EXECUTI VE SUMMAR Y

EXECUTIVE SUMMARY

The aim of my project is to understand the Distribution Channel followed by Reliance Life Insurance, and to suggest improvements. Towards that end exploratory Research method was chosen for eliciting information from various stake holders including consumers, employees and management. To understand the Distribution channels, I interacted with the industry mentor, referred many journals on distribution channel and went through the training material provided by the organization. I did used Questionnaire in order understand the Distribution channel. After doing much of exploratory based Research I came to the conclusion that the company adopts three kind of distribution channel: Agent Advisors Bank assurance & Agency

In the end I have also given a recommendation to the company for expanding their Distribution channel with the help of Internet because it is likely to be the most important Distribution channel in the future world as the Government is also encouraging it,s use.

INTRODUCTION TO PROJECT

INTRODUCTION TO PROJECT
About the Insurance Sector in India: Insurance sector is an opportunity for India. This business is growing at the rate of 18-22 per cent annually. Presently it covers market of RS.450 billion. Together with banking sector it contributes about 7% to GDP. Gross premium collection is about 2% of GDP. Still 80% of Indian population is without life insurance. This is an indicator that growth potential for the insurance sector is immense. Insurance sector contribute a lot in economic development. It provides long term fund for infrastructure development. It is estimated that over the next ten years India would require investments of the order of one trillion US dollar. The Insurance sector, to some extent, can enable investments in infrastructure development to sustain economic growth of the country. There are two legislations that govern the sector-

The Insurance Act- 1938

The IRDA Act- 1999.

HISTORICAL PERSPECTIVE
In 1818 it was conceived as a means to provide for English Widows. The Bombay Mutual Life Insurance Society started its business in 1870. It was the first company to charge same premium for both Indian and non-Indian lives. The Oriental Assurance Company was established in 1880. Till the end of nineteenth century insurance business was almost entirely in the hands of overseas companies. Insurance regulation formally began in India with the passing of the Life Insurance Companies Act of 1912 and the provident fund Act of 1912. Several frauds during 20's and 30's sullied insurance business in India. By 1938 there were 176 insurance companies. The first comprehensive legislation was introduced with the Insurance Act of 1938 that provided strict State Control over insurance business. The insurance business grew at a faster pace after independence. The Government of India in 1956, brought together over 240 private life insurers and provident societies under one nationalized monopoly corporation and Life Insurance Corporation (LIC) was born. Nationalization was justified on the grounds that it would create much needed funds for rapid industrialization.

4 IS FOR INSURANCE
10

Insurance has four major characteristics that greatly affect the marketing and distribution.

1. Intangibility:
Unlike products, services cannot be held, touched, or seen before the purchase decision thus, they should be made tangible to a certain extent. Marketers should tangibilize the intangible to communicate service nature and quality. This can be done through: Paperwork Brochures.
Insurance is a guarantee against risk and neither the risk nor the guarantee is tangible. Hence, insurance rightly come under services, which are intangible. Efforts have been made by the insurance companies to make insurance tangible to some extent by including letters and forms . Service quality is often inconsistent. This is because service personnel have different capabilities, which vary in performance from day to day. This problem of inconsistency in service quality can be reduced through standardization, training and mechanization. In insurance sector, all agents should be trained to bring about consistency in providing service or, the insurance process should be mechanized to a certain extent. E.g.: the customers can be reminded about the payment of premium through e-mails and sms instead of agents. 2.

Inseparability:

Services are produced and consumed simultaneously. Consumers cannot and do not separate the deliverer of the service from the service itself. Interaction between consumer and the service provider varies based on whether consumer must be physically present to receive the service. In insurance sector too, the service is produced when the agent convinces the consumer to buy the policy and it is said to be consumed when the claim is settled and the policyholder gets the money. In both the above cases, it is essential for the service provider (agent) and the consumer (policy holder) to be present.

3. Inventory:
No inventory can be maintained for services. Inventory carrying costs are more subjective and lead to idle production capacity. When the service is available but there is

11

no demand, cost rises as, cost of paying the people and overhead remains constant even though the people are not required to provide services due to lack of demand. In the insurance sector however, commission is paid to the agents on each policy that they sell. Hence, not much inventory cost is wasted on idle inventory. As the cost of agents is directly proportionate to the policy sold.

IMPORTANT MILESTONES IN THE LIFE INSURANCE BUSINESS IN INDIA:

12

INSURANCE SECTOR REFORMS

In 1993, Malhotra Committee- headed by former Finance Secretary and RBI Governor R.N. Malhotra- was formed to evaluate the Indian insurance industry and recommend its future direction. The Malhotra committee was aimed at creating a more efficient and competitive financial system suitable for the requirements of the economy keeping in mind the structural changes currently underway and recognising that insurance is an important part of the overall financial system where it was necessary to address the need for similar reforms. In 1994, the committee submitted the report and some of the key recommendations included: i) Structure: Government stake in the insurance Companies to be brought down to 50%. Government should take over the holdings of GIC and its subsidiaries so that these subsidiaries can act as independent corporations. All the insurance companies should be given greater freedom to operate. ii) Competition: Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter the sector. No Company should deal in both Life and General Insurance through a single entity. Foreign companies may be allowed to enter the industry in collaboration with the domestic companies. Postal Life Insurance should be allowed to

13

operate in the rural market. Only one State Level Life Insurance Company should be allowed to operate in each state. iii) Regulatory Body: The Insurance Act should be changed. An Insurance Regulatory body should be set up. Controller of Insurance- a part of the Finance Ministry- should be made independent iv) Investments: Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to 50%. GIC and its subsidiaries are not to hold more than 5% in any company (there current holdings to be brought down to this level over a period of time) v) Customer Service: LIC should pay interest on delays in payments beyond 30 days. Insurance companies must be encouraged to set up unit linked pension plans. Computerization of operations and updating of technology to be carried out in the insurance industry. The committee felt the need to provide greater autonomy to insurance companies in order to improve their performance and enable them to act as independent companies with economic motives. For this purpose, it had proposed setting up an independent regulatory body- The Insurance Regulatory and Development Authority. Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in Parliament in December 1999. The IRDA since its incorporation as a statutory body in April 2000 has fastidiously stuck to its schedule of framing regulations and registering the private sector insurance companies. Since being set up as an independent statutory body the IRDA has put in a framework of globally compatible regulations. The other decision taken simultaneously to provide the supporting systems to the insurance sector and in particular the life insurance companies was the launch of the IRDA online service for issue and renewal of licenses to agents. The approval of institutions for imparting training to agents has also ensured that the insurance companies would have a trained workforce of insurance agents in place to sell their products.

14

PRESENT SCENARIO
The Government of India liberalized the insurance sector in March 2000 with the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Under the current guidelines, there is a 26 percent equity cap for foreign partners in an insurance company. There is a proposal to increase this limit to 49 percent. The opening up of the sector is likely to lead to greater spread and deepening of insurance in India and this may also include restructuring and revitalizing of the public sector companies. In the private sector 15 life insurance companies have been registered. A host of private Insurance companies operating in life segments have started selling their insurance policies since 2001. Table shows the current market players in the life Insurance Industry (Source IRDA).

COMPANIES PRESENTLY IN LIFE INSURANCE SECTOR

Sr. No. 1 2 3 4 5 6

Name of the Company Bajaj Allianz Life Insurance Co. Limited Bharti Axa Life Insurance Co. Ltd. HDFC Standard Life Insurance Co. Ltd ICICI Prudential Life Insurance Co. Ltd ING Vysya Life Insurance Co. Ltd. Life Insurance Corporation of India

15

7 8 9 10 11 12 13 14 15

Max New York Life Insurance Co. Ltd Met Life India Insurance Co. Pvt. Ltd. Kotak Mahindra Old Mutual Life Insurance Ltd. SBI Life Insurance Co. Ltd. Tata AIG Life Insurance Co. Ltd. Reliance Life Insurance Co. Ltd. Aviva Life Insurance Co. India Pvt. Ltd. Sahara India Life Insurance Co. Ltd. Shriram Life Insurance Co. Ltd.

16

RESEARCH OBJECTIVE

17

RESEARCH OBJECTIVE

STATEMENT OF PROBLEM
The main objective of my project is to know the channel distribution of Reliance Life Insurance and to recruit quality agent advisors for the company for providing life Insurance solutions to the customers. Agent advisors play a vital role in the growth of company with respect of companys earnings as well as they create value for the organization after achieving some milestones. Agent advisors are an integral part of the team and sales manager assigned to them help them to groom in terms of personality development, selling skills and handling objections of customers.

RESEARCH PLAN

(1) Definition of problem Identification of distribution channel of Reliance Life Insurance (2) Research objectiveObjective of my research is following1) To find out various channel of Reliance Life Insurance. 2) To find out contribution in distribution of Agents and Other channel.

3) To find out contribution of new distribution channel as: -

18

(a) (b)

Corporate Direct Sales Associate (DSA) Bank assurance

(3) Research parameters (a) Objective is sub divided into the following research parameters. 1) 2) 3) 4) No of policy sold annually Type of policies The no of calls made The geographical area covered

(b) Selling technique. 1) 2) Understanding of product Facilities used by him whilst selling insurance

(c) Motivational factors- it comprises 1) 2) 3) 4) Training and development Performance appraisal Relation they share with the company Monetary benefit

(4) Need for the study To gain an insight on the functioning of the distribution of policy and contribution by agents, Corporate Direct Selling Associates (DSA) and other channels of Reliance

19

Life Insurance that will aid the competitors in this sectors to devise an effective distribution strategy. (5) Variables studied Respondents are followings 1) Insurance Advisors (Sells Agents) of Reliance Life Insurance 2) Middle level Executive

20

COMPAN Y PROFILE
21

COMPANY PROFILE

FOUNDER
Few men in history have made as dramatic a contribution to their countrys economic fortunes as did the founder of Reliance, Sh. Dhirubhai H Ambani. Fewer still have left behind a legacy that is more enduring and timeless.

As with all great pioneers, there is more than one unique way of describing the true genius of Dhirubhai: The corporate visionary, the unmatched strategist, the proud patriot, the leader of men, the architect of Indias capital markets, the champion of shareholder interest. But the role Dhirubhai cherished most was perhaps that of Indias greatest wealth creator. In one lifetime, he built, starting from the proverbial scratch, Indias largest private sector enterprise. When Dhirubhai embarked on his first business venture, he had a seed capital of barely US$ 300 (around Rs 14,000). Over the next three and a half decades, he converted this fledgling enterprise into a Rs 60,000 crore colossusan achievement which earned Reliance a place on the global Fortune 500 list, the first ever Indian private company to do so. Dhirubhai is widely regarded as the father of Indias capital markets. In 1977, when Reliance Textile Industries Limited first went public, the Indian stock market was a place patronised by a small club of elite investors which dabbled in a handful of stocks. Undaunted, Dhirubhai managed to convince a large number of first-time retail investors to participate in the unfolding Reliance story and put their hard-earned money in the Reliance Textile IPO, promising them, in exchange for their trust, substantial return on

22

their investments. It was to be the start of one of great stories of mutual respect and reciprocal gain in the Indian markets. Under Dhirubhais extraordinary vision and leadership, Reliance scripted one of the greatest growth stories in corporate history anywhere in the world, and went on to become Indias largest private sector enterprise. Through out this amazing journey, Dhirubhai always kept the interests of the ordinary shareholder uppermost in mind, in the process making millionaires out of many of the initial investors in the Reliance stock, and creating one of the worlds largest shareholder families.

ABOUT RELIANCE
Reliance Life Insurance Company Limited is a part of Reliance Capital Ltd. of the Reliance - Anil Dhirubhai Ambani Group. Reliance Capital is one of Indias leading private sector financial services companies, and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Reliance Capital has interests in asset management and mutual funds, stock broking, life and general insurance, proprietary investments, private equity and other activities in financial services. Reliance Capital Limited (RCL) is a Non-Banking Financial Company (NBFC) registered with the Reserve Bank of India under section 45-IA of the Reserve Bank of India Act, 1934. Reliance Capital sees immense potential in the rapidly growing financial services sector in India and aims to become a dominant player in this industry and offer fully integrated financial services. Reliance Life Insurance is another step forward for Reliance Capital Limited to offer need based Life Insurance solutions to individuals and Corporates.

23

CORPORATE OBJECTIVE
At Reliance Life Insurance, we strongly believe that as life is different at every stage, life insurance must offer flexibility and choice to go with that stage. We are fully prepared and committed to guide you on insurance products and services through our well-trained advisors, backed by competent marketing and customer services, in the best possible way.

It is our aim to become one of the top private life insurance companies in India and to become a cornerstone of RLI integrated financial services business in India.

CORPORATE MISSION

To set the standard in helping our customers manage their financial future.

1.3

PRODUCT AND SERVICES

BELOW ARE FEW OF THE PLANS THAT ARE OFFERED BY RELIANCE LIFE INSURANCE.

INSURANCE PLANS AVAILABLE 1. Products (Individual Plans) Savings (Endowment)

2. Reliance Endowment Plan

(formerly Divya Shree)

24

3. Reliance Special Endowment Plan

(formerly Subha Shree)

4. Reliance Cash Flow Plan

(formerly Dhana Shree)

5. Reliance Child Plan

(formerly Yuva Shree)

6. Reliance Whole Life Plan

(formerly Nithya Shree)

Pensions
7. Reliance Golden Years Plan

(formerly Bhagya Shree)

Investments 8. Reliance Market Return Plan

(formerly Kanaka Shree)

9. Risk / Protection

10. Reliance Term Plan

(formerly Raksha Shree)

Products (Group / Corporate Plans

25

11. Risk (Protection) Reliance Group Term Assurance Policy (formerly Group Term Assurance Policy (formerly EDLI Scheme) 12. Pensions
a. Reliance Group Gratuity Policy

(formerly Group Gratuity Policy)

b. Reliance Group Superannuation Policy

(formerly Group Superannuation Policy)

26

RESEARCH METHODOLOGY

27

RESEARCH METHODOLOGY

(1) Data

Collection :-

It consists of primary data and secondary data. Primary data was collected by holding semi- structured and focused individual interviews of sales Agent, executive, Consultant and Personnel associated with Corporate Direct sales associate. For the primary data Interviewed 35 insurance personnel, out these 15 were Executives including Consultants, Executive (Managerial), and associated Executive from other tied organization. Where as secondary data was obtained by different records, magazines, newspapers, inter nets and various pamphlets of Reliance Life Insurance

(2) Type of Research

The type of research used for our study was an exploratory research, as the objective of the research was to have in depth understanding of the sales agents. However I covered a specific list of topics and sub areas. This was done in the form of Open-ended question, where the timing, exact wordings and time allocated to each question area was left at the interviewers Since the research was qualitative, the need for formal and rigid questionnaire was not felt. discretion open structure ensured that inspected facts or attitudes could perused easily. (3) Sample

size :-

I have selected sample on the basis of performance of the premium collected by agent at least 25 policies per year. Other has been taken from the branch Manager and Consultant, branch Executives. All are taken randomly.

28

ANALYSIS & FINDINGS

29

ANALYSIS & FINDINGS

After the interview of 20- agents and 15- officer I have gathered much Information that can be classified in the following ways i.e.

On the basis of Age.

Graph 1.1

9 8 7 6 5 4 3 2 1 0 18-25 26-35 36-45 46 above Agents Executives

TABLE 1.1 Age No of Agents No. Of Executives Or Other 2 8 4 1 15 18-25 4 26-35 8 36-45 5 46 above 3 total 20

Analysis of this information make us clear that maximum no of Insurance advisor comes from age group 25-35. It has inference that Maximum agents are matured enough to deal and live in the organization.When I the look age group of officers we can find it easily that maximum come from matured and experienced age range i.e. 26-35. It has implication that company is administered by well experience young people.

30

On the basis of Education.

Graph 1.2

12 10 8 6 4 2 0 No of agent No. of Consultant executives Others HSC Degree PG Professional degree

TABLE 1.2 Education level HSC Degree PG Professional Degree No of Agents No of Executives Consultants No Others Total 3 1 2 13 4 1 3 10 3 4 4 3 3 14 20 4 5 5 34 total

I can have many inferences from the above information as follows on the basis of Education.

31

50% of Agent comes from degree level, 20% from professional degree and rest from others 80% Executive comprises professional degree. 60% Consultant/ manager has professional degree and other from, Degree, and PG. Other executive to whom I met have 60% professional degree. When I assess total staff (agents with officers) I draw inferences that out of total, approximately 90% staff are graduate and above that. If I exclude Agents then 70% (0ut 0f 15, 10 have professional degree) is professional. It means company is mostly governed by professionals. Note Professional qualification means MBA/MCA/ BE/CA etc. Out of 35, a person has not given their opinion.

32

Geographical area they covered

Graph 1.3
No. of agents 12 10 8 6 4 2 0 Specific Non specific Whole city No. of agents

TABLE 1.3 Area No of agent specific 4 not specific 2 whole city 10 total 20

Information from above table states that out of total, maximum (50%) covers whole city of Delhi. 40% covers specific area (means, western, eastern suburban). When I combine this information I can have more specific inferences. As Reliance Life Insurance have most dynamic& experience professional young people with different geographical area covers and maximum has to facility to grow business in any area.

Working time
When I analyzed the question on the basis of timing, maximum agents have their flexible time. But officers and Managers have specific time generally 9am to 8 pm and more than that. Here we have to consider two types of agent one is part timers and others is full timers. So full timer gives maximum time and uses the facility of Tele phone in the Office.

33

Telephone call per day Graph 1.4

TABLE 1.4
No of calls Agents 1-6 2 7-13 5 14-20 10 21- 27 3 total 20

Telephone calls generally made by agents are maximum 14-20 calls / day. And time of calling depends on policy and person.

34

Feature of the company

When I asked about the features of convenience, 90% has their (Out of the 34 persons) opinion in favor of Trust and customer friendly.

Operational hassles/problems Graph 1.5

12 10 8 6 4 2 0
ilit y el in g re av ai la b du Ti m Tr ce w or k

No. of agents executives

Pr o

av

TABLE 1.5
Hassles No of Agent Executives travel 11 10 21 timing 1 1 2 1 phone availability 1 procedure paper work 3 1 4 4 2 6 total 20 14 34

Maximum operational hassles comes from traveling and after that paper work involved but weight age is almost low, Procedure is the third most problem in distribution of the services. Time and phone availability have very low contribution in operational problem.

Facility available for agents and Officers

35

ph

on

Pa p

er

When agents are asked about the facilities that are provided by the Reliance Life Insurance for him maximum has answered in the support of telephone, and very few have support regarding stationary. Some have given their view in the support of computer facilities. But they demanded more support of stationary and traveling allowances.

About Appraisal system

When I talked about performance appraisal system in Reliance Life Insurance they all have similar view that it has good performance appraisal system. Insurance advisors are judge by their performance to fulfilling their target weekly, monthly, annually basis. Many other things also they are considering in the process of performance appraisal. So this system is very effective to keep motivated of the channel force.

Knowledge about product and training.

Company provides comprehensive knowledge about products to Insurance adviser and dealing staff so as they can do their work without any confusion. Staffs are trained by extensive training session (100 hours) and required test. They are also assessed time to time by the Organisation to maintain their knowledge and skills. Similar things are also available for the officer but in different way. They have to take care of the organization so they have go with a very hard extensive session of training. Insurance advisors average earning falls at the range of 1 lakh to 2 lakh per years but it depends on the advisors. There no limitation of their earnings if they have enough contact and selling skills. Here consultant have no fixed income only salary is fixed but commission from Agents is not fixed. Due to commission they are always want to develop their business.

36

Executive has some more fixed income than above two. Income depends on experience and position in the company.

Factors responsible to Select Reliance Life Insurance.

When I analyzed the factors that are responsible for the selecting Reliance Life Insurance for doing their job; Maximum has given their consent in the following way.

For Executives.
Trust >Brands> Salary structure >performance of company>Infrastructure support> level of autonomy> flexibility of Time hours>Perk and allowances>security>others. For Agents Trust >Brands> Perk and allowances> flexibility of Time> > Infrastructure support> performance of company> level of autonomy>security>others>salary structures Generally Agents and Executive have similar point of views of the 1st two choices but they are different in other choices. For example Agents have given Perk and allowances their third choices. Fourth choice is infrastructure support where as last is salary. It is because they dot have salary structure. So maximum monetary benefit they can have possible only selecting of these choices. Maximum executives have opinion for salary structure and Performance of the company with infrastructure support, in there Third, fourth, and fifth choices. Perhaps this choices are due to they dont have commission base advantages.

Factors that are responsible to get motivated to remain in Reliance Life Insurance:

37

For Agents:
Monetary factor> Status>Easy entry>Flexible work time >commission base pay>Perks/ allowances>Job satisfaction> autonomy> job security>others.

For Executive
Status>Job satisfaction>Monetary factory>Autonomy>Perks/allowances>Job security>Flexible work time>Easy to Entry> commission base pay>others. Differences of choices are due to their personal requirements. We can explain for Agents money is more valuable but for executive their status takes more weight age. Similarly we can go to the others.

Factors make you as a part of Reliance Life Insurance?

Mainly trust and brand value of Reliance Life Insurance work here more than the other factors to remain as a part of this organization. This is fact New York Life as a brand of quality, economic, and strong believe for perfection and Reliance Life Insurance has good image and perception for the people.

They are ranked as following way

Trust>> Brand name>> Performance of the company>> Job satisfaction>> Salary structure>> security>> others.

38

Factor that can Influence the people in future.

For the most influential factors responsible the people to remain in the Organization can be arranged in the following way. Carrier growth Opportunity>pay package>Salary>Others. So for the future carrier growth has maximum weight age then others (for both of them).

Change in the distribution channel

When I think about new change in the area of distribution. They have similar view but some agents have opinion to remain in Traditional way. They have their own logic, it has no substitute because insurance is a product of selling not bringing. It requires personal relation and faith. Executives have their opinions that Reliance Life Insurance has many distribution channels(traditional as well as new) but new multiple distribution channel is required due to maintaining sales growth and reducing the cost of delivery. Change is required because combined forces of increasing technological expertise, Transformation in the Industry and Innovative techniques working in the Indian market, the distribution system seems to be widening. In there view future customers will be multi channel. The insurers will have to offer all types of channel to the customer and it is the customer who will have the right to choose the channel suiting him/her. Future demand of high level of sophistication in providing our services to customer cant be ignore. So change in distribution channel is required. They have a corporate agency channel, which handles its corporate agents and have tieups with 38 corporate houses. In their opinion DSA provide a very wide reach in India. This is a much diversified channel. They are best served using similar approach- such as direct mail or Telemarketing.

39

Recently it tied up with India Bulls and some NGOs. The distribution has to happen at the grass root level, as the average rural Indian finds a greats level of comfort and security in dealing in groups. The Rural population normally prefers monthly premium in line with the Micro-finance repayments that they are used to.

Future distribution channel for Reliance Life Insurance.

They have given their view on the future channel that will be most effective for Reliance Life Insurance would be Banc assurance and Direct Marketing.

Performance with respect to distribution.(restricted to Reliance Life Insurance)

When they were asked to give their opinions on the weight age of performance of Different distribution channel of Reliance Life Insurance, If hundred (100) points is whole business then contribution of channel can be show as following way;

40

100 80 60 40 20 Agency (approx 60%) Corporate Agents (33%) Banc assurance (4-5%) NGOs (1-2%) others (0-2%)

They have given 1st rank to the agents and Insurance Advisors or Traditional channel (only for Reliance Life Insurance) But opportunity of new modern channel cant be denied. After trained Insurance Advisor, they have given their 2nd rank Corporate Agent and farther as following way; Agency>Corporate Agents (DSA)> Banc assurance>NGOs>Brokers>Direct Marketin

41

SWOT ANALYSIS

42

SWOT ANALYSIS

STRENGTH
Reliance is pioneer in insurance industry hence, having strong brand image It is having largest market share in insurance sector Aggressive promotion and sales of the product Strong and well-defined software support like Pace It has well defined and integrated Standard Operational Procedures (SUBs) which specifies guidelines to be followed in system like recruitment process, product planning etc. Business Opportunity Presentation(BOP) is defined. Strong database. Good HR policies as it provides growth opportunities

WEAKNESS
Retrenchment rate is high i.e. hiring and firing advisors which may lead to leakage of information Few products are expensive Focus is on urban area. Rural is not being considered Do not target the people of lower level people. Only focuses on Upper and Middle class people. Difficult to compete with LIC because of customers reliability

43

OPPORTUNITY
There is still Vacant market to be captured Growing Indian economy Launch of short term plans Change in market trends Medicare launched

THREATS
Threats from the changing policies of the government Authenticity of the claims cannot be judged hence cause moral hazards and frauds It any advisor does not follow the IRDA regulations, it may be harmful for the companys goodwill Due to retrenchment, there is a chance of data leakage New market players are emerging into insurance sector which increased the competition. For example, latest launch of Reliance Life and Bharati Axa LIC and Bajaj Allianz are the major competitors After sale service for customers satisfaction is a challenging job.

WHAT IS A DISTRIBUTION CHANNEL?

A channel of distribution or trade channel is the path or route along which goods move from producers to ultimate consumers or industrial users. In other words, it is the distribution network through which a producer puts his product in the hands of actual users. The channel of distribution includes the original producer, the final buyer and any middlemen-either wholesaler or retailer. The term middleman refers to any institution or individual in the channel which either acquires title to the goods or negotiates or sells in

44

the capacity of an agent or broker. But facilitating agencies that perform or assist in marketing function are not included as middlemen in the channel of distribution. This is because they neither acquire title to the goods nor negotiate purchase or sale. Such facilitating agencies include banks, railways, roadways, warehouses, insurance companies, advertising agencies, etc. The following diagram (chart) is illustrative of the channel of distribution which may exist in a market.

The above chart indicates that the number of middlemen may vary. If there is direct sale by the produce to the consumers then there is no middleman. But that is very rare. As the chart shows the producer may sell goods to retailer who may then sell the same to consumers. The producer may sell goods to wholesalers who may in turn sell to retailers and the retailer may sell to consumers. The fourth alternative channel of distribution is when any agent/dealer intervenes between the producer and retailers and acts as a middlemen. The agent is appointed by the producer for the sale of goods to the retailers. Another alternative channel is there when producers agent sells goods to wholesalers who sell to retailers. Agent/dealer is an independent person/firm buying goods and selling them to retailers. Agent/dealer may also sell to wholesalers who may then sell to retailers and goods are thus made available to consumers. In the channel of distribution there may be more than one agent/dealer and wholesaler. Channel decisions determine how the firm will reach its target markets. The choice and performance of the channel are major determinants of an organizations success. Channel
45

of distribution decisions are of vital importance to all types of firms, including producers, wholesalers, and retailers. A key factor in selecting a channel is economic performanceestimated revenue and cost flows over the planning horizon. Qualitative factors are also important in selecting channels of distribution. Given two channel alternatives that are similar in their estimated economic performance, selection may rest on the extent of management control that the firm could exercise in the two channels.

DISTRIBUTION CHANNEL OF INSURANCE INDUSTRY IN INDIA

The insurers must refine and exploit the market segment product distribution system linkage. This will lead to distribution system pluralism; many different distribution systems will be implemented across companies rather than across the industry. Distribution channels:Why it is needed.

1 Distribution - the key differentiator

It has been two years since the Indian insurance market has opened up, and the new entrants into the market have set up shop in every major city. The public sector companies have already established themselves in the market. But there are multiple challenges faced by these insurance companies, of which two are critical: Designing of products suiting the market Using the right distribution channel to reach the customer While the companies have been quite successful in dealing with the first of these challenges using the existing product features and leveraging the technical know-how of

46

their partners, most are still grappling with the right channel mix for reaching potential customers. This paper discusses the distribution channels from the perspective of the socio-cultural ethos of the market and how these channels fit into it, along with where the various companies face challenges and bottlenecks. Whenever any debate arises about the intermediaries and distribution channels, the discussion veers to technology and its impact on distribution. However, the authors believe that the basic existential problems being faced by the channels in this market needs to be looked into first, and then the question of enablers technology, tools, training, learning etc. -- is to be taken up.

2 Challenging Scenario demanding role transformation of intermediaries

Insurance has to be sold the world over, and the Asian Market is no exception. The touch point with the ultimate customer is the distributor or the producer (as they are known in certain markets), and the role played by them in insurance markets is critical. It is the distributor who makes the difference in terms of the quality of advice for choice of product, servicing of policy post sale and settlement of claims. In the Asian markets, with their distinct cultural and social ethos, these conditions will play a major role in shaping the distribution channels and their effectiveness. In today's scenario, insurance companies must move from selling insurance to marketing an essential financial product. The distributors have to become trusted financial advisors for the clients and trusted business associates for the insurance companies.

47

This calls for leveraging multiple distribution channels in a cost effective and customer friendly manner. For example, in the developed markets producers (brokers and agents) form the major channels of distribution, while the web as a complementary channel is catching up slowly. According to a Forrester survey, 88% of the Life insurance executives responding identified agents as the primary channel of distribution. The distinction of channels in the developed markets is: personal distribution systems and direct response systems. Personal distribution systems include all channels like agencies of different models and brokerages, bancassurance, and work site marketing. Direct response distribution systems are the method whereby the client purchases the insurance

48

directly. This segment, which utilizes various media such as the Internet, telemarketing, direct mail, call centers, etc., is just beginning to grow.

3 What should the companies look at?

Basically companies have to take a look at the intermediaries they are using, whether it is optimal to use them, and what are the alternatives? The new companies have attempted appealing only to the middle, upper middle and elite classes in the major cities. Contrasted with Public sector insurance companies, with their offices across the country, the new companies have miles to go before they reach anywhere. They must overcome the mindset of the customer that life insurance is Life Insurance Corporation of India (LIC) and general insurance is General Insurance Corporation of India (GIC) if they hope to grow in the market. Meanwhile, the public sector companies are going to great lengths to revamp their image to look and feel more contemporary. In this process all are targeting the same market --the existing pie is being cut up further, but no attempt is being made to increase the size of the pie. For example, while attempts are made to complete the quota of rural insurance in percentage terms, the rural market potential is yet to be tapped, as the new insurers are not able to attract the right kind of talent into their distribution force to address this. Intelligent segmentation of distribution channels to match the market segmentation is what will help the companies to move in this direction.

4 Distribution Scenario in the Indian market

In today's Indian insurance market, the challenge to insurers and intermediaries is twopronged: Building faith about the company in the mind of the client Intermediaries being able to build personal credibility with the clients

49

Traditionally tied agents have been the primary channels for insurance distribution in the Indian market; the public sector insurance companies have their branches in almost all parts of the country and have attracted local people to become their agents. The agents are from various segments in society and collectively cover the entire spectrum of society. A person who has lived in the locality for many years sells the products of the insurance company with a local branch nearby. This ensures the last mile touch point being closer to the customer. Of course, the profile of the people who acted as agents suggests they may not have been sufficiently knowledgeable about the different products offered, and may not have sold the best possible product to the client. Nonetheless, the customer trusted the agent and company. This arrangement worked adequately in the absence of competition. In today's scenario agents continue as the prime channel for insurance distribution in India, as is the case in most markets, supported by call centers to a small extent. Almost all the new players follow this model primarily because the regulations for other channels are yet to be put in place. However there is great excitement in the industry over the impending broker regulations, and companies are planning possible channels in their enthusiasm to increase volumes. The belief that all these channels will grow and seamlessly integrate to bring in business seems a fallacy. What has emerged is a much more difficult and evolving market scene with existing players, more new players coming in, and global marketing practices and ideas being tested. But none of this has changed the fundamental character of the market, which we believe will take more time than expected As the insurance market in India is liberalized, the pattern of distribution is likely to undergo some changes with new channels being introduced A quantum jump in insurance business in terms of premium, policies, lives covered, etc would necessitate a corresponding increase in the capacity of the distribution channels. The cost of effectiveness of certain channels would induce insurers to start using them.

50

There are sectors of market for whom the agency channel may not be the most efficient and introduction of new channel will help to increase the penetration of insurance products.

Creation of awareness and demand as a result of the increasing distribution channels.

Dissatisfaction with the existing channels. Key issue in increasing the number of policies sold would be; The number of agents Public awareness Public perception of the need for protection and long term savings. Favourable tax treatment Professionalism of financial advisors Quality and range of products. Favourable tax treatment Profetionalism of financial advisors Quality and range of products. The distribution channels would play an important role in meeting the increased volumes. Traditionally, the life insurers have been working primarily on the agency distribution force, while the general insurance business has depended primarily on the development officer. The private players are bringing with them international experience, new technology, new channels of distribution and of course, new products. The ground rules in the insurance business are being redefined. Even the existing public sector players are gearing up with matching strategies to face competition.

51

EXAMPLE: Tied Agent of LIC*Tied agents attached to development officers * Direct agents/career agents supervised by ABM(S)/BM/Sr.B.M

Branch Manager

Direct Agents Development officer Career Agents (presently not in practice) Full time Part time Agents

52

Changes in distribution pattern of life insurance after IRDA came into existence. FROM TIDE AGENTS

MULTIPLE CHANNELS
BANKS CORPORATES/ INSTITUTIONS BROKERS TELEMARKETING/ WORK-SITE MKTG./ DIRECT MKTG. INTERNET

TO

CHANNEL DEVELOPMENT STRATEGIES AT RELIANCE LIFE INSURANCE

Tied agency model Bank assurance and alliance Corporate Agency (exclusive for Reliance) and Brokers(can sell any product) Tied Agency (Agent Advisors) Tied Agency is the largest distribution channel of Reliance Life Insurance, comprising a large advisor force that targets various customer segments. The strength of tied agency lies in an aggressive strategy of expanding and procuring quality business. With focus on sales & people development, tied agency has emerged as a robust, predictable and sustainable business model.

53

Bank assurance and Alliances

At its most simple level bank assurance is the business of banks selling insurance. In concrete terms banc assurance, which is also known as Allfinaz constitutes a package of financial services that can fulfill both banking and insurance needs at the same time. Simplest form where bank provides database to the insurance companies and insurance companies pays certain base charges for each customer and commissions are paid on the basis of conversions. Strategic alliance Sharing of customer data Branding of insurers products to leverage the banks own brand Developing specific products exclusive to banks own customer Deployment of insurers staff within the bank Joint marketing strategy with complete risk management and financial services offers. Sharing of technical infrastructure. Bank assurance is the term used to describe the sale of investment products in a bank. The word is a combination of "bank" and "assurance" signifying that both banking and insurance is provided by the same corporate entity. Bank assurance - selling life insurance through bank branches - has also driven life insurance business over the two years. Heres why. First, banks deposits as a percentage of total financial assets of the household sector have gone down from about 46% in 1980 to about 30% now. This means that banks have to seek other avenues, beyond just interest income, to remain profitable. Banks have found that selling life insurance policies is a great way to make profits. Company adopted the concept of bank assurance merely few years back and got a good amount of success through that. Within a short span of time, company has large number

54

of partners like Yes Bank, India bulls and Amway. B & A has emerged as a vital component of the companys sales and distribution strategy, contributing to approximately one third of companys total business. The business philosophy at B&A is to leverage distribution synergies with our partners and add value to its customers as well as the partners. Flexibility, adaptation and experimenting with new ideas are the hallmarks of this channel. Corporate Agency (exclusive for Bhati Axa) and Brokers(can sell any product) Corporate agency are those which sells exclusive Services of Reliance Life Insurance and Where are a Brokers is a one who can sell and service of and company depending on the rate of commission

FUNCTIONS OF AN AGENT AT RELIANCE LIFE INSURANCE.

An insurance agent would be required to solicit and procure new insurance business, in manner that is consistent with the interests of the policyholders and of the insurance company. For this purpose he would have to do the following contact prospects for insurance; study their insurance needs; persuade them to buy; complete all formalities for proposal for new insurance, including filling up the proposal forms; collecting supporting documents and premium arranging inspection if necessary, ensure that warranties and special conditions, if any are property explained to the insured Assist the insured in filling the proper documents and proofs for making a claim.

55

An insurance agent would be required to solicit and procure new insurance business, in manner that is consistent with the interests of the policyholders and of the insurance company. For this purpose he would have to do the following contact prospects for insurance; study their insurance needs; persuade them to buy; complete all formalities for proposal for new insurance, including filling up the proposal forms; collecting supporting documents and premium arranging inspectionif necessary, ensure that warranties and special conditions, if any are property explained to the insured Assist the insured in filling the proper documents and proofs for making a claim.

56

57

CHANNEL DEVELOPMENT PROCESS FOR TIED AGENCY MODEL

Start Name Gathering in P200 Short listing Contacting NO

Intereste d?

YES

End

Initial Screening NAT Career Seminar & P200NO

Intereste d?

YES

End

Career interview FCS

IC-33?

NOT CLEARED Reappear CLEARED

Contract with MNYL 58

End

WAYS OF NAME GATHERING

There are several ways for gathering names in order to follow rule of 31. Natural Market: A natural market consist of people to whom you know well from your family, friend circle, relative can be a good prospect. The most admired way for recruitment in Reliance Life Insurance is through natural market. Natural market persons are easily approachable and most of the successful recruitment in Reliance Life Insurance is from natural market. Personal Observation: It means identify the right person through observation. For e.g. a person residing in your locality and very famous in taking initiative in social activities can be a good prospect. Nominator Call: A nominator is a person who is very much influential in the market as well as in societies. Name gathering and identification is easy in this case, but these people are highly unapproachable. These people can be very productive in giving references of the prospect. They are not prospect by default. Centre of Influence (CoI) Call: A centre of influence person is people who are influential and you know them personally. They are approached for giving references of the client.

59

LIMITATIO N

60

LIMITATIONS

1. The time for which the project was conducted was very short. Hence the sample size was restricted to 50 only. 2. The scope of study was also restricted to the study of awareness about the Reliance life insurance and consumer preferences. It could be widened to cover various others aspects of insurance product demand. 3. As there are many competitors of Reliance life insurance in the pvt. Insurance sector. Only 3 of its competitors products were analyzed in detail. A detailed study of all the competitors of Reliance life insurance would have given more reliable and accurate results. 4. The area from where the sample population was selected was Noida only. Other cities and moreover rural area was not covered under the study. 5. The primary data was collected form present and potential insurance personnel of insurance products to evaluate their preferences. But the preferences of financial agents was not considered which would have helped to evaluate the preferable commission sale which helps to boost product sale.

61

CONCLUSIO N

62

CONCLUSION

THE INTERNET CHANNEL

The company should focus on Internet channel as the Internet is likely to be the most important of the new forms of distribution as the government is encouraging its use (for eg. E-choupal) It is already apparent that customers are using the new Internet technology in other business fields (e.g. bookselling, air ticketing etc.). However, insurers have been slow to get to this market. For example, The worldwide property and casualty market is estimated to be worth $l50bn but less than 1% of these insurance transactions are currently being conducted online. India is no exception to that, only iota of business is generated through this channel. This sluggishness is perhaps a little surprising as the simpler commoditized insurance products should sell quite well on the Internet. Arguably, other more tangible products such as clothing, furniture and sporting equipment may not sell so well because customers prefer to see them before making a purchase. A recent survey states that the biggest barriers to using the Internet is product complexity (62%), followed by need for paper signatures and regulatory restrictions (both 38%), security risks (32%), and cost of online development and integrating legacy systems (both 29%). The lead in selling insurance on the Internet appears to be coming from America, where start-up companies that cover the whole quote-to-claim insurance process online now exist. For example, eCoverage.com is now writing motor business in 2 US states (backed by Japanese venture capital from Softbank) & GeneraLife.com is selling life assurance on the net. However European companies are following suit, such as ineas.com which has become the first European insurer to sell its products exclusively via the Internet, already operating in the Netherlands, France, Belgium and Germany.

63

THE INDIAN OPPORTUNITY

There are 38.5 million Indians online as of now and this number is set to grow to 100 million by 2007-08. Sky-rocketing at a CAGR of 125%, the online travel industry is expected to become a $2-billion industry by 2008. The number of heavy internet users in India, the persons who spend long hours on the web, has grown to 38 per cent this year, as against barely 16 per cent in 2001. These heavy users are spending an average 8.2 hours per week on the internet, I-Cube 2006 report said. Their numbers are increasingly rising over the past few years: from 16 per cent in 2001 to 20 per cent in 2004 and to 38 per cent the total internet users in 2006 - resulting in a jump of 20 per cent over a 5-year period. In contrast, the number of 'light' users has dropped from 63 per cent in 2001 to a 28 per cent in 2006, which shows the older population spend more time on internet as against the younger lot who are considered to be more net-savvy. While, the school going children spend an average of 322.3 minutes a week on the internet, the college going students spend an average of 433.2 minutes per week and the older men spend an average of 580.5 minutes a week. Working women spend 535.3 minutes per week while women non-working women spend an average of 334.5 minutes each week. There will be 50 million internet users by March 2007. At present 25% of the internet users in India are from small towns and this figure is estimated to increase further. 32 per cent active users of the Internet in India use it for sourcing information and research. Back in 2001, only 20 per cent used the Internet for searching information. Email as a killer application is on the downslide with only 46 per cent of subscribers using the Internet for e-mail, compared to 64 per cent in 2001

64

RECOMENDATION

65

RECOMMENDATION
The company should focus on Internet channel as the Internet is likely to be the most important of the new forms of distribution as the government is encouraging its use (for eg. E-choupal) It is already apparent that customers are using the new Internet technology in other business fields (e.g. bookselling, air ticketing etc.). However, insurers have been slow to get to this market.

MY EXPERIENCE
My Experience with Reliance Life Insurance will always be grateful for me. I learned many things in Reliance Life Insurance. The very first thing I learned in Reliance Life Insurance is to handle objections from the customers. Different type of scripts of Reliance Life Insurance helps in this. Working on deadline for achieving target is most crucial process in this sector and I am thankful to my Manager who was always behind me to support during initial phases and helped me to complete my training. The GO meet to reward successful AA and SM for the month is another example which clearly emphasizes that Reliance Life Insurance has strong belief in maintaining a healthy relationship with their stakeholders. Overall Channel Distribution of Reliance Life Insurance at Noida was a fair attempt from me. My telephonic conversation with the prospect always gave me a positive direction to build my confidence and even in bad phase of response I learnt the art of making calmness. I shared a lot of activities with my colleagues. All the trainees from different background also remained a source of energy for my daily activities. IN FUTURE INSURANCE WILL BE BOUGHT NOT SOLD

66

BIBLIOGRAPHY

67

BIBLIOGRAPHY

Web sites Indianmba.com www.allconferences.com www.iloveindia.com business.mapsofindia.com www.google.com www.reliancelife.co.in www.kampusonline.com Asia insurance review

Books

Philip kotler, MARKETING MANAGEMENT, 12e Kothari C.R Research Methodology

Journal

Indian Journal of Marketing vol.xxxxiv (Oct.2007) Indian Journal of Management vol. xxxv (March 2007)

68

ANNEXURE

69

ANNEXURE

1. QUESTIONNAIRE :

NAME . QUALIFICATION.. AGE.. (1) Why you select Reliance Life Insurance as an Agent? (a) For Monetary benefits (c) Commission (e) Interest in the sector (b) flexibility in Hours (d) easy of entry (f) nature of job

(2) What geographical area do you cover? (3) What is your work timing? (4) How many calls do you made in a day? 5. What features / services of the company do you like for your convenience? (a) Trust in the company (b) Quick settlement of claims (c) Customize product 6. What are the operational hassles/ problems that you face? (a) Travel (d) Procedure (b) timing (c) phone availability

(e) paper work

70

7. What are the facilities you are using or provided by the company? (a) Traveling allowances (b) telephone (c) computer (d) Day hour food (e) stationary

8. Does Company provide knowledge of entire product range in its portfolio? 9. Does Reliance Life Insurance have performance appraisal system? 10. What is your yearly average Income? (11) What factors would you consider while selecting the new Life Insurance Company? Please rank them on the basis of 1-10 point. Factors Trust Performance of company Security Salary structure Brand value Infrastructure support Perk/ allowances Flexible work timing Level of autonomy

71

(12) What are the reasons / factors for which you remain in this Organization? Rank them on the basis of 1-10 point. REASONS RANK1 (For Reliance) Monetary factors Job satisfaction Autonomy Easy of entry Flexible work hours Status Job security Commission base pay Perks/allowances Others RANK2 (For others)

72

(13) What are the reasons /factors for which you are a part of this Reliance Life Insurance? RANK them on the basis of 1-7 basis points. FACTORS Trust Performance of the company Security Salary structure Brand name Job satisfaction RANK1 RANK2

Others. 14.Out of which most important factor for you in future is (a) Salary (c) carrier growth opportunity (b) pay package (d) others

15.Do you think rules of game are changes mean mass distribution system in rural area is not obligation but opportunity? 16. What is your suggestion for future distribution of Reliance Life Insurance? 17. How you rate the performance of the company with respect to its channel and customer requirement.

73

74