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JOINT VENTURES IN INSURANCE
INDUSTRY
CHAPTER:-1
INTRODUCTION OF INSURANCE
INTRODUCTION
The aim of all insurance is to compensate the owner against loss
arising from a variety of risks, which he anticipates, to his life, property
and business. Insurance is mainly of two types: life insurance and
general insurance. General insurance means Fire, Marine andMiscellaneous insurance which includes insurance against burglary or
theft, fidelity guarantee, insurance for employers liability, and insurance
of motor vehicles, livestock and crops.
The Insurance !ct, "#$% and the General Insurance &usiness
'(ationali)ation* !ct, "#$% govern Fire and Marine Insurance, while the
Indian Marine Insurance !ct, "#+ governs marine insurance in our
country. These laws contain provisions relating to the constitution,
management and winding up of insurance companies and the conduct of
insurance business of all types. !ll insurance business in India has been
nationali)ed.
! -ontract of insurance is a contract by which one party
undertakes to make good the loss of another, in consideration of a sum of
money, on the happening of a specified event, e.g. fire, accident or death
or any eventual direct or indirect losses within the limit of law. aw
recogni)es insurance as a system of sharing risk too great to be borne by
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one individual. Insurance is a financial topic of paramount importance
for every individual. Insurance is designed to protect the financial well/
being of you and your dependents in the case of une0pected loss. 1ome
forms of insurance are re2uired by law, while others are optional.
!greeing to the terms of an insurance policy creates a contract between
you and the insurance company. In e0change for payments from you
'called premiums*, the insurance company agrees to pay you a sum of
money upon the occurrence of a specific event. That event may be as
mundane as a visit to the doctor or as serious as a car crash, depending
on the type of insurance
DEFINITION
! promise of compensation for specific potential future losses in
e0change for a periodic payment. Insurance is designed to protect the
financial well/being of an individual, company or other entity in the case
of une0pected loss. In e0change for payments from the insured 'called
premiums*, the insurer agrees to pay the policy holder a sum of money
upon the occurrence of a specific event. In most cases, the policy holder
pays part of the loss 'called the deductible*, and the insurer pays the rest.
Insurance can also be defined as:/Insurance is a provision for the
distribution of risks3 that is to say, it is a financial provision against loss
from unavoidable disasters. The protection which it affords takes the
form of a guaranty to indemnify the insured if certain specified losses
occur.
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CHAPTER:-2
INSURANCE SECTOR IN INDIA
The insurance sector in India has become a full circle from being
an open competitive market to nationali)ation and back to a
liberali)ed market again.
Tracing the developments in the Indian insurance sector reveals
the +4/degree turn witnessed over a period of almost "#4 years.
The business of life insurance in India in its e0isting form started
in India in the year "5"5 with the establishment of the 6riental
ife Insurance -ompany in -alcutta.
MILESTONES IN THE LIFE INSURANCE BUSINESS IN
INDIA ARE
"#"% / The Indian ife !ssurance -ompanies !ct enacted as the
first statute to regulate the life insurance business.
"#%5 / The Indian Insurance -ompanies !ct enacted to enable the
government to collect statistical information about both life and
non/life insurance businesses.
"#5 / 7arlier legislation consolidated and amended to by theInsurance !ct with the ob8ective of protecting the interests of the
insuring public.
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"#9+ / %9 Indian and foreign insurers and provident societies
taken over by the central government and nationali)ed. I-
formed by an !ct of ;arliament, vi). I- !ct, "#9+, with a capital
contribution of s unanimous agreement, after years of
deliberation, that opening the market to both Indian and foreign privatecompanies could help the economy meet its growing insurance needs,
spark the growth of rural areas, and promote India as a regional
reinsurance hub. The specific provisions of the I
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ift the ban on domestic private companies3
ESTABLISHMENT OF A NEW INDUSTRY
REGULATOR
The I
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needed development funds. 1ince then, the state/owned insurance
companies have grown into giant monolith, lumbering and often
inefficient but the only choice.
CHAPTER:-3
PRIVATE INSURERS
IMPACT OF THE ENTRY OF PRIVATE
INSURANCE
;rivate insurance companies have to date written a small
percentage of business in this sector during the last three years, but they
have ushered in a competitive environment that has accelerated market
growth. 1tate/owned insurers still write the bulk of insurance business,
and they have the net worth re2uired to underwrite large corporate risks
without depending almost entirely on reinsurance support. ?owever,
their focus on restructuring is beginning to put them at a disadvantage
against private competitors. 6ver the ne0t few years, the share of the
market held by the public insurers is e0pected to drop substantially, with
private companies assuming a growing percentage of the business
written. The Transformation of the General Insurance -ompany
DEVELOPING OPPORTUNITIES FOR GLOBAL
COMPANIES:-
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!s of !pril %44, there were a total of " private life and 5 private
non/life companies operating in India. The four public sector insurers B
(ational Insurance, (ew India !ssurance, 6riental Insurance, and
Cnited India Insurance companies//are still strong and have a long track
record. ?owever, private companies run by e0perienced Indian and
foreign partners are building their customer base and over time will
probably ac2uire a larger share of the market.
JOINT VENTURE IN THE INSURANCE SECTOR:-
In the race of globali)ation some countries have emerged as front
runners and India is definitely one of them. -ompanies who want to be
global players cannot afford to ignore India, be it for its huge market or
growing middle class with an increasing purchasing power or for getting
the 8obs done at cost/effective prices. 7ntry into any country or market
place re2uires careful planning, procedures have to be complied with and
India is no e0ception. The purpose of this presentation is to provide an
overview of key considerations which must be borne in mind by
investors while negotiating collaborative ventures including some
suggestions on contractual clauses to be incorporated in the agreements
Doint Eenture companies are the most preferred form of corporate
entities for =oing &usiness in India. There are no separate laws for 8oint
ventures in India. The companies incorporated in India, even with up to"44 foreign e2uity, are treated the same as domestic companies. !
Doint Eenture may be any of the business entities available in India.
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A TYPICAL JOINT VENTURE IS WHERE:-
Two parties, 'individuals or companies*, incorporate a company in
India. &usiness of one party is transferred to the company and as
consideration for such transfer3 shares are issued by the company
and subscribed by that party. The other party subscribes for the
shares in cash.
The above two parties subscribe to the shares of the 8oint venture
company in agreed proportion, in cash, and start a new business.
;romoter shareholder of an e0isting Indian company and a third
party, whowhich may be individualcompany, one of them non/
resident or both residents, collaborate to 8ointly carry on the
business of that company and its shares are taken by the said third
party through payment in cash.
APPROVALS RELATED TO THE JOINT VENTURE
!ll the 8oint ventures in India re2uire governmental approvals, if a
foreign partner or an (
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weeks. !n application to the
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recently allowed foreign investment up to 9" in mining for commercial
purposes and up to # in telecommunication sector. The government is
also e0amining a proposal to do away with the stipulation that foreign
e2uity should cover the foreign e0change needs for import of capital
goods. In view of the countrys improved balance of payments position,
this re2uirement may be eliminated.
CHAPTER:-4
JOINT VENTURE AGREEMENT
1election of a good local partner is the key to the success of any
8oint venture. 6nce a partner is selected generally a Mem!"#$%m &
U#$e!'("#$)#* or a Le((e! & I#(e#( is signed by the parties
highlighting the basis of the future 8oint venture agreement.
! Memorandum of Cnderstanding and a Doint Eenture !greement
must be signed after consulting lawyers well versed in international laws
and multi/8urisdictional laws and procedures.
&efore signing the 8oint venture agreement, the terms should be
thoroughly discussed and negotiated to avoid any misunderstanding at a
later stage. (egotiations re2uire an understanding of the cultural and
legal background of the parties.
&efore signing a J)#( Ve#(%!e A*!eeme#(the following must be
properly addressed:/
=ispute resolution agreements
!pplicable law.
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Force Ma8eure
?olding shares
Transfer of shares
&oard of =irectors
General meeting.
-76M=
Management -ommittee
Important decisions with consent of partners
=ividend policy
Funding
!ccess.
-hange of control
(on/-ompete
-onfidentiality
Indemnity
!ssignment.
&reak of deadlock
Termination.
The Doint Eenture agreement should be sub8ect to obtaining all necessary
governmental approvals and licenses within specified period.
HOW TO DRAFT JOINT VENTURE AGREEMENTS
AND CONTRACTS+
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Generally a Memorandum of Cnderstanding or a etter of Intent is
signed by the parties highlighting the basis of the future 8oint venture
agreement. ! good Doint Eenture agreement is one which provides a
comprehensive road map of the duties and obligations of both the
parties. It minimi)es complications when a dispute arises. ?owever,
many a time>s people neglect to pay attention while drafting a Doint
Eenture agreement.
&efore finali)ing a Doint Eenture !greement, the terms should be
thoroughly discussed and negotiated to avoid any misunderstanding at alater stage. (egotiations re2uire an understanding of the cultural and
legal background of the parties.
! Memorandum of Cnderstanding and a Doint Eenture !greement
must be signed after consulting lawyers well versed in international laws
and multi/8urisdictional laws and procedures.
&efore signing a Doint Eenture !greement the following must be
properly addressed:/
!pplicable law.
Force Ma8eure
?olding shares
Transfer of shares
&oard of =irectors General meeting.
-76M=
Management -ommittee
"%
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Important decisions with consent of partners
=ividend policy
Funding
!ccess.
-hange of control
(on/-ompete
-onfidentiality
Indemnity
!ssignment.
&reak of deadlock
Termination
1ecurity and confidentiality
egal compliance
Fees and payment terms
;roprietary rights
!uditing rights
7vents of =efaults and !ddressing
=ispute
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(on/compete !greement
-onfidentiality !greement
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and products, you facilitate growth. In other words, you increase
profit margin and increase your revenue potential.
1haring the economic risk with co/venturer / It pays to have
someone sharing the responsibility with you in case you end up in
deep troubles. This is also true with 8oint venture. 1ince you are
sharing assets, the risk of losing a great deal of money is divided
to both parties.
Aidening economic scope fast
&uilding reputation is often difficult, not to mention time
consuming and e0pansive. !t a 8oint venture, you are able to
widen your economic scope without spending too much money
and waiting for a long time.
Tapping newer methods, technology, and approach you do not
have
In order to grow and e0pand, you need resources in the forms of
methods, technology, and approach. For that matter, it would help
a lot if you will be able to partner with an entity that presently has
the things you don>t and the things you need. Doint venture opens
up the venue for such need.
&uilding relationship with vital contacts
!side from economic territory, another advantage of 8oint venture
is thability to give you business relationships with vital contacts.
This is 8ust like automatically befriending your partner>s
influential friend that can give you access to lots of things such as
business opportunities and a pass to vital information.
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DISADVANTAGES OF ENTERING A JOINT VENTURE:/
1hared profit
1ince you share assets, you also share the profit. The profit ofboth parties usually depends on the si)e of the share to the
venture or may be defined on the agreement.
=iminished control over some important matters / 6perational
control and decision making are sometimes compromised in
8oint ventures. 1ince there is an agreement that divides which
one will take over a particular operation, the other may not be
satisfied with how the things are worked out with another. This
leads us to another disadvantage of a 8oint ventureJ
Cndesired outcome of the 2uality of the product or pro8ect
1ince one party may not have control on the supervision of the
production or the e0ecution of one part of the system, this can
happen. This often leads to disputes and lawsuits. To avoid
this, both parties agree on specific details about the whole
operation process.
Cncontrolled or unmonitored increase in the operating cost
!gain, defined control over the operation may lead to this
disadvantage. It is important therefore to make sure that all
things are clarified on the paper before singing in the 8oint
venture agreement.
Making money by entering a 8oint venture is easy provided that
you know e0actly what you are doing. Aith these advantages
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and disadvantages presented, you are clearly aware of the
things that await you.
SETTING UP A JOINT VENTURE IN INDIA
GUIDELINES FOR INVESTMENT IN INDIA
In 8oint ventures, pick your business partner carefully
t surrender
your 8udgment
?ire 2ualified advisors 'e.g., lawyer, consultant, accountant*
CHAPTER:-,TYPES OF JOINT VENTURE
1 TYPES OF JOINT VENTURES
T.!ee m'( /mm# (0e' & )#( e#(%!e /m"#)e' m"0 e
$e'/!)e$ "' &556'-
!N Two parties, whowhich may be individuals or companies, one of
them non resident or both residents, incorporate a company in India.
&usiness of one party is transferred to the company and as
"$
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consideration for such transfer3 shares are issued by the company and
subscribed by that party. The other party subscribes for the shares in
cash.
&N !lternately, the above two parties subscribe to the shares of the
8oint venture company in agreed proportion, in cash, and start a new
business.
-N ;romoter shareholder of an e0isting Indian company and a third
party, whowhich may be individualcompany, one of them non/
resident or both residents, collaborate to 8ointly carry on the business of
that company and its shares are taken by the said third party through
payment in cash.
%. INCORPORATION.
In case a new 8oint venture company has to be formed in India, the
following are pertinent issues to decide:
!N Formalities
O"P whether the 8oint venture company will be a public or a private
limited company,
O%P the place of
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OP choose the subscribers to the Memorandum of !ssociation which
will obviously include the partners to the 8oint venture and their
nominees,
O9P prepare the Memorandum and !rticles of !ssociation in
consultation with the 8oint venture partners, get them printed and
suitably stamped, and submitting the same with re2uired documents
like statutory declaration us of the -ompanies !ct "#9+ O!ctP and
Form no."5 us "+ of the !ct regarding address of the registered
office, to
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ac2uiring shares of the company and establishing place of business in
India us "# and %# of Foreign 70change
plantationdealing in real estate other than its development and the
company files a declaration with
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The Doint Eenture agreement should be conditional upon obtaining all
necessary approvals consents licenses permissions of appropriate
agencies of Government of India like
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sum and royalty fee may be converted into e2uity by the Indian
company, who may issue shares to the foreign technology provider.
Further, amount due towards repayment of loans raised from foreign
institutionscompanies in the form of 70ternal -ommercial &orrowing
'7-&* may also be converted into e2uity.
CONSTITUTION OF BOARD OF DIRECTORS:-
In 8oint ventures, membership of the &oard of =irectors '&oard* of
the DE- isnormally proportionate to the e2uity investment made by the
parties. The &oard en8oys widevariety of powers under the !ct.
=ecisions concerning the company can be effectively implemented or
become binding against the company when they are routed through
orratified by the board of directors3 be it matters relating to operation of
bank accounts or contracts being e0ecuted by the company.=ecisions of
the &oard are normally taken by simple ma8ority with an affirmative
vote by the minority shareholders on certain specified matters. ?owever,
in case of a 94:948oint ventures or where the 8oint venture partners have
e2ual representation on the &oard, companies can confront deadlock
situations on arriving at decisions by clear ma8ority. Further, in a 8oint
venture where the foreign partner holds the ma8ority ownership, its
common that they should nominate their personnel to the key position of
the -76Managing =irector 'M=*. ! -76M= runs the day/to/day
affairs of the company while the minority shareholder may appoint the
-hairman of the company who also presides over the board meetings. In
8oint ventures where both parties hold 94:94 shares, appointment of key
positions is a matter of negotiations and, normally, such a position
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should be filled by someone who has local knowledge and the e0pertise
to lead.
OBLIGATIONS AND AGREEMENTS:-
minds at the outset of a new venture. Qet, it is important that this issue of
Rwhat should happen if the relationship breakdown> is considered at an
early stage. Ahile negotiating the e0it, the principal aspect to be
considered is that it should be smooth, efficacious so as to enable both
the parties to get on with their respective businesses. Ahat triggers an
e0itS 1pecified events ranging from a change of control of one of the
parties, or a material breach of the 8oint venture agreement, or the
insolvency of a party can result in parting of ways. ;rovisions for e0it
should be made where materially differing commercial views emerge.
Thus, it is usual to document termination provisions in the 8oint venture
agreement, setting out the conse2uences of a management or shareholder
%
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deadlock and the method of resolving or dealing with its occurrence.
;arties to a 8oint venture do not normally e0pect their partner to have the
right or the ability to dispose its interest freely. (ormally, a party may
have a right of first refusal to buy the shares or a veto on any transfer of
shares or the identity of the transferee.
Sme & (.e )m!("#( /5"%'e'7!)')#' 6.)/. %*.( ( e
)#/5%$e$ )# (.e J)#( Ve#(%!e "*!eeme#( "!e "' &556':/
A; PARTIES:-
The foreign party, ordinarily known as the original party, may be
the parent, holding or subsidiary company of the investing company.
B) APPROVALS:-
The Doint Eenture agreement is sub8ect to the
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D; OBJECT:-
The ob8ects, scope, e0tent and the end product of the joint venture should be
specified.
E; SHAREHOLDINGS:-
This clause lays down the shareholding ratio between the parties
in accordance with either the cash inputs or the assets brought in by
them. It further states the class of shares to be issued and the rights
attached thereto. ;rovisions relating to shareholders> meetings, voting
rights, future issue of share capital, transfer of shares, etc., are also stated
in this clause.
F; MANAGEMENT:-
The constitution of the board to directors, provisions relating to
meetings and resolutions therefore form the ingredients of this clause.Terms and conditions for e0pansion of business, appointment and
removal of the senior management and service agreements are all stated
in thisclause.
G; RESOLUTION OF DISPUTES:-
The terms of this clause are to ascertain when a dispute is deemed
to arise and the manner of settlement. The disputes are generally
resolved using means of alternate dispute resolution. ?owever, litigation
%9
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may also be resorted to. The effects of such disputes on the DE shall be
governed by the provisions of this clause.
?* -6(FI=7(TI!ITQ:/
This clause is in the nature of prohibitory clause. It entails
provisions for the preservation of the company>s secrets and strategic
information.
I; TERMINATION OF AGREEMENT:-
The conditions and circumstances, which lead to the termination
of the Doint Eenture agreement, such as, breach of agreement,
insolvency, etc., are stated in this cluse. !he conse"uences of such ter#intion re
lso #entioned here under.
Further, a RForce de ma8eure> clause may be added to the above, which provides protection to parties tothe agreement in case of any event beyond its control, which prevents it from performing its prescribed functions.
CHAPTER:-s
continue to communicate effectively with each other. It is also important
that the 8oint venture itself develops its own culture, hopefully bringing
together the best features from each partner and best suited for the
successful development and operation of the insurance DE in the places
in which it carries on business
THE JOINT VENTURE AGREEMENT CHEC>LIST
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the terms or duration for which the 8oint venture will e0ist3
the provisions for management and performance of 8oint venture
obligations3 and,
!llocation of revenues and e0penses from the pro8ect.
THE JOINT VENTURE AGREEMENT CHEC>LIST:
The date on which the agreement is established and e0ecuted.
The names, addresses, and identification of the parties,
including the type of business of each member of the 8oint
venture.
The name under which the 8oint venture will do business.
The principle place of business of the 8oint venture.
The purpose of the 8oint venture. If the purpose is to access a
specific pro8ect, a full description of that pro8ect is re2uired.
The terms of the 8oint venture: when and how the 8oint venture
is terminated3 and, how such items as guarantees, defects, and
insurance will be handled after termination.
! statement that the parties are actually co/ventures for the
pro8ect whether or not the contract is in the name of all
members.
! declaration that the organi)ation is a 8oint venture, not a
partnership.
$
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The establishment of a fund by the parties to finance the work,
together with the amounts to be contributed by each party, with
the fund being deposited in a special bank account under dual
control and all progress payments and other revenues being
deposited in such account.
! clause providing that, if additional working capital is
re2uired, the parties will proportionally contribute additional
funds, as needed and naming the penalty for failure to
contribute.
! declaration of the participation of the parties and percentage
in which profits and losses are shared. Csually these
percentages are proportional to the contributions to the working
fund, but the amount of contribution of funds by parties can be
increased or decreased depending on the contributions of
e2uipment or e0pertise, which also must be considered.
;ayment of any fee to the controlling co/venturer or sponsor
should be specified3 whether a share of the profits in e0cess of
that contemplated is given to the controlling manager or a flat
dollar sum is paid.
If e2uipment is involved, a specific clause should be inserted
especially where the parties contribute varying amounts of
e2uipment.
5
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The parties to the 8oint venture should agree to sign all
necessary documents relating to the contract, bank loans,
bonds, indemnity agreements and the like.
-ontrol management committee may be determined. !
management committee may be established with provision for
remuneration. !lternatively, one of the co/venturers should be
designated as general manger of the pro8ect, with authority to
bind the 8oint venture. ! provision to clearly define not only
the management duties, but all other duties of the co/venturers
and procedures to be followed in dealing with unusual
situations or problems that may develop.
! regular meeting schedule should be considered.
! financial and periodic 8oint venture and progress reporting
procedure should be implemented.
7stablishment of a 8oint venture bank account, and the
appointment of a chartered accountant and lawyer.
The possibility of the death, bankruptcy, or insolvency of a
member must be handled.
The ac2uisition of e2uipment and materials by the 8oint venture
and the disposal of such e2uipment and material either by sale
with the proceeds treated as ordinary revenues, or by
distributing the funds to the co/venturers on a pro/rata basis.
;rovide for the ac2uisition of licenses in the name of the 8oint
venture or each co/venturer as re2uired.
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1pecify the type of insurance carried by the 8oint venture and
clearly define the liabilities that are to be insured against by
each participant.
=efine items that are to be considered as costs to the 8oint
venture for the purpose of determining profit or loss and
describe those items that are not reimbursable to members of
the 8oint venture.
! clause should be included respecting the confidentiality of
trade information passed between the co/venturers.
6wnership or retention of patents, technology, and consultant
reports should be addressed.
7stablish the performance security re2uirements of the pro8ect
and the bonding obligations of the co/ventures.
1tate that undivided pro/rata interests are held by the co/
venturers on all assets of the 8oint venture.
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Ainding up, final performance and financial statements for the
8oint venture.
(otice clause.
The applicable 8urisdiction of the !greement should be stated.
The nature, si)e, and comple0ity of the pro8ect together with the
sophistication of the parties will determine the detail in which the Doint
Eenture !greement is prepared and aforementioned topics dealt with.
This checklist is meant only as a guide to putting a Doint Eenture
!greement together. The appropriate professional services, such as
legal counsel should be sought out and utili)ed
TERMINATION OF JOINT VENTURE AGREEMENT
1urvival terms after the termination of the Doint Eenture agreement.
The Doint Eenture agreement should be sub8ect to obtaining all
necessary governmental approvals and licenses within specified
period.
7very Doint Eenture agreement should be modified as applicable
under different circumstances. 6ne brush should not paint all the
painting. International Doint Eenture could be is a legal minefield and
many companies are not aware of the problems it causes.
"
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CHAPTER:-8
CASE STUDY
TATA AIG @CASE STUDY;
THE TATA GROUP
The Tata Group 'www.tata.com* is one of Indias largest and most
respected business conglomerates, with revenues in %44/49 of "$.5
billion '
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si0 continents, and its companies e0port products and services to "4
nations
AIG
!merican International Group, Inc. '!IG*, world leaders in
insurance and financial services, is the leading international insurance
organi)ation with operations in more than "4 countries and
8urisdictions. !IG companies serve commercial, institutional and
individual customers through the most e0tensive worldwide property/
casualty and life insurance networks of any insurer. In addition, !IG
companies are leading providers of retirement services, financial services
and asset management around the world. !IGs common stock is listed
on the (ew Qork 1tock 70change as well as the stock e0changes in
ondon, ;aris, 1wit)erland and Tokyo.
http://images.google.com/imgres?imgurl=http://www.swagatgroup.net/logo_tata_aig.gif&imgrefurl=http://www.swagatgroup.net/secure.htm&h=78&w=76&sz=4&hl=en&start=1&tbnid=ukPw1zqlwUOycM:&tbnh=73&tbnw=71&prev=/images%3Fq%3DTATA%2BAIG%2BJOINT%2BVENTURE%26gbv%3D2%26svnum%3D10%26hl%3Denhttp://images.google.com/imgres?imgurl=http://www.financialpartnership.com.au/docimage%3Fimg%3D1838&imgrefurl=http://www.financialpartnership.com.au/page%3Fpg%3D689%26stypen%3Dhtml&h=64&w=89&sz=3&hl=en&start=161&tbnid=ZjMnB2_Ei6KmUM:&tbnh=56&tbnw=78&prev=/images%3Fq%3DAVIVA%2BLIFE%2B%26start%3D160%26imgsz%3Dsmall%257Cmedium%257Clarge%257Cxlarge%26gbv%3D2%26ndsp%3D20%26svnum%3D10%26hl%3Den%26sa%3DN8/12/2019 (AKSHU) Joint Venture in Insurance Industri
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!merican International Group, Inc. '!IG*. Tata !IG ife
combines the Tata Group>s pre/eminent leadership position in India and
!IG>s global presence as the world>s leading international insurance and
financial services organi)ation. The Tata Group holds $ per cent stake
in the insurance venture with !IG holding the balance %+ percent. Tata
!IG ife provides insurance solutions to individuals and corporate. Tata
!IG ife Insurance -ompany was licensed to operate in India on
February "%, %44" and started operations on !pril ", %44"
ICICI PRUDENTIAL JOINT VENTURE
Ahen the government opened up the insurance industry to the
private sector, I-I-I was 2uick to launch a life insurance company and a
general insurance company. I-I-I ;rulife was launched as a 8oint
venture with the reputed CU insurance firm ;rudential. ';rudential
gained visibility in India as a sponsor of the -ricket Aorld -up "#5,
which India won // an event considered to be India>s greatest sporting
moment.*
I-I-I ;rulife has very 2uickly gone on to become India>s largest
private life insurance company. !gain the success lay in aggressive
marketing, smart advertising, omnipresence and 2uick e0pansion. I-I-I
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also has a strong presence in the general insurance sector with I-I-I
ombard General Insurance -ompany imited.
;rudential plc announced that I-I-I ;rudential ife Insurance, its
8oint venture with I-I-I td on % (ov %444, has received a licence
from the Insurance
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and understood. It launched a corporate campaign using the theme of
R1in door> to epitomi)e protection, trust, togetherness and all that is
Indian3 endearing itself to the masses. The success of the campaign, Rthe
calling card of the company>, saw the brand awareness scores almost at
par with its 4 year old competitor. The theme of protection was also
e0tended to subse2uent product and category specific campaigns B from
child plans to retirement solutions B which highlight how the company
will be with its customers at every step of life.
From day one, the company has unflinchingly focused on being a
mass/market player, developing products, creating a distribution network
and deploying resources that would further its goal. !part from ramping
up and thoroughly training its advisors, the company has twelve R&anc
assurance> partners B the largest in the country. It swiftly revised and
added to its initial range of products, pioneering market/linked products
and pension plans, to offer customers the most fle0ible life insurance
policies in the country.
In February %44, I-I-I ;rudential increased its capital base by
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;roduct I-I-I ;rudential>s ultimate promise is financial security.
! strong brand certainly boosts sales, but without customer/friendly,
innovative products, even the best brand would not last long.
I-I-I ;rudential>s product range has been developed on the
understanding that different people have their own sets of needs at
various stages of their lives. It has thus built a fle0ible portfolio of
products that can be customi)ed to cater to varying needs of people at
each life stage, and thus ensure protection in every step of life. The
company>s philosophy has been to help customers understand their
financial needs and work closely with them to customi)e a product that
would meet this need. !dvisors can offer a complete range of products /
1avings plans, -hild plans, Market/linked plans, ;rotection plans,
changing needs at every stage of life. In
fact, I-I-I ;rudential was the first to un/bundle product benefits,
pioneering the concept of Rriders> and soon after introduce
comprehensive market/linked and retirement plans.
RECENT DEVELOPMENTS:-
In keeping with its belief that a happy customer is the best
endorsement, I-I-I ;rudential has embraced the R1i0 1igma> approach
to 2uality, an e0ercise that begins and ends with the customer B from
capturing his voice to measuring and responding to his e0periences. This
$
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initiative is currently helping the company improve processes,
turnaround times and customer satisfaction levels.
!nother novel introduction is the I-I-I ;rudential ifestyle
s
success has been meteoric, becoming the number one private life insurer
within months of launch. Today, it has one of the largest distribution
networks amongst private life insurers in India, with branches in 9
cities. The total number of policies issued stands at more than $54,444
with a total sum assured in e0cess of s retail market share amongst private companies stood at
+, making it a clear leader in the segment.
5
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I-I-I ;rudential>s success is rooted in its philosophy to always
offer the customer a choice. This has been the driving force behind its
multi/channel distribution strategy, which includes advisors, banks,
direct marketing and corporate agents. In fact, I-I-I ;rudential was the
first life insurer to invest in multiple channels and offer the customer
choice and access3 thus reducing dependency on any one channel. Aithin
si0 months, the campaign rewarded I-I-I ;rudential with an increased
share of % of the total pensions market and $5 amongst private
players.
CLOSING THOUGHTS ON ICICI PRUDENTIAL JOINT
VENTURE
-learly the brand is willing to 2uickly sei)e every opportunity that
it sees. The moves into banking, life insurance and general insurance
when the government opened up these sectors to private players shows
that the brand owners truly believe that fortune favors the brave. &y
investing heavily in advertising, marketing and infrastructure, I-I-I
became the most dominant name in each of these sectors. This strategy
helped them take an early lead in industries with immense potential.
?owever, this Kburn the candles at both the endsL pursuit of
growth may not work for long. 1uddenly everywhere one looks there is
an I-I-I presence in almost every segment of the finance market. The
brand seems to be losing coherence and cohesiveness with the I-I-I
name spread far and thin. 1ome people are getting worried at the huge
#
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si)e of each of I-I-I>s plays and are scared that if this giant topples it
will carry many with it.
I-I-I needs to make sure that it does not fly too close to the sun.
The brand can easily fall in its pursuit of its ambitions. ;erhaps
consolidation would be a good idea for the brand to pursue for a while.
This brand needs to tread cautiously to insure its own future or it may
harm those who bank on it.
CHAPTER:-
CONCLUSION
Doint Eentures are becoming a popular means to enter Indian
markets for global giants. ?owever, the risks of cross/border e0pansion
are slightly lowered, but they still remain. To have a successful DE, both
partners should have a good understanding of each other>s cultures,establish good work collaboration and work towards a common
ob8ective. The risks of cultural integration still e0ist / often times
management from both the sides often ignore the cultural integration
issue assuming that they can take care of it / but cultural integration
often falls between the cracks / and the DE ultimately fails.
6ne of the most popular strategies for entering international
markets is through 8oint ventures / where the risks, costs, management,
and success of the venture are shared by the partners. For international
8oint ventures, the entities are sub8ect to a multitude of regulations and
94
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legal re2uirements, which must be fully understood by the parties
involved. !dded to this are comple0 business considerations, which
must be satisfied / often within the framework of a foreign culture and
foreign practices. Finally, cultural and social difference also plays a large
role in the success or failure of such ventures.
Doint venture partnerships, where businesses come together to help
achieve mutual goals, can be e0tremely effective for small enterprises
hoping to compete in a crowded and competitive marketplace.
They enable businesses to pool their resources, skills, e0pertise or
finance to achieve results that would have been more difficult or
impossible individually. Doint ventures can be long/term partnerships,
when developing a new product for e0ample, or much shorter
arrangements when entering a new market. 1mall businesses can team up
with partners that have complementary skills or specialist knowledge to
help e0ploit new opportunities or undertake fresh challenges.
The frantic cross selling and up/selling of products and services is
now becoming too strident and insistent for the general public>s comfort.
The tall targets set across several products are probably weighing on the
team and there is an unseemly haste in the speed of each transaction.
Cneasy customers and investors are worried that the brand may have
overe0tended itself. -asual in2uiry among ac2uaintances reveals a fear
that the brand may collapse in the future because of the sheer volume of
activities it is undertaking.
9"
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CHAPTER:-
BIBLIOGRAPHY
BIBLOGRAPHY
KDoint Eenture in Insurance &usinessL / Mr. 1atyandani Uhanna
Kife InsuranceL / Uenneth &lack, ?arold =. 1kipper.
KI-/ IF7 I(1C
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