DISSERTATION ON MARKETING TECHNIQUES AND

CONSUMER PERCEPTION OF GENERAL

INSURANCE

Towards The Partial Fulfillment of

Post Graduate Diploma in Management
Contents
ABSTRACT............................................................................................................................................4
INTRODUCTION...................................................................................................................................4
COMPANY DETAILS..............................................................................................................................5
Royal Sundaram...................................................................................................................................5
Partners...............................................................................................................................................5
COMPETITORS.....................................................................................................................................5
RELATIONSHIP MARKETING AND OTHER MARKETING TECHNIQUES...................................................6
INTERMEDIARIES AND DISTRIBUTION CHANNELS...............................................................................9
Levels of the distribution channel......................................................................................................11
Channel conflict.................................................................................................................................11
Major channel alternative available..................................................................................................13
PRODUCT CLASSIFICATIONS..............................................................................................................22
MARKETING CHALLENGES.................................................................................................................37
HAZARDS IN INSURANCE...................................................................................................................38
GENERAL TRENDS IN THE GENERAL INSURANCE SECTOR AND THE IMPACT OF PRIVATIZATION AND
DE TARIFFING....................................................................................................................................41
Appendix A........................................................................................................................................43
Appendix B.........................................................................................................................................43
Appendix C.........................................................................................................................................43
Appendix D........................................................................................................................................44
Appendix E.........................................................................................................................................44
ABSTRACT

The purpose of the project is to understand and analyze the various marketing techniques employed by
the company to prospect for and retain its clients. The project also serves to understand the marketing
strategy of the company in light of how the company caters to various segments of people by using
various marketing mix and by employing appropriate segmentations. The project also analyses the
various distribution channels in the company, their importance to the company and the factors that go
into selecting a particular distribution channel. The various challenges to marketing insurance products
and the challenges in the insurance sector are also analyzed. The project also aims to cover a strategic
analysis of the company in light of its strength and weaknesses. By means of a survey the project also
aims at uncovering as to what causes people to chose a particular insurance company, what is their
perception about the various distribution channels available to them and also their perception about the
insurance sector.

INTRODUCTION

General Insurance industry has undergone a number of changes in the past few years. After
liberalization a number of private players have come into existence.

Another change that has come in the general insurance market is the gradual de-tariffing of standard
insurance products. Earlier due to these standard covers and due to prescribed tariffs the competition
was purely on price. However with de –tariffing setting in customized covers are being introduced to suit
customer needs. With de-tariffing of various products being introduced and insurance market being
essentially a buyers market these general insurance companies employ a number of marketing
techniques to compete with each other.

Royal Sundaram is the first private player in the general insurance market and deals in selling various
general insurance products.

The purpose of this project is to provide a comprehensive coverage of the various marketing techniques
employed by Royal Sundaram. The various ways, in which royal Sundaram prospects for its clients, the
channels that it employs will be studied. Also the techniques employed in maintaining relationship with
customers, and the marketing strategies employed are all analyzed in detail. Also with the onset of de-
tariffing in the general insurance sector the ways in which products are customized to suit various
customer segments will be analyzed. Then a study on Royal Sundaram’s products and how it caters to
different customer segments and needs will be studied. The study will also compare products of
competitors across health insurance. Health insurance being one of the fastest growing sectors it would
be interesting to note the various ways in which products are designed and the services offered to
attract customers.

Apart from this the project will provide a comprehensive insight into the company, including business
structure and operations and key competitors. The hallmark will have the detailed strategic analysis of
the company. This highlights its strengths and weaknesses and the opportunities and threats it faces
going forward. The various challenges in marketing general insurance products are also analyzed.
Also a market research to understand the consumer’s perception about general insurance products
would be conducted. This research would help analyze why a particular company has been selected by a
particular client, their reasons for selecting a particular product and their perception about the
insurance industry and the channels that are available to them.

COMPANY DETAILS

Insurance is of two types life insurance and general insurance. Royal Sundaram deals with general
insurance products.

Royal Sundaram

Royal Sundaram alliance insurance company limited is first private insurer in the country to be licensed
post privatization in 2001 dealing with general insurance products. Royal Sundaram was the first
company to offer cashless hospitalization, first to offer segment specific business solution, first to offer
cobranded credit cards and first to offer industry specific proposition. The company has a product range
that caters to common man as well as to corporate conglomerates. The company does business in over
150 cities.

The company’s partners are Sundaram finance, one of the most respected non banking financial
institution in India and RSA, one of the oldest and second largest general insurer in the UK.

Partners

Sundaram Finance

Sundaram Finance is a triple A rated Non banking finance company and is one of the most respected
financial services companies in India. The Sundaram Finance group’s operation span vehicle finance,
Home mortgages, Asset management, General Insurance, Business process outsourcing, IT solutions and
distribution of financial products. Sundaram Finance has a network of over 320 branches across India
with over 2500 employees.

RSA

RSA is one of the world’s leading multinational quoted insurance groups. It has the capability to write
business in over 30 countries and has its major operations in the UK, Scandinavia, Canada, Ireland, Asia,
Middle East and Latin America. It focuses on general insurance and has around 22000 employees and in
2007, its net written premium was 5.8 billion pounds.
COMPETITORS

General insurance corporation of India that remained the sole player in the general insurance arena till
December 2000 was split into four insurance companies namely Oriental Insurance, New India
Insurance, National insurance and United India Insurance Limited. The various Private players are
listed in Appendix B. In total there are twenty three companies as of April 2010.

RELATIONSHIP MARKETING AND OTHER MARKETING TECHNIQUES

The process of creating, Maintaining and enhancing strong value laden relationship with customers and
other stakeholders. It was revealed according to a recent survey that reducing defection by 5%
companies can improve profits by anywhere between 25 to 85 percent. If we consider the insurance
market the benefits of buying an insurance product is still viewed with some amount of skeptics. It is
here that relationship marketing is gaining importance. The goal of relationship marketing is to create,
maintain and enhance strong relationships with customers.

There are five levels of relationship that can be formed with customers

Basic: The Company sells the product but does not follow up in any way.

Reactive: The Company sells the product and encourages the customer to call in case of any problem.

Accountable: The company employee calls the customer after a short period of sale to check it the
product meets the customer expectations. He also listens to any particular disappoints faced and any
suggestions for product/ service agreement.

Proactive: Employees of the company call the customer from time to time with suggestions about
improved product use or helpful new products.

Partnership: The Company works continuously with the customers to deliver better value.
Company employs different levels of relationship marketing based on the profitability of the customer.
For example it would not be quite logical to apply Accountable level relationship marketing to the not so
profitable customers. This means the cost of frequent calls, visits and other personalized way of
maintaining communication would be more than the benefit that can be obtained through the
customer.

Royal Sundaram employs relationship marketing at the Proactive level for its valued customers. It
maintains a list of its most exclusive profitable customers and on a time to time basis meets them. The
company then verifies if any new covers could be suggested to the existing customers, address their
grievances and offer suitable help. For the not so profitable customers the company employs
relationship marketing at the Accountable and Reactive levels.

Listed below are some of the relationship marketing techniques employed by Royal Sundaram and how
they stand to benefit the company.

Retaining renewals is one of the key marketing aspects in an insurance company. Insurance market is
essentially a buyers market. A buyers market is essentially a market where the buyers have a variety of
choices to choose from and supply is much greater than the demand. It is five times expensive to
acquire new customers than retain old ones. Hence the wise thing to do is to retain the existing
customers. A database of the existing clients of the Royal Sundaram along with the date of issue, date of
expiry, policy number, and policy type is maintained. Also a list of the client’s claims ratio is maintained.
Now with all these information we get to know the various clients that do business with the company
and also their profitability to the company and the amount of business they would generate.

A notice of date of expiry of policy is constantly monitored and as soon as the date of expiry nears a
renewal notice is sent. The renewal notice explicitly states the new premium that would be charged.
There could be dissatisfaction amongst customers due to some claims not being paid out. It is extremely
important to have a personal meet up with the client and explain to them reasons for repudiation of
claims. It is important that also all the various grievances raised are dealt with and if there is an
increase in premium of the product then a explanation for the same needs to be provided. Providing
excellent customer service in terms of ease of availing new policies, helping them avail add on benefits
and claims redressed all are done in line with the objective of retaining customers.

Also a regular visit to the client is important. This way one can market newer policies or add on covers to
existing customers. By regularly visiting Royal Sundaram gathers information about any new needs of
the customer like a new machine could be purchased which would require an erection. This would call in
for an erection all risks policy. Thus being in touch with clients would serve to sell newer policies to
existing clients. Also we can assess on a regular basis if the existing clients are happy with the way
grievances are redressed and claims settled.

Royal Sundaram also provides some gifts and incentives to its most values clients. They send out diaries
calendars and wishes. The company also studies the individual needs of a particular client and provides
some add on covers and customize their products to well suit their needs. It also provides the client with
a portfolio of its products that can be managed online.
By creating an online portfolio a customer receives renewal reminder alerts in his mailbox. The customer
also receives information about the various products and services. He also receives a copy of the online
news letter of the company-iTalk.

Online facilities like InstaRenew to renew policy online, online help and chat facilities to provide details
about the products to customers and InstaBuy to buy policy online are all some of the good relationship
management techniques adopted by the company. For showing the company’s commitment to good
relationship management ten ways of servicing are listed in the site namely helpline numbers , email,
writing through post, grievance redressal form online to file grievances online, refer a friend to take up a
policy, TPA contact numbers( numbers of third party administrators who help avail benefits in health
insurance), E-services to register for filing complaints online and filing claims online ,Branch location,
compliment us that measures customer satisfaction through a simple survey and forms central were a
customer can avail the forms online.

For effective claims handling which is an extremely important segment of customer relationship
management in an insurance industry Royal Sundaram makes use of the online claim facility. The
company’s website lists the various documents that would be required to file a claim in each and every
type of general insurance. The claim forms can also be downloaded online. Also as soon as a claim is
submitted the sum insured and date of policy is checked for. If there are any issues with the above
mentioned two parameters then it is notified to the customer as early as possible. Customers are in
general skeptical of the claims process and the above mentioned practice evokes trust and calls for
better relationship management.

Also in some commercial business since data about the client is not completely available in direct
marketing due to the absence of an intermediary a detailed analysis about the client is to be performed.
The kind of business the client deals in , the kind of coverage it has taken up previously , nature of
buying ( whether the client involves in impulse buying / thoroughly researches before buying a
product) , parameter most important to client are all to be studied in detail for effective interaction with
the client.

An example that helps understand the benefits of doing a detailed study of the client’s insurance
policies was given by one of the employees of Royal Sundaram. In a textile industry the shopkeeper
complained of his previous insurer repudiating a valid claim on account of burglary and hence had a
poor perception towards the insurance industry. On further probing it was found that insurance policy
did not cover theft but only covered burglary. Theft is technically different from burglary. Burglary is the
forceful entry into the premises and taking away the textile items whereas theft is the stealing that
happens without a forceful entry. It could be due to any known personnel like employee, client walking
into the premise and taking away the textile items. Now on doing a detail probing helped to understand
the needs of the client. In this way a suitable cover could be provided.

Another marketing technique employed is that customers can be offered discounts to lure them to buy
the product. Some of the general insurance products are standard covers. In the sense the scope for
differentiation of these products are limited because of some existing definitions by IRDA. There are also
some existing tariffs for a number of general insurance products. Own products under general insurance
are usually health, personal accidents and home insurance. Hence these discounts offered by these
companies are a major source of competition for these products. A simple inspection is done before a
discount can be provided. This report would be valid for a period of three years. For properties whose
worth is more than 1.5 Crores a risk inspection report is prepared. This report may contain suggestions
for better measures of safety which could be handed over to the client. This is also one of the marketing
techniques. In the sense it shows that the company is concerned about the client’s safety mechanisms.

After these inspections, discounts are provided to lower risk propositions to attract those customers. It
is here that the principle of utmost good faith holds great importance. For example a client had a policy
with some insurance company ‘x’ and it provides information about its claims history to another
company ‘y’ from which it plans to take a policy. The company has no means of ascertaining this
information hence the principle of good faith holds good when providing discounts. When providing for
discounts the standard rates are first specified and if the client accepts to take the product without the
discount then it would prove beneficial to the company. However if the client does not agree then the
information is passed on either through intermediary/ directly for the need of discounts. Now the
company provides the suitable discounts to the client. This technique ensures that unless the client
requires a discount the company can sell the policy at a better price hence making better profits.

INTERMEDIARIES AND DISTRIBUTION CHANNELS

Maintaining a good rapport with the intermediaries is the next most important step in marketing
insurance products. Insurance literates are few in number. Even educated people find it difficult to
understand the terms, conditions, exclusions of the policy due to the wording format of insurance
products. Hence people are dependant on these intermediaries to testify for the products. (Quote
results and observations from survey if applicable). From the company’s perspective these
intermediaries are extremely important to them especially in retail business. Retail business is a volume
driven business. Direct marketing in such a volume driven business would not be a wise way to market.
Consider the amount of retail customers an employee of the company can meet in a day and also the
number of converts they could be making out of those met which would be even smaller. Targeting the
right set of customers and prospecting for them becomes a challenge in the retail business. Hence from
the perspective of the company also these brokers are a boon.

These intermediaries would be playing the following functions

Information:

To the company they offer information about the customers needs, changing need of the insurance
clients by means of frequent interactions with them. This the company receives in the form of a quote
from the intermediary listing out all the information of the prospective client.
To the clients they provide information about the various companies, the various insurance products
these companies offer, the products that would best suit the customer’s needs and also provide
information about the services provided by an insurance company and pass information about goodwill
of the company to the clients. Information about claims, nature of misfortune, and other information
pertaining to claims recovery is also passed on from client to intermediary to the company.

Persuasion:

Not only do these intermediaries pass on information about the products to the clients they also
persuade them to buy them. In insurance sector where the demand for products is lesser than the
supply this persuasion function is of great significance

Matching:

Here the client’s needs are matched to the products available and the product best suited to the needs
is suggested to the client.

Negotiation:

An agreement on price, terms of the product, conditions, exclusions are all negotiated. The
intermediary sends a quote to the Royal Sundaram stating the needs of the client. This quote could be
sent to several insurance companies. The insurance company could ask the intermediary for further
information if it is requires it. The intermediary then passes on the necessary information from the client
to the company. The company now sees if it feasible to provide the particular product. Suppose a cover
for pre existing disease is requested by the client and the company does not offer the required cover,
then it informs the intermediary about it. Then the intermediary negotiates with both the client and the
company on terms, conditions and exclusions with both parties. They would also negotiate on premium.
Suppose a particular general insurance company offers better discounts, then the intermediary could
negotiate with the other company requesting for a discount on premium. After negotiation and both
parties agreeing to it a sale of the insurance product is made.

A diagram that indicates how intermediaries reduce the amount of effort between client and company is
shown below.
Levels of the distribution channel

The distribution channel in the insurance company is either zero level or level one.

Zero level is nothing but direct marketing. In some B2B marketing the insurer directly meet with the
clients which are industries and market their products. Internet marketing wherein the clients interact
with the employees of the company is also direct marketing employed by the company. Royal
Sundaram’s website provides information about the company and the various products that they offer.
The company also provides forms for the various insurance products to be filled. It also offers a helpline
number through which the customer can clarify his queries and then apply for an insurance product.

There all also one level distribution channels that is available to the company. These include brokers,
agents, banks, dealers, direct sales associates who operate between the client and the company.

Channel 1: Direct Marketing: Zero level with no intermediaries

Company Customer

Channel 2: Marketing through intermediaries like brokers/ agents/dealers/direct

sales associates/bank: level one

Company Intermediary Customer

Channel conflict

It is extremely important that individual channel members work together to run the company profitably.
Unfortunately such a broad view has not been taken by individual channel members. The channel
members are often concerned with their individual goals. For example the brokers who are one of the
intermediaries might have individual goals that are quite different from that of the company. The
brokers might seek to maximize their commission and the company its profits. These conflicting goals
would lead to some channel conflicts.

Horizontal conflict

This is the conflict that arises among firms at the same level of the channels. The conflict between
different brokers, different agents are all examples of horizontal conflict.

Vertical conflict

This is the conflict that is more prevalent in the insurance sector. It refers to conflicts between different
levels of the same channel. The conflict between the company and the brokers which are at different
levels of the distribution channels are examples of vertical conflict. Sometime vertical conflict could be
beneficial to the customers. This is because the brokers could have greater bargaining powers and it
becomes important for the company to manage its relationship well with the broker and the customer.

Vertical Marketing system

A conventional distribution channel consists of the various distribution channels acting independently. In
a vertical marketing system the intermediaries, the company all act as a unified system. Vertical
marketing came into being to control channel behavior. In the Insurance sector, Company owned agents
are example of corporate vertical marketing system. Common ownership at different levels of channel
is how corporate vertical marketing works.

Horizontal Marketing system

In this system two or more companies/ entities at the same level of the channel would cooperate with
each other to market insurance products. Bancassurance is an example of horizontal marketing. The
company sells its products through the bank’s distribution channels.

Designing a channel usually consists of the following steps

Analyzing customer service needs

Defining the channel objectives and constraints

Identifying major channel alternatives

Evaluating these alternatives

In the first step of designing a channel we identify what the customer expects from this product.
Insurance products are complex to understand. Hence the customers typically expect the intermediaries
to know about the technicalities of the product and expect the intermediaries to choose the one that
best suits their needs. Apart from choosing the product they also expect the intermediaries to help them
with claims settlement, premium payment and other servicing.

In the second step the amount of target customers to be achieved are to be set or estimated. The
company’s channel objectives are influenced by the nature of its products, company policy, marketing
intermediaries, competitors and environment. Here the product is intangible and also is technical in
nature hence the channels are to have a basic minimum knowledge of general insurance products which
is tested by means of conducting an exam or by providing adequate training. Also a study of
competitor’s channels would determine if there are any new channels that are available to the
insurance sector. For example telecassurance which is the selling of insurance products using the
distribution channels of the rapidly growing telecom sector could be used by one of the competitors of
an insurance company which can be emulated.

In the third step the major channel alternatives available to the companies and the ones the company
has employed is studied
Major channel alternative available

Agents

Insurance agents are insurance professionals that serve as an intermediary between the insurance
company and the insured. Agents are responsible for their timely and accurate processing of forms,
premiums and paperwork. A captive agent is one who works for only one company and will sell policies
only of that insurer. An independent agent is one who works as an agent for a variety of different
insurers.

Corporate agents

This is a concept introduced with a view to taking advantage of the presence of a large number of
entities with a sizeable client base, contacts and goodwill already operating in the market. With multiple
locations and a network of people assisting them they could be used effectively to market insurance.
Corporate agent can thus be defined as a firm or company formed under the companies’ act 1956 or a
banking company or a panchayat or a NGO covered under the cooperative societies. They also include
the automobile dealers selling motor insurance policy along with the vehicle and the travel agents
selling the overseas travel policy.

Various corporate agents currently with Royal Sundaram are ING Vysya bank, T V Sundaram Iyengar &
Sons Ltd, Repco Bank, Namkkal Andavar Business Credits Ltd, Sundaram Finance Ltd, Sri Bhama
Associates, Balika Tours and Travels, White field motors, Trust 1 Consulting Ltd, Relleno Insurance
Solutions Pvt Ltd, EF Insurance Advisors Pvt Ltd, Empire Motors Pvt Ltd, Giltedge InfoTech Services Ltd,
Furdoonji & Sons, SBI Cards & Payment Services P. Ltd, Citi Bank N A, Standard Chartered Bank, L & T
Finance Ltd, Leaseplan Fleet Management India (P) Ltd, Shakthi Motors, Pooja Associates, Rajshree
Automotive Limited, Chandra Automobile India Pvt. Ltd, TAS auto Finance, Cassim Unlimited, Alfin
Marketing Services Pvt Ltd and Andromeda Marketing Pvt. Ltd.

Referrals

This is a concept similar to getting prospects and leads to affect sales with customers. Banks and various
other entities like credit card holders association etc that have a large database of members and clients
can act as a referral. These institutions could share or market their database to provide leads the
intermediaries to sell insurance. The referral provider is not an intermediary but can be regulated by the
insurance regulator, through approval of the terms of the agreement, between the insurer and the
referral provider. Thus these referrals enhance penetration of insurance through provision of good
prospecting lists.

Direct sales associates

These intermediaries are associates with the bank and help in processing loan applications. These
associates can also act as an intermediary. For example when they help to obtain auto loan for a
customer they can also help the client obtain auto insurance.
Brokerage firms

Brokers can be best described as super independent agents. They can offer a whole host of insurance
products. Brokers have a greater duty towards the clients. They analyze the business and secure correct
and adequate coverage for the business. Brokers do not take title of the goods. Their main function is to
help in buying and selling insurance products and for these services they earn a commission on the
selling price. On one hand these brokers act as intermediary between insurer and client, helping to
assess the client’s business and risk profile and accordingly suggest appropriate coverage. On the other
hand they also act to convince the insurer to assume the risk involved in underwriting particular policies.
Although insurance brokerage firms draw their salaries from insurers, a firm’s top priority is to see the
client’s interests. Moreover firms do not charge any commission for services provided to clients.

Insurance brokerage firms are also supposed to manage knowledge and information flow relating to
their clients and the market in which they operate. In addition they also have to collate data from other
sources and analyze them to see the big picture.

Structure of an Insurance Brokerage Firm

Typical Structure of an IBF

Risk assessment Underwriting Group Claims Processing

group Group

Business development
Group

Focus on studying Focus on Service to clients

the needs of client product and for expediting the
advice and cost price processing of
effectiveness claims

Interaction with Insurance Co and clients

Considering two examples to better understand the importance of these brokers if a person owns a
motorbike and seeks motor TP insurance then he can seek any intermediary because the product
offered by all insurance companies is the same and the pricing is also the same. However suppose a
health insurance needs to be availed for a family of say head, his mother father and sister needing
coverage of say 5 Lakhs and he needs a coverage for his spouse for 3 Lakhs and for his two children of 2
Lakhs each. If the family contacts an insurance agent of a company that does not have a product for
senior citizen then he may be told that no health insurance product is available for parents. If the
company does not offer family floater then he may be told nothing about the particular option. This is
the time going to an insurance brokerage firm is beneficial. The brokerage firm acts as a one stop shop
for all the client’s needs. The broker could provide a senior citizens policy for parents, family floater for
family and a separate policy for sister.

Royal Sundaram uses these distribution channels extensively. In July 2006 Bajaj capital insurance broking
and Royal Sundaram co branded home insurance launch. Through its 115 investment centers and 16
insurance venues, Bajaj capital offers its clients a large spectrum of investment advisory products.

Trends in the broking industry

It is important to look at how the broking industry has grown by leaps and bounds in a matter of few
years and how customers have started to prefer brokers as a distribution channel. As against 40 brokers
on 31st March 2003 when the broking industry was first born there are around 263 insurance brokers as
on August 2008. Another trend in India is the tilt brokers have towards retail lines. The reason could be
the large uninsured retail market and its growing consumer class.

Apart from the growing number of insurance brokers what needs mention is the evolution of the role of
an insurance broker. Earlier brokers were considered to be donning the role of a mere postman
delivering policies. However the brokers are now perceived to be playing an extremely important role
nowadays. According to a survey conducted by IRDA following results were observed. Around 49% felt
that the role of an insurance broker has evolved from being just a matchmaker between the client and
the insurer to a risk consultant providing value added services. These services include loss control,
claims management, contract reviews, safety program recommendations and other risk management
services that go beyond the structuring and placement of insurance cover. When insurance broking was
introduced most clients viewed insurance brokers similar to agents however now increasingly people
are able to distinguish between the two channels as indicated by the survey.
Role of an Insurance Broker

A risk consultant
13% 1% Providing value added
services
20% 49% One who helps me shop
around and get the
lowest price
A matchmaker between
17% the insurer and the client
Quite simillar to agent
All of the above

In survey conducted also to study the importance of brokers it was observed that around 35% of the
people surveyed rated the brokers to be very important and 43% considered it important.

Importance of Insurance brokers in the market

21% 1%
35%

Very Important
Important
Occasionally useful
Others

43%

Although the concept of brokers was considered important and the awareness was increasing it was
observed that different people have different perceptions about brokers. According to the survey
conducted it was observed that lowest price with best available coverage, excellent claims handling with
short turn around time (TAT), proper placement of policy where the three aspects that were highly
valued and the most important parameters in deciding on an insurance broker.
Parameters critical for choosing an Insurance Broker

Support in handling routine administrative work 7%

Reputation and track record 8%

Prompt delivery of promised services 12%

Quick response to queries 14%

Proper placement of policy 18%

Excellent claims handling with short TAT 20%

Lowest price with best available coverage 21%

0% 5% 10% 15% 20% 25%

Also regarding the future prospects of brokers in India it was observed that around 54% of the people
surveyed believed that future prospects was very bright and 43% observed it to be good.

Future Prospects of Insurance Brokers

3%

43%
Very Bright
54% Good
Nil

Bancassurance

Bancassurance is the relationship between the bank and the insurance company whereby the insurance
company uses the bank sales channel in order to sell insurance product. Bancassurance allows the
insurance company to maintain direct sales teams as their products are sold through the bank to
customers of the bank by bank staff. Bank staff and tellers rather than an insurance salesperson become
the point of sale for the customer. Bank staff are advised and supported by the insurance company
through product information, marketing campaigns and sales training.
There are four models of bancassurance the top three models operating in India while financial holding
company is not prevalent in India. The four models are listed below

Pure distribution

The bank acts as an intermediary offering products of more than one insurance company. The
advantage of this model is that the bank is able to offer new lines of product without having to
make significant upfront investment. This model also works well in markets where customers
value advisor independence. However the disadvantage of this model is that both the bank and
insurance company have a fragmented view of relationship with the customer.

Strategic alliance

The bank sells the products of only one insurance company. Advantage of this model is that the
bank is able to select the best insurance provider in terms of the quality of products offered,
brand image ,quality of after sales This model offers the bank an easy way of increasing the
portfolio without investing large amounts of money. This model also offers low risk in terms of
required investment. The insurance company also gains access to the bank’s customer without
having to make a major financial investment. The disadvantages of using this model are that
there are low levels of integration between the bank and the insurance companies as both
companies operate as separate entities. Bank staff may be reluctant to sell insurance due to low
product knowledge. Administration issues may arise from the fact that the customer does not
have a clear understanding of who is responsible for which product or who should be contacted
in case of claims.

Joint venture

In this model the bank and the insurer establish a jointly owned insurance company or
distributor thus creating a new entity. The advantages of this model are that there is an equal
partnership joint decision making. Partners can leverage each others’ strength in the new
venture as each one will be focusing on its line of business. Products are designed specifically for
banking customers. The disadvantages of this model are insurers may feel that they lose control
of the distribution side of the operation as the bank acts as the distributor. Bank staff may be
reluctant to sell insurance products.

Financial holding

A holding company owns both an insurer and a bank. Advantages of this model are that the
operations and system can be fully integrated. There is high capability to leverage on bank’s
existing customer and other service provisions. The other advantages are that this model acts as
a one stop shop for financial service for all customers.
 There are two types of arrangement a bank can enter into

Corporate agency arrangement

In this arrangement the bank employees would be identified they would undergo the IRDA
mandatory training program pass the IRDA exam and then get licensed. Only on completion of
this exam they would be authorized to sell the product of insurance companies to their
customers. The relationship here in this arrangement would be that of bank being a pure
distributor while that of the insurer being a pure manufacturer. The bank would get a
commission on the sale of business.

Royal Sundaram has entered into a corporate agency agreement with ING Vysya for distribution
of general insurance products.ING Vysya distributes Health, Personal accident, Motor, Travel
and Home insurance through the bank’s extensive branch network.

Referral arrangement

In this arrangement the bank would provide the insurer all the infrastructural support and refers
the customer who are interested insurance plans to the representative of the insurance
company placed in the bank premises, who would then sell the required plan to the customer.
For referring the customer of the bank to the insurance company the bank would be paid a
referral fee on the business actually booked.

Royal Sundaram has distribution relationships with American express, Citibank, Standard chartered
Bank, Repco Bank, SBI-GE, ING Vysya and Lakshmi Vilas Bank.

Direct marketing

Marketing through the internet, through phone, or by meeting customers in person are some of the
ways of marketing insurance products which all fall under the category of direct marketing. Some leads
are obtained directly through the company employees or from the toll free number when customer
enquires about a particular product. These leads are then converted by meeting them in person. Also
when a customer browses through the website of the company and he uses the online chat facility
direct marketing is employed. Royal Sundaram has its company website www.royalsundaram.in which
has an online chat facility. Here the employees of the organization are available 24/7 to chat with the
clients and to answer all their queries. Also some commercial business is built through means of contact
than through intermediaries in such cases the company employees directly market their products to
these companies.

Third party administrators

It is an organization that process insurance claims. This process can be typically viewed as outsourcing
the administration of the claims processing, since the TPA is performing a task traditionally performed
by the company providing insurance. These intermediaries are agents who are responsible for cashless
benefits that can be obtained instead of getting the bills reimbursed. Cashless hospitalization is a feature
that first introduced by royal Sundaram in health insurance. This feature enables the customer to get his
treatment in the allied hospitals without paying in cash. The insured could also not avail this benefit and
instead get his bills reimbursed later on. Royal Sundaram has three third party administrators to service
health insurance and travel insurance. They are Medicare TPA services, Paramount TPA services and TTK
services.

Telcassurance

This channel is a new distribution channel that is new to the insurance arena whose potential is yet to
be fully explored. Currently Royal Sundaram does not employ telecassurance. However it is worth
discussing this channel due to the various features that makes it unique and substantial. Using the
existing telecom distribution channels to market insurance products is termed as telcassurance. The
distribution channels available to telecom is diverse ranging from company owned or franchise exclusive
stores , direct selling agents, telecom shops, right down to small neighborhood kirana stores. There are
some important features of telecom distribution that makes it appealing to the insurance market. First
the owners of these telecom distribution channels have an entrepreneurial mindset. Secondly the
telecom margins are shrinking by the day due to intense competition and small business owners are
looking for additional sources of revenue. Third these dealers have a fairly large prospect base and they
are influential in their local community. Here are examples of customer oriented product distribution
models that can work by coordinating with the existing telecom distribution channels

Rural segment and semi urban low income households

This segment constitutes the lion’s share of the overall telecom subscriber base and can be
leveraged to provide micro insurance products to them. These households have high savings
preference and hence these products are to be savings oriented, flexible and provide capital
safety.

Rural, semi urban middle income segment

The above mentioned segment is adequately serviced and has strong relationship with their
neighborhood telecom outlets. An agency model would hence work well in this context as it
leverages the strong relationship that already exists and keeps the cost highly variable for the
insurance company.

Urban middle income

This segment deals with telecom dealers and exclusive company / franchised showrooms and
the urban middle income get their products and services from these channels. The relevant
products here could be simple health insurance products.

Urban mass affluent

 An attractive segment is also challenging as consumers have access to insurance products
through their banks or agents. The affinity towards buying insurance through these sources is
much higher than through their telecom provider. However dealer and franchisee relationships
can be leveraged to generate leads that are then closed by special insurance staff of the
insurance company.

The fourth and final step is evaluating these alternatives. The evaluation of these alternatives is done
against economic, control and adaptive criteria. Some channels could be more profitable than the
others in the sense they could cost less in investment but still produce huge sales. Hence a cost benefit
analysis would be done based on the channels available to the company, the commissions paid to the
various intermediaries, in case of direct marketing the salary offered , the conveyance expense incurred
for them to reach the clients, the cost of calling the clients are all factored in. The amount of sales
generated is then calculated for each of them and hence a comparison can be made of these channels.
Similarly some channels like the agents (employed by the company) the company can exercise greater
control over them than over brokers. This would also be an important criterion in evaluating
effectiveness. Tied agents were the company could exercise great control over the channel was the
most widely used channel earlier however now due to changing trends and the need to give greater
importance to clients insurance sector has moved to channels that the company can exercise lesser
control over like the insurance brokers.

Evaluation and comparison of the various insurance intermediaries

Type of Intermediaries/ Agent Corporate Agent Insurance Brokerage

Parameter Firm
Set up Individual Partnership/ Individual Corporate setup duly
licensed by IRDA after
thorough analysis
Area coverage 2-3 localities Part of a City Generally many cities
Investment None Small Investment, say Up to Rs 100 Lakhs
shop / office
Strategy towards client Selling only Selling only Assist the client in
buying the right product
at right price from right
insurance company
Product range Cannot be 100% Cannot be 100% say 100%
competency motor only
Service offered Partial catering to Partial catering to Complete from risk
individual clients clients say motor only assessment to claim
lodging/ Settlements
Product coverage by various insurance intermediaries - examples

Agent Motor, Household, Mediclaim

Corporate Agent Motor Vehicle –Maybe corporate agent is DSA

of a bank for auto loan or is an auto mobile
dealer.
Overseas Mediclaim (Travel agents)
Very few corporate agents offer
comprehensive service
IBF’S Some offer Non life insurance only
Most offer Life + Non-Life +Health – all
products and across all companies
Hence from the Perspective of client it is said to be better to deal with IBS focusing on corporate clients
and handling all products as they can handle all aspects of client needs

Now that the importance of these intermediaries are studied from the perspective of both customers
and company and how it helps in marketing the products it is of gargantuan importance to maintain
good relationships with them. While some intermediaries demand greater commissions, some would
look for better servicing of clients, some would look for covers that suits best the customer needs. Some
intermediaries are pleased with just frequent personalized visits of company employees. It is through
frequent interactions with these intermediaries that one gets to know what an intermediary requires.
Now customized to these needs of the intermediaries a suitable service is provided.

PRODUCT CLASSIFICATIONS

Products can be based on their durability and tangibility as well as based on their end user whether an
industrial product or a consumer based product. Now based on durability products can be durable or
non durable based on the longetivity of the product. General insurance products are products that
typically have a validity of one year after which they have to be renewed to incur their benefits in future.
The only exception to this duration of one year is the marine insurance. Marine insurance is that which
covers the insurance of loss or damage to goods during transit by rail, road, sea or air. The duration of
policy for a marine insurance is the period of consignment. Since marine insurance is coverage of loss of
goods during transit the duration of the policy is limited to the period of consignment.

The next classification is based on tangibility of the products. Insurance products are intangible products
whose benefits cannot be experience instantly. On paying a premium the customer gets only a contract
a document that promises to pay for loses in event of a loss. Hence the benefit of insurance is felt only
on account of incurring a loss else it remains to be just an agreement on a piece of paper.

Due to this intangibility of insurance it is termed as a service. People generally look for cues when going
for these insurance products due to the intangibility of the product from place, people, equipment,
communication material and price that they can see. Hence word of mouth marketing is of paramount
 importance here. People try to look for cues to see if the insurance company they deal with offer
prompt claims settlement and offer valuable services. To look for these cues they turn to blogs, advice
from trusted intermediaries or listen to people who have had experiences with the insurance company
before. To control negative word of mouth the company tries to achieve standardization of service.
Services largely depend on the person providing the service and each person has a different personality
and a different servicing style. To control this variability and negative word of mouth the company sets
some standards of service like claims / grievance to be addressed within 24 hours of filing for it. Also it
looks for opinion leaders who are nothing but big clients who have had a favorable experience of service
to voice their opinions. For instance has Royal Sundaram has its clients talk about the services provided
and these comments are posted on the company’s site for people to see.

Products can also be classified as customer or industrial product. This classification is based on the end
user of the product. The company offers both retail and commercial products. Under retail the products
offered are Health insurance, Hospital cash insurance, Travel insurance, Car insurance, Accident
insurance and home insurance. Under Business the company offers business solution products like
marine, burglary, engineering, liability etc , employee solution products rural sector and social sector
insurance products. The following diagram illustrates the product hierarchy of Royal Sundaram. A
separate table below illustrates the further classification of the various commercial products.

Products at Royal Sundaram

Royal Sundaram products

Retail Commercial

Travel Business Rural sector

shield Accident solutions
Car shield shield

Hospital Home Insurance Employee

cash shield solutions Social sector
Health
Insurance Home
shield

Family
Home content
Health
Shield
Health
shield
One of the product strategic decisions that a company makes is that of building a product line. A
product line is a group of products that are closely related because they function in a similar manner,
are sold to the same customer groups, are marketed through the same types of outlet, or fall within the
same price ranges. Width of the product mix is the number of product line that the company carries.
Length of the line refers to the total number of items the company has. Depth refers to the number of
versions offered of each brand or product in the line. Consistency of the product mix refers to how
closely the various product lines are related in end use, production requirements, distribution channel
or some other way. Using these above stated parameters of product line we can define the company’s
product strategy. The company can add new lines thus widening the existing product mix. It can
lengthen its existing product lines to become a full line company. The company can also add more
versions of each product and deepen its product mix. The company can also pursue greater product
consistency or lesser depending on whether it wants to build a strong reputation in a single field or in
several fields. For example the product lines of the company are two in number one for retail and one
for commercial. So the width is two. The length of the company is the total number of products that it
offers which is equal to thirty four. The depth here refers to the versions of a product for example a
marine insurance could have slight modifications in its product. For example though marine insurance is
a standard product it could have slight variations in cover suitable to the industry. Rust and oxidation
cover could not be suitable to the paper industry whereas it is not important for the steel industry.
Hence depth here refers to the different versions of a single product.

Commercial products available ate Royal Sundaram

Business solutions Marine Insurance

Theft Insurance
Engineering Insurance
Liability Insurance
Industry all Risks
Office shield
Hotel shield
Excelerator
Enterprise shield
Education shield
Traders shield
All risks
Standard fire and special perils
Consequential loss
Employee solutions Group Health Insurance
Group Accident Insurance
Workmen’s Compensation
Rural sector Farmers package shield
Livestock shield
Kisan pump shield
Rural personal accident insurance
Janatha personal accident insurance
Rural micro enterprise shield
 Rural hospital cash insurance

This segmentation can be better understood in the light of general trends in the general insurance
sector which is explained later. The trends show that earlier there was almost no differentiation in
products, prices and covers but now trends are slowing changing.

Marketing has evolved from a mere selling/ pushing of products to the customers to a technique that
involves understanding the needs of the customers and develops products that cater to these needs.
Advertising and selling are only end points of marketing. An assumption that all customers are similar is
no more a widely held belief in marketing. This led to the birth of segmentation concept in marketing.
Segmentation is thus a compromise between mass marketing which assumes that all customers can be
treated alike and the assumption that each person requires a dedicated effort. Market segmentation is
defined as the process of dividing a market into distinct group of buyers with different needs,
characteristics or behavior who might require separate produces or marketing mixes. Check Appendix C
for various types of segmentations for the consumer market and the variables on which these
segmentations are performed.

How segmentation and customization of products happen in Royal Sundaram and a brief description of
the products is all provided below:

Segmentation and customization of consumer market products in Royal Sundaram

Product Name Brief description Segmentation Variable Customization offered

and key features
Health Insurance Customization:
There are two types:
one for customers who
prefer a group
insurance (floater) and
one for customers who
prefer individual
insurances
a)Family health A comprehensive Demographic Key feature
insurance package that offers segmentation. For The hospitalization sum
complete protection family health insurance would be floater among
and health insurance different price is all family members.
coverage to the insured charged based on age
and his family. and family size.

A package that provides Demographic Key feature

b)Health shield protection to the segmentation. For
insured and his family. health shield different
price is charged based
on age (age of the
oldest member of the
Family discount of 3 %
covering 3 or more
members
 family)
Car Insurance Customization:
a)Car shield A package that provides Geographic There are two types of
protection to the car as segmentation. For covers available
well as to against claims different regions customized to the
of damage caused to different premium is user’s needs.
the third parties and charged that is a higher 1)Cover for damage to
their property. premium for cities like the car
Ahmadabad, Bangalore, 2)Cover for liability
Chennai, Kolkata, caused to third parties
Mumbai, Delhi and
Pune. There are also some
add on covers that can
Behavioral be availed that can be
segmentation based on customized to customer
the variable usage rate preference like the loss
that is when no claims of baggage cover that
are made on the covers the damage to
product a discount in baggage kept in the
premium is provided insured vehicle, life
termed as the no claims time road tax cover
bonus. In the sense for that covers the full time
lesser usage of the road tax paid for a new
claims a greater vehicle, Full invoice
discount is provided. price cover that allows
a customer to insure for
Behavioral the full list price as
segmentation based on against the usual 95%
the variable benefits cover.
sought for example These are some of the
some people would customizations so based
seek the benefit of on what the customer
covering for their prefers he can choose
baggage along with the among the various
damage to the car and customized insurance
some would seek the products.
benefit of covering for
car windshield glass etc.
Travel Insurance Travel Insurance
a)Travel shield It is a comprehensive Behavioral products are
package that covers segmentation based on customized to the
unexpected incidents the variable usage rate needs of the customers.
such as baggage delay, that is there are While some may prefer
loss of baggage, flight different packages insurance for delays
delays, medical available for a single greater than twelve
expenses and loss of trip and multiple trips. hours others may not.
travel documents These extra benefits or
during travelling Demographic covers come at extra
 overseas. segmentation based on prices and based on the
age in the sense needs of the customer a
different premium is policy is availed for.
charged based for
different age groups.

Behavioral
segmentation based on
benefits sought
precisely economy that
is there are separate
packages for people
who prefer lesser
benefits with lesser
premium (more
economical) and
separate package for
people who prefer
more benefits at the
cost of a greater price.
Home Insurance There are two covers
under home insurance
one for the building and
the other for contents
at home. The customer
can choose the one that
meets his needs.
Key feature:
a)Home shield This package provides Behavioral Covers expense on
damage to building segmentation based on architects as an extra
which is occupied as the variable user status benefit
residence. and loyalty status that
is there is varying
discounts for different
tenure of years of
insurance. A user with
tenure of just three
years is offered
discount of 15%
whereas a user with
tenure of say 10 years
who is regular user of
the insurance product is
provided a discount of
50%.

b)Home content shield This policy covers Behavioral

household contents segmentation based on
 against various perils. the variable benefits
sought. There are three
covers silver gold and
platinum that cover
different home content
against varying perils at
a different price.
Hospitalization Cash Hospital cash insurance
Insurance is an add on cover to
hospitalization
a)Hospital cash shield This policy acts as a Behavioral expenses covered
supplement to the segmentation based on through health
health insurance and benefits sought that insurance. Customers
covers hidden costs to offers different who feel that there is a
hospitalization which packages for accidental need for them to cover
are not cover by health hospital confinements for all the hidden costs
insurance intensive care benefit of hospitalization not
convalescence care covered by their health
benefit and illness insurance can avail this
hospital confinements. policy.

Personal Accident
Insurance

a)Accident shield Insurance that covers Demographic Based on the amount of

financial commitments segmentation based on coverage required by
In the death of or the variable family size the customer three
disablement of a family in the sense that in different variations of
member. event of death the the policy is available.
company shall pay grant
of Rs 5000 if there is
one dependant child
and 10000 if there are
more than one
dependant children.

Now we look at how segmentation happens in a business markets the various variables used in
segmentation in a business market and how Royal Sundaram implements segmentation of its products
in the commercial business. The variables that help in segmentation of the commercial market also
apply here but there are some variables that are more specific to the business market.

Check Appendix D for various variables for segmentation in the business market
Segmentation and customization of commercial products in royal Sundaram

Product Name Brief description Segmentation Variable Customization

offered and key
features
Business Solutions

a)Marine insurance A policy that covers loss of
damage to goods in transit.
Demographic The cover can be
segmentation based on customized based
the variable Industry that on the needs of the
is tailor made wordings industry for
for various industries like example to paper
electronic, Health care, industry rust and
Pharmaceutical etc. oxidization cover is
not important but
Segmentation on personal it is important for a
characteristics based on steel industry.
the variable attitude
towards risk that is in the Customization for
form of different clauses large industries in
for different level of risks. the form of open
There are 3 clauses policy and open
available ICC (A) that cover are all
covers all risks by introduced.
accidental circumstances Industries who are
and ICC (B) that covers involved in
lesser range of risks and frequent shipments
ICC (C) lesser range of could it find it
risks than B. inconvenient to
avail a cover
Segmentation on separately for each
situational factors such as shipment and this
size of order is also done customization
in the sense that an open would benefit
cover is provided in case clients.
of firms making numerous
regular shipments. Open
covers is a cover for large
export and import firms
who find it inconvenient
to obtain cover for each
and every shipment
separately.

b)Theft/Burglary A policy that covers burglary Segmentation based on

insurance or housebreaking. personal characteristics
such as buyer-seller
similarity and attitudes
 towards risk is done that
is different prices are
charged for risk avoiding
customers who have
employed safety
mechanisms like burglar
alarm, employed
watchmen etc.

c)Engineering insurance Coverage of damage to Segmentation based on Different covers

plants and machinery and
various equipments is all
covered under engineering
insurance.
purchasing approaches
precisely the variable
power structure to focus
on engineering dominated
industries.
are available like
the erections all
risks, boiler and
pressure plant,
electronic
equipment etc and
the client chooses
the one that suits
him.

d)Liability Insurance Insurance policy that Different covers

provides indemnity in are available for
respect of damages payable product,
under law for personal workmen’s
injury to third party or compensation,
damage to their party. public liability etc
and the client
chooses the one
that suits his
needs.

e)Industrial all risks Comprehensive cover for
large sized business where
assets at all locations of the
insured exceed 100 Crores
. specifically for companies
Demographic Apart from the
segmentation based on standard cover that
the variable company size covers material
is performed. This cover is damage due to
various perils and
with assets exceeding 100 loss caused due to
Crores. business
interruption it can
also be customized
to clients needs to
cover the loss of
profits due to
machinery
breakdown.

f)Office shield A flexible policy to meet the The product is by itself a Office shield has
insurance needs of a segmented product covers for business
 modern office where only customized to the needs interruption,
administrative functions are of offices. Demographic breakdown, cover
performed. segmentation is applied for portable items,
here based on the variable and money in
industry as this product transit, dishonesty
caters only to offices that of employees,
involve in administrative group personal
functions. accident, and loss
of baggage and
Segmentation based on public liability. The
situational factors based only compulsory
on variable specific cover under this
application is also applied policy is of
here. Office shield has property all risks.
covers for business Now certain office
interruption, breakdown, would not require
cover for portable items, of money in transit
money in transit, cover as they might
dishonesty of employees, not be dealing with
group personal accident a considerable
etc. Now various products amount of money
are offered with varying in transit hence the
combinations of these product can be
covers. customized to
include the cover
of its choice.

g)Hotel shield Tailor made policy to The product is by itself a Hotel shield has
support the specific needs segmented product covers for business
of the hotel industry. customized to the needs interruption,
of hotels. Demographic breakdown, cover
segmentation is applied for portable items,
here based on the variable and money in
industry as this product transit, dishonesty
caters only to hotels of employees,
namely restaurants, café, group personal
guest house, resort etc. accident, and loss
of baggage and
Segmentation based on public liability. The
situational factors based only compulsory
on variable specific cover under this
application is also applied policy is of
here. Hotel shield has property all risks.
covers for business
interruption, breakdown,
cover for portable items,
money in transit,
dishonesty of employees,
 group personal accident
etc. Now various products
are offered with varying
combinations of these
covers.

h)Excelerator shield Tailor made policy to suit This is a product as a This cover also is a
the needs of motor trade result of demographic combination of
industry. segmentation based on many covers like
variable industry the cover of road
specifically suited to the risks, internal risks,
needs of motor industry risk to property
specifically to automobile business
dealer, repair and interruption etc.
maintenance garage Based on what
owner or bodywork suits the client’s
specialist. needs best the
client can avail the
suitable cover.

i)Enterprise shield A policy that covers business Demographic This cover also is a
having assets worth segmentation based on combination of a
between 10 Crores and 100 the variable company size number of sub
Crores. is performed. This cover is covers such as fire
specifically for companies and burglary cover,
with assets worth cover for business
between 10 and 100 interruption,
Crores. breakdown,
portable items,
money in transit
,dishonesty of
employees, group
personal accident
etc. and based on
what the client
wants he chooses
his cover.

j)Education shield Policy that covers the needs Demographic This cover contains
of the education industry segmentation based on various covers like
namely schools and the variable industry business
colleges. results in this product interruption cover,
suited specifically to the cover for
education industry. breakdown,
Segmentation based on portable items,
situational factors namely money in transit,
the variable specific and dishonesty of
application is also applied employees, group
 that is the product offers personal accident
varying combinations of and public liability.
the covers. Based on what the
institution needs
the cover is
customized.

k)Traders shield A policy for shopkeepers Segmentation is similar to The covers

namely bakers, the education shield but available are
bookkeepers, florists, the product is designed identical to the
grocers, pharmacists, specifically for education shield
wholesalers, owners of shopkeepers. and can be
fancy goods, home customized based
appliances etc. on the needs of
different shops.

l)All risks A policy that covers portable Segmentation based on
items like laptops, mobiles, operating variable
cameras and projectors. specifically the variable
customer capabilities is
done. According to the
needs of the clients
flexible covers are
provided.
Variable excess are
also provided
based on what the
client requires in
addition to varying
flexible covers.

m)Standard fire and A policy that covers Segmentation based on Risk inspection
special perils building, plant and personal characteristics in report that
machinery, stocks, furniture, the sense based on the contains
fixture and fittings against variable attitude towards suggestions for
fire and its allied perils. risk different discounts is safety of building
provided based on the and other
provisions the company precautionary
has taken to overcome suggestions are
risk. provided to the
Segmentation based on clients.
operating variable based
on the variable customer
capabilities is also
performed that is there
are extra covers for
terrorism on extra
Premium.

n)Consequential loss A policy that provides Segmentation on Extra covers for

protection against loss of operating variable based layoff and
profits in business due to an on customer capabilities retrenchment
interruption in business and segmentation on compensation
consequent upon an insured situational factors based auditor’s fee,
 peril and claim admitted on variable specific extension to cover
under the material damage application are performed supplier and client
policy. to provide varying covers premises can all be
done on paying
additional
premium.
Employee solutions
a)Group health insurance A comprehensive health Demographic Many extra
insurance package that segmentation based on benefits can be
covers hospital and medical the age of the company availed like
expenditures of the different discounts is inclusion of
employees of an provided to the company. maternity cover,
organization and of their Segmentation on waiver of 30 day
family members. operating variable based waiting period and
on variable customer waiver of first year
capabilities is done that is exclusions by
some clients could avail paying some
maternity cover while premium. Also out
some may not and patient care is
different premium and provided for
coverage is provided specific cases like
based on what they need. kidney stone
removal
tonsillectomy etc.

b)Group accident A policy that covers Segmentation on Extra covers for

insurance employees against injuries operating variable based medical expenses
resulting in on customer capabilities cover and
death/disablement. in the sense some clients temporary total
might require coverage disablement cover
due to accidents only can all be provided
when employees are on if the client needs
duty while others might it on extra
require coverage premium.
throughout the day.

c)Workmen’s A policy that covers any

compensation damage caused to employee
during employment under
worker’s compensation act
1923.
Rural sector
Demographic
segmentation based on
the variable occupation is
done in the sense all the
products that come under
rural solutions are
designed exclusively for
 farmers. This
segmentation is applicable
to all the products listed
below under rural
solutions.

a)Farmers package shield A covers specifically Based on what the

designed to take care of the farmer needs he
needs of the farmer that can avail the
includes cover for dwellings, various sections
household contents, tractor available under the
etc. cover namely cover
for household
contents, personal
accident, pump set,
television set,
tractor and cover
for dwellings

b)Livestock shield Protects the farmer from The key feature is

financial loss due to the that premium
death of livestock. comes at an
affordable rate at
4% of sum insured.

c)Pump insurance A policy that covers the loss Key feature is the
or damage to pump sets. premium which is
2% of sum insured.

d)Rural personal accident An exclusive policy for rural Provides accident

insurance and social sector that benefits as basic
provides accidental benefits. cover and
reimbursement of
hospitalization as
extended cover.

e)Janatha personal The policy covers death or
accident insurance personal disablement to the
insured arising due to
accidental injury designed
for rural and social sector.
f)Rural micro enterprise This policy covers loss due
shield to perils like fire, burglary,
storms, riots and other such
Segmentation on This is a cover that
situational factors based provides insurance
on specific application against accidents
that is a cover only for only for the rural
accident or an extended and social sector.
cover for hospitalization
benefits.
Policy can be
extended to
include
 perils designed exclusively derangement or
for small scale industries, breakdown of
village industries and insured machinery.
enterprises in rural areas.

The policy covers Demographic

g)Rural hospital cash hospitalization expenses
insurance due to illness or accident for
rural areas, cooperative
members, and social sectors
such as workers and other
unorganized sector.
Social sector
a)Shakthi health shield This cover is exclusively for
the women of SHG to cover
their heath insurance needs.
Segmentation based on
company size whose total
sum insured does not
exceed 10 lakhs and
different premium for
different type of
constructions that is
segmentation based on
attitude towards risk.
Demographic
segmentation based on
age that is different
premium charged for
different age groups.
Demographic
segmentation based on
gender that is that is both
these products health
shield and security shield
cater to women
exclusively.

This policy covers women in

b)Shakthi security shield the age group of 18-70
against uncertainties like
accidents and damage to
assets and property.

Once these segments are identified there are three marketing strategies a company can follow:

Undifferentiated marketing: Under this strategy the firm decides to ignore market segment differences
and go after the market with one offer. This strategy is adopted when the firm believes that there are
weak market segment differences or when believed that the products appeal transcends segments.
Differentiated marketing: Using a differentiated marketing a firm decides to target several market
segments and designs separate offer for each of them. The marketing mix namely product, price,
promotion and place or any of these tools would then vary for each of these segments.

Concentrated marketing: is an appealing strategy when the company’s resources are limited. Instead of
going after a small share of a large market the firm goes after a large share of one or more submarkets.

The marketing strategy adopted by Royal Sundaram is differentiated marketing. Consider for example
health insurance. There is different segmentation of this based on retail / commercial as well as
segmentation for the rural sector and one specifically for women. There is also health insurance for
employees in an organization. Marketing mix premium is different for rural sector and the other sector.
The premium charged for the rural sector is lesser and also maternity cover is offered in case of
employee health insurance which is an example of how the marketing mix product is also different
across different segments. Star health and allied insurance company and Apollo Muninch Health
Insurance Company are examples of general insurance companies that have taken to concentrated
marketing. In the sense they market only health insurance products in the general insurance sector
instead of playing in a number of sectors simultaneously.

MARKETING CHALLENGES

Marketing insurance products has always met with challenges a plenty.

Pre- Privatization challenges

Lack of awareness amongst the people about the importance of insurance was and continues to be one
of the main challenges even today. Even literates and highly qualified people find the language in
insurance products to be too technical.

No innovative insurance products were present that catered to the different needs of the customers.

Also slow servicing in the form of poor claims settlement was prevalent during the pre privatization era.

There was also a dearth of qualified distributors who could successfully convert prospects into clients.

Post privatization challenges

Increased competition leading to difficulty in bringing in new clients and retaining the existing ones is
one of the challenges faced post privatization.

With De- tariffing introduced in a number of products the biggest challenges lies in quoting accurate
prices and with more and more customization setting in the difficulty lies in providing the best package
at a suitable price. To arrive at a suitable price there is a growing emphasis on getting the right kind of
data. In a country like India collecting and maintaining huge volumes of data in billions of gigabytes is by
itself a big challenge.
Also some of the challenges are that

 Benefits of insurance products are not immediately experienced as with other tangible products.
The benefits of insurance products can be experienced only when a loss has incurred and claims
are serviced. On paying a premium a contract is received from the insurer to protect the insured
against certain losses. Since the benefits are not experienced instantly convincing the customers
to buy the products is a difficult task.
 Another problem is that since the customers do not understand the language of insurance
products certain assumptions are made. Exclusions of the policy what is covered the meaning of
excess are all not clearly understood while availing a policy. Only during claim repudiation do
customers come to understand they are disappointed and develop distrust against such
products.
 Another problem is that insurance marketing is perceived as being too intrusive in nature. Being
a buyers market there is a lesser demand for insurance products as compared to the supply. This
results in a number of people calling in and persuading the customers to buy their products
which is too intrusive for the taste of customers.
 The growing power of the internet and the freedom of voice can have both positive as well as
negative repercussions for the insurance market. Any non payment of claim is quickly voiced on
the internet and the dissatisfaction experienced is voiced and can seriously tarnish the image of
the company.

One other challenge in the insurance sector that is typical to it is dealing with hazards. These hazards are
discussed in detail because they are challenges specific to the insurance industry that have caused
numerous problems to the industry.

HAZARDS IN INSURANCE

The peculiarity of insurance contracts is well acknowledged with invisible nature of its ingredients be it
the contingent benefits that are insured or the inherent risks associated with them. In any contract one
of the parties to the contract needs to rely on the disclosures made by the other and both parties shall
have consensus to the terms of the contract. However while agreeing to the terms of the insurance
contract before issuance of policy contract insurance companies need to gauge the inherent and latent
risks associated with the subject of insurance, which is referred to as hazards in insurance parlance.

Providing insurance sometimes makes an insured’s behavior riskier. Once the risk is insured the insured
is insulated from the full financial consequences of the risk, and could behave differently from the way
he would have behaved, had not the risk been insured. Such behavioral change in an insured is termed
as moral hazard. Moral Hazard can be classified into five types a) information asymmetry, b) adverse
selection, c) fraud, d) deliberate breach of statutory laws / scant regard for their compliance and e) poor
housekeeping and unsatisfactory industrial relations. Hence the insurers treat every claim with
suspicion.

From the perspective of the insured such skeptics of the insurers compel them to question the insurers
who are unwilling to pay their claims promptly. Surveyors and their inefficiencies are also a source of
moral hazard for insurers. The powerlessness of the insured claimants to take on their insurers, who
refuse to document their grounds for delays or repudiation or partial settlement of claims, represents
the biggest moral hazard of insurers. Moral hazard is a double edged sword.

Morale Hazard in motor insurance

There are two types of morale hazards with respect to motor insurance they are Ex-ante and Ex-post.
Under Ex-ante we have adventures, physical and customary hazards. Morale hazards in motor insurance
arise from the adventures predisposition of the insured. Rash driving, driving under the influence of
alcohol, lax driving etc are all examples of adventures hazards. Violation of traffic rules like last minute
rushing over yellow lights, unmanned railway line crossing have been so subconsciously accepted that
they are termed as customary hazards. India has a number of isolated road stretches and when the
insured drives his partially damaged vehicle along such roads it causes further damage to the vehicle.
Though this loss termed as the consequential loss is not covered under motor policies it is impossible to
distinguish such damages to the vehicle from the original damage to the vehicle. Such hazards are
termed as adversarial hazards and are less frequent the previously mentioned two.

Ex-post morale hazard deals with the negative consequences of a loss. The insured desires the insurer to
pay for more than what the negative consequences actually amount to. There is a plethora of instances
where the insured disputes the surveyor’s decision on reparability of a damaged vehicle and demands
replacement of the entire vehicle sometimes. In this kind of hazard the insured starts believing an
accident as an opportunity than a mishap and tries to capitalize on such events. Eventually the insured is
given the benefit of doubt but such claims highly aberrate the loss expectations of the underwriter.

Moral hazard in motor insurance

Moral hazard refers to undesirable predisposition on the part of the insured which adds to the chances
of risk and increase the liability of the insurer. They come under two categories moral hazards in the
own damage section and moral hazards in the third party damages section. Moral hazard in own
damages section deals with how an insured is desperate to secure a hassle free claim and hence resorts
to façade any anomalies. Substitution of a licensed driver confessing to the accident in place of an
unlicensed driver actually driving the vehicle, misrepresentation of the facts prior to insurance are
examples of inflicted hazards. While inflicted hazards are committed by an individual person there are
others which are schematic act by more than one person including the insured. These hazards are
termed as intrigued hazards and some examples are fabricated driving licenses, road permits, medical
papers and injury certificates. The most hazardous events are the claims which are entirely constituted
for securing an insurance claim such as lodging a theft claim after selling off the vehicle. Such hazards
are termed as constituted hazards.

Moral hazard in third party claims is extremely important as motor third party claims is the biggest of
all claim components of motor insurance. During investigations a number of hazardous instances have
been uncovered, substitution of an insured vehicle in place of uninsured vehicle, substitution of licensed
driver in place of an unlicensed driver causing the accident, unlawful occupants of the insured vehicle
portrayed as pedestrian victims of the accident, natural deaths having been portrayed as pedestrian
victims of the accident. The noble phenomenon of motor third party which is to support the livelihood
of the survivors of road accident victims is manipulated by some unscrupulous persons causing huge
financial stress to the insurance companies. The difference between moral and morale hazard is that
morale hazard is more frequent whereas moral hazard is more impactful in terms of cost.

There are two ways to deal with these hazards

 By identifying and refusing to accept hazards in the form of claims

 Accepting the hazard and distributing the cost of the hazard evenly on all policy holders in the
form of increased pricing

Since it is impossible to root out all hazards the only way left for insurers is increase the price. It is here
that de- tariffing has greatly benefited the customers as it would be harsh to make the vast majority of
the policy holders pay for the acts of a few unscrupulous people.

Hazards in health insurance

There are some problems specific to the health insurance sector the first one being that the concept of
medical underwriting has just started to make inroads. There is also high claims ratio in this sector. This
could be due to numerous reasons like

 Health insurance attracts people who are older or less healthy than implied by the common
premium rate and this phenomenon is termed as adverse selection.
 Lack of medical history of individuals/ groups
 Absence of standardized health care facility and costs
 Frauds being perpetuated in connivance with interested parties.
 Lack of control over the service providers
 Lack of technically skilled manpower
 Moral hazards

One another challenge specific to health insurance is that a major chunk of people in the age group of
30 to 45 years do not voluntarily go for health insurance until and unless they are part of the corporate
system. That leaves behind the large group of people from the unorganized sector, which is self
employed.

Below is the way that is suggested to deal with the above problem specific to health insurance

Insurers could design products with maximum coverages and minimum exclusions and price it according
to the target group and thus make the health care more affordable in order to attract the people
employed in the unorganized sector.

Given below is some of the ways to better manage the various moral hazards associated with insurance

Segregation of claims among various classes of policies like females, juveniles etc, cause wise analysis of
various claims, policy year wise analysis would provide valuable inputs to the industry on the extent of
prevalence of moral hazard and the need for putting in place any additional safeguards to resist the
same. Also intermediary wise claims experience data may provide valuable inputs to the industry on the
need for taking up sound reporting standards and the base for monitoring the market conduct practices
of various classes of intermediaries.

GENERAL TRENDS IN THE GENERAL INSURANCE SECTOR AND THE IMPACT OF PRIVATIZATION AND DE
TARIFFING

How de tariffing has brought about a change from competition purely on price to competition by
introducing various add on covers and customizing the products based on what the customer needs.

The insurance industry was opened up to the private players in the year 2000. The introduction of
brokers as intermediaries occurred in the year 2003. The Indian regulators introduced a road map in
2005 for a smooth transition from a regulated market to a free pricing regime.

The process of de tariffing in fact was first attempted in 1994 when marine cargo business was de
tariffed which resulted in abysmally low premium being quoted for the risk cover. The marine insurance
policies almost ended up becoming accommodations for the still under tariff fire insurance policies with
the premium plummeting to as low as rupee 1. Then freedom in pricing was initiated in first phase in
January 2007 for all policies except motor third party, though this initial price freedom was restricted
within abroad range from the tariff rates. (There are two sections under the motor policy one for
damage to the vehicle termed as own damage (OD) and insuring against liability to third party death/
disablement caused by the vehicle termed as third party (TP)). Tariff restrictions were no longer binding
and the insurers were permitted to structure the premiums based on guided tariffs filed by the
individual companies. However during the first phase there was no freedom to vary the wordings of the
terms, conditions, warranties, clauses etc. Hence the competition was mostly on price. Full price
freedom was given to launch innovative products for the retail customers.

The final step would be to permit insurance companies to launch innovative products for the retail
customers. The second phase of de tariffing scheduled to commence on April 2008 took of partially only
in January 2009. This introduced limited freedom in fire engineering and motor OD section. The
following relaxations were permitted to the insurers. Insurers were permitted to file variations in
deductibles from those prescribed under fire, engineering, Industrial all risks (IAR) and motor OD subject
to written disclosures and acceptance by the insured person. Insurers are allowed to file add on covers
above the erstwhile tariff covers in fire, engineering, IAR and motor OD with additional premium. Loss of
use and motor depreciation under motor OD insurance are some examples. However the insurers are
still not permitted to abridge the scope of the standard covers beyond the options permitted in the
erstwhile tariffs. Revised products have to be approved by file and use guidelines and can be offered to
the person already holding the policy on renewal and not on cancellation of the existing policy midterm.

As a result of these liberalized guidelines new customer friendly policies have come into places some
examples are
Nil depreciation policy: In the earlier policies depreciation is deducted from the claim at the settlement
of loss. For instance royal Sundaram has a depreciation waiver clause in which depreciation is not
applied to plastic and metal parts in case of claim.

Incidental expenses cover: This cover provides for the payment of incidental expenses like hiring a taxi
to go reach home, emergency repair of parts etc after vehicle meets with an accident.

Personal effects: This cover will reimburse loss of personal items kept in the car. Royal Sundaram has
introduced an add on cover for loss of baggage kept in the insured vehicle.

Rental car benefit: Insured is deprived of the use of the vehicle after accident or theft. This cover
provides for use of an alternative vehicle.

Waiver of EMI/ loan installments: This cover is to provide for payment of loan installment to the
financiers during the period of accidental repairs.

Fleet discount: Fleet discount on premium for individuals who own more than one car.

Now looking at the implication of this de tariffing in the fire and engineering sectors

As per the liberalized guidelines smaller industries would be able to avail which where hitherto reserved
for larger industries. Advantage of IAR is the cover of machinery breakdown insurance along with fire
cover. The IAR is suitable for industries which can absorb larger deductibles i.e. those who want to cover
only bigger losses and not smaller ones. Insurers are permitted to have IAR products for all industries
including petrochemical without the earlier minimum limit of 100 Crores.

From perspective of engineering insurance mobile equipments that were to be covered on a case to
case basis can be made available as a class rated policy now.

Now to consider the impact of de tariffing from the perspective of fire insurance housebreaking risk can
be covered as an extension to fire insurance of residential property thereby avoiding the necessity of
taking separate burglary cover.

Spontaneous combustion loss or damage to property insured caused by its own fermentation can be
covered as an extension. Boiler explosion are also proposed to be covered as an extended cover to the
fire policy.

These add on covers show general insurance is moving from competition purely on price to competition
on benefits which is a good sign for the customer. This indicates that the companies that would emerge
successful in the future would be the ones that will offer greater value for money.
References
Appendix A

INSURANCE BASICS

Assets are insured because they are likely to be destroyed or made non functional through an accidental
occurrence. Such possible occurrences are termed as perils. Risk means there is a probability of loss or
damage. The mechanism of insurance is that people who are exposed to the same risks come together
and agree that if one of the members suffers a loss the others will share the loss and make good to the
person who lost. For example there are around 20 Television sets in a street each having a worth of say
20,000. Now it has been found out that in a year 2 television sets are stolen in the street. The total
worth of the loss is 40000. Now instead of this 40000 being borne by 2 families it is borne by 20 families
by paying out a premium of 2000 each which is enough to pay the loss. The insurance companies who
provide insurance are termed as insurers and the customers who avail the policy and protected against
the risk are called the insured. The amount 2000 which is the share of contribution by each of the
families is termed as premium. The compensation paid out to those who suffer is termed as a claim.

When the insured pays the premium and the insurer accepts the risk a contract of insurance is
concluded. The policy issued by the insurer is the evidence of the contract. No contract is valid unless
there is due consideration. The premium is the consideration from the insured and the promise to
indemnify is the consideration from the insurer. An insurance contract like all other contracts shall
satisfy all the conditions of acceptance, objects of the contract must be legal and the parties to the
contract should be competent.

Principle of utmost good faith

The parties to commercial contract are required to observe good faith. In insurance also good faith is
required to be observed but it is more onerous. The proposer who seeks insurance has a legal duty to
disclose all material information about the subject matter of insurance to the insurers who do not have
this information. This would help the insurer to make a decision whether to accept the risk and also to
fix up the rates of premium based on the nature of risk. Proposal forms are designed to obtain all
material information about the subject matter of insurance.

Insurable interest

The owner of the property has a right under law to effect insurance on the property if he is likely to
suffer financially when the property is lost or damaged. This legal right to insure is called insurable
interest. Without insurable interest the contract of insurance will be void. Some examples of insurable
interest are ownership of property is a clear example of insurable interest; a bank has insurable interest
in the property on the mortgage of which loans have been given. Cargo owners both sellers and buyers
have insurable interest in the goods owned by them.

Assignment

The transfer of rights and liabilities of an insured to another person who has acquired insurable interest
in the property acquired.
Indemnity

The object of the principle of indemnity is to place the insured after a loss in the same financial position
as far as possible as he occupied immediately before the loss. Every policy of insurance contains a sum
insured which is the maximum limit of liability under the policy. Some policies are subject to excess and
franchise clause. In either case if the loss does not reach the excess or franchise limit then it is not
payable at all. The difference between excess and franchise is that if the loss exceeds the limit the
excess only is payable under the excess clause and entire loss is payable under the franchise clause.

Subrogation

The transfer of rights and remedies of insured to the insurer who has indemnified the insured in respect
of the insured to the insurer who has indemnified the insured in respect of the loss. If the insured has
any rights of action to recover the loss from any third party who is primarily responsible for the loss, the
insurer having paid the loss is entitled to avail him of these rights to recover the loss from the third
party. The effect is that the insured does not receive more than the actual amount of his loss and any
recovery affected from the third party goes to the benefit of the insurer to reduce the amount of his
loss.

Contribution

An insured may have several insurances on the same subject matter. If he recovers his loss under all
these insurance he will make a profit out of the law. Common law has therefore evolved the principle of
contribution which may be defined as the right of insurers who have paid a loss under a policy to
recover a proportionate amount from other insurers who are liable for the same loss.

Proximate cause

The object of insurance is to provide indemnity for such losses as are caused by insured perils. If the
stocks are burnt, then the cause of loss is fire which is covered under a fire policy and hence the claim is
payable. If the stocks are stolen the loss is not payable under the fire policy as burglary is not a peril
covered. Thus it is important to determine the cause of loss to decide whether the loss is payable or
not. If the loss is brought about by only one event it would be no problem to decide the question of
liability. But in actual situations, the loss may be the result of two or more causes, acting simultaneously
or one after the other. Then, it becomes necessary to choose the most important, most effective and
most powerful cause which has brought about the loss. This cause is termed as the proximate cause and
all other causes are considered as being remote.

Underwriting

It is the process of evaluating risk and exposures of a particular client. They decide how much coverage
the client should receive, how much they should be paying for it, or whether to accept the risk and
insure them. Underwriting typically involves measuring the risk and charging a premium appropriate to
the risk.
INSURANCE DOCUMENTS

Proposal form

This form contains questions designed to elicit all material information about the particular risk
proposed for insurance. In marine insurance proposal forms are not used. However to obtain
information query forms are used.

Policy forms

Policy is a document which provides evidence of the contract of insurance. It shall clearly state the name
and address of the insured, full description of the property, location of the property, period of
insurance, sum insured, perils covered, premium payable, any excess/ franchise, policy terms, conditions
and warranties, any special conditions attaching to the policy, provision for cancellation etc.

The policy form contains conditions called express conditions which are necessary to regulate the
contract. They serve various purposes like condition which provides for cancellation of policy etc.

The policy form also contains exclusions which explicitly state the situations under whish the insurer
would not cover the losses of the insured. For example if stocks are burnt by a bomb dropped by an
enemy country then the loss is caused by a war which is an excluded peril under the standard fire policy.

Warranties

Apart from express conditions there are express warranties incorporated in the policy. Having accepted
a risk for a certain premium and subject to certain terms and conditions the insurer would like to ensure
that the risk remains throughout the duration of the policy, the same as it existed at the time of the
proposal. For this purpose warranties are inserted at the time of proposal. Example of warranty in
burglary insurance warranted that the premises are guarded by a watchman at all times.

Cover notes

Cover notes are issued when the negotiations for insurance are in progress and it is necessary to provide
cover on a provisional basis or when the premises are being inspected for the actual rate applicable.
Pending the preparation of the policy, the cover note is issued as evidence of protection for a temporary
period of time and to prove that cover is in force.

Endorsements

It is the practice of insurers to issue policies in a standard form containing certain perils and excluding
certain others. If it is intended at the time of issuing the policy to modify the terms and conditions of the
policy, it is done by setting out the alteration in a memorandum which is attached to the policy and
forms part of it. This memorandum is called an endorsement. Alterations to the policy could typically
include variations in sum insured, change of insurable interest, extension to cover additional perils etc.

Renewal notice
Insurers issue a renewal notice one month in advance of the date of expiry of policy inviting renewal of
the policy.

Claim form

In general a claim form is designed to elicit full information regarding the circumstance of the loss such
as date of loss, time, cause of loss, extent of loss etc. The other questions vary from one class of
insurance to another.

Survey Report

Certain documents are to be submitted by the claimants or secured by the insurers to substantiate
claims. Example for fire insurance a report from the fire brigade would be necessary, in cyclone damage
a report from the meteorological department, in burglary a report from police etc.
Appendix B

Year 2000-01

S.No. Date of Name of the Company

Registration

1 23.10.2000 Royal Sundaram Alliance Insurance

Company Limited

2 23.10.2000 Reliance General Insurance Company

Limited.

3 04.12.2000 IFFCO Tokio General Insurance Co. Ltd

4 22.01.2001 TATA AIG General Insurance Company

Ltd.

5 02.05.2001 Bajaj Allianz General Insurance Company

Limited

6 03.08.2001 ICICI Lombard General Insurance

Company Limited.

Year 2002

S.No. Date of Name of the Company

Registration

7 15.07.2002 Cholamandalam General Insurance

Company Ltd.

8 27.08.2002 Export Credit Guarantee Corporation Ltd.

9 27.08.2002 HDFC-Chubb General Insurance Co. Ltd.

Year 2007

S.No. Date of Name of the Company

Registration

10 03-08-2007 Apollo Munich Health Insurance

Company Limited

11 04-09-2007 Future Generali India Insurance

Company Limited

12 16-11-2007 Universal Sompo General Insurance

Company Ltd.

Year 2008

S.No. Date of Reg. Name of the Company

13 8.05.2008 Shriram General Insurance Company Limited,

14 27.06.2008 Bharti Axa General Insurance Company Ltd.

15 15.12.2008 Raheja QBE General Insurance Co. Ltd

Some other companies that have entered the general insurance arena recently are

S.No. Name of the Company

16 Max Bupa Health Insurance company Ltd

17 SBI general insurance company Ltd

18 Star health and Allied insurance company Ltd.

Appendix C

VARIABLES SOME EXAMPLES

Geographic
Region In the USA these are Pacific, Mountain, and West North Central.
West
South Central, East North Central, East South Central, South.
Atlantic, Middle Atlantic, New England. Each country has its own
Variation on this.
County size A, B, C, D.
City size Under 5,000; 5,000-20,000; 20,000-50,000; 50,000-100,000;
100,000-250,000; 250,000-500,000; 500,000-1,000,000
Density Urban, suburban, rural.
Climate Northern, Southern.
Demographic
Age Under 6, 6-11, 12-19, 20-34, 35-49, 50-64, 65+.
Gender Male, female
Family size 1-2, 3-4, 5+.
Family life cycle Young, single; young, married, no children; young, married,
youngest
child under 6; young, married, youngest child 6 or over; older,
married with children; older, married, no children under IS;
older,
Single; other.
Income Under $10,000; $10,000-15,000; $ 5,000-20,000; $20,000-
30,000;
$30,000-50,000; $50,000-75,000; $75,000 and over.
Occupation Professional and technical; managers, officials and proprietors;
clerical, sales; craftsmen, foremen; operatives; farmers; retired;
Students; homemakers; unemployed.
Education Grade school or less; some high school; high school graduate;
some
College; college graduate.
Religion Catholic, Protestant, Jewish, other.
Race White, Black, Asian, Hispanic, other.
Nationality American, British, French, German, Scandinavian, Italian, Latin
American, Middle Eastern, Japanese, other
Psychographic
Social class Lower lowers, upper lowers, working class, middle class, upper
Middles, lower uppers, upper uppers.
Lifestyle Achievers, believers, strivers.
Personality Compulsive, gregarious, authoritarian, ambitious.
Behavioral
Purchase occasion Regular occasion, special occasion.
Benefits sought Quality, service, economy.
User status Non-user, ex-user, potential user, first-time user, regular user.
Usage rate Light user, medium user, heavy user.
Loyalty status None, medium, strong, absolute.
Readiness state Unaware, aware, informed, interested, desirous, intending to
buy.
Attitude towards product Enthusiastic, positive, indifferent, negative, hostile
Appendix D
VARIABLES
Demographics
Industry
Company size
Location
Operating variables
Technology
User/non-user status
Customer capabilities
Purchasing approaches
Purchasing function organizations
Power structure
Nature of existing relationships
General purchase policies
Purchasing criteria
Situational Factors
Urgency
Specific application
Size of order
Personal characteristics
Buyer-seller similarity
Attitudes towards risk
Loyalty
SOME EXAMPLES
Which industries those buy this product should we
focus on?
What size companies should we focus on?
What geographical areas should we focus on?
What customer technologies should we focus on?
Should we focus on heavy, medium or light users,
or non-users?
Should we focus on customers needing many
services or few services?
Should we focus on companies with highly
centralized or decentralized purchasing
organizations?
Should we focus on companies that are
engineering dominated, financially dominated or
marketing dominated?
Should we focus on companies with which we
already have strong relationships or simply go
after the most desirable companies?
Should we focus on companies that prefer
leasing? Service contracts? Systems purchases?
Sealed bidding?
Should we focus on companies that are seeking
quality? Service? Price?
Should we focus on companies that need quick
delivery or service?
Should we focus on certain applications of our
product rather than all applications?
Should we focus on large or small orders?
Should we focus on companies whose people and
values are similar to ours?
Should we focus on risk-taking or risk-avoiding
customers?
Should we focus on companies that show high
loyalty to their suppliers?
Appendix E

Questionnaire on Customer perception

1) Do you own health/personal accident/motor/home insurance?

a) Yes b) No
If Yes Please specify the insurance owned ____________ from
________________ Company.
2) Do you plan to avail a policy in future?
a) Yes b) No
If so please specify what policy _________________
3) I did not avail a policy because I was not approached for a policy
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
4) I did not avail a policy because I don’t find the need for it
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
5) I feel insurance is a cost incurring process with no immediate benefit
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
6) I have a basic distrust towards insurance product
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
If you agree please specify the reason for distrust a) bad experience of relatives and friends
b)reading complaints about the insurance sector c) product is difficult for me to understand
d)marketing is too intrusive (I get irritated with people calling me often) e) any other reason
please specify _____________________
7) I selected the above company because it was suggested by my dealer/broker/agent/ bank/credit
card /any other intermediary to me.
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
Please specify the intermediary through which you availed the policy ______________
8) I selected the company because it is well known for its prompt claims payment.
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
9) I selected the company because it is offers a cover most suited to my needs
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
10) I selected this company because of the ease with which I could avail a policy.
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
11) I chose this company because it offers the lowest premium.
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
12) I chose this company because my friend who owns a policy with the same company suggested it
to me/ read about it through blogs
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
13) I chose this company because it has tie up with big companies and therefore evokes trust
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
14) How satisfied are you with the company chosen?
a) Very satisfied b) satisfied c) neutral d) dissatisfied e) very dissatisfied
 15) Am satisfied with the claims recovery process of the company
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
16) Am satisfied with the way grievances are addressed in the company
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
17) Terms , conditions and exclusions of the policy was clearly explained to me
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
18) Every time my premium was increased/changed I was clearly explained the reason for it.
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
19) I feel good about receiving wishes and small gifts from the company on various occasions
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
20) Any other reason for choosing this particular company please
specify___________________________
21) I don’t want to renew my policy with the same company.
a) Strongly agree b) agree c) neutral d) disagree e) strongly disagree
If you don’t want to renew please state the reason _____________________________
22) I choose the health insurance product because it had cover for
a) Out patient coverage b) Critical illness c) senior citizens d) cashless hospitalization e) I chose it
because my intermediary suggested it

Distribution channel perception and some general perception

(In each of the parameters listed below rank each of these channels on a scale of 1 to 5, example: If you
feel that the agent is a highly trustworthy source give it agent a 5 for trustworthiness and a 1 if you feel
agent is not a trustworthy source)

Parameter Agent Broker Interaction Interaction Bank/Direct Dealers Word of

with with sale mouth
company company Associates (Hearing
employee employee about
over over phone the
internet product
through
trusted
sources
)
Trustworthiness
/Credibility
Ease of availing
policy
Clarity about
benefits of the
product
Ease of
recovery of
claims
The channel
from which I
would most
likely purchase