A STUDY ON THE DISTRIBUTION CHANNEL OF IDBI Fortis

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By

Indira Mohanty (08BSHYD0304)

IDBI Fortis Life Insurance Company Ltd

A Report

On

The Study of the Distribution Channel of IDBI Fortis

Suggesting alternate means and aids to increase the efficacy of the distribution channel

By

Indira Mohanty

A report submitted in partial fulfillment ofthe requirements of MBA Program

Hyderabad

Dr.S.Subramanian (Faculty Guide)Mrs. Shanthi Yagyanath (Company Guide)

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Serial No Table of Contents Page no1 List of Illustration 52 Abstract 63 Introduction 74 Company Profile 85 Brief about IRDA 86 About ULIP 97 Purpose of Project 108 Scope of Work 119 Terms of reference 1110 Methodology 1111 Study Of Distribution Channel 1212 Personal Distribution System 1313 Bancassurance 1514 Challenges for bancassurance 1715 Mall assurance 1816 Direct Distribution system 1917 Distribution Model 2018 Porters Five Forces Analysis 2319 Benefits of using web technology 2520 CRM 2821 Expectation management 3122 Current Issues 3223 Analysis 3424 Recommendations 4525 Summer Internship experience 4726 Online application submission 4927 Work Flow and Notification 6028 Conclusion 6229 Appendix(questionnaire) 6330 References 71

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ACKNOWLEDGEMENTS

I would like to thank Mrs Shanti Yagyanath Agency Manager(IDBI Fortis Life Insurance Co Ltd, Coimbatore), for providing me with an opportunity to learn and complete my summer internship project in this respected organization.

I also take this opportunity to thank Dr. S . Subramanian(Faculty Guide) for the invaluable inputs and consistent guidance and support in terms of completion of my report and also facing real time issues that I faced in the corporate world.

I am grateful to my husband , Mr Amit Kumar Jha , my father Dr. A . Mohanty , my mother Mrs Deblina Mohanty , my batchmates from IBS Hyderabad and all those people who helped me with finding the resources and provided me with their valuable feedback.

Had it not been for them, the successful completion of this project would not have been possible.

Indira Mohanty

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List of Illustrations

Sl. No. Tables and Figures Page No1. Growth of Life Insurance Market in India 72. Company Profile 83. Market Share of Pvt Life Insurers in Sep,2008 94. Distribution Network 125. Why Bancassurance 166. Advantages of Bancassurance 167. Direct Distribution System 198. Channel-wise Premium by Private Companies 209. Distribution Models 2010. Importance of Distribution Channel 2211. Channel Comparison 2312. Porter’s Five Forces Analysis 2313. Benefits of Using Web Technology 2514. Difference between Traditional and Integrated Distribution Systems 2715. CRM 2816. Expectation Management 3117. Demographics of Sample 3418. Growth of Insurance Sector in India 3519. Most Sought after Insurance Companies 3620. Preferred Modes of Investment and Procurement of Policy 3721. Preferred Channels 3822. Desirable Features of Insurance Product 3923. Problems Faced by Customers 4024. Scree Plot 4125. Total Variances Explained 4226. Communalities 4227. Rotated Component Matrix 43

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AbstractThe insurance industry in India witnessed sweeping changes since 1999, when the Insurance Regulatory and Development Authority Act were enacted. While there was only one life insurer and five public sector non-life insurers at that stage, there were sixteen life and fifteen non-life insurers by August 2007.

There are multiple challenges faced by the insurance industry out of which using the right distribution channel to reach the customer is of utmost significance. Leveraging multiple distribution channels in a cost effective and customer friendly manner is important.

The key challenge for insurers is to attract and retain the distribution channels by:

Making it easier for channels to do business with them.Providing good and quick underwriting support.Delivering differentiated service to top performers.Providing proactive service.Launching incentive plans and contests.Managing commissions in a more efficient manner.

Insurance companies can position themselves as preferred providers by delivering on key areas:

New business and underwriting support.Marketing and sales support.Client and customer services.

Distribution is a key determinant of success for all insurance companies. Today, the nationalized insurers have a large reach and presence in India. Building a distribution network is very expensive and time consuming. If the insurers are willing to take advantage of India’s large population and reach a profitable mass of customers, then new distribution avenues and alliances will be necessary. Initially insurance was looked upon as a complex product with a high advice and service component. Buyers prefer a face-to-face interaction and they place a high premium on brand names and reliability. As the awareness increases, the product becomes simpler and they become off-the-shelf commodity products. Today, various intermediaries, not necessarily insurance companies, are selling insurance. For example, in UK, even retailers like Marks & Spencer sells insurance products.

In this report, an attempt has been made to understand the distribution network in detail, suggest alternate channels and also address certain issues that prevail in the insurance industry.

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IntroductionInsurance business is divided into four classes: 1) Life Insurance 2) Fire Insurance 3) Marine Insurance and 4) Miscellaneous Insurance. Life Insurers transact life insurance business; General Insurers transact the rest. There has been a remarkable growth of 35% for the past 7 consecutive years,in the insurance market driven by liberalization and with new private players enhancing the consumer education and experience. This has compelled many international players like AIG, MetLife, New York life to enter into joint ventures with Indian companies. Saturation of the insurance markets in developed economies has made the Indian market more attractive for the international players. Total life insurance premium in India is projected to grow to Rs 1,230,000 Crore by 2010-11, which itself indicates the magnitude of the insurance industry in India. India is the 5th largest insurance industry in the world.

2002

2003

2004

2005

2006

2007

0 5000 10000 15000 20000 25000 30000 35000

10305.4

11967.4

14627.9

18787.9

23368.5

31781.16

Growth Of Life Insurance Market in India (USD Millions)

Growth Of Life Insurance Market in India (USD Mil-lions)

The benefits of Life Insurance are manifold

a) It is superior to traditional savings vehicles: In events of untimely death or accidents, the policy provides a pay out of guaranteed sum assured whereas traditional vehicles would yield just the amount invested plus interest accrued.

b) It encourages savings: It becomes compulsory for the insured to save regularly. In contrast savings held in a deposit account can be accessed or stopped easily.

c) Provides easy settlement and protection against creditors: Creditors have no right to the money paid by the insurer, when the policy is written under a trust.

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d) It helps to achieve the purpose of the Life assured: When a insured gets a large amount of money, he can instruct the insurer that the claim amount be given in installments .

e) Tax Relief: Policy holders enjoy income tax rebate under Section 88.

Company Profile

IDBI Fortis Life Insurance Co Ltd, is a joint venture between three leading financial conglomerates –India’s premier development and commercial bank, IDBI, one of India’s leading private sector banks, Federal Bank and Europe’s banking and insurance giant, Fortis, each of which enjoys a significant status in their respective business segments. In this venture, IDBI owns 48% equity while Federal Bank and Fortis own 26% equity each. IDBI FORTIS began its operations in March 2008 and has collected premiums of over Rs 1 bn ($ 21.6 mn) in its first five months, and is rated as fastest growing life insurance company in the private sector.

Brief About IRDA

Till 1999, there were not any private insurance companies in Indian insurance sector. The Govt. of India then introduced the Insurance Regulatory and Development Authority Act in 1999, thereby de-regulating the insurance sector and allowing private companies into the insurance. Further, foreign investment was also allowed and capped at 26% holding in the Indian insurance

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companies. In recent years many private players entered in the Insurance sector of India. There are around 22 life insurance companies in India as of now.

About the Product-ULIP( Wealth insurance)

ULIP: Unprecedented growth in New Business Premiums began when most insurers started selling ULIP products aggressively. Among the more important points about ULIP are: stipulation of minimum three years lock-in period, minimum life insurance cover of five times the annual premium etc. The concept of life insurance works on lines of providing security to beneficiaries in the event of untimely death of the policyholder. However, ULIPS are aimed at offering dual benefits like life insurance cover as well as investment options and hence , is akin to hitting two birds with one stone. The premium paid by investors is either invested in equity or debt or both .The investment is usually shown in units and its value is represented as NAV. Thus ULIP enables the buyer to earn a return on the premium paid as well as secure a protection to his family in the vent of untimely death. Insurance companies generally offer 4- 5 types of ULIPS with varying investment options and charges and conditions for withdrawal and surrender. The

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Market Share of Private Life Insurers as in Sept 2008

kind of flexibility and transparency that it offered gives ULIP widespread popularity. ULIPS are tax deductable up to 100000 from the gross total income under Section 80C of the income tax act, 1961.The returns are also tax deductible subject to conditions Section 10(10 D)

Rider Benefits -All life insurance plans are combinations of term assurance and survival benefit. It is like preparing a tea in pure water, milk or different proportions of milk and water. Each different combination gives birth to a new life insurance plan. Tea could be made tastier by adding sugar, ginger or cardamom. All these are akin to riders in a life insurance plan. Riders are benefits that run parallel to the original contract, available on payment of premium called rider premium.

WEALTHINSURANCE: Wealth Insurance, a flagship product of IDBI Fortis, is also a ULIP product. It’s a combination of comprehensive investment choices, protected by powerful insurance options with reasonable charge structure, making it a one stop solution for customers wealth building plan.

PURPOSE OF PROJECT

a) Understanding the importance of the Distribution Channel of IDBI Fortis: Distribution costs affects the insurer’s profits, therefore it becomes important to continuously improve and streamline the distribution process. Therefore I have tried to elaborate on the distribution channel and understand why it has such a significant role to play in the Insurance Industry.

b) Identifying alternate channel of Distribution: Use of Web Technologies to obtain quotes, complete policy applications online, so that agents can work more efficiently.

c) Recommendations: To increase the efficiency of the distribution channel.

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Scope of Work

We had been allotted sales targets. As IDBI Fortis is the fastest growing private insurance company, it’s increasing its customer base by leaps and bounds. In order to be able to sell effectively, a detailed study of the Insurance Industry as such, the distribution channel, and the insurance products was imperative.

The study also helped in identifying certain loopholes, and suggesting recommendations so that the company can reach a vast array of profitable customers. My scope of interest was primarily in the distribution channel, suggest alternate channels and various technological aids which would help in increasing the market share of the company.

The study has been done both on primary as well as secondary research, and supplemented with the aid of the management.

Terms of Reference

Based on the scope of the work, the terms of reference of the study were as follows:

Understanding the insurance industry, specifically with reference to the distribution channel.

Analyzing various factors that affect the purchase behavior of customers.

Suggesting various methods and ideas that would increase the efficiency of the distribution channel, and help in increasing the competitive advantage of IDBI Fortis.

Methodology

This project is a combination of primary as well as secondary research. Secondary data from internet websites, literature, and business magazines has been used.

A market survey has also been conducted with the help of questionnaires. Around hundred customers were approached, to find out their perception about different aspects of the insurance industry.

An online application was formulated that would help in online form submission and policy procurement, which would be of immense help at the point of sale.

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Study of the Distribution Channel

Understanding the Distribution Channel

Many of the world’s insurance companies are moving toward multi-distribution models, recognizing that the sale of insurance through multiple distribution networks is a powerful lever for growth. Multi-distribution can help insurers to generate additional revenues and improve network sales productivity, since lead generation and management are more tailored to ‘value-creating’ relationships. As a result, cross-network cooperation can increase the sales conversion rate, and therefore improve the sales productivity of networks – which consequently boosts revenues.

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Multi Distribution Network

Personal Distribution System

It includes brokers, agents, banc assurance, mall assurance, worksite marketing.

Brokers

Brokers like Religare, India Info line, Anand Rathi, Emkay and Edelweiss have established insurance broking divisions. These entities are selling life as well as non-life insurance products of multiple companies. Brokers are required to possess a minimum capital of 50 Lakhs for entering the business along with abiding with certain regulatory guidelines. Brokers represent the customer and sell products of more than one company. For IDBI Fortis particularly, the brokers in Hyderabad are namely Emkay, Excellent Brokers, and Karvy.

Agents

For a long time, individual agent has been the main, and often the only, distributor of life insurance. Every new insurer has to build this as the dominant channel for distributing life insurance products despite realization that agency channel has major drawbacks and inefficiencies.Issues relating to recruitment in large numbers, pre-recruitment training, examination, productivity, attrition, acquisition costs, selling practices etc. has been issues associated with agencies. Ill-equipped agency force in any company would hurt their growth and well-being. Agents bring about 705 of new business across the industry and the industry as a whole is said to employ around 1.9 million agents.

Agents help to evade insurer –policy holder conflicts. Insurance contracts are prepaid. In exchange for premiums, the policyholder receives a bundle of contingent cash payments and services. This prepayment creates opportunities for expropriative behavior. For example, the insurer might renege on the delivery of either promised payments or services.

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Gender of Agents: It is also a relevant feature that would make a difference, especially for the female population. Nurses, “Gram-Sevikas” can target the female segment of the population more effectively similar to child health programs and population control programs.

Types Of Agents

a) Exclusive Agents: A captive agent, or a person who represents only one insurance company and is restricted by agreement from submitting business to any other company unless it is first rejected by the agent’s company.

b) Independent Agents: Agent who is self-employed, is paid on commission, and represents several insurance companies. They are used for more complex products because of their knowledge about many products.

c) Career Agents: Full time commissioned sales personnel holding an agency contract. Many banc assurers avoid this channel as the agents might oversell out of personal interest in quantity and not quality.

d) Salaried agents: They are under control and supervision of banc assurers. They are paid on salary basis; however career agents are paid on the basis of their sales.

e) Platform Bankers: They spot the leads in the banks and gently suggest the customers to walk over and speak with appropriate representatives.

Special advisors

Special advisors are highly trained employees belonging to the insurance partner, who distributes insurance products to bank’s corporate clients. Complex insurance requirements are handled by advisors. They are on the salary payroll, and receive sales based incentive compensation.

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Worksite Marketing

It is the sale of voluntary insurance products to employees at the worksite through payroll deduction. With change in HRM policies and compensation packages, worksite products have a definite market that can’t be ignored. Its advantages are:

a) Captive customer base.b) High trust factor.c) Potential to sell individual and group insurance.

Bancassurance and Corporate Agent

Insurers have entered into arrangements with corporate distributors through ‘corporate agency’ contracts. Banc assurance works well as visiting to banks is natural to customers.

a) Brick and Mortal Model of Banking: Approximately 80% of banking transactions are done in the banking branches. This makes banc assurance a favorable way of selling insurance.

b) There is very high trust in the banking systemc) Bank Managers are looked upon as Financial advisors.d) The bank staff needs to be coached well by the insurer.e) Banks need to accept insurance as its core product, run reward and recognition products

for the bank staff in order to motivate them to sell.

IDBI is a well known and trusted bank, known for its corporate and product brands, retail banking with Government backing. It has a large customer base for cross selling and also a large capital base.

Fortis ranks among Europe’s top 20 financial institutions, with a market capitalization of EURO 43 billion. With excellent solvency and presence over 50 countries, the company combines global strength with local flexibility. Its leading in bancassurance in Spain, Portugal, Malaysia and Luxembourg.

Federal bank also plays a key role in bancassurance, being one of India’s leading private sector banks, with a strong network of 600 branches across India. It is one of the first Indian banks to have an entirely automated and inter-connected branch network.

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Why should banks consider Bancassurance?

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Branch walk Ins

Insurance sales staff present in the branch location.

Fresh Accounts

Outbound sales team to contact new customers.

Non Walk in Customers

Direct MailersTelemarketing

Corporate Customers

Worksite Marketing

Bank

Extreme competitiveness in the banking sectorTo augment their income.Develop a sales cultureImprove Customer SatisfactionIncrease employee productivity.

Insurers

The wide bank network can be exploitedDatabase like financial standing, spending habits, purchase capability can be used to customize products.Ratio of leads to sales is likely to be high as banks already establish relationship with customers

Customers

Comprehensive financial advisory services are available under one roof.Enhanced convenience.Easy access for claims, as banks are a regular go.

WHY BANCASSURANCE

Advantages for the

Challenges for Bancassurance

Time Constraint: Bank personnel are already dealing with business targets, internal operations etc. Since selling insurance deviates them from their primary responsibilities, they do not favor Bancassurance.

Solution:1. Therefore it becomes important to designate an employee exclusively for banc

assurance. However this is subject to cost benefit analysis , as in many cases the insurance business income fetched by the staff is is lower as compared to the normal salary payout to him.

2. Insurance counters manned by the employees of the insurance industry have also been tried in some branches. But this also has not given the expected benefit as the customers view the insurance staff as outsiders.

Product Disparity: Insurance deals with financial risk mitigation and bank serviced are designed to promote savings. The bank employees are therefore hesitant to market insurance that are more attractive than bank deposit schemes. In the past they have come across depositors who have requested them to close the deposit accounts to purchase such policies.

Solution:

1. The banks and the insurance companies can get together and customize the products in such a way that there is no such clash.

Customer Resistance: Banks run the risk of losing customers because of cross selling pressure for insurance. Hence, it may dissuade them from actively marketing insurance service.

Policy Lapse: Approximately 50% of the policies sold get discontinued due to lack of follow up. This is because of the lack of interest on the part of the bankers, in contrast to the individual agents to continued remittance to premiums.

Honoring maturity/damage claim is the duty of the insurance companies. In the event of the insurance company repudiating the policyholders claim could affect the credibility of the bank.

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Mall assurance

The entry of multinational players into retail segments and raising income levels have heralded the emergence of big malls which are one stop sale point to all house hold needs of families. Thus the insurers are planning to put up direct outlets in these malls to increase their market share. It is estimated that over 14 Crore customers visited retail outlets of future group alone last year and it expected to grow to 20 Crore.( source: economic times, Oct 25,2007)Thus, visitors are likely to be doing window shopping of insurance outlets.

Mall assurance is the concept of selling insurance policies with retails products through super markets and retail chains in order to boost returns. ICICI Lombard has already entered into an agreement with Reliance Retail. The leading giant Wal mart sells life, motor, travel, home, and mortgage insurances through its chains of stores worldwide.

Kishore Biyani , the promoter of Pantaloon Group , estimates that with a mere 1% conversion rate , the insurance business will have over 2million clients. Reliance Fresh, is into life and general insurances. ITC has an insurance venture called ITC Choupal.

Met life Insurance has a tie up with Mumbai’s Apna Bazaar cooperative store .Bajaj Allianz has a tie up with Godrej Agnovet to sell its insurance products through Godrej Aadhaar, which is an agri –cum – retail shop.

In the case of shop assurance, though , the malls make it easier to reach different classes of people with suitable insurance products at less cost and best ambience, the problem comes when the customer behavior is found rigid and where they become dependent on advisors leaving no room for the existing players to try any new models.

However pricing can be a differentiator and comes to help. Future Generali plans low priced policies, with a premium range of Rs 49 for Rs 50000 personal accident cover, Rs 99 for Rs 1 lakh personal accident cover etc. This is going to be the key customer acquisition strategy to attract new customers, both who have and don’t have insurance coverage.

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Direct Distribution System

Client purchases the insurance directly through internet, telemarketing, direct mailers and call centers. This system has not grown rapidly in India as most customers don’t yet depend on the internet for financial transactions. They are accustomed to the traditional system of agents and brokers.

Online Social Networks: The emergence of web based social networks, which allow the public to interact with one another across the globe, provides anew avenue to individual agents to interact with various sections and elicit their insurance needs and preferences.. Big business houses are also drawing their plans to enter into this arena.Tech Savvy individual agents would be the best to utilize the opportunity through these networks to expand their business circle. Besides agents, even companies might benefit by getting referral leads through this network.

In IDBI Fortis there are telecallers, who try to approach new customers through outbound calls. There is a toll free number exhibited in the website which permits customers to call the agency if they want any information.

IDBI Fortis also has its product information and illustrated tools on the web. There are product brochures that can be downloaded from its website. These are all direct ways of reaching to the customers.

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Online AdvertisingCall Centers

Online Networking

Distribution Models

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Integrative ModelDirectly integrated with the bank’s processesPremiums are collected by the bank by direct debitBank staff knows the details about all the insurance produ ts in offer.

Non Integrated/Specialist Model

Distributes insurance through experts who are generally employees of the insurance compny.

Finanacial Planning Model

Beneficial to the customers, bank and the insurer, and a useful way to reach a large number of customers.

Strategic Alliance Bank only markets the insuance products.No other insurance functions are carried out by the bank.

Full Integration The bank sells the insurance products under its brand, acting as the provider of financial solutions matching customer needs.

Source: RBI annual report

Factors affecting the Distribution system

a) In cases of centralized insurance promotion the value of exclusive agency system is higher. Conversely in cases of decentralized insurance promotion, the value of independent agency system is higher.

b) Firm Size: Fixed costs and scale economies associated with hiring , training, and managing the distribution system suggest that larger firms have a comparative advantage using exclusive agents. The insurer can directly monitor an exclusive agent which is not possible in the case of an independent agent.

c) Geographic Concentration: Returns to adopting an exclusive agency is more in geographically concentrated markets. Monitoring costs also increase with greater geographic dispersion.

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Importance of the Distribution Channel

For insurers to derive profit, they must improve operations and agent based support for the key distribution segments. There must be a multiproduct multichannel distribution model that compliments an insurer’s revenue objectives and profit margins.

Distributors want to do business with the best insurance companies. Agents prefer insurers that facilitate improved services. To increase profitability through interactions with the distributors and customers, the

approach to the distribution should be with a technology oriented solution that is flexible and cost-effective.

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Align Distribution Channel with

Customer Segment

Porters Five Forces Analysis

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Channel Comparison

Threat of New Entrants

a) Active presence of many international and Indian players makes its imperative for IDBI Fortis to introduce innovative, easier and attractive means of distribution.

b) The Indian market is highly brand oriented. Everyone swears by LIC. So IDBI Fortis being a new entrant has to carve a niche for itself. More and more insurance companies are coming into existence as the international markets are getting saturated.

c) Economies of scale is difficult to achieve in the intial stages of entry as suggested by the theory of the experience curve.

d) High profit in the life insurance industry attracts firms outside the industry motivating potential entrants to commit the resources to hurdle any entry barriers.

Bargaining power of the buyers

a) Buyers in this industry are very return oriented and hence switch very easily. Therefore the company must have different and flexible schemes in order to retain the buyers.

b) As nowadays there is intense competition in the insurance industry. Hence, the buyer exhibits higher bargaining power. Therefore IDBI Fortis needs to be having a competitive advantage over its immediate competitors.

c) High switching costs of the buyer proportionately increases its buying power.d) Buyers have a strong bargaining power over premium, service and other terms of

sale.

Bargaining powers of the Suppliers

a) Suppliers bargaining power increases if the administrative costs are lower and the claim procedure time is lower.

b) Insurance being a tax exempted product increases the bargaining power of the suppliers.

c) Suppliers exhibit greater bargaining power if they offer reasonable premiums, better service, use advanced technology.

d) Higher bargaining power can be achieved by offering customized products, especially when existing players lack in this aspect

Threat from Substitutes a) As far as savings are concerned, there are many options like term deposits,PPF,

Government securities, Post office securities, Mutual funds ,gold and many others,

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b) In terms of risk coverage, there is no close substitute to life insurance, except for other life insurance companies.

Rivalry amongst existing players a) Post privatization product and service differentiation exist between all the

insurance companies.b) Nationalized players have negligible use of computerization and MIS. Thus IDBI

Fortis can capitalize on this, being a new entrant, right from the start.

The Benefits of using Web Technology

A customer centric IT system should have two main components seamlessly integrated with the back office platforms. The components are point of sale and a channel portal .

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Flexible,Customizable & easily integratable

Integrate

Allow easy integration with existing policy administration systems,claims management

systems.

SecureIdentity enabled

portal ensures that prospects enter the portal anonymously,

agents can log in with

passwords,employees can use identity authentication.The

viewer gets a customized view.

Communication

Agents and business partners

Empower

Give agents all the tools they

need to close the deal at one time.

Accessebility

Today customers want to get

information via mobiles,

internet,kiosk, or other ways.

Point of Sale

At the point of sale the agent must be able to perform the need and cost benefit analysis that best suits the customer. The agent must be able to give a demo of a variety of investment scenarios, and share past performances.

The agent must be able to generate a quote real time and generate the proposal.

If a paper form is used , there will be a delay in the proposal being converted into a policy. Therefore online submission forms gives the insurer a competitive advantage.

Once the proposal is submitted online , channel partners must be able to track the status of the proposal through an online portal.

To enable channels to provide better service, insurers must provide them with access to relevant customer information like past transactions, policy and premium status etc.

Portals

A major services cost for insurance companies is call centers and support agents. A portal that provides information at the click of the mouse to those who want it will lead to a drastic reduction of calls. Substantial cost to the company can thereby be reduced.

All product collaterals and brochures should be available online on request. This reduces printing and postage costs. There are many transactions that do not need manual intervention. Transactions based portals can reduce operational and back office costs substantially.

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Traditional Model Integrated Model

Customer Relationship Management (CRM)Can be defined as the concept whereby an organization takes a comprehensive view of its customers to maximize the customer relationship with it and the customers profitability for the organization. The company needs to implement new breed of technology with data base tools for gathering information about their customers, desktop tools for enterprise wise information sharing and web technologies that lets the customers’ service themselves. So CRM is customer centric , value based, multi channeled, information based and enterprise wide.

Insurance companies collect a myriad of data. Many companies have a large number of customer databases that are ignored. The large number of stored data therefore needs to be converted to knowledge. Companies can consolidate the data using data mapping, data warehousing, repositories, data mart designs, use of decision support tools, data mining and predictive modeling.

Leveraging data means working with IT , reviving it, examining it and consolidating and assembling it in a form that gives the agent valuable information about the customer. A total composite picture needs to emerge about the client.

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r

Customer Interaction

Customer Behavior

Customer Demographics

Household Relationships

Customer Risk

Distribution Prefernces

Propensity to buy

Customer Profitability

Life Events

The following elements are necessary to make an environment conducive of CRM

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Legacy Systems - It contains customer data,demographics, household relatioships, policy holders product data.

Data Warehousing - Various customer elments are identified and compiled in a repository. This can be accessed by various points in the distribution channel.

Data Marts - Club set of customer data specific to the needs of various departments of the company like marketing, finance,underwriting, risk management.

Data Mining - Helps to evaluate large volumes of data to identify hidden patterns, trends and corelation in the customer data.

Sales Force Automation - Customer data and profiles can be easily accessed by the sales force

Marketing Systems -Provide powerful insights into the customer database, by improvising new products and services inorder to maximise customer relationships.

Call centres - The ability to speak with a live represenatative 24/7 provides excellent opportunity for CRM.

Performance measurement of CRM - Customer retension percentages, product per househol ratios, customer profitability and customer service levels.

Importance of CRM

CRM gives priority to customer centricity, and lays emphasis on the importance of technology. CRM is about people first and technology second.

Helps to interact with customers in a more informal mannerEnables online paymentHelps in maximizing revenues in business by carefully targeting customers.The most profitable customers can be identified.The efficiency of the sales team goes up as paper systems are discarded .Effective customer service can be provided.

GIS -The knowledge about the risk and GIS location can be used by the loss adjusters and

surveyors to examine individual perils, set premium rates and take better decisions during policy underwriting. It reduces the cost of segmenting and reaching the right customers, by giving a better understanding of strengths of different risks and their implications to different products in offer. It also enables excluding unprofitable customers. For example, an area which is prone with diseases like TB, AIDS , cholera , needs exclusive attention. Eg Google maps, MapQuest, Wikimapia, yahoo maps.

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Expectation ManagementHigher expectations from the customer leads to lower satisfaction levels, the difference between the customer satisfaction and customer expectations directed many corporates to focus and design customer expectations management system to improve satisfaction level in existing customers.Customer expectation management is the process of managing customer expectation s to increase their satisfaction levels by meeting the expectation of the customers. In this process the , the requirements or needs and expectations are differentiated first and following which necessary steps taken to bridge the gaps between expectation and satisfaction.

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Points to ponderBefore launching an e-commerce effort and bypassing its traditional distribution channels, a business should analyze which products are appropriate for electronic distribution, which consumer activities will be supported by which channel participants, and which segments or groups of consumers are likely to adopt electronic distribution.Easy to enter: How easy will it be to enter the channel and attack existing businesses?Profitable: Is the targeted market attractive enough to incur initial profits?Opportunistic Pick Off: Here the new application does not need to subsidize additional lines of business. It is ideally positioned to make better offers to customers it wants to attract, and in the product market it wants to enter.Generally quick acceptance of a new application indicates profitability while slow acceptance can lead to very high costs and failureThe airline industry, grocery retailing, music and movie industry has been hit by electronic distribution. Similar principles might apply to the insurance industry as well.

Current Issues In ULIP Products

Earlier the industry had adopted a voluntary code of ‘benefit illustrations’ covering the range of assumption of returns to be used. This range was fixed between 6% pa to 10% pa. In the recent past many complaints have surfaced that companies were showing benefit illustrations with very high unrealistic potential returns.This has been a matter of concern for the regulator. Some of these have been addressed under the ‘code of best practices’ implemented by the Council. One looks forward to the continued prevalence of good practice in this area. There is a requirement that Appointed Actuaries should certify the benefit illustrations, particularly in ULIP cases.Employment Opportunity: It is to be studied whether for entry level positions in insurance a degree or a post-graduate degree is an absolute necessity. Many school-leavers may not be able or willing to pursue higher studies. Insurance companies could consider recruitment at ‘plus two’ levels, give a short training and deploy. This approach will give quick access to a very large pool of persons and it could be an important initiative. Claims Settlement is an area which needs immediate improvements in such competitive environments.Rebating means a share of commission receivable by the agent/broker is given to the prospect/client. This is done to attract the client in the purchase of insurance contract by

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offering cash. Competition among agents/brokers is so cut-throat, some agents indulge in such unethical practices. Public are advised not to ask for any prohibited rebates in premium since commission payment to an agent is the only income for some to take care of their families. Similarly, agents are also advised not to indulge in such practices which could cause them loss of agency income.

Costly Affair-Many companies charge around 40% in the first year .However term plans charge a mere 7%.Only from the 4rth year the charge stabilizes at 4-5% per annum. The very high commission structure in the initial years makes ULIP a very expensive proposition. Most of the investors are not even aware of such nitty grities as the agents hide such facts from them.Mis selling: IRDA has put a ban on complex actuarial funded ULIPS which give a misleading picture to policy holders about the account balance. They do not deduct charges upfront. Thus the consumer gets a feeling that he is getting a higher allocation for funds invested. However the initial allocations are notional which lie in the form of actuarial units and would be converted to real money in the future. The ban is particularly applicable to 2 companies, Bajaj Allianz and Aviva Life Insurance.

Suggestion - The economic incentive should be structured in such a way that instead of charging heavy commission in the initial years , it should be spread out evenly over the period of the policy. Then even the agents would refrain from miss selling,

Analysis

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Demographics of the Sample Under Consideration

In order to conduct the market survey, questionnaires were sent across to around 110 people. Around 69% of them were salaried. All of them had invested in different insurance companies at some point of time. The responses were basically to find out the difficulties they faced, and the changes they think should be incorporated.

Particulars Frequency PercentSalaried 76 69.09Self Employed 1 0.91

Occupation Student 31 28.18Home Maker 2 1.82

Gender Male 91 82.73

Female 19 17.27

Single 91 82.73Marital Status Married 19 17.27

No Answer 9 8.18No Income 13 11.82< 4 lacs 42 38.18

Annual Income 4-8 lacs 26 23.648-12 lacs 11 10.0012-16 lacs 7 6.36>16 lacs 2 1.82

<5000 25 22.735001-10000 14 12.7310001-20000 29 26.36

Premium Paid 20001-30000 15 13.6430001-40000 8 7.2740001-50000 4 3.6450001-100000 11 10.00>100000 4 3.64

Growth of Insurance Sector in India

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The people who participated in filling up the questionnaire were asked about their perception about the growth of insurance sector in India in the coming decade. Around 55% of the respondents said that they were fairly optimistic that the insurance sector would grow, 15% were highly optimistic whereas 22% were neutral. Only 8% had pessimistic views on the growth of insurance sector. Also, from the statistics, we find that the median as well as the mode is 4, which stands for Optimism regarding the growth of Insurance Sector.

Column1 Column2N 110

Mean 3.764Std. Error of Mean 0.083Median 4Mode 4Std. Deviation 0.867

3% 5%

22%

55%

15%

Growth Of Insurance Sector in India

Highly PessismisticPessismisticNeutralOptimisticHighly Optimistic

Most Sought After Insurance Company

The respondents were asked to specify the names of Insurance companies whose policy they already had. In this, LIC took the lead with 46% of the respondents already having policy of LIC, followed by ICICI Prudential (20%) and SBI Life Insurance (11%). Only

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Statistics - Future of Insurance

2% of the respondents had policy of IDBI Fortis, which shows that it has a very long way to go and capture the market from the big players already present in this market.

7%6%

20%

46%

11%3%

2%1% 2% 1% 1%1%

Most Sought After Insurance Companies

Birla Sun LifeHDFC Standard LifeICICI PrudentialLICSBI Life InsuranceBharti Axa Life InsuranceIDBI Fortis Life InsuranceNational InsuranceBajaj Allianz Life InsuranceOriental Life InsuranceMax NewYork Life InsuranceNew India Life Insurance

Preferred Modes of Investment

The respondents were asked as to what they thought as the most preferred mode of investment; which was the investment instrument most commonly used by them. 21% of them thought that Real Estate was the best investment instrument, closely followed by Mutual Funds (19%) and Gold (16%). Only 11% of the respondents thought of Insurance as a lucrative investment instrument. This means that IDBI Fortis and the insurance companies at large have to modify the outlook of the policies offered by them, and make more investment oriented, in order to attract larger number of investments.

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10%15%

19%16%3%

21%

14%0% 0%

Preferred Modes Of Investment

InsuranceFDMFGoldBondReal EstateStockNSCPPF

Preference to Procure Policy

The respondents were asked what was/ would be their most preferred distribution channel to procure policies from the insurance companies. Around 47% of the respondents said they would prefer to procure policies Online, while 31% of them voted for Agents and 21% for Banks. Also, the response shows that there is a latent need for the presence of Online (Web) medium to procure policies, which is the main objective of this research.

31%

21%

2%

47%

Preference to Procure Policy

AgentBankBrokerOnline

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Zeroing in On a Policy

The respondents were asked how did they decide which policy to invest into, and how do they choose the insurance company and the policy to invest in. 29% of them said that they relied on Friend’s Advice, while 22% of them still relied on the Agent’s Advice. 2`% of them followed the Word of Mouth and 10% of them relied on the Online Advertisement. Hence, we find that apart from strengthening the online medium, a great deal of opportunity lies ahead in terms of CRM. The existing customers could be asked to refer their friends for buying insurance policies, and they could be provided with certain benefits if their referrals get converted into customers. Hence, we see that a new channel of Direct Marketing lies ahead, where existing customers help in getting new customers.

21%

29%22%

7%

5% 10%1% 3% 1% 0%

Preferred ChannelsWord of MouthFriend AdviceAgent AdvicePrint AdsTV AdsOnline AdsPast PerformanceSelf AnalysisInvestment WebsitesParents Advice

Descriptive Statistics of Desired Features in Insurance Sector

The following table shows the descriptive statistics, arranged in descending order of the mean score of the features. This means that the feature on the top is the most desirable, while that in the bottom is the least desirable. Thus, we find that “Hassle Free Procedures” are the most favoured, followed by “Friendly Service”, whereas contacting customers for “Special Future Offers” is the least favourable. Hence, this is also suggestive of the fact that establishing a user-friendly online portal will help us in achieving the desirable feature of “Hassle Free Procedures”.

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Descriptive Statistics NMinimum

Maximum Mean

Median Mode

Std. Deviation

Hassle Free Procedures11

0 1 5 4.564 5.000 5.000 0.711

Friendly Service11

0 1 5 4.545 5.000 5.000 0.737Good Reputation and Performance Record

110 1 5 4.464 5.000 5.000 0.762

Tax Saving11

0 1 5 4.436 5.000 5.000 0.914

Financial Security11

0 1 5 4.364 5.000 5.000 0.864

High Returns11

0 1 5 4.327 5.000 5.000 0.825

Flexibility in Plans11

0 1 5 4.318 4.500 5.000 0.845

Future Emergency Cover11

0 1 5 4.291 4.000 4.000 0.942

Health and Medical Benefits11

0 1 5 4.255 5.000 5.000 0.990

Easy Agent Accessibility11

0 1 5 4.155 4.000 5.000 0.950

Money Back Guarantee11

0 1 5 4.145 4.000 5.000 0.985

Disability Cover11

0 1 5 4.055 4.000 5.000 1.099

Low Premium11

0 1 5 3.718 4.000 3.000 1.042

Special Future Offers11

0 1 5 3.200 3.000 4.000 1.233

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Descriptive Statistics of Problems faced by Customers In Current Scenario

The following table shows the descriptive statistics, arranged in descending order of the mean score of the problems currently faced and their respective desired solution. This means that the feature on the top is the most desirable, while that in the bottom is the least desirable. Thus, we find that “Presence of Call Centre” is the most favoured, followed by “Presence of Online Service”, whereas “Timely Receipt of Policy” is the least favourable among all the other problems. Hence, this is also suggestive of the fact that establishing a user-friendly online portal will help us in achieving the desirable solution of “Presence of Online Service”.

Descriptive Statistics N Minimum Maximum Mean Median ModeStd. Deviation

Presence of Call Centre 110 1 5 4.545 5.000 5.000 0.915Presence of Online Service 110 1 5 4.136 4.500 5.000 1.088Personalization of Schemes 110 1 5 4.109 4.000 5.000 0.942Customer Service 110 1 5 3.255 3.000 4.000 1.035Timely Arrival of Maturity Value 110 1 5 2.727 3.000 3.000 0.908Timely Receipt of Policy 110 1 5 2.709 3.000 3.000 0.999

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Factor Analysis of Desirable Features in Insurance Sector

A Factor Analysis was carried out to find out the components which explained the maximum cumulative variance, and such that the desirable features could be clubbed into distinct and few components, to get a macroscopic view which is constructed from the microscopic view. The following figure represents the Scree Plot of the factor analysis. From this, we can find that principal components from 1 to 3 should be considered, as they are above the eigen value of 1. Also, it shows that component 1 explains the maximum amount of variance, followed by other components.

The following table shows the individual and cumulative variances explained by the various components. It is seen that the first 3 components together explain 56.652% of the variance.

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otal Variance Explained Column1 Column2 Column3 Column4 Column5 Column6Component Initial Eigenvalues Rotation Sums of Squared Loadings

Total% of Variance

Cumulative % Total

% of Variance

Cumulative %

1 5.126 36.614 36.614 3.180 22.711 22.7112 1.648 11.769 48.382 2.839 20.281 42.9923 1.158 8.270 56.652 1.912 13.660 56.6524 0.997 7.119 63.7715 0.961 6.862 70.6336 0.734 5.242 75.8757 0.720 5.141 81.0168 0.618 4.417 85.4339 0.503 3.596 89.029

10 0.467 3.332 92.36111 0.330 2.355 94.71612 0.290 2.069 96.78513 0.247 1.765 98.55014 0.203 1.450 100.000

Extraction Method: Principal Component Analysis.

The following table represents the communalities of the various desirable features in descending order of their values after extraction.

Communalities Initial ExtractionFinancial Security 1 0.782Hassle Free Procedures 1 0.699Good Reputation and Performance Record 1 0.685Health and Medical Benefits 1 0.666Friendly Service 1 0.659Future Emergency Cover 1 0.647Easy Agent Accessibility 1 0.622Flexibility in Plans 1 0.602High Returns 1 0.539Tax Saving 1 0.489Disability Cover 1 0.455Money Back Guarantee 1 0.420Special Future Offers 1 0.415Low Premium 1 0.252Extraction Method: Principal Component Analysis.

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The following table represents the Rotated Component Matrix, showing the load factors of each desirable feature in each of the three components. As a rule of thumb, we associate a particular desirable feature with that component in which it has the highest absolute load factor.

Rotated Component Matrix Column1 Column2 Column3 Component

1 2 3Special Future Offers -0.021 -0.057 0.641Future Emergency Cover 0.020 0.700 0.396Tax Saving 0.202 0.300 0.598Health and Medical Benefits 0.111 0.406 0.699Disability Cover 0.031 0.613 0.280High Returns 0.328 0.652 0.076Financial Security 0.262 0.843 -0.037Good Reputation and Performance Record 0.593 0.576 0.039Low Premium 0.273 0.303 0.293Money Back Guarantee 0.481 0.133 0.414Easy Agent Accessibility 0.687 0.096 0.375Hassle Free Procedures 0.776 0.303 -0.071Friendly Service 0.787 0.183 0.079Flexibility in Plans 0.773 0.040 0.058Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.

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After segregating the features as per the maximum absolute value of their load factor, we get the following matrix:

Rotated Component Matrix Column1 Column2 Column3 Component

1 2 3Special Future Offers 0.641Future Emergency Cover 0.700Tax Saving 0.598Health and Medical Benefits 0.699Disability Cover 0.613High Returns 0.652Financial Security 0.843Good Reputation and Performance Record 0.593Low Premium 0.303Money Back Guarantee 0.481Easy Agent Accessibility 0.687Hassle Free Procedures 0.776Friendly Service 0.787Flexibility in Plans 0.773

Hence, we find that following features are present in the various components:

1. Component 1 (renamed as Customer Orientation) consists of:a. Good Reputation and Performance Recordb. Easy Agent Accessibilityc. Hassle Free Proceduresd. Friendly Servicee. Flexibility in Plansf. Money Back Guarantee

2. Component 2( renamed as Security)a. Future Emergency Coverb. Disability Coverc. High Returnsd. Financial Securitye. Low Premium

3. Component 3( renamed as Benefits)a. Special Future Offersb. Tax Savingc. Health and Medical Benefits

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Recommendations

According to the market survey , it can be seen that most respondents feel optimistic about the growth of the insurance industry. The penetration of insurance in India is only 4.8% as compared to 13.1 % in the UK. The lowest insurance penetration is in China. Thus there is a lot of scope for the insurance industry to further grow and reach out to maximum number of customers. IDBI Fortis is already the fastest growing private insurance company. It has to continue to do so, as it will take several years before the market can ever get saturated.

Its also seen that most respondents have invested in LIC. As of March 31st 2008, LIC is said to own around 80,000 crores of assets. Therefore it is clear, that using multiple channel of distribution, customizing the products, and incorporating CRM is of utmost importance for IDBI Fortis. Using technology to make it easier for the customers as well as all points in the distribution network is very necessary to set IDBI Fortis apart from the several other insurance companies. Product differentiation will attract customers even though LIC has been enjoying monopoly over the years.

Most respondents are of the view that it is most profitable to invest in real estate. That is probably because of the low returns and high charges in the case of ULIPs. Therefore it has been discussed for a long time that the charges of ULIPs must be revised. The charges are primarily because of the high commission paid to the agents .Therefore the commission structure also needs to be revised.

Almost more than half of the respondents were of the view that they would like to procure the policies online. They had this notion that filling insurance forms are very cumbersome and lot of paperwork was required. The follow up also becomes difficult after the first premium is paid. They wanted to track the status of their policies online.In this age of online banking they also prefer to pay the premiums online. I have also designed an online application form and premium payment user interface , which can be utilized at the point of sale.

Most customers relied on their friends advise while investing in a policy , therefore it will be a very lucrative initiative to start with a referral incentive for the existing customers . The customers would also benefit with and the company would also expand its customer base successfully.

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The descriptive statistics suggest that customers give the highest priority to hassle free procedures. Therefore an integrated online portal as mentioned earlier would make things much easier both for the agents as well as the customers. It does not require a separate meeting with the agent to fill the forms or submit the documents, if such a feature is already enabled online.

While talking about the problems faced by customers, they felt that for any clarifications or in case of doubts the only available option was to go the bank or agency or call up the agent or broker. If the agent wouldn’t be available at the time their query would remain unresolved. Therefore they felt that having a call centre (communication centre) would be most effective solution to their problems.

According to the factor analysis, we can come to the conclusion that for customers, the most important is the reputation of the company, the customer centricity of the organization, customer service. Therefore incorporating CRM is very important in case of IDBI Fortis as it has started its operations just a little more than a year ago, therefore this is a good time to set the base for CRM.

Secondly, customers are more inclined towards higher returns and financial security. Therefore the ULIPs should be structured in a more profitable and innovative way to attract customers.

Thirdly, customers also lay emphasis on the different riders. Therefore the company can customize the riders as per the customer requirements. The flexibility of the product will sure attract more customers.

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Summer Internship Experience

My internship with IDBI Fortis was a very good and a different kind of experience. We were set targets for selling the product which is called Wealth insurance. It is a ULIP product with different schemes and riders.

First of all , I had to study the product carefully. Mrs Shanti, Mr Vijakumar , Miss Priya were always there to answer our doubts in case of any clarifications through out the day.

After acquiring a good product knowledge , I started off with approaching customers. It was a bit difficult to sell as I started selling effectively in the month of March, and by that time many of the people who I approached had just finished investing for the financial year 2008-09.

I also realized that if I approached 30 customers , it was most likely that one would be interested.So the idea was to approach as many customers as possible.

One particular customer who has two small kids was very impressed by the PPT which said that child would become a crorepati. And he finally did invest even though he stays in the UK. Therefore I think more of such financial models must be created to suit the needs of different customers.

Some of the people I approached were NRI’s . But I was unable to convert them, as they thought it was cumbersome to courier the documents and the photographs. Therefore, I strongly feel , had the forms, payments , and submission of documents been possible online, it would have been able to convert more customers.

Many customers wanted to see the benefit illustration sheet online, or real time. Many wanted to able to track the status of their policies online.

Some customers were of the opinion that the returns are very low. So , I think I if a referral incentive policy was incorporated they would have been more interested.

Some customers were very loyal to LIC. They were not ready to look either left or right. Therefore its very important for IDBI Fortis to take such initiatives which haven’t been taken by LIC or any other insurance company earlier, product differentiation is very important, to make Wealthinsurance stand apart from the rest. Some were also worried that the company has just started a year ago, so they were not willing to take the risk.

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There were moments of dejection as well , when some of the customers who had promised backed out. They had promised in the month of March , that they would invest in April, for the financial year 2009-2010. But some of them backed out. I was filled with resentment. But I realized that if I had taken a post dated checque from the customer then the customer would not have changed his mind. I realized that in sales, one should follow the customer persistently till he invests. If the customer promises to invest later, a salesperson should try not to allow the time gap. If that happens , its not long before the customer changes his mind or spends the money somewhere else.

My faculty guide Dr S Subramanian guided me throughout my project . From the very beginning he helped me to have more clarity about what the purpose of my project was. He also had helped me suggestions, guidance and valuable feedback from time to time.

I would like to conclude saying that I was of the opinion that selling was impossible for me, even four months back. I did not have the confidence in me to be able to sell a financial product to someone. However, this internship has provided with the opportunity to realize my own potential. It has not only strengthened my capabilities as a sales personnel, but it has also enhanced my confidence to a great extent. It has opened many doors of communication and has stressed the importance of communication and networking in the field of Sales and marketing.

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Online Application SubmissionWhen a new or an existing user logs into the login page, he is redirected to the Search Page as shown below.

The user can search for his existing policies by either entering the Policy Id or the Policy Status of the Policy he wants to search for, or by entering a combination of both the search fields. Even if the user doesn’t enter anything in the Search Criteria and hits the Go button, a blind search query is submitted to the database. Such blind queries are performance intensive, as they search the whole database, and populate all the policies that are under the current user.If there are no results to display for the Search Criteria entered by the user, the Search Results table would show “No Results Found”.The Search Results table has relevant columns that provide vital information about the policies held by the user. Apart from having other information, it also has an “Edit” column. Using this button, the user would be able to edit certain information about his personal details like contact address, Email, Cell Number etc, as well as the Nominee Details and the Fund Options that he wants to exercise for his policy.

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The table also has a “Make Payment” column. Through this, the user would be redirected to the “Online Payment” page and he can make payments for his premiums online using online banking of supported banks. After making the payment, the user would be redirected back to the Search page, and notification would be sent to his Email account along with the digitally signed premium payment confirmation attached in the mail. However, this button would be enabled only when the Policy Status would be “Premium Payment Pending”.The table also has a “Show Details” column. Upon clicking on this button, the user would be redirected to the “Details” page, where he would be able to view the policy details in greater details. However, all the values on this page would be read-only, and the user won’t be able to edit any information.

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When the user clicks on the “Create New Policy” button on Search page, he is redirected to this page. This page is “Step 1 of 9”.If the user clicks on the Cancel Button, he would be redirected to a Dialog page where he would be asked if he is sure that he wants to cancel the present transaction. If the user clicks on “Ok” button on Dialog page, he is redirected to the Search page. If the user clicks on the “Cancel” button, he is redirected to the current page.In this page, the user is asked to fill in his personal details, such as demographics, contact details and other personal information.On clicking the “Next” button, the user is redirected to the next step of this train.

This page is “Step 2 of 9” of the train, and is called the “Proposer’s Details” page.

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The page starts with a question asking the user if the Proposer is different from the person to be insured. If the user checks the checkbox, then the remaining fields below become editable, else they are read only fields. This is the business logic because if the Proposer and the person to be insured are one and same, then the user doesn’t need to fill the contact details etc all over again.Clicking on Previous button takes the user to the previous page, and clicking on Next button takes the user to the next page of the train.The Cancel Button has similar functionality as explained earlier.

This page is “Step 3 of 9” of the train, and is called the “Nominee and Appointee Details” page.In this page, the user can enter the names of nominees, if any, for his policy. He can enter as many nominees as he wants to, and specify the share that a particular nominee would receive. The user has to make sure that the sum of the shares of all nominees should be 100%. The user also has to enter other demographic and contact details of the nominees.If the nominee is an adult, as asked by one of the columns, then its not required for the user to enter the name and details of Appointee for the particular nominee, and hence the corresponding fields pertaining to the Appointee are non-editable.

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However, if a nominee is a minor, it becomes necessary for the user to enter the details of the Appointee for such nominees, and those fields become editable and mandatory in that case.The Cancel, Previous and Next buttons have similar functionalities as explained earlier.

This is “Step 4 of 9” of the train, and the name of this page is “Coverage Details”. In this page, the user has to input certain values which would determine the frequency

and the amount of Premium that he would have to pay, such as “Premium Payment Term”, “Sum Insured”, “Premium Mode” etc.

There is also an option to include optional riders. Upon checking this checkbox, the “Optional Riders” table becomes visible, wherein the user can input the rider name, benefit term and the rider sum insured.

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After entering all relevant details, the user can click on the “Calculate Premium” button. This invokes a function which in turn calculates the premium amount taking into account the optional riders, sum insured, premium mode and premium payment term. The value is then populated in the corresponding read-only box. The user can do a what-if analysis over here by trying various combinations of all values, unless he arrives at a premium amount acceptable to him.

The user is also asked to fill his bank details. Upon maturity, the total amount receivable by the user would be automatically transferred to this account through online transaction.

The Cancel, Previous and Next buttons have similar functionalities as explained earlier.

This is “Step 5 of 9” of the train, known as the “Fund Details”.In this page, the user can allocate what portion of his premium payment should go towards which particular fund for investing. These funds are run by IDBI-Fortis, and their details are provided on the main website, along with their performance. Hence, after being informed about all the funds’ performance, the user can do the fund allocation.

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The user should keep in mind that the sum of all fund allocations should be 100%. A check is performed regarding this when the user leaves this page and wants to go to the next page. Cancel, Previous and Next buttons have similar functionalities as explained earlier.

This is the “Step 6 of 9”, known as the “Personal Health” page.This page has a certain number of disease categories listed, and the user is asked if he is/ was suffering from such diseases at present/ in past.In case the user marks any disease as “Yes”, the user is asked to fill in the details of such disease, and this field becomes mandatory.The user is also asked to fill in contact details of the family doctor, so that the doctor can be contacted and a cross check can be done regarding the response of the user and that provided with the doctor.

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Cancel, Previous and Next buttons have similar functionalities as explained earlier.

This is “Step 7 of 9” of the train, known as “Family History”.In this page, the user is asked to enter small details about his family.In case the user chooses “Current State of Health” of any family member as “Deceased”, then the “Current Age” box is disabled and those of “Cause of Death” and “Age at Death” are enabled and become mandatory. Otherwise, the latter two boxes are disabled and the former box is enabled.Cancel, Previous and Next buttons have similar functionalities as explained earlier.

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This is “Step 8 of 9” of the train, known as “Additional Details” page.

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In case the user has entered “Female” as Gender in “Step 1 of 9”, i.e, Details of Insurer page, then the region consisting the first four questions of this page would be made visible, as those questions are relevant only if the person being insured is a female.In this page, an attempt is made to find out about the habits of the person being insured, as the habits being asked over here directly affect the number of years a person lives.In case the person marks whether he consumes tobacco as “yes”, the corresponding table is rendered asking the user to provide details about the type of substance consumed, quantity consumed and the time since when he is consuming them.Similar kind of behaviour is expected when the user provides the answer for whether he consumes alcohol or unprescribed drugs as yes.Cancel, Previous and Next buttons have similar functionalities as explained earlier.

This is the “Step 9 of 9” of the train, and is known as the “Documents” page.

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In this page, the user is asked to upload documents regarding his Photo Id proof, Residence Proof and Income Proof.A number of options are provided in each case, and it is mandatory for the user to upload the relevant document and check the radio button corresponding to the document.In case the user checks the question asking if the ID proof and residence proof are same, he has to upload just the Photo Id proof and the Income Proof.Cancel and Previous buttons have similar functionalities as explained earlier.When the user clicks on the Submit Button, all the data and documents submitted by the user are committed to the relevant tables of the database. The user is then redirected to the Search page, where he gets a confirmation message that his details were submitted successfully, and is also provided with the Policy ID which he should store for future use. The status of the policy is now “Request Received”.

This is the Online Payment page, and is a standalone page.The user is redirected to this page when he clicks on the “Make Payment” button corresponding to a policy that is displayed in the Search page Results table.The Transaction ID is system generated and unique, and Premium Amount is fixed as per the policy. Both these fields are read-only.The user has to select a bank in which he holds an online account from the drop down list.

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When he clicks on the Go button, he initiates the online payment process, whereby he is directed to the online login page of the corresponding bank.If he clicks on the Cancel button, the same events occur as explained in earlier pages.

WORKFLOW AND NOTIFICATION

When the user submits details about the policy, he receives an email regarding the same, with the Policy Id and the status of policy as “Request Received”. Also, the user is said that he would be receiving further updates about the policy status through emails, or else he can login to the IDBI-Fortis website and go to the Search page to see the same.Next, the status of the policy is changed to “Documents Verification Pending”. Here, the process of “Underwriting” is carried out and the validity of the documents submitted by the user as ID proof, Residence proof and Income proof. After these are verified, the status of policy is internally changed to “Documents Verification Completed”.Next, the status of the policy is changed to “Approval Pending”. During this, following activities are carried out:

a. If the Proposer and the person being insured are one and same, an email is sent to the Email address as provided in the policy application, asking them to confirm if such an activity has been carried out by them. Also, call centre people are required to call up the concerned person and verify the details as specified in the application.

b. If the Proposer and the person to be insured are different, then a workflow email is sent to each of them, and they have to confirm that they are aware of the online policy application being submitted. The call centre representatives are also required to call up both the persons individually and verify the details provided in the online application.

c. If the names of any Nominees are specified in the application, all the Nominees are individually sent Emails, asking their approval to become the nominee. In case the nominees are minors, their respective Appointees are sent Emails asking them to verify and accept the same. Also, the call centre representatives get in touch with the Nominees/Appointees as applicable, and confirm the same.

d. The Family Doctor is also contacted via Email, telephone or in person, as feasible, providing the details as mentioned by the user in the application form, and asking him to confirm the same.

After all the document verification and external approvals are received, the workflow then sends notification to a senior person internally within IDBI-Fortis who has the authority to declare policy documentation as valid. After he approves, the status of the

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policy is changed to “Premium Payment Pending”, and a notification is sent to the user to make the payment to bring the Policy in force.The user then logs into the IDBI-Fortis website and comes to the Search page. He searches for that policy, either with the help of the Policy ID or the Policy Status. Once the policy is shown in the Results table, he can initiate the online payment by clicking on the “Make Payment” button.Once the online payment of premium is successful, the status of the policy is changed to “Policy In Force” and the user receives an workflow email with the e-copies of the policy as well as the premium payment confirmation, both digitally signed, as the attachments.In case the user fails to pay premiums of a policy already in force, the status of the policy is changed to “Policy Out of Force”, and a notification regarding the same is sent to the user’s email.

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ConclusionIt was long before predicted that the independent agency system will gradually lose its importance and will cease to exist singing the requiem of agent driven way of distributing insurance products. But , it has so far not materialized. So , it is clear that the agents force is here to stay, but what does one make of the continuing experiments by the insurers to find an alternative channel of distribution. It is clear that that in practice not one channel is adequate to reach the final customer, giving reasons for the insurers to utilize multiple distribution channels as the only way to to succeed in satisfying the customers. Integrating these multi channel distributors through IT is vital. It is the only way by which insurers can balance the needs of different groups o consumers in an effective and efficient way.

No power on earth can stop an idea whose time has come. Victor Hugo

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Appendix

Research QuestionnaireDear Sir/Madam,I am a student of IBS,Hyderabad.As part of the requirements for my post graduation course in Management I am required to do a reasearch based project.Kindly spend a few minutes of your valuable time and fill in this questionnaire.

* Required

1) Name * Please enter your full name

2) Contact Number

3) Email Id *

4) Location Please enter the name of the city

5) Gender

Male

Female

6) Occupation

Salaried

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Self Employed

Student

Home maker

Retired

Other:

7) Marital Status

Married

Single

8) Which method of investment is the best according to you?

Insurance

Fixed Deposits

Mutual Funds

Gold

Bonds

Real Estate

Stock Market

Other:

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9) Your annual income

< 4 lakhs

4-8 lakhs

8-12 lakhs

12-16 lakhs

> 16 lakhs

Other:

10) What is your opinion on the future of Insurance sector in India in the coming decade regarding its growth?

1 2 3 4 5

Highly Pessimistic Highly Optimistic

11) With reference to your experience with any insurance company , please rate the following : a) Maturity Value does not arrive on time

1 2 3 4 5

Strongly Disagree Strongly Agree

b) Policies do not arrive on time as promised after completing all formalities

1 2 3 4 5

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Strongly Disagree Strongly Agree

c) Customer service not satisfactory

1 2 3 4 5

Strongly Disagree Strongly Agree

d) It would be great to have a call center with a toll free number for clarifications to customer queries

1 2 3 4 5

Strongly Disagree Strongly Agree

e) The whole process should be made online, right from application filling to receipt of the policy

1 2 3 4 5

Strongly Disagree Strongly Agree

f) The insurance plans are very rigid, and a bit of personalization is desirable

1 2 3 4 5

Strongly Disagree Strongly Agree

12) You own insurance policies of which of the following companies

Birla Sun Life

HDFC Standard Life

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ICICI Prudential

LIC

SBI Life Insurance

Bharti Axa Life Insurance

IDBI Fortis Life Insurance

Other:

13) Is it desirable that the company (of which you hold policies) - a) Contacts you in the future with special offers/schemes

1 2 3 4 5

Not Desirable at all Highly Desirable

b) Covers future emergencies *

1 2 3 4 5

Not Important Very Important

c) Is Tax saving *

1 2 3 4 5

Not Important Very Important

d) Provides Health and Medical benefits *

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1 2 3 4 5

Not Important Very Important

e) Has Disability Cover *

1 2 3 4 5

Not Important Very Important

f) Yields High Returns *

1 2 3 4 5

Not Important Very Important

g) Provides Financial Security *

1 2 3 4 5

Not Important Very Important

h) Has a good reputation and performance record *

1 2 3 4 5

Not Important Very Important

i) Has Low Premiums *

1 2 3 4 5

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Not Important Very Important

j) Has Money- Back guarantee *

1 2 3 4 5

Not Important Very Important

h) Ensures easy accessibility to agents *

1 2 3 4 5

Not Important Very Important

k) Is Hassle free, and has non cumbersome procedures *

1 2 3 4 5

Not Important Very Important

l) Has Friendly Service *

1 2 3 4 5

Not Important Very Important

m) Provides Flexibility in plans (Customization ) *

1 2 3 4 5

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Not Important Very Important

14) Are you planning to invest in the near future?

Yes

No

Not Sure

15) How much premium , in total, do you pay annually (INR)? *

<5000

5001-10000

10001-20000

20001-30000

30001-40000

40001-50000

50001- 1 lakh

> 1 lakh

16) How would you prefer to procure a policy? *

Agents

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Bank

Brokers

Online

Other:

17) How do you choose the policy to invest in? *

Word of Mouth

Friends' advice

Agents' advice

Print advertisement

Television advertisement

Online advertisement

Other:

18)Would you like to be a financial advisor yourself? *

Yes

No

Not sure

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References http://www.irdaindia.org/

http://www.compuquotes.com/insurance-definition-independent-agent.html

www.banknetindia.com/finance/insreport09.htm - 18k

http://www.mib.com/kd/html/Insurance_Distribution_India.html#1

www.wikipedia.org

www.investopedia.com

Insurance Chronicle

Recent trends in Insurance Sector in India by Nakkiran & Sivaparakasan

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