1

A

Summer Internship Report

On

Hybrid distribution ModelOf

Submitted in partial fulfilment of the Requirement for award of

Master in Business Administration

Submitted to : Submitted by :

Dept. of Business Administration Sahil Monga

Roll No. 1416210015

M.B.A 2.3

Department of Business Administration

Chaudhary Devi Lal University, Sirsa(Session: 2015-2016)

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DECLARATION

I, hereby declare that the Summer Training Report entitled "Hybrid Distribution Model of SBI life Insurance" in submitted in partial fulfillment of

the requirement for the award of “Master in Business Administration” collected by my own effort and it is true and real up to my knowledge is

concerned and the report is not submitted to any other educational institutions or for any other

purpose whatsoever

(Sahil Monga)

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Preface

Now days in this dynamic era Insurance is coming as an important tool for reducing the effect of uncertainty and risks. It

becomes an integral part and indispensable part of human life. There are various types of Insurance Plans to provide protection

from loss and uncertainties. So Distribution channel has very important place in a Insurance company.

So it is a great opportunity for me to study on "Hybrid Distribution Model of SBI life Insurance" . The purpose of

this research is to know every aspect related to Distribution channel of insurance .

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ACKNOWLEDGMENT

Research Report is a combined effort including this one also, so / would like to thank to all who have helped me completion of

this report purposeful.

I also want to thank to Mr. Karanveer, Unit Manager and Mr. Pawan Sharma , Learning & Development Officer in SBI LIFE

Insurance Co. Ltd. for helping me in completion of this study.

Further I Would like to thanks to all of my Teachers. Staff Members. Library Members, and Friends for their valuable support

and advices which helps me a lot to completing this study purposeful.

(Sahil Monga)

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TABLE OF CONTENTS

Chapter No. Particular Page No.Chapter No. 1st Company Profile 1-18

Chapter No. 2nd Research Methodology 19-20

Chapter No. 3rd Analytical Study 21-42

Chapter No. 4th Conclusion and Suggestions 43-45

Chapter No. 5th Bibliography 46

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List of Tables and Diagrams

List of Tables and

Diagrams

Particulars Page No.

Table no. 1 Board of Directors 10

Table no. 2 Key persons 10

Table no. 3 Advantages & Disadvantage of

bancassurance

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Table no. 4 Percentage of employees left 39

Table no. 5 Sales-Force Attrition Trend in Life Insurance 39

Figure no.1 New Business Premium Total Market Share 17

Figure no.2 New Business Premium Private Market Share 18

Figure no.3 Hybrid distribution Channel of SBI Life

insurance

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Figure no.4 Channel Mix – Gross Premium Collection 35

Figure no.5 Sale force attrition life insurance industry 40

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Chapter 1 st

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1. COMPANY PROFILE

Life is a big gamble. Things don’t always turn out the way you want them to. Anything can happen to you or to your valuables. An accident, a theft, death, the possibilities are endless.

The problem before society was this uncertainty that hung over like a sword. How could society protect its members from such random risks that could strike anyone, anytime?

The solution was pooling.  Pooling together of risks among an entire population so that the impact of hazard is minimized for everyone. Notice how similar this simple financial innovation has much in common to how we humans organize ourselves. We stay together in groups and help each other.  Insurance works in a similar way. People pool together their risks and help the guys who run out of luck.

Let’s say you have 2% chance of being killed pre-maturely.  If you are killed, your dependents like your parents and children will be left helpless. You can ensure that they are not harmed incase anything happens to you by signing up for life-insurance. The life insurance company will pay your dependents the sum for which you were covered in case you die within the period for which you were covered and will charge you a yearly fee called premium for this service. The company will collect premiums from all individuals who signed up for life insurance and pay an individual’s dependents from this pooled premium incase he loses his ability to earn (death/permanent disability). Of a very large sample of people, statistically if the 2% chance probability is correct, 2 out of every 100 people will die and will need to be paid. This probability becomes stable as the sample size increases. This stability enables companies to be sure they won’t be bankrupted by lots of claims. Therefore, you should try to opt for large, trustworthy insurance companies over small ones. The premiums are determined by Actuaries and Appraisal Agencies after calculating the risk involved.

Insurance companies need to obviously be financially sound so that they can pay off claimants. As a result they have to follow regulations of the countries in which they are operating. In India, the insurance industry is regulated by IRDA

Remember that you are not gambling with your life while buying life insurance. You are buying your piece of mind. A Life Insurance policy is extremely essential for an individual who wants to stay secure and happy and has dependents. After all, our money is not an end in itself. Of what use is all our income if we cannot promise security to our family?

Insurance can assume a lot of forms

Life Insurance (Term Plans, Endowment Plans, ULIPS)

General Insurance .

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In a plain vanilla term life insurance, you will not get back your premium in case you outlive your covered period. Yet, term life insurance is much better than some other products like ULIPS or Endowments that are currently on offer.

Nowadays, insurance can be purchased for seemingly small and trivial things.  A good rule of thumb to follow is that if you will be completely devastated by the loss of an object, you should purchase insurance for it. A good example is your home. If your life will not be thrown off-track by the loss of a particular object, there is no sense purchasing insurance for it.

Also remember that Insurance is not an Investment product, it is a Risk Management product. Stay away from products like ULIPS and Endowments that combine Insurance and Investment. They make for poor Insurance products (High Premiums) and poor Investment products (Low Returns). When you forget this distinction, you will be taken for a ride by insurance agents who get hefty commissions for ULIPS. Typically, Insurance Companies frame policies in a way so that Moral Hazards are minimized.

Meaning Of Insurance

Insurance is a contract between the insurance company (insurer) and the policyholder(insured). In return for a consideration (the premium), the insurance company promises to pay a specified amount to the insured on the happening of a specific event. In layman term Insurance is the mechanism of transfer of risk wherein the person taking out insurance transfers their risk to the insurance company in return for a payment (known as the premium). Insurance is necessary because no one foresees the event which may happen in future. If anybody can see their future then there was no need of Insurance. In case of future untoward events risk like Accident/Death, Insurance comes to rescue where the financial gap due to these risks is compensated upon. Insurance is generally divided into two parts:-

(1) Life Insurance: - Life insurance companies cover risks that relate to human lives. They offer different benefits under different types of products and cover the risk of early death, as well as the risk of living into old age. Under traditional plans, like term insurance plans, insurance companies provide death cover. If the insured person dies within the term of the policy then the nominee/beneficiary is paid a specified amount (also known as the sum insured). Under pension plans, insurance companies offer periodic monthly payments (annuities) to support the insured during their retirement.

(2) Non-Life Insurance (General Insurance): - Non-life insurance companies generally cover risks other than those relating to human lives. The exceptions to this are personal accident and health insurance, which are provided by non-life insurance companies. Any asset either gives a monetary return (e.g. a house given on rent), or offers convenience (e.g. a car which can be used to travel from one place to another) can be insured. All assets are exposed to various risks: they can be damaged or destroyed by fire, earthquake, riot, theft, flooding, cyclones etc. If the asset is damaged by any of these risks, the owner will be at a disadvantage and they will lose the income or the convenience the asset provided. Non-life insurance companies offer products that cover these risks and compensate the owner should the asset be damaged by one of them. It

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is a product from this type of company that an individual would buy to protect their assets, for example, their home against fire etc.

ABOUT SBI LIFE INSURANCE

Life is full of surprises, some pleasant and some not so pleasant. Our families and we have to live with these uncertainties. Preparing for the uncertainties of life is what Insurance is all about. Insurance is a tool, a solution for delegating the worries concerning tomorrow onto a trustworthy institution so that you can start living today.

With SBI Life, you could smoothen the rough edges of life; make it a bit easier, so you needn't worry about your children's education, or your family's future. Whether you are looking for a safe investment vehicle with good returns or life cover with regular returns in the future, all it needs is one small action on your part. Leave the rest to us and SBI Life will take care of your near and dear ones, and most importantly you.

SBI Life Insurance is a joint venture between the State Bank of India and Cardif SA of France. SBI Life Insurance is registered with an authorised capital of Rs 500 crore and a paid up capital of Rs 350 crores. SBI owns 74% of the total capital and Cardif the remaining 26%. SBI Life has already covered more than 8 lacs group lives with an additional 2.5 lacs lives through individual policies. State Bank of India enjoys the largest banking franchise in India. Along with its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,000 branches across the country, the largest in the world.

Cardif is a wholly owned subsidiary of BNP Paribas, which is The Euro Zone’s leading Bank. BNP is one of the oldest foreign banks with a presence in India dating back to 1860. It has 9 branches in the metros and other major towns in the country. Cardif is a vibrant insurance company specializing in personal lines such as long-term savings, protection products, and creditor insurance. Cardif has also been a pioneer in the art of selling insurance products through commercial banks in France and 29 more countries.

While sharing its aggressive plans, SBI Life also announced the infusion of additional fresh capital of Rs. 75 crores to take its capital base up to its authorized share capital limit of Rs. 500 crores. Speaking on the occasion, Mr. S. Krishnamurthy, MD and CEO, SBI Life Insurance said, “The additional capital has been injected to maintain stipulated solvency margins for the exponential new business growth and expanding branch network” SBI Life Insurance’s mission is to emerge as the leading company offering a comprehensive range of Life Insurance and pension products at competitive prices, ensuring high standards of customer service and world class operating efficiency. The company plans to make the insurance buying process quick, simple, and based on well-informed judgments. In 2004, SBI Life Insurance became the first company amongst private insurance players to cover 30 lakh lives.

The company expects to carve a niche in the Indian insurance market through extensive product innovation and aims to provide the highest standards of customer service through a technological interface. To facilitate this, call centers have been already installed and help lines

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will be installed and customers will have access to their accounts through the Internet or through SBI branches. The company proposes to make available ready liquidity to its Life Insurance policies by way of loans at SBI counters. This will make Life Insurance a liquid asset in the financial portfolio of households.

SBI Life Insurance is uniquely placed as a pioneer to usher bancassurance into India. The company hopes to extensively utilise the SBI Group as a platform for cross-selling insurance products along with its numerous banking product packages such as housing loans, personal loans, and credit cards. SBI’s access to over 100 million accounts provides a vibrant base to build insurance selling across every region and economic strata in the country.

Mission, Vision and Values of SBI Life: -

Mission: -

"To emerge as the leading company offering a comprehensive range of life insurance and pension products at competitive prices, ensuring high standards of customer satisfaction and world class operating efficiency, and become a model life insurance company in India in the post liberalization period".

Vision: -

"To be the most trusted and preferred life insurance provider."

Values: -

Trustworthiness.Ambition.Innovation.Dynamism.Excellence.

BANCASSURANCE

The bank insurance model (BIM), also sometimes known as Bancassurance, is the partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank sales channel in order to sell insurance products, an arrangement in which a bank and an insurance company form a partnership so that the insurance company can sell its products to the bank's client base.BIM allows the insurance company to maintain smaller direct sales teams as their products are sold through the bank to bank customers by bank staff and employees as well. Bank staff and tellers, rather than an insurance salesperson, become the point of sale and point of contact for the customer. Bank staff are advised and supported by the insurance company through product information, marketing campaigns and sales training. The bank and the

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insurance company share the commission. Insurance policies are processed and administered by the insurance company. This partnership arrangement can be profitable for both companies. Banks can earn additional revenue by selling the insurance products, while insurance companies are able to expand their customer base without having to expand their sale forces or pay commissions to insurance agents or brokers. Bancassurance, the sale of insurance and pensions products through a bank, has proved to be an effective distribution channel in a number of countries in Europe, Latin America, and Asia.

Brief History:-

The first countries to venture into the field were Spain and France. In the early 70s, ACM (Assurances du Crédit Mutuel) Vie et IARD (life and general insurance) were officially authorized to start operations, a watershed event in the history of insurance. It was their idea to bypass the middleman for loan protection insurance and to insure their own banking customers themselves. They thus became the precursors of what – 15 years later – would become “Bancassurance”. For their part, the Spanish began their adventure in the early 1980s, when the BANCO DE BILBAO Group acquired a majority stake in EUROSEGUROS SA (originally LA VASCA ASEGURADORA SA, incorporated in 1968). However, their control was initially only financial, since Spanish law prohibited banks from selling life insurance. This legal barrier was removed in 1991.

Today, the top five Spanish Bancassurance companies control one third of the market (Vida Caixa, BBVA, SHC Seguros, Aseval, Mapfre Vida). However, from a purely historical point of view, the real pioneers were the British with the creation of Barclays Life in September 1965. This subsidiary was not a great success in the UK, and nor, for that matter, was the concept of Bancassurance. On the other hand, the Bancassurance concept attracted more than one bank on the continent and the big players very quickly began to set up subsidiaries or joint ventures, thereby introducing the model into their respective countries:

France: In 1971, Crédit Lyonnais acquired the Médicale de France Group and in 1993 signed an agreement giving the Union des Assurances Fédérales Group exclusive rights to sell life insurance through the Crédit Lyonnais network.

Spain: In 1981, the Banco de Bilbao Group acquired a majority interest in EUROSEGUROS SA, an Insurance and Reinsurance company.

Belgium: In 1989, AG – Belgium’s leading insurance company – and Générale de Banque, created Alpha Life. One year later, the big Dutch insurance company AMEV N.V., and VSB, a Dutch bank, went into business together. In the same year, they were joined in the first cross-border merger by AG Group, thereby creating the Fortis Group.

SBI LIFE BANCASSURANCE

It is the largest channel of distribution compared to others (i.e. Institutional Alliance,Corporate Solutions, and Retail Agencies). Bancassurance Channel only contributed around 40-50% profits for SBI Life.

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Process of Insurance Selling:-

It has its Bancassurance tie-up with State Bank of India and it 5 associate banks, namely State Bank of Patiala, State Bank of Mysore, State bank of Travancore, State Bank of Hyderabad and State bank of Bikaner and Jaipur. Employees of these banks are volunteer or chosen by their managers to become Insurance Advisors for SBI Life. The prospective Insurance Advisors have to pass an exam and undergo a stipulated amount of hours’ of training after which they obtain a license from the IRDA. These individuals are called Certified Insurance Facilitators (CIF). In addition to their banking duties and responsibilities, the CIFs undertake the task of cross selling insurance products in order to earn cross selling revenue for their bank. Thus all CIFs are employees of SBI and its associate banks. Business Development Managers (BDMs) from SBI Life oversee and coordinate the activities of the CIFs in the bank branches. The branch target and individual targets are assigned by the head offices. Incentive driven contests are run by both, SBI Life as well as SBI in order to motivate and encourage the sales force. Since the CIFs are bank employees, they report to their managers in the branch itself. The CIF approaches the customers on his/her own and goes ahead to complete the deal. In certain cases, CIFs pass on the leads to their respective BDMs who tales it ahead from there. The number of CIFs varies from branch to branch depending on its nature of business, span of operation, location and scale

Products of SBI Life: -

Products are broadly categorized into:-

(1) Individual Plans(2) Health Plans(3) Group Plans

(1) Individual Plans:- Individual Plans are further classified into:-

(i) Unit Linked Plans: -Under Unit Linked Plans there are 7 products offered by SBI Life. These products are Smart Performer, Unit Plus Super, Saral Maha Anand, Smart Elite, Smart Scholar, Smart Horizon and Smart Wealth Assure. Unit Linked Insurance Plans are long term investment cum protection plans that offer customer an opportunity of availing market linked returns while providing life insurance protection. Depending on risk appetite, customer has the option of choosing from host of funds having varied degree of risk exposure. Flexibility and transparency are some of the other attractive features that make ULIPs an attractive long term investment option.

(ii) Child Plans: -There are two products offered under this plan namely Scholar II and Smart Scholar. These plans basically secure child’s future by taking care of expense like education and provide financial support in case of any uncertainty in future. Also it secures child life from an unfortunate event, by securing financial gap where nominee would receive full sum assured along with vested bonus, plus regular guaranteed survival benefit if there is death of parent.

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(iii) Pension Plans: - Two products are offered under this plan namely Annuity Plus and Saral Pension. About nearly 70-80% of people doing job does not have the facility of pension. So this plan secure financial gap that might occur after retirement. Thus the products mentioned here provide regular income even after retirement so that people do not compromise their standard of living even after retirement.

(iv)Protection Plans: -

There are 6 products under this plan and they are eSheild, Grameen Bima, Swadhan, Saral Sheild, Smart Sheild and Smart Income Shield. These plans are basically pure term plan (term plan has got only death benefit no maturity benfit) and thus these plans are cheaper at cost. They provide death cover with full sum insured during term plan.

(v) Savings Plans: -

In this plan there are 6 products mainly Smart Income Protect, Sanjeevan Supreme, Shubh Nivesh, Saral Life, Flexi Smart and Money Back. These types of plans are for those who want to invest so that they can save. Instead of saving and keeping at home the money can be invessted under these plans to get better deal with interest and bonus which will be payable at maturity.

(2) Group Plans: -

SBI Life offers a wide range of employee benefit solutions which helps organizations to retain, reward and encourage the best talent in the industry. It also provides a host of corporate solutions to both statutory needs as well as voluntary needs of the employers and hence ensures to strengthen the employer -employee relationship in the long run. Under this plan there are many Products but main two products which are selling huge are – RiNn Raksha and Swadhan.

(i) RiNn Raksha- RiNn Raksha provides Insurance against Car Loans as well as Home Loans. Thus it provides tension free life without any liability worries and thus the best seller product since most of family wants a Home and Car which today has become a necessity. This plan offers life to live “Debt Free” and thus tagline of the product says “Inherit your home and not home loan”.

(ii)Swadhan (Group):- It is a Non-Participating Group Term Insurance Plan which offers dual benefits of life cover protection in the event of death and refund of premium in case of survival up to the end of the cover term.

The top selling products are Smart Performer and RiNn Raksha.

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Board Of Directors (Table no. 1) :-

Name of Directors & Designation  

Director Identification Number (DIN)

Smt. Arundhati Bhattacharya, Chairman 02011213

Mr. V G Kannan, Director 03443982

Mr. B Sriram, Director 02993708

Mr. Pierre de Portier de Villeneuve, Director 06738111

Mr. Gerard Binet, Director 00066024

Mr. Nilesh Vikamsey, Independent Director 00031213

Mr. Ravi Rambabu, Independent Director 01845094

Mr. K M Bhattacharya, Independent Director 00318457

Mr. Raj Narain Bhardwaj, Independent Director 01571764

Mr. Arijit Basu, Managing Director & CEO 06907779

Key Persons (Table no. 2) :

Name of Key person Role/designation

Mr. Arijit Basu Managing Director & CEO

Mr. Anand Pejawar Executive Director – Marketing

Mr. Sanjeev Pujari Executive Director - Actuarial & Risk Management and Chief Risk Officer

Mr. Ravi Krishnamurthy Executive Director – Marketing

Mr. M Anand Executive Director – Marketing

Mr. Abhijit Gulanikar Chief Officer Investments

Mr. Sangramjit Sarangi Chief Financial Officer

Mr. S P Singh Chief Audit Officer

Mr. Subhendu Bal Appointed Actuary

Mr. Sarang Cheema Compliance Officer

Key Milestone

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Financial Year13-14:  

Most Trusted Private Life Insurance Brand 2013' by The Economic Times, Brand Equity and Nielsen SurveyMost Trusted Brand identifies brand which posses the most special ingredient - the Consumer's Trust. 

Best Life Insurance Provider 2013 – Runner Up' by Outlook MoneyThe Outlook Money Awards recognise excellence in Financial Services.

Indian Insurance Awards 2013:Under-served Market Penetration Award 2013' (Private Sector):for being pro-active in terms of reaching out to customers in relatively under-penetrated states and regions in India. 

Claims Service Company of the Year Award 2013' (Private Sector): SBI Life has demonstrated effective and speedy claims settlement while maintaining high levels of client service, satisfaction and focus in handling claims in FY 2012-13, setting up a benchmark for the industry to follow. 

Global Performance Excellence Award 2013' by Asia Pacific Quality Organisation (APQO)SBI Life has achieved a unique distinction by featuring amongst the nine organisations from six Asian and Pacific Rim Countries to be recognised as exemplary companies of world class quality performance. 

Digital Inclusion Skoch Awards 2013' SBI Life received the award for the project - Enabling partners to collect premium through Electronic Fund Transfer - Cash & Direct Debit. The award recognises best practices in the fields of governance, finance, banking, technology, corporate citizenship, economics and inclusive growth. 

Communication Excellence Award 2013 at 4th CMO Asia Awards' SBI Life received the award for the project - Represented by 25 countries across Asia, CMO Asia Awards recognises organisations for displaying leadership in strategic communication combined with consistent innovation. 

Recognised amongst Top-50 Great Places to Work' SBI Life was ranked 36th amongst Great Places to work in India. India's Best Companies to Work for Study 2013, the largest study in the country on workplace culture, attracted participation from around 550 organisations spanning across 22 industries. 

BFSI (Banking Financial Services and Insurance) 2014 Awards The Most Admired Life Insurance Company in the Private Sector' The Best Life Insurance Company in the Private Sector' The BFSI Award recognises the best performances of various Banking, Finance and Insurance Services. The award focuses on best of the best practices of the BFSI industry based on the strategy, security, customer service and the future technology challenges and

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innovations. 

Awards at the World HRD Congress:Dream Company To Work For 2014 in Private Insurance'Dream Employer of the Year 2014' - Ranked 4thEmployer Branding Award 2014' for Talent ManagementWorld HRD Congress is the largest rendezvous of HR Professionals from across the world. It recognizes the organisations with best HR Practices across the globe. 

Training Provider of the Year Award' at Asia's Training & Development Excellence Awards 2013 The award is conferred by World HRD Congress and endorsed by Asian Confederation of Business. 

ISO 27001 Certification for Information Security Management System' (ISMS) 

ISO 9001:2008 Certification for Quality Management Systems for Planning, Designing and Developing Training Programs' 

Financial Year 12-13: 

Most Trusted Private Life Insurance Brand, 2012", for the second consecutive year, by The Economic Times, Brand Equity and Nielsen, Most Trusted Brands 2012

Won the coveted Indian Merchant Chamber (IMC) Ramkrishna Bajaj National Quality Award, 2012 in &Service Sector'

Awarded The Indian Insurance Award 2012 - Claims Service of the Year Award and Under-Served Market Penetration Award

Awarded the Dun & Bradstreet - PSU Award 2012 for the "Top Indian Public Sector Enterprise" in the Insurance sector  Won the "Best Employer" Brand Award at IPE BFSI Awards

CRISIL has reaffirmed its AAA / Stable rating to SBI Life, indicating highest financial strength to meet policyholder obligations

ICRA has reaffirmed its iAAA rating indicating highest claims paying ability and a fundamentally strong position

Received ISO 10002: 2004 Certification for Complaints Management System (CMS)

Financial Year 11-12: 

Awarded the most coveted NDTV Profit Business Leadership Award, twice in a row, 2010 & 2011. 

Awarded ‘Most Trusted Life Insurance Brand - II  By The Economic Times, Brand Equity and Nielsen, Most Trusted Brands 2011.

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Globally topped the prestigious Million Dollar Round Table (MDRT) for having the maximum number of MDRT members, for three years consecutively.

CRISIL reaffirmed its AAA / Stable rating to SBI Life,  indicating highest financial strength to meet policyholder obligations. 

ICRA reaffirmed its iAAA rating indicating highest claims paying ability and a fundamentally strong position.

Won one of the most prestigious quality distinction, IMC Ramkrishna Bajaj National Quality Awards 2011- "Certificate of Merit" 

Awarded Silver Shield by ICAI for Excellence in Financial Reporting for FY 2010 – 11 under the Insurance category.

Won  ’Best Presented Accounts Award‘ by The South Asian Federation of Accountants (SAFA), in the Insurance Category for the Annual Report FY 2009-10.

Financial Year 10-11: 

SBI Life won the coveted Bloomberg UTV Financial Leadership Award 2011 - "Life Insurer of the year". 

Won the most coveted NDTV Profit Business Leadership Award 2010.

Globally topped the prestigious Million Dollar Round Table (MDRT) 2010 for having the maximum number of MDRT members.

Awarded the Gold Shield by Institute of Chartered Accountants of India (ICAI) for Excellence in Financial Reporting. 

Won the ‘ICS Quality Champion Award 2010’ for Continual Quality Improvement. 

Adjudged Best Life Insurer 2010 - Runner Up by Outlook Money. 

Launched an innovative customer care initiative - SMS ‘SOLVE’ for prompt Grievance Redressal.

Appraised at Maturity level 3 of Capability Maturity Model Integration (CMMI) Version 1.2 for its ISG Division. 

ICRA reaffirmed ’iAAA’ rating to SBI Life, indicating highest claims paying ability and meeting policyholders obligations. 

CRISIL, country’s leading rating agency, reaffirmed its highest financial rating AAA/Stable to SBI Life.

Financial Year 09-10: 

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Reported a robust Net Profit of Rs.276 Crores.

Crossed Rs.10,000 Crores in Gross Written Premium (GWP).

Assets Under Management (AUM) grew by 96% to Rs.28, 551 Crores.

Globally topped the prestigious MDRT 2009 for having Maximum number of MDRT Members.

ICRA reaffirmed iAAA rating to SBI Life indicating highest claims paying ability. 

Awarded ISO Certification (ISO/IEC 27001:2005) for Information Security Management System (ISMS).

Retained ISO 9001:2000 certificate for superior claim settlement process.

Major Players In Indian Insurance

Life Insurance:

Public: Life Insurance Corporation of India

Private: HDFC Standard Life Insurance Max New York Life Insurance ICICI Prudential Life Insurance Kotak Mahindra Life Insurance Birla Sun-Life Insurance TATA AIG Life Insurance SBI Life Insurance ING Vysya Life Insurance Bajaj Allianz Life Insurance MetLife Insurance AMP Sanmar Life insurance Aviva Life Insurance Sahara India Life Insurance Shriram Life Insurance BharathiAXA Life Insurance

General Insurers

Public: National Insurance New India Assurance Oriental Insurance United India Insurance

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Private: Bajaj Allianz General Insurance ICICI Lombard General Insurance IFFCO-Tokyo General Insurance Reliance General Insurance Royal Sundaram Alliance Insurance

Competitive Analysis:-

For the last couple of years, the life insurance industry went through a transition phase that has changed the dynamics and approach of the insurance players. After a strong growth phase, the Indian life insurance industry is now stabilizing. The industry is facing a number of challenges involving the macro-economic environment, consumer sentiment and rapid regulatory changes. As a consequence, the insurance players are struggling with slow growth, rising costs, deteriorating distribution structure and other constraints. The industry players are re-configuring their business model, product mix and distribution structure to achieve a bigger pie of market share.

Life insurance penetration in India was always low, but, worryingly enough, it has been falling even lower for last two consecutive years. New regulations enforced by the insurance regulator effective September 2010, are partly responsible for curbing the scope of Unit Linked Insurance Plans (ULIPs). The share of linked business is declining year after year. In distribution channel mix, Bancassurance channel is gaining more prominence due to its cost effectiveness and wide network availability. During the year, the industry strengthened its focus towards enhancing professional delivery of products and services, customer satisfaction and operational efficiency. In financial year 2013-14, the industry has witnessed a de-growth of 6.3% in new business premium income. With low insurance penetration as compared to the large Indian population base, there is tremendous scope for the life insurers to capitalize on.

Figure no. 1: New Business Premium Total Market Share

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71.25%

28.75%

Premium

LICPrivate companies

Figure 2: New Business Premium Private Market Share

16.85%

15.63%

9.73%

4.47%

14.42%5.97%

6.17%

3.86%

4.28%

2.73%

15.88%

Premium

SBI LifeICICI PrudentialBajaj AllianzReliance LifeHDFC LifeBirla SunlifeMax LifeKotak MahindraMet LifeIndiaFirstOthers

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Insurance Industry statistics :

New business premium fallen to 107,011 crores during the current financial year 2012-13 from 114,233 crores of the previous financial year, showing a de-growth of 6.32%;

Private sector has registered a de-growth of 5.97%;

Private sector retained a market share of 28.75% of total new business premium which is slightly better than the previous year;

Regular premium (non-single) business of private players has declined marginally by 3.5%, whereas the same is declined by 17% for the industry as a whole;

Single premium business of private sector has declined sharply by 11.6%, whereas the same has grown by 6.63% for the industry.

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CHAPTER 2 nd

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2. RESEARCH METHODOLOGY

Problem Statement:-The study of Hybrid Distribution Model and High Attrition Rate of SBI LIFE Insurance .

OBJECTIVE OF THE STUDY:-

To study the Hybrid Distribution Model of SBI LIFE Insurance .

To study the attrition and reasons behind it in SBI life insurance .

To manage the talent by proper recruitment process to increase the productivity of SBI Life insurance

To discuss the possible means for retention of talent in cost effective manner

TOOLS OF DATA COLLECTION:-

Secondary tool : Secondary data is collected through various mediums and these are such as

library, books, journals, internet, newspaper, magazines

SIGNIFICANCE OF THE STUDY:-Distribution channel is the life blood of insurance business. Insurance distribution is strewn with opportunities and challenges . To make most of opportunities in growing market like india we have to overcome challenges while enchasing opportunities .Traditional distribution channel of agency still rules the roost in life insurance in india , alternative distribution channel which came up after the opening up of six years back have huge potential which need to be tapped. It has been two years since the Indian insurance market has opened up, and the new entrants into the market have set up shop in every major city. The public sector companies have already established themselves in the market.

An employee is a real pillar of any organization and long term retention of competent workforce is the most important factor in achieving high level performance. Thus in this context, the present study is highly significant for life insurance companies and other related organization facing problem and huge loss due to employee attrition. Research findings will also be useful for other companies facing similar type of problem.

LIMITATION OF THE SUTDY:-

The time allotted for conducting the in plant study was only 45 days. It is not enough for

understanding about the organization in detail.

Unavailability of some documents which were confidential.

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Employees were busy in their work so they could not give more information.

The study is limited to my experience and knowledge.

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Chapter 3 rd

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3. Analytical study of Hybrid Distribution Model of SBI LIFE Insurance

Meaning Of Distribution channel:- Distribution means to spread the product or services through out the market place such that a large number of people can buy it.

Distribution channel is the life blood of insurance business. Insurance distribution is strewn with opportunities and challenges . To make most of opportunities in growing market like india we have to overcome challenges while enchasing opportunities .Traditional distribution channel of agency still rules the roost in life insurance in india .alternative distribution channel which came up after the opening up of six years back have huge potential which need to be tapped

It has been two years since the Indian insurance market has opened up, and the new entrants into the market have set up shop in every major city. The public sector companies have already established themselves in the market. But there are multiple challenges faced by these insurance companies, of which two are critical:

Designing of products suiting the market Using the right distribution channel to reach the customer

While the companies have been quite successful in dealing with the first of these challenges using the existing product features and leveraging the technical know-how of their partners, most are still grappling with the right channel mix for reaching potential customers. This paper discusses the distribution channels of SBI Life insurance from the perspective of the socio-cultural ethos of the market and how these channels fit into it, along with where the various companies face challenges and bottlenecks. Whenever any debate arises about the intermediaries and distribution channels, the discussion veers to technology and its impact on distribution. However, the authors believe that the basic existential problems being faced by the channels in this market needs to be looked into first, and then the question of enablers - technology, tools, training, learning etc.

Challenging Scenario demanding role transformation of intermediaries:

Insurance has to be sold the world over, and the Asian Market is no exception. The touch point with the ultimate customer is the distributor or the producer (as they are known in certain markets), and the role played by them in insurance markets is critical. It is the distributor who is makes the difference in terms of the quality of advice forchoice of product, servicing of policy post sale and settlement of claims. In the Asian markets, with their distinct cultural and social ethos, these conditions will play a major role in shaping the distribution channels and their effectiveness.

In today's scenario, insurance companies must move from selling insurance to marketing an essential financial product. The distributors have to become trusted financial advisors for the clients and trusted business associates for the insurance companies.

This calls for leveraging multiple distribution channels in a cost effective and customer friendly manner. For example, in the developed markets producers (brokers and agents) form the major channels of distribution, while the web as a

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complementary channel is catching up slowly. According to a Forrester survey, 88% of the Life insurance executives responding identified agents as the primary channel of distribution. The distinction of channels in the developed markets is: personal distribution systems and direct response systems. Personal distribution systems include all channels like agencies of different models and brokerages, bancassurance, and work site marketing. Direct response distribution systems are the method whereby the client purchases the insurance directly. This segment, which utilizes various media such as the Internet, telemarketing, direct mail, call canters, etc., is just beginning to grow.

Distribution Scenario in the Indian market :

In today's Indian insurance market, the challenge to insurers and intermediaries is two-pronged:

Building faith about the company in the mind of the client Intermediaries being able to build personal credibility with the clients

Traditionally tied agents have been the primary channels for insurance distribution in the Indian market; the public sector insurance companies have their branches in almost all parts of the country and have attracted local people to become their agents. The agents are from various segments in society and collectively cover the entire spectrum of society. A person who has lived in the locality for many years sells the products of the insurance company with a local branch nearby. This ensures the last mile touch point being closer to the customer. Of course, the profile of the people who acted as agents suggests they may not have been sufficiently knowledgeable about the different products offered, and may not have sold the best possible product to the client. Nonetheless, the customer trusted the agent and company.

This arrangement worked adequately in the absence of competition. In today's scenario agents continue as the prime channel for insurance distribution in India, as is the case in most markets, supported by call centers to a small extent. Almost all the new players follow this model primarily because the regulations for other channels are yet to be put in place. However there is great excitement in the industry over the impending broker regulations, and companies are planning possible channels in their enthusiasm to increase volumes. The belief that all these channels will grow and seamlessly integrate to bring in business seems a fallacy. What has emerged is a much more difficult and evolving market scene with existing players, more new players coming in, and global marketing practices and ideas being tested. But none of this has changed the fundamental character of the market, which we believe will take more time than expected.

SBI Life insurance’s multiple distribution channels :

Distribution channels have changed the way life insurance has been marketed in India. Apart from the well established agency channel, the Insurers have been exploring alternative channels viz. bancassurance, corporate agencies, brokers, rural channels, direct and online marketing etc. Though the alternative channels may not be in position to completely replace the personal selling based channels yet they offer an effective reach at reduced cost. This paper makes an earnest attempt to study the behavior of the SBI life insurance in the selection of these two distribution channels in an Indian perspective by making a comparative study.

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Though a multi-channel strategy is better suited for the Indian market as well, it is important to keep in mind that this market is really a conglomeration of multiple markets. Each of the markets within this conglomeration requires a different approach. Apart from geographical spread the socio-cultural and economic segmentation of the market is very wide, exhibiting different traits and needs. Let us look at the various insurance distribution channels and the challenges faced by them from these perspectives. SBI Life has a unique multi-distribution model encompassing vibrant Bancassurance, Retail Agency, Institutional Alliance and Corporate Solutions distribution channels.

SBI Life extensively leverages the State Bank Group relationship as a platform for cross-selling insurance products along with its numerous banking product packages such as housing loans and personal loans. SBI’s access to over 100 million accounts across the country provides a vibrant base for insurance penetration across every region and economic strata in the country, thus ensuring true financial inclusion. Agency Channel, comprising of the most productive force of over 80,000 Insurance Advisors, offers door to door insurance solutions to customers.

Figure No. 3 : Hybrid distribution Channel of SBI Life insuranceSBI Life insurance BrokersInternet

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Agency Channel:

Conventionally, insurance products have been sold through agents, who are not the regular employees of the organization but the organizational success, however, critically depends on the effectiveness of these people . An agent is the public face of an insurance company. Most of the insurance clients never get to see any one else besides the agent. They are known by a myriad of names like financial advisors, insurance agents, life advisors and certified financial consultants. Due to increasing competition, the skill set of these agents has also been undergoing a change. Companies like SBI Life Can boast of a professionally qualified and well – trained agency force. Also shares about the changing profile of an insurance agent in India due to the competition in the industry as well as other substitute investments like mutual funds and housing property to compete for the same rupee.

Today, investment is becoming more sophisticated and the customer, more demanding. Agents are more of a necessity because of the fact that insurance is primarily a concept that needs to be sold prior to underwriting and also as they play vital role in servicing the customers. It also maintains that since insurance organizations have realized the importance of prompt customer service in the competitive market, the insurance agents must have to be on their toes catering to the growing customer needs and serving them always. The future referrals can come from satisfied customers. The agents need to carry out jobs like collection of premium, revival of lapsed policies, nomination and assignment, grant of loans, payment of survival benefits, settlement of surrender value, policy alterations and the settlement of claims. The role of the agent today is becoming more and more important. Linked to one insurer, they get a commission on the policies sold, which is usually a fixed percentage on the premium. The Indian experience shows that , SBI Life the organization has an agency force of more than 80000. Majority of business being achieved through the tied agency force necessitates that the agents interests have to be kept in mind while developing products. Some private players have gone ahead and are recruiting High Network Individuals (HNIs) like chartered accountants, doctors, corporate trainers and teachers as their agents for effective prospecting and conversion into policy.

For a decade agency was only distribution channel for life insurance in india. The agency Channel provided a significant thrust to the overall business, contributing 60% in FY 2006-07 and contributing 48 % of new business premium in 2013-14 for SBI LIFE Insurance. This channel has various merits .

Merits :-

Through agency personal contact and relationship can be established With the customer. Agents provide various presale and post sales services to customers. It involves no capital investment This channel’s awareness and acceptability is maximum among people Due lo personal contact ,it can provide valuable feedback about the need and expectation

of consumers.

Agents :

Today's insurance agent has to know which product will appeal to the customer, and also know his competitor's products in the same space to be an effective salesman who can sell his

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company, the product, and himself to the customer. To the average customer, every new company is the same. Perceptions about the public sector companies are also cemented in his mind. The new companies are looking for educated, aware individuals with marketing flair, an elite group who can be attracted only with high remuneration and the lure of a fashionable job, all of which may not be possible in this business with its price pressures and the complexity of selling insurance. Unable to attract this segment, they have started easing recruitment conditions as against the stringent norms they had earlier, thereby diluting the process. While the public sector companies are able to attract agents, they continue to suffer from high attrition rates due to indiscriminate agent appointment.

The most successful of these companies tied agents are hardly of the elite variety of salesman. They are still the neighbourhood , goobers , the postman, the schoolteacher, and the shopkeeper -- who know the people and are themselves known in the community. The challenge here is the lack of knowledge of the competitive market and the inability to do intelligent comparisons with the competitor's products. Educating and training these agents is a serious challenge for the insurance company. The relevance of this kind of agent continues even today as agents are sought or contacted by families by word of mouth. Insurance companies are advised not to follow the path of FMCG's/credit card companies, believing that a suited and booted customer care consultant or financial consultant will necessarily appeal to the average Indian customer. Another social feature in the market is the considerable respect for age in Indian society and a belief that an older person knows better.

A very young up-market agent who is a typical salesman may not appeal to a large segment of the middle class, which is looking for a solid trustworthy person from whom they can buy insurance. In this context it might be a rewarding exercise to recruit some older people (who have taken VRS2 from banks and other financial institutions) to sell some lines of products like pension plans, annuities etc. Gender of agents is another relevant feature in the rural context that makes a difference, especially for the female population. Women to whom the customers can relate - e.g., nurses, gram sevikas that can target the female segment of the population more effectively. What is applicable for the rural women and children health programs and population control programs is equally applicable for insurance selling also. SBI Life has adopted a version of this strategy by appointing gram sahayaks4 to sell and service the rural customers. With this kind of segmentation of intermediaries the challenge for the insurance company lies in training and educating these people to become effective sales persons. But this in no way diminishes the benefits of intermediary segmentation.

Types of Agents :

Insurance agents : An agent is a person who represents an insurance firm and sells insurance policies on its behalf . Agency Channel, comprising of the most productive force of over 80,000 Insurance Advisors working for SBI life Insurance. An independent agent sells insurance products on behalf of one insurance carrier. An independent insurance agent normally works from a small or store-front office, and will include the insurance company brand on all marketing materials. Independent agents receive a commission from the insurance company on all policies sold.

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Eligibility for agents:

The eligibility was made 12th Standard for all places with population of 5000 and 10th standard for all other places.

Training of 100 hours (with a relaxation for the qualified people and 150 hours in the case of composite agents who can do life as well as general business) was mandated as a prerequisite for issue of License.

Training of 25 hours practical training has also been introduced for renewal of license for all new agents.

Corporate Agents :- The corporate agent is a concept introduced with a view to taking advantage of the presence of large no. Of firms , corporations, banks , NGOs , punchayats who are in contact with people in normal discharge of their activities and utilize their presence and services for canvassing the sale of insurance contracts . Similar to an independent agent, a corporate agent sells insurance products for one insurance carrier. Corporate agents normally do not have public offices, relying instead on telemarketing and online sales efforts funded by the insurer. Corporate agents are employees of the insurance companies and draw a salary for their efforts.

Definition of corporate agent includes a firm, a company founded under the Companies Act 1956, Banking company as defined under the said act or a cooperative society including a cooperative bank registered under cooperative societies act of 1912, NBFC registered with RBI, Panchayat or a local authority or NGO or a micro lending finance organization under cooperative society Act or any Board or Institution recognized by either central or state Government.

Specified person or the corporate insurance executive to have the same qualifications applicable to the individual agent and undergo the requisite training.

Bancassurance Channel :

Bancassurance means that selling of life assurance and other insurance products and services by banking institutions. It means that it is a joint venture between a bank and insurance company. Banks in India are all pervasive, especially the public sector banks. Can they also become the foremost channel for distribution of insurance ? Perhaps in the future. The public sector banks, with their vast branch networks, are also plagued by a rigid unionized workforce and archaic systems, and lack vision of a broader service spectrum encompassing non-banking products. The newer banks are constrained by their lack of reach and meager branch strength.

For banks to become a predominant channel for selling insurance will require a paradigm shift. But the encouraging fact for insurance companies waiting for bancassurance to take off is that bank branches are here to stay, and customers do want them. A customer survey by Deloitte Consulting5 in the western developed markets found that for banking activities, customers place high importance on having convenient branches in their banking relationships. This is good news for the Indian banks with their many branches, and also makes a strong case for taking up

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bancassurance. The major lines of business that can be sold through bancassurance successfully are term insurance, creditor insurance, and non-life products like Property, Motor and Personal accident, Homeowners comprehensive insurance etc. An example is SBI Life,6 which is waiting for the broker regulation to be put in place in order to move ahead aggressively with the bancassurance model.

One of their major product lines is creditor insurance, and they have launched their first creditor insurance product, which covers the liabilities of the creditor in case of death of debtor. SBI Life is planning a similar product for home loan borrowers of State Bank of India. This model has high relevance in the Indian context with far-flung villages where the insurance potential is in volume and not in high per capita premiums. Some advantages and disadvantages are:

Table no. 3

Advantages of bancassurance Disadvantages of bancassurance

High credibility (as trustworthy caretakers of money) with the public.

Economic viability for the banks to take up as bancassurance is a volume business

A ready customer base Training of people and lack of vision and awareness

Low cost channel for selling simple vanilla products

Useful for selling only certain lines of products

Extensive reach including the rural pockets

Initial investment in systems and processes and people training .

The strategy should be to use multiple banks according to their presence in different regions. Success would come by using bancassurance where it will most effective - i.e., selling simple, cheap products to the masses at a low cost. This awareness is growing and is evident from the fact that nearly every insurance company has partnered with one or many banks to implement bancassurance.

SBI Life extensively leverages the State Bank Group relationship as a platform for cross-selling insurance products along with its numerous banking product packages such as housing loans and personal loans. SBI and its associate banks has 20000 plus branches in all over india . SBI’s access to over 100 million accounts across the country provides a vibrant base for insurance penetration across every region and economic strata in the country. Bancassurance contributed 24% in 2006-07 and contributed 30% of new business premium in 2013-14.

Insurance Brokers :

Insurance broker became a regulated term under the Insurance Brokers (Registration) Act 1977 which was designed to thwart the bogus practices of firms holding themselves as brokers but in fact acting as representative of one or more favoured insurance companies. The term now has no legal definition following the repeal of the 1977 Act. The sale of general insurance was regulated

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by the Financial Services Authority from 14 January 2005 until 31 March 2013 and by the Financial Conduct Authority since 1 April 2013. Any person or firm authorized by the Authority can now call themselves an insurance broker.

Insurance brokerage is largely associated with general insurance (car, house etc.) rather than life insurance, although some brokers continued to provide investment and life insurance brokerage until the onset of more onerous regulation in 2001. This drove a more transparent regime based predominantly on up front negotiation of a fee for the provision of advice and/or services. This saw the splitting of intermediaries into two groups: general insurance intermediaries/brokers and independent financial advisers (IFAs) for life insurance, investments and pensions.

General insurance brokering is carried out today by many types of authorized organisations including traditional high street brokers and telephone or web-based firms. With the broker regulation under review and expected any time, this could be the next hope, especially for the urban market. This will be a new experience for the insurance customer, accustomed to brokers in financial services, real estate, and travel and tourism. For historical reasons the image that 'broker' carries in the minds of the customer is not very favorable. Thus the new breed of insurance brokers face the challenge of establishing credibility. The positives are that brokers in the urban arena can attract the elite and the upper middle class customer. Brokers represent the customer and will sell the products of more than one company. They seek to determine the best fit for the client and can effectively address the mind block faced by the public about the various companies. This is applicable in the case of life insurance for the high-end and corporate/group segment.

In the non-life segment, broking is not entirely new, as reinsurance brokers were arranging exotic covers. For individual customers also, with a wide range of competitive products, the broker can get a good deal. The corporate broking companies will have to play a prominent role. If NGOs based in rural areas can be attracted into the rural sector cooperatives arena, they stand a good chance of succeeding and can help the new players get a foothold in the rural market. These are the players with the potential to make the difference, as they have the trust of the people. We envisage scenarios like that in Bangladesh's micro lending growth and the milk co-operatives 7 in Gujarat selling insurance in addition to milk production and distribution. It would be a new dawn in Indian insurance distribution! With the right impetus the Indian rural insurance scenario could be one with high business volume and tremendous growth potential.SBI Life Insurance have already partnered with NGOs8 to sell some low cost insurance in rural areas. However, the challenge lies in establishing regulations that protect the customer and attract the right players

into the brokerage market rather than creating another middlemen segment eroding the premium. The broker acts as an intermediary between the companies and insurers and represents insurance buyer. Insurance brokers differ from agents. Agents represent the insurer but insurance broker represent the clients .This channel is new experience for the life insurance customer .Brokers have a fiduciary responsibility towards the customer.

A fiduciary responsibility is a legal relationship of trust and confidence between two parties. Brokers as fiduciary legally promise you to keep your interest paramount. So as brokers they understand your needs and browse through several insurers to get you the best-fit product. The Company has garnered a business of 2% through this channel. Insurance broker are of following two types :

1) Retail insurance brokers : usually arrange insurance policies for individuals or companies and deal directly with them. Policies for individuals include motor, house,

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travel or pet cover, whereas policies for companies are likely to cover damage to property and business disruption. Retail insurance brokers also deal with employer's liability and public and products liability insurance.

2) Commercial insurance brokers:   deal with high value and more complex insurance cover in areas such as marine, aviation, oil and gas, and financial risks.

Typical work activities:

Activities depend on the type of employer and scale of the business. In a large company, a broker may specialize in a core area; in a small firm, a broker could be involved in most functions, including new business development and acting as placing broker and claims broker.

Tasks often involve:

gathering information from clients, assessing their insurance needs and risk profile; building and maintaining ongoing relationships with clients including scheduling and

attending meetings and understanding the nature of clients' businesses or lives; foreseeing clients' insurance needs, such as policy renewals; researching insurance companies' policies and negotiating with underwriters to find the

most suitable insurance for clients at the best price; arranging specialized types of insurance cover in complex cases; this may involve

preparing reports for insurance underwriters and surveyors and negotiating with insurers; advising clients on risk management and helping to devise new ways to mitigate risks, for

example, by adding security measures such as fencing, surveillance cameras or lighting to commercial properties to reduce the likelihood of a break-in;

ensuring clients understand the terms and the extent of the cover provided in line with industry regulations;

renewing or amending existing policies; advising clients whether and when they need to make a claim on their policies; marketing and acquiring new clients; developing relationships with underwriters, surveyors, photographers, structural

engineers and other professionals; administrative tasks such as paperwork, correspondence and keeping detailed records; winning accounts against competitors; keeping up with changes in the insurance market and in the clients' industries; collecting insurance premiums and processing accounts.

Work site marketing :

This area needs to be tapped, as in any country one of the biggest markets is through the worksite. With changes in human resources management polices and compensation packages, group products or work site products do have a definite market that cannot be ignored. Here the advantages would be:

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Captive customer base Potential to sell individual insurance and group insurance High trust factor High hit ratio for the intermediaries

The challenges would be the cost effectiveness, product customization and efficient post sales servicing, which would determine continued business. Technology has a key role to play in worksite marketing to ensure cost benefits. Banks and financial institutions have been successfully marketing credit cards and other financial products using this channel. If not an identical model a similar approach can be used for selling insurance.

Direct Business Channel (Internet):

Internet has become one of the most important channel for insurance companies. Internet provide online insurance market place. Though India is joining the fast growing breed of net users, using net for transactions has not yet caught up. Though a few banks provide online banking, the usage is still a small fragment. The insecurity associated with transactions over the net is still an inhibiting factor. At present most of the insurance companies have product information and/or illustrative tools on the web. We do not see the web evolving into a means for direct selling of insurance in the current scenario. In the Indian market, where insurance is sold after considerable persuasion even after face-to-face selling, the selling over the net, which must be initiated by the client, would take some more time.

While the technology capability is there, improvements in bandwidth and infrastructure are needed. Also needed are simpler products where auto-underwriting is feasible. Automobile insurance, one of the segments of insurance purchased "off the shelf" in India, would be the ideal segment to start with. On the life side, term assurance for standard lives with simplified underwriting is a possibility.

These channels by themselves will not be able to overcome the mindset of the people, but rather

can only be enablers for the human channels. With the changing customer needs, the Company has introduced online products for its tech savvy young generation potential client base.

The direct business also includes business generated by Company’s Corporate Solution & Cross Selling departments dealing directly with corporate & individuals as per their needs. The Company has garnered a business of 3% as Direct Business in FY 2014-15 which grew from 2% of FY 2006-07.

Contribution of different channels in Total Premium Collection :

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The Company, SBI Life, has delivered another successful year of operational excellence, financial performance, growth & recognitions. Balancing profitability and growth, despite worsening global financial environment & slowdown in Indian insurance industry, SBI Life has posted a record profit of 622 crores reflecting a growth of 11.94% as compared with previous year.

The Company collected a total Gross Written Premium (GWP) of 10,450 crores, comprised of 5,183 crores New Business Premium and 5,267 crores Renewal Premium. The Company has registered a strong growth of 19.40% in its First Year Premium and a growth of 13.30% in its Individual new business measured on Annualized Premium Equivalent (APE) basis. The performance in Renewal Premium collection led to improvement in the Company’s 25th month persistency by 319 basis points and 37th month persistency by 1144 basis points. The company retained a private market share of 16.85% and a total market share of 4.84% for the financial year 2013-14.

Reflecting excellence in its operational efficiency, SBI Life continued to maintain one of the lowest Operating Expense (excl. service tax on ULIP charges) to GWP Ratio at 9.73%, amongst private sector life insurance companies. The Asset under Management (AUM) of the Company rose by 11.46% to 51,912 crores as on March 31, 2014 as against 46,576 crores as on March 31, 2013. The Company is committed to maintain a stricter solvency margin level than the regulatory requirement. The Solvency ratio of the Company stands at 2.15 as on March 31, 2014 as against the regulatory requirement of 1.50, indicating the strong & stable financial health of the Company.

All key distribution channels namely, Bancassurance, Agency and Corporate Solutions demonstrated profitable business growth during the year. The Agency Channel provided a significant thrust to the overall business, contributing 41.57% of total premium as a result of superior productivity levels of Insurance Advisors. Bancassurance contributed 34.19% of the total premium , Corporate Solutions contributed 21.09% of total premium and internet channel contributed 3.15% .

During the financial year 2013-14, the company grew at a steady pace and strengthened its base by adding 44 new branches, 385 employees and 7,527 Insurance Advisors & CIFs. Testifying Company’s approach towards life insurance inclusion, 23% of total lives covered by the Company are from the rural segment and 68,714 lives covered are from the underprivileged social sector, leading to the Company exceeding the minimum Rural & Social regulatory requirements.

Channel Mix – Gross Premium Collection(Figure no. 4)

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FY 2010-11

FY 2011-12

FY 2012-13

FY 2013-14

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

AgencyBancassuranceBrokerInternet

Problem of high attrition rate: In the best of worlds, employees would love their jobs, like their co-workers , work hard for their employers, get paid well for their work, have ample chances for advancement, and flexible schedules so they could attend to personal or family needs when necessary. And never leave. But then there's the real world. And in the real world, employees, do leave, either because they want more money, hate the working conditions, hate their co-workers , want a change, or because their spouse gets a dream job in another state. One of the biggest challenges employers face in today’s market is the high attrition rates. A reduction in the number of employees through retirement, resignation or death" So, what does that entire turnover cost? And what employees are likely to have the highest turnover? Who is likely to stay the longest? Different organizations use different method to calculate the rate of attrition. The most common formula to calculate the rate of attrition used by many organizations is:

Attrition Rate = N umber of employees who¿ the yearAverage employees∈the year

× 100

Employee attrition especially in sales force is one of the critical problems which are faced by Insurance Companies during these days. In an ideal situation an employee consider multiple comfort level while working in an office for e.g. employer's goodwill in the market, remuneration, future growth, working condition, co-workers, current role's scope in the market & most important future stability with the organization. High attrition rate of insurance agents is one of the biggest challenges for an insurance company. Conservative estimates put the attrition rates at 35-40 per cent. For new insurance companies still struggling to break even, the rising attrition rate is yet another challenge that they have to battle. For mature companies too, the attrition rate especially in the face of rising competition is a growing threat. Intense competition and globalization of businesses has put mounting pressure on organizations to deliver more and

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better than before. Organizations need to develop and deploy human resources that can articulate the vision of the organization and make teams with the synergy to perform at much higher levels. Human resource builds and drives the knowledge assets of an organization, the value of which has been established to be many times more than the tangibles. In the present scenario it is becoming important for organizations to focus on finding, developing, and retaining talented employees. This paper aims to enhance understanding of the phenomenon of high employee turnover in the insurance industry and factors that lead to job satisfaction of employees. Earlier it wasn't important for the organization, whether their employees are committed or not, but now the time has been changed. The company cannot afford to lose its best employee to competitors. Therefore, it is a paramount consideration for insurance companies to think, why people are vacating their positions.

REASONS FOR HIGH ATTRITION

Determining what constitutes “high turnover” is a complex issue, because there is no simple linear relationship between turnover rates and the social and/or economic performance of companies. Issues ranging from poor job fit, lack of recognition or support from senior management, uncertainty about the organization’s future and poor management communication are some of the reasons why people start looking for other opportunities. Reasons that can be attributed to high employee turnover are:

Being an insurance agent in India is seen as a societal stigma as there is uncertainty of job and income attached to it. People join insurance companies as a part time job or a gap filler occupation and not as a long – term career. Very few competent people want to become agents owing to low social status attached to it.

It is a high pressure job. It is expected from an agent to understand the customer’s needs and sell the products accordingly. This process involves a high level of persuasion and a sustained effort for a long period of time. A lot of people succumb to such pressures.

The expectation achievement gap adds to the turnover. Many people are lured to the profession with a high earning potential. However, to earn a decent income, agents require a lot of patience, perseverance, and persuasion in the field. During early phase, the earnings of the agents are low despite hard work. This expectation achievement gap leads many of them to break down in the initial period of joining the profession.

Scarce skilled or experienced human resource in insurance market leads to wide – scale poaching and head – hunting amongst the competitors. The industry has yet to witness mature hr processes, like work force planning, training, motivation and retention. The lack of pre-planned recruitment leads the firms to indulge in poaching human resources working in other insurance firms.

With insurers having a high percentage of the workforce from multiple sectors (non-domain), the chances of losing employees to other fields, like Fast Moving Consumer Goods companies or other financial outfits, are high.

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Reasons for joining an insurance company :-

Growth Opportunity Flexibility of Time Challenging Job Reputation of the Company Work Environment of the Company Attractive Salary/Incentive Plans Job Security Peer/Friends' Advice Unemployment Earn an Extra Amount

Variables that lead to job satisfaction :-

Job Security Work Environment Accomplishments Balance in Work and Family Life Monetary Benefits Career Growth

Reasons for leaving an insurance company :-

Better Job Opportunity Better Salary Target Pressures No Time for the Family Job Insecurity Relocation Bad Work Culture

Data Presentation and Findings :-

The survey reveals that 60% of the employees left the insurance sector in less than 1 year; 22% employees remained in the same sector for 1-3 years; 8% of employees worked in this sector for at least 4-6 years; 5% of employees remained in the same sector for 10 years, and 5% had been in the insurance industry for more than 10 years.

Table no. 4

Percentage of employees left No of years in which left

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60 % In less than 1 year22 % In 1-3 years08 % In 4-6 years05 % In 10 years05 % In more than 10 years

Source : SBI LIFE insurance annual report year 2013-14.

Sales-Force Attrition Trend in Life Insurance:

sales force on company specific as well as on Industry India industry; and In the following line chart last seven years (2006-07 to suggest feasible remedies to reduce sales 2013-14) attrition trends of public and private life force attrition down in life insurance sector in insurers in India as well combined figure for the India. industry has been presented

Sales-Force Attrition Trend in Life Insurance Table No. 5Turnover Rate

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

Private 23.37 30.34 46.43 40.56 46.47 40.81 35.07LIC 13.72 12.55 15.33 18.33 27.16 31.58 26.89Industry 17.28 21.29 31.96 30.31 37.05 35.76 35.76

Sale force attrition life insurance industry(Figure no.5)

Source : IRDA annual reports of respected years.

Dealing with employee turnover:

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-140

10

20

30

40

50

60

IndustryLIC#REF!

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Organizations that keep the front line staff motivated and equip them with the right tools are most likely to enjoy long term superior performance. The challenge of creating a dynamic, enthusiastic, motivated front line environment is an opportunity in disguise for organizations. Organizations need employees who are committed, flexible, and ready to participate in decision making. Retaining such employees in the organizations is becoming imperative in today’s competitive environment. Behavioural research studies show that all human activities including jobs are directed towards satisfying certain needs. Patterns of individual behaviour and motivation differ, because individuals seek to fulfil different sets of needs in different ways as adopted from their environmental and social back-grounds. Maslow (1943) propounded the Hierarchy of Needs theory originally applied as a general theory of psychological motivation. However, the usefulness of its theoretical model was adopted by organizational theorist McGregor in 1960, who applied Maslow’s theory in the work place. Later on, the Hierarchy of Needs theory has been adopted and incorporated into applications in many areas in business . In the management field, it is an effective approach towards understanding motivation. Motivation is connected to several levels of the ‘needs hierarchy’ of human beings. Appreciation, love, respect and fulfilling work are several motivators other than monetary benefits that an individual looks for. An attempt is made in the paper to align Maslow’s Hierarchy of needs to the findings of the survey to offer a better understanding of employee turnover. Maslow suggests that each individual aspires for a higher level unfulfilled need once they have gratified the lower order need. An individual’s level of aspirations rise when needs on lower levels are satisfied. The lower four layers of the pyramid are called ‘deficiency needs’ or D-needs, physiological, safety and security, love and belongingness and esteem. With the exception of the lowest layer of management· Sales Force Turnover physiological needs, if these ‘deficiency needs’ are not met, the body gives no physical indication but the individual feels anxious and tensed. Various levels of Maslow’s Hierarchy of Needs are analyzed in the perspective of insurance agents:

Physiological Needs:

These include the most basic needs that are vital to survival, including the need for water, air, food, and sleep. These needs are the most basic and instinctive needs in the hierarchy. All other needs become secondary until these physiological needs are met. In the perspective of insurance agents these needs are addressed by the compensation plan. Insurance companies primarily work on incentive based compensation plans, which leads to income uncertainties. An employee looks forward to a sufficient compensation structure which would take care of all of his/her basic physiological needs. A robust, safe and easy to understand compensation plan may retain employees who are striving to materialize their physiological needs. It is necessary for the companies to update the compensation plan with time, so that it fulfils the physiological needs of the individual and his/her family at different stages of their lives.

Safety Needs:

Such needs are important for survival, but they are not as demanding as the physiological needs. Desire for steady employment, health insurance, safe neighbourhoods, and shelter from the environment could be a few. There are two aspects of the security which would concern a person in the insurance business. One is the personal physical security while on field; and the psychological fear of job security with high targets is the second.

Social Needs:

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Maslow states that people seek to overcome feelings of loneliness and alienation. This involves both giving and receiving love, affection and the sense of belongingness. This need of an individual gets highly affected in insurance companies predominantly. Individuals do not gain a high status in society, which is attributed to the social stigma of being an insurance agent, and big target pressure causes separation from one’s family, friends and relatives. Employees have been found complaining about not being able to spend ample time with their family and friends. The insurance companies may compensate for this by creating a fun-filled work environment and developing a conducive work environment. Team building initiatives can be taken by mangers to inculcate the sense of belongingness.

Needs for Esteem:

A normal human desires to be accepted and valued by others. People engage themselves to gaining recognition, attaining a sense of contribution, feeling accepted and self valued, be it in a profession or hobby. Imbalances at this level can result in low self-esteem or an inferiority complex. Those working as employees in an insurance company are viewed as people of comparatively less ability. The attitude is developed due to mass recruitment undertaken by insurance firms, where not much focus is placed on selecting suitable candidates. This diminution in esteem leads to leaving the industry on getting a better opportunity. Many companies are focusing on creating a positive image of the industry by using the media, though much is yet to be done. Measures like change in job title and nature of the job could be positive steps in this direction. As the industry matures, the positioning needs a change from being a mere money maker option to an industry which provides learning and high growth opportunities.

Need for Self-Actualization:

Maslow describes self-actualization as a person’s need to be and do what he/she was born to do. These needs make themselves felt in signs of restlessness. Aperson feels on edge, tensed, or lacking something. Insurance companies are providing a career growth path and higher education opportunity for employees as a measure of retaining them. These steps are strides towards fulfilling the discontented Self Actualization needs of the employees.

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Chapter 4 th

4. CONCLUSION AND SUGGESTIONS

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The current state of insurance distribution in India is still in flux. On one hand, insurers are awaiting regulations to be approved for brokerages and bancassurance to be truly launched. On the other hand they are trying the corporate model of intermediaries in addition to the traditional models in the market. There is no right and wrong in all this. The success of marketing insurance depends on understanding the social and cultural needs of the target population, and matching the market segment with the suitable intermediary segment. In addition a major segment of the Indian population has low disposable income, meaning that every penny won will be obtained after a lot of persuasion and the expected value for money is high. All intermediaries can't sell all lines of business profitably in all markets. There should be clear demarcation in the marketing strategies of the company from this perspective. Clients should also receive price differentials for using different channels. This is not a new concept, as the Public sector Property & Casualty companies are giving discounts in lieu of agency commission. The channel composition should not be homogeneous but should reflect the larger society. For example:

Agents from different economic, social strata and different age and gender. Bancassurers ranging from multinational banks to micro credit lending agencies. Brokers stretching from corporate to NGOs to milk co-operatives.

These intermediaries need to be empowered with the right learning, training and sales tools and technology enablers. Coupled with the right product mix, this will help the insurers to survive and flourish in this competitive market. Let us conclude with a story of a retired postal clerk who became a success story for selling postal savings and insurance in his village in Punjab in Northern India. The person is the father of our colleague, who is a retired postal employee and took up agency for postal savings and insurance to supplement his meager retirement earnings. Today -- 10 years later -- he is one of the top agents selling postal savings and insurance in his village, assisted by his illiterate wife and grandson (a seven year old computer literate) doing all the administrative work from home on a small Personal computer using a package (developed by our friend who is a programmer) to handle his client portfolio! The entire village population trusts him with the investment advices that he doles out and has no qualms in handing over small amounts of cash to him for depositing in the post office. He is their trusted customer care or financial consultant. This we feel is the essence of distribution of financial products in India . An individual's motive for working may vary according to the nature and potency of the unsatisfied portion of his/her individual hierarchies of needs. It is evident that individuals do not join an insurance company only for Fair compensation and Employment; instead they also look for job security, ease of working in flexible timing, and career advancement. They look to satisfy multiple levels of needs simultaneously and aspire for a job which offers a good mix of primary, social and esteem needs. The survey reveals a similar mix which may lead to job satisfaction. Individuals leave an organization if they are not satisfied with the job, e. g. factors like stress, career advancement and environment which forced the respondents to leave the organization. Insurance companies may consider offering a distinct proposition to successfully attract and retain the sales force. Managers may design systematic strategies rather than taking a random approach of hit and trial. Researchers conceptualized certain strategies based on the findings of the survey. Different needs of the employees could be addressed from the suggestions mentioned below. According to the survey 60% of the sales force leaves the company in less than one year. The occurrence leads to incurring a huge cost in recruiting and training of the employees. Companies may focus on retention for a specified period of time (break even period) so as to recover the cost incurred on the employee. This could be formally included as a process while recruiting candidates. Once the break - even period is calculated, strict actions can be taken to

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ensure that employees do not leave the organization before completion of b e p. One such measure could be getting a bond signed by the employee. Our survey reveals that there are two factors: Primary Needs and Social & Esteem Needs as the major influencers of job satisfaction. It is necessary for all levels of managers in sales function to under- stand that motivation can increase job satisfaction. Companies may focus on the work environment that enhances employee motivation for the job. This includes a conducive and fun filled work environment, suiting to the needs of the young employees. This is essential for compensating the affected social life owning to the nature of the job. A few measures that can be included are: Variable pay pack- age based on performance; Working from home when required for a short term; Sponsored vacations and Job rotation on a periodic basis. The survey reveals that Stress, Career Advancement and Environment influence an individual's decision to leave insurance companies. It is suggested that the companies may define job roles for a clear understanding of an employee, including clear documentation of the process and the jobs performed. This would reduce the stress levels to a significant level. Companies should focus on having education and ongoing learning for the workforce, sponsoring employees on post-graduate programs and treating applicants and employees in the same way as one treats customers. The exercise would help employees in developing their knowledge base and their chances to grow within the organization.

The firms concentrate on 20% of the employees who contribute to 80% of the productivity. Companies may identify such employees and their unsatisfied needs in order to formulate individual specific retention plans. Succession planning is needed for the critical positions in the organization for faster replacement. To reduce poaching of employees within the industry, bilateral agreements between companies should be signed. Basic norms are being put in place and the code of ethics is being stressed by the industry. A Common Database should be maintained by all players of the industry to ensure that they are not cannibalizing each others' resources.

MAJOR FINDINGS:

i. Majority of the respondents are dissatisfied with their income ii. Majority of the respondents are satisfied and aware about their future benefits contributed

by the insurance companies.iii. Majority of the respondents are dissatisfied with the equity of compensation provided to

them at the same level of employment. iv. Majority of the respondents agree that working environment is clean and transparent and

proper infrastructure is provided by the organization. v. Majority of the respondents agree that they have to work extra time to full-fill target

causes stress. vi. Majority of the respondents agree that their job is enhancing their social prestige.

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Chapter 5 th

5. BIBILIOGRAPY

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Books:

Abbasi, S., and K. Hollman. 2000. Turnover: The real bottom-line. Public Personnel Management 29(3): 333 – 42.

Abdul Rahman, S. M., M. Raza Naqvi, and M. Ismail Ramay. 2008. Measuring turnover intention: A study of it professionals in Pakistan. International Review of Business Research Papers 4 (3): 45–55.

Beach, R., D. Brereton, and D. Cliff. 2003. Workforce turnover in FIFO mining operations in Australia:An exploratory study. Brisbane: Brisbane Centre for Social Responsibility in Mining.

Bowen, H. R., and J. H. Schuster. 1986. American professors: A national resource imperiled. NewYork: Oxford University Press.

Elangovan, A. R. 2001. Casual ordering of stress, satisfaction and commitment, and intention to quit:A structural equation analysis. Leadership & Organization Development Journal 22(4): 159–65.

Annual Report of SBI LIFE insurance (2013-14) .

Annual Reports of IRDA of various years.

Websites:

www.irdaindia.org www.sbilifeinsurance.com www.wikipedia.org www.ibef.org