History of insurance in India

In India, insurance has a deep-rooted history. It finds mention in the writings of Manu (
Manusmrithi ), Yagnavalkya ( Dharmasastra ) and Kautilya ( Arthasastra ). The writings talk in
terms of pooling of resources that could be re-distributed in times of calamities such as fire,
floods, epidemics and famine. This was probably a pre-cursor to modern day insurance. Ancient
Indian history has preserved the earliest traces of insurance in the form of marine trade loans and
carriers’ contracts. Insurance in India has evolved over time heavily drawing from other
countries, England in particular.
 
   1818 saw the advent of life insurance business in India with the establishment of the Oriental
Life Insurance Company in Calcutta. This Company however failed in 1834. In 1829, the
Madras Equitable had begun transacting life insurance business in the Madras Presidency. 1870
saw the enactment of the British Insurance Act and in the last three decades of the nineteenth
century, the Bombay Mutual (1871), Oriental (1874) and Empire of India (1897) were started in
the Bombay Residency. This era, however, was dominated by foreign insurance offices which
did good business in India, namely Albert Life Assurance, Royal Insurance, Liverpool and
London Globe Insurance and the Indian offices were up for hard competition from the foreign
companies.
 
     In 1914, the Government of India started publishing returns of Insurance Companies in India.
The Indian Life Assurance Companies Act, 1912 was the first statutory measure to regulate life
business. In 1928, the Indian Insurance Companies Act was enacted to enable the Government to
collect statistical information about both life and non-life business transacted in India by Indian
and foreign insurers including provident insurance societies. In 1938, with a view to protecting
the interest of the Insurance public, the earlier legislation was consolidated and amended by the
Insurance Act, 1938 with comprehensive provisions for effective control over the activities of
insurers.
 
   The Insurance Amendment Act of 1950 abolished Principal Agencies. However, there were a
large number of insurance companies and the level of competition was high. There were also
allegations of unfair trade practices. The Government of India, therefore, decided to nationalize
insurance business.
 
      An Ordinance was issued on 19th January, 1956 nationalising the Life Insurance sector and
Life Insurance Corporation came into existence in the same year. The LIC absorbed 154 Indian,
16 non-Indian insurers as also 75 provident societies—245 Indian and foreign insurers in all. The
LIC had monopoly till the late 90s when the Insurance sector was reopened to the private sector.
 
     The history of general insurance dates back to the Industrial Revolution in the west and the
consequent growth of sea-faring trade and commerce in the 17th century. It came to India as a
legacy of British occupation. General Insurance in India has its roots in the establishment of
Triton Insurance Company Ltd., in the year 1850 in Calcutta by the British. In 1907, the Indian
Mercantile Insurance Ltd, was set up. This was the first company to transact all classes of
general insurance business.
1957 saw the formation of the General Insurance Council, a wing of the Insurance Associaton of
India. The General Insurance Council framed a code of conduct for ensuring fair conduct and
sound business practices.
 
    In 1968, the Insurance Act was amended to regulate investments and set minimum solvency
margins. The Tariff Advisory Committee was also set up then.
 
    In 1972 with the passing of the General Insurance Business (Nationalisation) Act, general
insurance business was nationalized with effect from 1st January, 1973. 107 insurers were
amalgamated and grouped into four companies, namely National Insurance Company Ltd., the
New India Assurance Company Ltd., the Oriental Insurance Company Ltd and the United India
Insurance Company Ltd. The General Insurance Corporation of India was incorporated as a
company in 1971 and it commence business on January 1sst 1973.
 
     This millennium has seen insurance come a full circle in a journey extending to nearly 200
years. The process of re-opening of the sector had begun in the early 1990s and the last decade
and more has seen it been opened up substantially. In 1993, the Government set up a committee
under the chairmanship of RN Malhotra, former Governor of RBI, to propose recommendations
for reforms in the insurance sector.The objective was to complement the reforms initiated in the
financial sector. The committee submitted its report in 1994 wherein , among other things, it
recommended that the private sector be permitted to enter the insurance industry. They stated
that foreign companies be allowed to enter by floating Indian companies, preferably a joint
venture with Indian partners.
 
     Following the recommendations of the Malhotra Committee report, in 1999, the Insurance
Regulatory and Development Authority (IRDA) was constituted as an autonomous body to
regulate and develop the insurance industry. The IRDA was incorporated as a statutory body in
April, 2000. The key objectives of the IRDA include promotion of competition so as to enhance
customer satisfaction through increased consumer choice and lower premiums, while ensuring
the financial security of the insurance market.
 
     The IRDA opened up the market in August 2000 with the invitation for application for
registrations. Foreign companies were allowed ownership of up to 26%. The Authority has the
power to frame regulations under Section 114A of the Insurance Act, 1938 and has from 2000
onwards framed various regulations ranging from registration of companies for carrying on
insurance business to protection of policyholders’ interests.
 
    In December, 2000, the subsidiaries of the General Insurance Corporation of India were
restructured as independent companies and at the same time GIC was converted into a national
re-insurer. Parliament passed a bill de-linking the four subsidiaries from GIC in July, 2002.
 
     Today there are 14 general insurance companies including the ECGC and Agriculture
Insurance Corporation of India and 14 life insurance companies operating in the country.
 
     The insurance sector is a colossal one and is growing at a speedy rate of 15-20%. Together
with banking services, insurance services add about 7% to the country’s GDP. A well-developed
and evolved insurance sector is a boon for economic development as it provides long- term funds
for infrastructure development at the same time strengthening the risk taking ability of the
country.

The Indian insurance market in spite of having a history covering almost two centuries took a
turn after the establishment of the Life insurance corporation in India in 1956. From being an
open competitive market to being nationalized and then back to a liberalized market again, the
insurance sector has witnessed all aspects of contest.

the Indian insurance market conventionally focused around life insurance until recently, a various
range of other insurance policies covering sectors like medical, automobile, health and other classes
falling under general insurance came up, generally provided by the private companies. The life insurance
of India added 4.1% to the GDP of the economy in 2009, an immense growth since 1999, when the gates
were opened for the private company in the market.

INDIAN INSURANCE INDUSTRY:

Insurers

Insurance industry, as on 1.4.2000, comprised mainly two players: the state insurers:  

  Life Insurers:

 Life Insurance Corporation of India (LIC)

 General Insurers:

 General Insurance Corporation of India (GIC)  (with effect from Dec'2000, a National Reinsurer)

GIC had four subsidary companies, namely ( with effect from Dec'2000, these subsidaries have been de-
linked from the parent company and made as independent insurance companies.

1. The Oriental Insurance Company Limited

2. The New India Assurance Company Limited
3. National Insurance Company Limited
4. United India Insurance Company Limited.

INSURANCE BUSINEES :
Insurance business is divided into four classes :

1) Life Insurance 2) Fire Insurance 3) Marine Insurance and 4) Miscellaneous Insurance.

Life Insurers transact  life insurance business; General Insurers transact the rest.

No composites are permitted as per law.

LEGISLATION (as on 1.4.2000):

Insurance is a federal subject in India. The primary legislation that deals with insurance business in India
is: 

Insurance Act, 1938, and Insurance Regulatory & Development Authority Act, 1999.

INSURANCE PRODUCTS (as on 1.4.2000)  (for latest information get in touch with the current insurers –
website information of insurers is provided at the web page for insurers ):

Life Insurance:

Popular Products: Endowment Assurance (Participating), and Money Back (Participating). More than 80%
of the life insurance business is from these products.

General Insurance:

Fire and Miscellaneous insurance businesses are predominant. Motor Vehicle insurance is compulsory.

CUSTOMER PROTECTION:

Insurance Industry has Ombudsmen in 12 cities. Each Ombudsman is empowered to redress customer
grievances in respect of insurance contracts on personal lines where the insured amount is less than Rs.
20 lakhs, in accordance with the Ombudsman Scheme. Addresses can be obtained from the offices of
LIC and other insurers.

Policy Change in the Indian Insurance market

The Insurance Regulatory Development Act, 1999 (IRDA Act) allowed the entry of private companies in
the insurance sector, which was so far the sole prerogative of the public sector insurance companies.
The act was passed to protect the concerns of holders of insurance policy and also to govern and check
the growth of the insurance sector. This new act allowed the private insurance companies to function in
India under the following circumstances :

 The company should be established and registered under the 1956 company Act
 The company should only the serve the purpose of life or general insurance or reinsurance
business
 The minimum paid up equity capital for serving the purpose of reinsurance business has been
decreed at Rs 200 crores
 The minimum paid up equity capital for serving the purpose of reinsurance business has been
decreed at Rs 100 crores
 The average holdings of equity shares by a foreign company or its subsidiaries or nominees
should not go above 26% paid up equity capital of the Indian Insurance company.

Investment policy in the Indian insurance market

  A policy known by the name of 'Health plus Life Combi Product', offering life cover along with
health insurance has been granted permission by the IRDA act and insurance companies are
allowed to provide it now.
 The FDI limit in the insurance sector has been capped at 26% for the foreign marketeers but the
government is thinking to increase it to 49% and a bill of this offer is pending at the Rajya Sabha
 A low cost pension scheme is supposed to be formed by the Pension Fund Regulatory and
Developmental Authority (PFRDA) on 1st April, 2010 to provide social security to the the poorer
class.
 The compulsory ceding by every General Insurance Corporation (GIC), would go on to stay at
10% under current regulations as specified by IRDA.

Future of Indian Insurance Market

As per the report of 'Booming Insurance Market in India' (2008-2011), concentration of insurance
markets in many developed countries of the world has made the Indian insurance market more
magnetic in terms of international insurance players. Furthermore, the report says

 Home insurance sector is likely to achieve a 100% growth since home insurance are made
compulsory for housing loan approvals by the financial institutions.
 In the coming three years Health insurance sector is all set to become the second largest
business after motor insurance.
 During the period of 2008-09 to 2010-11 the non life insurance premium is likely to have a
growth of 25%.

Share of forigen companies in indian insurance market is 26% in 1999 but

the expected hike in Foreign Direct Investment (FDI) cap to 49% is also expected to boost industry
growth

 Position of india in world insurance market

for the first time moved up the ranking to be among the top 10 life insurance markets worldwide in fy
-09. thanks to the global financial crisis in this regard as it made the Indians to think more about
insurance. The economic Survey acknowledges this growth. The report for the year `09-10 states that
insurance sector penetration, both in life and non-life segments, has improved since the time the sector
has been opened for private participation.
Indian insurers feel that India can leapfrog to a position just behind China by growing faster than other
Asian countries like Korea and Taiwan which are still ahead of India.

According to V vaidyanathan, MD, ICICI Prudential, 40% of the growth in life insurance will come from
Asia. Within Asia India and China will contribute to 80% of the growth. "The Indian industry will grow by
12-13% as against 5-6% global growth. India’s ranking will have to go up" he said. He adds that industry
growth in India is essential since no social security exists in India.
"Factors like a stable 8 per cent annual growth rate of the economy make India one of the most
promising amongst the emerging markets, with the potential to go beyond Korea and Taiwan" said
Rajesh Relan, MD, Metlife Insurance India. He adds that with nearly 80% of its 1.2 billion population
without life insurance, even a marginal increase in penetration would result in a huge increase in
volumes.

Life Insurers
 
 NAME OF THE COMPANIES

1)Bajaj Allianz Life Insurance Company Limited .

2) Birla Sun Life Insurance Co. Ltd

3) HDFC Standard Life Insurance Co. Ltd

4) ICICI Prudential Life Insurance Co. Ltd

5) ING Vysya Life Insurance Company Ltd.

6) Life Insurance Corporation of India

7) Max New York Life Insurance Co. Ltd

8) Met Life India Insurance Company Ltd.

9) Kotak Mahindra Old Mutual Life Insurance Limited

10) SBI Life Insurance Co. Ltd

11) Tata AIG Life Insurance Company Limited

12) Reliance Life Insurance Company Limited.

13) Aviva Life Insurance Company India Limited

14) Sahara India Life Insurance Co, Ltd.

15) Shriram Life Insurance Co, Ltd.

16) Bharti AXA Life Insurance Company Ltd.

17) Future Generali India Life Insurance Company Limited

18) IDBI Fortis Life Insurance Company Ltd.,

19) Canara HSBC Oriental Bank of Commerce Life Insurance Company Ltd.

20) AEGON Religare Life Insurance Company Limited.

21) DLF Pramerica Life Insurance Co. Ltd.

22) Star Union Dai-ichi Life Insurance Co. Ltd.,

23) IndiaFirst Life Insurance Company Limited

Non-life Insurers
1)Bajaj Allianz General Insurance Co. Ltd.

2)iCICI Lombard General Insurance Co. Ltd.

3)IFFCO Tokio General Insurance Co. Ltd.

4)National Insurance Co.Ltd.

5)The New India Assurance Co. Ltd.

6)The Oriental Insurance Co. Ltd.

7)Reliance General Insurance Co. Ltd.

8)Tata AIG General Insurance Co. Ltd.

9)Royal Sundaram Alliance Insurance Co. Ltd

10)United India Insurance Co. Ltd.

11)Cholamandalam MS General Insurance Co. Ltd.

12)HDFC ERGO General Insurance Co. Ltd.

13.Export Credit Guarantee Corporation of India Ltd.

14)Agriculture Insurance Co. of India Ltd.

15)Star Health and Allied Insurance Company Limited

16)Apollo Munich Health Insurance Company Limited

17)Future Generali India Insurance Company Limited

18)Universal Sompo General Insurance Co. Ltd. 

19)Shriram General Insurance Company Limited,

20)Bharti AXA General Insurance Company Limited

21)Raheja QBE General Insurance Company Limited,

22)SBI General Insurance Company Limited

23)Max Bupa Health Insurance Company Ltd.

How Do Insurance Companies Make Money?
Insurance Company Premiums

1. Although there are variations between insurance products and insurance companies, the basic
principals they use to make money are the same. To provide insurance, insurance companies
charge a premium, which is the price for the insurance. You can pay premiums in several ways,
depending upon the type of insurance and your preference. For example, auto insurance was
traditionally paid every six months. Now, many companies will allow monthly payments or
annual payments as well. These premiums are the money the insurance company receives from
its customers.

Insurance Company Payouts

2. An insurance company pays out money according to the terms of the insurance when a certain
event happens to a policy holder. In the case of homeowner's insurance, the insurance
company may pay if there is a fire. Typically, the maximum amount the insurance company will
pay is stated in the policy. These payouts represent expenses to the insurance company.

Shared Risk and Large Numbers

3. If a customer pays $500 in auto insurance premiums, but does not have an accident, the
insurance company keeps the $500. Likewise, if a customer pays $500 in auto insurance
premiums and has an accident that causes $50,000 in damage, the insurance company will pay
out $50,000 regardless of the fact that the customer paid far less.

This concept is called shared risk. In the example above, if the insurance company can get 100
customers to each pay $500 per year in premiums, but those customers have no claims for
every one customer who has $50,000 in claims, the insurance company would break even.
Every customer over 100 per one represents a profit, or every dollar charged over $500
represents a profit.

Of course, the real world isn't this tidy. However, over a large number insurance customers,
statistical trends emerge. With bigger numbers, these trends become increasingly accurate.
 Reserves

4. Because claims are not filed on any sort of regular timetable, there are times when the
insurance company will have more cash come in reserve than it needs to pay claims. In our
example above, if one out every five people file an average claim of $5,000 each year, that
means that in one year, there may be five claims of $100 each (and other years where they are
higher). In this year, the insurance company will have received $5,550 in premiums and paid
only $500 in claims. The extra $500 charged over the required break-even amount is still profit.
However, the company now has taken in $4,500 that the statistics say they will need later to
pay claims. So, the company will keep that money as a "reserve." This money is not profit. Is is
simply being held to pay expenses later.

Investing Reserves

5. An insurance company's reserves are not held in a savings account. Rather, the insurance
company invests those reserves. If the insurance company makes a positive return on those
investments, then that money would be a profit. So, if the company makes a 10 percent return
on the $4,500 before it needs that money to pay out claims, then it would make $450 in "extra"
profit just by holding its reserves.

The combination of charging profitable premiums, plus making money on invested reserves, is
how an insurance company makes money.

Coverage Selection and Rejection

6. In order to make the models work, an insurance company must have a way to statistically
measure the amount of risk involved in any insurance product. If it cannot measure such risk,
an insurance company may not sell a certain product to a certain segment of the population or
to a certain area. Furthermore, if an insurance company can project the risk, but cannot figure
out a way to offer a product to cover such a risk in a way that is profitable, the company may
again not offer that product.

For example, many companies have stopped writing homeowner policies in areas that are
subject to a high frequency of hurricanes, such as some coastal areas in Florida. In this instance,
the insurance companies have determined that there is no way to profitably offer such policies
because the premiums would need to be so high that few people would buy the insurance, and
then the model for spreading risk over large numbers will not work.

So how do insurance companies make money?

They make money two ways. By taking your premiums and investing them and getting
returns on that investment. By also by taking the premiums and gambling that something
will not happen.

Some insurance companies manage an underwriting profit, some don't. Many

insurance companies make their profit on what is called the float.
Life insurance companies make lots of money as has been established by the companies that are
publicly traded and reveal their books to the public. The question many have is just how do they
do this?

Life insurance is nothing more than gambling. You pay a premium on a regularly scheduled date
each month. If you die during the period the policy is in place, then you win the bet and the
company pays out the death benefit to the person you designate. Of course, it is a bit of a hollow
"win" since you have passed away, but there you are.

So, how does the life insurance company win? It does this by analyzing huge amounts of data on
life expectancies and such. It analyzes so many different factors it will make your head spin.
Smoke? You are going to die earlier than normal according to the data. Don't eat meat? You are
going to live longer according to the data. The various factors taken into account ultimately
create a portfolio for you that the life insurance company can then offer rates off of as well as a
term. This obviously slants things in favor of the life insurance company. Over the thousands of
policies it will right, it will generally come out ahead.

There is another way that insurance companies win as well. It has to do with something called a
"lapse", perhaps the favorite world of any life insurance executive. What is a lapse? It is when a
policy expires without a death benefit being paid. This can be as simple as the end of the term of
a policy, but we are talking about a more specific situation here. We are talking about when
people abandon their policies because they no longer can afford to pay the premiums. The
company gets all the premiums and makes no payout. Since the abandonment occurs earlier than
the length of the policy, it is a huge statistical win for the insurance company.

How do life insurance companies make money? Well, there are lots of ways. The lapse is
perhaps the predominant one.

The profit for the insurance companies can be shown as follows:

Profit for the firm = Premium received from the insured + Income from the investment made
from the premium received - losses incurred [claims settled] - expenses incurred for the
establishment of office, salaries etc.

Underwriting

Insurance companies make money through under writing. This is process in which the
insurance company selects the risk that can be covered, and fixing the premium for
covering those risks and investing the money received in appropriate business.

The company needs to spend sufficient time, consider wide range of data and possibilities
and probabilities. At the end, the insurance company should decide about the premium,
which needs to be competitive at the same time profitable to the insurance company.

Estimation of underwriting
The insurance companies underwriting performance can be measured by their combined
ratio. To arrive at the combined ratio the loss ratio needs to be added to the expense ratio.

The loss ratio is nothing but the incurred loss plus loss adjustment expenses divided by the
premium received. The expense ratio is nothing but underwriting expenses divided by
premium written.

The combined ratio will give the companies true picture i.e whether it is on profit or loss. If
the combined ratio is less than hundred the company is running in profit . if the combined
rate is more than hundred then the company is losing.

2009 World Insurance report SUMMARY source:capgemini

Summary of
Key Findings
The World Insurance Report 2009 discusses the implementation, opportunities and challenges of selling
insurance through multiple distribution networks. Multi-distribution has emerged as a key success factor
for
the world’s insurance companies, especially in mature markets.
The increasingly complex web of networks (intermediaries) and channels (access points)2 has made the
distribution of insurance far more competitive, but multi-distribution offers insurers a way to transform
the
challenge of the competitive landscape into an opportunity.
Ultimately, multi-distribution offers insurers a way to reach customers that could not be reached before,
and to
extract more value from existing customers. However, multi-distribution—like any evolution—involves a
process
of transformation for the organization. This report focuses, in particular, on implementing that
transformation.
The report’s findings draw on a survey of more than 2,250 distributors and in-depth interviews with 59
senior executives from leading global insurers3. Our research reveals new insights on the attitudes
distributors
have toward multi-distribution, the influence insurers have on those attitudes, the necessary steps to a
multi-distribution model, and the real-life progress insurers are making in building and leveraging
multidistribution
capabilities.
What follows is a summary of our key findings:
1. Multi-distribution is a powerful growth model, especially in mature markets. It offers the most
effective
way to attract new customers and increase the wallet share from existing customers, and it can increase
the
rate at which customer contacts are converted into sales. As a result, even if the volume of sales leads (or
customer contacts) is constant, multi-distribution can generate additional revenues. Moreover, the
increased
conversion rate accelerates revenue generation, and thus improves sales productivity.
ƒ.To achieve sustainable growth, insurers need to increase the number of their policies held by each
customer (which we refer to as “multi-equipment”). The average share of wallet for a single insurer is
currently just 1.1 to 1.5 policies, though the average mature-market insurance customer holds 5.2 policies,
and typically uses 2-3 different distributor networks.
ƒ. Insurers could also reach more customers and increase wallet share by enabling distributors to
specialize in more than one type of coverage, but our research suggests the upside of that approach is
limited, not least because insurers cannot sustain multi-specialization in more than 10% to 20% of
distributors.
2. Distributors are not inherently predisposed by their existing business model to favor or resist
multi-distribution. There are conflicting views among distributors about the benefits of network
cooperation, even among those with the same business model. This suggests it is not intrinsic
characteristicslike the type of network, incentive and commission structures or exposure to other
networks that swayopinions about the value of multi-distribution. Distributor attitudes can therefore be
changed.
ƒ.We grouped our sample of distributors into four types based on their attitudes to multi-distribution:
27% could be described as Very Enthusiastic, 29% as Enthusiastic, 31% as Resistant, and 13% as Very
Resistant. However, there was a relatively even spread of network types in each group.
3. 30 variables have some impact on the level of resistance toward multi-distribution. Of those, 14
havea very significant cumulative impact, led by financial incentives, the Internet and online
portals.
Above all, Very Resistant distributors doubt financial incentives can persuade networks to cooperate, but
they are also skeptical the Internet will help them sell additional products to their customers, and are
dubious about the value of insurers’ online portals and hosted Internet services.
ƒ.Negative sentiment on those three variables alone would increase the population of the Very Resistant
distributors in our sample from 13% to 51%, given the individual effect of the variables on perceptions
about multi-distribution, and the impact of the variables on each other.
4. Insurers can turn knowledge about drivers of resistance to positive effect to reduce resistance
and create real enthusiasm for multi-distribution. All of the levers identified as drivers of resistance
have the potential to be used to positive effect. Since each lever has a twofold effect, it is the additive
impact of the levers—not their individual strength—that determines the optimal sequence in which
levers should be pulled. Arguably, it is more effective to pull levers that tackle resistance first, before
trying to increase enthusiasm.
ƒ.We grouped the most impactful levers into six “initiatives” that the insurer will need to address in
order to cover the levers most likely to mitigate resistance and build enthusiam for multi-distribution.
These are as follows: Incentivizing cooperation; Addressing customers ownership issues; Raising
awareness about the Internet and interaction tools; Branding and Promotion; Enhancing customer
intelligence; and Enabling distributors.
5. A mature multi-distribution model develops through five distinct phases. We developed a Multi-
Distribution Maturity Assessment Framework, with which we calculated an overall maturity score, and a
score for each stage, for insurers in our sample. We found:
ƒ.Multi-network capabilities. The vast majority has developed a mix of distributors to almost full
potential,i.e., scored nearly 100% on this stage.
ƒ.Multi-access-point capabilities. The majority has built significant multi-channel capabilities, but the
average score topped out at 60%-70%. The most sophisticated multi-distributors did not score any higher,
suggesting they turned their focus to building other capabilities after a certain point.
ƒ.Mutualization of functions. Nearly 20% of multi-distributors scored 100%, meaning they fully
centralizeand share all their operational functions (e.g., IT, HR, marketing) across all their networks. The
remaining80% scored above 55%. Executives rate IT mutualization as the most important aspect of
mutualizationfor furthering multi-distribution, giving it a 4 rating on a scale of 1-5, but they concede it is
also the mostcomplex (3.9 rating on a 1-5 scale.)
ƒ.Centralized intelligence is the next step, and a pre-requisite in the progression to effective cross-
networkcooperation. However, the scores on this stage are relatively low in all groups, even among the
most maturemulti-distributors, so opportunities clearly remain. In particular, insurers could be using more
advancedtools and methods to gather and interpret data (e.g., about customer behaviors, propensity to
defect, etc.)
ƒ.Cross-network cooperation. Only a very few insurers can claim to have facilitated fluid cooperation
among distributors, but the most mature multi-distributors overall have acquired a broad set of
capabilities, suggesting insurers need at least a minimum level of maturity in all stages to excel.

2009 World Insurance report SUMMARY

6. Today’s multi-distributors use relatively simple approaches to positive effect to achieve network
cooperation. Insurers have already adopted a range of approaches to exploit the natural synergies among
networks, e.g., between physical and non-physical networks or product-specialist networks. It is those
synergies that ultimately create value for all stakeholders—customers, distributors and insurers.
ƒ.Case studies on IFFCO TOKIO General Insurance, ING Belgium, KBC Bank & Verzekering, Genertel
(Part of the Generali Group), and If P&C Insurance illustrate some of the lessons learned, which include
the need to develop effective commission and incentive strategies, establish clear support structures and
operating principles (e.g., with regards to who “owns” the customer relationship), adapt internal
functions,
develop workforce skills and behaviors, and establish strong leadership.
7. We believe that moving to a multi-distribution model is undeniably a process of transformation
for
an insurer’s entire organization. We believe seven critical enablers form the logical components of this
transformation, in which insurers: start with the customer; follow with the network; rethink organizational
design and leadership; embrace technology; test and learn with cooperation pilots; monitor the value of
theoverall business; and manage the power of information.
These findings should offer hope to insurers that fear the path to multi-distribution is too long and
arduousto pursue—especially in the current economic downturn. In fact, it is true the path has its
stumbling blocks,and requires an ongoing commitment to business transformation. However, multi-
distribution is arguablyeven more important in this tough competitive and economic environment, when
insurers will need tofocus more and more on generating revenue and growth from the core business of
product development,underwriting and distribution.