PROJECT REPORTON

“THE CHANGING SCENARIO OF INSURANCE”At

SUBMITTED TO: Mr. ASHISH CHANDRA

SUBMITTED BY: YASH BANSAL

05115903909

RUKMINI DEVI INSTITUTE OF ADVANCED STUDIES

ACKNOWLEDGEMENT

I YASH BANSAL student of RDIAS [Rukmini Devi Institute of

Advanced Studies], have done a project on TATA AIG Life

Insurance Co. Ltd. with the help of able people who have

guided me at every moment of crisis. First of all I owe my

everything to my Director Sir & to all my Professors at RDIAS,

who helped me a lot in developing a right attitude, a

competitive spirit, a sense of responsibility and commitment to

work hard. I truly admire their competence & dedications. I give

sincerely thanks to Mr. ASHISH CHANDRA who guided me

through out the project with his knowledge and skill.

Secondly, I would like to thank my parents & my colleagues.

In the need, I would like to thank that my supreme authority

which rests above all-THE ALL MIGHTY God who has blessed me

with opportunity to work with such a good people. I sincerely

pray to God to give me courage and will to work harder &

harder all through my life.

YASH BANSAL

PREFACE

This project reports on THE CHANGING SCENARIO OF

INSURANCE at TATA AIG

This project report gives the needed beneficial practical

knowledge and could help anyone to know the history and uses

of the products being promoted by the company.

This project is based on the qualitative data and it help to

discover new relationship. So this project is based on the

exploratory research.

In this project primary data is qualitative in nature. Along with

this data a lot of secondary data is also used.

EXECUTIVE SUMMARY

In today’s competitive and dynamic world, with every business providing the same kind of product or service, only that firm which comes up with an innovative idea can hope to survive in the long run, by attracting and luring customers.

Insurance, sure is an upcoming sector but with the privatization of the same, selling insurance products has become tough due to the competition angle attached to it.

It is usually said that if you can sell insurance, you can sell anything in the world including garbage. The reason behind this concept is the hesitant and unaware population, who simply run away at the mere mention of its name.

Providing insurance to a huge population such as ours encompassing different strata of society has indeed been a formidable task for the last few decades. WHO statistics put the insurance access in India at around 65 percent. The remaining 35 percent do not have any access at all. Governments in most parts of the world, developed or otherwise, realize the limitations when it comes to providing Insurance per se or its financing aspects. In a globalize market-driven economy, it becomes imperative for each country to look for the solutions and structure them to suit the domestic needs. While there will be various factors both external and internal influencing this search, there is no doubt that public and private healthcare providers and financers will have to keep the customer in focus when formulating a well thought out and highly integrated approach to cover all sorts of requirements.

It is true that in managing healthcare, the pre-payment route through insurance schemes rather than out-of-pocket payments are preferable and a fairer form of revenue collection. But there are loopholes in the present indemnity-based insurance products offered by the public sector units and pricing of products are mostly non-scientific. It is well known that Mediclaim is a loss-making proposition with claim ratios being as high as 130 percent. The opening up of the health insurance sector to private is seen as one that will provide better solutions. Insurance concepts in healthcare are changing from managed care to defined care and there is no doubt that the private insurers can provide the customers with a wide

variety of products. But health insurance is still in a limbo at the moment in absence of any clear-cut guidelines from the IRDA.

Pricing is the key issue and major international players already present in India are sort of waiting in the wings to see what and how their competitors go about their strategies.

COMPANY PROFILE

It is one of the largest financial investments in India.Broad spectrum of financial solutions for corporate and retail customers.Assets in excess of Rs. 106600 cr.Better than sovereign rating.It is trusted by millions of Indians over the years.

Shares In Market74%-TATA Group26%-AIG Group

VISION

To be India's most preferred General Insurance Company.

PURPOSE

To create unmatched value for our customers, employees, business partners and shareholders by delivering remarkable service that is consistent, fair and transparent.

VALUES Customer First : Anticipate their priorities. Exceed their

expectations. 

Integrity: We must conduct our business fairly, with honesty and transparency. Everything we do must stand the test of public scrutiny. 

People : We must work cohesively with our colleagues across the Group and with our customers and partners around the world, building strong relationships based on

tolerance, understanding and mutual cooperation. Strive to develop diverse talent and reward excellence. 

Performance : We must constantly strive to achieve the highest possible standards in our day-to-day work and in the quality of the goods and services we provide. 

Passion : We must be excited about what we do. We must have a strong internalized drive to meet goals. Relentless determination to solve customer problems. 

AREAS OF SPECIALISATION

Premature Death

1 out of 4 people don’t reach the age of 60. You are providing your family with a lifestyle. This lifestyle is dependent on your continued income

generating capability. If this income were to stop unfortunately, how would your

family meet its financial requirements? My responsibility is to help you protect your family

financially in event something unfortunate happens…

Living too long

7 out of 10 people endure retirement instead of enjoying it.

Do you want financial independence post retirement? Imagine living beyond your working years on a depleted

income. However, you would want to maintain your some living

standards and be financially independent. My responsibility is to help you secure a financially stable

future post retirement.

Children FutureTo get a premier MBA degree in year 2010 will cost Rs. 14 lakh.

It is your responsibility to provide your children with best possible education they can have.

Do you want to compromise on their future?My responsibility is to help you build financial assets for your children’s future.

OBJECTIVES OF THE STUDY

The objectives of this project are as follows:

To learn and understand the distribution aspect of insurance products.

To identify the insurance needs of the Indian population with respect to their emotional, physical and financial conditions.

To match the needs of the population with the products in hand or else design a new product.

RESEARCH METHODOLOGY

The research is carried on in a proper planned and systematic manner. This methodology includes:

Familiarization with the concept of insurance and its various terms.

Thorough study of the information collected.

Conclusions based on findings.

WHEN WAS INSURANCE STARTED….

Almost 4,500 years ago, in the ancient land of Babylonia, traders used to bear risk of the caravan trade by giving loans that had to be later repaid with interest when the goods arrived safely. In 2100 BC, the Code of Hammurabi granted legal status to the practice.That, perhaps, was how insurance made its beginning.

Life insurance had its origins in ancient Rome, where citizens formed burial clubs that would meet the funeral expenses of its members as well as help survivors by making some payments.

As European civilization progressed, its social institutions and welfare practices also got more and more refined. With the discovery of new lands, sea routes and the consequent growth in trade, Medieval guilds took it upon themselves to protect their member traders from loss on account of fire, shipwrecks and the like.

Since most of the trade took place by sea, there was also the fear of pirates. So these guilds even offered ransom for

members held captive by pirates. Burial expenses and support in times of sickness and poverty were other services offered. Essentially, all these revolved around the concept of insurance or risk coverage. That's how old these concepts are, really.

In 1347, in Genoa, European maritime nations entered into the earliest known insurance contract and decided to accept marine insurance as a practice.

The first step….Insurance as we know it today owes its existence to 17th century England. In fact, it began taking shape in 1688 at a rather interesting place called Lloyd's Coffee House in London, where merchants, ship-owners and underwriters met to discuss and transact business. By the end of the 18th century, Lloyd's had brewed enough business to become one of the first modern insurance companies.

Insurance and Myth...Back to the 17th century. In 1693, astronomer Edmond Halley constructed the first mortality table to provide a link between the life insurance premium and the average life spans based on statistical laws of mortality and compound interest. In 1756, Joseph Dodson reworked the table, linking premium rate to age.

Enter companies...The first stock companies to get into the business of insurance were chartered in England in 1720. The year 1735 saw the birth of the first insurance company in the American colonies in Charleston, SC.

In 1759, the Presbyterian Synod of Philadelphia sponsored the first life insurance corporation in America for the benefit of ministers and their dependents.

However, it was after 1840 that life insurance really took off in a big way. The trigger: reducing opposition from religious groups.

The growing years...The 19th century saw huge developments in the field of insurance, with newer products being devised to meet the growing needs of urbanization and industrialization.

In 1835, the infamous New York fire drew people's attention to the need to provide for sudden and large losses. Two years later, Massachusetts became the first state to require companies by law to maintain such reserves. The great Chicago fire of 1871 further emphasized how fires can cause huge losses in densely populated modern cities. The practice of reinsurance, wherein the risks are spread among several companies, was devised specifically for such situations.

There were more offshoots of the process of industrialization. In 1897, the British government passed the Workmen's Compensation Act, which made it mandatory for a company to insure its employees against industrial accidents.

With the advent of the automobile, public liability insurance, which first made its appearance in the 1880s, gained importance and acceptance?

In the 19th century, many societies were founded to insure the life and health of their members, while fraternal orders provided low-cost, members-only insurance.

Even today, such fraternal orders continue to provide insurance coverage to members as do most labour organizations. Many employers sponsor group insurance

policies for their employees, providing not just life insurance, but sickness and accident benefits and old-age pensions. Employees contribute a certain percentage of the premium for these policies.

INSURANCE IN INDIA

The insurance sector in India has come a full circle from being an open competitiveMarket to nationalization and back to a liberalized market again. Tracing theDevelopments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost two centuries.

A brief history of the Insurance sector

Insurance in India can be traced back to the Vedas. For instance, yogakshema, the name of Life Insurance Corporation of India's corporate headquarters, is derived from the Rig Veda. The term suggests that a form of "community insurance" was prevalent around 1000 BC and practiced by the Aryans.

Bombay Mutual Assurance Society, the first Indian life assurance society, was formed in 1870. Other companies like Oriental, Bharat and Empire of India were also set up in the 1870-90s

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act,1956, with a capital contribution of Rs. 5 crore from the Government of India.

The General insurance business in India, on the other hand, can trace its roots to theTriton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British.

Some of the important milestones in the general insurance business in India are:

1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business.1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up.

1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the general insurance business in India with effect from 1st January 1973. 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.

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 that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms…” In 1994, the committee submitted the report and some of the key recommendationsincluded:

i) 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.

ii) Competition Private Companies with a minimum paid up capital of

Rs.1bn should be allowed to enter the industry. No Company should deal in both Life and General

Insurance through a single entity. Foreign companies may be allowed to enter the industry

in collaboration with the domestic companies. Postal Life Insurance should be allowed to operate in the

rural market Only one State Level Life Insurance Company should be

allowed to operate in each state.

iii) Regulatory Body An Insurance Regulatory body should be set up Controller of Insurance (Currently a part from the Finance

Ministry) should be made independent

iv) 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)

v) Customer Service LIC should pay interest on delays in payments beyond 30

days Insurance companies must be encouraged to set up unit

linked pension plans Computerization of operations and updating of technology

to be carried out in the insurance industry

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 (IRDA)

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 were the launch of the IRDA’s 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.

ALL ABOUT INSURANCE

DEFINITIONS

GENERAL DEFINITION:In the words of John Magee, " Insurance is a plan by themselves which large number of people associate and transfer to the shoulders of all, risks that attach to individuals. "

FUNDAMENTAL DEFINITION:In the words of D.S.Hansell, “Insurance accumulated contributions of all parties participating in the Scheme. "

CONTRACTUAL DEFINITION:In the words of Justice Tindall,"Insurance is a contract in which a sum of money is paid to the assured as consideration of

insurer’s incurring the risk of paying a large sum upon a given contingency."

CHARACTERISTICS OF INSURANCE Sharing of risks Cooperative device Evaluation of risk Payment on happening of a special event The amount of payment depends on the nature of losses

incurred. The success of insurance business depends on the large

number of people insured against similar risk. Insurance is a plan, which spreads the risk and losses of

few people among a large number of people. The insurance plan is a plan in which the insured transfers

his risk on the insurer.

FUNCTIONS OF INSURANCE

PRIMARY FUNCTIONS

1. Provide protection : - Insurance cannot check the happening of the risk, but can provide for the losses of risk.

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

3. Assessment of risk : - Insurance determines the probable volume of risk by evaluating various factors that give rise to risk.

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

SECONDRY FUNCTIONS:

1. Prevention of losses : - Insurance cautions businessman and individuals to adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions.

2. Small capital to cover large risks : - Insurance relives the businessman from security investment, by paying small amount of insurance against larger risks and uncertainty.

3. Contributes towards development of larger industries.

OTHER FUNCTIONS: It is a means of savings and investment.

NEED ANALYSIS

First let us look at why one needs insurance and then we will study various needs of the customers.

WHY WE NEED INSURANCE?

We all hope to live a full life till a ripe old age. To do the very last for our parents and watch our children stand on their own feet.

But, what if fate cuts life short? Who would pay for our children’s education? Their marriage? Ensure life’s continuity for them.

Why not plan for life’s adversities?

What if a sudden disability or illness puts us out of action? If we were unable to attend office for a while, who would take care of all the medical expenses? Who would pay the mounting household bills?

Should these adversities occur, are we equipped to face the situation? Where would we get the money to face the crisis? Would life continue smoothly for our children?

Why not plan to protect and provide for them?

Since we have no control over life’s ebbs and flows, why not do something over which we do not have control – plan for life’s contingencies.

DO I NEED INSURANCE?

HUMAN LIFE CONCEPT

Your life is your most valuable asset. This is easily proved if we were to assign a monetary value to your life; this value depends on your income- earning potential or your Human Life Value.

Your income supports your family. Helps them to get the most out of life. Month after month, year after year, you and your dependents live the best way you can use the money you earn. This money enables your household to run smoothly, your children to college, takes care of the medical bills, your vacations and helps maintain your lifestyle.

On the basis of your income or earning potential, we can calculate your Human Life Value. A simple rule of thumb to compute it as follows: multiply your present annual income by the number of years until you plan to retire.

This does not take in factors such as inflation or an increase in your income over time. Therefore, your Human Life Value is a great deal higher than the amount calculated above.

What if an unfortunate incident happens in your life and you were unable to work? Your income would stop. Your family is then, at a risk of losing all your future income. The potential cost of losing your income is too great to ignore.

PROTECTING YOUR MOST VALUABLE ASSET

If something were happen to you, here are a few possible ways of dealing with the financial implications:

1. Draw from your savings: But how long would the funds last? A lifetime of savings could be used up in a few months.

2. Borrow from others: Who will lend you the money? Even family and friends can only help to an extent. And anyway, this would only be a short-term solution.

3. Sell your assets: What price will you get for your assets? Would you like to sell your home? Your car?

4. Transfer the risk to an insurance company.

We recommend that you transfer the risk to an insurance company. It’s cheaper, safer and smarter in the long run.

If you insure the risk, your money outflow is actually miniscule. For the sake of illustration, an annual premia payout of approx. Rs. 25 for 15 years guarantees your family will receive Rs. 1000 – if something happens to you in that situation a small price to pay for providing peace of mind to your family. A smaller sum is payable for transferring the risk of disability.

Another advantage of transferring the risk is that you remove the uncertainty.

So do take care to protect your most valuable asset…..your life!

WHAT IF I ALLREADY HAVE INSURANCE?

They say that the only thing permanent in life is change. You have to adjust to life’s changes and accordingly provide for protection of your family and make prospects for unforeseen circumstances. The amount of protection and prospect you require depends on your life stage.

You should re-evaluate your needs for protection and make provision whenever there is a change in your life stage.

While your protection needs may be comparatively less when you are single, they increase when you have children. Re-evaluate your insurance needs at the following life stages:

Your marriage The birth of a child

Schooling of a child

Marriage of a child

Retirement

CHANGES IN YOUR LIFENEEDS:

Your provision needs may suddenly increase should such a circumstance happen:

Taking care of an ailing child Taking care of an aged relative

Fighting an illness

Buying a bigger house, etc.

CHANGES IN YOUR LIFESTYLE:

Your insurance needs change with changes in your lifestyle. You may like to increase your cover when:

There has been a steady rise in your income, or You have received a sudden windfall and you can put it

aside as tax-deferred savings for retirement.

NEED FOR HEALTH INSURANCE

Providing quality healthcare to a huge population such as ours encompassing different strata of society has indeed been a formidable task for the last few decades. WHO statistics put the healthcare access in India at around 65 percent. The remaining 35 percent do not have any access at all. Government in most parts of the world developed or otherwise, realizes the limitations when it comes to provide healthcare per se or its financing aspects. In a globalize market-driven economy, it becomes imperative for each country to look for the solutions and structure them to suit domestic needs. While there will be various factors both external and internal influencing this search, there is no doubt that public and private healthcare providers and financers will have to keep the patient or customer in focus when formulating a well thought out and highly integrated approach to cover all sorts of requirements.

Pricing is the key issue and major international players already present in India are sort of waiting in the wings to see what and hoe their competitors go about their strategies. There is no doubt that private medical insurance is bound to be dearer than the existing public sector health policies. And therein lies the problem for the new entrants who are at a disadvantage as the incumbent players are providing comprehensive coverage at low and unviable premiums. The new entrants should ideally not compete with existing Mediclaim policies, use a better USP than pricing and design new products suited to the Indian background and succeed in building a sure but steady market. There is a room for everyone provided there is a simplicity and transparency, insurers are neutral and willing to control unnecessary healthcare delivery costs to be patients and make claim procedures simple.

CHILDREN’S HEALTH INSURANCE PROGRAM

The health care needs of Indian children are compelling. The Indian population has a greater proportion of children (33 percent younger than age 15, compared with 22 percent for the U.S population of all races) and a higher birth rate (26.6 live birth per 1,000 population, compared with 15.9 per 1,000 for U.S all races).

However, teen pregnancy is much higher, with 45 percent of Indian mothers under age 20 at the birth of their first child, compared with 24 percent of U.S mothers of all races. In addition, a much greater proportion of Indian people continue to live below the Federal poverty level (1990 Census shows 31.6 percent of Indians residing in the 35 states with Indian reservations had income below the federal Poverty level- a rate 2.4 times the comparable rate for Americans of all the races).

Very few Indian people have access to or can afford private health insurance. Many people on reservations depend upon HIS-funded health care. HIS per capita spending is only one third the amount spent on health care by the average American. HIS direct care, and HIS-funded Tribal and urban Indian health programs provide mostly primary health care services. HIS funds used to pay other health care providers for specialty care are extremely limited, estimated to meet only about 60 percent of the need for such services.

Approximately half or more of Indian people live off reservations in other rural and urban areas and often lack access to affordable, culturally approximate care. HIS is able to fund 33 urban Indian programs for a total of only about $25 million. Thus, CHIP presents a unique opportunity to maximize the potential for Federal and State funds to help fill some of the large gaps in health care for uninsured, low-income Indian children by expanding the provision of child health assistance in an effective and efficient manner.

ONSET OF INSURANCE

Liberalization and globalization of economy has created enormous pressure on Indian companies to change. In order to survive and grow in the fast changing competitive market, a paradigm shift is needed for Indian firms. It has become inevitable for Indian companies to be competitive by focusing on customer, competition and competencies, the three important aspects of modern business. However, it requires tremendous effort, cultural transformation and change in the outlook for Indian companies to emulate this paradigm shift.

Indian business and industry are no doubt under enormous pressure owing to the impact of liberalization and globalization of the Indian economy. However, the rise of Islamic fundamentalism showing its ugly head in the terrorist attacks on the US followed by the US war against Al-Qaeda in Afghanistan has worsened the situation. The tremors of Indo-Pak war have only added to the complexity of the already subdued business environment in India as well as across the Globe. Now, with the Allied forces again involved in a war with Iraq with no indication regarding the timing of the outcome, further problems can only be expected.

On the other hand, our northern neighbor, China, has stolen a clear march over us in the realm of industrial growth. It has set up such huge manufacturing facilities, which have resulted in very low cost per unit. Political governance in that country is much disciplined too. The process of liberalization in China started in 1979 has been steadily maintained. As a result of all this China accounts for 4% of global trade while we are less than 1%. They have received FDI flows of over US $42 bn in the year 2001-02, while India could get only about US $2.5 bn. INDIAN INSURANCE SECTOR

At the turn of the century, the Indian insurance sector, once the domain of state-run insurance companies was open to private

enterprise. Closed to foreign competition since nationalization in 1956, the life insurance industry had been protected from competitive pressures. Now, with the re-opening of the sector, several new players have entered the scene.

The Insurance sector opened up to private competition on December 7, 1999, with the introduction of the Insurance Regulatory and Development Authority (IRDA (bill.

The business of insurance is not new to India. It is been around for over a century. With the opening up of the sector, leading multinational entered the Indian market through partnerships with eminent Indian business houses. What was the quite business is becoming one of the hottest businesses today.

THE GREAT INDIAN INSURANCE MARKET There are two factors that make India an attractive market for most insurance companies.

First, of course, is the sheer size of the market. With a population of over one billion, out of which about 40-45% is the insurable population, India is clearly a market poised for growth. The insurance penetration as well as the size of the average cover is well below international averages, again providing a great marketing opportunity for the insurance

companies. The share of Indian insurance in the global market stood around 0.41% in 2000. When calculated as premiums in percent of GDP, the figure stands around 2.32, whereas countries like United States and Japan have 8.76 and 10.92 respectively. However, despite its teeming more than one billion population, India still has a low insurance penetration of 1.95 percent, 51st in the world. Despite the fact that India boasts a saving rate of around 25 percent, less than 5percent is spent on insurance. These figures indicate the extent of untapped potential of the Indian insurance market.

Second, till about four years back life insurance in India was synonymous to LIC, which did most of the category building effort. While LIC has done commendable work, there is still a great deal of scope for bringing in innovative products and distribution channels to tap this market.

There is one truth in marketing and that is ‘Different Consumers Approach Buying Differently’. This is true as seen from product preferences of other industries and is especially true for insurance in India. Studies have time and again shown that insurance is bought because of convenience, product features, product placement, safety of funds, advice and not the price.

TATA GROUPThe Tata Group companies operate in seven business sectors: Communications and Information Technology, Engineering, Materials, Services, Energy, Consumer Products and Chemicals. The Group was founded by Jamsetji Tata in the mid 19th century, a period when India had just set out on the road to gaining independence from British rule. Consequently, Jamsetji Tata and those who followed him aligned business opportunities with the objective of nation building.

The Tata Group is one of India's largest and most respected business conglomerates, with revenues in 2007-08 of $ 62.5 billion (Rs. 251,543 crore). Tata companies together employ some 350,000 people. The Group's 27 publicly listed

enterprises have a combined market capitalization of some $ 60 billion and a shareholder base of 3.2 million. The major Tata Companies are Tata Steel, Tata Consultancy Services, Tata Motors, Tata Chemicals, Tata Communications, Tata Power, Indian Hotels and Tata Tea. The Tata Group has operations in more than 85 countries across six continents, and its companies export products and services to 80 countries.

American International Group, Inc. (AIG)American International Group, Inc. (AIG) is a leading international insurance organization with operations in more than 130 countries and jurisdictions. AIG companies serve commercial, institutional, and individual customers through one of the most extensive worldwide property-casualty networks of any insurer. In addition, AIG companies are leading providers of life insurance and retirement services around the world. AIG common stock is listed on the New York Stock Exchange, as well as the stock exchanges in Ireland and Tokyo.

PRODUCTS

Term Tata AIG Life Assure One year/ Five Years/10 Years/ 15

Years / 20 Years / 25 Years Lifeline Plans, and Term to age 60 known as Assure Lifeline to Age 60

Tata Aig Life Raksha

Moneyback Tata AIG Life Assure 21 years Money Saver

Pension Tata AIG Life Nirvana Tata AIG Life Nirvana Plus

Health Tata AIG Life Health First Tata AIG Life Health Investor

Tata AIG Life Health Protector - 5 Year Guaranteed Renewal Accident and Health Plan

Tata AIG Life Hospi CashBack

Endowment Tata AIG Life Assure 10 Years / 20 Years / 30 Years

Security & Growth Plans Tata AIG Life Assure Golden Years Plan Tata AIG Life Shubhlife

Wholelife Tata AIG Life Mahalife Gold

Annuity Tata AIG Life Easy Retire

Children Tata AIG Life Assure Career Builder Tata AIG Life Assure Educare at 18 & Assure Educare at 21 Tata AIG Life Starkid

Unit Linked Tata AIG Life InvestAssure Superstar Tata AIG Life InvestAssure Sampatti

Tata AIG Life InvestAssure Insta+ Tata AIG Life InvestAssure Optima Plus

Tata AIG Life InvestAssure Swarna Jeevan Plus

Insurance sector to drive Indian CRM market

After telecom and banking, it’s the turn of insurance companies to deploy customer relationship management (CRM) solutions. As competition intensifies, insurers are trying every trick in the book to retain existing customers, with a wide range of services driving the market for CRM applications in the process, says Akhtar Pasha

While the insurance sector is seeking to maintain a balance between acquiring customers and developing existing ones, customer acquisition is vital, as no retention strategy will entirely stem customer defection. Today, the focus is on selling more products to existing customers to improve profitability. Customer-focused strategies require CRM (customer relationship management) to help acquire customers thorough various touch points and translate operational data into actionable insights for proactively serving customers.

While the CRM market in India is still nascent, bigger players such as ICICI Prudential Life Insurance Company are adopting it in a big way. Anil Tikoo, head-IT at ICICI Prudential Life Insurance Company says, “As a forward looking company, we see CRM playing a significant role in acquiring new customers. CRM lets us obtain granular details about our customers, helping us to design better products, improve service levels and reduce operational costs.” CRM has helped ICICI Prudential Life capture five lakh customers through effective event-based marketing and lead tracking to cross- and up-sell products.

Tarun Pandey, application manager at Aviva Life Insurance Company India adds, “CRM helps us categorise and segment customers and align our products that best suit them.” Aviva says that CRM is helping them expand into rural areas. Aviva caters to close to 100,000 customers with its CRM solution.

Spending on CRM is up

Insurance firms spend close to 12 percent of their IT budgets on CRM software and services. The cost includes operational CRM and spending on BI tools. Industry pundits believe that insurance firms are looking for CRM initiatives with budgets ranging from Rs 50 lakh going right up to Rs 3 crore. The sector is busy compiling data on individuals, including their purchasing patterns and buying preferences of policies, pension plans and the like. In many cases, policy renewal marketing to existing customers remains an unsophisticated exercise, often amounting to little more than a request to renew, with no attempt at putting a value proposition before the customer. With a little help from CRM software, insurance firms can sell multiple insurance policies and pension plans to the same customer.

The opportunity is huge

Within the financial services sector, IT investment in insurance is expected to grow the fastest with a CAGR of 35 percent in the five-year forecast period (2001-02 to 2004-05). Other sub-verticals of the financial services sector are expected to grow at a CAGR ranging from 21 to 25 percent.

According to a report from Indian Infoline (January 2004), India has the highest number of life insurance policies in force in the world. The industry is pegged at Rs 400 billion in India. Gross premium collections stand at 2 percent of the GDP and this has been growing by 15 to 20 percent per year from the Life Insurance Corporation of India (LIC) and other government-owned insurers. Privatisation has led to new players entering this market and it is expected to grow at a rapid pace.

Business drivers for CRM

Margins are under pressure: A couple of years ago, LIC dominated the insurance market with the help of its sales force and channels and margins were reasonably high. All of them have equally strong international and local partners; all are

focusing upon similar geographies and target audiences. The new firms selling life insurance and non-life insurance [pensions, insurance as saving, etc] have failed to emulate the LIC model because margins are getting squeezed. There are several pain areas that new insurance firms face—acquiring new customers, retaining them, cross-selling products and controlling rising costs while providing comprehensive support.

“The convergence of four factors—protection, saving (investment option), loans and pension—have compelled insurance companies to align with banks in reaching out to a larger audience,” says Tikoo. This trend has led to another—insurance companies are joining hands with banks by becoming channel partners for insurance. Tata AIG has a marketing alliance with HSBC, Birla Sun Life has one with Citibank and IDBI and LIC ally with Corporation Bank, while Kotak Life Insurance has an arrangement with Kotak Bank. This strategy helps insurance firms increase their footprint to cover a larger part of the customer base in the 20-30 years demographic. CRM helps connect a bank’s high net worth customers with insurance firms.

Customer expectations are rising: Customers, faced with a dizzying array of insurance products expect customised offerings, value, ease of access, and personalisation from insurers. At the same time, they don’t want to pay a premium for these services. High customer expectations and lower exit barriers could lead to increased customer attrition.

USING ANALYTICAL CRM INSURANCE COMPANIES CAN ENHANCE

Cross – and up-selling capability to provide market opportunities within an existing customer database.

Predictive capability to determine customer behaviour. Information regading customer retention or attrition helps

determine the likelihood of policy lapses and helps

identify customers worth targeting for retention campaigns.

Customer segmentation that leverages data to create accurate categories for use in marketing strategies.

Market automation that combines analytics with campaign management functionality to help drive a more effective and efficient marketing campaign.

Future Prospects

Job opportunities are likely to increase manifold. The number of people working in the insurance sector in India is roughly the same as in the UK with a population that is 1/7 India's; the US with a population 1/4 the size of India has nearly 4 times the number. In the emerging markets, the picture is no less encouraging. In S Korea, the no of full time employees more than doubled over a ten year period. Thailand added 50 per cent more jobs in four years.

The liberalization of the insurance sector promises several new jobs opportunities for those employed in the finance sector who are equipped with degrees in finance. Finance professionals who had witnessed a slump in the job market would be a much-relieved lot to hear about the privatization of the insurance sector.

There could be a huge inflow of funds into the country. Given the industry's huge requirement of start-up capital, the initial years after opening up are bound to see a strong inflow of foreign capital. Moreover, given that the break-even, typically, comes much later than in the case of other sectors, odds are that the first remittance of dividend will not happen before a good 10-15 years.

In the areas of reinsurance, huge capacity is likely to be created with players like Swiss Re and Munich Re keenly observing the unfolding saga of liberalization of insurance industry in India. Not only the outward reinsurance will reduce, it is bound to attract inward reinsurance from the neighboring countries and regions. If the regulator is forward looking and legislature is supportive, this trend may well lead to the creation of a Lloyds like market for the direct as well as reinsurance businesses.

Another effect of de-regulation will be that, projects, especially mega-projects where one needs the capacities of the international re-insurance market, will get exposed to international trends to an even greater extent than is the case today. This will affect rates too. Areas like the personal lines segment, where we also expect to see substantial growth as also new types of covers, would usually not be affected by international trends in the same way as, there is much less need for global re-insurance support.

Another potential channel that reduces the need for an owned distribution network is worksite marketing. Insurers will be able to market pensions, health insurance and even other general

covers through employers to their employees. These products may be purchased by the employer or simply marketed at the workplace with the employer’s co-operation.

Worldwide interest in E-commerce and India's predominant position in information technology and software development is also likely to be a major factor in the marketing of insurance products in the immediate future. The internet account is increasing in arithmetic progression and the trend has already been set by some of the leading insurers and insurance brokers worldwide.

Finally, some potential Indian entrants into insurance hope to ride their existing distribution networks and customer bases. For example, financial organizations like TATA AIG,ICICI or Kotak Mahindra intend to tap the thousands of customers who already buy their deposits, consumer loans or housing finance. Other hopeful entrants anticipate specific alliances such as with hospitals to provide health cover.

LIMITATIONS OF THE PROJECT

By working on this project, I gained a lot of knowledge about the insurance sector in INDIA. However, there were many limitations or problems that I faced while working on this project. The following are the limitations:

I had to rely only on the primary data.

Most of the contents / data I collected were difficult to understand because they were new for me.

I was a stranger in the city of marketing and it was tricky and time consuming to understand the mysteries of it.

Marketing is more creative and innovative field and its usage and study are brain squashing.

Convincing the people to invest in a new product that affect their lives was a tough job.

The answers of the customers could have been biased.

Some of the customers were not able to devote heir attention in listening to the new products and they did not trust us.

BIBLIOGRAPHY

. Material Provided By TATA AIG Life Insurance.

. www.tataaig.com

. Google search engines