Fast food giants Domino's Pizza and McDonald's offer freebies if they are unable to deliver an order within stipulated time. Private insurers have taken this cue, backing their service level agreements with financial penalties and promises.
When bidding for competitive, corporate group business, private life insurance companies incorporate self-imposing penalties in any likelihood of delay in payment of claims.
"Group insurance business is highly competitive and when we bid for this business, we back up our service claims with a service level agreement that self-imposes financial penalties on us in the event of not meeting expectations," said MetLife India managing director, Venkatesh Mysore.
MetLife professes an average turnaround time of five days in claims processing.
In the event that there is a delay in payment of claims, the insurance company pays interest on the amount in question. Such financial penalties is some of means insurance companies to beget corporate business.
Group business has become extremely competitive as players vie to get corporate accounts even when there is a high risk of claims exceeding premium collections.
Birla Sun Life takes it one step further and offers group plans on a unit-linked platform. This, it says, offers all the upside when the market is in a bull run.
However, in the event of an individual retiring when the market has slumped and net asset value (NAV) of the fund becoming negative, Birla Sun Life offers a safety feature.
"If the market experiences a downward trend when employees retire, we guarantee to pay all the contributions made by the individual towards his superannuation, so that he does not suffer," said Birla Sun Life vice president (group life and pension) Jaskirat Kaur.
Private insurance companies are trying to make inroads into the group business. Birla Sun Life tops in the group insurance business among private life players with a market share of about 35 per cent. It has collected a total group premium income of Rs 163.03 crore (Rs 1.630 billion) in fiscal 2004.
Seen as a major thrust area for the company, Birla Sun Life envisages group insurance premium to continue to contribute significantly to total new business income in fiscal 2005.
"Group term business is very competitive and price-driven. However, as this business is very sensitive to claims, we need to stay within the competitive band-width or find ourselves out of business the next year," said Kaur.
MetLife, though keen to tap the US-based corporates having operations in the country, is declining business.
"We are betting a lot on group business as we bid for every account. However, there are times when we decline business as well," said Mysore.
