Iffco tokio general insurance co.ltd

IFFCO-TOKIO GENERAL INSURANCE CO.LTD

Executive Summary

As the student of NAVNITLAL RANCHHODLAL INSTITUTE OF

BUSINESS OF MANAGEMENT (Gujarat university Ahmedabad) I have to

present the project regarding my training, In the course of M.B.A. Summer

training work has to be presented as project report. It is very important for

student to select proper topic and training center.

z for his/her summer training, as it will be helpful for student to have

practical experience corporate world & partial fulfillment of the M.B.A programme.

I have completed my training at

“IFFCO TOKIO”

1ST Floor, House-A, 21st Century Business Centre.

Nr.World Trade Centre, Ring Road,

surat-395002.

which is the Surat S.B.U of Iffco Tokio General Insurance Co. Ltd.

Iffco Tokio General Insurance Co. Ltd. is one of the leading player in

general insurance industry among the private players. It is increasing its market

share day by day.

This project contains general detail of insurance industry, brief detail of

private players in the market & brief detail of IRDA bill along with detail of

different product & analysis of marketing channel of insurance industry.

NAVANITLAL RANCHHODLAL INSTITUTE OF BUSINESS MANAGEMENT

1


Introduction Of industry

Introduction

Insurance in India started without any regulation in the Nineteenth

Century. It was a typical story of a colonial era: a few British insurance

companies dominating the market serving mostly large urban centers. After the

independence, it took a dramatic turn. Insurance was nationalized. First, the life

insurance companies were nationalized in 1956, and then the general insurance

business was nationalized in 1972. Only in 1999 private insurance companies

have been allowed back into the business of insurance with a maximum of 26%

of foreign holding & latest updating about the same is proposed to be 49%.

History of General Insurance in India

The Indian insurance industry is segmented into two distinct markets: the

life insurance market and the non-life, or general, insurance market. The General

insurance business in India can trace its roots to the Triton Insurance Company

Ltd., the first general insurance company established in the year 1850 in Calcutta

by the British. Some of the important milestones in the general insurance

business in India are:

• 1907: The Indian Mercantile Insurance Ltd. set up, the first company to

transact all classes of general insurance business.

• 1957: General Insurance Council, a wing of the Insurance Association of

India, frames a code of conduct for ensuring fair conduct and sound

business practices.


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• 1968: The Insurance Act amended to regulate investments and set

minimum solvency margins and the Tariff Advisory Committee set up.

• 1972: The General Insurance Business (Nationalization) Act, 1972

nationalized the general insurance business in India.

• January 1973: 107 insurers amalgamated and grouped into four

companies.

1. Oriental Insurance Company Limited.

2. New India Assurance Company Limited.

3. National Insurance Company Limited and.

4. United India Insurance Company Limited.

General Insurance in India

• Features of Indian General Insurance Market

• Low market penetration.

• Ever-growing middle class component in population.

• Growth of consumer movement with an increasing demand for better

insurance products.

• Inadequate application of information technology for business.

• Adequate fillip from the Government in the form of tax incentives to the

insured, etc.

• India is one of the least insured countries but the potential for further

growth is phenomenal.

• Rates of claim settlement were earlier in India the highest in the world, 70

per cent in general

• insurance, compared to around 40 per cent internationally.


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• Non-life premium has a 0.71 per cent share of GDP.

• General Insurers (Private Companies) have earned around Rs.1000-cr

income.

• Half of the current demand for comes from the corporate segment.

Benefits of General Insurance

• Insurance is the instrument of Security, saving and peace of mind. It

provides several benefits by paying a small amount of premium to an

insurance company.

• Safeguards one’s assets.

• Peace of mind-in case of financial loss.

• Encourage saving.

• Tax rebate.

• Protection from the claim made by creditors.

• Security against a personal loan, housing loan or other types of loan.

Role of General Insurance in growth of economy

The General Insurance Industry has an enviable track record among

public sector units. It has a consistent profit and dividend paying record

accompanied by a steady growth in its financial resources. Through investments

in the Government sector and socially- oriented sectors the Industry has

contributed immensely to the nation's development. The industry is recognized

as one of the largest financial Institutions in the country. The ventures initiated by

the industry in the areas of Mutual Fund, Housing Finance has done exceedingly

well in recent years. To protect the country's foreign exchange reserves, the

reinsurance arrangement are so organized that maximum retention is made

possible within the country while at the same time protecting interests of the

policy holders. The GIC’S inwards reinsurance wing, called the SWIFT,


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maximizes the foreign exchange balance by acting as an international insurer

accepting risks from all over the globe.

India vs. Global Market

India's insurance penetration is low at 1.95 per cent and ranks 51 in the world. In

premium collection the record is better, at 23rd position. The ratio of premium

collected to gross domestic product is a mere 0.58 per cent. Compared with an

average of 7.1 percent in most industrialized countries. India is still at a very

nascent stage with an $8-9 (Rs.400-450) per capita expenditure on insurance,

out of which $2 to $2.5(Rs.100-150) will be on general insurance. This was

primarily because in India non-life insurance is not considered important and

people perceive it as an unnecessary expenditure. Non-life insurance premium at

a percentage of GDP is estimated at 2.70 for Japan, 2.55 for South Korea, 1.89

for Malaysia, 1.62 for Singapore, 1.38 for Taiwan, 1.23 for Thailand, 0.86 for the

Philippines, 0.68 for China, 0.66 for Indonesia, and 0.51 for Pakistan.

Regions/

Country USD (billions) Percentage

North America 689.2 32.7

Latin America 653.0 31.0

Europe 32.9 1.6

Asia 647.1 30.7

India 3.0 0.15

World 2,105.8 100.0

Future of General Insurance


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The Indian insurance sector will register a high growth rate in the future

years to come, says the report prepared by Fitch Ratings. This will be due to the

innovative products, better distribution network, better services coupled with

other never-before changes that have taken place in the insurance sector. The

report laid stress on branding, customer service and tailor made products that will

assume importance besides information technology that will become vital to bring

down costs in the future. Also data warehousing, ensuring effective cross selling

will grown in importance to exploit the largely unexploited market.

Regulations

In India Insurance is a federal subject. The primary legislation that deals

with insurance business in India is:

Insurance Regulatory Authority

On the recommendation of Malhotra Committee, an Insurance Regulatory

Development Act (IRDA) passed by Indian Parliament in 1993. Its main aim was

to activate an insurance regulatory apparatus essential for proper monitoring and

control of the Insurance industry. Due to this Act several Indian private

companies have entered into the insurance market, and some companies have

joined with foreign partners. In economic reform process, the Insurance

Companies has given boost to the socio-economic development process. The

huge amount of funds that are at the disposal of Insurance Companies are

directed as desired avenues like housing, safe drinking water, electricity, primary

education and infrastructure. Above all the policyholders gets better pricing of

products from competitive insurance companies.

Liberalization

The opening up of Insurance sector was a part of the ongoing

liberalization in the financial sector of India. The domain of State-run insurance

companies was thrown open to private enterprise on December 7, 1999, with the

introduction of the Insurance Regulatory and Development Authority (IRDA) Bill.


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The opening up of the sector gave way to the world known names in the industry

to enter the Indian market through tie-ups with the eminent business houses.

What was once a quiet business is becoming one of the hottest businesses

today.

Post liberalization

The changing face of financial sector and the entry of several companies

in the field of non-life Insurance segment are one of the key results of these

liberalization efforts. Insurance business by way of generating premium income

adds significantly to the GDP. Despite the fact that the market is vast in India for

the Insurance business, the coverage is far less compared with the international

standards. Estimates show that a meager 35-40 million, out of a population of

950 million, have come so far under the umbrella of the insurance industry. The

potential market is so huge that it can grow by 15 to 17 per cent per annum. With

the entry of private players, the Indian Insurance Market may finally be able to

make deeper penetration in to newer segments and expand the market size

manifold. The quality of service will also improve and there will be wide range of

product catering to the needs of different customers. The pace for claims

settlement is also expected to improve due to increased competition. The general

insurance market in India is likely to be risky in the initial stages, but this will

improve in the next three to five years Therefore, it may be advantageous to be a

second-round entrant. In the general insurance market the need to build trust

over time is less important than in the life market because the risk assessment

systems and data that are the key to success in the general insurance market

are significantly underdeveloped in India even today

Market Players

General Insurers:


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Presently there are 13 general insurance companies with 4 public sector

companies and 9 private insurers. Although the public sector companies still

dominate the general insurance business, the private players are slowly gaining

a foothold. A brief description of various players is given below

• General Insurance Corporation of India (GIC) (with effect from Dec'2000,

a National Reinsurer)

GIC had four subsidiary companies, namely (with effect from Dec'2000, these

subsidiaries have been de-linked from the parent company and made as

independent insurance companies.

1. The Oriental Insurance Company Limited

2. The New India Assurance Company Limited,

3. National Insurance Company Limited

4. United India Insurance Company Limited.


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Private players

Yr: 2000-2001 : ( From 2nd April '2000 to 31st December'2001)

S.No. Registration

Number

Date of

Registration

Name of the Company

1 102 23.10.2000 Royal Sundaram

Alliance Insurance

Company Limited

2 103 23.10.2000 Reliance General

Insurance Company

Limited.

3 106 04.12.2000 IFFCO Tokio General

Insurance Co. Ltd

4 108 22.01.2001 TATA AIG General

Insurance Company

Ltd.

5 113 02.05.2001 Bajaj Allianz General

Insurance Company

Limited

6 115 03.08.2001 ICICI Lombard General

Insurance Company

Limited.

Yr: 2001- 2002 : ( From 1st Jan 2001 to Dec. 2002)


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S.No. Registration

Number

Date of

Registration

Name of the Company

1 123 15.07.2002 Cholamandalam General

Insurance Company Ltd.

2. 124 27.08.2002 Export Credit Guarantee

Corporation Ltd.

3. 125 27.08.2002 HDFC-Chubb General

Insurance Co. Ltd.

IFFCO Tokio General Insurance Co. Ltd

IFFCO-TOKIO General Insurance Company limited(itgi) is a joint venture

between IFFCO (Indian Farmer Fertilizer Cooperative Limited), KRIBHCO

(Krishak Bharti Cooperative Limited), IPL (Indian Potash Limited) & the Japanese

insurance giant Tokio Marine & Fire Insurance Co.Ltd.

ICICI Lombard General Insurance

ICICI Lombard General Insurance Company Limited (ICICI Lombard) is a

74:26 venture between ICICI Bank Limited, India's largest private sector bank

and Lombard Canada Limited, one of the oldest property and casualty insurance

companies in Canada. ICICI Lombard commenced business in September 2001

and is today operational in 40 cities across India.

TATA AIG Insurance Company Ltd

IT is a joint venture between the Tata group; India's most trusted industrial

house and American International Group, Inc. (AIG), the leading U.S. based

international insurance and financial service organization.


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Bajaj Allianz

Bajaj Allianz General Insurance Company Limited is a joint venture

between Bajaj Auto Limited and Allianz AG of Germany. Both enjoy a reputation

of expertise, stability and strength. The venture Bajaj Auto holds 74 per cent of

the paid up equity capital of Rs 110 crore, while the remaining 26 per cent is held

by Allianz.

HDFC Chubb General Insurance

HDFC holds 74 percent and Chubb 26 percent in the new joint venture

company, HDFC Chubb General Insurance Ltd, was initially capitalized at Rs.100

crore.

Reliance General Insurance Company Limited

Reliance Industries has around Rs.300 Crores into its insurance venture

through its financial arm Reliance Capital Ltd.It is the first Indian private company

without any foreign insurance tie-up.

Royal Sundaram

Royal Sundaram, a joint venture between Sundaram Finance of Chennai,

India and Royal & SunAlliance of UK, is built upon values of truth, trust,

teamwork, people commitment and professionalism.

Cholamandalam MS General Insurance Company Limited

Cholamandalam MS General Insurance Company Limited (Chola-MS) is a

joint venture of the Murugappa Group & Mitsui Sumitomo. Chola-MS commenced

operations in October 2002 and has issued more than 1.4 lakh policies in its first

calendar year of operations.


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MILESTONES OF INSURANCE REGULATIONS IN THE 20TH CENTURY

YEAR SIGNNIFICANT REGULATORY

1912 The Indian Life Insurance Company Act

1938 The Insurance Act: Comprehensive Act to regulate insurance business

in India

1956 Nationalization of life insurance business in India

1972 Nationalization of general insurance business in India

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)Recommendations of the IRA

1997 Mukherjee Committee Report submitted but not made public

1997 The Government gives greater autonomy to LIC, GIC and its

subsidiaries with regard to the restructuring of boards and flexibility in

investment norms aimed at channeling funds to the infrastructure

sector

1998 The cabinet decides to allow 40% foreign equity in private insurance

companies-26% to foreign companies and 14% to NRI’s, OCB’s and

FII’s

1999 The Standing Committee headed by Murali Deora decides that foreign

equity inprivate insurance should be limited to 26%. The IRA bill is

renamed the

Insurance Regulatory and Development Authority (IRDA) Bill

1999 Cabinet clears IRDA Bill

2000 President gives Assent to the IRDA Bill


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Introduction Of Company

IFFCO-Tokio General Insurance Co. Ltd. (ITGI) is a joint venture

between IFFCO and The Tokio Marine and Fire Insurance Co. Ltd, Japan.

Incorporated on 4th December 2000 and within this short span we have become

a leading Insurance Company in India. ITGI is also the pioneer in launching

innovative products like "Sankat Haran Policy" for farmers. With the Corporate

office in Gurgaon and operating offices in 26 offices, ITGI is looking at expanding

the market base of general insurance in India by opening Offices in most major

cities in India. We believe in educating the general masses about insurance and

bringing to the market simple and customized insurance policies. With a claim

process as simple and friendly as can be, we promise to give our policyholders

"The Life They Deserve". To be approachable from all places, ITGI has also


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opened up call centers with a universal toll-free number that can be accessed

throughout India.

Indian Farmers Fertilizers Co-operative Limited (IFFCO) is well known as

a pioneer in large-scale fertilizer manufacturing and is the leading fertilizer

producer in the country. IFFCO has a membership of about 35,000 Co-

operatives at State, District and Primary level spread in 22 States and 2 Union

Territories. The manufacturing plants are at Kalol, Kandla, Phulpur and Aonla

which have been consistently operating at a capacity utilization of more than

100% for the past several years.

The Tokio Marine & Fire Insurance Co.Ltd. has over one hundred and

twenty years of experience in general insurance business and is the largest and

oldest general insurance company of Japan. It is a member of the large and

highly diversified Mitsubishi group comprising of over 1500 companies. The

company is rated 'AA' (strong financial security characteristics) by the

international rating agency Standard & Poor's. Tokio Marine has been

continuously serving as one of the important reinsurance companies to the

nationalized Indian Insurance market. Main aim of the company are as follows.

• To win the TRUST of Individuals, Trade, Industry and Commerce

and protect Citizens, Corporates, Cooperatives and International

Investors in India.

• To be the INDUSTRY LEADER by

• Building customer satisfaction through Fairness, Transparency and

Quick Response;

• Providing Innovative Products and Service to suit every Customer's

need;


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• Being Technology Driven, Cost Conscious and Price Competitive;

• Creating a niche in the Rural Segment

Paid up capital of different partners

Current Paid Up Capital Rs. In Million

Indian Farmers Fertilizers Co-op Ltd. 510

Tokio-Marine Group (Millea Asia) 260

Krishak Bharati Co-op Ltd. 200

Indian Potash Ltd. 30

Total 1000


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Indian partners:

• INDIAN FARMERS FERTILIZERS CO-OP LTD.

During mid- sixties the Co-operative sector in India was responsible for

distribution of 70 per cent of fertilizers consumed in the country. This Sector had

adequate infrastructure to distribute fertilizers but had no production facilities of

its own and hence dependent on public/private Sectors for supplies. To

overcome this lacuna and to bridge the demand supply gap in the country, a new

cooperative society was conceived to specifically cater to the requirements of

farmers. It was a unique venture in which the farmers of the country through their


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own Co-operative Societies created this new institution to safeguard their

interests. The number of co-operative societies associated with IFFCO has risen

from 57 in 1967 to more than 36,000 now.

• KRISHAK BHARATI COOPERATIVE LIMITED

Krishak Bharati Cooperative Limited (KRIBHCO), a premier Cooperative

Society for manufacture of fertilizer, registered under Multi-State Cooperative

Societies Act-1985, was promoted by the Govt. of India, IFFCO, NCDC and other

agricultural co-operative societies spread all over the country.

KRIBHCO has setup a Fertilizer Complex to manufacture Urea, Ammonia

& Bio-fertilizers at Hazira in the State of Gujarat, on the bank of river Tapti, 15

Kms from Surat city on Surat - Hazira State Highway.

• INDIAN POTASH LIMITED

The company was incorporated in 1995 as a consortium of importers of

Muriate of Potash (MOP) who are primarily in the private sector. The company

started in a small way in south India but very soon expanded their marketing

network to the whole of India.

On the recommendations of National Commission on Agriculture, the

Government of India expanded the equity base of the company with majority of

equity holding and Board seats with cooperative and Public Sector Fertilizer

companies.

Today, Cooperative and State/Central Public Sector Companies hold

more than 90 per cent equity with IFFCO as the largest shareholder with 33.98

per cent.


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Indian Potash Limited (IPL) remained as the sole agency for import,

handling, distribution and sales promotion of Potassic Fertilizers in the country

from 1970 to 1992 when import of Potassic Fertilizers was decontrolled and

decanalised. However, the company continues to be one of the three state

Trading Enterprises and is also entrusted with the responsibility of maintaining

buffer stocks on behalf of Ministry of Chemicals & Fertilizers for decontrolled

fertilizers.

IPL is registered as a Public Limited Company under the Companies Act

1956 and has its own Memorandum and Articles of Association. Its annual

turnover is USD 330 million (approx.) and it has an uninterrupted record of

making profit and paying dividend to the shareholders except for one year in its

history.

Foreign Partners:

• MILLEA ASIA:

As a part of Tokio Marine Group vision which is to provide the customer

with a new total Risk Management service, Millea Asia Pte. Ltd has come into

existence with a concrete plan to provide maximum value to customers and

share holders by concentrating on the strengths of each company and form a

new insurance group which integrates with life, property & causality business

under the integrated management.

Millea Asia Pte. Ltd considers the Asian market as top priority area and

has assumed the role of regional management head quarters and as a technical

support center for the Asian subsidiaries / affiliates like ITGI. Management skills

and insurance technical knowledge is centered at this management entity and

shared with and transferred to ITGI for the betterment in all respects.


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• TOKIO MARINE GROUP:

Headquartered in Tokyo, Japan, Tokio Marine has a worldwide network in

41 countries or regions to meet our customers' various demands. Over 3,400

employees, with different nationalities, backgrounds and languages work within a

total of 35 subsidiaries and affiliated companies forming the Tokio Marine Group,

in order to support our customers.

• IFFCO-TOKIO Insurance Services Limited (ITIS)

IFFCO-TOKIO General Insurance Company Limited (ITGI) has recently

formed a wholly owned subsidiary called IFFCO-TOKIO Insurance Services

Limited (ITIS) for the purpose of marketing and distribution of insurance products.

To begin with it shall sell the General Insurance Products of ITGI and from there,

grow on to become a one-stop financial solutions provider.

The company would comprise of well-trained marketing professionals. The

objective is to offer world-class services to the clients. Such a model has been

implemented to great success by Tokio Marine and Fire Insurance, which have

operations in 41 countries across the world. The elite channel of marketing

professionals are set to redefine the way financial services are offered to

customers.

ITIS, while consolidating marketing through the conventional channels

would also develop and implement models of insurance distribution with

alternative channels like cooperatives, associations etc. It is envisaged that the

new outfit shall bring the spread and reach for ITGI while at the same time ITGI

can have a more focused approach on the higher end of general insurance

business. The focus would be on the retail and the SME sector.


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ITIS would, to its marketing team offer an excellent pathway and a fast

track growth by rewarding the high performers and thus stimulating growth.

The products under the Retail Lines cater to the insurance needs where

the insured is an individual or small/medium unit.

Examples of insurances, which a individual may require to undertake:

• Motor Vehicle Insurance

• Travel Overseas Insurance

• Home

Examples of insurances Small and medium units may require:

• Trade Protector

• Office Protector

• Small & Medium Enterprises Package Policy

• In addition to the above the products offered are:

• Health (for Group)

• Critical Illness

• Surgery Protector

• Personal Accident

Mission:


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To win the trust of individuals, trade, industry and commerce and protect

citizens, corporates, cooperatives and international investors in India.

Vision:

To be the industry leader by building customer satisfaction through

fairness, transparency and quick response.

Products:

• All risk

• Critical illness

• Directors and officers liability

• Group medishield

• Group personal accident

• Home and family protector

• Individual personal accident

• Industry protector

• Motor commercial

• Motor cycle/ scooter


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• Motor private car

• Office protector

• Professional indemnity

• Surgery protector

• Trade protector

• Sankat haran bima yojna (PA)

Performance of the company

Fire Marine Misc. Total

Year ended

31.3.03

Year ended

31.3.02

Year ended

31.3.03

Year ended

31.3.02

Year ended

31.3.03

Year ended

31.3.02

Year ended

31.3.03

Year

ended

31.3.02

Gross

Written

Premium

103.52 36.14 18.42 3.34 91.39 31.02 213.33 70.51

Net

Premium16.86 2.07 8.52 1.53 44.65 9.53 70.03 13.13


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Earned

Premium9.67 0.94 3.66 0.02 26.17 2.79 39.50 3.75

Interest 0.52 0.18 0.56 0.03 1.89 0.38 2.97 0.59

Total 10.19 1.122 4.22 0.05 28.06 3.17 42.47 4.34

Year ended 31.3.2003

Year ended 31.3.2002

Underwriting Profit/(Loss) (0.23) (8.22)

Interest 9.81 10.12

Other Expenses (0.21) (0.17)

Profit Before Tax 9.37 1.73

Provision for Tax 3.01 6.00

Profit after Tax 6.36 1.67

Proposed Dividend 2.26 -

Balance transferred to Reserves

4.10 1.67

• Business growth


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For ITGI, business in fire policy premium was Rs. 103.52 Crores in 02-03

as compared to Rs. 36.14 Crores in 01-02, business in marine policy premium

was Rs. 18.42 Crores in 02-03 as compared to Rs. 3.34 Crores in 01-02, in misc.

policy premium was Rs. 91.39 Crores in 02-03 as compared to Rs. 31.02 in 01-

02.

• Share of product mix in ITGI in 02-03:


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SHAPE \* MERGEFORMAT

In major income of ITGI was fire premium policy is 48.53%, and

engineering was 12.79%, motor was 12.02%, health was 4.63%, marine hull

2.13%, marine cargo 6.51%, liability 0.15%, and others 13.24%.


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• Number of Policies Issued:

Revenue Head 02-03 01-02

Fire 10,829 2,074

Marine 26,228 5,161

Motor 25,484 2,659

Other Miscellaneous 107,214 18,489

Total 169,755 28,383

WHY IFFCO-TOKIO AS YOUR INSURER ?

• UNDERWRITING:

1. IFFCO-TOKIO is having the best team of professionals. We provide risk

management Solutions to our customers. We analyze all the risk

exposures of our customers and measure their impact on a matrix of

frequency & severity. Based upon this analysis, we advise the customer to

transfer necessary exposure to the insurance company at an optimum

cost.

2. We ensure that best insurance products are designed at optimum cost to

ensure full protection to valued assets, balance sheet and various related

intangible factors.

3. We ensure constant touch with our clients so that all additions, deletions

and modifications are inserted in the policy without any time gap to ensure

its relevancy at the time of claim.


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4. We take care of all renewals well in advance by providing necessary

inputs as an insurance advisor.

5. We ensure that receipt & policy copy with suitable endorsements reaches

to our customers within 48 hours.

6. Our Pricing strategy for Non-tariff covers is very competitive thereby

endeavoring to give maximum benefit to the insured.

• CLAIMS :

1. The service of an insurance company is tested in the event of a claim. We

at ITGI are committed to settle any claim within a maximum period of 10

days from the date of receipt of the final survey report (irrespective of the

amount).

2. We enter into a written MOU for binding our commitment for the prompt

settlement of the claim into a legal contract. This MOU binds us legally to

abide by our commitment.

3. We carry out simulation testing for surveyors to ensure that there time and

quality is as per our expectations

4. In case of disagreement about the quantum of loss or pending finalization

of final assessment / reinstatement of the damaged property, ON

ACCOUNT payment is promptly released.


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5. We are a company which is totally IT driven. Our all offices in the country

are connected by WAN and each office has the accessibility of the policy

underwritten by any of the offices in the entire country. This is very helpful

in servicing in case the accident/loss takes place in the city other than

where the underwriting office is situated. Hence all your motor/ marine

claims can be settled then & there only in case the accident takes place

outside city & you so desire.

6. We are having a unique concept of CALL CENTRE. The call center shall

be accessible from any part of the country through a toll free number. The

product related information’s, claims intimations, claims progress & other

insurance related information’s could be had through it.

We believe in a concept of total transparency and honesty in claims settlement.

No claim shall be finally assessed without your concurrence and satisfaction.

About the Product


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• Definition:

"Insurance is a contract between two parties whereby one party called

insurer undertakes in exchange for a fixed sum called premiums, to pay the

other party called insured a fixed amount of money on the happening of a

certain event."

Insurance is a protection against financial loss arising on the happening

of an unexpected event. Insurance companies collect premiums to provide for

this protection. A loss is paid out of the premiums collected from the insuring

public and the Insurance Companies act as trustees to the amount collected.

For Example, in a Life Policy, by paying a premium to the Insurer, the

family of the insured person receives a fixed compensation on the death of the

insured.

Similarly, in car insurance, in the event of the car meeting with an

accident, the insured receives the compensation to the extent of damage. It is

a system by which the losses suffered by a few are spread over many,

exposed to similar risks.

• Why should you take Insurance?

Insurance is desired to safeguard oneself and one's family against

possible losses on account of risks and perils. It provides financial

compensation for the losses suffered due to the happening of any unforeseen

events.

By taking life insurance a person can have peace of mind and need not

worry about the financial consequences in case of any untimely death.


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Certain Insurance contracts are also made compulsory by legislation.

For example, Motor Vehicles Act 1988 stipulates that a person driving a

vehicle in a public place should hold a valid insurance policy covering "Act"

risks. Another example of compulsory insurance pertains to the Environmental

Protection Act, wherein a person using or carrying hazardous substances (as

defined in the Act) must hold a valid public liability (Act) policy.

• Who provides Insurance?

In India, prior to liberalization Insurance protection was made available

through Public sector Insurance Companies, namely, Life Insurance

Corporation of India (LIC) and the four subsidiaries of General Insurance

Corporation of India (GIC).

By the passing of the IRDA Bill, the Insurance sector has been opened

up for private companies to carry on Insurance business. Click on the following

link for the list of insurance companies operating in India.

• INSURANCE BUSINEES:

General Insurance business is mainly divided into following classes:

1) Motor Insurance, 2) Fire Insurance, 3) Marine Insurance and 4) Miscellaneous

Insurance.

MOTOR VEHICLE INSURANCE


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Motor Insurance is a Tariff Business as per Motor Vehicle Act, 1988. The Act

was repealed in the year 1988 and has some amendments in November 1994 &

later on premium was revised in July, 2002.

It is advisable for vehicle owners to take comprehensive policy, which covers the

risk of vehicle, third party liability as well as personal accident of driver, driver-

owner and passengers.

Motor policies are divided into two sections :

1. Loss or damage to the insured vehicle, and

2. Liability to Third Party Liability for personal injury, death or property

damage.

Perils covered under Private Car Comprehensive Policy :

a) Accidental External means

b) Fire

c) External explosion

d) Self-ignition

e) Frost

f) Burglary, House-breaking

g) Earthquake perils

h) Flood etc. perils

i) Riot, Strike, Malicious Damage and Terrorist act damage.

Exclusions :

a) Indirect or consequential losses


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b) Depreciation or wear & tear

c) Mechanical/ electrical breakdown

d) Loss or damage to tyres only.

Two-wheeler Comprehensive Policy :

The cover under this policy is similar to the cover under Private Car Policy. But

the following losses are not covered :

a) Loss or damage to the motorcycle and its accessories by frost.

b) Loss or damage by theft or burglary of accessories only.

General

a) Towing charges from place of accident are payable under aforesaid

comprehensive policies.

b) Insured is also allowed to get temporary repairs done to the damaged

vehicle

c) Limit is fixed between Rs. 500/- to the maximum of Rs. 1500/-


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STANDARD FIRE & SPECIAL PERILS

Fire insurance policy is suitable for the owner of property/ financial interest

who holds the property (movable or immovable) such as building, plant &

machinery, furniture, fixture & fittings and other contents, stock & stock in

process along with goods held in trust or in commission including stocks at

suppliers/ customer’s premises, machinery temporarily removed from the

premises for repair.

Perils covered

Fire

Lightning

Explosion/ Implosion

Aircraft damage

Riot, Strike, Malicious Damage

Storm, Tempest, Hurricane, Tornado, Flood & Inundation

Impact damage

Subsidence & Landslide including Rockslide

Bursting & Overflowing of Water Tanks, apparatus and Pipes.

Missile Testing operations

Leakage from Automatic Sprinkler Installation

Bush Fire.

Additional Covers

Architects, Surveyors, Consulting Engineers fee (in excess of 3% of

claim amount)

Debris removal (in excess of 1% of claim amount)


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Deterioration of stock in cold storage due to power failures following

damage to an insured peril.

Deterioration of stock in cold storage premises due to change in

temperature arising out of loss or damage to the cold storage,

machinery (ies) in the insured’s premises due to operation of insured

peril.

Forest fire

Impact damage due to insured’s own vehicles, Fork lifts, Cranes,

Stackers and the like.

Spontaneous Combustion.

Omission to insure addition alterations & extensions.

Earthquake (Fire & Shock)

Spoilage Material Damage cover.

Leakage & Contamination cover.

Temporary Removal of stocks.

Loss of Rent Clause.

Insurance of additional expenses of rent for an Alternative

Accomodation.

Start-up expenses

Level of Coverage :

Sum Insured option on either Market Value (i.e. new replacement cost

less depreciation for wear & tear & use) or Reinstatement Value basis

(i.e. Local Authority Clause for covering additional cost to comply with

regulations affecting immovable property).

It is also necessary to keep the Sum Insured on building, machinery,

etc. at right levels and for this there is a provision of Escalation Clause


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whereby the Sum Insured can be indexed against inflation at a specific

percentage chosen by proposer, on payment of necessary additional

premium.

In respect of stocks, you can opt for various alternative Clauses to take

care of fluctuating stocks at one place or at different places and also

for seasonal variations of stocks by way of Floater Policy, Declaration

Policy or Floater Declaration Policy which considerably reduces your

premium outgo while providing full protection level.

Exclusions :

Fire due to own fermentation, natural heating or spontaneous

combustion of the stocks or by their undergoing any heating or drying

process.

Burning by order of any Public Authority.

Explosion of boilers or steam generating vessels & machinery subject

to centrifugal force by its own explosion/ implosion.

Pressure waves generated by aircraft.

Total or partial cessation of work/ retarding/ interruption of any process

or operations arising out of riot, strike, malicious damage.

Burglary, house breaking, theft, larceny arising out of riot, strike,

malicious damage.

Impact damages by rail/ road vehicle/ animal belonging to the insured

or employee or any occupier of the premises.

Normal cracking, settlement, bedding down, up heaving of land/

structures, coastal or river erosion, defective design, workmanship or

use of defective material.


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Destruction or damage caused by forest fire.

Loss, damage or destruction due to war & warlike operations, ionizing

radiations, radioactivity, pollution, contamination, etc.

Loss or damage by pollution or contamination except due insured peril.

Loss or damage to the electrical machine/ apparatus, which is the

source of fire i.e. overrunning, excessive pressure, short circuiting,

leakage of electricity, etc.

Loss or damage to stocks in cold storage caused by change of

temperature.

Any consequential loss.

Excess :

EXCESS DESCRIPTION

5% of each claim or Rs. 10,000/-

whichever is higher.

If loss due to operation of lightning,

subsidence & landslide, earthquake-fire

& shock, storm/ tempest/ flood/

inundation, etc.

A flat rate of Rs. 10,000/- If loss happened due to perils, other

those mentioned above, covered under

the policy.

A flat excess of Rs. 10,000/- In case loss, destruction or damage to

bullion, unset precious stones, curious,

work of art (unless specifically covered)

due to insured perils.


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Miscellaneous Insurance.

1 )BURGLARY & HOUSE BREAKING

This policy is specially meant for those individuals or organizations who

own valuable items or properties such as stock-in-trade, goods held in trust or on

commission, furniture, fixture, fittings, money in locked safe and any other item or

equipment.

Perils Covered :

ITGI policy provides protection against loss or damage to insured property due to

burglary and housebreaking, i.e,

Theft following upon an actual, forcible and violent entry to or exit from the

insured premises, and

Also damage to the premises themselves by burglars during such

incidents.

Level of Coverage :

The Sum Insured should be fixed on current market prices for stocks.

Other items such as furniture, fixture, equipments, etc, it can be fixed

either on Market Value (i.e. new replacement cost less depreciation), or on

Reinstatement Value basis.

To cover the fluctuating stocks at one place or at many places or

variations due to seasonality, options are from Floater, Declaration or

Floater Declaration Polices.


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Option for First Loss Policy where Sum Insured chosen is a percentage of

the full value of property in respect of stocks of bulk nature, where it is

impossible for the entire stocks/ contents to be burgled at one time.

Exclusions :

When insured’s family member or staff is a principal or accessory in an

incident.

Act of persons lawfully on the insured premises.

Act consequent to fire, explosion, riot, strike, convulsions of nature like

earthquake, etc.

War and nuclear risks.

Premises left unoccupied and unattended for over seven days.

Loss of cash from safe using duplicate key, unless the key is obtained by

threat or force.

Any consequential loss.

2) HOME SUVIDHA POLICY

Home Suvidha (a Package Policy) has been designed keeping in mind the

varying needs of the customers & gives protection to their home against a wide

range of risks and perils. It’s a simple policy wherein there are various

categories of Sum Insured and one can opt for the category most suitable

depending upon the extent of risk.

Coverage & perils under Home Suvidha :

Section 1 : Fire & Allied Perils (Contents)


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Contents of premises are covered against fire, explosion,

bursting/ overflowing of water tanks, riots, strike & malicious

damage, earthquake, flood, cyclone, landslide, etc.

Exclusions : As per fire policy.

Section 2 : Burglary & Other Perils (Contents)

Contents are covered against housebreaking, burglary,

robbery or dacoity and also against impact damages by

falling trees/ electric poles/ lamp posts, breakage or collapse

of television or radio aerials/ satellite dishes and damage by

civic authorities in the prevention of fire.

Exclusions : As per Burglary & House Breaking Policy

except premises left unoccupied or unattended for more than

60 days in continuation.

Section 3 : Television/ Video Equipment

This section covers loss or damage to TV/ video Equipment

against fire, theft, accidental damage and breakdown.

Exclusions :

1. Faults/ Defects existing at the commencement of this

insurance and well known to insured or any of family

member and any willful act or negligence of the same.

2. Continuous influence of operation e.g. wear & tear,

cavitation, erosion, corrosion, incrustation.

3. Any cost incurred in connection with elimination of

functional failures unless caused by perils covered.

4. Any manufacturer or supplier default or any amount

recoverable under the terms of Maintenance

Agreement.


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5. Damage to rented or hired equipments for which

owner is responsible either by law or under lease and/

or Maintenance Agreement.

6. Cost incurred/ time involved in the movement of

equipment and/or other property/ personnel outside

Geographical Limits, other than cost of delivery for

equipment parts Damaged.

7. Damage arising through fitting, adjustment, repair or

dismantling of any part of said equipment/ installation

other than by an authorised representative of an

Electronic Equipment manufacturer, dealer or that of

a reputed repairer

8. Damage to external antenna, dishes, masts & fittings

by theft.

9. Damage to consumable items like picture tube/ tape

due to use of the tape/ tube contrary to instruction of

manufacturer.

10. Any cost required for alteration, improvement or

overhaul or for making drawings, patterns and core

boxes.

Excess :

5% of claim amount or Rs. 500 /- whichever is

higher for each & every claim.

Section 4 : Personal Accident

This covers insured and their family members against

accidental bodily injury leading to death or disablement

[either permanent total permanent partial].

Exclusions :

1. Compensation under more than one of the table-

benefits in respect of the same period of disablement.


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2. Any other payment after a claim under any of the

benefits.

3. Any payment in case of more than one claim under

this section during any one policy period.

4. Payment of compensation in respect of death or injury

as a direct consequence of :

a) Committing or attempting suicide or intentional

self-injury.

b) Being under the influence of intoxicating liquor or

drugs.

c) Engaging in aviation other than traveling as a

bonafide passenger in any licensed standard type

of aircraft anywhere in the world.

d) Pregnancy or childbirth.

e) Venereal disease or insanity.

f) Contracting any illness directly or indirectly arising

from or attributable to HIV and/ or any HIV related

illness including AIDS and/ or any mutant

derivative or variation HIV or AIDS.

g) Committing any breach of law with criminal intent.

Section 5 : Fire & Allied Perils (Building)

Covers residential building against perils mentioned under

Section 1 above.

Exclusions : Same as in Section 1 above.

Section 6 : Personal Computer

Coverage against loss or damage to personal computer

insured due to fire, theft, accidental damage and breakdown.

Exclusions : Same as in Section 3 above.

Excess :


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5% of claim amount subject to a minimum of Rs.

2500/- in respect of each & every claim.

3)TRADE SUVIDHA POLICY

ITGI’s Trade Suvidha Insurance Policy gives complete protection to the

insured’s business against a wide range of risks and perils. It is a simple policy

wherein there are various categories of Sum Insured and you may opt for the

category most suitable depending upon the extent of risk. This simplified

package policy saves the tedious process of remembering and calculating minute

details of the assets of your business.

Coverage under Trade Suvidha :

Section 1 : Fire & Allied Perils (Contents)

Contents of premises are covered against fire, explosion,

riots, strike & malicious damage, earthquake, flood, cyclone,

landslide, impact damage by rail/ road vehicle or animal, etc.

Premium Rating : Rs. 2.25 per mille on the Sum Insured.

Exclusions : As per fire policy.

Excess :

5% of claim or Rs. 25,000/- in respect of each &

every loss arising out of “Act of God” perils such

as lightning, storm, tempest, flood, inundation,

subsidence, landslide & rockslide, earthquake, fire

and/ or shock covered under the policy.

Rs. 10,000/- for each & every damage arising out

of perils (other than above) covered under the

policy


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Section 2 : Burglary & Other Perils (Contents)

Contents are covered against housebreaking, burglary,

robbery or dacoity and also against impact damages by

falling trees/ electric poles/ lamp posts, breakage or collapse

of television or radio aerials/ satellite dishes and damage by

civic authorities in the prevention of fire.

Premium Rating : Rs. 1.25 per mille on the Sum Insured

Exclusions : As per Burglary & House Breaking Policy.

Section 3 : Money

Covers loss to Money. Money shall mean & include cash,

bank drafts, bank & currency notes, current coins, cheques,

postal orders, money orders and current postage stamps

which must be in the personal custody of the insured or his/

her authorised representatives and is being carried for

business purpose.

Premium Rating :

Rs. 5 per mille on the Sum Insured.

Coverage :

Loss of Money due to accident or misfortune whilst in

direct transit

1) from or to insured premises.

2) Between any collection/ payment centre and Bank.

Loss of Money due to house breaking, robbery,

dacoity, hold-up whilst in

1) Insured premises during business hours.

2) Locked safe or strong room, locked steel almirah/

standard cash box inside the insured premises

outside business hours.


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Exclusions :

Shortage of money due to error or omission.

Loss of money entrusted to any person other than the

Insured or authorised representatives.

Loss from any unattended vehicle, transits outside the

limits of the city/ town where the insured premises are

located, etc.

Section 4 : Personal Accident

This covers insured and their partners, directors or

permanent employees aged between 18-70 against

accidental bodily injury leading to death or disablement

[either permanent total permanent partial].

Premium Rating : Rs. 0.85 per mille on the Sum Insured.

Exclusions :

Compensation under more than one of the table-

benefits in respect of the same period of disablement.

Any other payment after a claim under any of the

benefits.

Any payment in case of more than one claim under

this section during any one policy period.

Payment of compensation in respect of death or injury

as a direct consequence of :

i. Committing or attempting suicide or intentional

self-injury.

ii. Being under the influence of intoxicating liquor

or drugs.

iii. Engaging in aviation other than traveling as a

bonafide passenger in any licensed standard

type of aircraft anywhere in the world.


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iv. Pregnancy or childbirth.

v. Venereal disease or insanity.

vi. Contracting any illness directly or indirectly

arising from or attributable to HIV and/ or any

HIV related illness including AIDS and/ or any

mutant derivative or variation HIV or AIDS.

vii. Committing any breach of law with criminal

intent.

Section 5 : Fidelity Guarantee

Coverage against direct pecuniary loss to the insured

caused by any act of fraud or dishonesty committed by any

salaried employee of the insured up to amount stated in the

schedule.

Premium Rating : Rs. 5 per mille on the Sum Insured

Provision : The loss shall have occurred in connection with

occupation and duties of the employee during the

uninterrupted continuance of his/ her employment and be

discovered within six months after the death, resignation,

dismissal or retirement of such person or six months after

this policy shall have ceased to exit, whichever of these

events shall happen first.

Exclusions :

Not more than one claim is payable in respect of

any one insured employee.

Any act or default of any insured employee done

or omitted to be done after the discovery by the

insured.

Any sum payable or due to him by the insured

shall be deducted from the amount payable under

the policy.


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Section 6 : Electronic Equipment

Covers loss or damage to computer, fax machine and their

parts/ accessories as well as data carrying material which

may be damaged by any cause other those excluded under

this section. Computer would include the entire system

consisting of CPU, keyboard, printer, monitor, stabilizer,

UPS, etc.

Premium Rating : Rs. 10 per mille on the Sum Insured.

Coverage :

Cost of dismantling and re-erection for purpose of

repairs.

Ordinary freight to & from repair shop.

Custom duties and other dues.

Cost of repairs and replacement.

The coverage is applicable after successful completion of

performance and acceptance test of the equipment and

when such equipments are at work, at rest or being

dismantled for the purpose of cleaning, overhauling and/ or

in aforesaid operation or while being shifted within the

premises.

Exclusions :

Damage due to faults/ defects existing at the

commencement of this insurance and known to

the insured, the insured’s directors, partners,

employees.

Willful act or negligence of the insured or insured’s

employees, directors, partners, representative.

Continuous influence of operation e.g. wear &

tear, cavitations, erosion, corrosion, incrustation.


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Any cost incurred in connection with elimination of

functional failures unless caused by perils

covered.

Any manufacturer or supplier default or any

amount recoverable under the terms of

Maintenance Agreement.

Damage to rented or hired equipments for which

owner is responsible either by law or under lease

and/ or Maintenance Agreement.

Cost incurred/ time involved in the movement of

equipment and/or other property/ personnel

outside Geographical Limits, other than cost of

delivery for equipment parts Damaged.

Damage arising through fitting, adjustment, repair

or dismantling of any part of said equipment/

installation other than by an authorised

representative of an Electronic Equipment

manufacturer, dealer or that of a reputed repairer

Damage to consumable items like bulbs, valves,

tubes, ribbons, fuses, seals, belts, wires, chains,

rubber tyres, objects made of glass, etc. unless

such parts are affected by an indemnifiable.

Damage to the insured item itself.

Any cost required for alteration, improvement or

overhaul.

Any cost of making drawings, patterns and

coreboxes/

Any extra cost for overtime, night-work, works on

public holiday, express freight, etc. for repairs or

replacement.


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Excess :

S.NO DESCRIPTION EXCESS

1. Personal Computer 5 % of each claim amount or Rs. 2500/-

Whichever is higher.

2. Electronic Equipment other

than Winchester Drive

5 % of each claim amount or Rs. 1000/-

Whichever is higher.

3. Electronic Equipment –

Winchester Drive

10 % of each claim amount or Rs.

2500/- Whichever is higher.

4) MEDI – SHIELD POLICY

Medi- shield is a group health insurance policy which is available to a group/ association/ Institution/ Corporate body. It covers reinstatement of Hospitalization/ Domiciliary hospitalization expenses for illness/ disease or injury sustained by the insured person within India only.

SCOPE OF COVER:

a) Room Rent, Boarding Expenses as provided by the Hospital/ Nursing Home.

b) Nursing Expenses.c) Surgeon, Anesthetist Medical Practitioner, Consultants, Specialist fees.d) Anesthesia, Blood, Oxygen, Operation Theatre charges, Surgical

Appliances, Medicines & Drug charges, Diagnostic Materials and X-ray,


48


Dialysis, Chemotherapy, Radiotherapy, Cost of Pacemaker, Artificial Limbs and Cost of organs and similar expense.

LIMIT OF LIABILITY

The liability of the company in respect of all claims admitted during the period of Insurance shall not exceed the Sum Insured per Insured person as mentioned in the Schedule.

EXCLUSIONS:

THE company shall not be liable to make any payment under this policy in respect of any expended whatsoever incurred by any Insured Person in connection with or in respect of:-

a) All diseases injuries which are in pre- existing condition when the cover incepts for the first time.

b) Any disease other than those stated in clause c) below, contracted by the insured person during the first 30 days from the commencement date of the policy. This exclusion shall not however, apply in the opinion of panel of medical practitioners constituted by the company for the purpose, the insured person could not have known of the existence of the disease or any symptoms or complaints thereof at the time of making the proposal for insurance to the company. This condition shall not however apply in case of the insured person having been covered under this scheme or group insurance scheme with any of the Indian insurance companies for a continuous period of preceding 12 months without any break.

c) During the first year of the operation of the policy, the expenses on treatment of diseases such as Cataract, Benign Prostetic Hyperthrophy, Hysterectomy for Menorrahagia or Fibromyoma, Hemia, Hydrocele, Congenital Internal Disesase, Fistuainanus, piles, Sinusitis and related disorders are not payable. If these diseases are pre- existing at the time of proposal they will not be covered even during subsequent period of renewal too.

d) War and Nuclear Risks:e) Circumcision unless necessary for treatment of a diseases nt excluded

hereunder or as may be necessitated due to an accident, Vaccination or inoculation or change of life or cosmetic or aesthetic treatment of any description, plastic surgery other than as may be necessitated due to an accident or as a part of any illness.

f) The cost of spectacles and contact lenses, hearing aids.g) Dental treatment or surgery of any kind unless requiring hospitalization. h) Convalescence, general debility, Run- down condition or rest cure,

congenital external disease or defects or anomalies, sterility, venereal disease, internal self- injury and use of intoxicating drugs/ alcohol.


49


i) All expenses arising out of any condition directly or indirectly cause to or associated with Human T- Cell Lymphotropic Virus Type III ( ITILB-III) or Lymphadinopathy Associated Virus (LAV) or the Mutants Derivative or variation Deficiency Syndrome or any Syndrome or condition of a similar kind commonly referred to as AIDS.

j) Charges incurred at Hospital or Nursing Home primarily for diagnostic, X- ray or laboratory examinations or other diagnostic studies not consistent with or incidental to the diagnosis and treatment of the positive existence or presence of that ailment, sickness or injury, for which confinement is required at a Hospital/ Nursing Home or at home under Domiciliary Hospitalization as defined.

k) Expenses on vitamins and tonics unless forming part of treatment of injury or disease as certified by the attending Physician.

l) Treatment arising from or traceable to pregnancy, childbirth including caesarean section.

m) Voluntary medical termination of pregnancy during the first 12 weeks from the date of conception.

n) Naturopathy Treatment.

Note: Acupuncture/ Magnetic treatments are not covered.

AGE LIMIT 5 TO 80 YEARS:

This insurance is available to persons between the age of 5 years and 80 years. Children between the age of 3 months and 5 years of age can be covered provided one or both parents are covered concurrently. Persons above 75 years have to be avoided if they want coverage on stand alone basis. Coverage to persons about 75 years of age are to be granted only if they are cases of renewals and have been covered with us for period of at least 3 years.

EXTENSION OF POLICY PERIOD:

In case the insured Person who is covered under Medi- shield Policy has to go abroad for 15 days and accordingly he buys an Overseas Mediclaim Policy for that 15 days and submits the proof of Overseas MEDISHIELD Policy to the company. In that event the period of Insurance in respect of that insured Pesron will be extended by 15 days. Alternatively if the Insured person is part of family and / or Group and the period of Insurance is to be same for everyone in the family, then in that case the pro-rata premium for the period when he was abroad will be available as Refund credit to that Insured Peron and it can be adjusted against next years renewal premium. However, there will not be Cash refund of the Premium.


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10. GROUP DISCOUNT:

Total No. of members Group Discounts25 to 100 15%Upto 300 18%Upto 500 19%Upto 1000 22%Upto 5000 28%Upto 10000 32%Upto 20000 33%Upto 25000 37%Upto 50000 40%Beyond 50000 To be decided by the Corporate

Office

BONUS/MALUS:

LOW CLAIM RATIO DISCOUNT(BONUS):

Incurred Claim ratio under the Medi- shield policy

Discount %

Not exceeding 60% 5Not exceeding 50% 15Not exceeding 40% 25Not exceeding 30% 35Not exceeding 25% 40

HIGH CLAIM RATIO LOADING (MALUS):


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Incurred Claims Ratio under the Medi- shield Loading Between 80% and 100% 25Between 101% and 125% 55Between 126% and 150% 90Between 151% and 175% 120Between 176% and 200% 150Over 200% Cover to be reviewed

1. EXTENSION UNDER MEDI-SHIELD POLICY

The policy can be extended to cover the education cost of the Insured Person.i) Any Tuition fees for repeating the academic year/ semester/class.

ii) Any examination fees.iii) Any fixed monthly boarding/ loading Expenses not exceeding

0.5% of the Sum Insured for School Education and 1.0% of Insured in Case of University, College Education.

iv) Other necessary incidental cost subject ot proof being submitted by you.

a) MAXIMUM AMOUNT PAYABLE:

The maximum amount payable is Rs. 60000/-.

b) INDEMNITY PERIOD:

The maximum period for which policy pay is 12 months.

RATE:1) Rs. 100 per school going Student2) Rs. 200 for College going student.

2. AMBULANCE CHARGES:- Rs 1000/-RATE: This benefit is payable at the rate of Rs. 5/- per Insured Person.

3. COST OF TRAVEL a) Cost of Travel for any relation, friend, colleague or any other

nominated person: the Maximum liability would be restricted to Rs. 15,000/- or actual expenses whichever is lower in any one period of Insurance. The prescribed rate would be Rs. 30/- per Insured person.

b) Cost of Travel for Insured Person: The maximum liability of the Company would be restricted to Rs. 7500/- or actual Expenses whichever is lower in any one period of insurance. The prescribed rate would be Rs. 15 per person.


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4. COST OF SUPPORTING ITEMS: The company’s maximum liability would be limited to Rs. 10,000/- or actual expenses whichever is lower in addition to Sum Insured. The prescribed rate would be Rs. 25/- per Insured Person. Supporting item includes stretchers, wheel chairs, intra-ocular lens, spectacles or any other item which in the opinion of registered medical practitioner is necessary for insured person.

5. Discounts for Reducing Pre and Post Hospitalization Period:

Accordingly for every reduction in this Pre Hospitalization period by 1 week, the discount would be 0.5% of the premium and it can be done pro- rata basis of remaining days thereof. For the post Hospitalization period, the reduction in the period by every week would entitle the Insured to earn the discount of 1% at the rate of per week and pro- rata of 1% for remaining days thereof.

6. Hospital Daily Cash:Overall sum insured chosen by insured can be apportioned for No. of days and a hospital daily cash cover can be granted.

Discount available

In the Premium

If the overall Sum Insured is apportioned for 30 days- 25%If the overall Sum Insured is apportioned for 45 days- 35%If the overall Sum Insured is apportioned for 60 days- 50%

8. ADDITIONAL OPTIONAL COVER OF BOARDING & LODGING EXPENSES:

Rs. 1500/- per week for one of the family members or next of kin who accompanies the insured person during the period of hospitalization. This weekly compensation will not be available for more than 8 weeks.


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Objective of Project

• To present work which I have done during my training period.

• To have the basic knowledge of general insurance and general detail

about various policies

• Working on this project enabled me to come into contact with important

authorities and individual who will be helpful to me in future.

• The project is prepared for the partial fulfillment of the M.B.A programme


54


Methodology of the Project

It is very important to have proper methodology for conducting any project

work. By presenting project in a proper way one can a very good impression on

the reader.

This project includes general detail about insurance industry, company details

different player in the market, product detail, & some detail of IRDA bill which has

been covered in the first part.

Now in second part I m presenting the different marketing channel & how they

can be integrated to have good results for the company.


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Finding and analysis:

As we know that every product & service has to be marketed properly to

have the desired results. In general we have general marketing channel is as

follows:

Manufacturer- Whole seller – Dealer -Retailer

These channels preferable for product only in service industry we have

make our own lobby of marketing channel. As we are in phase of revolution there

are no of new option are available to market our services. As insurance &

banking industry play the major role in service industry & support the whole

economy to prosper. I have presented my finding & analysis, which is as follow in

context to insurance & banking industry


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Channel of Distribution:

Till few years back, the only mode of distribution of insurance products

was through Agents. While agents continue to be the predominant distribution

channel, today a number of innovative alternative channels are being offered to

consumers. A substantial shift in the distribution of insurance in India is expected.

Many of these changes will echo international trends. Worldwide, Insurance

products move along a continuum from pure service products to pure commodity

products initially, insurance is seen as a complex product with a high advice and

service component. Buyers prefer a face-to-face interaction and place a high

premium on brand names and reliability. As products become simpler and

awareness increases, they become off-the-shelf, commodity products. Sellers

move to remote channels such as the telephone or direct mail. Insurance is sold

by various intermediaries, not necessarily insurance companies. Some of them

are brokers, the internet and direct marketing. Banks and finance companies will

emerge as an attractive distribution channel for insurance. This trend will be led

by two factors which already apply in other world markets. First, banking,

insurance, fund management and other financial services will all form a set of

services rather than disparate ones.

Second, banks and finance companies are being driven to increase their

profitability and provide maximum value to their customers. Therefore, they are

themselves looking for a range of products to distribute. Though it is too early to


57


predict, the wide spread of bank branch network in India could lead to

bancassurance emerging as a significant distribution mechanism.Insurers in

India should also explore distribution through non-financial organizations. For

example, insurance for consumer items such as refrigerators can be offered at

the point of sale. This piggybacks on an existing distribution channel and

increases the likelihood of insurance sales. Alliances with manufacturers or

retailers of consumer goods will be possible. With Increasing competition, they

are wooing customers with various incentives, of which insurance can be one.

Another potential channel that reduces the need for an owned distribution

network is worksite marketing. Insurers will be able to market pensions, health

insurance and even other general covers through employers to their employees.

These products may be purchased by the employer or simply marketed at the

workplace with the employer’s co-operation. Pricing India is a very price sensitive

market. However, 65 per cent of the business is in tariff, where pricing is still

determined by the government, which decides the rates, terms & conditions for

various businesses like Fire, Motor, Engineering, Workmen compensation

insurance etc. It is going to change over the next few years. In non-tariff products

like personal accident, Burglary, Cash-in-transit, marine transit etc. There is a lot

of pressure on pricing. Although the insurers are free to quote the rates,

companies will have to be reasonable while determining a pricing structure

because, across the globe, there are instances of companies going bust while

playing the game of undercutting state-run companies.

One of the most significant changes in the financial services sector over

the past few years has been the growth and development of bank & insurance.

Banking institutions and insurance companies have found bank & insurance to

be an attractive and profitable complement to their existing activities. The

successes demonstrated by various bank & insurance operations particularly in

Europe have triggered an avalanche of mergers and acquisitions across

continents and efforts are on to replicate the early success of bank & insurance

in other parts of the world as well.


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Distribution is the key issue in bank & insurance and is closely linked to

the regulatory climate of the country. Over the years, regulatory barriers between

banking and insurance have diminished and have created a climate increasingly

friendly to bank & insurance. The passage of Gramm-Leach Bliley Act of 1999 in

US and IRDA Bill in India in 2000 have stimulated the growth of bank &

insurance by allowing use of multiple distribution channels by banks and

insurance companies.

bank & insurance experience in Europe as well as in other select countries offers

valuable guidance for those interested in insurance distribution through the

banking channel in developing markets. Many banks and insurers are looking

with great interest at building new revenue through bank & insurance - including

large, traditional companies that wouldn't have considered such an approach

about a decade ago. Of particular interest, many believe, is the potential for bank

& insurance in developing economies such as those of Latin America and

Southeast Asia.

Distribution channels in bank & insurance

Traditionally, insurance products have been promoted and sold principally

through agency systems in most countries. With new developments in

consumers’ behaviours, evolution of technology and deregulation, new

distribution channels have been developed successfully and rapidly in recent

years. bank & insurance make use of various distribution channels:

-Career Agents

-Special Advisers

-Salaried Agents

-Bank Employees / Platform Banking

-Corporate Agencies and Brokerage Firms


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-Direct Response

-Internet

-e-Brokerage

-Outside Lead Generating Techniques

The main characteristics of each of these channels are:

Career Agents:

Career Agents are full-time commissioned sales personnel holding an

agency contract. They are generally considered to be independent contractors.

Consequently an insurance company can exercise control only over the activities

of the agent which are specified in his contract. Despite this limitation on control,

career agents with suitable training, supervision and motivation can be highly

productive and cost effective. Moreover their level of customer service is usually

very high due to the renewal commissions, policy persistency bonuses, or other

customer service-related awards paid to them.

Many bank & insurance, however avoid this channel, believing that agents

might oversell out of their interest in quantity and not quality. Such problems with

career agents usually arise, not due to the nature of this channel, but rather due

to the use of improperly designed remuneration and/or incentive packages

.

Special Advisers:

Special Advisers are highly trained employees usually belonging to the

insurance partner, who distribute insurance products to the bank's corporate

clients. Banks refer complex insurance requirements to these advisors. The


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Clients mostly include affluent population who require personalised and high

quality service. Usually Special advisors are paid on a salary basis and they

receive incentive compensation based on their sales.

Salaried Agents:

Having Salaried Agents has the advantages of them being fully under the

control and supervision of bank & insurance. These agents share the mission

and objectives of the bank & insurance. Salaried Agents in bank & insurance are

similar to their counterparts in traditional insurance companies and have the

same characteristics as career agents. The only difference in terms of their

remuneration is that they are paid on a salary basis and career agents receive

incentive compensation based on their sales. Some bank & insurance,

concerned at the bad publicity which they have received as a result of their

career agents concentrating heavily on sales at the expense of customer service,

have changed their sales forces to salaried agent status.

Platform Bankers:

Platform Bankers are bank employees who spot the leads in the banks

and gently suggest the customer to walk over and speak with appropriate

representative within the bank. The platform banker may be a teller or a personal

loan assistant and the representative being referred to may be a tarined bank

employee or a representative from the partner insurance company.

Platform Bankers can usually sell simple products. However, the time

which they can devote to insurance sales is limited, e.g. due to limited opening

hours and to the need to perform other banking duties. A further restriction on the

effectiveness of bank employees in generating insurance business is that they

have a limited target market, i.e. those customers who actually visit the branch

during the opening hours.


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In many set-ups, the bank employees are assisted by the bank's financial

advisers. In both cases, the bank employee establishes the contact to the client

and usually sells the simple product whilst the more affluent clients are attended

by the financial advisers of the bank which are in a position to sell the more

complex products. The financial advisers either sell in the branch but some

banks have also established mobile sales forces.

If bank employees only act as "passive" insurance sales staff (or do not

actively generate leads), then the bank & insurance potential can be severely

impeded. However, if bank employees are used as "active" centres of influence

to refer warm leads to salaried agents, career agents or special advisers,

production volumes can be very high and profitable to bank & insurance.

Set-up / Acquisition of agencies or brokerage firms:

In the US, quite a number of banks cooperate with independent agencies

or brokerage firms whilst in Japan or South Korea banks have founded corporate

agencies. The advantage of such arrangements is the availability of specialists

needed for complex insurance matters and -in the case of brokerage firms - the

opportunity for the bank clients to receive offers not only from one insurance

company but from a variety of companies. In addition, these sales channels are

more conceived to serve the affluent bank client.

Direct Response:

In this channel no salesperson visits the customer to induce a sale and no

face-to-face contact between consumer and seller occurs. The consumer

purchases products directly from the bank & insurance by responding to the

company's advertisement, mailing or telephone offers. This channel can be used

for simple packaged products which can be easily understood by the consumer

without explanation.


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Internet:

Internet banking is already securely established as an effective and

profitable basis for conducting banking operations. The reasonable expectation is

that personal banking services will increasingly be delivered by Internet banking.

bank & insurance can also feel confident that Internet banking will also prove an

efficient vehicle for cross selling of insurance savings and protection products. It

seems likely that a growing proportion of the affluent population, everyone's

target market, will find banks with household name brands and proven skills in e-

business a very acceptable source of non-banking products.

There is now the Internet, which looms large as an effective source of

information for financial product sales. Banks are well advised to make their new

websites as interactive as possible, providing more than mere standard bank

data and current rates. Functions requiring user input (check ordering, what-if

calculations, credit and account applications) should be immediately added with

links to the insurer. Such an arrangement can also provide a vehicle for

insurance sales, service and leads.

E-Brokerage:

Banks can open or acquire an e-Brokerage arm and sell insurance

products from multiple insurers. The changed legislative climate across the world

should help migration of bank & insurance in this direction. The advantage of this

medium is scale of operation, strong brands, easy distribution and excellent

synergy with the internet capabilities.

Outside Lead Generating Techniques:

One last method for developing bank & insurance eyes involves "outside"

lead generating techniques, such as seminars, direct mail and statement inserts.


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Seminars in particular can be very effective because in a non-threatening

atmosphere the insurance counselor can make a presentation to a small group of

business people (such as the local chamber of commerce), field questions on the

topic, then collect business cards. Adding this technique to his/her lead

generation repertoire, an insurance counselor often cannot help but be

successful.

To make the overall sales effort pay anticipated benefits, insurers need to

also help their bank partners determine what the “hot buttons” will be for

attracting the attention of the reader of both direct and e-mail. Great opportunities

await bank & insurance partners today and, in most cases, success or failure

depends on precisely how the process is developed and managed inside each

financial institution. This includes the large regional bank and the small one-unit

community bank.


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Suggestions and Conclusion

It is not possible to market insurance on sole marketing channel we should

integrated different channel & business model to become successful in insurance

business. Following are some suggestions to achieve that.

Distribution Models

Bank & insurance have developed three basic distribution models:

Integrative, Specialist and Financial Planning model.

Integrative / Generalist Model:

The integrative model distributes products through existing bank channels,

and in its most well-known European version, branch bankers themselves sell

insurance products to customers. Theoretically, this offers “One Stop Banking”

and requires extensive training to branch staff. Bank staff are supposed to know

the details of all the insurance products on offer. Telemarketing and direct mail

are also examples of integrative approaches.

Specialist Model:

The specialist model distributes investment or other complex insurance

products through product experts who are generally employees or

representatives of the insurance company. Platform bankers help identify


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prospects who are then contacted by an insurance professional. This process

requires less training bur requires higher compensation to support the referral

process. This model may not meet all of customers’ needs since it lengthens the

process of sale of even a simple insurance product which can otherwise be sold

across the counter.

Financial Planning Model:

The “financial planning” model is the only “team” approach. This method

offers each customer and prospect a full financial planning package addressing

all of the individual's financial concerns, risk tolerances and location in the cycle

of life. This process is beneficial for the customer, the bank and the insurer, as

the customer is viewed “outside the numbers”. bank & insurance convey the

message that they want to know all about the customer in relation to their current

and future financial needs and want to assist them on all those aspects of their

life.

To move a bank in the direction of becoming an effective user of the

financial planning model, the bank’s sales force first has to be taught how to

qualify prospects and make referrals and properly approach the

customer/prospect. This process will include and actively involve the bank &

insurance’s project in charge who is best acquainted with pertinent federal and

state regulations for the bank’s geographic market area.

Insurers' bank partners must then learn how to spot existingdepositors

/borrowers' “life triggers,” i.e., milestones in a life that represent insurance

opportunities. Although bank representatives have always done this in

conjunction with bank products, it is new to them to apply this concept to

insurance products as well. For example, a younger depositor mentions he is


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withdrawing part of his savings to purchase his first car. Knowledgeable bank

representatives or platform bankers would immediately understand the

requirement for the car insurance and may be personal accident insurance.

These bank staff functioning now as financial services representatives can

provide such sound practical advice, i.e., an insurance product to fit customer

current and future needs.

In general, a well-trained sales person can always count on certain “life

triggers” -birth, death, divorce, career change or other catastrophic event—to

lead his or her regular bank customers to new insurance products. If the bank’s

personnel are shown how to capitalize upon these triggers using insurance

products, they will automatically provide referrals to the insurance group and

insurance sales will follow.

Either of these distribution models works under the right circumstances.

What's most important is whether the model is compatible with the bank's

customer base and the insurance company's strategic objectives. European bank

& insurance experience shows that the Financial Planning Model is an extremely

productive way to reach a large number of bank customers.

Key Value Drivers

Which distribution model to use is a tactical decision secondary to more

basic strategic concerns. bank & insurance strategies should be driven by

markets and channels, encompass a broad range of tactics and practices, and

leverage the competencies of the bank and the insurer. They should identify and

build upon a discrete set of value drivers, those factors of such fundamental

importance that to ignore any one of them could be fatal to the success of the

project. The following four value drivers should be considered in a bank &

insurance strategy:

Brand equity.


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The strategy should leverage the bank's brand equity with consumers.

Consumers throughout the world rate bankers higher than insurance agents in

terms of such criteria as objectivity of advice and product knowledge. A

rationalized bank & insurance strategy will build on the superior brand equity of

banks by integrating insurance into the bank product portfolio and distribution

infrastructure. For many customers, banks can become the primary providers of

financial services by supplying personal risk management along with more

traditional banking services. Lloyds TSB has been using its own brand name for

a long time and have only recently indicated rebranding after acquiring Scottish

Widow. Halifax and Abbey National continue to use their own brand names

despite acquiring Clerical Medical and Scottish Mutual.

Distribution. The distribution model should accomplish the following objectives:

1) It should cater to all segments of the banking population

2) It should work as a single shop for all financial requirements for the bank

customer

3) It should effectively utilize the existing branch banking platform

4) It should take advantage of the multiple sales opportunities afforded by the

bank's other distribution channels

5)It should strive for congruence between product characteristics and channel.

One of the key economic advantages of bank & insurance is the savings

achieved through efficient utilization of the bank's existing distribution channels.

At some point in the development of a bank & insurance operation, the marginal

cost of adding one more customer becomes negligible. bank & insurance can

reduce significantly the costs of agent recruitment, selection and conservation.

These savings can be passed on to consumers through lower premiums, or the

bank can maintain the premiums at market level in order to increase profitability.


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Because the lower and middle segments of the life market are not price-

sensitive, the second option is often more desirable.

Technology.

Bank & insurance should plan a technological infrastructure that will

exploit customer information found in the bank's database to uncover sales

opportunities and produce transactional simplicity for insurance customers.

The information banks have about their customers' buying habits,

economic status and money management practices constitutes a valuable asset

often unrecognized even by large, sophisticated banking institutions. Using

technology to order information about the economic behaviour of customer

segments can provide valuable insights about insurance-selling opportunities.

For instance, customers buying a home through a bank mortgage can be

approached for a variety of insurance products. With a traditional insurer,

behavioural information about policyholders is usually unavailable, but even

when known, can only be employed by agents (who have an economic interest in

thwarting a direct relationship between the company and the client).

Bank & insurance should use technology to simplify the insurance

purchase as much as possible, thereby making the purchase an easier, more

pleasant experience and further differentiating themselves in the process. Buying

insurance in the traditional way means dealing with agents and the complications

of the underwriting process, which bank & insurance can eliminate. Branch

customers are usually in a hurry and don't want to wait, so banks will serve them

best by simplification. With point-of-sale technology, customers should be able to

buy policies in a short time and leave the bank with coverage in hand.

Particularly with an intangible such as an insurance policy, the buying experience

itself is a key part of the purchase. bank & insurance should make the experience

as positive as possible, and technology can contribute greatly to this effort.


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Culture.

An effective bank & insurance strategy acknowledges the fundamental

cultural conflict between the bank and the insurance company by aligning the

bank's interests with those of the insurance company. Without the bank's total

commitment to the insurance strategy, any bank & insurance program is doomed

to fail. One of the more effective ways to achieve this commitment is for the bank

to have an equity interest in the insurance company. With a stake in the financial

results of the insurance operation, the bank has a powerful in-centive to support

the insurance strategy. The alternative approach, buying "shelf space" in the

bank to sell insurance products, will rarely be as effective.

In any given situation, one of the four value drivers may greatly outweigh the

importance of the others. In some cases, solving the cultural problem may loom

especially large, while in others building an effective technology platform may be

paramount. bank & insurance will need to consider all four, however, to achieve

successful balance.

Trends in Mature Markets

Bank & insurance has blossomed across Europe with penetration rates

ranging from 20 percent of pensions and life premiums in Germany to 73 percent

in spain, according to Data monitor. In the UK, around 10 percent of life

insurance premium income is generated regularly through bank & insurance

channel.

The success of bank & insurance in European countries to date and its

projected future growth are eagerly trumpeted by investment bankers, particularly

to clients considering entering the market. In their view, bank & insurance is one

of the primary beneficiaries of the global movement toward liberalization and

subsequent integration of financial services. Clearly, the concept of one-stop

shopping, or allfinanz, is more advanced in some European markets where the

process of integration of financial services is further along.


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European experience shows that tax-advantaged insurance products with

an emphasis on savings accumulation can be successful in the banking channel

under certain circumstances. Protection products, such as pure term insurance,

are rarely promoted, and the big sellers are investment products with an

insurance wrapper. These products tend to compete with banking or investment

products rather than other insurance products.

In some countries, such as France and Spain, favourable tax treatment

affords bank & insurance products competitive advantages. On certain pension

products sold in Europe through banks, the tax advantages are substantial,

sometimes even including deductible premiums. In the United States, where

bank & insurance has achieved more modest success, it is openly acknowledged

that the market for annuities sold through banks and insurance agents would

evaporate if the government withdrew the favourable tax treatment of these

products. However, annuities continue to enjoy tax advantages, and the market

for these products through the bank channel is booming.

Distribution Strategies in an Emerging Market

The business model for bank & insurance in Europe does not necessarily

transfer to the regulatory and economic environment of a developing market. To

succeed in emerging markets, bank marketers will have to develop unique

strategies consistently attuned to local customer expectations and consistent with

bank distribution capabilities. The biggest challenge is determining how to reach

the middle and lower-middle economic classes, which comprise the largest group

of bank customers in such countries.

A frequent mistake made by many bankers and insurers is their failure to

develop unique strategies specifically for bank & insurance. Instead, they simply

extend their traditional agency distribution approach, because they view bank &

insurance as just another means of reaching their existing market of affluent


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consumers. Agents typically target the affluent because the average revenue per

customer is sufficient to support the fixed and variable costs of the distribution

system. The agency channel thus perpetuates itself: commissioned agents sell to

affluent customers because they generate enough revenue to make it profitable

to sell to other affluent customers. Because agents are the insurance company's

true customers, insurers provide them with products suitable for sale to the

affluent.

In developing markets, affluent populations are much smaller than their

counterparts in North America or Europe. Although distribution models geared to

wealthier bank customers exist, bank & insurance who pursue this segment of

the market are forced to compete directly with traditional insurers. In a

developing market, a strategy focused solely on affluent customers ignores the

largest group of bank customers.

A successful bank & insurance strategy focused on middle and lower-

middle income segments of the bank marketplace requires insurers to rethink

assumptions. To fully exploit the potential of the mass-market banking channel,

insurers need new types of distribution, underwriting, administration, policy issue

and delivery, premium collection procedures, customer service strategies and

sales approaches. In bank & insurance, technology must be combined with

fundamental knowledge of insurance to develop processes unique to the banking

environment.

Distribution Channels and Product Complexity

The design and implementation of the distribution model is as important, if

not more so, than product design in bank & insurance (except for the few clients

who require customized product solutions for individual financial planning needs).

If an insurance or investment product offers basic protection or the promise of

reasonable return at a fair price, consumers will buy it if the product, the

distribution system and the channel are compatible. Low penetration of insurance


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in emerging markets is not a failure of product design, but a failure of the

distribution system.

The diagram below demonstrates that products at varying levels of

complexity require different distribution channels and cost structures. As products

become more customized, the complexity of the product and the cost of

distribution (expressed as the cost-per-customer contact) increases. As a result,

the product and distribution system must also change. Complicated estate or

retirement planning cannot succeed via direct mail, and it's not economically

feasible to sell only accidental death through an external agency force. In a

traditional sales environment, neither the company nor the agent can earn

adequate profits selling a low-premium product (such as accidental death)

because costs are too high. Conversely, a direct mail company can be

enormously successful selling an accident product with an average premium of

only $100 because the cost per solicitation can be kept low

To be successful, the components of a distribution model must work

together; product features and benefits, distribution costs and marketing

channels all should complement each other. Bancassurers can tap all the


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channels identified in the model: direct mail, telemarketing, platform bankers,

Internet, in-house specialists, Career Agents or professional financial advisors.

The most effective bancassurance strategies will be driven by customers and

channels, not products, and will leverage the bank's competitive strengths.

A customer and channel driven bank & insurance strategy finds and

engages buyers where they are found. No attempt is made to impose a

preconceived product driven strategy. Traditional life insurers are often trapped:

they create a product with features attractive to agents (such as high

commissions), and then let the agents find appropriate target markets. This is a

type of "top-down" product development approach. However, the bank channel

requires an analysis of the market that starts at the bottom, with the customers,

and works up.

A "bottoms-up" approach in bank & insurance works differently. A

customer and channel-driven strategy capitalizes on the existing relationship of

trust and familiarity between the banker and branch customer and the frequency

of branch visits. In emerging markets, the lower-income customers found in bank

branches are usually wage-earners or small-business owners - the same type of

customers ignored by most insurance agents.

Visiting local branches frequently, these customers often develop close

relationships with branch managers or tellers. (Relatively few insurance agents

achieve similar levels of trust with their customers.) Even in the United States,

where Internet banking and automatic teller machines (ATMs) are omnipresent,

50 percent of bank customers have monthly contact with their local bank branch.

In developing markets, these contacts are more frequent and personal and often

come in the form of visits to a branch to perform simple transactions such as

funds deposits or withdrawals.

The type of distribution channels that a company uses affects the design

and pricing of its products, as well as the way in which the products are promoted

and perceived in the marketplace. Some bank & insurance started out by selling


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simple products which could be sold in large volumes but which usually had low

margins to cover expenses and profits. If we compare how products and

distribution are related to the profits of an organization, we will come to the

conclusion that the more complex the products sold are, the higher the required

margins will need to be.

Many banks entered bank & insurance with a defensive strategy in their

attempt to avoid market share erosion by insurance companies. Very soon,

though, they realized that they could gain market share if they expanded their

product range, developed a sales culture within their organizations, created a

multi-channel distribution structure and exploited the potential of the customer

information that can enable the identification of customer needs.

Cultural Issues in Distribution

The managers of banks and of life insurance companies can come from

quite different cultures. There may be differences in the way of thinking and

business approaches of bankers and managers of insurance companies. These

differences create a communication and implementation problem in bank &

insurance operations. Banks are traditionally demand-driven organizations with a

reactive selling philosophy. Life insurance organizations are usually need-driven

and have an aggressive selling philosophy.

It has been observed that this friction at the level of bank employees and

life insurance salespeople arises from differing philosophies towards selling, the

jealousies of bank employees regarding remuneration of life sales staff and fears

of "cannibalization" of deposits, e.g. the bank employee fears that the

salesperson encourages withdrawal of bank deposits, putting the bank

employee's job in greater jeopardy. As a result the team spirit is negatively

influenced and, since this is a crucial factor for the success of any operation, it

has to be confronted.

Cultural differences between the banking and the insurance industries

must be understood, respected and lived with in order for the bank & insurance


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venture to succeed. The development of a single culture is another possible

solution but this requires a very strong commitment from the top management.

This commitment must be continuously conveyed to all bank employees and life

insurance agents. One way of achieving this is to develop a "statement of

mission" for the new organization and to get the staff to commit to fulfilling this

statement. This can help to ensure that there is a common path for the bank and

the life insurer.

Integration of Various Distribution Channels

It seems very difficult for a single distribution channel to successfully reach

the bank & insurance 's goals and specific target markets. Many bank &

insurance are using multiple distribution channels. This way they avoid becoming

locked into one channel and they can offer services to a greater number of target

markets. Multiple distribution channels provide another valuable feature. They

enable the enterprise to offer customers multiple options for access. Therefore, if

a customer wants to see someone about a particular service on one day but

wants to transfer funds at a later date, e.g. on a Sunday night, the availability of

both branch office and 24-hour telephone access increase the service value to

that customer.

However, conflicts may arise among the various channels and also within

channels under a multi-channel system. To avoid this it is necessary to ensure

the following:

1) Colleagues within a channel are motivated to cooperate

2) There is communication of the importance of every link in the distribution


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3) Cultural differences are communicated and respected

4) The goals of every partner in the distribution process can be fulfilled by the

process

5) The specific role and performance expectations of each channel member are

clearly stated, understood and accepted

6) Communication between channels is encouraged

7)Channel leadership is strong and committed to success.

By completely integrating their distribution channels in accordance with an

established model, companies can achieve substantial cost savings, improve

productivity and ensure that all stakeholders, shareholders, customers and staff

are satisfied.

The future of integrated distribution calls for the customer to be placed at

the heart of the distribution network. The call centre and the agency no longer

operate as separate channels. Rather a synergy is realised through realignment

of roles and responsibilities and the creation of a new sales integrated sales

process, maximising lead generation activity. Whatever the combination of

distribution channels, the financial services company must seek to always

improve the customer experience and deliver the service more cost effectively.


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Bibliography

• www.itgi.org

• www.irdaindia.org

• www.indiainfoline.com

• S. Balachandran, IC 34 General Insurance. Mumbai


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