bharti axa
TRANSCRIPT
PREPARED BY:- WORK CARRIED OUT AT VARUN KALIA BHARTI AXA GENERAL INSURANCE CO. LTD.AS A PART OF INDUSTRY INTERNSHIP PROGRAM
FACULTY GUIDE:- COMPANY GUIDE:-Ms. DIVYA BHUTANI Mr. SIDDHARTHA SHARMA [email protected] [email protected]
1
SCOPE OF MICRO-INSURANCE IN CO-OPERATIVE AND AGRICULTURAL SECTOR
SCOPE OF MICRO-INSURANCE IN CO-OPERATIVE AND AGRICULTURAL SECTOR
ACKNOWLEDGEMENT
I would like to express my deep sense of gratitude to the faculty at Chitkara Business School, particularly Mr. Sandhir Sharma, HOD Marketing, to have guided me through my internship program.
I would like to express heart felt thankfulness to my industry mentor, Mr. Siddhartha Sharma, Regional manager- north to have given me his precious time and expertise to help me keep learning during my internship and for having made a big positive difference towards the whole learning process.
A special mention for MR. DINESH & MR. AMANDEEP at bharti AXA general insurance company ltd. For helping me gain useful insights regarding agricultural insurance and prospective general insurance business in co-operative banks.
Varun kalia
TABLE OF CONTENTS:-
2
CH NO.
NAME OF CHAPTER AND PARTICULARS
PAGE NO.
- EXECUTIVE SUMMARY 5-71. LITERATURE REVIEW 9-122. INTRODUCTION 14-26
2.1 INDUSTRY PROFILE 14-202.2 COMPANY PROFILE 22-26
3. PROJECT PROFILE 27-414. FINDINGS & ANALYSIS AND
CONCLUSION43-51
- REFERENCES 53- ANNEXURE 55-56
3
EXECUTIVE SUMMARY
The micro- insurance industry in India is facing stiff competition. The impetus for this rising competition is the growth in the number of private players in the market, though the public sector still enjoys majority of the market share but with each passing year the private companies are eating up small part of their shares.
4
The urban market is almost saturated but new trends suggest that companies moving towards the largely untapped and potential market- Rural and semi-urban India. The micro-insurance penetration level was only 0.62% of the country’s GDP last year compared to 2.53% in case of life insurance segment, hence the market is still new and needs to be tapped. The fact that nearly 72% of the total population resides in these areas, which also has low penetration of insurance cover, has been attracting many companies to enter this segment. Bharti AXA is one of such companies, other major company being Reliance General Insurance.
The Indian general insurance industry has historically been dominated by the agency channel, through which 75% of total premium income is sourced but in recent periods a new channel has developed and become new buzz word in India- Bancassurance. The banking and insurance industries have changed rapidly in the changing and challenging economic environment throughout the world. In this competitive and liberalized environment everyone is trying to do better than others and consequently survival of the fittest has come into effect and this has given rise to a mutual relationship which amazingly complements each other’s strengths and weaknesses.
Co-operative banks are one of the most important and strong channels to reach out to under developed semi-urban and majorly rural Indian market. These banks serve this segment of customers largely and has about 80% of it’s branches in semi-urban and rural areas, thereby providing a new and innovative channel to the general insurers to educate and cross sell the products to the emerging potential market. Hence, co-operative sector has become synonyms with the rural and urban sector in India.
5
Bharti AXA General Insurance Company has tie ups with four districts central co-operative banks in Punjab as of now- Amritsar Central Co-operative bank, Gurdaspur Central Co-operative bank, Jalandhar Co-operative co-operative bank and Hoshiarpur Central Co-operative bank. Under this tie up, the company presently provides insurance cover for following types of loans (securing bank loans):-
Housing. Cash credits to traders. Loans given to non-farm sector.
The company has further plans of foraying into the rural and semi-urban market through co-operative banks by cross-selling micro- insurance products directly to the customer’s. Thus, this report provides the study which was conducted in Punjab’s co-operative sector with Jalandhar District as sample so as sample so as to find and determine the micro- insurance products which would be a success in the rural and semi-urban market.
This report provides an in-depth into the co-operative banking in Punjab, alongwith a broad analysis of the Indian general insurance industry. With this analysis as a base the report further explores the under developed semi-urban and rural market in Punjab. This market exploration has been carried out with the aim of finding scope of micro-insurance in co-operative sector and hence determining the micro-insurance product that will fit well in this market. The report focuses on basic functions carried out by co-operative banks such as deposits, loans etc. which can serve as a complementary to sell insurance. The report even discusses different related aspects
6
regarding penetration of micro-insurance in rural areas and other under-developed semi-urban areas in Punjab and what steps can be taken to educate these customer’s about the micro-insurance products.
CHAPTER 1 LITERATURE REVIEW
7
Insurance is the safeguard against probable danger. Insurance can be bought against a particular event for its possible occurrence. It is a prevarication tool used as a preventive measure against future losses. This device is applied for minimizing or managing the future contingent risks. It is a mode of financially managing instrument through which a person gets the benefit of insurance coverage for a particular event. Therefore, a person buys future contentment and pleasure living through insurance. While in cooperative banking sector, insurance schemes are basically designed for the rural and semi-urban customers as they form the major portion of their customer base. Some of the reviewed articles have been presented in this section which discuss about the bright scope of micro- insurance in this sector.
The first article, RURAL INSURANC E : AN INTRODUCTION by Subir Ghosh not only focuses Rural insurance as an introduction but also provides the extent of Rural Insurance in cross-country analysis. With a huge population and large untapped market, insurance happens to be a big opportunity in India. However, insurance penetration in the country continues to be low. insurance has far been mostly city-oriented. But things are happening in the rural areas
8
where human life and income-generating rural assets need protection, and there is tremendous scope for developing insurance business. Apart from life insurance, the micro-insurance products such as weather, crop, disaster, livestock, have huge potential in the rural areas, but there is need to educate people about the benefits of rural insurance. Insurance needs to be packaged in such a form that it appears to be an acceptable investment to the rural people. In the near future, micro-insurance will definitely be one option that rural India is going to accept. Therefore, there exists an immense opportunity to explore the rural potential with all its complexities and variables and meet the challenge of developing insurance business in India.
The second article, “INSURING RURAL INDIA” by Richard Holloway and Rajagopalan Krishnamurthy , highlights the factors that spur the Rural Insurance business in India. Studies have shown that the awareness level of long-term savings in general, among the rural population in India, is high. In fact, the rural savings to income ratio, at 30%, is much higher than that of the urban population. Most of the private players are now beginning to realize the potential of the rural market, and have begun to make more proactive initiatives. Due to these initiatives, there has been a rapid increase in insurance penetration levels in rural regions.
The third article “THE WIDENING SCOPE OF INSURANCE” by Dr. C. Rangarajan, Chairman Economic Advisory Council to the Prime Minister says that the insurance sector has a vast potential not only because incomes are increasing and assets are expanding but also because the volatility in the system is increasing. In a sense, we are living in a more risky world. Trade is becoming increasingly global. Technologies are changing and getting replaced at a faster rate. In
9
this more uncertain world, for which enough evidence is available in the recent period, insurance will have to play in reducing the risk burden individuals and businesses have to bear.In the emerging scenario, the insurance industry must pay attention to (a) product innovation, (b) appropriate pricing, and (c) speedy settlement of claims. The approach to insurance must be in tune with the changing times. The mission of the insurance sector in India should be to extent the insurance coverage over a large section of the population and a wider segment of activities. The three guiding principles of the industry must be to charge premium no higher than what is warranted by strict actuarial considerations, to invest the funds for obtaining maximum yield for the policy holders consistent with the safety of capital and to render efficient and prompt service to policy holders. With imaginative corporate planning and an abiding commitment to improved service, the mission of widening the spread of insurance can be achieved.
10
The fourth article, “BANCASSURANCE- AN EMERGING CONCEPT IN INDIA” by Naveen Sethi talks about the insurance companies requiring immense distribution strength and tremendous manpower to reach out to such a huge customer base in present in India. This distribution is undergoing a sea change as various insurance companies are proposing to bring insurance products into the lives of the common man by making them available at the most basic financial point, the local bank branch, through bancassurance. Simply put,
bancassurance is the process through which insurance products are sold to customers at their local banks. With a banking network of 65,000 branches serving more than 300 million retail banking customers, insurance can be available at affordable prices to people even in remote corners of the country. The relationship is symbiotic,
11
but there are challenges. The most common challenges to success are poor manpower management, lack of sales culture, with bank and insufficient product promotions. One more important obstacle is a set of regulatory barriers.But one thing stands obvious, if insurance in India is to succeed, it can only be through bancassurance.
CHAPTER-2 INTRODUCTION
12
2.1 INDUSTRY PROFILE
INSURANCEIt is a method or a technique which provides for a collection of small amounts of premium from many individuals and firms out of which the losses suffered by the few are paid.
The functions of insurance can be bifurcated into two parts:-1. Primary functions2. Secondary functions3. Other functions
The primary functions of insurance include the following:-1. Provide protection – The primary function of insurance is to
provide protection against future risk, accidents and uncertainty. Insurance cannot check the happening of the risk, but can certainly provide for the losses of risk. Insurance is actually a protection against economic loss, by sharing the risk with others.
13
2. Collective bearing of risk – Insurance is a device to share the financial loss of few among many others. Insurance is means by which a few losses are shared among larger number of people. All the insured contribute the premiums towards a fund and out of which the persons exposed to a particular risk is paid.
3. Assessment of risk – Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. Risk is the basis for determining the premium rate also.
4. Provide certainty – Insurance is a device, which helps to change from uncertainty to certainty and whereby the uncertain risks may be made more certain.
The secondary functions of insurance includes the following:-
1. Prevention of losses – Insurance cautious individuals and businessmen adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions, installation of automatic sparkler or alarm systems, etc. prevention of losses cause lesser payment to the assured by the insurer and this will encourage for more savings by way of premium. Reduced rate of premiums stimulate for more business and protection to the insured.
2. Small capital to cover larger risks – Insurance relieves the businessmen from security investments, by paying small amount of premium against larger risks and uncertainty.
3. Contributes towards the development of larger industries – Insurance provides development opportunity to those larger industries having more risks in their setting up. Even the financial institutions may be prepared to give credit to
14
sick industrial units which have insured their assets including plant and machinery.
The other functions of insurance include the following:-1. Means of saving and investment – Insurance serves as
savings and investment, insurance is a compulsory way of savings and it restricts the unnecessary expenses by the insured’s for the purpose of availing income-tax exemptions also, people invest in insurance.
2. Source of earning foreign exchange - Insurance is an international business. The country can earn foreign exchange by way of issue of marine insurance policies and various other ways.
3. Risk free trade – Insurance promotes exports insurance, which makes the foreign trade risk free with the help of different types of policies under marine insurance cover.
OVERVIEW OF GENERAL INSURANCE MARKET IN INDIA
15
The general insurance business in India started with the establishment of Triton Insurance company limited in 1850 at Calcutta. In 1907, the first company, the mercantile insurance ltd. was set up to transact all classes of general insurance business. General insurance council, a wing of the insurance association of India in 1957, framed a code for ensuring fair conduct and sound business practices. In 1968, the Insurance Act was amended to regulate and to set minimum solvency margins. In the same year, the tariff committee was also set up. In 1972, the general insurance business (nationalization) act was passed to nationalize the general insurance business in India with effect from 1st January 1973. For these 107 insurers was amalgamated and grouped into four company’s viz., the national insurance company ltd., the new india assurance company ltd., the oriental insurance company ltd., and the united india insurance company ltd. general insurance corporation of india was incorporated as a company. IRDA( insurance regulatory and development authority) act 1999 paved the way for the entry of private players into the insurance market which was hitherto the exclusive privilege of public sector insurance companies/corporations.
Following graph shows the market share holdings of private vis-à-vis public players.
16
Due to the effectiveness of private marketing strategies, the market share of public insurers has consistently declined. Given a faster growth rate, the market share of the private sector is catching that of the public sector and the two will likely converge over the medium term. In the past, private insurers had aggressively targeted the more profitable (and tariffed) corporate fire and engineering businesses by combining them with discounted offers on de-tariffed products, for example, personal accident and health, marine cargo and hulls.
ANALYSIS OF INDIAN GENERAL INSURANCE INDUSTRY
Strengths/opportunities1. The intense competition brought about by deregulation has
encouraged the industry to innovate in all areas; from
17
underwriting, marketing, policy holder servicing to record- keeping.
2. Aggressive marketing strategies by private sector insurers will buoy consumer awareness of risk and expand the markets for products.
3. Competition in a deregulated environment will allow market forces to set premiums that are appropriate for exposures and push insurers to differentiate their products and services.
4. Innovations in distribution and improvements in market penetration will follow as public and private insurers compete to market their products.
5. Allowing insurers to issue their own policy wordings and setting own rates will enable underwriters to tailor products to meet client needs.
6. The Insurance Regulatory Development Authority of India’s (IRDA) emphasis on quarterly reporting/monitoring of insurer solvency will enhance capital adequacy and transparency. Licensed brokers are very much part of the intermediary structure and only those with adequate capital, professional experience and expertise will be licensed by IRDA.
Weaknesses/challenges1. Premium rates will remain under pressure due to intense
competition on the more profitable lines.2. Private insurers need to raise more capital, otherwise growth
could be constrained since reliance on reinsurance for capital relief is not always viable or available.
3. Traditional distribution channels, especially tied agents, need to be improved to match the new product offerings.
18
4. There is general lack of transparency as financial and operational data for insurers are not readily available as none of India’s insurers are directly listed on stock exchanges.
5. Like all developing economies on a fast track, the shortage of trained insurance professionals and technicians at all levels cannot be remedied in the short term.
6. Natural catastrophes will always be present; the Indian sub-continent is vulnerable to cyclones, floods, hurricanes and earthquakes, and until there is a national capacity to manage losses, dependence on overseas reinsurers will continue.
19
2.2 COMPANY PROFILE
ABOUT BHARTI AXA GENERAL INSURANCE
Bharti AXA General Insurance is a joint venture between Bharti, one of India’s leading business groups with interests in Telecom, Agri Business and Retail; and AXA, world leader in Financial Protection and Wealth Management. Bharti Group holds 74% of equity and AXA holds 26% of the equity.
With a vision to become the leader and preferred company for financial protection in India, Bharti AXA General Insurance offers its customers - individuals and businesses- a wide range of products and services that meet their insurance needs. The values upon which its business practices are based are availability, attentiveness and reliability. The company leverages the Bharti Group’s large customer pool, and has developed a strong multi-channel distribution network in both urban and rural markets.
20
The company was incorporated on 13th July 2007. Headquartered in Bangalore, the company currently has 40 branches across India. The Management team at Bharti AXA General Insurance consists of experienced leaders who are passionate about their company’s vision and goals and are committed to the development of Bharti AXA General Insurance as the preferred company for Financial Protection in India.
Bharti AXA presents an array of protective plans to suit your personal and business requirements. These embody our commitment to our system of values.
a) Reliable – prompt settlements, customer service and professionalism.
b) Attentive – to customer needs as they change with time, and actively listening to our customers.
c) Available – easy customer access to money and to our company, and plans that have built-in flexibility and convenience.
STRATEGY
Quality Policy - To provide fast, fair and friendly service to customers & partners.
To achieve a leadership position in India through a multi-distribution, multi-product platform.
21
To adapt AXA's best practice blueprints as a sound platform for profitable growth.
To leverage Bharti's local knowledge, infrastructure and customer base.
To deliver high levels of shareholder return.
To build long term value with our business partners by enhancing the proposition to their customers.
To be the employer of choice to attract and retain the best talent in India
Strong distribution network & customer base of Bharti - provides access to customer base of more than 60 million.
STRATEGIC DIFFERENTIATORS
Multi channel execution capability
AXA's current Asia product range which is a strong match to products sold to the masses
Global scale of AXA providing cost effective and speedy re-use of systems, products and business capability
ABOUT AXA
AXA aspires to do business responsibly, and to build trust-based relationships with its stakeholders:
22
Clients: Consistently deliver efficient local service and adapted solutions, while adhering to the highest standards of professional conduct.
Shareholders: Create lasting value by achieving operating performance that ranks among the best in the industry, and provide transparency financial information.
Employees: Ensure professional fulfillment by offering a supportive and respectful workplace where people are empowered and the continuous development of competencies is encouraged.
Suppliers: Maintain excellent supplier relationships by adhering to a set of clearly defined procurement guidelines and promoting ongoing dialogue.
STRATEGY
AXA's strategy is to combine organic and external growth to meet the challenge of operational excellence in all of the following areas:
Product innovation Core business expertise (underwriting, claims management,
pricing, investment performance) Distribution Quality of service Productivity
All AXA employees are champions of operational excellence. They are supported in this aim by the AXA Way continuous process improvement program.
23
Leveraging the resources of the AXA Group, and in accordance with AXA's values and commitments, 214 044 people are working daily to execute this strategy.
Group profile
In the financial markets, AXA is positioned as a global leader in Financial Protection.
Key figures:
80 million clients worldwide 216 095 employees (including exclusive sales associates)
worldwide (at December 31, 2009) 400,000 shareholders 90.1 billion euros in revenues (at December 31,2009) 3.5 billion euros in adjusted earnings (at December 31,2009)
ORGANISATIONAL STRUCTURE
S.NO.
NAME OF PERSON ROLE/POSITION
1. MR. SUNIL BHARTI MITTAL
CHAIRMAN
2. MR. PRAKASH NENE DIRECTOR3. MR. SIEW POD NGO DIRECTOR4. MR. JAN VAN DEN BERG DIRECTOR5. MR. ALEX KIMURA DIRECTOR6. MR. GUY MERCILLAT DIRECTOR7. MR. AKHIL GUPTA DIRECTOR
24
8. MR. RAKESH BHARTI MITTAL
DIRECTOR
9. MR. MANIK JHANGIANI DIRECTOR10. MR. NASSER MUNJEE DIRECTOR11. MR. BHARAT S RAUT
INDEPENDENT DIRECTOR
12. MR. MILIND CHALISGAONKAR
CEO
13. DR. AMARNATH ANANTHANARAYAN
CEO
PRODUCTS OFFERED FOR RURAL AREAS
The many important economic activities that are carried in rural areas such as farming, cattle rearing, sericulture etc. are exposed to several risks that threaten the livelihoods of the people engaged in them. Attentive to the needs to the rural sector, Bharti AXA has a range of Rural Insurance products to mitigate those risks and offer financial protection to its rural customers.
Agricultural Pump Set Insurance Policy
Water is a precious resource and farmers depend on pumpsets to deliver it to your fields. With so much at stake, it is vital that they insure there pumpset against damage and theft. Likely losses flow
25
out and coverage benefits flow in when they would have the Bharti AXA Agricultural Pump Set Insurance policy.
Cattle insurance policy
For a farmer, cattle plays a major role in sustaining him and his family. Exposing them to diseases or accidents will affect their business. To protect themselves and their most vital resources from unforeseen losses, it’s a very fruitful and effective policy for farmers to opt for.
MANY POLICIES SIMILAR TO THESE ARE AS FOLLOWS-
1. Farmer’s package policy.2. Machinery breakdown insurance policy.3. Baggage policy.
26
CHAPTER-3 PROJECT PROFILE
AN INTRODUCTION TO CO-OPERATIVE SECTORThe concept of co-operation emphasizes on the collective action of individuals to achieve common goals which may not have been possible for one isolated individual.
27
The principles of co-operation define the basic characteristics of any co-operative organization. These principles form the common thread that runs through all the co-operative societies with marginal variations. A cooperative is defined as an autonomous association of persons united to meet their common economic, social and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise. It is a business organization owned and operated by a group of individuals for their mutual benefit. A cooperative may also be defined as a business owned and controlled equally by people who use it’s services or who work for it.
Co-operatives have extended across the entire country and there are currently an estimated 230 million members worldwide. The cooperative credit system has the largest network in the world and cooperatives have advanced more credit in the Indian Agricultural sector than commercial banks. In fertilizer production and distribution the INDIAN FARMERS FERTILISER COOPERATIVE (IFFCO) commands over 35 % of the market. Dairy cooperatives operating under the leadership of the NATIONAL DAIRY DEEVELOPMENT BOARD and through 15 state cooperative milk marketing federations have now become the largest producer of milk in the world. The groundwork for this was laid in early 1970’s when the largest dairy development programme in the world- Operation Flood was launched.
The establishment of co-operative society in India is governed by a separate and special Act called “THE CO-OPERATIVE SOCIETIES ACT”.
CO-OPERATIVE BANKS
28
The co-operative banks have a history of almost 100 years. The co-operative banks are important constituent of the Indian Financial System, judging by the role assigned to them, the expectations they are supposed to fulfill, their number, and the number of offices they operate. The co-operative movement originated in the west, but the importance that such banks have assumed in India is rarely paralleled anywhere else in the world. Their role in rural financing continues to be important even today, and their business in the urban area has also increased phenomenally in recent years mainly due to the sharp increase in the number of primary co-operative banks.
While the co-operative banks in rural areas mainly finance agricultural-based activities including farming, cattle, milk, hatchery, personal finance, etc. along with some small scale industries and self-employment driven activities, the co-operative banks in urban areas mainly finance various categories of people for self-employment, industries, small-scale units, home finance, consumer finance, personal finance, etc. some of the co-operative banks are quite forward looking and have developed sufficient core competencies to challenge state and private sector banks.
There are two main categories of the co-operative banks:-(a) short-term lending oriented co-operative banks- within this category there are three sub categories of banks viz. state co-operative banks, district co-operative banks and primary agricultural co-operative societies.(b) long-term lending oriented co-operative banks- within the second category, there are land development banks at three levels; state, district and village level.
29
Co-operatives operating in Punjab- Punjab state co-operative agricultural development bank ltd. Punjab state co-operative bank ltd. Punjab state co-operative supply & marketing federation ltd.
(markfed) Punjab state co-operative milk producer’s federation ltd.
(milkfed) The Punjab state federation of co-operative sugar mills ltd.
(sugarfed) The Punjab co-operative cotton marketing & spinning mills
federation ltd. (spinfed) Punjab state handlooms weavers apex co-operative society ltd.
(weavco)
DISTRICT CENTRAL CO-OPERATIVE BANKS OF PUNJAB STATE CO-OPERATIVE BANK
S.NONAME OF THE CENTRAL CO-OPERATIVE BANK
LOCATION
1. AMRITSAR CENTRAL CO-OPERATIVE BANK AMRITSAR2. BHATINDA CENTRAL CO-OPERATIVE BANK BHATINDA3. FARIDKOT CENTRAL CO-OPERATIVE BANK FARIDKOT4. FAZILKA CENTRAL CO-OPERATIVE BANK FAZILKA5. FEROZEPUR CENTRAL CO-OPERATIVE BANK FEROZEPUR6. GURDASPUR CENTRAL CO-OPERATIVE BANK GURDASPUR7. HOSHIARPUR CENTRAL CO-OPERATIVE BANK HOSHIARPUR
30
8. JALANDHAR CENTRAL CO-OPERATIVE BANK JALANDHAR9. KAPURTHALA CENTRAL CO-OPERATIVE BANK KAPURTHALA10. LUDHIANA CENTRAL CO-OPERATIVE BANK LUDHIANA11. MANSA CENTRAL CO-OPERATIVE BANK MANSA12. MOGA CENTRAL CO-OPERATIVE BANK MOGA13. MUKTSAR CENTRAL CO-OPERATIVE BANK MUKTSAR14. NAWANSHAR CENTRAL CO-OPERATIVE BANK NAWANSHAR15. PATIALA CENTRAL CO-OPERATIVE BANK PATIALA16. ROPAR CENTRAL CO-OPERATIVE BANK ROPAR17. SANGRUR CENTRAL CO-OPERATIVE BANK SANGRUR18. TARANTARAN CENTRAL CO-OPERATIVE BANKTARANTARAN
Some attractive schemes provided by the bank to low credit rated customers include-
SEHKARI BIMA YOJANA- The co-operative banks in Punjab are pioneers of starting this yojana w.e.f. 1.6.1999 in the country. Under this scheme, every depositor who opens a saving bank with Rs. 1100/-or more is provided personal accidental insurance cover for Rs. 1 lakh, during the period he keeps the account with the bank, at a very nominal premium.
KISAN CREDIT CARD SCHEME- this new scheme has been implemented by the bank for the benefit of farmers. The scheme improves upon existing scheme of crop loans by allowing the farmers flexibility and freedom of choice to avail and repay loans as per requirements. Maximum credit limit of the farmers has been raised from Rs. 70,000 per crop to Rs. 85,000 per crop.
JEEVAN RAKSHA PENSION-CUM-GRATUITY SCHEME- this scheme has been started by the bank particularly for the benefit of rural old farmers who can enjoy pension facility in
31
their old age by depositing Rs. 650/- month. If the depositor dies before 10 years, the nominee of the deceased is allowed to continue to deposit the money in the scheme and for the pension after 10 years.
INTRODUCTION TO THE RESEARCH:
Time and again we hear or listen in television or journals that rural India is the next big thing for Indian marketers and the fact stands true for Micro-insurers too. Following figures substantiates it, according to statistics:-
800 million people. Estimated annual size of the rural and semi-urban market.
Durables Rs. 5000 crores. Agri-inputs (incl. tractors) Rs. 45000 crores. 2/4 wheeler vehicles Rs. 8000 crores.
41 million kisan credit-cards issued with cumulative credit of Rs. 977 billion resulting in tremendous liquidity.
42 million rural households are availing banking services in comparison to 27 million urban households.
Investment in formal savings instruments; 6.6 million households in rural and 6.7 million in urban India.
The main purpose of our study is to elaborate the scope of co-operative banks in micro-insurance industry and see to its popularity and other factors that are important in studying and referring to its significance for rural areas, agriculture and poor farmers. Let’s see what micro-insurance basically is.
Micro-insurance, the term used to refer to insurance to the low-income people, is
32
different from insurance in general as it is a low value product (involving modestpremium and benefit package) which requires different design and distribution strategies such as premium based on community risk rating (as opposed to individual risk rating), active involvement of an intermediate agency representing the target community and so forth. Insurance is fast emerging as an important strategy even for the low-income people engaged in wide variety of income generation activities, and who remain exposed to variety of risks mainly because of absence of cost-effective risk hedging instruments. Although the type of risks faced by the poor such as that of death, illness, injury and accident, are no different from those faced by others, they are more vulnerable to such risks because of their economic circumstance. In the context of health contingency, for example, a World Bank study , reports that about one-fourth of hospitalized Indians fall below the poverty line as a result of their stay in hospitals. The same study reports that more than 40 percent of hospitalized patients take loans or sell assets to pay for hospitalization. Indeed, enhancing the ability of the poor to deal with various risks is increasingly being considered integral to any poverty reduction strategy.Historically in India, a few micro-insurance schemes were initiated, either by non governmental organizations (NGO) due to the felt need in the communities in which these organizations were involved or by the trust hospitals. These schemes have now gathered momentum partly due to the development of micro-finance activity, and partly due to the regulation that makes it mandatory for all formal insurance companies to extend their activities to rural and well-identified social sector in the country (IRDA 2000). As a result, increasingly, micro-finance institutions (MFIs) and NGOs are negotiating with the for-profit insurers for the purchase of customized group or standardized individual insurance schemes for the low-income people. Although the reach
33
of such schemes is still very limited---anywhere between 5 and 10 million individuals---their potential is viewed to be considerable.Recently, the ILO prepared a list of products of all insurance companies,public as well as private, for the disadvantaged groups in India. Some of the observationsmade on the basis of the list are presented below:• Out of 80 listed insurance products, 45 (55%) cover only a single risk. The otherproducts, covering a package of risks, mostly focus on 2 (20%) or 3 (18%) risks.• The available products cover a wide range of risks. However, the broad majorityof the insurance products cover life (40 products or 52%) or accident-related risks.The health coverage remains very limited (12 products).• Most life insurance products (23 out of 42) are addressed to individuals. However,some products may be bought both by individuals and groups.• Most life insurance products (55%) have been designed to cover an extendedcontract duration ranging from 3 to 20 years.• Out of 42 life insurance products, 23 are pure risk products. The other 19 productspropose various types of maturity benefits.• Out of the 12 currently available health insurance products, 7 have been designedand are restricted to groups.• Out of the total 12 health products, 7 products propose the reimbursement ofhospitalization expenses while the other 5 have chosen to narrow down thecoverage to some specific critical illnesses.• Most of the health insurance products specifically exclude deliveries and other
34
pregnancy-related illnesses. Most of these products also mention amongst theirexclusion clauses, HIV/AIDS.• Most products whether life or non-life require a single payment of premium (i.e., a one-time payment) upon subscription.• Private insurance companies have three times more products than the publiccompanies.
As per the IRDA statistics, the public insurance companies still play a predominant role in the present coverage of the rural and social sectors. This is only to be expected since the incumbent public insurers have been in the market for a number of years now.
Health and life are two most important risks for which micro-insurance isdemanded. Indeed, at low-income level, when much of the income goes into meeting basic needs, the scope of having varying priority needs is very limited. On the supply side it’s observed that out of 80 odd products only 7 products are health insurance products that provide for reimbursement of hospital expenses. Admittedly, compared to life insurance, which is a relatively straightforward business, health insurance is a much more complex service as it involves addressing the provision of healthcare that is location specific. The design and sale of products are currently driven by the objective of meeting the regulatoryobligation and the making of profits or reducing losses. In this situation, there is a danger of certain priority needs getting neglected by the insurance companies.
35
THE MOST COMMON PRODUCTS OF MICRO-INSURANCE ARE AS FOLLOWS:-
Credit lifeTerm life/ personal accidentSavings lifeProperty insuranceEndowment lifeHealth insuranceAgriculture
FOLLOWING IS THE TABLE WHICH SHOWS THE DIFFERENCE BETWEEN CONVENTIONAL AND MICRO-INSURANCE:-
Conventional Insurance Micro-insurance
Complex policy document
• Limited eligibility with standard exclusions• Regular premium payments as banking transaction
•Usually minimum of 12 months
• Screening requirements may include a medical examination
•Simple, easy to understand policy document•Broadly inclusive, with few if any exclusions• Premiums accommodate customers’ irregular cash flows, paid in cash or with another financial transaction • Period of coverage can be as short as 4 months• Any screening requirements would be limited to a declaration of good health•Only small sums insured•Community or group pricing
36
•Small and large sums insured•Priced based on age/specific risk
• Agents and brokers are primarily responsible for sales
•Market is largely familiar with insurance
• Distribution channel may manage the entire customer relationship, perhaps including premium collection and claims payment•Market is largely unfamiliar with insurance
Micro Insurance Product Statistics:-
Year No. of Products approved
2006-07 5
2007-08 11
2008-09 6
2009-as on date
1
37
Total 23
CHALLENGES AHEAD FOR MICRO-INSURANCE POPULARITY:-
Low insurance awareness among the targeted segment Need of more innovative but simple and flexible products
taking into account the life style and needs of the low income group people
Simplification Product development—exclusions must be made clear and
simple Proposal approval Premium payment Maturity / death claim settlement Grievance redressal mechanism Affordability of premium—limited disposable income Mobility of the targeted population High volatility and uncertainty of income Enhanced role of SHGs All documents must be in vernacular language Developing insurance awareness amongst the low income
band people Need to develop Health micro insurance products Need of good quality data Standardizing underwriting procedures for MI. Regulatory assistance
38
PROBLEM STATEMENT:-
Bharti AXA general insurance has tie-ups with a number of district central co-operative banks in Punjab. It is currently in the business of securing loans for these banks, these include providing insurance cover for housing loans, cash credit to customers and loans for to non-farm sector i.e., loans given to people employed in work other than farming/agriculture.
Bharti AXA now aims to cross sell its line of General Insurance products and now currently focusing on selling its products through co-operative banks. Thus, going one step ahead of its current business where it interacts only with co-operative banks, by interacting directly with the Bank Managers and cross selling insurance by obtaining leads from the bank.
39
The research titled “ scope of micro-insurance in co-operative and agricultural sector” aims to find best suited micro-insurance products for the co-operative sector in Punjab, which implies finding the product which is likely to be most preferred and successful in the rural and semi-urban market in a few years.
SIGNIFICANCE TO THE RESEARCHERTo get a good understanding of co-operative sector in Punjab and recommend to the company the possible ways of conducting successful business in this sector.
SIGNIFICANCE TO THE INDUSTRYThis is a limited study which takes into consideration the response from rural and semi-urban areas of jalandhar district, punjab and its nearby villages. This data can be explorated to take the view of the trends across the industry. The significance for the industry lies in studying these trends that emerge from the study. It is a rapidly changing and evolving sector. People are only beginning to wake up to its vast possibilities. A study like this can attempt to guide the future of the industry based on current trends.
DATA COLLECTION TOOLSurvey approach method of sampling was used to collect data. The survey method of obtaining information is based on the questioning of respondents. 100 respondents were chosen for survey. Respondents are asked a variety of questions regarding their behaviour, intentions, attitudes, awareness and motivations. Various things are to taken care of while designing a good questionnaire. These include asking questions (before designing) such as will the question be understood in the correct
40
manner by the respondent, how many close and open ended questions should be included etc. The questionnaire consisted of following types of questions:
Dichotomous questions (Yes/ No) Multiple choice questions
CONTACT METHODSA direct contact method was used to collect data i.e., Personal Interviewing. It is the most versatile method. This method was applicable in both exploratory as well as descriptive research. It was helpful in exploratory research as it helped to reach out to experts and gather their views regarding the problem at hand and thus providing a much clear picture for carrying out descriptive research for the study.
LIMITATIONS OF THE RESEARCH1. The research is confined to a certain parts of Punjab and
doesn’t necessarily shows a pattern applicable to all of the country.
2. Some respondents were reluctant to divulge personal information which can affect the validity of responses.
3. In a rapidly changing industry, analysis in one segment can change very quickly. The environmental changes are vital to be considered to assimilate the findings.
41
CHAPTER-4 FINDINGS & ANALYSIS
42
AND CONCLUSION
FINDINGS AND ANALYSIS
This section contains the informative data that was gathered as a result of primary and secondary data collection. A graphical analysis of primary data has been provided later in this section.
To begin with, some of the key facts regarding the District Central Co-operative Bank need to be highlighted:-
There are 72 branches of Jalandhar Central Co-operative Bank in Jalandhar district, more than any other commercial bank in the district.
New schemes such as Sehkari bima yojna – provides a personal accident cover of Rs. 1 lakh at a very nominal premium to anyone who opens an account with a balance of Rs. 1100 or more.
These facts are important as it can be inferred that the co-operative bank in the district has a dense and widely spread network and the major portion of bank’s customers come from rural and semi-urban areas as evident from the deposits and
43
advances statistics. Thus, it serves as an effective and efficient channel for reaching the rural and semi-urban customer segment.
With this preliminary information at hand, research was preceded further by conducting a survey. Conclusions were made only after an analysis of the findings obtained from the survey. The findings have been quantified and graphs are used wherever possible for better comprehension of the results.
ANALYSIS OF SURVEY FINDINGS:
TABLE 1- NUMBER OF PEOPLE HAVING INSURANCE
RESPONSE NO.OF RESPONDENTS
SHARE(%)
YES 70 70%NO 30 30%TOTAL 100 100%
44
INTERPRETATION: Of the 100 respondents interviewed 70% hold an insurance
policy. This result is irrespective of whether insurance policy is life
or non-life. Data suggests insurance in general terms has made inroads
into the rural and semi-urban market.
TABLE 2-NUMBER OF RESPONDENTS HAVING PERSONAL ACCIDENT POLICY
RESPONSE NO.OF RESPONDENTS
SHARE(%)
YES 11 31%NO 23 69%TOTAL 34 100%
45
TABLE 3- NUMBER OF RESPONDENTS HAVING HEALTH INSURANCE POLICY
RESPONSE NO.OF RESPONDENTS
SHARE(%)
YES 8 23.5%NO 26 76.5%TOTAL 34 100%
46
TABLE 4- NUMBER OF RESPONDENTS HAVING MOTOR VEHICLE (TWO WHEELER/FOUR WHEELER) INSURANCE POLICY
RESPONSE NO.OF RESPONDENTS
SHARE(%)
YES 21 72.4%NO 8 27.6%TOTAL 29 100%
INTERPRETATION: Out of 29 non-life policy holders, only 9 have a personal
accident policy cover. Even health policy has lower penetration, with only 11
holders among 29 non-life policy holders. Some of the health policy holders include smart card holders issued under Rashtriya Swasthiya Bima Yojna.
47
Major non-life policies people hold are motor insurance as 80% respondents hold it. But there are many cases with elapsed policy and where it is yet to be renewed.
Among other non-life policies, people own building insurance, cattle and crop insurance covers to some extent.
These findings are worth noting because these two micro-insurance products are of highest concern among the line of different micro-insurance products and they both are low on penetration. Following findings throw more light on the level of awareness among people regarding various other products available.
TABLE 5- MICRO-INSURANCE POLICIES AWARENESS AMONG RESPONDENTS
POLICY TYPE NO.OF RESPONDENTS
MOTOR INSURANCE 83HEALTH INSURANCE 18PERSONAL ACCIDENT 27CATTLE INSURANCE 41CROP INSURANCE 36ANY OTHER -
48
Out of the 100 respondents, 83 i.e., the maximum number of respondents are aware about the motor vehicle insurance. The reason being that loan for motor vehicle in the area is quite popular and it is a mandate to get an insurance cover before borrowing a loan for motor vehicle from the bank.
The most significant findings among these is that the pioneer products of micro-insurance such as health and personal accident are not among the list of products having high level of awareness.
Thus, apart from motor insurance, the other insurance schemes haven’t made significant inroads into this particular segment of market.
TABLE 6- PEOPLE’S OPINION ABOUT INDIAN INSURANCE COMPANIES
49
RESPONSE NO.OF RESPONDENTS
SHARE(%)
RIGID PLANS 67 67%NON-USER FRIENDLY 29 29%UNSATISFACORY SERVICES
26 26%
NON-AGGRESSIVE 35 35%SATISFACTORY 24 24%GOOD 10 10%VERY GOOD 0 0%
INTERPRETATION- 67% of the respondents have the opinion that Indian
Insurance Companies have rigid plans.
50
29% feel that Insurance companies are user-friendly. 26% feel that services of Indian Insurance Companies are
Unsatisfactory. 35% of the respondents are of the view that Indian Insurance
Companies are Non- aggressive. 24% feel that products and services of Indian Insurance
Companies is Satisfactory. Whereas, only 10% feel that it is good enough. And according to the present survey, no single person has
felt that it is very good.
FINANCIAL HIGHLIGHTS:-(2009-10) BALANCE SHEET AS AT 31st MARCH 2010
51
52
UP TO QUARTER MARCH 2010(RS.000’)
UP TO QUARTER MARCH 2009(RS. 000’)
SOURCES OF FUNDSHARE 2000,000 16,25,800PENDING ALLOTMENT 750,000 -RESERVES AND SURPLUS 589,134 274,200FAIR VALUE CHANGE ACCOUNT
1709 1070
BORROWINGS - -
TOTAL 3,340,843 1,901,070
APPLICATION OF FUND’SINVESTMENT’S 2,631,213 1,159,990LOANSFIXED ASSETS 317,835 282,453DEFERRED TAX ASSETS
CURRENT ASSETSCash and Bank Balances 284,357 56,587Advances and Other Assets 428,279 159,387Sub-Total (A) 712,636 215,974CURRENT LIABILITIES 1,256,523 308,513
PROVISIONS 1,200,076 161,576
DEFERRED TAX LIABILITY
Sub-Total (B) 2,456,599 470,089NET CURRENT ASSETS (C) = (A - B)
(1,743,963) (254,115)
MISCELLANEOUS EXPENDITUREDEBIT BALANCE IN PROFIT AND
2,135,758 712,742
TOTAL 3,340,843 1,901,070
COMPUTATION OF RATIOS:-LIQUIDITY RATIOS:-
1. CURRENT RATIO:- CURRENT ASSETS/CURRENT LIABILITIES
(Rs. IN LAKHS)
CURRENT ASSETS 7126.36
CURRENT LIABILITIES 12565.3CURRENT RATIO 0.56:1
2. QUICK RATIO:-CURRENT ASSETS-STOCK-PREPAID EXPENSES/CURRENT LIABILITIES
QUICK ASSETS 4495.36CURRENT LIABILITIES 12565.3QUICK RATIO 0.357
SOLVENCY RATIOS:-1. DEBT – EQUITY RATIO= LONG TERM DEBT/ EQUITY
DEBT 0EQUITY 2000DEBT EQUITY RATIO 0
53
2. EQUITY RATIO = SHAREHOLDER FUND/ TOTAL ASSETS * 100
SHAREHOLDERS FUND
2000
TOTAL ASSETS 2949EQUITY RATIO(%) 67.8
3. FIXED ASSETS TO NET WORTH RATIO = FIXED ASSETS/TOTAL CAPITAL* 100
FIXED ASSETS 317.8TOTAL CAPITAL 3339.13FIXED ASSETSTO NET WORTH RATIO(%)
9.51
3.TOTAL LIABILITY TO TOTAL ASSETS RATIO= TOTAL LIABILITIES/TOTAL ASSETS
TOTAL LIABILITY 11469.62TOTAL ASSETS 2949TOTAL LIABILITY TO TOTAL ASSETS RATIO
3.88
PROFITABILITY RATIOS:-1. NET PROFIT RATIOS= NET PROFIT / NET SALES * 100
NET PROFIT 2135.7NET SALES 416.6NET PROFIT RATIO 51.2
54
CONCLUSIONSo, one of the major outcomes from the project was how to interact with the customers and distributors (bankers) effectively. This project gave an experience on how to deal with distributors, being bankers in this case. Personal emphasis were given to bank people so as to convince them that the tie-up with Bharti AXA General Insurance will be lucrative for both company and bank. The project even involved interacting with existing and prospective customers. Customers generally have a wide range of queries which have to be answered patiently and convincingly, as a consequence that will satisfy the customer. So to deal with customers is a fine art which has been learned from this project.
55
REFERENCES
WEBSITES:- http://www.ibef.org http://economictimes.indiatimes.gov.in http://www.pbcooperatives.gov.in http://www.irdaindia.org
56
http://banknetindia.com http://bhartiaxa.org
ARTICLES FROM MAGAZINES:- Holloway R. And Krishnamurthy R.(2006 December),
“Insuring India” , Insurance chronicle, pp. 47-49 RURAL INSURANC E : AN INTRODUCTION by Subir
Ghosh INSURING RURAL INDIA” by Richard Holloway and
Rajagopalan Krishnamurthy THE WIDENING SCOPE OF INSURANCE” by Dr. C.
Rangarajan, Chairman Economic Advisory Council to the Prime Minister
BANCASSURANCE- AN EMERGING CONCEPT IN INDIA” by Naveen Sethi
ANNEXURE
57
QUESTIONNAIRENAME:AGE:OCCUPATION:
1. Do you hold an insurance policy?a) Yesb) No
2. If yes, which of the following you hold?a) Life policyb) Non-life policyc) Both
3. Are you satisfied with the non-life policy you hold?a) Yesb) No
If yes, (i) Are you satisfied with the service agent?
a) Yesb) No
58
4. Are you time to time informed about different non-life/micro-insurance policy schemes through agents or some other channel?
a) Yesb) No
5. Which of the non-life and micro policies you aware of?a) Motor insuranceb) Health insurancec) Personal accidentd) Cattle insurancee) Crop insurancef) Any other________________________________________
6. If you are holder of a non-life policy, theni. Do you hold a personal accident policy?
a) Yesb) No
ii. Do you hold a health insurance policy?a) Yesb) No
iii. Do you hold a motor vehicle insurance policy?a) Yesb) No
iv. If you hold some other non-life policy, please mention ________________________________
7. How would you rate Indian Insurance Companies?a) Rigid plansb) Non-user friendlyc) Unsatisfactory servicesd) Non-aggressivee) Satisfactoryf) Goodg) Very good
8. What would you look for in an Insurance Companies?
59
a) A trusted nameb) Friendly service and responsivenessc) Good plansd) Accessibility
THANK YOU
60
61