Академический Документы
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Культура Документы
CHAPTER
NO.
TOPIC
Introduction
II
Methodology
III
PAGE
NO
IV
Case Study
Insurance Industry Supports Soccer
-FIFA World Cup 2006
IV
Conclusion
IIV
Questionnaire
IIIV
Bibliography
I. INTRODUCTION
Insurance plays an important role in general life. Risk exist every
where, to cover these risk Insurance is very important. But the method or
procedure of insurance need to be change. As days goes needs &
requirements of the people get change. Insurance includes different-different
products to fulfill the need of the people.
The year 2000 was a landmark year in the history of Indian insurance
industry. The industry was thrown open for the private players. The year
2007 is going to be another watershed year for the industry. Detariffication
from January 1, 2007 will totally change the complexion of the non-life
industry. Coming close on the heels of the entry of private players, it is
going to be another significant development for the insurance industry. A
second wave of interest in the industry is already being talked about. Those
who missed the bus in the year 2000 may try to step in now.
As technology & life style of the people change, it is necessary for
innovation in insurance. This is very knowledgeable to do project on
INNOVATIVE EYE OF INSURANCE. This is the reason I have chosen
this topic.
II. METHODOLOGY
In order to conduct research an appropriate methodology becomes
necessary. In this direction both primary & secondary data were attempted to
be collected.
The methodology for collecting data with reference to collecting data
was taken forms the different articles, books & journals published by
ICFAIs & the relevant website. The different libraries of the colleges &
institutions were great help.
Thus methodology relied on both primary & secondary dada with the
help of discussion, observations as well as published work & unpublished
work.
Chapter: 1
CONCEPT OF INSURANCE
Definition of Insurance:
Insurance is an institution, which eliminates risk & which substitutes
certainty for uncertainty. Insurance is the protection of the economic value
of assets. The asset would have been created through the efforts of the
owner, in the hope that through the income generated there from or some
other output, some of her/his need would be met. If the assets gets lost
earlier, being destroyed or made functional or loss of life, through an
accident or other unfortunate event, those deriving benefits there from
suffers Insurance is mechanism that helps to reduce such adverse
consequences. Insurance is a contract between the (Insurance Company) &
the Insured (whose life or assets are covered) under which the insurer
undertakes to compensate the insured for the loss arising from the risk
insured against. The insurance is the elimination of the risk & replacement
of certainty for uncertainty of loss.
Categories of Insurance:
Insurance has two broad categories:
i) Life Insurance
ii) General Insurance or Non Life Insurance.
miscellaneous
insurances
are:
Burglary, Fidelity
Chapter No: 2
INDIAN INSURANCE INDUSTRY
Insurance, it is oft quoted, is the art of the impossible and the science
of the implausible. The future is uncertain. The business environment today
is volatile and fast changing. Intentional, it is said, is the key to predict the
future. Insurance very aptly fills this slot. Insurance which originated in the
12th century AD as a concept has, over the years, grown in stature to evolve
as a full-fledged subject.
The demands of the changing environment have prompted the
insurance industry to mould its business in tune with the changing times. As
a result, the Indian insurance market gave itself a face lift. The entry of
private players saw a spate of new products and services on offer in the
insurance market. To cite an example, the latest kid on the block is temple
insurance. Temples with hefty incomes are becoming attractive targets for
insurance companies as the incidence of claims is low and the potential for
premium is high. Sabarimala and Guruvayur in Kerala are two examples that
come to mind. There is also talk of introduction of body parts policies.
Special medical insurance for students and group term cover for youth are
also a case in point.
6
The convergence wave has caught up with the financial sector too.
The boundaries among insurance, banking and securities are fast vanishing.
Credit cards are increasingly offering various insurance products to
subscribers, often at competitive rates much below those available directly
from the insurer. Mobile phone firms are offering group term insurance free
for those in the age group of 18-35 years.
The year 2000 was a landmark year in the history of Indian insurance
industry. The industry was thrown open for the private players. The year
2007 is going to be another watershed year for the industry. Detariffication
from January 1, 2007 will totally change the complexion of the non-life
industry. Coming close on the heels of the entry of private players, it is
going to be another significant development for the insurance industry. A
second wave of interest in the industry is already being talked about. Those
who missed the bus in the year 2000 may try to step in now. The expected
rise in the FDI ceiling adds to this interest.
The year 2007 is going to be eventful also in many other ways for
insurance industry-providing event insurance for the World Cup Cricket
2007, greater business intelligence, increased M&A activity, adopting the
best underwriting practices and of course, product innovation to cap it all.
Chapter No: 3
PRIVATISATION HELPS INDIAN INSURANCE TO
PRODUCE INNOVATIVE PRODUCT
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11
12
insurance companies.
According to a Fitch report on the insurance sector, the bancassurance
channel has contributed about 20% of the total insurance business in the
financial year 2005. Whereas all the alternative distribution channels
together have contributed 25-30% of sales in private insurance companies.
These distribution channels include corporate brokers, bancassurance, the
Internet and corporate agents.
Every private player is following different strategies to increase their
market share and to get the rap position in the insurance industry.
For example:
Aviva CEO, Stuart Purdy said that the bancassurance channel with tieups with four banks contributes almost 70% of the total sales of Aviva.
According to Anuroop Singh, CEO and MD of Max New York Life
Insurance Co. Ltd (MNYL), over 90% of the life insurance schemes ill
the world are sold through individual agents only. He also states that
agents are the primary channel for selling insurance policies and MNYL
have invested substantially in training the life insurance advisers.
AMP Sanmar is following a different strategy when compared to other
private players, where it is tied up with transport finance companies and
chit fund companies to sell its life policies on the back of fixed deposits
and bonds.
In order to strengthen its position further in India, Bajaj Alliance Life
Insurance Co. has introduced some aggressive strategies like introducing
new products and tapping the rural markets. Apart from the tie-ups with
seven Regional Rural Banks (RRBs), it has also introduced the new
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15
market. He also forecast the state player LIC loosing about 50% share over a
span of 15 years or more. With the entry of more private players, the
competition has become very high in the life insurance segment. Banks life
Punjab National Bank and Vijaya Dank are planning to enter into the life
insurance segment and the IRDA is looking into their application.
Conclusion:
Already, the insurance sector is recording a growth much more than
what was expected. Every life or non-life insurance company is looking for
ways to expand their operations in India. Insurance companies are spending
a huge amount to identify the needs of the customers and are providing a
variety of products to attract them. The top most public sector insurance
players are also identifying new ways to satisfy the needs and will be
competing with the private players in the near future. As more new players
enter the fray there will be ample scope for growth and the industry will
become highly competitive.
16
Chapter No: 4
THE NEED FOR INFORMATION TECHNOLOGY IN
INSURANCE
The rapid innovations in the field of information technology and
communication technology have posed serious challenges for the insurance
industry in India. The use and application of information technology in wide
variety of insurers operations has now become strategic in the sense that it
has direct impact on the productivity of resources, and a sweepening impact
on reducing the cost of various activities.
With the arrival of private insurance players, the competition has
become more intense and an important role is being played by insurance
sector. Even though the use of information technology is not new to the
insurance sector, yet we may find tight compartmentalization regarding the
use of information technology in various departments of the insurance
companies including the major players since last 50 years. The most visible
of these departments are accounting, policy issue and servicing, claim
processing, sales management etc.
Therefore the imperative for all insurers, especially LIC and GIC is
to build up an efficient interface between the various departments and
segments. This would reduce the paper work, improve efficiency of service
delivery and provide competitive advantage to the insurance companies.
17
actually migrated not just how many policies have lapsed or surrendered.
Using database technology companies can get a comprehensive,
performance, loyalty, and lost opportunity.
Data Warehouse:
Data warehousing technology is based on integrating a number of
information systems into one stop shopping database to achieve vision of
making company national in scope, but regional in focus. Traditionally, the
sale of policies and the claim settlement are two separate areas for the
insurance companies. Data warehousing allows managing by profit levels
with an integrated approach rather than by limiting losses. Data mining can
be used as means to control costs and increase revenue resulting in
enormous earning for effective users.
Decision Support Systems:
The path of business applications of computers, computer based
information systems (CBIS), encompasses many stages including the very
early applications like transactions processing systems (TPS) followed by
the management information systems (MIS). The computer applications like
decision support systems (DSS), expert systems (ES) and executive
information systems (EIS) are still awaited in insurance business. Office
automation (OAS) happens to be continuously ongoing, dynamic process for
any business. Companies to utilize decision support systems by
implementing data warehouses that pull information from existing legacy
systems into a customer information database. Such decision support
systems will equip the insurance managers with ability to allow for
19
customized products and services that are more in line with what customers
want.
Group Linking Software:
Group-linking software enables sharing of information and
particularly suits document heavy insurance business. Tracking of policy
application shows how information that is input and accessed from a number
of locations can increase efficiency.
Imaging and Work-flow Technologies:
The proposal forms may be scanned into an imaging system; data
may be extracted for update to computer and for automated underwriting
workflow may be implemented.
Mapping:
Insurers to meet different needs, such as identifying loss prone areas or
geographic claim analysis, can use mapping technology. It helps the insurer
to analyse the extent of its network i.e. the insurer can determine whether it
has too many or too few agency force in a particular area.
Call Centre Technology:
Good customer service is a crucial element in gaining, maintaining
and retaining profitable customer. Call centre concept based on interactive
voice response services (IVRS) is gaining importance in this aspect.
Employees based the primitive concept of call centre on an enquiry system
providing information services to customers through telephone line answers.
The totally automated computerized exchange but lacks in flexibility i.e.
only predefined queries are serviced.
20
Video Linking:
A video linking facility between two remote units of an insurance
company or between an insurer and a broker allows underwriters at one
place and brokers at other unit to discuss risk inherent in a proposal face to
face.
Cat Models:
Catastrophic models use data from the recent spate of natural disasters
that helps develop more predictions of insurers property exposures in future
disasters. Using this data curious what-if scenarios of probable maximum
loss (PML) using the best estimate available at an insurers exposures are
tested. Finally an underwriting policy that limits the companys exposure to
catastrophic losses is implemented. Intranet is the network connecting
different offices of the same business to permit the internal data within the
business.
Extranet is a network allowing the business to communicate with
business partners like suppliers, vendors, banners, regulations etc. on the
electronic channel. Internet is a global network of many computer networks.
Any user, who would like to exchange some information with other user at a
remote location, can log into the computer of Internet provider via modem or
an Internet access CPU (IAC). The Internet and online service providers are
providing opportunities to create new forums that can be utilized by
everyone worldwide. Insurers can browse through many useful sites on the
Internet.
21
22
the existing ones and of course, the information on various discounts and
incentives can be provided at a much faster rate and lower rate.
Customer Services:
The insurance being a service needs high concerns in terms of services.
Customer service requires maximum attention and should span the entire
gamut of activities in the purchase of a product i.e. right from the
dissemination of information, documentation to policy administration and
claim settlement. The service quality standards of the new private insurance
players have posed a threat to the giants viz. the LIC and GIC. The
investments in the personnel and knowledge systems have helped private
players companies build significant domain expertise.
1) Market Research
2) Consumers targeting and segmentation
3) Customizations of products
4) Easy procedures like premium payments, claims settlements,
tracking of brokers and agents
5) Complaints management / grievance handling
6) Intermediary analysis.
Finance:
Information technology can be effectively used for internal
management viz. Accounting, treasury management, financial performance
reporting etc. and as well as in resource mobilization, portfolio management,
investment planning etc.
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24
Functional specifications
Development of application and user manuals
Assignment of work to project leaders, system analysis and
programmers
Evaluation of studies
Network Manager:
Network Administration
User administration, systems security, e-mail etc.
Controlling and supervision of network administrators
Operations Manager:
Maintenance of hardware
Job scheduling, backups and file control
Assigning work to operators and DEOs
Training of users
Controlling of data flow
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Chapter No: 5
Applications of E-Learning In the Insurance Sector
Employment in the insurance industry today requires
multiple skills and needs constant learning and
training. E-Learning is an ideal method of learning
for agents who are in the field all the time.
Some industries and markets, which are tech-savvy and have quickly
embraced e-learning, have certain characteristics. These characteristics are
linked to the advantage that can be gained from e-learning. The most
tangible advantages of e-learning are:
Faster, focused and economical learning with minimal lead time;
Consistency, timeliness and repetitive learning, possible at minimum cost.
Transcending geographical barriers, business groups and segments.
To impart continuous and constant training to a large number of
personnel employed by the insurance companies, resorting to e-learning is
must to sharpen their knowledge and skills, so that the employees can work
tactfully and be more productive to the companies. When the relevance of
e-learning is assessed, it should be done in terms of the people who can
adopt e-learning. The business functional areas where the application of elearning can be highly useful include new business, policy management,
customer management, claims management, reinsurance, etc. The support
functions include accounting, certification of agents and employees,
27
handling, etc. The e-learning activity in the insurance industry covers all
segments of people-employees, agents, partners and customers.
Agents are the primary channels for selling insurance. Hence, training
of agents is a high priority. E-learning is an ideal method for agents who are
spread across the country and are in the field all the time. Employment in
the insurance industry today requires multiple skills and need constant
learning and consequently the bottom line. This training has to be achieved
cost-effectively. Fro an insurance company to introduce online initiatives
like marketing, claims, settlement and self-service, the customer has to be
technology receptive. Customer education can decrease the incidences of
risk in many areas. For example, and online risk management tool can help
corporate customers with increased risk prevention and risk control
techniques resulting in reduced loss occurrences. Business associates have
an important role in the marketing and servicing of insurance. Training of
such partners is essential for insurers to maintain excellent service levels to
the customers.
administrative expenses per policy plan are quite high as the lapsation ratio
of the policies is high, that is, policy plans are discontinued even before one
year of their purchase. However, in other advanced countries, the situation
is just the opposite; it keeps the administrative expenses low. Considering
31
all these factors, if e-learning is practiced and companies are resorting more
to B2C transactions, the administrative and selling expenses can be brought
down and the benefits can be passed on to the policyholders.
Considering the present status, we need to understand that e-learning
is yet to be accepted as a complete replacement for classroom learning, it is
rather a complementary measure. The strategy is to have an optimal mix of
multiple learning methodologies depending on the overall knowledge
management strategy.
32
Chapter No: 6
Innovations In Indian Insurance
The opening of Indian Insurance market to private players has
expanded the market & laid to experimentation in policy designs. As s part
of these, many innovations have been tried out in insurance distribution.
Aggressive pursuit of growth necessitated new initiatives-opting for affinity
& point-of-sale channels, besides rural thrust. The article focuses on these
innovations.
Ever since insurance was nationalized in the fifties, Indian life
insurance had been monopolized by LIC till the sector was opened up about
three years back. As for general insurance the market was carved up among
four government entities. LIC operated nationally through its network of
agents armed with tables & scheme details to promote insurance policy.
Economic liberalization brought in its wake multiple private players,
which resulted in competition. Indian corporate groups ventured into the
arena, armed with their MNC partners global expertise. Almost all major
corporate groups ventured into this market, spotting great potential for
market expansion.
Taking on LIC nationwide, well-entrenched network of agents was
going to be obviously a time-consuming exercise. LICs national network of
agents, guided by its team of Development Officers has been put in place
over three decades.
Being a competitor to this erstwhile monopoly player and succeeding
33
in the market would mean effectively countering its field presence. Rivaling
that established network would definitely be a very long-term proposition.
Though all private players set up their own IRDA qualified agent networks,
they encashed on other immediately available channels for distributing the
policies.
Indian companies had a majority stake (74 percent) in the private
insurance companies. Their national reach was an obvious starting point to
spread out. Being promoted by major corporate entities, the private
insurance players were quick to utilize their promoting company's retail
presence. ICICI Prudential, for example, leveraged the widespread.
National presence of its Indian promoter ICICI. ICICI bank expanded
aggressively among private banks. Cross-selling insurance at its bank
branches did help ICICI Prudential in reaching out to a larger audience. SBI
Life also benefited from such a background.
When insurance is one of the many activities of the promoting
corporate, the entire group's businesses can be exploited. HDFC Standard
Life is a prime example for this. Spanning housing finance, banking,
securities, and mutual funds, the parent group's wide network of more than
300 combined branches provided a great platform for making effective use
of the network for its foray into insurance.
Bancassurance opened up another distribution channel for the
insurance companies. A spate of tie-ups followed, with both regional and
national banks finding eager insurance partners. For insurance firms, these
associations provided a good chance to establish their presence in different
regions, based on the bank with which they tied-up. Selective partner (bank)
choice did enable many insurance companies to advance their business
interests and strengthen their national bas2. Some regional banks such as
34
Lord Krishna Bank (with ICICI Prudential and Bajaj Allianz) and
Development Credit Bank (with Birla Sun Life and Tata AlC) entered into
tie-ups with multiple insurance players. The result of this channel's
popularity: between 15 percent and 30 percent of aggressive insurance
players' policy distributions are coming from this intermediary route. To
extract greater commitment from their bank partners and extend support to
them, some insurance companies are entering into mutually exclusive
agreements. Such agreements prohibit the partners from entering into a
similar understanding with any other organization. Om Kotak Mahindra has
such a tie-up with Dena Bank, by which the former doesn't entertain
bancassurance with any other bank and the latter also doesn't distribute
policies of any other insurance company.
Besides their own initiatives, players are also benefiting from
intense competition in other industries. In their bid to add value to their
offerings, marketers in some categories are resorting to providing
insurance cover to their customers. Vardhaman Chemicals, marketer of
ayurvedic toothpaste brand Amar, faces a well-entrenched rival Vicco
Vajradanti. Adding new variants (cinnamon and fennel seeds) and
offering a wide basket of products from low to high price points,
Vardhaman telt it wasn't enough to stir up interest in its brand. A
creative route it adopted was to tie up with Tata AIG, to offer Rs.25,000
personal accident cover with its 200 gm pack. For Tata AIG, this was a
new avenue, through an FMCG marketer. Pepsodent took a cue and
tied-up with New India Assurance for dental insurance for its customers.
In a bid to expand the net of potential customers, companies
explored new avenues. Insurance firms entered into arrangements with
other service providers having a similar customer profile such as credit
35
card companies, travel houses and telecom service providers. For the
service providers, the insurance company tie-up is a service
enhancement to their customers that differentiates them from their
competitors. Insurance companies benefit through a wider reach for
their products.
Credit card holders represent an option in both directions distribution of policies and premium collections. For luring more
customers into this competitive business, HDFC Bank launched a new
card (Health Plus) that was bundled with Mediclaim. ICICI Prudential
partnered Visa, which enjoys a big network of banks for collection of
premiums. In this 111utually beneficial arrangement, the former gets
access to the network of even those banks with which it has no formal
tie-ups. Visa gains through more utilization of its infrastructure, and of
course a fee. To utilize this channel better, LIC is even contemplating
launching its own credit card.
Post 9/11, inherent risk in air travel has attained higher
consciousness among tourists. Travel houses, in their attempt to get
travelers shed their inhibitions and take cover, have tied-up with
insurance providers. Galileo India, a solution provider
to travel industry, was co-opted by Bajaj Allianz and ICICI Lombard.
Innovative short-term schemes such as insuring baggage, targeting
students going abroad for their higher studies have also been designed.
Such policies targeted at students not only cover their medical expenses
but also sponsor a family member's trip to be with the student on
compassionate grounds. Moreover, options are available to cover fees in
the event of sponsor's death. Thomas Cook is distributing Tata AlGs
travel related general insurance policy, through its subsidiary India Alive
36
Tours. Many such policies also cover the risk of falling ill and the
consequent medical treatment expenses abroad.
Telecom service providers, especially mobile players, also opened up
an avenue for insurance companies. Max New York provides a cover up to
Rs 4 lakh, to Escotel's subscribers under its Club Royale scheme. Personal
accident and hospitalization charges are covered for BPL mobile's
subscribers - thanks to an arrangement with Bajaj Allianz. lClCl Lombard
has a cover for Spice Telecom subscribers in Punjab.
A new channel has been opened up by 531 Life, through its
understanding with EPF (Employees Provident Fund) Commissioner. It has
designed a specific scheme, EDLI (Employees Deposit Life Insurance).
Though Mediclaim did establish the base for insuring medical
treatment costs, its reach and popularity isn't what was expected of it.
Hospitals are nowadays taking a proactive approach - designing health
insurance packages and approaching insurance players - opening up another
option for them. Chennai-based Apollo Hospitals and Hyderabad-based Care
Hospitals have ventured into health insurance, with the latter tying up with
National Insurance for a cover of Rs.1 lakh towards treatment expenses.
Rural Thrust:
Earlier, rural markets were looked at closely only when urban Indian
market showed signs of stagnation or saturation for many categories.
Insurance, however, is one category that's proving to be an exception. Rural
penetration is being attempted along with urban spread.
To make up for lack of infrastructure in rural markets, players are
entering into a spate of partnerships with groups operating there. While A
viva has partnered with Lakshmi Vilas Bank to reach out to rural SHGs
37
increase
in
rural
premium
income
within
four
year
39
Chapter No: 7
Past and Present for a Bright Future
Technology plays a vital role in todays market. Business
intelligence involves arrangement of data that is needed
for taking strategic business decisions like launching a
new product for an insurance company by investing
huge amount, time and other resources. The article
explains how business intelligence could help insurance
companies to develop new and innovative products and
attain competitive advantage.
Insurance Industry
India is a great market for all products. With diversified culture and
preferences, diversified needs and changing trends, and increasing salary
made India a successful market globally. The insurance sector in India was
valued at nearly US$10 bn in the year 2005 and is now growing at a greater
pace.
With a big giant called the LIC, which by itself is a company formed
by enforcing an act called the Life Insurance Corporation of India Act of
1956 is a huge consolidated entry. Now with more number of insurance
companies having proliferated the life insurance industry in India, there is a
need for more innovative marketing scrategies, consolidation, new
distribution networks like bancassurance, brokers and more qualified agents
for its consistent growth.
That political system in India is very skeptical about the fact that
whether more participation by the multinational giants and more investment
40
by them in the form of capital can actually question the ethic of the industry
thereby destroying the local players and pave the way for videshi market in
India again. But it is true on our part to accept the new entries have actually
changed the rules of the game in the insurance industry.
One such change that has made a huge positive impact in the minds of
Indian consumers is the product innovation by the insurance companies.
When we had a monopoly era in the Indian Insurance market, insurance was
just a risk-cover mechanism. People also looked at the insurance agent as a
messenger of evil who threatens one by speaking about the perils of life and
ask them to safeguard against such perils. But now insurance plans are
perceived more of an investment plan that gives risk cover, tax benefit and
even good returns. The insurance advisors or financial consultants or
financial planners are now considered as true professionals.
Historical Data
The insurance company needs to study historical data like its past
performance, claims obligation in a specific market, premiums mobilized,
sales performance, etc.
Current Transaction Data
The insurance company also needs to understand its current stand and
performance by analyzing the current data, like do we have enough cash
reserves, how much can we allocate in marketing, which is our successful
channel partner for distribution, and do we have enough sales force to sell
this product.
41
HR management system.
2.
3.
in data warehouse and other information such as customer channel are kept
in dimension tables. The key performance indicators is analyzed from the
purview of multiple dimensional data and is called as multi-dimensional
analysis.
Drilling Up and Drilling Down
The OLAP reporting tool let us drill down from a level say sales
volume in children insurance plan in 2005, Q1 of 2005, January month of
Q1 of 2005, first week of January Q1 of 2005.
Thus, a BI reporting tools gives an in-depth analysis of data. Also you
can drill up from the level to sales volume 2005 the uppermost level.
Drilling Across
There are also means of drilling across in the same level like sales
volume competitive analysis in 2004 and 2005.
Automated Generation of Reports
A BI tool also allows automated generation of reports. Say if you
want to see month-end premium collected reports you can format is with all
your necessary data with the help of scheduler options can also schedule
your report to run every month-end.
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Conclusion
Such advance options available in BI allows any company, in our case
an insurance company to do all complex analysis with all necessary
combinations of data and arrive at a better understanding on how the new
product should be. With business intelligence implemented companies of all
nature have a better chance of winning a competitive edge.
45
CASE STUDY
EVENT INSURANCE
46
some reason or the other. Moreover, other traditional risks such as the
organizers liability also have to be covered. The German organizers have
purchased
protection
for
postponement
and
for
total
47
48
49
sponsored car convoy (900 Hyundai cars) and also the spectators at the
various stadiums. The exact premium amount the insurers will be paid to
provide the cover has been closely guarded.
For a purchaser of the World Cup ticket, the insurance package is a
personal accident cover that pays out 15,000 Swiss francs ($12,440) if the
ticket holder dies from an accident in any one of the stadiums where the
World Cup matches are conducted. In case, an injury renders the victims
invalid the payment would be 100,000 francs.
The insurance coverage also includes liability, contingency and
property insurance.
The risks involved are injury, team travel risks, absenteeism, brand
reputation, prize promotion, win bonuses, hooliganism and the big risk of
cancellation. It is beyond the scope of this article to cover all the risks. I
50
propose to deal with the bigger risks viz. Cancellation, terrorism, epidemic
and injury to the players.
The Big Risks:
Post September 11, 2001 any big event has to operate in a changed
world. As of today nothing can be much bigger than the FIFA World Cup
2006. September 2001 and thereafter, terrorist organizations have caused
mass casualties on innocent populations. These high profile strikes have
sent shock waves around the world. The World Cup, which will be a mega
event, offers the potential to be a probable target for those who align
themselves with the radical Islamic and other terrorist networks.
The trophy is Vulnerable to Theft
One version of the trophy had disappeared in the 76-year history of
the event. Called the Jules Rimet Cup and made of gold-plated silver, the
original trophy, was hidden in a shoe-box during World War II. It was stolen
at an exhibition in London in 1966. A mongrel dog, found it in garden a
week later.
After winning the trophy for the third time in 1970, Brazil earned the
right to keep it. In 1983, the cup was exhibition at Rio de Janeiro. This time
the cup disappeared forever.
For the insurer, the big risks would arise from TV broadcasting, the
World Cups biggest source of income. As against the loss of few millions
in gate sales, the losses to the broadcaster can run into hundreds of millions.
To exemplify, the 1980 Olympic Games in Moscow which took place at the
height the cold war was the costliest sports event for the insurance industry.
51
Absenteeism
52
Unlike the last World Cup in Japan and Korea, many of the matches
this summer take place at the end of the 9-5 working day. Experts reckon as
many as one is seven men (and one in 20 women) might phone in ill / sick to
watch or recover from match-related drinking the right before.
According to estimates by a UK-based accounting firm, British stand
to lose 500 million pounds this June due to World Cup related sick leave and
post-match sluggishness. This figure is expected to rise if England makes it
to the final rounds.
Dutch firms are insurance themselves against workers who stay away
en masse. Sez Assurantie, a Dutch insurance company, recently launched a
new insurance policy allowing employers in the country to insure themselves
against the sudden rise in applications for sick leave expected during this
months World Cup. The company has choose to offer a new product for
short absenteeism.
Whoever has a major financial stake in the event will take event
cancellation cover. This list will include not only FIFA, the local organizer
and the corporate sponsors but also local hotels and the makers of
commemoration mugs, t-shirts, footballs, sportwear and flags. In spite of the
cover the best protection against cancellation will be proper risk assessment
and risk management. The organizers have spent considerable years finetuning their security plans to prevent a possible terrorist attack.
Even the German Minister of Health started preparing for the World
Cup 2004 itself. The Robert Koch Institute insisted an enhanced nationwide
infectious disease supervision campaign. Influenza will be on top of the
agenda. Also on the priority list will be the H5N1 stain of avian flue given
the recent epidemic across Europe. The Institute is also on the look out for
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other deadly diseases for example, the raging chorera epidemic in Angola as
foodball teams and fans congregate in Germany from around the world.
According to expert in event risks, insurance companies have
traditionally looked at factors like weather, political risks and risks arising
out of terrorism. The World Cup bearing one of the worlds most high risk
sporting event, it is natural for the hosts and FIFA to make it a trouble free
event.
against the pain of seeing England defeated in the early stages of the World
Cup. The fan has paid I 05 for a World Cup All Risks Insurance policy
through the insurance broker britishinsurance.com. The fan said he had taken
out the policy to compensate for the agony of watching England lose in the
early stages of the cup. He insured himself against psychological trauma.
The pressure of the World Cup, it is said, is not just on the players,
coaches and managers. The supporters are also under tremendous pressure
and suffer because of their nation's performance.
If England is defeated in the first round of the competition the insurer will
turn to five sports commentators to judge if its exit is premature. The fan
will then have to provide medical evidence showing that he has suffered
from severe mental tension to get his seven-figure claim amount. The policy
however, does not cover the team's failure to march to the next round as a
result of players being out due to metatarsal injuries.
The local German organizing committee has also gone the
conventional way and paid 5 mn in premiums for a contingency insurance
provided by Hareburg-Mannheimcr and backed by other insurers including
AIG Europe. The contract provides cover to the extent of 158 mn in case
the World Cup is postponed and has to be held later in another country.
the rights of being the exclusive insurance provider for the World Cup in
Germany. The company is not only the tournament's official insurer but also
one of the official suppliers/National sponsors to the 2006 FIFA World Cup.
Hamburg-Mannheimer is not new to event insurance. It insured the
2004 European soccer championship in Portugal. For the FIFA World Cup in
Korea/Japan in 2002, Hamburg-Mannheimer had provided the FIFA with a
television contingency insurance. It also intends to cover the World Handball
Championships in Germany in 2007.
Hamburg-Mannheimer
Sports
GmbH
also
offers
tailor-made
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Conclusion
The insurance sector is recording a growth much more than what was
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1)
What is your outlook for the insurance industry? Will 2009 mark
India's entry into the big league of global insurance? Where do
you expect the penetration: levels to be by 2010? At what rate is
the insurance sector (life and non-life) expected to grow in the
next 10 years. Do you foresee any big change in the reinsurance
industry in the country by that time?
The insurance industry is expected to have a great future in our
country. Given the potential India has, the industry is going to grow
rapidly. The detariffing of general insurance in 2009 is going to be the
beginning of an important changeover in the history of general
insurance in the country. India is gaining a significant position in the
emerging markets and it is a question of time before India can enter
into the big league of global insurance. Penetration levels would
increase substantially in the coming years as greater savings and
material development will necessitate more insurance buying. Service
and prices will be highly competitive enabling consumers to buy
insurance for all their needs. Growth in the life insurance sector is
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2.
3.
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4.
What is the path the regulator is embarking upon for itself in the
days ahead? Will it be more and more regulation?
The regulator has never advocated more and more regulation. In
fact, we have always been encouraging self-regulation which is
reflective of a mature industry. Considering the changes, the industry
is going through in our country, I would advocate a right balance
between regulation by the authority and self regulation by the
industry. In certain areas such as micro-insurance or health, perhaps
the regulator could play a role to bring about a greater focus but in
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certain other areas such as market conduct of intermediaries, etc., selfregulation will go a long way in helping the industry develop in a
professional way. I have always held that the industry should behave
in a manner that does not give scope for regulatory intervention.
5.
6.
over the last few years has taken place in a fairly organized manner
not only among the private companies but also in the public sector
companies. Pricing in the detariffed era is expected to be based on
proper assessment of risk and the available data. Coding and
collection of data by the TAC for the products to be detariffed is being
activated in cooperation with the insurers.
7.
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the near future. I wish to see a lot more penetration of this class of
business and a uniform approach by all insurers on matters relating to
renewal, portability, etc. Regulations/guidelines in this important area
of non-life business are under consideration.
8.
9.
Are you in favor of raising the FDI cap in the insurance industry
from 26 to 49%?
I believe that an increase in the FDI cap will not only bring in
the much needed capital into the insurance industry but also bring in
international know-how and skills thus expanding the industry's
capabilities. It will pave the way for a more competitive environment
as it will enable the existing joint ventures to expand as well. This is
good in the larger interest of the nation as it will see an increase in
investment in infrastructure and also have a tremendous impact on the
growth of the industry.
10.
Can you throw some light on the move for a consolidated law on
insurance?
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IIIV. Bibliography
Books
Articles/Research Material
Sites
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