WORKING OF DISTRIBUTION CHANNELS
BROKERS
Insurance brokers act as an intermediary between clients and insurance companies. Clients may be either individuals or commercial businesses and organisations. They use their in-depth knowledge of risks and the insurance market to find and arrange suitable insurance policies and arrange cover. They act in the interest of their clients and offer products from more than one insurer to ensure that their clients get the best deal.
Retail insurance brokers usually arrange insurance policies for individuals or companies and deal directly with them. Policies range from motor, house, travel or pet cover for individuals or property to employer's liability and public and product liability insurance.
Commercial insurance brokers deal with high value and more complex insurance cover in areas such as marine, aviation, oil and gas and financial risks.
AGENTS
Insurance agents, who may be referred to as insurance sales agents, help clients choose insurance policies that suit their needs. Clients include individuals and families as well as businesses. Captive agents work for an insurance company, and only sell that company's products. They are one ones who connect with the customers emotionally. They are a good mediator between the insurer and the insured. They tell about the latest taste of the consumer in the market to the company. They generally work under (DO) development officer, who works under sales manager. There are many agents under one DO. They also help the agents and give them tips about how to approach the potential customers.
BANCAASSURANCE
The bank insurance model (BIM), also sometimes known as bancassurance, is the partnership or relationship between a bank and an insurance company whereby the insurance company uses the bank sales channel in order to sell insurance products, an arrangement in which a bank and an insurance company form a partnership so that the insurance company can sell its products to the bank's client base.
BIM allows the insurance company to maintain smaller direct sales teams as their products are sold through the bank to bank customers by bank staff and employees as well.
Bank staff and tellers, rather than an insurance salesperson, become the point of sale and point of contact for the customer. Bank staff are advised and supported by the insurance company through product information, marketing campaigns and sales training.
The bank and the insurance company share the commission. Insurance policies are processed and administered by the insurance company.
This partnership arrangement can be profitable for both companies. Banks can earn additional revenue by selling the insurance products, while insurance companies are able to expand their customer base without having to expand their sales forces or pay commissions to insurance agents or brokers.
Bancassurance, the sale of insurance and pensions products through a bank, has proved to be an effective distribution channel in a number of countries in Europe, Latin America, and Asia
MICROINSURANCE AGENTS
Micro agent was a channel in the insurance industry that was developed for deeper penetration of insurance into India. However, with smaller ticket size coupled with low commissions, this channel has seen low participation from distributors.

Micro-insurance products, which offer coverage to low income households is a mechanism to penetrate rural areas. It is a general or life insurance policy with a sum assured of Rs 50,000 or less, however the average ticket size ranges from Rs 2000-4000 per policy.
According to existing regulations, district cooperative bank, regional rural and urban co-operative banks, primary agricultural cooperative societies, companies appointed as banking correspondents and individual owners of kirana shop, medical shop, petrol bunk and PCOs in rural areas are allowed to act as micro-insurance agents.
Online channel
The online journey of insurance started in 2005 with players like Apna insurance and Bima deal entering the market. After testing the aggregation model, startups forayed into selling leads to insurance companies and earned a commission on every lead conversion. The process of going online is not too difficult. The insurer need to build a website, open a call center and post existing products online with the secure payment option to get the premium.
These days the internet users are increasing day by day and this is becoming a big market for selling the policies online. This was believed that internet will have a very big negative impact on the agency channel but it did not happen. When we tried to find the customers who have purchased the policies online , it became quite difficult to find them. People in India still don’t have trust and comfort factor in the online channel. consumers have not shown a marked preference for purchasing insurance product via the Internet. Currently, less than two percent of insurance products are purchased via the Internet. Although less frequently used, company-led distribution channels through mediums such as direct mail or telephone call centers have seen increasing growth.
Online channel are mostly used by the consumers who have been shifted to India from foreign countries or the high class people. We had a talk with Mr. Harsh Kanchan , he has a term insurance plan which he bought from Max Newyork life insurance through online. According to him, he has not faced any problem in buying the policy online because it was a very normal policy with no much complications in terms and condition. However, buying other plan which are little complex to understand are still finding it difficult to get a customer base in India. The companies are trying their best in reaching to the problems of the customers and solving their queries. The site also have a live chat option through which a company professional can guide and help the customer in understanding and buying the right product. There are lags in connecting and making relation with the customer online but, with the change in culture and society, the people are becoming more tech-savy which is a positive sign for the growth of online selling.

FUTURE OF DISTRIBUTION CHANNEL’S
AGENTS
Future demand for insurance sales agents depends largely on the variety of financial products and volume of sales. Sales of health insurance, long-term-care insurance, and other comprehensive financial planning services designed specifically for the elderly are expected to rise sharply as the population ages. In addition, a growing population will increase demand for insurance for automobiles, homes, and high-priced valuables and equipment. As new businesses emerge and existing firms expand their insurance coverage, sales of commercial insurance also should increase, including coverage such as product liability, workers' compensation, employee benefits, and pollution liability insurance.
Employment of agents will not keep up with the rising level of insurance sales, however. Many insurance carriers are trying to contain costs and are shedding their captive agents—those agents working directly for insurance carriers. Instead carriers are relying more on independent agents or brokers.
Insurance sales agents will need to expand the products and services they offer as consolidation increases among insurance companies, banks, and brokerage firms and as demands increase from clients for more comprehensive financial planning.
Independent agents who incorporate new technology into their existing businesses will remain competitive. Agents who use the Internet to market their products will reach a broader client base and expand their business. Agents who offer better customer service also will remain competitive.

BANCASSURANCE
Bancassurance provides ample scope to diversify and to increase our fee based income by leveraging the existing customer database.
As well as Bank customers well perceive the Bancassurance venture which would ultimately ends up with multiple benefits to customers. The benefits to customer range from better service quality, advice on financial planning, credibility, transparency dealing, ease of renewals. Hence future of bankassurance is bright.

ONLINE MARKETING
The online insurance market in India is likely to grow 20 times by 2020, a study showed. A study conducted by Boston Consultancy Group and Google showed that overall internet influenced sales would be Rs 15,000 crore to Rs 20,000 crore. At present, it is in excess of Rs 700 crore online sales. Life insurance sales contribute around Rs 300 crore, motor insurance around Rs. 250 crore, while other insurance lines such as health and travel make up around Rs 150 crore. By 2015, the online insurance industry is expected to grab 25-30% of the overall insurance market, out of 50-60 % of volume would be dominated by third party aggregators. Similarly, as e commerce industry expects 2-3 players would emerge successful in this space, however, it’s an industry still in the nascent stage and has a long way to go. What we have seen so far is the run up. Things seem poised for a big leap in the coming years.
Brokers
The future of insurance broker can see a big boom in the coming future as the level of competition is increasing with more number of players coming in the market. The brokers have played a big role in increase the sales of insurance products in India. The IRDA has reviewed its importance in the distribution channel and have proposed the concept of sub-broking , the authority has come up with the regulations for the same. The regulation have enlarged the scope of regulatory supervision and encouraging new applicants to take up the profession of insurance broker. The number of insurance brokers are continuously increasing in India year after year and after the new regulations it is expected that there will be more international brokers who will try to enter the Indian insurance market to increase the penetration level of insurance.
Microinsurance
A mere year later, the number of low-income people accessing microinsurance may have increased by as much as 50% from 2006, partly due to the identification of new programs, and partly because of significant growth of covered lives within both existing and new microinsurance programs. Microinsurance has very recently become increasingly popular and as “insurers” (in the broadest sense, including commercial insurers, mutual benefit associations, community-based groups, and others) learn more lessons about this market there is improvement in product offerings, process efficiencies, and market responsiveness. The massified market could mean coverage by quality microinsurance products for as many as one billion low-income people over the next ten years. Clearly, there is a long way to go, many lessons to learn, and distribution and efficiency breakthroughs yet to come to get good microinsurance to a billion people in ten years. What follows are the thoughts of several of the leading people in microinsurance on just how we can get there.
We see the beginnings of some of these requirements already. With interest, and indeed activity, within the rapidly growing microinsurance market, it is likely that we will see more and more focus on these issues. We cannot simply be satisfied with overpriced credit-life products to microfinance clients, and life policies that pay claims after many months. Massification of this market will happen when all parties become serious about microinsurance and responsibly address the issues discussed by these contributors. This can happen, and there are many signs that improvements will continue. Let us all move onward to covering one billion low-income people by 2018 with products that they value, offered efficiently, in an environment that facilitates continued expansion.

CHALLENGES AND OPPORTUNITIES FACED BY DISTRIBUTION CHANNELS 1. BROKERS
We visited ALMOND BROKERS to determine challenges and opportunities it is facing as distribution channel.
CHALLENGES
1. Regulatory framework is biggest problem. 2. If the FDI does not become 49% MNC’s lose interest which decreases the business. 3. For brokers selling retail products, their Local competitors are selling similar policies, as well as banks and Internet brokers, which present a threat to the bottom line. 4. As insurance rates increase, some people may move their policies to other insurance agencies, another threat to your profitability. 5. Banks can’t force or pressurize the corporate to take insurance. This is the biggest opportunity for the brokers to tap the corporate.

OPPORTUNITIES 1. Selling supplemental products gives you an opportunity to increase your profits 2. . Networking and building relationships with other businesses, such as accounting and legal firms, provides an opportunity to seek referrals to businesses and consumers needing insurance policies. 3. Providing services as an insurance consultant, in addition to selling policies, is a way to increase income and become a trusted source for recommending policy coverage

2. CORPORATE AGENCY INCLUDING BANCASSURANCE
We visited STANDARD CHARTERED for understanding the opportunities and threats it is facing as a distribution channel
CHALLENGES
1. Maintaining the same service levels for insurance business as that for the banking services may be one of the biggest challenge. 2. Banks will have to be prepared for possible disruptions to client relations arising from more frequent non-life insurance claims. 3. Products are not available according to changing needs of customers 4. If terms and conditions are not properly explained to customer it will create problem in future. 5. In case of failure of the ban assurance operation, the bank runs the threat of image risk. 6. Maintaining the same service levels for insurance business as that for the banking services may be one of the biggest challenge. 7. Training / re-training bank staff on insurance products of different companies. 8. Difficult to target outside customers.

OPPORTUNITIES 1. No need to run for customers. 2. Proper support from bank in selling the policies. 3. Banks have all the financial details of customer therefore there are fewer chances of frauds. 4. Banks have wide range of network. 5. Bank gets new customers and better penetration in existing customer base. 6. It is better than agency model. 3. MICROINSURANCE AGENTS
CHALLENGES
1. Micro insurance agents are not educated , training them is biggest challenge 2. Convincing rural people to buy insurance is other challenge. 3. Large no. of frauds. 4. Lack of awareness among people 5. Higher non-renewal due to premium payment difficulty. 6. Low commissions are the main cause of few sellers of micro insurance products. OPPORTUNITIES 1. Large sector of rural population is uninsured there is scope of business growth. 2. There is more disposable income with the people in rural areas as compared to urban areas. 3. Large number of unemployed people in rural areas, who are ready to work in not much high pay.

4. Online channel
Challenges
1. Communication
There is a communication problem between the insurer and the insured in online selling. The two parties don't have the benefit of seeing body language, voice inflections or facial expressions while discussing business matters online. 2. Trust issue
Some Internet sellers also experience challenges due to trust and security issues when operating online. The threat of Internet scams, compromised websites, credit card fraud and other online threats may cause a potential customer to pass on purchasing from an online seller's website. 3. Bad web design
Many new customers are frustrated, confused during online shopping. When a website is poorly designed or doesn't have adequate information, the site owner may lose sales. It becomes difficult to attract new customers. 4. No physical touch
Customers don’t have any physical contact or personal with the company while buying the policy and this dissuade many customers to buy the policies online. The company needs to advertise and promote online selling.
Opportunities in online channel 1. cheaper premium
The premium on online policies are much cheaper than the offline policies in a term plan and an average purchase takes 15-20 minutes. That means there is a huge opportunity. 2. Time
Buying policy online takes less time if it’s a simple policy and saves some cost of the company compared to offline, as said by the official of an insurance company. 3. Attract more educated consumers It has been observed that it tends to attract more educated and informed consumers who understand and appreciate the need for accurately disclosing information such as health status when applying for insurance. Interestingly, the proportion of claims rejected is lower for this group than for offline applicants. 4. E- repositories
IRDA has released guidelines for insurers for issuing electronic policies and for setting up e-repositories for holding such policies in electronic form, steps that will facilitate the further growth of the online distribution of insurance policies. 5. Cost and convenience
The advantages of cost and convenience, and the emergence of a do-it-yourself generation that is happy making purchasing decisions online, seem to be leading the growth of this new distribution channel. 5. Agents
Challenges
1. Companies must be able to manage the data around agent recruitment and productivity, and achieve the necessary efficiency to support growth. 2. The first challenge with agency forces in India is the need to continually recruit new agents to maintain the current size. That requires companies to maintain a large pipeline of new agents every year, plus the recruiting, training, and qualifying that go along with it. This is necessary both to keep up with attrition and to grow the agency force overall. 3. To manage them with a view to retaining the good agents and either remediating or terminating the poor performers. When only a small percentage of new agents turn out to be acceptable and a minute number become star performers, the logistics of managing productivity are immense.
Opportunities
1. In India people believe more in physical and this is the channel , in which they can physically see the person (agent). This is the reason why agents bring the maximum share of premium in life insurance companies. 2. Agents help in giving the current taste of the customers in the market to the companies. 3. IRDA has also relaxed the norms for becoming an agent and for continuing it.