SECTION I: KNOWLEDGE OF THE INSURANCE INDUSTRY INTRODUCTION Insurance industry has always been a growth-oriented industry globally.

On the Indian scene too, the insurance industry has always recorded noticeable growth vis--vis other Indian industries. The Triton General Insurance Co. Ltd. was the first general insurance company to be established in India in 1850, which was a wholly Britishowned company. The first general insurance company to be set up by an Indian was Indian Mercantile Insurance Co. Ltd., which was established in 1907. There emerged many a player on the Indian scene thereafter. The general insurance business was nationalised after the promulgation of General Insurance Business (Nationalisation) Act, 1972. The post-nationalisation general insurance business was undertaken by the General Insurance Corporation of India (GIC) and its 4 subsidiaries: 1.Oriental Insurance Company Limited; 2.New India Assurance Company Limited; 3.National Insurance Company Limited; and 4.United India Insurance Company Limited. Towards the end of 2000, the relation ceased to exist and the four companies are, at present, operating as independent companies. The Life Insurance Corporation (LIC) was established on 01.09.1956 and had been the sole corporation to write the life insurance business in India. The Indian insurance industry saw a new sun when the Insurance Regulatory & Development Authority (IRDA) invited the applications for registration as insurers in August, 2000. With the liberalisation and opening up of the sector to private players, the industry has presented promising prospects for the coming future. The transition has also resulted into introduction of ample opportunities for the professionals including Chartered Accountants. The Indian Insurance industry is featured by the attributes: Low market penetration; Ever-growing middle class component in population. Growth of consumer movement with an increasing demand for better insurance products; Inadequate application of information technology for business. Adequate fillip from the Government in the form of tax incentives to the insured, etc.

The industry formations need to keep vigil on these characteristics of the Indian market and formulate their strategies to entail maximum contribution to the output of the sector. The Indian life and non-life insurance business accounted for merely 0.42 percent of the world's life and non-life business in 1997. The figures of the basic parameters of the industry's performance viz. Insurance Density and Insurance Penetration also are evident of the hitherto existing low-yield Indian market conditions. The term "Insurance Penetration" broadly measures the contribution of the insurance industry in relation to a nation's entire economic productivity. The figure of premium vis--vis the GDP of 1999 stood at 0.54 percent for non-life insurance business and 1.39 percent for the life insurance business. The term "Insurance Density" reflects the Insurance purchasing power. The premium per capita in India amounted to US $ 2.40 for non-life insurance and US $ 6.10 for life insurance in 1999 but with the deregulation of the sector, a sea change in the scene is most likely. The insurance sector in India has come a full circle from being an open competitive market to nationalisation and back to a liberalized 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. 1956: 245 Indian and foreign insurers and provident societies taken over by the central government and nationalised. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the Government of India. The General insurance business in India, on the other hand, can trace its roots to 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. 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.

STRUCTURE OF THE INSURANCE INDUSTRY The structure of the insurance industry comprises of the Operating department, Administrative department and the finance department. The Operating Department generally performs the basic functions pertaining to the designing of products, marketing thereof, servicing the insured the insured, management of portfolio, etc. The Administrative Department looks after the day-to-day affairs of the company. The Finance Department backs the operations and administration of the company by accounting for the transactions, streamlining the flow of funds, materializing the management decisions, etc. The Administration Department as well as the Finance Department, usually, functions through in-house setup. The Finance Department functions in the areas of accounting, financial and management reporting, budgeting and controlling, etc. and thus renders enormous scope for finance professionals. The new entrants in the insurance sector are likely to call for the services of the

Chartered Accountants for their financial setup requirements. The Chartered Accountants have engaged themselves in the audit of Insurance Companies since long. With the transition in the insurance sector, the horizons for their contribution have broadened. There has, emerged a king-size pool of opportunities that the Chartered Accountants can explore and apply their professional wisdom and experience to.

BASIC FUNCTIONS OF THE INSURANCE INDUSTRY 1. Risk Perception and Evaluation:

The fundamental function of an insurer is to provide a cover against the detriment caused to the insured due to the happening of certain specified and agreed events. Thus, prior to providing such umbrella through a product, the insurer has to assess the risk involved in the transaction. The insurer has to identify the element of risk prevalent in the concerned industry or a particular unit. The perception of risk requires the study of variables through various methods including the application of scientific and statistical techniques and correlation thereof with the industry or unit under study in light of their basic environmental and infra-structural characteristics. After the identification and categorisation of the risks perceived, the probability of happening of the losscausing events and the severity of the loss has to be assessed. 2. Designing the Insurance Product:

On the basis of the risks perceived, the insurer develops a product to cover the stipulated risks. While designing an insurance product, an insurer decides its cost to be charged from the insured in the form of premium, reduction thereof in certain cases like not lodging any claim during the previous covered period(s), suggesting the implementation of risk-mitigating measures, etc. The features of a product should be flexible enough to provide for the determination of premiums, rebates, additional premiums, etc. depending upon the risk benchmarks as determined. 3. Marketing of the Product:

The core function of the marketing force of an insurance company is to generate awareness about the insurance products among the target market. But in the Indian scenario, where the insurance penetration is too low as compared to the other nations, the marketing force needs to perform the pro-active role in developing an insurance culture. It is through the efficiency of the sales force of an insurance company that the desirability and the success of a product are determined.

In Indian insurance market, the function is, basically performed by the agents. The persons desiring to function as insurance agents have to obtain license to act as such from the IRDA or an officer authorised by the Authority in this behalf. The agents approach the prospective buyers and apprise them of the basic features of the products. In order to dispense with the functions, the agents need to possess adequate knowledge of the insurance industry, products and the modalities attached therewith. Further, the marketing personnel should be adequately backed by the back-office setup.

4.

Selling of the Products:

The term selling in the context of insurance industry connotes the issuance of policies to the applicant proposer. The non-life insurance policy basically embodies the covenant between the insurer and the insured wherein the former agrees to indemnify the latter for the loss caused to him on the happening of the certain agreed events up to a specified limit. The life insurance policy generally contains the agreement whereby the insurer agrees to pay to the insured or the beneficiary of the policy an agreed amount on the expiry of the term of the policy or in the event of the death of the insured respectively. The additional benefits in the shape of Riders viz. Accidental Death Benefit, Double Sum Assured, Critical Illness benefits; Waiver of Premiums, etc. can also be appended with the policy on the payment of an additional premium. In Indian industry, the function is, generally performed by the insurer. In addition, the insurance companies depute their Direct Selling Representatives to look after the function. They receive the proposal documents, vet them and issue policies to the proposers. 5. Management of Portfolio:

The management of the portfolio includes the assessment of requirement of funds, identification of various sources of finance, the evaluation of the sources in the light of their cost, availability, timing, etc., reconciling the features of various sources with the needs of the company and the selection of appropriate conjunction of sources. The insurer possesses huge amount of funds, which need proper management. The management of the portfolio of an insurance company requires the identification of investment avenues, evaluation thereof and the selection of the most appropriate mix of alternatives where the funds of the company can be invested. The selection requires the knowledge of finance related functions and techniques apart from the in-depth know of the patterns of requirement of funds in the company as well as in the industry as a whole.

SECTION II INSURANCE POLICY: THE TOTAL PRODUCT CONCEPT Theodore Levitt propounded the Total Product Concept (TPC), which implied that a product had three levels of features and the consumption was in totality. LEVEL 1: Core Product: In the Insurance Industry the core product is the policy that provides protection to the consumers against the risks. This is the main reason for which the Insurance Company is in existence. It provides protection by way of various riders viz. Accidental Death Benefit, Double Sum Assured, Critical Illness benefits, Waiver of Premiums, etc. On the basis of the risks perceived, the insurer develops a product to cover the stipulated risks. While designing an insurance product, an insurer decides its cost to be charged from the insured in the form of premium, reduction thereof in certain cases like not lodging any claim during the previous covered period(s), suggesting the implementation of risk-mitigating measures, etc. The features of a product should be flexible enough to provide for the determination of premiums, rebates, additional premiums, etc. depending upon the risk benchmarks as determined.

LEVEL 2: Formal Product: When the customers expectation grows synchronized with increased competition, the marketer offers some tangibility to the existing core product to differentiate itself from the competitors. 1. Brand:

In order to distinguish itself from the competitors, the Insurance Company gives a brand name to its policy. This brand name gives an identity to the product (policy) offered by the insurance company. Thus ICICI Prudential Life Insurance has brands viz ICICI Pru Smart Kid, ICICI Pru Save n Protect, ICICI Pru Life Link, etc. 2. Attributes:

Just giving a brand name to the policy may not be enough for the insurance company to distinguish its offerings. The product offering must also have attributes that will attract the consumers to take the policy. The attributes must suit and satisfy the needs wants and desires of the various types of consumers that the company is targeting at. Thus ICICIs investment plans suit the consumers who want to secure their family through insurance or invest money for growth. And its retirement plans suit the ones who want to enjoy their fruits of labor after retirement or want to go for a dream vacation. 3. Instruction Manual:

To make the service consumption easier for the consumers, the instruction manual with the policy becomes very important. The instruction manual gives an overview to the consumers as to how to go on with the filling of the application form. It also gives information about the various formalities that have to be adhered to at the time of submission of the application form.

LEVEL 3: Augmented product: With further expectation of the consumer again synchronized with intense competition marketers offer more and more intangible features. 1. Post-sales service: The insurance company must not consider it as the end of the service providing the consumer has taken once the policy. The functions of an insurance company include the provision of the Post-sales services to the consumer. Among the services rendered by the insurance company is the service of processing and release of claims. The insurance company needs to verify the accuracy of the facts presented in relation to the insurance claim and the documents produced in support thereof. 2. Delivery points: The delivery points can be the branches that the insurance company has at the discretion of the of the consumers location. The delivery points can also be mobilized with the presence of the insurance agents. The agents can cover a wide area and get in contact with the consumers to provide the service to him.

3. Customer education and training: The customer education and training is very important for the insurance company. The agents play a vital role in this context. The customer can be educated on various benefits that can be accrued in his future life by taking a policy. This is where the agents communication skills come into the picture. The insurance company has to play an active role in enabling the agents to impart the best customer education through appropriate training given to the agents. 4. Customer complaint management: Customer complaints management with regards to delay in discharge of claims must be effectively handled by the insurance company to have competitive edge over its competitors. The complaint management will help the company to get the consumers closer to the organization as the consumers feel that their grievances are taken care of. Thus LIC has an online feedback system where the consumers of the policy can register their grievances. 5. Payment options: The insurance company can offer payment options to the consumers with regards to payment of premium the mode of payment and the period within which the premium amount has to be paid.

SECTION III: WORKING OF THE INSURANCE INDUSTRY INSURANCE INDUSTRY: THE PHILOSOPHICAL GOAL.

CHANELLISING

COMMAND ECONOMY

The Insurance Company collects money in the form of premium from individuals (A, B, C & D). The money collected from people is used to meet one persons calamity. The Insurance Company enters into the process of channelising by disbursing the amount collected into the command economy. Thus a significant part of the activities of the insurance industry of an economy entails mobilization of domestic savings and its subsequent disbursal to investors. The main risk faced by the insurance company is when all the insurers claim for the reimbursement at the same time. This situation is very rare to occur, and is one of the major threat that the insurance company faces in its business operations.

SECTION IV: MARKETING MIXES IN THE INSURANCE INDUSTRY PRODUCT MIX

The formulation of product mix for the insurance business makes it significant to take a look at the services and schemes of insurance organisations. The product portfolio is known and the process of formulating a package should be known. It is natural that the users expect a reasonable return for their investments. It is quite natural that the insurance organisations want to maximise profitability. Both of these dimensions are found interrelated. It is well known that the key objectives of insurance business are mobilisation of savings and channelisation of investments. This makes it essential that insurance business is made lucrative so that the users /potential users get incentives to buy a policy or to invest in the insurance organisations. The insurance organisations also need to promote the underwriting activities, which would activate the process of arresting the regional imbalance. In the context of formulating the product mix, it is essential that the insurance organisations promote innovation and in the product portfolio include even those services and schemes which are likely to get a positive response in the future. The corporate objectives indicate that the insurance organisations are required to be careful, especially while launching a new policy. The policies should not only generate enough premium but it is also important that the policies cover persons working in the informal sector, serving as porter, working as manual labourers, or engaged in farm sector. It is the need of the hour that the insurance organisations make their service internationally competitive. This makes a strong advocacy in favour of innovative product mix strategy for the public sector insurance organisations. Thus the formulation of product mix should be in face of innovative

product strategy. Strategies of foreign and private insurance companies should be taken into consideration while initiating the innovative process. The formulation of product strategy should assign due weightage to the rural segment emerging as a big profitable segment especially in the 21st century. The policies and schemes should have rural orientation so that backward and neglected regions of the country get priority attention and the regional imbalance is minimised. In this context, it is also pertinent that the insurance organisation make possible welfare orientation and include in the product portfolio even those policies and schemes which become instrumental in safeguarding the interest of the weaker sections of the society. The partially tapped or totally untapped profitable segments of the future should be identified and tapping the potentials optimally is also important. A sound product portfolio is the need of the hour and therefore the regulatory barriers or constraints in activating the innovation process should be minimised.

Product Planning & Development The purpose of insurance business is to generate profits besides sub serving the social interests. The present business is likely to be more competitive. Product is like a stage on which the entire drama of successful marketing is acted. It is like an engine that pulls the rest of the marketing programs. It is in this context that the product management in an insurance organisation needs an intensive care. Yesterday, the policyholders had limited hopes and aspirations but today they expect more and they would even like something more tomorrow. This focuses on the fact that strategic decisions are influenced by the environmental conditions. The product development needs a new vision, a new approach and a new strategy. Till now the public sector insurance organisations have made possible an optimum utilisation of their marketing resources especially in rural areas where tremendous opportunities are available. Thus they should assign due weightage to the development services /schemes which cater to changing needs and requirements of the rural segment. In the development of product, the corporate investments need due priority. Channelising the corporate investments influences the rate of profitability of insurance companies and also contributes considerably to the socio-economic transformation process. Thus the product planning and development should: Give due weightage to the socially and economically backward classes Maximise the mobilisation of savings by offering lucrative schemes. Assign due weightage to interests of investors. Maintain economy in business by promoting cost effectiveness. Act as a trustee of policyholders. Keep in mind the emerging trends in business environment. Improve the quality of customer / user services.

PROMOTION MIX With the advent of private players in the insurance, companies resort to rampant promotion. Promotion mix for this sector is as follows: Advertisement Advertisement can be done through the telecast media, broadcast media and print media. Insurance companies have been making optimal use of all the three kinds. Use of World Wide Web, as media is almost negligible and will not be very frequent in the near future considering the fact that the majority of customer base of these companies is not yet exposed to the Internet. The telecast media has been the most effective of all in case of the insurance sector. Most of the companies have their separate advertising section to take care of this aspect. An important consideration while making the decision as to the selection of the media is budgetary constraint. Since the insurance companies work on a large scale, usually this constraint does not stand as an obstacle.

Publicity It is a device to promote business without making any payment and therefore it could be also called as unpaid form of persuasive communication bearing a high rate of sensitivity. Developing rapport with the media is an important aspect of publicity. This makes it essential that the PR officers working in the insurance organisations maintain contacts with the media personnel, organise press conference, and offer small gifts and memento to them. These days LGD marketing is gaining popularity the world over. It also can be applicable here. At the apex and regional levels, the PROs bear the responsibility of projecting positive image of the organisation. Thus it is necessary to select suitable personnel for this. They should be in particular taught to deal with people, simple things like talking, greeting etc. Sales Promotion Incentives to the end users for taking the policy play an important role in promoting the insurance business. Since the insurance business is also related to achieving of a particular target, it is pertinent that the policymakers assign due weightage to the same. The offering of small gifts during a particular period, the rebate, discount, and bonus can increase business of organisation by leaps and bounds. Besides, there can be gifts for the insurance agents also. Personal Selling Personal selling in case of the insurance organisations is quite important considering the existence of the insurance agents spread at all levels. Selection of these agents, their training is responsibility of the organisation. There is difference in urban and rural market. Rural customers might be uneducated / uninformed etc. compared to the urban customer. Hence the organisations will have to make selections of the rural and urban agents accordingly. Word of Mouth Promoting The word of- mouth communications result into wider publicity, which substantially sensitise the process of influencing the impulse of users/prospects of the insurance services. The satisfied group of customers, opinion leaders, the social reformists and the popular personalities act as word of mouth communicators. The

advertisement slogans may be insensitive, the publicity measures may be ineffective but the positive feelings of friends and relations communicated cannot be ineffective. This makes it clear that the most important thing in the promotion of any business is the quality of services. Telemarketing With the development of satellite communication facilities and with the expansion of the television network, we find telemarketing gaining popularity the world over. The insurance organisations in general need to promote telemarketing. The foreign insurance companies have been assigning due weightage to this and in India this is beginning to gain importance with the advent of competition in this sector. The telemarketer is supposed to be well aware of the telephonic code so that the task of satisfying the customers/their queries will not consume much of time. World Wide Web In banking as well as insurance, more and more importance is being given to online contact facilities whereby complaints/comments could be sent through an email. Email is fastest written mode of communication and since it has been recognized legally, its use to clear doubts has been in full swing.

PRICE MIX In the insurance business, the pricing decisions are concerned with the premium charged against the policies interest charged for defaulting the payment of premiums & credit facilities, commission charged for underwriting & consultancy services. The formulation of pricing strategies becomes significant with the viewpoint of influencing the target market or prospects. To be more specific in the Indian context where the disposable income in the hands of prospects is found low, the increasing inflationary pressure has been instrumental in contracting the discretionary income, the increasing consumerism has been making an assault on the saving potentials of masses, it is pertinent that the insurance organizations in general & public sector insurance organizations in particular adopt such a strategy for pricing that makes it a motivational tool & paves the ways for increasing the insurance business. Of course, a motivational pricing strategy is required to be given due weightage. This necessitates a new vision for setting premium structure & paying the bonus & charging the interest. The strategy may have a new vision in the sense that the insurance organizations prefer to make a mix of high & low pricing strategy. The motive is to make the premium structure commercially viable so that the insurance organisations succeed in having a sound product portfolio besides fuelling development orientation. The pricing decisions make it essential that the insurers keep in their minds the nature of policy vis-vis the segment to which the prospects belong. In the tangible products, cost of production is taken as the basis for fixation of prices. Even in the insurance business, it is found to be an important consideration & a dominating base. This makes the cost of insurance a decisive factor for charging premium. The important bases for determining the cost are rate of death, rate of interest & the expenses incurred on the insurance business. The mortality table helps the determination of death rate. It is to predict future mortality. The best method of construction of mortality table is to select a large number of persons at attained age, which is meant age close to the birth rate. The second important element is the rate of interest. On the basis of mortality rate, it is estimated that when & how much amount is to be received as premium & would be paid as claims but on the basis of interest rate, it is estimated that how much interest can be earned by investing the insurance funds. The last element is cost which focuses on different types of expenses. There are certain expenses, which incurred at the time of inception of the policy. This necessitates determination of the nature of expenses. The

determination of expenses according to occurrence & equal distribution of the expenses every year for equitable distribution of loading are found significant to make possible a sound management of expenses.

The process of rate of fixation in the insurance organizations is not so scientific & identifies the cases of moral hazard. It is easier to identify the physical hazard but the task of identifying the moral hazard is found difficult. The premium charged is to be made rational to cater to the payment of claims on a priority basis including the catastrophic losses, management expenses & margin of profit. It is essential that various related to both the hazards are estimated in a scientific way. The actual process of rating consists of three steps, e.g. classification, discrimination & scheduling.

The price mix decisions are: Making possible cost of effectiveness Restructuring of premium Due priority to profit generating investments. Rationalizing or optimizing the social costs Paving avenues for channelising the productive investments Assigning dude weightage to the policies meant for the socially & economically backward classes Making the ways for maximizing profit

PLACE The first component of the marketing mix is related to the place decisions in which our focus would be on the two important facets managing the insurance personnel and locating a branch. The management of agents and insurance personnel is found significant with the viewpoint of maintaining the norms for offering the services. This is also to process the services to the end user in such a way that a gap between the services- promised and services offered is bridged over. In a majority of the service generating organizations, such a gap is found existent which has been instrumental in aggravating the image problem. The policy makers make provisions; the senior executives specify the standards and quality and the branch managers with the cooperation of the frontline staff and others bear the responsibility of making available the promised services to the end users. The public sector insurance organizations have failed in both the areas. The agents, rural career agents, the frontline staff and even a majority of the branch managers have become a party gap. The transformation of potential policyholders to the actual policyholders is a difficult task that depends upon the professional excellence of the personnel. The agents and the rural career agents acting as a link lack professionalism. The front-line staff and the branch managers are found not assigning due weightage to the degeneration process. The insurance personnel if not managed properly would make all efforts insensitive. Even if the policy makers make provision for the quality up gradation, the promised services hardly reach to the end users. This makes it significant that the insurance organizations in general and the public sector insurance organizations in particular keep their minds in changing the expectations of customers and the prospects. The behavioral profile of insurance personnel is studied in a right fashion and the changes required due to the changing perception of expectation

are incorporated. It is essential that they have rural orientation and are well aware of the lifestyles of the prospects or users. They are required to be given adequate incentives to show their excellence. While recruiting agents, the branch managers need to prefer local persons and by conducting refresher courses to brush up their faculties to know the art of influencing the users/prospects. In addition to the agents, the front-line staff also needs an intensive training program. This makes it essential that the branch managers organize an ongoing training program, which focuses on behavioral management. Another important dimension to the Place Mix is related to the location of the insurance branches. While locating branches, the branch manager needs to consider a number of factors, such as smooth accessibility, availability of infrastructural facilities and the management of branch offices and premises. In addition it is also significant that the branch managers assign due weightage to the safety provisions. The management of offices makes it significant that the branch mangers are particular to the office furnishing, civic amenities and facilities, parking facilities and interior office decoration. Thus the place management of insurance branch offices needs a new vision, distinct approach and an innovative style. This is essential to make the work place conducive, attractive and proactive to the generation of efficiency. The motives are to offer the promised services to thee end users without any distortion and making the branch offices a point of attraction. The branch managers need professional excellence to make place decisions productive.

PEOPLE People are most important component of marketing mix for the insurance industry. Sophistication in the process of technological advances makes the ways for the personnel in such a way that an organization succeeds in making possible a productive utilization of technologies used or likely to be used. Professional qualification requirements change as technological develops & evolves. The use of computers microcomputers, fax machines, sophisticated telephonic service, e-mailing, intra-net service have been found throwing a big impact on the perception of quality of service. This makes it essential that the insurance organizations also think in favour of developing personnel in line with the development and use of information technologies. The front-line-staff as well as the branch managers are required to be given the training facilities so that they in position to make possible an effective use of the technologies. The insurance organizations bear the responsibility of developing the credentials of their employees. In this context, it is also significant that they think about the behavioral profile of insurance personnel. It is pertinent that the employees are well aware of the behavioral management. They know & understand the changing level of expectations of users & make sincere efforts to fulfill the same. In this context, it is also significant that the senior executive while recruiting, training & developing the insurance personnel make it sure that employees serving the organization have a high behavioral profile in which empathy has been given due place. The psychological attributes become significant with the viewpoint of influencing the prospects or retaining the users. It is in this context that the insurance companies need a rational plan for the development of insurance personnel.

PHYSICAL EVIDENCE Physical evidence includes facility design, equipment, signage, employee dress, tangibles, reports & statements. Signage: Signage personifies the insurance company. It gives an identity by which users recognize the company. A signage depicts the companys philosophy & policy.

Following are the some of the examples

Tangibles: Insurance companies give their customers & agents various tangible items like pens, letter pad, calendars etc. such things try to reduce the intangibility characteristics of this industry. Statements: The statements are the punch lines, which deeply depicts the vision & attitude of an insurance company towards its users/potentials. It also indicates their business motive. PROCESS Flow of activities: Since major activities are conducted through the agents, the agents are given training and refresher courses etc. There are branches of insurance organizations where these agents go for processing of proposals/claims etc. Standardization: The proposal/claim forms and other formalities are standardized in case of each branch of an organization. Standardization here implies procedural standardization. But the processing may differ from case to case in case of claims.

Customization: As stated earlier, each case has its own peculiarities. Hence amount of premium, proceedings of a claim etc. are quite subjective.

Number of steps: Clients of an insurance company differ from an insurance policy holder to a larger conglometeer. Number of steps in case of each group will definitely differ. However in case of individual customer, the agents handling the proceedings. Thus the actual customer, the agent handles the proceedings. Thus the actual customer is not involved in proceedings for a majority of steps. In case of the corporate, usually separate officer are appointed to take care of each case. Standardization reduces many steps as well as the time taken.

Simplicity: Use the national language/regional language, customer friendly forms and instruction manuals, segregation of various departments into counter etc has made entire process quite simple. Complexity: Insurance works on spread of risk principle. The companies have to use others money and hence they arte very careful not only while processing the claims but also while accepting the proposals in the first place. Because of some stringent norms, the process of obtaining and furnishing documents, proofs etc becomes complex; but it has been quite simplified by the existence of the agents.

Customer Involvement: Customers involvement in case of insurance organization is quite limited. The insurance agent acts as PROs for the company, they perform majority of the necessary formalities. The customers are only involved in case of formalities like medical examinations, interviews etc. but the organizations make it a point to let the customers express their concerns through the customers complaint cell and mail/email contact

SECTION VI: RECENT TRENDS & OPPURTUNITIES IN THE INSURANCE INDUSTRY NEW RISK HORIZONS Business is becoming increasingly vulnerable due to wide variety of risk particularly after September 11, 2001 disaster in which twin towers located in the hearts of New York city were crashed by terrorist attack resulting in loss of 6,000 human lives as well as financial loss to the extent of $45 billion. The impact of this terrorist attack has created new horizon of risk to the business world today. However, rapid changes in the global economy, development of technology and e- business already gathered momentum. Increased dependency on technology has originated new risks that have resulted in well-published incidents. Computer hackers obtaining credit card information from Visa and Power Gen, the love Bug Virus, cyber extortion, web content liability, professional errors and omission, computers and other crimes and activities such as terrorism, kidnapping and companys executive and extortion of money, commercial liability etc have significant impact on business resulting in extreme financial loss, commercial embarrassment or regulatory implications. Corporate insurance/risk managers, under the circumstances, have to demand increasingly complex insurance products. They have to be more attentive and knowledgeable about emerging risks, how those risks are managed effectively and efficiently, and how they could ultimately affect a companys financial situation and therefore its position in the marketplace. In short, how such risks are managed and can give to an insured a competitive advantage. In the changing times, adoption of e- commerce into business models, the integration of web based communication and data transfer capabilities into the business operations, and leveraging of advanced network and technology architecture for maximum benefit are the new horizons of the risks. For the corporate insurance/risks manager, these new exposures cyber risks can lead to cyber losses, widening the interpretation of what constitutes insure property damage, particularly as it relates to information technology and data. All the while, organizations are under tremendous pressure to reduce expenses and increase profit margin, and cannot afford to suffer a property loss of business interruption due to any cause (risk). How a company identifies, quantifies, qualifies and manages these new risks exposures, in addition to the well known traditional risks, is becoming an important factor in creating shareholders value. This often means changing the way. Everyone in the organization have to think about risk. Insurance managers are seeing price levels (premium) continue to rise albeit modestly- in todays primary commercial property and reinsurance markets. They are demanding that insurers improve their risk assessment and quantification offerings so that an insured may avail the benefit in cost (premium rate) on account of well managed risk. The good news for insurance managers is that as the economy evolves, insurers are increasingly matching that evaluation with new products, service and capabilities due to opening up the insurance market to the private players. Insurers who are truly listening to their customers and striving to be more in tune with their needs are responding to the fast changing corporate insurance and risk management landscape. They are listening to their customers. They are making fresh approaches to address the new challenges faced by insured organization by designing the new products as per the need. Insurers are providing value-added services to insured to protect the value created by the business.

Insurers are increasingly required to develop and expand their information technology platforms to ensure that the vast amount of data they collect about their customers. Insurance/risk portfolio can easily and seamlessly be transformed into valuable risk management information. To help their customers, insurers should make better-informed decisions. They must be able to swiftly deliver this data to their customers (insured) anywhere in the world. Insurers are also discovering that risk assessment have to be customized to meet policyholders new exposures and needs. The insurance industry is stepping up and addressing these challenges in several different ways.

LOOKING AHEAD There is presently building in India an upsurge in consumer awareness, putting immense and unavoidable pressure on the insurance industry. A lifting of the bar on composite insurance, where companies are allowed to do only life or non-life business today, can also be expected. Instead of categorizing insurance by class, the focus may shift more to the period for which the cover was offered and the risk underwritten. Already there is demand for permitting the industry to underwrite pure risk and leaving investment decisions to policyholders. With the entry of competition, the rules of the game are set to change. The market is already beginning to witness a wide array of products from players whose number is set to grow. In such a scenario, the differentiators among the different players are the products, pricing, and service. Meanwhile, the profile of the Indian consumer is also evolving. Consumers are increasingly more aware and are actively managing their financial affairs. Today, while boundaries between various financial products are blurring, people are increasingly looking not just at products, but also at integrated financial solutions that can offer stability of returns along with total protection. To satisfy these myriad needs of customers, insurance products will need to be customized. Insurance today has emerged as an attractive and stable investment alternative that offers total protection Life, Health and Wealth. In terms of returns, insurance products today offer competitive returns ranging between 7% and 9%. Besides returns, what really increases the appeal of insurance is the benefit of life protection from insurance products along with health cover benefits. Consumers today also seek products that offering flexible options, preferring products with benefits unbundled and customizable to suit their diverse needs. The trend in developed economies where people not only live longer and retire earlier are now emerging in India. Where once the fear was one of dying too early, now, with increasing longevity, the fear also is one of living too long and outliving one's assets. With the breakdown of traditional forms of social security like the joint family system, consumers are now concerning themselves with the need to provide for a comfortable retirement. This trend has been further driven by the long-term decline in interest rates, which makes it all the more necessary to start saving early to ensure long term wealth creation. Today's consumers are increasingly interested in products to help build wealth and provide for retirement income. This all adds up to major change in demand for insurance products. While sales of traditional life insurance products like individual, whole life and term will remain popular, sales of new products like single premium, investment linked, retirement products, variable life and annuity products are also set to rise. Firms will need to constantly innovate in terms of product development to meet ever-changing consumer needs. However,

product innovations are quickly and easily cloned. Pricing will also not vary significantly, with most product premiums hovering around a narrow band. In this competitive scenario, a key difference will be the customer experience that each life insurance player can offer in terms of quality of advice on product choice, along with policy servicing, and settlement of claims. Service should focus on enhancing the customer experience and maximizing customer convenience. Long-term growth in the business will depend greatly on the distribution network, where the emphasis must evolve from merely selling insurance to acting as financial advisors, helping customers plan their finances depending on life stage and personal requirements. This calls for a strong focus on training of the distribution force to act as financial consultants and build a long lasting relationship with customer. This would help create sustainable competitive advantage not easily matched.

RURAL-URBAN MIX It must be borne in mind that India is a predominantly rural country and will continue to be so in the near future. New players may tend to favor the "creamy" layer of the urban population. But, in doing so, they may well miss a large chunk of the insurable population. A strong case in point is the current business composition of predominant market leader the Life Insurance Corporation of India. The lion's share of its new business comes from the rural and semi-rural markets. In a country of 1 billion people, mass marketing is always a profitable and cost-effective option for gaining market share. The rural sector is a perfect case for mass marketing. Competition in rural areas tends to be "kinder and gentler" than that in urban areas, which can easily be termed cutthroat And the generally smaller policy amounts in rural areas would be more than offset by the higher volume potential in these areas in contrast with urban areas. Identifying the right agents to harness the full potential of the vibrant and dynamic rural markets will be imperative. Rural insurance should be looked upon as an opportunity and not an obligation. A smaller bundle of innovative products in sync with rural needs and perception and an efficient delivery system are the two aspects that have to be developed in order to penetrate the rural markets.

CONCLUSION Competition will surely cause the market to grow beyond current rates, create a bigger "pie," and offer additional consumer choices through the introduction of new products, services, and price options. Yet, at the same time, public and private sector companies will be working together to ensure healthy growth and development of the sector. Challenges such as developing a common industry code of conduct, contributing to a common catastrophe reserve fund, and chalking out agreements between insurers to settle claims to the benefit of the consumer will require concerted effort from both sectors. The market is now in an evolving phase where one can expect a lot of actions in coming days. The current impediments for foreign participation like 26% equity cap on foreign partner, ill defined regulatory role of IRDA (Insurance Regulatory development Authoritythe watchdog of the industry) in pension business etc. are expected to be removed in near future. The earlyadopters will then have a clear advantage compared to laggards in gaining the market share and market leadership. The will need to make sure right now that all their infrastructure is in place so that they can reap the benefit of an "unlimited potential