Back to Business

I am a insurance guy atleast it feels better to say so, so I proclaim my self as an insurance guy , well though I have a better qualification then most of the people in insurance industry to say that ( hey I always had this big mouth ) okay enough parag .. enough .. so back to how insurance companies are going to make profit (or big bucks ) going with the theme of the blog. Right now there are around 17 insurance companies fighting for market share in India including the new Future- Generali and IDBI – Fortis. With only 3.5% of Indian population insured these companies have a great market to cover, with respect to market share LIC has around 74% of share and the rest companies are fighting for the remaining 36 %. Insurance initially was started by the merchants in Britain who used to go for long voyages , if any ship sank or was looted by pirates (which at that time had high chances .. common johny depp fans..its time to say yay!) then all the merchants used to compensate the one who lost his goods. Insurance basic purpose is public service to help the victim during the time of loss of goods or loved one (well that is debatable, but we will stick to basic definition), But then the question comes how do these companies makes profit?? A Life Insurance company devices the product keeping in mind the mortality rate ( total people expected to die out of 1000 according to the age group), morbidity (The health index) , profit that the came from the investment, expenses , lapsation ratio (ratio of people not continuing with their policy) and various other factors. The product development and calculation is done by Actuaries (who are a rare species), then there are sales guys, operations guys. Now with more Unit linked policies coming the difference between a mutual fund and a insurance is reducing as in insurance you get insurance along with units whose NAV (Net Asset value) changes along with market as in Mutual funds and then again the expense cost cut by insurance company is more than the mutual fund AMC cost. Will write in detail about the difference between the two. Normally an insurance company makes profit in 6-7 year of their operation and a insurance policy comes in green in about 4-5 years thanks to the medical cost and the first year commission (30% of total premium). Well that is past that everyone know now lets talk about what is going to be the future of insurance. Well if I wear my futurist cap and see the sector the first things that comes is that the insurance product are going to be more diversified i.e. catering to health, micro financing, as now the biggest challenge is to cater it to untapped market i.e. rural areas. In the future we can see more innovative product coming up. In underwriting the future is expert system as underwriting is one of the critical systems where company undertakes the risk, with expert system the decision will be more consistent and precise and cane be easily customized for new product. The future of servicing is that companies will start focusing on their core competency and outsource the rest to other companies. Customer service is going to be a key differentiator with more and more services going on self service mode. The response will become a key differentiator and in next 5 years only the companies who have a substantial customer base will remain and there will be a consolidation in the insurance market. Investment will be one of the important and critical function which will keep creating value for the customer and thus help in attracting new business. Also from the sales point of you the company which has more FOS (Fleet on street) , will keep increasing its top line with logging more insurance policies , the FOS will become the key whether that is its direct advisors or business partners. With respect to service/Technology, I suggest (thanks to Milind Gore , AVP in my department) that the details of policy, customer information will be stored in the data mart and customer will be recognized with just a client id , so a customer can walk into the branch , fill his client id , add some documents like medical sheets, payment slips and others and there is no data entry to be done. Also this will help the insurance company in risk mitigation as the retention limit of the customer will be known. Also it will decrease the customer service cost by a huge percent as the insurance company will have consistent data and since all the application will use the same data so there will be data consistency across all the customer touch point. It will give me cross sell opportunity and in a sense would be one stop solution for most of the problem… okay guys I am planning to write a paper on these so will post that …whuff enough gyan for today… but guys keep watching next post will be on a lighter side and quite interesting …chalo now me signing off from here …

Nach baliye 3 - the Truth behind the show

From today i am again starting writing my blog, with this blog i will be writing all the things that comes to my mind , some interesting stuff along with lot of crap. Well today watching the final of nach baliye – a dance reality show, lets talk about how these shows make money as the motto of this blog is “LETS MAKE LOTS OF MONEY, HONEY” so lets understand what is the business model of such kind of shows, why is every channel across is eager to host a reality show. First of all as obvious it’s advertising which is a known to all as a source of revenue for the channels, now the revenue is directly proportional to TRP (Television rating) which the show gets, which is calculated on a weekly basis more information about it later(their business model). So you will see a lot of stints and games ( rona – dona, fighting, walking out of shows) and other things. The other revenue earner is the votes that are sent through Phone calls and SMS. Now every sms that is send (Mind you that is worth 3 Rs compared to normal SMS that is 30 paise) every 2 rs goes to channel that means around 66 Percent and rest is kept by the service providers. So Don’t be amused when next time even if you are asked about what sari should be worn by which bahu (Ekta is capable of that… no offences .. I respect her a lot). The third revenue earner is the sponsorship for clothes, makeup, travel, car etc etc …. Which for sponsors gives them word to mouth publicity or in stylish terms called “Viral marketing” don’t forget I am MBA guys and at the same times gives lot of moolah to channels. These shows have also become a platform for promoting other shows and films ( don’t tell me you missed shahrukh khan’s promotion of his films on all the shows whether that was a singing competition ,dance competition or food competition). The another avenue of revenue for these shows is the feed that these guys sell to the news channel and radio channel (Now common what else will these news channel show for 24 hours) also it’s gives a great platform to sell merchandise for ex you will see boogie woogie dance track or Nach baliye songs, t-shirts etc etc .. so at the end its all the money honey and we will explore that together . So next time when you see the next emotional appeal from any participant or fight between the contestants or the judges think of the green bucks that these channels will be making . Between amir and sanjeeda have won the nach baliye 3 and man I must say sanjeeda is true a very beautiful girl .. chao guys me singing off … and going for research to bring you “all about money , honey” on some other topic.