Research paper on Automated Vending Machine

Research paper on Insurance Payment Through AVM’s

Research Paper

On

Change Required in the Method

Of

Insurance Payment

Through

AVM’s

(Automated Vending Machine)

In India

Report Written by:Hitesh D. (Bhardwaj)

Suman

(Copyright Reserved under Indian Copyright Act)

Email:[email protected]

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Contents

Contents......................................................................................................1

1.0 Abstract: ...............................................................................................2

1.1 Literature Review: .............................................................................2

2.0 Significance / Importance of Research:..............................................3

3.0 Introduction:.......................................................................................4

4.0 Research Methodology:......................................................................4

4.1 Research Strategy:.............................................................................5

4.2 Research Design: ...............................................................................5

4.3 Research Population: .........................................................................5

4.4 Sample Size: .....................................................................................6

4.5 Method of calculating Sample Size:....................................................6

4.6 Questionnaire Survey: .......................................................................6

4.7 Ethical Permission: ............................................................................6

4.8 Limitation of Research: ......................................................................6

5.0 Analysis and Evaluation of Research:.................................................6

5.1 Evaluation for Rathdhana:...............................................................6

5.2 Evaluation for Sheva:......................................................................7

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6.0 Suggestions:.......................................................................................7

7.0 Conclusion:.........................................................................................8

8.0 Bibliography:......................................................................................8

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1.0 Abstract:

Our Research paper is based on Intensive Survey of Rural Villages from

Haryana State in India; which will confirm the change that we all need to

see in the format to serve ‘End Customer’ (Farlex, Inc., 2011). We have

tried to evaluate the new unified method of payment required i.e. via

AVM’s (Automated Vending Machine) in comparison with other

methods, as it might change our way of serving customer in changing

world scenario. There need to be a technological change that will help us

in better after sales customer service; which has to be the priority for this

business Model. Our services need to be holistic in the sense that

customer wants to have more than what we can offer and we need to be

one stop shop for decreasing their cost and time spent on payment of

dues. Consumer of rural India might look ignorant, but over the period of

time they have evolved like any urban consumer. It seems when it comes

to buying any product and services, they also want value for money.

1.1 Literature Review:

‘Insurance’ is a method of Hedge, bought against the future uncertain

Risk which may or may not arise (EconomyWatch, 2009). Insurance can be

used to secure one against ‘specified Contingent Losses, Death or

Damage’ against which insurer pays a certain sum at regular intervals

with guaranteed cover (Williams Collins Sons Pvt. Ltd., 2009).

There are various types of Insurance: ‘Life Insurance’ which insures

person’s life for buying Life insurance Certificate (EconomyWatch, 2009).

Once provided, Insurance Company remains legally responsible to pay

financial compensation to once family entitled in case of death of the

person insured (EconomyWatch, 2009);(Investopedia ULC, 2011);

(LifeInsure.com, 2011).

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‘In India, Insurance saw its arrival in 1818, with the foundation of Oriental

Life Insurance Company, Calcutta. This whole era till Indian Independence

of 1947, was subjugated by British Insurance Firms’ (IRDA, 2011).

Mediclaim is also known as ‘Medical Insurance’ (EconomyWatch, 2009);

as one is permitted to get risk coverage amount used up on his health for

illness or injury grounds from the Insurance Company for hospitalization or

pay the care provider directly (Emediclaim, 2011); (Ria Health Insurance

Pvt.Ltd., 2011).

‘General Insurance’ involves a variety of specified risk coupled with

General Life like of Automobiles, Business related, Natural Calamities,

Commercial and Residential Properties etc. (EconomyWatch, 2009) ;

(HighBeam™ Research, Inc., 2011) ; (Bloomsbury Information Ltd, 2009–

11, 2011).

‘In India, General Insurance came as a legacy of British History in 1857

with the set up of Triton Insurance Company Ltd. In 1907, Indian

Mercantile General Insurance was set up which dealt in all types of

general insurance’ (IRDA, 2011).

‘After Malhotra Committee recommendation in 1999; introducing IRDA

(insurance regulatory and Development Authority) for regulating and

expanding Insurance Industry as a Governing body. In April 2000, IRDA

was statutorily incorporated. In August 2000, IRDA opened up the

economy for Foreign Investor in local Insurance Company up to 26% of

Paid up capital’ (IRDA, 2011).

‘Prior to set-up of IRDA governing body and Opening up of Insurance

sector for foreign player; India had Public Sector Firms (Majority of

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Government Ownership) along with few of the domestic Private Player in

both Life and General Insurance’ (IRDA, 2011).

We believe Insurance payment through Machines would be a new thought

in the Insurance sector of the world. Automated Vending Machines are

the future for reaching to the masses in India. Especially, people living in

faraway places from Metro cities in smaller towns and bigger villages may

need such services.

A ‘Vending Machine’ is defined as a device that sells all types of food and

drink and diverse items in which you pay some change and select which

item you wish for (WebFinance, Inc., 2011). If we go by Answers.com, it

means a coin-operated machine to trade products (Answers Corporation,

2011).

Note: The Image has been taken as an example from the Article of

‘Requirements Traceability in the Model-Based Testing Process’ (Bernard &

Legeard, 2008,p. 48).

So how does an Automated Vending Machine Works?

‘To buy a drink one goes to a DVM (Drink Vending Machine). Consumer can

select the drink through the machine after putting coins into it. Service

Person is the one who fills the tray of Drinks in the DVM when it gets

empty’(Bernard & Legeard, 2008,p.48).

We believe if one imagines same function of payment options in Cash and

Cards when it comes to general insurance will make a lot of difference in

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the world. Practically, trial has not been done in any financial Sector of the

World. One needs to understand this cycle in a bigger picture too.

‘Consumer chain cycles’ of vending Machine will make us understand

the need for standardized services to all consumers (Donaldson et al.,

2006,p.177). If all Insurance products started to sell in the same manner

through Automated Vending Machine; then we can have unified model of

selling all Insurance products as well with lower retention.

Note: The image has been taken from online website (Hirsh, 2011).

2.0 Significance / Importance of Research:

One need to understand why this research is important, as no one has

ever tried to think out of the box till now. We have been acting as a slave

of old methods of doing things. So, here are the reasons why this research

becomes important.

Our Research is meant to understand a method of New Technological Payment System which is preferred by various sections of youth.

The change in payment method is also necessary due to increasing costs and expenses behind maintaining different channels of Agent at a time for various insurance.

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Indian societal changes in consumption are mainly due to Capitalist Economy as most of Cultural and behavioural change have took place since opening up of economy in 1991 (Jacob, 2010,p.1).

‘Targeted Inflation Policy’ of Government of India has brought a huge unwanted cost and expense hike in whole economy which have affected both women and children (Dev, 2011, p.2).

To see whether or not it there would be feasible to have ‘AVM Payment Model’ while comparing with other ‘Methods of Payment Systems’ across various insurance companies, as they have their own pros and cons.

3.0 Introduction:

We believe human being has tried to secured most of valuable resources

via insuring them for a fraction of its original value. It makes a possibility

for us the future restoration of same product or item. We all know any loss

of living being whether human or non human cannot be compensated. Yet

one has tried to make a value for it, through the method of evaluation for

Insurance.

‘If we look at method of life insurance selling, there is usually one method

which is quiet common that is via Employee (direct contact) of Insurance

Company. The other methods have been via Agents (Corporate,

Individual), Brokers and these people are mostly registered as a Company

(Corporate), Enterprise and or Association etc. Details of people can be

extracted through IRDA website’ (Narayan et al. 2009-2010).

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‘Currently in general Insurance, there are 5 companies from government

sector including General Insurance for Reinsurance and rest 19 are from

private sector including 5 which are in specialised trade of general

Insurance. Yet government companies are able to perform much better in

most of the part even though just few of the private companies are

comfortably operating in high profits’ (Narayan et al. 2009-2010).

‘If we take total investments of 66371.92 crores in 2010 then government

sector have 51687 crores and private sector players have total market

investment of 14684 crores. In last 6 months (April-September 2010)

Gross premium underwritten was 59% Approx by Government company

and rest by Private sector general insurance led by ICICI Lombard

(Excluding ECGC, Max Bhupa, Apollo Munich,Star Health & Allied

Insurance)’ (Narayan et al. 2009-2010).

WE believe in most parts of ‘general Insurance government company

doesn’t have anybody crawling in front forget about standing. It’s mostly

because of first entrance benefit into this market. Yet private players

together have almost 1/3 of the market covered in both Life as well as

general insurance. Same is the situation in case of life Insurance as well’

(Narayan et al. 2009-2010).

We believe anyone can easily define a company’s payment method

through charts. If one has to study how LIC works in India in comparison to

others then he or she has to understand the payment method of it (LIC,

2004).

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Note: Chart had been made in Free-Mind Software to Map out the Payment methods for premium of LIC (LIC, 2004).

Indian v/s Rest of The World (Insurance Density)

Insurance Density at GDP of India (Since 2001-02 Onwards) (Narayan et al., 2009-2010, p.).

‘With just .6% of GDP population density under Non-Life insurance at a point of time; we are still behind world average of Non-Life insurance’ (Narayan et al., 2009-2010, p.). We believe to reach the masses we need a method which makes us visible 24*7 while we can keep ourselves in operating margins too. Automated vending machines will be the next big thing for increasing the habit of buying a Non-Life Insurance in general masses.

4.0 Research Methodology:

Research is a hard-working, logical autopsy or exploration to substantiate

old knowledge and harvest new knowledge (Burns & Grove, 1987). English

Dictionary Defines Research Design as:

A careful Search

Exploration

Research towards collecting sum of knowledge (Fellow & Liu, 1998).

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4.1 Research Strategy:

Naoum delineates Research Strategy in which the research objectives

are probed. There are two different types of research strategies such as-

Quantitative research

Qualitative research

Quantitative Research approaches try to acquire/fold accurate data and

study relationships between facts and theories. Whereas the qualitative

approaches tried to gain/comprehend people perception as entities or as

collections, because of more are ‘Subjective’ in environment (Fellows &

Liu, 2008; Burns & Grove, 1987).

In our research, a quantitative as well as qualitative research approach is

designated to found the variables and factors that affect the Consumers

behaviour for choosing one method of payment over other. It also helped

us for assessment and evaluation of benefits from each one of them in

different situation across the industry.

4.2 Research Design:

According to Burns & Grove (1997) ‘Research Design’ guides the

researcher in implementing and designs the study in a way that is most

likely to achieve the proposed goal. The Research Design is the

arrangement used to answer the research question. Kervin (1992) refers

to Research Design as a plan for assembling and analysing data which

involves selection of cases, variables and data sources.

It is the Researcher’s job to ensure that the design chosen satisfy the

particular research question. Polit & Hungler (1999) states that

‘Research Design’ involve the development of a plan or strategy that

will lead in collecting and analysis of data. Burns & Grove (1997) defines

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Qualitative Research as a formal, aim oriented process to obtain

numerical data. This method can be utilised to explain variables and

conclude the relationship between variables (Burns & Grove, 1997; Kervin,

1992).

In our research, an Open-ended questionnaire is used to assemble

data from respondents. Structured questionnaires were presented to

the people of Rathdhana as well as Sheva in both cities whether of same

Caste or Community altogether to collect the data and identify the

frequency of the response for repeated Method of payment preferred

and for different one’s as well.

By undertaking a Survey, it was possible for the researcher to acquire

data about the practices, condition or views of the participant through

questionnaires. A Survey helps the researcher to classify more variables

at one time than it is possible through laboratory and/or field experiments

while the data is being collected. But there are key weaknesses of a

survey such as:-

The point in which the survey was conducted

Selection criteria of the respondent

Finally, the design of the survey itself

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4.3 Research Population:

The population is a set of individuals (or objects) having some shared

characteristics as defined by the sampling criteria established for the

study (Burns & Grove, 1997). In our research, the target population are

the people of Rathdhana and Sheva from 2 different cities of Haryana

who are having insurance products and paying for them through

different methods of payment system as per the availability in their

cities. We are also trying to have a better understanding to define

Method of payment they prefer; which have a valid co-relation with

purpose of our research as well such as:-

To understand Various Method of Payment used by Rural Indians

indifferent of their Castes, Communities and Gender for Research

purpose.

To understand the replication of payment method preferred by

any population we need to place different options as Methods of

Payment as well.

To Understand the Benefits of various Methods of Payment.

To have an understanding of Cost & Benefit Analysis of each one

of Method of payment from an Insurance Companies point of

view.

4.4 Sample Size:

Burns and Grove define sampling as the process of making selection or

the process of selecting representative units of people for the study in a

research investigation (Burns & Grove, 1997). Sample size is an important

feature in research work because it affects the cost of data collection,

raises questions about the accuracy of the findings, conclusions and on

the whole research legitimacy (Kervin, 1992).

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We believe Sample sizes are critical for conducting research. The

researcher needs to make sure that the sample size is not too small in

that case he might not have a wide range of participants to see results

and if your sample size is too large, the costs, time for your research will

be excessive.

4.5 Method of calculating Sample Size:

We have used Non Probability sampling Method for collection of data.

As per the definition mentioned in Tata McGraw Hill, it’s a method in

which, a Researcher uses a target, or quota, as a goal for seeking people

or elements that fit the characteristics of the subgroup; when the quota

for each subgroup is met, data collection is complete. The snowball

sample which are part of “non-probability sample procedures”; which

means that the probability of selecting a particular case is not known or

may be zero (Tutesigensi, 2010).

4.6 Questionnaire Survey:

A Questionnaire Survey was developed based on suggestions and need

that we thought are necessary for holistic evaluation. Questionnaire had

some qualitative aspects as well and it was made in an open ended way

so that we can have different opinions on the same query from sample

population. This way questionnaire would help us in understanding the

various factors involve in Method of Payment preferred i.e. No of

users, Cost of using one method over other in different parts and location

of India, required age group etc.

4.7 Ethical Permission:

It had been kept in mind that at any time during this Research work

Identity of our Respondent has not been leaked out. Rather permission

had been received in verbal form without much of any effort to convince

most of the Sample population. In case of Data collection part for

Rathdhana & Sheva Village; we have been successful in getting

information through respondent without much hindrance.

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4.8 Limitation of Research:

Due to shortage of time and lack of sufficient funds for Research we had

kept our survey around 100 families in each of the Village in cities like

Sonipat as well as Panipat. While limitation of the secondary data, and

lack of one preferred route of payment by different Income groups; we

have tried our best to give sufficient options.

There was another issue regarding the Method of Selection for population;

as we were supposed to select population based on Quota Sampling

method. Due to shortage of quota of People from different parts of society

required in our Research work; we have used Caste & Community

representation from existing population of village in both the cities.

Questionnaire surveys were recorded mostly with face to face

interaction; but a few of the Respondents had to be contacted through

Cell-phone as they were not available in Village of Rathdhana and Sheva.

For example, People from Agricultural community and Government sector

comes back home in the evening. So, they had been called for providing

detail information via cell-phone with prior consent. But, sometime it

might be a half hearted view of the Respondent, if he or she was in rush at

the time of call or in-person.

5.0 Analysis and Evaluation of Research:

5.1 Evaluation for Rathdhana:

90% of the population have less than 2 people insured in their

house. Only half of the remaining 10% people have more than 2

people insured. Rest half of them have more than 5 people insured.

More than 65% population have Debit Cards in that village.

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There is 12% population which uses social networking sites mainly

Facebook. Rest doesn’t have any specific purpose of use internet

expect for job search in government sector or university website.

More than 40% of the population have e-mail id on the internet. But

use of internet is not that frequent.

74% People of Rathdhana are ready to use Automated Vending

Machine if it offers extra benefits with minimum fuss.

64% of population prefers TV Soaps (Family Oriented Programs).

76% of the population have specific choice of program.

67% of population prefers regional Dialect channels (Haryanvi

Programs). Only 10% prefer English as well as Punjabi channels.

72% population wants to shift to new method of payment which is

cost efficient and provides centralised services.

5.2 Evaluation for Sheva:

More than 84% population have less than 2 people insured and only

16% population have 2 or more than 2 people insured.

More than 54% population have debit Card in that Village.

There is 10% population which access internet on day to day basis

but only Facebook. There are 36% population which got E-mail id on

the internet but they hardly surf internet.

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68% population have inclination towards watching some regional

dialect (Haryanvi) programs while only 5% watches English

programs too including some Punjabi channels.

58% population prefers TV Soaps (Family Oriented Programs). 69%

population have specific choice of programs that they would like to

watch.

78% population wants to shift in to better service provider but with

again with all solutions under one roof while being cost effective.

62% People of Sheva are ready to move towards Automated Vending

Machines but they too want services which gave them some extra

benefits besides insurance. They want system which help them

minimising cost and some unique payment system for All Civil

Amenities.

6.0 Suggestions:

So, How AVM Should Work in India?

The Image has been created in a Free-Mind Software. This is a Future

business Model for Indian Insurance Industry to serve the customer in

the wake of Consumerism. We call this Business Model the ‘Manohar

Bharat’.

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I. There should be an Automated Vending Machine at every village

with more than 5000 population in Haryana which have at-least 8

hours of electricity per day (irrespective of timings).

II. There need to be at least 1 and maximum 2 local agent in that

village who can help them guide into buying a health and or general

insurance.

III. Local women should be actively involved at ground level. Men in

rural India are more inclined towards following the advice of Senior

Family Members and especially Women in case of Maternity issue.

For those Folk Songs, (Ragini) Events and door to door promotion is

required in these bigger villages.

IV. For civil amenity bill payment benefits to rural Indians, we need to

act as facilitator or service provider who offers Insurance with other

services under one Umbrella.

V. We can also use Franchise route to enter these rural market which

has hardly been explored till now. There is a big open market for

Health, Motor Vehicle, Agricultural Ancillaries, and Micro Insurance

etc.

VI. The AVM should have facility of payment through Cards options

besides Cash. One should be able to pay via Electro-magnetic Cards

(Debit and Credit Cards) and or Smart Cards. They must have

Satellite Connectivity for better services in these regions.

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VII. A large no. of population which travels to cities or other

nearby cities would prefer them to be on route to stations or Central

Market areas (near main Centre of Village) too.

VIII. There is 20%-25% population which is extremely poor (BPL)

and can still be tapped; if payment method for insurance is charged

on Per day cost but insurance is paid on Monthly and or Quarterly

basis with an option for Micro-Health Insurance in it.

IX. The People from BPL category have preference for some Additional

benefits like Free Medicinal check-ups, Maternity check-up for

women in general too.

X. People in both Rathdhana and Sheva Village have some common

behaviour towards Insurance companies. Both of villages have high

inclination towards Government companies (LIC, GIC, and National

Insurance etc). They have more trust in government company

services than towards private sector.

XI. There is hardly any interest for private sector insurance provider

except for ICICI Lombard, HDFC Insurance, Kotak Mahindra

Insurance; People in these villages don’t have much of knowledge

about many Insurance companies’ in their regions.

7.0 Conclusion:

So to end this research paper, we will use few words by Oscar Wilde ‘An

idea that is not dangerous is unworthy of being called an idea at all’ (India

Fun Factory, 2011).

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We believe, it is an idea which came to our mind while I was in England

and We decided to work on it from research point of view prior to coming

back to India. It would be just a thought till it is applied practically and we

have no doubt that only a Company with strategic planning and Targeted

population will achieve Break Even point.

Even though cost of setting up automated vending Machine might be

quiet high comparing with Agents (Individual, Corporate) and or Brokers of

the company. But the cost can be covered via Franchise Model and not to

forget this model doesn’t only serve Insurance to our End User but Other

additional benefits as well.

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Economy & Finance

Research paper on Automated Vending Machine