(akshu) joint venture in insurance industri

8/12/2019 (AKSHU) Joint Venture in Insurance Industri

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JOINT VENTURES IN INSURANCE

INDUSTRY

CHAPTER:-1

INTRODUCTION OF INSURANCE

INTRODUCTION

The aim of all insurance is to compensate the owner against loss

arising from a variety of risks, which he anticipates, to his life, property

and business. Insurance is mainly of two types: life insurance and

general insurance. General insurance means Fire, Marine andMiscellaneous insurance which includes insurance against burglary or

theft, fidelity guarantee, insurance for employers liability, and insurance

of motor vehicles, livestock and crops.

The Insurance !ct, "#$% and the General Insurance &usiness

'(ationali)ation* !ct, "#$% govern Fire and Marine Insurance, while the

Indian Marine Insurance !ct, "#+ governs marine insurance in our

country. These laws contain provisions relating to the constitution,

management and winding up of insurance companies and the conduct of

insurance business of all types. !ll insurance business in India has been

nationali)ed.

! -ontract of insurance is a contract by which one party

undertakes to make good the loss of another, in consideration of a sum of

money, on the happening of a specified event, e.g. fire, accident or death

or any eventual direct or indirect losses within the limit of law. aw

recogni)es insurance as a system of sharing risk too great to be borne by

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one individual. Insurance is a financial topic of paramount importance

for every individual. Insurance is designed to protect the financial well/

being of you and your dependents in the case of une0pected loss. 1ome

forms of insurance are re2uired by law, while others are optional.

!greeing to the terms of an insurance policy creates a contract between

you and the insurance company. In e0change for payments from you

'called premiums*, the insurance company agrees to pay you a sum of

money upon the occurrence of a specific event. That event may be as

mundane as a visit to the doctor or as serious as a car crash, depending

on the type of insurance

DEFINITION

! promise of compensation for specific potential future losses in

e0change for a periodic payment. Insurance is designed to protect the

financial well/being of an individual, company or other entity in the case

of une0pected loss. In e0change for payments from the insured 'called

premiums*, the insurer agrees to pay the policy holder a sum of money

upon the occurrence of a specific event. In most cases, the policy holder

pays part of the loss 'called the deductible*, and the insurer pays the rest.

Insurance can also be defined as:/Insurance is a provision for the

distribution of risks3 that is to say, it is a financial provision against loss

from unavoidable disasters. The protection which it affords takes the

form of a guaranty to indemnify the insured if certain specified losses

occur.

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CHAPTER:-2

INSURANCE SECTOR IN INDIA

The insurance sector in India has become a full circle from being

an open competitive market to nationali)ation and back to a

liberali)ed market again.

Tracing the developments in the Indian insurance sector reveals

the +4/degree turn witnessed over a period of almost "#4 years.

The business of life insurance in India in its e0isting form started

in India in the year "5"5 with the establishment of the 6riental

ife Insurance -ompany in -alcutta.

MILESTONES IN THE LIFE INSURANCE BUSINESS IN

INDIA ARE

"#"% / The Indian ife !ssurance -ompanies !ct enacted as the

first statute to regulate the life insurance business.

"#%5 / The Indian Insurance -ompanies !ct enacted to enable the

government to collect statistical information about both life and

non/life insurance businesses.

"#5 / 7arlier legislation consolidated and amended to by theInsurance !ct with the ob8ective of protecting the interests of the

insuring public.


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"#9+ / %9 Indian and foreign insurers and provident societies

taken over by the central government and nationali)ed. I-

formed by an !ct of ;arliament, vi). I- !ct, "#9+, with a capital

contribution of s unanimous agreement, after years of

deliberation, that opening the market to both Indian and foreign privatecompanies could help the economy meet its growing insurance needs,

spark the growth of rural areas, and promote India as a regional

reinsurance hub. The specific provisions of the I


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ift the ban on domestic private companies3

ESTABLISHMENT OF A NEW INDUSTRY

REGULATOR

The I


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needed development funds. 1ince then, the state/owned insurance

companies have grown into giant monolith, lumbering and often

inefficient but the only choice.

CHAPTER:-3

PRIVATE INSURERS

IMPACT OF THE ENTRY OF PRIVATE

INSURANCE

;rivate insurance companies have to date written a small

percentage of business in this sector during the last three years, but they

have ushered in a competitive environment that has accelerated market

growth. 1tate/owned insurers still write the bulk of insurance business,

and they have the net worth re2uired to underwrite large corporate risks

without depending almost entirely on reinsurance support. ?owever,

their focus on restructuring is beginning to put them at a disadvantage

against private competitors. 6ver the ne0t few years, the share of the

market held by the public insurers is e0pected to drop substantially, with

private companies assuming a growing percentage of the business

written. The Transformation of the General Insurance -ompany

DEVELOPING OPPORTUNITIES FOR GLOBAL

COMPANIES:-

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!s of !pril %44, there were a total of " private life and 5 private

non/life companies operating in India. The four public sector insurers B

(ational Insurance, (ew India !ssurance, 6riental Insurance, and

Cnited India Insurance companies//are still strong and have a long track

record. ?owever, private companies run by e0perienced Indian and

foreign partners are building their customer base and over time will

probably ac2uire a larger share of the market.

JOINT VENTURE IN THE INSURANCE SECTOR:-

In the race of globali)ation some countries have emerged as front

runners and India is definitely one of them. -ompanies who want to be

global players cannot afford to ignore India, be it for its huge market or

growing middle class with an increasing purchasing power or for getting

the 8obs done at cost/effective prices. 7ntry into any country or market

place re2uires careful planning, procedures have to be complied with and

India is no e0ception. The purpose of this presentation is to provide an

overview of key considerations which must be borne in mind by

investors while negotiating collaborative ventures including some

suggestions on contractual clauses to be incorporated in the agreements

Doint Eenture companies are the most preferred form of corporate

entities for =oing &usiness in India. There are no separate laws for 8oint

ventures in India. The companies incorporated in India, even with up to"44 foreign e2uity, are treated the same as domestic companies. !

Doint Eenture may be any of the business entities available in India.

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A TYPICAL JOINT VENTURE IS WHERE:-

Two parties, 'individuals or companies*, incorporate a company in

India. &usiness of one party is transferred to the company and as

consideration for such transfer3 shares are issued by the company

and subscribed by that party. The other party subscribes for the

shares in cash.

The above two parties subscribe to the shares of the 8oint venture

company in agreed proportion, in cash, and start a new business.

;romoter shareholder of an e0isting Indian company and a third

party, whowhich may be individualcompany, one of them non/

resident or both residents, collaborate to 8ointly carry on the

business of that company and its shares are taken by the said third

party through payment in cash.

APPROVALS RELATED TO THE JOINT VENTURE

!ll the 8oint ventures in India re2uire governmental approvals, if a

foreign partner or an (


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weeks. !n application to the


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recently allowed foreign investment up to 9" in mining for commercial

purposes and up to # in telecommunication sector. The government is

also e0amining a proposal to do away with the stipulation that foreign

e2uity should cover the foreign e0change needs for import of capital

goods. In view of the countrys improved balance of payments position,

this re2uirement may be eliminated.

CHAPTER:-4

JOINT VENTURE AGREEMENT

1election of a good local partner is the key to the success of any

8oint venture. 6nce a partner is selected generally a Mem!"#$%m &

U#$e!'("#$)#* or a Le((e! & I#(e#( is signed by the parties

highlighting the basis of the future 8oint venture agreement.

! Memorandum of Cnderstanding and a Doint Eenture !greement

must be signed after consulting lawyers well versed in international laws

and multi/8urisdictional laws and procedures.

&efore signing the 8oint venture agreement, the terms should be

thoroughly discussed and negotiated to avoid any misunderstanding at a

later stage. (egotiations re2uire an understanding of the cultural and

legal background of the parties.

&efore signing a J)#( Ve#(%!e A*!eeme#(the following must be

properly addressed:/

=ispute resolution agreements

!pplicable law.

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Force Ma8eure

?olding shares

Transfer of shares

&oard of =irectors

General meeting.

-76M=

Management -ommittee

Important decisions with consent of partners

=ividend policy

Funding

!ccess.

-hange of control

(on/-ompete

-onfidentiality

Indemnity

!ssignment.

&reak of deadlock

Termination.

The Doint Eenture agreement should be sub8ect to obtaining all necessary

governmental approvals and licenses within specified period.

HOW TO DRAFT JOINT VENTURE AGREEMENTS

AND CONTRACTS+

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Generally a Memorandum of Cnderstanding or a etter of Intent is

signed by the parties highlighting the basis of the future 8oint venture

agreement. ! good Doint Eenture agreement is one which provides a

comprehensive road map of the duties and obligations of both the

parties. It minimi)es complications when a dispute arises. ?owever,

many a time>s people neglect to pay attention while drafting a Doint

Eenture agreement.

&efore finali)ing a Doint Eenture !greement, the terms should be

thoroughly discussed and negotiated to avoid any misunderstanding at alater stage. (egotiations re2uire an understanding of the cultural and

legal background of the parties.

! Memorandum of Cnderstanding and a Doint Eenture !greement

must be signed after consulting lawyers well versed in international laws

and multi/8urisdictional laws and procedures.

&efore signing a Doint Eenture !greement the following must be

properly addressed:/

!pplicable law.

Force Ma8eure

?olding shares

Transfer of shares

&oard of =irectors General meeting.

-76M=

Management -ommittee

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Important decisions with consent of partners

=ividend policy

Funding

!ccess.

-hange of control

(on/-ompete

-onfidentiality

Indemnity

!ssignment.

&reak of deadlock

Termination

1ecurity and confidentiality

egal compliance

Fees and payment terms

;roprietary rights

!uditing rights

7vents of =efaults and !ddressing

=ispute


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(on/compete !greement

-onfidentiality !greement


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and products, you facilitate growth. In other words, you increase

profit margin and increase your revenue potential.

1haring the economic risk with co/venturer / It pays to have

someone sharing the responsibility with you in case you end up in

deep troubles. This is also true with 8oint venture. 1ince you are

sharing assets, the risk of losing a great deal of money is divided

to both parties.

Aidening economic scope fast

&uilding reputation is often difficult, not to mention time

consuming and e0pansive. !t a 8oint venture, you are able to

widen your economic scope without spending too much money

and waiting for a long time.

Tapping newer methods, technology, and approach you do not

have

In order to grow and e0pand, you need resources in the forms of

methods, technology, and approach. For that matter, it would help

a lot if you will be able to partner with an entity that presently has

the things you don>t and the things you need. Doint venture opens

up the venue for such need.

&uilding relationship with vital contacts

!side from economic territory, another advantage of 8oint venture

is thability to give you business relationships with vital contacts.

This is 8ust like automatically befriending your partner>s

influential friend that can give you access to lots of things such as

business opportunities and a pass to vital information.

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DISADVANTAGES OF ENTERING A JOINT VENTURE:/

1hared profit

1ince you share assets, you also share the profit. The profit ofboth parties usually depends on the si)e of the share to the

venture or may be defined on the agreement.

=iminished control over some important matters / 6perational

control and decision making are sometimes compromised in

8oint ventures. 1ince there is an agreement that divides which

one will take over a particular operation, the other may not be

satisfied with how the things are worked out with another. This

leads us to another disadvantage of a 8oint ventureJ

Cndesired outcome of the 2uality of the product or pro8ect

1ince one party may not have control on the supervision of the

production or the e0ecution of one part of the system, this can

happen. This often leads to disputes and lawsuits. To avoid

this, both parties agree on specific details about the whole

operation process.

Cncontrolled or unmonitored increase in the operating cost

!gain, defined control over the operation may lead to this

disadvantage. It is important therefore to make sure that all

things are clarified on the paper before singing in the 8oint

venture agreement.

Making money by entering a 8oint venture is easy provided that

you know e0actly what you are doing. Aith these advantages

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and disadvantages presented, you are clearly aware of the

things that await you.

SETTING UP A JOINT VENTURE IN INDIA

GUIDELINES FOR INVESTMENT IN INDIA

In 8oint ventures, pick your business partner carefully

t surrender

your 8udgment

?ire 2ualified advisors 'e.g., lawyer, consultant, accountant*

CHAPTER:-,TYPES OF JOINT VENTURE

1 TYPES OF JOINT VENTURES

T.!ee m'( /mm# (0e' & )#( e#(%!e /m"#)e' m"0 e

$e'/!)e$ "' &556'-

!N Two parties, whowhich may be individuals or companies, one of

them non resident or both residents, incorporate a company in India.

&usiness of one party is transferred to the company and as

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consideration for such transfer3 shares are issued by the company and

subscribed by that party. The other party subscribes for the shares in

cash.

&N !lternately, the above two parties subscribe to the shares of the

8oint venture company in agreed proportion, in cash, and start a new

business.

-N ;romoter shareholder of an e0isting Indian company and a third

party, whowhich may be individualcompany, one of them non/

resident or both residents, collaborate to 8ointly carry on the business of

that company and its shares are taken by the said third party through

payment in cash.

%. INCORPORATION.

In case a new 8oint venture company has to be formed in India, the

following are pertinent issues to decide:

!N Formalities

O"P whether the 8oint venture company will be a public or a private

limited company,

O%P the place of


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OP choose the subscribers to the Memorandum of !ssociation which

will obviously include the partners to the 8oint venture and their

nominees,

O9P prepare the Memorandum and !rticles of !ssociation in

consultation with the 8oint venture partners, get them printed and

suitably stamped, and submitting the same with re2uired documents

like statutory declaration us of the -ompanies !ct "#9+ O!ctP and

Form no."5 us "+ of the !ct regarding address of the registered

office, to


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ac2uiring shares of the company and establishing place of business in

India us "# and %# of Foreign 70change

plantationdealing in real estate other than its development and the

company files a declaration with


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The Doint Eenture agreement should be conditional upon obtaining all

necessary approvals consents licenses permissions of appropriate

agencies of Government of India like


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sum and royalty fee may be converted into e2uity by the Indian

company, who may issue shares to the foreign technology provider.

Further, amount due towards repayment of loans raised from foreign

institutionscompanies in the form of 70ternal -ommercial &orrowing

'7-&* may also be converted into e2uity.

CONSTITUTION OF BOARD OF DIRECTORS:-

In 8oint ventures, membership of the &oard of =irectors '&oard* of

the DE- isnormally proportionate to the e2uity investment made by the

parties. The &oard en8oys widevariety of powers under the !ct.

=ecisions concerning the company can be effectively implemented or

become binding against the company when they are routed through

orratified by the board of directors3 be it matters relating to operation of

bank accounts or contracts being e0ecuted by the company.=ecisions of

the &oard are normally taken by simple ma8ority with an affirmative

vote by the minority shareholders on certain specified matters. ?owever,

in case of a 94:948oint ventures or where the 8oint venture partners have

e2ual representation on the &oard, companies can confront deadlock

situations on arriving at decisions by clear ma8ority. Further, in a 8oint

venture where the foreign partner holds the ma8ority ownership, its

common that they should nominate their personnel to the key position of

the -76Managing =irector 'M=*. ! -76M= runs the day/to/day

affairs of the company while the minority shareholder may appoint the

-hairman of the company who also presides over the board meetings. In

8oint ventures where both parties hold 94:94 shares, appointment of key

positions is a matter of negotiations and, normally, such a position

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should be filled by someone who has local knowledge and the e0pertise

to lead.

OBLIGATIONS AND AGREEMENTS:-

minds at the outset of a new venture. Qet, it is important that this issue of

Rwhat should happen if the relationship breakdown> is considered at an

early stage. Ahile negotiating the e0it, the principal aspect to be

considered is that it should be smooth, efficacious so as to enable both

the parties to get on with their respective businesses. Ahat triggers an

e0itS 1pecified events ranging from a change of control of one of the

parties, or a material breach of the 8oint venture agreement, or the

insolvency of a party can result in parting of ways. ;rovisions for e0it

should be made where materially differing commercial views emerge.

Thus, it is usual to document termination provisions in the 8oint venture

agreement, setting out the conse2uences of a management or shareholder

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deadlock and the method of resolving or dealing with its occurrence.

;arties to a 8oint venture do not normally e0pect their partner to have the

right or the ability to dispose its interest freely. (ormally, a party may

have a right of first refusal to buy the shares or a veto on any transfer of

shares or the identity of the transferee.

Sme & (.e )m!("#( /5"%'e'7!)')#' 6.)/. %*.( ( e

)#/5%$e$ )# (.e J)#( Ve#(%!e "*!eeme#( "!e "' &556':/

A; PARTIES:-

The foreign party, ordinarily known as the original party, may be

the parent, holding or subsidiary company of the investing company.

B) APPROVALS:-

The Doint Eenture agreement is sub8ect to the


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D; OBJECT:-

The ob8ects, scope, e0tent and the end product of the joint venture should be

specified.

E; SHAREHOLDINGS:-

This clause lays down the shareholding ratio between the parties

in accordance with either the cash inputs or the assets brought in by

them. It further states the class of shares to be issued and the rights

attached thereto. ;rovisions relating to shareholders> meetings, voting

rights, future issue of share capital, transfer of shares, etc., are also stated

in this clause.

F; MANAGEMENT:-

The constitution of the board to directors, provisions relating to

meetings and resolutions therefore form the ingredients of this clause.Terms and conditions for e0pansion of business, appointment and

removal of the senior management and service agreements are all stated

in thisclause.

G; RESOLUTION OF DISPUTES:-

The terms of this clause are to ascertain when a dispute is deemed

to arise and the manner of settlement. The disputes are generally

resolved using means of alternate dispute resolution. ?owever, litigation

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may also be resorted to. The effects of such disputes on the DE shall be

governed by the provisions of this clause.

?* -6(FI=7(TI!ITQ:/

This clause is in the nature of prohibitory clause. It entails

provisions for the preservation of the company>s secrets and strategic

information.

I; TERMINATION OF AGREEMENT:-

The conditions and circumstances, which lead to the termination

of the Doint Eenture agreement, such as, breach of agreement,

insolvency, etc., are stated in this cluse. !he conse"uences of such ter#intion re

lso #entioned here under.

Further, a RForce de ma8eure> clause may be added to the above, which provides protection to parties tothe agreement in case of any event beyond its control, which prevents it from performing its prescribed functions.

CHAPTER:-s

continue to communicate effectively with each other. It is also important

that the 8oint venture itself develops its own culture, hopefully bringing

together the best features from each partner and best suited for the

successful development and operation of the insurance DE in the places

in which it carries on business

THE JOINT VENTURE AGREEMENT CHEC>LIST


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the terms or duration for which the 8oint venture will e0ist3

the provisions for management and performance of 8oint venture

obligations3 and,

!llocation of revenues and e0penses from the pro8ect.

THE JOINT VENTURE AGREEMENT CHEC>LIST:

The date on which the agreement is established and e0ecuted.

The names, addresses, and identification of the parties,

including the type of business of each member of the 8oint

venture.

The name under which the 8oint venture will do business.

The principle place of business of the 8oint venture.

The purpose of the 8oint venture. If the purpose is to access a

specific pro8ect, a full description of that pro8ect is re2uired.

The terms of the 8oint venture: when and how the 8oint venture

is terminated3 and, how such items as guarantees, defects, and

insurance will be handled after termination.

! statement that the parties are actually co/ventures for the

pro8ect whether or not the contract is in the name of all

members.

! declaration that the organi)ation is a 8oint venture, not a

partnership.

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The establishment of a fund by the parties to finance the work,

together with the amounts to be contributed by each party, with

the fund being deposited in a special bank account under dual

control and all progress payments and other revenues being

deposited in such account.

! clause providing that, if additional working capital is

re2uired, the parties will proportionally contribute additional

funds, as needed and naming the penalty for failure to

contribute.

! declaration of the participation of the parties and percentage

in which profits and losses are shared. Csually these

percentages are proportional to the contributions to the working

fund, but the amount of contribution of funds by parties can be

increased or decreased depending on the contributions of

e2uipment or e0pertise, which also must be considered.

;ayment of any fee to the controlling co/venturer or sponsor

should be specified3 whether a share of the profits in e0cess of

that contemplated is given to the controlling manager or a flat

dollar sum is paid.

If e2uipment is involved, a specific clause should be inserted

especially where the parties contribute varying amounts of

e2uipment.

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The parties to the 8oint venture should agree to sign all

necessary documents relating to the contract, bank loans,

bonds, indemnity agreements and the like.

-ontrol management committee may be determined. !

management committee may be established with provision for

remuneration. !lternatively, one of the co/venturers should be

designated as general manger of the pro8ect, with authority to

bind the 8oint venture. ! provision to clearly define not only

the management duties, but all other duties of the co/venturers

and procedures to be followed in dealing with unusual

situations or problems that may develop.

! regular meeting schedule should be considered.

! financial and periodic 8oint venture and progress reporting

procedure should be implemented.

7stablishment of a 8oint venture bank account, and the

appointment of a chartered accountant and lawyer.

The possibility of the death, bankruptcy, or insolvency of a

member must be handled.

The ac2uisition of e2uipment and materials by the 8oint venture

and the disposal of such e2uipment and material either by sale

with the proceeds treated as ordinary revenues, or by

distributing the funds to the co/venturers on a pro/rata basis.

;rovide for the ac2uisition of licenses in the name of the 8oint

venture or each co/venturer as re2uired.

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1pecify the type of insurance carried by the 8oint venture and

clearly define the liabilities that are to be insured against by

each participant.

=efine items that are to be considered as costs to the 8oint

venture for the purpose of determining profit or loss and

describe those items that are not reimbursable to members of

the 8oint venture.

! clause should be included respecting the confidentiality of

trade information passed between the co/venturers.

6wnership or retention of patents, technology, and consultant

reports should be addressed.

7stablish the performance security re2uirements of the pro8ect

and the bonding obligations of the co/ventures.

1tate that undivided pro/rata interests are held by the co/

venturers on all assets of the 8oint venture.


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Ainding up, final performance and financial statements for the

8oint venture.

(otice clause.

The applicable 8urisdiction of the !greement should be stated.

The nature, si)e, and comple0ity of the pro8ect together with the

sophistication of the parties will determine the detail in which the Doint

Eenture !greement is prepared and aforementioned topics dealt with.

This checklist is meant only as a guide to putting a Doint Eenture

!greement together. The appropriate professional services, such as

legal counsel should be sought out and utili)ed

TERMINATION OF JOINT VENTURE AGREEMENT

1urvival terms after the termination of the Doint Eenture agreement.

The Doint Eenture agreement should be sub8ect to obtaining all

necessary governmental approvals and licenses within specified

period.

7very Doint Eenture agreement should be modified as applicable

under different circumstances. 6ne brush should not paint all the

painting. International Doint Eenture could be is a legal minefield and

many companies are not aware of the problems it causes.

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CHAPTER:-8

CASE STUDY

TATA AIG @CASE STUDY;

THE TATA GROUP

The Tata Group 'www.tata.com* is one of Indias largest and most

respected business conglomerates, with revenues in %44/49 of "$.5

billion '


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si0 continents, and its companies e0port products and services to "4

nations

AIG

!merican International Group, Inc. '!IG*, world leaders in

insurance and financial services, is the leading international insurance

organi)ation with operations in more than "4 countries and

8urisdictions. !IG companies serve commercial, institutional and

individual customers through the most e0tensive worldwide property/

casualty and life insurance networks of any insurer. In addition, !IG

companies are leading providers of retirement services, financial services

and asset management around the world. !IGs common stock is listed

on the (ew Qork 1tock 70change as well as the stock e0changes in

ondon, ;aris, 1wit)erland and Tokyo.
http://images.google.com/imgres?imgurl=http://www.swagatgroup.net/logo_tata_aig.gif&imgrefurl=http://www.swagatgroup.net/secure.htm&h=78&w=76&sz=4&hl=en&start=1&tbnid=ukPw1zqlwUOycM:&tbnh=73&tbnw=71&prev=/images%3Fq%3DTATA%2BAIG%2BJOINT%2BVENTURE%26gbv%3D2%26svnum%3D10%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.financialpartnership.com.au/docimage%3Fimg%3D1838&imgrefurl=http://www.financialpartnership.com.au/page%3Fpg%3D689%26stypen%3Dhtml&h=64&w=89&sz=3&hl=en&start=161&tbnid=ZjMnB2_Ei6KmUM:&tbnh=56&tbnw=78&prev=/images%3Fq%3DAVIVA%2BLIFE%2B%26start%3D160%26imgsz%3Dsmall%257Cmedium%257Clarge%257Cxlarge%26gbv%3D2%26ndsp%3D20%26svnum%3D10%26hl%3Den%26sa%3DN


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!merican International Group, Inc. '!IG*. Tata !IG ife

combines the Tata Group>s pre/eminent leadership position in India and

!IG>s global presence as the world>s leading international insurance and

financial services organi)ation. The Tata Group holds $ per cent stake

in the insurance venture with !IG holding the balance %+ percent. Tata

!IG ife provides insurance solutions to individuals and corporate. Tata

!IG ife Insurance -ompany was licensed to operate in India on

February "%, %44" and started operations on !pril ", %44"

ICICI PRUDENTIAL JOINT VENTURE

Ahen the government opened up the insurance industry to the

private sector, I-I-I was 2uick to launch a life insurance company and a

general insurance company. I-I-I ;rulife was launched as a 8oint

venture with the reputed CU insurance firm ;rudential. ';rudential

gained visibility in India as a sponsor of the -ricket Aorld -up "#5,

which India won // an event considered to be India>s greatest sporting

moment.*

I-I-I ;rulife has very 2uickly gone on to become India>s largest

private life insurance company. !gain the success lay in aggressive

marketing, smart advertising, omnipresence and 2uick e0pansion. I-I-I


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also has a strong presence in the general insurance sector with I-I-I

ombard General Insurance -ompany imited.

;rudential plc announced that I-I-I ;rudential ife Insurance, its

8oint venture with I-I-I td on % (ov %444, has received a licence

from the Insurance


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and understood. It launched a corporate campaign using the theme of

R1in door> to epitomi)e protection, trust, togetherness and all that is

Indian3 endearing itself to the masses. The success of the campaign, Rthe

calling card of the company>, saw the brand awareness scores almost at

par with its 4 year old competitor. The theme of protection was also

e0tended to subse2uent product and category specific campaigns B from

child plans to retirement solutions B which highlight how the company

will be with its customers at every step of life.

From day one, the company has unflinchingly focused on being a

mass/market player, developing products, creating a distribution network

and deploying resources that would further its goal. !part from ramping

up and thoroughly training its advisors, the company has twelve R&anc

assurance> partners B the largest in the country. It swiftly revised and

added to its initial range of products, pioneering market/linked products

and pension plans, to offer customers the most fle0ible life insurance

policies in the country.

In February %44, I-I-I ;rudential increased its capital base by


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;roduct I-I-I ;rudential>s ultimate promise is financial security.

! strong brand certainly boosts sales, but without customer/friendly,

innovative products, even the best brand would not last long.

I-I-I ;rudential>s product range has been developed on the

understanding that different people have their own sets of needs at

various stages of their lives. It has thus built a fle0ible portfolio of

products that can be customi)ed to cater to varying needs of people at

each life stage, and thus ensure protection in every step of life. The

company>s philosophy has been to help customers understand their

financial needs and work closely with them to customi)e a product that

would meet this need. !dvisors can offer a complete range of products /

1avings plans, -hild plans, Market/linked plans, ;rotection plans,

changing needs at every stage of life. In

fact, I-I-I ;rudential was the first to un/bundle product benefits,

pioneering the concept of Rriders> and soon after introduce

comprehensive market/linked and retirement plans.

RECENT DEVELOPMENTS:-

In keeping with its belief that a happy customer is the best

endorsement, I-I-I ;rudential has embraced the R1i0 1igma> approach

to 2uality, an e0ercise that begins and ends with the customer B from

capturing his voice to measuring and responding to his e0periences. This

$


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initiative is currently helping the company improve processes,

turnaround times and customer satisfaction levels.

!nother novel introduction is the I-I-I ;rudential ifestyle

s

success has been meteoric, becoming the number one private life insurer

within months of launch. Today, it has one of the largest distribution

networks amongst private life insurers in India, with branches in 9

cities. The total number of policies issued stands at more than $54,444

with a total sum assured in e0cess of s retail market share amongst private companies stood at

+, making it a clear leader in the segment.

5


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I-I-I ;rudential>s success is rooted in its philosophy to always

offer the customer a choice. This has been the driving force behind its

multi/channel distribution strategy, which includes advisors, banks,

direct marketing and corporate agents. In fact, I-I-I ;rudential was the

first life insurer to invest in multiple channels and offer the customer

choice and access3 thus reducing dependency on any one channel. Aithin

si0 months, the campaign rewarded I-I-I ;rudential with an increased

share of % of the total pensions market and $5 amongst private

players.

CLOSING THOUGHTS ON ICICI PRUDENTIAL JOINT

VENTURE

-learly the brand is willing to 2uickly sei)e every opportunity that

it sees. The moves into banking, life insurance and general insurance

when the government opened up these sectors to private players shows

that the brand owners truly believe that fortune favors the brave. &y

investing heavily in advertising, marketing and infrastructure, I-I-I

became the most dominant name in each of these sectors. This strategy

helped them take an early lead in industries with immense potential.

?owever, this Kburn the candles at both the endsL pursuit of

growth may not work for long. 1uddenly everywhere one looks there is

an I-I-I presence in almost every segment of the finance market. The

brand seems to be losing coherence and cohesiveness with the I-I-I

name spread far and thin. 1ome people are getting worried at the huge

#


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si)e of each of I-I-I>s plays and are scared that if this giant topples it

will carry many with it.

I-I-I needs to make sure that it does not fly too close to the sun.

The brand can easily fall in its pursuit of its ambitions. ;erhaps

consolidation would be a good idea for the brand to pursue for a while.

This brand needs to tread cautiously to insure its own future or it may

harm those who bank on it.

CHAPTER:-

CONCLUSION

Doint Eentures are becoming a popular means to enter Indian

markets for global giants. ?owever, the risks of cross/border e0pansion

are slightly lowered, but they still remain. To have a successful DE, both

partners should have a good understanding of each other>s cultures,establish good work collaboration and work towards a common

ob8ective. The risks of cultural integration still e0ist / often times

management from both the sides often ignore the cultural integration

issue assuming that they can take care of it / but cultural integration

often falls between the cracks / and the DE ultimately fails.

6ne of the most popular strategies for entering international

markets is through 8oint ventures / where the risks, costs, management,

and success of the venture are shared by the partners. For international

8oint ventures, the entities are sub8ect to a multitude of regulations and

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legal re2uirements, which must be fully understood by the parties

involved. !dded to this are comple0 business considerations, which

must be satisfied / often within the framework of a foreign culture and

foreign practices. Finally, cultural and social difference also plays a large

role in the success or failure of such ventures.

Doint venture partnerships, where businesses come together to help

achieve mutual goals, can be e0tremely effective for small enterprises

hoping to compete in a crowded and competitive marketplace.

They enable businesses to pool their resources, skills, e0pertise or

finance to achieve results that would have been more difficult or

impossible individually. Doint ventures can be long/term partnerships,

when developing a new product for e0ample, or much shorter

arrangements when entering a new market. 1mall businesses can team up

with partners that have complementary skills or specialist knowledge to

help e0ploit new opportunities or undertake fresh challenges.

The frantic cross selling and up/selling of products and services is

now becoming too strident and insistent for the general public>s comfort.

The tall targets set across several products are probably weighing on the

team and there is an unseemly haste in the speed of each transaction.

Cneasy customers and investors are worried that the brand may have

overe0tended itself. -asual in2uiry among ac2uaintances reveals a fear

that the brand may collapse in the future because of the sheer volume of

activities it is undertaking.

9"


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CHAPTER:-

BIBLIOGRAPHY

BIBLOGRAPHY

KDoint Eenture in Insurance &usinessL / Mr. 1atyandani Uhanna

Kife InsuranceL / Uenneth &lack, ?arold =. 1kipper.

KI-/ IF7 I(1C


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(akshu) joint venture in insurance industri

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