1. INTRODUCTION:

The insurance sector in India is on a high growth trajectory and has been growing at an impressive pace in the post liberalization era. Though insurance penetration has increased from 1.4% in 1999 to 4.2% currently, it also points out the huge potential that is waiting to be tapped. The liberalization of the sector in the year 1999, opened up the flood gates of competition and today there are over 22 companies which are fighting it out in the insurance market place. The intense competition has led to paradigm changes in the industry in terms of product offerings, introduction of riders, emergence of new distribution channels etc., This paper discusses the emergence of new distribution channels and specifically focuses on the success story of malassurance, an innovative distribution channel pioneered by the Future Group.

2. NEED FOR THE STUDY:

The insurance sector in India is one of the fastest growing sectors in the Indian economy holding great potential for sustaining high growth rates. With the opening up of the sector, competition in the sector intensified forcing companies to come up with innovations in product and service delivery in order to stay relevant to customers and garner business. The industry has witnessed a wave of innovations in various facets of the functioning of the industry and this trend is only set to continue in the future. In this context an important innovation in distribution channel is the distribution of insurance products through malls, termed as malassurance. The model was introduced only a few years back and there has not been any significant study assessing the functioning of the model. Therefore the authors felt the need to undertake a thorough assessment of the model with regard to its implementation, reach, present performance and future potential.

3. RESEARCH METHODOLOGY:

The study is descriptive in nature and the researcher has adopted the Case Study Approach. The authors had conducted an extensive literature survey to understand the concept in its various dimensions. The data used in the study is secondary in nature. Secondary data was sourced from newspapers, journal and magazine articles, company websites and other published sources.

4. LITERATURE REVIEW:

Jawaharlal (2011) opined that in the modern times, the way a service is rendered to a client has come to be seen as a more important factor than the efficacy of the product itself. With the emphasis that the global players are putting on delivering the best services to their clientele across all sectors, there is a certain percolation of the effect – among all the countries as also among all the domains. Rendering customer service in true spirit and not merely going about the formality religiously is the crux of the matter.

Rajendran and Natarajan (2010) stated that the Indian life insurance industry has its own origin and history, since its inception. It has passed through many obstacles, hindrances to attain the present status. There was a remarkable improvement in the Indian insurance industry soon after the acceptance and LPG in the year 1991. After 1991 the Indian life insurance industry has geared up in all respects, as well as it is being forced to face a lot of healthy competition from many national as well as international private insurance players.

Pandey Anoop and Manocha Sanjay (2011) stated that in India, Insurance has been synonymous with LIC. Life Insurance Corporation (LIC). With the impact of LPG (Liberalisation, Privatization and Globalisation), many private business houses have come up as joint ventures, with partnerships from multinational insurance companies. The Private players are introducing innovative insurance products, appointing qualified persons as agents and advisors. They are aggressively promoting their products and are going for multi-channel distribution.

Jothi A. Lenin (2011) elucidated that insurance in India is a flourishing industry, with several national and international players competing and growing at rapid rates. Insurance companies offer a comprehensive range of insurance plans, a range that is growing as the wealth of the middle classes increases and the economy.

Mahesh R and Venkatesh S (2011) stated that the landscape of Indian life insurance industry changed to a great degree due to opening up of insurance sector to private entry in India. Now as many as 22 private joint ventures and the public sector giant LIC are trying to entice the Indian consumers with well-designed products and benefits.

Regan (1997) examined the distribution channel preference from a transactions cost perspective. She found that independent agents are used more often by insurers that sell more complex insurance products, while exclusive agency insurers use their agents to market more standardized products.

Mayers and Smith (1981) examined the insurer’s distribution channel choice and they suggest that more complex products require higher levels of service and that high value/high price types of insurance products will be best distributed by an independent agency channel. Conversely, insurance products that are more standardized may require lower levels of service. These types of products would be best suited for a direct writer type of channel.

Scherer and Ross, 1990) suggest that firms adopt exclusive distribution systems to elicit additional promotional effort by their sales force. This promotions hypothesis implies that firms using exclusive agents should have smaller loss-to-premium ratios because they provide higher-service coverage.

Eberhart (2000) opined that insurance agents were faced with the strong possibility of being replaced with a more efficient and less-costly Internet-led distribution channel.

Birkhofer et al., (1999) stated that the ability to reduce the transactions costs of interaction between buyers and sellers has always been acknowledged as a central motivation for the use of the web.

Posey and Yavas (1995) noted that earlier studies had shown that insurers using the independent agency system have higher costs than those employing a direct writer system. Taken to their logical conclusion these studies suggest that competition in insurance markets should have eliminated the independent agency system.

Freny Patel (2004) elucidated that with competition heating up, alternate distribution channels are gaining tremendous importance. Barriers distinguishing various financial products are being removed. The first non-traditional channel for insurers was bancassurance which got off to a flying start because insurers had little option except to tap an existing network to expand reach.

Agarwal R (2012) opined that distribution channel is the most important element of the marketing mix of insurance industry. This is the sole key for insurance business. It was found that the public insurer is still getting its new individual business approx..97% or more in last five years through its individual agents a traditional form of insurance. While other 23 Private insurers are using innovative channels up to large extent, they are getting approx. 40% or more new individual business through innovative channels in the last five years.

Sanjiv Shankaran (2007) stated that the complicated nature of an insurance policy has made the efficacy of distribution channels the key determinant in a company’s profitability. The distribution channels’ importance also puts them in a position to influence customer choice. The influence of distribution channels on customer choice holds the potential of partially neutralising product innovations as they would push the product that is the flavour of the month.

Sanjay Manocha, Subhaash Chand Chitkara (2012) suggested that in today’s scenario, insurance companies must move from merely selling insurance to marketing it as an essential financial product. The distributors play a dual role – as trusted financial advisors for the clients and trusted business associates for the insurance companies. An insurer needs to think about the appropriate distribution channel to reach its target customer as well as the product that it is going to sell.

Robert I. Mehr (2002), studied the forces responsible for stimulating change in insurance marketing channels and the reaction of parties affected by change and found that the factors that influence the manner in which insurance flows from producer to consumer are economic forces, technological developments, and the changing sociological environment.

Venkateswara Rao (2004) opined that alternative distribution channels have given competitive edge for the insurers. It is apparent that multiple distribution channels will help an insurance company to offer a range of contact points to the customer, thereby increasing the chances of success.

Lucinda Trigo Gamarra (2007) gives insight into cost and profit efficiency levels of German life insurance firms for the period 1997-2005, and delivers information about scale economies in the German life insurance industry. Non-parametric DEA was used to estimate efficiencies for a sample of German life insurers for the years 1997-2005. Economic evidence was found for the coexistence of the different distribution systems which is the absence of comparative performance advantages of specialised insurers.

Kaninika Mishra (2010) opined that the advent of multi national life insurance companies in India has led to many innovations in life insurance products, marketing, distribution and new concept of internal risk management. Along with these distribution channels come various challenges. Effective management of channel conflict, and curtailing the costs of distribution will be of utmost importance.

Kamesh Goyal (2009) stated that from a distribution perspective within the life and general insurance industry the system primarily consisted of individual agents (who still are the dominant force and the largest premium generating channel). However, the emergence and contribution of other distribution channels has been significant in the last 4 to 5 years.

5. ATTRACTIVENESS OF THE INDIAN INSURANCE MARKET:

Expanding middle class plus increasing disposable incomes has lead to a booming retail market in India. According to NCAER’s (National Council of Applied Economic Research), ‘Great Indian Market Survey’, organised retail, which was worth 5,200 crore in 2007, is set to grow to 47,400 crore in 2013. India is not just a big country but has a large population as well. There are tremendous opportunities for an insurance company. 50% of the population is below 25 years old and we have a growing affluent middle class who are potential buyers for an insurance company. The penetration ratio is very low in life (4.1%) and in non-life, it is half compared to what has been achieved in other countries.

6. COMPETITION: DRIVING THE NEED FOR INNOVATIVE DISTRIBUTION CHANNEL:

The insurance sector which operated as a monopoly is today witnessing intense competition among 22 players. This has led to several innovations in terms of products, prices, riders, benefits, coverage and distribution channels. One reason for expanding distribution networks is that in the traditional agency model, the attrition rate is as high as 70% during the first year. With competition hotting up in the insurance sector, organisations are on the lookout for new channels for engaging with customers with the sole idea of increasing penetration.

ICICI has been selling traditional policies as well as ULIPs through the post office route. . For instance, ICICI Prudential Life Insurance has tied up with 22 post office circles in the country for distribution of insurance policies. The company has entered into a referral arrangement with post offices wherein the latter would refer customers to company officials who in turn would recommend a plan for which the post office gets a referral fee. Max New York Life has embarked on an initiative wherein the company would be tapping kirana stores to sell Max Vijay, which caters to the insurance needs of the low income groups. A pilot project is on in 30 cities across Uttar Pradesh. Under this pilot project, individual insurance agents and corporate agents have a referral arrangement with the owners of the retail shops, general merchants, mobile stores, chemists and other shop owners who refer prospects to individual insurance agents and corporate agents.

7.MALASSURANCE–THE EMERGING MODEL:

An interesting emerging trend is the concept of ‘Malassurance’, the trade initiative of distributing insurance through malls. Mallassurance as a channel of distribution focuses customer acquisition through low cost insurance products. The Mallassurance channel was introduced by Future Generali with the key objective of leveraging on the over 2 crore unique footfalls the Future Group retail outlets across the country. Since malls have emerged as leisure and entertainment destinations for entire families to shop, entertain and bond, malassurance offers the convenience of choosing, buying and servicing a whole gamut of insurance solutions best suited to individual needs at the same place where they shop regularly for their home needs. The Malls are used as a medium of catering to and providing total insurance solutions (both Life & General) to all customers visiting the malls. It is not a model for lead generation but a platform for retailing insurance products under the composite corporate agent.

Malassurance has been developed by Future Generali Insurance Company, a late entrant to the insurance sector in India and the company has been selling insurance products through its malls from May 2008. As Kishore Biyani, the founder of the Future Group had observed, “Insurance penetration is relatively low in India as the existing players cater to a small section of Indians. Through retailing of insurance products in the exciting environment of modern retail, we are going to make insurance accessible and attractive to every Indian, including the younger generation, professionals and home makers who frequent shopping malls”.

The company has adapted its systems and processes to ensure customers can buy a policy at the store and get the insurance certificate issued within 5 minutes. The model adopted for Mallassurance™ is to Acquire (at the store), Maintain and Upsell (telesales & direct.

The malassurance model hold great potential considering the low insurance penetration and also the expected potential growth of the Indian retail sector. The Indian retail sector was worth $435 billion in 2010 out of which traditional retail constituted $414 billion while the organised retail was worth $21 billion. The retail sector is expected to experience strong growth in the next 10 years and reach a size of $850 billion by 2020. While traditional retail is expected to grow at 5% to reach a size of $650 billion, organised retail would grow at 20 per cent to cross $200 billion. The recent government’s decision to allow foreign direct investment in multi-brand retail and easing of norms for single brand retail are expected add further impetus to the growth of the sector. The entry of foreign capital and foreign retailers is expected to catalyse the growth of the retail space and proliferation of malls is expected.

8. EXPERIENCE IN OTHER COUNTRIES:

It is difficult to make comparison country by country because it depends on the Mall, its location, attitude of the customers and their awareness about insurance. For example in UK, a co-operation between Tesco and Royal Bank of Scotland is something which is very attractive at the moment. They have 2 million customers and 800 million premium income originating from Mall assurance distribution.

9. THE MALASSURANCE MODEL OF THE FUTURE GROUP:

Future Generali. Insurance desks (varying between 40 and 160 square feet) are in operation in 160 Future Group stores across India and the company plans to take this to 300 more stores in coming months. The company offers total insurance solutions through Mallassurance effectively employing its impressive retail presence like Big Bazaar, Food Bazaar, Pantaloon, E-Zone, Home Town and others providing yet another value addition to the lives of customers.

In its very first year of operations, the company was able to garner a first premium income of over Rs.100 crores from its Life and Non Life businesses. It aims to set up over 100 composite branch offices by the end of this financial year offering both Life and Non Life business where Advisors can sell both Life Non Life Insurance solutions to their clients. This holistic Total Insurance Solutions model adopted by Future Generali is a significant differentiator from other insurance companies in the market today and also offers customers a one-stop-shop for all insurance needs. To attract customers, the insurance products have been marked at attractive price points of Rs.49, Rs.99 and Rs.199.

Future Generali has approached the Indian insurance market in a unique way through insurance kiosk in the neighbourhood mall. So, one can insure his home, car, or self from accidents for as less as Rs 49. Products offered over the counter are InstaLife and Endowment, for Life, and Auto, Personal Accident, Travel, Health and Home Package policies for Non-Life. Proposals exceeding certain limits, which require manual underwriting or medical examination, will have to be routed to the Future Generali Hub for processing.

To enable a seamless consumer experience at all points of sale and service, the company has embarked on a revolutionary approach towards creating a comprehensive system platform for the organization. The web-based system FGconnect serves as a single log-in platform for all multi-channel distributors including Mall advisors to generate quotes, issue receipts and perform auto-underwriting and policy issuance for low ticket size policies over the counter.

10. PROMOTIONAL MEASURES:

To drive sales from the malassurance channel, the company has come out with various promotional measures such as:

1. Mission 1 lakh: Through which 1,00,000 Personal Accident policies were retailed in 1 month

2. Maha Bachat: 150000 Group Term policies were retailed in 5 days.

3. There are other promotional events like ‘Aaja Meri Gaadi main baith ja’ for promoting Motor Insurance, Free Tax Planning campaign in March and similar other product promotions.

The company carried out another unique promotional initiative aimed at attracting new customers to its fold. Customers who visited any of the Future Group retail outlets nationwide from 25th November 2008 to 20th January 2009 participated in a unique and simple contest by dropping their car insurance details in a drop box. The results were declared in February 2009 and the two lucky winners received a brand new Chevrolet Spark car each.

11. MALASSURANCE – A SUCCESS STORY:

The customer, the end user in any innovation, has adopted the Mallassurance, wholeheartedly, which is evident from the resounding success of the channel. By selling simple, over-the-counter insurance products like Personal Accident, Home Protection plans and Simple Endowment, Future Generali’s Mallassurance connected with the customer like none before. The company has registered a 58 percent growth in Gross Written Premium for the third full year of operations ending 31st March 2012. The Company achieved GWP of Rs 661 crores as against Rs.418 crores in FY 12. Number of policies sold during the year was 681,940, an increase of 23% against last FY. The average ticket size for life products sold through Mallassurance is Rs 18,495 for Apr-Oct 2012, registering 20% increase, primarily due to an increased focus on pension products and ULIPs. There has been a 23 % month on month growth this fiscal in customer acquisition through Store Sales, 40% increase in Annualised Premium earnings this fiscal over the last and average daily leads have increased from less than 200 to over 450 per day.

12. CONCLUSION:

The growing trend of agent attrition in the life insurance industry has made it imperative for the insurance companies to actively consider new and innovative forms of distribution. Considering the vast scope for growth, and the inherent challenge in reaching out to the wide potential customer base, innovations in distribution channels would be a continuous affair. The malassurance channel holds great promise because it targets the youth who are the growing consumer class of the future. Another interesting point to note is that in India, shopping at malls is a family affair and whenever anybody wishes to purchase insurance, the concurrence of family members is taken. Malassurance facilitates this decision making process and acts as a win-win situation both for the company and for the consumer.

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Received on 03.06.2013 Modified on 20.06.2013

Asian J. Management 4(4): October –December, 2013 page 272-276