A CRITICAL EVALUATION OF THE ATTITUDE OF THE POLICY AND NON-POLICY HOLDERS OF ECGC

TABLE OF CONTENTS

1) 2) 3) 4)

CERTIFICATE OF AUTHENTICITY ACKNOWLEDGEMENT EXECUTIVE SUMMARY INTRODUCTION CREDIT INSURANCE SWOT ANALYSIS OF ECGC 5) EXPORT POTENTIAL IN INDIA 6) REVIEW THE LITERATURE 7) PROBLEM OF THE STUDY 8) OBJECTIVE OF THE STUDY 9) RESEARCH METHODOLOGY PROBLEM DEFINITION RESEARCH DESIGN SAMPLE SIZE AND SAMPLE DESIGN DATA ANALYSIS AND STATISTICAL TOOLS 10) FINDINGS FROM THE STUDY 11) RECOMMENDATIONS 12) LIMITATIONS OF THE STUDY 13) ANNEXURE QUESTIONNAIRE 14) BIBLIOGRAPHY

A CRITICAL EVALUATION OF THE ATTITUDE OF THE POLICY AND NON POLICY HOLDERS OF ECGC

CERTIFICATE OF APPROVAL

This is to certify that project report entitled A critical evaluation of the attitude of the policy and non policy holders of ECGC being submitted by RISHU KHULLAR to Indian institute of Tourism and travel management, Gwalior towards partial fulfillment of the requirement of Masters degree in business Administration is the original bona-fide work carried out by him under my supervision and guidance.

ACKNOWLEDGEMENTS

A formal statement of acknowledgement will hardly meet the ends of the justice in the matter of expression of my deeply felt sincere and allegiant gratitude to all those who encouraged me and helped me during my study It gives me immense pleasure, to express my unfeigned and sincere thanks and gratitude to my supervisor Mr.B.k.Satya for his valuable guidance sustained, encouraged and constructive critic at every stage of work, without which it would have never been accomplished. I am thankful to the staff members of ECGC of India ltd. Ludhiana Branch who gave me an opportunity to spend these two months in their organization and enrich my knowledge.

I also extend my heartiest thanks to all the teachers of Indian Institute of Tourism and Travel management, Gwalior for gracing me with the knowledge that I could use in the completion of this training. I am also very thankful to all my respondents who took time out of their busy schedules and helped me in carrying out this project.

(RISHU KHULLAR)

PROBLEM OF THE STUDY

Here the main problem is to known the level of awareness about credit insurance among those who can afford to buy insurance especially now when a no. of private insurer has entered the market. The researcher would also like to establish the main reasons being buying an ECGC policy, to know what type of cover is most preferred by people. After going through the literature review, the researcher has found out that people still believe in Government insurance policies i.e. ECGC policies, even many of them dont know ICICI is in insurance sector, with Lombard which is no. 1 insurance company of U.K. also in todays world when privatization has been given the green signal the people rely more on Govt. insurance companies than in private and this would take time when the general awareness would change.

Executive summary
This project titled A critical evaluation of the attitude of the policy and non policy holders of ECGC is an effort towards determining the perception of exporters towards ECGC. To understand their attitude an exploratory research was carried out where employees of different Export promotion Councils, various competitor of Ecgc like ICICI Lombard were interviewed. After conducting the exploratory research, there are certain key questions that are derived and these questions formed the basis of the questionnaire. Then the primary research was conducted where in data was collected from around 75 respondents from ludhiana region. The research is carried out in three phases: Phase I: in this phase, I have to know about the perception of the policy holders towards ECG. Phase II: here in came to know about the perception of the closed policy holders of ECGC. Phase III: the most important one and the challenging task to know the perception of non-policyholders of ECGC.

SWOT ANALYSIS of ECGC STRENGTH

High financial strength Project execution competency Strong business equity consumer Nation wide branch network & synergy (confidence with co-insurance) High experience, infrastructure & latest Internet assisted facilities. High level of managerial efficiency

WEAKNESSES
Not much established branch network infrastructure in remote places Not much established and happy subscriber base to leverage in

Indian market
Govt./large organization takes a lot of time for decision making It lacks flexibility in rules & regulations according to market demand It couldnt win the minds of its customers completely yet, due to lack of

customer awareness programme Now a days customer/policy holders seems it as a mandatory burden for

availing export finance than a facilitator

OPPORTUNITIES
Large addressal market created by new relaxed export policies of Govt. of India . Large demand for fresh policyholders due to increased facility of easy export finance from banks. Increasing trend of bankruptcy of big/established importers in Europe/abroad. Increasing rate of Banks N.P.A, due to defaulters in export credits.

THREATS
Regulatory issues-from I.R.D.A. (Insurance Regulatory & Development Authority of India )

Opening up of Insurance to Private sectors attracts international giants Reactive Premium rates/pricing by private sectors

INTRODUCTION
The Role of Credit Insurance
Will credit insurance play a core role in the day-to-day activities of the e-business oriented credit manager of 2010? If so, what core competencies are likely to attract the credit manager, and receivables financing bankers, to utilize a credit insurer's services?

The World of Credit Insurance--2000

Credit insurance is predominantly a European-based insurance product. In other words, European-based companies buy the cover and use the cover much more extensively than businesses in the rest of the world. In 1998 for example, of the total export credit insurance premium spending recorded by the Berne Union ($3.6 billion), $2.25 billion was spent by European companies. An additional $2 billion was spent by European companies purchasing "domestic" credit insurance coverage against insolvency risks in trading in their own country--a product which is not usually purchased by most companies trading outside Europe.

Consolidation
There has been a substantial level of consolidation among European credit insurers during the past five years. Eighty percent of premium spending is dominated by the four largest European credit insurers: EULER/Hermes (Hermes and EULER have a common ultimate parent--Allianz), Coface, Gerling and NCM. The propensity to purchase credit insurance cover among European companies, as compared with their counterparts in North America, is considerably greater. In the United States, a total premium spending (i.e. Export & Domestic) works out to approximately 0.07 percent of GDP in Germany, France and the UK, the spending exceeds 0.5 percent of GDP.

What Attracts European Companies to Purchase Credit Insurance?

First, the answer lies in the comparative structure of the European and North American economies. In Europe, a high proportion of GDP is exported by most mature economies. In North America, a low proportion of GDP is exported, and the bulk of sales are domestic. There also is a strong collections culture in the United States with common insolvency practices, a common language and a common currency.

Export-credit insurance plays bigger role in trade

For Tang Roux and the China Export & Credit Insurance Corporation under his leadership, the year 2005 is undoubtedly of special significance. If the period of time before 2001 was the start-up period for export credit insurance, then China Export & Credit Insurance Corporation had fulfilled extraordinary development of soaring high at a high level. Figures indicated that from 2004 to 2005, China's export credit insurance achieved USD34.4 billion in terms of insured amount; the business scale got doubled on a year-onyear basis for two successive years, thus having realized the objective of "Getting tripled within three years" since 2002. Undoubtedly, this achievement has laid a firm foundation for the rapid and steady development of China's export credit insurance. Nowadays, it has been an indubitable fact that the export credit insurance is functioning as an indispensable driving force for the development of China's trade business. As far as the growth indices are concerned, the business scale of China Export & Credit Insurance Corporation grew rapidly from US$2.75 billion in 2002 to US$21.2 billion in 2005 with an average annual growth rate of 98 percent. By the end of 2005, the business scale of China Export & Credit Insurance Corporation had added up to over US$43 billion, 2.7 times the accumulative business sum for the thirteen years since its establishment. Another conspicuous sign for the high-speed development of China Export & Credit Insurance Corporation is the ever-rising ranking of the corporation in the international ECA institutions. In 2001, the business scale of China Export & Credit Insurance Corporation ranked the 19th in the ranking of the ECA institution while its mid- and longterm insurance ranking the 14th and its investment insurance ranking the 13th; while in 2004, the corporation's rankings rose by a great margin with its short-term insurance ranking the 12th, 7 places up, and its mid-and-long-term insurance ranking the 10th, 4 places up. The corporation's ranking in 2005 is estimated to rise further. The rising of its rankings in the ranking of the international institution ECA means that the growth rate of China Export & Credit Insurance Corporation has gradually matched the ranking of China's trade in the world. On the other hand, according to the estimation made by the UN, IMF and the World Bank, the growth rate of the world trade in 2006 will reaching 7.6 percent, slightly higher than that in 2005. However, the growth rate of China's total foreign trade volume will be maintained at around 15 percent. Obviously, the steadily growing foreign trade will provide a comparatively large development space for the export credit insurance while raising higher requirements for the export credit insurance at the same time. 9

Credit insurance
Credit Insurance is an insurance policy associated with a specific loan or line of credit which pays back some or all of any money owed should certain things happen to the borrower, such as death, disability, or unemployment. The costs (called a "premium") for this are usually charged monthly, depending on the balance owed, and depending on the usage of the loan or line, could almost double the cost of it (on the opposite end of the spectrum, clever usage could avoid having to pay almost any premium at all). The sale of credit insurance is controversial because it is almost always cheaper for an individual to forgo credit insurance, and instead have a term life insurance or disability insurance policy to cover the credit balance. The reason is that credit insurance is guaranteed issue, no matter if a person would otherwise be insurable or not. So the rates offered must reflect this, and be worse than if a healthy or otherwise insurable person were to purchase coverage on their own. In addition, there is an even more controversial practice (called single premium credit insurance), usually associated with the sub prime lending industry, of charging the premium only one time at the beginning of the loan. For example, charging 5,000 dollars at the time of a mortgage refinance, which is usually financed (added to the total loan amount) as part of the loan. This is considered very bad by critics, since doing this is only cheaper if one is sure that one is going to stay with the loan forever and not refinance. Critics contend most people do not realize this and lose money by refinancing once again, thereby losing the benefits of the credit insurance.

Characteristics of Credit Insurance

Sharing the risk. Cooperative device. Payment on happening of a special event. The amount of payment depends on the nature of losses incurred. The success of insurance business depends on the large number of Exporters incurred. The insurance is a plan in which the insured transfers his risk on the insurer.

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FUNCTIONS OF INSURANCE
PRIMARY FUNCTIONS 1. Provide protection: - Insurance can not check the happening of the risk. But can provide for the losses of risk. 2. Collective bearing of risk: - Insurance is a device to share the financial losses of few among many others. 3. Assessment of risk: - Insurance determines the probable volume of risk by evaluating various factors that give rise to risk. 4. Provide certainty: - Insurance is a device, which helps to change from uncertainty to certainty. 5. Savings and Investment.

SECONDARY FUNCTIONS 1. Prevention of losses: - Insurance caution businessman and individuals to adopt suitable device to prevent unfortunate consequences of risk by observing safety instructions. 2. Small capital to cover large risks: - Insurance relives the businessman from security investment, by paying small amount of insurance against larger risks and uncertainty. 3. Contributes towards development of larger industries.

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History of Credit Insurance

Credit Insurance was born at the end of nineteenth century, but it was mostly developed in Western Europe between the first and Second World Wars. Several companies were founded in every country; some of them also managed the political risk to export on behalf of their State. Credit Insurance is a term used to describe both Trade Credit Insurance and Credit Life Insurance. Credit Life Insurance is a consumer purchase, often sold with a big ticket purchase such as an automobile. The insurance will pay off the loan balance in the event of the death or the disability of the borrower. Although purchased by the consumer/borrower, the benefit payment goes to the company financing the purchase to satisfy a debt. Trade Credit Insurance is purchased by business entities to insure their accounts receivable from loss due to the insolvency of the debtors. This product is not available to private individuals. Over the '90s, a concentration of the Trade Credit Insurance market took place and four big companies became the main players of a market focused on Western Europe, but rapidly expanding towards Eastern Europe, Asia and the Americas. Atradius. A merger between NCM and Gerling Kreditversicherung. Later renamed Atradius after it was demerged from the Gerling insurance group. Coface. Formerly a French government sponsored institution established in 1946, this company has now been privatised. Euler Hermes. Merger of the two credit insurance companies of the Allianz Group.

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EXPORT CREDIT INSURANCE

When you export business requires you to extend credit overseas, you can protect your companys foreign receivables and be confident to getting paid with an export credit insurance policy.

1.) WHY YOUR COMPANY NEED CREDIT INSURANCE?

Cash in advance and letters of credit are no longer competitive terms in the international marketplace. Creditworthy foreign companies, accustomed to buying on open account from their other suppliers, are going to expect the same terms from you. Your customers in emerging markets, on the other hand, may face scarce capital and high interest rates, making it difficult or impossible to order your products without credit terms. You need to extend competitive terms to grow your international business, but what happens if you don't get paid? Your foreign customers could file bankruptcy, run into cash flow problems, suffer from currency devaluations, or fail to pay you for a variety of other reasons. You can protect your foreign receivables against non-payment risks with an export credit insurance policy.

2.) WHAT RISK ARE COVERED?

Export credit insurance protects your foreign receivables against commercial and/or political risks which could result in non-payment of your invoices. Commercial risks take the form of buyer insolvencies (e.g. bankruptcy) or protracted defaults (slow payment). These problems could occur for many reasons, such as fluctuations in demand, natural disasters, or general economic conditions in your customer's country. Political risks include war, riots, and revolution, as well as currency inconvertibility, expropriation, and changes in import or export regulations. All of your export receivables can be insured under one multiple-buyer policy, or in some cases you can purchase key-buyer or single-buyer coverage. Export sales of all types of products may be covered, regardless of content or where the products are manufactured. Any kind of exporter can apply for receivables insurance, including manufacturers, distributors, dealers, etc. Your foreign customers don't need to be huge

corporations or government agencies; any buyers can be considered as long as they are creditworthy, as determined by financial information, trade references, or in some cases simply your company's own ledger experience. 14

3.) HOW MUCH DOES IT COST?

Premium rates are based on the terms you extend, the spread of your buyer and country risks, and your previous export experience. The cost is low, typically a small fraction of one percent based on sales volume . . . in most cases considerably less than the fees charged for letters of credit. Rates may be calculated as a function of your shipment volume, country and buyer credit limits, or outstanding receivables. Premiums are payable monthly, quarterly, or annually. Whether or not you pass this incremental expense on to your customers, the price of the coverage is insignificant compared to the additional business you can win by extending competitive credit terms overseas.

4.) WHY YOU SHOULD CHOOSE ECGC?

All export insurance policies sold by ECGC are fully backed by either the Indian. Government or top-rated commercial insurance companies. Specializing in this kind of coverage, ECGC offers a complete selection of policies from every insurance company and government agency that underwrites export credit insurance. Strong underwriting relationships enable ECGC to quote the most competitive premium rates in the market, with no added processing charges or broker fees. By monitoring how you are using your policy, ECGC can help you keep your export credit insurance coverage up-to-date as your export business grows. ECGC can supply credit reports on your international customers, offer training in foreign credit evaluation, assist with policy compliance and administration, and provide ongoing support for your sales, credit, and finance departments.

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5.) INSURANCE AS SALES AND FINANCING TOOL INCREASE YOUR EXPORT PROFITS: Grow your export sales by making
it more economical for your foreign customers to purchase larger quantities. Shipping larger orders helps you negotiate better pricing from your suppliers, make longer manufacturing runs, and transfer inventory carrying costs overseas.

PENETRATE YOUR TARGET MARKETS: Open new markets which your

company might otherwise perceive as too risky for extending credit terms. The opportunity to establish market share in emerging economies has never been greater.

GET MORE FROM YOUR DISTRIBUTORS: Negotiate stronger overseas

representation by offering competitive terms to your foreign distributors. Provide incentives to keep more of your products in the supply chain, increasing your market share and local brand recognition.

ENHANCE YOUR BORROWING CAPACITY: Obtain more favorable

financing by including your insured foreign receivables in your borrowing base. Export credit insurance makes your international receivables more attractive to your bank or other lenders. You can assign policy proceeds to the lender of your choice.

STRENGTHEN YOUR BALANCE SHEET: Keep your company's financial

position secure, despite exposure to unforeseen events, concentrations of foreign credit risks, and changing international market conditions. Insuring your foreign receivables may also enable you to reduce your bad debt reserves. Export credit insurance can help facilitate the "true sale" of your international receivables per FASB 125, as well as supporting asset securitization

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MAJOR PLAYER OF CREDIT INSURANCE

1. ICICI Lombard 2. Bajaj alliance insurance 3. Tata Aig insurance 4. Iffco- Tokyo insurance 5. National insurance company HSBC 6. SIDBI 7. Meridian Insurance

Introduction to ECGC

ECGC is A Corporation set up by the Government of India for providing Export Credit Insurance and guarantees facilities to India's exporters. It functions under the administrative control of Ministry of Commerce and is managed by a Board of Directors comprising representatives of the Ministry of Commerce, Ministry of Finance, Reserve Bank of India, Export Import Bank of India, Commercial Bank, General Insurance Corporation and the export trade. ECGC is essentially an export promotion organization, seeking to improve the competitive capacity of Indian exporters by giving them credit insurance and guarantee support

comparable to those available to their competitors from most other countries. It keeps its premium rates at the lowest levels possible. ECGC was registered with IRDA in Sept. 2002 under General Insurance (Credit Risk Insurance) business.

COMPANY PROFILE
VISION To excel in providing export credit insurance and trade-related services. MISSION To support the Indian Export Industry by providing cost-effective insurance and traderelated services to meet the growing needs of the Indian export market through the optimal utilization of available resources. OBJECTIVES Furthering the mission, the corporation has identified specific objectives. On a macro level, the objectives of the corporation is to initiate, facilitate promote globalization. On a micro level, we provide individualized services to Indian exporters. It begins by assisting Indian exporters with valuable and prompt information about the creditworthiness of buyers, their banks and countries. This helps the exporter manage his credit risk. To safeguard the exporter against unforeseen losses, it provides cost effective credit insurance cover in the form of policies. To expedite adequate bank finance to Indian exporters, it also offers surety insurance cover for bankers in the form of Guarantees, at competitive rates. ECGC has always taken the initiative to achieve improved performance in term of profitability, financial and operational efficiency indicators and have strived to get maximum returns on investment.

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OVER THE YEARS THE STORY SO FAR

The story of ECGC has all the makings of a success story. The firm had a modest beginning as Government of India venture in 1957. ECGC was started with an authorized capital of Rs. 5 Crores, Subscribed capital of Rs. 2.5 Crores and a paid-up capital of Rs. 50 lakhs. Today, the authorized capital is Rs. 1000 Crores and its paid-up capital is Rs. 800 Crores. At the end of first year, it had only 146 Policyholders and business covered was Rs. 1.30 Crores. Today, the firm has over 13, 000 policyholders the upward trend of ECGC is further evident in the fact that from 1957 to 2006-07, the premium income has increased from a mere Rs. 43,000 to Rs. 619 Crores and the claim paid went up from Rs.4.51 Lakhs to a stupendous Rs. 367 Crores. The flagship objective of ECGC has always been to provide export credit insurance cover to exporters and banks. An example of the success it has had in achieving this objective is the fact that as against one product in 1957, today it has 30 different products in our portfolio to suit the requirements of various kinds of exporters and banks.

ACHIEVEMENTS
ECGC is one of the oldest export credit insurance organizations in the world. The firm has endeavored to provide international standard service at competitive rates to Indian exporters and bankers. The corporate office and 51 branch offices have been accredited with ISO 9001:2000 certification by the Bureau of Indian Standards. ECGC has signed 16 Corporate Agency Agreements with commercial banks to sell its products and has as many as 48 brokers marketing its products.

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Internet is the "Mantra of today's world" and ECGC is in step with the times. It provides online services to all its customers. Further, policyholders will be aware of the identity of the buyers who have come to the adverse notice of the corporation. The bank also has full access to the defaulters list of exporters. ECGC has ventured into difficult territories like Africa, CIS and LAC. It has also helped countries like Trinidad and Tobago, Iran, Sri Lanka, Nepal, Bangladesh and Kuwait to set up similar agencies in their countries. It has records of over 3 Lakhs overseas buyers and trade data on countries, which in turn helps in assisting customers. ECGC is the first organization to introduce cover for losses arising out of a buyer's nonpayment due to discrepancies in L/C. It equips policyholders with adequate delegation and discretion in resale, in exposure on buyers under various schemes to aid easy and rapid action of their own. We have introduced simplified procedures for the settlement of claims up to Rs.25 lakhs. The policy claims of upto Rs.20 lakhs are settled within 7 days. The premium income of ECGC has increased from Rs.207.34 Crores in the year 1995-96 to Rs.619 Crores during the year 2006-07. However, the sanctioned strength of the employees has remained at 633. A customer satisfaction survey was done by the national Marketing Division of the Corporation with the help of the renowned independent agency AC Nielsen. The organization scored 8 on a scale of 1 to 10.

MILESTONES:
ECGC signs cooperation agreement with MIGA ECGC has signed a cooperation agreement with the World Bank Multilateral Investment Guarantee Agency (MIGA) on July 18, 2006 to provide credit protection to Indian companies investing in developing countries. The agreement was signed by Shri S. Prabhakaran, Executive Director of ECGC and Ms. Yukiko Omura, Executive Vice President of MIGA. 27

MIGAs mission is to promote Foreign Direct Investment (FDI) into developing countries to help support economic growth, reduce poverty, and improve peoples lives and promote investment opportunities in developing countries. MIGA provides three key services: political risk insurance for foreign investments in developing countries, technical assistance to improve investment climates and dispute mediation services, and to remove possible obstacles to future investment. As part of the World Bank Group, and having its shareholders, both host and investor countries, MIGA brings security and credibility to an investment that is unmatched. It acts as a potent deterrent against government actions that may adversely affect investments. Under this agreement, ECGC and MIGA will provide insurance against the loss that could arise due to political and economic risks such as transfer restriction, expropriation, war, terrorism and civil disturbances. Outbound foreign direct investment by Indian companies is more than one billion dollars, a year, and is growing regularly. More than half being directed to developing countries. The arrangement aims at promoting outward investment by Indian companies by providing them much needed protection for their overseas investments. Further, MIGAs presence brings the World Bank umbrella of deterrence against host government action that might affect the projects viability. This arrangement will increase the comfort level of Indian companies and enable them to consider opportunities of investment in countries that they might otherwise view as too risky.

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ECGC signs MoU with NSIC ECGC signed a memorandum of understanding with National Small Industries (NSIC) on July 31, 2006 at its Head Office in Mumbai for marketing export credit insurance products through its service network. The agreement was signed by Dr. Christy Fernandez, Chairman and Managing Director, NSIC. NSIC is engaged in promoting, aiding and fostering the growth of small industries and industry related small-scale services/ business enterprises in the country. NSIC has proved its strength and within the country and abroad by promoting modernization, up gradation of technology, quality consciousness, strengthening linkages with large and medium enterprises and enhancing exports projects and products from small industries. It has reoriented its schemes of assistance for small enterprises and repositioned its strategies for enhanced service delivery. It has taken many new initiatives for the development of small enterprises like Performance and Credit Rating Scheme and tie-up with banks for credit flow to small enterprises, mentoring and advisory services and infomediary services. ECGC signs agency agreement with Catholic Syrian Bank for Bancassurance ECGC signed its 14th corporate agency agreement with Catholic Syrian Bank on July 4, `06 at Trichur for marketing export credit insurance products through the network of the banks branches. The agreement was signed by Shri S. Prabhakaran, Executive Director of ECGC and Shri N. R. Achan, Chairman and CEO, Catholic Syrian Bank.

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Need for export credit insurance

Payments for exports are open to risks even at the best of times. The risks have assumed large proportions today due to the far-reaching political and economic changes that are sweeping the world. An outbreak of war or civil war may block or delay payment for goods exported. A coup or an insurrection may also bring about the same result. Economic difficulties or balance of payment problems may lead a country to impose restrictions on either import of certain goods or on transfer of payments for goods imported. In addition, the exporters have to face commercial risks of insolvency or protracted default of buyers. The commercial risks of a foreign buyer going bankrupt or losing his capacity to pay are aggravated due to the political and economic uncertainties. Export credit insurance is designed to protect exporters from the consequences of the payment risks, both political and commercial, and to enable them to expand their overseas business without fear of loss.

Guarantees to Banks Packing Credit Guarantee

Timely and adequate credit facilities at the pre-shipment stage are essential for exporters to realize their full export potential. Exporters may not, however, be easily able to obtain such facilities from their bankers for several reasons, e.g. the exporter may be relatively new to export business, the extent of facilities needed by him may be out of proportion to the equity of the firms or the value of collateral offered by the exporter may be inadequate. The Packing Credit Guarantee of ECGC helps the exporter to obtain better and adequate facilities from their bankers. The Guarantees assure the banks that, in the event of an exporter failing to discharge his liabilities to the bank, ECGC would make good a major portion of the bank's loss. The bank is required to be co-insurer to the extent of the remaining loss.

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CURRENT EXPORT SCENARIO Business covered under policies (Rs. in Crores)

26000 25000 24000 23000 22000 21000 20000 19000 1996-97 1997-98 1998-99 1999-2000 2000-01

Figure (1)

Bank finance covered (Rs. in Crores)

160000 140000 120000 100000 80000 60000 40000 20000 0 1996-97 1997-98 1998-99 1999-2000 2000-01

Figure (2)
Claims paid (Rs. in Crores)
250 200 1996-97 150 100 50 0 1997-98 1998-99 1999-2000 2000-01

Figure (3)

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Progress over the years 1957-2001 (Rs. in Crores)

2500 2000 1500 1000 500 0 Premiums Claims Recoveries

Figure (4)
Performance Highlights 2005-06 Commodity-wise value of Shipments covered under Short-term policies (Rs. in Crores)
16759.19 Others 7445.41 Engineering goods 3325.13 Leather & leather manufactures 3217.4 Readymade garments 2442.23 Chemicals Allied Products 2153.78 Cotton including handloom 1863.01 Basic chemical pharmaceuticals cosmetics

Figure (5)
36

Country-wise value of business covered under Short-term policies (Rs. in Crores)

7526.47 U.S.A 3862.86 U.K 2763.68 Germany 1805.25 Italy 1791.53 U.A.E 1294.51 France 1082.19 H.K 1058.94 Netherlands 923.36 Canada 904.47 Spain 15097.37 Others

Figure (6)
Performance over the last ten years (a) Total exports insured (Rs. in Crores)
45000 40000 35000 30000 25000 20000 15000 10000 5000 0 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 200596 97 98 99 2000 01 02 03 04 05 06 Series1

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(b) Total premium earned (Rs. in Crores)

700 600 500 400 Series1 300 200 100 0 1995- 1996- 1997- 1998- 1999- 2000- 2001- 2002- 2003- 2004- 200596 97 98 99 2000 01 02 03 04 05 06

(c) Total claims paid (Rs. in Crores)

500 450 400 350 300 250 200 150 100 50 0 199596 199798 19992000 200102 200304 200506 Series1

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(d) Total recoveries made / Received (Rs. in Crores)

140 120 100 80 60 40 20 0 199596 199798 19992000 200102 200304 200506 Series1

First of all, the kind of policy is selected according to the needs of the exporter and the buyer. Then the respective policy forms are filled. These, when filled, are checked for mainly the following important things: (A) Previous records of the exporter, if any. If the policyholder has no previous records or he has closed the policy since the past six months or more, he is issued a fresh policy. If he has been paying his premium regularly, he has to get his policy renewed every two years. In case the exporter has not been paid any claim since his last renewal, he is liable for no claim bonus; he will be given a bonus of 5% by each passing year.

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Need for the study

There have been large numbers of studies that have been done so far on ECGC. But most of them are about the views of the policy holders towards ECGC. There have been very few studies that have been about the perception of the closed policy and non-policyholders towards ECGC. Although in the present scenario, there is no strong competitor of ECGC In India. However, by taking into consideration the future prospects of the company the study is very important.

Objectives of the study

As we have seen the facts of the Indias total export, it is very much evident that we need to focus more on export in order to bring the balance of payment in the equilibrium. ECGC main aim is to promote the maximum export from India. Therefore, it gives awareness to the exporter so that they can maximize their export. But here the main question is does it really helpful to all the exporters, either it may be small or big exporters. The main objective of this study is to determine the needs of the exporters and their expectation from ECGC. I have further made the objective more explict; 1) 2) 3) 4) 5) To study what really exporter think of ECGC To know about the level of awareness among the exporters To become aware of the requirement of the exporters To know about the problems faced by the exporters To know about the acceptance level of various product of ECGC

Research Methodology

1. Problem Definition:
The problem for the present study can be precisely stated as To know the perception of Policy and Non-policy holders of ECGC

2. Research Design: Type of Study

The study was both an exploratory and descriptive in nature. Firstly, exploratory study was conducted to find out basic information regarding ECGC. After carrying out the exploratory research, descriptive research was carried out to identify the variables so as to understand the perception of policy and non policy holders of ECGC.

Data collection method:

In exploratory research, direct interviews were conducted with respondents and later for the purpose of Descriptive Research well-designed questionnaire were administered to the respondents. o Primary data collection It will be done by the way of getting questionnaire filled by the respondents. The questionnaire will be designed in such a manner so as to cover all the necessary information from exporter. o Secondary data collection

Sources for such kind of qualitative information would be interview with the Chairman of Export promotion Council, newspaper, magazines, research articles, journals, internet, surveys etc.

3. Sample Size and Sample Design: For the purpose of this research,
Stratified-sampling method is employed. The combined sample is 75 respondents. The sample population will only be from in and around Ludhiana.

Further, I explain

Population size = 557, which includes Policy holders=270 (48.47% of 557) Closed policy holders=87 (15.61% of 557) Non-policy holders=200 (35.9% of 557) (Assumed)

Using Proportionate Sampling, Actual size = 75, which includes Policy holders= 36 (48.47% of 75) Closed policy holders= 12 (15.61% of 75) Non-policy holders= 27 (35.9% of 75)

Actual visited
Respondents

75
65

Personal visit 40 Telephonic feedback 25 Non- respondents 10

4.

Data Analysis and Statistical Tools

The data collected by way of questionnaire were entered into Microsoft Excel and

Primary source of information: List of exporters where I visited (policy holders)

1) Deeps tools (P) ltd 2) Sri tools industries 3) SS engineering works 4) Lakra industries 5) Hamidi exports 6) Anand Concast limited 7) Swati Industries 8) Hero exports 9) Brown and Boice 10) Perfect Forgings 11) Space knitwears 12) Rinox Engineering 13) Alba parts inc 14) Palbro industries 15) Versatile enterprise limited 16) Cocoon overseas 17) Eastman industries limited 18) Ginter Forgings 19) Canon Industries pvt td 20) Hind Fastners 21) Sardar impex 22) IOL chemicals & pharmaceuticals] 23) Purti exports 24) Deepak international 25) Ell Cee engg pvt ltd 26) Perfect inc 27) Bunty embroidery works 28) Munish international

29) 30) 31) 32) 33) 34) 35) 36) 37)

Mehrasons Industries Superfine knitters ltd Unix international Rex exports Trb exports Safari exports Amar auto components pvt ltd Braun textile processors A k engineering company

Findings
First phase of the project (Policyholders)
During the first phase of the project, I visited to the policy holders of ECGC. The primary goal to visit to the exporter is to get the answers for the following questions:-

Finding 1
Type of policy mostly held by exporters Type of policy held NUMBER OF POLICIE S HELD SCR 133 SEC 9 BWP 13 MBE 7 SBE 5 SSP 3 TOTAL 170

BWP SEC

MBESBESSP

SBE

FINDING 2
Reasons for holding the specific policy Reasons for holding ECGC policies No. of Response by policy holders Premium Claim rates are paying comparatively ability cheaper 4 10 Quality service Credit Imposed worthiness by the of the bank organization 6 6

10

FINDING 3
Awareness about the product of ECGC

FINDING 4
Services of the ECGC Services of ECGC Policy holders Closed policy holders Fully satisfied Partly satisfied Fully dissatisfied Partly dissatisfied

FINDING 5
How exporters came to know about ECGC Sources Newspaper Bank Seminar Companys executive visit Business associates

FINDING 6
Exporters expectation from ECGC

List of exporters where I visited (closed policy holders)

1) Prabhat Forgings 2) Hamco overseas 3) Turbo tools pvt ltd 4) E N B exports 5) Flora Exports 6) Hari Om exports 7) Gupta Weaving and hosiery factory 8) Kapoor and kapoor Hoisery 9) Leisure Wear Exports 10) R&R Bikes 11) Akal Impex 12) Yuvraj International 13) Pruthi International 14) Sumeet Exports 15) Rajnish International

Finding of the second phase from closed policy holders

Here I visited to the closed policy holders of ECGC i.e. exporter who has taken policy once upon a time and then they have closed it due to some reason. The main objective of the visit is to get the answer for the following Statements:

Finding A
Reason for discontinuing the policy Reasons Out of Export Heavy business premium burden Rejection of claims Advise by the bank

Finding B

Customer relationship measure at ECGC

Excellent

moderate

Fair

poor

Finding C
Obstacles /Problem faced by the exporter Problems Arrangement of funds Fear of bad debts Comply with govt rule and regulations

Finding D
Suggestions to improve customer relationship measure at ECGC

4) To know more about their requirement so that ECGC can add a new policy to its current policies that may suite the requirement of the exporter

List of Exporters where I visited ( non policy holders)

Nanda Knitwears 2) Stelco Strips Ltd 3) M t international 4) Woolrich Woolen Mills 5) Moon Light auto pvt ltd 6) Oswal Cotton spinning Mills 7) Charley Knitweras 8) Ralson Industries Ltd 9) Servo Export House ltd 10) Ripul International ltd 11) Kishore Exports 12) Kailash Fabrics 13) Bedi Cycles 14) Ganga International 15) Jewel International
1)

Third phase of the project ( non policy holders )

This area needs to be more focus because what we know today will not feed you tomorrow, your domain expertise must grow with time. It means that not only you have to take care about the policyholders but to be in the market, ECGC need to tap or to have strong hold on the non-policyholders of ECGC. In order to cover them it needs to know about the answers of the following questions:1) Challenge/ obstacle/ threat faced by the exporters in their export business 2) To know about the competitor of ECGC if any 3) Reasons for not holding ECGC policy 4) Their suggestion to ECGC or their expectation from ECGC

FINDING
This chapter deals with the concluded aspects of the study carried out on General perception about export credit insurance- A comparative study of ECGC India ltd. The basic objective is for the study is for which study was carried out has been fulfilled in the earlier chapter, based on the objective interview schedule was designed. Data collected based on schedule was analyzed and some finding have emerged. MAJOR FINDING OF THE STUDY Based on the quantitative analysis the major findings of the study have been highlighted below.. Most of the exporters are satisfied with the extent of their credit insurance cover. They are not interested in buying more credit insurance. Majority of the respondent believed that larger risk coverage of their policy was the main feature of their policy that attracted them to buy that policy, though low premium was the next important feature. Exporters do not consider credit insurance as a good saving s because of law returns. As credit, insurance is a long- term & short- term contract. Maximum exporters do not have faith on private credit insurance companies they still prefer ECGC. Because of less advertising not many people are aware about private credit insurance companies. Most of the exporters do not know about broker, corporate agents and banc assurance, they rely on their agents only.

Some exporters have no idea about what type of cover they have. Some exporters have their doubts on the credibility and long stay of private insurance companies. Due to increased in consumerism new product is launched everyday.

88

CHAPTER 7 CONCLUSIONS

CONCLUSION
Reforms have marked the entry of many of the global insurance majors in to the Indian market in the form of joint ventures with Indian companies. Some of the key names are AIG and Lombard. There is presently building in India an upsurge in consumer awareness, putting immense and unavoidable pressure on the insurance industry. With the entry of competition, the rules of the game are set to change. In such a scenario, the differentiator among the different players will be the service. Meanwhile, the profile of the Indian consumer is also evolving. Consumers are increasingly more aware and are actively managing their financial affairs. Today, while boundaries between various financial products are blurring, people are increasingly looking not just at products, but at integrated financial solutions that can offer stability of returns along with total protection. To satisfy these myriad needs of customers, insurance products will need to be serviced to the customers in an effective way. Insurance today has emerged as an attractive alternative that offers total protection. Distribution will be a key determinant of success for all insurance companies regardless of age or ownership. The nationalized insurers currently have a large reach and presence. New entrants can not and does not expect to supplant or duplicate such as a network. Building a distribution network is expensive and time consuming. Thus the company had to come up with a multi-channel distribution strategy- leveraging bancassurance and corporate agents in addition to advisors and financial services consultants. The credibility of the bank makes it easier to win customers.

Given the current levels of dissatisfaction experienced by customers, the new insurance companies should concentrate on providing high quality services for differentiating their offerings. Some areas on which they should concentrate are like; enhance post-sale services in such area as sending all renewal notices in time, expeditious settlement of claim and refunds etc. Empathize with the customers and employees coming in contact with customers must show courtesy and good particularly behavior and gear up pre-sale services particularly those that will help in reducing customers anxieties and simplify document wherever necessary. To deliver the above, insurance companies will need to build a suitable organization with an appropriate management system, optimum physical infrastructure and a culture of innovation, productivity and customer- orientation that will enable them to survive and grow in the exciting and fast-growing line of insurance and in the competitive scenario, a key difference will be the customer experience that each credit insurance player can offer in term of quality of advice on product choice, along with policy servicing, and settlement of claims. 89

Service should focus on enhancing the customer experience and maximizing customer convenience. Long term growth in the business will depend greatly on the distribution network, where the emphasis must evolve from merely selling insurance to acting as financial advisors, helping customers plan their finances depending on credit stage and personal requirements. This call for strong focus on training of the distribution to act as financial consultants and build a long lasting relationship with customer. This would help create sustainable competitive advantage not easily matched For the private insurance companies in the vast and upcoming insurance business sector in India. In the competitive scenario, a key difference will be the customer experience that each credit insurance player can offer in term of quality of advice on product choice, along with policy servicing, and settlement of claims. Service should focus on enhancing the customer experience and maximizing customer convenience. Long term growth in the business will depend greatly on the distribution network, where the emphasis must evolve from merely selling insurance to acting as financial advisors, helping customers plan their finances depending on credit stage and personal requirements. This call for strong focus on training of the distribution to act as financial consultants and build a long lasting relationship with customer. This would help create sustainable competitive advantage not easily matched.

RECOMMENDATIONS
There are some of the recommendation had come up with the while doing this project. It will help to make insurance more important sector in todays economy. From the research I could find out that exporters are not aware about the policies and features of insurance. Therefore ECGC is recommended shed light on policies and explain the benefits, thus increasing the awareness. The need of the hour is to devise a comprehensive strategy that will help the firms face the challenges of the future. The financial services industry around the world over the undergoing a major transformation. It is very important that trained marketing professionals who are able to communicate specific features of the policy should sell the policy. The penetration of insurance in India is around 22%. The market player needs to explore this untapped potential through their marketing and sales network. The return of the polices are not properly managed and never given in time. So, these must be looked at. Pricing of insurance products, as empirically available in India, show that pricing is not in consonance with market realities. Credit insurance premium is generally perceived, as being too high while general insurance is priced too low.

Some insurance products, which are not available in India, should, be introduced in market. There are areas for new product development: Industry all risk policies, Large projects risk cover, risk beyond a floor level, and product liability cover. Insurance company will also had to get savvy in distribution. Enhanced marketing thus will be crucial. Already many companies have full operations capabilities over a 12 hour period. Facilities such as customer service center are already into 24 hour mode. These will provide services such as motor vehicle recovery. Technology will also pay an important role on the market.

The future seems to belong to financial supermarkets that will offer a host of services and products to the consumer. Due to increased in consumerism new product is launched everyday. 91

LIMITATIONS
Scope of study could have been broadened had consumer perception survey not been restricted to four market place only. Export credit insurance being a burgeoning industry in the country, the time period of the study was insufficient to conduct an exhaustive insight. Some of respondents were hesitant in sharing information.

BIBLIOGRAPHY

Web Site:www.ECGCIndia.in www.Indiacore.com www.money.com www.Irda.nic.in www.Insure.com www.Bimaguru.com