Metlife Srinagar Sayeem

MetLife India Insurance Company Ltd

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Table of Contents Executive Summary.......................................................................................................2 HISTORY OF INSURANCE.........................................................................................5 INSURANCE IN INDIA.............................................................................................10 Insurance......................................................................................................................11 LIFE INSURANCE......................................................................................................13 METLIFE PO L I C I E S ..............................................................................................17 INSURANCE AS INVESTMENT..........................................................................23 Literature Review.........................................................................................................25 Life Insurance Companies Are Consistently Coming up With More New Policies....27 OBJECTIVESOF THE STUDY..................................................................................29 RESEARCH DESIGNAND METHODOLOGY.........................................................31 METLIFE PROFILE....................................................................................................34 MetLife`S ACHIEVEMENTS....................................................................................41 Chart showing Market Share of ULIPS in Kashmir region.........................................44 Growth Ranking 2008..................................................................................................45 Financial Status of MetLife..........................................................................................46 From balance sheet............................................................................................46 BANCASSURANCE...................................................................................................48 Banks as Referral Agent of an insurance company..................................................58 Insurance products distribution by banks as Corporate Agents...............................59 INCORPORATION OF METLIFE AS A JOINT VENTURE WITH J&K BANK...61 Introduction to Reinstatement......................................................................................66 Reinstatement of Policies without CI Rider.............................................................67 Data Analysis and Interpretation..................................................................................71 RESEARCH FINDINGS.............................................................................................86 CONCLUSIONS:.....................................................................................................95 Suggestions...............................................................................................................97 ANNEXURE................................................................................................................99 Glossary..................................................................................................................100 QUESTIONNAIRE................................................................................................104 Bibliography...............................................................................................................107 Bibliography

Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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Executive Summary MetLife India Insurance Co. Pvt. Ltd. Is one of the largest, strongest and most respected financial organizations in USA. It was incorporated in India on April 11, 2001 as a joint venture between MetLife International Holdings Inc., The Jammu & Kashmir Bank, M. Pallonji and Co. Pvt. Ltd. And other private industries. The mission of the company is to provide 5 million customers in India world class solutions for financial security and in the process add significant value to its shareholders, associates and society by 2010. In order to facilitate its mission the need of the company was to analyze the factors responsible for lapsed Policies, and go for the revival of the same. Keeping in view the need of the company I took it as my Research Problem and developed the Questionnaire with the HR Department. To facilitate this process firstly I approached FA’s of various branches of J&K Bank and discussed the matter with them. After seeing their positive response towards the same problem as discussed above the details of customers was made and were approached personally with the prior appointment at a convenient place of the client at a suitable time and day. The Research was conducted in Srinagar City. As this is a Exploratory Research different branches of J&K Bank were allotted to me to discuss the cases of Lapsation with the Insurance Managers/CSO for the smooth conduct of the Survey. About 50 customers were contacted at various J&K Bank branches and at Head Office Of MetLife India Insurance .

The main objective of the study is to know the actual problem of lapses and loopholes in the whole system/process, The following objectives were set for the present study: 1) To rectify the errors in the system which led PSP’s and Monthly’s to appear in the lapsed list. 2) To find the discrepancy in the data for the rest of the modes.

Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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3) To know the factors responsible for the lapsed policies. 4) To go for the revival of the policies.

After analyzing the respondent’s views about the company a feedback were available to the company which proved to be helpful for the company in knowing the various strengths and the weaknesses. After knowing the company got a knowledge of the different fields where it should work if it wants to achieve the sky heights in the industry. Before this research it was seen that the company was good in introducing new customers to the organization. But a company cannot be successful if it focuses on new business only which was practiced in MetLife. The retention rate at the MetLife was not followed upto that extent as it was needed, this was seen after the research was conducted inspite the reinstatement guidelines followed by MetLife were good. The research was also helpful to the company as various policies were reinstated and the customers also feel that their investment decision made by them were not wrong because the company is putting its efforts to get the referrals from the customers. The company is not keeping the customers interest away after they invest but the continuously remain in touch with them and make the various departments customer friendly which makes the image of the company as a customer focused company. To be a customer friendly is a very good thing for the organization. The study revealed that wrong selling was made by J&K Bank by the influence of Advance Managers. This was the prime cause It was revealed that the various policies lapsed because they were not given proper knowledge about the product, they purchased those products whose premium was not afforded by them but the commission received by the financial advisors and the channel sales officers was more from others due to which they advised them to buy those products.

Limitation of Research:

Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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The main limitation of the research that I feel was Shortage of time. This research was of vast nature and six weeks time was very little for its complete study. Customer satisfaction level cannot be fully analyze on the basis of 50 customers only, MetLife globally perform surveys and this survey will just serve as a part of that in Kashmir region.

At last I can say that to achieve its goals of Insuring 5 Million customers the MetLife can easily achieve it by simply overcoming such loopholes and there is a lot of opportunities for the Company to grow in the country like India.

Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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HISTORY OF INSURANCE

As with so many things in so many facets of our lives, Insurance too was born out of a primary need and shaped by socio-economic realities of this time. The story goes back to around 2100 BC, to the ancient civilization of Babylon and a business practice called "Bottomry". For

Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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all practical purposes form of marine insurance, bottomry enabled ship owners to borrow money against their ships to pay for the trip. With Piracy rampant on high seas, traders and seafarers were reluctant to sail to other lands for fear of their lives and

goods. Bottomry gave them

some semblance of security. The arrangement was that if only their ship returned did traders have to repay to loan, along with interest, which was pegged at an above market rate for the risk covered. So if their failed to make it back, they did not have to repay the loan, thereby recovering some or all of the loans.

ORIGINS With the marine route being the bedrock of trade and commerce in those days, the practice of bottomy evolved, and spread. With the growth of towns and trade in Europe, medieval guilds (groups organized on the basis of some common objectives, like traders) pooled in money to protect their members from loss by fire and shipwreck, to pay ransom if they were captured by Pirates, and to provides burial and support in sickness and poverty. By the middle of the 14 t h century, as evidenced by the earliest known insurance contract (Genoa, 1347). Marine insurance was common among maritime nations of Europe. Lloyd's of London, the largest marine insurer today, was founded in 1688, in a coffee shop in London. Lloyd's coffee house became the preferred place for merchants, ship owners and underwriters to transact business. Insurance development rapidly with the growth of British commerce in the 17 t h and 18 t h centuries and started becoming organized, along the way going through a period of defaulters and closures The British brought insurance to India in 1818, replete with imperialist prejudices. The Oriental life insurance company, the first insurance company in the country, insured only European widows, British

insurers eventually began insuring Indian lives, but for a

premium that was 15-20 percent higher than that payable by the British. It was only in 1870 that the disparity was corrected. Six Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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Indians, peeved by this second-Class treatment, set up by Bombay Mutual life assurance society, and started Insuring Indian lives at the same cost as British lives, social discrimination, in fact turned out to be a catalyst for Indian initiative in the insurance sector. In 1909, activist Ishwar Chandra Vidyasagar founded the Hindu family Annuity fund- the first instance of a pension - based investment scheme targeted at Indians. As had happened in England earlier, a flood of new players and patchy regulations snowballed into a crisis. Several insurers defaulted on their contractual obligations to policy holders, citing investment losses; some even folded up. The insurance Act 1938 introduced state controls on insurance, but even this failed to safeguard policy holder interest.

NATIONALIZATION Post-independence, discontent against insurers reached a pitch. Business was chaotic, foreign insurer were leaving the country and Indian insurers driven by greed and business considerations weren’t earning much credibility. The cry for nationalizing insurance grew louder. A move that insurers were of course opposed to. On 19 t h January 1956 the life of insurance business was nationalized. In one swoop the govt. snapped up 245 insurers and provident societies. Eight months later the LIC was formed which took over the businesses of the erstwhile private insurers and started expanding at a frenetic pace. Today this monolith has 2100 branch offices, 800,000 agents, and offers a bevy of insurance and investment products. LIC marked insurance less as a risk management too and more as a saving instrument with a tax edge. A look at LIC’s policy profile shows that just 18 percent of policies in force currently are protection plans; insurance cum investment plans account for 60 percent, with the balance being pure investment plans. Still, households embraced these safe investments avenues, with the sum assured (or the total value of cover) increasing from Rs. 1476 crores in 1957 to Rs. 459201 crores in 1998-1999. Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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Similar circumstances lead to the nationalization of Non-life (or general insurance). As in life insurance, pre-nationalization, there were an inordinately large number of insurers, many of whom were notorious for floating investment norms and delaying settlement of claims Nonlife

insurance

was

nationalized

in

1972.

A

general

insurance

corporation (GIC) was setup as a holding company; a total of 107 private insurers were merged and grouped to form GIC’s four subsidiaries.

PRIVATISATION There were various

reasons

given

by the

government to

nationalize the insurance sector; take insurance to the masses, facilitate the flow of long-term funds (which insurance companies, by virtue of the business they are in, have ready access to) into development of infrastructure in the country, and safeguard the interests of policyholders. Towards this end, state insurers did develop insurance sector, though most experts believe these monopolies could have done much, much more. In the early nineties, the government went on a reforms blinge and started loosening controls on Indian industry. In 1993, the government appointed the Malhotra committee, headed by the former RBI governor R.N. Malhotra, to draw up a blueprint for insurance sector

reforms.

The

Panel

submitted

its

report

a

year

later,

recommending privatization, backed by stiff entry guidelines and stringent regulations, so as to avoid a repeat of the pre-nationalization fee-for-all. The Insurance Regulatory and development Authority (IRDA) was formed to regulate the sector and oversee the process of privatization. In 2000, the IRDA started giving out licenses, and a year later the first of the private players started operations. The wheel had come full circle. Under state controls, the insurance sector, both life and non-life grew steadily. Still, Indians are not adequately insured and lag behind

Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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most countries. Total insurance penetration (insurance premiums as percentage of gross domestic product) is dismal when compared to its economic standing; just 2 percent of the population has some form of life insurance. But in this huge gap lies a huge opportunity, which is why private insurers are queuing up. In many ways, the re-entry of private insurers has marked a second coming for the sector. In just three years the sector has undergone a makeover, offering the fruits of a free market; more choice, better service, quicker settlement, tighter regulations, greater awareness. State insurers have been compelled to get their act together. And, to think of it, these are still very early days

INSURANCE IN INDIA

Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd 1818

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1870

The British introduce life insurance to India, with the establishment of the Oriental Life insurance company in Calcutta. Non-life insurance debuts, with Triton Insurance Company. Bombay Mutual Life Assurance Society is the first Indian-

1907

owned life insurance business Indian Mercantile Insurance is the first Indian non-life insurer.

1912

The Indian Life Assurance Companies Act enacted to regulate

1938

the life insurance business The Insurance Act, which forms the basis for most current

1956

insurance laws, replaces earlier Act. Government Steps up LIC.

1958

Life insurance nationalized government takes over 245 Indian

1972

and foreign insurers and provident societies. Non life insurance nationalized; GIC set up.

1993

Malhotra committee headed by former RBI governor R.N.

1850

Malhotra, setup to draw up a blue print for insurance sector 1994

reforms. Malhotra committee recommends reentry of private players,

1997

autonomy to PSU insurers Insurance regulator IRDA

2000

Development Authority) setup. IRDA starts giving licenses to private insurers;

(Insurance

Regulatory

and

ICICI prudential and HDFC standard life first private life 2001 2002

insurers to sell a policy Royal Sundaram alliance first non-life insurer to sell a policy Banks allowed to sell insurance plans; as TPA’s enter the scene, insurers start setting non-life claims in the cashless mode

Insurance

Definition and Meaning To insure means to make a contract that promises to payer secure payments of a specified sum of money in case of accident, damage, loss, injury, death or any other event taking place.

Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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The “Dictionary of Business and Finance” has defined insurance as “a form of contract or agreement under which one party agrees, in return for a consideration, to pay an agreed amount of money to another party to make good a loss, damage or injury to something of value in which the insured has a pecuniary interest as a result of some uncertain event”. It is a device by which the loss likely to be caused by an uncertain event is spread over a number of a person who is exposed to it and who proposes to insure themselves against such events.

MEANING OF INSURANCE From the above definition, it becomes clear that insurance is a voluntary agreement between two parties , viz. the insurer and the insured the former to compensate the latter against the loss suffered by him on the happening of an event. Thus , it is a device theough which the loss is spread over a large number parties. Insurance is the undertaking (assurance) given by a company , society or the State to provide safeguard against loss, provision against sikness, death etc. in return for a regular payments called premia (plural of premium). The person or company which undertakes to make payment in case of loss etc. is called the insurer and the person to whom such payments will be made is called the insured. The person who pays the premiums or premia is called insurant. The meaning of insurance can be well understood from the following example of fire insurance. Suppose there are ten houses in a particular locality costing Rs 1,000 each. On an average each year one house gets completely destroyed by fire. This means the unfortunate owner whose house catches fire has to suffer a loss of Rs 1000. Instead, this loss can be spread over all the ten owners by means of insurance. By providing fire insurance, a sum of Rs 100 ( in the form of premium) can be collected from each owner and the total amount Rs 1000 so collected can be given to the unfortunate owner to reconstruct the house. In this way, each year one house can be built. Each owner will annually pay Rs 100 for ten years. Thus, the loss is spread over all the owners equally. In real practice, however, it is in proportion to the value of insurance. Thus, insurance is a device by which the loss likely to be caused by an unforeseen event is spread over a large people who are exposed to it and who proposed to insurance themselves against such an event. From the legal point of view, insurance is based on a contract between two parties. It is a written agreement to make good some loss, damage or injury .The terms Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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and conditions agreed to are stated in the contract which is known as insurance policy. In this way, the risk of loss is transferred from the insured to the insurer. Insurance has nowadays become so popular that practically everything from a pin to a giant structure can be insured against a possible risk. Like any other contract, the contract of insurance must also satisfy

the

following conditions: 1

There must be an agreement between the two parties, the insurer and the insured.

2

The agreement called insurance policy must be in writing.

3

The parties to the agreement must give their free consent to all terms ad conditions of it.

4

The parties must be competent to enter into contract

5

There must be mutual consideration

6

The object of the contract must be lawful.

LIFE INSURANCE Of all forms of insurance, life insurance or assurance occupies a prominent place in all walks, of life. Almost every wage-earner is nowadays interested in taking life insurance. It has made such a tremendous progress that it has occupied a leading position in the field of insurance. This is because the risk involved is certain. The event is bound to happen soon or later, e.g. death. Hence sometimes the term "Assurance" is used instead of the term insurance. A contract of assurance guarantees the payment of a specified sum of money to the assured on the happening of a specified even. Hence life assurance Life insurance or assurance is defined as " a contract by which the insurer, Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

P a g e | 13

in consideration of a certain premium, either in a lump sum or by periodic payments, undertakes to pay certain sum of money to the assured on his reaching " a particular age or to those entitled to it in the event of his death". Thus, life insurance is a contract between an insurance

company

and

the

insured

whereby

the

insurer,

in

consideration for a premium, undertakes to pay a certain sum of money on the death of the insured or n expiry of a stipulated period whichever occurs earlier. Since each one of us, during our lives are faced with numerous risks failing health, financial losses, accidents and even fatalities, our instincts drives us to cover ourselves against those risks. Though an insurance cover can't protect you against emotional losses arising out of these risks, if softens the economic crisis that usually accompanies these losses. Contract of life insurance is mainly based on two principles, viz., those of utmost good faith and insurable interest. The person who wants to take our life insurance policy mus t poss es s in s u r able interes t in the life he wishes to get assured. Therefore, a person can take out a life insurance policy for himself or his wife, husband, son, daughter, parents or any other relative in whose life he or she has insurable interest. Life assurance contact is not a contract of indemnity. It is a contract for payment of a specific amount because actual loss of human life cannot be measured in terms of money. Life insurance differs from other types of insurance in several respects. First of all, it is no protection to the life of insured person. It is only a cover under compulsory saving is provided. It is a kind of channel to mobilize small savings into investment. Thus, it promotes savings and investment. It is in the form of a financial aid of the family of an insured person in the event of his premature death. In case, he survives throughout the term of the policy, he is paid a lump sum which is nothing but his own savings kept with the insurance company in the form of premiums deposited. Secondly, in life insurance, the amount of policy is certainly payable by the insurer sooner later except in the circumstances of controversial death of the assured. Thirdly, the term of a life insurance contract is sufficiently long such as 20 years or 25 Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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years in case of endowment policies. In case of whole life policies it may be still longer.

Settlement of the life insurance claims When a policy becomes due for payment in the event of the policyholder’s death, the following procedure has to be followed by his nominee to claim the amount of the policy. Proof of Death:

This is the first step in the procedure of getting the

amount claim. The proof of death has to be furnished to the insurance company if the policy has become due owing to the death of the assured. A certificate given by doctor who has treated the assured before his death is a satisfactory proof of his death or the certificate issued by the Municipality can also be a satisfactory proof of death. The necessary documentary evidence of death must be submitted to the insurance company. Proof of age:

The assured is required to produce a satisfactory

proof of his age to the insurance company at the time of taking out a policy. This evidence of age may not be given to the insurance company at the time of settlement, if the age was admitted by the insurance company earlier. In case, no such proof was submitted at the time of issue of policy, the claimant of the policy amount has to submit it, since without such a proof claim cannot be settled by the insurance company. Proof of title:

The person who lodges a claim with the insurance

company have to establish own legal title to the amount of the policy. Establishing legal title to the amount of the policy is necessary especially when no nominee is named in the policy. If the insurance company is satisfied with all the documentary proofs submitted, the amount claim is settled by it. In case, there is any

Sayeem Rafiq

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MetLife India Insurance Company Ltd

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dispute regarding the settlement of claim, the matter is referred to the court for arbitration purpose.

THE REAL CONCEPT OF INSURANCE A financial planner once said this about life insurance buying habits of Indians, they don’t buy insurance, and it’s sold to them. Unfortunately, but true. Individual awareness and understanding of life insurance products is extremely low, and many among the insured don’t even know whether the life insurance policy they own meets their insurance needs, and in large context, their personal finance needs,. In most cases, chances are, they could be doing better. The first and the most important step towards ‘doing better’ involves being financially being financially literate, and having, at the least, an elementary understanding of life insurance is all about. This means being aware of the various types of insurance products on offer in the market, as well as having the ability to understand one’s life insurance needs and find appropriate fits. Life insurance is chiefly a risk management tool, meant to offer financial protection to your dependants in the unfortunate event of your death. If you are adequately insured, your life insurance should enable your dependants ( Spouse, Children, parents) to maintain their current life style and pursue their life goals till such time as they are in a position to set up an alternative income stream by themselves. That’s the basic purpose of life insurance. But in India, as in most other developing markets, life insurance has come to represent more than just risk cover. The best selling insurance products in the market double as investment options and offer attractive tax breaks. In fact, it’s because of this two-in-one profile

that

they

appeal

to

the

average

individuals

who

seeks

convenience in personal finance matters.

Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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METLIFE PO L I C I E S Based on their objective, basis plans offered to insurers can be classified under three broad categories: pure insurance products (term plans), pure investment products (pension plans) and investment-cuminsurance

products

(endow ment,

money- back,

Investment-cum-

insurance products (endowment, money-back, whole-life and unit- linked insurance plans). Increasingly, insurers are launching hybrid variants of these plain vanilla plans.

TERM PLANS Term plans are the purest form of insurance. These are no-frills policies that cover only the risk of your death. In the event of your death during the policy term, your nominee receives the cover amount. In insurance parlance holders, mutual funds to unit holders, automobile Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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clubs to members, and so on. Factor in such freebies while computing your life cover.

ENDOWMENT PLANS While term plans cover just the risk of death, endowment plans also offer return on the premiums paid by you. So, if you die during the policy term, your nominee gets the sum assured plus some returns; if you survive the policy term, you still gets back the sum assured and returns. As much as this money if you live "Philosophy is an enticing proposition, it comes at a price; high premiums, which drag down the returns from endowment plans, to barely 4-6 percent a year. In an endowment plan, you pay premiums for pre-defined tenure and sum assured. The premium will depend on your age, the sum assured, the plant tenure and the nature of returns. A portion of premium paid by you is invested by the insurer on your behalf. Another portion goes towards. Meeting the insurer administrative expenses, this lowers the effective yield on your investment in endowment plans.

WHOLE-LIFE PLAN : The three categories of insurance plans mentioned above provide you life cover only for a d e f i n i t e p e r i o d , u p t o a c e r t a i n a g e ( g e n e r a l l y , 7 0 y e a r s ) W h o l e - l i f e p l a n s , o n , t h e o t h e r h a n d , a n d (generally, 70 years) Whole-life plans, on, the other hand, and provides you cover through your lifetime-the only class of insurance policies to do so. Typically, whole-life plans are structured such the policyholder has the option to pay premiums up to a certain age (referred to as the maturity age, the insurer provides you the option to either continue through your lifetime (for which no further premiums will have to be paid) or encash the maturity benefits (sum assured plus bonuses). Some insurers do give the option to encash the bonus during term itself,

Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

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which can serve as a useful income stream during your later years, if you so desire. But do you really need life cover through your time? Typically, your life insurance needs start taper off after the age of 50. Your children are earning and probably in need of life cover themselves. You yourself would have accumulated, or are well on your way to accumulating, a sizeable nest-egg to see you through your retirement years. Only if you have financial dependants or have an income steam to protect during your post-retirement year does it make sense to buy a whole-life policy.

UNIT- LINKED INSURANCE PLANS In insurance-cum-investment plans of the kind listed above, you have little say in where your money be invested. Your insurer too is governed by investment restrictions; it can invest just 10 per cent of the premium paid by you in equities; the greater chunk of 90 per cent h as to be inves ted in debt paper. While such res trictions are intended to ensure safety of your investment, they also lead to rigidity in investment and rein in your returns, to single digits. Unit-linked insurance plans get around such restrictions, by giving you greater control over where your premium is invested. Think of them as insurance plans that double as mutual funds. The annual premium you pay on unit linked plans is linked to the sum assured and the policy tenure. In the illustration given below for example, for a sum assured of Rs. 1 lakh on a 20- year plan, the premium payable is Rs 6,000 a year. In the first year, typically, around 20 per cent of the premium is deducted by the insurer towards your risk Sayeem Rafiq

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MetLife India Insurance Company Ltd

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cover and to meet its own administrative expenses (this figure drops gradually through the plan term, tapering off at around 5 percent). The balance 80 per cent in the first year (more in the subsequent years) is invested in an investment plan of your choice, and your are allocated unit, based on the prevailing net asset value (NAV) of the plan you have opted for. Just like in a mutual fund. The investment plans on offer cover the risk reward spectrum. You can choose from income plans (high on debt, low on equity), growth plans (high on equity, low on debt) and balanced plans (roughly equal distribution between debt and equity). Insurers, based on the historical performance of their plans and their return expectations, tend to project a range of returns for each plan. Take note that these are just guesstimates- what end up with could be higher or lower, depending on your plan's performance. Y o u c a n s w i t c h f r o m o n e p l a n t o a n o t h e r f r e e o f c o s t o n c e a year (a nominal amount is charged for additional switches). So, if you think stocks are going cheap, you can move to the growth plan; or, if you think stocks are overvalued, you can move your money to the income plan. Thus, unlike endowment plans, you can control your investment in unit-linked insurance plans. Unit-linked plans also enable you to periodically monitor the performance of your investment. Insurers declare the NAV of the various plans periodically-generally, once in three months. Exiting these plans is also easier and it doesn't invite prohibitive penalties. After a lock in period (generally, one year), you can withdraw your units anytime, in part or in full, at the then-prevailing NAV; your life cover will be reduced accordingly , You can also make incremental investments any time, and add a corresponding amount to your life cover. By their very nature, unit-linked insurance plans are meant for individuals who understand investing and the stock market but prefer to leave it to the experts to do active money management; they are prepared to forfeit assurance on returns for a chance to take home more than what a conventional endowment plan would offer. Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd The

case

to

prefer

unit-linked

plans

P a g e | 20 over

conventional

endowment plans is compelling. Insurance plans are long-term plans, with tenures stretching to 10, 15, 20 years-durations that give a good chance to reap the true returns potential of equities. In endowment plans, though your money stays locked for similar lengths of periods. At least 90 percent of it is invested in low yielding debt instruments, as a result of which returns from them are p e d e s t r i a n . I n o t h e r w o r d s , endowment

plans

don't

maximize

returns,

especially

for

knowledgeable investors. Unit-linked plans offer that possibility

PENSION PLANS Pension plans differ from the five types of insurance plans mentioned above in a fundamental way: not all of them offer life cover. So, why are we talking about them here? Because pension plans feature among the bevy of products offered by insurers and are pitched as retirement planning schemes, similar to other investment- based insurance plans. Pension plans are investment options that let you set up an income stream in your post-retirement years by routing your savings through an insurer, who invests it on your behalf for a fee. The precise returns you will get depend on several factors: your age when you begin

investing,

the

contributions

you

make,

your

investment

preferences based on your risk profile, the age at which your want the money to start coming back to you, and the n umber of years for which you want the returns. Immediate or deferred? The payback from pension plans generally takes the form of an annuity you are paid a certain sum every year. There are two types of annuities, depending on when the insurer begins

Sayeem Rafiq

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MetLife India Insurance Company Ltd

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the annuity paybacks. With an immediate annuity, the payments start the year you buy the contract. You hand over a lump sum (Say, your superannuation benefits) to your insurer and choose the periodicity of payments and the number of years for which you want a pension, based on your assessment of your life expectancy and needs of your financial dependants. Typically, this option would appeal to those who retired or are about to retire, are looking to set up an immediate, regular income stream, and feel ill-equipped to handle their investments on their own. The other type of annuity is a deferred annuity, wherein the annuity payments are deferred for later years (at a predefined age of vesting, as it is called). During the accumulation phase, your investments earn a return, and grow without being taxed-until you receive your annuity payments. Consequently, investments in wellmanaged annuity plans have the potential to grow substantially over a long period. However, you are liable to tax (at appropriate slab rates) on your annuity withdrawals, which are treated as income. Therefore, deferred annuities make financial sense if you're likely to move to lower tax bracket after your retirement. Deferred annuity schemes enforce a savings discipline: unlike with self managed investments, you are committed to making periodic payments. Additionally, since these are conceived of as long- term investment

vehicles,

premature

withdrawals

invite

prohibitive

penalties, so it's important to stick with them; only then will you also benefit from the power of compounding. Increasingly, insurers are packing in a few options that provide greater flexibility to your pension plan. Participative or unit-linked? The most important among this relates to where your money is invested and by extension, how much returns you can expect. Based on the surety of returns (which is reflected in the manner in which these plans are structured), pension plans can be classified as participative or unit-linked. In a participative plan, at the time of investing , the insurer will indicate (not assure) the annuity amount you are likely to receive during the benefit period.

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No such indicative assurances are given under unit-linked pension plans. Your contributions are directed to an investment plan of your choice. For each investment you make, you will be given some units, based on the scheme's then- prevailing NAV. As in unit-linked insurance plans, you can choose from a variety of scheme profiles (typically, income, growth and balanced) and make a free switch once a year (a nominal charge is levied for additional switches). Each contribution

made by

you will entitle

you to

additional

units.

Depending on the performance of your scheme, the value of your investment will appreciate or depreciate. Pension plans facilitate disciplined, long-term investing-one of the pillars of wealth creation. Each year, you set aside a certain, pre-specified sum towards you retirement kitty. This money says invested for long periods of time, reaping the benefits of compounding. Premature withdrawals invite prohibitive penalties- typically; you lose 7 percent of the current value of your investment if you withdraw within a year, 3.5 to 5 percent within 3 years and 3.5 percent after three years. On reaching the vesting age, you can withdraw your money. Alternatively, you can use it (in part or in full) to buy a participative annuity, from your existing insurer or from another insurer. The variable option gives you a play on equities, and therefore has the potential (but no assurance) to outperform the fixed- return option. It's a risk- return trade-off, and you have to find your fit. Some insurers, on some of their plans, give you the option to bundle life insurance along with these pension plans. Y o u c a n c h o o s e t h e a m o u n t o f l i f e c o v e r y o u w a n t , b a s e d o n w h i c h a premium will be deducted from your contribution, which will make a difference to your maturity amount: It will show up as marginally lower annuities in participative plans and lower sum invested in unit-linked plans

INSURANCE AS INVESTMENT Endowment plans are the best selling life insurance product in the country. This single fact says a lot about how most Indians who get themselves covered like their insurance products to be: insurance cum investment plans. Individuals have been known to banks on endowment Sayeem Rafiq

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plans to get their lives insured, save on tax, build a retirement corpus, and fund their children’s education and among other things. But are they

maximizing

their

returns,

or

can

they

do

better,

without

compromising on the life insurance benefits? In other words, do life insurance plans make good investments? The answers to these questions are not straight forward, given the number of factors that influence returns on your investments. These include the impossibility of predicting interest rates and tax rates over twenty years or more-tenures typically of insurance contracts .Yet, with some realistic assumptions, it is possible to assess if endowment plans make good investments.

THE RETURN EQUATION Illustration : The case of a healthy 30- year old male who wants life cover of Rs 5 lakh for 20 years. He has two options before him. The first is to buy an endowment plan which gives him life cover of Rs 5 lakh by way of a term plan ( the cheapest life cover), and invest the premium differential in investments of his choice. We have considered Insurance plans from LIC, the country’s largest Life Insurer. The endowment plans is Endowment Assurance Plan, in which he will have to pay an annual premium of Rs 23,978. the term plan is Jeevan Anmol, in which a cover of Rs 5 lakh can be had for a premium of Rs 1,528 a year. The differential of Rs 22,450 is invested in various instruments. In order to give an idea of the return possibilities, we looked at three instruments that span the risk- rewards spectrum: PPF( risk-free, moderated returns), debt funds ( moderate risks, moderate returns) and equity funds ( high risk , high return(. In an endowment plan they declare an annual bonus of Rs 50 per Rs 1,000 sum assured – a realistic assumption – through the term yields Rs 10 lakh (tax – free) the end of the term, which translated into a return of 6.6 per cent a year. That’s significantly less than what in other options would yield, even if the premium differential was invested in a comparable risk-free instrument, like the 8 per cent PPF; the returns Sayeem Rafiq

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would increase further if the premium differential was able to earn the historical returns debt funds and equity funds has been known to give over such long periods. THE ROAD AHEAD Returns from endowment plans have fallen sharply; between 1999 and 2005, bonus rates have dropped from 9 percent of sum assured to 4 percent and these could drop even further FALLING RETURNS There are guidelines on where life insurer can invest the money they collect by way of premiums from you on endowment plans. Around 90 per cent of it is to be invested in safe debt instruments, leaving just 10 percent for the high yielding asset class that is equities. It follows that profits of insurers will closely track returns from debt paper.

Literature Review 1. M. ShriNivas Osmania University Hyderabad, 2008 This study was a modest attempt to analyze the causes for lapsation after privatization on the basis of the experiences of the functionaries like branch managers, development officers, Agency managers and insurance agents (CSO’s) who are the core marketing staff for MetLife India Ins. Co. Pvt. Ltd. After privatization significant progress has taken place in Indian insurance sector especially in life insurance business. However still lot of potential for life insurance consumption is available in India as the India's Life Insurance penetration and density is low when compared to Asian average or world average. In spite of rapid progress the sector is suffering with high rate of lapsation of policies. This study reveals that forced selling of policies without caring for matching of MetLife products with requirements of the policy holders plays a vital role in lapsation of policies in the first year of policy life. This is happening due to the fact that beneficiaries are unaware about the insurance products and their comparative merits and limitations. In addition the services after sale of policies are not as per the requirements of the policy holders. Hence there is a need to organize special training camps to agents and awareness camps to Sayeem Rafiq

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beneficiaries periodically. Attention has to be paid on not to yield for forced selling, target oriented last movement selling without caring for matching of insurance products with that of the requirements of policy holder. 2. Misbah Showkat, Student of K.U., J&K, 2008 In her study Misbah has clarified that For the purpose of identifying prime causes for lapsation, the perceptions of the core functionaries in the marketing network of MetLife are ascertained by canvassing questionnaire. They include Branch managers, Area Managers, Sales Managers, Development Officers and Agents. For the purpose stratified random sampling is applied in selecting sample of Branch managers (BMs), Development Officers (Dos) and Banca Agents. The study is confined to the city of Srinagar. The findings include awareness levels of the customer (about personal risks, insurance and insurance product knowledge), product mismatch (lack of need based selling/ forced selling/ wrong selling), incompetent services (by agent and MetLife), financial problems of customers (due to insufficient income, inflation, lack

of

financial

planning ),

Competition

(with

other

financial

institutions and other investments with higher returns). 3. Irfan Ali Zargar, student of Kashmir Univer sity, J&K, 2007 In his study Irfan Ali has listed that purchase of insurance more than affordability, purchase of wrong type policies, purchase of expensive policies etc are some of the causes for lapsation. He has included the Srinagar city as epicenter, since Srinagar is the best site of Kashmir valley for successful business. Presently he is the Area manager of Sales Department; this is the result of his sincere efforts towards the mission of organization. The conclusion and recommendations were very helpful to the management. He has reinstated almost 100 (one hundred) lapsed policies. 4. IRDA journal Aug., 2008: The focus of this issue of journal is on “LAPSATION OF LIFE INSURANCE BUSINESS”. It starts with an article discussing inter alia the vulnerabilities that insurers are exposed to account of early lapsation. In the next article, a team of life insurance domain Sayeem Rafiq

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consultants project ‘persistency’ of business as the fifth ‘p’, which is as important as the other four ‘p’s of Marketing. Another article draws light about the important role that the distributor [Agency personnel or CSO] plays in ensuring that life insurance contracts don’t die an immature death. One significant adverse feature of high lapsation in life insurance is the financial crisis that it brings about, both for the insurer as well as the insured. This journal also focuses on the remedial measures adopted by life insurers. Although in an insurance contract, the insurer promises to pay the assured sum on the happening of the event, sometimes the claims are not paid on account of various reasons, this gives birth to the problem of “REPUDATION OF CLAIMS”.

5. Life Insurance Companies Are Consistently Coming up With More New Policies Now days there are so many ways where we can save our earnings and invest for the future. Investing in life insurance policy is one of the foremost way of doing that. MetLife has got so many products from which we can benefit ourselves. They are the whole term life insurance policy, the mortgage policy, the health insurance policy, the universal life insurance policy and many more. All the products offered by MetLife are very good, we can benefit ourselves from them if we in invest according to our requirements. MetLife offers various products for various life stages, it has got wealth accumulation plans, retirement, child care plans. So we should invest according to our need. Before investing in life insurance we should consult various persons like friends, family members etc. especially we should consult the customers of that very company in which we want to invest. We should inquire various important things from which reinstatement is one. We should always take decisions keeping in view both the aspects ie; could be, could not be. If somehow your policy gets lapsed then reinstatement is the obvious tool to change its states. Hence reinstatement is a compulsory thing which we should take care of. From the track record it is confirm that MetLife is using this tool with good technique.

6. PREMIUMS AND REINSTATEMENT Renewal premiums are those paid after the initial premium. MetLife offers its customers so many frequency with which renewal premiums will be paid. Renewal Sayeem Rafiq

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payment options given by MetLife are monthly, quarterly, semi-annually and annually. A policy at MetLife will lapse if the renewal premium has not been paid and the grace period has expired. Grace period at MetLife is a specified period of time, usually 30 or 31 days after the due date, during which the premium may be paid without penalty and coverage remains in force. If a renewal premium is not paid by the end of the grace period, the policy lapses, which means coverage ends and the company is no longer bound by the insurance contract. Metlife may waive its right to have premiums paid on the due date. If your policy lapses because you did not pay the premium by the end of the grace period, you may be able to reinstate your policy at MetLife with some special ease than other companies. It is because the reinstatement guidelines followed at MetLife are quite different from others, they are more customer focused. Policies at may be reinstated after termination. Payment of past due premiums is required. MetLife require an application and evidence you are insurable under their underwriting rules then in effect. Reinstatement takes effect on the date Metlife approve the application of reinstatement. If MetLife do not decline reinstatement in writing within 45 days, the policy will be reinstated on the 45th day after date of the conditional receipt will give you in exchange for your payment of all premiums due. 7.

Keep your Life Insurance Policy Current

There are two basic types of life insurance, and premium payments are processed differently for each of them. Failure to pay your premiums will have a different effect on your policy depending on the type of product purchased. There are many reasons why policy at MetLife lapses. The two most common reason a customer let's a Life Insurance Policy lapse is because they forgot to renew it or they don't think they can afford the premium. Allowing a Life Insurance Policy to lapse is a very bad thing. Don`t think you can simply call MetLife and reinstate your policy some time after it lapses similar to a cable, cell phone or electricity bill but the fact is you can't. If you allow your policy to lapse it is very likely you will need to apply for a new policy. This can be very costly as you may have had a term life insurance policy locked in 10 years ago when you were young and healthy. There is no doubt your premium will now go up even with the same death benefit but how much the premium goes up depends on how well your health is. Don't forget to renew it! MetLife have made it very easy to ensure you never forget to renew it. So before you invest in MetLife

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make sure that you are satisfied with the reinstatement procedure so that in will not prove costly to you

OBJECTIVESOF THE STUDY

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Objectives of the Study : The main objective of the study is to know the actual problem of lapses and loopholes in the whole system/process, The following objectives were set for the present study : 1) To rectify the errors in the system which led PSP’s and Monthly’s to appear in the lapsed list. 2) To find the discrepancy in the data for the rest of the modes.

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3) To know the factors responsible for the lapsed policies. 4) To go for the revival of the policies.

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RESEARCH DESIGNAND METHODOLOGY

RESEARCH DESIGN

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A conclusive Research was adopted to conduct the study in two stages. Firstly, to know the factors responsible for the lapsed policies, discrepancies in the data of SA, A and Q and to rectify the errors in PSP’s and monthly’s. Secondly, to go for the revival of the policies. In order to realize the objective of the study, primary data was collected through “SCHEDULE” besides the use of Secondary data.

Sampling Plan The population of interest was the policy holders of Kashmir valley whose policies has gone lapsed. Three branches of J&K bank were selected for the sample. All the 55customers were contacted whose policies fall in lapsed list. The customers were approached at their respective residences, business establishments or at the concerned bank branches. Some of the customers were contacted telephonically. Sample size Monthly

=

10 respondents

Quarterly

=

7 respondents

Semi-annually

=

15 respondents

Annually

=

23 respondents

DATA COLLECTION Data Source: Primary as well as secondary were used Primary data has been collected from the survey conducted through systematic gathering of data from structured sample of customers through questioner Secondary data comprised mainly of management books and various websites. The report mainly consists of primary data gathered through the

schedule of questions asked to the respondents directly.

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Research instrument In order to facilitate respondents’ expression a semi structured non disguised type of schedule of questions was used containing the relevant questions as per the reason of their non continuing of the policies. The same was done with the FA’s of the J&K bank. INTERVIEWING PROCESS The survey was conducted through interviews with the FA’s and customers were asked the reason of lapsed policies and the interviewer noted down the responses. This ensured high response rate and eliminated wrong irrelevant responses.

Pilot survey The schedule was pre tested for errors and ease of understanding. The errors thus determined were eliminated. The understanding issues were also eliminated to the extent they could be without any effect on the intended purpose of the query. This brought some changes in the schedule regarding phrasing, order, and number of Queries that were made on time.

Statistical tools Microsoft Excel was used for tabulation of data, percentages are drawn for generalizing the study and graphs are used for having better pictorial representation.

.

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METLIFE PROFILE

The spirit of MetLife’s commitment………..

VISION

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Build financial freedom for all through leadership in providing professional financial advice and building long term relationships through innovative protection, accumulation and retirement products, robust underwriting processes and creating a world-class customer service experience for our customers. OUR MISSION By 2010, provide 5 million customers in India world-class solutions for financial security and in the process add significant value to our shareholders, associates and society. OUR CORE VALUES 1

We lead through innovation to offer world class and competitive products to our customers.

2

We build long term relationships with our customers by creating a world class service experience through operational excellence and the innovative use of technology.

3

We create a customer centered and result focused division that inspires and has the buy in of all our associates and has their buy-in.

4

We are committed to creating a high performance organization by creating an environment that allows each one of our associates to perform at their peak. As a result we will also be recognized as an employer of choice.

5

We are committed to partnering with our internal and external customers for mutual success.

6

We work with integrity, fairness and financial prudence in all our dealings keeping the interest of our shareholders, customers and employees paramount. ………….Partnering for excellence

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MetLife proudly inherits its parent company's over- 136 year- o l d reputation of helping build financial freedom for everyone.

Ranked 38 on the Fortune 500 list (April 2004) MetLife insurances (MetLife) is one of the largest, strongest and most respected financial organizations. MetLife through its' affiliates is the number one life insurer in the U.S with approx. @2.5 trillion of life insurance in force (as of Dec. 2002) and has been delivering reliable, high quality service to its customers since 1868.

MetLife is a leader in group benefits that serve 88 of the top one hundred FORTUNE 500® companies, and providing benefits to 37 million employees and family members through its sponsors in the U.S. The MetLife companies are also ranked #1 in group life and #1 in commercial dental in the U.S. Headquartered in New York. MetLife through its affiliates, subsidiaries and representative offices, operates in 15 countries throughout the America, Europe and Asia. MetLife's institutional clients have approx. 35 million employees and members. MetLife has assets under management worth $255 billion. (FORTUNE 500® is a registered trademark of FOURTUNE® Magazine, a division of Time, Inc) MetLife insurance Company private Limited was incorporated in India

on

April

11,

2001

as

a

joint

venture

between

MetLife

international Holdings Inc., The Jammu and Kashmir Bank, M. Pallonji and Co. Private Limited and other private investors. MetLife hasdeveloped and distributes a range of life insurance in India. MetLife is headquartered in Bangalore with officers and presence in major Indian cities, and an additional 1000 outreach points through its channel partners.

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Through our highly professional agency system, we are dedicated to helping Indian consumers plan for their financial security through customized solutions. MetLife is driven by the principles of uncompromising integrity and the highest level of professionalism. Its mission is to work with utmost integrity, fairness and financial prudence in all its dealings. MetLife benefits from its parent company's global presence in the field of insurance, track record of establishing successful insurance operations in emerging markets and the unique strengths of its other Indian promoters. Drawing from these experiences, MetLife will be able to address the needs of the Indian customer. MetLife aspires to build on MetLife history of meeting policy holder and contract obligations and the, ability to withstand the impact of

adverse

economic

factors.

The

MetLife

brand,

known

for

empowering people to feel protected, guided and hopeful about their lives, will do the same for its Indian customers. In

the

past

two

years,

MetLife

has

made

significant

contributions to the growth of MetLife international. Since selling its first policy in January 2002, MetLife has experienced strong growth from its agency force, which increased 45% during 2003 alone. The company presently has more than 240,00 policies in place and has recently entered the institutional market with a group life product. While group insurance in India is not currently a large market, the segment is forecasted to grow rapidly in the next two-to-three years. By focusing on this untapped market, MetLife can meet the needs of large corporations, helping them establish benefit programs that help them attract and retain top talent. However, it is pertinent to mention here that India's Banc assurance and Corporate Agency has also played a significant role in contributing to this success. The goal is for MetLife to contribute significantly to the MetLife mission of reaching

100 million customers by 2010. To help reach that goal, MetLife plan on launching innovative products in the near future, this will act as a

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major differentiator among competitors. In additions, with the launch of the new MetLife television commercials, which is a first for our India operation, this will add greatly to MetLife's global brand recognition.

The

combination

of

this

brand

and

the

continued

outstanding efforts will provide the fuel to drive MetLife further up the road of success. MetLife delivers value and world-class service to customers through its financial advisors and corporate sales representatives. The mission of MetLife Insurance is to build financial freedom for all. What is financial freedom? It is all about securing one's future. It about approaching life’s major milestones without any worries. True financial freedom arises from identifying your financial capabilities, setting realistic goals based on your dreams and aspirations and achieving them through a comprehensive plan. Most importantly, while you set out to draw up financial plans for your life- you need to understand that it isn't a one-time plan. The planning that goes into attaining your financial freedom should be dynamic, since life itself is dynamic. What's good for you today might not be next year. During the course of your life you need to achieve your aspirations (life owning of house), meet certain financial obligations (life educating your children or-getting them married), ride over unforeseen contingencies and plan a financially independent retirement phase. The Met Advice Financial Planning could be the first step in your planning exercise. It attempts to give you on overview of the various investment options available in the market today.

PRODUCTS OF METLIFE 1.

MET 100

2.

MET SUKH

3.

MET MORTAGAGE PROTECTOR SINGLE PAY

4.

MET PLATINUM (PARTICIPATIVE ENDOWNMENT)

5.

MET 100 GOLD (PARTICIPATIVE WHOLE LIFE)

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9.

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6.

MET 100 PLATINUM (PARTICIPATIVE WHOLE LIFE)

7.

MET GOLD (NON PARTICIPATIVE ENDOWNMENT)

8.

MET BHAVISHYA

MET SUVIDHA (NON PARTICIPATIVE REGULARPAY) 10.

MET SUVIDHA (NON PARTICIPATIVE LIMITED PAY)

11.

MET SUVIDHA (NON PARTICIPATIVE SINGLE PAY)

12.

MET SUVIDHA (NON PARTICIPATIVE SINGLE PAY)

13.

MET SUVIDHA (PARTICIPATIVE LIMITED PAY)

14.

MET SUVIDHA (PARTICIPATIVE LIMITED PAY)

15.

MET SUVIDHA (PARTICIPATIVE SINGLE PAY)

16.

MET PENSION (PARTICI PATIVE SINGLE PAY)

17.

MET PENSION (PARTICIPATIVE REGULAR PAY)

18.

MET PENSION (PARTICIPATIVE LIMITED PAY)

19.

MET SURAKSHA (NON PARTICIPATIVE REGULARPAY)

20.

MET SURAKSHA (NON PARTICIPATIVE LIMITEDPAY)

21.

MET SURAKSHA (NON PARTICIPATIVE SINGLEPAY)

22.

MET SURAKSHA LIMITED TO AGE 60 (NON PARTICIPATIVE REGULAR. PAY)

23.

MET SURAKSHA LIMITED TO AGE 60 (NON PARTICIPATIVE LIMITED PAY)

24.

MET SURAKSHA LIMITED TO AGE 60 (NON PARTICIPATIVE SINGLE PAY) 25.

MET SMART PLUS-RP

26.

MET SMART PREMIER-RP

27.

MET SMART PLUS SINGLE

28.

MET SMART PREMIER SINGLE

29.

MET ADVANTAGE PLUS-

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MetLife`S ACHIEVEMENTS ➢ MetLife enjoyed a golden performance on May 15, 2009 (New York) - At the 15th Annual FCS Annual Portfolio Awards, the Financial Communications Society (FCS): four awards, all Gold trophies, plus the Best-in-Show Multicultural award for its "South Asian Brand Television Campaign," created by IW Group. The award was sponsored by Forbes. MetLife also won Gold in the new ROI category, which recognized the success of marketing campaigns for their stated return on investment. ➢ MetLife’s corporate vision – to build financial freedom for everyone – guides the company’s response to people’s growing need for first-rate financial products and services through various life stages and economic cycles. MetLife’s trusted brand, capital strength, and existing relationships with Sayeem Rafiq

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millions of individual and institutional customers around the globe uniquely position MetLife among its competitors. ➢ The "everyone" in MetLife’s vision took on added meaning in 2000 as the company welcomed an important new constituency: shareholders. MetLife transformed itself from mutual to stock ownership in April of that year through a demutualization and initial public offering that was completed in just 18 months after Board authorization. ➢ The year 2001 was a true test of the qualities that define MetLife. The company’s core values, brought to life in what MetLife does every day, were no more evident than in MetLife’s response to the tragic events that shook our nation on September 11. MetLife responded quickly. The company served its customers, communities and employees during this difficult time. At the same time, MetLife invested $1 billion in a broad array of publicly-traded common stocks. ➢ In 2001, MetLife was the first insurance company to establish a financial holding company with a nationally chartered bank. Leveraging its unparalleled distribution channels, MetLife entered the retail-banking arena with the launch of MetLife Bank, making it an easy and convenient way for MetLife’s customers to realize their financial goals. ➢ MetLife announced in 2002 that it would be continuing its long-standing relationship with Snoopy and the rest of the PEANUTS® characters. The company signed a new contract that would allow the characters to appear in MetLife’s domestic and international advertising for the next 10 years. ➢ The sale of State Street Research & Management Company to BlackRock, Inc. was announced in 2004. In line with MetLife’s strategy to focus on core business growth, the sale benefited many of the company’s Individual and Institutional Business clients who held investments through State Street Research, as it became part of one of the largest publicly traded investment management firms in the U.S. ➢ The company’s stated long-term goal is to become the recognized leader throughout the world for relationship building, connectedness and caring in financial services – in the "giant league" with over 100 million people as MetLife customers by the year 2010. ➢ MetLife took a major step toward realizing this goal in 2005, when it acquired Travelers Life & Annuity and substantially all of Citigroup’s international Sayeem Rafiq

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insurance businesses for $12 billion. Completed on July 1, 2005, the Travelers acquisition made MetLife the largest individual life insurer in North America based on sales, the second largest provider of retail annuities and the largest provider of institutional annuities. ➢ Working Mother magazine honoured MetLife in 2005 by naming the company one of the "100 Best Companies for Working Mothers," for the seventh consecutive year. In 2005, the company was named to Diversity Inc.’s list of the Top 50 Companies for Diversity. In early 2006, MetLife was also named to the National Association for Female Executives’ annual list of Top 30 Companies for Executive Women. ➢ In 2006, MetLife appointed C. Robert (Rob) Henrikson chairman of the board of directors, president and chief executive officer of MetLife, Inc. Henrikson was appointed CEO on March 1, 2006 and chairman of the board on April 25, 2006. ➢ Henrikson has been the architect of an aggressive growth strategy that included double-digit organic growth, the divestiture of non-core businesses, and an M&A strategy which resulted in market leadership in all of MetLife’s core product lines. Before it was commonly talked about, Henrikson recognized the opportunities presented by the changing demographics in a global marketplace and set the company on a course for continued success by developing innovative products and services and strengthening the company’s distribution power in the U.S. and 16 markets in Asia Pacific, Latin America and Europe. ➢ Today, a time when consumers are feeling a greater financial burden than ever before, MetLife is helping millions of customers create their own personal safety net. At no time in the company’s history has MetLife been as well positioned to capitalize on its history, its reputation for security and stability, and its innovative products and services as it is today. ➢ In the future, MetLife will continue to grow its business with focus, innovation and profitability. This will be accomplished by drawing on the reservoir of history that has produced an enduring set of corporate values based on more than 138 years of integrity, social responsibility, strong leadership and financial strength.

Some other achievements Sayeem Rafiq

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➢ Largest life insurer in the US with approximately $3.4 trillion of life insurance in force1 ➢ Serves 70 million customers and experiences the existence of over 140 years in the industry ➢ Ranked 39 on the FORTUNE 500 listing ➢ Ranked 6th In Fortune Magazine 2009 List of “America’s Most Admired Companies” ➢ Named by Forbes magazine as “The Best Managed Insurance Company in America (2008)” ➢ 3rd Runner up in customer loyalty survey Conducted by Business Standard & AC Nielson in 2008

Chart showing Market Share of ULIPS in Kashmir region

Inference and analysis: The Graph shows that 31.39 Cr is the market share of Kashmir region regarding ULIPS(Unit Linked Insurance Policies), 27 Cr is that of ICICI prudential and 22.5 Cr that of Bajaj Allianz. Inference : It implies that major portion of ULIPS market is that of MetLife India Insurance Ltd. But there is a tough completion among the three 1Metlife inc. through its affliates Sayeem Rafiq

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that is Bajaj Allianz, ICICI Prudential and MetLife. So, MetLife have an edge over others and should continue the same in the market.

Growth Ranking 2008 S B I L if e R e lia n c e L if e M e t L if e B ir la S u n lif e O m K o ta k S ahara M ax Ne w Y ork T a ta A IG H D F C S ta n d a r d S h r ir a m L if e IN G V y s y a IC IC I P r u d e n t ia l B a ja j A llia n z A v iv a D L F P r a m eNr icA a A e g o n R e ligN aA r e C a n a r a H S B C NOA B C ID B I F o r t is L ifN eA F u t u r e G e n e rNaAli B h a r a ti A x a LNifAe -20%

Sayeem Rafiq

103% 91% 88% 82% 73% 57% 51% 39% 37% 37% 21% 21% 1% 0%

0%

20%

40%

60%

80%

100%

120%

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Financial Status of MetLife {See annexure for fin. report}

From balance sheet The figure of total assets has increased from $356,808.0 (2004) to $559,149.0(2007) during past four years but it showed

drastic

decline

in

the

financial

year

2008,

[$501,678.0]. This might be the result of huge economic meltdown which effected all over the world. There is increase in cash amount but the long term investments have declined due to high risk in the slowing down economic scenario. Also the good will of company has increased to satisfactory level. Similarly the liabilities figure has increased from 2004 ($333,984.0) to 2007 ($523,970.0) but declined in 2008 financial

year

up

to

$477,944.0.

The

highest

figure

($408,961.0) is of policy liabilities i.e. the amount which the company owes to its policy holders in case of their claim/ accident. The amount of long term debt has shown an increasing trend from past five years ($7,412.0 to $13,425.0). There is a huge amount of retained earnings ($6,608.o to $22,403.0) which depicts that the company is not distributing its all net profit after tax in its shareholders. So the figure of total liability & shareholders’ equity is $501,678.0 in financial year 2008. Sayeem Rafiq

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From income statement

Total revenue figure shows increasing trend i.e. $38,701 to $50,989 where the total premium earned increases from $25,067 to $31,295. Gross profit shows small inclination from 2004 to 2007 but slows down in 2008 ($24,189 to $23,155). The company is doing increased expenses year after year, in 2005 it was $7,553 but in 2008 it was $7,907.0. Net

income

after

tax

figure

shows

incline

from

2004

($2,572.0) to 2007 ($4,102.0), but in 2008 the net income after tax amount is US $3,510. The EPS has increased in last 4 years but in 2008 it remains low at 4.72. From past ten years income statement predicts similar increase in coming financial year but there might the effect of economic slowdown. Figure moves from EBIT $1,175 to US $5,762 [In millions] (up to 2007), and in 2008 it declines to US $5,090 [In millions] Also ES (earning per share) varies from 0.83 to 5.2 (4.54 in 2008). From past 10 years balance sheet similar trend is viewed i.e. Current Assets varies from $225,232.0 (in millions) to $501,678, up to 2008. Also current liabilities vary from $211,542 to $477,944. In addition long term debt increases from $2,514.0 to $13,425.0. All above figures are forecasting better future of MetLife but C.A. should be utilized properly and lowering the liabilities. It is better to retain earnings than long term debt by discussing the same issue with share holders.

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BANCASSURANCE

BANCASSURANCE

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Banc assurance in its simplest form is the distribution of insurance products through a bank's distribution channels. In concrete terms banc assurance, which is also known as Allfinanz - describes a package of financial services that can fulfill both banking and insurance needs at the same time. It takes various forms in various countries depending upon the demography and economic and legislative climate of that country. Demographic profile of the country decides the kind of products banc assurance shall be dealing in with, economic situation will determine the trend in terms of turnover, market share, etc., whereas legislative climate will decide the periphery within which the bane assurance has to operate. The motives behind banc assurance also vary. For banks it is a means of product diversification and a source of additional fee income. Insurance companies see banc assurance as a tool for increasing their market penetration and premium turnover. The customer sees banc assurance as a bonanza in terms of reduced price, high quality product and delivery at doorsteps. Actually, everybody is a winner here. Benefits to bank Using bank as a distribution channel benefits both the insurance company and the bank. Benefits of using bank as a distribution channel are: 1)

Banks provide a readymade infrastructure and, therefore, reduces the time and cost in establishing distribution network by the insurance company Bank can supplement fee income without utilizing large amounts of capital.

3)

Leverage its strength in distribution of banking.-products.

4)

Customer

retention

by

offering

convenient

window

for

banking and insurance products.

Benefits to the insurance companies Benefits that would accrue to the insurance companies: Sayeem Rafiq

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Banks have the potential to avoid expensive agency system and facilitate prospecting of smaller term life insurance policies which are not covered by the existing agency system.

2

Banks' customer focused information system in the banks facilities automating the process of prospecting customers for specific products.

3

Banks provide an effective channel for direct marketing by periodic mailing and also online access.

4

Access to readymade customer base for selling insurance products.

5

Avoiding wasteful expenditure on data procurement, data warehousing and data mining.

Critical success factor Bank Assurance has been successful for selling insurance products due to: •

Easy accessibility

•

Customer trust on bank •

Frequent interaction with the customer

•

Quick service

•

Improved sales

•

Reduced cost of

•

High conversion rates of the customer

Convergence of Banking and Insurance Industries Key Issues for Banks in India As banks in India increasingly show active interest in entering the insurance sector, several managerial issues, regular concerns and Sayeem Rafiq

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operational challenges are beginning to surface. Her we seek to review the factors driving the phenomenon and then to consider some of the technical challenges that converge poses to senior bank managers. In particular, it advocates the need for a coherent articulation of the convergence proposal by every bank involved, and the implications the initiative holds for the core banking business. The study closes by considering some of the long-term implications in the initiative for public sector banks, which dominate the Indian financial system. The objective of the paper is to raise the awareness of banking and finance professionals about the global phenomenon of convergence in the financial sector and certain unique issues in the Indian context due to ownership and other aspects that underline the need for a careful trading of the path.

The pressure to move towards convergence There are three factors driving banks in India to look at entry into the insurance sector: 1) The attraction of fee income in the face of declining interest spread 2) The scope to divert the staff rendered surplus due to massive computerization 3) The motivation to enlarge the product range to bank customers. It is relevant to note that the factors that have pushed banks abroad into financial convergence by way of Banassurance are not entirely the same as in India. In continental Europe, well established Banasurance programmes contributes 20 to 30 % of the retail banking profits. The main driving force in their case has been to establish synergy with insurance to secure an additional and more stable stream of income. Banks have sought to leverage their extensive customer base and sell a range of financial services to increase customer retention. Another motive for banks overseas has been to reduce the risk based capital requirement for the same level of revenue. In a study published by the Economist Intelligence Unit in 1996 titled “Creating tomorrow’s leading retail bank”, one of the conclusions was that as Sayeem Rafiq

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retail banking became intensely competitive from electronic commerce, banks needed to quickly take up customer- centric business model, and Banc assurance emerged an important activity to aid banks ”based on their segmentation knowledge, develop pricing strategies and channel offerings for every single customer that are customized to the fullest possible extent”. Declining interest spread Banks in India at the present stage are not driven by such a customer segmentation approach before embarking on a new sector such as Insurance. At the same time, the three factors mentioned above are becoming important. While Indian banks have recorded an increase in net interest income spread) in the recent past, this is largely due to containment of interest expenditure in a softer interest regime witnessed at present. The ratio of spread earning foreign banks, as yields on assets have declined more than proportionately vis-à-vis the cost of liabilities. The net interest margin of the banks in India (as a percentage of total assets) was 2.85 % in 2001, which came down to 2.57 % in 2002. It is still higher than more competitive markets, such as UK (2.02 %), France (1.03 %), and Germany ( 0.8 %), and it can be expected that the margin would shrink to international levels as the competitive condition intensify. Re-deploying surplus staff: The second factor driving banks into insurance sector, viz. deploying staff ( most clerical) rendered surplus by the ongoing technology initiative, is a unique factor in India. Employee costs for Indian Banks have been high, especially for public sector banks at about 20 % of total expenses. The core banking initiatives undertaken by a number of banks will substantially streamline the transaction processing and back office operations, resulting in the need for major re-shuffle of personnel. As per an estimate, at least 20% of the clerical staff members engaged in these functions would need to be diverted for other work, and several banks are proposing to utilize them to undertake simple marketing or loan recovery initiative. In this context, a related question is whether the ongoing IT initiatives in banks are Sayeem Rafiq

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clearly planned with a view to quickly benefit from cross selling financial products to their vast customer base. A World Bank Review team that visited India in February 2001 to follow up the implementation of the Financial Sector Development Project had commented that the IT initiatives of Indian banks are not being driven by business or customer needs. The team found an undue focus on the hardware part of the technology without a corresponding attention being paid to the productivity aspect. This is an important observation that underlines the need to target the technology spend in banks to draw more value from customer, a key difference that characterizes the initiatives of banks abroad towards the convergence process. Expanding the range of Products: The third factor encouraging banks into insurance, viz. the urge to provide a broader range of products to customers, is an outcome of increasing competition in the banking industry. Banks have realized the importance of introducing new products and services which enhance the standing of the banks among customers. Introducing of new products brings publicity to banks and helps enhance their reputation among the peers. It is, however, important to recognize that banks in India tend to launch new products or services without having doing adequate homework. Banks in developed markets offer new services such as selling insurance products based on a deep study and research of customer behavior and their expectations, and extensive cost/benefit analysis. Product launches are preceded by a clear goal setting for the marketing team to achieve minimum levels of business. Marketing budgets are set, and the benefits flowing from the initiatives are closely monitored. On the other hand, most banks at home do not draw a clear roadmap for implementing new products, or set up a proper system to evaluate the benefits of new products at regular intervals. This is an important issue in the convergence process, which needs serious attention from the top level in the banks to achieve expected results.

Regulatory support for the convergence process in India India is one of the select countries that have provided a regulatory baking to the coming together of banking and insurance at a fairly stage of opening up the insurance

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sector. The banking regulator has divided the initiatives of banks to enter into the insurance business under three broad categories: Banks aspiring to take only distribution of insurance products without any form of risk participation. Such banks are freely permitted to do subject to certain filling requirements. a)

Bank proposing to take strategic equity stake in insurance ventures up to 10% of the equity capital of the insurance venture. Such initiatives are allowed in the case of strong banks with good profit record

b)

Banks seeking to form insurance joint ventures with up to 50% equity stake (and exceptionally up to 74%). This is allowed by the central bank in the case of very strong banks having a minimum net worth of not less than 500 crores, capital adequacy ratio of not less than 10%, good profit record and low level of impaired loans.

The Indian regulations concerning bank’s entry into insurance sector compare favorably with several other Asian countries. Thailand, for example allows banks to hold a maximum of only 10% of shares in insurance companies, while Taiwan allows only 5 %.

EVOLUTION OF THE CONVERGENCE PROCESS The model that allows pure distribution of insurance products through bank branches is catching up in India, with more than 20 banks announcing distribution arrangement for life and non life insurance products. Referral Model: There are two distribution models practiced here: the ‘referral’ arrangements and the ‘corporate agency’ arrangement. The referral arrangement refers to process whereby insurance company secures customer leads from the bank branch manager, by placing an insurance agent at the bank premises other means. It is a form of uncommitted relationship under which banks provide physical infrastructure to insurance companies within their select branches and earn a fee for each referral made by him. The insurance regulator has prescribed rules to restrict the referral model from becoming a major alternative to the more serious and binding corporate agency arrangement.

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Corporate Agency: Under the Corporate Agency Model, a bank becomes the authorized agent of an insurance company (life and non life) to distribute its products actively to customers. In the process, the bank agrees to undertake certain responsibilities. Corporate agency is a committed form of relationship that requires the bank staff involved in insurance selling to be trained and qualified for the purpose and the bank assuming responsibility to oversee that the sales activity is pursued as per the Insurance Regulations. In particular, the bank staff is expected to follow the standards of customer service prescribed the regulator. Under both Referral and Corporate Agency arrangements, a bank is allowed to tie up on exclusive basis with one life insurer and one non-life insurer. In other words, multiple tie-ups with several insurance companies is not allowed, so that bank can develop the required expertise by aligning with one firm. Banks aspiring to distribute products of more than one insurance company are required to take license as a broker and set up a separate firm owned by the bank As at March 2003, the regulator has approved strategic equity stake by four banks in Insurance companies. A strategic alliance may enable the bank partner to cooperate in developing insurance products suited to the bank distribution, and possibly in sharing customer information. The regulator has also approved full fledged joint venture arrangement in the case of four banks, with equity stake ranging from 26% to 74%.

Ideal Bancassurance model:

Is there an optimal Bancassurance model suitable for India? There is no straight

answer. The form of convergence that a bank chooses with an insurance company depends on the vision of the bank board, the size of the bank, its geographical reach and the client mix, and the capacity of the bank management to successfully manage the integration process. Given the divergent size and other characterizes of banks in India, it is likely that there will be multiple banassurance models here, perhaps all practiced successfully. In the popular model of entering into distribution agreements, the fundamental challenge for the bank and the insurance company is to reach a decision on a suitable commission structure, which provides adequate incentives to both. The major challenge in a corporate agency relationship is to make it work at the operational

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level. The task involved in making the frontline bank staff become competent insurance sales person and in the process overcoming several cultural and mindset barriers is somewhat indeed in our environment.. In the case of a bank assuming strategic equity stake without assuming risk participation in the insurance business, the key issue is what propels the bank to opt for this arrangement: whether it is proposed as a prelude to a more integrated form of entry, or an arrangement of convenience. In strategic stake relationship[s, the bank tends to remain a minority partner, thereby being unable to being about an alignment of its own interests with the insurance venture. Since the bank will be sharing equity partnership in the insurance firm with other minority and major holders, the inter se relationship issues would also assume importance. In a joint venture structure, both the partners are usually involved in setting up a new company as a green field operation, and the issues here are deeper. The decision of the bank to enter into a joint venture should be based on extensive discussions and negotiation between the bank and the insurance partner. A joint venture is a long term arrangement that should be well thought out and should work out in the mutual interest of both parties. There should be a strong commitment on the part of both the parties to create a truly partnership – based organization that reflects the virtues of both. Since bank- sponsored insurance ventures tend to draw more value from the bank partner than from the insurance partner at least in the early stages, the needs and expectations of both have to be balanced to create a participatory arrangement. An important issue for bank-sponsored insurance joint ventures in India is the higher level of equity ownership that the bank is required to take up in the early stages in accordance with the ownership rules in force, and the timing and manner of diluting the bank’s stake in the period ahead. Experience shows that the Indian banks are not adept at looking at equity ownerships with the eyes of an investor. A shrewd investor always spots opportunities for diluting the stake partly or fully at the right time with a view to book capital gains; Indian banks tend to carry on with the original level of equity holding irrespective of the performance of the invested entities until the regulatory authority directs them to disinvest. This is the case in respect of the asset management companies and other outfits set up by public sector banks, which continue to remain under their dominant ownership until the central bank directs them to lower the ownership levels, or totally exit from the business. Sayeem Rafiq

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It is too early to assess the performance of the relationship[ between banks and the insurance companies in India under the arrangements currently in force. Experience in other countries suggests that not all Banassurance models have been successfully everywhere. Quite a few of them have succumbed to problems encountered during the implementation phase.

Business risk A bank may also run the risk of adverse impact on the banking relationship with a customer following a dispute between the customer who has bought an insurance product from the bank, and the insurance company. This could arise in distribution of non—life insurance products, such as property insurance cover, or marine cargo cover. Any dispute in claim settlement could spill over to the banker-borrower relationship. For example, non settlement of a claim under a fire insurance policy may result in the loan becoming a non-performing asset, with the client seeking to take the bank to task for selling a policy on which the settlement is not forthcoming. Strong customer education at the timer of distributing the insurance policy by stressing the respective role of the bank and the insurer, and clear description in product literature about the insurance responsibility for claim settlement would help to mitigate the risk. In our context, as earlier stated, the Indian regulations apply the exclusivity principle in distribution arrangements between a bank and an insurer, which could add to the dimension of the risk. Since a bank is allowed to tie up with only one insurer, it will be obliged to place the business relating to all its clients with the insurance company concerned. The capabilities of the latter to service the needs of the large number of bank clients would become a critical factor.

Channel conflict risk One of the risks insurance companies run in entering into the banc assurance distribution arrangements is invoking the potential ire of the agency force. Individual agents are the main source of procuring business for insurance companies. The powerful agents usually Bancassurance partnership that competes with their business sources. There have been instances of agents boycotting insurance companies on Sayeem Rafiq

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account of bank distribution arrangements and create problems of channel management for insurers. This may have indirect problems for the bank taking up insurance distribution. Faced with such action, an insurance company tying up with bank may choose to design a different, probably less attractive or remunerative products for the bank distribution.

Banks as Referral Agent of an insurance company

Major aspects of the Insurance Regulations 1.

A Referral arrangement is entered into with a bank for access to its database, provisions of physical infrastructure and for display of publicity material of the insurer.

2.

A bank entering into such arrangement shall not be allowed to enter into any similar arrangement with another life insurance or non- Life Insurance Company.

3.

Where a bank has been licensed to act as a corporate agent for an insurance company, the bank shall not enter into referral arrangement with another insurance company.

4.

The purchase of insurance products by the customers of bank should be on a voluntary basis, and this should appear prominently in all publicity materials distributed by the bank and the insurer.

5.

There shall be no linkage either direct or indirect between the provision of banking services and sale of insurance products.

6.

Every referral arrangement shall be for a fixed period.

7.

A copy of the Referral Agreement entered into between the bank and the insurance company should be filed with the Insurance Regulatory Authority and RBI.

8.

Referral fee paid to the bank should be treated as acquisition cost to the insurer concerned, and the total of such referral fees paid should beat a proportion to the gross premium income earned through the arrangement. For instance, where the referral arrangement generates 10 % of the gross premium, the maximum payout as referral fee cannot exceed 5.5% of the premium amount.

9. Sayeem Rafiq

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Insurance products distribution by banks as Corporate Agents.

Major aspects of the Insurance Regulations 1.

A Corporate Agent cannot be an agent for more than one Life Insurance or one non- life Insurance company at the same time.

2.

Every bank aspiring to become a corporate agent should designate an officer as the ‘Corporate Insurance Executive’ (CIE). CIE’s are generally a director or a senior officer who shall be overall in-charge of the function of corporate agency.

3.

Only Specified Persons (SPs) in a corporate agent shall solicit and procure insurance business.

4.

Both CIE’s and SP’s should undergo the practical training of 100 hours and pass the test conducted for Corporate Agents by IRDA before they are given the license. IRDA has prescribed those employees possessing CAIIB qualification, or marketing, Chartered accountancy, cost accountancy, MBA qualification or such specified qualifications, need to undergo only 50 hours of training before taking the mandatory test.

5.

The insurer shall issue a license to the bank as the Corporate Agent, which shall be valid for a period of three years and could be renewed thereafter. There is a token fee of Rs 250 for issuing the license.

6.

A Corporate Agent is entitled for commission remuneration as provided in the Insurance Act, 1938 which ranges from a minimum of 2%for single premium policies and 40 % for policies with regular premium mode.

7.

The bank as a Corporate Agent shall be responsible for all acts of CIE and SPs. It shall ensure that only trained, skilled and authorized persons in the bank solicit or procure insurance business.

8.

The corporate agent shall not force any person to buy an insurance product. The employee selling the products shall give adequate pre-sales and post-sales advice to the insurer, and render all possible help and cooperation to an insured in completion of all formalities and documentation in the event of a claim. The Sp’s should explain to the prospect the nature of information required in the proposal form by the insurer and also the importance of disclosure of material information.

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9.

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The corporate agent shall bring to the notice of the insurer any adverse habits of the prospect, and not induce a prospect to submit wrong information.

10.

The corporate agent shall not offer different rates, advantages, benefits other than those offered by the insurer.

11.

The corporate agent shall not have portfolio of insurance business from one person or organization in excess of fifty percent of total premium procured in nay year.

INCORPORATION OF METLIFE AS A JOINT VENTURE WITH J&K BANK

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Our Banc assurance partner in life insurance is MetLife India, which is a joint venture of MetLife International Holdings Inc, the No 1 Life Insurer of USA, J&K Bank, M. Pallonji & CO and private equity investors with the following capital structure

MetLife India

26%

41.60 Crores

J&K Bank Ltd

25%

40. 00 Crores

M.Pallonji & co

31%

49. 60 Crores

Other private equity

18%

28.80 Crores

100%

160 .00 Crores

Investors Total

The initial authorized share capital of the joint venture company was Rs 110 crores divided into 11. 00 Crores equity shares of Rs 10/- each. However the joint ventures will require approximately Rs 450 Crores of capital over six years from the date the joint venture company was duly registered. In October 2003 the joint venture Sayeem Rafiq

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partners contributed additional share capital of Rs 50.00 crores out of which the bank’s contribution was 12.50 crores thereby raising the Bank’s share to Rs 40.00 crores. MetLife India formally launched its operation in J&K State on 7th of March 2002 at Srinagar with a small range of products namely Met Sukh ( Money Back Policy), Met Shanti (Endowment Policy) and Met 100 ( Whole Life Product). The product range was enhanced by introducing some new products as per the insurance needs of customers. The existing product range includes the following: Met Mortgage Protector policy: Specially devised to secure the interest of J&K Bank staff and the borrowers availing the Housing Loan, Car loan and term Loan facilities with a repayment period of 5 years and above Met Gold ( Endowment) Met 100 Gold (Whole Life Policy) Met Suvidha ( Endowment) Met 100 Platinum (Participating whole life for face amounts above Rs 5 lacs) In addition to the above products Metlife India has recently launched a pension product namely Met Pension. The bank has been selling the insurance products of MetLife India as theirCorporate Agents w.e.f. 23.06.03. MetLife India sold about 10000 policies with Annualized premiums of Rs 1027.62 Lacks through our branches . Bank earned a commission income of Rs 263.93 Lacks during the said period. The quantum of life insurance business mobilized by J&K bank during the year 2002-03 constitutes about 38% of the total business done by MetLife India through the country during the said period. The bank while using its 520 branch distribution channels for sales of MetLife India products provided a ready made infrastructure to Metlife India thereby reducing the time and cost in establishing a distribution network for the company’s products. Commission is paid on the following rates to Bank by MetLife 40% (maximum) Sayeem Rafiq

For the first Year Premium Regd No. 10807184

MetLife India Insurance Company Ltd 7.5 %

For 2nd and 3rd year

5%

For 4th year and onwards

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Bank in association with its Bancassurance partner i.e MetLife India has been providing fast and competent insurance services to its customers and earned their loyalty. Employee productivity of the bank has also increased as its customers buy the insurance products of their choice in less time at one shop. Presently the bank has got about 200 trained/licensed Insurance Managers and about 400 Clerks ( having product knowledge) whose services are utilized in prospecting the insurance customers for Bancassurance business throughout the country.

Objective To generate fee income for the Jammu & Kashmir Bank of Rs 40 Crores by the 7th year of operation.

Assumptions 1) Insurance income will pay Jammu & Kashmir Bank 40% Commission subject to regulations 2) Reimbursement of expenses incurred by the bank will be determined. Average premium per policy Rs 5000 Products 3) Traditional Life Products similar to that of LIC 4) Endowment 5) Money Back Strategy is to price similar to LIC to achieve expense loading, thereby giving better value to the customer Other Products 6) Credit Insurance 7) Capital Repayment Operational Plan 8) Identify JKB branches and employees who will be designated for insurance sales. 9) Put them through IRDA agent licensing for composite licenses ( both for life and non life) 10) Additional training to gain prospecting and selling skills 11) Marketing and sales support to be provided by MetLife India Insurance Sayeem Rafiq

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Company 12) Products sold through JKB branches to be Co-branded. Underwriting 13) MetLife will install electronic underwriting software at all designated branches of Jammu & Kashmir Bank 14) It is anticipated that approximately 85% of all applications will be electronically underwritten 15) MetLife offices will issue policies and courier them to Jammu & Kashmir Bank Branches Policy Holder Services 16) The IT architecture will facilitate providing customer service from Jammu & Kashmir Bank branches. 17) MetLife will also consider establishing a call centre for Jammu and Kashmir Bank Customer. Additional Support 18) MetLife will enjoy special advisors ad station them in Jammu & Kashmir Bank to support the sales efforts of J&K Bank employees. 19) MetLife will open dedicated offices in Jammu & Kashmir to provide pre and post sales support to Jammu & Kashmir Bank. 20) These dedicated offices will also have full-time courier agents to develop the markets in Jammu & Kashmir. 21) These offices would also support the rural branches of J&K Bank to generate business from rural areas to comply with IRDA regulations. 22) Continue Interactive process between MetLife India Insurance Company and Jammu & Kashmir Bank. 23) Identify branches and employees for licensing training 24) MetLife India will identify dedicated ban assurance coordinators 25) Joint effort to help Jammu & Kashmir Bank secure corporate agency License. 26) Discuss and finalize distribution agreement 27) Jammu & Kashmir Bank to send IT Director to MetLife to understand IT architecture of J&K Bank as well as MetLife India

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Introduction to Reinstatement The termination of an insurance policy due to non-payment of premium is known as lapsation. A policy lapses after the 30th day from the premium due date. The process to activate the lapsed policy is known as Reinstatement. Documents / Charges required for policy reinstatement The following grid is to be referred to determine the documents required for reinstating a lapsed policy. Reinstatement of Policies with CI Rider No.

of

Days

since

Lapsation 0 Day – 180 Days

181st Day - 270th Day

Sayeem Rafiq

Standard Case Collectible

Sub Standard Case

Premium

+

Premium

+

Interest Collectible

Interest + Revised DGH

Collectible Premium + Interest Collectible Premium + Interest + Revised

DGH

+

(Mandatory)

Regd No. 10807184

MER

MetLife India Insurance Company Ltd Collectible

Premium

+

Interest + Revised DGH + 271st – 1094th Day

Medical as per New Medical Grid depending on Current age and Sum at Risk

More than 1094 Days

Decline Request

P a g e | 65 Collectible Premium + Interest + Revised DGH + Medical as per New Medical Grid depending on Current age and Sum at Risk Decline Request

Reinstatement of Policies without CI Rider No.

of

Days

since Standard Case

Lapsation 0 day – 180 Days 181st Day - 365th Day

Collectible Premium + Interest Collectible Premium + Interest Collectible Premium + Interest Collectible Premium + Interest + + Revised DGH

th

th

366 – 1094 Day

Sub Standard Case

Revised

DGH

+

MER

(Mandatory) Collectible Premium + Interest Collectible Premium + Interest + + Revised DGH + Medical as Revised DGH + Medical as per per

New

Medical

Grid New Medical Grid depending on

depending on Current age and Current age and Sum at Risk More than 1094 Days

Sum at Risk Decline Request

Decline Request

Reinstatement Process at Branch Reinstatement process refers to restore the policy after the insurance policy has lapsed. ➢ Reinstatement requires the completion of specific reinstatement application or request, including questions regarding medical information and history as required. ➢ Past due premium payments are also required to process the reinstatement

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➢ Reinstatement can be processed as non-medical reinstatement and Medical reinstatement. Non-medical reinstatement is also referred to as AutoReinstatement. Branch Operations are able to process such reinstatement cases at their end. Branch Operations should ensure and complete the Reinstatement transaction in SWIFT in one go without closing system window / any interruption, while processing Non Medical Reinstatements. If the transaction is interrupted in between and re-started, SWIFT would show an error as "Previous Request Already Open" and the Reinstatement would not be processed. Other Important Points:1. If a Reinstatement transaction has been already processed within the last 30 days or a transaction is incompletely ranches processed, then SWIFT would display an error message that the previous request is already open, Branch is supposed to do a 'Contract Enquiry' for such cases to confirm if receipt has already been created. For such cases, request needs to be sent to Remittance team for Manual Reinstatement. If receipting is not done then Branch should do a renewal receipting and log a request for manual reinstatement with Remittance team. 2. Outstation cases are reinstated only on cheque realization 3. Paid Up cases are also required to be reinstated. 4. Branch needs to raise the request with Policy Servicing team after renewal receipting for Premium Holiday cases. POS team should further reinstate the policy and action the closure of the premium holiday transaction in Life Asia. DGH Reinstatement Process at Branches Process for Reinstatement of cases with DGH 1. Branches would do the receipting of premium through Renewal premium screen in SWIFT 2. If DGH is pending and premium is received, receipt the premium under renewal premium but wait for DGH to log a ticket in Met Desk 3. Once DGH is received, Branches to raise a ticket in Met Desk under Remittance along with the scanned copy of the DGH

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4. Remittance team would co-ordinate with Underwriting for processing and close the Met Desk ticket.

Important Points on Reinstatement Points to be noted regarding Reinstatement payments ➢ No excess or short payments can be accepted ➢ Policies which are lapsed for >1094 days cannot be reinstated (Subject to product-wise features) ➢ Medicals are subject to SUC check as per the underwriting guidelines. The rules with respect to reinstatement of each product is available in the Terms and Conditions ➢ The Remittance Team sends Lapsation notices to the customers in case of a case getting lapsed ➢ The Lapsation notices are sent to the customers on a frequency of T+7 days, where T= Lapsation Date. Subsequently, they are also informed through SMS and Phone call about the policy lapse status ➢ Lapsation Notices are sent for all frequencies and modes of payment ➢ The Lapsation Notices are dispatched on a once a week basis (for all the cases for which the date (T+7) if falling within the period) ➢

Interest Waiver Request can be raised with the Remittance Team for waivingoff the interest. Remittance team will approve/decline the waiver request as per applicable timelines

➢ Payments should be collected only after waiver request is approved by the Remittance Team, in case the waiver request is declined, then full payment has to be collected Sayeem Rafiq

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Important checks while submitting Reinstatement Requests ➢

A reinstatement quote has to be attached

➢ Whether the quote is still valid (i.e. not expired) has to be checked ➢ If the reinstatement quote is valid, then ensure that the payment is received in full and in line with the amount reflected in the quote (including collectible premium and interest as applicable) ➢

If the existing quote or available quote is not available has expired the branch user has to log-in a fresh reinstatement quote in the system. The quote will provide details of the outstanding amount payable for reinstating the policy. Provide the quote to the customer and ensure that only the full amount is accepted towards reinstatement of the policy

➢

Ensure that the payment and / or DGH requirement (if applicable) is fulfilled. In case if the Medicals are required, Branch Operations to coordinate and set up an appointment with the customer for the medicals tests and also provide the “Medical Authorization Letter” to the customer.

➢ Ensure the documentation is complete and the payment made is correct ➢ No short payments to be accepted.

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Data Analysis and Interpretation

Inferences and Analysis:5% respondents came to know about MetLife through Friends 1% respondents came to know about MetLife through Advertisement 89% respondents came to know about MetLife through J & K Bank 1% respondents came to know about MetLife l through Hoardings Most of the customers were introduced to MetLife through J&K Bank as the later is joint venture partner of this company in India and lesser number of customers got aware of it through friends and advertisement. Though most of its marketing is done by J&K bank but it needs to use other marketing tools to capture more and more market. Since the presence of MetLife has been made more visible through Co branding wherein both names appear (J&K bank and MetLife). MetLife does not make frequent use of Advertisements in Local Channels as people are used to these channels. Also the Srinagar City does not witness the use of Hoardings. MetLife makes very little use of Hoardings in the city as compared to LIC, HDFC Standard Life, ICICI Pru, Bajaj Allianz. That is why people are not much aware of MetLife. In order to gear up in the entire valley MetLife in association with J&K Bank should make proper plans to use these tools so that more and more people should come to Sayeem Rafiq

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know about that particular company.

55 respondents chose MetLife because it is affiliated with J&K Bank. 20% respondents chose MetLife because of its High returns 8%12 respondents chose MetLife because of its Tax Benefits 12% respondents chose MetLife because its variety in policies The major factor that MetLife became part of the respondents was The Goodwill that J&K Bank has created. Also the loyalty of the customers towards the bank was another factor to go for a MetLife Policy. Other reason being its high returns on policies, variety it provides and tax rebates.

20% respondents strongly agree that their investment is secure 70% respondents Agree that their investment is secure 7% respondents mentioned Cant Say. 2% respondents Disagree that their investment is secure 1% respondents Strongly Disagree that their investment is secure

More than 50 percent customers agree that their investment is secure and only few customers are not sure about their investments. So MetLife needs to build confidence in their customers. They should take regular feedback from the customers and should take steps that can help customers to know about their investments

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15% respondents strongly agree that MetLife staff is helpful to them 70% respondents agree that MetLife staff is helpful 5% respondents mentioned Can’t Say 7% respondents disagree that MetLife staff is helpful 3% respondents Strongly Disagree that MetLife staff is helpful More than 70% of the respondents agree that the staff of MetLife is helpful and provides proper guidance regarding policy matters. Few respondents did not experience any such behavior. To achieve better growth MetLife should minimize such kind of behavior if so ever. This entire business depends upon the customer satisfaction, whenever a customer is satisfied with the company he would invite others to join the race or otherwise it had a bad effect on the sales. So Metlife should help the customers as required by the customers. This helps in increasing the loyalty of the customers.

13%respondents pay their premium through cash 77% respondents pay their premium through their bank account 8% respondents pay their premium through cheque

Most of the customers pay their premium through their bank accounts. They feel it easy to pay their premiums through Bank by activating SIM. At the end of the each month the said amount is automatically debited from his account.

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Cheques are also given by some customers and few of the customers pay through cash. The payment of Premium through Cash mode is very low because people feel insecure to carry cash along with them

60% respondents mention that they Always receive Renewal premium notice in time. 7% respondents mention that they usually receive their Renewal premium notice in time. 13%

respondents

mention

that

they

sometimes

receive

Renewal

premium notice in time 20% respondents mention that they never receive Renewal premium notice in time. Though most of the customers receive their Renewal premium Notice in time but there are customers who receive Renewal notice but not in time. So MetLife should improve their services as customers wait for notices, and when they do not reach on time customer feels that he had some more time and in the mean time policy gets lapsed and customer suffers. So MetLife needs to improve their services and should send such notice in time because this becomes the cause for Policy lapsation.

65%respondents contact their CSO or insurance Managers in case they don’t receive their premium receipts. 5% respondents call MetLife in case they don’t receive usually receive their premium receipts

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20% respondents contact MetLife head office in case they don’t Head office sometimes receive their premium receipts 37% mentioned “other specify’ when asked. Most of the customers contact their CSO or Insurance manager in case they don’t receive their premium receipts as it is very easy for them to contact their respective CSO’s. Few of them either call MetLife office or contact them personally. Their perception is that they give the exact details regarding their issues. There are many customers who have never faced such problem i.e. they have always received their Premium Receipts and There are some who don’t bother about their receipts because of many reasons like busy schedules. But as this Premium receipt is an important document both for insurer and insured so customers should keep a track of all receipts and contact MetLife people in case they don’t receive otherwise this creates a lot of problems both for the Insurer and Insured Person.

3% respondents say that their policy has been lapsed twice. 1% respondents say that their policy has been lapsed many times. 54% respondents say that their policy has never lapsed. 44% respondents say that their policy has lapsed Once

Though most of the customers policy has never been lapsed but there are many whose policy has been lapsed either once, twice or many times. This lapsation creates a problem for both the cus tomers. and MetLife people Customers need to re activate their policy in such case by paying interest along with the premium amount. And MetLife staff needs to to do all cumbersome calculations involved in lapsation for customers and give them details regarding their policy.

48% respondents pay their premium monthly. 15% respondents pay their premium Quarterly. 24% respondents pay their premium Half yearly 8% respondents pay their premium yearly

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Majority of the respondents find monthly mode of premium payment more feasible than other modes of premium Payment and many others pay quarterly, half yearly or yearly. Customers find this mode of payment feasible as it does not put burden on them. The payment mode of premium depends upon the Income of the customer, investments etc. Most of the customers find it easy to pay small amount every month while for others it’s more feasible to pay in one whole yearly installment. This type of payment is done by Business Persons, high profile persons like Govt. Officials etc. And also for some it’s feasible to pay half yearly and quarterly.

25% respondents mentioned’ YES’ 60 %respondents mentioned ‘NO’ 15% respondents mentioned ‘CAN’T SAY’. One fourth of the responded that there should be an online system to pay the premiums and keep record of the same. These respondents have a good knowledge of electronic business, and frequently use internet. This feature will help them in doing transactions fast and would be in constant touch with their investments. Also a major portion of the respondents responded in negative, because they were not aware of such systems, their working etc. Also a majority of policy holders are Business persons and they also responded in negative because the communication link ( Internet) usually remains down and they find it hectic process. Major reason for this being that they were less educated and had no knowledge about computers. Thus As 25% customers find the need of such online systems so MetLife should not ignore them and should develop such a system which will help customer to check their details anywhere at anytime and get all necessary information regarding their policies and also Sayeem Rafiq

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regarding MetLife. Also they should motivate the customers who are against to such systems to use such features, and if they feel any problem MetLife should provide assistance in all manners to introduce electronic Business as it is time saving , and faster than normal procedures.

5% respondents say that they are always informed by Metlife about new products. 7% respondents say that they are usually informed by Metlife about new products. 8% respondents say that they are sometimes informed by Metlife about new products. 80% respondents say that they are never informed by Metlife about new products. Majority of the respondents say that they are not informed by MetLife regarding their new products. Metlife should inform their Customers about their new products They should send such information notices to customers and also Cso’s should provide such information to customers who visit them or who are in touch with the CSO. This will create a feeling among customers that they are being cared and will keep customers satisfied which will finally result in the increase in sales.

8% respondents say that they receive reminder always 20% respondents say that they receive reminder usually 52% respondents say that they receive reminder sometimes 20% respondents say that they never receive reminder As about 20% respondents never receive any reminder regarding their premium payment. There was found a delay in sending the reminder to Sayeem Rafiq

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customers, usually the mode of telecommunication is used to remind the customers their due date. But the problem is that the contact numbers are out dated. A need to update the contact numbers is the issue to be kept at highest priority.

56% respondents Always receive their Premium receipts. 12% respondents usually receive their premium receipts 29% respondents sometimes receive their premium receipts 3% respondents never receive their premium receipts Most of the customers receive the receipt after paying their premium. But there are some who sometime receive or don’t receive at all. This Sayeem Rafiq

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again focuses on the service .MetLife should try their best to improve their services and should give proper receipts while accepting premium from customers. Premium receipt is an important document for customer as well for MetLife. If there had been on-line system then this issue might not have been so important, so on-line system is recommended in Kashmir Valley particularly.

80% respondent mentioned that they received the receipt/ ticket No. raised. 20% respondent said that they did not receive the receipt due to lack of time/ busy schedule. It is obvious that after the cumbersome work of reinstating the lapsed policy, all the customers will demand any receipt No. from the concerned authority, whether it is the customer itself or the CSO. A few cases are here who have not received the receipt no. due to exhaustion from the process. Management should try to put all the customers at motivated level so that the goodwill of company would be sustained.

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28% respondents said that they would like to recommend MetLife to others 18% respondents said that they would not like to recommend MetLife to others 4% respondents mentioned ‘CANT SAY’. This question is directly related to the customer satisfaction. Though many customers were satisfied to the extent that they wanted to recommend MetLife to other People they know. But there were also many other customers who either did not want to recommend it to others or were not sure whether they will recommend or not. Such a response from customers side questions/doubts the satisfaction level in customers by MetLife .The main reason for this being bitter experience of customers with MetLife Thus MetLife should try its best to satisfy its customers and make customer their first priority. MetLife should also appoint well trained CSO”s that’ll develop confidence in their customers. MetLife should also focus on proper selling of policies. The customer should not feel that he/she has been cheated. Thus wrong selling should be avoided. Proper and correct information should be provided to customers regarding policy.

RESEARCH FINDINGS

“THE PERSISTENCY IN LIFE INSURANCE INDUSTRY” Sayeem Rafiq

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WITH SPECIAL THRUST ON LAPSES AND LOOPHOLES

Persistent means to continue to exist and the equality of being persistent is called Persistency. In Insurance terminology, it is to get renewal premiums continuously, without a break. If suppose there are 95% policies which are getting renewal premium continuously, it means there is 95% persistency. The rest of the 5% policies, which are not continuing are termed as Lapsed. In general, a period during which something that should happen does not happen is called Lapse. In Insurance terminology, if the policy holder does not pay his/her premium on the due date or even after a grace period of one month, the policy gets lapsed. There were almost 481 Lapsed Policies in MetLife India, Kashmir division. The graphical representation of all the policies as per the tables are shown as:

PRODUCT Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd

NAME OF THE PRODUCT

NUMBER OF POLICIES

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PERCENTAGE

Whole – Life

25

5

Platinum

27

6

Met Junior

4

1

Met Bavisha

5

1

Money Back

155

32

Gold End Non Par

24

5

Gold End Par

110

23

Endowment

131

27

Mode Nature of Payment

Number of Policies

Percentage

Annual

65

14

Semiannual

58

12

Quarterly

138

29

PSP

125

26

Monthly

91

19

GRAPHICAL REPRESENTATION

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Districts Name of District

Number of Policies

Percentage

Srinagar

96

35

Anantnag

57

20

Pulwama

58

20

Kupwara

9

3

Baramulla

26

9

Budgam

28

10

Non-Available

9

3

GRAPHICLA REPRESENTATION

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The following objectives were set for the present study: 1

To rectify the errors in the system which led PSP’s and Monthly’s to appear in the lapsed list.

2

To find the discrepancy in the data for the rest of the modes.

3

To know the factors responsible for the lapsed policies.

4

The most important was to go for the revival of the policies.

After delving deep and rectifying the errors in the system it was found that almost all the 200 policies in which PSP’s were 138 and Monthly’s were 60 were still on the stand. The problem cropped up because: 1) The underdeveloped system of the service 2) The infancy of MetLife in Kashmir 3) The in-experience of efficient FA’s of J&K 4) The most important the communication barriers at different stages

By day by day, the FA’s are becoming more experienced and the system of service is getting improved and the MetLife have entered into the maturity stage of growth. The communication barriers are getting less and less with time and MetLife is moving Sayeem Rafiq

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towards better quality service. Apart from PSP’s and Monthly’s there were almost 283 policies which fall in the category of semi-annual, annual and monthly mode of premiums. I was given by the MetLife almost 50 Customers. To meet the rest of the 3 objectives I adopted two approaches. My first approach was to contact financial advisors (FA’s)/ Insurance Managers of J&K Bank to know the factors responsible for the lapsed policies from their point of view and to clear the discrepancies in the data regarding the correction in names, addresses, CA Numbers and dates, the actual FA who has closed the sale of policy. My next step was to contact the customers personally so as to reach the gross root of lapsed policies. After, a die hard endeavor and concerted efforts I met 15 FA’s in branches of different districts. I also made somehow possible to meet all the 50 customers at their respective residences, business establishments and some at their concerned bank branches. Some of the customers were contacted telephonically because of their hectic schedules and engagements. My second objective to clear the discrepancies was solved just after meeting the concerned FA’s. My third objective to know the factors responsible for the lapsed policies was collected from the FA’s as well as from the customers after having a detailed talk with them. The summarized list of factors is as follows: 1

A large number of policies have been sold under the influence of the advance managers. The parties who have made policies have treated their first premium as loan charges. As soon as their amount of the loan was disbursed, they discontinued their policies.

2

A Good number of policies have been miss sold as the policies with heavy premiums does not become possible for the customers to continue.

3 Sayeem Rafiq

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had been under this impression that their policies are with the bank. After coming to know the actual reality I.e. MetLife is foreign company, they stopped to pay the premium. They believe MetLife being a foreign company can windup any time by which we will loose our hard earned money. 4

Lack of staff attached to FA’s of J&K bank. The FAs are more involved in closing the new sales and they don’t get much time for the revival of policies

5

Need based selling has not been done as customers now are comparing the returns of Bank with insurances they do not take the risk factor into the consideration

6

The FAs are going through the role conflict. Because, they were serving as managers in J&K Bank, they had different position and status. But after deputing them as FAs in MetLife they were asked to perform a job of insurance agent; which according to them is much inferior to their earlier positions. With the result they do not want to be after the customers.

7

It had been a wise decision if the manager would have been deputed as per their choices because as far as insurance and making of a sale is concerned, there should be a high degree of rapport with the customers because customers go for policies on personal liaisons.

8

As far as advertising and marketing is concerned MetLife is less visible. Therefore, there is less awareness among the masses in Jammu & Kashmir about MetLife.

9

The majority of population in Kashmir is Muslims; their religious belief is in conflict with the very concept of Insurance.

10

It is well said the first impression is last impression. Due to delays in the policy bonds, bad impression was engraved in the minds of the customers.

11

There is a big gap between the expected services and the perceived services. Due to poor services offered by MetLIfe, a majority of policies has gone lapsed.

12

There are unknown negative tendencies among the certain customers for non continuing their policies.

13 Sayeem Rafiq

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continue there policies. 14

Due to delay in the premium the customers were charged interest. This has badly hurt the feelings. Even though they had requested for the waiver of the interest accrued it was not waived. At the very moment they had decided in their minds of not continuing their policies.

15

There is no direct contact of MetLife with customers. They are at the two extremes continuum of system. The big gap between the two has increased the poor service.

16

Unrealistic goals were set for FA’s due to which some of the policies were made under coercion.

17

There are barriers in communication at different levels of the system

18

A large number of people in Kashmir simply forget to deposit their premiums because of their hectic schedules and engagements.

19

Because of the non facility of changing the term of the policy a number of policies go lapsed.

20

Before transferring the previous FAs have not handled over the list of the customers to the next one.

21

Changing of FAs as led a good number of policies to go lapsed, because the previous FA had personal relations with the customer.

22

Product Knowledge was not made clear to the customers at the time of sale of the policy. By the time customers have gone mature enough to distinguish the products.

23

A number of customers have already their policies in life insurance and they have been depositing their premiums from a long period. So they do not want to lose the amount there as it becomes burden for them to continue two policies at a time.

24

A number of customers had instructed the FA to debit their premiums on due dates but due to the change in FA it was not done. The customer remains in this notion that his premium has been debited from his account.

25

A number of policies are lapsed because there is a big gap between the perception of the customers and MetLife, thus they could not understand the actual behavior of the customer.

26

As new products offered by the other Insurance companies are more attractive coupled with high returns. The customers who have paid only

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a single premium in MetLife switch over their policies and go for the new policies in other companies. They feel that the choice of the products is very less in MetLife. 27

After paying the premium a number of customers have never received any sought of receipt. This has created a lack of trust and doubt among them. They feared to deposit the further premiums. They had made their minds until and unless they won’t receive the receipts of the paid premiums, they won’t pay the new premiums.

The last objective which was to work on the front line sales job was to motivate the customers for continuing the policies. After die hard efforts I was able to revive 47 Policies (awaited list of about 13 customers ) with a premium of about 6 lacks. The average premium per policy is Rs 12,000 i.e. Average

Sayeem Rafiq

=

premium amount / No of customers

=

Rs 6 Lacks / 47

=

Rs 12,000

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CONCLUSIONS: After deliberating upon “The Persistency in Life Insurance Industry with special thrust on loopholes and the reason for lapses”, it can be concluded that if MetLife has to sustain its position in Kashmir it has to provide extra services that can motivate customers and win their trust and loyalty. Customers usually complain about the various errors that are being created

by the organization

by not providing

the policy

documents and renewal receipts on time. Delivering quality product should be the first preference of an organization towards its customers as quality service is the basic element which frames firms quantitative advantage. The MetLife should go on improving the quality of the service they provide to the customers. We all know that present

era

is

the

era

of

‘buyers’

market

has

become

customer driven. The customers have become very smart with the

result

it

Customization,

has

given

birth

Customerization,

to

the

concepts

Relationship

like

Marketing

and Co-creative Marketing. Day by day customers are becoming more and more mature to distinguish between products offered by different companies. Immense lack of information about MetLife in Kashmir has created a vague picture in the minds of the Sayeem Rafiq

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people. MetLife is not concentrating in the retention of the existing customers but is more and more concerned with the new customers. Customers by and large are not satisfied with the

service

provided

by

the

MetLife.

The

complaints

regarding the policies made under the influence of advance manager is because of the fact that unrealistic goals were set by MetLife for the FA’s. Without any exaggeration any hype it can be inferred from the said study that whatever the business has been done by MetLife in Kashmir, it is only because of J&K Bank in general and FA’s particular. MetLife should understand that in Kashmir they are riding on the back of J&K Bank.

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Suggestions 1)

Though most of the Marketing is done by J&K Bank but MetLife should not solely depend on it but should adopt other marketing tools to capture more and more market.

2)

Wrong selling should be avoided i.e., No Policy should be sold under the influence of Advance Managers.

3)

Customers

should

be

given

actual

knowledge

about

the

company with whom his policy bond is made i.e Metlife . 4)

MetLife should equally concentrate in the retention of existing customers as well as capturing new ones.

5)

MetLife should send periodic Policy details to customers so that they have a track on their policy.

6)

MetLife should update its customer information database like customer address, phone number etc.

7)

MetLife should try to minimize its policy requirements so that policy taking becomes easy and less time consuming.

8)

tLife should try to personalize its services to some extend like giving reminders through phone calls, sms’s and emails.

9)

As observed the operation staff is overloaded with work. So more staff should be appointed to lessen the work load to provide quick and better service to customers

10)

Policy bonds should be issued within 3-7 days as the competitors are doing the same.

11)

One copy of the receipt should be sent by post to the customers and one through FA

Sayeem Rafiq

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MetLife India Insurance Company Ltd 12)

P a g e | 90

MetLife should update their customers about their new products and their CSO’s should also provide such information to customers.

13)

The list of lapsed policies should be given to FAs after every month.

14)

MetLife should have a proper training Mechanism to train and Develop CSO.

15)

Develop well organized renewal collection premium system.

16)

Develop customer relationship management.

17)

Be very flexible, innovative and customer driven. Customer if demand the waiver of interest should be given.

18)

MetLife should work hard to know the actual behavior of the customers.

19)

After transferring of FA’s a complete list of customers should be given to the next FA. This will help in conducting work smoothly

Sayeem Rafiq

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ANNEXURE

Sayeem Rafiq

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Glossary TERMS USED IN INSURANCE & LIFE INSURANCE

INSURER/ASSURER; The insurance company with whom an article is insured is known as insurer. Also known as underwriter, the insurer issues insurance policies. In life insurance the insurance company is called ASSURER. INSURED/ASSURED; The person who obtains insurance policies from an insurance company is called insured or assured. Every insured party must possess insurable interest in the subject-matter insured. PROPOSAL; It’s the application made by the assured to secure insurance policy from the insurer. Proposal has to be made on a prescribed form supplied by the insurance company. POLICY; Insurance policy is a contract between insurer and insured. It contains all terms and conditions of the contract as agreed by both parties. Its a stamped and sealed document issued by the insurance company. PREMIUM: It is the amount of installments payable by the insured to the insurance company in consideration for the company’s assurance to indemnify him against a specific loss. CLAIM; It is a demand made by the insured on the insurance company to compensate him against the loss or damage suffered by him in the event of materializing of the risk for which insurance cover was obtained. SURRENDER VALUE; This is the value which an insurance company assesses and is prepared to

Pay to the assured who desires to

surrender his policy by giving up his rights the policy. Sometimes the policy holder finds it impossible to continue pay premiums due to his poor economic conditions or some other unavoidable circumstances. A policy can be surrendered only after paying premiums for at least three years

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PAID UP VALUE; A policy holder who wishes to discontinue his policy and stops payments of further premiums may get the policy converted into a paid up value. In such case , the policy holder

is

entitled to receive the paid up value of the policy. The amount is payable only on maturity or death of the policy holder whichever is earlier. ASSIGNMENT OF POLICY; Assignment of policy means transfer of property in the policy to the third party It is possible to assign a policy without assigning the rights to it. Assignment of policy is governed by the following rules; (a) Assignment must be made in writing. (b) The notice of assignment must be given to the insurer. It is essential to observe these rules to make these assignee’s title effective against insurance company otherwise If the company makes any payment to the assignor ,without the assignee’s knowledge

,the

company

would

stand

protective.

The

assignment of the policy carries with it the right to all profits, Bonus etc. NOMINATION OF POLICY; When a policy holder specifies the name of the person in the policy with a view to enabling him to get the amount of the policy in case of his death, its called nomination. The person who is so entitled to get the amount of the policy is called Nominee. If the policy matures within the life time of assured, the amount is payable to the assured himself or his nominee as per his own desire.

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Financial data in U.S. Dollars Values in Millions (Except for per share items)

Income Statement Sayeem Rafiq

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QUESTIONNAIRE

Sayeem Rafiq

Regd No. 10807184

MetLife India Insurance Company Ltd Policy Holder: ……………………….. Policy No: …………………………….. Mode of Policy: ……………………….

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Income: …………………….. Type of policy: ……………..

1. You were introduced to MetLife through Friends Advertisements J&K bank Hoardings 2. MetLife became part of you because of its:Tax benefit Variety of policies High returns on your investments Affiliation with J&K Bank 3. MetLife makes your investment secure: Strongly agree Agree Can’t say Disagree Strongly Disagree 4. Staff of MetLife always ready to help you:Strongly agree Agree Can’t say Disagree Strongly Disagree

5. You pay your premium via: Cash It automatically gets deducted from your account (SIM) Cheque Others specify ……………………………………………. 6. You get renewal premium notice in time:Regularly Usually Seldom Never 7. In case you don’t receive your premium receipt, you Contact your CSO Call MetLife toll free no. Sayeem Rafiq

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Contact Head office Others Specify ………………………………………… 8. Your policy has lapsed Once Twice Many times

9. Most feasible mode of payment Monthly Quarterly Semi-Annually Yearly 10 Would you like to pay your premium and check your policy status on- line? Yes No Can’t Say 11 Does MetLife inform you about its new products? Yes No Can’t Say 1.

13. You receive reminder when you don't pay your premium on due date: Usually Never Sometimes Always

13. After the payment of premium, Do you receive its reciept? Usually Never Sometimes Always 14. Does Did reinstatement

you

received

any

notice

regarding

policy

Yes No 15. Would you like to recommend MetLife to others? Recommend Sometimes Sayeem Rafiq

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Can’t Say No 17. Any suggestions: ______________________________________________________ ______________________________________________________ ______________________________________________________ ___________________________________________________. Note: This questionnaire is designed to get insights regarding the factors responsible for lapsed policies and satisfaction of existing policy Holders of MetLife India Insurance Co. Pvt. Ltd.security by Sayeem Rafiq Wani Reg. No. 10807184.

Bibliography •

http://www.metlife.co.in/

•

http://www.allbankingsolutions.com/insuresub3.htm

•

http://www.indianmba.com/Occasional_Papers/OP85/op85.html

•

http://ww.smashits.com/video/snoop/12802/indian-insurancesector-at-boom.html

•

http://business.mapsofindia.com/india-insurance/market.html

•

http://www.business-standard.com/india/news/market-sharepsuplayers-in-mf-industry-falls/362390/

•

http://prasathr.sulekha.com/blog/post/2006/09/insuranceindustry-in-india.htm

•

http://www.financialexpress.com/news/metlife-wont-take-tarpmoney/446796/

•

http://www.business-standard.com/india/news/metlifestrengthens-its-customer-service-platform/328282/

•

D.R. Cooper P.S. Schindler, Business Research Methods-9 t h edition, Tata McGraw-Hill companies, 2008

•

IRDA journal Aug. 2008, vol.-VI, no.8, “lapsation in life insurance , the No-Win”.

• Ms. Misbah (2008), project work on “customer satisfaction at MetLife Insurance, Srinagar city”

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• Mr. Irfan Ali Zargar (2007) project work on “lapsation of policies with MetLife’s loopholes”

Sayeem Rafiq

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