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  1. 1. Financial Intermediaries in Non-Life Insurance FICCI October 16, 2001
  2. 2. Current Industry Scenario <ul><li>Low business and territorial penetration levels - need for new distribution channels </li></ul><ul><li>Poor marketing strategies, lack of innovation in designing & pricing the product - New products and better packaging </li></ul><ul><li>Low service standards - Need for improved customer service </li></ul><ul><li>Poor Risk Management Practices - Prudent underwriting practices in line with international standards. </li></ul><ul><li>Intermediaries to play a key role in fulfilling the above needs. </li></ul>
  3. 3. HR Seminar <ul><li>WHY AM I HERE ? </li></ul><ul><li>The success of the Insurance business depends on the role played by the intermediaries. </li></ul><ul><ul><li>In the Indian context -role of intermediaries in : </li></ul></ul><ul><ul><ul><li>Life insurance business for procurement and servicing. </li></ul></ul></ul><ul><ul><ul><li>General Insurance business - presently for servicing e.g. settlement of claims </li></ul></ul></ul><ul><ul><ul><li>New Insurance Companies are getting organised - ability of the company to develop a complete network of robust intermediaries is key to success. </li></ul></ul></ul><ul><li>Relevance and challenges in intermediation of the insurance business cannot be underestimated. </li></ul><ul><li>Specialists to speak on various topics related to intermediaries training & HR interface </li></ul>
  4. 4. Definition <ul><li>What is Insurance ??? </li></ul><ul><ul><li>Insurance is all about a promise of a payment / service. </li></ul></ul><ul><ul><li>Emerging Customer centric Business Model in India </li></ul></ul>
  5. 5. The Changing Context In India <ul><li>Personal Lines - </li></ul><ul><ul><ul><li>Car repair syndrome </li></ul></ul></ul><ul><li>Commercial Lines </li></ul><ul><ul><ul><li>Fire claims syndrome </li></ul></ul></ul>
  6. 6. Challenges Ahead : Global context <ul><ul><li>The emerging expectations </li></ul></ul><ul><ul><ul><li>of the promise </li></ul></ul></ul><ul><ul><ul><li>of the intermediaries </li></ul></ul></ul><ul><ul><li>Managing these expectations </li></ul></ul><ul><ul><ul><li>Long haul process of change management </li></ul></ul></ul>
  7. 7. Presentation Flow <ul><li> No of Slides </li></ul><ul><li>Intermediaries 3 </li></ul><ul><li>Current Scenario 4 </li></ul><ul><li>Intermediaries - a schematic 1 </li></ul><ul><li>Personal Lines Business 4 </li></ul><ul><li>Motor product Intermediaries 2 </li></ul><ul><li>Commercial lines 1 </li></ul><ul><li>Other Issues 1 </li></ul><ul><li>Summing up 2 </li></ul>
  8. 8. Intermediaries <ul><li>Definition </li></ul><ul><ul><li>The link between insurer and insured (Customer) for insurance sales and service. </li></ul></ul><ul><li>Key/Formal Insurance intermediaries include </li></ul><ul><ul><li>Insurance Agents </li></ul></ul><ul><ul><li>Brokers </li></ul></ul><ul><ul><li>Insurance Consultants </li></ul></ul><ul><ul><li>Surveyors and Loss Assessors </li></ul></ul><ul><ul><li>Third Party Administrator </li></ul></ul><ul><ul><li>Reinsurance Broker </li></ul></ul>
  9. 9. Intermediaries (contd.) <ul><ul><li>Other Intermediaries : </li></ul></ul><ul><ul><ul><li>Co-operatives </li></ul></ul></ul><ul><ul><ul><li>Actuaries </li></ul></ul></ul><ul><ul><ul><li>IT Systems provider </li></ul></ul></ul><ul><ul><ul><li>Rating agencies </li></ul></ul></ul><ul><ul><ul><li>Any other person assisting and representing an Insurer in any of the following: </li></ul></ul></ul><ul><ul><ul><ul><li>Soliciting, negotiating, procuring or effectuating an insurance contract or its renewal; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Disseminating information relating to coverage or rates; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Forwarding an insurance application; </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Servicing and delivering an insurance policy or contract </li></ul></ul></ul></ul>
  10. 10. Intermediaries (contd.) <ul><ul><ul><li>Inspecting a risk; </li></ul></ul></ul><ul><ul><ul><li>Setting a premium rate; </li></ul></ul></ul><ul><ul><ul><li>Investigating or assessing a claim or loss; </li></ul></ul></ul><ul><ul><ul><li>Transacting a matter after effectuation of a contract; </li></ul></ul></ul><ul><ul><ul><li>Representing a matter after effectuation of a contract; </li></ul></ul></ul><ul><ul><ul><li>Representing or assisting an insurer or other person in any other manner in the transaction of an insurance contract; </li></ul></ul></ul><ul><ul><ul><li>Servicing a policy or contract. </li></ul></ul></ul><ul><li>The total intermediation equation has to be right to be a successful insurance company in the new environment. </li></ul>
  11. 11. Current Scenario <ul><li>Key Intermediaries </li></ul><ul><li>Agents </li></ul><ul><ul><li>Primacy to insurer’s interest (FACE OF INSURANCE COMPANY) </li></ul></ul><ul><ul><li>Cannot represent multiple insurers hence are “tied” to an insurer </li></ul></ul><ul><ul><li>Practical training and passing of examination is mandatory and sponsored by one insurer </li></ul></ul><ul><ul><li>Discourages switching of Insurers </li></ul></ul><ul><li>Broker </li></ul><ul><ul><li>Primacy to insured’s interest </li></ul></ul><ul><ul><li>Can represent multiple insurers to provide suitable products to the insured </li></ul></ul><ul><ul><li>IRDA has formulated regulations governing insurance brokers (to be passed) </li></ul></ul>
  12. 12. <ul><li>Key Intermediaries </li></ul><ul><li>Surveyor / Loss Assessor </li></ul><ul><ul><li>To examine the claim and assess the actual loss suffered </li></ul></ul><ul><ul><li>To submit a report for the consideration of the insurance company </li></ul></ul><ul><li>Third Party Administer (TPA) </li></ul><ul><ul><li>Arises mainly out of Managed Health Care business. </li></ul></ul><ul><ul><li>Only “companies” registered under The Companies Act, 1956 are allowed to act as TPA </li></ul></ul><ul><ul><li>IRDA is finalising regulations governing TPAs. </li></ul></ul><ul><li>Reinsurance Brokers </li></ul><ul><ul><li>Link between insurer and reinsurance organisations </li></ul></ul><ul><ul><ul><li>Incentivised by the reinsurer for annual treaties and facultative deals </li></ul></ul></ul>Current Scenario (contd)
  13. 13. Current Scenario (contd) <ul><li>Appointed Actuary </li></ul><ul><ul><li>Provides actuarial advice to the management. </li></ul></ul><ul><ul><li>Assurance to IRDA </li></ul></ul><ul><li>Co-operatives </li></ul><ul><ul><li>Reach in rural areas </li></ul></ul><ul><ul><li>rural populace more comfortable while dealing with cooperatives. </li></ul></ul><ul><li>IT Systems provider </li></ul><ul><ul><li>Essential support for all new Insurance companies </li></ul></ul><ul><ul><li>IT systems backbone of the operations </li></ul></ul><ul><li>Rating Agencies - AM BEST, Standard & Poor, Moody’s </li></ul>
  14. 14. Current Scenario (contd) <ul><li>Skill set of an agent and broker </li></ul><ul><ul><li>Customer orientation </li></ul></ul><ul><ul><li>Advice customer according to needs </li></ul></ul><ul><ul><li>Ability to sell multiple products </li></ul></ul><ul><ul><li>Provide market intelligence </li></ul></ul><ul><ul><li>Good working knowledge of IRDA regulations and willingness to adhere to it </li></ul></ul>
  15. 15. Surveyor/ Loss Assessor Third Party Administrator Intermediaries - a schematic Reinsurance Broker Broker Insurance Company IT Systems Provider Bancassurance Actuary Other Intermediaries Agent Risk Advisory Corporate Individuals Co-operatives
  16. 16. Personal Lines Business - Backdrop <ul><li>Untapped potential largely due to </li></ul><ul><ul><li>Lack of product knowledge and brand recall </li></ul></ul><ul><ul><li>Absence of a customer centric approach </li></ul></ul><ul><ul><li>Products not addressing the changing trends in customer needs </li></ul></ul><ul><ul><li>Low penetration due to inadequate marketing / delivery system </li></ul></ul><ul><ul><li>Absence of risk-cum-investment tools resulting in low involvement buying behavior </li></ul></ul><ul><ul><li>Unattractive commission structure </li></ul></ul>
  17. 17. Personal Lines - Opportunity Ahead <ul><li>Increased consumerism </li></ul><ul><li>Increased social instability </li></ul><ul><li>Higher disposable incomes </li></ul><ul><li>Operation of law </li></ul><ul><li>Changing attitudes </li></ul><ul><li>Easier availability </li></ul><ul><li>Increased medical cost </li></ul>
  18. 18. Some Challenges Ahead <ul><li>Need to develop state of the art training institutes focussing on sales & management </li></ul><ul><li>Put in place scientific selection / recruitment of Intermediaries </li></ul><ul><li>Promote, encourage professional association of intermediaries and self-regulation concepts </li></ul><ul><li>Marketing support to distribution channels </li></ul><ul><li>Link business strategy more effective with technological reality </li></ul><ul><li>THERE IS URGENT NEED TO CREATE AN ENVIRONMENT/STRUCTURE, INCLUDING TRAINING CENTRES/EDUCATION TO ENHANCE CAPACITY BUILDING OF INTERMEDIARIES. </li></ul>
  19. 19. Suite of Personal Line Products <ul><li>Motor </li></ul><ul><li>Home & Home content </li></ul><ul><li>Health </li></ul><ul><li>Overseas Travel </li></ul><ul><li>Education </li></ul><ul><li>... </li></ul><ul><li>Each line of business requires its own selling and processing intermediaries and dependency vary across the products </li></ul><ul><li>MULTI DIMENSIONAL MANAGEMENT MATRIX </li></ul>
  20. 20. Motor Product Intermediaries <ul><li>Sales </li></ul><ul><ul><li>Agents for vehicle insurance </li></ul></ul><ul><ul><ul><li>Manufacturers wanting to become agents / brokers to provide one stop services to their customers </li></ul></ul></ul><ul><ul><ul><li>Auto Dealers: point of sale influencers in the value chain </li></ul></ul></ul><ul><ul><ul><li>Direct Marketing Agents:decision influencers at the point of provision of finance </li></ul></ul></ul><ul><li>Services </li></ul><ul><ul><li>Surveyors </li></ul></ul><ul><ul><ul><li>Assessing vehicle damage </li></ul></ul></ul><ul><ul><ul><li>Examining, Inquiring and Investigating the causes and circumstances of loss </li></ul></ul></ul><ul><ul><ul><li>Estimating measuring and determining the quantum of loss </li></ul></ul></ul>
  21. 21. Motor Product Intermediaries (contd.) <ul><li>Garages and Workshops to carry out actual repairs </li></ul><ul><li>Other Service Intermediaries </li></ul><ul><ul><li>Towing service providers </li></ul></ul><ul><ul><li>On the spot repairs </li></ul></ul><ul><ul><li>Trauma services </li></ul></ul><ul><ul><ul><li>Ambulance providers </li></ul></ul></ul><ul><ul><ul><li>Blood banks </li></ul></ul></ul>
  22. 22. Commercial Lines- Intermediary Challenges <ul><li>Key Issues </li></ul><ul><ul><li>Business to Business vis-à-vis Business to Customer in PL </li></ul></ul><ul><ul><li>Key differentiation </li></ul></ul><ul><ul><ul><li>Sales Process </li></ul></ul></ul><ul><ul><ul><ul><li>Different skill sets and role of Agents / Brokers </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>More personalised approach </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Risk Assessment Intermediary </li></ul></ul></ul></ul><ul><ul><ul><li>Claims Servicing </li></ul></ul></ul><ul><ul><ul><ul><li>Role of surveyor critical </li></ul></ul></ul></ul>
  23. 23. Other Issues <ul><li>Bancassurance </li></ul><ul><li>Direct Channels </li></ul>
  24. 24. Summing Up - Emerging Scenario <ul><li>Emerging trend </li></ul><ul><ul><li>Channels to evolve according to market opportunities /economics </li></ul></ul><ul><ul><li>Agents/Brokers will align to market and customer profile </li></ul></ul><ul><li>Implies </li></ul><ul><ul><li>Undertake agent profiling by doing intermediary mining </li></ul></ul><ul><ul><li>Align agents to products being sold and customers being targeted over time </li></ul></ul>
  25. 25. <ul><li>Learning from banking industry? </li></ul><ul><li>Local flavour to play important role </li></ul><ul><li>Rules of the game will be written by Indian Companies </li></ul><ul><li>Key to success is keep ear to the ground and keep modifying as per changing requirements </li></ul><ul><li>Fit ground realities to your organisation’s business strategy </li></ul>Summing Up - Looking ahead
  26. 26. Thank You
  27. 27. Backdrop - Motor Insurance claims Insurance Company Garage owner Surveyor Car Dealer Agent or Broker Towing & other Services Financier
  28. 28. Backdrop - Fire Insurance claims Insurance Company Surveyor Salvage Buyer Repairer Agent/Broker
  29. 29. Insurance Education Insurance Education Management cadre Operational level Domestic Training Overseas training Intermediaries
  30. 30. Direct Channels <ul><li>Minimum physical contact </li></ul><ul><ul><li>Call Centres </li></ul></ul><ul><ul><ul><li>Ideal for renewal business </li></ul></ul></ul><ul><ul><ul><li>Economic dispensing of insurance related information </li></ul></ul></ul><ul><ul><ul><li>Service related guidance and support </li></ul></ul></ul><ul><ul><li>E-Intermediaries </li></ul></ul><ul><ul><ul><li>Internet based information dispensing </li></ul></ul></ul><ul><ul><li>Other remote terminals </li></ul></ul><ul><ul><ul><li>ATMs </li></ul></ul></ul><ul><ul><ul><li>Kiosks </li></ul></ul></ul>
  31. 31. Banks as an Agent - Bancassurance (?) <ul><li>Provides readymade customerbase </li></ul><ul><li>Approx. 70,000 bank branches </li></ul><ul><li>Insurance products can be linked with banking products </li></ul><ul><li>Comfort for customers since he is accustomed to doing regular monetary transactions with the bank. </li></ul><ul><li>Reach potential middle / lower class population </li></ul><ul><li>Ease in sale of standard products </li></ul><ul><li>Sales experience in other products </li></ul><ul><ul><ul><li>Mutual funds </li></ul></ul></ul><ul><ul><ul><li>Credit cards </li></ul></ul></ul><ul><ul><ul><li>Personal loans </li></ul></ul></ul><ul><li>Essential to keep the products simple </li></ul><ul><ul><li>Pre-underwritten product guidelines </li></ul></ul>