A Study on Social Obligation of Enterprises Engaged in General Insurance Business

8/8/2019 A Study on Social Obligation of Enterprises Engaged in General Insurance Business

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A Study on Social Obligation of Enterprises Engaged in General

Insurance Business

Introduction

Insurance company has corporate social responsibility towards improving the

environment, but at the same time, the company has to garner good premium as

ultimately the insurer has to earn profits for its shareholders & stakeholders. The

company can earn profits only when there are less early death claims and more maturity

claims. When the insurer starts insuring the poor slum dwellers as per the directives of

IRDA, it becomes its concern to improve the conditions. In metropolis, we have the

spectacle of both plenty and poverty living together-a sky scraper adjoined by a dirty

slum full of unsanitary conditions and filth. All the four companies are government

companies registered under the Act. The New India Assurance Company Ltd, The United

India Insurance Company Ltd, The National Insurance Company Ltd, The Oriental

Insurance Company Ltd.

Statutory Obligations of General Insurance Company

The following are the statutory obligations of general insurance companies.

New India Assurance Company Limited

• To develop general insurance business in the best interest of the

community.

• To provide financial security to individuals, trade, commerce and all other

segments of the society by offering insurance products and services of high quality at affordable cost.

• Highest priority to customer needs.

• High standards of public conduct.

• Transparency in operation.

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United India Insurance Company Limited

• To provide Insurance protection to all.

• To ensure customer satisfaction.

• To function on sound business principles.

• To help minimize national waste and to help develop the Indian economy.

National Insurance Company Limited

• To optimize the accessibility of Indian business and carry on reinsurance

policies and foreign operations.

• To establish Risk Management Technologies and minimize the losses.

• To act as strong and active non-life insurer.

The Oriental Insurance Company Limited

• To keep the focus on customer and serve their insurance requirements.

• To offer high quality service by being customer friendly.

• To invest funds for optimum grant and engage in profitable business.

The following are the statutory obligations of private general insurance companies

(Bajaj Allianz, Tata AIG, Royal Sundaram, etc.,)

• To be the first choice insurer for customers.

• To be the preferred employer for staff in the insurance industry.

• To be the number one insurer for creating shareholder value.

• As a responsible, customer focused market leader, strive to understand the

insurance need of the consumers and translate it into affordable products

that deliver value for money.

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Business Focus of General Insurance Companies

• To position them as a leading corporate and retail insurance company

catering to the needs of their customers.

• Their guiding principles are customer service and client satisfaction. All

their efforts are directed towards understanding the culture, social

environment an individual insurance requirement of their customers so

that they can cater to their varied needs.

• Working closely with leading intermediaries including corporate agents,

motor dealers, agents, banks, associations and other intermediaries to

focus on the corporate and retail business.

• To leverage the customer base and expertise.

• To be technology driven and will strive to setup world class technological

infrastructure. This will include a renowned insurance software;

networking of all offices and intermediaries as well as the ability to

interface with customers via all media.

Duties of General Insurance Companies

The insurance company has a duty to handle your claim promptly, reasonably and

in "good faith and fair dealing". The duty of "good faith and fair dealing" basically means

that your insurance company must

• Adjust the claim (either pay it or deny it) within a reasonably prompt time.

•

Must cooperate with the customer regarding the claims.• Must tell in writing precisely why it is denying the claim specifying each

contract term or provision upon which it relies.

• Must attempt to find a basis to pay the claim rather than find reasons to

deny it.

• Must "play fair" with the clients.

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IRDA Guidelines for Private Insurance Sector

IRDA’s guidelines mandate that for private sector players, rural business should

account for 7 per cent of the total Gross Written Premium (GWP), after the first eight

years of operations. For new players, this cap is relaxed and varies between 2-7 per cent.

The cap increases every year. Public players had to underwrite rural business amounting

to 6 per cent of GWP in 2007-08, which was increased to 7 per cent in 2008-09. To meet

their social obligation, private players have to cover 5,000 BPL lives in the first financial

year and increase it to 55,000 lives in the tenth financial year. Public players have to

cover 5.5 lakhs lives or the average of the number of lives covered by the insurer in the

social sector from 2002-03 to 2004-05, whichever is higher.

“The rural sector has immense business potential as 70 per cent of the Indian

population resides in these areas. We are tying up with NGOs and third party

administrators to increase our reach. We have also set up rural insurance units within our

branches. We are also issuing biometric cards for RSBY,” said Mr. Gaurav Garg,

Managing Director and Chief Executive Officer, Tata AIG General Insurance. Tata AIG

is also looking at using embedding technology for cattle insurance, as one of the steps to

make its rural segment profitable.

IFFCO Tokio has launched a pilot project to track the green cover, type of soil

and temperature variations of an area over a period of time. NASA’s satellite imagery is

used to arrive at the Normalized Difference Vegetation Index. This helps the company to

assess whether there has been a crop failure or not and accordingly pay claims, said Mr

N.K. Kedia, Director (Marketing), IFFCO Tokio General Insurance. The company has

also rolled out radio frequency identification technology for cattle insurance to check

fraudulent claims.

Details regarding the general profile of the respondents

Factors Classification No of. Percentage

4



Respondent

s

SexMale 88 73.33%

Female 32 26.67%

Age

Below 30 Years 15 12.50%

31 – 40 Years 19 15.83%

41 – 50 Years 35 29.17%

51 – 59 Years 23 19.17%

60 Years and Above 28 23.33%

Marital StatusMarried 98 81.67%

Unmarried 22 18.33%

LiteracyLiterate 103 85.83%

Illiterate 17 14.17%

Educational

Qualification

Primary Education 9 8.74%

Higher Education 15 14.56%

Graduation 41 39.81%Post Graduation 26 25.24%

Professional 12 11.65%

Occupation

Business Man 54 45.00%

Government Employee 17 14.17%

Private Employee 16 13.33%

Professionalist 9 7.5%

Housewives 24 20.00%

Annual Income

Below Rs. 5,00,000 31 25.83%

Rs. 5,00,001 to

Rs. 10,00,00056 46.67%

Rs. 10,00,001 to

Rs. 15,00,00021 17.50%

Above Rs. 15,00,000 12 10.00%

Source: Primary Data

Inference

Regarding personal profile of the respondents, the above table shows that the

male respondents are more, majority of respondents (29.17%) are having the age between

41 – 50, majority (81.67%) of the respondents are married, majority of the respondents

(85.83%) are literates, about 39.81% of them are educated up to graduation level, 45% of

the respondents are business man, majority of the respondents are earning Rs. 5,00,001 to

Rs. 10,00,000.

5



Nature of Business

S. No Nature of Business No. of Respondents Percentage

1. Manufacturing 25 46.292. Trading 12 22.22

3. Whole selling 9 16.67

4. Service 3 5.56

5. Retailing 5 9.26

Total 54 100

Source: Primary Data

It is noted that 46.29% of the respondents are doing manufacturing business.

Nature of General Insurance Policy

S. No Nature of General Insurance Policy No. of Respondents Percentage

1. Fire 40 33.33

2. Marine 20 16.67

3. Motor 40 33.33

4. Miscellaneous 20 16.67

Total 120 100

Source: Primary Data.

It is inferred that two third of the respondents opted for Fire and Motor insurance.

Percentage of Loss

The researcher has also analyzed the percentage of loss faced by the

policyholders. The following table explains the percentage of loss incurred by the

policyholders.

S. No Percentage of Loss No. of Respondents Percentage

1. Less than 25 Percent 17 34.69

2. 25 – 50 Percent 21 42.86

3. 50 – 75 Percent 7 14.29

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4. 75 – 100 Percent 4 8.16

Total 49 100


Note: The respondents who have incurred loss.

It is clear from the above table that, out of 49 respondents, 21 respondents

incurred loss between 25 – 50 percent, 17 respondents have incurred the loss less than 25

percent, 7 of them incurred between 50 – 75 percent and the remaining 4 respondents

incurred loss more than 75 percent.

Awareness of Grievance Redressal Cell

Grievance cell is a mechanism in which the grievance of the policyholders can

apply and get the proper reply within a specific authority within the stipulated time. The

policyholders may be satisfied if the reply is genuine. The policyholder’s awareness

about the existence of grievance redressal cell is given in the following table.

S. No Particulars No. of Respondents Percentage

1. Known 94 78.33

2. Not Known 26 21.67

Total 120 100Source: Primary Data.

It is evident that out of 120 respondents, 72.5 percent of the respondents are aware

of the grievance redressal cell and the rest 27.5 percent of the policyholders are unaware

of the existence grievance redressal cell in general insurance corporation.

It is found that majority of the respondents (72.5 percent) are known about the

grievance redressal cell mechanism in general insurance corporations.

Opinion about Customer Service in GIC

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The expectation of the customer varies from one another. The following table

reveals the expected level of the customer service in GIC.

S. No Opinion No. of Respondents Percentage

1. More than Expectations 10 8.332. Less than Expectations 16 13.33

3. Best 34 28.33

4. Satisfied 56 46.67

5. Dissatisfied 4 3.34

Total 120 100


The inference from the above table that 46.67 percent of the respondents are

satisfied with the customer services offered by the general insurance corporations, 28.33

percent of them said that the customer service is best, 13.33 percent of them expressed

that customer service is less than their expectations, 8.33 percent of them opines that the

services are more than their expectations and 3.34 of them are dissatisfied with the

customer service rendered by GIC.

Overall Attitude about Customer Service in General Insurance Corporations

(Relating to Policy)

Component SA A NN D SD Total% of total

Points

Advice in selection of policy

26

(130

)

68

(272)

12

(36

)

2

(4)

12

(12

)

120

(454)17.09

Policy Condition

27

(135

)

70

(280)

15

(45

)

5

(10)

3

(3)

120

(473)17.82

Safety and Security

72

(360

)

28

(112)

6

(18

)

6

(12)

8

(8)

120

(510)19.20

Advertisement and Publicity 12

(60)

21

(84)

19

(57

58

(116

10

(10

120

(327)

12.31

8



) ) )

Location of Branch

22

(110

)

51

(204)

15

(45

)

21

(42)

11

(11

)

120

(412)15.51

Premium Rates32

(160

)

72

(288)

15(45

)

– 8

(8)

120

(480)18.07

Total

191

(955

)

310

(1240

)

8

(24

)

–

52

(52

)

720

(2656

)

100

Source: Primary Data / Processed Data.

Note: Figures without bracket denotes the number of responses given by the

policyholders.

The above table discloses the fact that there is an agreement in all the views

except the views that, advertisement and publicity has decreased. Out of 120 respondents,

10 respondents are not satisfied with the advertisement and publicity and hence it has the

least accepted view with a mean score of 327 points.


(Relating to Agents Performance)

Component SA A NN D SD Total

% of

total

Points

Service of the Agent27

(135)

43

(172)

14

(42)

24

(48)

12

(12

)

120

(409)14.93

Issue of premium demand

notice

66

(330)

32

(128)

15

(45)

7

(14)-

120

(517)18.88

Agents remainder to pay

premium

28

(140)

62

(248)

10

(30)

12

(24)

8

(8)

120

(450)16.43

Policy renewal24

(120)

74

(296)

10

(30)

12

(24)-

120

(470)17.16

Function of Offices 26 53 21 12 8 120 15.95

9



(130) (212) (63) (24) (8) (437)

Change of Address32

(160)

52

(208)

20

(60)

12

(24)

4

(4)

120

(456)16.65

Total

203

(1015)

360

(1264)

90

(270)

79

(158)

32

(32)

720

(2739)

100


Note: Figures without Bracket denotes the number of responses given by the policy

holders.

The table discloses that there is an agreement with all the views except the views

that, service of the agents has decreased. Out of 120 respondents, 12 respondents are not

satisfied with the change of address and hence, it has the least accepted view with a

means score of 409 points.


(Relating to Customer Service)

Component SA A NN D SD Total% of total

Points

Transfer of policy

23

(115

)

64

(256)

23

(69)

6

(12)

4

(4)

120

(456)14.89

Sending Discharge forms17

(85)

64

(256)

14

(42)

15

(30)

10

(10

)

120

(423)13.81

Performance of the

surveyor

47

(235

)

41

(164)

12

(36)

13

(26)

7

(7)

120

(466)15.27

Customer Service17

(85)

58

(232)

22

(66)

23

(46)-

120

(429)14.00

Grievance settlement

23

(115

)

57

(228)

15

(45)

17

(34)

8

(8)

120

(430)14.03

Settlement of claims 21 51 3 24 21 120 12.63

10



(105

)(204) (9) (48)

(21

)(387)

CRM

32

(160

)

62

(248)

15

(45)

7

(14)

4

(4)

120

(471)15.37

Total

180

(900

)

397

(1588

)

104

(312

)

105

(210

)

54

(54

)

840

(3064

)

100


Note: Figures without Bracket denotes the number of responses given by the policy

holders.

The table discloses that, there is an agreement with all the views except the views

that, settlement of claims has decreased. Out of 120 respondents, 21 respondents are not

satisfied with the settlement of claims and hence, it has the least accepted view with a

means score of 387 points.

Suggestion

• Communication is the key to success. The GIC should pay more attention

on the communication with the customers on regular basis by means of

customer meet and appraising them with latest schemes. Further the GIC

should take steps to market the new polices by giving advertisement, or to

send through news letters, circulars and the like.

• The GIC should carry out its regular Customer Satisfaction Audit to find

the areas of discrepancies and try to improve customer satisfaction.

• Proper training should be given to the employees of GICs.

• It is advisable to establish Customer Protection wing at the Branch level.

• Better and long term customer relationship can be effectively achieved by

going for customer’s surveys periodically at regular intervals. If there is

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any complaint, such complaint must be redressed immediately to the

satisfaction of the customers.

Conclusion

“Customer is like a child: goes where he is invited, stays where he is well

treated”. Hence it is difficult to acquire and retain the customer. Building customer

centric enterprise is critical for the long term success of insurance industry. Relationship

marketing plays a key role in building customer loyalty. Therefore, to survive in the

competitive market, insurance companies need to follow the statutory obligations. Thus it

results in the ability to measure customer value and improve service. With the help of a

right Customer Protection solution the insurance companies can achieve a great success.

Insurance companies should host Customer Protection a red carpet welcome to sustain in

the market.

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Documents

A Study on Social Obligation of Enterprises Engaged in General Insurance Business