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GENPACT

BANKING & FINANCIAL SERVICES IN

GENPACT

SESSION (2011-13)UNDER THE GUIDENCE OF - SUBMITTED BY:-

Mr. ROHIT SINGH PAYAL SRIVASTAVAPROCESS DEVELOPER (PROCESS EXECUTIVE)

GURU GRAM BUSINESS SCHOOL

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A PROJECT REPORT ON

BANKING & FINANCIAL SERVICES IN

GENPACT

SUBMITTED BY

PAYAL SRIVASTAVA

FOR THE DEGREE OF

MASTER IN BUSINESS ADMINISTRATION (INDUSTRY INTEGRATRED)

UNDER THE GUIDANCE OF

Mr. ROHIT SINGH (PROCESS DEVELOPER) IN GENPACT

AND

Mr BATRA (PRINCIPAL) IN GURU GRAM BUSINESS SCHOOL

ACADEMIC YEAR 2011 - 2013

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PAYAL SRIVASTAVA

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DECLARATION

I, PAYAL SRIVASTAVA OF THE GURU GRAM BUSINESS SCHOOL OF 3 RD SEMESTER , HEREBY

DECLARE THAT I HAVE COMPLETED THE PROJECT ENTITLED BANKING & FINANCIAL

SERVICES IN GENPACT IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE SECOND

YEAR OF MASTER IN BUSINESS ADMINISTRATION (INDUSTRY INTEGRATRED) MANAGEMENT

STUDIES COURSE FOR THE ACADEMIC YEAR 2011-2013

I FURTHER DECLARE THAT INFORMATION SUBMITTED BY ME IS TRUE AND ORIGINAL TO THE

BEST OF MY KNOWLEDGE.


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ACKNOWLEDEGEMENT

I EXPRESS MY SINCERE THANKS TO Mr. ROHIT SINGH FOR HER VALUABLE GUIDANCE IN

DOING THIS PROJECT.

I WISH TO TAKE THE OPPORTUNITY TO EXPRESS MY DEEP SENCE OF GRATITUDE TO

PRINCIPALMr. BATRA FOR THEIR VALUABLE GUIDANCE AND SUPPORT IN THIS ENDEAVOUR

THEY HAVE BEEN A CONSTANT SOURCE OF INSPIRATION.

FINALLY IT IS THE FOREMOST DUTY TO THANK ALL MY RESPONDENTS, FAMILY, FRIENDS

AND TEACHERS WHO HAVE HELPED ME DIRECTLY OR INDIRECTLY IN COMPLETING MY

FIELD WORK, WITHOUT WHICH THIS PROJECT WOULD NOT HAVE BEEN SUCCESSFUL.

PAYAL SRIVASTAVA

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TABLE OF CONTENTS

Sr. No Contents Page no

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SYNOPSIS

The economic reforms undertaken in the last 15 years have brought about a considerable improvement in the

health of banks and financial institutions in India. The banking sector is a very important sector of the Indian

economy. The sector has made a marked improvement in the liberalization period. There has been extraordinary

progress in the financial health of the commercial banks with respect to capital adequacy, profitability, asset

quality and risk management. Deregulation has opened new doors for banks to increase revenues by entering

into investment banking, insurance, credit cards, depository services, mortgage, securitization, etc.

The limit for foreign direct investment in private banks has been increased from 49% to 74%. In addition, the

limit for foreign institutional investment in private banks is 49%. Liberalization and globalization have created a

more challenging environment in the banking sector as well as in the other segments of the financial sector such

as mutual funds, Non Banking Finance Companies, post offices, capital markets, venture capitalists, etc. Now

the challenges faced by the sector would be gaining profitability, reinforcing technology, maintaining global

standards, corporate governance, sharpening skills, risk management and, the most important of all, to establish

'Customer Intimacy'.

The insurance business is one of the most rapidly growing areas in the financial sector. As an economy grows

over the years, insurance sector intensifies and broadens its reach. Every practical and futuristic individual

would want himself, his family and his assets to be insured. Insurance deals mainly with life and general

insurance. India has a large insurance market commensurate with its population. The IRDA Act 1999

(Insurance Regulatory and Development Authority of India Act) has given new opportunities to private players

to enter into the market on the fulfillment of certain prerequisites. The IRDA is the licensing authority in the

sector; the current FDI cap/Equity in the sector stands at 26 percent. There is no doubt the challenges ahead will

become tougher with more companies competing both in general and life Insurance. Also mortgage insurance

will soon be coming into the industry. New players have contributed to the launch of innovative products

services and value-added benefits. Major foreign players have entered the country and announced joint ventures

in both life and non-life areas. These include New York Life, Aviva, Tokio Marine, Allianz, Standard Life,

Lombard General, AIG, AMP and Sun Life among others.

Commercial banks are coming up with more and more vacancies, and the banking sector now has more new

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jobs than any other sector. Right from the branch level to the highest level, there is tremendous range of

opportunities available in the sector. Jobs in this sector can be both rewarding and enjoyable, as you get

opportunities to learn about business, interact with people and build up clientele. The same is the case with

insurance, as it is the fastest growing industry under the financial sector. Both government and private players

are currently offering a plenty of jobs in this sector. So, this is great news for you if you are thinking to go into

the banking & insurance streams.

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CHAPTER 1

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GENPACT

Company Overview

A global leader in business process and technology management, Genpact is the company of choice for clients,partners and employees across the world. With many pioneering firsts to its credit Genpact has always led theway in powering the intelligent enterprises to outperform.

Genpact, a global leader in business process management services, uses process to help its clients powerintelligence across their enterprise to run smarter operations, make smarter decisions and use smartertechnology. Genpacts Smart Enterprise Processes (SEPSM) framework, its unique science of process combinedwith deep domain expertise in multiple industry verticals, leads to superior business outcomes.

Genpacts Smart Decision Services deliver valuable business insights to its clients through targeted analytics,reengineering expertise, and advanced risk management. Making technology more intelligent by embedding it

with process and data insights, Genpact also offers a wide range of technology services.

We began in 1997 as a business unit within GE and this lineage has contributed to our deep understanding ofprocess. Starting first with the business of GE Capital and then expanding scope across GE businesses, toproviding business process management capabilities that delivered outstanding business impact for thecompany.

Over a sustained 14-year period, Genpact has been the key provider of business process and technologymanagement services to GE and they continue to be a significant Genpact client. In January 2005, Genpactbecame an independent company to bring our process expertise and unique DNA in Lean Six Sigma to clientsoutside the GE family. In August 2007, Genpact was listed on the NYSE under the symbol G.

Driven by a passion for process innovation and operational excellence built on its Lean and Six Sigma DNAand the legacy of serving GE for more than 15 years, the companys 60,000+ professionals around the globedeliver services to its more than 700 clients from a network of 70+ delivery centers across 18 countriessupporting more than 30 languages.

Genpact has been an early mover in the industry and a pioneer in many of the areas that have given strength tothe concept of Business Process Management. From the first to introduce Six Sigma for Process Transitions tothe first to build a Science of Process Management (SEPSM), Genpact has always led the way, and in theprocess helped our clients outperform

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1.1 BANKING IN INDIA

Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the

State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest

commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in

1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial

banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader

powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the

six next largest in 1980.

Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the

Government of India holding a stake), 31 private banks (these do not have government stake; they may be

publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over

53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector

banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding

18.2% and 6.5% respectively

EARLY HISTORY

Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of

India which started in 1786, and the Bank of Hindustan, both of which are now defunct. The oldest bank in

existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which

almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two

being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the

British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their

successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's

independence, became the State Bank of India.

Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of theeconomic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest

Joint Stock bank in India. It was not the first though. That honor belongs to the Bank of Upper India, which was

established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being

transferred to the Alliance Bank of Simla.

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When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States

promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, mos

of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping

deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next

several decades until the beginning of the 20th century.

Foreign banks too started to arrive, particularly in Calcutta, in

the 1860s. The Comptoire d'Escompte de Paris opened a

branch in Calcutta in 1860, and another in Bombay in 1862;

branches in Madras and Pondichery, then a French colony,

followed. HSBC established itself in Bengal in 1869. Calcutta was

the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking

center.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It

failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the

present and is now one of the largest banks in India.

Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability.

Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had

improved. Indians had established small banks, most of which served particular ethnic and religious

communities.

The presidency banks dominated banking in India but there were also some exchange banks and a number of

Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks,

mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally

under capitalized and lacked the experience and maturity to compete with the presidency and exchange banks.

This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are

like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome

compartments."

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The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The

Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian

community. A number of banks established then have survived to the present such as Bank of India

Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India.

The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi

district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four

nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina

Kannada district is known as "Cradle of Indian Banking".

NATIONALISATION

By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the

Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about thepossibility to nationalise the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the

intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray

thoughts on Bank Nationalisation."The paper was received with positive enthusiasm. Thereafter, her move was

swift and sudden, and the GOI issued an ordinance and nationalised the 14 largest commercial banks with effect

from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a

"masterstroke of political sagacity."Within two weeks of the issue of the ordinance, the Parliament passed the

Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on

9 August, 1969.

A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the

nationalization was to give the government more control of credit delivery. With the second dose o

nationalization, the GOI controlled around 91% of the banking business of India. Later on, in the year 1993, the

government merged New Bank of India with Punjab National Bank. It was the only merger between

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nationalized banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After this,

until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the

Indian economy.

The nationalised banks were credited by some, including Home minister P. Chidambaram, to have helped the

Indian economy withstand the global financial crisis of 2007-2009.

LIBERALISATION

In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization, licensing a small

number of private banks. These came to be known as New Generation tech-savvy banks, and included Global

Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of

Commerce, Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapidgrowth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong

contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks.

The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign

Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the

present cap of 10%,at present it has gone up to 49% with some restrictions.

The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4

method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook

and tech-savvy methods of working for traditional banks.All this led to the retail boom in India. People not just

demanded more from their banks but also received more.

Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even

though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality

of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets

relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous

body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to

manage volatility but without any fixed exchange rate-and this has mostly been true.

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With the growth in the Indian economy expected to be strong for quite some time-especially in its services

sector-the demand for banking services, especially retail banking, mortgages and investment services are

expected to be strong. One may also expect M&As, takeovers, and asset sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra

Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in

a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector

banks would need to be vetted by them.

In recent years critics have charged that the non-government owned banks are too aggressive in their loan

recovery efforts in connection with housing, vehicle and personal loans. There are press reports that the banks

loan recovery efforts have driven defaulting borrowers to suicide.

1.2 ANCIENT BANKING PRACTICES

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Banking in India is as old as the hills. It flourished even in ancient Vedic times. Money was accepted on deposit

and given in the form of advances. As far back as the second or third century A.D. Manu, the great Hindu jurist,

devoted a section of his work to deposits and advances and laid down rules relating to the interest to be paid or

charged.

During the mogul period, the indigenous bankers played a very important role in lending money and financing

of foreign trade and commerce. They were also engaged in the profitable business of money changing.

Every town, big or small, had a sheth also known as shah, shroff, or chettiar who performed a number of

banking functions. He was respected by all sections of people as an important citizen. In principal towns

besides shroffs, there was a Nagar Sheth or Town Banker. These Sheths or Shroffs, besides doing money-lending business, were instrumental in transferring funds from place to place and doing collection business

mainly through hundis. The hundis were an accepted mode of transfer of money for commercial transactions.

1.3 BANKING TRANSITION

PHASE I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The

East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as

independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial

Bank of India was established which started as private shareholders banks, mostly Europeans shareholders.

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In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was

set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India,

Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in

1935.

During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and

1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of

commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later

changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of

India was vested with extensive powers for the supervision of banking in india as the Central Banking

Authority.

During those days public has lesser confidence in the banks. As an aftermath deposit mobilisation was slowAbreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover

funds were largely given to traders.

PHASE II

Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalised

Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semi-urban areas.

It formed State Bank of india to act as the principal agent of RBI and to handle banking transactions of the

Union and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major

process of nationalisation was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira

Gandhi. 14 major commercial banks in the country was nationalised.

Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks

This step brought 80% of the banking segment in India under Government ownership.

The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:

1949: Enactment of Banking Regulation Act.

1955: Nationalisation of State Bank of India.

1959: Nationalisation of SBI subsidiaries.

1961: Insurance cover extended to deposits.

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1969: Nationalisation of 14 major banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980: Nationalisation of seven banks with deposits over 200 crore.

After the nationalisation of banks, the branches of the public sector bank India rose to approximately 800% in

deposits and advances took a huge jump by 11,000%.

Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about

the sustainability of these institutions

PHASE III

This phase has introduced many more products and facilities in the banking sector in its reforms measure. In

1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the

liberalisation of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory

service to customers. Phone banking and net banking is introduced. The entire system became more convenient

and swift. Time is given more importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by

any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible

exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks

and their customers have limited foreign exchange exposure.

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1.4 BANKING SECTOR

Banking in India is as old as the hills. It flourished even in ancient Vedic times. Money was accepted on deposit

and given in the form of advances. As far back as the second or third century A.D. Manu, the great Hindu jurist,

devoted a section of his work to deposits and advances and laid down rules relating to the interest to be paid or

charged. During the mogul period, the indigenous bankers played a very important role in lending money and

financing of foreign trade and commerce. They were also engaged in the profitable business of money

changing.

Every town, big or small, had a sheth also known as shah, shroff, or chettiar who performed a number of

banking functions. He was respected by all sections of people as an important citizen. In principal towns

besides shroffs, there was a Nagar Sheth or Town Banker. These Sheths or Shroffs, besides doing money-

lending business, were instrumental in transferring funds from place to place and doing collection business

mainly through hundis. The hundis were unaccepted mode of transfer of money for commercial transactions

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1.5 INDUSTRY ANALYSIS

Threat of new Entrants

With the financial services opening up, and the flow of foreign capital unrestricted, players who have remained

dormant in India like BNP Paribas and America Express are likely to enter. These firms with deep pockets will

definitely bring in the best practices and bring about massive consolidation and restructuring in the industry.

Threat of suppliers

A huge threat of suppliers exists with the human capital being wooed by foreign banks, and the customers being

attracted by the ever-increasing portfolio of services being offered. Therefore the industry is fast becoming

service oriented with faster and better technologies, and better distribution channels.

Threat of buyers

Buyers like corporates choose multinationals with exposure in foreign markets to raise funds. Therefore in the

long run these banks are likely to move towards relationship banking with few, but profitable clients.

Rivalry among existing firms

There is tremendous rivalry amongst the existing firms, and this can only increase given the recent policy

changes, which favor takeovers and mergers and flow of foreign capital into the country. This will lead to the

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sector offering better and faster services, a lookout for lower return on assets, and willingness to take on higher

risk projects. This rivalry has already manifested itself in an increasing number of firms looking to move into

universal bankin

1.6 MARKETING MIX

The key objectives for financial service providers are:

Attracting customers in the first place

Retaining customers through high levels of client satisfaction and by providing a portfolio of financial

services to meet their changing needs over time.

Some key issues, which must be taken into consideration in designing the most effective financial services

marketing mix, are as follows:

PRODUCT

There is little or no room for innovation in product design due to the ease by which competitors can make

similar offerings, for example by altering charges or interest rates to meet those of competitors. Additionally,

many financial services are affected by other restrictions, such as government directives relating to income tax

and investments or constraints on the amounts, which can be invested. Differentiation therefore can be best

achieved through the other elements of marketing mix. Current accounts are dominated by banks, although the

building societies share of this market in which they could not compare until recently is growing.

PRICE

This relates to the cost involved to the customer in bank charges or credit card interest rates. These prices seem

to evoke low levels of customer sensitivity as many customers enjoy free banking by maintaining their current

accounts in credit, for example on paying their credit card balances off each month. The introduction of new

charges, however such as the annual credit card fee had a noticeable effect initially, however, and sparked off

competitive reaction from lenders prepared to offer cards with no annual charge.

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Price also relates to the value of the product to the customer and as such, can be highly sensitive. This can be in

terms of interest rates charged on a mortgage, where reductions in interest for first time buyers or preferential

rates for existing customers of other services (for example current account holders) are standard promotional

tools in the industry, representing a form of discounting. The rate of return offered to investors is another

element of the price and the different products within the range are frequently priced at differential rates, to

attract long-term savers or large lump-sum investors. Pricing can therefore be used to differentiate the offering

and is likely to be used by customers in selecting a service.

PROMOTION

Banks and other major financial institutions such as insurance companies undertake major advertising

campaigns continuously. The main purpose of the advertising is to strengthen awareness of the brand and the

company image and to inform the market about the services available. The trend has also been towards

developing more below the line promotional activities using highly sophisticated databases to target direct mail

campaigns at distinct market segments and using publicity, sponsorship, and other promotional means. Personal

selling can be done over the telephone once the initial inquiry has been made and customer care has been

developed to enable a strong personal selling strategy to work.

Another idea where personal selling is a strong tool is in the area of insurance products and the emergence of

bancassurance- the product offered through links between banks and insurers, commonly with banks as the

controlling partner. The insurance organisations expertise in personal selling and the strong customer loyalty

and extensive customer base of the banks make for synergy in business development. The importance of

personal selling is now widely recognised and many institutions offer home visits by financial advisers.

PLACE

Place or location has always been regarded as critical in retail financial services where high street positions are

maintained by most of the large institutions. For transaction services where regular and frequent branch contact

is requires this can be important. Some consumers prefer personal, face-to-face contact within a branch and may

be more likely to use a local branch or building society. Changes in distribution systems, technology and

consumer demands are all key influences in the evolution of the place component in the marketing mix.

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PEOPLE

Customer care is the forefront of both quality and differentiation in the financial services industry. Staff needs

to be highly trained not only in customer care but also in how to respond to the rapidly changing market

environment. Personnel can be used to develop competitive advantage in the marketplace and to build and

maintain relationships with customers.

PROCESS

This is the main area where technological advances have led to major change. Improvements in the process

stem not only from the automation of many transactions and data handlings within the organisations but also

from process re-engineering to reduce delays in processing mortgage applications or the installations of

automated queuing systems to cut down on waiting time.

PHYSICAL EVIDENCE

The environment in banks in changing, moving away from austerity and formality to a more friendly approach

reflected in more attractive layouts and dcor. Other physical evidence plays an important part in financial

transactions such as the documentation, which must be presented by salespeople to prove that they are

authorized to offer investment advice. This creates confidence and helps to build the relationship between

customer and provider. It is also widely used to tangibilise the service. Attractive brochures and policy

documents, presented in glossy folders, cheque book and credit card holders, gold credit cards, childrens

collectable money boxes are all examples of physical evidence being used In this way.

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1.7 CHANGING SCENARIO

The economic reforms initiated in the aftermath of the 1991 crisis have blown winds of change in every

segment of the economy. The banking industry, one of the supporting precursors to any rapidly growing

economy, has undergone a period of considerable change since the 1990s. The three sectors of the banking

industry namely public, private and foreign are the cornerstones of the changing banking industry.

The Indian banking sector has a massive geographical reach and the credit- deposit of 48% figures speak

volumes of the inherent strength of this industry. Until recently, the lack of competitiveness vis-a-vis global

standards, low technological level in operations, over staffing, high NPAs and low levels of motivation had

shackled the performance of the banking industry.

The entry of the New Private Sector banks into the market changed the face of this industry. Nurturing

collaborative ventures and paying strong emphasis on Forex services, the private banks are globalizing Indian

banking business armed with strategic alliances with foreign collaborators; these banks have opened doors to

new positive ideas, concepts and products. These private banks have set a trend for universal banking. For

instance, Global Trust Bank is the first Indian Bank to have equity participation from International Finance

Corporation and Asian Development Bank. Similar trends are seen in Centurion Banks alliance with Keppel

Bank, Singapore and HDFC Bank with Nat West Markets, United Kingdom. Recently ICICI successfully

completed its ADR issue on New York Stock Exchange (NYSE).

The intensification of competition in the banking industry because of growing private sector participation

coupled with growing customer needs has spurred innovation resulting in new products and services. The

private sector banks spearhead this "Innovation Revolution".

The new private sector banks are targeting specific products and client group. However with the advent of

foreign players participation, the private sector banks position stands threatened.

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With emphasis on service and technology, it is for the first time that Indian banks (mainly private) are

challenging the foreign banks. These banks are making heavy use of technology to give good service at par with

foreign banks but to a much wider clientele. Branch size has been reduced considerably by using technology

thus saving work force. This has resulted in an overall cost saving. In addition, the Any Time Money (ATM)

facility helps draw large customers to a branch. ICICI Bank has already launched Database Management

(referring to using the database of existing clients to generate more revenues).

The new private banks are on an expansion phase and are now moving into semi-urban areas and satellite towns

to fulfill their branch expansion norms. ICICI bank, HDFC bank, GTB, IndusInd, BOP and UTI Bank

have come out with IPOs as per licensing requirement. The other three private sector banks are expected

to come out with their IPOs in next fiscal. Their technological edge and product innovation has seen them

gaining market share from the slower, less efficient older banks. These banks have targeted non-fund

based income as major source of revenue, with their level of contingent liabilities being much higher then

their other counterparts viz. PSU and old private sector banks. The new private banks have been

consistently gaining market shares from the public sector banks. The major beneficiary of this has been

corporate clients who are most sought after now.

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CHAPTER 2

2.1 INSUARNCE - INTRODUCTION

Life insurance, in its pristine form, evolved out of a sense of co-operation within the community that was

present even at the dawn of history. The Sanskrit termyogakshema, which means "well-being" is present in the

Rig Veda and it is used in the context of some form of insurance in vogue during the Aryan times. There are

references in Kautilyas Arthashastra to some kind of social security system for the welfare of the subjects.

Later on, the Indian joint family system too fulfilled the need for security.

In the Western world, life insurance evolved mainly from the maritime industry. Shakespeare speaks of

putters out of five in some of his plays an oblique reference to private financiers who used to gamble on the

lives of sea-farers by offering five times the money deposited with them in case of certain contingencies.

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In its present form, life insurance had its origin in England and made its debut in India in the year 1818.

Initially, Indians were not considered on par with Europeans as far as their insurability was concerned. There

were also many other failures. It was in the early part of the 20 th century that some kind of legislation was made

to regulate the industry. From then on, life insurance made great strides in the country.

At the time of Independence and thereafter, there were more than 200 companies operating in India and not all

of them on sound ethical principles. Many factors combined together to prompt the then Government to

nationalize the life insurance industry in 1956 to form the Life Insurance Corporation of India

The years from 1956 to 1999 saw the Life Insurance Corporation of India emerge as a giant financial institution

and the lone organization purveying life insurance, if we ignore the minimal presence of postal life insurance

The institution succeeded in penetrating many areas and segments of the population and in garnering public

money for public welfare.

Late seventeenth century was an era of growing international trade. New shipping routes were discovered and

adventurous sailors brought exotic products from strange and alien lands. But their journeys across the oceans

were fraught with danger and unknown risks. They required some kind of protection against the peril lurking in

high seas. This gave rise to a new breed of entrepreneurs - marine underwriters - who agreed to cover the losses

in return for a fixed amount of premium. Their business depended on current information about the sea routes

pirates, political condition, weather patterns, conditions aboard the ship, and consumer tastes for exotic

products. In order to acquire business information, many marine underwriters began to frequent Edward Lloyd's

coffeehouse in London. This was the place where they could share business intelligence with other underwriters

and captains of trading ships. In 1771, seventy nine underwriters who did business at Lloyds' got together to

form a society that went on to become the most famous of all insurance companies - Lloyd's of London.

The insurance sector in India has come a full circle from being an open competitive market to nationalisation

and back to a liberalised market again. Tracing the developments in the Indian insurance sector reveals the 360-

degree turn witnessed over a period of almost two centuries.

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2.2 BRIEF HISTORY

The origin of insurance is very old .The time when we were not even born; man has sought some sort of

protection from the unpredictable calamities of the nature. The basic urge in man to secure himself against any

form of risk and uncertainty led to the origin of

Insurance.

The insurance came to India from UK; with the establishment of the Oriental Life insurance Corporation in

1818.The Indian life insurance company act 1912 was the first statutory body that started to regulate the life

insurance business in India. By 1956 about 154 Indian, 16 foreign and 75 provident firms were been established

in India. Then the central government took over these companies and as a result the LIC was formed. Since then

LIC has worked towards spreading life insurance and building a wide network across the length and the breath

of the country. After the liberalization the entrance of foreign players has added to the competition in the

market.

The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company

Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. In 1957

General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring

fair conduct and sound business practices. In 1972 The General Insurance Business (Nationalization) Act, 1972

nationalized the general insurance business in India with effect from 1st January 1973. It was after this that 107

insurers amalgamated and grouped into four companies viz. the National Insurance Company Ltd., the New

India Assurance Company Ltd., the Oriental Insurance Company Ltd. and the United India Insurance Company

Ltd. GIC incorporated as a company.

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2.3 INSURANCE BUSINESS

By any yardstick, India, with about 200 million middle class households, presents a huge untapped potential for

players in the insurance industry. Saturation of markets in many developed economies has made the Indian

market even more attractive for global insurance majors.

With the per capita income in India expected to grow at over 6% for the next 10 years and with improvement in

awareness levels, the demand for insurance is expected to grow at an attractive rate in India. An independent

consulting company, The Monitor Group has estimated that the life insurance market will grow from Rs.218

billion in 1998 to Rs.1003 billion by 2008 (a compounded annual growth of 16.5%)3.

Insurance business has a positive correlation with economic development in an economy. As an economy

develops over the years, insurance sector starts making inroads into the interiors of the system. Most of the

times, insurance begins with the life insurance and gradually spreads to the field of general insurance. Every

forward-looking person would invariably have his/her life insurance done. Even in a country like India, it is

hard to believe that any adult person living in towns would not have life insurance done and the concept is

picking up even in the rural areas. In other words, the life insurance market in India is as large as its population.

There is no doubt that the liberalized life insurance industry is booming; and liberalization of the life insurance

market has so far proved to be a great success. New Life business is growing at 35 per cent, and invested funds

have grown dramatically by about Rs. 90,000 crore in 2003-04 to touch about Rs. 3,50,000 crore.

India with about 200 million middle class household shows a huge untapped potential for players in the

insurance industry. With such a large Indian population and the untapped market area of this population

Insurance happens to be a very big opportunity in India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together with banking services, it adds about 7 per cent to the countries GDP .In spite of

all this growth the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian

populations are without Life insurance cover and the Health insurance. This is an indicator that growth potential

for the insurance sector is immense in India.

LIFE INSURERS

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Public Sector

Life Insurance Corporation of India

Private Sector

Allianz Bajaj Life Insurance Company Limited

Birla Sun-Life Insurance Company Limited

HDFC Standard Life Insurance Co. Limited

ICICI Prudential Life Insurance Co. Limited

ING Vysya Life Insurance Company Limited

Max New York Life Insurance Co. Limited

MetLife Insurance Company Limited

Om Kotak Mahindra Life Insurance Co. Ltd.

SBI Life Insurance Company LimitedTATA AIG Life Insurance Company Limited

AMP Sanmar Assurance Company Limited

Dabur CGU Life Insurance Co. Pvt. Limited

GENERAL INSURERS

Public Sector

National Insurance Company Limited

New India Assurance Company Limited

Oriental Insurance Company Limited

United India Insurance Company Limited

Private Sector

Bajaj Allianz General Insurance Co. Limited

ICICI Lombard General Insurance Co. Ltd.

IFFCO-Tokio General Insurance Co. Ltd.

Reliance General Insurance Co. Limited

Royal Sundaram Alliance Insurance Co. Ltd.

TATA AIG General Insurance Co. Limited

Cholamandalam General Insurance Co. Ltd.

Export Credit Guarantee Corporation

HDFC Chubb General Insurance Co. Ltd.

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The insurance industry is quite diverse in terms of portfolio of products provided by different companies. The

products can be broadly classified into two product lines:

1. Property and casualty (P&C)

2. Life insurance.

Life insurance product line can be further sub-divided into life insurance, health insurance and annuity products

Growing consolidation and change in the regulatory framework has led many insurers to add new products to

their portfolio. This presents its own unique challenge to the insurer in leveraging its greatest asset - data.

2.4 BASICS

What Is Insurance?

Insurance is a contract that pledges payment of an amount to the person assured (or his nominee) on the

happening of the event insured against.

The contract is valid for payment of the insured amount during:

1. The date of maturity, or

2. Specified dates at periodic intervals, or

3. Unfortunate death, if it occurs earlier.

Among other things, the contract also provides for the payment of premium periodically to the Corporation by

the policyholder. Insurance is universally acknowledged to be an institution, which eliminates 'risk', substituting

certainty for uncertainty and comes to the timely aid of the family in the unfortunate event of death of the

breadwinner.

By and large, Insurance is civilisation's partial solution to the problems caused by death. Insurance, in short, is

concerned with two hazards that stand across the life-path of every person:

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1. That of dying prematurely leaving a dependent family to fend for itself.

2. That of living till old age without visible means of support.

2.5 INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee, headed by former Finance Secretary and RBI Governor R. N. Malhotra, was

formed to evaluate the Indian insurance industry and recommend its future direction.

The Malhotra committee was set up with the objective of complementing the reforms initiated in the financial

sector. The reforms were aimed at creating a more efficient and competitive financial system suitable for the

requirements of the economy keeping in mind the structural changes currently underway and recognising tha

insurance is an important part of the overall financial system where it was necessary to address the need for

similar reforms

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

Included:

Structure

Government stake in the insurance Companies to be brought down to 50% Government should take over the

holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations All the

insurance companies should be given greater freedom to operate

Competition

Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the industry

No Company should deal in both Life and General Insurance through a single

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Entity

Foreign companies may be allowed to enter the industry in collaboration with the domestic companies

Postal Life Insurance should be allowed to operate in the rural market

Only one State Level Life Insurance Company should be allowed to operate in

Each state

Regulatory Body

The Insurance Act should be changed

An Insurance Regulatory body should be set up

Controller of Insurance (Currently a part from the Finance Ministry) should be

made independent

Investments

Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%

GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be

brought down to this level over a period of time)

Customer Service

LIC should pay interest on delays in payments beyond 30 days

Insurance companies must be encouraged to set up unit linked pension plans

Computerisation of operations and updating of technology to be carried out in the insurance industry

The committee emphasised that in order to improve the customer services and increase the coverage of the

insurance industry should be opened up to competition. But at the same time, the committee felt the need to

exercise caution as any failure on the part of new players could ruin the public confidence in the industry.

Hence, it was decided to allow competition in a limited way by stipulating the minimum capital requirement of

Rs.100 crores. The committee felt the need to provide greater autonomy to insurance companies in order to

improve their performance and enable them to act as independent companies with economic motives. For this

purpose, it had proposed setting up an independent regulatory body.

The Insurance Regulatory and Development Authority

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Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December

1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule

of framing regulations and registering the private sector insurance companies.

The other decisions taken simultaneously to provide the supporting systems to the insurance sector and in

particular the life insurance companies was the launch of the IRDAs online service for issue and renewal of

licenses to agents. The approval of institutions for imparting training to agents has also ensured that the

insurance companies would have a trained workforce of insurance agents in place to sell their products, which

are expected to be introduced by early next year.

Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible

regulations. In the private sector 12 life insurance and 6 general insurance companies have been registered.

2.6 PLAYERS & MARKET SHARES

Reforms were initiated with the passage of Insurance Regulatory and Development Authority (IRDA) Bill in

1999. IRDA was set up as an independent regulatory authority, which has put in place regulations in line with

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global norms. So far in the private sector, 12 life insurance companies and 9 general insurance companies have

been registered.

The introduction of private players in the industry has added to the colors in the dull industry. The initiatives

taken by the private players are very competitive and have given immense competition to the on time monopoly

of the market LIC. Since the advent of the private players in the market the industry has seen new and

innovative steps taken by the players in this sector. The new players have improved the service quality of the

insurance. As a result LIC down the years have seen the declining phase in its carrer. The market share was

distributed among the private players. Though LIC still holds the 75% of the insurance sector but the upcoming

natures of these private players are enough to give more competition to LIC in the near future. LIC market share

has decreased from 95% (2002-03) to 81 %( 2005-06). The following company has the rest of the market share

of the insurance industry.

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2.7 WINDS OF CHANGE

Reforms have marked the entry of many of the global insurance majors into the Indian market in the form of

joint ventures with Indian companies. Some of the key names are AIG, New York Life, Allianz, Prudential

Standard Life, Sun Life Canada and Old Mutual.

The entry of new players has rejuvenated the erstwhile monopoly player LIC, which has responded to the

competition in an admirable fashion by launching new products and improving service standards.

The following are the key winds of change brought about by privatisation.

Market Expansion

There has been an overall expansion in the market. This has been possible due to improved awareness levels

thanks to the large number of advertising campaigns launched by all the players.

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Customer Service

Consumers remain the most important center of the insurance sector. After the entry of the foreign players the

industry is seeing a lot of competition and thus improvement of the customer service in the industry

Computerisation of operations and updating of technology has become imperative in the current scenario.

Foreign players are bringing in

International best practices in service through use of latest technologies. The one time monopoly of the LIC and

its agents are now going through a through revision and training programmes to catch up with the other private

players.

Distribution Channels

Till date insurance agents still remain the main source through which insurance products are sold. The concept

is very well established in the country like India but still the increasing use of other sources is imperative. It

therefore makes sense to look at well-balanced, alternative channels of distribution.

LIC has already well established and have an extensive distribution channel and presence. New players may

find it expensive and time consuming to bring up a distribution network to such standards. Therefore they are

looking to the diverse areas of distribution channel to have an advantage. At present the distribution channels

that are available in the market are:

Direct selling

Corporate agents

Group selling

Brokers and cooperative societies

Bancassurance

Bancasurance

Bancassurance is on of the most upcoming channels of distribution. India has an extensive bank network

established over the years. What Insurance companies have to do is to just take advantage of the customers

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long-standing trust and relationships with banks. This is a mutually beneficial situation as banks can also

expand their range of products on offer to customers, while the insurance company will also earn profits from

the exposure. Another advantage is that banks, with their network in rural areas, help to fulfill rural and social

obligations stipulated by the Insurance Regulatory and Development Authority (IRDA) recently.

The creation of bancassurance operations has made an important impact on the financial services industry at

large. This is though a new concept but it has gained a lot of importance in the industry at present and has a

great future.

Product Innovation

There has been a plethora of new and innovative products offered by the new players. Customers have

tremendous choice from a large variety of products from pure term (risk) insurance to unit-linked investmentproducts. Customers are offered unbundled products with a variety of benefits as riders from which they can

choose. More customers are buying products and services based on their true needs and not just traditional

money back policies, which is not considered very appropriate for long-term protection and savings. There is

lots of saving and investment plans in the market. However, there are still some key new products yet to be

introduced - e.g. health products.

Rural Marketing

Rural India seems to have an appetite for mobile phones, computers, and cars and to add to it we have

insurance. In India with the private players having entered into the insurance industry, the expected explosion in

job opportunities may not actually happen but for them the catchments area is the opportunities in the rura

India. in India the insurance business can be said to be "a marathon, not a sprint". This is because of the nature

of the business being long term. With merely two years of the industry being opened, not surprisingly, the new

comers are making losses. The public sector companies, notably the LIC, have gained in strength, thanks to the

deepening of the market consequent to the awareness created by the new companies. However this does not

deterred the private sector, which knows know that the race is a marathon, not a sprint. However it seems thathey if not anything, are only increasing their spending, though only out of the capital. Today, there are 18

insurance companies in India excluding the PSUs, with 12 in the life insurance business and the rest in non-life

The rural consumer is now exhibiting an increasing propensity for insurance products. A research conducted

exhibited that the rural consumers are willing to dole out anything between Rs 3,500 and Rs 2,900 as premium

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each year. In the insurance the awareness level for life insurance is the highest in rural India, but the consumers

are also aware about motor, accidents and cattle insurance.

In a study conducted by IMBR the results showed that nearly one third said that they had purchased some kind

of insurance with the maximum penetration skewed in favor of life insurance. The study also pointed out the

private companies have huge task to play in creating awareness and credibility among the rural populace. The

perceived benefits of buying a life policy range from security of income bulk return in future, daughter's

marriage, children's education and good return on Savings, in that order, the study adds.

IT & Insurance

In the insurance industry today, there is a clear trend away from selling a broad range of products to a large

volume of customers in a one size-fits-all manners. Instead of focusing on their different products lines as silos(i.e., life, property and casualty etc) insurers are looking for ways to offer highly targeted insurance products

that are tailored to the individuals customers with the highest propensity to buy them. There is a evolutionary

change in the technology that has revolutionized the entire insurance sector. Insurance industry is a data-rich

industry, and thus, there is dire need to use the data for trend analysis and personalization.

With increased competition among insurers, service has become a key issue. Moreover, customers are getting

increasingly sophisticated and tech-savvy. People today dont want to accept the current value propositions

they want personalized interactions and they look for more and more features and add ones and better service

The insurance companies today must meet the need of the hour for more and more personalized approach for

handling the customer.

Today managing the customer intelligently is very critical for the insurer especially in the very competitive

environment. Companies need to apply different set of rules and treatment strategies to different customer

segments. However, to personalize interactions, insurers are required to capture customer information in an

integrated system.

With the explosion of Website and greater access to direct product or policy information, there is a need to

developing better techniques to give customers a truly personalized experience. Personalization helps

organizations to reach their customers with more impact and to generate new revenue through cross selling and

up selling activities. To ensure that the customers are receiving personalized information, many organizations

are incorporating knowledge database-repositories of content that typically include a search engine and lets theGGBS (MDU) | 2013


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customers locate the all document and information related to their queries of request for services. Customers

can hereby use the knowledge database to mange their products or the company information and invoices, claim

records, and histories of the service inquiry. These products also may be able to learn from the customers

previous knowledge database and to use their information when determining the relevance to the customers

search request.

Mergers & Acquisitions

This is an era of mergers and acquisitions. Private companies including MNCs are amalgamating the world

over to get more competitive edge. Currently, the general insurance industry has been opened up. The question

here is that for over two years, eight private companies have operated and has the size of the cake expanded. We

here find that this is not true. The insurers are doing enough to raise the level of risk awareness or are they

merely content to compete in the markets organized and established. However sooner or later the private sector

players will have to put in place strategies aimed not at winning the existing accounts of the public players but

at diversifying markets penetration as a whole. The private players in the future would have to turn their

attention to working in the unorganized and under served markets.

What is likely to happen is that the private players would continue to skim the profitable segments of the

already organized business in the urban areas? The time has already come for the government of India to

evaluate the performance of private companies vis--vis is their declared objective of opening up the industry.

However it is high time for the government to realize that importance of merging the public sector general

insurance companies into single entity. The resent scenario calls for a better performance from part of each of

the public sector insurance companies against each other; or in other words a competition to be the best. The

result what we see is the undercutting of premium to retain or wrest business and quoting an uneconomical rate

of premium. While this allows one of the Public Sectors Company to win a business form another in this

manner. The others suffer a loss and the resultant effect is a cannibalization with a fall in the average premium

of the public sector itself. This at many times brings advantage to the private players who grab the business

because of the unethical competition among the public players.

The purpose of having four companies all subsidiaries of General Insurance Corporation of India (GIC)

National Insurance Company, New India Assurance Company, Oriental Insurance Company, And The United

India Insurance Company; at the time of nationalization was to have competition among themselves in service

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and products at the same price. The service provided by them was also equally good or bad depending on the

experience of the customers.

Now with real competition coming in with most of the global insurance players setting footprints here, it is felt

that the time for merger has come and to enjoy the benefits if the size. It is to be sated that size does matter in

insurance business. All over the worlds mergers and acquisitions in the risk-underwriting sector is common

The benefits if the four insurance companies merge will be enormous. The merged entity will enjoy higher

underwriting and risk retention capacity; increase in reinsurance premium, reduction in reinsurance outflow,

healthy solvency margins, setting right the asset liability mismatch and reduction in cost. The insurance market

thus becomes a gambling place. Had the public sector companies made into a single entity, perhaps the total

premium of the four public sector companies in the year 2004-05 would have gone up but 25 percent. But the

public sector alone is forced to underwrite the loss making motor third party liability (TPL) insurance. The

public insurance companies insured a loss of Rs 1943 crore on this portfolio on just one year (04-05). The

cumulative loss under this portfolio is astronomical. The loss of profitable business in view of undeserved

competition among the public sector companies is hampering the subsidization of social insurance including the

motor TPL.

ALL THOSE ABOVE WERE CHANGES MADE DUE TO MARKET PRESSURES, ENTRY OF

FOREIGN PLAYERS AND MANY MORE ASPECTS. BUT, STILL THE LOOPHOLES REMAINS,

OPPORTUNITY EXSISTS, THREAT PREVAILS. ALL THOSE HAS BEEN DESCRIBED BELOW:

Market Expansion

The scope for expansion is still unlimited as virtually all the players are concentrating on large cities and towns

- except by LIC to an extent there was no significant attempt to tap the rural markets.

Customer Service

Though lot is being done for the increased customer service and adding technology to it but there is a long way

to go and various customer surveys indicate that the standards are still below customer expectation levels. The

companies that can reach those expectations will only survive.

Distribution Channels

To make distribution channels a success the companies have to be very alert and skillful to now how to use

these channels in a proper way.

Bancasurance

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Insurance companies should see bancassurance as a tool for increasing their market penetration in India. It is

also good for the one who sees bancassurance in terms of reduced price, high quality product and delivery at

doorsteps. Everybody is a winner here.

Rural Marketing

As insurance companies go more and more rural in search of business, there will be opportunities in the rural

sector. Those who understand rural India better will be in demand.

Regulatory and Development Authority (IRDA) have set stiff rural targets for insurance companies. For the life

sector, in the first year, 5 per cent of the total policies written should come from the rural sector. This will go up

to 15 per cent in five years. Similarly, for the non-life sector, two per cent of the total gross premium income

should come from the rural sector going up to 5 per cent in five years, according to the regulation. All thesemoves will make the investment the rural area a big start.

IT & Insurance

The insurance sector remains a very competitive market and those companies that are able to best utilize their

data and provide their customer with the most personalized options will have the distinct competitive advantage

The insurers that come up to the top will be those who leverage the appropriate technology solutions effectively

in order to foster customer loyalty attract new customers and improve operational efficiency by providing

common information across their lines of business.

Mergers & Acquisitions

It is thus clear that it is good for the public sector companies to merge immediately when they are still strong,

lest a merger becomes inevitable later after the independent public sector companies fail one after another. This

does not bid well for the public sector, nor for the insuring public and not for the economic development either.

For a progress it would require merger of strong public sector companies. Else it would render public sector

companies weak and destroy them.

It Is Thus Clear That The Fittest Will Survive

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CHAPTER 3

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3.1 ICICI PRUDENTIAL

Market

For over 50 years, life insurance in India was defined and driven by only one company the Life Insurance

Corporation of India (LIC). With the Insurance Regulatory and Development Authority (IRDA) Bill 1999

paving the way for entry of private companies into both life and general sectors there was bound to be new-

found excitement and new success stories. Today, just three years since their entry, their cumulative share has

crossed 13% (Source: IRDA), far exceeding expectations.

Clearly insurance is on a growth path. The percentage of premium income to GDP which was just 2.3% in2000/01 rose to 3.3% in 2002/03; and life insurance has emerged as the dominant contributor to this growth.

The industry presented a huge opportunity. Life insurance penetration, for instance, was at an abysmal 22% of

the insurable population. However, private players have had to rise to many challenges. They were faced with

attitudinal barriers towards the category and the perception that insurance was only a tax-saving tool. Insurance

per se had lost it basic rationale: protection. It wasnt surprising then that its potential lay frozen and

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unexploited. The challenge for private insurance players was to change the established category driver and get

customers to evaluate life insurance as an investment-cum-protection tool.

Achievements

Beginning operations in December 2000, ICICI Prudentials 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 54 cities. The total number of policies issued stands at more than

780,000 with a total sum assured in excess of Rs. 160 billion.

ICICI Prudential closed the financial year ended March 31, 2004 with a total received premium income of Rs

9.9 billion, up 135% from last years total premium income of Rs. 4.20 billion. New business premium income

shows a 106% growth at Rs. 7.5 billion, driven mainly by the companys range of unique unit-linked policies

and pension plans. The companys retail market share amongst private companies stood at 36%, making it a

clear leader in the segment.

To add to its achievements, in the year 2003/04 it was adjudged Most Trusted Private Life Insurer (Economic

Times Most Trusted Brand Survey by ACNielsen ORG-MARG). It was also conferred the Outlook Money

Best Life Insurer award for the second year running. The company is also proud to have won Silver at EFFIES

2003 for its Retire from work, not life campaign. Notably, ICICI Prudential was also short-listed to the final

round for its Sindoor campaign in EFFIES 2002.

ICICI Prudentials 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, ICICI Prudential was the first life insurer to invest in multiple channels and offer

the customer choice and access; thus reducing dependency on any one channel.

ICICI Prudential also made great strides in the retirement solutions and pensions market. The company'spenetration of the retirement market was driven by the focussed approach towards creating awareness through a

sustained campaign: Retire from work, not life. Within six months, the campaign rewarded ICICI Prudential

with an increased share of 23% of the total pensions market and 78% amongst private players.

History

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ICICI Prudential Life Insurance Company Limited is a 74:26 joint venture between ICICI Bank and Prudential

plc, UK. The company brings together the local market expertise and financial strength of ICICI Bank and

Prudentials international life insurance experience. The company was granted a Certificate of Registration by

the IRDA on November 24, 2000 and eighteen days later, issued its first policy on December 12.

From its early days, ICICI Prudential seemed to have the wherewithal for a large-scale business. By March 31

2002, a little over a year since its launch, the company had issued 100,000 polices translating into a premium

income of approximately Rs. 1,200 million on a sum assured of over Rs. 23 billion.

When the company began its operations, the need was to build a brand that was relatable to, symbolised trust

and was easily recognised and understood. It launched a corporate campaign

using the theme of Sindoor to epitomise protection, trust, togetherness and all that is Indian; endearing itself to

the masses. The success of the campaign, the calling card of the company, saw the brand awareness scores

almost at par with its 40 year old competitor. The theme of protection was also extended to subsequent product

and category specific campaigns from child plans to retirement solutions which highlight how the company

will be with its customers at every step of life.

From day one, the company has unflinchingly focussed on being a mass-market player, developing products,

creating a distribution network and deploying resources that would further its goal. Apart from ramping up and

thoroughly training its advisors, the company has twelve Bancassurance partners 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 flexible life insurance policies in the country.

In February 2004, ICICI Prudential increased its capital base by Rs. 500 million, its ninth capital hike, bringing

the total paid-up equity capital to Rs. 6,750 million. With the authorised capital of the company standing at Rs.

12 billion, ICICI Prudential continues to have the highest capital base amongst all life insurers in the country.

The challenge ICICI Prudential now faces is to retain its top-notch position and continue to deliver the finestlife insurance and pension solutions to its ever-growing customer base.

Product

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GENPACT

ICICI Prudentials ultimate promise is financial security. A strong

brand certainly boosts sales, but without customer-friendly,

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

Prudentials product range has been developed on the

understanding that different people have their own sets of needs a

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

of products that can be customised to cater to varying needs of

people at each life stage, and thus ensure protection in every step of

life. The companys philosophy has been to help customers

understand their financial needs and work closely with them to

customise a product that would meet this need. Advisors can offer a

complete range of products - Savings plans, Child plans, Market-

linked plans, Protection plans, Retirement plans, Investment plans and group plans and tailor a flexible

solution to meet the customers changing needs at every stage of life. In fact, ICICI Prudential was the first to

un-bundle product benefits, pioneering the concept of riders 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, ICICI Prudential has embraced the Six

Sigma approach to quality, an exercise that begins and ends with the customer from capturing his voice to

measuring and responding to his experiences. This initiative is currently helping the company improve

processes, turnaround times and customer satisfaction levels.

Another novel introduction is the ICICI Prudential Lifestyle Rewards Club, India's first rewards programme for

Life Advisors; it allows ICICI Prudential Advisors to redeem points for items ranging from kitchenware to gold,

white goods, and even international holidays.

Promotion

ICICI Prudential is a case study in how advertising and marketing can play a vital role in re-shaping an industry

It has demonstrated how an industry where the customer was nothing more than a policy number has changed to

one where customer preference rules the roost.

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GENPACT

Brand-building in a complex category like life insurance is an uphill and multi-faceted task. At the time of

launching operations, the communications task was to build credibility, so as to give the customer the

confidence that it was a company that could be trusted to invest funds with. The aim was to encourage people

to view insurance not as a compulsory tax saving instrument, but as a means to lead a worry-free, secure life

and in the process, create the differentiator for brand ICICI Prudential.

The brand proposition for all the campaigns was reflected in the line: Suraksha: Zindagi ke har kadam par.

The campaign featured a significant competitive advantage, the sound financial backing and credentials of

ICICI and Prudential, and showcased products from different segments. The advertising idea was encapsulated

in the symbol of protection the Sindoor. This campaign contributed extensively to raising brand awareness

and creating a distinctive identity for the company.

At the same time the theme of protection was carried forward with ICICI Prudentials Safe Puja contest where

Puja Pandals contested to be the Safest Puja Pandal. This beautifully tied in the concept of protection with the

popular local event of Durga Puja.

The refreshingly different Retire from work, not life campaign succeeded in bringing retirement planning into

the consideration set of a younger target audience, and won a Silver Effie for its efforts. The media campaign

was complemented by seminars to spread awareness about the need for retirement planning.

Very recently, the company launched a new

corporate campaign an extension of the Sindoor

communication which aims at reassuring

customers that the company is committed to staying with

them through all the ups and downs in life, using marriage

and the seven vows or Saat Pheras as a metaphor for

commitment. The campaign aims at strengthening the

brand by memorably bringing out the commitment for lifeelement. As part of ICICI Prudentials continuous efforts to

reach out to customers in new and innovative ways, the

company recently tied up with the Forbes Six Sigma

rated Dabbawalla organisation in Mumbai for a direct

marketing exercise.

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GENPACT

In a unique effort to create awareness about a tax-saving product, the company attached a creative of a bitten

apple to Mumbais ubiquitous lunchboxes. It worked wonderfully with Mumbais office-goers and one that

translated into substantial business for the company.

Brand Values

Market research reveals that the values people associate with ICICI Prudential are, indeed, those that the

company hopes to project: lifelong protection and value for money. The core value is protecting your loved

ones, throughout lifes ups and downs. It is a powerful proposition; one, which ICICI Prudential, is taking into

the marketplace.

Things you didn't know about ICICI Prudential

1. The logo is the combination of ICICI Banks I-man and Prudentials lady prudence. The I-man signifiesthe dynamic individual with drive and conviction, while Prudence epitomises wise conduct.

2. Every three minutes ICICI Prudential protects one more Indian life.

3. ICICI Prudential is the only Indian life insurance company to have an equity base of more than Rs. 5

billion.

4. ICICI Prudential is the only life insurance company to implement a Six Sigma quality programme.

5. Of the companys 2,000 plus employees, less than 5% have prior experience in the life insurance

industry.

6. The average age of its employees is 29 years.

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GENPACT

MARKET

Citibank is the world's pre-eminent global financial services

company. It serves nearly 120 million customers individuals

corporations, institutions and governments across continents

and countries; providing them with a wide range of financia

products and services. Banking with Citibank is a status symboin any part of the world.

In India, Citibank has played an even more unique role in introducing world class practices and technologica

infrastructure.To many Indians, the entire credit card industry is synonymous with Citibank, which pioneered

this financial segment in India. Over 40% of all credit cards in India are issued by Citibank. While maintaining

the premium standards of its products and services, Citibank has also achieved a very impressive market share

in other segments of banking including the retail, corporate and investment segments. This achievement isreflected in diverse indicators of cutting edge banking operations. Citibank has the largest volume of foreign

exchange transactions for any foreign bank in India, with an 8% market share of total foreign exchange

transactions conducted by all the banks and other financial institutions in India. As the leading custodian,

Citibank has over Rs. 12 billion worth of custody assets under management.

ACHIEVEMENTS

Citibank is recognised as one of the most proficient and premier financial service providers in the country

Every other bank in India has tried to copy one element or the other from Citibank's success in continuous

provision of a sophisticated, seamless and tailored service to all customers. It has also pioneered many world

class practices in India.Thus, Citibank was the first such institution to start issuing credit cards in the country. It

was also the first to introduce focussed lending programmes for retail customers. Again, it was the first financial

institution to invest heavily in electronic infrastructure that enabled its customers to use facilities like

Automated Teller Machines (ATMs) and the internet.

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GENPACT

The brand has a country wide presence in India through 26 offices and branches across nineteen cities.

HISTORY

The direct predecessor of Citibank was the City Bank of New York, founded in 1812. This institution became a

fountainhead of services for mercantile capital very early and witnessed rapid growth throughout the nineteenth

century. It also established an accruing reputation for innovative creation of high-utility financial services, in

keeping with contemporary and emerging requirements. In 1894, it became the largest bank in the US. By the

very early years of the twentieth century, the bank had expanded into Asia through acquisition of the

International Banking Group that operated in many commercial centres of the continent including Bombay and

Calcutta. By 1930, it was the largest international bank in the world with 100 branches in 23 countries outside

the US.

The bank's name was changed to Citibank in 1976. In 1981 it purchased the license of Diners Club

International, the credit card franchisee. Citibank's worldwide expansion gained even greater momentum in

October 1998 when it merged with Travelers Group Inc. Today Cit

payal srivastava

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