a critical evaluation of the attitude of the policy and non-policy holders of ecgc

7/27/2019 A Critical Evaluation of the Attitude of the Policy and Non-policy Holders of Ecgc

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A CRITICAL EVALUATION OF THE ATTITUDE OFTHE POLICY AND NON-POLICY HOLDERS OF ECGC


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TABLE OF CONTENTS

1) CERTIFICATE OF AUTHENTICITY

2) ACKNOWLEDGEMENT

3) EXECUTIVE SUMMARY4) INTRODUCTION

CREDIT INSURANCE

SWOT ANALYSIS OF ECGC

5) EXPORT POTENTIAL IN INDIA

6) REVIEW THE LITERATURE

7) PROBLEM OF THE STUDY

8) OBJECTIVE OF THE STUDY

9) RESEARCH METHODOLOGY

PROBLEM DEFINITION

RESEARCH DESIGN

SAMPLE SIZE AND SAMPLE DESIGN

DATA ANALYSIS AND STATISTICAL TOOLS

10) FINDINGS FROM THE STUDY

11) RECOMMENDATIONS

12) LIMITATIONS OF THE STUDY

13) ANNEXURE

QUESTIONNAIRE

14) BIBLIOGRAPHY


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A CRITICAL EVALUATION OF THE ATTITUDE OF

THE POLICY AND NON POLICY HOLDERS OF ECGC


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CERTIFICATE OF APPROVAL

This is to certify that project report entitled A critical

evaluation of the attitude of the policy and non policy

holders of ECGC being submitted by RISHU KHULLAR

to Indian institute of Tourism and travel management,

Gwalior towards partial fulfillment of the requirement ofMasters degree in business Administration is the original

bona-fide work carried out by him under my supervision

and guidance.


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ACKNOWLEDGEMENTS

A formal statement of acknowledgement will hardly meet the ends of the

justice in the matter of expression of my deeply felt sincere and allegiantgratitude to all those who encouraged me and helped me during my study

It gives me immense pleasure, to express my unfeigned and sincere thanks and

gratitude to my supervisor Mr.B.k.Satya for his valuable guidance sustained,

encouraged and constructive critic at every stage of work, without which it

would have never been accomplished.

I am thankful to the staff members of ECGC of India ltd. Ludhiana Branch

who gave me an opportunity to spend these two months in their organizationand enrich my knowledge.

I also extend my heartiest thanks to all the teachers of Indian Institute of

Tourism and Travel management, Gwalior for gracing me with the knowledge

that I could use in the completion of this training.

I am also very thankful to all my respondents who took time out of their busy

schedules and helped me in carrying out this project.

(RISHU KHULLAR)


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PROBLEM OF THE STUDY

Here the main problem is to known the level of awareness about credit

insurance among those who can afford to buy insurance especially now when

a no. of private insurer has entered the market. The researcher would also

like to establish the main reasons being buying an ECGC policy, to know what

type of cover is most preferred by people.

After going through the literature review, the researcher has found out that

people still believe in Government insurance policies i.e. ECGC policies, even

many of them dont know ICICI is in insurance sector, with Lombard which

is no. 1 insurance company of U.K. also in todays world when privatization

has been given the green signal the people rely more on Govt. insurance

companies than in private and this would take time when the general

awareness would change.


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Executive summary

This project titled A critical evaluation of the attitude of the policy

and non policy holders of ECGC is an effort towards determining

the perception of exporters towards ECGC.

To understand their attitude an exploratory research was carried

out where employees of different Export promotion Councils,

various competitor of Ecgc like ICICI Lombard were interviewed.

After conducting the exploratory research, there are certain key

questions that are derived and these questions formed the basis ofthe questionnaire.

Then the primary research was conducted where in data was

collected from around 75 respondents from ludhiana region.

The research is carried out in three phases:

Phase I: in this phase, I have to know about the perception of the

policy holders towards ECG.

Phase II: here in came to know about the perception of the closed

policy holders of ECGC.

Phase III: the most important one and the challenging task to know

the perception of non-policyholders of ECGC.


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SWOT ANALYSIS of ECGC

STRENGTH

High financial strength

Project execution competency

Strong business equity consumer Nation wide branch network & synergy

(confidence with co-insurance)

High experience, infrastructure & latest Internet assisted facilities.

High level of managerial efficiency

WEAKNESSES Not much established branch network infrastructure in remote places

Not much established and happy subscriber base to leverage in

Indian market

Govt./large organization takes a lot of time for decision making

It lacks flexibility in rules & regulations according to market demand

It couldnt win the minds of its customers completely yet, due to lack of

customer awareness programme

Now a days customer/policy holders seems it as a mandatory burden for

availing export finance than a facilitator

OPPORTUNITIES

Large addressal market created by new relaxed export policies of Govt. of

India .

Large demand for fresh policyholders due to increased facility of easy export

finance from banks.

Increasing trend ofbankruptcyof big/established importers in Europe/abroad.

Increasing rate of Banks N.P.A, due to defaulters in export credits.
http://www.superindian.com/http://www.bankruptcylawyersnetwork.com/http://www.bankruptcylawyersnetwork.com/http://www.superindian.com/http://www.bankruptcylawyersnetwork.com/


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THREATS

Regulatory issues-from I.R.D.A. (Insurance Regulatory & Development

Authority ofIndia )

Opening up of Insurance to Private sectors attracts international giants

Reactive Premium rates/pricing by private sectors
http://www.superindian.com/http://www.superindian.com/


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INTRODUCTION

The Role of Credit Insurance

Will credit insurance play a core role in the day-to-day activities of the e-business oriented

credit manager of 2010? If so, what core competencies are likely to attract the credit

manager, and receivables financing bankers, to utilize a credit insurer's services?

The World of Credit Insurance--2000

Credit insurance is predominantly a European-based insurance product. In other words,

European-based companies buy the cover and use the cover much more extensively than

businesses in the rest of the world. In 1998 for example, of the total export credit insurance

premium spending recorded by the Berne Union ($3.6 billion), $2.25 billion was spent by

European companies. An additional $2 billion was spent by European companies

purchasing "domestic" credit insurance coverage against insolvency risks in trading in

their own country--a product which is not usually purchased by most companies trading

outside Europe.

Consolidation

There has been a substantial level of consolidation among European credit insurers during

the past five years. Eighty percent of premium spending is dominated by the four largest

European credit insurers: EULER/Hermes (Hermes and EULER have a common ultimate

parent--Allianz), Coface, Gerling and NCM. The propensity to purchase credit insurancecover among European companies, as compared with their counterparts in North America,

is considerably greater. In the United States, a total premium spending (i.e. Export &

Domestic) works out to approximately 0.07 percent of GDP in Germany, France and the

UK, the spending exceeds 0.5 percent of GDP.

What Attracts European Companies to Purchase Credit Insurance?

First, the answer lies in the comparative structure of the European and North American

economies. In Europe, a high proportion of GDP is exported by most mature economies. In

North America, a low proportion of GDP is exported, and the bulk of sales are domestic.There also is a strong collections culture in the United States with common insolvency

practices, a common language and a common currency.


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Export-credit insurance plays bigger role in trade

For Tang Roux and the China Export & Credit Insurance Corporation under his

leadership, the year 2005 is undoubtedly of special significance. If the period of time before

2001 was the start-up period for export credit insurance, then China Export & Credit

Insurance Corporation had fulfilled extraordinary development of soaring high at a high

level.

Figures indicated that from 2004 to 2005, China's export credit insurance achieved

USD34.4 billion in terms of insured amount; the business scale got doubled on a year-on-

year basis for two successive years, thus having realized the objective of "Getting tripled

within three years" since 2002. Undoubtedly, this achievement has laid a firm foundation

for the rapid and steady development of China's export credit insurance.

Nowadays, it has been an indubitable fact that the export credit insurance is functioning as

an indispensable driving force for the development of China's trade business.

As far as the growth indices are concerned, the business scale of China Export & Credit

Insurance Corporation grew rapidly from US$2.75 billion in 2002 to US$21.2 billion in

2005 with an average annual growth rate of 98 percent. By the end of 2005, the business

scale of China Export & Credit Insurance Corporation had added up to over US$43billion, 2.7 times the accumulative business sum for the thirteen years since its

establishment.

Another conspicuous sign for the high-speed development of China Export & Credit

Insurance Corporation is the ever-rising ranking of the corporation in the international

ECA institutions. In 2001, the business scale of China Export & Credit Insurance

Corporation ranked the 19th in the ranking of the ECA institution while its mid- and long-

term insurance ranking the 14th and its investment insurance ranking the 13th; while in

2004, the corporation's rankings rose by a great margin with its short-term insurance

ranking the 12th, 7 places up, and its mid-and-long-term insurance ranking the 10th, 4

places up. The corporation's ranking in 2005 is estimated to rise further. The rising of its

rankings in the ranking of the international institution ECA means that the growth rate of

China Export & Credit Insurance Corporation has gradually matched the ranking of

China's trade in the world.

On the other hand, according to the estimation made by the UN, IMF and the World Bank,

the growth rate of the world trade in 2006 will reaching 7.6 percent, slightly higher than

that in 2005. However, the growth rate of China's total foreign trade volume will be

maintained at around 15 percent. Obviously, the steadily growing foreign trade will

provide a comparatively large development space for the export credit insurance while

raising higher requirements for the export credit insurance at the same time.

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Credit insurance

Credit Insurance is an insurance policy associated with a

specific loan or line of credit which pays back some or allof any money owed should certain things happen to theborrower, such as death, disability, or unemployment.

The costs (called a "premium") for this are usually chargedmonthly, depending on the balance owed, and dependingon the usage of the loan or line, could almost double thecost of it (on the opposite end of the spectrum, cleverusage could avoid having to pay almost any premium atall).

The sale of credit insurance is controversial because it isalmost always cheaper for an individual to forgo creditinsurance, and instead have a term life insurance ordisability insurance policy to cover the credit balance. Thereason is that credit insurance is guaranteed issue, nomatter if a person would otherwise be insurable or not. Sothe rates offered must reflect this, and be worse than if ahealthy or otherwise insurable person were to purchase

coverage on their own.

In addition, there is an even more controversial practice(called single premium credit insurance), usuallyassociated with the sub prime lending industry, ofcharging the premium only one time at the beginning ofthe loan. For example, charging 5,000 dollars at the timeof a mortgage refinance, which is usually financed (addedto the total loan amount) as part of the loan. This is

considered very bad by critics, since doing this is onlycheaper if one is sure that one is going to stay with theloan forever and not refinance. Critics contend mostpeople do not realize this and lose money by refinancingonce again, thereby losing the benefits of the creditinsurance.
http://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Life_insurancehttp://en.wikipedia.org/wiki/Disability_insurancehttp://en.wikipedia.org/wiki/Sub_prime_lendinghttp://en.wikipedia.org/wiki/Insurancehttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Life_insurancehttp://en.wikipedia.org/wiki/Disability_insurancehttp://en.wikipedia.org/wiki/Sub_prime_lending


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Characteristics of Credit Insurance

Sharing the risk.

Cooperative device.

Payment on happening of a special event.

The amount of payment depends on the nature of losses incurred.

The success of insurance business depends on the large number of Exporters

incurred.

The insurance is a plan in which the insured transfers his risk on the insurer.


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FUNCTIONS OF INSURANCE

PRIMARY FUNCTIONS

1. Provide protection: - Insurance can not check the happening of the risk. But can

provide for the losses of risk.

2. Collective bearing of risk: - Insurance is a device to share the financial losses of few

among many others.

3. Assessment of risk: - Insurance determines the probable volume of risk by

evaluating various factors that give rise to risk.

4. Provide certainty: - Insurance is a device, which helps to change from uncertainty to

certainty.

5. Savings and Investment.

SECONDARY FUNCTIONS

1. Prevention of losses: - Insurance caution businessman and individuals to adopt

suitable device to prevent unfortunate consequences of risk by observing safety

instructions.

2. Small capital to cover large risks: - Insurance relives the businessman from security

investment, by paying small amount of insurance against larger risks and

uncertainty.

3. Contributes towards development of larger industries.


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History of Credit Insurance

Credit Insurance was born at the end ofnineteenth century, but itwas mostly developed in Western Europe between the first andSecond World Wars. Several companies were founded in everycountry; some of them also managed the political risk to export onbehalf of their State.

Credit Insurance is a term used to describe both Trade CreditInsurance and Credit Life Insurance.

Credit Life Insurance is a consumer purchase, often sold with a bigticket purchase such as an automobile. The insurance will pay offthe loan balance in the event of the death or the disability of theborrower. Although purchased by the consumer/borrower, thebenefit payment goes to the company financing the purchase tosatisfy a debt.

Trade Credit Insurance is purchased by business entities to insure

their accounts receivable from loss due to the insolvency of thedebtors. This product is not available to private individuals.

Over the '90s, a concentration of the Trade Credit Insurance markettook place and four big companies became the main players of amarket focused on Western Europe, but rapidly expanding towardsEastern Europe, Asia and the Americas.

Atradius. A merger between NCM and Gerling Kreditversicherung.Later renamed Atradius after it was demerged from the Gerlinginsurance group.

Coface. Formerly a French government sponsored institutionestablished in 1946, this company has now been privatised.

Euler Hermes. Merger of the two credit insurance companies of theAllianz Group.
http://en.wikipedia.org/wiki/Nineteenth_centuryhttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/Trade_Credit_Insurancehttp://en.wikipedia.org/wiki/Trade_Credit_Insurancehttp://en.wikipedia.org/wiki/Trade_Credit_Insurancehttp://en.wikipedia.org/wiki/Trade_Credit_Insurancehttp://en.wikipedia.org/wiki/Atradiushttp://en.wikipedia.org/wiki/Compagnie_fran%C3%A7aise_d'assurance_pour_le_commerce_ext%C3%A9rieurhttp://en.wikipedia.org/wiki/Euler_Hermeshttp://en.wikipedia.org/wiki/Allianz_Grouphttp://en.wikipedia.org/wiki/Nineteenth_centuryhttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/Trade_Credit_Insurancehttp://en.wikipedia.org/wiki/Trade_Credit_Insurancehttp://en.wikipedia.org/wiki/Trade_Credit_Insurancehttp://en.wikipedia.org/wiki/Trade_Credit_Insurancehttp://en.wikipedia.org/wiki/Atradiushttp://en.wikipedia.org/wiki/Compagnie_fran%C3%A7aise_d'assurance_pour_le_commerce_ext%C3%A9rieurhttp://en.wikipedia.org/wiki/Euler_Hermeshttp://en.wikipedia.org/wiki/Allianz_Group


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EXPORT CREDIT INSURANCE

When you export business requires you to extend credit overseas, you can protect your

companys foreign receivables and be confident to getting paid with an export creditinsurance policy.

1.) WHY YOUR COMPANY NEED CREDIT INSURANCE?

Cash in advance and letters of credit are no longer competitive terms in the

international marketplace. Creditworthy foreign companies, accustomed to buying on

open account from their other suppliers, are going to expect the same terms from you.

Your customers in emerging markets, on the other hand, may face scarce capital and

high interest rates, making it difficult or impossible to order your products without

credit terms.

You need to extend competitive terms to grow your international business, but what

happens if you don't get paid? Your foreign customers could file bankruptcy, run into

cash flow problems, suffer from currency devaluations, or fail to pay you for a variety

of other reasons. You can protect your foreign receivables against non-payment risks

with an export credit insurance policy.

2.) WHAT RISK ARE COVERED?

Export credit insurance protects your foreign receivables against commercial and/or

political risks which could result in non-payment of your invoices. Commercial risks

take the form of buyer insolvencies (e.g. bankruptcy) or protracted defaults (slow

payment). These problems could occur for many reasons, such as fluctuations in

demand, natural disasters, or general economic conditions in your customer's country.

Political risks include war, riots, and revolution, as well as currency inconvertibility,

expropriation, and changes in import or export regulations.

All of your export receivables can be insured under one multiple-buyer policy, or in

some cases you can purchase key-buyer or single-buyer coverage. Export sales of all

types of products may be covered, regardless of content or where the products are

manufactured. Any kind of exporter can apply for receivables insurance, including

manufacturers, distributors, dealers, etc. Your foreign customers don't need to be huge


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corporations or government agencies; any buyers can be considered as long as they are

creditworthy, as determined by financial information, trade references, or in some cases

simply your company's own ledger experience.

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3.) HOW MUCH DOES IT COST?

Premium rates are based on the terms you extend, the spread of your buyer and

country risks, and your previous export experience. The cost is low, typically a small

fraction of one percent based on sales volume . . . in most cases considerably less than

the fees charged for letters of credit.

Rates may be calculated as a function of your shipment volume, country and buyer

credit limits, or outstanding receivables. Premiums are payable monthly, quarterly, or

annually.

Whether or not you pass this incremental expense on to your customers, the price of the

coverage is insignificant compared to the additional business you can win by extending

competitive credit terms overseas.

4.) WHY YOU SHOULD CHOOSE ECGC?

All export insurance policies sold by ECGC are fully backed by either the

Indian. Government or top-rated commercial insurance companies.

Specializing in this kind of coverage, ECGC offers a complete selection of

policies from every insurance company and government agency that underwrites

export credit insurance.

Strong underwriting relationships enable ECGC to quote the most competitive

premium rates in the market, with no added processing charges or broker fees.

By monitoring how you are using your policy, ECGC can help you keep yourexport credit insurance coverage up-to-date as your export business grows.

ECGC can supply credit reports on your international customers, offer training

in foreign credit evaluation, assist with policy compliance and administration, and

provide ongoing support for your sales, credit, and finance departments.


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5.) INSURANCE AS SALES AND FINANCING TOOL

INCREASE YOUR EXPORT PROFITS:Grow your export sales by makingit more economical for your foreign customers to purchase larger quantities. Shipping

larger orders helps you negotiate better pricing from your suppliers, make longer

manufacturing runs, and transfer inventory carrying costs overseas.

PENETRATE YOUR TARGET MARKETS:Open new markets which yourcompany might otherwise perceive as too risky for extending credit terms. The

opportunity to establish market share in emerging economies has never been greater.

GET MORE FROM YOUR DISTRIBUTORS:Negotiate stronger overseasrepresentation by offering competitive terms to your foreign distributors. Provide

incentives to keep more of your products in the supply chain, increasing your market

share and local brand recognition.

ENHANCE YOUR BORROWING CAPACITY:Obtain more favorablefinancing by including your insured foreign receivables in your borrowing base. Export

credit insurance makes your international receivables more attractive to your bank or

other lenders. You can assign policy proceeds to the lender of your choice.

STRENGTHEN YOUR BALANCE SHEET:Keep your company's financialposition secure, despite exposure to unforeseen events, concentrations of foreign credit

risks, and changing international market conditions. Insuring your foreign receivables

may also enable you to reduce your bad debt reserves. Export credit insurance can help

facilitate the "true sale" of your international receivables per FASB 125, as well as

supporting asset securitization

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MAJOR PLAYER OF CREDIT INSURANCE

1. ICICI Lombard

2. Bajaj alliance insurance

3. Tata Aig insurance

4. Iffco- Tokyo insurance

5. National insurance company HSBC

6. SIDBI

7. Meridian Insurance


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Introduction to ECGC

ECGC is A Corporation set up by the Government of India for providing Export Credit

Insurance and guarantees facilities to India's exporters. It functions under the

administrative control of Ministry of Commerce and is managed by a Board of Directors

comprising representatives of the Ministry of Commerce, Ministry of Finance, Reserve

Bank of India, Export Import Bank of India, Commercial Bank, General Insurance

Corporation and the export trade.

ECGC is essentially an export promotion organization, seeking to improve the competitive

capacity of Indian exporters by giving them credit insurance and guarantee support


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comparable to those available to their competitors from most other countries. It keeps its

premium rates at the lowest levels possible.

ECGC was registered with IRDA in Sept. 2002 under General Insurance (Credit Risk

Insurance) business.

COMPANY PROFILE

VISION

To excel in providing export credit insurance and trade-related services.

MISSION

To support the Indian Export Industry by providing cost-effective insurance and trade-

related services to meet the growing needs of the Indian export market through the optimal

utilization of available resources.

OBJECTIVES

Furthering the mission, the corporation has identified specific objectives. On a macro level,

the objectives of the corporation is to initiate, facilitate promote globalization. On a micro

level, we provide individualized services to Indian exporters.

It begins by assisting Indian exporters with valuable and prompt information about the

creditworthiness of buyers, their banks and countries. This helps the exporter manage his

credit risk. To safeguard the exporter against unforeseen losses, it provides cost effective

credit insurance cover in the form of policies. To expedite adequate bank finance to Indian

exporters, it also offers surety insurance cover for bankers in the form of Guarantees, at

competitive rates.

ECGC has always taken the initiative to achieve improved performance in term of

profitability, financial and operational efficiency indicators and have strived to get

maximum returns on investment.


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OVER THE YEARS THE STORY SO FAR

The story of ECGC has all the makings of a success story. The firm had a modest

beginning as Government of India venture in 1957.

ECGC was started with an authorized capital of Rs. 5 Crores, Subscribed capital of Rs. 2.5

Crores and a paid-up capital of Rs. 50 lakhs. Today, the authorized capital is Rs. 1000

Crores and its paid-up capital is Rs. 800 Crores. At the end of first year, it had only 146

Policyholders and business covered was Rs. 1.30 Crores. Today, the firm has over 13, 000

policyholders the upward trend of ECGC is further evident in the fact that from 1957 to

2006-07, the premium income has increased from a mere Rs. 43,000 to Rs. 619 Crores and

the claim paid went up from Rs.4.51 Lakhs to a stupendous Rs. 367 Crores.

The flagship objective of ECGC has always been to provide export credit insurance

cover to exporters and banks. An example of the success it has had in achieving this

objective is the fact that as against one product in 1957, today it has 30 different products

in our portfolio to suit the requirements of various kinds of exporters and banks.

ACHIEVEMENTS

ECGC is one of the oldest export credit insurance organizations in the world. The firm has

endeavored to provide international standard service at competitive rates to Indian

exporters and bankers. The corporate office and 51 branch offices have been accredited

with ISO 9001:2000 certification by the Bureau of Indian Standards.

ECGC has signed 16 Corporate Agency Agreements with commercial banks to sell its

products and has as many as 48 brokers marketing its products.


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Internet is the "Mantra of today's world" and ECGC is in step with the times. It provides

online services to all its customers. Further, policyholders will be aware of the identity of

the buyers who have come to the adverse notice of the corporation. The bank also has full

access to the defaulters list of exporters.

ECGC has ventured into difficult territories like Africa, CIS and LAC. It has also helped

countries like Trinidad and Tobago, Iran, Sri Lanka, Nepal, Bangladesh and Kuwait to set

up similar agencies in their countries. It has records of over 3 Lakhs overseas buyers and

trade data on countries, which in turn helps in assisting customers.

ECGC is the first organization to introduce cover for losses arising out of a buyer's

nonpayment due to discrepancies in L/C. It equips policyholders with adequate delegation

and discretion in resale, in exposure on buyers under various schemes to aid easy and rapid

action of their own. We have introduced simplified procedures for the settlement of claims

up to Rs.25 lakhs. The policy claims of upto Rs.20 lakhs are settled within 7 days.

The premium income of ECGC has increased from Rs.207.34 Crores in the year 1995-96 to

Rs.619 Crores during the year 2006-07. However, the sanctioned strength of the employees

has remained at 633.

A customer satisfaction survey was done by the national Marketing Division of the

Corporation with the help of the renowned independent agency AC Nielsen. The

organization scored 8 on a scale of 1 to 10.

MILESTONES:

ECGC signs cooperation agreement with MIGA

ECGC has signed a cooperation agreement with the World Bank Multilateral

Investment Guarantee Agency (MIGA) on July 18, 2006 to provide credit protection

to Indian companies investing in developing countries. The agreement was signed by

Shri S. Prabhakaran, Executive Director of ECGC and Ms. Yukiko Omura,

Executive Vice President of MIGA.

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MIGAs mission is to promote Foreign Direct Investment (FDI) into developing

countries to help support economic growth, reduce poverty, and improve peoples

lives and promote investment opportunities in developing countries. MIGA provides

three key services: political risk insurance for foreign investments in developing

countries, technical assistance to improve investment climates and dispute

mediation services, and to remove possible obstacles to future investment. As part of

the World Bank Group, and having its shareholders, both host and investor

countries, MIGA brings security and credibility to an investment that is unmatched.

It acts as a potent deterrent against government actions that may adversely affect

investments.

Under this agreement, ECGC and MIGA will provide insurance against the loss

that could arise due to political and economic risks such as transfer restriction,

expropriation, war, terrorism and civil disturbances.

Outbound foreign direct investment by Indian companies is more than one billion

dollars, a year, and is growing regularly. More than half being directed to

developing countries. The arrangement aims at promoting outward investment by

Indian companies by providing them much needed protection for their overseas

investments. Further, MIGAs presence brings the World Bank umbrella of

deterrence against host government action that might affect the projects viability.

This arrangement will increase the comfort level of Indian companies and enable

them to consider opportunities of investment in countries that they might otherwise

view as too risky.


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ECGC signs MoU with NSIC

ECGC signed a memorandum of understanding with National Small Industries

(NSIC) on July 31, 2006 at its Head Office in Mumbai for marketing export credit

insurance products through its service network. The agreement was signed by Dr.

Christy Fernandez, Chairman and Managing Director, NSIC.

NSIC is engaged in promoting, aiding and fostering the growth of small industries

and industry related small-scale services/ business enterprises in the country. NSIC

has proved its strength and within the country and abroad by promoting

modernization, up gradation of technology, quality consciousness, strengthening

linkages with large and medium enterprises and enhancing exports projects and

products from small industries. It has reoriented its schemes of assistance for small

enterprises and repositioned its strategies for enhanced service delivery. It has taken

many new initiatives for the development of small enterprises like Performance and

Credit Rating Scheme and tie-up with banks for credit flow to small enterprises,

mentoring and advisory services and infomediary services.

ECGC signs agency agreement with Catholic Syrian Bank for Bancassurance

ECGC signed its 14th corporate agency agreement with Catholic Syrian Bank on

July 4, `06 at Trichur for marketing export credit insurance products through the

network of the banks branches. The agreement was signed by Shri S. Prabhakaran,

Executive Director of ECGC and Shri N. R. Achan, Chairman and CEO, Catholic

Syrian Bank.


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Need for export credit insurance

Payments for exports are open to risks even at the best of times. The risks have assumed

large proportions today due to the far-reaching political and economic changes that are

sweeping the world. An outbreak of war or civil war may block or delay payment for goods

exported. A coup or an insurrection may also bring about the same result. Economic

difficulties or balance of payment problems may lead a country to impose restrictions on

either import of certain goods or on transfer of payments for goods imported. In addition,

the exporters have to face commercial risks of insolvency or protracted default of buyers.

The commercial risks of a foreign buyer going bankrupt or losing his capacity to pay are

aggravated due to the political and economic uncertainties. Export credit insurance is

designed to protect exporters from the consequences of the payment risks, both political

and commercial, and to enable them to expand their overseas business without fear of loss.

Guarantees to Banks

Packing Credit Guarantee

Timely and adequate credit facilities at the pre-shipment stage are essential for exporters

to realize their full export potential. Exporters may not, however, be easily able to obtain

such facilities from their bankers for several reasons, e.g. the exporter may be relatively

new to export business, the extent of facilities needed by him may be out of proportion to

the equity of the firms or the value of collateral offered by the exporter may be inadequate.

The Packing Credit Guarantee of ECGC helps the exporter to obtain better and adequate

facilities from their bankers. The Guarantees assure the banks that, in the event of an

exporter failing to discharge his liabilities to the bank, ECGC would make good a major

portion of the bank's loss. The bank is required to be co-insurer to the extent of the

remaining loss.


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CURRENT EXPORT SCENARIO

Business covered under policies (Rs. in Crores)

19000

20000

21000

22000

23000

24000

25000

26000

1996-97

1997-98

1998-991999-2000

2000-01

Figure (1)


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Bank finance covered (Rs. in Crores)

0

20000

40000

60000

80000

100000

120000

140000

160000

1996-97

1997-98

1998-99

1999-2000

2000-01

Figure (2)

Claims paid (Rs. in Crores)

0

50

100

150

200

250

1996-97

1997-98

1998-99

1999-2000

2000-01

Figure (3)

35


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Progress over the years 1957-2001 (Rs. in Crores)

0

500

1000

1500

2000

2500

Premiums

Claims

Recoveries

Figure (4)

Performance Highlights 2005-06

Commodity-wise value of Shipments covered under Short-term policies (Rs.

in Crores)

Figure (5)

36

16759.19 Others

7445.41 Engineering goods

3325.13 Leather & leather

manufactures

3217.4 Readymade garments

2442.23 Chemicals Allied

Products

2153.78 Cotton including

handloom

1863.01 Basic chemical

pharmaceuticals cosmetics


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Country-wise value of business covered under Short-term policies

(Rs. in Crores)

Figure (6)

Performance over the last ten years

(a) Total exports insured (Rs. in Crores)

0

5000

10000

15000

20000

25000

30000

35000

40000

45000

1995-

96

1996-

97

1997-

98

1998-

99

1999-

2000

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

Series1

37

7526.47 U.S.A

3862.86 U.K

2763.68 Germany

1805.25 Italy

1791.53 U.A.E

1294.51 France

1082.19 H.K

1058.94 Netherlands923.36 Canada

904.47 Spain

15097.37 Others


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(b) Total premium earned (Rs. in Crores)

0

100

200

300

400

500

600

700

1995-

96

1996-

97

1997-

98

1998-

99

1999-

2000

2000-

01

2001-

02

2002-

03

2003-

04

2004-

05

2005-

06

Series1

(c) Total claims paid (Rs. in Crores)

0

50

100

150

200

250

300

350

400

450

500

1995-

96

1997-

98

1999-

2000

2001-

02

2003-

04

2005-

06

Series1

38


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(d) Total recoveries made / Received (Rs. in Crores)

0

20

40

60

80

100

120

140

1995-

96

1997-

98

1999-

2000

2001-

02

2003-

04

2005-

06

Series1

First of all, the kind of policy is selected according to the needs of the exporter and

the buyer. Then the respective policy forms are filled. These, when filled, are

checked for mainly the following important things:

(A) Previous records of the exporter, if any. If the policyholder has no previous

records or he has closed the policy since the past six months or more, he is

issued a fresh policy. If he has been paying his premium regularly, he has to

get his policy renewed every two years. In case the exporter has not been paid

any claim since his last renewal, he is liable for no claim bonus; he will be

given a bonus of 5% by each passing year.


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40

Need for the study

There have been large numbers of studies that have been done so far

on ECGC. But most of them are about the views of the policy

holders towards ECGC. There have been very few studies that have

been about the perception of the closed policy and non-policyholders

towards ECGC.

Although in the present scenario, there is no strong competitor of

ECGC In India.

However, by taking into consideration the future prospects of thecompany the study is very important.


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Objectives of the study

As we have seen the facts of the Indias total export, it is very much evident that

we need to focus more on export in order to bring the balance of payment in the

equilibrium.

ECGC main aim is to promote the maximum export from India. Therefore, it

gives awareness to the exporter so that they can maximize their export. But here

the main question is does it really helpful to all the exporters, either it may be

small or big exporters.

The main objective of this study is to determine the needs of the exporters

and their expectation from ECGC. I have further made the objective more explict;

1) To study what really exporter think of ECGC

2) To know about the level of awareness among the exporters

3) To become aware of the requirement of the exporters

4) To know about the problems faced by the exporters

5) To know about the acceptance level of various product of ECGC


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Research Methodology


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1. Problem Definition:

The problem for the present study can be precisely stated as To know the

perception of Policy and Non-policy holders of ECGC

2. Research Design:

Type of StudyThe study was both an exploratory and descriptive in nature. Firstly,

exploratory study was conducted to find out basic information regarding ECGC.

After carrying out the exploratory research, descriptive research was carried out to

identify the variables so as to understand the perception of policy and non policyholders of ECGC.

Data collection method:In exploratory research, direct interviews were conducted with respondents and

later for the purpose of Descriptive Research well-designed questionnaire were

administered to the respondents.

o Primary data collection

It will be done by the way of getting questionnaire filled by the

respondents. The questionnaire will be designed in such a manner so as

to cover all the necessary information from exporter.

o Secondary data collection


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Sources for such kind of qualitative information would be interview with

the Chairman of Export promotion Council, newspaper, magazines,

research articles, journals, internet, surveys etc.

3. Sample Size and Sample Design: For the purpose of this research,Stratified-sampling method is employed. The combined sample is 75 respondents.

The sample population will only be from in and around Ludhiana.

Further, I explain Population size = 557, which includes

Policy holders=270 (48.47% of 557)

Closed policy holders=87 (15.61% of 557)

Non-policy holders=200 (35.9% of 557)

(Assumed)

Using Proportionate Sampling,

Actual size = 75, which includes

Policy holders= 36 (48.47% of 75)

Closed policy holders= 12 (15.61% of 75)

Non-policy holders= 27 (35.9% of 75)

Actual visited 75

Respondents 65

Personal visit 40

Telephonic feedback 25

Non- respondents 10


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4. Data Analysis and Statistical Tools

The data collected by way of questionnaire were entered into Microsoft Excel and

Primary source of information:

List of exporters where I visited (policy holders)

1) Deeps tools (P) ltd

2) Sri tools industries

3) SS engineering works

4) Lakra industries

5) Hamidi exports

6) Anand Concast limited

7) Swati Industries

8) Hero exports

9) Brown and Boice10) Perfect Forgings

11) Space knitwears

12) Rinox Engineering

13) Alba parts inc

14) Palbro industries

15) Versatile enterprise limited

16) Cocoon overseas

17) Eastman industries limited

18) Ginter Forgings

19) Canon Industries pvt td20) Hind Fastners

21) Sardar impex

22) IOL chemicals & pharmaceuticals]

23) Purti exports

24) Deepak international

25) Ell Cee engg pvt ltd

26) Perfect inc

27) Bunty embroidery works

28) Munish international


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29) Mehrasons Industries

30) Superfine knitters ltd

31) Unix international

32) Rex exports

33) Trb exports

34) Safari exports

35) Amar auto components pvt ltd

36) Braun textile processors

37) A k engineering company

Findings

First phase of the project (Policyholders)

During the first phase of the project, I visited to the policy holders of ECGC. The

primary goal to visit to the exporter is to get the answers for the following

questions:-

Finding 1

Type of policy mostly held by exporters

Type of

policy

held

SCR SEC BWP MBE SBE SSP TOTAL

NUMBER

OF

POLICIE

S HELD

133 9 13 7 5 3 170


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SBE

SEC

BWPMBESBESSP

FINDING 2

Reasons for holding the specific policy

Reasons

for

holding

ECGCpolicies

Premium

rates are

comparatively

cheaper

Claim

paying

ability

Quality

service

Credit

worthiness

of the

organization

Imposed

by the

bank

No. of

Response

by policy

holders

4 10 10 6 6

FINDING 3

Awareness about the product of ECGC


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FINDING 4

Services of the ECGC

Services of

ECGC

Fully satisfied Partly

satisfied

Fully

dissatisfied

Partly

dissatisfied

Policy holders

Closed policy

holders

FINDING 5

How exporters came to know about ECGC

Sources Newspaper Bank Seminar Companys

executive

visit

Business

associates

FINDING 6

Exporters expectation from ECGC


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List of exporters where I visited (closed policy holders)

1) Prabhat Forgings

2) Hamco overseas

3) Turbo tools pvt ltd

4) E N B exports

5) Flora Exports

6) Hari Om exports7) Gupta Weaving and hosiery factory

8) Kapoor and kapoor Hoisery

9) Leisure Wear Exports

10) R&R Bikes

11) Akal Impex

12) Yuvraj International

13) Pruthi International

14) Sumeet Exports

15) Rajnish International


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Finding of the second phase from closed policy holders

Here I visited to the closed policy holders of ECGC i.e. exporter who has taken

policy once upon a time and then they have closed it due to some reason.

The main objective of the visit is to get the answer for the following

Statements:

Finding A

Reason for discontinuing the policy

Reasons Out of Export

business

Heavy

premium

burden

Rejection of

claims

Advise by the

bank

Finding B


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Customer relationship measure at ECGC

Excellent moderate Fair poor

Finding C

Obstacles /Problem faced by the exporter

Problems Arrangement of

funds

Fear of bad debts Comply with govt

rule and

regulations

Finding D

Suggestions to improve customer relationship measure at ECGC

4) To know more about their requirement so that ECGC can add a new policy

to its current policies that may suite the requirement of the exporter


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List of Exporters where I visited ( non policy holders)

1) Nanda Knitwears2) Stelco Strips Ltd

3) M t international

4) Woolrich Woolen Mills

5) Moon Light auto pvt ltd

6) Oswal Cotton spinning Mills

7) Charley Knitweras

8) Ralson Industries Ltd

9) Servo Export House ltd

10) Ripul International ltd

11) Kishore Exports

12) Kailash Fabrics13) Bedi Cycles

14) Ganga International

15) Jewel International


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Third phase of the project ( non policy holders )

This area needs to be more focus because what we know today will not feed you

tomorrow, your domain expertise must grow with time. It means that not only youhave to take care about the policyholders but to be in the market, ECGC need to

tap or to have strong hold on the non-policyholders of ECGC. In order to cover

them it needs to know about the answers of the following questions:-

1) Challenge/ obstacle/ threat faced by the exporters in their export business

2) To know about the competitor of ECGC if any

3) Reasons for not holding ECGC policy

4) Their suggestion to ECGC or their expectation from ECGC


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FINDING

This chapter deals with the concluded aspects of the study carried out on General

perception about export credit insurance- A comparative study of ECGC India ltd.

The basic objective is for the study is for which study was carried out has been fulfilled in

the earlier chapter, based on the objective interview schedule was designed. Data collected

based on schedule was analyzed and some finding have emerged.

MAJOR FINDING OF THE STUDY

Based on the quantitative analysis the major findings of the study have been highlightedbelow..

Most of the exporters are satisfied with the extent of their credit insurance cover.

They are not interested in buying more credit insurance.

Majority of the respondent believed that larger risk coverage of their policy was the

main feature of their policy that attracted them to buy that policy, though low

premium was the next important feature.

Exporters do not consider credit insurance as a good saving s because of lawreturns.

As credit, insurance is a long- term & short- term contract. Maximum exporters do

not have faith on private credit insurance companies they still prefer ECGC.

Because of less advertising not many people are aware about private credit

insurance companies.

Most of the exporters do not know about broker, corporate agents and banc

assurance, they rely on their agents only.


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Some exporters have no idea about what type of cover they have.

Some exporters have their doubts on the credibility and long stay of private

insurance companies.

Due to increased in consumerism new product is launched everyday.

88

CHAPTER 7

CONCLUSIONS


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CONCLUSION

Reforms have marked the entry of many of the global insurance majors in to the Indian

market in the form of joint ventures with Indian companies. Some of the key names areAIG and Lombard. There is presently building in India an upsurge in consumer

awareness, putting immense and unavoidable pressure on the insurance industry.

With the entry of competition, the rules of the game are set to change. In such a scenario,

the differentiator among the different players will be the service. Meanwhile, the profile of

the Indian consumer is also evolving. Consumers are increasingly more aware and are

actively managing their financial affairs. Today, while boundaries between various

financial products are blurring, people are increasingly looking not just at products, but at

integrated financial solutions that can offer stability of returns along with total protection.

To satisfy these myriad needs of customers, insurance products will need to be serviced to

the customers in an effective way. Insurance today has emerged as an attractive alternativethat offers total protection.

Distribution will be a key determinant of success for all insurance companies regardless of

age or ownership. The nationalized insurers currently have a large reach and presence.

New entrants can not and does not expect to supplant or duplicate such as a network.

Building a distribution network is expensive and time consuming. Thus the company had

to come up with a multi-channel distribution strategy- leveraging bancassurance and

corporate agents in addition to advisors and financial services consultants. The credibility

of the bank makes it easier to win customers.


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Given the current levels of dissatisfaction experienced by customers, the new insurance

companies should concentrate on providing high quality services for differentiating their

offerings. Some areas on which they should concentrate are like; enhance post-sale services

in such area as sending all renewal notices in time, expeditious settlement of claim and

refunds etc. Empathize with the customers and employees coming in contact with

customers must show courtesy and good particularly behavior and gear up pre-sale

services particularly those that will help in reducing customers anxieties and simplify

document wherever necessary.

To deliver the above, insurance companies will need to build a suitable organization withan appropriate management system, optimum physical infrastructure and a culture of

innovation, productivity and customer- orientation that will enable them to survive and

grow in the exciting and fast-growing line of insurance and in the competitive scenario, a

key difference will be the customer experience that each credit insurance player can offer

in term of quality of advice on product choice, along with policy servicing, and settlement

of claims.

89

Service should focus on enhancing the customer experience and maximizing customer

convenience. Long term growth in the business will depend greatly on the distribution

network, where the emphasis must evolve from merely selling insurance to acting as

financial advisors, helping customers plan their finances depending on credit stage and

personal requirements. This call for strong focus on training of the distribution to act asfinancial consultants and build a long lasting relationship with customer. This would help

create sustainable competitive advantage not easily matched

For the private insurance companies in the vast and upcoming insurance business sector in

India.

In the competitive scenario, a key difference will be the customer experience that each

credit insurance player can offer in term of quality of advice on product choice, along with

policy servicing, and settlement of claims. Service should focus on enhancing the customer

experience and maximizing customer convenience. Long term growth in the business will

depend greatly on the distribution network, where the emphasis must evolve from merelyselling insurance to acting as financial advisors, helping customers plan their finances

depending on credit stage and personal requirements. This call for strong focus on training

of the distribution to act as financial consultants and build a long lasting relationship with

customer. This would help create sustainable competitive advantage not easily matched.


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RECOMMENDATIONS

There are some of the recommendation had come up with the while doing this project. It

will help to make insurance more important sector in todays economy.

From the research I could find out that exporters are not aware about the policies

and features of insurance. Therefore ECGC is recommended shed light on policies

and explain the benefits, thus increasing the awareness.

The need of the hour is to devise a comprehensive strategy that will help the firms

face the challenges of the future. The financial services industry around the world

over the undergoing a major transformation. It is very important that trained

marketing professionals who are able to communicate specific features of the policy

should sell the policy.

The penetration of insurance in India is around 22%. The market player needs to

explore this untapped potential through their marketing and sales network.

The return of the polices are not properly managed and never given in time. So,

these must be looked at.

Pricing of insurance products, as empirically available in India, show that pricing is

not in consonance with market realities. Credit insurance premium is generally

perceived, as being too high while general insurance is priced too low.


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Some insurance products, which are not available in India, should, be introduced in

market. There are areas for new product development: Industry all risk policies,

Large projects risk cover, risk beyond a floor level, and product liability cover.

Insurance company will also had to get savvy in distribution. Enhanced marketing

thus will be crucial. Already many companies have full operations capabilities over

a 12 hour period. Facilities such as customer service center are already into 24 hour

mode. These will provide services such as motor vehicle recovery. Technology will

also pay an important role on the market.

The future seems to belong to financial supermarkets that will offer a host of services and

products to the consumer. Due to increased in consumerism new product is launched

everyday.

91

LIMITATIONS

Scope of study could have been broadened had consumer perception survey not

been restricted to four market place only.

Export credit insurance being a burgeoning industry in the country, the time period

of the study was insufficient to conduct an exhaustive insight.

Some of respondents were hesitant in sharing information.


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BIBLIOGRAPHY

Web Site:-

www.ECGCIndia.in

www.Indiacore.com

www.money.com

www.Irda.nic.in

www.Insure.com
http://www.ecgcindia.in/http://www.indiacore.com/http://www.money.com/http://www.irda.nic.in/http://www.insure.com/http://www.ecgcindia.in/http://www.indiacore.com/http://www.money.com/http://www.irda.nic.in/http://www.insure.com/

a critical evaluation of the attitude of the policy and non-policy holders of ecgc

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