 4.2% 1.3% 0.6% 1.1% 1.0% 2.3% 0.1% 1.6% 0.7% 0.9%

Growth in premiums of different insurance companies:-

Companies ICICI Prudential HDFC Standard SBI Life Bajaj Allianz Aviva life insurance MetLife insurance Reliance life

Premium up to oct 07 (Rs.mill.) 31831.8 10675.7 14717.4 26498.1 4586.8 2756.0 8571.2

Premium up to oct 06 (Rs.mill.) 20808.5 6595.7 8142.4 15208.2 3464.2 1162.7 2803.7

Growth % 53 61.9 80.8 74.2 32.4 137.0 205.7

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insurance Birla sun life insurance Max new York life insurance Bharti AXA life insurance Tata AIG ING Vysya Kotak Mahindra

7595.4 6942.0 258.7 4413.0 3047.7 3476.6

3844.7 3720.4 1.1 3264.8 2086.7 2172.6

97.6 86.6 22907.8 35.2 46.1 60.0

12. Comparison of ULIP products of different insurance companies

ICICI Prudential

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Fund options- growth fund, balanced fund, income fund, and preserver. allocation to equities- upto 100% in growth fund, upto 40% in balanced fund, nil in income fund, 50% in preserver. minimum premium- 20,000. min/max age at entry- upto 65 years. sum assured- annual premium*term/2. fund management charges- 1.5% in growth fund, 1.0% in balanced fund, .75% in income and preserver fund. fixed monthly expenses- 60rs. partial withdrawals- above one partial withdrawal 100 rs. charge per withdrawal. charges on top ups- 1%. switching charges- above 4 switches in a year 100 rs. Per switching.

Birla Sun Life Insurance

fund options- enhancer fund, builder fund, protector fund. allocation to equities- maximum 35% in enhancer fund, maximum 20% in builder fund, maximum 10% in protector fund. minimum premium- 20,000 rs. min/max age at entry- 30 days to 60 years. sum assured- face amount + policy fund. fund management charges- 1% for all the fund options. fixed monthly expenses- 22 rs.+ annual charges as applicable. partial withdrawals- 2 free partial withdrawals in a year. charges on top ups- 2%. switching charges- 2 free switches in a year, and 100 rs. Per switching.

HDFC Standard Life Insurance

fund options- growth fund, balanced fund, defensive fund, secure fund, liquid fund. allocation to equities- 100% in growth fund, 30-60% in balanced fund, 15-30% in defensive fund, 0% in secure and liquid fund. minimum premium- 10,000. min/max age at entry- 18- 65 years.

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sum assured- annual premium*term/2, to 40 times the regular premium amount. fund management charges- .80%. fixed monthly expenses- 20 rs. partial withdrawals allowed- above 6 partial withdrawals 250 rs. per withdrawal. charges on top ups- 2.5% for initial 2 years, after 1%. switching charges- 24 free switching and then 100 rs. per switching.

SBI Life Insurance

fund options- equity fund, bond fund, growth fund, balanced fund. allocation to equities- upto 100% in equity fund, upto 20% in bond fund, 40 - 100% in growth fund, 40 60% in balanced fund. minimum premium- 24,000. min/max age at entry- 7 65 years. sum assured- 5 50 times the regular premium amount. fund management charges- 1.5% for equity fund, 1.35% for growth fund, 1.25% for balanced fund, 1% for bond fund. fixed monthly expenses- 60 rs. partial withdrawals allowed- above 4 partial withdrawals 100 rs. per withdrawals. charges on top ups- 1%. switching charges- above 4 switching 100 rs. per switching. switching charges- above 2 switching per year 500 rs. Per switching.

Reliance Life Insurance fund options- equity fund, growth fund, balanced fund, capital secure fund. allocation to equities- upto 100% in equity fund, upto 40% in growth fund, upto 20% in balanced fund, 0% in capital secure fund. minimum premium- 10,000.

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min/max age at entry- 30 days to 65 years. sum assured- for age of 12 years 5 times, above 12 years 5 times to unlimited. fund management charges- 1.75% in equity and growth fund, 1.5% in capital secure fund. fixed monthly expenses- 40 rs. partial withdrawals allowed- rs. 100 for every withdrawal. charges on top ups- 2%. switching charges- above 1 switching 100 rs. Per switching.

Insurer

Market view

Product focus

Distribution strategy

Others

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ICICI Prudential

Market growth at 60%CAGR in medium term, target to maintain share at 30% in private segment.

Pension and healthy products likely to grow given aging population and increasing life expectancy. Product awareness is slightly behind LIC despite a significant time disadvantage; health could comprise 3 5% of product mix in 5 years.

Significantly 40% from non agency force, expanding reach to non metro areas.

Significant requirement for maintain share in a high growth market, both partners willing to contribute,

diversified with capital

HDFC Standard life insurance

Expect high double digit market

Focus on regular premium products and

Prefer own offices versus franchisees,

Breakeven not necessarily in next 18

64

growth over next few years, steady state not expected

higher persistency levels, group focus given flexibility in equity investment, competitive versus mutual funds for longer tenure products given lower amc charges Most products homogeneous across players, not much price differentiation, ULIPsales unlikely to be affected by recent regulations, not much threat from mutual

higher focus on training agents rather than hard sell, rural focus required but obstacles include lack of bank infrastructure.

months, it would require capital even if FDI were raised to 49%.

Bajaj Allianz life insurance

Current industry growth sustainable for next 7 10 years, target 10% market share in next 5 years

More focus on Growth and smaller towns, market share greater emphasis on agency force expansion. oriented strategy, detarrifing would hit non life segment adversely.

funds. Birla sun life Target to be top Currently only insurance in 5 years unit linked products sold but group linked products are focus area 65

Agent productivity is an issue given their part time nature, target is 130

It believes some marginal players could br bought out.

for development.

branches all over India, also will leverage on groups products distribution strengths.

13. Data Analysis:

Primary data has been collected by the survey of branch and agency manager of different insurance companies in Udaipur city sample size for this research is 15.

66

Recruitment of advisors:- In insurance industry advisors play most important

role, and these advisors are recruited through different ways. Mainly four ways for recruiting the advisors are1. 2. 3. 4. Through personal references. Through advertisements. Through walk in interviews. Through placement agencies.

Recruitment Personal reference

Response yes no Total

Frequency 13 2 15

Percent 87.0 13.0 100.0

14 12 10 8 6 4 2 0 Frequency yes no

Recruitment Advertisement

67

Response yes no Total

Frequency 5 10 15

Percent 33.0 67.0 100.0

10 8 6 4 2 0 Frequency yes no

Recruitment Interviews
Response yes no Total Frequency 12 3 15 Percent 80 20 100.0

68

12 10 8 6 4 2 0 Frequency yes no

Recruitment Placement agencies

Response no Frequency 15 Percent 100.0

15

10 no 5

0 Frequency

69

Recuritement of advisors

16 2

14

12 10

No. of Insurance companies

10

8 13 6 12

15 no yes

4 5 2 0

personal references

adv ertisements

walk in interv iews

placement agencies.

Method of Recuritment

87% of the companies are recruiting their advisors through personal reference and 80% through walk in interviews, 30% of the companies are recruiting their advisors through advertisement also, but none company is recruiting their advisors through placement agencies.

70

 Making advisors active: To get efficient work from their advisors companies do some practices to make them active. some practices are1. 2. 3. 4. By increasing incentives. By offering higher channel position. By awarding them non cash prizes. By giving them training session.

Active Incentives
Response yes no Total
12 10 8 6 4 2 0 Frequency yes no

Frequency 3 12 15

Percent 20.0 80.0 100.0

Active Higher channel position

Response yes no Total Frequency 3 12 15 Percent 20.0 80.0 100.0

71

12 10 8 6 4 2 0 Frequency yes no

Active Non cash prizes

Response yes no Total Frequency 6 9 15 Percent 40.0 60.0 100.0

10 8 6 4 2 0 Frequency yes no

72

Active Training session

Response yes no Total Frequency 8 7 15 Percent 53.33 46.66 100.0

8 7.8 7.6 7.4 7.2 7 6.8 6.6 6.4

yes no

Frequency

16

14

12 9 10 12 12

no yes

No. of Insurance Companies

6 8 6 2 3 3

increasing incentives

offering higher channel position

awarding them non cash prizes

giving them training session

73 Methods of making advisor active

 53.33% of the companies are giving training session and 40% of the companies awarding non cash prizes to make their advisors active, 20% of companies are increasing incentives and offering higher channel position to make their advisors active.

Type of products: Different insurance companies are having different

categories of insurance products. Some product categories are1. 2. 3. 4. Term insurance products. Unit linked products. Money back products. Endowment products.

Products Term insurance

Response yes no Total Frequency 3 12 15 Percent 20.0 80.0 100.0

74

12 10 8 6 4 2 0 Frequency yes no

Products Unit linked

Response yes no Total Frequency 14 1 15 Percent 93.33 6.66 100.0

14 12 10 8 6 4 2 0 Frequency yes no

Products Money back

75

Response yes no Total

Frequency 1 14 15

Percent 6.66 93.33 100.0

14 12 10 8 6 4 2 0 Frequency yes no

Products Endowment
Response yes no Total
14 12 10 8 6 4 2 0 Frequency yes no

Frequency 2 13 15

Percent 13.33 86.66 100.0

76

16 1 14 12 10

12 14 14

No. of Insurance C o mpanies

13

8 6 4 2 0 3

No yes

term insurance

unit link

money back

endowment

T ype o f P ro duct

93.33% companies are promoting their unit linked products and some companies are promoting rest of the products including unit linked products.

Basis of product deployment: - All insurance companies are deploying their

products in various categories. Some of the tactics are-

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1. 2. 3. 4.

Profit oriented. On customers need and demand. On channel feedback from market. By adding some additional benefits in current products.

Product deployment Profit oriented

Response yes no Total Frequency 3 12 15 Percent 20.0 80.0 100.0

12 10 8 6 4 2 0 Frequency yes no

Product deployment Customers need

Response yes no Total Frequency 11 4 15 Percent 73.33 24.66 100.0

78

12 10 8 6 4 2 0 Frequency yes no

Product deployment Market feedback

Response yes no Total

Frequency 2 13 15

Percent 13.33 86.66 100.0

14 12 10 8 6 4 2 0 Frequency yes no

79

Product deployment Additional benefits

Response yes no Total Frequency 4 11 15 Percent 26.66 73.33 100.0

12 10 8 6 4 2 0 Frequency yes no

16

14

12

10

12

11 13 No yes 11

No. of Insurance Com panies

4 4 2

Profit oriented

On customers need and demand

On channel feedback from By adding some additional market benefits in current products

Basis of Product deloym ent

73.33% companies are deploying their products based on the customers need and demand.

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Differentiation strategies:
1. 2. 3. 4.

To make their products different from their

competitors companies are using some strategies which areBy advertisement and promotional activities. By pricing of the product. Based on the deployment of the funds. By providing better service quality.

Differentiation promotional activities

Response yes no Total Frequency 3 12 15 Percent 20.0 80.0 100.0

12 10 8 6 4 2 0 Frequency yes no

81

Differentiation pricing
Response yes no Total
8 7.8 7.6 7.4 7.2 7 6.8 6.6 6.4

Frequency 7 8 15

Percent 46.66 53.33 100.0

yes no

Frequency

Differentiation deployment of funds

Response yes no Total Frequency 5 10 15 Percent 33.33 66.66 100.0

82

10 8 6 4 2 0 Frequency yes no

Differentiation service
Response yes no Total Frequency 9 6 27 Percent 60.0 40.0 100.0

10 8 6 4 2
12 16

yes no
6 8

14

0
10

Frequency
12

10

No. of Insurance Companies

no yes

6 9 4 7 5 2 3

advertisement and promotional activities

pricing of the product

83

deployment of the funds.

providing better service quality

Differentiation Strategies

60% of the companies are giving better service quality and 46.66% better pricing to differentiate their products from their competitors.

84

Mode of interaction: There are different types of way to interact with customers.
Some of the important ways are1. 2. 3. 4. Direct marketing. By creating database (telephonic contact). Through advertisement. Through on line contacts.

Mode of interaction Direct

Response yes no Total Frequency 9 6 15 Percent 60.0 40.0 100.0

10 8 6 4 2 0 Frequency yes no

Mode of interaction Telephone

85

Response yes no Total

8 7.8 7.6 7.4 7.2 7 6.8 6.6 6.4

Frequency 8 7 15

Percent 53.33 46.66 100.0

yes no

Frequency

Mode of interaction Advertisement

Response yes no Total Frequency 1 14 15 Percent 6.66 93.33 100.0

86

14 12 10 8 6 4 2 0 Frequency yes no

Mode of interaction online contacts

Response yes no Total
16

Frequency 1 14 15

Percent 6.66 93.33 100.0

14

14 12 10 8 6

12

10 14 14

yes no

No. of 4 In s u ra n c e 8 2 C o m p 0 n ie s a
6 9 4

no

Frequency
8

yes

2 1 0 1

D irec t m ark eting c reating databas e advertis em ent. on line c on tac ts (telephonic c ontac t

87 M o d e o f In te ra c tio n

 60% of the companies are interacting with customers through direct

marketing and 53.33% by telephonic contacts (creating database).

88

Strategy to compete in market:

1. 2. 3. 4. Better service quality. Change in pricing of products.

Most common strategies to compete in

the market for insurance companies are-

By increasing periodicity of interaction with advisors and customers. By providing extra benefits to advisors and customers.

Strategies Service
Response yes no Frequency 12 3 Percent 80.0 20.0

Total

15

100.0

12 10 8 6 4 2 0 Frequency yes no

Strategies Pricing
89

Response yes no Total

Frequency 2 13 15

Percent 13.33 86.66 100.0

14 12 10 8 6 4 2 0 Frequency yes no

Strategies Interaction
Response yes Frequency 4 Percent 26.66

90

no Total

11 15

73.33 100.0

12 10 8 6 4 2 0 Frequency yes no

Strategies Extra benefits

Response yes no Total Frequency 2 13 15 Percent 13.33 86.66 100.0

91

14 12 10 8 6 4 2 0 Frequency yes no

16

14

12

10

11 13 13 no

No. of Insurance Companies

8 12 yes

4 4 2 0 2

Better service quality

Change in pricing of products

interaction

extra benefits

Strategies used to Compete

92

 60% of the companies are giving better service quality and 46.66% better pricing to differentiate their products from their competitors.

14. Conclusion
93

 Insurance companies are recruiting their advisors mainly through personal reference, through advertisement, and through walk in interviews. None of the company is recruiting their advisors through placement agencies. Those advisors who are recruited through personal references need more training session and company has to put effort to make them active. Most of the companies are giving training session to advisors to make them active. Only one or two companies are providing higher channel position and increasing incentives to make them active.
Insurance companies are deploying their products mostly based on

customer needs and demands. Insurance companies are not doing enough market researches to know the potential of the market. Most of the insurance companies are differentiating themselves from the competitors by providing better service quality. Some companies are differentiating themselves providing better pricing of the product. Insurance companies have forgotten their traditional products. Companies are totally concentrating on selling ULIP products.

15. Recommendations
94

 Insurance

companies should start recruiting advisors through placement agencies. By practicing this companies will get more capable advisors who can work efficiently.

Insurance companies should also promote the term and endowment insurance products including ULIP products. Because these are basic insurance products. Promote products as life insurance products not an as investment products. Insurance companies should use on line contacts for customer interaction. Insurance companies should more focus on advertisement and promotion activities for differentiate from competitors. Insurance companies should increase incentive for making advisor active

16. Questionnaire

95

NameCompanyDesignationContact no.-

1. How long you have been in insurance industry? (a) < 2 years (b) 2-5 years (c) 5-8 years (d) >8 years

2. When did you join your present company? (a) < 2 years (b) 2-5 years (c) 5-8 years (d) >8 years

3. Your designation while joining this company.. . 4. How many advisors do you have? (a) <250 (b) 250-400 (c) 400-550 (d) >550

5. On what basis do you recruit your advisor? (a) Through personal reference (b) Through advertisement (c) Through walk in interviews (d) Through placements agencies 6. How do you make them active? (a)By increasing incentives (b)By offering higher channel position (c)By awarding non-cash prizes (d)By giving training session

96

7. How many MBAs do you have in your agency? (a) None (b) 1-3 (c) 4-6 (d) more than 6

8. On what products you are stressing more? (a) Term insurance (b) Unit linked products (c) Money back products (d) Endowment products 9. What is the basis of your product deployment? (a) Profit oriented (b) On customers need and demand (c) On channel feedback from market (d) By adding some additional benefits in current product 10. How do you differentiate your product from your competitors? (a) By advertising and promotional activities (b) By pricing of the product (c) Based on the deployment of funds (c) By providing better service quality 11. Your mode of interaction with customers. (a) Direct marketing (b) By telephonic contacts (creating database) (c) Through advertisement (d) Through online contacts 12. Which kind of strategies should an insurance company use to compete in the market (in your view)? (a) Better service quality (b) Accordingly change in the pricing of product

97

(c) By increasing periodicity of interaction with advisors and customers (d) By providing extra benefits to advisors and customer 13. What is average total premium collection in your branch (in a month) (a) <2 Cr. (b) 2-4 Cr. (c) 4-5 Cr. (d) >5 Cr.

14. Other useful activities which you do in agency (if any, please mention) ... ... ... 15. What are your future plans (please define). .. ..

17. References
Books Insurance in India Magazines Business world News papers The Hindu Internet IRDA website

98

Insurance distribution (ICFAI Publications) Insurance industry (ICFAI Publications)

Magazines on investment

Business Line

Google search

Economic Times

Websites of different insurance companies

99