A REPORT ON
PRIVATE SECTOR INSURANCE & ITS PROFITABILITY IN INDIA
By SUBHANKAR GOSWAMI 09BS0002419
A REPORT ON
PRIVATE SECTOR INSURANCE & ITS PROFITABILITY IN INDIA
A REPORT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS OF MBA PROGRAM OF THE ICFAI UNIVERSITY, DEHRADUN
FACULTY GUIDE: Dr. JUIN CHOWDHURY IBS BANGALORE
STUDENT NAME: SUBHANKAR GOSWAMI 09BS0002419
DATE OF SUBMISSION: 14th MAY, 2010
DECLARATION I hereby declare that this report on “Private sector insurance & its profitability in India” has
been written and prepared by me, during the academic year 2010 – 2011. This project was prepared under the guidance & supervision of Ms Juin Chowdhury, faculty guide, IBS Bangalore, and Ms Shanthi Yagyanath, distribution manager – chief, IDBI Fortis Life Insurance Co. Ltd., in partial fulfilment of the requirement for the MBA degree course of ICFAI Business School. I also declare that this project is the result of my own efforts, and to the best of my knowledge, a similar work has not been submitted to any other institution for the award of any degree or diploma.
PLACE: Bangalore th
DATE: 12 May, 2010
SUBHANKAR GOSWAMI 09BS0002419
Acknowledgement Abstract Company Profile About the sponsors of IDBI Fortis Life Insurance Co. Ltd The Indian Insurance Industry Indian Insurance : History Indian Insurance : Sector Reform Protection of the interest of policy holders Milestones of the insurance regulations in the 20 century List of Insurance Companies in India List of life insurers List of general insurers List of reinsurers The Insurance Industry – – Market Share The Revenue Gap Rural Insurance : The way Forward Survey analysis & findings Age group Occupation Investment Investment pattern Market share Awareness about IDBI Fortis Limitations of the study Recommendations Annexure Bibliography
th
ACKNOWLEDGEMENT
I owe a great many thanks to a great many people who helped and supported me during the writing of this book. My deepest thanks to my faculty guide, Ms Juin Chowdhury , for guiding and correcting the various documents of mine with utmost attention and care. She has taken enormous pains to go through the project and make rectifications as and when nee ded. My deep sense of gratitude to my industry guide, Ms C Shanthi, manager distribution chief, IDBI Fortis Life Insurance Co Ltd, for her support and guidance. Thanks and appreciation to the helpful people at IDBI Fortis Life Insurance Co Ltd, for thei r support. I express my thanks to all the respondents of my survey, who have disclosed their personal information, which helped the survey result reach a valuable and meaningful conclusion. I would also take this opportunity to thank the faculty members at IBS Bangalore, without whom, this project would have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.
Subhankar Goswami 09BS0002419 IBS Bangalore.
ABSTRACT In India, Insurance is a federal subject. Until 1999, there was no private insurance company in India and the government exercised a complete monopoly. However, in 1999, the government finally opened the gates for the private companies to tap the insurance market. Currently, 2 million people in India (0.2% of the population of 1 billion) are covered under Mediclaim whereas in developed countries like USA, about 75% of the population are covered under some insurance scheme. However, with more & more private companies in the sector, the situation may change soon. This project aims to bring out the tremendous scope on the part of the private insurance companies to tap the vast untapped population & pile up revenues that would completely revolutionize the Indian Insurance Industry. Thus the primary objective of the project is to find out the amalgamated revenues & profits generated by the private sector insurance companies in India, and predict their future scope. The project comprises a mix of both exploratory and descriptive research study. The type of data will be primary & secondary data. The primary data collection has been done through a ‘structured ‘structured questionnaire’, where as, the secondary data collection has been collected from various magazines, newspapers, journals, websites, online reports, published articles & previously conducted researches. The sample size is kept at 200 and the sample consists of a pool of respondents – businessmen, service personnel, professionals & retired individuals. The analysis of the survey report has been done with the help of MS Excel, where the results have been explained with the help of various graphs & pie-charts.
CHAPTER 1 COMPANY PROFILE IDBI Fortis Life Insurance Co Ltd is a joint- venture of IDBI Bank, India’s premier development and commercial bank, Federal Bank, one of India’s leading private sector ba nks and Fortis
Insurance International, a multinational insurance giant based out of Europe. In this venture, IDBI owns 48% equity while Federal Bank and Fortis own 26% equity each. At IDBI Fortis, we endeavour to deliver products that provide value and convenience to the customer. Through a continuous process of innovation in product and service delivery we intend to deliver world-class wealth management, protection and retirement solutions to Indian customers. Having started in March 2008, in just five months mo nths of inception we became one of the fastest growing new insurance companies to garner Rs 100 Cr in premiums. The company offers its services through a vast nationwide network across the branches of IDBI Bank and Federal Bank in addition to a sizeable network of advisors and partners. In only its first year of operations, as on March 31st 2009, the company collected more than 328 Cr in premiums – highest first year collection in the history of Indian life insurance industry, through over 87000 policies and over Rs R s 2825 Cr in Sum Assured. 1.1 ABOUT THE SPONSORS OF IDBI FORTIS LIFE INSURANCE CO LTD: IDBI Bank Ltd. continues to be, since its inception, India’s premier industrial development bank. Created in 1956 to support India’s industrial backbone, IDBI Bank has since evolved into a powerhouse of industrial and retail finance. Today, it is amongst India’s foremost
commercial banks, with a wide range of innovative products and services, serving retail and corporate customers in all corners of the country from over 700 branches and more than 1180 ATMs. The Bank offers its customers an extensive range of diversified services including project financing, term lending, working capital facilities, lease finance, venture capital, loan syndication, corporate advisory services and legal and technical advisory services to its corporate clients as well as mortgages and personal loans to its retail clients. As part of its development activities, IDBI Bank has been instrumental in sponsoring the development of key insti tutions involved in India’s financial sector – such as the Securities and Exchange Board of India (SEBI), National Stock Exchange of India Limited (NSE) and National Securities Depository Ltd. Federal Bank is one of India’s leading private sector banks, wi th a dominant presence in the
state of Kerala. It has a strong network of over 660 branches and 690 ATMs spread across India. The bank provides over four million retail customers with a wide variety of financial products. Federal Bank is one of the first large Indian banks to have an entirely automated and interconnected branch network. In addition to interconnected branches and ATMs, the
Bank has a wide range of services like Internet Banking, Mobile Banking, Tele Banking, Any Where Banking, debit cards, online bill payment and call centre facilities to offer round the clock banking convenience to its customers. The Bank has been a pioneer in providing innovative technological solutions to its customers and the Bank has won several awards and recommendations. Fortis is an international insurance group composed of AG Insurance, the overall market
leader in life and non-life insurance in Belgium, distributing its insurance products through the network of BNP Paribas Fortis Bank and independent insurance brokers, and Fortis Insurance International with subsidiaries in the UK, France, Hong Kong, Luxembourg (Nonlife), Germany, Turkey, Russia and Ukraine, and joint ventures in Luxembourg (Life), Portugal, China, Malaysia, Thailand and India.
CHAPTER 2 THE INDIAN INSURANCE INDUSTRY In India, insurance is a flourishing industry, with several national and international players competing and growing at rapid rates. Thanks to reforms and the easing of policy regulations, the Indian insurance sector is allowed to flourish, and as Indians become more familiar with the various insurance products, the growth can only increase with period starting from 2010 – 2015, projected to be the ‘Golden Age’ for the Indian insurance industry. INDIAN INSURANCE POLICIES AT A GLANCE:
The Indian insurance companies offer a comprehensive range of insurance plans, a range that is growing as the economy matures and the wealth of the middle class increases. The most common types include –
Term life policies
Endowment policies
Joint life policies
Whole life policies
Loan cover term assurance policies
Unit – linked insurance plans
Group insurance policies
Pension plans
Annuities
Apart from these, general insurance plans are also available to cover m otor insurance, travel insurance, home insurance & health insurance. Due to the growing demand for insurance, more and more insurance companies are now emerging in the Indian insurance sector. With the opening up of the economy, several international leaders in the insurance sector are trying to venture into the India insurance industry.
2.1 INDIAN INSURANCE: HISTORY The history of the Indian insurance sector dates back to 1818, when the Oriental Life Insurance Company was formed in Kolkata. A new era began in the India insurance sector, with the passing of the Life Insurance Act of 1912.
The Indian Insurance Companies Act was passed in 1928. This act empowered the government of India to gather necessary information about the life insurance and non-life insurance organizations operating in the Indian financial markets. The Triton Insurance Company Ltd formed in 1850 and was the first of its kind in the general insurance sector in India. Established in 1907, Indian Mercantile Insurance Limited was the first company to handle all forms of India insurance.
2.2 INDIAN INDIAN INSURANCE: SECTOR REFORM The formation of the Malhotra Committee in 1993 initiated reforms in the Indian insurance sector. The aim of the Malhotra Committee was to assess the functionality of the Indian insurance sector. This committee was also in charge of recommending the future path of insurance in India. The Malhotra Committee attempted to improve various aspects of the insurance sector, making them more appropriate and effective for the Indian market. The recommendations of the committee put stress on offering operational autonomy to the insurance service providers and also suggested forming an independent regulatory body. The Insurance Regulatory and Development Authority Act of 1999 brought about several crucial policy changes in the insurance sector of India. It led to the formation of the Insurance Regulatory and Development Authority (IRDA) in 2000. The goals of the IRDA are to safeguard the interests of insurance policyholders, as well as to initiate different policy measures to help sustain growth in the Indian insurance sector. The Authority has notified 27 Regulations on various issues which include Registration of Insurers, Regulation on insurance agents, Solvency Margin, Re-insurance, Obligation of Insurers to Rural and Social sector, Investment and Accounting Procedure, Protection of policy holders' interest etc. Applications were invited by the Authority with effect from 15th August, 2000 for issue of the Certificate of Registration R egistration to both life and non-life insurers. The authority has its Head Quarter at Hyderabad.
2.3 PROTECTION OF THE INTERREST OF POLICY HOLDERS: IRDA has the responsibility of protecting the interest of insurance policyholders. Towards achieving this objective, the Authority has taken the following steps:
IRDA has notified Protection of Policyholders Interest Regulations 2001 to provide for: policy proposal documents in easily understandable language; claims procedure in both life and non-life; setting up of grievance redressal machinery; speedy settlement of claims; and policyholders' servicing. The Regulation also provides for payment of interest by insurers for the delay in settlement of claim. The insurers are required to maintain solvency margins so that they are in a position to meet their obligations towards policyholders with regard to payment of claims.
It is obligatory on the part of the insurance companies to disclose clearly the benefits, terms and conditions under the policy. The advertisements issued by the insurers should not mislead the insuring public. All insurers are required to set up proper grievance redress machinery in their head office and at their other offices. The Authority takes up with the insurers any complaint received from the policyholders in connection with services provided by them under the insurance i nsurance contract.
2.4 MILESTONES OF THE INSURANCE REGULATIONS IN THE 20TH CENTURY YEAR
SIGNIFICANT REGULATORY EVENT
1912
The Indian Life Insurance Company Act
1938
The Insurance Act: Comprehensive act to regulate insurance business in India
1956
Nationalization Nationalization of Life Insurance business in India
1972
Nationalization Nationalization of General G eneral Insurance business in India I ndia
1993
Setting up of Malhotra Committee
1994
Recommendations of Malhotra Committee
1995
Setting up of Mukherjee Committee
1996
Setting up of (Interim) Insurance Regulatory Authority (IRA)
1997
Mukherjee committee report submitted but not made public
1997
The government gives greater autonomy to LIC, GIC & its subsidiaries with regard to the restructuring of boards & flexibility in investment norms aimed at channelling funds to the infrastructure sector
1998
The cabinet decides to allow 40% foreign equity e quity in private insurance companies – 26% to foreign companies & 14% to NRIs, OCBs & FIIs
1999
The standing committee headed by Murali Deora decides that foreign equity in private insurance should be limited to 26%. The IRA IR A bill is renamed to Insurance Regulatory and Development Authority (IRDA) Bill.
1999
Government clears IRDA Bill
2000
President gives assent to the IRDA Bill
2.5 LIST OF INSURANCE COMPANIES IN INDIA Life Insurers
Indian Insurance companies
Genaral Insurers
2.5.1 LIST OF LIFE INSURERS Public Sector:
Life Insurance Corporation of India (LIC)
Private Sector:
Allianz Bajaj life insurance company limited l imited
Birla Sun life insurance company Ltd
HDFC standard life insurance company Ltd
ICICI prudential life insurance co. Ltd
ING Vysya life insurance co. Ltd
Max New York life insurance co. Ltd
MetLife insurance co. Ltd
Om Kotak Mahindra life insurance co. Ltd
SBI life insurance co. Ltd
IDBI Fortis life insurance co. Ltd
TATA AIG life insurance co. Ltd
AMP Sanmar Assurance co. Ltd
Dabur CGU life insurance co. Pvt. Ltd
Reinsurers
2.5.2 LIST OF GENARAL INSURERS Public sector:
National Insurance co. Ltd
New India Assurance co. Ltd
Oriental Insurance co. Ltd
United India Insurance co. Ltd
Private Sector:
Bajaj Allianz General Insurance co. Ltd
ICICI Lombard General Insurance co. Ltd
IFFCO – TOKIO General Insurance co. Ltd
Reliance General Insurance co. Ltd
Royal Sundaram Alliance Insurance co. Ltd
TATA AIG general insurance co. Ltd
Cholamandalam General Insurance co. Ltd.
Export Credit Guarantee Corporation Co rporation
HDFC Chubb General Insurance co. Ltd
2.5.3 REINSURER
General Insurance Corporation Of India
CHAPTER 3 THE INSURANCE INDUSTRY – MARKET SHARE
MARKET SHARE PUBLI BLIC SE SECTOR (L (LIC)
PRIVAT VATE SE SECTOR
36% 64%
LIC (Life Insurance Corporation of India) still remains the largest life insurance company
accounting for 64% market share. Its share, however, has dropped from 74% a year before, mainly owing to entry of private players with innovative products and better sales force. ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance company in India.
It experienced growth of 58% in new business premium, accounting for increase in market share to 8.93% in 2007-08 from 6.97% in 2006-07. Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its market share went up to 6.98% in 2007-08 form 5.66% in 2006-07. The company ranked second (after LIC) in number of policies sold in 2007-08, with total market share of 7.36%. SBI Life Insurance Co Ltd in terms of new number of policies sold, the company ranked 6th in 2007-08. New premium collection for the company was Rs 4,792.66 crore in 2007-08, an increase of 87% over last year. Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its market share went up to 2.96% from 1.23% a year back. It now ranks 5th in new business premium and 4th in number of new policies sold in 2007-08. HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore crore in FY2007-08, registering a year-on-year growth of 64%. Its market share is 2.88% and it ranks 6 th among the insurance companies and 5th amongst the private players. Birla Sun Life Insurance Co Ltd market share of the company increased from 1.22% to 2.11% in 2007-08. The company moved to the 7th position in 2007-08 from 8the a year before, pushing down Max New York Life insurance company. Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08. Total new business generated was Rs 641.83 crore as against Rs 387.51 crore. The company was pushed down to the 8th position from 7th in 200708. Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the company reported growth of 80%, moving from the 11th position to 9th. It captured a market share of 1.19% in 2007-08. Last year the company doubled its branch network to 150 from 74. Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08 from 9th last year.
It has presence in more than 3,000 locations across India via 221 branches and close to 40 banc assurance partnerships. Aviva Life Insurance plans to increase its capital base by Rs R s 344 crore. With the fresh investment, total paid-up capital of the insurer would go up to Rs 1,348.8 crore. The above explanation has been illustrated in the form of a pie – chart below:
Market Share 2% 3%
3%
LIC
5% 1%
ICICI Prudential
6%
Bajaj Allianz
7%
SBI 9%
64%
Relaince HDFC Standard Max newyork Kotak Mahindra others
CHAPTER 4 THE REVENUE GAP
LIC
Private Insurers
0
5000
10000
15000
Private Insurers
LIC
Premium Collected in Jan-09 (Rs)
2,642.58
10,401.14
Premium collected in Jan-08 (Rs)
3,522.96
6,028.45
Public sector Life Insurance Corporation of India (LIC) has clocked a robust 72.53 per cent jump in fresh premium collection in January 2009 leaving behind major private sector players, most of whom have posted negative growth in the month as compared to January 2008. Data released by insurance sector regulator IRDA shows that the first-year premium collected by private life insurers in January 2009 has seen a negative growth of 24.99 per cent as compared to the same period last year. LIC, the country's biggest life insurer, has, however, witnessed a growth of 72.53 per cent in fresh premium collected during the month. Leading private sector players such as Bajaj Allianz, ICICI Prudential Life, SBI Life, Aviva and HDFC Standard Life have posted a negative growth in the first month of 2009 as compared to last year. Private insurers that garnered a total fresh premium of Rs 2,642.58 crore, experienced a decline of 24.99 per cent in January 2009 as against Rs 3,522.96 crore in January last year. The number of policies sold by private players in the month was 1,342,316 as against 1,363,953 in January 2008.
LIC collected fresh premium of Rs 10,401.14 crore in January 2009, up by 72.53 from Rs 6,028.45 crore in the same period last year. The number of policies sold by the state-owned LIC grew by 34.91 per cent at 4,363,421 in January this year as against 3,234,209 during January 2008. Bajaj Allianz's fresh premium fell by 49.65 per cent to Rs 343.41 crore from Rs 682.14 crore collected in January 2008, the regulator said. The other life insurance companies that witnessed a dip in fresh premium are Aviva (41.64 per cent), SBI Life (39.95 per cent), ICICI Prudential Life (35.79), HDFC Standard Life (35.08 per cent) and Kotak Mahindra (24.18 per cent), the IRDA data said. Amongst the major private players to clock a growth are Max New York Life Insurance and Tata AIG, posting a growth of 10.52 per cent and 20.05 per cent respectively, in fresh premium collection in January 2009. However, if we consider the ‘ Annual Premium’ Premium’ collected in fiscal years 2008 & 2009, for both life as well as general ge neral insurance, the result is not that pleasant. The result shows an 8% dip in the annual premium collected in FY 2009 as compared to FY 2008.
Within this sector, Life Insurance Corp. of India Ltd (LIC), the venerable public sector insurer, was the big loser. LIC saw its market share tumble to 41% in 2008-09 from 48% the year before. But private firms did better. They increased their share in life insurance to 59% in 2008-09 from 52% in the previous year. The trend was slightly different in the non-life insurance sector. This market —for gross written premiums —grew by 9% last year compared with 2007-08. Here, too, private firms proved to be more aggressive, growing by 12% as against a 7% g rowth of the governmentowned companies. And contrary to what some people say, here, too, government-owned
non-life insurance companies saw their market share slip, though marginally, from 60% to 58.9%, while the private sector saw an increase from 40% to 41%. Clearly, there will be more agony for state-owned insurers in the coming years, as business declines despite a large workforce.
EXIBIT 4.1 INDIAN INSURANCE INDUSTRY: NEW AVENUES FOR GROWTH 2012
With an annual growth rate of 15-20% and the largest number of life insurance policies in force, the potential of the Indian insurance industry is huge. Total value of the Indian insurance market (200405) is estimated at Rs. 450 billion bil lion (US$10 billion). According to government sources, sources, the insurance and banking services’ contribution to the country's g ross domestic product (GDP) is 7% out of which
the gross premium collection forms a significant part. The funds available with the state-owned Life Insurance Corporation (LIC) (LIC) for investments are 8% of GDP. Till date, only 20% of the total insurable population of India is covered under various life insurance schemes, the penetration penetration rates of health and other non-life insurances in India is also well below the international level. These facts indicate the of immense i mmense growth potential of the insurance sector. Though, the existing rule says that a foreign partner can hold 26% equity in i n an insurance company, a proposal to increase this limit to 49% is pending with the government. Since opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into i nto the Indian market and 21 private companies have been granted licenses. Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private pri vate sector and snapping up the new innovative products on offer. The life insurance industry in i n India grew by an impressive 36%, with premium income from new business at Rs. 253.43 billion during the fiscal year 2004-2005, braving stiff competition from private insurers. LIC, has clocked 21.87% growth in business at Rs.197.86 billion by selling 2.4 billion new policies in 2004-05. But this was still not enough to arrest the fall in its market share, as private players grew by 129% to mop up Rs. 55.57 billion in 2004-05 from Rs. 24.29 billion in 2003-04 2003-04.. Though the total volume of LIC's business increased in the last fiscal year (2004-2005) compared to the previous one, its market share came down from 87.04 to 78.07%. The 14 private insurers increased their market share from about 13% to about 22% in a year's time. The figures for the first two months of the fiscal year 2005-06 also speak of the growing share of the private insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent. percent. There are presently 12 general insurance companies companies with four public sector companies companies and eight ei ght private insurers. According to estimates, private insurance companies collectively have a 10% share of the non-life insurance market.
CHAPTER 5 RURAL INSURANCE: THE WAY FORWARD
The rural market in India, constituting 742 million people, is by far the largest potential market in the world. The annual rural household income of Rs 56,630 (as per NCAER, IMDR 2002) coupled with changing rural aspirations in consumption patterns and lifestyles unfold tremendous opportunities opportunities for rural marketing. However, Howeve r, some of the issues that seem to be hindering large-scale advent in the rural markets are lack of understanding of rural customer, inadequate data on rural markets, poor infrastructure, low levels of literacy and poor reach of mass media. The insurance sector, per se, also did not make much headway in the rural sector. The insurance market in India, liberalised in 2000 with the advent of private insurance companies in November 2000 has not expanded in real terms beyond the urban domain. The penetration of insurance in India is pitifully low and if we aim for the modest target of insurance premium becoming 15% of GDP, insurance companies need to look at newer market segments rather than fight for a share in the same pie.
There exists a vast potential in the rural areas where more than 70% of our population lives. But it is common perception and belief amongst the insurance companies that it is expensive to do business in rural areas. Most companies are focusing only on meeting regulatory requirements from rural areas and don’t see them as commercially viable rural business opportunities, waiting to be exploited.
The insurance business (measured in the context of first year premium) grew by 47.93% in 2005-06, surpassing the growth of 32.49% achieved in 2004-05. However, insurance penetration in the country continues to be low.
Insurance penetration or premium volume as a share of a country's GDP for the year 2005 stood at 2.53% for life insurance and 0.62% for non-life insurance. The level of penetration tends to rise as income increases, particularly in life insurance. India, with its huge middle class households, has exhibited potential for the insurance industry. This has made international players to look at the Indian market. Moreover, saturation of markets in many developed economies has made the Indian market all the more attractive for global insurance majors.
CHAPTER 6 SURVEY ANALYSIS & FINDINGS A Sample size of 200 was chosen c hosen and the responses of the respondents were analysed using the MS Excel and summarized in the form of o f pie-charts and bar diagrams. The analysis of the survey result is illustrated as under:
6.1 AGE GROUP:
80 60 40 20 0 Below 25 yrs
25 - 35 yrs 35 - 45 yrs 45 - 55 yrs
Above 55 yrs
The above bar diagram clearly shows that most of the respondents were in the age group of 25 – 35 years, thereby, proving the fact that “The Youth Factor” is of primary importance, as far as the Indian insurance sector is concerned. Targeting the youth is of paramount importance. 6.2 OCCUPATION:
100 80 60 40 20 0 SERVICE
BUSINESS
PROFESSIONAL
RETIRED
Results have shown that a major portion of the respondents are service class people or professionals. 6.3 INVESTMENT PATTERN:
15% Shares, debentures & Mutual funds
85%
Other investment options
About 80% of the respondents have expressed their interest & knack of investing their money in Shares, debentures, ULIP policies & mutual funds. This show the “Risk Taking” nature of modern India, where people don’t hesitate in taking some calculated calculated risks, when it
comes to investments. 15% have resorted to other investment options such as bank deposits, post office savings, real estates etc., which reflects their “Risk Averse” nature. 6.4 MARKET SHARE:
Market Share 60 40 20 0 LIC
ICICI Prudential
Bajaj Allianz
Others
Results have shown that, Life Insurance Corporation of India, the state owned company has the largest market share i.e. 53%. ICICI prudential has the second biggest market share of 21%; followed by Bajaj Allianz with 14.8%; whereas w hereas all the other insurance companies
including IDBI Fortis Life Insurance Co. Ltd together occupy about 11.2% of the insurance market. 6.5 The survey results have also shown that 92.3% of the respondents have some kind of an
insurance policy. But this is a minute picture and does not portray the actual fact, since; the sample size of 150 is no where close to the huge Indian I ndian population. population.
6.6 AWARENESS ABOUT IDBI FORTIS: 4%
YES NO 96%
It has been found that nearly 96% of the respondents are not aware of the policies offered by IDBI Fortis Life Insurance Co. Ltd. This indicates the tremendous need on the part of the company, to increase its marketing & advertising budget.
6.7
LIMITATIONS OF THE SUDY: The respondents may not furnish accurate & genuine information during the course of the survey. There might be lack of seriousness among the respondents while filling up the questionnaire, which in turn might lead to data inaccuracy. The research considers a sample size of about 300 and hence the results of the study might not portray the true picture. p icture.
CHAPTER 7 RECOMMENDATIONS Till date most of the companies in India are always focused on urban market or at least they sell their products/services with the same models that of predominantly urban-market oriented. IDBI Fortis is also no different. But, in order to increase its market share, IDBI Fortis needs to make its presence felt in the rural market. This is in view of the fact that the rural population constitutes 70% of the t otal Indian population. Hence, in order to capitalize & increase its market share, IDBI Fortis needs to adopt the “Bottom of The Pyramid Model”. Model” . One of the main vocal point of BoP Model is -
understand
low-income people as your consumers and make your product affordable (cost or units) to the BoP market. Most of the companies, these days, have started to remodel their products/services according to this principle. However, targeting BoP market means more than this. One needs to make sure that the offerings are suited to the local needs. That is exactly missing in Insurance sector. Now a days, there are many insurance policies that are selling their policies as low as Rs 10, Rs 25 (much less than an US dollar). IDBI Fortis should also welcome this step. Some of the innovative steps that IDBI Fortis may take, in order to increase its market share are as under:
Insurance policies should be completely flexible & separately priced for the rural sector.
Second comes the distribution aspect. There is no need to keep a separate chain of distribution. Utilize 1-2 millions telecom retail distribution chains. For the simple reason that these bring the structural efficiency in order to reduce the costs.
‘The Social Angle’ needs to be considered . Most of the rural people live in joint
families or at least they would love to consume services as a family. This is evident from their consumption patterns such as marriage/functions, pilgrim trips etc. So your service should consider this trick and offer them a group oriented policies. In fact, one may even consider community based policies. That would possibly become an instant hit.
The company needs to increase its Marketing & Advertising budget; and it should strive to come up with some ‘Awareness Program’ so that people become aware of
its various innovative & beneficial policies. In all of the above scenarios, recent advances in technology would play a great role.
ANNEXURE 1. THE BOTTOM OF THE PYRAMID MODEL:
In economics, the bottom of the pyramid is the largest, but poorest socio-economic group. In global terms, this is the 2.5 billion people who live on less than $2.50 per day. The phrase “bottom of the pyramid” is used in particular by people developing new models of doing
business that deliberately target that demographic, often using new technology. This field is also often referred to as the " Base of the Pyramid " or just the " BoP". Examples: Micro-credit
As The Economist reported on August 11, 2005, one example of “bottom of the pyramid” is the growing microcredit market in South Asia, particularly in Bangladesh. With technology being steadily cheaper and more ubiquitous, it is becoming economically efficient to “lend
tiny amounts of money t o people with even tinier assets”. The microfinance network discussed in the article, Sa- Dhan, argues that the availability of credit to the poor “helps the poor but allow banks to increase their business”. Agriculture
Another example of the bottom of the pyramid targeting at work is eChoupal in rural India. ITC manages an agricultural trading company. To eliminate the inefficiencies in its supply chain caused by corrupt middle men at local rural markets, it created a network of “e Choupals” (choupal = vil lage square) in rural communities. Through these e-Choupals,
individual farmers have been able to check the market trading price of their produce and sell it directly to ITC. Both the individual farmers and ITC have increased their revenues, because the layers of ineffiency no longer have a role in the transaction between seller and buyer. Market-specific products
An example of product that is designed with needs of the very poor in mind is that of a shampoo that works best with cold water and is sold in small packets to reduce barriers of upfront costs for the poor. Such a product is marketed markete d by Hindustan UNILever. Business and community partnerships pa rtnerships
As Fortune reported on November 15, 2006, since 2005 the SC Johnson Company has been partnering with youth groups in the Kibera slum of Nairobi, Kenya. Together SC Johnson and the groups have created a community-based waste management and cleaning company,
providing home-cleaning, insect treatment, and waste disposal services for residents of the slum. SC Johnson's project was the first implementation of the Base of the Pyramid Protocol 2. THE SURVEY QUESTIONNAIRE: Q. NAME: Q. AGE (Please tick the appropriate option):
BELOW 25 YRS
25 – 25 – 35 YRS
35 – 35 – 45 YRS
45 – 45 – 55 YRS
ABOVE 55 YRS
Q. ADDRESS:
......................................................................................................................................................... ......................................................................................................................................................... ......................................................................................................................................................... Q. TELEPHONE NO: Q. OCCUPATION (Please select the appropriate option): o
BUSINESS
o
SERVICE
o
PROFESSIONAL
o
RETIRED
Q. ANNUAL INCOME (tick the appropriate option):
UPTO Rs 1 LAKH
Rs 1 – 1 – 2 LAKHS
Rs 2 – 2 – 3 LAKHS
Rs 3 – 3 – 4 LAKHS
Rs 4 – 4 – 5 LAKHS
ABOVE Rs 5 LAKHS
Q. RATE THE FOLLOWING IN THE ORDER IN WHICH YOU THINK IS THE BEST INVESTMENT PLAN (5 - HIGHEST; 1 - LOWEST) FEATURES SHARES & DEBENTURES BANK DEPOSITS MUTUAL FUNDS INSURANCE PRODUCTS POST OFFICE SAVINGS OTHERS
RATING
Q. HOW WOULD YOU PLAN YOUR INVESTMENT FOR THE NEXT 1 YEAR? (please tick the suitable blocks) 0 – 10 %
10 – 20 %
20 – 30 %
30 – 40 %
40 – 50 %
ABOVE 50 %
SHARES & DEBENTURES BANK DEPOSITS MUTUAL FUNDS INSURANCE PRODUCTS POST OFFICE SAVINGS OTHERS
Q. DO YOU HAVE AN INSURANCE POLICY? (Tick the appropriate option)
YES
NO
Q. WHICH OF THE FOLLOWING INSURANCES DO YOU OWN?
LIFE INSURANCE
HEALTH INSURANCE
ACCIDENTAL INSURANCE
OTHERS, PLEASE SPECIFY........................................................................................................................................
Q. WHAT ARE YOUR REASONS BEHIND TAKING AN INSURANCE POLICY? (Please tick the suitable options)
RISK COVERAGE INVESTMENT PURPOSE PENSION SCHEMES TAX BENIFIT OTHERS
IF OTHERS, PLEASE SPECIFY.......................................................................................................................................... Q. WHICH INSURANCE COMPANY’S POLICY DO YOU OWN? (Please ( Please tick the suitable option) LIC ICICI PRUDENTIAL BAJAJ ALLIANCE IDBI FORTIS OTHERS
IF OTHERS, PLEASE SPECIFY...................................................................................................................................... Q. WHAT FEATURES DO YOU CONSIDER BEFORE TAKING AN INSURANCE POLICY? FEATURES
STRONGLY AGREE
AGREE
NEUTRAL
DISAGREE STRONGLY DISAGREE
INSURANCE COVERAGE HIGH RETURNS LOW PREMIUM AMOUNT RISKS INVOLVED OTHERS
Q. HOW DO YOU RATE THE FEATURES OF THE INSURANCE PRODUCT OFFERED TO YOU BY THE COMPANY IN WHICH YOU ARE HOLDING INSURANCE? ( 5 - HIGHEST; 1 - LOWEST) FEATURES
RATING
INSURANCE COVERAGE HIGH RETURNS LOW PREMIUM AMOUNT FLEXIBLE WITHDRAWLS OTHERS
Q. WHAT IS YOUR PREFERRED MODE OF PAYMENT? (Please tick the appropriate option) option )
HALF-YEARLY
YEARLY
QUARTERLY
MONTHLY
Q. DO YOU KNOW ABOUT ANY OF THE FOLLOWING INSURANCE PLANS OFFERED BY IDBI FORTIS? YES
NO
WEALTHSURANCE HOMESURANCE PROTECTION PLAN BONDSURANCE PLAN RETIRESURANCE PLAN
Q. HAVE YOU INVESTED IN ANY OF THESE PLANS? (Please tick the suitable option)
YES
NO
If Yes, please specify the plan...............................................................................................................................................
Q. WHAT IS THE TERM OF YOUR INVESTMENT? (Tick the suitable option)
LONG TERM
MEDIUM TERM
SHORT TERM
YOUR VALUABLE FEEDBACK ABOUT ABOUT THIS SURVEY ........................................................................................................................................................................ ........................................................................................................................................................................ ........................................................................................................................................................................
BIBLIOGRAPHY
FROM ONLINE BOOKS, JOURNALS, WEB PAGES, etc:
The Financial Express, Monday, 19
th
April, 2010. Rural Insurance: the way forward.
JOURNAL (online). Available from: http://www.financialexpress.com/news/ th
Business Wire, Friday, January 25 , 2008. Emerging Rural Insurance Market In India
Gives An Extensive Research And In Depth Analysis Of The... ARTICLE (online). Available from: http://www.allbusiness.com/insurance/ th
Malapati Raja Sekhar, June 17 , 2008.Innovations waiting in selling insurance
policies
for
rural
India!
ARTICLE
(online).
Available
from:
http://www.venturewoods.org/ R.N.Bhaskar, R.N.Bhaskar, Thursday, July 2, 2009. The capitalist/the agony, ecstasy of insurance.
ARTICLE (online). Available from: www.livemint.com EcconomyWatch, Indian Insurance companies. WEB PAGE (online). Available
from::www.ecconomywatch.com from
RNCOS E-services E-services pvt ltd, September 2005. Indian Insurance Industry: new avenues
for
growth
2012.
ARTICLE
(online).
Available
from:
http://www.researchandmarkets.com/reports/
Jo Black, Monday, April 21, 2008. India’s insurance sector poised for 200% growth by
2010. ARTICLE (online). Available from: http://www.asiaeconomywatch.co.uk/2008/
rd
Pinky Walia, Tuesday, 23 ,September 2008. Top 10 Life Insurance Companies in India. ARTICLE. Available from: http://blogs.siliconindia.com/Pinky/
th
February 25 , 2009, LIC leads in premium collection. ARTICLE (online). Available from: http://news.outlookindia.com/
