B E A C O N A Newsletter by SIMCON– SIMSREE Consulting Club Volume:2 Issue : 4 February 2014 Inside this issue:- Six Sigma Green Belt Workshop Guest Lecture: Mr. Prasad Akerkar Featured Article on : Insurance Sector Company Analysis : GIC Re Concept of the Month: Hostile Takeover Defense Strategies Quiz
February 2014 Edition of BEACON, A Monthly Newsletter by SIMCON. Inside this issue: INDUSTRY ANALYSIS : Insurance Sector COMPANY ANALYSIS : GIC Re Six sigma green belt workshop Guest Lecture: Mr. Prasad Akerkar Concept of the Month Quiz Did You Know?
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
B E A C O N A Newsletter by SIMCON– SIMSREE Consulting Club
Volume:2
Issue : 4 February 2014
Inside this issue:-
Six Sigma Green Belt Workshop
Guest Lecture: Mr. Prasad Akerkar
Featured Article on : Insurance Sector
Company Analysis : GIC Re
Concept of the Month: Hostile Takeover Defense
Strategies
Quiz
Six Sigma Green Belt Workshop Volume: 2
Issue : 4
SIMCON arranged a 4 days Six Sigma green belt program from 3rd to 7th February for a batch of 59 students.
Sessions were taken by one of the finest faculty for Six Sigma, Mr. Vishwdeep Khatri, the CEO, of Benchmark
Six Sigma. Mr. Khatri has been engaged with leading companies in FMCG, Automotive, IT, Telecom sectors
for Lean Six Sigma initiation and deployment. Pre-course material
was distributed among the students to cover the course with pace.
Mr. Khatri employed a creative technique to increase the
involvement of students. He had divided the batch into 12 teams
and throughout the course; points were given to teams for their re-
sponses and problem solving capabilities. Competitive spirit in the
teams motivated the students to participate more actively. The
course started with introduction and definition of Six Sigma course.
After the introduction, methodology for implementation of Six
Sigma in an organization was explained. Two methodologies are
used to implement Six Sigma: DMAIC and DMADV. DMADV is
used in introduction phase of a product or process and DMAIC is
used to improve the existing process. Mr. Khatri explained practical aspects of the Six Sigma techniques; ex-
amples from manufacturing and aviation sectors were given. Students were taught to work on the statistical
software Minitab. Students learnt to do hypothesis testing and graphical techniques on Minitab. Many hypothe-
sis tests like ANOVA, 2-proportion test and Chi square test which take a lot of time while solving with pen
and paper, can be done in few seconds with Minitab. Mr. Khatri explained different graphical techniques like
frequency plots, box plots and histogram to represent the data effectively.
Different operational
techniques such as control
charts, process capability and
RPN were discussed in the
class. Along with the mathe-
matical tools, some qualitative
tools for decision making like
Delphi technique, Pugh matrix
were explained to the class. Be-
fore final examination, a mock
test was conducted. In the
mock test, students revised the
syllabus covered in course and
also got their doubts cleared by
the faculty. On the last day of
course, green belt certification examination was conducted.
Because of excellent faculty, detailed study material and enthusiasm of students, „Six Sigma Course‟
was a success. The program gave application orientation of theory and added value to students.
BEACON : Page 1
Feb. 2014
For detailed report and all industry analysis from previous Beacons together, please visit our blog :
http://simconblog.wordpress.com
Guest Lecture by Mr. Prasad Akerkar Volume: 2
Issue : 4
On 28th February 2014, SIMCON organized a guest lecture by Mr. Prasad Akerkar, SAP Practice Head &
Learning and Development Department Head at Larsen & Tourbo Infotech Ltd. Mr. Akerkar spoke on “ERP
System Implementation & Change Management”.
Mr. Akerkar started his lecture by explaining ba-
sics of ERP, its use and implementation in a company,
methodology and benefits in different department. He
also gave students information about the history of ERP
and how it modified the technology over the years. He
gave insights to the students about supply chain, bottle-
necks in supply chain and the role ERP plays while deal-
ing with these bottlenecks.
Mr. Akerkar talked about Business Development
Process. He made the students familiar with various con-
cepts like Make to Order, Make to Stock etc. He shared
his experiences and gave real time examples for better
understanding of students. He said that the approach,
consulting attitude, exploring and expansion plays a cru-
cial role in development of any business process. Sir
made the session very interactive by taking the example
of ERP implementation in a college (say SIMSREE) and
asking students how it could be used in various college activities like admission, lecture schedules and fi-
nance.
Sir also explained the role of ERP implementation Life
Cycle in Project Management. He gave a brief idea to the stu-
dents related to the stages through which a new Project goes
like Project Preparation, Business Blueprint, Realization, Final
Preparation and Post Go Live Support and how the real time
examples are solved. He also spoke about the role of ERP in
benefit realization and improvement of efficiency and effec-
tiveness of processes.
Students also got to know about Change Acceleration
Process (CAP) module and 7 steps involved in implementation
of CAP. They also got insights about Proposed Framework for
Change management.
The lecture was very informative and engaging. Being able to listen to and ask questions of such an
informative speaker was a real benefit to the SIMSREE students. We thank Mr. Akerkar on behalf of SIM-
CON and SIMSREE.
BEACON : Page 2
Feb. 2014
For detailed report and all industry analysis from previous Beacons together, please visit our blog :
http://simconblog.wordpress.com
INDUSTRY ANALYSIS : INSURANCE Volume: 2
Issue : 4
Introduction One of the most critical aspect to secure the livelihood
of an individual or his family is the insurance of the valuable
assets related to the person, be it his life, his health or his other
possessions like house, vehicles etc. Realizing the value created
by insurance, Government of India, rather almost governments
of all major countries, have made it compulsory for insurance of
the maximum chunk of population.
The insurance in India is a USD 72bn industry and
reinsurance is a USD 41bn industry. Reinsurance means insur-
ance for the insurance companies, wherein insurance companies
cede their amount (insure the amount) from various portfolios
to a reinsurer so that in the times of contingency the reinsurer
will pay claims for a fixed portion. The purpose of reinsurance
being timely payment of dues and reduced load on the insurance
company in terms of capital available and solvency.
With a CAGR of 25% pa in insurance premiums from
2003 to 2010, the insurance market in India is surely booming
at a high pace. Still the penetration of insurance remains at 4%
for life insurance and 0.7% for non-life insurance. With the fi-
nancial inclusion mandate by RBI, it is required that a maxi-
mum chunk of population be insured. To achieve this vision the
government is trying to enhance insurance penetration through
tax saving on insurance products, mandate for compulsory in-
surance in case of items like vehicles, house etc.
Segments in Insurance Industry
The Insurance Regulatory and Development Authority
(IRDA) which was established under the IRDA Act in 1999, is
responsible for regulating, promoting and ensuring growth of
the insurance and reinsurance business in India.
Porter’s 5 Forces Model
Barriers to Entry
The Indian Insurance Industry is characterized by significant
barriers to entry, including licensing restrictions and capital
requirements, as well as scale economies.
Threat of Substitutes
Most insurance companies offer similar suite of services and
thus, there are plenty of substitutes available. A company can
differentiate only in terms of value it offers to its customers.
The threat of substitutes is thus high.
Bargaining Power of Suppliers
The suppliers of insurance company provide the company with
capital. The suppliers of capital to the insurance company under
the regulations may not pose a big threat. Hence the bargaining
power of suppliers is low for the industry.
Bargaining Power of Consumers
High brand loyalty for a company and low differentiation be-
tween the products will discourage individuals to shift from one
insurer to another. An individual will, therefore, have low bar-
gaining power. However large corporate clients of the industry
like airlines, pharmaceuticals, etc. which pay millions of dollars
per year as insurance premium have a high bargaining power
because they are the high margin customers for the industry.
Intensity of Rivalry
Competitiveness in the Indian insurance sector, with large num-
ber of players and low differentiation between their products, is
high. Spending on advertisements continue to grow and market-
ing budgets as well as strategies are becoming more aggressive.
BEACON : Page 3
Feb. 2014
For detailed report and all industry analysis from previous Beacons together, please visit our blog :
http://simconblog.wordpress.com
INDUSTRY ANALYSIS : INSURANCE Volume: 2
Issue : 4
Impact analysis
Privatization of insurance and reinsurance sector
This resulted in end of monopoly of LIC and GIC in life and
non-life sector respectively and in 2000 GIC was declared as
Indian reinsurer. Allowance of private players resulted in there
being almost 40 private players in the insurance market. How-
ever, LIC continues to be the market leader, though its market
share has declined from 98% in 2003 to 70% in 2010. GIC still
remains the only reinsurer within India but a lot of other players
are reinsuring in India through fronting modes like Swiss Re,
Munich Re etc.
Allowance of FDI upto 26% in insurance sector
This resulted in large no. of private players forming partnership
with foreign players with the partnership being Indian player
74% and the foreign player at 26%. In order to better meet the
demands of the Indian market, it is suggested that the FDI in
insurance be raised to 49%. Besides causing an improvement in
funding and risk assessment expertise in this sector, it has also
led to an improved product portfolio and better reach of the
product with urban insurance cover experiencing a sudden
boom.
Trends
Tie ups with an Indian insurer by foreign players
With a cap at 26% for FDI, many insurers have been trying to
form partnership with Indian banks to start business in a big
way in India. Large untapped market calls for higher underwrit-
ing capacity and keeping this in mind many private Indian play-
ers and foreign players are vying for government‟s proposal to
increase FDI in insurance to 49%.
Retroceding to foreign players
With the cap on minimum amount to be ceded to Indian rein-
surer reduced to 5% for non-life insurance, insurers are getting
better options for ceding the insurance amount by doing the
same to foreign players who offer better premiums and better
expertise in terms of risk management. Foreign players having
an association with GIC Re to have reinsurance branches or
fronting possibilities within India
Maximum retention within India
In order to maximize reinsurance retention within India, IRDA
has consistently tried to develop policies that will secure the
market for GIC. With non-life insurance ceding minimum
limit at 5% and for life insurance it is expected to be around
30% (maximum limit), GIC gets a secured chunk of orders.
Electronic claim disbursements
According to the latest circular on unclaimed amount, issued by
the Insurance Regulatory and Development Authority (IRDA),
life and non-life insurance companies had around Rs.1,372.64
crore of unclaimed amount in FY10, which increased to
Rs.4,865.81 crore by FY13. To plug this increase (of more than
200% or an annual increase of about 52%), IRDA has mandated
that settlements such as paying maturity benefits or insurance
claims be made through electronic transfers only. Electronic
settlements means quick and direct payments, which is why
IRDA has made it mandatory to remit proceeds of all insurance
claims only through the electronic mode from the next fiscal.
Electronic clearance is mandatory for new policyholders and the
insurer will have to collect bank details along with documentary
proofs. For existing life policyholders, it is optional. The insurer
has to inform policyholders of this option in the next six
months. To pay the death claims, the insurer will need bank
account details of the nominee as well. There are a few excep-
tions to the rule. Small-ticket policies are exempt from elec-
tronic transfer. If the payment does not exceed Rs. 10,000 for a
life insurance policy, or Rs. 25,000 for a non-life policy, the
insurer can pay by cheque.
References:
Handbook on Indian Insurance Statistics 2011-12 published
by IRDA
IBEF – Indian Insurance Industry Analysis Presentation
KPMG – Insurance Industry Road Ahead
Deloitte – Indian Insurance Sector Innovate Now Or Stag-
nate
PWC – Reinsurance 2020: Breaking the mould
IRDA Annual Report, 2012-13
Indian Express Article “Global reinsurance firms gearing
up to enter India” - January 20, 2014
HBR Working Paper - Understanding the Incentives of
Commissions Motivated Agents: Theory and Evidence
from the Indian Life Insurance Market
Comments on the “IRDA‟s (Life Insurance-Reinsurance)
Regulations, 2013, Global Federation of Insurance Associa-