INSURANCE DISTRIBUTION CHANNELS

Submitted by:

Shobhit Agarwal

INSURANCE

Insurance in its basic form is defined as “ A contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of a certain event."

• The insurance sector is growing at a speedy rate of 15-20%. Together with banking services, insurance services add about 7% to the country’s GDP.

• In 1999, the Insurance Regulatory and Development Authority (IRDA) were constituted as an autonomous body to regulate and develop the insurance industry.

Distribution channels in insurance

Life insurance products are sold through individual agents and many of them have this as their only career occupation. General insurance products are sold through individual agents, corporate agents and brokers. Distribution channels such as agents are licensed by the IRDA

AGENTS

Insurance sales agents, commonly referred to as “producers” in the insurance industry, sell one or more types of insurance, such as property and casualty, life, health, disability, and long-term care. Property and casualty insurance agents sell policies that protect individuals and businesses from financial loss resulting from automobile accidents, fire, theft, storms, and other events that can damage property.

Insurance is a complex product, intangible in nature, which is basically a promise by the insurer to cover the contingent event. So, it requires personal selling effort, an interaction with the prospect, creating confidence and trust in his mind. A study by the Life Insurance Marketing and Research Association (LIMRA), conducted amongst 27 million US households, indicated that 76 % would prefer to buy insurance only after face 2 face discussions with an intermediary.

LICENSING OF THE AGENT

A license will not be issued if the person-• Has not completed 18 yrs of age, is a

minor• Found to be of unsound mind• Found guilty of criminal misappropriation

or criminal breach of trust.

 

Further the person must • Have passed 12th standard – in area with

a population of 5000 or more.• Have undergone training in an institution

approved by IRDA for at least 50 hrs.

SPECIAL AGENT

Section 2(17) has approved a ‘special agent’ as one who procures life insurance business for the insurer, in consideration of commission.

Special agents can work in the life insurance business, not in the general business.

CORPORATE AGENT

• It enables the insurer to take advantage of the presence of a large number of firm, corporations, societies, etc., who are in contact with the people in the normal discharge of their activities and utilize their presence and services for canvassing insurance products.

• The concept of corporate agency was introduced in 2000 by IRDA. The agent who is not an individual is called a corporate agent.

BROKERS

An Insurance broker is an independent Insurance agent who works with many insurance companies to find the very best available policies for his or her clients.

A typical insurance agent works for one specific company, and chooses from within that company's policies for clients. While an insurance broker is different from the typical agent in this regard, the two are otherwise similar. Both structure policies, settle claims, and usually work on a commission basis.

IRDA provides three kinds of brokers. • The DIRECT BROKER, who can deal with

both life and general insurance.• The RE INSURANCE BROKER is authorized

to place reinsurance business of clients who are insurers, with reinsurers.

• The COMPOSITE BROKER is authorized to handle both direct and reinsurance business as well.

BANCASSURANCE

A French term referring to the selling of insurance through a bank's established distribution channels. The sale of insurance and other similar products through a bank.

IRDA in October 2002 allowed banks to act as a corporate agents, of one life insurance company and one general insurance company.

Indian banks have a vast network of branches across the country. There are more than 65000 branches in India and Deposits with banks continue 50 percent of domestic savings in India.

Marketing of Insurance

Insurance marketing involves marketing of various features of policies which dominate the scene of involvement with the purpose to ensuring proper revenue to the policy holder.

Insurance marketing is basically just the marketing of insurance products.

• Online advertising is one marketing tool that is worth the money. As the Internet takes on more power and influence all of the time, having a web presence will put you on the cyber map and get you noticed. It has been found through studies that 75 percent of all households have access to a computer and Internet resources.

• Block line advertising in trade journals, industry publications and periodicals is the way to go. This is because industry professionals read these publications to keep in the know.

• Television ads and print ads are excellent forms of insurance marketing. However the downside is that both can be very expensive.

CASE STUDY

• ICICI PRUDENTIAL LIFE INSURANCE

We cover you at every step in life (Suraksha… Zindagi ke har kadam par)

• ICICI Prudential is a joint venture between ICICI Bank and Prudential plc engaged in the business of life insurance in India based in Mumbai.

• ICICI Prudential is the largest private insurance company and second largest insurance in India after LIC.

• ICICI Bank and Prudential plc holds 74% and 26% stake respectively in ICICI Prudential Life.

Brand strength

Infrastructure

Customer base

Market Innovators

Local knowledge

ICICI

PRUDENTIAL

Reputation

Insurance expertise

Product

Distribution

Operations

The joint strengths

• CHAIRMAN – CHANDA D. KOCHHAR• MANAGING DIRECTOR – NIMESH SHAH

ICICI Prudential has one of the largest distribution and servicing network with over 2,000 proprietary offices & customer touch points across India. ICICI Prudential Life Insurance came into the market to sell a policy in 2001.

ICICI Prudential arguably became the first private insurance company to recognize and harness the power of TV advertising.

ICICI Prudential is advertising in outdoor, TV and press etc.

• Today, it has one of the largest distribution networks amongst private life insurers in India, with branches in 54 cities. The total number of policies issued stands at more than 780,000 with a total sum assured in excess of Rs.160 billion.

• ICICI Prudential is coming in front for development of rural sector, by way of establishing a school, by digging a well in villages. May be it seems like a fool’s suggestion but it is one of the way to gain trust in rural sector.

• The company has also undertaken press and internet campaigns to inform customers about benefits of some of its products, particularly retirement solutions, through the Chintamani campaign.

• ICICI Prudential Life Insurance has also announced a strategic distribution tie-up with Hariyali Kisaan Bazaar. As a partner, Hariyali Kisaan Bazaar can now distribute ICICI Prudential's protection, wealth creation, retirement solutions and health insurance products to customers across the its growing number of rural business hubs in the country.

• The company also made sure the products were priced competitively, Compared with the competition.

• ICICI Prudential has managed to sign on 6.5 million policy holders, it is because the company has built up a strong agent network, which brings in 60 per cent of the total premium. Today the insurer has nearly 250,000 agents working for it

DISTRIBUTION SYSTEM OF ICICI PRUDENTIAL

• Tied Agency

Tied Agency is the largest distribution channel of ICICI Prudential, 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.

Bancassurance and Alliances

ICICI Prudential was a pioneer in offering life insurance solutions through banks and

alliances. Within a short span of two years, and with nearly a large number of partners.

B & A has emerged as a vital component of the company’s sales and distribution strategy, contributing to approximately one third of company’s total business.

Information Technology

• The Information Technology function at ICICI Prudential is committed to enable business through the use of technology.

• provides real-time information to customers and is responsible for customer relationship management.

ICICI Prudential has one of the largest distribution networks amongst private life insurers in India, having commenced operations in 132 cities and towns in India.

• ICICI Prudential has recruited and trained more than 72,000 insurance advisors to interface with and advise customers.

• The Company recently tied up with the Forbes Six Sigma rated Dabbawalla organization in Mumbai for a direct marketing exercise.