Insurance is a financial service for collecting the savings of the public and providing them with risk coverage. The main function of insurance is to provide protection against the possible chances of generating losses. It eliminates worries and miseries of losses by destruction of property and death. It also provides capital to the society as the funds accumulated are invested in productive heads.
Insurance is a regulated Industry. Prices across the board are very similar. Agents do what is in their best interest, not the company they represent, and will sell what they believe is the easiest and personally most lucrative policies. Direct Agents work to build relationships with their customers and take those relationships with them when they move on to the next company they represent. Insurance companies have recognized these realities and have attempted to overcome them in a variety of ways, Insurance companies have gone direct to consumer, effectively eliminating the need for an agent as well as reducing cost. They have modified policies to be less expensive by removing options and increasing deductibles, and they are constantly telling consumers how stable they are. Thus the insurance companies are trying to change the trend by creating brand image for them.
With a view of influencing the target market or prospects, the formulation of pricing strategy becomes significant. The pricing in insurance is in the form of premium rates. The three main factors used for determining the premium rates under a life insurance plan are mortality, expense and interest. The premium rates are revised if there are any significant changes in any of these factors.
The insurance services depend on effective promotional measures. In a country like India, the rate of illiteracy is very high and the rural economy has dominance in the national economy. It is essential to have both personal and impersonal promotion strategies. In promoting insurance business, the agents and the rural career agents play an important role. Due attention should be given in selecting the promotional tools for agents and rural career agents and even for the branch managers and front line staff.
The process should be customer friendly in insurance industry. The speed and accuracy of payment is of great importance. The processing method should be easy and convenient to the customers. Installment schemes should be streamlined to cater to the ever growing demands of the customers. IT & Data Warehousing will smoothen the process flow. IT will help in servicing large no. of customers efficiently and bring down overheads. Technology can either complement or supplement the channels of distribution cost effectively. It can also help to improve customer service levels. The use of data warehousing management and mining will help to find out the profitability and potential of various
customers product segments.
Distribution is a key determinant of success for all insurance companies. Today, the nationalized insurers have a large reach and presence in India. Building a distribution network is very expensive and time consuming. Technology will not replace a distribution network though it will offer advantages like better customer service. Finance companies and banks can emerge as an attractive distribution channel for insurance in India. In Netherlands, financial services firms provide an entire range of products including bank accounts, motor, home and life insurance and pensions. In France, half of the life insurance sales are made through banks. In India also, banks hope to maximize expensive existing networks by selling a range of products.
The life and pensions sector has many reasons to be upbeat about its future. The number of people aged over 60 will more than triple to over 2 billion by 2050. The number of middle class people (earning more than $10/day) will grow from 430 million to 1.2 billion in 2030, with 2/3rds of this growth coming from India and China, creating much more wealth to protect and more demand for life cover. Over the next 30 years, some 1.8 billion people are expected to move into cities, most of them in Asia and Africa, increasing the world's urban population to 5.6 billion and reshaping the marketplace for insurers and other financial services businesses. The number of people connected to the internet will increase from 1.8 billion today to 5 billion by 2020, changing how customers interact with your business and their expectations over the speed and intuition of response.
A larger and longer living global population is increasing demand for retirement products. In turn, the increasing affluence of people within the high growth markets of South America, Asia, Africa and the Middle-East is creating a growth need for wealth protection. But as customers become accustomed to the ease, elegance and intuition of the Apple/ Amazon 'experience,' they want the same accessibility, transparency and responsiveness in their life insurance and pensions products.
Advances in processing capacity, customer profiling and risk analytics are now opening the way for a new generation of 'smart' policies. To stay in the game, your business needs to be thinking and acting at the same rate as technology and customer expectations are evolving.
Cloud computing is allowing businesses to turn fixed costs into variable costs. At the foundation of cloud computing is the broader concept of converged infrastructure and shared services. For example, a cloud computer facility that serves European users during European business hours with a specific application (e.g., email) may reallocate the same resources to serve North American users during North America's business hours with a different application (e.g., a web server). This approach should maximize the use of computing power thus reducing environmental damage as well since less power, air conditioning, rack space, etc. are required for a variety of functions. With cloud computing, multiple users can access a single server to retrieve and update their data without purchasing licenses for different applications. Proponents claim that cloud computing allows companies to avoid upfront infrastructure costs, and focus on projects that differentiate their businesses instead of on infrastructure. Proponents also claim that cloud computing allows enterprises to get their applications up and running faster, with improved manageability and less maintenance, and enables IT to more rapidly adjust resources to meet fluctuating and unpredictable business demand.
Digital distribution would allow your business to move into new markets without the need for expensive and difficult to establish branch or agency networks on the ground. The development of low cost and easy-to-understand and compare policies will be crucial in filling the gaps created by the withdrawal of social welfare and defined benefit plans
Hurdles:
Hurdles:
Less public awareness A vast majority of people especially in rural& urban areas are left outside the insurance coverage. This mainly results from the unawareness among the people. People are not aware of the benefits from the health insurance policy and a great number of people believe that insurance business is nothing but cheating and assume that negative attitude from people. Centralization -Most of the insurance companies in our country are located in urban areas and there are few branches in rural areas.
Poor economic conditions - Most of the people in this country live under extreme poverty level in rural. All of these people fight to earn their livelihood and are marginal in relation to the expenditure with the income. It is quite impossible to save some money for future need. Therefore they are quite unable to give the amount to the insurer which is called as premium and regarded as safety or precautionary measures against any accident. Higher cost of business - Growing cost of business is another problem that insurance companies are facing now a day. They urge that government tax, house rent, utility, commission fee, stationeries are growing day by day. But the policy holders are not willing to pay too much premium with growing. So they are facing difficulties in running their business efficiently.
