Final Project1

ROLE OF BROKERS IN INSURANCE INDUSTRIES.
PROJECT ON
SUBMITTED BY JAYSHREE K. RATHOD ROLL NO. 12-16-49
FOR THE MASTERS DEGREE
FINANCIAL MANAGEMENT (M.F.M.) BATCH: 2009-2012 UNDER GUIDANCE OF Prof. Jayendran Rajappa.
K.J. SOMAIYA INSTITTE OF MANGEMENT STUDIES & RESEARCH VIDYANAGAR, VIDYA VIHAR (E), MUMBAI- 400 077.
K. J. Somaiya Institute of Management Studies and Research
ACKNOWLEDGEMENT
As I developed my project on Role of Broker in Insurance Industries, I have been fortunate to receive assistance, suggestions and support from numerous friends and faculty. First and foremost my thanks goes to my guide, Prof. Jayendran Rajappa express my feeling of immense gratitude for his guidance and kind help. I would also like to thank all teaching and non-teaching staff members who have helped me directly or indirectly in the successful completion of this project and studies.
(Jayshree K. Rathod)
DECLARATION
I Jayshree Rathod, student of MFM Semester V of SIMSR hereby declare that the project work presented in this report is my own work and has been carried out under the supervision of Prof. Jayendran Rajappa. My report is submitted as a part of study curriculum and as a partial fulfillment of the degree of MBA. ___________________________________________________________________
CERTIFICATE
This is to certify that the project entitled Role of Brokers in insurance industries " is successfully done by Ms. Jayshree K. Rathod during the third year of this course in partial fulfillment of the Masters Degree in Financial Management under the University of Mumbai through the K. J. Somaiya Institute of Management Studies & Research, Mumbai. This project represents the work done by Ms. Jayshree K. Rathod This project in general is done under my guidance.
Date: 8th October 2011.
Prof. Jayendran Rajappa (Project Guide) Address of Guide: K.J.Somaiya Institute of Management Studies & Research Vidyanagar, Vidya Vihar (E) Mumbai 400 077.
CONTENTS OF PROJECT. Chapter-1 - Summary of Project. Chapter-2 - Introduction to Insurance Industry. Chapter-3 - Introduction to Broking Industry. Chapter-4 - How & Why Insurance brokers in Indian Market. Chapter-5 - Concepts of brokers in insurance industries. Chapter-6 - Insurance broker Code of conduct for intermediaries. Chapter-7 - Insurance broker different from agent and writer. Chapter-8 - The Role and Significance of brokers in Insurance Industry. Chapter-9- Brokers in International Market. Chapter-10 - Success of Insurance brokers. Chapter-11- Failure of Insurance brokers. Chapter-12 - Future of Insurance brokers. Chapter-13 - Case Study Functions of brokers Havmore Brokers Pvt. Ltd. Chapter- 14 List of Brokers Chapter- 15 - Bibligoraphy
Summary of Project.
Name of the Topic
Role of Brokers in Insurance Industries.
Name of the Domain

Insurance
Objective of the Study

This study examines the concept of Brokers in Insurance Industries which is introduced in 2002 in India. Currently IBAI is considering issuing licenses to Brokers to start Insurance broking firm.This study will explain the role and significance of brokers in insurance industry. It will also define how it is different from Agent and direct business. People are still not aware of exact role of brokers in insurance. So this study will put light on the role and duty of brokers. Its also explain the role brokers in international market and entrance of international company in Indian Insurance Market. It includes the function and departments of broker ie. HAVMORE BROKERS PVT. LTD to get the clear idea of Brokers functions.
Research Methodology
This study is based on Insurance patterns on Indian Insurance company as well as the general guidelines prescribed by IRDA and IBAI.The source involves collection of secondary data primarily from the Internet. The analysis and conclusions have been drawn making use of various analytical techniques
Limitation of Study
Broker are recently entered and gripped into market so less information is availabe.
Conclusion
The study aimed at clarifying the concept of broker in the insurance industries and its need in insurance industries. It also set the stage for understanding that brokers are played vital role in market and not merely temporary phenomenon. Brokers are here to stay and there are signs that they will continue to grow and expand.
INTRODUCTION:
INSURANCE:
Insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance can be defined as the equitable transfer of the risk of a loss from one entity to the other in exchange of payment. Risks which can be insured share some common characteristics which get covered are: Large number of similar exposure units Definite loss Accidental loss Large loss Affordable premium Calculable loss Limited risk of catastrophically larger losses
INSURANCE INDUSTRY:
The insurance sector has a long history in India. The insurance sector in India has come a full circle from being an open competitive market to nationalization and back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals the 360-degree turn witnessed over a period of almost 190 years. The business of life insurance in India in its existing form started in India in the year 1818 with the establishment of the Oriental Life Insurance Company in Calcutta. The 1st legal enactment was made in 1870. The 1st Indian Insurance Act was passed in 1938 and amended in 1950, when it was nationalized. However, the sector was once again thrown open to the private sector on December 1999, followed by the establishment of the Insurance Regulatory and Development Authority (IRDA) in April 2000. Though the Insurance Sector is now open for private players as a consequence of the new liberalization policies of the Government, the existing government owned Insurance companies will, nevertheless, continue to be in the government sector. These existing companies will, however, have to strive for better realization of their corporate objectives and goals to meet the demands and expectations of the public. Quality of service and product that an industry offers must move forward with progress in the state of the economy. As the quantum and quality of service change over time, the levels at which customers continue to remain satisfied with the services provided, also keep on increasing. Ultimately, the success of any industry depends upon its positioning in the state of economy and on meeting the expectations of the service users. With competition, the performance level of individual companies is expected to increase. Segmentation is taking place within the economy with a need for socially responsive service sector. Globalization is the new economic reality, which is here to stay, heralding a new era of insurance in India. With the opening of the insurance industry, India stands to gain with the following major advantages: Globalization will provide improved opportunities to the customer for better products, with more reasonable and affordable pricing. The customer will get faster servicing. It will enhance the savings rate. Long-term funds for infrastructure development will be available to the Country. It will secure for India larger inflows of foreign capital needed to sustain our GDP growth.
So, its clear that the insurance the insurance was in private hands before 1971 and was nationalized in 1972 with all private companies merged into General Insurance
Corporation of India as the parent company with 4 subsidiaries as National Insurance Company Ltd. with Head Office at Calcutta, New India Assurance Company Ltd. with Head Office at Bombay, Oriental Insurance Company Ltd. with Head Office at New Delhi and United India Insurance Company Ltd. with Head Office at Madras. In 1993 the need for Private Insurance Companies and Multinational Companies was felt and beginning of liberalization process started. Important milestones in the Indian life insurance business 1912: The Indian Life Assurance Companies Act came into force for regulating the life insurance business. 1928: The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance businesses. 1938: The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the insuring public. 1956: 245 Indian and foreign insurers and provident societies were taken over by the central government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of ` 5 crore and that too from the Government of India. The history of general insurance business in India can be traced back to Triton Insurance Company Ltd. (the first general insurance company) which was formed in the year 1850 in Kolkata by the British. Important milestones in the Indian general insurance business. 1907: The Indian Mercantile Insurance Ltd. was set up which was the first company of its type to transact all general insurance business. 1928: The Indian Insurance Companies Act was enacted for enabling the government to collect statistical information on both life and non-life insurance businesses. 1938: The earlier legislation consolidated the Insurance Act with the aim of safeguarding the interests of the insuring public.
1956: 245 Indian and foreign insurers and provident societies were taken over by the central government and they got nationalized. LIC was formed by an Act of Parliament, viz. LIC Act, 1956. It started off with a capital of ` 5 crore and that too from the Government of India. 1957: General Insurance Council, an arm of the Insurance Association of India, framed a code of conduct for guaranteeing fair conduct and sound business patterns. 1968: The Insurance Act improved for regulating investments and set minimal solvency levels and the Tariff Advisory Committee was set up. The history of general insurance business in India can be traced back to Triton Insurance Company Ltd. (the first general insurance company) which was formed in the year 1850 in Kolkata by the British.
INSURANCE BROKING.
An insurance broker finds sources for contracts of insurance on behalf of their customers. Most of the consumers looking for insurance coverage policies choose to go by way of an insurance broker. Insurance coverage brokers execute a very essential function in the industry. They bridge the gap between the buyers and insurance coverage providers. The part of an insurance broker is not various from brokers in other industries. An insurance coverage broker would deliver the buyer, i.e. the customer and the seller with the desired insurance cover. Usually the insurance coverage brokers perform independently and are not linked to any particular insurance coverage organization. Therefore, they can increase their search place whenever necessary to find the correct insurance coverage for their customers. The role of an insurance broker is to search and framework policy for its customers and settle claims as when necessary. The insurance broker has to follow:

Locating protection Economic organizing A number of providers Claim settlement
HOW AND WHY INSURANCE BROKERS IN INDIAN MARKET:
Govt. of India decided to embark on economic reforms in the 1990s. The command and control economy gradually gave way to market economy in sector after sector, including the financial sector which comprised Insurance sector. Various reforms were initiated in the financial sector. The economy responded positively to the reforms. Competition in the manufacturing sector geared it up to invest in technology, restructure its operations, reduce cost, achieve improved productivity, bring quality of products to international standards. Along with financial sector reforms, there were many reform measures by the Govt. for the insurance sector. Insurance Sector Reform Measures initiated by the Government were based on the Report of the Malhotra Committee, which submitted its Report in 1994. The main observations of the Malhotra Committee were: There was hardly any worthwhile competition in the insurance sector; With progressive reduction in the agency commission structure there was no scope for any well informed or trained career agency organization to emerge; The only Government Companies in the insurance sector resorted to appointing salaried development officers to sell its insurance covers which resulted in growing staff burden and attendant problems; The service aspect suffered and customer satisfaction was a casualty. Insurance consciousness did not percolate and spread. The Malhotra Committee, therefore, among other things, recommended: Opening of insurance industry to competition. Apart from making the four operating Government Companies in general insurance autonomous, other private players to be permitted; Creation of a Regulatory Authority for providing a level playing field to all entities operating in the country; Development of an efficient and professional marketing structure to spread the message of insurance, improve service and customer satisfaction; Introduction of Broking Firms who would act as professional intermediaries as in other established markets.
Insurance Regulatory Authority was established as an Interim Regulator in 1996 and became a full-fledged statutory Insurance Regulatory and Development Authority (IRDA) in 1999 with the passing of IRDA Act of 1999 on 19th April 1999. Thereafter, IRDA enacted various Rules and Regulations and ushered in reforms in insurance sector. One of them is the Insurance Regulatory and Development Authority (Insurance Brokers) Regulations, 2002 w.e.f. 16.10.2002. Subsequently, 185 Insurance Brokers have obtained licence from I.R.D.A. and have started their broking operations investing huge capital, with the sole purpose of rendering professionalized service to the insurance buyers.
CONCEPTS OF BROKERS IN INSURANCE INDUSTRIES. Definition An independent agent who represents the buyer, rather than the insurance company, and tries to find the buyer the best policy by comparison shopping. India has been a rather late starter. The IRDA brought out its first set of regulations, permitting Brokers to operate, as recently as October 2002. The first set of Licenses was issued only in Jan 2003 (India Insure being the first to have been granted the License). INSURANCE BROKERS ASSOCIATION OF INDIA (IBAI) is the IRDA-recognized apex body of all licensed insurance brokers in India. Presently there were Approx 320 direct brokers, 45 composite brokers and 22 re-insurance brokers. While not many large brokers are present in the Indian market at the moment, the overall contribution from corporate brokers is likely to increase as many corporate agents are now becoming brokers. Global insurance brokers such as Aon, Marsh, Willis and Howden have also entered the Indian market. In India, Brokers are different from other Insurance service providers in several ways. Unlike an Agent (or a corporate agent), who represents a specific Insurer only, A Broker REPRESENTS THE CLIENT, and not the insurer. He can approach all Insurers for a competitive quote. A Banc assurance outfit (commercial banks), is normally an Agent and not a broker. A Third Party Administrator (TPA; sometimes confused with a Broker) is a service provider for Insurance companies, providing services related to health insurance only.
IRDA has permitted 3 types of Brokers to operate in India: The Direct Broker (between end-users and primary insurers only), Re-insurance Brokers (between primary insurers and re-insurers only) and He can approach all Insurers for a competitive quote. Composite Brokers (both the above).
Functions of a direct broker The functions of a direct broker shall include any one or more of the following: (a) obtaining detailed information of the client's business and risk management philosophy; (b) familiarising himself with the client's business and underwriting information so that this can be explained to an insurer and others; (c) rendering advice on appropriate insurance cover and terms; (d) maintaining detailed knowledge of available insurance markets, as may be applicable; (e) submitting quotation received from insurer/s for consideration of a client; (f) providing requisite underwriting information as required by an insurer in assessing the risk to decide pricing terms and conditions for cover; (g) acting promptly on instructions from a client and providing him written acknowledgements and progress reports; (h) assisting clients in paying premium under section 64VB of Insurance Act, 1938 (4 of 1938); (i) providing services related to insurance consultancy and risk management; (j) assisting in the negotiation of the claims; and (k) maintaining proper records of claims; Functions of a re-insurance broker The functions of a re-insurance broker shall include any one or more of the following: (a) familiarising himself with the clients business and risk retention philosophy; (b) maintaining clear records of the insurer's business to assist the reinsurer(s) others;
(c) rendering advice based on technical data on the reinsurance covers available in the international insurance and the reinsurance markets; (d) maintaining a database of available reinsurance markets, including solvency ratings of individual reinsurers; (e) rendering consultancy and risk management services for reinsurance; (f) selecting and recommending a reinsurer or a group of reinsurers; (g) negotiating with a reinsurer on the clients behalf; (h) assisting in case of commutation of reinsurance contracts placed with them; (i) acting promptly on instructions from a client and providing it written acknowledgements and progress reports; (j) collecting and remitting premiums and claims within such time as agreed upon; (k) assisting in the negotiation and settlement of claims; (l) maintaining proper records of claims; and (m) exercising due care and diligence at the time of selection of reinsurers and international insurance brokers having regard to their respective security rating and establishing respective responsibilities at the time of engaging their services. Functions of composite broker A composite broker shall carry out any one or more of the functions mentioned in regulations of direct and composite broker.
INSURANCE BROKER CODE OF CONDUCT FOR INTERDEDIARIES. Every Insurance Broker shall follow recognized standards of professional conduct and discharge his functions in the interest of the policyholders. Conduct in matters relating to clients relationship Every insurance broker shall: conduct its dealings with clients with utmost good faith and integrity at all times. a) act with care and diligence; b) ensure that the client understands his relationship with the broker and on whose behalf the broker is acting; c) treat all information supplied by the prospective clients as completely confidential to themselves and to the insurer(s) to which the business is being offered;
d) take appropriate steps to maintain the security of confidential documents in their possession; e) hold specific authority of client to develop terms; f) understand the type of client it is dealing with and the extent of the clients awareness of risk and insurance; g) obtain written mandate from client to represent the client to the insurer and communicate the grant of a cover to the client after effecting insurance; h) obtain written mandate from client to represent the client to the insurer/ reinsurer; and confirm cover to the insurer after effecting re-insurance, and submit relevant reinsurance acceptance and placement slips; i) avoid conflict of interest.
Conduct in matters relating to Sales practices Every insurance Broker shall: (a) confirm that it is a member of the Insurance Brokers Association of India or such a body of brokers as approved by the Authority which has a memorandum of understanding with the Authority; (b) confirm that he does not employ agents or canvassers to bring in business; (c) identify itself and explain as soon as possible the degree of choice in the products that are on offer; (d) ensure that the client understands the type of service it can offer; (e) ensure that the policy proposed is suitable to the needs of the prospective client; (f) give advice only on those matters in which it is knowledgeable and seek or recommend other specialist for advice when necessary; (g) not make inaccurate or unfair criticisms of any insurer or any member of the Insurance Brokers Association of India or member of such body of brokers as approved by the Authority; (h) explain why a policy or policies are proposed and provide comparisons in terms of price, cover or service where there is a choice of products; (i) state the period of cover for which the quotation remains valid if the proposed cover is not effected immediately; (j) explain when and how the premium is payable and how such premium is to be collected, where another party is financing all or part of the premium, full details shall be given to the client including any obligations that the client may owe to that party; and (k) explain the procedures to follow in the event of a loss. Conduct in relation to furnishing of information Every insurance broker shall: (a) ensure that the consequences of non-disclosure and inaccuracies are pointed out to the prospective client; (b) avoid influencing the prospective client and make it clear that all the answers or
statements given are the latter's -own responsibility. Ask the client to carefully check details of information given in the documents and request the client to make true, fair and complete disclosure where it believes that the client has not done so and in case further disclosure is not forthcoming it should consider declining to act further; (c) explain to the client the importance of disclosing all subsequent changes that might affect the insurance throughout the duration of the policy; and (d) disclose on behalf of its client all material facts within its knowledge and give a fair presentation of the risk.
Conduct in relation to explanation of insurance contract Every insurance broker shall a) provide the list of insurer(s) participating under the insurance contract and advise any subsequent changes thereafter; (b) explain all the essential provisions of the cover afforded by the policy recommended by him so that, as far as possible, the prospective client understands what is being purchased; (c) quote terms exactly as provided by insurer; (d) draw attention to any warranty imposed under the policy, major or unusual restrictions, exclusions under the policy and explain how the contract may be cancelled; (e) provide the client with prompt written confirmation that insurance has been effected. If the final policy wording is not included with this confirmation, the same shall be forwarded as soon as possible; (f) notify changes to the terms and conditions of any insurance contract and give reasonable notice before any changes take effect; (g) advise its clients of any insurance proposed on their behalf which will be effected with an insurer outside India, where permitted, and, if appropriate, of the possible risks involved.
INSURANCE BROKER DIFFERENT FROM AGENT AND WRITER
Insurance Broker
Insurance brokers act as intermediaries between insurers and insurance companies but represent the interests of the insured. As agents of the insured, their obligation is to produce the best possible insurance solution for the insured and not the insurer.
Insurance Agent An insurance agent transacts insurance as an intermediary between the insured and insurer, but is an agent or representative of the insurer. Independent agents may conduct business as agents of multiple insurance companies, whereas captive agents may only transact insurance on behalf of one company of which they are employees.
Direct Writer Insurance companies that transact directly with the insured without benefit of an agent or broker are known as direct writers. It is more common to find direct writers in personal lines--insurance for individuals--than in commercial insurance for businesses. The primary difference between insurance agents and insurance brokers is that agents are representatives of the insurance company, whereas brokers are representatives of the insured. Because of the difference in representation, agents are given different powers in insurance transactions than those afforded to brokers, such as the power to bind coverage. Also find the services offered by Broker and Agent. Particulars Customized service Risk Assessment and Audit Need analysis Research led Assistance in premium payment Claim handling and management Option of buying from different Broker Agent
Companies Designing of Insurance Products Insurance Portfolio Management Insurance Audits
INSURANCE BROKERS V/S DIRECT WRITER. Insurance broker have multiple choice to offer the customer whereas direct writer have limited choice limited to his insurance company. Insurance broker keep personal touch with customer whereas direct writer keep professional touch with customer. Removal of 5% discount to corporate to approach directly to the insurance company, has increased the chances of brokers.
THE ROLE AND SIGNIFICANCE OF BROKERS IN INSURANCE INDUSTRY.
Broking is not a new concept. In West Asia, companies run by non-resident Indians go to brokers. It is not as though it is an alien concept or unusual thing to do. Its quite the other way in India. Insurance is being purchased just on the basis of price and nothing else. People really dont know half the time why they are buying. In developed countries, many brokers will work for free when it comes to big business. There is still commission paid in many parts of the world. But for bigger blocks of business, like aircraft insurance, which is complex and very risky, the broker giving professional advice can be sued if proved that he had given wrong advice either to the customer or to the insurer. There are some cases against brokers already in the insurance market. It is a matter of contractual rights and obligations. The broker represents the customer, and if he gives incorrect or wrong advice then he is held responsible, and the broker has to take insurance against those risks. If the insurance is badly put together, then you have the right to sue your broker. The IRDA regulations are quite clear on the brokers responsibilities. There are many cases of brokers being sued in all sorts of jurisdiction. In addition to fully understanding the business and benefits environment in an emerging country, multinational companies must determine how they want to be competitively positioned against other firms. To optimally position themselves, they must take a holistic approach to remuneration. The key to success is striking the precise balance between insurers and the brokers. The Authority is of the considered view that further licensing of Composite Brokers be stopped. Those that have been issued licenses may be asked to apply separately for licensees for direct and reinsurance broking at renewal. There would be two legal entities with separate responsibilities and accountability norms. Brokers represent the client, not the insurer, Brokers have expertise, knowledge of market and negotiating skills, Brokers are accountable to clients for professional negligence. Brokers are technically competent to evaluate insurance companies on the basis of coverage, services and price and thus ensure healthy competition, Brokers are more aware of national and international markets Brokers provide several Other Services like Policy Audit, improvement in coverages, expert handling of claims, day-to-day policy administration, etc., Outsourcing to professionals frees up mind space and makes the in-house team available for other more productive activities K. J. Somaiya Institute of Management Studies and Research
Brokers domain knowledge is useful to study the survey reports, determine / question lapses Brokers assist in speedy and fair settlement of claims. Brokers are the most stable insurance distribution channel. Brokers normally have higher bargaining power leading to significant Cost Savings for clients. Brokers are able to get a better deal in hard markets. Brokers can structure specialized insurance programs policy limits, minimizing deductibles and optimizing coverage terms Brokers help you get the best terms and service from your insurer shifting from your existing insurer is not necessary. Brokers help you evaluate the terms and service you are enjoying today vis--vis the best available in todays competitive market take advantage of competition. Brokers help you see all the faces of a cube and choose the best for yourself - even the best insurer can present only 1 face of the cube his own. The role of insurance brokers in India is not well understood. Many customers buy insurance polices without knowing whether they need them and why. It is argued that why do you need a broker to buy an insurance policy when you can buy it directly from the insurance company at a discount? This is the question many corporates ponder over when a broker is engaged for buying a policy. There is a lack of understanding even among brokers who are already out in the market as to really what the role of a broker is; and the customers dont know it either. A few brokers have positioned themselves as discounters, rebaters of premium, or glorified agents. The role of broker is to generate risk awareness at both sides. He adds a lot of value at both ends of the purchase. He is not the one to merely sell a policy to the customer, but he also enables the customer to identify the type of policy most suited to his needs. A real broker will also add a lot of value at the other end, where the insurance company as the underwriter needs to know exactly what the customer requirements are and quite often, need to be encouraged to develop new products. Thus brokers operate at both ends of the supply chain, What has been happening till now is that people from insurance companies come knocking on the door and offer discount on insurance premium by 5- 10 percent; and customers think that is a good deal. They may not even need that fire insurance in the first place. Customers have got dozens of fire insurance policies from different insurers. It is the worst possible scenario that insured can have at the time of a big claim. He would have a horrendous time trying to get a claim settlement that would benefit the company. The way insurance is being purchased is going to change as brokers who know their role come into the market and K. J. Somaiya Institute of Management Studies and Research
quality companies will use them. Companies that are only interested in price will go direct and get a discount or whatever and will not have the proper protection. Role in the Past An insurance broker is seen as one of the intermediaries who operates in the insurance market. The term insurance broker finds a mention in the definition of the term intermediary or insurance intermediary in the Insurance Regulatory and Development Authority Act, 1999. The definition intermediary includes and limits itself to insurance brokers, reinsurance brokers, insurance consultants, surveyors and loss assessors. It would be pertinent to note that there is no mention of the term agent in this definition as of date. The description intermediary is usually synonymous with the concept of a third party whose role is to ensure that both the parties to a contract obtain what they want, the third party working for both parties for their joint benefit. However, in the Indian context, the insurance broker has been seen since the introduction of the Broking Regulations as a person who will represent the insured and add value to the transaction. The relationship is almost invariably contractual supported by a mandate from the insured and is usually intended to be paid for the services rendered, by way of brokerage which forms part of and emanates usually out of the premium. The upshot of this view was that although the broker owes his loyalty primarily to the insured, the broker gets ultimately paid by the insurer for services being rendered primarily to the insured. This leads to a dichotomy of sorts with the poser as to how an insured could trust the loyalty of his broker when the latter was being actually paid by the insurer. In the light of this method of receiving compensation, the scenario could be ripe for an unprincipled insurer to step in and take advantage of the situation vis--vis the insured by justifying his stance that it was the insured who desired to approach the insurer directly despite the presence of the broker owing to alleged loss of confidence and trust in the broker by the insured. In the international arena there were departures from this norm with consultancy assignments being undertaken on a Fee basis with payments made by the insured to the broker. The transition into this phase in India is seen in some segments where the role of the broker is perceived rightly by the user of such services by seeing value creation by the broker in the transaction. As regards general insurance business in the tariff regime, the function of the broker was to advise the insured on a suitable insurance programme by improving the current programme and to attract suitable insurers on the best terms. In the absence of opportunity being provided to the intermediary to bring to the table his experience in drafting the policy wordings or for that matter in improvising the rates, a question was K. J. Somaiya Institute of Management Studies and Research
often raised as what is the value addition that the broker can bring to the transaction. The most important and crucial role that a broker played, which all would appreciate, was to increase the level of informed decision making by the insured in transferring the risk to the most competitive insurance company. However, in the detariff scenario the role and responsibilities of the insurance broker has multiplied in the sense that he not only has to get the right price for the insured to enable him to take informed decision to select the right underwriter, but he also has a duty towards the underwriter to ensure that all parameters of rating a risk have been rightly applied. This is only to ensure that a clear balance is maintained so that one does not impinge on the other in the event of a catastrophe. The Way Forward: Advances in technology are transforming the traditional roles of the broker and the consumer. The broker is gradually evolving into the new role of the facilitator. He facilitates the satisfaction of the needs felt by the insured. In the process, the underwriter, broker and the consumer are forming symbiotic relationships in which their mutual loyalties are recognised and nurtured. In the earlier era, when the broker was absent, the consumer was taken for granted. He was a docile underdog in the world of insurance. Business opening hours, mode of payment, suite of products, range of services was all decisions dictated by the underwriter at his sole discretion. Dissatisfied insureds were pushed aside and the queue for buying the products continued to be filled in by the less demanding and more subservient consumers. However, the unprecedented sea change brought in by the private insurers both in life and general insurance business post liberalisation of the insurance industry has resulted in a new movement where consumer delight is the buzz word. We have witnessed this in the banking and telecom sectors in our country in the last two decades and there is no reason why it will not catch up with insurance sector in the next decarde. Shift Towards Retaining the Client: In todays competition world, it is very essential to provide quality service. Provide right information to the customer. The true role of a broker will get tested and be up for judgement by those who would avail of his services.
Adequate Data Based Experiences: A brokers office would be expected to deliver far more than what has been delivered in the past. This would call for a high degree of qualified professionals with hands-on experience manning the brokers offices and the brokers offices functioning with a combined strength of the extended marketing arm of the underwriters and the erstwhile risk management role played by the in house team of the insureds. Implementing such schemes requires a high degree of professionalism, infrastructure to understand the forces that are redesigning the concept of the insureds and dynamism into the market brought in by the changing roles of consumer group activists. A brokers office therefore will have to be built on these foundations on which it is expected that the consumer loyalty will be built and sustained.
BROKERS IN INTERNATIONAL MARKET.
In the developed world, insurance broking came into existence about twelve decades back. From being a matchmaker between insurance companies and business firms earlier, the scope of the broker has expanded to providing various value-added services. Apart from structuring and placement of insurance cover, these include claims management, risk management, alternative risk transfer mechanisms, employee-benefit solutions, captive management, actuarial services, HR outsourcing, political and environment risk advice, pre-emergency planning and evacuation, business continuity planning etc. The three largest insurance brokers in the world, by revenue, are Aon, Marsh & McLennan, and Willis Group Holdings. In international market, its standard practice that a Broker evaluation is done first where client evaluates various service aspects & capabilities of 2-3 short-listed brokers & selects one of them as Authorised Broker who then helps the client buy the most appropriate product. This broker then also services those products for the period of insurance. Generally, these broker appointments are for 3-5 years tenure where a broker can design a medium to long term insurance program & execute the same in the best interests of client. K. J. Somaiya Institute of Management Studies and Research
But in India, due to clients perception of brokers as agents of insurer as well as brokers focus to root out current broker & win the business solely on basis of obtaining lowest quote, client are being misguided in appointing multiple brokers for single insurance contract. This logically has led to unethical practices as well as falling service levels for the insurance contracts
Following are the logical fall-outs of this faulty practice:
When the competition is between the brokers & not insurers, the broker tends to fudge the claims & other related data while presenting to insurer to enable him obtain a lower quote. This is simply misrepresentation of clients information which most of the clients may not be aware of. Many clients are strict about their corporate code of conduct, ethics & values but ignore such wrongful conduct by their authorized representatives. Ethical conduct is the first casualty of multiple broker arrangement.
Misrepresentation of data may help a broker get lower quote but when insurers come to know about this, they either ask for more premium OR are ready to cancel the policy as the claims ratio is high (this is bound to be high when the premium underwriting is faulty). The ultimate sufferer in such case is always the client. Faulty underwriting, over a period of time, results into continuing losses for insurers & hence, insurers tend to behave extra-conservative. Insurance is about calculated risk-taking to arrive at moderate premium rates but with continuing losses, the premium rates harden which ultimately results in higher costs for clients. When insurers make losses, they look at various options to cut down the costs. The brokerage gets cut first which results into lower incomes for brokers. Brokers then look at providing minimal service & tend to make same revenues by increasing volume. This further deteriorates the service levels of the broker. As the broker who now has understood his clients philosophy of using multiple brokers every year, has no interest in looking at the clients insurance program for more than 1 year horizon which results in short-term approach. This tends to make the insurance program undergo changes every year which results in inconsistent user experience. K. J. Somaiya Institute of Management Studies and Research
Internationally, there is a shift from commission based service to fee based service in the Insurance broking. This is partly due to the conflict between maintaining independence of the brokers vis--vis their commercial interests while favouring an insurer. In the USA, many brokers are either disclosing their commission rate to their clients or simply passing the commission benefit to the client, in lieu of a placement fees from the client. In the UK, it is perfectly legal for the intermediary (called IFA) to give up commission thereby increasing the policy value of the clients. The Broking concept is so well established in the Western markets that close to 80-90% of all corporate/ commercial insurance business are transacted through Brokers and not directly between Insurers and Clients.
SUCCESS OF INSURANCE BROKERS.
The post detariffing war has begun in the $5 billion Indian general insurance market. The opening round of the pricing battle for business has gone in favour of the state owned insurers who have begun aggressively pitching for recovering their lost business to private sector insurers. Since the opening up of the insurance sector, several private players, including foreign ones, have entered insurance business in India. In totality, India has about 16 players in life and 15 in the general insurance sector. Indian insurance market size is presently estimated at Rs. 5000 crores. it is expected to grow five-fold. K. J. Somaiya Institute of Management Studies and Research
Indian insurance market potential could be gauged by the fact that currently about 40-42 million people have been brought under insurance whereas the potential is estimated at 200-250 million. Insurance companies could tap only 5 percent of Indian middle class segment. Foreign equity is fixed at 26% as per current regulations. There is no statutory bar for a foreign firm to have a higher equity participation in the broking entity. Brokers are now emerging out as a powerful outsourced vendor for insurance marketing. The entry of major broker like Aon , Marsh and Willis has boom the market of insurance market. Aon was the first multinational company to entry into India. The nature of insurance business is such that legal standards alone are not sufficient to encourage professionalism in the industry. It is more a matter of ethical conduct and mindset and self-regulation at the level of brokers themselves that can bring in higher professional standards. It has to be self-motivated. This is unlikely to happen. The only deterrent against unethical conduct is a monitoring mechanism to ensure that breaches are detected quickly and the levels of punishment imposed severe. Professional standards, in the current environment, have to be enforced. Freeing the market of tariff price controls is giving the brokers an opportunity to display their professional wares but ultimately, in any market the professional standards can be raised only if the consumers make tough demands for improved services, and if there exists fair competition for excellence among the brokers themselves. The insurers are able to manage the high expectations of the consumers and the brokers by their professional expertise and ethical conduct. As of now, none of the stakeholders has dis played any initiative to respond to enhancing the demands for higher professional and ethical standards is disappointing. An international survey suggest that 73% of the corporate and significant clients considered brokers to be very important or essential. A major challenge being faced by the underwriters and sales force across the country is that they are under tremendous pressure to ignore sound underwriting principles with the pretext of competition. The market has become highly volatile, competitive after detariffing. The bid for the top slot has detetiorated into a fight for survival. At present, the entire industry has been through lot of turmoil in India. THE SUCCESS FACTOR: Brokers have been able to garner, an impressive brokerage income, and particularly in a predominantly tariff environment and with the other constraints, should be regarded as a success of regulatory intervention in introducing them into the system. In a fully nontariff environment, their role and consequential prospects of higher earnings seems even brighter. A brokerage remuneration of Rs. 122 crores in 2004-05 and an estimate of Rs. 180 crores in 2005-06 has been received. Within three years of introducing the new K. J. Somaiya Institute of Management Studies and Research
distribution channel, it is a substantial progress. The expected capital invested by about 222 brokers could be estimated at about Rs. 170 crores or less. Out of these 222 brokers , the direct brokers number 193, with reinsurance brokers 4 and composite brokers 25. A majority of the brokers are based in the Western Zone and number 79; and in the Northern Zone they number 78. The Southern Zone has 47 and the Eastern Zone has only 18 brokers. There is, however, no licensed broker representation hailing from the States of Goa, Madhya Pradesh, Jammu & Kashmir, Haryana, Himachal Pradesh, Uttranchal, Bihar, Jharkhand and Orissa, all the Northeastern States and Pondicherry, rendering the broking activities enevenly spread. In 2004-05 a business of Rs. 2500-3000 crores and in 2005-06 estimated Rs. 4000-5000 crores was placed by brokers. Quite a few brokers have opened branches or entered into franchisee arrangements with other bodies, as, currently, there is no regulatory requirement to seek the Authoritys permission for it. Broking has been introduced only in 2002 and that too in an industry environment that is predominantly a tariff dominated one, wherein the Brokers have had no opportunities to demonstrate their professional expertise, knowledge and negotiating skills, but still the broker community has attracted persons of proven professional competence, insurance expertise and ethical conduct to its fold. LIFE INSURANCE SCENARIO: In India, Life insurance is generally considered as a tax-saving device instead of its other implied long term financial benefits. Indian people are prone to investing in properties and gold followed by bank deposits. They selectively invest in shares also but the percentage is very small4-5%. Even to this day, Life Insurance Corporation of India dominates Indian insurance sector. With the entry of private sector players backed by foreign expertise, Indian insurance market has become more vibrant. Indian government considers insurance as one of major sources of funds for infrastructure development. The contribution of brokers is not insignificant in the area of Life insurance. Though a Direct Broker does not require any extra qualification to deal with life insurance but because of the long term nature of business, brokers have not shown much interest in life segment. Insurers also have the tendency to develop their agency force to create new business with personal report both in urban and rural areas. LIC has the biggest Agency force so far and also have launched the Micro Scheme to cover the length and breadth of the country. THE FAILURE OF INSURANCE BROKER. In the sixth year of liberalisation the number of insurers have reached to 30 plus but still many big groups are in queue to make foray and tying up with their foreign counterparts. As compared to private players, brokers are still junior in experience but more in number. K. J. Somaiya Institute of Management Studies and Research
The Regulator was not very supportive to brokers in first three years, however, after detariffing w.e.f. 01.01.2007 brokers have found a level playing field to prove their capability. Some of the brokers have closed their shops and many are out of the race. More than 40% are just pulling on. With the recommendations of expert committee on certain major issues, brokers feel that they will soon have their voice in the market. During these three tough years in the market, many brokers have died their natural death. The success bubble of insurance brokers may burst because of following reasons: 1. The lack of representation of licensed brokers from so many states and Union Territories is glaring. This could be due to several factors; the large amount of minimum paid-up capital required, the lack of entrepreneurship of locals, the inadequate availability of insurance potential, the proximity of metros to a few of the states, the expansion of licensed broker offices through opening of branches, franchising arrangements and subbroking. 2. A few brokers have opened a number of branches, without regard to the adequacy of working capital requirements, and without ensuring the availability of qualified and trained manpower at such offices. Franchisee arrangements and sub broking practices have already been brought in. A few brokers are also working as agents of insurers, under a binding authority to issue policies and service customers, for which insurers pay them remuneration. 3. The injection of professionalism and the mindset for implementing acceptable best practices among the brokers must start at the entry point. The entry into the broking profession has been regulated, based more on the threshold of the minimum paid-up capital norm of Rs. 50 lakh for a direct broker than on any professional insurance qualification or expertise of the personnel that form the broking firm. 4. Such easy entry norms have perhaps encouraged non-insurance professionals to enter the profession, who view broking, as a business worth investing in. With commercial instincts, rather than professional capabilities, guiding the broking business of the firm, it is likely that the available opportunities for unethical practices of kickbacks to creep in are quite high. 5. No value addition has been brought in by the broker, who is arguably not a professional with proven expertise; and that the percentage quantum too is high. Customers do not adequately appreciate the professional capabilities and inherent talents of the brokers. Now in the de-tariff regime brokers have to be totally professional to impose risk management capabilities and negotiating skills of the highest order.
6. The quality level of the professional expertise required in a non-tariff environment cannot be below the international level because both international insurance companies ( Joint ventures) and insurance brokers are already in the market. The knowledge gap between the two is likely to bring in and promote unethical practices. 7. The broker has currently no access to financial information, in the absence of nonpublication of quarterly un-audited financial statements by insurers. Even annual statements are not published. He has also no authority to ask and satisfy himself, on behalf of the insured, that effective reinsurance placement with BBB rated reinsurers has been done and the extent thereof.. 8. As far as healthy competition is concerned now in the detariffed environment, there is full opportunity for brokers to display or leverage their professional capabilities. After three years of opening, brokers have opportunities to display their professional skills and expertise. 9. In the beginning, the brokers were concerned more with protecting their invested capital and wanting to raise their brokerage revenues, quickly as the market has been hostile to their entry. As new entrants, they are unwanted by most stakeholders; their difficulties are compounded due to the market being tariff one. 10. The brokers seem disappointed that their brokerage incomes are below their expectations. The demand for kickbacks out of the current remuneration structure further compels them for unethical practices. 11. IRDA have no mechanism to keep the financial status of insureres under regular review and watch in a price freed market. While in a non-tariff market the rates are expected to go downward rather than upward, placing the financial resources of insurers under strain. It is imperative that the public, including the insured and the brokers, should be reassured of the financial viability of insurers themselves. 12. It is not clear why when a surveyor is permitted to offer consultancy services to a client, he does not service, a broker should be prohibited from doing so. There is always a conflict of interest and a possibility of unethical conduct. 13. The Authority is strictly in the mood to discourage the sub-broking system since the relationship between the two is fraught with legal implications from the point of privity of contract among the broker, the sub-broker and the consumer. Who is responsible to whom for liabilities? 14. Broking distribution channel has yet to prove its professional credentials and make meaningful contributions in a non-tariff market. Because Indian market is so dynamic, K. J. Somaiya Institute of Management Studies and Research
multinational companies are continually monitoring the human resources solutions being offered to ensure that they are attuned to the environment. They are sure that their compensation structures are current so that they continue to attract and retain the talent critical to their success. In addition, with the influx of foreign insurance companies and other vendors in this region, it is imperative that multinationals have local advisers who know the market and who can establish suitable relationships to serve the companies needs. The market is an open and free one. But no financial information is made available to the consumers, at regular intervals to make their choice of the insurer with whom they or their brokers wish to deal. In a total non-tariff environment, wherein the rates could go down to uneconomic levels, the un-audited underwriting results and the comparative profitability of each insurer needs to be measured at frequent intervals. The Authority has no other financial mechanism to assess the direction in which the competition among the insurers is taking the industry and for any course- corrective actions to be initiated. This single step would improve corporate governance of insurers. Customers today have different priorities; one may be price-conscious the other may be performance conscious, yet another may be time-conscious and yet another convenienceconscious. By making price as the sole issue, brokers have not even attempted to determine ways by which they could enhance value addition in the transaction to make them unique. What is at stake in the bargain is the capture of emotion, enthusiasm and mind of the customer in fovour of the particular insurer. Here comes the opportunity for innovation and creativity on the part of the brokers to excite the interest in the customer. Broker should be looking for this aspect in the transaction. Right now private insurers have a host of compelling strategies. They are selective in their acquisitions of accounts. They are focused on what they want. They are moneyminded and are strictly commercial. The PSU insurers are status conscious, and are a proud lot, as a class, the feeling being nurtured by their staff day in and day out. The customer segment itself would emerge as their bigger rate competitors. Now that the rates are freed, the customers would play games at reverse marketing. This term refers to bluffing the PSU insurers. They are more aggressive and more determined and more united than before. Brokers have a tough role to deal with them on pricing terms. Any rate quoted by the broker have to be supported by the respective insurers. Unstability and reluctance may give place to unreliability of both insurer and the broker. There is a need for the Authority to ensure that the insurance broking firms are serious enough, business wise to run as a professional broking company, with competence and with necessary insurance expertise. There is a compelling necessity, in the free market to ensure that a minimum number of the Directors of the broking company are knowledgeable in insurance technicalities and are ethical in their conduct and do behave as professional experts in their field, to the satisfaction of the Authority and the consumer public. The issue of kickbacks has to be relentlessly monitored to ensure that neither the K. J. Somaiya Institute of Management Studies and Research
insurers nor the brokers are indulging in it. Providing services related to insurance consultancy and risk management, and assisting in the negotiation of claims, are the functions to be necessarily performed by a broker, as part of his duties to his client. The justification to maintain a differential in the remuneration levels between a qualified broker and a qualified agent cannot be easily brushed aside. Insurance brokers have been given a wider field to display their professional expertise in risk management, consultancy and claims advice to all consumers, and with the brokers continuing to have a choice provided in the code of conduct to collect fees from the client but the brokerage payable will not exceed the current norms. Further the legality of reimbursing brokers with the service tax on brokerage paid by insurers, who do not receive professional services, needs examination in the light of existing laws. The biggest constraint compelling the brokers to die their own death is the provision that brokers are not entitled to receive any fee from insurers other than the prescribed brokerage. This is a direction to the insurers, who are the beneficiaries of business. The word fee is added only in case of brokerage in the Insurance Act, 1938, Section 42 E. If any additional fee or any other remuneration is paid to the broker by an insurer or any other service is rendered to the insurers on the insurance policy placed with him, it amounts to breach of the Section 42E. It may also amount to rebating. If the provisions amended and the fee is not allowed at least in claim consultancy services, the bubble of success of insurance brokers may burst soon.
FUTURE OF INSURANCE BROKERS.
In future, insurance would be safe only with a broker When its come to insurance, its not just important to carefully decide what product to buy but its equally important to buy it from the right person. The seller of insurance polices can be either an insurance adviser or an insurance broker. And if you want options of different polices from different companies to choose from, go for an insurance broker as the broker is better placed to understand and service your needs. Emerging multinational companies are seeking expansion into new markets. China and India have become particular hot spots for this activity because of their abundant human capital resources. Populations in both countries exceed 1 billion, with more than 50 percent between the productive ages of 18 and 64 years old. With the inherently low business operating costs and highly skilled and educated workforce, the utilization of these two markets is causing rapid change and increasing the competitive environment. China, for example, has 23 different provinces each with a distinct set of provincial plans. To operate there, companies need to understand the landscape so that they can create the right supplemental employee benefits plans for the provinces in which they operate. In addition, different employee benefits plans are required depending on the type of legal entity that is established. Typical employee benefits, including group health care, life insurance and retirement benefits, can be delivered through the Foreign Enterprises K. J. Somaiya Institute of Management Studies and Research
Service Corporation (FESCO) for joint-venture companies or tailored to the employers needs if the company operates as a wholly owned foreign enterprise (WOFE). As expected, it is simpler to establish a state owned company than it is a WOFE. Internationally brokers are an expert lot and recognized Risk Advisors, Claim Consultants, Prudent underwriters who add value to the insured. European market is mainly dominated by the brokers as against Indian market dominated by the Agents. Insurance Brokers handle around 80% premiums of Insurance market. We are sure the Indian Insurance Brokers have a challenging and self satisfying task ahead to ensure that the insurance market both life and non-life are developed in a healthy direction. Broking intermediaries have been able to improve their market share up to around 27%. Top three international broker control around 80 percent of brokers business procured by top 20 brokers. In the coming years, contribution from corporate brokers is likely to increase as many corporate agents are now becoming brokers.
FUNCTIONS OF BROKERS I.E HAVMORE BROKERS PVT. LTD.
HAVMORE INSURANCE BROKERS PVT.LTD Introduction 'Havmore Insurance Brokers Private Limited is a private limited company with its registered head office at Mumbai, has got its license from the Insurance Regulatory and Development Authority (IRDA) of India on 16th December 2004, to operate as Insurance Broker. Our Company is a part of the Financial Consultancy Group providing all kind of corporate consultancy and business support services. As a Professional broker the company offers a full array of risk management products, services and solutions that can be integrated, custom-designed and delivered through a seamless distribution network to meet marketplace challenges.
ADVANTAGE HAVMORE
1. The company represents the Insurance buyer, so as to service their interests & not
that of the Insurance Company. There is no additional cost to the Insurance Buyer for placing business through Havmore. 2. Havmore Insurance Brokers Pvt.Ltd is different from Agents. Agents represent a given Insurance Company and only sell the policies of their respective Companies. The company have the authority to sell all policies, in Life & Non-Life, of any Insurance Company in India. 3. The companys manpower includes qualified & experienced Insurance Professionals, who have in-depth Insurance knowledge & are able to provide Insurance Consultancy as well as arrange for all kinds of Insurance Covers. Thus, all the clients have the benefit of the most competitive premium rate & terms. 4. The company analyses the insurance needs of the clients, study their existing policies, and advise them about suitable Insurance Covers in order to protect their assets & financial interests. 5. The company provides a total package of services for the Insurance Buyer, including Post Insurance Services & offer assistance in submission of claim documents to the Insurance Company. 6. It is governed by the code of conduct prescribed by I.R.D.A.
7. The company presents itself as professionals who represent Buyer. i.e. you only, & not the Insurance Company. They can place the insurance of their client with any Insurance company, in the best interests of the Buyer. Thus, THE HAVMORE INSURANCE BROKERS Pvt.Ltd is a single window solution for all the Insurance-related issues, problems and requirements.
STRENGTH OF HAVMORE
1. Vast experience of the directors in the financial field.
2.
Wide range of contacts and networks spread across the Country.
3. Strong relations with various corporates in and around Mumbai. 4. Large financial resources.
MANAGEMENT CHAIRMAN Mr. Dinesh T. Jangla, is the ex-manager of a nationalized bank with 38 years banking experience; he started his career by working in insurance company and later joined the Banking industry. While in the Banking Industry he handled various Departments viz, Bill Advances, NRI deposits, Operations, Marketing support, Business Development, Relationship Management, Accounts etc.
MANAGING DIRECTOR Mr. Hemang D. Jangla A dynamic professional, holds a Post Graduate Diploma in Business Administration. He is well versed in Financial Management, Marketing Management, Import Export Trade Development, Merchant, Banking Corporate Finance, Human Resource Management. He holds several Diplomas in various Management studies. He has also attended various National & International Conferences / Services / Workshops in Insurance/ Banking / GATT Management Services / Mergers and Acquisition / Promotion of Business fair etc. He also plays active role in social and nongovernment organizations. He is a member of Bhartiya Vitta Sahakar Samati, a financial NGO. He is a member of Bhartiya Vikas Parishad, largest NGO in India. SERVICES OFFERED BY HAVMORE Always act for the client. Assist the client in identifying and evaluating risk. Help client Determine all insurance needs and requirements. Acquire a total understanding of the clients business and philosophy. Customize integrated risk solutions to suit the clients needs. Prepare presentations on behalf of the client, underwriting slips and all necessary documentation for insurance underwriting purpose, while observing all critical matters of disclosure, presenting the clients business in a positive light. Select the right insurer for the client depending on the security, reinsurance capabilities, level of professionalism, and claims service of the insurer. In many cases so far, the lack of professional advice in the documentation process has led to non-admittance of claims. Going forward, the broker will take care of this. Leverage buying power on behalf of clients. Negotiate with underwriters, best terms taking into account price, coverage scope, insurer security and service standards. Recommend an appropriate insurance programme to the client. K. J. Somaiya Institute of Management Studies and Research
Prepare/agree policies that reflect accurately the agreed terms of insurance. Collect and disburse premiums in a timely manner. Providing additional services such as consulting, risk management, risk modeling and uninsured loss recovery. Complete all necessary documentation and maintain accurate records of past claims. When claims occur, act as advocate for the client, negotiate best equitable settlement in terms of the policy and expedite timely payment of claims. Keep the client informed regarding the insurance market, technical, statutory or other relevant matters. Treat all client data with utmost confidentiality. In India, be a catalyst in the development and introduction of new innovative products and services.
PRODUCTS OF HAVMORE GENERAL INSURANCE

1. Fire insurance 2. Marine insurance 3. Motor insurance 4. Personal insurance 5. Health insurance 6. Liability policy
7. Special line policy
8. Miscellaneous insurance
LIFE INSURANCE 1. Term plan 2. Endowment plan 3. Pension plan 4. Unit linked plan 5. Child plan 6. Health plan
ORGANISATIONAL STRUCTURE OF HAVMORE

CHAIRMAN
MANAGING DIRECTOR
OPERATIONS
FINANCE
MARKETING
HUMAN RESOURCEE
INFORMATION TECHNOLOGY
1. UNDERWRITING 2. CLAIMS LIFE NON-LIFE
1. TELESALES
1. CORPORATE
K. J. Somaiya Institute of Management Studies 2. SME and Research 2. RETAIL
ASSOCIATE CHANNEL
MARKETING (LIFE) Tele Sales The telesales vertical is a method of direct marketing in which the salesperson solicits prospective customer to buy products or services. The process in Havmore includes sales pitches by the sales or customer care executives over the phone. In Havmore they have categorized their telemarketing as: Business to Customers Business to Business In the telesales vertical the lead is given to the telesales executives with it they pitch their clients and close the deal over the phone. The lead is generated or identified by various means like: Obtaining from other companys database Other public lists K. J. Somaiya Institute of Management Studies and Research
The leads are generally purchased from major sources of lead generation. The executives are given monthly targets in the form of: Number of policies to be sold and or Amount of premium to be collected If each executive achieves over and above their target then they become entitled for incentives. Since it is a broking firm, the point of sale is not single policy or a single company but they are allowed to pitch their clients on the clients specific needs and requirements. The company has tied up with all life insurance companies namely: 1. Bajaj Allianz 2. LIC 3. TATA AIG 4. Birla Sun Life 5. MET Life 6. SBI Life Insurance etc.
RETAIL The retail vertical is a method of direct marketing in which the salesperson solicits prospective customer to buy products or services. The process in Havmore includes sales pitches by the sales or customer care executives by meeting the customer face-to-face. The telecallers calls the client and fix the appointment and the field executives meet the clients and explain the proposal to him and takes the procedure further. In Havmore they have categorized their telemarketing as: K. J. Somaiya Institute of Management Studies and Research
Business to Customers Business to Business In the telesales vertical the lead is given to the telesales executives with it they pitch their clients and fix the appointment and the field executives carries the deal further. The lead is generated or identified by various means like: Obtaining from other companys database. Other public lists. Various search engines The leads are generally purchased from major sources of lead generation. The executives are given monthly targets in the form of: Number of policies to be sold and or Amount of premium to be collected If each executive achieves over and above their target then they become entitled for incentives. Since it is a broking firm, the point of sale is not single policy or a single company but they are allowed to pitch their clients on the clients specific needs and requirements. The company has tied up with all life insurance companies namely: 1. Bajaj Allianz 2. LIC 3. TATA AIG 4. Birla Sun Life 5. MET Life 6. SBI Life Insurance etc.
ASSOCIATE MODEL The main focus of the associate model is to build associate for the insurance business and expand the business by combining individuals to the business. The advantage of associate model is that it gives the power of a broking firm to the associate in his operations. The target audiences for the associate model are the individuals, institutions and the corporate persons. In Havmore the associate model is started 1 month back which is handled by Mr.Chandraprakash Singh with a team strength of 3 members and right now they have 31 associates with them. The process of making associates starts with collecting the leads i.e potential individuals for becoming associates. 1. Collecting the leads i. Leads are collected through other companys databases ii. Various search engines like Google, Bing etc. iii. One stop operators like Justdial.com. iv. References of existing customers. 2. Taking the Appointment 3. Meeting with the client and explaining the proposal. 4. If the customer agrees completing the formalities and confirm the person as an associate. 5. For the first month the associates are required to make 3 policies or else the associates code gets deactivated and he will not be able to continue further. 6. If an associate makes 3 policies in the first month, the code gets activated and he will be able to continue with the business. 7. The commission given to the associate is based on the following slabs:
Percentage of Commission according to the companies Group A (Bajaj, Aviva, Future, Birla) PLAN ENDOWMENT PLAN TERM PLAN ULIP PLAN PENSION PLAN SINGLE PREMIUM PLAN PERCENTAGE 35% 35% 3% 4.55 1%
Group B (All The Private companies) PLAN ENDOWMENT PLAN TERM PLAN ULIP PLAN PENSION PLAN SINGLE PREMIUM PLAN PERCENTAGE 25% 20% 2% 4.5% 1%
Group C (LIC & SBI) PLAN ENDOWMENT PLAN TERM PLAN ULIP PLAN PENSION PLAN SINGLE PREMIUM PLAN PERCENTAGE 20% 15% 2% 2.5% 1%
The associate model has a one time commission i.e no renewal commission basis for the payment of commission to the associates. The associate gets the commission for the first year on every policy he brings but he will not get commission on the renewal of the policy in the subsequent years and this is the income for the company i.e. Havmore.
Associate Commission model
ASSOCIATE
SUBASSOCIATE 1 =
SUBASSOCIATE 2 =
4%
4%
SUB-ASSOCIATE 3 = 4%
SUBASSOCIATE 4 =
4%
SUBASSOCIATE 5 = 4%
SUBASSOCIATE =
SUB ASSOCIATE =
3%
3%
SUB-ASSOCIATE = 3%
SUBASSOCIATE =
SUBASSOCIATE =
3%
3%
SUBASSOCIATE =
SUBASSOCIATE =
2%
2%
SUBASSOCIATE =
2%
SUBASSOCIATE =
2%
SUBASSOCIATE =
2%
SUBASSOCIATE =
SUBASSOCIATE =
SUBASSOCIATE =
1%
1%
1%
SUBASSOCIATE =
SUBASSOCIATE =
1%
1%
NON-LIFE COMMISSION PLAN

Maximum percentage of premium payable as agency commission or brokerage (% of final premium excluding service tax) Class of Business S. No. 1 Fire, IAR and Engineering insurances i. General ii. Risks treated as large risks 5% 6.25%
Agency Comm. 10%
Brokerage 12.50%
2 3 4 5 6
Motor insurance business (OD portion), WC/EL & statutory Public Liability Insurance Motor Third Party insurance Marine Hull insurance Marine Cargo business All other business
10% Nil 10% 15% 15%
10% Nil 12.50% 17.50% 17.50%
NON-LIFE CORPORATE SALES The corporate sales vertical takes care of the insurance of corporate business only. Its main focus is to bring business from the corporate and public sector units. The corporate sales includes the selling of non-life insurance to the companies such as marine insurance, fire insurance, motor insurance and the likes. The corporate vertical also follows a process to start and end the deal. 1. Collecting the leads The leads are collected from the database of other companies. Reference from the existing clients. 2. Calling and fixing the appointment for meeting. 3. Meeting the client and explaining the products and the services offered by the company. 4. Getting the feedback and resolving queries if any. 5. Confirming and closing the deal. 6. Getting all the documents required for the paper work. 7. The documents then goes to the underwriting for further processes and if any discrepancies arises the customer needs to be contacted again. 8. After the verification, the documents are sent to the respective company for further procedures. 9. If everything is right the company issues the policy and the customer pays the required amount to the company. As a broking firm it is very important to provide proper and timely service to the customer to retain the existing customers and to attract the new customers.
OPERATIONS Insurance underwriting Underwriting may also refer to insurance; insurance underwriters evaluate the risk and exposures of potential clients. They decide how much coverage the client should receive, how much they should pay for it, or whether even to accept the risk and insure them. Underwriting involves measuring risk exposure and determining the premium that needs to be charged to insure that risk. The function of the underwriter is to acquireor to "write"business that will make the insurance company money, and to protect the company's book of business from risks that they feel will make a loss. In simple terms, it is the process of issuing insurance policies.
Collecting the Necessary Information

1. To begin the underwriting process, an underwriter needs to have several pieces of
information in order to provide the most accurate evaluation of a potential policyholder. This information includes the insurance application (previously completed by the customer or their insurance agent), VIN numbers (Vehicle Identification Number) for any vehicles to be insured, MVRs (Motor Vehicle Reports) for any drivers to be insured, loss histories from previous insurers, photographs of properties to be insured, and any other information related to the type of insurance being underwritten (commercial, small business, homeowner's, health, etc.).
Analyzation 2. Once the required information has been collected, the underwriter can begin to analyze each piece of information. Underwriters are governed by underwriting guidelines set forth by their company. Therefore, all information is evaluated against these guidelines. Underwriters have different levels of authority, as well. If the information and analysis reveals that a decision needs to be made by someone with a higher level of authority it will then be passed on to that particular underwriter. K. J. Somaiya Institute of Management Studies and Research
The main purpose of analysis is to determine how much risk a particular customer will bring to the company. A client with no losses, clean driving records, and good to perfect credit is preferable to one who has had several losses, driving violations or issues of imperfect credit. Identifying options 3. Once the analysis of the provided information is complete, the underwriter basically has three options: 1. Accept the application and approve a policy 2. Reject the application and deny coverage/refuse to write a policy. 3. Approve an application with conditions attached (lower coverage limits, modification of loss control practices, higher premiums) After the underwriter chooses how to proceed, the application will either be forwarded to the policy processing department, back to the agent for modifications and review with the customer, or a rejection letter will be sent to the agent and the customer.
START
INFORMATION FROM CUSTOMER
INFORMATION THROUGH MARKETING REPRESENTATIVE
BASIC DETAILS OF THE QUOTATION
CALCULATE THE COVERAGE AMOUNT BY OWN CALCULATION
FORWARD TO THE INSURANCE COMPANY FOR APPROVAL OF THE AMOUNT
DECIDE WHICH IS THE BEST QUOTATION FOR THE CUSTOMER AND SEND IT TO THE SALES PERSON
SALES PERSON SENDS THE QUOTATION TO THE CUSTOMER FOR APPROVAL
COLLECT DOCUMENTS FOR THE ISSUANCE OF THE POLICY
DOCUMENTS GOES TO THE BACK OFFICE FOR FURTHER PROCEDURES AND VERIFICATIONS
THE BACK OFFICE SENDS THE DOCUMENTS TO THE INSURANCE COMPANY
AFTER THE VERIFICATION THE INSURANCE COMPANY ISSUES THE PLOCY AND SENDS IT TO THE CUSTOMER
END
CLAIMS
Claim settlement is one of the most important services that an insurance company can provide to its customers. Insurance companies have an obligation to settle claims promptly. You will need to fill a claim form and contact the financial advisor from whom you bought your policy. Submit all relevant documents such as original death certificate and policy bond to your insurer to support your claim. Most claims are settled by issuing a cheque within 7 days from the time they receive the documents. However, if your insurer is unable to deal with all or any part of your claim, you will be notified in writing.
LIFE There are two types of claims in life: 1. Maturity 2. Death
1. Maturity On the date of maturity the insured is required to send maturity claim/ discharge form and original policy bond well before the maturity date to enable them timely settlement. Most companies offer/issue post dated cheques and /or make payment through ECS credit on the maturity date. 2. Death
Non Life 1. Theft 2. Burglary K. J. Somaiya Institute of Management Studies and Research
3. Lost in transit 4. Accident
Flow Chart as below.
START
RECEIVES THE CLAIMS INTIMATION FROM THE CLIENT OR THE CLAIMANT
ASKS FOR THE DOCUMENTS FOR PROCESSING LIKE POLICY PAPER, DATE AND CAUSE OF DEATH (IN CASE OF LIFE INSURANCE)
CONDUCTS A SURVEY IF NECESSARY
SENDS THE DOCUMENTS TO THE INSURANCE COMPANY
AFTER ALL THE SURVEY AND VERIFICATION THE INSURANCE COMPANY CLEARS THE CLAIM AND SEND THE AMOUNT TO THE CLIENT
THE BROKING FIRM SEND THE TRANSFER COPY TO THE CLIENT AS SOON AS IT RECEIVES FROM THE INSURANCE COMPANY
END
SUMMARY& RECOMMENDATION In every industry, there are islands of excellence and large numbers of mediocre players and insurance broking is no exception to that. The broking community still has a long way to go in meeting the needs of customers. While detariffication is changing the dynamics of the broking community, it is likely to take significant time and resources to ensure that clients understand the full benefits brokers can bring to them. The key is to be K. J. Somaiya Institute of Management Studies and Research
aware of international trends, remain service oriented, flexible and sensitive to the challenges facing customers. Brokers need to exceed expectations and create surprises.
BIBLIGORAPHY:
Site: http://www.irda.gov.in http://www.ibai.org/ www.havmore.in
Journals: Economic Times Books: Insurance Books Practice of General Insurance.

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ROLE OF BROKERS IN INSURANCE INDUSTRIES.

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

SUBMITTED BY JAYSHREE K. RATHOD ROLL NO. 12-16-49

FOR THE MASTERS DEGREE

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

Date: 8th October 2011.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

Name of the Domain

Objective of the Study

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

Locating protection Economic organizing A number of providers Claim settlement

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

HOW AND WHY INSURANCE BROKERS IN INDIAN MARKET:

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

INSURANCE BROKER DIFFERENT FROM AGENT AND WRITER

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

Companies Designing of Insurance Products Insurance Portfolio Management Insurance Audits

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

THE ROLE AND SIGNIFICANCE OF BROKERS IN INSURANCE INDUSTRY.

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

K. J. Somaiya Institute of Management Studies and Research

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

BROKERS IN INTERNATIONAL MARKET.

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

Following are the logical fall-outs of this faulty practice:

ROLE OF BROKERS IN INSURANCE INDUSTRIES.

SUCCESS OF INSURANCE BROKERS.

ROLE OF BROKERS IN INSURANCE INDUSTRIES.