Explain price risk and its types.

Explain Risk management methods

Answer
Price risk is the risk of a decline in the value of a security or a portfolio that can be
minimized through diversification, unlike market risk. It is lower in stocks with
less volatility such as blue-chip stocks. Investors can use a number of tools and
techniques to hedge price risk, ranging from relatively conservative decisions such
as buying put options to more aggressive strategies including short selling
and inverse ETFs.
Types
iquidity Risk: The possibility that the cash available to a bank exceed by
customers calls on it, or the income generated by a corporation, along with the
funds raise through equity or debt issuance and/or borrowing, are insufficient to
cover operating commitment forcing the corporation to stop operations. It can also
be through thin markets sometimes resulting from distractions, which result in the
unavailability of hedging instruments at economic prices.
Most institutions generally face two types of liquidity risk, the first relates to the
depth of markets for definite products and the second to funding the financialtrading activities of the firm. For example, some firms have contract limits for every
futures contract based on the volume of turnover and outstanding. Senior managers
have to develop methods to identify and monitor the firms liquidity sources to
ensure it can meet the funding demands of its activities. This is achieved by
examining the differences in maturities between assets and liabilities and by
analysing future funding requirements based on various assumptions, including the
firms ability to settle down positions quickly in adverse conditions.
Credit Risk (Counterparty Risk): This risk may occur due to the non-payment by
the borrower or counterparty such that loans, bonds or leases will not be repaid on
time or in full or the counterparty will fail to perform on an obligation to the
institution. The likelihood of this happening is calculated through the repayment
record or default rate of the borrowing entity, determination of market conditions,
and default rate of a loan portfolio of similar borrowers.
Sovereign Risk: This is the risk that a government action will interfere with
repayment of a loan or security. This is measured, by the past performance of the
nation and present default rate and situation such as political, social and economic.
It is controlled by severe credit analysis, limiting exposure as a percentage of
portfolios, and incorporating covenants into the loan documents.

Interest Rate Risk: The risk due to changes in interest rates results in financial
losses related to asset or liability management. It is measured by past and present

market instability and the profile of the asset or liabilities of the bank and its
possible exposure through gap management.
Foreign Exchange Risk: The risk caused due to the rate change in the foreign
exchange that cause foreign exchange denominated assets to fall in value or foreign
exchange denominated liabilities to rise in expense. It is measured by marking-tomarket the importance of the asset, or raise of the liability, by the actual movement
of the exchange rate between the currency of the asset or liability and the currency
of the booked or pending asset or liability, or country of earnings return.
Capital Risk: The risk may incur if the institution has insufficient capital for losses,
which can result in bankruptcy or regulatory closure. It has a sub-optimal equitydebt capital profile which negatively impacts the market price of its stock. It is
controlled by conditions and reserves from past earnings sufficient enough to cover
operating losses; and by evaluating the loan, securities and trading operations
accurately for any pending losses or deterioration.

Risk management process

Regardless of the type of risk being considered, the risk management process
involves several key steps:
1. Categorize all significant risks.
2. Estimate the potential frequency and severity of losses.
3. Improve and choose methods for managing risk.
4. Execute the risk management methods selected.
5. Keep track of the performance and suitability of the risk management methods
and strategies on a continuous basis. Figure gives a flow chart of the risk
management process.
Risk management methods
These methods are not mutually exclusive and may be largely categorized as:
Loss control
Loss financing
Internal risk reduction
Usually, loss control and internal risk reduction include the decisions to invest (or
forgo investing) resources to cut down the expected losses. These are theoretically
similar to other investment decisions, such as a companys decision to purchase a
new plant or an individual deciding to buy a computer. Loss financing decisions are
the decisions concerned about the manner of paying for the losses if they do occur.
Loss control
The activities which decrease the expected cost of losses by lowering the
occurrence of losses and/or their extent are referred as loss control. Sometimes loss
control is also termed as risk control. Usually, the actions basically affecting the
frequency of losses are referred as loss prevention methods. Actions primarily
influencing the severity of losses that do occur are often called loss reduction
methods.

Loss financing
Methods applied to obtain funds for paying for or offsetting losses that occur are
termed as loss financing (sometimes called risk financing). There are four broad
methods of financing losses:
(1) Retention,
(2) Insurance,
(3) Hedging, and
(4) Other contractual risk transfers.
Internal risk reduction
In addition to loss financing methods that allow businesses and individuals to
reduce risk by transferring it to another entity, businesses can reduce risk internally.
There are two major forms of internal risk reduction:
(i) Diversification, and
(ii) Investment in information.
Flow Chart

Figure: Risk Management Flow Chart

Question 2 An organization is a legal entity which is created to do some activity of

some purpose. There are elements of a life insurance organization. Explain the
following elements of life insurance organization.

Solution: An organization is a legal entity which is created to do some

activity or to achieve some purpose. It is created under some law, which
gives it a status and identity. Because of the identity, the organization is
considered to be a person in law. Therefore, it can enter into contracts,
be sued in courts, accumulate property and wealth, and do business, in
the same manner as any individual can do. The way activities are
grouped lead to the formation of offices, departments and sections
Responsibilities (for results) have to be clarified and authorities (to take
decisions and utilize resources) have to be defined. When all these are
clarified, there will be people holding various positions, with
designations, occupying places in offices and with clear authority and
responsibilities.
Important activities
The important activities in a life insurance company are:

Procuring applications or proposals from prospective buyers of life

insurance.

Scrutinizing and making decisions on the proposals for insurance.

This is called underwriting.

Issuing the policy document, incorporating the terms and

conditions of the insurance cover.

Keeping track of the performance of the insurance contract by

either party, like payment of premium or payment of benefits.

Attending to the various requirements that may arise during the

term of the contract like nominations, assignment, alteration of
terms, surrenders and payment of claims.

Other supporting activities like advertising, investment of funds,

maintenance of accounts, management of personnel, processing of
data, compliance with regulations and laws.

Internal organization
Within an insurance office, the following departments are likely to exist.
These may be located in the branch office (as in the LIC now) or in the
Divisional / Head offices (as in the LIC earlier and new companies now).
These departments are to be identified by the activities being carried out,
although they may be called by different names.

Business development or agency or marketing concerned with the

development of agency force, market development and business
growth.

New business, which would receive, scrutinize and take

underwriting decisions on the new proposals for insurance and also
issue the policy.

Policy-holders servicing which would be concerned with

administration of the policy, monitoring premium payments, lapses
and revivals, attending to alterations, nominations, assignments,
surrenders, loans and claims.

Accounts to handle the financial flows.

The following departments are likely to be centralized in the Head

Offices, as they require specialized skills and also because they impact
the whole organization.

Actuarial, studying the experience, doing valuations, declaring

bonuses, monitoring the adequacy of premiums, setting underwriting
standards, studying mortality rates, etc.

Investments of funds, studying the opportunities for maximizing

returns.

Advertisement, publicity and public relations.

Departments like personnel, HRD, training, purchases (of stationery and

office equipment), administration for office upkeep, etc., will be found in
all offices, sometimes catering to that office alone or sometimes catering
to the entire organization.
The distribution system
Life insurance is not compulsory under law. General insurance is
frequently purchased due to compulsions under the law (Motor Vehicles
Act) or from the financiers demanding insurance as collateral security. In
the case of life insurance, the compulsion is negligible. There is often a
tendency of deferring the decision. Death as a practical possibility is
either ignored or not considered imminent. The requirements of today
take priority over the requirements of tomorrow. Even if not absolutely
essential, the requirements of today seem to be more compelling. Life
insurance has to be secured when in the best of health.

Otherwise, the insurer will refuse to grant the insurance cover. Agents
are necessary for selling life insurance due to the following reasons:

Insurance is an idea that has to be explained and its usefulness has

to be clarified personally.

Each prospective buyer has special needs and requires specialized

solutions.

Personalized guidance can be given only when there is a live

interaction with the agent.

Significant amount of money is to be set aside immediately and

regularly for a long term in future, for a benefit, which is vague and
far away.

The insurer has to assess the risk involved in every proposal for
insurance, for which the necessary information would include details
on personal life styles, habits, family, etc. The agent, who gets to
meet the proposer closely, is in a position to provide some of this
valuable information.

Functions of the agent

The major function of the agent is to solicit and acquire life insurance
business for the insurer, which has appointed him as an agent. While
proposing a person for insurance, the agent has to assess his needs and
his paying capacity, make all reasonable enquiries about the health and
habits of the life to be insured and get proof of his age to be admitted at
the commencement of the policy. If medical examination is required, the
agent has to arrange for the same. After the proposal becomes a policy,

the agent has to ensure continuance of the policy by the means of timely
payment of renewal premiums, get nomination or assignment effected
and help in prompt settlement of claims.
Agents of the LIC are not authorized to collect premiums other than the
first premium along with the proposal. If a policyholder pays premium to
agent, the LIC does not accept any liability for the same. The premium is
treated as paid only when it is paid into the office. However, in practice
agents do collect premiums from policyholders to ensure promptness in
payment. Some agents may also pay the premium first, and then collect
the same from the policyholder.
When he does so, he is functioning as the agent of the policyholder. The
insurer will not accept any liability for these actions of the agents
Question 3 Explain the doctrine of indemnity, doctrine of subrogation and
warranties and its types and classification.

Doctrine

This comes from the Latin word doctrina, and is the codification of beliefs, or some teachings.
This can be more easily understood if you apply it to religion, where it is easy to see that a belief
system is built up on a doctrine of things that have been taught.
Doctrine can also apply to the legal world, and in this case makes reference to a point of law
that has been developed over many years and so becomes a belief. Examples of this are the
doctrine of fair use; or the doctrine of self defense. These are ideas that have been finely tuned
over the years and so now seem to be set in stone.

Indemnity

Indemnity is a sum of money that is paid as compensation to another party. The most obvious
compensation that springs to mind in our ambulance chasing society is the compensation that is
paid for an injury or damage that has been caused by the negligence of somebody else, but

there are other types of compensation that are also indemnity.

This means that indemnity can cover things such as replacing faulty goods, or repairing
something that is faulty. It can mean refunding items that were bought for cash, and it can mean
reinstatement.

Doctrine of Indemnity

Doctrine of Indemnity, therefore, is the rules that govern indemnity and those that have been
developed and honed over the years so that they cover all eventualities. It also means that they
are set in statute and so are clearly defined.

Explanation of doctrine of subrogation- The doctrine of subrogation refers to the right of

the insurer to stand in the place of the insured, after settlement of a claim, in so far as the
insureds right of recovery from an alternative source is involved. If the insured is in a
position to recover the loss in full or in part from a third party due to whose negligence the
loss may have been precipitated, his right of recovery is subrogated to the insurer on
settlement of the claim. The insurers, therefore, recover the claim from the third party. The
right of subrogation may be exercised by the insurer before payment of loss.

ESSENTIALS OF DOCTRINE OF SUBROGATION

1. Corollary to the principle of indemnity: The doctrine of subrogation is the
supplementary principle of indemnity. The latter doctrine says that only the actual value of
the loss of the property is compensated, so the former follows that if the damaged property
has any value left, or any right against a third party the insurer can subrogate the left
property or right of the property because in the insured is allowed to retain, he shall have
realized more than the actual loss, which is contrary to principle of indemnity.
2. Subrogation is the Substitution: The insurer, according to this principle, becomes
entitled to all the rights of insured subject matter after payment because he has paid the
actual loss of the property. He is substituted in place of other persons who act on the right
and claim of the property insured.
3. Subrogation only up to the amount of payment: The insurer is subrogated all the
rights, claims, remedies and securities of the damaged insured property after
indemnification, but he is entitled to get these benefits only to the extent of his payment.
The insurer is thus, subrogated to the alternative rights and remedies of the insured, only up
to amount of his payment to the insured. In the same way if the insured is compensated for

his loss from another party after he has been indemnified by his insurer he is liable to part
with the compensation up to the extent that insurer is entitled to. In one USA case is was
made clear If the insurer having paid the claim to the insured, recovers from the defaulting
third party in excess of the amount paid under the policy, he has to pay this excess to the
insured through he may charge the insured his share of reasonable expenses incurred in
collecting.
4. The Subrogation may be applied before payment: If the assured got certain
compensation from third party before being fully indemnified by insurer, the insurer can
pay only the balance of the loss.
5. Personal insurance: The doctrine of subrogation does not apply to personal insurance
because the doctrine of indemnity is not applicable to such insurance. The insurers have no
right of action against the third party in respect of the damages. For example, if an insured
dies due to negligence of a third party his dependent has right to recover the amount of the
loss from the third party along with insurance policy amount. No amount of the policy
would be subrogated by the insurer.
A warranty is a type of guarantee that a manufacturer or similar party makes regarding the
condition of its product. It also refers to the terms and situations in which repairs or
exchanges will be made in the event that the product does not function as originally
described
or
intended.
types
Consumer guarantees

Consumer guarantees are your customers rights whenever you sell goods and
services. These rights used to be known as a statutory warranty. You can not deny a
customer their consumer guarantee rights.
If goods or services fail to meet a consumer guarantee, you must fix the problem. We
call this a remedy. This will usually be as a refund, repair, exchange or repeat service.
Consumer guarantees apply for the reasonable life of the product, even if other forms of
warranty have run out.
Find more details about consumer guarantees that apply to goods
Find more details about consumer guarantees that apply to services
Express warranties

You must honour any promise you make about your goods or services. These might be
spoken or written claims.
These include:

whether your goods or services are high quality

what state they are in, and how long this will last

whether they are in good condition, and how long they will stay like that

whether they do their job properly, and for how long

what specific characteristics they have, and how long these will last.

Find more details about express warranties

Warranties against defects

Also known as manufacturers warranties.

You might offer a warranty against defects (also called a manufacturers warranty) when
a customer buys your goods. A warranty against defects doesnt promise anything about
the product itself. It simply makes a promise to fix faults or problemsfor example, you
might give the customer a replacement.
This type of warranty usually comes with a time limit.
You must give the customer the warranty in writing. It will need to:

state the terms clearly and legibly in plain language

provide the warrantors name, business address, phone number and email

outline any time limits

explain details and procedures (such as authorised repairers or transportation)

tell your customers that the warranty wont affect their consumer guarantees.

If you provide a warranty against defects you must comply with the details in that
warranty.
A warranty against defects is provided in addition to consumer guarantees and does not
limit or replace them.

Example

A consumer buys a deck chair. The chair comes with a written warranty, which states
that the manufacturer will replace the chair if it breaks within 2 years. The chair falls
apart after 18 months. The consumer is entitled to the remedy of having the chair
replaced.
Extended warranties

You might offer your customer an extended warranty. This extends the customers time
to make a claim on an express warranty or a warranty against defects. Consumer
guarantees may entitle your customer to a repair, refund or replacement even if a
warranty period is over.
A consumer does not need to purchase an extended warranty if it only covers a length
of time that it would be reasonable to expect the goods to last for anyway. If you sell
extended warranties, you must ensure you are offering something of value to the
customer and not something that is already their legal right.
A business must be fair and honest about this type of warranty. You are not allowed to:

put undue pressure on the customer to buy it

use unfair tactics to sell it

mislead anyone about their legal rights.

Question 4
Give short notes on :
Evidence and claim notice.- Evidence is also referred to as support or facts. Evidence is just
that: facts. Unlike claims, facts are indisputable. You may have heard the redundant phrase
"true facts." The phrase is redundant because all facts are true: that's what makes them
facts.
Evidence is what you use in persuasive writing to support the claims that you present.
Is it true that, in "Where I Lived, and What I Lived For," "Henry David Thoreau believed
that preoccupation with insignificant events caused nineteenth-century Americans to
overlook what is important in life"? The only way to find out is by examining the evidence.
The evidence we should consider is easy to locate. We simply need to review Thoreau's essay

and look for comments he makes that may support our claim. If we find such comments,
these would be the facts we could use to support our interpretation.
Again, the evidence we use to argue such a claim falls under the category of "facts," things
that are true and therefore cannot be argued or disputed. The easy way to see if you are
presenting a statement of fact as evidence is to ask yourself if the statement is indisputably
true. Is the statement below a fact and therefore possibly good evidence for a claim about
Thoreau's essay?
Thoreau says, "Men think that it is essential that the Nation have commerce, and
export ice, and talk through a telegraph, and ride thirty miles an hour, without a
doubt, whether they do or not; but whether we should live like baboons or like men,
is a little uncertain."
Of course, this is a statement of fact. It is undoubtedly true that Thoreau made this
comment in "Where I Lived, and What I Live For," so the sentence above might be good
evidence to support a claim about Thoreau's essay. If someone questions if the sentence is
true, the skeptic simply needs to open the book and read the passage. (But the quotation
marks around the words above should make clear that these are Thoreau's actual words.)
Now, whether or not Thoreau's statement is a claim or a fact, whether people do or do not
know if they should "live like baboons or like men," is irrelevant. Thoreau, in fact, is making
a claim, but this is Thoreau's claim, not the claim of the writer using Thoreau's words as
evidence. The fact that Thoreau made the comment, though, is indisputable.
All good arguments must be supported by a strong foundation of facts. An essay filled with
claims but no supporting evidence is not really an argument at all. It is instead a collection
of the writer's interpretations or beliefs, and readers will have no reason to believe the
interpretations or beliefs is they are not well supported with facts.
How many facts do you need to support each claim that you make in a persuasive essay?
Good question. To some extent, the amount of evidence you need depends on the claim you
are trying to support. However, I think it's a good idea to present at least three facts to
support each claim. One fact is almost never enough, and it's difficult to build a strong
argument with only two facts. After all, I might be able to take one or even two statements
that Thoreau makes and argue for all kinds of different meanings, ignoring the possibility
that these meanings may not be suggested anywhere else in all of Thoreau's writings. Would
you like someone drawing conclusions about beliefs you might have based upon
only one statement you made at some point in your life?
Three facts seems to me the point when readers will start to be convinced that you have a
well-supported interpretation. If you use at least three facts to support your interpretation
of Thoreau's ideas, you are saying that Thoreau makes at least three different statements
that all suggest the same thing to you, at least three statements that support your
interpretation of Thoreau's beliefs. Could we draw a conclusion about some belief you may
have based upon three statement you have made that suggest this belief? Well, we are more
likely to be accurate than if we rely on only one statement to draw our conclusion.

Presenting
Evidence
When you are using evidence to support your interpretation of a text, the evidence you take
from the text itself can be presented in three different ways, outlined below.
1. A Quotation: When you quote from the text, you copy the words exactly as they
appear in the original, and you put quotation marks around the words you take from
the text. Quotation marks tell readers that what they see in your essay is exactly what
they would see in the original text.
2. A Paraphrase: When you paraphrase, you put into your own words an idea that the
writer conveys in the text. The paraphrase in itself should not convey any
interpretation of the writer's ideas; instead, the paraphrase should be your own way
of stating the exact idea that the writer conveys. In general, when you paraphrase,
you use about the same number of words to convey the idea that the writer uses in
the text. You should not put quotation marks around words you paraphrase, but you
should make sure that you are conveying the same meaning that the writer conveys
and that you really are using your own words to convey the idea.
3. A Summary: When you summarize, you use considerably fewer words to convey a
writer's ideas. A writer might make a good point that you could use as evidence to
support your interpretation of the text, but the writer might develop this idea over
several paragraphs. You would not want to bring such a long quotation into your
essay, nor would you probably want to devote a large section of your essay to
paraphrasing everything that the writer says. Instead, you could reread the
information from the text carefully and then summarize the writer's points, perhaps
using only a few sentences to convey an idea that the writer develops in a page or
more. Of course, you need to make sure that your summary is accurate, that it really
does convey concisely the points that the writer develops. When you summarize, you
should not put quotation marks around your own words.
In general, writers will use a combination of quotations, paraphrases, and summaries when
developing an interpretation of a text. Again, only words copies exactly from the original
should go in quotation marks in your essay. In some cases, you might use paraphrases and
summarizes to put the writer's ideas into your own words, but you might include a few key
words or phrases from the original as part of your paraphrase or summary. If this is the
case, you need to make sure that those key words and phrases from the original are in
quotation marks.

Claims -In a work of persuasive writing, the writer presents "claims," which
are propositions that convey the writer's interpretations of or beliefs about
something. Claims are not facts but rather conclusions that the writer draws from

facts. The claims below convey interpretations of Henry David Thoreau's

essay "Where I Lived, and What I Lived For," a selection from Thoreau's Walden.

Thoreau believed that preoccupation with insignificant events caused

nineteenth-century Americans to overlook what is important in life.

Thoreau felt that technology was the primary cause of distress for nineteenthcentury Americans.

Thoreau thought that we should follow the ways of nature to lead more
fulfilling lives.

Thoreau felt that each individual has the responsibility to understand and
reject the "shams and delusions" that are too often accepted as truths.

Thoreau demonstrated his misanthropy (hatred of human beings) in his essay

and saw no choice but to abandon civilization.

Notice how we could argue over the truth of the statements presented above.
This fact alone should help you determine if you are presenting a claim. A claim,
by its very nature, includes the possibility of at least two different, sometimes
opposing, points of view. After all, there would be no reason to argue for a belief
or interpretation if the subject of the belief or interpretation provided for only one
possible point of view.
I think that most of the claims listed above could be argued well with specific
evidence from Thoreau's essay, but I would be a little suspicious of one of the
claims and downright skeptical about another one. To me, Thoreau seems
disturbed by the emphasis on technological "improvements" in his day, such as
the telegraph and railroad, but does he really believe that technology is the
"primary cause of distress"? Right now, I really don't know, so I would wait to see
how well the writer could support this interpretation before I would make up my
mind. I approach the last claim with more skepticism, the claim that "Thoreau
demonstrated his misanthropy (hatred of human beings) in his essay and saw no

choice but to abandon civilization." Right now, I don't see Thoreau as a

misanthrope, but I would be open to reading this writer's interpretation, examining
carefully the way the writer argues this claim.
As you come up with claims for your essays, make sure of two things:
1.

2.

that the claims really do convey your interpretation and are not simply
statement of fact (see below), and

that the claims can be supported with specific evidence.

Subrogation - Subrogation is a term denoting a legal right reserved by most insurance

carriers. Subrogation is the right for an insurer to legally pursue a third party that caused an
insurance loss to the insured. This is done as a means of recovering the amount of the
claim
paid
by
the
insurance
carrier
to
the
insured
for
the
loss.

Salvage- Damaged property an insurer takes over to reduce its loss after paying a claim.
Insurers receive salvage rights over property on which they have paid claims, such as
badly-damaged cars. Insurers that paid claims on cargoes lost at sea now have the right to
recover sunken treasures. Salvage charges are the costs associated with recovering that
property
Question 5ly explain the marketing mix (7 Ps) for insurance companies
Marketing --Mix For Insurance Companies The to best meet the needs of its
targeted market. The Insurance business deals in selling services and therefore due
weight-age in the formation of marketing mix for the Insurance business is needed.
The marketing mix includes sub-mixes of the 7 P's of marketing i.e. the product, its
price, place, promotion, people, process & physical attraction. The above mentioned
7 P's can be used for marketing of Insurance products and banking services, in the
following manner: 1. PRODUCT A product means what we produce. If we produce
goods, it means tangible product and when we produce or generate services, it
means intangible service product. A product is both what a seller has to sell and a
buyer has to buy. Thus, an Insurance company sells services and therefore services
are their product. In India, the Life Insurance Corporation of India (LIC) and the
General Insurance Corporation (GIC) are the two leading companies offering
insurance services to the users. Apart from offering life insurance policies, they also

offer underwriting and consulting services. 2. PRICING With a view of influencing

the target market or prospects the formulation of pricing strategy becomes
significant. The pricing in insurance is in the form of premium rates. The three main
factors used for determining the premium rates under a life insurance plan are
mortality, expense and interest. The premium rates are revised if there are any
significant changes in any of these factors. Mortality (deaths in a particular area)
When deciding upon the pricing strategy the average rate of mortality is one of the
main considerations. In a country like South Africa the threat to life is very
important as it is played by host of diseases. Expenses: The cost of processing,
commission to agents, reinsurance companies as well as registration are all
incorporated into the cost of installments and premium sum and forms the integral
part of the pricing strategy.
2 | Journal of Management and Science - JMS
2249-1260 (Printed)

ISSN 2250-1819 (Online) / ISSN

Interest:The rate of interest is one of the major factors which determines people's
willingness to invest in insurance. People would not be willing to put their funds to
invest in insurance business if the interest rates provided by the banks or other
financial instruments are much greater than the perceived returns from the
insurance premiums. 3.PLACE This component of the marketing mix is related to
two important facets
i) Managing the insurance personnel, and ii) Locating a
branch. The management of agents and insurance personnel is found significant
with the viewpoint of maintaining the norms for offering the services. This is also to
process the services to the end user in such a way that a gap between the servicespromised and services -- offered is bridged over. In a majority of the service
generating organizations, such a gap is found existent which has been instrumental
in making worse the image problem. The transformation of potential policyholders
to the actual policyholders is a difficult task that depends upon the professional
excellence of the personnel. The agents and the rural career agents acting as a link,
lack professionalism. 4. PROMOTION: The insurance services depend on effective
promotional measures. In a country like India, the rate of illiteracy is very high and
the rural economy has dominance in the national economy. It is essential to have
both personal and impersonal promotion strategies. In promoting insurance
business, the agents and the rural career agents play an important role. Due
attention should be given in selecting the promotional tools for agents and rural
career agents and even for the branch managers and front line staff. They also have
to be given proper training in order to create impulse buying. Advertising and
Publicity, organisation of conferences and seminars, incentive to policyholders are
impersonal communication. Arranging Kirtans, exhibitions, participation in fairs and
festivals, rural wall paintings and publicity drive through the mobile publicity van
units would be effective in creating the impulse buying and the rural prospects
would be easily transformed into actual policyholders. 5. PEOPLE Understanding

the customer better allows to design appropriate products. Being a service industry
which involves a high level of people interaction, it is very important to use this
resource efficiently in order to satisfy customers. Training, development and strong
relationships with intermediaries are the key areas to be kept under consideration.
Training the employees, use of IT for efficiency, both at the staff and agent level, is
one of the important areas to look into. Human resources can be developed
through education, training and by psychological tests. Even incentives can inject
efficiency and can motivate people for productive and qualitative work.
6. PROCESS: The process should be customer friendly in insurance industry. The
speed and accuracy of payment is of great importance. The processing method
should be easy and convenient to the customers. Installment schemes should be
streamlined to cater to the ever growing demands of the customers. IT & Data
Warehousing will smoothen the process flow. IT will help in servicing large no. of
customers efficiently and bring down overheads. Technology can either complement
or supplement the channels of distribution cost effectively. It can also help to
improve customer service levels. The use of data warehousing management and
mining will help to find out the profitability and potential of various customers
product segments.
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A. Flow of activities: all the major activities of banks follow RBI guidelines. There has
to be adherence to certain rules and principles in the banking operations. The
activities have been segregated into various departments accordingly. B.
Standardization: banks have got standardized procedures got typical transactions.
In fact not only all the branches of a single-bank, but all the banks have some
standardization in them. This is because of the rules they are subject to. Besides
this, each of the banks has its standard forms, documentations etc. Standardization
saves a lot of time behind individual transaction. C. Customization: There are
specialty counters at each branch to deal with customers of a particular scheme.
Besides this the customers can select their deposit period among the available
alternatives. D. Number of stores: numbers of steps are usually specified and a
specific pattern is followed to minimize time taken. E. Simplicity: in banks various
functions are segregated. Separate counters exist with clear indication. Thus a
customer wanting to deposit money goes to deposits counter and does not mingle
elsewhere. This makes procedures not only simple but consume less time. Besides
instruction boards in national boards in national and regional language help the
customers further. 7. PHYSICAL DISTRIBUTION: Distribution is a key determinant of
success for all insurance companies. Today, the nationalized insurers have a large
reach and presence in India. Building a distribution network is very expensive and
time consuming. Technology will not replace a distribution network though it will

offer advantages like better customer service. Finance companies and banks can
emerge as an attractive distribution channel for insurance in India. In Netherlands,
financial services firms provide an entire range of products including bank accounts,
motor, home and life insurance and pensions. In France, half of the life insurance
sales are made through banks. In India also, banks hope to maximize expensive
existing networks by selling a range of products. The physical evidences include
signage, reports, punch lines, other tangibles, employees dress code etc. A.
Tangibles: banks give pens, writing pads to the internal customers. Even the
passbooks, chequebooks, etc reduce the inherent intangibility of services. B. Punch
lines: punch lines or the corporate statement depict the philosophy and attitude of
the bank. Banks have influential punch lines to attract the customers. Banking
marketing consists of identifying the most profitable markets now and in future,
assessing the present and future needs of customers, setting business development
goals, making plans-all in the context of changing environment. Conclusion In India,
banks hope to maximize expensive existing networks by selling a range of products.
It is anticipated that rather than formal ownership arrangements, a loose network of
alliance between insurers and banks will emerge, popularly known as bank
assurance. Another innovative distribution channel that could be used are the nonfinancial organisations. We cant deny the fact that if foreign banks are performing
fantastically, it is not only due to the sophisticated information technologies they
use but the result of a fair synchronization of new information technologies and a
team of personally committed employees. The development of human resources
makes the ways for the formation of human capital.
*****
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PROFITABILITY ANALYSIS OF SELECT PRIVATE SECTOR BANKS IN INDIA

Haridayal Sharma Assistant Professor, P.G. & Research Department of Commerce,
D.G.Vaishnav College, Chennai-600106.
INTRODUCTION A private sector Indian bank is one having its registered office in
India, and majority of its shares are held by private parties. India is the largest
country in South Asia with a huge financial system characterized by many and
varied financial institutions and instruments. The banking system in India, like those
in most developing economies, is characterized by the coexistence of different
ownership groups, public and private, and within private, domestic and foreign. The
Indian banking sector continues to witness domination by the public sector banks.
Over the last decade, the banking sector has witnessed the entry of many new
private sector banks, resulting in momentous changes. A noteworthy aspect of the
private sector banks is their ability to command a proportionately higher share of

net profit, even though they have a lower share in terms of customer deposits.
Private sector banks are oriented toward niche banking, unlike the public sector
banks, which meet the mass banking requirements. The strategies adopted by the
private sector banks are more in tune with those of the foreign banks, where
emphasis is given to establishing superior benchmarks of efficiency, focusing on
niche customers, providing impressive customer service and bringing about
operating efficiencies by using high-end technology. Like the foreign banks, the
private sector Indian banks recruit the finest manpower, employ state-of-the-art
technologies and are oriented towards building a strong brand image. Even though
the private sector Indian banks do not have an extensive range of branch networks,
the emerging trends indicate that they pose a great competition to the public sector
banks because of their increasing market share. The paper aims at analysing the
profitability of select private banks across the select period. REVIEW OF
LITERATURE In India, research on the performance and efficiency of Indian banking
industry is limited in the existing literature. Rammohan and Ray (2004) compared
performances of 58 public sector, private sector and foreign banks for the period
1992-2000, using a revenue maximization efficiency approach. Das (1997)
estimated the technical, allocative and scale efficiency of scheduled commercial
banks for various pre-reform and reform years. The study considered net interest
income and interest income of banks as the two outputs. In his study, Das
computed the efficiency measures for the public sector commercial banks. The
results indicate that the State Bank Group, in general, improved in terms of overall
efficiency during the 26 year period. Das found that inefficiency was technical in
nature, which showed that there is underutilization or wastage of resources rather
there being allocative inefficiency. Pal, Mukherjee and Nath (2000) studied the
efficiency of 68 major Indian commercial banks for the year 1999. They took 27
public sector banks, 20 private sector banks and 21 foreign sector banks for their
study. They also identified weak banks. Five output variables were taken. They were:
deposits, net profits, advances, non-interest income and spread. Similarly, five input
variables taken were net worth, borrowings, operating expenses, number of
employees in the country and number of bank branches in the country. Uppal
(2006) analyzed the profitability of four major bank groups, i.e., SBI and its
associates, Nationalized banks, New private sector banks and foreign banks in the
post-reforms era and concluded that there is a significant difference in the
profitability of various major bank groups. Ballabh (2002) examined various
techniques to increase the employees productivity.
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PARAMETERS FOR STUDY Profitability of the banks was analysed using selected
parameters based on review of literature. Ten parameters in the form of ratios
dealing with the profitability of a bank are i. Interest Spread ii. Adjusted Cash

Margin(%) iii. Net Profit Margin iv. Return on Long Term Fund(%) v. Return on Net
Worth(%) vi. Return on Assets Excluding Revaluations vii. Interest Expended /
Interest Earned viii.Other Income / Total Income ix. Operating Expense / Total
Income x. Selling Distribution Cost Composition HYPOTHESES The hypothesis
developed were H01: The select private sector banks do not differ in terms of the
specified profitability parameters. H02: There is no significant change in the
profitability parameters of the private sector banks during the select period.
METHODOLOGY Private sector bank that are listed and part of BSE BANKEX were
identified. The period of study for analyzing the profitability of private sector banks
was restricted to five years ranging from April 2006 to March 2011. The necessary
data for computation was obtained through the website of the concerned bank and
other websites offering financial information. For certain banks past data was not
available, such banks were not considered for the study. Finally, based on
availability of complete data, following four private sector banks are studied for a
period from April 2006 to March 2011. i. Axis Bank ii. HDFC Bank iii. ICICI Bank iv.
Kotak Mahindra bank STATISTICAL TOOLS Apart from the basic univariate analysis
like Arithmetic Mean, Standard Deviation, percentage analysis and ratios, bivariate
analysis in the form of Analysis of Variance (ANOVA) is also used. LIMITATIONS The
study has the following limitations i. The study is restricted only to large private
sector banks listed on BSE 30 sensex, and the mid size private sector banks were
excluded due to time and cost constraints. ii. Four of the large private sector banks
were considered due to non availability of data. iii. The study period is restricted to
five years. iv. Select profitability parameters were used to analyse the profitability of
these banks and other aspects such as efficiency, Networth etc were not
considered. ANALYSIS Analysis of select parameters was done in the form of analysis
of variance (ANOVA). First, ANOVA is applied to find the significance of difference in
profitability based on select parameters across the sample banks. The analysis is
given in Table1. Table 1: ANOVA of Profitability parammeters across selected banks
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Variable df F Sig. Interest Spread 3, 16 15.795 0.000

Adjusted Cash Margin(%) 3, 16 1.264 0.320 Net Profit Margin 3, 16 0.923 0.452
Return on Long Term Fund(%) 3, 16 5.185 0.011 Return on Net Worth(%) 3, 16 8.557
0.001 Return on Assets Excluding Revaluations 3, 16 9.144 0.001 Interest Expended
/ Interest Earned 3, 16 36.389 0.000 Other Income / Total Income 3, 16 o.825 0.499
Operating Expense / Total Income 3, 16 9.093 0.001 Selling Distribution Cost
Composition 3, 16 4.256 0.022
It is found that sample banks differ significantly in terms of Interest Spread, Return
on Long Term Fund(%), Return on Net Worth, Return on Assets Excluding

Revaluations, Interest Expended / Interest Earned, Operating Expense / Total

Income and Selling Distribution Cost Composition. Table 2: ANOVA of Profitability
Parameters across different years Variable df F Sig. Interest Spread 4, 15 0.519
0.723
Adjusted Cash Margin(%) 4, 15 5.218 0.008 Net Profit Margin 4, 15 9.669 0.000
Return on Long Term Fund(%) 4, 15 1.858 0.170 Return on Net Worth(%) 4, 15 1.135
0.377 Return on Assets Excluding Revaluations 4, 15 1.466 0.262 Interest Expended
/ Interest Earned 4, 15 0.342 0.845 Other Income / Total Income 4, 15 0.518 0.724
Operating Expense / Total Income 4, 15 0.580 0.681 Selling Distribution Cost
Composition 4, 15 1.619 0.221
Second, the significance of difference is identified in profitability based on select
parameters across the specific time period ranging from April 2006 to March 2011.
Table 2 provides the detailed information. It is identified that Adjusted Cash
Margin(%) and Net Profit Margin ratio showed a significant difference over the years.
CONCLUSION Since the process of liberalization and reform of the financial sector
were set in motion in 1991, banking has undergone significant changes. The
underlying objectives of these were to make the system more competitive, efficient
and profitable. A decade of economic and financial sector reforms has strengthened
the fundamentals of the Indian economy and transformed the operating
environment for banks and financial institutions in the country. In
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this background, the study is done to analyse the profitability of select private
sector banks in India. It is identified that banks differ in terms of Interest Spread,
Return on Long Term Fund (%), Return on Net Worth, Return on Assets Excluding
Revaluations, Interest Expended / Interest Earned, Operating Expense / Total
Income and Selling Distribution Cost Composition. This may be due to the
managerial and administrative differences across various banks. Further, it is
attempted to find the difference in profitability aspects of banks over a period of
time. Adjusted Cash Margin (%) and Net Profit Margin ratio showed a significant
difference over the years. It shows that there is a change in total income and net
profit. This is due to the growth and advances made by these banks over the same
period.
*****
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CUSTOMERS PERCEPTION TOWARDS MOBILE BANKING SYSTEM

1S.Sudalai Muthu, 2R.Hariharan and 3Raja.G 1Reader and 2&3Research Scholar,
Department Of Banking Technology, Pondicherry University, Pondicherry.
MOBILE BANKING Mobile banking (also known as M-Banking, mbanking, SMS
Banking etc.) is a term used for performing balance checks, account transactions,
payments, credit applications etc. via a mobile device such as a mobile phone or
Personal Digital Assistant (PDA). The earliest mobile banking services were offered
via SMS. With the introduction of the first primitive smart phones with WAP support
enabling the use of the mobile web in 1999, the first European banks started to
offer mobile banking on this platform to their customers. Mobile banking has until
recently (2010) most often been performed via SMS or the Mobile Web. Apple's
initial success with iPhone and the rapid growth of phones based on Google's
Android (operating system) has led to increasing use of special client programs,
called apps, downloaded to the mobile device.
Mobile Banking Services Banks offering mobile access are mostly supporting some
or all of the following services: Mini-statements and checking of account history
Alerts on account activity or passing of set thresholds Monitoring of term
deposits Access to loan statements Acc ess to card statements Mutual
funds / equity statements Insurance policy management Pension plan
management Status on cheque, stop payment on cheque Ordering check
books Balance checking in the account Recent transactions Due date of
payment (functionality for stop, change and deleting of payments) PIN provision,
Change of PIN and reminder over the Internet Blocking of (lost, stolen) cards
Domestic and international fund transfers Micro-payment handling Mobile
recharging
GSM
1. SMS Channel 2. WAP Portal 3. Stand alone mobile application client
CDMA
1. SMS channel
2. WAP Portal - e.g R-World
MOBILE BANKING
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Commercial payment processing Bill payment processing Peer to Peer

payments Withdrawal at banking agent Deposit at banking agent One way to

classify these services depending on the originator of a service session is the

Push/Pull' nature. Push' is when the bank sends out information based upon an
agreed set of rules, for example your banks sends out an alert when your account
balance goes below a threshold level. Pull' is when the customer explicitly requests
a service or information from the bank, so a request for your last five transactions
statement is a Pull based offering. The other way to categorize the mobile banking
services, gives us two kind of services Transaction based and Enquiry Based. So a
request for your bank statement is an enquiry based service and a request for your
fund's transfer to some other account is a transaction-based service. Transaction
based services are also differentiated from enquiry based services in the sense that
they require additional security across the channel from the mobile phone to the
banks data servers. Based upon the above classifications, we arrive at the following
taxonomy of the services listed before.
Technologies behind Mobile Banking Technically speaking most of these services can
be deployed using more than one channel. Presently, Mobile Banking is being
deployed using mobile applications developed on one of the following four channels.
IVR (Interactive Voice Response) SMS (Short Messaging Service) WAP
(Wireless Access Protocol) Standalone Mobile Application Clients
IVR Interactive Voice Response IVR or Interactive Voice Response service operates
through pre-specified numbers that banks advertise to their customers. Mobile
banking based on IVR has some major limitations that they can be used only for
Enquiry based services. Also, IVR is more expensive as compared to other channels
as it involves making a voice call which is generally more expensive than sending
an SMS or making data transfer (as in WAP or Standalone clients).
Bank initiated Push (alerts) Customer initiated
Enquiry 1.Credit / Debit Alerts 2.Threshold balance alerts 3.Bill Payment alerts
1.Balance Enquiry 2.Recent transaction history 3.Cheque Status 4.Requests
Cheque book, stop payment, A/c Statement
Financial Transactions
1.Fund Transfer 2.Bill Payment 3.Merchant payment / shopping 4.Investment
services
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SMS Short Messaging Service SMS uses the popular text-messaging standard to
enable mobile application based banking. The way this works is that the customer
requests for information by sending an SMS containing a service command to a pre-

specified number. The bank responds with a reply SMS containing the specific
information. WAP Wireless Access Protocol WAP uses a concept similar to that
used in Internet banking. Banks maintain WAP sites which customer's access using a
WAP compatible browser on their mobile phones. The figure demonstrates the
framework for enabling mobile applications over WAP. The actually forms that go
into a mobile application are stored on a WAP server, and served on demand. The
WAP Gateway forms an access point to the internet from the mobile network.
Standalone Mobile Application Clients Standalone mobile applications are the ones
that hold out the most promise as they are most suitable to implement complex
banking transactions like trading in securities. They can be easily customized
according to the user interface complexity supported by the mobile. In addition,
mobile applications enable the implementation of a very secure and reliable channel
of communication. Mobile Banking Architecture This two-part series on mobile
banking security will help Bank security officers and auditors understand the
security threats in Mobile banking. The concept is different from SMS Banking which
was discussed previously. The architecture is based on the specific requirement that
the facility is provided through GRPS, GSM, CDMA, EDGE, 3G and CSD enabled
mobile phones. With Mobile banking, the following services can be availed of, but is
not restricted to, Viewing A/C statement Viewing Cheque Status Stopping
Cheque Payment Cheque Book Request Fixed Deposit Enquiry Bill Payment
Shopping/ Purchasing items The services can be provided to customers directly
by the bank or through a 3rd party vendor and explanations for both are followed.
The setup will have a web server, application server and the database at the banks
premises. The application will ensure what services are to be provided to the
customer. Based on the banking services provided to the customer, the security of
the infrastructure has to be built in. The database can be the same as the core
banking database, having another table for mobile banking users. The customer
uses his/her mobile phones to transact through the mobile network. The mobile
banking server in turn talks to the Core banking systems of the bank for user
authentication, processing transactions, authorization, etc. This is the more popular
architecture as banks can quickly roll out their mobile banking solutions by
connecting to a 3rd party. This is also the architecture with more security issues as
interconnection with a 3rd party is involved. In this architecture, the mobile banking
servers are located at the 3rd party vendors data centre. These servers will talk to
the core banking servers of the bank through a secured channel (dedicated or
shared link) for authentication, authorization and transaction processing.
STATEMENT OF PROBLEM Six billion people are expected to own mobile phones in
the globe by 2011, there are currently 584.32 Million mobile subscribers in India and
100 million are added every year. Comprehend with the increase in mobile
penetration in India, now banks and other financial
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institutions are offering various services through mobile phones. Realizing the
importance of mobile banking services offered by banks the researcher has assume
this study to assess the customers perception towards mobile banking services.
OBJECTIVE

To study the mobile banking services offered by Indian bank. To assess and
analyze the customers perception towards M- banking services offered by banks.
To assess the main reasons for using mobile banking services offered by banks.
To find out the problems regarding usage of mobile banking. HYPOTHESIS
There is no significant relationship between personal characteristics of the
customers and their level of opinion about mobile banking. There is no significant
difference between personal characteristics of the customers and their perception
about mobile banking services. METHODOLOGY The following methodology has
been adopted to study the awareness about mobile banking services. Data and
sources Only primary data collected for the study with well prepared questionnaire.
Sampling One twenty three sample questionnaires are collected from the public
regarding the perception of mobile banking services. Convenient sampling method
has been adopted to select the sample respondents. Period of study The study
covers the period of four and half month from (05/01/11 to 2/05/11). Tools used for
Analysis All the collected data were analysed with the help of suitable statistical
tools. The following statistical tools were used to assess the awareness. Percentage
analysis Chi-Square test Garretts ranking techniques Factor analysis One way
analysis of variance and t- Test Mobile Banking Customers
1.1 Age Group of the Customers The Distribution of the sample customers based on
their age group is given in the table below.
Table - 1.1: Age group of the Customers Age Group No of Customers Percent Below
25 102 82.93 26 to 50 13 10.57 above 50 8 6.50 Total 123 100 Source: Primary data
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The table 1.1 reveals out of 123 sample customers taken for the study, 102
(82.93%) customers were in the age group is below 25. It is inferred that a vast
majority of the sample customers are youngsters. 1.2 Educational Qualification of
the Customer The Classification of the sample customers based on their
educational qualification is shown in the table below.

Table - 1.2: Educational Qualification of the Customer Educational Qualification No of

Customers Percent Post Graduate 118 95.93 Professional Degree 5 4.07 Total 123
100 Source: Primary data
From the table 1.2 it is observed that 118 (95.93%) out of 123 sample customers
are completed their Educational Qualification is post Graduation and remaining five
customers are completed Professional degree.
It is obvious that vast majority of
the sample customers are post graduation. 1.3 Occupational Status wise
classification of the customer The Distribution of the sample customers based on
their occupational status is shown in the table below. Table - 1.3: Occupational
Status of the Customer Occupational Status No of Customers Percent Private Sector
28 22.76 Business 8 6.50 Student 87 70.73 Total 123 100 Source: Primary data
The table 1.3 it is observed that 87 out of 123 collected samples occupational status
of the customers are students, rest of them work in private sector and do business.
1.4 Family Income wise classification of the Customer The Distribution of the
sample customers based on their Family Income is shown in the table below.
The above table inferred that a vast majority of the sample customers family
income is below Rs.75,000.
1.5 Bank Sector wise classification of the Customer
Table - 1.4: Family Income of the Customer Family Income (Rs in Annual) No of
Customers Percent Below 75,000 68 55.28 1,50,001 to 3,00,000 12 9.76 >3,00,000
43 34.96 Total 123 100 Source: Primary data
Table - 1.5: Bank Sector-wise Customer
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The Classification of the sample customers based on their banking sector is shown
in the table below.
It is observed from the table 1.5 says that 36 (28.15%) of the customers are
operated their financial transaction through private sector banks and the remaining
87 (70.73%) are public sector banks. 1.6 Services used by Mobile Banking Customer
Table - 1.6: Services used by Mobile Banking Customer SERVICES YES NO Ministatements and checking of account history 21 102 Alerts on account activity or
passing of set thresholds 5 118 Monitoring of term deposits 17 106 Access to loan
statements 1 122 Access to card statements 11 112 Mutual funds / equity
statements 5 118 Insurance policy management 2 121 Pension plan management
0 123 Status on cheque, stop payment on cheque 7 116 Ordering check books 1

122 Balance checking in the account 24 99 Recent transactions 13 110 Due date
of payment 2 121 PIN provision, Change of PIN and reminder over the Internet 9
114 Blocking of (lost, stolen) cards 4 119 Domestic and international fund transfers
0 123 Micro-payment handling 0 123 Mobile recharging 0 123 Commercial
payment processing 0 123 Bill payment processing 0 123 Peer to Peer payments 0
123 Withdrawal at banking agent 1 122 Deposit at banking agent 0 123 Source:
Primary data
Table 1.6 observed that utmost of the customers have says no for
services like domestic and international fund transfers, Micro-payment handling,
mobile recharging, commercial payment processing, peer to peer payments,
withdrawal at banking agent and deposit at banking agent are not used by the
customers. 1.7 Reasons for using M- Banking The Garretts ranking technique is
used to find the major reason for using m-banking facilities among the bank
customers in Puducherry. Table - 1.7 : Reasons for using Mobile Banking Service
Reasons Garrett's Score Mean Rank Instant & Immediate 8456 68.75 I
Sector No of Customers Percent Private 36 28.15 Public 87 70.73 Total 123 100
Source: Primary data
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Quality Service 5664 46.05 VI Convenient Device 5973 48.56 IV Flexible Device
5819 47.31 V Fast & Effortless 6164 50.11 III Simple Mechanism 5652 45.95 VII Less
cost 4725 38.41 VIII Time Saving 6624 53.85 II Source: Primary data
Form the above table, it is observed the Instant & Immediate has secured highest
mean score (68.75) and ranked as first, Time saving (53.85) ranked as second,
Fast & Effortless (50.11) ranked as third and Less cost has secured lest mean
score (38.41) and ranked last. From the eight reasons for using mobile banking
services, the three reasons that have secured highest mean score are given below.
Instant & Immediate Time saving Less cost 1.8 Perception towards M-Banking
To identify the perception towards M-Banking through the customer, the factor
analysis technique has been used. The fourteen factors are identified namely V1,V2,
V3..V14 is given in the table 1.9 below.
Table 1.8 reveals that KMO Measure of sampling adequacy is higher than the 0.5
which explains that the sample used in the factor analysis is adequate. Bartlett's
Test of Sphericity test shows the chi-square value is lesser than the one percent
level of significant value is 0.01. It explains, there is a highly relationship among the
variables chosen for this analysis. Table 1.9: Rotated Component Matrix(a)
Component 1 2 3 4 Educating the customer- V1 0.826 0.021 0.074 0.141 ErrorlessV2 0.813 0.084 0.315 -0.205 Meet the needs in future-V3 0.790 0.183 0.087 0.410
Low (or) No cost-V4 0.782 0.421 -0.053 0.135 Security-V5 0.699 0.169 0.303 -0.257

Easy to use-V6 0.451 0.400 0.401 0.365 Privacy is maintained-V7 -0.104 0.888
0.069 -0.157 24x7 Availability-V8 0.111 0.834 0.324 0.069 Customer friendly deviceV9 0.348 0.693 0.183 0.154
Table 1.8 : KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling
Adequacy. 0.764
Bartlett's Test of Sphericity
Approx. Chi-Square 1128.423 df 91 Sig. 000
Source: Primary data
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Satisfies all my banking needs-V10 0.287 0.686 -0.307 -0.140 Time savings-V11
0.446 0.616 0.338 0.064 Motivate the work force-V12 0.054 0.081 0.840 -0.042 Fast
& Effortless-V13 0.353 0.171 0.813 0.058 Quick decision making-V14 0.034 -0.069
-0.010 0.881 Extraction Method: Principal Component Analysis. Rotation Method:
Varimax with Kaiser Normalization. a Rotation converged in 5 iterations. Source:
Primary data
The above table 1.9 presents the rotated component matrix(a) for each variable.
The table shows that variables V1, V2, V3, V4, V5 and V6 have loading of 0.826,
0.813, 0.790, 0.782, 0.699 and 0.451on factor 1 respectively; this suggests that
factor 1 is a combination of these variables. At this point, factor 1 can be named
Convenience. In case of the factor 2 columns indicates that shows variable
V7,V8,V9,V10 and V11 have loadings 0.888, 0.834, 0.693, 0.686 and 0.616 on factor
2 respectively; this suggest factor 2 is named 24X7 & Flexible Services. In case of
the factor 3 columns indicates that shows variable V12 and V12 have loadings
0.840 & 0.813 on factor 3 respectively; this suggest factor 3 is named speed and
V14 have a single loading 0.881 on factor 4 named as immediate financial
decision.
The important the perception towards M-Banking through the
customer are given below. Convenience 24X7 & Flexible Services Speed
Immediate financial decision 1.9 Opinion about mobile information system For the
purpose of the study opinion towards MIS decided to three categories like poor,
moderate and good opinion. Intend of opinion concept the overall scores of each
and every customer calculated then customer opinion was decided based on the
mean and standard deviation derived from total score of hundred and twenty three
customers. According to this technique the distribution of the sample customers
based on their opinion about MIS is shown in the table below.
Inferred from the above table, nearly 2/5th of the customers are given that poor
opinion about MIS. Followed by 9.76% of the customers are opined that well. On the

other hand, more than half of the customers are moderately viewed about mobile
information system providing by banks. It is concluded that more number of
customers are moderately appreciate mobile information system. 1.10 Relationship
between personal characteristics of the customers & level of opinion
Table 1.10: Opinion regarding Mobile Banking System Opinion Frequency Percent
Poor 48 39.02 Good 12 9.76 Moderate 63 51.22 Total 123 100 Source: Primary data
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The Chi-square analysis was used to find the relationship between personal
characteristics of the customer and their opinion about mobile information system
or observed frequency related to expected values with the setting of hypothesis.
Ho: There is no significant relationship between age group of customers and their
level of opinion. Table 1 .11: Age group-wise Opinion level
Age group
Opinion Total Bad Good Moderate
below25 % within age
37 12 53 102 36.27 11.76 51.96 100
26 to 50 % within age
8 0 5 13 61.54 0.00 38.46 100
above 50 % within age
3 0 5 8 37.50 0.00 62.50 100
Total % within age
48 12 63 123 39.02 9.76 51.22 100 Pearson chi-square value = 4.984, df = 4,
Sig.value = 0.289 Source: Primary data It is observed from the table, the Pearson
chi-square comes out to be 0.289 which is greater than the five percent level of
significant value 0.05. Therefore, the hypothesis is accepted. Hence, it can be
concluded that there is no significant relationship between age group of the
customers and their level of opinion about mobile information system. Ho: There is
no significant relationship between educational qualification of customers and their
level of opinion. Table - 1.12: Educational qualification and opinion level
Education
Opinion Total Bad Good Moderate

Post graduate % within education

43 12 63 118 36.44 10.17 53.39 100
Professional degree % within education
5 0 0 5 100 0 0 100
Total % within education
48 12 63 123 39.02 9.76 51.22 100 Pearson chi-square value = 8.144, df = 2,
Sig.value = 0.017 Source: Primary data The table, the Pearson chi-square statistics
comes out to be 0.017 which is lesser than the five percent level of significant value
0.05. For that reason, the hypothesis is rejected. Hence, it can be concluded that
there is a significant relationship between educational qualification of the customers
and their level of opinion regarding MIS. Ho: There is no significant relationship
between occupational status of the customers and their level of opinion. Table
1.13: Occupational status and opinion level
Occupation
Opinion Total Bad Good Moderate
Private sector % within occupation
14 4 10 28 50 14.29 35.71 100
Business % within occupation

Elucidate the benefits of reinsurance. Elaborate on the application of reinsurance.

Answer

Reinsurance is an arrangement by which an insurance company

transfers all or a portion of its risk under a contract (or contracts)
of insurance to another company. The company transferring risk
in a reinsurance arrangement is called the ceding insurer. The
company taking over the risk in a reinsurance arrangement is
the assuming reinsurer. In effect, the insurance company that
issued the policies is seeking protection from another insurer, the
assuming reinsurer. Typically, the reinsurer assumes responsibility
for part of the losses under an insurance contract; however, in

some instances, the reinsurer assumes full responsibility for the

original insurance contract. As with insurance, reinsurance
involves risk transfer, risk distribution, risk diversification across
more insurance companies, and coverage against insurance risk.
Risk diversification is the spreading of the risk to other insurers to
reduce the exposure of the primary insurer, the one that deals
with the final consumer.

Application of Reinsurance
to MARINE AND AVIATION Insurance
Quota share and surplus are quite common even though
facultative method is still very widely used.
Excess of loss and stop loss arrangements are also made in
catastrophe hazards, such as, general average, total loss to
hull etc.

Application of Reinsurance to
ACCIDENT Insurance
All types of treaties are commonly used.
In cases of hazardous elements or where accumulation and
catastrophe are apprehended or in cases of liability
insurances, excess of loss or stop loss are most favored. Pools
are considered in special types of risks, such as, crop
insurance.

Facultative method is not much used unless the business is

beyond the absorption capacity of the treaty.
Facultative method is also used when the ceding company
does not wish to interest the treaties for some obvious
reasons.

Application of Reinsurance to LIFE

Insurance
The most commonly used type is the surplus treaty.
Facultative cover is also still in use although in a very limited
degree.
Pools are used for various types of impaired lives, such as,
lives suffering from heart disease, blood pressure, diabetes
etc.