JBFSIR Volume 1, Issue 9 (December, 2011) ISSN 2231-4288

The Journal of Sri Krishna Research & Educational Consortium

JOURNAL ON BANKING
FINANCIAL SERVICES &
INSURANCE RESEARCH
Internationally Indexed & Listed Referred e-Journal

PERFORMANCE EVALVATION OF THE

UNITED INDIA INSURANCE COMPANY LIMITED
MRS. H. CHRISTY CYNTHIA*; DR. N. R. NAGARAJAN**

*Assistant Professor, Department of Commerce (CA/EC),

Ayya Nadar Janaki Ammal College, Sivakasi.
**Director in Commerce,
Sri Kaliswari College, Sivakasi.

ABSTRACT

Insurance is a way of reducing uncertainty of occurrence of an event. Insurance is

an investment. Its basic purpose is to derive plans to counteract the financial
consequences of unfavorable events. Insurance is a social device for eliminating
or reducing the cost to society to certain types of risks.

Insurance is essentially a co-operative endeavor. It is the function of the

insurance to protect the few against the heavy financial impact of anticipated
misfortunes by spreading losses among many who are exposed to risks of similar
misfortune.

In general, insurance can be broadly classified as Life Insurance and Non-Life

Insurance. The term Insurance Marketing refers to the marketing of insurance
services with the motto of customer - orientation and profit-generation. The
insurance marketing focuses on the formulation of an ideal mix for the insurance
business so that the insurance organizations survive and thrive in a right
perspective. The quality of services can be improved by formulating a fair mix of
the core and peripheral services.

The marketing concept in the insurance business is concerned with the expansion
of insurance business in the best interest of society vis-a-vis the insurance
organizations. The present day socio-economic scenario leads to the inevitable
basic need for general insurance.
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INTRODUCTION

Insurance market is an ice-cream parlor where earlier there were only few brands like vanilla
and strawberry. But in the boundary- less world and customer oriented market, customers are
demanding different flavors with different tastes. Similarly, in the insurance sector also many
innovative products are being introduced almost every day to cater to the varied requirements
of customers. There has been a tremendous change in the financial services arena across the
world in last five years. Commoditization, globalization, deregulation and rapid technological
advancements are the sweeping changes that have changed the market scenario of financial
services industry.

FORMS OF INSURANCE

From the practical point of view the insurance can be classified into two broad categories
such as Life Insurance and Non- Life Insurance.

LIFE INSURANCE

Life insurance is a contract whereby the insurer in consideration of the premium paid
either in lump sum or in periodical installments undertakes to pay an annuity or certain sum of
money, either on the death of the insured or on the expiry of a certain number of years,
whichever is earlier.

NON LIFE INSURANCE

Other than Life Insurance, everything will come under Non Life Insurance. This type of
insurance is for only one year.

GENERAL INSURANCE BUSINESS COMPANIES IN SIVAKASI

After the formation of general insurance under the Central Government control, the
Divisional offices and respective branches were established throughout the major cities. Since,
Sivakasi is an industrially developed area, and all the subsidiaries have opened the Divisional
and Branch offices in the study area. The pioneer to start insurance company at Sivakasi was
The New India Assurance Company Limited, which was established in 1973. Next came, the
Oriental Insurance Company Limited in 1977. Having understood the potentialities of the
Insurance market, the United India Insurance Company Limited, opened its branch in 1979
and the National Insurance Company Limited opened its branch in 1986. Hence, the study
area could feel very proud of having all branches of the four subsidiaries of the General
Insurance Corporation.

UNITED INDIA INSURANCE COMPANY LIMITED

The United India Insurance Company Limited is one of the four subsidiaries of General
Insurance Corporation with its headquarters at Chennai is the second largest Insurer by size of
premium and market share of the entire General Insurance business transacted throughout
India under the stewardship of Mr. K. N. Bhandari.

This vast network includes 21 regional offices, 313 divisional offices and 789 branch
offices. Service to its largest clientele is done through 3820 officers, 3275 development
officers, 11,777 supervisory and clerical staff and 2693 subordinate Staff.
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JBFSIR Volume 1, Issue 9 (December, 2011) ISSN 2231-4288

STATEMENT OF PROBLEM

The GIC has to face severe competitions from different angles. Due to privatization, more
than six players have come into the general insurance sector in India. Moreover, the GIC has
more than 180 products which are outdated in the present context as they are not suitable to
the changing needs of the customers. The GIC has to face severe problems from the
distribution side also. The GIC has to take some risks in strengthening the existing distribution
channel and expanding the new channels on par with new players in the field.

REVIEW OF LITERATURE

Ms. J. Margaret Radha Rani has undertaken a study entitled. Role of New India
Assurance Company in providing Rural Insurance Schemes in April 1990 in Madurai
Kamaraj University. In her readings, she has stated that commanding majorities i.e.,
68.30% of the respondents have taken policy only on compulsion from banks. Moreover,
the advertisements given by the New India Assurance

Company from rural insurance schemes has not reached the rural messes. Mr.R.Murugan
in his project, titled, Fire Insurance in Sivakasi has highlighted the significance of fire
insurance business to match and fireworks industries.

MS.S.Kala has undertaken a study entitled The workings and Evaluation of New India
Assurance Company Limited., in Sivakasi Taluk, in May 2000. In her findings, she has
stated that 48.38% of the respondents have insured with the expectation of loss of
property by fire and 21.74% of them for loss due to shortage and theft etc. Hence, the
insurance policy was essential for industrial units.

SCOPE OF THE STUDY

The present study focuses mainly on the potentialities of the marketing of various GIC
products intended to cover the period from 2000 - 01 to 2009-10. The study also covers the
progress of GIC policies, claims and premiums. The study concentrates on the role of agents
and clients attitude towards the use of GIC products.

OBJECTIVES OF THE STUDY

The following are the main objectives of the present study.

1. To review the growth and progress of the United India Insurance Company Limited.

2. To analyze the performance evaluation of the United India Insurance Company Limited.

3. To offer suitable suggestions for the improvement of services of the Company.

HYPOTHESES

There is a positive relationship between claims incurred and premium received.

There is a positive relationship between incurred claims and settlement of claims.

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Higher the income higher is the expenditure of the United India Insurance Company
Limited.

DEFINITION OF CONCEPTS

Premium The monetary consideration paid by the insured to the insurer under contract of
insurance is called premium.

Peril It is an event that causes a personal or property loss.

Re-insurance A system whereby an insurer having accepted a risk given off a part of the
risk to another insurer so that his own ultimate liability is reduced.

Sum-insured The monetary limit of liability of insurers under policy insurance is referred to
as sum insured.

PERIOD OF STUDY

The present study covers a period of 5 years from 2005-06 to 2009-10 in order to
ascertain the latest trend in the insurance field.

FIELD WORK AND COLLECTION OF DATA

The fieldwork for the study was conducted during the months of November, December
2009 and January 2010. The data were collected through a pre-tested interview schedule.

METHODOLOGY

The study is mainly focused on the marketing of products of the General Insurance
Corporation. Four subsidiaries of GIC are functioning in the study area. Out of the 4
subsidiaries, the United India Insurance Company Limited has been selected purposely since
it is the second biggest one in Sivakasi in terms of volume of business and the number of
policies canvassed and it is the second largest insurer in the whole of India. So, it was selected
for investigation.

SOURCES OF DATA

The data required for the study has been collected both from primary and secondary
sources. The interview schedule was used to collect the data from the Company. The personal
interview technique was adopted with the help of pretested schedule to collect the data from
the agents and policyholders.

The Secondary data were collected from the records of the insurance company, books,
magazines, journals such as Indian Journal of Marketing, The Insurance Times and so on and
also information through internet.

PERFORMANCE EVALUATION OF UNITED INDIA INSURANCE COMPANY

LIMITED

The key areas of performance in the insurance companies are:

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Number of policies covered

Growth rate of premium

Claims incurred

Settlement of Claims

Sources of Income

Expenditure

Profit position

Financial performance

NUMBER OF POLICIES EFFECTED

The success of any business depends upon its ability to win the confidence of customers.
A customer is a significant visitor to the premises of all business. The number of policies
issued by the sample units has been analyzed and the results are presented in the below table.

TABLE 1

NUMBER OF POLICIES ISSUED, GROWTH RATE PREMIUM, CLAIMS

INCURRED DURING THE PERIOD FROM 2000-01 TO 2009-10

Number of
Total Premium Trend
Policies Trend Claims Trend
Year
Percentage Percentage Made Percentage
Collected
issued

2000-01 6720 - 234 - 113.96 -

2001-02 7340 109.23 253 108.12 127.96 112.29

2002-03 8450 125.74 278 118.80 130.03 114.10

2003-04 9100 135.42 310 132.48 152.60 133.91

2004-05 9978 148.48 355 151.71 165.07 144.84

2005-06 10745 159.90 390 166.67 243.85 213.98

2006-07 11102 165.20 549 234.61 276.28 242.44

2007-08 12415 184.75 652 278.63 358.96 314.99

2008-09 13540 201.49 730 311.97 485.12 425.69

2009-10 14495 215.70 803 343.16 496.28 435.49

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Source: Records from Sivakasi Divisional Office

It is apparent from the above table that the growth of policies is on the increasing trend
every year i.e., the number of policies has increased from 6720 in 2000-01 to 14495 policies
in 2009-10, thus registering 215.70% growth over a period of ten years. It shows that the
United India Insurance Company Limited in Sivakasi has progressed well in marketing its
insurance products in Sivakasi.

On the basis of this growth rate, its future growth rate in 2012 has been projected with the
help of trend analysis in the below table.

TABLE 2

TREND ANALYSIS FOR GROWTH OF POLICY

Year Policies
X = (x-99) X2 XY Yc = a+bx
(X) (Y)

1998-99 6.720 -4 16 -26.88 4.67

1999-00 7.340 -3 9 -22.02 6.10

2000-01 8.450 -2 4 -16.90 7.53

2001-02 9.100 -1 1 9.10 8.96

2002-03 9.978 0 0 0 ID.39

2003-04 10.745 1 1 10.745 11.82

2004-05 11. 102 2 4 22.204 13.25

2005-06 12.415 3 9 37.245 14.68

2006-07 13.540 4 16 54.160 16.11

2007-08 14.495 5 25 72.475 17.54

2008-09 - 18.97

2009-10 - 20.40

Total 103.885 - 85 121.929

Yc = a+bx

a = Y/N

= 103.885/10

= 10.388
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= 10.39

b = Y / X2

= 121.929/85

= 1.434

= 1.43

From the above analysis, it is evident that the number of policies would go up to
20,400 in 2012. It means that there would be heavy demand for the insurance, policies in
Sivakasi in future. To meet the growing demand, it is recommended that the United India
Insurance Company Limited shall take all efforts to strengthen the existing products besides
innovating new products.

GROWTH RATE OF PREMIUM

Having seen the growth rate in terms of number of policies, an attempt has been made to
analyze the growth rate in terms of premium collection. The Table-1 reveals the growth rate of
premium collected during the study period.

As seen in the number of policies, a favorable trend prevails in the case of premium
collected also. The above table shows that there is a steady growth of premium during the
study period from Rs. 234 lakhs in 2000-01 to Rs. 803 lakhs in 2009-10. It reveals that more
the number of polices more is the premium collection.

CLAIMS INCURRED

A claim is considered to be the insureds demand for indemnification of loss by the

insurance company in accordance with the terms and conditions laid down in the insurance
policy. Whenever damages are incurred, the insured will make the claim for the loss of
properties. The following table reveals the claims made from 2000 01 to 2009 10.

The Table-1 highlights the fact that the claims of the United India Insurance Company
Limited have also continuously increased from Rs. 113.96 Lakhs in 2000 01 to Rs. 496.28
Lakhs in 2009 10, thus registering a growth of 435.49 % over the study period.

Further an analysis has been made to examine the relationship that exists between the
premium collected and claims incurred as shown in the below table.

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TABLE 3

TABLE SHOWING CORRELATION BETWEEN CLAIMS INCURRED AND TOTAL

PREMIUM

Total Incurred

Year Premium Claims dx dx2 dy dy2 dxdy

(X) (Y)

2000 234 113.96 -121 14641 -51. 11 2612 6184.31

2001 253 127.96 -102 10404 -38.07 1449 3883.14

2002 278 130.03 -77 5929 - 35.04 1228 2698.08

2003 310 152.60 -45 2025 -12.47 155 561.15

2004 355 165.07 - - - - -

2005 390 243.85 35 1225 78.78 6206 2757.30

2006 549 276.28 194 37636 112.21 12368 21768.74

2007 652 358.96 297 88209 193.89 37593 57585.33

2008 730 485.12 375 140625 320.05 102432 120018.75

2009 803 496.28 306.72 94077 331.21 109700 164372.89

Total 862.72 394771 899.42 273743 379829.69

dxdy dx dy /n
=
dx 2 ( dx) 2 /n dy 2 ( dy)2 /n

379829 .69 862 .72 (899 .42 ) /10

=
2 2
394771 (862.72) /10 273743 (899.42) /10

= 302189.89 / 348548.85

= + 0.91

From the above analysis, it is found that, there is a high degree of positive correlation
between premium received and claims incurred. Hence, there is a positive relationship
between claims incurred and premium received.

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JBFSIR Volume 1, Issue 9 (December, 2011) ISSN 2231-4288

SOURCES OF INCOME

Premium income constitutes the major source of income to the United India Insurance
Company Limited. So, the company has to carefully manage its general insurance policies, so
that it gets adequate return in order to satisfy the policy holders. The major sources of income
of the United India Insurance Company Limited are collected and presented in the below
table.

TABLE 4

SOURCES OF INCOME (FIGURES IN LAKHS)

S. No Details 2005-06 2006-07 2007-08 2008-09 2009-10

218.37 248.12 274.06 325.04 374.43

1. Premium Income
(37.18) (33.45) (37.89) (52.58) (51.94)

Interest and 183.75 259.01 275.01 138.91 168.03

2.
Dividend (31.28) (34.92) (38.04) (22.4 7) (23.31)

Non-payment of 149.52 179.56 130.08 117.76 135.49

3.
Claims (25.45) (24.21) (17.89) (19.05) (18.79)

Miscellaneous 35.75 55.06 44.07 36.43 42.92

4.
Income (6.09) (7.42) (6.09) (5.89) (5.95)

Total 587.39 741.75 723.22 618.14 720.87

Source: Primary Data

Note: Figures in brackets indicate percentages

It is vivid from the above table that the income from premium is the major source of
income for the study unit in recent times. It constitutes 52.58% of the total income in 2008-09
and 51.94% in 2009-10. It is followed by income from interest and dividend earned through
investments. It shows a declining trend in recent times.

Hence, it is recommended that the company shall take necessary steps to improve the
quality of their investment portfolio by investing more on government and industrial securities
and thereby pushing up its income through interest and dividend.

SOURCES OF EXPENDITURE

Having seen the source of income, an analysis has been made to highlight the various
sources of expenditures. The following table presents the same.

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TABLE 5

DETAILS OF EXPENDITURES (FIGURES IN LAKHS)

$S. No Details 2005-06 2006-07 2007-08 2008-09 2009-10

Commission to 38.73 39.46 42.03 44.42 45.76

1.
Agent (36.37) (35.67). (34.10) (35.16) (34.12)

58.03 59.06 60.28 62.72 64.85

2. Salary to Staff
(54.50) (53.39) (48.91) (49.64) (48.34)

1.76 2.89 3.53 5.25 5.69

3. Postal
(1.65) (2.61) (2.86) (4.16) ( 4.24 )

5.18 7.25 12.93 9.72 12.75

4. Travelling
(4.86) (6.55) (10.49) (7.69) (9.51)

2.78 1.97 4.48 4.24 5.08

5. Other Expenses
(2.62) (1. 78) (3.64) (3.35) (3.79)

Total 106.48 110.63 123.25 126.35 134.13

Source: Primary Data

Note: Figures in brackets indicate percentages

It is observed from the above table that salaries to employees are the major source of
expenditure for the study unit. It constitutes 49.64% of the total expenditure in 2008-09 and
48.34% of total expenditure in 2009-10. It is followed by commission to agents. It is
interesting to note that the expenditure varies with the income earned as shown in the below
table.

TABLE 6

TABLE SHOWING CORRELATION BETWEEN INCOME AND EXPENDITURE

x (x - x) X X2 Y (y - y) y y2 Xy

587.39 -90.884 8259.901 106.48 -13.688 187.361 1244.0201

741.75 63.476 4029.203 110.63 -9.538 90.973 -605.4341

723.22 44.946 2020.143 123.25 3.082 9.499 138.5236

618.14 -60.134 3616.079 126.35 6.182 38.217 -371.7484

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720.87 42.596 1814.419 134.13 13.962 194.937 594.7254

3391.37 0 19739.745 600.84 0 520.987 1000.0866

X = 3391.37/5 = 678.274

Y = 600.84/5 = 120.168

1000.0866
=
19739 .745 520 .987

= 1000.0866 / 3206.867

= 0.312

From the above calculation, it is found that, there is a high degree of positive correlation
between income and expenditure. Hence, higher the income higher is the expenditure has been
proved.

PROFIT POSITION OF SIVAKASI DIVISIONAL OFFICE

Profit is the basic regulator of all kinds of sectors. The success of any business or
management is depending upon its profit earning capacity. The profit earned or loss incurred
over a period of time should be taken into account to a get a clear picture about the success of
any unit.

TABLE 7

PROFIT EARNED DURING 2005 2009 (FIGURES IN LAKHS)

Year Profit / Loss Trend Percentage

2005-06 159.84 -

2006-07 195.96 14.19

2007-08 210.47 18.68

2008-09 272.73 24.21

2009-10 287.59 25.53

Total 1126.59

Source: Primary Data.

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JBFSIR Volume 1, Issue 9 (December, 2011) ISSN 2231-4288

From the above table, it is gratifying to note that the United India Insurance Company
Limited has earned profit throughout the study period. In 2005-06, it was Rs.159.84 lakhs and
it has increased to Rs.287.59 lakhs in 2009-10 registering 25.53% growth over a period of five
"years. It is a healthy trend indeed since profitability would go a long way in increasing the
public confidence and in building up a good image.

SUMMARY OF FINDINGS

It is found that all the three types of policies viz., fire, marine and motor constitute more
or less an equal share in premium income during 2009-10.

In 2000-01, it was Rs. 113.96 lakhs and it has increased to Rs. 496.28 lakhs in 2009-10,
thus registering a growth of 435.49% over the study period.

As far as the settlement of claims is concerned there is an increasing trend throughout the
study period, increasing from Rs. 113 lakhs in 2000-01 to Rs. 493 lakhs in 2009-10.

While analyzing the profitability position, it is heartening to note that the United India
Insurance Company Limited has been earning profits throughout the study period. In
2005-06, it was Rs. 159.84 lakhs and it has increased to Rs. 287.59 lakhs in 2009-10, thus
registering 25.53% increase over a period of five years.

SUGGESTIONS

To achieve the business performance target, it is suggested that the study unit shall adopt
various marketing strategies such as introduction of new schemes, restructuring of old
plans, designing of new social security schemes, creation of awareness among rural
people, reviewing the mode of premium, establishing customer relationship management,
etc.,

It is suggested that the company shall take more steps to popularize these policies through
advertisement, circulars etc., and by extending fire insurance facilities at a concessional
rates to institutions.

It is suggested that the company shall devise new schemes for rural based industries and
the tiny sectors functioning in the rural area.

CONCLUSION

The foregoing discussion on the marketing of general insurance products in Sivakasi

shows that the movement is picking up in the area. If the above suggestions are duly carried
out, the United India Insurance Company Limited will be able to market more effectively in
the interest of the customers of this area as well as in the interest of the country as a whole.

BIBLIOGRAPHY

BOOKS

1. Dr. Ghanashyam Panda, Principles and Practice of Insurance, Kalyani Publishers,

New Delhi, 1995.

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JBFSIR Volume 1, Issue 9 (December, 2011) ISSN 2231-4288

2. Kanwal, I.S., Text Book of Insurance, Kalyani Publishers, New Delhi, 1995.

3. Mishra, M.N., Principles and Practice of Insurance, Sultan Chand and Company
Limited., New Delhi 2002.

4. Nagaraj an, N.R., Principles and Practice of Insurance, M.M.Publishers,

Virudhunagar, 2002.

5. Periyasamy, P., Principles and Practice of Insurance, Himalaya Publishing House,

Mumbai, 2002.

6. Singha, P.K. and Sahoo, S.C., Services Marketing - Text and Readings, Himalaya
Publishing House, Mumbai, 1994.

REPORTS AND JOURNALS

1. Annual Report of United India Insurance Company Limited 2009-2004.

2. Manual for Agents, Life Insurance Corporation of India, 2004.

3. The Insurance Times - The only journal of insurance in India.

WEBSITE

1. www.gicofindia.com

2. www.uiic.co.in

3. www.bimaonline.com

4. www.insurancemarketingtips.com

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