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INSURANCE SECTOR IN INDIA

The insurance sector in India has come a full circle from being an

open competitive market to nationalization and back to a liberalized

market again. Tracing the developments in the Indian insurance sector

reveals the 360-degree turn witnessed over a period of almost two

centuries.

A brief history of the Insurance sector

The business of life insurance in India in its existing form started

in India in the year 1818 with the establishment of the Oriental Life

Insurance Company in Calcutta.

Some of the important milestones in the life insurance business

in India are:

1912: The Indian Life Assurance Companies Act enacted as the first

statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the

government to collect statistical information about both life and non-

life insurance businesses.

1938: Earlier legislation consolidated and amended to by the

Insurance Act with the objective of protecting the interests of the

insuring public.

1956: Two Hundred and Forty Five Indian and foreign insurers and

provident societies taken over by the central government and

nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956,

with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can

trace its roots to the Triton Insurance Company Ltd., the first general

insurance company established in the year 1850 in Calcutta by the

British.

Some of the important milestones in the general insurance

business in India are:

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

to transact all classes of general insurance business.

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

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

business practices.

1968: The Insurance Act amended to regulate investments and set

minimum solvency margins and the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalization) Act,

1972 nationalized the general insurance business in India with effect

from 1st January 1973.

Insurance sector reforms:

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In 1993, Malhotra Committee headed by former Finance

Secretary and RBI Governor R.N. Malhotra was formed to evaluate the

Indian insurance industry and recommend its future direction.

The Malhotra committee was set up with the objective of

complementing the reforms initiated in the financial sector. The

reforms were aimed at "creating a more efficient and competitive

financial system suitable for the requirements of the economy keeping

in mind the structural changes currently underway and recognizing

that insurance is an important part of the overall financial system

where it was necessary to address the need for similar reforms…"

In 1994, the committee submitted the report and some of the

key recommendations included:

1) Structure

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Government stake in the insurance Companies to be brought

down to 50%

Government should take over the holdings of GIC and its

subsidiaries so that these subsidiaries can act as independent

corporations

All the insurance companies should be given greater freedom to

operate

2) Competition

Private Companies with a minimum paid up capital of Rs.1bn

should be allowed to enter the industry

No Company should deal in both Life and General Insurance

through a single entity

Foreign companies may be allowed to enter the industry in

collaboration with the domestic companies

Postal Life Insurance should be allowed to operate in the rural

market

Only One State Level Life Insurance Company should be allowed

to operate in each state

3) Regulatory Body

The Insurance Act should be changed

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An Insurance Regulatory body should be set up

Controller of Insurance (Currently a part from the Finance

Ministry) should be made independent

4) Investments

Mandatory Investments of LIC Life Fund in government securities

to be reduced from 75% to 50%

GIC and its subsidiaries are not to hold more than 5% in any

company (There current holdings to be brought down to this

level over a period of time)

5) Customer Service

LIC should pay interest on delays in payments beyond 30 days

Insurance companies must be encouraged to set up unit linked

pension plans

Computerization of operations and updating of technology to be

carried out in the insurance industry The committee emphasized

that in order to improve the customer services and increase the

coverage of the insurance industry should be opened up to

competition.

But at the same time, the committee felt the need to exercise

caution as any failure on the part of new players could ruin the

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public confidence in the industry. Hence, it was decided to allow

competition in a limited way by stipulating the minimum capital

requirement of Rs.100 crores. The committee felt the need to

provide greater autonomy to insurance companies in order to

improve their performance and enable them to act as

independent companies with economic motives. For this

purpose, it had proposed setting up an independent regulatory

body.

Why Insurance?

Insurance is desired to safeguard oneself and one's family

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

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financial compensation for the losses suffered due to the happening of

any unforeseen events.

By taking life insurance a person can have peace of mind and

need not worry about the financial consequences in case of any

untimely death.

Certain Insurance contracts are also made compulsory by

legislation. For example, Motor Vehicles Act 1988 stipulates that a

person driving a vehicle in a public place should hold a valid insurance

policy covering "Act" risks. Another example of compulsory insurance

pertains to the Environmental Protection Act, wherein a person using

or carrying hazardous substances (as defined in the Act) must hold a

valid public liability (Act) policy.

Basically there are two types of insurance:

1. Life Insurance

2. General Insurance

Insurance - Life

Your family counts on you every day for financial support: food,

shelter, transportation, education, and much more. Insurance provides

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you with that unique sense of security that no other form of

investment provides. It gives you a sense of financial support

especially during that time of crisis irrespective of the fluctuations in

the stock market. Insurance provides for your career goals right from

your childhood years.

Life insurance is all about making sure your family has adequate

financial resources to make those plans and dreams come true. It

provides financial protection to help your family or business to manage

after your death.

Few of the Life insurance policies are:

1. Whole life policies  - Cover the insured for life. The insured

does not receive money while he is alive; the nominee receives

the sum assured plus bonus upon death of the insured.

2. Endowment policies  - Cover the insured for a specific period.

The insured receives money on survival of the term and is not

covered thereafter.

3. Money back policies  - The nominee receives money

immediately on death of the insured. On survival the insured

receives money at regular intervals during the term. These

policies cost more than endowment with profit policies.

4. Annuities / Children's policies  - The nominee receives a

guaranteed amount of money at a pre-determined time and not

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immediately on death of the insured. On survival the insured

receives money at the same pre-determined time. These policies

are best suited for planning children's future education and

marriage costs.

5. Pension schemes  - are policies that provide benefits to the

insured only upon retirement. If the insured dies during the term

of the policy, his nominee would receive the benefits either as a

lump sum or as a pension every month.

Since a single policy cannot meet all the insurance objectives, one

should have a portfolio of policies covering all the needs.

Insurance - General

  Every asset has a value and the business of general insurance

is related to the protection of economic value of assets. Assets would

have been created through the efforts of owner, which can be in the

form of building, vehicles, machinery and other tangible properties.

Since tangible property has a physical shape and consistency, it is

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subject to many risks ranging from fire, allied perils to theft and

robbery.

Concepts of insurance have been extended beyond the coverage

of tangible asset. Now the risk of losses due to sudden changes in

currency exchange rates, political disturbance, negligence and liability

for the damages can also be covered.

But if a person judiciously invests in insurance for his property

prior to any unexpected contingency then he will be suitably

compensated for his loss as soon as the extent of damage is

ascertained.

Few of the General Insurance policies are:

1. Property Insurance:   The home is most valued possession. The

policy is designed to cover the various risks under a single policy.

It provides protection for property and interest of the insured and

family.

2. Health Insurance:   It provides cover, which takes care of

medical expenses following hospitalization from sudden illness or

accident.

3. Personal Accident Insurance :  This insurance policy provides

compensation for loss of life or injury (partial or permanent)

caused by an accident. This includes reimbursement of cost of

treatment and the use of hospital facilities for the treatment.

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4. Travel Insurance :  The policy covers the insured against

various eventualities while traveling abroad. It covers the insured

against personal accident, medical expenses and repatriation,

loss of checked baggage, passport etc.

5. Liability Insurance :  This policy indemnifies the Directors or

Officers or other professionals against loss arising from claims

made against them by reason of any wrongful Act in their Official

capacity.

6. Motor Insurance :  Motor Vehicles Act states that every motor

vehicle plying on the road has to be insured, with at least

Liability only policy. There are two types of policy one covering

the act of liability, while other covers insurers all liability and

damage caused to one's vehicles.

Since a single policy cannot meet all the insurance objectives,

one should have a portfolio of policies covering all the needs. Of the

two types of insurances, MetLife deals in Life Insurance in India.

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Met-Life Begins:

The origins of Metropolitan Life Insurance Company (MetLife) go

back to 1863, when a group of New York City businessmen raised

$100,000 to found the National Union Life and Limb Insurance

Company.

The new company insured Civil War sailors and soldiers against

disabilities due to wartime wounds, accidents, and sickness. In 1868,

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after several reorganizations and five difficult years, the company

decided to focus on the life insurance business. A new company was

chartered to sell "ordinary" insurance to the middle class. The founders

chose the name because they had been most successful in New York

City, or the "Metropolitan" District.

This new venture also faced difficulties. A severe business

depression that began in the early 1870s rapidly put half of the 70 life

insurance companies operating in New York State out of business. Only

very large, long-established ordinary life insurance companies

remained strong. Policy lapses over successive years forced the

company to contract until it reached its lowest point in the late 1870s.

In 1879, MetLife President Joseph F. Knapp turned his attention

to England, where "industrial" or "workingmen's" insurance programs

were widely successful. American companies had not bothered to

pursue industrial insurance up to that time because of the expense

involved in building and sustaining an agency force to sell policies door

to door and to make the weekly collection of five- or ten-cent

premiums.

By importing English agents to train an American agency force,

MetLife quickly transferred successful British methods for use in the

United States. By 1880, the company was signing up 700 new

industrial policies a day. Rapidly increasing volume quickly drove down

distribution costs, and the new program proved immediately

successful.

The MetLife agent became an important person in the lives of

these striving families. Manuals instructed agents to call at a home at

the same time each week to ensure familiarity and contact. In the

process of collecting premiums, insurance agents listened to the

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problems, concerns, and hopes of their clients. So successful was this

approach that by 1909, MetLife became the nation's largest life insurer

in terms of insurance in force, a leadership position we continue to

hold today in North America.

MetLife Today

In 2001 MetLife was the first insurance company to establish a

financial holding company with a nationally chartered bank. Leveraging

its unparalleled distribution channels, MetLife entered the retail-

banking arena with the launch of MetLife Bank. This will make an

easier and more convenient way for MetLife’s customers to realize

their financial goals.

After the tragic events of September 11, MetLife responded

quickly. First and foremost, MetLife was fully committed to its

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policyholders. Chairman and CEO Bob Benmosche remarked that "our

focus today is on lending whatever support we can to our customers,"

and that MetLife "is fully prepared financially to pay all claims."

MetLife’s support did not end there. In responding to the tragedy,

MetLife and MetLife Foundation made a number of grants to aid those

affected, including: $1 million Foundation grants to both the

September 11th Fund to meet longer-term needs of victims, and to the

Twin Towers fund to assist families and rescue workers. MetLife

Foundation also matched employee contributions to the American Red

Cross Disaster Relief Fund.

At the same time MetLife, Inc. announced that it had invested $1

billion in a broad array of publicly traded common stocks. The

company said that this was the beginning of a program to significantly

increase MetLife’s investment in the public equity markets, and one

way to get back to the basics of building America’s future.

Additional grants for disaster relief were made in 2001 and 2002

to a number of different organizations including the Children’s Health

Fund and the Renaissance Economic Development Corporation.

In 2002 Working Mother magazine honored MetLife by naming

the company one of the "100 Best Companies for Working Mothers,"

for the fourth consecutive year. In addition, the Minority Corporate

Counsel Association (MCCA) selected MetLife’s Law Department as a

recipient of the Employer of Choice Award for its commitment to

creating and maintaining a diverse and inclusive organization.

On the international front, the Mexican Government selected

MetLife to acquire Aseguradora Hidalgo, S.A., Mexico’s largest life

insurer for approximately $965 million. MetLife "has the expertise, the

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resources and the commitment to provide exceptional products and

services to customers in Mexico, one of the fastest growing life

insurance markets," noted Bill Toppeta, president of MetLife

International.

MetLife announced in 2002 that it would be continuing its long-

standing relationship with Snoopy and the rest of the PEANUTS®

characters. The company signed a new contract that would allow the

characters to appear in MetLife’s domestic and international

advertising for the next 10 years. Commenting on the partnership,

Senior Executive Vice President and Chief Administrative Office Lisa

Weber noted that "Snoopy is our corporate ambassador and has been

an important part of our advertising campaign for 17 years."

For its future successes, the company can draw on the reservoir

of history that has produced an enduring set of corporate values based

on almost 135 years of integrity, social responsibility, strong

leadership, financial strength, and innovative products and services

with over 137 years of experience and acquiring the 36th position

among the fortune 500 companies, the MetLife companies serve

millions of customers in the Americas and Asia with one goal in mind –

to build financial freedom for everyone. The MetLife companies are a

leader in group benefits that serve 88 of the top one hundred

FORTUNE 500®* companies, and provide benefits to 37 million

employees and family members through its plans sponsors in the U.S.

The MetLife companies are also ranked #1 in group life and #1

in commercial dental in the U.S. The MetLife companies are the

number one life insurer in the U.S. with approximately US $2.5 trillion

of life insurance in force.

In India, MetLife was incorporated in 2001, and aims to differentiate

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itself through customized need based selling, simple and innovative

products, and technology-backed service experience, to tread its path

to build financial freedom for everyone.

MetLife's stated long-term goal is to become the recognized

leader throughout the world with over 100 million people as customers

by the year 2010. The company took a major step toward realizing this

goal in January 2005, when it announced its intention to purchase

Citigroup's Travelers Life & Annuity and substantially all of Citigroup's

international business for $11.5 billion.

Vision/Mission

Is build financial freedom for all through leadership in

providing financial advice and building long-term relationships

through innovative protection, accumulation and retirement products,

robust underwriting processes and creating world-class customer

service experience for the customers.

MetLife want to provide customers in India with world-class

solutions for financial security, and in the process add significant value

to our shareholders, associates and society.

Core Values

Being Innovative in offering world class and competitive products

to customers.

To build Long Term Relationships with the customers by creating

a world class service experience through operational excellence

and the innovative use of technology

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By creating a Customer Centered and Result Focused Vision that

inspires each of the Associates and has their buy-in

Committed to creating a High Performance Organization by

creating an environment that allows each of the Associates to

perform at their peak and hence recognized as an Employer of

Choice 

Committed to Partnering with our internal and external

Customers for mutual success

Work with Integrity, Fairness and Financial Prudence in all the

dealings keeping the interests of the Shareholders, Customers

and Associates paramount.

CORPORATE GOVERNANCE

Venkatesh Mysore – Managing Director

Miro Farrugia – Chief Financial Officer

Suraj Kaeley – Chief Marketing Officer

B Ashwin - Chief Administrative Officer

Anil Kumar K R - Chief Planning Officer

Vikrant Pande – Director (Banc assurance and Corporate Agency)

Gaurav Suri – Director (Marketing)

Sudip Mukhopadhyay – Director (Institutional Business)

Smitashree Menon – Director (Human Resources)

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K Sriram – Chief Actuary

Ajith Vellat – Director (Information Technology)

Kailash Kulkarni – Director (Agency Sales)

Rajen Jatar – Director (Finance) 

Neerav Kaushik – Director (Service Delivery)

Shiva Belavadi – Director (Institutional Service Delivery & Claims)

Corporate Partners

As the vital channel for MetLife’s products, some exemplary

banks and financial institutions have been chosen. These serve as the

interface between the customers and Metlife to aid them to understand

the unique needs and aspirations of every Indian and update the

products of Metlife with features that form the cornerstones of financial

freedom.

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J&K Bank

The J&K Bank Ltd., incorporated on October 1st, 1938

commenced its business on July 4th, 1939. The bank now, has a

network of 440 branches spread over the length and breadth of the

country. A significant contributing factor for this fast growth is the solid

founding principles that are dedicated to the cause of transforming the

Bank not only as a financial heart but also the social heart of the

community. 

The J&K Bank is the first state owned bank of the country and

53% of equity is held by the Govt. of J&K. The bank has a consistent

track record of growth and profitability. It has a unique distinction of

being banker to the J&K State Govt. and has also been appointed by

RBI as its agency in J&K, responsible for carrying general banking

business of the Central Govt. and collection of taxes pertaining to the

Central Board of Direct Taxes.

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Dhanalakshmi Bank  

The Dhanalakshmi Bank Limited (DLB) headquartered at Thrissur

in Kerala, was started seven decades back, at a time when banking

was less known to the people. In a high literate state of Kerala, the

bank grew in strength over the years. And today, it has 153 branches

spread over Kerala, Tamil Nadu, Karnataka, Andhra, Maharashtra,

Gujarat, West Bengal (Kolkata) and New Delhi.

The bank has ambitious plans for growth in branches, total

business and profits. All the 153 branches are classified as NRI

branches, and are computerized and in the process of implementing

Wide Area Network, ATM's, Any Branch Banking and Cash Management

Services, Telebanking and Internet Banking.

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Karnataka Bank

The Karnataka Bank Ltd., a premier private sector bank of the

country, was incorporated on February 18th, 1924 at Mangalore, a

coastal town in South Kanara, a district of Karnataka state, which has

attained renown as the Cradle of Indian Banking.

Today it is one of the leading private sector banks in the country,

known for its steady and disciplined growth and cordial customer

service. The Bank has a strong national presence through a

widespread network of 358 branches. The bank has 230 branches

wholly/partially computerized, as of now.

Plans are underway to put in place additional products to

enhance customer satisfaction and to increase income stream with the

help of upgraded technology. The bank has already put in place an

elaborate risk monitoring and asset liability management system.

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Other Partners  

KARVY

In 1982, a group of Hyderabad-based practising Chartered

Accountants started Karvy Consultants Limited with a capital of

Rs.1,50,000 offering auditing and taxation services initially. Later, it

forayed into the Registrar and Share Transfer activities and

subsequently into financial services. All along, Karvy's strong work

ethic and professional background leveraged with Information

Technology enabled it to deliver quality to the individual.

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GEOJIT SECURITIES

Geojit Securities was founded by Mr.C.J George in 1987 as a

Proprietorship for doing Broking business in Cochin Stock Exchange. In

1994, the business was taken over by Geojit Securities Ltd, a Joint

Venture between Mr.C.J George and the Kerala State Industrial

Development Corporation Ltd. In the following year, the company

came up with an IPO and the shares were listed in various Stock

Exchanges in India in 1995.

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WAY2WEALTH

Way2Wealth is a premier Investment Consultancy Firm that has

been launched with the aim of making investing simpler, more

understandable and profitable for the investors. Way2Wealth brings a

wide range of product offerings from Fixed Income Securities, Life

Insurance and Mutual Funds to Equity and Derivatives (on the National

Stock Exchange) for the convenience and benefit of it customers.

Way2Wealth has over 40 easily accessible Investment Outlets spread

across 20 major towns and cities in the country.

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MINI MUTHOOTHU

Established in 1921, Mini Muthoothu with an illustrious history of

banking behind them today operates from 75 branches in Kerala and 5

in Bangalore. All business concerns of Mini Muthoothu function under

the strict guidelines set by the Department of Company Law Affairs

and Reserve Bank of India. They also have a certificate of compliance

with the requirements regarding prudential norms from the Reserve

Bank of India. Mini Muthoothu, under the able leadership of its

Chairman, Mr. Roy M Mathew, offers both the resources and

capabilities like any national player coupled with individualized

attention to its customers.

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METLIFE PRODUCT OVERVIEW:

1) Met100

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Met100 is a limited pay whole-life policy in a non-participating

form. The policy covers the entire life (or till 100 years of age) and has

a guaranteed up-front sum-assured and paid-up value. Besides, the

policyholder has the option to surrender the policy at any point of time

for cash at a pre-decided guaranteed "surrender value". Met100 thus,

assures guaranteed sum assured – to the policyholder on survival at

age of 100 or, a guaranteed amount for the nominee/beneficiary in

case of death. Also, on payment of additional premiums one or more of

the various riders like Accidental death benefit, Term Rider, Waiver of

Premium Rider, Critical Illness rider can be added to the policy.

Highlights

Life Time protection

Affordable premiums

Tax Benefit

Access to cash value of the policy

Guaranteed returns in case of survival or death.

2) Met100 Gold

Met100 Gold is a limited pay whole-life policy in participating

form, covering the entire life or till the 100 years of age. A bonus is

declared after the first two years of holding the policy, which is

credited as reversionary bonus. Besides, the company can also declare

terminal bonus. A unique feature about this policy is that the

participation in the profit continues even after the premium paying

term, provided the premiums have been paid for the full term. The

premium paying modes available are Annual, Semi-annual, Quarterly,

Monthly and Payroll Savings Scheme. Also, on payment of additional

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premiums one or more of the various riders like Accidental death

benefit, Term Rider, Waiver of Premium Rider, Critical Illness rider can

be added to the policy.

Highlights:

Life Time protection

Affordable premiums

Tax Advantage

Access to the cash value of the policy

Future prosperity of the company is shared by getting

reversionary and terminal bonuses.

3) Met Sukh

Met Sukh is a money back non-participating policy where

‘assured’ lump-sum amount is paid to the policyholder at regular

intervals. Being a non-participating policy, the premium rates, sum

assured, surrender values and paid-up values are guaranteed up-front

for Met Sukh. The plan can be availed for the term of 20 years, where

the money is paid every 5 yrs. Premiums for Met Sukh are ceased on

death or on expiry of term - whichever is earlier. Also, on survival at

the end of 20th year the policyholder receives a 40% accrued

guaranteed addition. The biggest benefit of Met Sukh however, is that

in case of death during the term of the plan, the nominee/ beneficiary

receives the guaranteed sum assured plus accrued guaranteed

additions. On payment of additional premiums one or more of the

various riders like Accidental death benefit, Term Rider, Waiver of

Premium Rider, Critical Illness rider can be added to the policy.

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Highlights

Assured sum at regular intervals

Guaranteed returns at maturity

Waiver of premium in case of death

Protection

Savings

4) Met Bhavishya

Met Bhavishya, a non-participating money-back policy with

guaranteed returns, has been specially designed to meet the financial

requirements for children at their different stages of life. The insured

here is the parent and the child – the beneficiary. The policy is suitable

for parents in the age group 20-50 years having children of 0-12 years

old. There are two options to choose from and fixed term benefits

periodic additions & terminal additions are payable based on the

option that you select. The policy can be customized through 4 riders -

Accidental Death Benefit, Critical Illness (10 illness), Waiver of

Premium (Accidental Disability) and Term Rider

Highlights

Guaranteed returns at regular intervals

Secures the present and the future for the child

Waiver of Premium in case of death.

5) Met-Mortgage Protector

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Met-Mortgage Protector is a single pay/limited pay policy,

specially designed to protect the dependants of the insurer against the

liabilities incurred on a housing loan. The individual here is insured and

not the asset. The biggest benefit of the policy is its decreasing term-

assurance plan, which reduces the burden on the dependants, while

providing guaranteed sum assured to the beneficiary. Met Mortgage

Protector is available for terms of 5-25 yrs

Highlights

Protect dependents against liabilities incurred on housing loan.

Cover continues even after the premium paying term is over.

Flexible terms

6) Met Suvidha

Met Suvidha is a participatory endowment plan that provides

savings and security in one policy. It provides a lot of flexibility in

choosing the premium paying term between 15-30 years i.e. terms are

available for 15, 16, 17, 18…30 years. Met Suvidha has been

developed keeping in mind people with shorter and irregular earning

spans e.g. Celebrities. The policy allows for flexibility in paying

provides protection to an individual whenever required, and offers tax

advantage. Also, being a participatory policy it is suitable for people

who would like to share the future prosperity of the company by

getting reversionary bonuses and terminal bonuses.

7) MetSuvidha (Non- Participating Endowment Assurance)

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Met Suvidha provides the savings and security in one policy. It

provides a lot of flexibility for the policy terms between 15 - 30 year i.e

for the terms 15,16,17,18…30 years. This product is developed

keeping people in mind especially people who have irregular and

shorter earning spans. It provides protection to an individual during the

need and whenever required. It provides tax advantage

8) Met Suraksha

Met Suraksha is a term assurance plan and provides pure

protection at the cheapest price for a specified period of time. The

policy has a term of 5/10/15/20/25 years and level term is up-to 60

years of age. It is an participating endowment policy. The tax benefits

are provided throughout the premium paying terms. Met Suraksha

provides multiple premium paying options like annual, semi-annual,

quarterly, monthly and payroll savings scheme (PSP).

USP

Financial security after retirement

Multiple premium paying options

Tax benefits throughout the premium paying options.

9) Met Pension Participating Deferred Annuity

Met Pension is structured as a participating endowment and a

participating immediate annuity. This provides only one annuity option

i,e Life Annuity. Being a pension plan it is developed to provide

financial security after retirement. It provides tax benefits throughout

the premium paying options. The death benefit during the endowment

phase will be the return of premium plus the reversionary bonus if any.

In case of the immediate annuity phase there will be no benefits in this

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phase for the beneficiary of the policy. The maturity benefits at the

end of the endowment phase is equal to the face amount plus

guaranteed addition plus attached reversionary bonuses, if any plus

terminal bonus, if any. MetLife’s pension product offers multiple

premium paying options.

Highlights

Financial security after retirement

Tax benefits throughout the premium paying options

Multiple premium paying options

10) Met Ultimate-"A universal life insurance policy"

Met Ultimate acts as a flexible policy which combines elements

of protection and accumulation simultaneously and provides ready

access to the accumulated cash value. It also acts as a savings account

where in the premiums are deposited, various charges deducted and

interest credited to the accumulated amount. Met Ultimate provides

minimum guaranteed return (net rate 3.5 p.a.) an additional bonus

interest declared on the investment performance. It has the facility of

tax free withdrawals after two policy years from the accumulation

account. Met Ultimate offers "Premium Holidays" where there is no

schedule for premium payments after third policy year which allows for

skipping payment of premiums without lapsing the policy.

Highlights

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Flexibility

Tax benefits

Provides coverage up to 100 years of age

Skipping of premium payments after the third policy year without

lapsing the policy.

Tax free withdrawals after two policy years from the

accumulated account.

Flexibility to increase/decrease the Face Amount

11) Met Group Life

Met Group Life is a flexible group insurance policy that would

enable both employer and employees to select the right mix of life

insurance to suit their individual needs. It’s a yearly term insurance

product which pays a face amount to the employees against the risk of

death thereby assuring peace of mind. Met Group Life presents a

hassle free implementation and flexible premium paying modes-

annual, semi-annual, quarterly or monthly. It offers easy enrolment

process with no medical underwriting up to free cover limit, non-

transferable employer liability, non-taxable face-amount for beneficiary

and an additional cover on a contributory basis. Met Group also offers

the option of converting Group Coverage to Individual Coverage if the

employee desires, and the advantage of covering spouse and children

– subject to minimum participation levels.

Highlights

Flexible Group Insurance Policy

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Provides protection for employee’s family

Provides significant increased employee motivation, morale and

loyalty leading to a better work environment

Unit-Linked Plans of MetLife

12) Met-Smart

Met Smart is a transparent, unit linked whole life plan that

matures at age 100. The premium you pay is used partly for insurance

cover and the balance is invested in funds to buy units. Met Smart

offers 3 insurance options as well as 6 investment options that you can

choose from, based on your risk profile.

Met Smart at a glance:

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A Unit linked whole life plan that matures at age 100

Offers you life protection and the advantage of investing in

stocks, debt instruments and government securities

3 insurance options

A never before choice of 6 investment options covering the

complete range of investment possibilities to suit your risk-return

profile

Offers you the option of switching between funds

Convenient limited pay option that allows you to complete

premium payment over a fixed term and enjoy the full benefits

Offers a premium holiday after 3 years

Gives you the freedom to withdraw from your funds.

13) Met-Adventure

Met Advantage is a unit-linked pension plan that works hard for

you when you stop working. And, like the name suggests, it comes with

the maximum number of advantages. For one, it ensures that you lead

a comfortable lifestyle. Always. More importantly, it helps you plan

ahead, keeping in mind the escalating cost of living. What’s more,

unlike any other plan, Met Advantage comes with six investment

options, seven annuity options, and, much more.

Met Advantage at a glance:

Transparent unit-linked pension insurance plan

Choice of 6 investment options.

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Dump-in option.

Life cover protection up to vesting age

Tax savings on premium up to Rs.3,366* per annum.

Postponement of vesting age

Option of switching between funds

No health check-up

Flexible premium paying terms

Option to commute up to 1/3rd of vesting benefits tax-free

STRUCTURE OF THE SALES FUNCTION

MetLife India Insurance sales function previously dealt in two

functional structures within the organization. These two Structures

were:

Corporate sales

Agency sales

Corporate/Group Sales:

Corporate sales includes that part of MetLife India Insurance in

which the sales are affected through the various sales manager , who

on behalf of the company meet various corporate heads and try to sell

36

group insurance on the condition that all the employees of that

particular corporate will have insurance from MetLife India Insurance,

automatically when they will join that organization.

Group Insurance has been recognized as an ideal tool to enhance

productivity and build employee satisfaction in business houses and

offer value-added benefits to customers of financial institutions and

members of various affinity groups. MetLife India’s Group Insurance

solutions have been created to satisfy the changing needs of various

group customers.

Agency Sales:

Agency sales includes that part of Met-life in which sales are

affected through various individual agents known as Financial advisors

(or can be called agents) who are basically working with the company

on the commission basis. Leads are generated by advisors themselves

and sales are affected henceforth. The hierarchy structure of the

Agency sales is as under:

o Branch Sales Manager (BSM)/ Center Sales Manager

o Agency Manager (AM)

o Sales Manager(SM)

o Assistant Sales Manager (ASM)

o Financial Advisors(FA)

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With the opening up of the insurance sector and with so many

players entering the Indian insurance industry, it is required by the

insurance companies to come up with innovative products, create

more consumer awareness about their products and offer them at a

competitive price. New entrants in the insurance sector had no

difficulty in matching their products with the customers' needs and

offering them at a price acceptable to the customer.

But, insurance not being an off the shelf product and one which

requiring personal counseling and persuasion, distribution posed a

major challenge for the insurance companies. Further insurable

population of over 1 billion spread all over the country has made the

traditional channels of the insurance companies costlier. Also due to

heavy competition, insurers do not enjoy the flexibility of incurring

heavy distribution expenses and passing them to the customer in the

form of high prices.

With these developments and increased pressures in combating

competition, companies are forced to come up with innovative

techniques to market their products and services. At this juncture,

banking sector with it's far and wide reach, was thought of as a

potential distribution channel, useful for the insurance companies. This

union of the two sectors is what is known as Bancassurance.

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What is Bancassurance?

Bancassurance is the distribution of insurance products through

the bank's distribution channel. It is a phenomenon wherein insurance

products are offered through the distribution channels of the banking

services along with a complete range of banking and investment

products and services. To put it simply, Bancassurance, tries to exploit

synergies between both the insurance companies and banks.

Bancassurance if taken in right spirit and implemented properly

can be win-win situation for the all the participants' viz., banks,

insurers and the customer.

Advantages to banks

Productivity of the employees increases.

39

By providing customers with both the services under one roof,

they can improve overall customer satisfaction resulting in

higher customer retention levels.

Increase in return on assets by building fee income through the

sale of insurance products.

Can leverage on face-to-face contacts and awareness about the

financial conditions of customers to sell insurance products.

Banks can cross sell insurance products Eg: Term insurance

products with loans.

Advantages to insurers

Insurers can exploit the banks' wide network of branches for

distribution of products. The penetration of banks' branches into

the rural areas can be utilized to sell products in those areas.

Customer database like customers' financial standing, spending

habits, investment and purchase capability can be used to

customize products and sell accordingly.

Since banks have already established relationship with

customers, conversion ratio of leads to sales is likely to be high.

Further service aspect can also be tackled easily.

Advantages to consumers

40

Comprehensive financial advisory services under one roof. i.e.,

insurance services along with other financial services such as

banking, mutual funds, personal loans etc.

Enhanced convenience on the part of the insured

Easy accesses for claims as banks are a regular go.

Innovative and better product ranges

HYPOTHESIS

This project is based on the study of High net worth individuals

and high net work individuals, there recruitment methodologies and

there inclination towards the available business opportunity in

insurance sector. Keeping this in mind we started thinking about, that

how to know the basic thinking of HNI’s i.e what they all have in there

mind while investing there money and time in certain business and

how much they are aware of the opportunities in which they are

investing.

After meeting few clients and collecting some data it was known

that the clients are making their investment decisions with the advice

of different consultancy bodies.

41

TARGETING HNI’s AND BOOSTS SALES

We are experiencing some of the most turbulent times in history.

There are literally thousands of different marketing strategies one

would be using to grow one’s business but only a few that one need to

do consistently that will allow him to make all the money he desire.

Here are some of the strategies:

Do not rely on simple sources of Business

A Marketing Parthenon means having multiple/different sources

of revenue and lead generation instead of relying on just one.

For example, let's say your primary method for generating new

business is through direct mail. What happens if, for whatever reason,

your postcards stop working tomorrow? How will that impact your

business? Now imagine you also generate leads through the internet,

space advertising, referrals, word of mouth, joint ventures, etc.?

You have now successfully diversified your portfolio like a good

money manager. Start now by conservatively testing other methods of

marketing so that if one method stops working, it won't put down your

entire business.

Follow up

This is probably the most important marketing strategy, yet only

few follow it. It has been proved time and again that 70% of people

42

who respond to a cold call or letter will buy the product/service. But

they may not buy from the original caller; the reason cited is lack of

following up the leads.

Whenever a prospect responds to your cold call/letter, it only

shows that he is only interested and there may not be any immediate

sale. Further, it must be remembered that because people buy when

THEY are ready to buy not when YOU are ready to sell. So it is up to

you to follow up till you close the sale.

Maintain Relationships

Did you know it's far easier to re-sell an existing client than to

sell to someone who doesn't know and trust you? Did you also know

that you lose 1/12 of the value of a client every 30 days you don't

communicate with them? So knowing these two facts, what's the

easiest, most profitable way to maintain relationships and re-sell

existing clients? You guessed it right.

A Monthly Newsletter! But don't just send a monthly newsletter.

Make sure you also enclose inserts about other products and services

that you offer.

Create a Back-End for Your Business (Cross Selling)

It's far easier to re-sell to an existing client. It's also... Far More

Profitable! to create a Back-End For Your Business. Once you've spent

the high upfront costs to acquire a new client, it's relatively

inexpensive to send them a letter promoting another product or

service.

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For example, once you are successful in selling, say a car

insurance product, you can sell other related insurance products such

as health insurance, householders insurance etc. by proper follow up to

promote these products.

For the purpose of checking the validity of hypothesis a sample

questionnaire (Refer to Appendix A) was prepared on the basis of

which the findings and analysis were being made.

ANALYSIS BASED ON QUESTIONNAIRE SURVEY

RISK BEARING CAPACITY OF HNI’s

Risk is one of the primary factor that an individual have in mind while

investing his/her money or while analyzing any business opportunity.

Due to this I surveyed the people for the amount of risk they are willing

to take while investing there money.

“Risk is the potential loss that may on the happening of

certain events.”

The major risks are:

Interest-Rate Risk:

44

When interest rates rise, bond prices will fall.

Existing bond portfolio will lose value and vice versa.

Reinvestment risk:

Risk is of interim cash flows being reinvested at a lower rate.

Call Risk:

If issuer calls back call option bonds, when interest rate falls,

they can be replaced with cheaper debt. The investor cannot keep a

high coupon bond.

Default risk :

Issuer may default on its obligation to make timely principal and

interest payments.

Inflation risk:

When inflation rates rises, the value of interest payment is

reduced. Higher interest rates will make the existing bonds lose value

again.

Risk and return co-relation:

Risk and return are closely related with each other, they are

inversely proportional to each other. With increase in risk the rate of

return rises and with decrease in risk the rate of return decreases.

45

There is one more type of risk that an individual have to face while

investing his/her money in any kind of business or other activity, and

that is Inflation.

“Inflation is an increase in the general price level of goods and

services.”

Over time, inflation reduces the purchasing power of the rupee

and making it less worth year after year.

To find out the exact situation in the market, I surveyed different

persons and ask about the amount of risk they want to bear in

achieving returns while investing there money in any market or

product. After collecting the responses I came to the conclusion that

maximum number of people are the one which are in the category of

low risk ,this means that people are very much protective about there

money and does not want to invest at the places at where the risk is

high (for ex-equity). As seen in the Pie chart below that people are not

willing to take high risk ,but if there are returns then they can go

towards the options where the risk are medium(32%) or low(34%).

46

Risk Bearing Capacity

high10%

medium32%

low34%

no risk24%

high medium low no risk

The tendency of people to save is now changing and now people

want to earn more income by investing there money in a profit giving

activity. As shown in the chart below that a large mass of people, i.e.

78%, had said yes to the question that whether they want to earn

Extra Income Generation

yes78%

no22%

yes no

47

more money or not. This clearly indicates that there is a huge market

for the companies who are in the sector of selling insurance products

and other market linked products.

The maximum people in this survey was the persons in the age

group of 25-35 who are young, dynamic and have a large network of

people around them. These young and dynamic persons should be

targeted because from them only there will be the upcoming

entrepreneurs.

INCLINATION OF HNI’s TOWARDS FLEXIBLE WORKING

HOURS

Flexible working hours means that there is no restriction of

timings while working. The need is that the work should be completed

on the due date, not necessary at what timing you have worked to

complete it.

Flexible working hours are nowadays very much accepted

pattern of doing work in an organization. It is very much prevalent in

the IT industries, but now it is being adopted by the other industries or

sector too. Due to the fact that it makes the person feel free in its job,

and also due this the work is being completed to the perfection.

Our survey also signifies this fact that flexi-working hours are the

choice of today. We surveyed a number of people(High net work and

High net worth individuals) and found out that what actually they

inclined too, so that we understand that while investing there money

and time in the business opportunity available in the insurance sector,

will they be giving there free time to it.

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As shown in the pie chart above, out of people HNI’s surveyed a

large percentage of them showed interest in Flexible working hours(i.e

80%) as compared to the people who were not interested in it(i.e

20%).

So, while targeting the High network or High net worth

individuals, we should try to make them feel that they need not have

to work at bounded timings, and should make them feel the easiness

of working in flexi working hours and how they can make there

unproductive time, a productive one.

INCLINATION OF HNI’s TOWARDS BUSINESS

OPPURTUNITY

Since the liberalization of insurance industry the opening of

insurance industry has been a key landmark. The Indian insurance

industry is sitting on a volcano of growth and potential waiting to

explode. Since the last three years that the industry is opened to

private players it has shown a renewed vibrancy resulting in new

opportunities.

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These opportunities are in terms of employment, savings, and

new channels of insurance distribution, wider coverage to rural areas

and even to the economically deprived section of the society.

Insurance industry is providing business opportunity to HNI’s,

that is very much profitable to both the party’s i.e. insurance company

and the Individual who is joining them. For insurance companies they

are getting there products and policies sold to large mass of people

who comes under the network of these HNI’s. At the same time these

HNI’s are getting a opportunity of extra income generation, without

effecting there present working or business or job.

Other Business Opportunity

yes62%

no38%

yes no

Nowadays people are becoming more and more inclined to

generate extra sources of income, They want to invest there money

and free time in fruitful work which give in return huge revenues to

them.

50

To find out the exact thinking of HNI’s towards these business

opportunities, we surveyed quite a number of people and found out

that the percentage of people who want to earn more thorough these

business opportunities are very much larger then the one’s who do not

want to go towards these opportunity. The pie chart below shows the

exact pattern we got after the survey, i.e 62% people are inclined

towards it, while 38% are not.

So while targeting these High net worth and high net work

individuals, one should be clear about the opportunities available and

have the adequate information to make the individual understand the

opportunity available.

The above analysis of our showed that HNI’s are very much

eager to go for the business opportunities available, but the next thing

is that, how many of them are aware of the income generation source,

i.e awareness of the people about these opportunity.

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Awareness about the exisiting business oppurtunity

6

12

23

9

0

5

1015

20

25

1

no. of people

aw

are

ness

good little no idea want to know

The bar-diagram above clearly indicates that maximum

percentage of people are those who have no idea(around 50%)about

the business opportunities and the fact that really important that only

10-12% people are those who have a good knowledge of these.

So, for tapping these section of individuals, insurance companies

should make there communication systems more stronger and finer, so

that the information about these opportunities should reach the

individuals adequately.

Also the companies who want to target these HNI’s should know

the places where they will find these influential individuals. Such

influential individual are generally attached to some or the other

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community organizations such as by being a member of civic group,

social or political group or any of the religious groups.

The finding done through the questionnaire showed that each of

these HNI’s are related to one or the other community organizations.

Community Groups

14%

32%

12%12%

30%

political social civic religious none

WHY NOT METLIFE?

MetLife being 136 years old private company in the insurance

sector and holding its 36th position in the list of fortune 500 companies,

it is shocking that in the Indian market it is the least known company in

comparison to other private sector insurance companies.

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The main reason for this is mainly its late entry in the Indian

market (in 2001) wherein the older companies have already have a

stronger foot hold it is just a beginning for this and so it will have to

pay for its share of time to get to the roots. Again it being a foreign

company Indian mass cannot rely on the same at such an early stage,

they have this thinking that it may anytime get shut down. They lack

trust and faith in MetLife and so fear in investing their money with it.

Again a reason to why more than 50% of the sample surveyed

doesn’t know MetLife is because of its weaker tie-ups with banks

such as Jammu & Kashmir bank, Dhanlakshmi bank and the Karnataka

bank. If it would have made tie-ups with any of the giants in this

insurance sector than may be the competition would have been much

less than it is actually now. Even the other partners of MetLife are not

that strong that would have helped it gain the same position as it has

in the U.S.

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MetLife is a private company that believes in its ethics very

strongly and sticks to them very tightly. It believes in actions rather

than speech and so it hardly spends its funds in advertising and

publicity because it wants its work to speak for them, so it’s

advertising as compared to other companies is very weak. But

in here, in the Indian market most of the people go by seeing the

advertisements and the heights of publicity done. This is one of the

major reasons of people not being aware of such a big company! But

now they getting into advertisements and publicity because this is one

of the major pathways to reach out to its customers and be at their

doorsteps as this is what the mass wants!

VALIDITY OF HYPOTHESIS

The hypothesis we took when we had started the project was

that the HNI’s while investing there money consult with some

consultants, that can be a banker, a investment consultant or a

chartered accountant, also that most of these person want to have

extra income, but the major concern is the risk associated with it i.e

the risk should be less or no risk should be there. Adding to it these

HNI’s are inclined towards the new business opportunities available

and are pretty much aware about these opportunities present. Also

that they are not sure about the credibility of the private companies

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and that’s why they do not want to invest there money in the private

sector i.e. they prefer the public sector companies..

Taking the example of MetLife we also took in the hypothesis

that the foreign companies are the least wanted companies at present

in this sector.

According to the data we have collected and analysis done that

is shown with the help of pie-charts and bar graphs above in the

project, it is clear that:

HNI’s while investing there money use to consult either with a

banker(26%) or investment consultant(32%) or a chartered

accountant(28%).

Most of HNI’s want to generate extra income

While investing and generating extra income maximum of these

HNI’s major consideration is about the risk factor associated with

the investment. That is most of them were not interested in

taking risk or can only want to have a low risk investment.

Met-life India pvt limited ,due to having foreign name and due to

the fact of having weak partners in India is lagging behind as

compared to the other companies having strong Indian partners

and a Indian company name attached with them.

All of the above things we took in hypothesis were proved, to be

accepted but the only thing that our hypothesis failed to prove is that

the awareness about the business opportunities available in the

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market is high. Our study showed that maximum percentage

(23%),were the person who have no idea about these opportunities

and only 8% of the total were having good idea.

ISSUES AND CHALLENGES FACING THE

INSURANCE INDUSTRY

The liberalization followed by growth of the Indian Insurance

industry has opened wide opportunities for Service and Infrastructure

sectors. This growth has to be properly channelized. Some of the major

challenges which have to address for channelizing the growth of

insurance sector are Product Innovation, Distribution Network,

Investment Management, Customer Service and Education.

Product Innovation

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Customers are now looking at Insurance as complete financial solution

offering stable returns coupled with total protection. Companies will

need to constantly innovate in terms of product development to meet

ever changing consumer needs. Understanding the customer better

will enable Insurance companies to design appropriate products,

determine price correctly and increase profitability. In this context

Management Guru Peter Ducker has rightly said "Markets are changing

from Cost lead pricing to Price lead costing".

Distribution Network

While companies have been successful in product innovation,

most of them are still grappling with right mix of Distribution Channels

for:

a. Capturing maximum market share to build brand equity.

b. Building strong and Effective Customer relationships.

c. Cost effective customer service.

This calls for Selection of right type of Distribution channel mix

along with prudent and efficient FOS (Fleet On Street) Management.

1. Distribution Network:

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While the traditional channel of tied up advisors or Agents

would be the chief distribution channel, insurer should innovate

and find new methods of delivering the products to customers.

Corporate agency, brokerage, Bancassurance, e-insurance,

cooperative societies and panchayats are some of the channels

that can be tapped by the insurers to reach the appropriate

market segments.

2. FOS Management

The major issues to be addressed in Insurance FOS

management are High Attrition, lack of Motivation and Product

knowledge. Continuous training, performance linked reward

systems, and career counseling can effectively tackle these

issues.

Customer Education and Service

Insurance, particularly life insurance is never bought but sold. To

convince a large population, which is comparatively not well informed

about the intangible benefits of life insurance, is indeed an onerous

task. This apart, the task would be to position Insurance as a risk

planning tool rather than a tax saving and investment tool.

In the present competitive scenario, a key differentiator would be

professional customer service in terms of quality of advice on product

choice along with policy servicing. Servicing should focus on enhancing

the customer experience and maximizing customer convenience. This

calls for effective CRM system which eventually would create

sustainable competitive advantage and build long lasting relationship.

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Investment Management

The most difficult challenge would be to provide returns comparable to

other financial instruments. The problem is further aggravated by

interest rates moving south. Need of the hour for an insurer is to follow

prudent underwriting practices and efficiently cut down management

and administrative expenses. Insurers must follow best investment

practices and have a strong Asset management Company to maximize

returns.

Others

1. Untapped market Segments

Apart from meeting the above challenges, it is important to

increase customer base in semi urban and rural areas which offer

huge potential. The fact that major chunk of business for life

insurance giant, LIC comes from rural and semi urban areas

stands as a testimony. However, this ignores the difficulties of

approaching this segment. Much of the demand may not be

accessible because of large distances or high costs relative to

returns.

2. Health Insurance:

Health insurance is another growth area which offers huge

potential. Estimates indicate that out of the total potential of

Rs.3000 - 4000 crores only Rs.450 - 500 crores is being tapped.

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Lack of requisite infrastructure, non standardization of pricing

and procedures, lack of product variants has hampered the

growth of this lucrative market.

E – Broking

In the Indian market, where insurance is sold after considerable

persuasion, the selling over the net would take some more time. Also,

Insurers need to design products where auto underwriting is feasible.

Certain products like term insurances, vehicle insurances, medic lame

and others can be sold through internet. But a pure e-commerce model

may not be possible for insurance sector where Customer-Need-

Analysis, Capital-Need-Analysis and other factors go into determining

the exact customer solution. But even then, selling on internet is very

attractive because of low distribution costs. It makes sense for the

insurance companies to supplement their traditional sales channels

with Internet.

The passage of IT bill has given legal sanctity to transactions

over the net and subsequent modification of insurance act allows

payment of premium through credit card. While the technology

capability is there, improvement in bandwidth and infrastructure are

needed to give the required boost to e-commerce on the net.

Future Perspective

Competition will result in the market to grow beyond current

rates and offer additional consumer choice through the introduction of

new products, services and price options. Development of industry

61

code of conduct, contributing to a common catastrophe reserve fund

and chalking out agreements to settle claims to the benefit of

customer can be expected with concerted efforts from all the players.

The current impediments such as 26% equity cap on foreign

partner, limited investment avenues, ill defined regulatory role of IRDA

in pension business etc are to be removed in near future. As the

industry evolves, the present classification of life and non life

insurance may change. There may be specialization in each class of

business. In the years to come, we may witness Insurers underwriting

only one or two classes of business such as health insurance, auto

insurance, life insurance, pension provider, property and casualty etc.

Challenges in Distribution

KPMG have prepared a report on `Insurance Trends and Issues`

which examines the future of distribution for both life and general

insurance in India once the sector is opened. It is based on KPMG

research in India and abroad and on insights gained through working

with clients in different markets. There are four significant issues which

the report examines.

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1. The threat of new players taking over the market has been

overplayed.

2. Nationalized players will continue to hold strong market share

positions, but there will be enough business for new entrants to

be profitable.

3. New companies often overestimate the need for insurance

expertise. They assume that a joint venture is the most

appropriate type of alliance, when in fact many forms are

possible.

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4. Both new and existing players must explore new distribution and

marketing channels.

Insurance sector to drive Indian CRM market

After telecom and banking, it’s the turn of insurance companies

to deploy customer relationship management (CRM) solutions. As

competition intensifies, insurers are trying every trick in the book to

retain existing customers, with a wide range of services driving the

market for CRM applications in the process

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CRM with BI tools can help insurance firms monitor the ebb and

flow of customer behavior, giving them a holistic 360-degree view of

their customers

While the insurance sector is seeking to maintain a balance

between acquiring customers and developing existing ones, customer

acquisition is vital, as no retention strategy will entirely stem customer

defection. Insurance companies are experiencing unacceptable levels

of customer churn, thanks to which they are focusing on keeping the

customers they already have in a bid to ensure a net growth in their

customer base. Today, the focus is on selling more products to existing

customers to improve profitability. Customer-focused strategies

require CRM (customer relationship management) to help acquire

customers thorough various touch points and translate operational

data into actionable insights for proactively serving customers.

CRM with BI (Business Intelligence) tools can help insurance

firms monitor the ebb and flow of customer behavior, giving them a

holistic 360-degree view of their customers.”

CRM has helped customers through effective event-based

marketing and lead tracking to cross- and up-sell products. CRM helps

categories and segment customers and align products that best suit

them. CRM is helps to expand into rural areas

Insurance companies with huge customer databases, servicing

their customers through numerous branches and call centres will

invest between 15 to 20 percent of their total IT budget on CRM

applications

65

Current market scenario

Insurance firms are tactically rolling out an application here and

there rather than strategically implementing a complete CRM suite. In

this, they are on the right track. “They (insurance firms) are taking

baby steps, starting with operational CRM to increase sales force

automation. Once they have a sufficiently large customer database,

they use BI tools to mine data from various sources (such as contact

centers and from banks with which they align) pushing the need for

analytical CRM solutions.

CRM technologies such as sales force automation, contact centre

segmentation and campaign management tools are maturing and

finding wider adoption with large insurance companies.

The banking, financial services and insurance (BFSI) sector and

telecom will continue to drive the CRM market, but the uptake of CRM

in the insurance vertical will climb steeply in 2004 and growth will be

rapid and higher [than in other verticals] The insurance vertical has

crossed the threshold of IT and process maturity beyond which an

investment in CRM investments starts yielding good returns. The need

to integrate customer data from multiple channels and to increase

sales force productivity (including that of agents) and running

productive marketing campaigns will continue to drive demand for

CRM software.

Spending on CRM is up

Insurance firms spend close to 12 percent of their IT budgets on

CRM software and services. The cost includes operational CRM and

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spending on BI tools. Industry pundits believe that insurance firms are

looking for CRM initiatives with budgets ranging from Rs 50 lakh going

right up to Rs 3 crore. The sector is busy compiling data on individuals,

including their purchasing patterns and buying preferences of policies,

pension plans and the like. In many cases, policy renewal marketing to

existing customers remains an unsophisticated exercise, often

amounting to little more than a request to renew, with no attempt at

putting a value proposition before the customer. With a little help from

CRM software, insurance firms can sell multiple insurance policies and

pension plans to the same customer.

The opportunity is huge

Within the financial services sector, IT investment in insurance is

expected to grow the fastest with a CAGR of 35 percent in the five-year

forecast period (2001-02 to 2004-05). [Source: IDC India] Other sub-

verticals of the financial services sector are expected to grow at a

CAGR ranging from 21 to 25 percent. Much of this spending will be on

CRM applications and integrating multiple delivery channels. IDC says

that new delivery channels are evolving as the insurance market

expands.

According to a report from Indian Infoline (January 2004), India

has the highest number of life insurance policies in force in the world.

The industry is pegged at Rs 400 billion in India. Gross premium

collections stand at 2 percent of the GDP and this has been growing by

15 to 20 percent per year from the Life Insurance Corporation of India

(LIC) and other government-owned insurers. Privatization has led to

67

new players entering this market and it is expected to grow at a rapid

pace.

More than three-fourths of India’s insurable population has no life

insurance, pension cover and post-retirement protection cover. A

substantial part of the insurance market—the portion dealing in

pension plans and insurance as an investment option—is protected by

a tariff and administered price regime. Competition in pricing is yet to

emerge. Once that happens, as with all dynamic customer-oriented

service industries such as banking and telecom, the race to gain and

retain customer mind share will be on.

Business drivers for CRM

Margins are under pressure: A couple of years ago, LIC

dominated the insurance market with the help of its sales force and

channels and margins were reasonably high. Today, there are close to

20 companies offering both life and general insurance products. All of

them have equally strong international and local partners; all are

focusing upon similar geographies and target audiences. The new firms

selling life insurance and non-life insurance [pensions, insurance as

saving, etc] have failed to emulate the LIC model because margins are

getting squeezed. There are several pain areas that new insurance

firms face—acquiring new customers, retaining them, cross-selling

products and controlling rising costs while providing comprehensive

support.

Insurers have added a plethora of products and services to their

kitty. These range from insurance as an investment option to pension

plans. They target the younger generation in the 20 to 30 years age

group. The convergence of four factors—protection, saving (investment

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option), loans and pension—have compelled insurance companies to

align with banks in reaching out to a larger audience

This trend has led to another—insurance companies are joining

hands with banks by becoming channel partners for insurance. This

strategy helps insurance firms increase their footprint to cover a larger

part of the customer base in the 20-30 years demographic. CRM helps

connect a bank’s high net worth customers with insurance firms.

More than three-fourths of India's insurable population has no life

insurance, pension cover and post-retirement protection cover giving

an indication of the insurance opportunity in India

Customer expectations are rising: Customers, faced with a

dizzying array of insurance products expect customized offerings,

value, ease of access, and personalization from insurers. Today,

customers are expecting individual attention, responsiveness,

customization and access. At the same time, they don’t want to pay a

premium for these services. High customer expectations and lower exit

barriers could lead to increased customer attrition.

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Where to begin—operational CRM or analytical

CRM?

The choice between operational and analytical CRM as a starting

point depends upon the insurer’s needs. Insurance companies with

multiple financial products and a big customer base, such as

integrated insurance solution providers, will leverage their customer

base to cross- and up-sell different financial products, including

insurance. Such providers will benefit from adopting analytical CRM.

Market segmentation, campaign management and data mining

applications will benefit them in many ways.

Call center text mining: This tool can help improve the

customer experience by resolving complaints rapidly. Insurers are

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using these tools to mine text from call center transcripts to identify

issues faced by customers.

Text mining tools also help detect and capture other useful

pieces of information around a customer’s life stage, financial needs

and product interests. These can be used to generate leads and trigger

cross selling. However, to be fully effective, customer service

representatives must be trained to probe for information that will help

in cross selling during the text-mining phase. Text mining tools are

leading edge today, but are predicted to take off quickly.

Insurers can use event triggers to generate leads that can be

acted upon quickly, usually within 24 hours

Event-triggering tools monitor incoming transaction and

contact data in near-real-time to recognize changes in a customer’s

behavior or profile to trigger actions or alerts.

Lead management gets sophisticated: Often the ability of an

insurer to generate leads by means of event-triggering, re-engineered

touch points and cross line-of-business referral can outstrip their ability

to manage said leads. In such a situation, though the number of leads

generated rises, the conversion rate does not. It may even drop.

CRM can help provide sales representatives with a mechanism to

priorities and manage leads.

Pure insurance providers who do not have a large customer base

will derive the maximum value from operational improvements,

especially in integrating customer information from multiple channels

and sales force automation.

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Most insurers will look to empower their agents by deploying

partner-facing applications. Apart from making agents more

productive, it will let insurers keep in touch with customers, otherwise

difficult in a primarily channel-driven business.

Analytical CRM insurance companies can enhance Cross- and

up-selling capability to provide market opportunities within an

existing customer database. Information regarding customer retention

or attrition helps determine the likelihood of policy lapses and helps

identify customers worth targeting for retention campaigns.

Customer segmentation, leverages data to create accurate

categories for use in marketing strategies.

Market automation, combines analytics with campaign

management functionality to help drive a more effective and efficient

marketing campaign.

Broad CRM perspective

CRM module Areas where it can be applied

Collaborative CRM

Applying collaborative interfaces (such as e-mail, conferencing,

chat, real-time) to facilitate interaction between customers and

organizations, as well as between organizational entities dealing with

customer information

(Customers to sales representatives, sales to marketing, agent to

provider)

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Operational CRM

Automating horizontal integrated business processes involving

front-office customer touch points-sales, marketing, and customer

service-via multiple, interconnected delivery channels and integration

between front-office and back-office

Analytical CRM

Analyzing data created on the operational side of the CRM

equation for the purpose of business performance management.

Analytical CRM is tied to a data warehouse architecture; it is most

often evident in analytical applications that leverage data marts.

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SWOT ANALYSIS:

1. STRENGHTS:

Brand name:

The Metropolitan Life Insurance Company (MetLife ) is the

number one insurer in the U.S. based on over US$2 trillion of life

insurance in force. MetLife serves approximately 9 million

individual households in the U.S. as well as 87 of the Fortune 100

companies. MetLife's institutional clients have approximately 33

million employees and members. Headquartered in New York,

MetLife through its affiliates, subsidiaries and representative

offices operates in 15 countries throughout the Americas, Europe

and Asia. The MetLife brand, known for empowering people to

feel protected, guided and hopeful about their lives, will it is

hoped do the same for its Indian customers. 

Experience in this particular field of

insurance (136 yrs old):

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MetLife India inherits its parent company's over-130-year-

old reputation of helping build financial independence for its

customers. MetLife India has developed and distributes a range

of life insurance products in India.

International Backup:

MetLife India benefits from its parent company's global

presence in the field of insurance, track record of establishing

successful insurance operations in emerging markets and the

unique strengths of its other Indian promoters. Drawing from

these experiences, MetLife India hopes to be able to address the

needs of the Indian customer. MetLife India aspires to build on

MetLife's history of meeting policy holder and contract

obligations and the ability to withstand the impact of adverse

economic factors.

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2. WEAKNESSES:

Weaker tie-ups

The major problem with the progress of Metlife in India is

its weak partners. In India partners of Met-life are J & K Bank, M

Palonji & co.pvt. ltd, Dhanlaxmi bank,all three of them are

certainly cannot be considered as India wide banks. Also in

comparison to other strong competitors such as ICICI Prudential,

Tata AIG etc who are in partnership with strong names in India

such as ICICI & TATA, MetLife’s partners are too weak

Late entry

As compared to other Insurance companies who are at

present have more market share than Met-life, it had entered

into the market after these companies, Also, Met-Life was the

last one to enter into the market of MLPI’s (market link

products),which are the major selling products of any insurance

company.

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3. OPPORTUNITY:

Large untapped Indian market

`

With such a large population and the untapped market

area of this population Insurance happens to be a very big

opportunity in India. Nearly 80% of Indian populations are

without Life insurance cover and the Health insurance. This is an

indicator that growth potential for the insurance sector is

immense in India.

Can go for product diversification

Innovative products and aggressive distribution have

become the say of the day. Indians, have always seen life

insurance as a tax saving device, are now suddenly turning to

the private sector that are providing them new products and

variety for their choice. The There has been a plethora of new

and innovative products offered by the new players. Customers

have tremendous choice from a large variety of products. More

customers are buying products and services based on their true

needs and not just traditional money back policies, which is not

considered very appropriate for long-term protection and

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savings. There is lots of saving and investment plans in the

market. However, there are still some key new products yet to

be introduced - e.g. health products.

4. THREAT:

Increased competition in the insurance

sector

The insurance sector remains a very competitive market

and those companies that are able to best utilize their data and

provide their customer with the most personalized options will

have the distinct competitive advantage. The insurers that come

up to the top will be those who leverage the appropriate

technology solutions effectively in order to foster customer

loyalty, attract new customers and improve operational

efficiency by providing common information across their lines of

business.

Increase in the number of new players in this

sector

The introduction of private players in the industry has

added to the colors in the dull industry. The initiatives taken by

the private players are very competitive and have given

immense competition to the on time monopoly of the market LIC.

Since the advent of the private players in the market the

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industry has seen new and innovative steps taken by the players

in this sector. The new players have improved the service quality

of the insurance. As a result LIC down the years have seen the

declining phase in its career. The market share was distributed

among the private players.

RECOMMENDATIONS:

1. Advertising and Publicity –

These days everybody is going for things, which they see

on air. Advertising and Publicity hold a very strong role in any

products life cycle, it helps the public know about the existence

of the products and the role, which they play in the lives of the

people. MetLife believes in strong ethics and believes that

actions speak more than words and so want its work to prove for

itself and so doesn’t believe in advertising and publicizing itself

but in the Indian context it is a must for any company to

publicize itself because it holds the best medium to reach to its

customers and also to increase its customer base.

2. Implementation of CRM –

While the insurance sector is seeking to maintain a balance

between acquiring customers and developing existing ones,

customer acquisition is vital, as no retention strategy will entirely

stem customer defection. Today, the focus is on selling more

products to existing customers to improve profitability.

Customer-focused strategies require CRM (customer relationship

management) to help acquire customers thorough various touch

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points and translate operational data into actionable insights for

proactively serving customers.

CRM with BI (Business Intelligence) tools can help

insurance firms monitor the ebb and flow of customer behavior,

giving them a holistic 360-degree view of their customers.”

CRM has helped customers through effective event-based

marketing and lead tracking to cross- and up-sell products. CRM

helps categories and segment customers and align products that

best suit them. CRM is helps to expand into rural areas

3. Strengthening the distribution network –

MetLife India mainly operates in all the metros and in

certain big cities. In order to expand its position and to reach to

its customers what MetLife needs is to set-up its branches in

more cities and should also get into the rural areas where there

is a huge untapped market. As MetLife already has a wide global

set up it can easily expand in India also in order to reach to the

customers and be available at their door steps.

4. Strong tie-ups with well known and already `

established companies or banks –

Tie-ups act as a backbone for any company as they too

represent the main company as a whole. MetLife being

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associated with banks such as Jammu & Kashmir bank,

Dhanlakshmi bank & the Karnataka bank, which in itself are not

so common with the general mass, makes it difficult for MetLife

to get itself placed in the Indian market. For overcoming the

same MetLife can go for further mergers and acquisitions with

strong banks which would help it grow, for example, it

announced its intention to purchase Citigroup's Travelers Life &

Annuity and substantially all of Citigroup's international

business for $11.5 billion. Such purchases and tie-ups would

help it strengthen its roots and create its own niche in the Indian

market.

5. Product diversification –

Instead of catering to only one kind of product MetLife can

slowly diversify with the kind of products it deals with. MetLife

only provides life insurance products; it can get into the debt

market by providing housing loans and various other vehicle

loans as these are on a high these days.

6. Emphasis on use of Information Technology –

In the insurance industry today, there is a clear trend away

from selling a broad range of products to a large volume of

customers in a one –size-fits-all manners. Instead of focusing on

their different products lines as silos (i.e., life, property and

casualty etc) insurers are looking for ways to offer highly

targeted insurance products that are tailored to the individuals

customers with the highest propensity to buy them.

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There is a evolutionary change in the technology that has

revolutionized the entire insurance sector. Insurance industry is a

data-rich industry, and thus, there is dire need to use the data

for trend analysis and personalization.

With increased competition among insurers, service has

become a key issue. Moreover, customers are getting

increasingly sophisticated and tech-savvy. People today don’t

want to accept the current value propositions, they want

personalized interactions and they look for more and more

features and add ones and better service.

The insurance companies today must meet the need of the

hour for more and more personalized approach for handling the

customer. Today managing the customer intelligently is very

critical for the insurer especially in the very competitive

environment. Companies need to apply different set of rules and

treatment strategies to different customer segments. However,

to personalize interactions, insurers are required to capture

customer information in an integrated system.

With the explosion of Website and greater access to direct

product or policy information, there is a need to developing

better techniques to give customers a truly personalized

experience. Personalization helps organizations to reach their

customers with more impact and to generate new revenue

through cross selling and up selling activities. To ensure that the

customers are receiving personalized information, many

organizations are incorporating knowledge database-repositories

of content that typically include a search engine and lets the

customers locate the all document and information related to

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their queries of request for services. Customers can hereby use

the knowledge database to manage their products or the

company information and invoices, claim records, and histories

of the service inquiry. These products also may be able to learn

from the customer’s previous knowledge database and to use

their information when determining the relevance to the

customers search request.

The insurance sector remains a very competitive market

and those companies that are able to best utilize their data and

provide their customer with the most personalized options will

have the distinct competitive advantage. The insurers that come

up to the top will be those who leverage the appropriate

technology solutions effectively in order to foster customer

loyalty, attract new customers and improve operational

efficiency by providing common information across their lines of

business.

Conclusion

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The insurance business is major service oriented business in the world. The services offered by the insurance industry are well recognized and utilized by the general public and commercial sector of the world. The life insurance business has covered nearly 40% of the population of the world. Global players with strong brands in the insurance industry today set up their back office operation in low cost countries, manage capital on a global basis, make use of their special skills worldwide and use their superior managerial ability to secure leadership positions in the industry.

The claims management is an integral part of insurance. It involves the storage, processing and transmission of information relating to settlement of insurance claims. The use of Information Technology also plays a very important role in claims settlement. In managing the claims handling function, insurers seek to balance the elements of customer satisfaction, administrative handling expenses, and claims overpayment leakages. As part of this balancing act, fraudulent insurance practices are a major business risk that must be managed and overcome. Disputes between insurers and insured over the validity of claims or claims handling practices occasionally escalate into litigation which should be solved with due care.

In this fast developing scenario it will not be enough if companies have the futuristic strategies. Implementation of the strategies, effectively adapting them to ongoing changes can spell success. The success of claim management depends on the satisfaction of the customers. The customers are attracted to an insurance company by its state of art claim service. Therefore, before designing an IT system for claim management, customer’s expectations are to be taken in to account. The customers, their needs, knowledge of how the market works, and what they want, these are the things that are important for an insurance company for serving the customers in a better manner through better technology.

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Bibliography

The information is taken from various sources such as books, magazines, articles, internet etc.

Books:

Theories and Practices in Insurance

Insurance watch

Business world

Business today

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Webliography

www.insuremagic.com

www.licindia.com

www.icicprulife.com

www.insurancewatch.com

www.insuranceonline.com

Search engines:

www.google.com

www.ask.com

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