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INSURANCE IN INDIA
1.1. INTRODUCTION
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private companies to solicit insurance and allowing foreign direct
investment of up to 26%, the insurance sector has been a booming
market. However, in India, the government owns the largest life-
insurance company.
1.2. HISTORY
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companies should be certified by an actuary. However, the disparity
still existed as discrimination between Indian and foreign companies.
The oldest existing insurance company in India is the National
Insurance Company Ltd., which was founded in 1906. It is in business.
1.3. ACTS
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CHAPTER 2
2.1. INTRODUCTION
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brought up with the purpose of looking after the needs of European
community and Indian natives were not being insured by these
companies. However, later with the efforts of eminent people like Babu
Muttylal Seal, the foreign life insurance companies started insuring
Indian lives. But Indian lives were being treated as sub-standard lives
and heavy extra premiums were being charged on them. Bombay
Mutual Life Assurance Society heralded the birth of first Indian life
insurance company in the year 1870, and covered Indian lives at
normal rates. Starting as Indian enterprise with highly patriotic motives,
insurance companies came into existence to carry the message of
insurance and social security through insurance to various sectors of
society. Bharat Insurance Company (1896) was also one of such
companies inspired by nationalism. The Swadeshi movement of 1905-
1907 gave rise to more insurance companies. The United India in
Madras, National Indian and National Insurance in Calcutta and the Co-
operative Assurance at Lahore were established in 1906. In 1907,
Hindustan Co-operative Insurance Company took its birth in one of the
rooms of the Jorasanko, house of the great poet Rabindranath Tagore,
in Calcutta. The Indian Mercantile, General Assurance and Swadeshi
Life (later Bombay Life) were some of the companies established
during the same period. Prior to 1912 India had no legislation to
regulate insurance business. In the year 1912, the Life Insurance
Companies Act, and the Provident Fund Act were passed.
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The first two decades of the twentieth century saw lot
of growth in insurance business. From 44 companies with total
business-in-force as Rs.22.44 crores, it rose to 176 companies with total
business-in-force as Rs.298 crores in 1938.
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1818: Oriental Life Insurance Company, the first life insurance
company on Indian soil started functioning.
1870: Bombay Mutual Life Assurance Society, the first Indian life
insurance company started its business.
1912: The Indian Life Assurance Companies Act enacted as the first
statute to regulate the life insurance business.
1956: 245 Indian and foreign insurers and provident societies are taken
over by the central government and nationalized. LIC formed by an Act
of Parliament, viz. LIC Act, 1956, with a capital contribution of Rs. 5
crores from the Government of India.
The General insurance business in India, on the other hand, can trace its
roots to the Triton Insurance Company Ltd., the first general insurance
company established in the year 1850 in Calcutta by the British.
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2.2. NATIONALIZATION
2.3. SUBSIDIARIES
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LIC Lanka is a joint venture formed in 2003 with the
Barleet Group of company, Sri Lanka.
2.4. OBJECTIVES
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• Act as trustees of the insured public in their individual and
collective capacities.
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3. LIC has won ‘NDTV Profit leadership award 2007 under life
insurance category’, ‘Outlook money award 2007 as the best life
insurer’, ‘CNBC awaaz consumer award 2007 as the best life
insurance company’, ‘Golden peacock award for excellence in
corporate governance 2007’, ‘Web 18 genius of the web award
2007 and many more’.
4. LIC adjudged number one trusted service brand to the 4th
successive year by ET Brand Equity Survey.
5. LIC has adjudged Super brand India for 2004-06 and reader’s
digest ‘Trusted brand’ Asia 2007.
6. This is the only corporation that is catering to more than 190
million satisfied policyholders in India and abroad.
7. This is one of the very few institution that pays interest on
pending maturity claims!
8. More than 2050 LIC branches all over India are connected
together to serve. You can pay your premium anywhere in the
country.
9. During its long existence, LIC has kept on updating its portfolio
by bringing in new plans depending on public requirement. More
than 50 of them are most popular and can be customized to meet
any of your requirements. LIC ULIPs have become extremely
popular due to the returns they offer.
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Most Trusted Brand 2010 Top in Insurance Category
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CNBC AWAAZ CONSUMER AWARD 2007
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2.6. POSITIVE AND NEGATIVE POINTS OF LIC
I. POSITIVE POINTS
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v. Many people argue that LIC has not been able to penetrate the
market as it has insured only 15% of the population. My point is,
in a poor country like India where there are so many people
living below the poverty line, so many people who die of
starvation, so many people who don’t have access to basic
medication, so many people who don’t have basic necessities of
life like food, shelter, education and clothing. Will such a person
first feed his children or buy Insurance? Lets not forget that a
majority of the Indian population is poor and a substantial
percentage is living below the poverty line. At a personal level I
feel that LIC has done a satisfactory job of insuring people.
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increases the expenses of LIC. Competitions for Agents are held
with Prizes being offered on the number of policies sold and not
on the number of lives insures. Therefore, many Agents are
tempted to split the policies in order to get better prizes.
However, if an agent wants the forms or sales literature, most of
the time its out of stock. But surprisingly, just a week before any
such scheme is about to close, the office is flooded with forms &
sales literature. This is disturbing.
iv. Though LIC has more than 2000 branches, they are not
systematically located. In Mumbai’s Fort area, LIC has more then
20 branches within a radius of 1.5 Kms. Whats the use? In the
suburbs where most of the people reside, there are number
branches at all. LIC has number branches in Bandra (East), Khar
(East) & (West), Santracruz (East), Vile Parle (East), Andheri
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(West), Jogeshwari (West), Mahim, Matunga etc. If LIC gives a
thought to systematic relocation of its offices, it will immensely
help the policyholders.
To sum up, I would say that LIC will never cheat a Policyholder in
payment of claim, but at the same time everyone will agree that LIC is
not responsive to the needs of the customer. If you have purchased an
LIC policy, then don’t forget to pay the premium on time and when
your policy gets matured, LIC will honestly pay your Maturity amount
on time.
The employees are sometimes rude in their behavior with the
policyholder. If a claim cheque is handed over by a courteous and
smiling employee of LIC, it ill enhance the image of LIC in the mind of
the policyholder.
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Today LIC is not just an Insurance Company, LIC is a Movement, LIC
is a Cult, LIC is a Religion. Imagine 10 lac agents and 1 lac employees
servicing 16 crores policyholders in India. You cannot deny that LIC
has become the way of lifer in India. Daily you can hear someone or
the other talking of LIC in local trains, at fish markets, at restaurants,
on News Channels, in your own offices etc.
As I earlier said, LIC has started lacking in effective leadership. If a
company like LIC starts sponsoring irrelevant awards like Zee Cine
awards which it had done 2 years ago, then it will send wrong message
in the minds of the policyholders. Imagine India’s most famous
institution sponsoring a Cine Awards function stating that it was done
to increase the brand awareness of LIC. That sounded like a big joke. It
is time that the top level officials of LIC come out of their air-
conditioned cabins and travel by public transport for sometime in order
to feel the pulse of the common man.
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it comes to settle the claims and need to improve on this front," said the
union minister of state for finance Namo Narain Meena. He was
addressing a meeting to mark the golden jubilee of LIC Agents
Association's Nagpur unit.
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distribute money. The accounts would be maintained in a regular
branch of respective banks. It is expected the entire six-lakh villages of
the country would be covered by March 2013.
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CHAPTER 3
CUSTOMER
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3.2. FACTOR WHICH INFLUENCES CUSTOMER BEHAVIOR
Awareness of needs
People may realize certain needs only when it is practically farced on
them. The need for proper and timely food and rest, is well known but
is taken seriously only when some forces them to observe some
regulations.
Creation of needs
It is possible to create needs. Examples- tea, toothpaste, detergents etc.
In all these cases a need had to be created.
Availability
Easy availability is another important factor. By making things easily
available, it is possible to create needs or in any case satisfy perceived
needs.
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Cost and finance
This is a very important aspect. If the need for say, a vaccumiser is felt
but if the price is considered to be high, there will be no market for it.
This is precisely what has happened to this product. Free availability of
finance helps in boosting demand. The demand for vehicles in the
recent years, in India, has been triggered off to a great extent by easy
availability of finance.
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Good insurers consider every lost insured a disaster.
They from and get prepared to avoid similar disasters. If an insured or a
client is hard to get, all the more glory goes with getting it. Selling is a
noble profession because it satisfies the need of a buyer just as doctor
cures a patient. Selling may be applied as common sense, but it will
need a good deal of training common sense and making practical use of
it. A sales call, which is put off till tomorrow is usually never made. Do
it now. Close the sale otherwise we are just wasting our time and
working for the competition. Work systematically and for the orders.
Nothing will be sold if all possible objections must first be overcome.
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and firm to your product. Tell more and more about your product. The
customer will not hesitate for it and that is the customer’s signature on
the bottom line.
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lasting value. Every customer is one- man advertising agency. Don’t
ever lure him with a low price and deceive him with a low quality
product, you will loose both customer and your goodwill forever.
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healthy start. However, it is yet to make huge profits, with only two of
the eight private players managing a small net profit last years, business
indicators all point to the potential for better performance with time.
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CHAPTER 4
SERVICE
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With the passing of the IRDA in 2000, the insurance market in India
has opened the private sectors. As a result, as many as 34 insurance
companies entered the market, in collaboration with foreign by the end
of 2002-03.
Insurance is a service
A service is performed not produced. These are
people oriented activities by their nature, service. They are difficult to
observe, measure and classify. There are some distinguishing
characteristics, which set it apart from goods.
Intangibility
Unlike goods, which tangible in the sense that they
have physical dimensions and attributes and can be seen, felt are not
objectively measurable. The courtesy shown be an airhostess can be felt
and measured only by a customer’s evaluation of good or bad.
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Inseparability
Production and consumption of service cannot be
separated unlike in a physical item, which is produced in a factor,
bought in a shop and used in the convenience. But a service like a
waiter’s behavior is immediate, in the presence of the customer. That’s
what is felt by the customer- not his behavior before or after or
elsewhere.
Perishability
Unlike physical goods, which could be stored for
long periods of time, services perish if not used. An advertisement, if
not seen when beamed, is lost forever.
Ownership
In service, ownership does not pass from seller to
buyer. The buyer only acquires the right to certain benefits of what the
seller offers, like the use of hotels rooms.
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4.3. SUCCESS STRATEGY IN CUSTOMER SERVICE
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value creation accorded to the customer. Customer satisfaction is
cutting edge in a competitive scenario.
Customer satisfaction does not mean giving to
customer what we think they want. It means giving to customer what
they really want and will benefit them. Any service that comes
automatically is more satisfying. When buying provisions, if the
beautiful plastic carry bag is given only after asking for it, there is
number satisfaction. Without being asked, it may produce smile.
Service by its very nature is difficult to observe, measure classify and
standardized. A service is intangible yet provides satisfaction.
I. BROKERS
There is also the system of brokers in some countries,
who canvass business and place the same with insurers, on terms that
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are standard or even negotiated. Negotiation of terms will be necessary,
if the needs of the proposer are unique and not met by the benefits
under the standard plans of insurance. A broker usually does business
for than one insurance company. He collects commission from the
insurer with whom the business is placed and does not charge the
prospect.
II. AGENT
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The agent is the main intermediary between the
customers and the insurer. The customer-agent link is stronger than the
agent-company link, which in turn, is than the customer-company link.
Customer loyalty to the insurer depends on how strong the agent’s link
with the customer is. A death claim provides a tremendous opportunity
to strengthen this link. The agent is expected to keep in constant touch
with his policyholders to become aware of the changes in his situation
including marriages, death of relatives, release of mortgages. Anyone
of them may necessitate some changes like title to policy money or
more insurance. The contact conveys a message that the agent cares foe
the policyholder and the family. An agent who is seen only at the time
the policy was being bought, is likely to be perceived as selfish, not
concerned about the policyholder’s interest and therefore, not believed.
The agent’s show of concern could also be interpreted as not genuine
and therefore, his promises not very dependable.
Training of Agents
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In order to ensure that candidates, who are genuinely
interested in the agency work, are inducted in this profession, the
corporation has introduced the concept of “Pre-recruitment
Orientation”. A small booklet entitled “seven steps to success”
specially prepared for this purpose is supplied to every prospective
agent. He is expected to study this book with the help of Development
Officer and the Officer-in-charge of the branch is required to select the
candidate only after satisfying himself that the candidates has aptitude
for selling and has acquired some rudimentary knowledge about life
insurance.
Manual of Agents
Programmed Learning Text Books.
Get the rules working for you profitably.
Servicing Manual for Agents.
5) Programmed Manual for calculation of Loan and Surrender
Values.
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Agents Policy cum Commission Register.
Book of Data Sheets.
Prospecting Guide.
True Life Insurance Stories.
1) Selling the right policy i.e. the policy that correctly answers the
individual’s needs and circumstances;
2) Selling the right policy i.e. explaining its benefits in such a way that
the policyholder would consider it necessary to maintain the policy.
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3) Inculcating the habit of saving i.e. ensuring that the policyholder
saves regularly from his income so that he has the amount necessary to
pay the premium readily available in cash when the premium falls due.
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The most important service that the agent is expected
to render immediately after the issue of a policy is in respect of
admission of age, if age has not been admitted, and the appointment of
a nominee or assignee. The agent can render after-sales service in other
matter as well, namely, alterations in the policy contract, arranging for
policy loans, conservations of policies, revival of lapsed policies,
additional insurance and finally, the settlement of claims. Instructions
on all these aspects of servicing are given in the servicing manual for
agents. Agents are advised to study them carefully.
III. CONSUMERISM
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In the past several decades, a social movement has
arisen to ensure that the voice of the customer is heard and responded
to. This has become know as consumerism and refers to policies and
activities designed to protect interest and right of consumers.
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To be heard and to be assured that their interests will receive the
consideration at appropriate time.
To seek redress against unfair trade practices or unscrupulous
exploitation of consumers.
To consumer education.
V. DIRECT SELLING
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Throughout the years, insurance has been sold mainly
through agents. As part of the strategies to reduce costs, insurers have
experimented with alternate method of selling. One of them is direct
marketing, trying to get the prospect to approach the insurer directly to
seek insurance. In various other fields of sales, direct marketing has
succeeded to bring down the costs, by eliminating the intermediary.
Eureka Forbes does not able to supply goods to their members at
cheaper rates by directly establishing contact with manufacturers. Big
retailers have also done the same.
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In case of goods, the product manufactured in the factory passes
through the wholesalers, stockiest and retailers, before it reaches the
consumer. In case of insurance, the agent is primary components of the
distribution channel. He is the equivalent of the retailer. The supervisor
of agents, by whatever name called, is an important part, because it is
he who, by creating and training agents, makes the channel effective.
New agents widen the channel.
Equally important would be the other intermediaries,
like brokers and insurance consultants. Some life insurers are trying to
eliminate intermediaries to save costs. Direct selling in one such
attempt. This is increasing in foreign countries. In India, people by and
large know about life insurance but still have a lot of wrong notions
about it. Personal contracts by agents may continue to be necessary for
quite some time.
Another method being attempted is the use of the
extensive network of branches of banks. The customers of both banks
and life insurers are practically from the same segment of population.
Through the same contract, the prospect can be helped to arrange for
both bank deposits and life insurance. There would be saving in
infrastructure costs and overheads. New insurers find this an easy way
to access vast areas. It may be possible to develop composite products
having the elements of both life insurance and banking. These have to
develop.
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VII. ADVERTISEMENT
The Regulation framed by the IRDA has made some stipulations about
advertisements by insurers as well as by intermediaries like agents.
These stipulations apply to all messages in the print and electronic
media, hoardings, Internet, leaflets, business cards etc. that urge others
to buy life insurance. These stipulations state that-
Claims made about the benefits should not be beyond the
ability of the policy to deliver
Benefit described should match policy provisions
Words or phases should not be used in such a way as to
hide minimize the cost of hazards
Important exclusions, limitations and conditions of the
contract should be disclosed sufficiently
Information should not be misleading
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Illustrations about future benefits or assumptions should
not be unrealizable in the light of current performance
Benefits that are not guaranteed should not be referred to in
ways that they are not noticed
There should be no implication of sponsorship, affiliation
or approval that does not exist
There should not be any unfair or incomplete comparisons
with products of competitors
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Any person who has attained majority and is eligible
to enter into a valid contract can insure himself/ herself and those in
whom he/ she has insurance durable interest.
Policies can also be taken, subject to certain
conditions, on the life of one’s spouse or children. While underwriting
proposals, certain factors such as policy holder’s state of health, the
proponent’s income and other relevant factors are considered by the
Corporation.
Online Payment
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Online Payment Gateway is LIC’s initiative to provide you with on
demand service within a few clicks! You can now have many of the
functionalities that were available only at a branch office, online at
your fingertips.
Here’s a simple step-by-step guide on how you can go about using this
facility:
1. Once you have enrolled your policy(s), you can click on the link
‘Pay Premium Online’ to see a list of policies whose premium is
due.
2. You have a choice to select the policies for which you want to
pay premium.
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4. At the bank site you will need to login with your net banking
username/password. On successful login, the total amount to be
paid by you towards LIC will be displayed.
Benefits
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• It is also a secure arrangement, as the policy data is not shared
between LIC and Banks over net as only the amount to be paid is
encrypted and transported. The login id at both the sites (LIC and
Bank) is known only to you.
• And above all there is no charge for you to avail this service.
At cash counter
Apart from paying the premiums at the cash counters at LIC offices,
policy holders can avail these alternate ways of paying their premium
on time.
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• Policy holders of Andhra Pradesh can now pay their premiums at
any AP ONLINE centers. Similarly, policyholders of Madhya
Pradesh can pay premiums at MP ONLINE centers.
• Paying through ATM’s: ATM’s of Corporation bank and AXIS
bank can be used to pay premiums and this facility is completely
free for all policyholders. However, the policyholders need to
pre-register by using the bank’s website.
• ECS (Electronics Clearance System) payment: Policy holders
need to register their policies so that the required premium
amount will be deducted from their accounts as and when they
fall due.
• SMS payment: Policyholders who are having a bank account in
Corporation bank can avail this method. They should register
their mobile number at any corporation bank ATM once before
using this payment mode.
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This facility is presently available at 53centers. Total places where ECS
can be offered as per RBI is 64. Through ECS premium can be
collected for ULIP and Health Insurance policies also.
3. ATM:
Available with two banks Corporation Bank and Axis Bank. Through
ATM Premium can be collected for in force policies only which are
NOT with MLY/ SSS mode or under ULIP or Health Insurance Plan.
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5. Axis Bank:
6. AP Online:
8. Comat Payment:
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Center in other state like Haryana, Sikkim, Premium started from
28/04/2009.
Admission Of Age:
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• Certificate of Baptism or Certified Extract from Family Bible, if
it contains age or date of birth.
• Certified Extract from School or College records, if age or date of
birth is stated therein.
• Certified Extract from Service Register in the case of Govt.
employees and employees of Quasi-Govt. Institutions or
• Passport issued by the Passport Authorities in India.
Payment of Premium:
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• Premium payment can also be made through ATMs of
Corporation Bank and UTI Bank.
• Premium payment can also be made through Electronic Clearing
Service (ECS) which has been launched at Mumbai, Hyderabad,
Chennai, Kolkata, New Delhi, Kanpur, Bangalore, Vijay Wada,
Patna, Jaipur, Chandigarh, Trivandrum, Ahmedabad, Pune, Goa
and Nagpur, Secunderabad & Visakhapatnam. A policyholder
having an account in any Bank which is a Member of the local
Clearing House can opt for ECS debit to pay premiums. The
policyholders wishing to use this system would have to fill up a
Mandate Form available at our Branches/DO and get it certified
by the Bank. The certified Mandate Forms are to be submitted to
our BO/DO.
• Citibank Kiosks at Industrial Assurance Building, Churchgate,
New India Building, Santacruz, Jeevan Shikha Building, Borivili
are dedicated for collection of premiums through cheques.
Days Of Grace:
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• When the days of grace expire on a Sunday or a public holiday,
the premium may be paid on the following working day to keep
the policy in force.
• If the premium is not paid before the expiry of the days of grace,
the policy lapses.
• If the policy has lapsed, it can be revived during the life time of
the life assured, within a period of five years from the date of the
first unpaid premium but before the date of maturity subject to
certain conditions.
• The Corporation offers three convenient schemes of revival viz.,
Ordinary Revival, Special Revival and Installment Revival.
Policies can also be revived under Loan-cum-Revival and SB-
cum-Revival schemes.
• Request for revival may be made to the Branch Office servicing
the policy.
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correct address facilitates better service and quicker settlement of
claims.
• Policy records can also be transferred from one Branch Office to
another for servicing, as requested by the policyholder.
Loans:
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Relief to Policyholders:
Nomination:
Death Claims:
• If the life assured dies during the term of the policy, death claim
arises. The death of the policyholder should be immediately
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intimated in writing to the Branch Office where the policy is
serviced along with the following particulars:
1. The No./s of the policy/ies
2. The name of the policyholder
3. Death Certificate issued by concerned Authority
4. The date of death
5. The cause of death and
6. Claimant’s relationship with the deceased
• On receipt of the intimation of death, necessary claim forms are
sent by the Branch Office for completion along with instructions
regarding the procedure to be followed by the claimant.
• The claims which have arisen after a period of three years are
treated as non-early claims and settled within 30 days from the
date of receipt of all requirements.
• The claims that have arisen within a period of two years from the
date of commencement of the policy, are treated as early claims
and investigation is compulsory in such cases.
• The claim is usually payable to the nominee/assignee or the legal
heirs, as the case may be. However, if the deceased policyholder
has not nominated/assigned the policy or if he/she has not made a
suitable provision regarding the policy moneys by way of a Will,
the claim is payable to the holder of a Succession Certificate or
some such evidence of title from a Court of Law.
• The Corporation grants claims concessions under certain Plans
whereby payment of full sum assured is made, subject to the
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deduction of unpaid premiums with interest till the date of death
and unpaid premiums falling due before the next anniversary of
the policy, in the event of the death of the life assured within a
period of six months or one year from the date of the first unpaid
premium, provided premiums have been paid for at least three
years and five years respectively.
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Initiatives in Policy Servicing Areas:
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It could be even pledged with LIC/ any other
financial institutions for availing a loan by you. LIC retains the
policy bond when you go in for a loan against the policy. Make sure
that the documents your searching is not one that has assigned to
LIC, or to another financial institution.
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CONCLUSION
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BIBLOGRAPHY And WIBLOGRAPHY
Website
www.icici.com
1) What are the benefits of paying your LIC premiums through net-
banking/phone-banking?
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6) How to pay the insurance premiums through the banks?
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