A SUMMER TRAINING REPORT aviva life insurnace co. ltd. SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF BACHELOR OF BUSINESS ADMINISTRATION (BBA) jagannath university, jaipur CHANNEL distribution OF aviva life INSURANCE CO. LTD. TRAINING SUPERVISORSUBMITTED BY Branch Manager Enrollment No. SESSION 2007-2010 GURU JAMBHESHWAR UNIVERSITY HISAR – 125001 ACKNOWLEDGEMENT First of all I would like to thank the Management at Aviva Life Insurance Co. for giving me the opportunity to do my two-month project training in their esteemed organization.
I am highly obliged to (Sales Manager) for granting me to undertake my training at Netaji Subhash Palace. I express my thanks to all Sales Managers under whose able guidance and direction, I was able to give shape to my training. Their constant review and excellent suggestions throughout the project are highly commendable. My heartfelt thanks go to all the executives who helped me gain knowledge about the actual working and the processes involved in various departments. Preface
In today’s competitive and dynamic world, with every business providing the same kind of product or service, only that firm which comes up with an innovative idea can hope to survive in the long -run, by attracting and luring customers. Insurance sure is an upcoming sector but with the privatization of the same, selling insurance products has become tough due to the competition angle attached to it. It is usually said that if you can sell insurance, you can sell anything in the world including garbage. The reason behind this concept is the hesitant and unaware population, who simply run away at the mere mention of its name.
Providing insurance to a huge population such as ours encompassing different strata of society has indeed been a formidable task for the last few decades. WHO statistics put the insurance access in India at around 65 percent. The remaining 35 percent do not have any access at all. Governments in most parts of the world, developed or otherwise, realize the limitations when it comes to providing Insurance per se or its financing aspects. Contents 1. Introduction Overview of Industry as a whole 1 Profile of the organization 12 Problems of the organization 14 Competition Information 15 S. W. O. T Analysis of the Organization 16 . Objective and Methodology Significance Managerial usefulness of the study 18 Objectives Scope of the study 19 Research Methodology 20 3. Conceptual Discussion 23 4. Data analysis and Interpretation 48 5. Findings and Recommendations 58 Annexures Bibliography /References Chapter 1 INTRODUCTION 1. 1OVERVIEW OF INDUSTRY AS WHOLE The insurance sector was opened up for private participation four years ago and FICCI has doing yeoman service to the development of this sector by facilitating exchange of views between the industry, policymakers, and the regulator through the annual conference.
This has provided a forum to take stock of the developments and discuss the future course of action. These annual conferences before and after the reforms in the sector have provided useful inputs to the policy makers and the regulatory body and the FICCI deserves appreciation for the professional manner in which these conferences are organized and should be legitimately proud of the contribution made by it in the growth and development of insurance sector. The reasons that prompted the government to bring in reform in the insurance sector are well known.
While the Public Sector insurance companies made enormous contribution in the spread of awareness about insurance, and expanded the market, it was recognized that their reach was still limited, the range of products offered restricted and the service to the consumer inadequate. It was also felt that the rapid economic growth witnessed in the 90s cannot be sustained without a thriving insurance sector. It was also recognized that India has a vast potential that is waiting to be tapped and this could be achieved when sufficient competition is generated nd it is exposed to the developments in the rest of the world. The insurance sector was, therefore, opened up for private sector participation with provision for limited foreign equity exposure. We have now four years experience of the public and private sector together operation in the market. ORIGIN OF LIFE INSURANCE The concept of insurance probably began in China over five thousand years ago. Others will argue that insurance began slightly later, in Babylonia. In any case, ancient peoples were interested in protecting against loss.
They devised insurance systems to protect the investments underpinning trade efforts, particularly with respect to goods shipped across the seas. It was centuries after the first “insurance policies” were drafted in efforts to aid commerce, that the concept of life insurance took hold in ancient Rome. The ancient Romans believed that anyone who was wrongly buried would become “an unhappy ghost. ” This idea of a “forlorn and shivering spirit in an agony of loneliness” so bothered the Romans that they tended to invest large sums in elaborate burials
Although the belief in the importance of “correct” burial reached through all levels of society, resources did not. Roman society suffered a rather large gap between the rich and the poor. Those on the lower socioeconomic strata, including many soldiers, lacked the requisite resources for a proper Roman burial. These factors led to the creation of burial clubs. Groups of individuals formed and all members were required to regularly donate to a common fund that was used in the event of a member’s death to fund his funeral. A Roman military leader, Marius, created a burial club among his troops in approximately 100 B.
C. and many similar organizations came into being in this era. Eventually, the practice grew to include providing a stipend to the survivors of the deceased. The Roman burial clubs represent the beginning of life insurance as we know it. A group of people enters into a voluntary agreement to pay premiums that are used to provide benefits to any paying member of the group who happens to die. Stripped to its essence, life insurance today, in all of its complexity and with all of its variations, still bears a remarkable resemblance to the burial clubs of ancient Rome.
The idea of the Roman burial club was compelling then. The Roman government was not fond of organizations of any sort forming-perceiving them as potential breeding grounds for challengers to the power structure. The burial clubs, however, were allowed to exist. The sensibility of their plan was obvious even to tyrants. Today we may be more concerned with providing replacement income for the family of the deceased than we are about funerary expenses. We also tend to worry considerably less about whether or not a funeral might produce a forlorn or shivering ghost.
We still do, however, embrace the principle that the financial strength of many, when combined, can produce necessary results for others in difficult times. Life insurance continues today because those underlying principles remain unchanged. We don’t often see ourselves as being akin to Roman legionnaires marching into battle, but those of us who pay our life insurance premiums in an effort to protect ourselves and our family from expense and difficulty do share a common trait with the ancients who invented life insurance in the form of burial clubs. INDUSTRY PROFILE A thriving insurance sector is of vital importance to every modern economy.
Firstly because it encourages the habit of saving, secondly because it provides a safety net to rural and urban enterprises and productive individuals. And perhaps most importantly it generates long- term invisible funds for infrastructure building. The nature of the insurance business is such that the cash inflow of insurance companies is constant while the payout is deferred and contingency related. This characteristic feature of their business makes insurance companies the biggest investors in long-gestation infrastructure development projects in all developed and aspiring nations.
This is the most compelling reason why private sector (and foreign) companies, which will spread the insurance habit in the societal and consumer interest are urgently required in this vital sector of the economy. Opening up of insurance to private sector including foreign participation has resulted into various opportunities and challenges in India. LIFE INSURANCE MARKET The Life Insurance market in India is an underdeveloped market that was only tapped by the state owned LIC till the entry of private insurers. The penetration of life insurance products was 19 percent of the total 400 million of the insurable population.
The state owned LIC sold insurance as a tax instrument, not as a product giving protection. Most customers were under- insured with no flexibility or transparency in the products. With the entry of the private insurers the rules of the game have changed. The 12 private insurers in the life insurance market have already grabbed nearly 9 percent of the market in terms of premium income. The new business premium of the 12 private players has tripled to Rs 1000 crore in 2002- 03 over last year. Meanwhile, with regard to state owned LIC’s new premium business has fallen
Innovative products, smart marketing and aggressive distribution. That’s the triple whammy combination that has enabled fledgling private insurance companies to sign up Indian customers faster than anyone ever expected. Indians, who have always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. The growing popularity of the private insurers is evidenced in other ways. They are coining money in new niches that they have introduced. The state owned companies still dominate segments like endowments and money back policies.
But in the annuity or pension products business, the private insurers have already wrested over 33 percent of the market. And in the popular unit-linked insurance schemes they have a virtual monopoly, with over 90 percent of the customers. The private insurers also seem to be scoring big in other ways- they are persuading people to take out bigger policies. For instance, the average size of a life insurance policy before privatization was around Rs 50,000. That has risen to about Rs 80,000. But the private insurers are ahead in this game and the average size of their policies is around Rs 1. lakh to Rs 1. 2 lakh- way bigger than the industry average. Buoyed by their quicker than expected success, nearly all private insurers are fast- forwarding the second phase of their expansion plans. No doubt the aggressive stance of private insurers is already paying rich dividends. But a rejuvenated LIC is also trying to fight back to woo new customers. INSURANCE TODAY In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R. N. Malhotra, was formed to evaluate the Indian insurance industry and recommend its future direction.
The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial sector. With the setup of Insurance Regulatory Development Authority (IRDA) the reforms started in the Insurance sector. It has became necessary as if we compare our Insurance penetration and per capita premium we are much behind then the rest of the world. The table above gives the statistics for the year 2000. With the expected increase in per capita income to 6% for the next 10 year and with the improvement in the awareness levels the demand for insurance is expected to grow. As per an independent consultancy company, Monitor Group as estimated a growth form Rs. 218 Billion to Rs. 1003 Billion by 2008. The estimations seems achievable as the performance of 13 life Insurance players in India for the year 2002-2003 (up to October, based on the first year premium) is Rs. 66. 683 million being LIC the biggest contributor with Rs. 59,187 million. As of now LIC has 2050 branches in 7 zones with strong team of 5,60,000 agents. IMPACT OF GLOBALISATION While nationalized insurance companies have done a commendable job in extending the volume of the business, opening up insurance sector to private players was a necessity in the context of globalization of financial sector.
If traditional infrastructural and semipublic goods industries such as banking, airlines, telecom, power etc. , have significant private sector presence, continuing a state of monopoly in provision of insurance was indefensible and therefore, the globalization of insurance has been done as discussed earlier. Its impact has to be seen in the form of creating various opportunities and challenges. The introduction of private players in the industry has added colours to the dull industry. The initiatives taken by the private players are very competitive and have given immense competition to the on time monopoly of the market LIC.
Since the advent of the private players in the market the industry has seen new and innovative steps taken by the players in the sector. The new players have improved the service quality of the insurance. As a result LIC down the years have seen the declining in its career. The market share was distributed among the private players. Though LIC still holds 75% of the insurance sector the upcoming nature of these private players are enough to give more competition to LIC in the near future. LIC market share has decreased from 95%(2002-03) to 81% (2004-05).
The following company holds the rest of the market share of the insurance industry. IMPACT OF GLOBALISATION NAME OF THE PLAYER MARKET SHARE (%) LIC 82. 3 ICICI PRUDENTIAL 5. 63 BIRLA SUN LIFE 2. 56 BAJA ALLIANZ 2. 03 SBI LIFE 1. 80 HDFC STANDARD 1. 36 TATA AIG 1. 29 MAX NEW YORK 0. 90 AVIVA 0. 79 OM KOTAK MAHINDRA 0. 51 ING VYASA 0. 37 AMP SANMAR 0. 26 METLIFE 0. 21 1. 2 PROFILE OF THE ORGANIZATION: COMPANY PROFILE Aviva is UK’s largest and the world’s 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.
With a history dating back to 1696, Aviva has a 35 million-customer base worldwide. It has more than ? 332 billion of assets under management. In India, Aviva has a long history dating back to 1834. At the time of nationalisation it was the largest foreign insurer in India in terms of the compensation paid by the Government of India. Aviva was also the first foreign insurance company in India to set up its representative office in 1995. In India, Aviva has a joint venture with Dabur, one of India’s oldest, and largest Group of companies.
A professionally managed company, Dabur is the 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. With a strong sales force of over 12,000 Financial Planning Advisers (FPAs), Aviva has initiated an innovative and differentiated sales approach to the business. Through the “Financial Health Check” (FHC) Aviva’s 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 customer’s 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. Aviva pioneered the concept of Bancassurance in India, and has leveraged its global expertise in Bancassurance successfully in India. Currently, Aviva has Bancassurance tie-ups with ABN Amro Bank, American Express Bank, Canara Bank, Centurion Bank of Punjab, The Lakshmi Vilas Bank Ltd. nd Punjab & Sind Bank, 15 Co-operative Banks in Gujarat, Rajasthan, Jammu & Kashmir, Bihar, West Bengal and Maharashtra and one regional Bank in Sikkim. When Aviva entered the market, most companies were offering traditional life products. Aviva started by offering the more modern Unit Linked and Unitised With Profit products to the customers, creating a unique differentiation. Aviva’s products have been designed in a manner to provide customers flexibility, transparency and value for money. It has been among the first companies to introduce the more modern Unit Linked
Products in the market. Its products include: whole life (Life Long), endowment (Life Saver, Easy Life Plus), and child policy (Young Achiever) single premium (Life Bond and Life Bond Plus), Pension (Pension Plus), Term (Life Shield), fixed term protection plan (Freedom Life Plan) and a tax efficient investment plan with limited premium payment term (LifeBond5). Aviva products are modern and contemporary unitised products that offer unique customer benefits like flexibility to chose cover levels, indexation and partial withdrawals.
Aviva’s Fund management operation is one of its key differentiators. Operating from Mumbai, Aviva has an experienced team of fund managers and the range of fund options includes Unitised With-Profits Fund and four Unit Linked funds: – Protector Fund, Secure Fund, Balanced Fund and Growth Fund. Aviva has 112 Branches in India (including rural branches) supporting its distribution network. Through its Bancassurance partner locations, Aviva products are available in 378 towns and cities across India.
Aviva is also keen to reach out to the underprivileged that have not had access to insurance so far. Through its association with Basix (a micro financial institution) and other NGOs, it has been able to reach the weaker sections of the society and provide life insurance to them. For three consecutive years in 2005, 2006 and 2007, Aviva has had relatively high scores on the parameters of Credibility, Respect, Fairness, Pride and Camaraderie in the survey administered by Grow Talent Company Ltd. along with Great Places to Work® Institute, Inc. and Business World magazine. [pic] WHO IS AVIVA DABUR
A professionally managed company, it is the country’s leading producer of Founded in 1884, Dabur is one of India’s oldest and largest group of companies with consolidated annual turnover in excess of Rs 1,899 crores. Traditional healthcare products. AVIVA Aviva is UK’s largest and the world’s 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. With a history dating back to 1696, Aviva has a 35 million-customer base worldwide. It has more than ? 332 billion of assets under management.
VISION Aviva – where exceeding expectations through innovative solutions is “the” way of life This is the compelling vision that Aviva India has created through the active contribution of its employees. These lines not only define the way we live and work but also serve as a reminder to deliver the best to our customers, shareholders, colleagues, partners & employees at all times. Embedded in this vision are the core values of Integrity, Customer centricity, Passion for winning, Innovation and Empowered team that we have collectively defined and committed to working towards.
PARTNERS [pic] Aviva is committed to helping our customers get ‘Kal par Control’ and make the most out of their lives. It is the constant endeavour to ensure that our customers have easy access to Aviva products and services at all times. Aviva has pioneered bancassurance in the country through its tie-ups with 22 leading private and nationalised Banks in the country. Aviva also focuses on bancassurance worldwide and has a proven track record of successful bancassurance relationships. It has 40 major partnerships with leading banks across the globe.
Aviva is a leading bancassurer in countries such as France, Italy, Spain, Australia and New Zealand. ABN AMRO Bank ABN AMRO is a prominent international bank with European roots and a clear focus on consumer and commercial banking gaining a competitive edge on the chosen markets and client segments. ABN AMRO Bank (India) ventured into the Indian market in 1920 primarily to finance the diamond trading business and evolved by mid 1990’s into a fastest growing retail bank and a well-respected wholesale bank. The Bank is recognized as one of the most successful consumer banking outfits in the county, known for its innovation and aggression.
ABN India consumer banking pioneered the distribution of third party financial products like mutual funds, bonds and life insurance. Aviva’s relationship with ABN India commenced in June 2002 under which the bank introduces its customers to Aviva for insurance and provides access to its affluent customer base across the country through its operations in 21 branches at 14 locations. American Express Bank American Express Company is a diversified worldwide travel and financial services company founded in 1850. It is the world’s largest single card issuer, based on purchase volume generated of nearly 55 million cards worldwide.
Present in India since 1921, American Express provides high quality travel related and financial services in India. Aviva Life Insurance entered into a strategic alliance with American Express for distribution of Life Insurance in June 2002 to offer top-of the line saving-cum-protection plans to Amex bank and card customers. Aviva offers tailor-made investment solutions to the high net worth clients of the Wealth Management channel. The retail card segment is being tapped through outbound calling to the Amex cardholders. The American Express Inbound call center also pitches Aviva products to its callers. The Lakshmi Vilas Bank Ltd
The Lakshmi Vilas Bank Ltd, based out of Karur, is among the top private banks in India. It has 221 branches with a customer base of 1. 2 million, across 10 states. Currently Aviva products are sold across 204 branches of LVB. Canara Bank Canara Bank is one of the largest retail banks in India with 2,513 branches spread across 25 States and 4 Union Territories. The customer base of Canara Bank exceeds 27 million. With a net profit of INR 1110 Crores, deposits of over INR 96,908 Crores, 47389 employees for the year ending Mar 2005, Canara Bank is truly a Bank to be reckoned with for the sheer magnitude of coverage it offers its clients.
Canara Bank has tied up with Aviva as a Corporate Agent for its Life Insurance Products. Aviva products are currently offered in 1030 Canara Bank branches in 103 Cities. Punjab & Sind Bank Punjab & Sind Bank was established in the year 1908. Based on the principles of social commitment to the people, help the farmers, and the weaker sections of the society to raise their standard of living and play a significant role in the development of the country. Even after 96 years of its inception, Punjab & Sind Bank stands committed to honor the high ideals of its founding fathers.
Punjab and Sindh Bank has a network of 759 branches and 132 extension counters all over the country with close to 9,765 employees. 42 per cent of its branches are in the rural and semi urban areas. In line with spirit of liberalisation the Bank has laid special emphasis on International banking, Hire purchase, Leasing, Tele-banking and Credit card facilities. The bank has also started their Rural Development Division, High Tech Agricultural Branches, Specialised Locker Branches, Industrial Finance and SSI branches, besides Housing Finance Branch for the convenience of its customers. Centurion Bank of Punjab
Centurion Bank of Punjab is a new generation private sector bank offering a wide spectrum of retail and corporate banking products and services. It holds leadership positions in retail two-wheeler loans and commercial vehicle loans. It has been among the earliest banks to offer a technology-enabled customer interface that provides easy access and superior customer service. RBI has approved the merger between Centurion Bank and Bank of Punjab effective from October 1st, 2005. The merged entity, named Centurion Bank of Punjab, has a strong nationwide franchise of 241 branches and extension counters and 389 ATMs.
With strengths in the retail, SME and agriculture businesses the bank is well poised to capture the opportunities that exist in the Indian market. The combined bank’s 3,500 employees will continue to provide support and an enhanced banking experience to our customers, as part of a bigger, stronger bank. “Aviva’s key strength is its fund management capabilities with an experience of 30 years in money management. ” EQUITY The much-awaited correction finally materialised in the quarter ended June 2006. The BSE Sensex, which peaked at 12612 levels on 10th May 2006, has corrected to around 10000 levels.
After three years of sustained Bull Run, the recent correction has been a timely reminder that the markets, in the short term, may see downsides too. Compared to the rise in the market, the downtrend has not been very large though it has been quicker than expectations. Even post this 20% or so correction from its peak, the Sensex is up 12. 9% year to date. This much-needed correction has weeded out some of the euphoria and the focus on value is back. Does this correction reflect any change in the key fundamentals of India? We do not think so. The three-year rally was in the first place due to appreciation of India’s sustainable growth story.
The second reason was an improvement in the global liquidity as investor’s appetite for risk iJhansieased. The India growth story remains intact and the GDP growth in the last few quarters is an evidence of this. We expect GDP to grow by over 7% on a sustainable basis and hence India would continue to be an attractive investment destination. The major reason for the correction has been liquidity moving out of the markets. This has been caused by fall in the commodity prices from their peak, rising global interest rates and high crude prices causing worries about inflation and a global meltdown.
With the tightening of global liquidity and reduced risk appetite of investors, there have been outflows from emerging markets including India. Secondly, valuations in India were among the highest in emerging markets and hence witnessed a greater compression. One of the major fears globally is that of a slowing economy in the US and China. India is highly resilient to global meltdowns as private consumption accounts for 62% of our GDP and exports account for only 12% of GDP. With a favourable demographic profile- iJhansieasing working population and improved disposable income in the hands of the consumer, this resilience will only improve.
This coupled with superior growth and demographics will drive flows back to India in the long term. In the short term, the markets could continue to witness volatility as the direction would be determined by global liquidity, progress of monsoons and the quarterly results for June 2006. We believe, for the long-term investor, this correction would provide a good opportunity to participate in the India growth story. However, expectations of returns from equity should be moderate with stock returns tracking earnings growth. FIXED INCOME Is virtuous cycle turning vicious? Inflation has touched one year high of 5. 4%, and INR has touched 2 year low of 46. 04. Aligning with these movements, yield on benchmark 10 year Government Bond also went up to a four year high of 8. 10%. The latest balance of payments numbers for 2005-06 show an overall balance of $15 bn, helped by a less-than-expected deficit on the current account ($10. 6 bn). This was essentially due to strong invisibles (private remittance and net software exports) providing cover for a trade deficit, which was itself moderated by a strong 28% y-o-y growth in exports. Net inflows on the capital account stood at $24. 7 bn with $5. 7 bn coming from net FDI and $12. bn being accounted for by portfolio inflows. Though headline inflation recently has picked up with prices of food and non food articles in the ‘primary goods’ category rising, the government has taken short-term measures in the form of liberalizing imports of wheat and sugar and banning exports of pulses in order to ease the supply situation. Core inflation, that is, excluding the more volatile primary and fuel categories, has picked up a bit in comparison to last year. However it is expected to remain in a manageable range. RBI seems committed to containing inflation and would thus act accordingly.
Recently, RBI chose to iJhansiease rates to manage inflationary expectations and in response to various central banks hiking rates globally. This has led to a few banks raising lending rates in addition to getting reflected in the money and bond markets. GDP growth for 2005-06 came in at a better than expected 8. 4%, propped up by improved agriculture performance. For 2006-07 also, despite inflationary pressures, the GDP is expected to grow at over 7%. Going forward, monetary tightness will weigh on the interest rate outlook and it is expected to remain firm. 3. PROBLEMS OF THE ORGANIZATION Since Aviva Life is a private player in the insurance industry, it has not yet reached break-even. Hence, it has high cost due to which its premiums are high as compared to LIC. • It has to create credibility in the public. • It has to compete with the wide range of products that its competitors offer. • It has to focus towards rural segment also which has a great scope of growth. • It has to decide on the strategies to be adopted which will help to counter competition. • It has to increase its no. of branches and also enhance its network of agents so that it can compete with LIC. It has to focus on providing effective training to its agents so that the customer base can be increased and moreover customer satisfaction can be ensured. 4. COMPETITION INFORMATION BAJAJ ALLIANZ [pic] Bajaj Allianz is a joint venture between Allianz AG one of the world’s largest insurance companies, and Bajaj Auto, one of the biggest 2 and 3 wheeler manufacturers in the world. Bajaj Allianz is into both life insurance and general insurance. Allianz Group is one of the world’s leading insurers and financial services providers. Founded in 1890 in Berlin, Allianz is now present in over 70 countries with almost 174,000 employees.
Bajaj group is the largest manufacturer of two-wheelers and three-wheelers in India and one of the largest in the world. Today, Bajaj Allianz is one of India’s leading and fastest growing insurance companies. Currently, it has presence in more than 550 locations with over 60,000 Insurance Consultants. BIRLA SUN LIFE INSURANCE [pic] Birla Sun Life Insurance Company Limited is a joint venture between Aditya Birla Group and Sun Life Financial of Canada. Aditya Birla Group is an Indian multinational conglomerate with presence in India, Thailand, Indonesia, Malaysia, Philippines, Egypt, Canada, Australia and China.
Sun Life Assurance, Sun Life Financial’s primary insurance business, is one of the leading insurance companies of the world and ranks amongst the largest international financial services rganizations in the world. The Group has presence in several countries such as Canada, United States, Philippines, Japan, Indonesia, India and Bermuda. ICICI PRUDENTIAL LIFE INSURANCE [pic] ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and Prudential plc, a leading international financial services group headquartered in the United Kingdom.
ICICI was established in 1955 to lend money for industrial development. Today, it has diversified into retail banking and is the largest private bank in the country. Prudential plc was established in 1848 and is presently the largest life insurance company in the UK. ICICI Prudential is curently the No. 1 private life insurer in the country. For the financial year ended March 31, 2005, the company garnered Rs 1584 crore of new business premium for a total sum assured of Rs 13,780 crore and wrote nearly 615,000 policies. ING VYSYA LIFE INSURANCE [pic]
ING Vysya Life Insurance Company Limited is a joint venture between Vysya Bank and ING Group of Holland, the world’s 4th largest financial services group, with presence across 50 countries, and a heritage of over 150 years. ING Vysya Life Insurance Company Private Limited entered the private life insurance industry in India in September 2001. With in a short span of time ING Vysya Life Insurance has registered an impressive growth. The company currently has over 10,000 active advisors working from 75 branches (in 30 cities) across the country and over 2300 employees. KOTAK MAHINDRA OLD MUTUAL LIFE INSURANCE LIMITED pic] Kotak Mahindra Old Mutual Life Insurance Ltd. is a joint venture between Kotak Mahindra Bank Ltd. (KMBL), and Old Mutual plc. Kotak Mahindra is one of India’s leading financial institutions and offers a range of financial services such as commercial banking, stock broking, mutual funds, life insurance, and investment banking. Old Mutual was established more than 150 years ago and offers a diverse range of financial services in South Africa, the United States and the United Kingdom. The company is listed on the London Stock Exchange with a market capitalization and has its headquarters in London.
LIFE INSURANCE CORPORATION OF INDIA (LIC) [pic] Life Insurance Corporation of India (LIC) is an autonomous body authorized to run the life insurance business in India with its Head Office at Mumbai. It has been established by an act of the Parliament and started functioning from 1/9/1956. LIC is the biggest insurance player in the country. Out of the total premium of Rs 3766 crore generated by the insurance industry through group business in the year 2005-06, LIC alone accounted for Rs 3051 crore. In the financial year 2005-06, LIC has grown at 30. 68%.
In respect of number of lives insured, LIC has shown a growth of over 152%. In respect of number of schemes, LIC has a growth of 2%. LIC’s market share in number of individuals covered and number of policies stands at 77% and 81%, respectively. MAX NEW YORK LIFE INSURANCE [pic] Max New York Life Insurance Company Limited is a joint venture between Max India Limited, a multi-business corporate, and New York Life International, a global expert in life insurance. New York Life is a Fortune 100 company that has over 160 years of experience in the life insurance business.
Max India Limited is a multi-business corporate dealing in Clinical Research, IT and Telecom Services, and Specialty Plastic Products businesses. Max New York Life Insurance started its operations in India in 2000. It is the first life insurance company in India to be awarded the IS0 9001:2000 certification. Max New York offers customized products tailored to suit individual’s needs. With its various Products and Riders, there are more than 400 product combinations to choose from. Today, Max New York Life Insurance has a network of 57 offices spread over 37 cities all over India.
METLIFE INDIA INSURANCE [pic] MetLife India Insurance Co. Pvt Ltd is a joint venture between MetLife Group and its Indian partners. The Indian partners include J Bank, Dhanalakshmi Bank, Karnataka Bank, Karvy Consultants, Geojit Securities, Way2Wealth, and Mini Muthoothu. Met Life Group has presence in America and Asia and has an experience of over 137 years in providing financial services. The MetLife companies are the number one life insurer in the U. S. with approximately US $2. 8 trillion of life insurance in force. MetLife serves 88 of the top one hundred FORTUNE 500 companies.
MetLife entered Indian insurance sector in 2001. SBI LIFE INSURANCE [pic] SBI Life Insurance is a joint venture between the State Bank of India and Cardif SA of France. SBI Life Insurance is registered with an authorised capital of Rs 500 crore and a paid up capital of Rs 350 crores. State Bank of India is the largest banking franchise in India. Along with its 7 Associate Banks, SBI Group has a network of over 14,000 branches across the country, the largest in the world. Cardif is a wholly owned subsidiary of BNP Paribas, which is The Euro Zone’s leading Bank.
BNP is one of the oldest foreign banks with a presence in India dating back to 1860. SHRIRAM LIFE INSURANCE [pic] Shriram Life Insurance Company Ltd is a joint venture between the Chennai-based Shriram Group and the South African insurance major Sanlam. The company launched its operations in India in December 2005. Shriram Life has set a target of achieving a premium income of Rs 110 crore during the first year of operations. While focussing largely on the strong network of over 65,000 agents and distribution network of more than 550 branches, Shriram Life is also contemplating bancassurance alliances with couple of banks.
TATA AIG LIFE INSURANCE [pic] Tata AIG Life Insurance Company Limited is a joint venture between Tata Group and American International Group, Inc. (AIG). Tata Group is one of the oldest and leading business groups of India. Tata Group has had a long association with India’s insurance sector having been the largest insurance company in India prior to the nationalisation of insurance. The Late Sir Dorab Tata, was the founder Chairman of New India Assurance Co. Ltd. , a group company incorporated way back in 1919. American International Group, Inc is the leading U.
S. based international insurance and financial services organization and the largest underwriter of commercial and industrial insurance in the United States. AIG has one of the most extensive life insurance networks in the world. 1. 5 SWOT ANALYSIS SWOT Analysis is a tool used for understanding an organization’s strengths, weaknesses, opportunities and threats The SWOT Analysis tool can be used in identifying an organization’s strengths (S) and weaknesses (W), and examining the opportunities (O) and threats (T) it is facing.
The outcome from a SWOT Analysis enables organizations to focus on strengths, minimize weaknesses, address threats, and take the greatest possible advantage of opportunities available. Strengths: ? Our members value the professional designation. ? We have a lower course fee structure than similar programs. ? We provide good customer service. ? Our instructors are highly-regarded in the profession. ? We have a small staff and low overhead. Weaknesses: ? We are slow to make decisions and adapt to changes that affect the profession. ? The professional designation is rarely included as a condition of employment. We are overly dependent on key volunteers who developed and teach our certification courses. ? We do not have the resources to research the market and promote the designation. Opportunities ? A developing market such as the Internet ? Mergers, joint ventures or strategic alliances ? Moving into new market segments that offer improved profits ? A new international market ? A market vacated by an ineffective competitor Threats ? A new competitor in your home market ? Price wars with competitors ? A competitor has a new, innovative product or service ? Competitors have superior access to channels of distribution ?
Taxation is introduced on your product or service CHAPTER 2. 0 research objective and methodology 2. 1significance of the study The project aims to study the various distribution channels, the existing ones and the new areas available to a life insurance company considering their salient features, business potentials and reach in the market is to focus on the available To analyse the areas which can be taken into consideration to cater to the larger area of market, what should be the distribution channel and how can that channel be developed 2. 2managerial usefulness of the study
The study is useful to know the channel distribution of Aviva Life Insurance and to recruit quality agent advisors for the company for providing life Insurance solutions to the customer’s. 2. 3objectives of the study • To understand the various channels of distribution of life insurance. • To study what are the major areas where the company can focus on to develop their sales network • To determine the network which is most suitable to the company and how it can be developed 2. 4scope of the study • Study the various distribution channels, the existing ones and the new areas. evaluating the new areas their limitation and extent. Corporate Agency tie – ups through which the untapped market segments can be targeted 2. 5methodology (1) Data Collection It consists of primary data and secondary data. Primary data was collected by holding “semi- structured and focused individual interviews” of sales Agent, executive, Consultant and Personnel associated with Corporate Direct sales associate. For the primary data Interviewed 35 insurance personnel, out these 15 were Executives including Consultants, Executive (Managerial), and associated Executive from other tied organization. Where as secondary data was obtained by different records, magazines, ewspapers, inter nets and various pamphlets of Reliace Life Insruance. (2) Type of Research The type of research used for our study was an exploratory research, as the objective of the research was to have in depth understanding of the sales agents. Since the research was qualitative, the need for formal and rigid questionnaire was not felt. However I covered a specific list of topics and sub areas. This was done in the form of Open-ended question, where the timing, exact wordings and time allocated to each question area was left at the interviewer’s discretion open structure ensured that inspected facts or attitudes could perused easily. 3) Sample size I have selected sample on the basis of performance of the premium collected by agent at least 25 policies per year. Other has been taken from the branch Manager and Consultant, branch Executives. All are taken randomly. CHAPTER 3. 0 CONCEPTUAL DISCUSSION: The study at Aviva Life insurance company consisted of following two components: •Study of the alternative distribution channels for life insurance. •Development of alternative channels of distribution and appointment of corporate agencies. 3. 1 DISTRIBUTION OF LIFE INSURANCE
There are two basic models upon which the distribution of life insurance works. One is the traditional model and other comprises of some modifications over and above the basic model. TRADITIONAL MODEL The traditional model comprises of distribution of life insurance through individual life advisors. It has been the basic model used before the opening up of the insurance sector and when LIC was the only player in this sector. This has also proven to be the most successful of the distribution channels used until now.
It had the advantage of direct selling wherein the life advisors used to interact directly with the customers. But the major problem with this entire structure was that in a long period of time it resulted out in too many a life advisor in numbers. And keeping a check on the functioning of this many number of life advisors became more and more tedious. This resulted in trying out of other channels of distribution, which would result in the entire structure getting shrunk in terms of the direct follow-ups of the life advisors yet giving a deeper coverage and penetration in the market.
And this was possible only through some basic modifications being made in the traditional model. ALTERNATE MODEL In the alternate model what was done was either the span of control for the Sales Managers was decreased or the penetration in terms of the reach to the people was increased. So, where the SM earlier managed a field force of 15-20 Life Advisors, he may now handle just 4-5 Corporate Agents, who in turn end up with 15-20 Field Executives each. The following are the basic type of the structure that has been introduced so far. 3. 2 THE INSURANCE INTERMEDIARIES
In majority of cases, the prices of the produce or goods manufactured or the services rendered is not dependent on the customer but on the perceived value of the offer. In such cases the role of the intermediary stops with bringing the sellers & the buyers together & influencing the buyer to buy the product on offer. In case of insurance, the prices also depend on details furnished by the buyer, for example, under life & health policies, the person’s age, present state of health, occupation, determine the nature & price of the product. The insurance instrument is unique in another aspect as well.
Insurance transactions are becoming more & more complex & in spite of the details being furnished by the insurer in the policy document, many insured claim that they do not understand the provisions of the contract in the view of their technical nature. In the view of the above, the role of the intermediary gains much importance. The intermediary has obligation towards the insured as well as the insurer. •For the insured, he has to explain the provisions of the contract. He has to guide the client keeping in view his insurance needs. •For the insurer, he has to facilitate getting information about the insured.
Due to above reasons, despite of rapid technological advances the human face of intermediary continues to hold sway in the insurance industry. AGENTS Agents perform the task of retailers; giving customers information about the available choices& helping them make purchase decisions. Agents may be appointed in any place for the purpose of soliciting or procuring insurance business for the company. FUNCTION: The main function, the agent should be expected to perform would include – client identification , marketing, investors’ education & counseling, marketing expansion & quality control of front line agents, collection of premium.
Regulation: In India, the regulation provides that the insurance agent can represent only one life & one non-life insurance company. An agent has to obtain a license from IRDA, which is granted only on the recommendation of the insurer, who proposes to appoint the agent. BROKERS Insurance brokers are organizations who assess the complete insurance heeds of the clients and’ then work out back-to-back policies with insurers to give a complete solution to the client. The’ distribution strategy here is quite different since the brokers will have to access to multiple insurers.
Ultimately, the variety of policies and options and the level of service given by different insurers will have to direct impact on the market share and mind share of the insurer with the broker. WHY USE A BROKER? In the present day economic environment many companies and institutions find themselves unable to optimise insurance related matters with the sole use of their personnel. This happens because of : •The specific nature of insurance terminology and procedure. •Frequent changes affecting the position of insurers. • The complex character of an insurance contract. The supply of increasingly complicated insurance products. •Insufficient knowledge of the insurance market. As a result, modern insurance markets have developed the institution of independent insurance brokers, i. e. highly specialized experts, dedicated to support the clients and their interests before the insurer. TYPES OF BROKERS : There are three types: – •Direct Broker- Licensed to carry on both life as well as general insurance broking direct basis only. •Re-insurance broker- licensed to carry on re-insurance broking only. Composite Brokers-Licensed to carry on both direct as well as re- insurance broking. MAIN FUNCTIONS OF THE BROKERS •Take instructions from their clients. •Execute them in an efficient manner. •Assist in the negotiations of claims. PRINCIPLE TASKS OF A BROKER •Current monitoring of the insurance market, especially the credibility of insurers and the quality of services they render to the clients. • Analysis of available insurance products. •Assistance to the clients regarding the choice between the securities offered by insurance. Commitment on the side of the client in the process of arrangement and conclusion of insurance contracts, especially concerning neg0tiations of the terms and conditions of the Insurance. •Assistance to the client in the handling and settlement of claims. REGULATIONS The insurance broker is expected to playa more professional role than an agent. The IRDA specified professional educational qualifications and experience required of brokers are definitely more stringent than that set out for the agent. Besides the broker have minimum capital norms.
The IRDA has also made it compulsory for the brokers to obtain professional indemnity cover. Finally, IRDA regulations specify a detailed code of conduct for the brokers. CORPORATE AGENTS & DIRECT SALES AGENT (DSA) DSAs provide a very wide reach in India. Some DSAs already distribute financial products such as credit cards, loans & even non-life insurance products. This is a much diversified channel. Each DSA must be evaluated based on its own characteristics. Some are small & target very knowledgeable clients. These are best served through the financial planning techniques.
Some are large & use a mass-market approach in their existing business. These are best served using direct mail or tele-marketing approach. There are some that are hybrid with a small wealthy clientele along with a mass market. It is best for the insurer to segment these markets using appropriate distribution techniques. The products for this channel must again match the distribution technique. If the DSA has a simple clientele, simple straightforward products (return of premium term, single premium term & non- participating endowment with all the simplified Underwriting) are sufficient.
However, more sophisticated-client require the-product range to be wide to match the needs identified during the sales process. The DSAs & the Insurers must view each other with great clarity. Not all DSAs want to or are suitable to distribute Insurance. The payback can be even longer than bankassurance. Therefore the need for commitment & management is greater than in case of bankassurance. This has proven to be a very successful channel for other products but yet to be proven for insurance. This is a very promising channel but will require much time & effort.
NON GOVERNMENT ORGANISATION (NGO) NGOs are non – profit organizations working towards the social goal. Most often this is realized through foreign funding, though domestic funding is also available. The ethos of these organizations is to spread social & financial benefits in areas & groups of population, who do not have access to these benefits. Normally a large NGO will work through several small NGOs & Self Help Groups (SHG) & deliver their service down to the grass root level of the rural society.
To distribute insurance products through these channels, a thorough understanding of the ethos of these organizations and their methods of operation is crucial. The distribution has to happen at the grassroots level of comfort and security in dealing in groups. There will be opinion leaders among these groups who will be the main proponents – followed by the rest of their respective groups. The training and product distribution will have to flow from the NGO to this level and has to be delivered in a customized manner typical of the rural market place.
There is also a need of robust mechanism of premium collections year on year. The rural population normally prefers monthly premium in line with the micro finance repayments. PRODUCTS The adherence to the main philosophy and the ethos of the NGO is crucial and hence customized products within social messages will work best. The products also need to be simple, easy to understand and easy to deliver. Underwriting needs to be limited and simple, so that issue of the policy is not a long affair. The social message of covering the lives of the wage. arners of the rural population is extremely important, along with the continuation of the education of their children in case of a calamity. BANK ASSURANCE With changes in the agency regulations in insurance / banking regulations & emerging of the brokerage models, Banks would now be able to play more proactive role as a distributor of Insurance products. Bank assurance should be one of the priority tie-up areas as a distributing channel for personal lines products. International experience has been that: •It is very easy to synchronize the banking & insurance products. It is a cost effective way to achieve volumes. • It is simple to operate. • Have a large customer base. •Branch name recognition. •Credibility. The banking activity can be broadly classified into 3 areas: •PERSONAL BANKING SEGMENT •ADVANCES ( Personal Loans) SEGMENT • OTHERS (Credit Cards) PERSONAL BANKING SEGMENT It requires extensive marketing effort. Apart from direct selling of insurance products to their customers, the banks can also make available their database for the insurance companies to identify & target the High Net worth Individuals for various personal lines covers.
The customers generally come to the banks for serious business & it is felt that the majority of them would be receptive of the concept of ‘One Stop Shop. ADVANCE SEGMENT It could be treated as a kind of captive business as the marketing effort required would be much lesser, The borrower is compulsorily required to take insurance for the financed assets & given the present low accessibility to insurance products, the borrower could be easily persuaded to take the cover through the bank, He would find it much more convenient to purchase the policy from the bank instead of hunting around for a insurance company’s office or agent.
Here, the foreign banks & new Indian private banks have been aggressively marketing their products over a last few years & have a very strong presence in areas of Home Loans, Vehicle Finance, Consumer Finance & Personal Loans much ahead of even the top public sector banks. Public Sector Banks have not done well in the retail segment. They have mainly been catering to the commercial segment. OTHERS There can be potential customers totaling to anywhere between 1-5 lacs people depending upon the particular bank’s penetration level in this segment.
This is also a high growth segment & is said to be growing at a rate of 25% every year. Currently health & personal accident (PA) are the covers that are mostly sold to this segment, However the possibility of selling other personal lines products to this segment can also be explored. BANK ASSURANCE IN INDIA The industry believes that Bank assurance will be a big thing in India. Banks with billions of customers know about saving & spending patterns & can reach insurance buyers.
Distribution of insurance through banks is growing very fast in Europe where banks sell more than half the total life insurance policies. Malaysia & Singapore have shown how bank assurance can build volume & valve insurance companies. In India, regulators have just allowed our banks to cross sell insurance products to its customers. Our network of 65000 branches serving more than 300 million retail banking customers; would now be technically ready to offer life & non – life products. In the process, banks would be the pivotal medium to lift the abysmally low level of insurance penetration in the country.
Bank assurance distribution in India will be different from that existing in the other countries in the following three ways: Insurance selling in India will be limited to protection type life insurance products or simple endowment policies with minimum accompanying benefits (riders), unlike other western countries where banks use sophisticated technology to tailor policies according to the customers needs. The range of bank branches in India that will be involved in selling insurance products will differ from the slick platform of the west.
Metro & urban branches will cater to well – heel customers & many rural branches offering products to millions belonging to the unorganised & informal sectors. The average size of insurance policies sold through bank counters in India will-generally be small, not the high value private banking type of insurance sales of bank assurance platforms abroad. The average size of savings policies is currently about Rs. 60000 by way of sum assured. Everybody: Banks, Insurers & customers will gain through bank assurance.
The employees will be shaken of the complacence bank assurance will generate large commission earnings which will compensate for declining profits in traditional banking. Insurance companies view bank assurance as a new channel will be cost effective; banks feel they have a competitive edge over other channels due to their proximity to customers, a large database of the existing customers & their image. The global track record of Bank assurance in the global market is not bright and most success is in life insurance and not in general insurance.
The most glittering example of success is France, where 55 % of life insurance is sold through banks, but in other markets bank assurance has failed with distribution of insurance products through bank branches accounting for less than 10 % of the market. Even in India, bank assurance will be more comfortable with life insurance products, which have synergies with things like fixed deposits. But bank assurance is likely to face many hurdles. KEY SUCCESS FACTORS FOR BANK ASSURANCE •Integration at an operational level is critical to the success ofbank assurance relationship. Distribution System: performance peaks if insurance products are sold through bank agents. •Product Designing: tailoring insurance product to the bank’s needs and enhance the sales efficiency. •Sales Approach: a proactive sales approach fuels revenue growth. •Branding Strategy: a positioning close to the bank brand increases customer and employee acceptance. •IT Systems: integrating IT system is necessary to fully realize cross-selling potential. MLM (Multi Level Marketing) Multi-level marketing is system of marketing which puts more emphases upon the recruiting of distributors than on the selling of products.
MLM is very attractive, however, because it sells hope and appears to be outside the mainstream of business as usual. It promises wealth and independence to all. In the insurance sector different MLM’s try to tap up as the corporate agents. But there functioning can be either straight way just in case of a corporate agent or as a MLM wherein the entire chain is used up and the commissions are penetrated and passed on deep within the chain. The structure of the working of the MLM’s can be made according to the specific needs and demand the company to be tied up with.
Unfortunately, no matter what the product, MLM is doomed to produce more failures than successes, For every MLM distributor who makes a decent living or even a decent supplemental income, there are at least ten who do little more than buy products and promotional materials, costing them much more than they will ever earn as an MLM agent. The most successful MLM scheme is Amway. The reason MLM schemes cannot succeed is because MLM marketing is, in essence, a legal scheme. The basic idea is for a sales person to recruit more sales persons.
This is very advantageous to those who own the company and supply the products, especially since the sales persons in MLMs are also customers. But it is puzzling why a sales person would think it is to his or her advantage to increase the number of competing sales persons. HNI (High Net worth Individuals) It basically works on the elite selling model. In the HNI model the insurance companies try to tap the customer segment in the higher echelons of the society so that it can cater to a high average policy size. NEW AREAS TO BE EXPLORED
Presently lot of work is being done to form tie ups with people in different sectors so that they on the basis of their present customer base can help us tap into the -new and the untapped market segments. For this working out the tie-ups are being done in the following segments of the market. APPOINMENT OF CORPORATE AGENCY During the in – house training we explored the following sectors to assess their potential as a Corporate Agency for the distribution life insurance: •Companies engaged in financial services: – 1. Finance, investment and leasing companies Investment/financial 2. Consultants 3.
Charted Accountants/Company secretaries •Share Brokers •Event Management Companies •Builders and Developers •Non Governmental Organizations •Associations and affiliation groups STEPS IN SELECTION OR RESEARCH METHODOLOGY: 1) Choosing a segment 2) Getting a Database 3) Present working model in the segment, customer reaches etc 4) Explaining out our business model. Or else suggesting alternatives to the present business model 5) Getting feedback from the particular segment about the businesses models suggested 6) Trying to figure out if any other alternative can be suggested 4. 0 DATA ANALYSIS AND INTERPRETATION
After the interview of 20- agents and 15- officer I have gathered much Information that can be classified in the following ways i. e. 1) On the basis of Age. |Age 18-25 26-35 36-45 46 –above total | |No of Agents 4 8 5 3 20 | |No. Of Executives | |Or Other 2 8 4 1 15 | pic] Interpretation Analysis of this information make us clear that maximum no of Insurance advisor comes from age group 25-35. It has inference that Maximum agents are matured enough to deal and live in the organization. When I the look age group of officer’s we can find it easily that maximum come from matured and experienced age range i. e. 26-35. It has implication that company is administered by well experience young people. 2) On the basis of Education. Education level HSC Degree PG Professional total | |Degree | |No of Agents 3 10 4 3 20 | |No of Executives 5 5 | |Consultants 1 1 3 5 | |No Others 2 3 5 | |Total 3 13 4 15 35 | [pic] Interpretation I can have many inferences from the above information as follows on the basis of Education. 50% of Agent comes from degree level, 20% from professional degree and rest from others 80% Executive comprises professional degree. 60% Consultant/ manager has professional degree and other from, Degree, and PG. Other executive to whom I met have 60% professional degree.
When I assess total staff (agents with officers) I draw inferences that out of total, approximately 90% staff are graduate and above that. If I exclude Agents then 70% (0ut 0f 15, 10 have professional degree) is professional. It means company is mostly governed by professionals. Note – Professional qualification means MBA/MCA/ BE/CA etc. Out of 35, a person has not given their opinion. 3) Geographical area they covered |Area specific not specific whole city total | |No of agent 4 2 10 16 | [pic] Interpretation
Information from above table states that out of total, maximum (50%) covers whole city of Delhi. 40% covers specific area (means, western, eastern suburban). When I combine this information I can have more specific inferences. As Aviva Life have most dynamic& experience professional young people with different geographical area covers and maximum has to facility to grow business in any area. Working time When I analyzed the question on the basis of timing, maximum agents have their flexible time. But officers and Managers have specific time generally 9am to 8 pm and more th
