A PROJECT REPORT ON

Rural Distribution Network Set UP

Submitted in partial fulfillment for

POST GRADUATE DIPLOMA IN MANAGEMENT

Program of

INSTITUTE OF TECHNOLOGY AND SCIENCE

GHAZIABAD

SUBMITTED BY:

Vijendra Singh

PGDM (2009-2011)

INDUSTRY GUIDE FACULTY GUIDE

Mr. Vikas Bhuwania Prof. Satish Kumar

Assistance Manager Department of Managemnt

JKRMIBL I.T.S. Ghaziabad

1

ACKNOWLEDGEMENT

With regard to my Project with JK Risk Managers and Insurance Brokers

Ltd. I would like to thank each and every one who offered help, guidelines

and support whenever required.

First and foremost I would like to express gratitude to my mentor Mr. Vikas

Bhuwania, Assistance Manager, JKRMIBL and Prof. Satish Kumar,

Department of Management, ITS Ghaziabad for their support and guidance

in the Project work.. I am extremely grateful to Mr. Kuldeep Raghuwansi,

Group Manager and Mr.Praveen Kumar Ojha, Group Manager JKRMIBL

for their valuable guidance and timely suggestions.

I would like to like to express my gratitude to to the Placement cell and

especially to the coordinator of placement cell Prof. Durba Roy , who gave

me this opportunity to work with JK Risk Managers and Insurance Brokers

Ltd . Also I would like to thank all the faculty members of ITS Ghaziabad

who gave me their valuable support time by time.

I would also like to extend my thanks to my friends for their support and

lastly, I would like to express my gratefulness to the parent’s for seeing me

through it all.

Vijendra Singh

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CERTIFICATE

This is to certify that Mr. Vijendra Singh, student of ITS, Mohan Nagar Ghaziabad

has completed project work on Rural Distribution Network Set UP under my

guidance and supervision.

I certify that this is an original work and has not been copied from any source.

Signature of Guide

Mr. Vikas Bhuwania

Assistance Managers,

JKRMIBL, New Delhi

Date-

3

DECLARATION

I hereby declare that this Project Report entitled JKRMIBL, submitted in

the partial fulfillment of the requirement of Post Graduate Diploma In

Management of INSTITUTE OF TECHNOLOGY and SCIENCE,

GHAZIABAD is based on primary & secondary data found by me in

various departments, books, magazines and websites & Collected by me in

under guidance of Mr. Vikas Bhuwania.

DATE: VIjendra Singh

PGDM 2009-11

Roll No.-2009171

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TABLE OF CONTENTS

S.No. TOPIC PAGE No

Executive Summary 6

1 Introduction 8

2 Objective and Scope of the study 10

3 Research Methodology 12

4 Organizational Profile 13

5 Concept and Theories 27

6 Analysis of Distribution Network 36

7 Learning and Recommendation 40

8 Conclusion 43

9 Bibliography 44

5

EXECUTIVE SUMMARY

.

All over the world agriculture is synonymous with risk and uncertainty. Crop

insurance helps in stabilization of farm production and income of the farming

community. It helps in optimal allocation of resources in the production process.

Indian Government has been concerned about the risk and uncertainty prevalent in

agriculture.

The government of India started offering widespread crop in insurance in

1985, with the Comprehensive Crop Insurance Scheme. The CCIS has been

replaced by the National Agriculture Insurance Scheme. The NAIS is considered

to be an improvement over the CCIS, but it has simply replaced one flawed with

another slightly less flawed one. The main flaws of the NAIS are the goal of

financial viability, its mandatory nature, its failure to address adverse selection,

arbitrary premiums, and the area approach.

Then the times comes for a crop insurance scheme, which can provide

benefits for loanee as well as non-loanee farmers, which is not mandatory in nature

and having weather based risk coverage. It was the evaluation of weather based

crop insurance scheme. WBCIS scheme is basically a scheme which covers the

risk, which directly related with the uncertainty of weather.

Agriculture Insurance Company of India Limited (AIC)is a public sector

undertaking headquartered out of New Delhi, India. It currently offers area based

and weather based crop insurance programs in almost 500 districts of India. It

covers almost 20 million farmers, making it one of the biggest crop insurers in the

world.

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JK Risk Managers and Insurance Brokers Ltd. part of JK organization, is an

insurance brokers for AIC, which carrying the crop insurance schemes in deferent

states of India.

This study was conducted in the rural area of Haryana and Punjab. In Haryana I

covered Fatehabad, Bhiwani, Sirsa ,Kurukshetra & in Punjab I did Ludhiyana,

Bathinda. In this study we covered approximately 2000 people. These people were

farmers, sarpanch, agriculture development officers, mandi pradhan, local seeds and

pesticides dealers, nambardar of villages and various other ones. The main focus

was different aspects of various crop insurance schemes, like its benefits, financial

viability, reaching, and risk coverage.

This project is basically to study the distribution network set up in the

rural area of Haryana and Punjab and find out the optimum strategy to build up

the effective distribution network for crop insurance. The main objective of this

research is try to find out the different ways, so that an optimal distribution network

can be build up in long run. As everyone knows that, profitability of industry in any

business either product or services broadly depends upon the distribution channel

and network.

The Project is completed during my Post Graduate Diploma in Management

(PGDM) program, in Institute of Technology & Science (I.T.S.), Mohan Nagar

Ghaziabad. I.T.S. was established under the aegis of Durga Charitable Society. It

started imparting PGDM Program in the year 1996.

7

INTRODUCTION

All over the world agriculture is synonymous with risk and uncertainty. Crop insurance

helps in stabilization of farm production and income of the farming community. It helps

in optimal allocation of resources in the production process. Indian Government has been

concerned about the risk and uncertainty prevalent in agriculture. In recent years we have

seen a drastic shift in weather. Since last few years, climate change becomes more

healthy topics for discussion between the government of deferent countries, business

professionals, and agriculture world. Although agriculture always related with the high

risk and uncertainty, but because of few changes in climate becomes it more risky and

uncertain.

As we know the only tool to protect the profitability of our agribusiness is risk

coverage. The government of every nation now becomes about more conscious about the

risk coverage in agriculture. The government of India started offering widespread crop in

insurance in 1985. In 1985, government of India has started a Comprehensive Crop

Insurance Scheme(CCIS). But within few years, this scheme was replaced by National

Agriculture Insurance Scheme. The NAIS is considered to be an improvement over the

CCIS, but it has simply replaced one flawed scheme with another slightly less flawed

one. Government crop insurance has proved to be a

failure worldwide, but India seems to have ignored both its own failure and the failure of

other countries. The main flaws of the NAIS are the goal of financial viability, its

mandatory nature, its failure to address adverse selection, arbitrary premiums, and the

area approach. Internationally, private crop insurance is not highly developed but varied

successful private programs do exist. Even if India withdrew from crop insurance

schemes, it could still support farmers through an income guarantee or investment in

infrastructure.

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After the failure of NAIS scheme, weather based crop insurance scheme comes

into action. Weather Based Crop Insurance aims to mitigate the hardship of the insured

farmers against the likelihood of financial loss on account of anticipated crop loss

resulting from incidence of adverse conditions of weather parameters like rainfall,

temperature, frost, humidity etc.

The WBCIS is basically run under the Indian government as well as the state

governments of different states with a view of providing financial risk coverage on

different type of crops for the farmers. It’s totally weather based crop insurance scheme,

which covers only weather based risks like high & low temperature, high wind speed and

rainfall either excess of deficit.

The Agriculture Insurance Company of India Ltd.(AIC) and ICICI Lombard

the two insurance companies which provides WBCIS for crop insurance either subsidies

scheme or commercial scheme on behalf of government or itself.

JK Risk Managers and Insurance Brokers Ltd(JKRMIBL). is an insurance brokers of

AIC. JKRMIBL is basically made marketing and selling of these schemes in different

states of India.

JKRMIBL is using direct distribution network to market the different schemes of AIC.

Means they directly meet with the farmer, tells the benefits of scheme and making their

sales.

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OBJECTIVES OF THE STUDY

The Prime Objective of the study is to assess the optimum strategy of rural

distribution network set up for crop insurance in Punjab and Haryana. Also

to study the different ways to set a proper distribution network so that sales

can be maximized and future competition in crop insurance can be

minimized with the help of proper distribution channel and network. .

This objective is to be fulfilled by examining the optimum distribution

strategy, for JK Risk Managers and Insurance Brokers Ltd. in Haryana and

Punjab.

SCOPE OF STUDY

As we know the largest market in the world with 700 million Rural Folks.

With growing purchasing power and increasing aspiration level attracting big

corporate houses towards the market related with the rural areas and

agriculture. Growing uncertainty in weather & monsoon and recent climate

change issues resulting the agriculture more and more risky which would be

converted into demand for the crops to be insured.

Growing awareness level in farming techniques and government concerns

about the educated and productive farming creating a huge opportunity for

the corporate houses which one are working in this segment. This may also

results in more competitive market if other players will enter in coming

future.

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LIMITATIONS

There were certain limitations in the project as – The project got only two

months which is a short period of time, another limitation was project was

limited to work only with the farmers, villagers and other ones which one

are most of the times uneducated, so sometimes findings are not hundred

percent correct.

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RESEARCH METHODOLOGY

The research is totally based on Primary data and secondary data. The Primary data is

based on my findings during my visit in various cities of HARYANA and PUNJAB

districts Fatehabad, Sirsa, Bhiwani,KurukshetraLudhiyana and Bathinda. During

this visit in these cities, I visited different government offices, then meet with the

different officers like ADO, BDO and SDO, made healthy discussion about crop

insurance scheme, so that various aspect of distribution can be easily understand. I have

also visited some local pesticides, seeds dealers and ask him various possibilities of

building network with the help of them.

Research Type : Analytical

Research Area : Haryana , Punjab

Respondents : 500 (Including: Farmers, ADO, BDO, SDO,

Local pesticides dealers, Seeds dealers)

Source of Data Collection : Primary and secondary

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COMPANY PROFILE

Group Profile:

J.K. Organization, founded over 100 years ago, is an eminent industrial group in India. The

Group has multi-business, multi-product and multi-location operations. The Companies in

the Group manufacture and sell a large range of products with leadership position in

several areas including Automotive Tyres and tubes, Paper & Pulp, Cement, V-Belts, Oil

Seals, Power Transmission Systems, Hybrid Seeds, Woolen Textiles, Readymade

Apparels, Sugar, Food & Dairy Products, Cosmetics etc. Clinical Research and Software

Development are other activities. The Organization is recognized as a dynamic force

playing a key role in the resurgence of India.

J.K. Organization has different companies for different businesses. Most of these are

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public limited companies and are quoted on the stock exchange with a large number of

public shareholders.

All products of the Group are not only strong brand names, but also reputed market leaders,

in their respective segments. The success of the Group is based on the use of latest

technology, continuous research & development and innovation. The Organization has set

up highly reputed Research and Development Institutes in India.

Member Companies

JK TYRE AND INDUSTRIES

JK PAPER

JK LAKSHMI CEMENT

FENNER INDIA

JK SEEDS

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JK SUGAR

UMANG DAIRIES

CLINIRX

Certifications

International Quality Certifications and Awards

Innovation and passion to perform have always been the driving forces at J.K.

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Organization.

Hari Shankar Singhania, being bestowed the honour of Padma Bhushan

by the Hon'ble President of India, Shri A.P.J. Abdul Kalam

All major manufacturing Companies have ISO 9001 certification. In 1998 JK Tyre

became the world’s first tyre manufacturer to be awarded the QS-9000 certification for

multi-location operations. It was first Indian company to have E-mark Certification, a

pre-requisite for Tyre.exportst o EC and other countries

JK Paper Mills, JK Tyre and JK Lakshmi Cement were the first in their industry to get

the ISO 9001 certification and ISO 14001 & OHAS 18001 certification. Many

companies in the Group have consistently received National honour and Awards in

various fields such as marketing, human resource, productivity, safety environment,

energy efficiency & conservation, use of green technologies etc.

 

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Vision & Mission Stands For - Dynamic & Successful business organization- A Socially-valued Enterprise- Business Integrity

Core Values- Caring for people- Integrity including intellectual honesty, openness, fairness & trust- Commitment to Excellence

 

Product Offered

The advent of JK Organization on the industrial landscape of India almost synchronizes

with the beginning of an era of industrial awareness - an endeavour for self reliance and

the setting up of a dynamic Indian industry. This was way back in the middle of the 19th

century. And the rest that followed is history.

JK Organization has been a forerunner in the economic and social advancement of India.

It always aimed at creating job opportunities for a multitude of countrymen and to

provide high quality products. It has striven to make India self reliant by pioneering the

production of a number of industrial and consumer products, by adopting the latest

technology as well as developing its own know-how. It has also undertaken industrial

ventures in several other countries.

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JK Organisation is an association of industrial and commercial companies and charitable

trusts. Its member companies, employing nearly 50,000 persons are engaged in the

manufacture of a variety of products and in diverse fields of commerce.

Trusts are devoted to promoting industrial, technical and medical research, education,

religious values and providing better living and recreational facilities. With the spirit of

social consciousness uppermost in mind, J.K. Organisation is committed to the cause of

human advancement.

As an Insurance Broker, JKRMIBL is supposed to seek “optimum” insurance solutions

for it’s customers in the retail and the corporate segments.

But unlike most Indian insurance brokers, at JKRMIBL, we paint a wider canvas using

our in house risk engineers and specialists we can and do look at all the dimensions of

any “Pure Risk” situation faced by a customer and look at options for Risk Avoidance,

Minimization, Retention and finally look for innovative solutions for Transferring

“Residual” risks popularly called “Insurance”.

Our Group’s significant knowledge resources employed in specialist consultancy firms,

research institutes and institutions of higher learning can be leveraged to provide our

demanding customers risk mitigation solutions which are unique for each customer.

Off course being a full service insurance broker we understand our legal responsibility to

ensure for our customers all the services as laid down by the IRDA in the Regulations

governing our business, and the range of services are:

Obtaining detailed information of the client's business and risk management

philosophy;

Familiarising ourselves with the client's business and underwriting information so

that this can be explained to an insurer and others;

Rendering advice on appropriate insurance cover and terms;

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Maintaining detailed knowledge of available insurance markets, as may be

applicable;

Submitting quotation received from insurer/s for consideration of a client;

Providing requisite underwriting information as required by an insurer in assessing

the risk to decide pricing terms and conditions for cover;

Acting promptly on instructions from a client and providing him written

acknowledgements and progress reports;

Assisting clients in paying premium under section 64VB of Insurance Act, 1938 (4

of 1938);

Providing services related to insurance consultancy and risk management;

Assisting in the negotiation of the claims; and

Maintaining proper records of claims;

For our retail customers we bring to them the benefits of analysis by experts who choose

the best price and coverage combinations from the various insurance company products

for both life and non-life and make these available through our online web based pipeline

which is accessed by our sales and marketing executives at Points of Sales to provide

customers price and coverage comparisons and assist them in buying the insurance covers

in a knowledgeable and cost effective manner.

Our remuneration strategy is simple and transparent:

For corporate customers with annual premium outgo in excess of INR 50 lacks, we have

a fee based model for different services based on a use and pay approach. Please contact

us for more information on our range of services and fee schedule.

For Other Corporate customers, we work on a prepared brokerage basis built into the

premium paid with prior and full Knowledge of our customers.

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For Retail customers, our online network delivers products of various insurance

companies, duly customized for JKRMIBL customers, giving them value for each single

rupee paid as premium and our brokerage is built on a standard basis into the premium

itself.

Under all circumstances our remuneration never crosses limits specified and laid

down by the IRDA in its regulations.

Life Insurance

LIFE INSURANCE Life Insurance

We at JK Insurance & Risk Managers believe in complete need analysis of the customer

and suggest products that are in their best interest. We have tie up with all the major life

companies so the customer has various options. We believe in long term relationships and

give highest importance to policy servicing related issues. Whenever you need us you

shall find us eager to help you. We are there with you all the way.

GENRAL INSURANCE

Insurance, in law and economics, is a form of risk management

primarily used to hedge against the risk of a contingent loss. Insurance is defined as the

equitable transfer of the risk of a potential loss, from one entity to another, in exchange

for a premium. Insurer, in economics, is the company that sells the insurance. Insurance

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rate is a factor used to determine the amount, called the premium, to be charged for a

certain amount of insurance coverage. Risk management, the practice of appraising and

controlling risk, has evolved as a discrete field of study and practice.

RISK MANAGEMENT

Risk management is the human activity which integrates recognition of risk, risk

assessment, developing strategies to manage it, and mitigation of risk using managerial

resources.

CLAIMS MANAGEMENT

This is an additional service that has been emphasized by the IRDA in the regulations for

the brokers. We Support in Checklist Preparation, Check on adherence to the Checklist,

Claim analysis, Asses the survey done by the insurance company, assisting and guiding

in the preparation of document, Follow up with Surveyor, Follow up with the insurance

company.

ABOUT JKRMIBL

"Excellence comes not from mere words or procedures. It comes from an urge to strive and deliver the best. A mindset that says, When it is good enough, improve it. It is a

way of thinking that comes only from a power within." - H.S.Singhania

JK Risk Managers & Insurance Brokers Limited is an independent business unit under the umbrella of the J K Organisation”.

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The advent of JK Organization on the industrial landscape of India almost synchronizes

with the beginning of an era of industrial awareness - an endeavor for self reliance and

the setting up of a dynamic Indian industry. This was way back in the middle of the 19th

century. And the rest that followed is history.

JK Organization has been a forerunner in the economic and social advancement

of India. It always aimed at creating job opportunities for a multitude of countrymen and

to provide high quality products. It has striven to make India self reliant by pioneering the

production of a number of industrial and consumer products, by adopting the latest

technology as well as developing its own know-how. It has also undertaken industrial

ventures in several other countries.

JK Organization is an association of industrial and commercial companies and charitable

trusts. Its member companies, employing nearly 50,000 persons are engaged in the

manufacture of a variety of products and in diverse fields of commerce.

Trusts are devoted to promoting industrial, technical and medical research,

education, religious values and providing better living and recreational facilities. With the

spirit of social consciousness uppermost in mind, J.K. Organization is committed to the

cause of human advancement.

Product Offered

Property insurance

It mainly comprises of material value in the form of tangible assets. Since tangible

property has a physical shape and consistency, it is subject to many risks ranging from

fire, allied perils to theft and robbery. But if a person judiciously invests in insurance for

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his property prior to any unexpected contingency then he will be suitably compensated

for his loss as soon as the extent of damage is ascertained.

Marine Insurance

With the globalization of the economy, supplier linkages span oceans, but still require

goods to be delivered to the concerned party in a pristine state, just-in-time.

1. Marine Cargo:

2. Marine Turnover Policy:

Fire Insurance Cover

1. Standard Fire and Special Perils:

2. Consequential Loss

Engineering

1. Machinery Break down

2. Boiler and pressure Plant

3. Electronic Equipment Insurance

4. Business Interruption losses

5. Erection All Risk

6. Contractors Plant and Machinery

7. Contractors All Risk

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Goods in Transit

Cover for loss of or damage to your property or goods when in transit whether they are

carried in your own vehicles and/or by third party carriers.

All Risk Cover

Insures is the risk of accidental damage to portable equipment such as laptops and other

electronic devices, test and measuring instruments, etc. at any location and including

whilst in transit in the personal custody of the employees of the business.

Corporate Fleet

Management of insurance of the fleet of vehicles owned by companies is a task in itself,

which requires investment of good time and effort.

PEOPLE RISKS:

Under the purview of this class of insurance, the risks associated with human life in

general can be covered up to the limit specified. A person can insure his or her life and

his health against any unplanned contingencies.

In event of his death, his dependants will be reimbursed to the full amount that he was

insured for. Or if the insured person meets with an accident or suffers from an illness that

cripples him forever, he will be compensated with the complete sum assured anyway

since he may not be able to lead a normal life again.

In case, the accident is not that severe, he should be able to recover after

medical treatment and rehabilitation. If he has opted for medical cover, then his medical

expenses, treatment and medication will be paid for by his insurance policy.

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Health and Disability or Death

Personal Accident

Voluntary Employee Benefits

Travel Policy

FINANCIAL RISKS:

Today’s corporate environment is characterized by increased sensitivity to Corporate

Governance issues, stringent client contracts, demanding stakeholders and an increased

need for protection against fraud. This necessitates companies to protect themselves

against a wide range of exposures arising out of the dynamic nature of business.

Burglary and Theft

Credit Insurance

Money Insurance

Employee infidelity

LIABILITIES RISKS:

Commercial General Liability Insurance

Product Liabilities Insurance

Public Liability Insurance

Directors & Officers Liabilities Insurance

Professional Indemnity Insurance

Workmen’s Compensation Insurance

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Umbrella Liability Insurance

With the help of these kinds of insurance products JK risk covering every segment of risk

and offering to the customer to cover the each kind of risk.

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CONCEPTS & THEORIES

Insurance

Insurance is a tool to protect you against a small probability of a large unexpected loss. It

is a technique of providing people a means to transfer and share risk where losses

suffered by few are met from the funds accumulated through small contributions made by

many who are exposed to similar risks. Insurance is not a tool to make money but a tool

to help compensate an individual or business for unexpected losses that might otherwise

cause a financial disaster.

Brief history of insurance sector

The insurance sector in India has completed all the facets of competition –from being an

open competitive market to being nationalized and then getting back to the form of a

liberalized market once again. The history of the insurance sector in India reveals that it

has witnessed complete dynamism for the past two centuries approximately. 

With the establishment of the Oriental Life Insurance Company in Kolkata, the business

of Indian life insurance started in the year 1818.

Important milestones in the Indian life insurance business

1912: The Indian Life Assurance Companies Act came into force for regulating the

life insurance business.

1928: The Indian Insurance Companies Act was enacted for enabling the

government to collect statistical information on both life and non-life insurance

businesses.

1938: The earlier legislation consolidated the Insurance Act with the aim of

safeguarding the interests of the insuring public.

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1956: 245 Indian and foreign insurers and provident societies were taken over by

the central government and they got nationalized. LIC was formed by an Act of

Parliament, viz. LIC Act, 1956. It started off with a capital of Rs. 5 crore and that

too from the Government of India.

The history of general insurance business in India can be traced back to Triton Insurance

Company Ltd. (the first general insurance company) which was formed in the year 1850

in Kolkata by the British.

Important milestones in the Indian general insurance business

1907: The Indian Mercantile Insurance Ltd. was set up which was the first company

of its type to transact all general insurance business.

1957: General Insurance Council, an arm of the Insurance Association of India,

framed a code of conduct for guaranteeing fair conduct and sound business patterns.

1968: The Insurance Act improved for regulating investments and set minimal

solvency levels and the Tariff Advisory Committee was set up.

1972: The General Insurance Business (Nationalization) Act, 1972 nationalized the

general insurance business in India. It was with effect from 1st January 1973.

107 insurers integrated and grouped into four companies viz. the National Insurance

Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company

Ltd. and the United India Insurance Company Ltd. GIC was incorporated as a company.

Insurance companies in India

IRDA has till now provided registration to 12 private life insurance companies and 9

general insurance companies. If the existing public sector insurance companies are

considered then there are presently 13 insurance companies in the life side and 13

companies functioning in general insurance business. General Insurance Corporation has

been sanctioned as the "Indian reinsurer" for underwriting only reinsurance business. 

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List of Insurance companies in India

LIFE INSURERS Websites

Public Sector

Life Insurance Corporation of India www.licindia.com

Private Sector

Allianz Bajaj Life Insurance Company Limited www.allianzbajaj.co.in

Birla Sun-Life Insurance Company Limited www.birlasunlife.com

HDFC Standard Life Insurance Co. Limited www.hdfcinsurance.com

ICICI Prudential Life Insurance Co. Limited www.iciciprulife.com

ING Vysya Life Insurance Company Limited www.ingvysayalife.com

Max New York Life Insurance Co. Limited www.maxnewyorklife.com

MetLife Insurance Company Limited www.metlife.com

Om Kotak Mahindra Life Insurance Co. Ltd. www.omkotakmahnidra.com

SBI Life Insurance Company Limited www.sbilife.co.in

TATA AIG Life Insurance Company Limited www.tata-aig.com

AMP Sanmar Assurance Company Limited www.ampsanmar.com

Dabur CGU Life Insurance Co. Pvt. Limited www.avivaindia.com

GENERAL INSURERS

Public Sector

National Insurance Company Limited www.nationalinsuranceindia.com

New India Assurance Company Limited www.niacl.com

Oriental Insurance Company Limited www.orientalinsurance.nic.in

United India Insurance Company Limited www.uiic.co.in

Private Sector

Bajaj Allianz General Insurance Co. Limited www.bajajallianz.co.in

ICICI Lombard General Insurance Co. Ltd. www.icicilombard.com

IFFCO-Tokio General Insurance Co. Ltd. www.itgi.co.in

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Reliance General Insurance Co. Limited www.ril.com

Royal Sundaram Alliance Insurance Co. Ltd. www.royalsun.com

TATA AIG General Insurance Co. Limited www.tata-aig.com

Cholamandalam General Insurance Co. Ltd. www.cholainsurance.com

Export Credit Guarantee Corporation www.ecgcindia.com

HDFC Chubb General Insurance Co. Ltd.  

REINSURER

General Insurance Corporation of India www.gicindia.com

Insurance In India

Insurance sector is an opportunity for India.

This business is growing at the rate of 18-22 per cent annually.

Presently it covers market of RS.450 billion.

Together with banking sector it contributes about 7% to GDP.

Gross premium collection is about 2% of GDP.

This is an indicator that growth potential for the insurance sector is

immense.

Insurance sector contribute a lot in economic development.

It provides long term fund for infrastructure development.

It is estimated that over the next ten years India would require investments

of the order of one trillion US dollar.

Crop Insurance

Crop insurance is a means of protecting the agriculturist against financial losses

due to uncertainties that may arise from crop failures/losses arising from named

or all unforeseen perils beyond their control.

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The government of India started offering widespread crop in insurance in 1985, with the

Comprehensive Crop Insurance Scheme.

Crop Insurance

NAIS SCHEME WBCIS SCHEME

Risk Coverage In NAIS:-

Fire & Lightning

Storm, Cyclone, Hailstorm, Typhoon

Tempest, Hurricane, Tornado

Flood, Inundation & Landslide

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Drought, Dry spells

Pests / Diseases

Risk Coverage in WBCIS:-

Temperatures(high as well as low)

Wind Speed(high wind speed)

Rainfall (excess, deficit and consecutive dry days)

National Agriculture Insurance Scheme (NAIS)

It also known as Rashtriya Krishi Bima Yojana (RKBY). The primary objectives of the

RKBY are as under to provide insurance coverage and financial support to the farmers in

the event of failure of any of the notified crop as a result of natural calamities, pests &

diseases. Other features like to encourage the farmers to adopt progressive farming

practices, high value in-puts

and higher technology in Agriculture. It also helps stabilize farm incomes, particularly in

disaster years.

Weather Based Crop Insurance Scheme (WBCIS)

Weather Based Crop Insurance aims to mitigate the hardship of the insured farmers

against the likelihood of financial loss on account of anticipated crop loss resulting from

incidence of adverse conditions of weather parameters like rainfall, temperature, frost,

humidity etc. Weather based Crop Insurance Scheme (WBCIS) is a unique Weather

32

based Insurance Product designed to provide insurance protection against losses in crop

yield resulting from adverse weather incidences. It provides payout against adverse

rainfall incidence (both deficit & excess) during Kharif and adverse incidence in weather

parameters like frost, heat, relative humidity, un-seasonal rainfall etc. during different

seasons. It is not Yield guarantee insurance.

Weather Insurance different from crop insurance

While Crop Insurance specifically indemnifies the cultivator against shortfall in crop

yield, Weather based Crop Insurance is based on the fact that weather conditions affect

crop production even when a cultivator has taken all the care to ensure good harvest.

Historical correlation studies of crop yield with weather parameters help us in developing

weather thresholds (triggers) beyond which crop starts getting affected adversely. Payout

structures are developed to compensate cultivators to the extent of losses deemed to have

been suffered by them using the weather triggers. In other words, Weather based Crop

Insurance uses weather parameters as ‘proxy’ for crop yields in compensating the

cultivators for deemed crop losses.

Experiences of weather insurance for farmers and limitations

Weather Insurance is a new concept. High level of transparency was / is maintained

throughout. After every period of insurance some improvements were made based on

feedback received and also on internal research and experience. Limitations are many like

- distance of the farm from the weather station, non-coverage of perils other than weather,

wider sowing / planting window of the crop, differences in soil types & management

practices, shift in climatic & weather patterns, etc. leading to weak correlation between

the yield and the weather indices, etc.

WBCIS operation

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Weather based Crop Insurance Scheme (WBCIS) operates on the concept of “Area

Approach” i.e., for the purposes of compensation, a ‘Reference Unit Area (RUA)’ shall

be deemed to be a homogeneous unit of Insurance. This RUA shall be notified before the

commencement of the season by the State Government and all the insured cultivators of a

particular insured crop in that Area will be deemed to be on par in the assessment of

claims. Each RUA is linked to a Reference Weather Station (RWS), on the basis of which

current weather data and the claims would be processed. Adverse Weather Incidences, if

any during the current season would entitle the insured a payout, subject to the weather

triggers defined in the ‘Payout Structure’ and the terms & conditions of the Scheme.

The “Area Approach” is as opposed to “Individual Approach”, where claim

assessment is made for every individual insured farmer who has suffered a loss.

Buyers of WBCIS

All Cultivators (including sharecroppers and tenant cultivators) growing the crop

(insurable under the scheme) in any RUA in the Pilot areas shall be eligible for coverage.

However, the Scheme is mandatory for all Loanee Cultivators of Lending Banks /

Financial Institutions who have Sanctioned Credit Limit for the particular crops and

optional for ‘Others’.

Amount of Insurance Protection

Amount of insurance protection (sum insured) is broadly the cost of inputs expected to be

incurred by the insured in raising the crop. Sum insured is predeclaired per unit area

(Hectare) by AIC at the beginning of every crop season, in consultation with experts in

State Government; and it may be different for different crops in different RUAs. Sum

insured is further distributed under the key weather parameters used in the insurance in

proportion to the relative importance of the weather parameters.

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Amount of Insurance for Loanee cultivators and others

In case of Loanee cultivator, the sum insured per crop is calculated by multiplying the

sum insured (pre-declared cost of inputs) with the crop-specific ‘Acreage’ declared in the

Loan Application Form by the Loanee cultivator for the purpose of “Maximum

Borrowing Limit (MBL)” fixed for him by the Lending Bank. In case of Others (Non-

Loanees), the sum insured per crop is calculated by multiplying the sum insured (pre-

declared cost of inputs) with the ‘Acreage’ expected to be sown / planted under the

particular crop and mentioned in the ‘Insurance Proposal Form’.

Main Flaw in NAIS Scheme

Lofty goal of financial viability.

Mandatory for loanee farmer.

Adverse selection, in the case of non-loanee farmers.

Premium do not equal at risk level.

The area approach.

Main Flaw in WBCIS Scheme

Only weather based risks are the part of risk covered.

No physical verification of field, its production capacity and finally the

production in field.

In some of the cases risk period starts middle of the seasons.

Analysis of Distribution Network

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AIC & ICICI Lombard are two main players in WBCIS.

Agriculture Insurance Company of India Limited (AIC) is a public sector undertaking

headquartered out of New Delhi, India. It currently offers area based and weather based

crop insurance programs in almost 500 districts of India. It covers almost 20 million

farmers, making it one of the biggest crop insurers in the world.

Agriculture Insurance Company Of India Ltd (AIC) is promoted by General Insurance

Corporation of India (GIC), NABARD and the 4 Public Sector General Insurance

companies. AIC has taken over the implementation of National Agricultural Insurance

Scheme (NAIS) which until Financial Year 2002 – 03 was implemented by GIC.

AIC is under the administrative control of Ministry of Finance, Government of India,

and under the operational supervision of Ministry of Agriculture. Insurance

Regulatory and Development Authority, Hyderabad, is the regulatory body governing

AIC.

AIC has 17 Regional Offices spread across India. AIC sells various agriculture and allied

insurance products and schemes. A significant amount of business is derived out of

National Agriculture Insurance Scheme

Products for AIC

Weather Based Crop Insurance Scheme (WBCIS)

Bio – fuel Tree/ Plant Insurance Policy

Wheat Insurance

Mango Insurance

Varsha Bima

Coffee Insurance

Rubber Insurance

Agriculture Insurance Company of India Ltd.(AIC) has two insurance brokers to market

their scheme, JK Risk Managers and Insurance Brokers Ltd. and Safeway. JK Risk

Managers and Insurance Brokers Ltd. is the following direct distribution network in crop

insurance.

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Direct distribution means approaching to the customers directly without using any

intermediary, sub-channels or network. JK Risk Managers and Insurance Brokers Ltd.

approaches to the farmers directly to get their crop insured. They directly approaching to

the farmers to sell the crop insurance policies of AIC.

Approach taken by JK Risk Managers and Insurance brokers Ltd

They directly meet to the farmers to sell their policies.

Meeting with the agriculture development officers(A.D.O) & Sub divisional

officers (S.D.O) , so that they can tell about the scheme , insurance policies and its

benefits.

They convince and motivate these officers about the scheme, so that they can

motivate the farmers for crop insurance.

JK also approaching to the sarpanch, nambardar, patwari of villages, so that they

can easily market their policies.

Another options are like Mandi Pradhan of local anaj mandi, Pesticides seller,

Seed seller, so that JK can approach to their farmer & share croppers.

JK also approach to the IFFCO, HAFED, PACS for marketing purpose.

Some of local political background people also helping in crop insurance.

SWOT ANALSYS

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Strength-

Only two players are there, it makes easy to compete.

JK is already exist in rural market with a renowned brand in other industry and

segments, which help them to market the policies.

No sub-brokers , sub-channel, means cost saving.

Market size is too much large, so need not to meet every farmers.

Weakness-

No regional and local office, this is main drawback for JK.

Farmer can get information, suggestion and complain only at the start of seasons,

when JK executives will be there.

No local and regional office, creates disbeliefs in the mind of farmers.

Most of the times scheme comes only for one week or ten days, during this limited

period it’s not easy to reach in every village, and follow them.

Although farmers are agree to buy the policies, but having 2 to 3 executives it’s

not possible to follow all of them, within the limited span of time.

Opportunities-

Huge untapped market is still there like Uttar Pradesh, Bihar etc.

There are a few players in this segment, so lots of opportunity to become market

leader as an insurance brokers.

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Threats-

Since there is huge potential in crop insurance, so big corporate houses may enter

in this segment, which one are already in insurance sector.

Ex- Reliance, Tata, Birla etc.

Because of no local and regional branches, reaching would be more difficult in

order to compete with the rivals in coming future.

LEARNING’S & RECOMMENDATIONS

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LEARNINGS

During the project with JK Risk Managers and Insurance Brokers Ltd. no. of things is

learnt by me –

Various aspects about the Insurance products.

Different types & features of the Insurance policies of companies.

Also some of the functioning of the different government offices has come to

know.

Most importantly I got the practical experience of consumer behavior.

I learn how to motivate the customer towards crop insurance.

I learn what are the different crop insurance schemes and their risk coverage.

The Primary purpose of mine to do a project in an Insurance Company was to know how

the concept selling works and how people show their interest towards Concepts Product

and invest in it for risk coverage. To learn from the behavior of customer that what

should keep in mind when we are making policies or any Product for the common people.

My Project was successful in getting that experience. During my research I talked to

various types of customer they were common people, they were businessmen, but most of

them were farmers. From this interaction I got insight of the consumer perception and his

attitude towards financial Product. I analyzed there are people who have money but are

either not aware of crop insurance or very conservative in their approach towards

financial products. I also got the knowledge of concept product how they work.

These are some learning which I learnt during the Project with JKRMIBL in Punjab and

Haryana.

RECOMMENDATIONS

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Strategies to develop effective distribution team

Build up a team which consisting of local people like sarpanch, nambardaar, patwari

etc , and tell them benefits of crop insurance.

Motivate the people for crop insurance by telling them about the effect of climate

change which leads to lower/uncertain productivity of crops.

If these people get motivated, they would be a effective channel for us, because rural

people and farmers having a kind of beliefs in them.

The local seeds and fertilizers dealers are directly connected with the farmers.

They can be a good source to channelize the business.

With the help of local people, we can easily market our product within a limited

span of time.

Get connected with the local mass leader and communicate them about new

upcoming scheme so that they can make people aware and create goodwill. If

possible give them some incentives.

JK should provide some specialist in agriculture who can tell people about the

new ideas of agriculture and indirectly promote risk insurance. In this way they

can built up CRM as well as get business.

JK should open a local fund collection house(Depot), so that the loyal customer as

well as aware farmers can get their crop insured easily. Which save the time of

customers as well as of the organization and expand the business.

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The above mentioned plan will incur high initial cost to the company, but this will

be a very beneficial to the organization to mobilize the business. Also it would be

proved as a competitive advantage over forthcoming competitors.

CONCLUSION

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There are millions of farmers in India who work the hardest and yet seem to suffer the

most. Their occupation is fraught with the highest risk as it is totally at the mercy of

nature.

Enormous market opportunity attracting big corporate houses in this segment. So now

the time for focusing upon the distribution strategies, so that competition can be easily

handled, because in every industry distribution network plays a vital rule in the success of

the firm and organization.

Now when the competition in the market has tightened so now it’s the time for

JKRMIBL to differentiate itself as an Insurance Brokers . JK has also a competitive

advantage over other competitors as it already exist in the market with a big and

renowned name in different industries. So now JKRMIBL needs to maintain that

competitive advantage over the other players in India.

BIBLIOGRAPHY

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BOOKS

Marketing management by Philip Kilter.

Marketing research by David.J.luck and Ronald S. Rubin.

Strategic marketing management by Wilson Gillian.

MAGZINES & NEWSPAPERS

Business today

Economic times

WEB SITES

www.Jk.org

www.google.com

www.aic.com

www.jkbima.org

www.wikkipedia.org

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