insurance noteis.doc
TRANSCRIPT
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Topic : Insurance Intermediaries
DISTRIBUTION OF INSURANCE PRODUCTS
Traditionally t!e li"e insurers !a#e $een solely depended on t!e a%ency distri$ution"orce& On t!e contrary t!e %eneral insurance $usiness !as depended totally on t!e
de#elopment o""icers&
Insuran
ce
company
Insuran
ce
a%ent
A%ent
T!e scenario !as $een di""erent "or t!e %eneral insurers a no a%ency commission
'as paya$le "or 'ritin% $usinesses more t!an () la*! t!us pro!i$itin% $ro*ers&In
t!e emer%in% scenario t!ere 'ill $e t!ree players + t!e $uyers 'ill consist o"
consumers employees and employers and t!e carriers or t!e policy issuers 'ill"ocus mainly on li"e and annuities property and casualties !ealt! and ancillaries
and t!e critical lin* in t!e system 'ill $e t!e distri$utor& T!ose '!o 'ill pro#ide
#alue,added and lo',cost ser#ices 'ill $e t!e sur#i#ors&
Traditional C!annel o" Distri$ution
A%ents
Bro*ers
Ne' Distri$utor C!annels
Direct mar*etin%
Corporate a%ents
Independent Financial Ad#isors
Telemar*etin%
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-e$site .ar*etin%
Retail c!ains
Interest mar*etin%
Banc assurance
INSURANCE INTER.EDIARIES AND T/EIR FUNCTIONIN0
Insurance industry in India !as $een lot o" c!an%es since t!e openin% o" t!e sector
"or pri#ate participation& Industry !as 'itnessed entry o" a plet!ora o" companies
and is to 'itness many more to "oray& T!ere !as $een a lot o" inno#ation $ot! on
t!e products "ront and also on ser#ice "ront&Inno#ation on t!e ser#ice "ront include
pro#idin% call Centre "acilities pro#idin% personali1ed "inancial plannin% tools e,
ser#icin% o" products and t!e recent one is t!e introduction o" t!ird party
administrators& T!e #arious insurance intermediaries "rom t!e consumer2s and
mar*eter2s perspecti#e are:
3a4 A%ents
3$4 Bro*ers
3c4 Sur#eyors and 5oss assessors
3d4 T!ird party administrators
3e4 Corporate a%ents
T!e Insurance Re%ulatory and De#elopment Aut!ority 3IRDA4 !as "ormulated a codeo" conduct "or Insurance Bro*ers and a%ents and prescri$ed strict penalties
includin% cancellation o" licenses "or de"ault and manipulation& T!e code o" conduct
"ormulated $y IRDA co#ers t!e entire %amut o" acti#ities includin% relations!ip 'it!
clients sales practices duty to disclose in"ormation to clients claims ad#ertisin%
su$,$ro*ers and remuneration amon% ot!ers&
SUR6E7ORS AND 5OSS ASSESSORS
Sur#eyors and loss assessors are independent pro"essionals appointed $y an
insurance company to assess t!e loss or dama%e '!en a claim is noti"ied under a
policy issued $y t!em& An insurance sur#eyor must $e duly licensed $y t!e
Insurance re%ulatory and de#elopment aut!ority& 5icenses are issued to tec!nically
8uali"ied people '!o are 8uali"ied in insurance su$9ects and are Fello's or
Associates o" t!e Insurance Institute o" India or C!artered Insurance Institute o"
5ondon or any ot!er tec!nically 8uali"ied li*e En%ineerin% %raduates or diploma
!olders in any disciplines C!artered Accountants 0raduates in .edical Sciences& A
sur#eyor a"ter discipline t!e license may $e empanelled $y any or all o" t!e
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insurance companies in India& T!e insurance company selects a sur#eyor '!o is
8uali"ied to underta*e t!e assessment o" loss or dama%e in relation to t!e policy
issued and also dependin% upon t!e estimated loss in#ol#ed&
/is duties include:
In#esti%ate and con"irm t!e cause o" loss&
Ad#ise t!e insured to ta*e %ood care o" sal#a%e to miti%ate t!e loss&
To ensure t!at insured !as ta*en all necessary steps to contain t!e loss&
Assess t!e 8uantum o" loss&
Determine t!e lia$ility o" t!e insurers 'it!in t!e "rame'or* o" t!e policy
conditions&
To act on $e!al" o" t!e insurance company in disposal o" sal#a%e to reali1e
maimum #alue&
T!ou%! t!e sur#eyor is appointed $y t!e insurance companies !e is re8uired to $e
impartial and o$9ecti#e in !is assessment "a#ourin% neit!er t!e insurers nor t!e
insured !o are t!e t'o parties to t!e contract under a policy& T!is necessitates a
!i%! de%ree o" pro"essionalism&Since lon% time t!e %eneral insurance industry 'assu""erin% on account o" satis"action 'it! t!e sur#eyor2s loss assessment report and
delay in t!e settlement o" claim& T!ere"ore IRDA !as recently issued re%ulations
pertainin% to sur#eyors and loss assessors '!ic! cate%ories on t!e $asis o" t!eir
8uali"ication practical eperience and past eperiences&
T/IRD PART7 AD.INISTRATORS
T!ird party administrators are t!e ne' $reed o" intermediaries in t!e !ealt!
insurance sector '!ic! "acilitate t!e access o" t!e policy!olders to a net'or* o"
!ospitals;nursin% !omes& T!e introduction o" '!om 'ill $ene"it $ot! t!e insured and
t!e insurer& TPA2s maintain t!e data$ases o" policy !olders and issue t!em identity
cards 'it! uni8ue identi"ication num$ers and !andle all t!e post policy issues
includin% claim settlements& T!ey run a
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TPA2s $ene"it $ot! t!e insurer and insured& For insured $etter ser#ices are o$tained
and "or insurers t!ey su$stantially reduce t!e administrati#e costs& TPA license is
%ranted to companies re%istered under t!e Companies Act (>?@ !a#in% a minimum
paid up capital o" Rs& (&)) crores 'it! "orei%n participation not eceedin%
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Co,insurance reco#ery ser#ices "or $ot! premiums and claims&
Follo' up o" ser#ices "rom reinsurance companies&
Ser#icin% o" motor policies&
Inspection and ass essment o" ris* prior to issuance o" policy&
Ar$itration ser#ices&
A0ENTS
.ost o" t!e li"e insurance companies in India "ollo' t!e traditional route o"
mar*etin% t!rou%! a%ents& In case o" pri#ate players t!ey are nomenclature as
Insurance Ad#isors;Planners& T!e companies %enerally emp!asi1e on $uildin% a
%ood "ield "orce trained to %et people t!in*in% a$out t!eir "amily2s "inancial security
and recommend appropriate policies "or t!eir needs& A%ents !a#e traditionally
pro#ed to $e !i%!ly success"ul means o" distri$ution o" insurance products& E#ery
insurance a%ent !as to o$tain a license "rom IRDA $e"ore conduct o" insurance
$usiness and "ollo' a code o" conduct prescri$ed t!ereunder&
BROERS
Insurance $ro*ers are pro"essional '!o assess t!e speci"ic insurance needs o" t!e
client e#aluate t!e ris* and su%%est a suita$le insurance co#er "or t!e clients&
IRDA2s Annual Report
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Cate%ory I6 + Composite $ro*er
Cate%ory 6 + Insurance
Some o" t!e important pro#isions as contained t!erein are:
T!e %uidelines speci"ically pro#ide t!e 8uali"ication no rms and t!eir "unctions "or#arious classes o" $ro*ers&
T!e net 'ort! re8uirement "or composite insurance $ro*ers is Rs&
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insurance $ro*in% $usiness in India and international players can contri$ute !ea#ily
in $rid%in% t!is %ap&
(c) Benefits to insurance companies: .ost ma9or %lo$al insurance companies
spend t!e ma9ority o" t!eir time !andlin% commercial and industrial ris*s& T!ey "ind
dealin% 'it! $ro*ers to $e easier and speedier $ecause only t!e intricate points orspecial re8uirements need detailed discussion& Bro*ers also assist in creatin%
insurance a'areness increasin% mar*et penetration and act as a catalyst to
increase competition and impro#e customer ser#ice&
(d) Foreign echange considerations:Bro*ers ena$le Indian insurers to
increase t!eir retention capacities $y applyin% t!eir international reinsurance s*ills
in optimi1in% t!eir reinsurance pro%rammes t!ere$y e""ectin% "urt!er sa#in% in
"orei%n ec!an%e out"lo'& In addition t!ey can assist t!e local insurers to de#elop
ne' products and accordin%ly increase t!e premium $ase&
CORPORATE A0ENTSCorporate a%ents are a ne' concept recently introduced $y IRDA to "acilitate t!e
distri$ution o" insurance products $y t!e corporates& T!e main a%enda to promote
corporate a%ents is to "acilitate $anc assurance in India& IRDA report o"
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customer pro"ita$ility measurement systems in $an*s cas! mana%ement
relations!ip 'it! corporations and t!e "act t!at $anc assurance distri$ution is more
cost e""ecti#e t!an traditional distri$ution are some o" t!e *ey attraction o" t!is
c!annel& @ re%ional rural $an*s account "or >
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communication c!annels suc! as statement inserts direct mail AT.s
telemar*etin% etc& Ban*2s pro"iciency in usin% tec!nolo%y !as resulted in
impro#ements in transaction processin% and customer ser#ice&By success"ully
minin% t!eir customer data$ase le#era%in% t!eir reputation and Gdistri$ution
systems2 3$ranc! p!one and mail4 to ma*e appointments and utili1in% Gsales
tec!ni8ues2 and products tailored to t!e middle mar*et European $an*s !a#e moret!an dou$led t!e con#ersion rates o" insurance leads into sales and !a#e increased
sales producti#ity to a ratio '!ic! is more t!an enou%! to ma*e $anc assurance a
!i%!ly pro"ita$le proposition&
Banc assurance .odels
Distri$ution Alliance + In t!is model t!e insurance company ties up 'it! t!e $an*
"or distri$ution o" insurance products&
Hoint #enture $et'een insurer and $an* + T!is type o" partners!ip $rin%s a $an*
'it! a 'ell,de#eloped customer data$ase to%et!er 'it! a lar%e li"e insurer 'it!stron% product and c!annel eperience to de#elop a po'er"ul ne' distri$ution
model& In t!is type o" #enture t!e $an* pro#ides t!e lead and its reputation and
$rand name '!ile t!e insurer $rin%s products and under'ritin% and ser#icin%
epertise& T!e partners com$ine t!eir indi#idual epertise to "or%e a $est practice
$anc assurance operation 'it! tailored products tailored distri$ution and lead
%eneration mec!anism& T!is model may $e applied to SBI 5i"e Insurance& It !as
access to some (( million !olders o" term deposits t!rou%! (=))) $ranc!es o" t!e
State Ban* o" India 3SBI4 '!ic! ser#e as a ready plat"orm and a ready distri$ution
c!annel& Ot!er players suc! as IN0 6ysya are also loo*in% at t!is option& T!ey see*
to set,up $ranc!es in many main cities mo#in% %radually into t!e semi,ur$an andrural areas&
5e#era%ed li"e distri$ution: Under t!is model t!e li"e insurance company ta*es
t!e lead in partners!ip '!ile se#eral $an*s act as corporate a%ents to pro#ide
access to middlemar*et leads&
5e#era%ed $an* distri$ution: Under le#era%ed $an* dist ri$ution it is t!e $an*
t!at ta*es t!e lead as in t!e partners!ip '!ile t!e li"e insurance companies supply
products "or its $anc assurance e""orts& T!is model calls "or a lar%e $an* 'it! a
ran%e o" e""ecti#e distri$ution c!annels 3$ranc!es AT.s mail p!ones4&Eac! model
!as its o'n particular ad#anta%es !o'e#er t!ey all s!are common "eatures '!ic!can create competiti#e ad#anta%e:
En!anced c ustomer ser#ice + pro#idin% con#enience simplicity and #alue in a
one stop en#ironment&
5e#era%e o" eistin% assets + suc! as #alua$le o"ten #ast customer data$ases&
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.ore income + %enerated "rom an increase in o#erall product sales and $etter
customer retention&
0reater producti#ity + a $anc assurance sales person2s producti#ity !as $een
measured to $e ?? !i%!er t!an t!e a%ency e8ui#alent&
uality sales culture + t!at is customer dri#en&
Impro#ed sta"" retention + !i%!er le#els o" satis"action amon% sales sta"" t!rou%!
%ood trainin% and remuneration sc!emes&
Cross,sellin% opportunities + stren%t!enin% customer relations!ip
mana%ement&ey issues to $e addressed to ma*e $anc assurance success"ul are:
Bot! t!e $an* and insurance company need to impro#e e""ecti#eness o" t!e Sales
c!annels $y identi"yin% and %ainin% access to tar%et customers addin% pus! to
mar*et pull trainin% o" sales sta"" di""erentiatin% per"ormance "rom competition
and controllin% cost per unit sold&
Product needs to $e Tailored to meet t!e need o" t!e customer $ase and "or ne'
distri$ution c!annels&
Communication needs to $e streamlined to address any culture issues $et'een
t!e $an* sta"" and t!e insurance sta""& Similarly di""erences in compensation
structures need to $e !andled sensiti#ely $e"ore t!ese start a""ectin% t!e moral o"
t!e $ranc! sta""&
Traditional processes need to $e redesi%ned not only to ta*e ad#anta%e o" t!e
ne' tec!nolo%y $ut also to a""ect a streamlined system $et'een $an* and t!einsurance company& Tec!nolo%y can $e used to put e""ecti#e use in sales support
"unction sta"" trainin% smoot!er processin% and online inte%rated in"ormation
system&
In"ormation system needs to $e re#ie'ed and per"ormance measurement
parameters need to $e specially adapted to $anc assurance&
S*ills need to $e de#eloped and reallocation o" assets and resources + "inancial
and !uman may also $e re8uired $et'een t!e $an* and insurance company&