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PROJECT REPORT Submitted For the Partial Fulfillment of the Degree ON METLIFE INDIA Submitted By: Anubhav Tyagi MBA(IT) IIIT Allahabad Indian Institute Of Information Technology- Allahabad -2- ACKNOWLEDGEMENT Something I never thought about as a student, but that becomes very clear as a trainee, in such a big organization is that while making a project, you come to face or have different experiences and by that you come to know that ―A project is not produced by just one person, it takes lot of hard work by lot of talented people who guide you with there expert advices and experiences.‖ And for making my project successful I have many person to thank for helping and guiding me in completion of the project. I would like to especially thank to Mr. Vijay Chourasia(Internal guide) and Mr. Abhijeet Mukerji (Branch manager), who kept the ship afloat for the past two months and shared there expert advices to make my project full of content and also provided me the facilities to prepare the project. Also I would like to thanks, Mr. Sachin Tyagi and Mr. Kumud. K. Tyagi for correcting, formatting and polishing my work with his special advices and guidance. Also I appreciate the staff of Metlife India, Kailash Colony and facility support provided by them for the past two months. Anubhav Tyagi MBA(IT) IIIT Allahabad Indian Institute Of Information Technology-Allahabad -3- OBJECTIVE The main objective of the project was to study the recruitment methodologies of the High Net-Worth Individuals and High Net- Work Individuals and at the same time study their inclination towards the business opportunity available in the insurance sector and their awareness towards the same. The study also aimed at knowing the brand recall of MetLife India Insurance. Indian Institute Of Information Technology-Allahabad -4- INSURANCE SECTOR IN INDIA 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. A brief history of the Insurance sector The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important milestones in the life insurance business in India are: 1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business. 1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non- life insurance businesses. 1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. Indian Institute Of Information Technology-Allahabad -5- 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance company established in the year 1850 in Calcutta by the British. Some of the important milestones in the general insurance business in India are: 1907: The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business. 1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices. 1968: The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 1972: The General Insurance Business (Nationalisation) Act, 1972 nationalised the general insurance business in India with effect from 1st January 1973. Indian Institute Of Information Technology-Allahabad -6- 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 recognizing that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms…" In 1994, the committee submitted the report and some of the key recommendations included: 1) Structure Government stake in the insurance Companies to be brought down to 50% Indian Institute Of Information Technology-Allahabad -7- Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations All the insurance companies should be given greater freedom to operate 2) Competition Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the industry No Company should deal in both Life and General Insurance through a single entity Foreign companies may be allowed to enter the industry in collaboration with the domestic companies Postal Life Insurance should be allowed to operate in the rural market Only One State Level Life Insurance Company should be allowed to operate in each state 3) Regulatory Body The Insurance Act should be changed An Insurance Regulatory body should be set up Indian Institute Of Information Technology-Allahabad -8- Controller of Insurance (Currently a part from the Finance Ministry) should be made independent 4) Investments Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50% GIC and its subsidiaries are not to hold more than 5% in any company (There current holdings to be brought down to this level over a period of time) 5) Customer Service LIC should pay interest on delays in payments beyond 30 days Insurance companies must be encouraged to set up unit linked pension plans Computerisation of operations and updating of technology to be carried out in the insurance industry The committee emphasized that in order to improve the customer services and increase the coverage of the insurance industry should be opened up to competition. But at the same time, the committee felt the need to exercise caution as any failure on the part of new players could ruin the public confidence in the industry. Hence, it was decided to allow Indian Institute Of Information Technology-Allahabad -9- 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. Indian Institute Of Information Technology-Allahabad - 10 - Why Insurance ? Insurance is desired to safeguard oneself and one's family against possible losses on account of risks and perils. It provides financial compensation for the losses suffered due to the happening of any unforeseen events. By taking life insurance a person can have peace of mind and need not worry about the financial consequences in case of any untimely death. Certain Insurance contracts are also made compulsory by legislation. For example, Motor Vehicles Act 1988, stipulates that a person driving a vehicle in a public place should hold a valid insurance policy covering " Act" risks. Another example of compulsory insurance pertains to the Environmental Protection Act, wherein a person using or carrying hazardous substances (as defined in the Act) must hold a valid public liability (Act) policy. Basically there are two types of insurance: 1. Life Insurance 2. General Insurance Insurance - Life Your family counts on you every day for financial support: food, shelter, transportation, education, and much more. Insurance provides you with that unique sense of security that no other form of investment provides. It gives you a sense of financial support especially during that time of crisis irrespective of the fluctuations in Indian Institute Of Information Technology-Allahabad - 11 - the stock market. Insurance provides for your career goals right from your childhood years. Life insurance is all about making sure your family has adequate financial resources to make those plans and dreams come true. It provides financial protection to help your family or business to manage after your death. Few of the Life insurance policies are: Whole life policies - Cover the insured for life. The insured does not receive money while he is alive; the nominee receives the sum assured plus bonus upon death of the insured.. Endowment policies - Cover the insured for a specific period. The insured receives money on survival of the term and is not covered thereafter. Money back policies - The nominee receives money immediately on death of the insured. On survival the insured receives money at regular intervals during the term. These policies cost more than endowment with profit policies. Annuities / Children's policies - The nominee receives a guaranteed amount of money at a pre-determined time and not immediately on death of the insured. On survival the insured receives money at the same pre-determined time. These policies are best suited for planning children's future education and marriage costs. Pension schemes - are policies that provide benefits to the insured only upon retirement. If the insured dies during the term of the policy, Indian Institute Of Information Technology-Allahabad - 12 - his nominee would receive the benefits either as a lump sum or as a pension every month. Since a single policy cannot meet all the insurance objectives, one should have a portfolio of policies covering all the needs. Insurance - General Every asset has a value and the business of general insurance is related to the protection of economic value of assets. Assets would have been created through the efforts of owner, which can be in the form of building, vehicles, machinery and other tangible properties. Since tangible property has a physical shape and consistency, it is subject to many risks ranging from fire, allied perils to theft and robbery. Concepts of insurance have been extended beyond the coverage of tangible asset. Now the risk of losses due to sudden changes in currency exchange rates, political disturbance, negligence and liability for the damages can also be covered. But if a person judiciously invests in insurance for his property prior to any unexpected contingency then he will be suitably compensated for his loss as soon as the extent of damage is ascertained. Few of the General Insurance policies are: Property Insurance: The home is most valued possession. The policy is designed to cover the various risks under a single policy. It provides protection for property and interest of the insured and family. Indian Institute Of Information Technology-Allahabad - 13 - Health Insurance: It provides cover, which takes care of medical expenses following hospitalization from sudden illness or accident. Personal Accident Insurance: This insurance policy provides compensation for loss of life or injury (partial or permanent) caused by an accident. This includes reimbursement of cost of treatment and the use of hospital facilities for the treatment. Travel Insurance: The policy covers the insured against various eventualities while traveling abroad. It covers the insured against personal accident, medical expenses and repatriation, loss of checked baggage, passport etc. Liability Insurance: This policy indemnifies the Directors or Officers or other professionals against loss arising from claims made against them by reason of any wrongful Act in their Official capacity. Motor Insurance: Motor Vehicles Act states that every motor vehicle plying on the road has to be insured, with at least Liability only policy. There are two types of policy one covering the act of liability, while other covers insurers all liability and damage caused to one's vehicles. Since a single policy cannot meet all the insurance objectives, one should have a portfolio of policies covering all the needs. Of the two types of insurances, MetLife deals in Life Insurance in India. Indian Institute Of Information Technology-Allahabad - 14 - MET-LIFE BEGINS:: The origins of Metropolitan Life Insurance Company (MetLife) go back to 1863, when a group of New York City businessmen raised $100,000 to found the National Union Life and Limb Insurance Company. The new company insured Civil War sailors and soldiers against disabilities due to wartime wounds, accidents, and sickness. In 1868, after several reorganizations and five difficult years, the company decided to focus on the life insurance business. A new company was chartered to sell "ordinary" insurance to the middle class. The founders chose the name because they had been most successful in New York City, or the "Metropolitan" District. This new venture also faced difficulties. A severe business depression that began in the early 1870s rapidly put half of the 70 life insurance companies operating in New York State out of business. Only very large, long-established ordinary life insurance companies remained strong. Policy lapses over successive years forced the company to contract until it reached its lowest point in the late 1870s. In 1879, MetLife President Joseph F. Knapp turned his attention to England, where "industrial" or "workingmen's" insurance programs were widely successful. American companies had not bothered to pursue industrial insurance up to that time because of the expense involved in building and sustaining an agency force to sell policies door Indian Institute Of Information Technology-Allahabad - 15 - to door and to make the weekly collection of five- or ten-cent premiums. By importing English agents to train an American agency force, MetLife quickly transferred successful British methods for use in the United States. By 1880, the company was signing up 700 new industrial policies a day. Rapidly increasing volume quickly drove down distribution costs, and the new program proved immediately successful. The MetLife agent became an important person in the lives of these striving families. Manuals instructed agents to call at a home at the same time each week to ensure familiarity and contact. In the process of collecting premiums, insurance agents listened to the problems, concerns, and hopes of their clients. So successful was this approach that by 1909, MetLife became the nation's largest life insurer in terms of insurance in force, a leadership position we continue to hold today in North America. MetLife Today In 2001 MetLife was the first insurance company to establish a financial holding company with a nationally chartered bank. Leveraging its unparalleled distribution channels, MetLife entered the retail- banking arena with the launch of MetLife Bank. This will make an easier and more convenient way for MetLife's customers to realize their financial goals. Indian Institute Of Information Technology-Allahabad - 16 - After the tragic events of September 11, MetLife responded quickly. First and foremost, MetLife was fully committed to its policyholders. Chairman and CEO Bob Benmosche remarked that "our focus today is on lending whatever support we can to our customers," and that MetLife "is fully prepared financially to pay all claims." MetLife's support did not end there. In responding to the tragedy, MetLife and MetLife Foundation made a number of grants to aid those affected, including: $1 million Foundation grants to both the September 11th Fund to meet longer-term needs of victims, and to the Twin Towers fund to assist families and rescue workers. MetLife Foundation also matched employee contributions to the American Red Cross Disaster Relief Fund. At the same time MetLife, Inc. announced that it had invested $1 billion in a broad array of publicly traded common stocks. The company said that this was the beginning of a program to significantly increase MetLife's investment in the public equity markets, and one way to get back to the basics of building America's future. Additional grants for disaster relief were made in 2001 and 2002 to a number of different organizations including the Children's Health Fund and the Renaissance Economic Development Corporation. In 2002 Working Mother magazine honored MetLife by naming the company one of the "100 Best Companies for Working Mothers," for the fourth consecutive year. In addition, the Minority Corporate Counsel Association (MCCA) selected MetLife's Law Department as a Indian Institute Of Information Technology-Allahabad - 17 - recipient of the Employer of Choice Award for its commitment to creating and maintaining a diverse and inclusive organization. On the international front, the Mexican Government selected MetLife to acquire Aseguradora Hidalgo, S.A., Mexico's largest life insurer for approximately $965 million. MetLife "has the expertise, the resources and the commitment to provide exceptional products and services to customers in Mexico, one of the fastest growing life insurance markets," noted Bill Toppeta, president of MetLife International. MetLife announced in 2002 that it would be continuing its long- standing relationship with Snoopy and the rest of the PEANUTS® characters. The company signed a new contract that would allow the characters to appear in MetLife's domestic and international advertising for the next 10 years. Commenting on the partnership, Senior Executive Vice President and Chief Administrative Office Lisa Weber noted that "Snoopy is our corporate ambassador and has been an important part of our advertising campaign for 17 years." For its future successes, the company can draw on the reservoir of history that has produced an enduring set of corporate values based on almost 135 years of integrity, social responsibility, strong leadership, financial strength, and innovative products and services With over 137 years of experience and acquiring the 36th position among the fortune 500 companies, the MetLife companies serve millions of customers in the Americas and Asia with one goal in mind – to build financial freedom for everyone. The MetLife companies are a Indian Institute Of Information Technology-Allahabad - 18 - leader in group benefits that serve 88 of the top one hundred FORTUNE 500®* companies, and provide benefits to 37 million employees and family members through its plans sponsors in the U.S. The MetLife companies are also ranked #1 in group life and #1 in commercial dental in the U.S. The MetLife companies are the number one life insurer in the U.S. with approximately US $2.5 trillion of life insurance in force. In India, MetLife was incorporated in 2001, and aims to differentiate itself through customized need based selling, simple and innovative products, and technology-backed service experience, to tread its path to build financial freedom for everyone. MetLife's stated long-term goal is to become the recognized leader throughout the world with over 100 million people as customers by the year 2010. The company took a major step toward realizing this goal in January 2005, when it announced its intention to purchase Citigroup's Travelers Life & Annuity and substantially all of Citigroup's international business for $11.5 billion. Vision / Mission Is to build financial freedom for all through leadership in providing financial advice and building long-term relationships through innovative protection, accumulation and retirement products, robust underwriting processes and creating world-class customer service experience for the customers. Indian Institute Of Information Technology-Allahabad - 19 - Metlife want to provide customers in India with world-class solutions for financial security, and in the process add significant value to our shareholders, associates and society. Core Values Being Innovative in offering world class and competitive products to customers. To build Long Term Relationships with the customers by creating a world class service experience through operational excellence and the innovative use of technology By creating a Customer Centered and Result Focused Vision that inspires each of the Associates and has their buy-in Committed to creating a High Performance Organization by creating an environment that allows each of the Associates to perform at their peak and hence recognized as an Employer of Choice Committed to Partnering with our internal and external Customers for mutual success Work with Integrity, Fairness and Financial Prudence in all the dealings keeping the interests of the Shareholders, Customers and Associates paramount . Indian Institute Of Information Technology-Allahabad - 20 - CORPORATE GOVERNANCE Venkatesh Mysore – Managing Director Miro Farrugia – Chief Financial Officer Suraj Kaeley – Chief Marketing Officer B Ashwin - Chief Administrative Officer Anil Kumar K R - Chief Planning Officer Vikrant Pande – Director (Bancassurance and Corporate Agency) Gaurav Suri – Director (Marketing) Sudip Mukhopadhyay – Director (Institutional Business) Smitashree Menon – Director (Human Resources) K Sriram – Chief Actuary Ajith Vellat – Director (Information Technology) Kailash Kulkarni – Director (Agency Sales) Rajen Jatar – Director (Finance) Neerav Kaushik – Director (Service Delivery) Shiva Belavadi – Director (Institutional Service Delivery & Claims) Indian Institute Of Information Technology-Allahabad - 21 - Corporate Partners As the vital channel for MetLife's products,some exemplary banks and financial institutions have been chosen. These serve as the interface between the customers and Metlife to aid them to understand the unique needs and aspirations of every Indian and update the products of Metlife with features that form the cornerstones of financial freedom. J&K Bank The J&K Bank Ltd., incorporated on October 1st, 1938 commenced its business on July 4th, 1939. The bank now, has a network of 440 branches spread over the length and breadth of the country. A significant contributing factor for this fast growth is the solid founding principles that are dedicated to the cause of transforming the Bank not only as a financial heart but also the social heart of the community. The J&K Bank is the first state owned bank of the country and 53% of equity is held by the Govt. of J&K. The bank has a consistent track record of growth and profitability. It has a unique distinction of being banker to the J&K State Govt. and has also been appointed by RBI as its agency in J&K, responsible for carrying general banking business of the Central Govt. and collection of taxes pertaining to the Central Board of Direct Taxes. Indian Institute Of Information Technology-Allahabad - 22 - Dhanalakshmi Bank The Dhanalakshmi Bank Limited (DLB) headquartered at Thrissur in Kerala, was started seven decades back, at a time when banking was less known to the people. In a high literate state of Kerala, the bank grew in strength over the years. And today, it has 153 branches spread over Kerala, Tamil Nadu, Karnataka, Andhra, Maharashtra, Gujarat, West Bengal (Kolkata) and New Delhi. The bank has ambitious plans for growth in branches, total business and profits. All the 153 branches are classified as NRI branches, and are computerized and in the process of implementing Wide Area Network, ATM's, Any Branch Banking and Cash Management Services, Telebanking and Internet Banking. Karnataka Bank The Karnataka Bank Ltd., a premier private sector bank of the country, was incorporated on February 18th, 1924 at Mangalore, a coastal town Indian Institute Of Information Technology-Allahabad - 23 - in South Kanara, a district of Karnataka state, which has attained renown as the Cradle of Indian Banking. Today it is one of the leading private sector banks in the country, known for its steady and disciplined growth and cordial customer service. The Bank has a strong national presence through a widespread network of 358 branches. The bank has 230 branches wholly/partially computerized, as of now. Plans are underway to put in place additional products to enhance customer satisfaction and to increase income stream with the help of upgraded technology. The bank has already put in place an elaborate risk monitoring and asset liability management system. Other Partners KARVY In 1982, a group of Hyderabad-based practising Chartered Accountants started Karvy Consultants Limited with a capital of Rs.1,50,000 offering auditing and taxation services initially. Later, it forayed into the Registrar and Share Transfer activities and subsequently into financial services. All along, Karvy's strong work ethic and professional background leveraged with Information Technology enabled it to deliver quality to the individual. Indian Institute Of Information Technology-Allahabad - 24 - GEOJIT SECURITIES Geojit Securities was founded by Mr.C.J George in 1987 as a Proprietorship for doing Broking business in Cochin Stock Exchange. In 1994, the business was taken over by Geojit Securities Ltd, a Joint Venture between Mr.C.J George and the Kerala State Industrial Development Corporation Ltd. In the following year, the company came up with an IPO and the shares were listed in various Stock Exchanges in India in 1995. WAY2WEALTH Way2Wealth is a premier Investment Consultancy Firm that has been launched with the aim of making investing simpler, more understandable and profitable for the investors. Way2Wealth brings a wide range of product offerings from Fixed Income Securities, Life Insurance and Mutual Funds to Equity and Derivatives (on the National Stock Exchange) for the convenience and benefit of it customers. Way2Wealth has over 40 easily accessible Investment Outlets spread across 20 major towns and cities in the country. Indian Institute Of Information Technology-Allahabad - 25 - MINI MUTHOOTHU Established in 1921, Mini Muthoothu with an illustrious history of banking behind them today operates from 75 branches in Kerala and 5 in Bangalore. All business concerns of Mini Muthoothu function under the strict guidelines set by the Department of Company Law Affairs and Reserve Bank of India. They also have a certificate of compliance with the requirements regarding prudential norms from the Reserve Bank of India. Mini Muthoothu, under the able leadership of its Chairman, Mr. Roy M Mathew, offers both the resources and capabilities like any national player coupled with individualized attention to its customers. Indian Institute Of Information Technology-Allahabad - 26 - METLIFE PRODUCT OVERVIEW: 1) Met100 Met100 is a limited pay whole-life policy in a non-participating form. The policy covers the entire life (or till 100 years of age) and has a guaranteed up-front sum-assured and paid-up value. Besides, the policyholder has the option to surrender the policy at any point of time for cash at a pre-decided guaranteed "surrender value". Met100 thus, assures guaranteed sum assured – to the policyholder on survival at age of 100 or, a guaranteed amount for the nominee/beneficiary in case of death. Also, on payment of additional premiums one or more of the various riders like Accidental death benefit, Term Rider, Waiver of Premium Rider, Critical Illness rider can be added to the policy. Highlights Life Time protection Affordable premiums Tax Benefit Access to cash value of the policy Guaranteed returns in case of survival or death. 2) Met100 Gold Met100 Gold is a limited pay whole-life policy in participating form, covering the entire life or till the 100 years of age. A bonus is declared after the first two years of holding the policy, which is credited as Indian Institute Of Information Technology-Allahabad - 27 - reversionary bonus. Besides, the company can also declare terminal bonus. A unique feature about this policy is that the participation in the profit continues even after the premium paying term, provided the premiums have been paid for the full term. The premium paying modes available are Annual, Semi-annual, Quarterly, Monthly and Payroll Savings Scheme. Also, on payment of additional premiums one or more of the various riders like Accidental death benefit, Term Rider, Waiver of Premium Rider, Critical Illness rider can be added to the policy. Highlights: Life Time protection Affordable premiums Tax Advantage Access to the cash value of the policy Future prosperity of the company is shared by getting reversionary and terminal bonuses. 3) Met Sukh Met Sukh is a money back non-participating policy where ‗assured' lump-sum amount is paid to the policyholder at regular intervals. Being a non-participating policy, the premium rates, sum assured, surrender values and paid-up values are guaranteed up-front for Met Sukh. The plan can be availed for the term of 20 years, where the money is paid every 5 yrs. Premiums for Met Sukh are ceased on death or on expiry of term - whichever is earlier. Also, on survival at the end of 20th year the policyholder receives a 40% accrued Indian Institute Of Information Technology-Allahabad - 28 - guaranteed addition. The biggest benefit of Met Sukh however, is that in case of death during the term of the plan, the nominee/ beneficiary receives the guaranteed sum assured plus accrued guaranteed additions. On payment of additional premiums one or more of the various riders like Accidental death benefit, Term Rider, Waiver of Premium Rider, Critical Illness rider can be added to the policy. Highlights Assured sum at regular intervals Guaranteed returns at maturity Waiver of premium in case of death Protection Savings 4) Met Bhavishya Met Bhavishya, a non-participating money-back policy with guaranteed returns, has been specially designed to meet the financial requirements for children at their different stages of life. The insured here is the parent and the child – the beneficiary. The policy is suitable for parents in the age group 20-50 years having children of 0-12 years old. There are two options to choose from and fixed term benefits periodic additions & terminal additions are payable based on the option that you select. The policy can be customized through 4 riders - Accidental Death Benefit, Critical Illness (10 illness), Waiver of Premium (Accidental Disability) and Term Rider Indian Institute Of Information Technology-Allahabad - 29 - Highlights Guaranteed returns at regular intervals Secures the present and the future for the child Waiver of Premium in case of death. 5) Met-Mortgage Protector Met-Mortgage Protector is a single pay/limited pay policy, specially designed to protect the dependants of the insurer against the liabilities incurred on a housing loan. The individual here is insured and not the asset. The biggest benefit of the policy is its decreasing term- assurance plan, which reduces the burden on the dependants, while providing guaranteed sum assured to the beneficiary. Met Mortgage Protector is available for terms of 5-25 yrs Highlights Protect dependents against liabilities incurred on housing loan. Cover continues even after the premium paying term is over. Flexible terms 6) Met Suvidha Met Suvidha is a participatory endowment plan that provides savings and security in one policy. It provides a lot of flexibility in choosing the Indian Institute Of Information Technology-Allahabad - 30 - premium paying term between 15-30 years i.e terms are available for 15, 16, 17, 18…30 years. Met Suvidha has been developed keeping in mind people with shorter and irregular earning spans eg. celebrities. The policy allows for flexibility in paying provides protection to an individual whenever required, and offers tax advantage. Also, being a participatory policy it is suitable for people who would like to share the future prosperity of the company by getting reversionary bonuses and terminal bonuses. 7) Met Suvidha(Non- Participating Endowment Assurance) Met Suvidha provides the savings and security in one policy. It provides a lot of flexibility for the policy terms between 15 - 30 year i.e for the terms 15,16,17,18…30 years. This product is developed keeping people in mind especially people who have irregular and shorter earning spans. It provides protection to an individual during the need and whenever required. It provides tax advantage 8) Met Suraksha Met Suraksha is a term assurance plan and provides pure protection at the cheapest price for a specified period of time. The policy has a term of 5/10/15/20/25 years and level term is up-to 60 years of age. It is an participating endowment policy. The tax benefits are provided throughout the premium paying terms. Met Suraksha provides multiple premium paying options like annual, semi-annual, quarterly, monthly and payroll savings scheme (PSP). Indian Institute Of Information Technology-Allahabad - 31 - USP Financial security after retirement Multiple premium paying options Tax benefits throughout the premium paying options. 9) Met Pension Participating Deferred Annuity Met Pension is structured as a participating endowment and a participating immediate annuity. This provides only one annuity option i,e Life Annuity. Being a pension plan it is developed to provide financial security after retirement. It provides tax benefits throughout the premium paying options. The death benefit during the endowment phase will be the return of premium plus the reversionary bonus if any. In case of the immediate annuity phase there will be no benefits in this phase for the beneficiary of the policy. The maturity benefits at the end of the endowment phase is equal to the face amount plus guaranteed addition plus attached reversionary bonuses, if any plus terminal bonus, if any. MetLife's pension product offers multiple premium paying options. Highlights Financial security after retirement Tax benefits throughout the premium paying options Multiple premium paying options Indian Institute Of Information Technology-Allahabad - 32 - 10) Met Ultimate-"A universal life insurance policy" Met Ultimate acts as a flexible policy which combines elements of protection and accumulation simultaneously and provides ready access to the accumulated cash value. It also acts as a savings account where in the premiums are deposited, various charges deducted and interest credited to the accumulated amount. Met Ultimate provides minimum guaranteed return(net rate 3.5 p.a) an an additional bonus interest declared on the investment performance. It has the facility of tax free withdrawals after two policy years from the accumulation account. Met Ultimate offers "Premium Holidays" where there is no schedule for premium payments after third policy year which allows for skipping payment of premiums without lapsing the policy. Highlights Flexiblity Tax benefits Provides coverage upto 100 years of age Skipping of premium payments after the third policy year without lapsing the policy. Tax free withdrawals after two policy years from the accumulated account. Flexibility to increase/decrease the Face Amount ] Indian Institute Of Information Technology-Allahabad - 33 - 11) MET GROUP LIFE Met Group Life is a flexible group insurance policy that would enable both employer and employees to select the right mix of life insurance to suit their individual needs. It's a yearly term insurance product which pays a face amount to the employees against the risk of death thereby assuring peace of mind. Met Group Life presents a hassle free implementation and flexible premium paying modes- annual, semi- annual, quarterly or monthly. It offers easy enrolment process with no medical underwriting up to free cover limit, non-transferable employer liability, non-taxable face-amount for beneficiary and an additional cover on a contributory basis. Met Group also offers the option of converting Group Coverage to Individual Coverage if the employee desires, and the advantage of covering spouse and children – subject to minimum participation levels. Highlights Flexible Group Insurance Policy Provides protection for employee's family Provides significant increased employee motivation, morale and loyalty leading to a better work environment Indian Institute Of Information Technology-Allahabad - 34 - Unit-Linked Plans of MetLife 12)MET-SMART Met Smart is a transparent, unit linked whole life plan that matures at age 100. The premium you pay is used partly for insurance cover and the balance is invested in funds to buy units. Met Smart offers 3 insurance options as well as 6 investment options that you can choose from, based on your risk profile. Met Smart at a glance: A Unit linked whole life plan that matures at age 100 Offers you life protection and the advantage of investing in stocks, debt instruments and government securities 3 insurance options A never before choice of 6 investment options covering the complete range of investment possibilities to suit your risk- return profile Offers you the option of switching between funds Convenient limited pay option that allows you to complete premium payment over a fixed term and enjoy the full benefits Offers a premium holiday after 3 years Gives you the freedom to withdraw from your funds. 13)MET-ADVANTAGE Met Advantage is a unit-linked pension plan that works hard for you when you stop working. And, like the name suggests, it comes with the maximum number of advantages. For one, it ensures that you lead Indian Institute Of Information Technology-Allahabad - 35 - a comfortable lifestyle. Always. More importantly, it helps you plan ahead, keeping in mind the escalating cost of living. What's more, unlike any other plan, Met Advantage comes with six investment options, seven annuity options, and, much more. Met Advantage at a glance: Transparent unit-linked pension insurance plan Choice of 6 investment options. Dump-in option. Life cover protection up to vesting age Tax savings on premium up to Rs.3,366* per annum. Postponement of vesting age Option of switching between funds No health check-up Flexible premium paying terms Option to commute up to 1/3rd of vesting benefits tax-free Indian Institute Of Information Technology-Allahabad - 36 - STRUCTURE OF THE SALES FUNCTION MetLife India Insurance sales function previously dealt in two functional structures within the organization. These two Structures were: Corporate sales Agency sales Corporate/Group Sales: Corporate sales includes that part of MetLife India Insurance in which the sales are affected through the various sales manager , who on behalf of the company meet various corporate heads and try to sell group insurance on the condition that all the employees of that particular corporate will have insurance from MetLife India Insurance, automatically when they will join that organization. Group Insurance has been recognized as an ideal tool to enhance productivity and build employee satisfaction in business houses and offer value-added benefits to customers of financial institutions and members of various affinity groups. MetLife India's Group Insurance solutions have been created to satisfy the changing needs of various group customers. Indian Institute Of Information Technology-Allahabad - 37 - Agency Sales: Agency sales includes that part of Met-life in which sales are affected through various individual agents known as Financial advisors(or can be called agents) who are basically working with the company on the commission basis. Leads are generated by advisors themselves and sales are affected henceforth. The hierarchy structure of the Agency sales is as under: o Branch Sales Manager (BSM)/ Center Sales Manager o Agency Manager (AM) o Sales Manager(SM) o Assistant Sales Manager (ASM) o Financial Advisors(FA) With the opening up of the insurance sector and with so many players entering the Indian insurance industry, it is required by the insurance companies to come up with innovative products, create more consumer awareness about their products and offer them at a competitive price. New entrants in the insurance sector had no difficulty in matching their products with the customers' needs and offering them at a price acceptable to the customer. But, insurance not being an off the shelf product and one which requiring personal counseling and persuasion, distribution posed a major challenge for the insurance companies. Further insurable population of over 1 billion spread all over the country has made the traditional channels of the insurance companies costlier. Also due to Indian Institute Of Information Technology-Allahabad - 38 - heavy competition, insurers do not enjoy the flexibility of incurring heavy distribution expenses and passing them to the customer in the form of high prices. With these developments and increased pressures in combating competition, companies are forced to come up with innovative techniques to market their products and services. At this juncture, banking sector with it's far and wide reach, was thought of as a potential distribution channel, useful for the insurance companies. This union of the two sectors is what is known as Bancassurance. What is Bancassurance? Bancassurance is the distribution of insurance products through the bank's distribution channel. It is a phenomenon wherein insurance products are offered through the distribution channels of the banking services along with a complete range of banking and investment products and services. To put it simply, Bancassurance, tries to exploit synergies between both the insurance companies and banks. Bancassurance if taken in right spirit and implemented properly can be win-win situation for the all the participants' viz., banks, insurers and the customer. Advantages to banks Productivity of the employees increases. Indian Institute Of Information Technology-Allahabad - 39 - By providing customers with both the services under one roof, they can improve overall customer satisfaction resulting in higher customer retention levels. Increase in return on assets by building fee income through the sale of insurance products. Can leverage on face-to-face contacts and awareness about the financial conditions of customers to sell insurance products. Banks can cross sell insurance products Eg: Term insurance products with loans. Advantages to insurers Insurers can exploit the banks' wide network of branches for distribution of products. The penetration of banks' branches into the rural areas can be utilized to sell products in those areas. Customer database like customers' financial standing, spending habits, investment and purchase capability can be used to customize products and sell accordingly. Since banks have already established relationship with customers, conversion ratio of leads to sales is likely to be high. Further service aspect can also be tackled easily. Advantages to consumers Comprehensive financial advisory services under one roof. i.e., insurance services along with other financial services such as banking, mutual funds, personal loans etc. Indian Institute Of Information Technology-Allahabad - 40 - Enhanced convenience on the part of the insured Easy access for claims, as banks are a regular go. Innovative and better product ranges Indian Institute Of Information Technology-Allahabad - 41 - HYPOTHESIS This project is based on the study of High net worth individuals and high net work individuals, there recruitment methodologies and there inclination towards the available business opportunity in insurance sector. Keeping this in mind we started thinking about, that how to know the basic thinking of HNI's i.e what they all have in there mind while investing there money and time in certain business and how much they are aware of the opportunities in which they are investing. After meeting few clients and collecting some data it was known that the clients are making their investment decisions with the advice of different consultancy bodies. TARGETING HNI's AND BOOST SALES We are experiencing some of the most turbulent times in history. There are literally thousands of different marketing strategies one would be using to grow one's business but only a few that one need to do consistently that will allow him to make all the money he desire. Here are some of the strategies: Do not rely on simple sources of Business A Marketing Parthenon means having multiple/different sources of revenue and lead generation instead of relying on just one. For example, let's say your primary method for generating new business is through direct mail. What happens if, for whatever reason, your postcards stop working tomorrow? How will that impact your Indian Institute Of Information Technology-Allahabad - 42 - business? Now imagine you also generate leads through the internet, space advertising, referrals, word of mouth, joint ventures, etc.? You have now successfully diversified your portfolio like a good money manager. Start now by conservatively testing other methods of marketing so that if one method stops working, it won't put down your entire business. Follow up This is probably the most important marketing strategy, yet only few follow it. It has been proved time and again that 70% of people who respond to a cold call or letter will buy the product/service. But they may not buy from the original caller; the reason cited is lack of following up the leads. Whenever a prospect responds to your cold call/letter, it only shows that he is only interested and there may not be any immediate sale. Further, it must be remembered that because people buy when THEY are ready to buy not when YOU are ready to sell. So it is up to you to follow up till you close the sale. Maintain Relationships Did you know it's far easier to re-sell an existing client than to sell to someone who doesn't know and trust you? Did you also know that you lose 1/12 of the value of a client every 30 days you don't communicate with them? So knowing these two facts, what's the easiest, most profitable way to maintain relationships and re-sell existing clients? You guessed it right. Indian Institute Of Information Technology-Allahabad - 43 - A Monthly Newsletter! But don't just send a monthly newsletter. Make sure you also enclose inserts about other products and services that you offer. Create A Back-End For Your Business (Cross Selling) It's far easier to re-sell to an existing client. It's also... Far More Profitable! to create a Back-End For Your Business. Once you've spent the high upfront costs to acquire a new client, it's relatively inexpensive to send them a letter promoting another product or service. For example, once you are successful in selling, say a car insurance product, you can sell other related insurance products such as health insurance, householders insurance etc. by proper follow up to promote these products. For the purpose of checking the validity of hypothesis a sample questionnaire (Refer to Appendix A) was prepared on the basis of which the findings and analysis were being made. Indian Institute Of Information Technology-Allahabad - 44 - ANALYSIS BASED ON QUESTIONNAIRE SURVEY RISK BEARING CAPACITY OF HNI's Risk is one of the primary factor that an individual have in mind while investing his/her money or while analyzing any business opportunity. Due to this I surveyed the people for the amount of risk they are willing to take while investing there money. ―Risk is the potential loss that may on the happening of certain events.‖ The major risks are: Interest-Rate Risk: When interest rates rise, bond prices will fall. Existing bond portfolio will lose value and vice versa. Reinvestment risk: Risk is of interim cash flows being reinvested at a lower rate. Call Risk: If issuer calls back call option bonds,when interest rate falls,they can be replaced with cheaper debt.The investor cannot keep a high coupon bond. Indian Institute Of Information Technology-Allahabad - 45 - Default risk: Issuer may default on its obligation to make timely principal and interest payments. Inflation risk: When inflation rates rises, the value of interest payment is reduced. Higher interest rates will make the existing bonds lose value again. Risk and return co-relation: Risk and return are closely related with each other, they are inversely proportional to each other. With increase in risk the rate of return rises and with decrease in risk the rate of return decreases. There is one more type of risk that an individual have to face while investing his/her money in any kind of business or other activity, and that is Inflation. ―Inflation is an increase in the general price level of goods and services.‖ Over time, inflation reduces the purchasing power of the rupee and making it less worth year after year. To find out the exact situation in the market, I surveyed different persons and ask about the amount of risk they want to bear in achieving returns while investing there money in any market or Indian Institute Of Information Technology-Allahabad - 46 - product. After collecting the responses I came to the conclusion that maximum number of people are the one which are in the category of low risk ,this means that people are very much protective about there money and does not want to invest at the places at where the risk is high (for ex-equity). As seen in the Pie chart below that people are not willing to take high risk ,but if there are returns then they can go towards the options where the risk are medium(32%) or low(34%). Risk Bearing Capacity no risk high 24% 10% medium 32% low 34% high medium low no risk The tendency of people to save is now changing and now people want to earn more income by investing there money in a profit giving activity. As shown in the chart below that a large mass of people, i.e. 78%, had said yes to the question Indian Institute Of Information Technology-Allahabad - 47 - Extra Income Generation no 22% yes 78% yes no that whether they want to earn more money or not. This clearly indicates that there is a huge market for the companies who are in the sector of selling insurance products and other market linked products. The maximum people in this survey was the persons in the age group of 25-35 who are young, dynamic and have a large network of people around them. These young and dynamic persons should be targeted because from them only there will be the upcoming entrepreneurs. INCLINATION OF HNI's TOWARDS FLEXIBLE WORKING HOURS Flexible working hours means that there is no restriction of timings while working. The need is that the work should be completed on the Indian Institute Of Information Technology-Allahabad - 48 - due date, not necessary at what timing you have worked to complete it. Flexible working hours are nowadays very much accepted pattern of doing work in an organization. It is very much prevalent in the IT industries, but now it is being adopted by the other industries or sector too. Due to the fact that it makes the person feel free in its job, and also due this the work is being completed to the perfection. Our survey also signifies this fact that flexi-working hours are the choice of today. We surveyed a number of people(High net work and High net worth individuals) and found out that what actually they inclined too, so that we understand that while investing there money and time in the business opportunity available in the insurance sector, will they be giving there free time to it. Flexible Working Hours no 20% yes 80% yes no Indian Institute Of Information Technology-Allahabad - 49 - As shown in the pie chart above, out of people HNI's surveyed a large percentage of them showed interest in Flexible working hours(i.e 80%) as compared to the people who were not interested in it(i.e 20%). So, while targeting the High network or High net worth individuals, we should try to make them feel that they need not have to work at bounded timings, and should make them feel the easiness of working in flexi working hours and how they can make there unproductive time, a productive one. INCLINATION OF HNI's TOWARDS BUSINESS OPPURTUNITY Since the liberalistion of insurance industry the opening of insurance industry has been a key landmark. The Indian insurance industry is sitting on a volcano of growth and potential waiting to explode. Since the last three years that the industry is opened to private players it has shown a renewed vibrancy resulting in new opportunities. These opportunities are in terms of employment, savings,new channels of insurance distribution, wider coverage to rural areas and even to the economically deprived section of the society. Insurance industry is providing business opportunity to HNI's, that is very much profitable to both the parties i.e inurance company and the Individual who is joining them. For insurance companies they are getting there products and policies sold to large mass of people who comes under the network of these HNI's. At the same time these HNI's are getting a opportunity of extra income generation, without effecting there present working or business or job. Indian Institute Of Information Technology-Allahabad - 50 - Other Business Opportunity no 38% yes 62% yes no Nowadays people are becoming more and more inclined to generate extra sources of income, They want to invest there money and free time in fruitfull work which give in return huge revenues to them. To find out the exact thinking of HNI's towards these business opportunities, we surveyed quite a number of people and found out that the percentage of people who want to earn more thorough these business opportunities are very much larger then the one's who do not want to go towards these opportunity. The pie chart below shows the exact pattern we got after the survey, i.e 62% people are inclined towards it, while 38% are not. So while targeting these High net worth and high net work individuals, one should be clear about the opportunities available and have the adequate information to make the individual understand the opportunity available. Indian Institute Of Information Technology-Allahabad - 51 - The above analysis of our showed that HNI's are very much eager to go for the business opportunities available, but the next thing is that, how many of them are aware of the income generation source, i.e awareness of the people about these opportunity. Awareness about the exisiting business oppurtunity 25 23 awareness 20 15 12 9 10 6 5 0 1 no. of people good little no idea want to know The bar-diagram above clearly indicates that maximum percentage of people are those who have no idea(around 50%)about the business opportunities and the fact that really important that only 10-12% people are those who have a good knowledge of these. So, for tapping these section of individuals, insurance companies should make there communication systems more stronger and finer, Indian Institute Of Information Technology-Allahabad - 52 - so that the information about these opportunities should reach the individuals adequately. Also the companies who want to target these HNI's should know the places where they will find these influential individuals. Such influencial individual are generally attached to some or the other community organizations such as by being a member of civic group, social or political group or any of the religious groups. The finding done through the questionnaire showed that each of these HNI's are related to one or the other community organizations. Community Groups 14% 30% 32% 12% 12% political social civic religious none WHY NOT METLIFE? MetLife being 136 years old private company in the insurance sector and holding its 36th position in the list of fortune 500 companies, it is Indian Institute Of Information Technology-Allahabad - 53 - shocking that in the Indian market it is the least known company in comparison to other private sector insurance companies. The main reason for this is mainly its late entry in the Indian market (in 2001) wherein the older companies have already have a stronger foot hold it is just a beginning for this and so it will have to pay for its share of time to get to the roots. Again it being a foreign company Indian mass cannot rely on the same at such an early stage, they have this thinking that it may anytime get shut down. They lack trust and faith in MetLife and so fear in investing their money with it. Know Met-life? yes 40% no 60% yes no Again a reason to why more than 50% of the sample surveyed doesn't know MetLife is because of its weaker tie-ups with banks such as Jammu & Kashmir bank, Dhanlakshmi bank and the Karnataka bank. If it would have made tie-ups with any of the giants in this insurance Indian Institute Of Information Technology-Allahabad - 54 - sector than may be the competition would have been much less than it is actually now. Even the other partners of MetLife are not that strong that would have helped it gain the same position as it has in the U.S. MetLife is a private company that believes in its ethics very strongly and stick to them very tightly. It believes in actions rather than speech and so it hardly spends its funds in advertising and publicity because it wants its work to speak for them, so it's advertising as compared to other companies is very weak. But in here, in the Indian market most of the people go by seeing the advertisements and the heights of publicity done. This is one of the major reasons of people not being aware of such a big company! But now they getting into advertisements and publicity because this is one of the major pathways to reach out to its customers and be at their doorsteps as this is what the mass wants! Indian Institute Of Information Technology-Allahabad - 55 - VALIDITY OF HYPOTHESIS The hypothesis we took when we had started the project was that the HNI's while investing there money consult with some consultants, that can be a banker, a investment consultant or a chartered accountant, also that most of these person want to have extra income, but the major concern is the risk associated with it i.e the risk should be less or no risk should be there. Adding to it these HNI's are inclined towards the new business opportunities available and are pretty much aware about these opportunities present. Also that they are not sure about the credibility of the private companies and that's why they do not want to invest there money in the private sector i.e they prefer the public sector companies.. Taking the example of MetLife we also took in the hypothesis that the foreign companies are the least wanted companies at present in this sector. According to the data we have collected and analysis done that is shown with the help of pie-charts and bar graphs above in the project, it is clear that : HNI's while investing there money use to consult either with a banker(26%) or investment consultant(32%) or a chartered accountant(28%). Most of HNI's want to generate extra income Indian Institute Of Information Technology-Allahabad - 56 - While investing and generating extra income maximum of these HNI's major consideration is about the risk factor associated with the investment. That is most of them were not interested in taking risk or can only want to have a low risk investment. Met-life India pvt limited ,due to having foreign name and due to the fact of having weak partners in India is lagging behind as compared to the other companies having strong Indian partners and a Indian company name attached with them. All of the above things we took in hypothesis were proved, to be accepted but the only thing that our hypothesis failed to prove is that the awareness about the business opportunities available in the market is high. Our study showed that maximum percentage(23%),were the person who have no idea about these opportunities and only 8% of the total were having good idea. Indian Institute Of Information Technology-Allahabad - 57 - ISSUES AND CHALLENGES FACING THE INSURANCE INDUSTRY The liberalization followed by growth of the Indian Insurance industry has opened wide opportunities for Service and Infrastructure sectors. This growth has to be properly channelised. Some of the major challenges which have to addressed for channelising the growth of insurance sector are Product Innovation, Distribution Network, Investment Management, Customer Service and Education. Product Innovation Customers are now looking at Insurance as complete financial solution offering stable returns coupled with total protection. Companies will need to constantly innovate in terms of product development to meet ever changing consumer needs. Understanding the customer better will enable Insurance companies to design appropriate products, determine price correctly and increase profitability. In this context Management Guru Peter Drucker has rightly said "Markets are changing from Cost lead Pricing to Price lead Costing". Distribution Network While companies have been successful in product innovation, most of them are still grappling with right mix of Distribution Channels for: a. Capturing maximum market share to build brand equity. Indian Institute Of Information Technology-Allahabad - 58 - b. Building strong and Effective Customer relationships. c. Cost effective customer service. This calls for Selection of right type of Distribution channel mix along with prudent and efficient FOS (Fleet On Street) Management. 1. Distribution Network: While the traditional channel of tied up advisors or Agents would be the chief distribution channel, insurer should innovate and find new methods of delivering the products to customers. Corporate agency, brokerage, Bancassurance, e-insurance, cooperative societies and panchayats are some of the channels that can be tapped by the insurers to reach the appropriate market segments. 2. FOS Management The major issues to be addressed in Insurance FOS management are High Attrition, lack of Motivation and Product knowledge. Continuous training, performance linked reward systems, and career counseling can effectively tackle these issues. Customer Education and Service Insurance, particularly life insurance is never bought but sold. To convince a large population, which is comparatively not well informed about the intangible benefits of life insurance, is indeed an onerous task. This apart, the task would be to position Insurance as a risk planning tool rather than a tax saving and investment tool. Indian Institute Of Information Technology-Allahabad - 59 - In the present competitive scenario, a key differentiator would be professional customer service in terms of quality of advice on product choice along with policy servicing. Servicing should focus on enhancing the customer experience and maximizing customer convenience. This calls for effective CRM system which eventually would create sustainable competitive advantage and build long lasting relationship. Investment Management The most difficult challenge would be to provide returns comparable to other financial instruments. The problem is further aggravated by interest rates moving south. Need of the hour for an insurer is to follow prudent underwriting practices and efficiently cut down management and administrative expenses. Insurers must follow best investment practices and have a strong Asset management Company to maximize returns. Others 1. Untapped market Segments Apart from meeting the above challenges, it is important to increase customer base in semi urban and rural areas which offer huge potential. The fact that major chunk of business for life insurance giant, LIC comes from rural and semi urban areas stands as a testimony. However, this ignores the difficulties of approaching this segment. Much of the demand may not be accessible because of large distances or high costs relative to returns. Indian Institute Of Information Technology-Allahabad - 60 - 2. Health Insurance: Health insurance is another growth area which offers huge potential. Estimates indicate that out of the total potential of Rs.3000 - 4000 crores only Rs.450 - 500 crores is being tapped. Lack of requisite infrastructure, non standardization of pricing and procedures, lack of product variants has hampered the growth of this lucrative market. E – BROKING In the Indian market, where insurance is sold after considerable persuasion , the selling over the net would take some more time. Also, Insurers need to design products where auto underwriting is feasible. Certain products like term insurances, vehicle insurances, mediclaim and others can be sold through internet. But a pure e-commerce model may not be possible for insurance sector where Customer-Need- Analysis, Capital-Need-Analysis and other factors go into determining the exact customer solution. But even then, selling on internet is very attractive because of low distribution costs. It makes sense for the insurance companies to supplement their traditional sales channels with Internet. The passage of IT bill has given legal sanctity to transactions over the net and subsequent modification of insurance act allows payment of premium through credit card. While the technology capability is there, improvement in bandwidth and infrastructure are needed to give the required boost to e-commerce on the net. Indian Institute Of Information Technology-Allahabad - 61 - FUTURE PERSPECTIVE Competition will result in the market to grow beyond current rates and offer additional consumer choice through the introduction of new products, services and price options. Development of industry code of conduct, contributing to a common catastrophe reserve fund and chalking out agreements to settle claims to the benefit of customer can be expected with concerted efforts from all the players. The current impediments such as 26% equity cap on foreign partner, limited investment avenues, ill defined regulatory role of IRDA in pension business etc are to be removed in near future. As the industry evolves, the present classification of life and non life insurance may change. There may be specialization in each class of business. In the years to come, we may witness Insurers underwriting only one or two classes of business such as health insurance, auto insurance, life insurance, pension provider, property and casualty etc. Challenges in Distribution KPMG have prepared a report on `Insurance Trends and Issues` which examines the future of distribution for both life and general insurance in India once the sector is opened. It is based on KPMG research in India and abroad and on insights gained through working with clients in different markets. There are four significant issues which the report examines. Indian Institute Of Information Technology-Allahabad - 62 - 1. The threat of new players taking over the market has been overplayed. 2. Nationalized players will continue to hold strong market share positions, but there will be enough business for new entrants to be profitable. 3. New companies often overestimate the need for insurance expertise. They assume that a joint venture is the most appropriate type of alliance, when in fact many forms are Indian Institute Of Information Technology-Allahabad - 63 - possible. 4. Both new and existing players must explore new distribution and marketing channels. Indian Institute Of Information Technology-Allahabad - 64 - 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 CRM with BI tools can help insurance firms monitor the ebb and flow of customer behaviour, giving them a holistic 360-degree view of their customers While the insurance sector is seeking to maintain a balance between acquiring customers and developing existing ones, customer acquisition is vital, as no retention strategy will entirely stem customer defection. Insurance companies are experiencing unacceptable levels of customer churn, thanks to which they are focusing on keeping the customers they already have in a bid to ensure a net growth in their customer base. Today, the focus is on selling more products to existing customers to improve profitability. Customer-focused strategies require CRM (customer relationship management) to help acquire customers thorough various touch points and translate operational data into actionable insights for proactively serving customers. CRM with BI (Business Intelligence) tools can help insurance firms monitor the ebb and flow of customer behaviour, giving them a holistic 360-degree view of their customers.‖ Indian Institute Of Information Technology-Allahabad - 65 - CRM has helped customers through effective event-based marketing and lead tracking to cross- and up-sell products. CRM helps categorise and segment customers and align products that best suit them. CRM is helps to expand into rural areas Insurance companies with huge customer databases, servicing their customers through numerous branches and call centres will invest between 15 to 20 percent of their total IT budget on CRM applications Current market scenario Insurance firms are tactically rolling out an application here and there rather than strategically implementing a complete CRM suite. In this, they are on the right track. ―They (insurance firms) are taking baby steps, starting with operational CRM to increase sales force automation. Once they have a sufficiently large customer database, they use BI tools to mine data from various sources (such as contact centres and from banks with which they align) pushing the need for analytical CRM solutions. CRM technologies such as sales force automation, contact centre segmentation and campaign management tools are maturing and finding wider adoption with large insurance companies. The banking, financial services and insurance (BFSI) sector and telecom will continue to drive the CRM market, but the uptake of CRM in the insurance vertical will climb steeply in 2004 and growth will be rapid and higher [than in other verticals] The insurance vertical has Indian Institute Of Information Technology-Allahabad - 66 - crossed the threshold of IT and process maturity beyond which an investment in CRM investments starts yielding good returns. The need to integrate customer data from multiple channels and to increase sales force productivity (including that of agents) and running productive marketing campaigns will continue to drive demand for CRM software. Spending on CRM is up Insurance firms spend close to 12 percent of their IT budgets on CRM software and services. The cost includes operational CRM and spending on BI tools. Industry pundits believe that insurance firms are looking for CRM initiatives with budgets ranging from Rs 50 lakh going right up to Rs 3 crore. The sector is busy compiling data on individuals, including their purchasing patterns and buying preferences of policies, pension plans and the like. In many cases, policy renewal marketing to existing customers remains an unsophisticated exercise, often amounting to little more than a request to renew, with no attempt at putting a value proposition before the customer. With a little help from CRM software, insurance firms can sell multiple insurance policies and pension plans to the same customer. The opportunity is huge Within the financial services sector, IT investment in insurance is expected to grow the fastest with a CAGR of 35 percent in the five- year forecast period (2001-02 to 2004-05). [Source: IDC India] Other sub-verticals of the financial services sector are expected to grow at a Indian Institute Of Information Technology-Allahabad - 67 - CAGR ranging from 21 to 25 percent. Much of this spending will be on CRM applications and integrating multiple delivery channels. IDC says that new delivery channels are evolving as the insurance market expands. According to a report from Indian Infoline (January 2004), India has the highest number of life insurance policies in force in the world. The industry is pegged at Rs 400 billion in India. Gross premium collections stand at 2 percent of the GDP and this has been growing by 15 to 20 percent per year from the Life Insurance Corporation of India (LIC) and other government-owned insurers. Privatisation has led to new players entering this market and it is expected to grow at a rapid pace. More than three-fourths of India's insurable population has no life insurance, pension cover and post-retirement protection cover. A substantial part of the insurance market—the portion dealing in pension plans and insurance as an investment option—is protected by a tariff and administered price regime. Competition in pricing is yet to emerge. Once that happens, as with all dynamic customer-oriented service industries such as banking and telecom, the race to gain and retain customer mind share will be on. Business drivers for CRM Margins are under pressure: A couple of years ago, LIC dominated the insurance market with the help of its sales force and channels and margins were reasonably high. Today, there are close to 20 companies offering both life and general insurance products. All of them have equally strong international and local partners; all are focusing upon Indian Institute Of Information Technology-Allahabad - 68 - similar geographies and target audiences. The new firms selling life insurance and non-life insurance [pensions, insurance as saving, etc] have failed to emulate the LIC model because margins are getting squeezed. There are several pain areas that new insurance firms face—acquiring new customers, retaining them, cross-selling products and controlling rising costs while providing comprehensive support. Insurers have added a plethora of products and services to their kitty. These range from insurance as an investment option to pension plans. They target the younger generation in the 20 to 30 years age group. The convergence of four factors—protection, saving (investment option), loans and pension—have compelled insurance companies to align with banks in reaching out to a larger audience This trend has led to another—insurance companies are joining hands with banks by becoming channel partners for insurance. This strategy helps insurance firms increase their footprint to cover a larger part of the customer base in the 20-30 years demographic. CRM helps connect a bank's high net worth customers with insurance firms. More than three-fourths of India's insurable population has no life insurance, pension cover and post-retirement protection cover giving an indication of the insurance opportunity in India Customer expectations are rising: Customers, faced with a dizzying array of insurance products expect customised offerings, value, ease of access, and personalisation from insurers. Today, customers are expecting individual attention, responsiveness, customisation and Indian Institute Of Information Technology-Allahabad - 69 - access. At the same time, they don't want to pay a premium for these services. High customer expectations and lower exit barriers could lead to increased customer attrition. Where to begin—operational CRM or analytical CRM? The choice between operational and analytical CRM as a starting point depends upon the insurer's needs. Insurance companies with multiple financial products and a big customer base, such as integrated insurance solution providers, will leverage their customer base to cross- and up-sell different financial products, including insurance. Such providers will benefit from adopting analytical CRM. Market segmentation, campaign management and data mining applications will benefit them in many ways. Call center text mining: This tool can help improve the customer experience by resolving complaints rapidly. Insurers are using these tools to mine text from call center transcripts to identify issues faced by customers. Text mining tools also help detect and capture other useful pieces of information around a customer's life stage, financial needs and product interests. These can be used to generate leads and trigger cross selling. However, to be fully effective, customer service representatives must be trained to probe for information that will help in cross selling during the text-mining phase. Text mining tools are leading edge today, but are predicted to take off quickly. Indian Institute Of Information Technology-Allahabad - 70 - Insurers can use event triggers to generate leads that can be acted upon quickly, usually within 24 hours Event-triggering tools monitor incoming transaction and contact data in near-real-time to recognize changes in a customer's behavior or profile to trigger actions or alerts. Lead management gets sophisticated: Often the ability of an insurer to generate leads by means of event-triggering, re-engineered touch points and cross line-of-business referral can outstrip their ability to manage said leads. In such a situation, though the number of leads generated rises, the conversion rate does not. It may even drop. CRM can help provide sales representatives with a mechanism to prioritise and manage leads. Pure insurance providers who do not have a large customer base will derive the maximum value from operational improvements, especially in integrating customer information from multiple channels and sales force automation. Most insurers will look to empower their agents by deploying partner- facing applications. Apart from making agents more productive, it will let insurers keep in touch with customers, otherwise difficult in a primarily channel-driven business. Indian Institute Of Information Technology-Allahabad - 71 - Analytical CRM insurance companies can enhance Cross- and up- selling capability to provide market opportunities within an existing customer database. Information regarding customer retention or attrition helps determine the likelihood of policy lapses and helps identify customers worth targeting for retention campaigns. Customer segmentation , leverages data to create accurate categories for use in marketing strategies. Market automation , combines analytics with campaign management functionality to help drive a more effective and efficient marketing campaign. Broad CRM perspective CRM module Areas where it can be applied Collaborative CRM Applying collaborative interfaces (such as e-mail, conferencing, chat, real-time) to facilitate interaction between customers and organisations, as well as between organisational entities dealing with customer information (customers to sales representatives, sales to marketing, agent to provider) Indian Institute Of Information Technology-Allahabad - 72 - Operational CRM Automating horizontal integrated business processes involving front- office customer touch points-sales, marketing, and customer service- via multiple, interconnected delivery channels and integration between front-office and back-office Analytical CRM Analysing data created on the operational side of the CRM equation for the purpose of business performance management. Analytical CRM is tied to a data warehouse architecture; it is most often evident in analytical applications that leverage data marts. Indian Institute Of Information Technology-Allahabad - 73 - SWOT ANALYSIS: 1. STRENGHTS: Brand name: The Metropolitan Life Insurance Company (MetLife ) is the number one insurer in the U.S. based on over US$2 trillion of life insurance in force. MetLife serves approximately 9 million individual households in the U.S. as well as 87 of the Fortune 100 companies. MetLife's institutional clients have approximately 33 million employees and members. Headquartered in New York, MetLife through its affiliates, subsidiaries and representative offices operates in 15 countries throughout the Americas, Europe and Asia. The MetLife brand, known for empowering people to feel protected, guided and hopeful about their lives, will it is hoped do the same for its Indian customers. Experience in this particular field of insurance (136 yrs old): MetLife India inherits its parent company's over-130-year-old reputation of helping build financial independence for its customers. MetLife India has developed and distributes a range of life insurance products in India. Indian Institute Of Information Technology-Allahabad - 74 - International Backup: MetLife India benefits from its parent company's global presence in the field of insurance, track record of establishing successful insurance operations in emerging markets and the unique strengths of its other Indian promoters. Drawing from these experiences, MetLife India hopes to be able to address the needs of the Indian customer. MetLife India aspires to build on MetLife's history of meeting policy holder and contract obligations and the ability to withstand the impact of adverse economic factors. 2. WEAKNESSES: Weaker tie-ups The major problem with the progress of Metlife in India is its weak partners. In India partners of Met-life are J & K Bank, M Palonji & co. pvt ltd, Dhanlaxmi bank,all three of them are certainly cannot be considered as India wide banks. Also in comparison to other strong competitors such as ICICI Prudential, Tata AIG etc who are in partnership with strong names in India such as ICICI & TATA, MetLife's partners are too weak Indian Institute Of Information Technology-Allahabad - 75 - Late entry As compared to other Insurance companies who are at present have more market share than Met-life, it had entered into the market after these companies, Also, Met-Life was the last one to enter into the market of MLPI's (market link products),which are the major selling products of any insurance company. 3. OPPORTUNITY: Large untapped Indian market ` With such a large population and the untapped market area of this population Insurance happens to be a very big opportunity in India. Nearly 80% of Indian populations are without Life insurance cover and the Health insurance. This is an indicator that growth potential for the insurance sector is immense in India. Can go for product diversification Innovative products and aggressive distribution have become the say of the day. Indians, have always seen life insurance as a tax saving device, are now suddenly turning to the private sector that are providing them new products and variety for their choice. The There has been a plethora of new and innovative products offered by the new players. Customers have Indian Institute Of Information Technology-Allahabad - 76 - tremendous choice from a large variety of products. More customers are buying products and services based on their true needs and not just traditional money back policies, which is not considered very appropriate for long-term protection and savings. There is lots of saving and investment plans in the market. However, there are still some key new products yet to be introduced - e.g. health products. 4. THREAT: Increased competition in the insurance sector The insurance sector remains a very competitive market and those companies that are able to best utilize their data and provide their customer with the most personalized options will have the distinct competitive advantage. The insurers that come up to the top will be those who leverage the appropriate technology solutions effectively in order to foster customer loyalty, attract new customers and improve operational efficiency by providing common information across their lines of business. Increase in the number of new players in this sector The introduction of private players in the industry has added to the colors in the dull industry. The initiatives taken by the private players are very competitive and have given immense Indian Institute Of Information Technology-Allahabad - 77 - 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 career. The market share was distributed among the private players Indian Institute Of Information Technology-Allahabad - 78 - RECOMMENDATIONS: 1. Advertising and Publicity – These days everybody is going for things, which they see on air. Advertising and Publicity hold a very strong role in any products life cycle, it helps the public know about the existence of the products and the role, which they play in the lives of the people. MetLife believes in strong ethics and believes that actions speak more than words and so want its work to prove for itself and so doesn't believe in advertising and publicizing itself but in the Indian context it is a must for any company to publicize itself because it holds the best medium to reach to its customers and also to increase its customer base. 2. Implementation of CRM – While the insurance sector is seeking to maintain a balance between acquiring customers and developing existing ones, customer acquisition is vital, as no retention strategy will entirely stem customer defection. Today, the focus is on selling more products to existing customers to improve profitability. Customer-focused strategies require CRM (customer relationship management) to help acquire customers thorough various touch points and translate operational data into actionable insights for proactively serving customers. Indian Institute Of Information Technology-Allahabad - 79 - CRM with BI (Business Intelligence) tools can help insurance firms monitor the ebb and flow of customer behaviour, giving them a holistic 360-degree view of their customers.‖ CRM has helped customers through effective event-based marketing and lead tracking to cross- and up-sell products. CRM helps categorise and segment customers and align products that best suit them. CRM is helps to expand into rural areas 3. Strengthening the distribution network – MetLife India mainly operates in all the metros and in certain big cities. In order to expand its position and to reach to its customers what MetLife needs is to set-up its branches in more cities and should also get into the rural areas where there is a huge untapped market. As MetLife already has a wide global set up it can easily expand in India also in order to reach to the customers and be available at their door steps. 4. Strong tie-ups with well known and already established companies or banks – Tie-ups act as a backbone for any company as they too represent the main company as a whole. MetLife being associated with banks such as Jammu & Kashmir bank, Dhanlakshmi bank & the Karnataka bank, which in itself are not so common with the general mass, makes it difficult for MetLife to get itself placed in the Indian market. For overcoming the same MetLife can go for further mergers and Indian Institute Of Information Technology-Allahabad - 80 - acquisitions with strong banks which would help it grow, for example, it announced its intention to purchase Citigroup's Travelers Life & Annuity and substantially all of Citigroup's international business for $11.5 billion. Such purchases and tie-ups would help it strengthen its roots and create its own niche in the Indian market. 5. Product diversification – Instead of catering to only one kind of product MetLife can slowly diversify with the kind of products it deals with. MetLife only provides life insurance products; it can get into the debt market by providing housing loans and various other vehicle loans as these are on a high these days. 6. Emphasis on use of Information Technology – In the insurance industry today, there is a clear trend away from selling a broad range of products to a large volume of customers in a one –size-fits-all manners. Instead of focusing on their different products lines as silos (i.e., life, property and casualty etc) insurers are looking for ways to offer highly targeted insurance products that are tailored to the individuals customers with the highest propensity to buy them. 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. Indian Institute Of Information Technology-Allahabad - 81 - With increased competition among insurers, service has become a key issue. Moreover, customers are getting increasingly sophisticated and tech-savvy. People today don't want to accept the current value propositions, they want personalized interactions and they look for more and more features and add ones and better service. The insurance companies today must meet the need of the hour for more and more personalized approach for handling the customer. Today managing the customer intelligently is very critical for the insurer especially in the very competitive environment. Companies need to apply different set of rules and treatment strategies to different customer segments. However, to personalize interactions, insurers are required to capture customer information in an integrated system. With the explosion of Website and greater access to direct product or policy information, there is a need to developing better techniques to give customers a truly personalized experience. Personalization helps organizations to reach their customers with more impact and to generate new revenue through cross selling and up selling activities. To ensure that the customers are receiving personalized information, many organizations are incorporating knowledge database-repositories of content that typically include a search engine and lets the customers locate the all document and information related to their queries of request for services. Customers can hereby use the knowledge database to manage their products or the company information and invoices, claim records, and histories of the service inquiry. These products also may be able to learn from the customer's Indian Institute Of Information Technology-Allahabad - 82 - previous knowledge database and to use their information when determiningthe relevance to the customers search request. The insurance sector remains a very competitive market and those companies that are able to best utilize their data and provide their customer with the most personalized options will have the distinct competitive advantage. The insurers that come up to the top will be those who leverage the appropriate technology solutions effectively in order to foster customer loyalty, attract new customers and improve operational efficiency by providing common information across their lines of business. Indian Institute Of Information Technology-Allahabad - 83 - APPENDICES : Appendix A SURVEY QUESTIONAIRE: For the purpose of finding out the exact market scenario and behavior of HNI's I prepared a questionnaire in which there was questions through which I would be able to understand various mindsets of these HNI's. QUESTIONNAIRE Name: Organization: Area of operation: Annual Income (approx): Age: Address: Phone Number: Mob no. : E mail: Indian Institute Of Information Technology-Allahabad - 84 - Are you attached with any community organization: Any Civic Group Any Social Group Any Political Group Any Religious Group Basic generic objective for making an investment: Saving Income generation Security Tax redemption Other (please specify) Whom would you consult before making an investment : Banker (name of the bank) : Chartered accountant (specify) : Investment consultant (specify) : How much money do you to invest annually : How much is your rate of return: What would be your expected rate of return : How much risk will you be able to bear : Indian Institute Of Information Technology-Allahabad - 85 - High Low Medium No risk Would you be interested in extra income generation: Yes No How much extra income would you want to generate: Are you interested in flexible working hours: Yes No Would you be interested in Business opportunity with low investment and high return: Yes No Are you aware of the business opportunity available in Insurance sector: Have good knowledge Have little knowledge No idea Want to know about Indian Institute Of Information Technology-Allahabad - 86 - Would you like to invest your money in Metlife : Yes No Indian Institute Of Information Technology-Allahabad - 87 - APPENDIX B Bancassurance in India Bancassurance in India is a very new concept, but is fast gaining ground. In India, the banking and insurance sectors are regulated by two different entities (banking by RBI and insurance by IRDA) and bancassurance being the combinations of two sectors comes under the purview of both the regulators. Each of the regulators has given out detailed guidelines for banks getting into insurance sector. Highlights of the guidelines are reproduced below: RBI guideline for banks entering into insurance sector provides three options for banks. They are: Joint ventures will be allowed for financially strong banks wishing to undertake insurance business with risk participation; For banks which are not eligible for this joint-venture option, an investment option of up to 10% of the net worth of the bank or Rs.50 crores, whichever is lower, is available; Finally, any commercial bank will be allowed to undertake insurance business as agent of insurance companies. This will be on a fee basis with no-risk participation. Indian Institute Of Information Technology-Allahabad - 88 - Some of the Bancassurance tie-ups in India are: Insurance Company Bank Bank of Rajasthan, Andhra Bank, Bank of Birla Sun Life Insurance Muscat, Development Credit Bank, Deutsche Co. Ltd. Bank and Catholic Syrian Bank Dabur CGU Life Canara Bank, Lakshmi Vilas Bank, American Insurance Company Pvt. Express Bank and ABN AMRO Bank Ltd HDFC Standard Life Union Bank of India Insurance Co. Ltd. Lord Krishna Bank, ICICI Bank, Bank of ICICI Prudential Life India, Citibank, Allahabad Bank, Federal Insurance Co Ltd. Bank, South Indian Bank, and Punjab and Maharashtra Co-operative Bank. Corporation Bank, Indian Overseas Bank, Centurion Bank, Satara District Central Co- Life Insurance operative Bank, Janata Urban Co-operative Corporation of India Bank, Yeotmal Mahila Sahkari Bank, Vijaya Bank, Oriental Bank of Commerce. Met Life India Karnataka Bank, Dhanalakshmi Bank and Insurance Co. Ltd. J&K Bank SBI Life Insurance State Bank of India Company Ltd. Bajaj Allianz General Karur Vysya Bank and Lord Krishna Bank Indian Institute Of Information Technology-Allahabad - 89 - Insurance Co. Ltd. National Insurance Co. City Union Bank Ltd. Royal Sundaram Standard Chartered Bank, ABN AMRO Bank, General Insurance Citibank, Amex and Repco Bank. Company United India Insurance South Indian Bank Co. Ltd. ISSUES TO BE TACKLED w.r.t BANCASSURANCE: Issues to be tackled Given the roles and diverse skills brought by the banks and insurers to a Bancassurance tie up, it is expected that road to a successful alliance would not be an easy task. Some of the issues that are to be addressed are: 1. The tie-ups need to develop innovative products and services rather than depend on the traditional methods. The kinds of products the banks would be allowed to sell are another major issue. For instance, a complex unit-linked life insurance product is better sold through brokers or agents, while a standard term product or simple products like auto insurance, home loan and accident insurance cover can be handled by bank branches Indian Institute Of Information Technology-Allahabad - 90 - 2. There needs to be clarity on the operational activities of the bancassurance i.e., who will do the branding, will the insurance company prefer to place a person at the bank branch, or will the bank branch train and put up one of its own people, remuneration of these people. 3. Even though the banks are in personal contact with their clients, a high degree of pro-active marketing and skill is required to sell the insurance products. This can be addressed through proper training. 4. There are hazards of direct competition to conventional banking products. Bank personnel may become resistant to sell insurance products since they might think they would become redundant if savings were diverted from banks to their insurance subsidiaries. Factors that appear to be critical for the success of bancassurance are : 1. Strategies consistent with the bank's vision, knowledge of target customers' needs, defined sales process for introducing insurance services, simple yet complete product offerings, strong service delivery mechanism, quality administration, synchronized planning across all business lines and subsidiaries, complete integration of insurance with other bank products and services, extensive and high-quality training, sales management tracking system for reporting on agents' time and results of bank referrals and relevant and flexible database systems. Indian Institute Of Information Technology-Allahabad - 91 - 2. Another point is the handling of customers. With customer awareness levels increasing, they are demanding greater convenience in financial services. 3. The emergence of remote distribution channels, such as PC- banking and Internet-banking, would hamper the distribution of insurance products through banks. 4. The emergence of newer distribution channels seeking a market share in the network. With huge untapped market, insurance sector is likely to witness a lot of activity - be it product innovation or distribution channel mix. Bancassurance, the emerging distribution channel for the insurers, will have a large impact on Indian financial services industry. Traditional methods of distributing financial services would be challenged and innovative, customized products would emerge. Banks will bring in customer database, leverage their name recognition and reputation at both local and regional levels, make use of the personal contact with their clients, which a new entrant cannot, as they are new to the industry. In customer point of view, a plethora of products would be available to him. More customized products would come into existence and that too all within a hand reach. Finally Success of the bancassurance would mostly depend on how well insurers and banks understand each other's businesses and seize Indian Institute Of Information Technology-Allahabad - 92 - the opportunities presented, weeding out differences that are likely to crop up. Appendix C Alternative channels of Insurance distribution With the liberalization of the insurance sector and competition tougher than ever before, companies are increasingly trying to come out with better innovations to stay that one-step ahead. Progress has definitely been made as can be seen by the number of advanced products flooding the market today - products with attractive premiums, unitised products, unit-linked products and innovative riders. But a hitherto untapped field is the one involving the distribution of these insurance products. Currently, insurance agents are still the main vehicles through which insurance products are sold. But in a huge country like India, one can never be too sure about the levels of penetration of a product. It therefore makes sense to look at well-balanced, alternative channels of distribution. Nationalised insurers are already well established and have an extensive reach and presence. New players may find it expensive and time consuming to bring up a distribution network to such standards. Yet, if they want to make the most of India's large population base and reach out to a worthwhile number of customers, making use of other Indian Institute Of Information Technology-Allahabad - 93 - distribution avenues becomes a must. Alternate channels will help to bring down the costs of distribution and thus benefit the customers. In March 2003, a seminar conducted by the Asia Insurance Review and attended by leading consultants in the Asian insurance market, threw up some interesting findings. However much the traditional agent's role be part of the company, the insurer must still be ready to adopt alternative distribution channels not to compete with agents but as a complementary effort to provide customers with an array of products Several insurers in Asia, are coming up with innovative, multi-channel and direct marketing techniques with successful results . Insurance distribution channels At present the distribution channels that are being utilized are: Direct selling Corporate agents i.e. pushing the insurance product through the directors or partners of a company Group selling Worksite marketing Brokers and cooperative societies Alternate delivery channels - Bancassurance: Bancassurance can be a sure fire way to reach a wider customer base, provided it is made use of sensibly. In Indian Institute Of Information Technology-Allahabad - 94 - India there is an extensive bank network established over the years. Insurance companies will have to take advantage of the customers' long-standing trust and relationships with banks. This is a mutually beneficial situation as banks can expand their range of products on offer to customers and earn more, while the insurance company profits from the exposure at the bank branches, and the security of receiving timely payments. The products that are likely to sell well through bancassurance are commodotised term and annuity products. Also, those products that combine insurance and banking needs help to create demand - such as loan cover, term assurance and simple products that can be sold over-the-counter at banks. Another advantage is that banks, with their network in rural areas, help to fulfil rural and social obligations stipulated by the Insurance Regulatory and Development Authority (IRDA). Selling through employees or authorised officials of a corporate: Selling through employees can also be a lucrative prospect. But the full potential of this channel has not yet been utilised since selling is now permitted only through directors or partners of the company. Worksite marketing is inexpensive and provides the opportunity to market products to large groups of people simultaneously. Call centres: Call centres can be utilised for generating leads. As the market keeps expanding, call centres have the potential of becoming an important medium for customer relationship management (CRM) and up selling to the customers. Indian Institute Of Information Technology-Allahabad - 95 - Cooperative societies and Brokers: Cooperative societies and brokers offer immense support to insurance companies to widen their reach. Private companies that are already appointing corporate agents, and non-banking financial corporations (NBFCs) with a sound retail network are in demand. Marketing through mailers etc.: Direct marketing through mailers, pamphlets etc. require customised simple products that can be purchased through such mediums, or through the Internet. Though the unavailability of good databases in India, and the high expenses to reach the target audience through direct mailers is a cause for concern, it is definitely a problem that can be solved through better management of resources, data collection etc. Winds of change Sustaining huge sales force is a costly affair especially when low-cost electronic distribution channels are available. Alternate delivery channels are not burdened by the monetary and geographic limitations of maintaining a physical presence. Alternate channels also help to cut back costs and enhance customer service thereby giving the company a competitive edge. To sum up, it is apparent that multiple distribution channels will help an insurance company to offer a range of contact points to the customer, thereby increasing the chances of success. However, along Indian Institute Of Information Technology-Allahabad - 96 - with these distribution channels comes the challenge of 'relationship management'. Since most of the new channels involve collaboration with various entities whose demands and powers of negotiation are varied, it requires delicate skills on the part of the insurance company to manage these relationships. Effective management of channel conflict, and curtailing the costs of distribution will be of utmost importance Indian Institute Of Information Technology-Allahabad - 97 - Appendix D Insurance companies IRDA has so far granted registration to 12 private life insurance companies and 9 general insurance companies. If the existing public sector insurance companies are included, there are currently 13 insurance companies in the life side and 13 companies operating in general insurance business. General Insurance Corporation has been approved as the "Indian reinsurer" for underwriting only reinsurance business. Particulars of the life insurance companies and general insurance companies including their web address is given below: LIFE INSURERS Public Sector Life Insurance Corporation of India Private Sector Allianz Bajaj Life Insurance Company Limited www.allianzbajaj.co.in Birla Sun-Life Insurance Company Limited www.birlasunlife.com HDFC Standard Life Insurance Co. Limited www.hdfcinsurance.com ICICI Prudential Life Insurance Co. Limited www.iciciprulife.com Indian Institute Of Information Technology-Allahabad - 98 - ING Vysya Life Insurance Company Limited www.ingvysayalife.com Max New York Life Insurance Co. Limited www.maxnewyorklife.com MetLife Insurance Company Limited www.metlife.com Om Kotak Mahindra Life Insurance Co. Ltd. www.omkotakmahnidra.com SBI Life Insurance Company Limited www.sbilife.co.in TATA AIG Life Insurance Company Limited www.tata-aig.com AMP Sanmar Assurance Company Limited www.ampsanmar.com Dabur CGU Life Insurance Co. Pvt. Limited www.avivaindia.com Reforms In Insurance Sector Insurance sector has been opened up for competition from Indian private insurance companies with the enactment of Insurance Regulatory and Development Authority Act, 1999 (IRDA Act). As per the provisions of IRDA Act, 1999, Insurance Regulatory and Development Authority (IRDA) was established on 19th April 2000 to protect the interests of holder of insurance policy and to regulate, promote and ensure orderly growth of the insurance industry. IRDA Act 1999 paved the way for the entry of private players into the insurance market which was hitherto the exclusive privilege of public sector insurance companies/ corporations. Under the new dispensation Indian insurance companies in private sector were permitted to operate in India with the following conditions: 1. Company is formed and registered under the Companies Act, 1956; Indian Institute Of Information Technology-Allahabad - 99 - 2. The aggregate holdings of equity shares by a foreign company, either by itself or through its subsidiary companies or its nominees, do not exceed 26%, paid up equity capital of such Indian insurance company; 3. The company's sole purpose is to carry on life insurance business or general insurance business or reinsurance business. The minimum paid up equity capital for life or general insurance business is Rs.100 crores. The minimum paid up equity capital for carrying on reinsurance business has been prescribed as Rs.200 crores. Protection of the interest of policy holders: IRDA has the responsibility of protecting the interest of insurance policyholders. Towards achieving this objective, the Authority has taken the following steps: 1. IRDA has notified Protection of Policyholders Interest Regulations 2001 to provide for: policy proposal documents in easily understandable language; claims procedure in both life and non- life; setting up of grievance redressal machinery; speedy settlement of claims; and policyholders' servicing. 2. The Regulation also provides for payment of interest by insurers for the delay in settlement of claim. Indian Institute Of Information Technology-Allahabad - 100 - 3. The insurers are required to maintain solvency margins so that they are in a position to meet their obligations towards policyholders with regard to payment of claims. 4. It is obligatory on the part of the insurance companies to disclose clearly the benefits, terms and conditions under the policy. The advertisements issued by the insurers should not mislead the insuring public. 5. All insurers are required to set up proper grievance redress machinery in their head office and at their other offices. 6. The Authority takes up with the insurers any complaint received from the policyholders in connection with services provided by them under the insurance contract. Indian Institute Of Information Technology-Allahabad - 101 - APPENDIX E Equity still the best Equity continues to remain the fancied asset class for investors-both for 2005 and over a medium term of three years. Gold, can also give double-digit returns,is the next preferred class,according to experts. The Indian economy is witnessing one of its best ever Bull Run on the bourses. Traditional rules for allocating assets ,making investment decisions ,gauging upside and weighing risk-returns are all changing.And changing rapidly.Those who had followed the golden rule of investment guru – ―Sell when everyone is buying and buy when everyone is selling‖- when the equity market had crested the 6000 level early in the year would be representing.As would have those who , braving the wrath of their wives ,sold off the family bullion.Both assets have returned double-digit growth on a year on year basis. Had the investors who had been hasty in booking profits invested in bank deposits or debt markets , he would have seen his capital eroding bit with every rise in inflation rates , which is currently hovering around 6- 7 percent. However, experts believe that 2005 will be The Year of the Equity and the yellow metal – a view well corroborated by over two dozen market movers , analysts , brokers ,fund managers and research houses. For once , the verdict was unanimous. If you have invested , stay invested. If you have not made allocations, give a higher weightage to equity class-atleast 40% on a conservative level and 60% for Indian Institute Of Information Technology-Allahabad - 102 - agggressive investors.The estimate on returns also varied- from the very conservative 15% to as high as 30% for one year ; and,over a three year period. Most analysts also feel that , with no tax on dividend or capital gains , there is bound to be a shift in capital from local investors. The total exposure to equity of the mutual funds boasting of a collective corpus of Rs.1,50,000 crore is less than 30%.And individual retail investors account for less than 2%.Given this abysmal level of exposure to equity , even a fraction change will see incremental funds now parked in bank deposits , mutual funds and household deposits moving to the equity markets. Added to this is the large number of equity offerings in the pipeline. With. the government going in for piecemeal disinvestment of its prized public sector offerings , both at the Central and the state level , the interest in equity is bound to remain high. 2005 will be The Year of the Equity and the yellow metal Enthuse banks One concern expressed by many experts was regarding the low level of equity held by Indian investors. Most of the gains being lapped up by FIIS , which have funds virtually on tap.In such a scenario the government will do well to enthuse banks and institutions to take a wider exposure to equity.Hardly any banks have breached the 5% ceiling permitted for equity investments. If the future is indeed bright and the industry is undergoing a structural change, it makes sense for Indian Institute Of Information Technology-Allahabad - 103 - them to use their burgeoning base of low cost deposits for temporarily store housing the shares.Rich profits could be reaped when the proper price is discovered. A case in point is the cross-holdings effected in ONGC, Indian Oil and Gas Authority.All three companies gain more than 15,000 crore over their investments of less than three years. And this was in a flat market..Gains in the booming market can be even more.Nationalised banks were forced to invest in other banks , going in for initial public offerings , on fears of there not being sufficient takers. However , investment in banks , if done by design , would help gilt plate the bottom line of these institutions , besides ensuring that the collective wealth remains within the country For banks which have made wrong calls on reading the dollar movement and dwindling treasury gains from risking interest rates , judicious investments in equity is also a commercial necessity. Non-index stocks While stating that equity is the best option , experts take pains to point out that this is meant for investors willing to take a longer view and not for traders wearing a grabs of investors. Horizon should be for atleast one year and more.Moving in and out may not give decent returns. Quite a few believe that non-Sensex stocks may be in a position to outperform index returns. However , this requires a proper selection procedure and adherence to investment discipline. Fund managers feel that diversified schemes would be the best bet for the Indian Institute Of Information Technology-Allahabad - 104 - non-savvy investors , though thematic schemes or sector funds may generate better returns in a bull market. Investments in Equites will continue to fetch decent returns in 2005 Equities still hold investment potential owing to strong economic growth , good corporate results , better investment climate , higher FII inflow and lack of other investment avenues with similar returns. There are still opportunities to cash in on the growth. Equity investors should only with a medium-term perspective of at least threee years and beyond , especially when there has been a significant rally in the markets over the past two years and the BSE Sensex is quoting at a historical high of around 6400. However , it should be kept in mnd that the global experience is that long term equities as an asset class tend to outperform other asset classes like bonds ,etc. Businesses and companies that have a competitive advantage and can outperform their global rivals will create value. These companies may lie in the mid-cap sector or the large-cap sector. However , the key determinant of long term growth capability will be their to create value innovate and deliver superior performance in the face of global competition. Any of the mid-caps today may be the large-caps of tomorrow,which has been demonstrated by the IT sector ,which was in the mid-cap segment in the early 1990s and today forms a significant part of the large-cap segment. Indian Institute Of Information Technology-Allahabad - 105 - Indian equity markets look attractive on account of the economy's strong fundamentals. The equity market is on a growth and dividend yeild basis is looking far more attractive, compared to bank deposits.The year 2004 was marked with a great amount of volatility.The markets swung from euphoria to panic and again back to reasonable levels.It is believed that the year 2005 will not be as volatile as 2004. Threat The risk in 2005 could emerge from the fact that the flows , which have come into the Indian equity markets , could have come from the currency view. There is a sensus that the dollar is going to weaken . Dollar funds are chasing non-dollar assets . India has received some of these flows . If the dollar gets a pull back from the exisiting level , some of these flows could return and it could have an adverse impact on our Indian markets Indian Institute Of Information Technology-Allahabad - 106 - Appendix F MOTIVATIONAL AWARDS / AWARDS & RECOGNITION MetLife believes that every team requires a leader and every leader, Recognition. For getting the best out of the team Motivation is a must and so is inspiring the team to reach greater heights. For doing the same support from the team leader as well as the Company is a must, which simultaneously enhances the qualities essential for being a Leader at MetLife and such qualities, are required to be awarded. Some of the rewards and recognition are: Trigger Award (for the sales manager in self-sales mode) Eagle Award (for the sales manager in self-sales mode) Eagle Maker (for the sales manager) The President's & Leader's Conferences (for outstanding performers of the year) The President's & Leader's Conferences (for Sales Managers) The President's & Leader's Conferences (for Agency Managers) Indian Institute Of Information Technology-Allahabad - 107 - The President's & Leader's Conferences (for Regional Managers- Agency) Best Region Award-Monthly & Best Region Award 2005 The Best Sales Manager Award Sales Hall Of Fame Indian Institute Of Information Technology-Allahabad
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