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A PROJECT REPORTON
EMERGENCE OF MAX NEW YORK LIFE ONE OF THE BIGGEST PRIVATE LIFE
INSURANCE PLAYER
A COMPARATIVE ANALYSIS WITHOTHER MAJOR INSURANCE PLAYERS
Submitted as a part of curriculum in Masters ofBusiness Administration programme by INSTITUTE
OF MANAGEMENT SCIENCES UNIVERSITY OFLUCKNOW
Academic Year 2008-2009
AMAR KUMAR GUPTAMBA (RETAIL MANAGEMENT)
(INSTITUTE OF MANAGEMENT SCIENCES
UNIVERSITY OF LUCKNOW,LUCKNOW)
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CONTENTS
Chapter 1: EXECUTIVE SUMMARY 6
Chapter 2: INSURANCE AN INTRODUCTION 7
Chapter 3: INDUSTRY PROFILE 18
3.1 ORIGIN OF INSURANCE3.2 ORIGIN OF LIFE ASSURANCE IN INDIA
3.3 INSURANCE SECTOR REFORMS
3.4 POTENTIALITY OF INSURANCE IN INDIAN MARKET
Chapter 4: LIFE INSURANCE PRODUCTS 29
4.1: WHOLE LIFE POLICY
4.2: ENDOWMENT POLICY
4.3: MONEY BACK POLICY
4.4: TERM POLICY
4.5: ANNUITY
4.6: JOINT LIFE POLICY
4.7: GROUP INSURANCE
Chapter 5: IRDA ACT 1999 36
5.1: DUTIES, POWERS, FUNCTIONS
Chapter 6: PLAYERS IN INDIAN INSURANCE INDUSTRY 39
6.1: LIFE INSURERS
6.2: GENERAL INSURERS
6.3: INSURANEC BUSINESSChapter 7: COMPANY PROFILE 43
7.1: ABOUT ICICI PRUDENTIAL
7.2: PRODUCTS
7.3: ABOUR THE PARTNERS
7.4: INSURANCE PLANS
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Chapter 8: MARKETING RESERCH 58Chapter 9: CONCLUSION 88
Chapter 10: RECOMMENDATION 90
Chapter 11: BIBLIOGRAPHY 92
Chapter 12: ANNEXURE 93
QUESTIONNAIRE
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ACKNOWLEDGEMENT
There is always a sense of gratitude which one express to other for the helpful so
needy services they render during all phases of life. I would like to express my
gratitude towards all those who have been helpful to me in getting this mighty
task of training to a successful end.
First of all, I consider it a pleasant duty to express my heart felt appreciation
, gratitude and indebtedness to Mr. Abhishek Gupta (Manager- Agency
Recruitment) & Mr.Sumit Narang(Sales Manager) for his keen interest,
invaluable pain taking & excellent guidance, patience, endurance,
encouragement & thoughtful advice throughout the project work duration.
I would also like to be thankful to Mr. Kalhan Kaul (Branch Manager, MAX
NEW YORK LIFE INSURANCE, SHAHJAHANPUR), who has given me the right
way to prepare my project report.
I am also thankful to all my friends who gave me constant & continuous
inspiration to complete this project.
(AMAR KUMAR GUPTA)
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PREFACE
Insurance market is growing very fast. The opportunity is also high in this sector
as only 5% of Indian market is covered by this sector and the players are trying to
extend in to the rest untapped 95%.
Though LIC in India is the market leader, relatively younger private organization
are also doing well in this sector. This is the pick time for all the players tocapitalize this growth and increase their market share through good distribution
channel network. MAX NEW YORK is one of the major Life insurance player. who
is emerging a market leader among private insurance group.
The success story of good market share of different organization depends on the
distribution channel network of the organization. The distribution channel network
is the interface between the producer or service provider and user. Hence it
should be highly effective to create a good brand perception on its user.
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Chapter - 1
EXECUTIVE SUMMARY
The Indian Insurance Industry is broadly segmented into public and private
insurance companies. Before year 2000, only public sector insurance companies
were allowed to do business in India. But after year 2000, insurance sector was
thrown open for private insurance companies as well.
But as of now there now around 19 private life insurance companies and around
9 private non-life insurance companies doing business in India.
This report is prepared with an aim to provide an overview of present Indian
Insurance Industry. Also with LIC, heading the public life insurance companies
and MAX NEW YORK LIFE heading the private life insurance players, this report
also provides a comparative analysis of Life policies.
Based on this report , the prospecting insurance customers would get help in
choosing the right insurance products for themselves.
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Chapter - 2
INSURANCE AN INTRODUCTION
Insurance may be described as a social device to ensure protection of economic
value of life and other assets. Under the plan of insurance, a large number of
people associate themselves by sharing risks attached to individuals. The risks,
which can be insured against, include fire, the perils of sea, death and accidents
and burglary. Any risk contingent upon these, may be insured against at a
premium commensurate with the risk involved. Thus collective bearing of risk is
insurance.
Insurance is a contract whereby, in return for the payment of premium by the
insured, the insurers pay the financial losses suffered by the insured as a result of
the occurrence of unforeseen events. The term "risk" is used to describe the
possibility of adverse results flowing from any occurrence or the accidental
happenings, which produce a monetary loss.
Insurance is a pool in which a large number of people exposed to a similar risk
make contributions to a common fund out of which the losses suffered by the
unfortunate few, due to accidental events, are made good. The sharing of risk
among large groups of people is the basis of insurance. The losses of an
individual are distributed over a group of individuals.
Definitions:
General definition:
In the words of John Magee, Insurance is a plan by themselves which
large number of people associate and transfer to the shoulders of all,
risks that attach to individuals.
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Fundamental definition:
In the words of D.S. Hansell, Insurance accumulated contributions of all parties
participating in the scheme.
Contractual definition: In the words of justice Tindall, Insurance is a contract in
which a sum of money is paid to the assured as consideration of insurers
incurring the risk of paying a large sum upon a given contingency.
Characteristics of insurance
Sharing of risks
Cooperative device
Evaluation of risk
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 people
insured against similar risk.
Insurance is a plan, which spreads the risk and losses of few people among a
large number of people.
The insurance is a plan in which the insured transfers his risk on the insurer.
Insurance is a legal contract which is based upon certain principles of
insurance which includes, utmost good faith, insurable interest, contribution,
indemnity, causas proxima, subrogation, etc.
The scope of insurance is much wider and extensive.
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Functions of insurance:
Primary functions:
1. Provide protection:- Insurance cannot 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.
Secondary functions:
1. Prevention of losses: - Insurance cautions 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.
Other Function:
Means of savings and investment:
Insurance companies are business houses. The product they sell is financial
protection. To succeed and survive, they must cover theircosts, which
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include payments to cover the losses of policyholders, as well as sales andadministrative expenses, taxes and dividends.
Insurance companies have two sources of income for covering these costs:
premiums and investment income. The premiums are collected on a regular
basis and invested in Government Bonds, Gilt, stocks, mutual funds, real estates
and other conservative avenues. However, investment income depends on
market conditions, interest rates, economy etc. and varies from year to year.
Because of the uncertainty associated with the investment income, insurance
companies must generate enough income from premiums to cover the bulk of
their expenses.
The risk becomes insurable if the following requirements are complied with:
The insured must suffer financial loss if the risk operates.
The loss must be measurable in money,
The object of the insurance contract must be legal.
The insurer should have sufficient knowledge about the risks he accepts.
Fundamentals of Insurance
The fundamental Principles of the Insurance are as follows:
Insurable Interest: Insurable interest means the legal right to insure.
Insurable Interest is a must and only then the insurance contract is
enforceable at law. This principle differentiates aContract of insurance from
wager. Lack of insurable interest renders the contract null and void. For
Insurable Interest to exist there must be Property, Rights, Interest, Life or
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Liability; this must be insured and the Insured should have a legallyrecognizable relationship thereto. The Insured should be benefited by the
safety of the property or is prejudiced by its loss. Insurable Interest may arise
in the following manner:
1. Ownership: Absolute ownership entitles the owner to insure the property.
This is the commonest method whereby Insurable Interest arises.
2. Partial Interest is also insurable e.g. a mortgagee. A creditor can also
insure the life of his debtor but only to the extent of his loan.
3. Administrators and executors i.e. officials appointed by a court of law to
take care of a property may also insure the property.
4. Relationship does not automatically constitute insurable interest. The only
relationship recognized by law for this purpose is the one between a husband
and wife.
5. An employercan insure his employee under a Personal Accident Policy as
he has insurable interest in them.
Proximate cause: Generally, the claims are payable under insurance policies
if they arise out of events which are proximately caused by the insured perils.
In other words, the proximate cause of the event has to be peril covered by the
policy, so as to constitute a valid claim.
Contribution: An insured may have several insurance on the same subject
matter. If he recovers his loss under all these insurance, he will obviouslymake a profit out of loss. This will be an infringement of the principle of
indemnity. Common Law has, therefore, evolved the doctrine of contribution
whereby the insured is prevented from recovering more than his loss, despite
his having several insurance on the subject matter.
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Subrogation: The principle of indemnity seeks to prevent the insured from
making profit out of loss. However, it may so happen that that the insured may
recover his loss under his policy and he may also have rights against third
parties. If, after the insurance claim is settled, the insured is allowed to enforce
his rights against third parties and to retain whatever damages he receives
from them, he will certainly make a profit and the principle of indemnity will be
infringed.
Common Law has therefore, evolved the doctrine of subrogation as corollary
to the principle of indemnity. Subrogation may be defined as the transfer of
rights and remedies of the insured to the insurers who have indemnified the
insured in respect of the loss. The Common Law right of subrogation is implied
an all contracts on indemnity, as it arises only after payment of loss.
Utmost Good Faith: In all General Insurance contracts we know that a
property or interest or liability or life is offered for insurance and the insuredhas to take decisions on the acceptance of the proposal. If he decides to
accept the proposal a premium commensurate with the risk has to be charged.
To enable him to take necessary decision in this regard, the insurer must have
certain facts about the risk offered. These facts influence the judgment of the
insurer in deciding about the acceptance or otherwise of the risk and the rate
of premium to be charged, if accepted. Such facts are known as material facts.
Nature of Insurance Contracts
When the insured pays the premium and the insurers accept the risks, the
contract of insurance is concluded. The policy issued by the insurers is the
evidence of the contract. The contract of insurance, likeany other contract,for
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example a contract for the sale of goods, is subject to the general law of contractas embodied in the Indian Contract Act,1872.
According to this Act, a contract must have certain essential features in order to
make it legally valid and enforceable. The following are the essential elements:
a) Offer and acceptance: Usually, the offer is made by the proposer, and
acceptance made by the insurer.
b) Consideration: This means that the contract must involve some mutual benefit
to the parties. The premium is the consideration from the insured and the promise
to indemnity is the consideration from the insurers.
c) Agreement between the parties: Both the parties should agree to the same
thing in the same sense.
d) Capacity of the parties: Both the parties to the contract must legally competent
to enter into the contract. For example, minors cannot enter into insurance
contracts.
e) Legality: The object of the contract must be legal and the contract should not
violate any legal requirements. E.g. no insurance can be had for smuggled goods.
Risk
Reasonable or not, risks are inescapable in business. Every business venture is
something of a gamble, because the possibility of loss is as real as the prospects
for profits. And even though managers do everything possible to ensure that their
business succeeds, they cannot guard against every conceivable form of risk.
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Pure Risk versus Speculative Risk
Pure Risk: Events representing the kind of risk that no business can predict or
escape, known as Pure Risk, it is the threat of a loss without the possibility of
gain. In other words, a disaster such as avalanche or fire is costly for the
business it strikes, but the fact that no disaster occurs contributes nothing to a
firm's profit.
Speculative Risk: It is the type of risk that offers the prospect of making profit -
and prompts people to go into business in the first place. Every business
accepts the possibility of losing money in order to make money.
Approaches to Risk Management
Risk Management is the process of reducing the threat of loss due to
uncontrollable events. Steps in selecting a risk management approach:
To identify all the things those can possibly go wrong.
To consider the probability that an event will occur.
Techniques of Risk Management are:
1. Avoiding the Risk: When a company avoids risk, it eliminates the possibility that
a particular event will occur. To avoid the possibility of a suit, for example, not to
produce any products -which would, of course, eliminate both the threats of a
lawsuit and the opportunity to profit. With rare exceptions, avoiding risk entirely is
extremely difficult.
2. Reducing Risk: A more practical approach is to reduce the risk by taking
precautions. Risk reduction is an important element in most companies' approach
to risk management. Typical precautions include putting safety locks on doors to
prevent robberies, installing overhead sprinklers to minimize fire damage, and
periodic checking motor vehicles to prevent accidents.
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3. Assuming risk: Many companies draw on current revenues or set aside a"Contingency Fund" to cover unexpected losses. Setting aside money on regular
basis could be cheaper than purchasing insurance. Moreover, the company can
earn interest on the reserved cash. Such assumption of risk is also called self-
insurance or risk retention.
4. Transferring the risk: Most companies still rely on outside insurance firms for
financial protection against catastrophic losses. In buying insurance, companies
transfer the risk of loss to an insurance firm, which agrees to pay for certain types
of losses. In exchange, the insurance firm collects a fee known as a premium.
Insurable and Uninsurable Risks:
Insurable risks: An insurable risk - one that an insurable company will cover -
Generally meets the following requirements. The peril insured against must not be
under the control of the Insured. This means, of course that insurer do not pay for
losses that are intentionally caused by an insured, caused at the Insured's
direction, or caused with the insured's collusion. For example, a fire insurancepolicy excludes loss caused by the Insureds own arson. It does, however, include
loss caused by an employee's arson. Losses must be calculable, and the cost of
insuring must be economically feasible. To operate profitably, insurance
companies must have data on the frequency of losses caused by a given peril. If
this information covers a long period of time and is based on a large number of
cases, Insurance companies can usually predict quite accurately how many
losses will occur in the future. For example, the insurance companies to fix up the
rate of premium of Personal Accident Insurance may use the information of the
number of people who will die each year in India in accidents. The peril must be
unlikely to affect all insured simultaneously. Unless an insurance company
spreads its coverage over large geographic areas or a broad population base or
different classes of Insurance, a single disaster might force it to pay out all its
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policies at once. The possible loss must be financially serious to the Insured. AnInsurance company could not afford the paperwork involved in handling numerous
small claims of a few Rupees each. As a result, many policies have a clause
specifying that the insurance company will pay only that part of a loss greater than
an amount - the deductible or excess - stated in the policy. The excess represents
small losses that the Insured has to absorb.
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Chapter 3
INDUSTRY PROFILE
3.1 Origin of Life Insurance
Life Assurance was born in England when the first policy providing temporary
cover for a period of 12 months was issued as easy as 1583 A.D. The Amicable
Society started granting fluctuating sum on death since 1705 and a fix sum since
1757, With the development of mortality tables, the life Assurance acquired a
scientific character. The Equitable Society founded in 1762 was the first Society
established on scientific basis.
3.2 ORIGIN OF LIFE ASSURANCE IN INDIA
In India, after failure of two British companies, the European and the Albert in
1870, which attempted writing business on Indian lives, first Indian Life Assurance
Society was formed in the same year called Bombay Mutual Assurance Society
Ltd. It was followed by the Oriental Life Assurance Company Limited in 1874,Bharat in 1896 and Empire of India in 1897. The Idea of insurance was born out
of a desire of the people to share loss of an individual by many. Originally it
restricted to forms other than life assurance. It started with Marine Insurance,
where the losses on account of perils of sea were shared by all who were
engaged in trade. Reference to some forms of insurance, is found in the codes of
Hammurabi, Manu (Manav Dharma Shastra). The word `Yogakshema is used in
the Rig Veda suggesting that some form of community insurance was practiced
by the Aryans in India over 3000 years ago. In India during Buddhist period burial
societies existed which were mutual in their character and used to help a family
by building a house, protecting the widow, marrying the girls.
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The Swadeshi Movement of 1905 provided impetus to the formation of severalcompanies such as the `Hindustan Cooperative, the `United India, the `Bombay
Life, the `National. Further in the wake of freedom movement number of
companies such as the `New India, the `Jupiter the `Lakshmi emerged.
The Government began to exercise a certain measure of control on Insurance
business by passing the `Insurance Act in 1912. For controlling investment of
funds, expenditure and management, a comprehensive Act was passed known as
`The Insurance Act 1938. For controlling the affairs, the office of Controller of
Insurance was established. The act was extensively amended in 1950.
In the year 1955, approximately 170 Insurance Offices and 80 Provident Fund
Societies had been registered for transacting Life Assurance business in India.
There were, however, no full guarantees to the policyholders. The concept of
trusteeship was lacking. Many insurance companies went into liquidation. There
were malpractices in insurance business. For achieving the following purposes it
was felt necessary to nationalize the insurance business in India. To provide
security to the policyholders
(i) To utilize the funds for nation-building activities.
(ii) To avoid cut throat competition
(iii) To abolish mal-practices
(iv) To spread the insurance message to the rural areas.
The first step in this direction was taken by the Government of India by issuing the
Life Insurance (the Emergency provisions) Ordinance, 1956 on 19 th January,
1956. The then Finance Minister, Shri C. D. Deshmukh mentioned the purpose of
nationalisation as reaching the goal of socialistic pattern of society, rendering
genuine service to the people in the rural area. The Life Insurance
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Corporation Act (Act XXXI of 1956) was passed by the Parliament in June 1956which came in force on 1st July 1956. The Life Insurance Corporation of India
came into existence on 1st September 1956.
3.3 INSURANCE SECTOR REFORMS
Having looked at the insurance sector, let us look at the efforts made by the
government to make the industry more dynamic and customer friendly. To begin
with, the Malhotra committee was set up with the objective of suggesting changes
that would achieve the much required dynamism.
The Malhotra Committee Report
In 1993, Malhotra Committee, headed by former Finance Secretary and RBI
Governor R. N. Malhotra, was formed to evaluate the Indian insurance industry
and recommend its future direction. In 1994, the committee submitted the report
and gave the following recommendations:
Structure
Government stake in the insurance Companies to be brought down to 50%
Government should take over the holdings of GIC and its subsidiaries so that
these subsidiaries can act as independent-corporations
All the insurance companies should be given greater freedom to operate
Market Regulations:
Private Companies with a minimum paid up capital of Rs.1bn should be
allowed to enter the industry
No Company should deal in both Life and General Insurance through a single
entity
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Foreign companies may be allowed to enter the industry in collaboration withthe domestic companies
Postal Life Insurance should be allowed to operate in the rural market
Only one State Level Life Insurance Company should be allowed to operate in
each state
Regulatory Body
The Insurance Act should be changed
An Insurance Regulatory body should be set up
Controller of Insurance (Currently a part from the Finance Ministry) should be
made independent
Investments
Mandatory Investments of LIC Life Fund in government securities to be
reduced from 75% to 50%
GIC and its subsidiaries are not to hold more than 5% in any company (There
current holdings to be brought down to this level over a period of time)
Customer Service
LIC should pay interest on delays in payments beyond 30 days
Insurance companies must be encouraged to set up unit linked pension plans
Computerization of operations and updating of technology to be carried out in
the insurance industry
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Overall, the committee strongly felt that in order to improve the customer servicesand increase the coverage of the insurance industry should be opened up to
competition.
But at the same time, the committee felt the need to exercise caution as any
failure on the part of new players could ruin the public confidence in the industry.
Hence, it was decided to allow competition in a limited way by stipulating the
minimum capital requirement of Rs.1 bn. This amount is not very high for foreign
firms, as it translates to only about US$25 million. Further, to date it is unclear
whether equity should be payable in one go or should be brought in as
installments. Also, the foreign equity participation was to be restricted to only
40%.
The committee felt the need to provide greater autonomy to insurance companies
in order to improve their performance and enable them to act as independent
companies with economic motives. For this purpose, it had proposed setting up
an independent regulatory body.
The industry and analysts find that there is lack of clarity in the following areas:-
Though coverage of rural areas was to be made compulsory, it raises the
question as to who would subsidies the rural policies as they would be difficult
to service and hence costs will go up.
There is some confusion with respect to investments. Where should the funds
be invested? Currently 70% of the funds with LIC & GIC are invested inGovernment securities. Would new entrants be allowed to invest in GOI
securities?
The report also does not enumerate exit options available to the new entrants.
In the event of failure, there should be an arrangement made whereby the
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other Companies pool in to bail the customers, who in all probability would bemiddle class individuals.
3.4 POTENTIALITY OF INSURANCE IN INDIAN MARKET
Marketing inefficiency of general insurers has kept society in dark even when so
many personal as well as commercial lines of insurance covers are available for
them. Insurers have failed to identify the need of the individual risk factors and
thereafter selecting proper market segments and developing demand of these
needs by adopting proper marketing mix. There is great scope of commercial lineof insurance as we are developing at a very fast rate but the potentiality and
scope of personal lines of insurance is vast as this areas is still under-tapped.
Product designing and pricing is also simple and growth of this portfolio is
guaranteed in this country which has a base of over 100 crore population, where
there are about 25 crore dwellings, 20 crore schools, colleges and educational
institutions and about 5 crore small and big shops. But despite this the Indian
insurers share in personal line of business is very low or negligible.
There are enormous growth opportunities to Indian as well as foreign insurers
because of such a huge base of population there is ample scope to introduce the
new line of covers as per the changing needs and to increase the per capita share
of the insurance by encouraging risk transfer by investing small portion of the
savings of the individuals.
By opening up the sector far more opportunities has came up in insurance and
reinsurance market. After privatization of this sector presence of the foreignplayers has also increased. Therefore the insurers, in time to come, will have to
change their attitude from selling of the product to marketing of the protection
needs of the insured and for this what is required is:
Effective product planning
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Suitable pricing
Efficient promotion and physical distribution.
Proper physical evidence.
Good and well trained sales force.
Your Plans, Your Dreams & Their Future:
The Essence of Life Insurance
Your family counts on you every day for financial support: food, shelter,
transportation, education, and much more. You and your spouse have plans for
your future and dreams for your family: another child, a bigger home, a new
business, college education, travel, retirement Life insurance is all about
making sure your family has adequate financial resources to make those plans
and dreams come true, if you were to die prematurely. And just as your spouse
and children (as beneficiaries) count on you, you count on your spouse. That's
why coverage for your spouse is also important. If he or she were to die
unexpectedly, you would feel similar financial strains. This is especially true today,
with so many "double income" families.
When Should Someone Invest?
The answer, of course, is right now! Since no one can tell when the best time to
invest is, it is whenever you have the money! One should first invest in any plans
for which tax-deductible contributions can be made because these types of
savings reduce current taxes. Then, any more surplus funds should be invested in
a variable annuity, especially in equities so as to get the maximum growth of the
capital.
Insurance as a Safety Net
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The function of insurance is to protect you against losses you can't afford. This isdone by transferring the risks of a person, business, or organization -- the
"insured" -- to an insurance company, or "insurer." The insurer then reimburses
the insured for "covered" losses -- i.e., those losses it pays for under the policy's
terms.
As the insurance consumer, you pay an amount of money, called a premium, to
the insurer to transfer the risk. The insurer pools all its premiums into a large fund,
and when a policyholder has a loss, the insurer draws funds from the pool to pay
for the loss. Life is full of unexpected events that can create large financial losses.
For example, whenever you drive, it is possible that you may have a costly
accident. Risks affect you by causing worry about potential loss and how to deal
with the consequences. Insurance reduces anxiety over a possible loss and
absorbs the financial brunt of its consequences. However, while insurance
coverage is essential, how much and what type of insurance people need differ
with each individual. You must decide how much risk you're willing to tolerate
without insurance. For example, benefits for disability policies typically begin aftera waiting period of one to six months. Therefore, you should ensure that you have
some form of coverage or financial resources before the policy period begin.
Where Can I Get Insurance?
Since insurance can be expensive, it makes sense to get more than one price
quote for coverage. At one time, we in India had no option but the nationalized
insurance companies like LIC, GIC, etc. Now several private players, often with
foreign tie-ups, are entering the fray. There are now several companies selling
any one type of insurance, each with its own price structures, coverage, and
policy exclusions. To help consumers choose among the various types of
coverages, companies train sales representatives in the technical points of their
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insurance products. Many representatives work for just one insurance company.There are also brokers and independent agents -- self-employed business people
who sell insurance on commission for several insurers -- who claim they can
comparison shop to get the best coverages for consumers. Certain banks also
sell insurance.
What Type of Insurance Agent Should I Trust?
With multiple players in the life insurance field now, a choice should be first made
regarding the insurance company before choosing an agent. To determine acompany's willingness to pay claims, ask a policyholder who has filed several
claims. Obviously, the more claims an insurer has handled with no complaints, the
more likely that the company will provide you with good service. Barring LIC, the
remaining players in life insurance are still new in the field, so this kind of
information will not be available for another few years at the least. It remains to be
seen how the newer players will perform on the claims front, but given the
regulatory framework and their strong parentage, their performance should be
comparable, if not better than LIC.
It is quite imperative that your insurance agent be competent and professional
enough to clearly understand your insurance requirements and suggest a
suitable scheme. Also, with insurance companies offering varying rate of
commissions on different schemes, there is a likelihood that a 'not-so-
professional' agent may be tempted to recommend a scheme which pays him a
higher commission, though it may not be very suitable for your needs. This isespecially so in the case of LIC, sole provider of life insurance in our country till
recently, where the eligibility criteria are not very rigorous and very often the level
of knowledge and competence of the agents leaves a lot to be desired. The new
players seem to be much more stringent in appointing agents and more
committed in providing training to them. In today's context, especially in case of
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LIC, it may be advisable to go in for an agent who comes recommended from oneof your friends, relatives or associates. Further, the agent should be able to
provide you with a comparison of multiple schemes and also explain them in
simple terms, so that you are are able to make an informed decision. In case an
agent is not inclined to spend the time and resources to provide you with relevant
information and solve your queries, it may be better to give a go-by to such a
person and start looking for a new agent. The market is becoming increasingly
competitive and it should not be a difficult task to find a good agent.
Life Insurance Players:
Bajaj Allianz General Insurance: Bajaj Allianz General Insurance Company
Limited is a joint venture between Bajaj Auto Limited and Allianz AG of
Germany. Both enjoy a reputation of expertise, stability and strength.
Birla Sun Life Insurance: The Aditya Birla Group contributes its knowledge of
the Indian market while Sun Life Financial contributes global expertise in the
areas of protection and wealth management.
HDFC Standard Life Insurance: HDFC and Standard Life have a long and
close relationship built upon shared values and trust. Providing long term
financial security to policy holders will be the constant endeavor.
ICICI Prudential Life Insurance: The Company was granted Certificate of
Registration for carrying out Life Insurance business, by the Insurance
Regulatory and Development Authority.
ING Vysya Life Insurance: ING, the worlds second largest life insurance
company together with Vysya Bank, one of Indias leading private sector
banks, forms ING Vysya Life Insurance.
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Chapter 4
LIFE INSURANCE PRODUCTS
4.1 WHOLE LIFE POLICY
These are low-cost insurance plans where the sum assured is payable on the
death of the insured
A typical whole life policy runs as long as the policyholder is alive. In other words,
the risk is covered for the entire life of the policyholder, which is why it is knownas whole life policies.
The policy money and the bonus are payable only to the nominee of the
beneficiary upon the death of the policyholder. The policyholder is not entitled to
any money during his or her own lifetime, i.e. there is no survival benefit.
Whole life policies are fairly rigid and inflexible and are suitable only in a few, very
specific cases.
Whole Life Policy can be a good initial policy to buy since its cost is very low. That
is an important consideration when one is just starting a career.
4.2 ENDOWMENT POLICY
Under these plans, the sum assured is pay-able on the maturity of the policy or in
case of death of the insured individual before maturity of the policy. Endowment
policies cover the risk for a specified period at the end of which the sum assured
is paid back to the policyholder along with the entire bonus accumulated during
the term of the policy. It is this feature - the payment of the endowment to the
policyholder upon the completion of the policys term -, which rightly accounts for
the popularity of endowment policies. The original sum assured and the
accumulated bonus - received back comes handy from the endowment can either
be used for buying an annuity policy to generate a
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monthly pension for the whole life, or put it in any other suitable investment of his
choice. As compared to whole life policies, the premium rates for endowment
policies are higher and the bonus rates are lower. On the plus side, these polices
offer an endowment - representing a return on his premium payments payable to
him in his own lifetime when the policy comes to an end.
4.3 MONEY BACK POLICY
Unlike ordinary endowment insurance plans where the survival benefits are
payable only at the end of the endowment period, money back policies provide for
periodic payments of partial survival benefits during the term of the policy, of
course so long as the policy holder is alive.
An important feature of this type of policies is that in the event of death at any
time within the policy term, the death claim comprises full sum assured without
deducting any of the survival benefit amounts, which may have already been paid
as money-back components. Similarly, the bonus is also calculated on the full
sum assured
Under money back policies premiums can be paid as per the insurance
companys policy. These could be quarterly, half yearly or annually. The
premiums for these policies are payable for the selected term of years, or till
death if it occurs earlier.
By buying such policies one can receive income at regular intervals other than the
risk cover it provides. Also a good amount of bonus on the full sum assured is
quite a good bargain Individual before expiry of the policy
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4.4 TERM POLICY:
Term policies; cover only the risk during the selected term period. If the
policyholder survives the term, the risk cover comes to an end.
A Term plan is designed to meet the needs of people who are initially unable to
pay the larger premium required for a whole life or an endowment assurance
policy, but they hope to be able to pay for such a policy in the near future.
No surrender, loan or paid-up values are granted under these policies because
reserves are not accumulated. If the premium is not paid with the days of grace,
the policy will lapse without acquiring a paid-up value.
However, a lapsed policy may be revived during the lifetime of the life assured but
before the expiry of the period of two years from the due date of the first unpaid
premium on the usual terms. Accident and / or Disability benefits are not granted
on policies under the Term plan.
4.5 ANNUITY (PENSION PLAN)
These plans provide for either immediate or deferred pension for life. The pension
payments are made till the death of the annuitant (per-son who has a pension
plan) unless the policy has provision of guaranteed period.
An annuity is an investment that one make, either in a single lump sum or through
installments paid over a certain number of years, in return for which one receive
back a specific sum every year, every half-year or every month, either for life or
for a fixed number of years.
After the death of the annuitant or after the fixed annuity period expires for annuity
payments, the invested annuity fund is refunded, perhaps along with a small
addition, calculated at that time.
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Annuities differ from all the other forms of life insurance discussed so far in one
fundamental way - an annuity does not provide any life insurance cover but,
instead, offers a guaranteed income either for life or a certain period.
Typically annuities are bought to generate income during ones retired life, which
is why they are also called pension plans. Annuity premiums and payments are
fixed with reference to the duration of human life.
4.6 JOINT LIFE POLICY
Joint life policies are similar to endowment policies in as much as these policies
also offer maturity benefits to the policyholders, apart form covering the risks as
all life insurance policies.
But these are categorized separately as these cover two lives together thus
offering a unique advantage in some cases; notable, for a married couple or for
partners in a business firm.
Under a joint life policy the sum assured is payable on the first death and again on
the death of the survivor during the term of the policy. Vested bonuses would also
be paid besides the sum assured after the death of the survivor. If one or both the
lives survive to the maturity date, the sum assured as well as the vested bonuses
are payable on the maturity date.
The premiums payable cease on the first death or on the expiry of the selected
term, whichever is earlier.
Accident benefits equivalent to the sum assured are available under this plan on
the first death. However, if both lives are covered under Double Accident Benefit
(DAB), the surviving life is covered under DAB until the end of the policy year, in
which the first life dies under the cover of the policy.
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These benefits are available with respect to both lives if
Both lives perish simultaneously owing to an accident. To avoid such an
eventuality, nomination is allowed under the policy OR
Both die within the specified period as a result of the same accident OR
The second life also dies in the same policy year as result of another accident. To
avoid such an eventuality, nomination is allowed under the policy.
Particularly for couples - Joint life policies provide dual-purpose income and risk
protection for both belonging to every income group and class of society.
Under a joint life plan though the premium payment stops after the first life's
death, bonuses continue to accrue on the basic Sum Assured till Maturity Date or
till the death of the second life, if earlier.
4.7 GROUP INSURANCE
Group Insurance offers life insurance protection under group policies to various
groups such as employer-employee, professionals, co-operatives, weaker
sections of society etc. It also provides insurance coverage to people under
certain approved occupations at the lowest possible premium cost. Besides
providing insurance coverage, it also offers group schemes to employers, which
provide funding of gratuity and pension liabilities of the employers Group
insurance plans have low premiums. Such plans are particularly beneficial to
those for whom other regular policies are a costlier proposition. Group insurance
plans extend cover to large segments of the population including those who
cannot afford individual insurance. As such the premia one need to pay is
comparatively lower and at the same time one can avail of insurance benefits.
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The main features of the schemes are low premium and simple insurabilityconditions. Premiums are based upon age combination of members, occupation
and working conditions of the group.
A number of group insurance schemes have been designed for various groups.
These include employer-employee groups, associations of professionals (such as
doctors, lawyers, chartered accountants etc.), and members of cooperative
banks, welfare funds, credit societies and weaker sections of society. Creditor-
Debtor groups are also offered group insurance schemes. Group insurance
schemes providing uniform cover can be granted to outstanding loans. These
groups are Members of primary housing societies where housing loans are
granted by State Apex housing societies, borrowers granted loans by Institutional
agencies in Public/Joint Sectors for housing purposes and borrower members of
cooperative societies/banks formed by employees of the same employers
4.8 SPECIAL PLAN
Special plans are insurance policy plans available from the national insuranceproviders to serve the needs of citizens that cannot be commonly classified or
segregated. These special plans are designed to satisfy needs ranging from debt-
clearance in event of the death of the insured to financial aid in the event of a
medical mishap.
Special plans also provide financial assistance for handicapped dependants as
well as emergency surgery required if and when a medical condition arises. Since
special plans are designed for people with diverse and specific needs, theaverage citizen may not necessarily need or use them. Yet, in the normal course
of life, situations may arise when one may need to provide for unplanned or
unexpected contingencies and mishaps.
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Chapter 5
IRDA ACT 1999
As per the section 4 of IRDA Act' 1999, Insurance Regulatory and Development
Authority (IRDA, which was constituted by an act of parliament) specify the
composition of Authority.
The Authority is a ten member team consisting of :
(a) a Chairman;
(b) five whole-time members;
(c) four part-time members,
(all appointed by the Government of India)
5.1 DUTIES, POWERS AND FUNCTIONS OF IRDA
Section 14 of IRDA Act, 1999 lays down the duties, powers and functions of
IRDA..
(1) Subject to the provisions of this Act and any other law for the time being in
force, the Authority shall have the duty to regulate, promote and ensure
orderly growth of the insurance business and re-insurance business.
(2) Without prejudice to the generality of the provisions contained in sub-section
(1), the powers and functions of the Authority shall include
(a) issue to the applicant a certificate of registration, renew, modify,
withdraw, suspend or cancel such registration;
(b) protection of the interests of the policy holders in matters
concerning assigning of policy, nomination by policy holders,
insurable interest, settlement of insurance claim, surrender
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value of policy and other terms and conditions of contracts ofinsurance;
(c) Specifying requisite qualifications, code of conduct and practical
training for intermediary or insurance intermediaries and agents;
(d) Specifying the code of conduct for surveyors and loss
assessors;
(e) Promoting efficiency in the conduct of insurance business;
(f) Promoting and regulating professional organizations connected
with the insurance and re-insurance business;
(g) Levying fees and other charges for carrying out the purposes of
this Act;
(h) calling for information from, undertaking inspection of,
conducting enquiries and investigations including audit of the
insurers, intermediaries, insurance intermediaries and otherorganizations connected with the insurance business;
(i) control and regulation of the rates, advantages, terms and
conditions that may be offered by insurers in respect of general
insurance business not so controlled and regulated by the Tariff
Advisory Committee under section 64U of the Insurance Act,
1938 (4 of 1938);
(j) Specifying the form and manner in which books of account shallbe maintained and statement of accounts shall be rendered by
insurers and other insurance intermediaries;
(k) Regulating investment of funds by insurance companies;
(l) Regulating maintenance of margin of solvency;
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(m) Adjudication of disputes between insurers and intermediaries orinsurance intermediaries;
(n) Supervising the functioning of the Tariff Advisory Committee;
(o) specifying the percentage of premium income of the insurer to
finance schemes for promoting and regulating professional
organizations referred to in clause (f);
(p) Specifying the percentage of life insurance business and
general insurance business to be undertaken by the insurer in
the rural or social sector; and
(q) Exercising such other powers as may be prescribed.
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Chapter 6
PLAYERS IN INDIAN INSURANCE INDUSTRY
6.1 LIFE INSURERS
Insurance industry, as on 1.4.2000, comprised mainly two players: the state
insurers:
Life Insurance Corporation of India (LIC)
6.2 GENERAL INSURERS:
General Insurance Corporation of India (GIC) (with effect from Dec'2000, a
National Reinsure)
GIC had four subsidiary companies, namely ( with effect from Dec'2000, these
subsidaries have been de-linked from the parent company and made as
independent insurance companies.
1. The Oriental Insurance Company Limited
2. The New India Assurance Company Limited,
3. National Insurance Company Limited
4. United India Insurance Company Limited.
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Yr: 2000-2007: Insurance Industry in the year 2000-2001 had 15 new entrants,
namely:
Life Insurers:
S.No. Name of the Company
1 Max New York Life Insurance Co. Ltd.
2 HDFC Standard Life Insurance Company Ltd.
3 ICICI Prudential Life Insurance Company Ltd.
4 Om Kotak Mahindra Life Insurance Co. Ltd.
5 Birla Sun Life Insurance Company Ltd.
6 Tata AIG Life Insurance Company Ltd.
7 SBI Life Insurance Company Limited
8 ING Vysya Life Insurance Company Private Limited
9 Allianz Bajaj Life Insurance Company Ltd.
10 Metlife India Insurance Company Pvt. Ltd.
11 Reliance Life Insurance Company Ltd.
12 Shriram Life Insurance Company Ltd.
13 Sahara India Life Insurance Company Ltd.
14 Bharti AXA Life Insurance Company Ltd.
15 Aviva Life Insurance Company Ltd.
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General Insurers:
S.No. Name of the Company
1 Royal Sundaram Alliance Insurance Company Limited
2 Reliance General Insurance Company Limited.
3 IFFCO Tokio General Insurance Co. Ltd
4 TATA AIG General Insurance Company Ltd.
5 Bajaj Allianz General Insurance Company Limited
6 ICICI Lombard General Insurance Company Limited.
6.3 INSURANCE BUSINESS:
Insurance business is divided into four classes :
1) Life Insurance 2) Fire Insurance 3) Marine Insurance and 4) Miscellaneous
Insurance.
Life Insurers transact life insurance business; General Insurers transact the rest.
No composites are permitted as per law
Legislation (as on 1.4.2000):
Insurance is a federal subject in India. The primary legislation that deals with
insurance business in India is:
Insurance Act, 1938, and Insurance Regulatory & Development Authority Act,
1999.
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Insurance Products (as on 1.4.2000) (for latest information get in touch with thecurrent insurers website information of insurers is provided at the web page for
insurers):
Life Insurance:
Popular Products: Endowment Assurance (Participating) and Money Back
(Participating). More than 80% of the life insurance business is from these
products.
General Insurance:
Fire and Miscellaneous insurance businesses are predominant. Motor Vehicle
insurance is compulsory.
Tariff Advisory Committee (TAC) lays down tariff rates for some of the general
insurance products.
New products have been launched by life insurers. These include linked-products.
For details, please visit the websites of life insurers.
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Chapter 7
COMPANY PROFILE
7.1 ABOUT MAX NEW YORK
Max New York Life Insurance Company Ltd . is a joint venture between New York
Life; a Fortune 100 company and Max India Limited; one of India's leading multi-
business corporations. The company has positioned Itself on the quality platform. In line
with its vision to be the Most Admired Life Insurance Company in India , it hasdeveloped a strong corporate governance model based on the core values of excellence,
honesty, knowledge, caring, integrity and teamwork. The strategy is to establish itself
as a Trusted Life Insurance Specialist through a quality approach to business.
Incorporated in 2000, Max New York Life started commercial operation in 2001. In line
with its values of financial responsibility, Max New York Life has adopted prudent
financial practices to ensure safety of policyholder's funds. The Company's paid up is
Rs. 1,232 crore.
Having set a Best in Class Agency Distribution Model in place, the company is spearheadinga major thrust into additional distribution channels to further grow its business. The company
has multi-channel distribution that includes the agency distribution, partnership distribution,
bancassurance, distribution focused on emerging markets and alliance marketing through
employed sales force. The company currently has33 bancassurance relationships, 14
corporate agency tie-ups and direct sales force at 14 locations. Max New York Life has put
in place a unique hub and spoke model of distribution to deepen rural penetration. The company
has 39 (9 hub office 30 spoke offices) offices dedicated to emerging markets in Punjab and
Haryana. Max New York Life offers a suite of flexible products. It now has 38 products covering
both life and health insurance and 8 riders that can be customized to over 800 combinations
enabling customers to choose the policy that best fits their need. Besides this, the company
offers 6 products and 4 riders in group insurance business.
The company currently has more than 10,424 employees.
Promoters:
Max New York Life is a joint venture between Max India Ltd., one of Indias
leading multi-business corporate and New York life, a Fortune 100 company. Max
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New York Life Insurance, incorporated in 2000, is one of Indias leading privatelife insurance companies. The company offers both individual and group life
insurance solutions. It has established a wide distribution network across India.
Through its wide network of highly competent life insurance agent advisors and
flexible product solutions, Max New York life Insurance is creating a partnership
for life with its customers in India.
Max India Ltd.
Founded in 1985, Max India Limited is a Public Limited company listed on theNSE and BSE of India with over 26,000 shareholders. Today, Max India Limitedis a multi-business corporate, driven by the spirit of Enterprise, focused onKnowledge, People and Service oriented businesses of:
Healthcare (Max Healthcare)
Life Insurance (Max New York Life Insurance)
Clinical Research (Neeman Medical International)
Max also Maintains Interests in:
Specialty Plastic Products for the packaging industry (Max Speciality
Products)
Healthcare Staffing (Max Health Staff)
Prominent shareholders are Mr Analjit Singh and a leading private equity firm,Warburg Pincus which accounts for 28.7% of the total shareholding. Thebalance shareholding is held by the public and Institutional Investors.
Till 1999, The Companys Main Interests and Partnerships were thefollowing:
Business
Bulk Active Pharmaceuticals
Electronic Component Distribution
Mobile Telephony
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V-SAT Communications
Plating Chemicals
Information Technology
Partners
DSM Gist Brocades
Motorola, USA
Avnet Inc., USA
Hutchison Telecom Ltd. Hong Kong
Comsat Investment Inc., USA & Lockheed Martin, USA
Atotech, Germany
Mind Crossing, USA
In 2000, the Company reinvented and restructured itself to focus on thebusinesses of Life under the them, LifeOur Focus.
Max New York Life Insurance, founded as a Joint Venture between Max India
Limited and New York Life, a Fortune 100 company, is one of the leadingprivate life insurers in India.
Max Healthcare, a subsidiary of Max India Limited is Indias first provider ofcomprehensive, standardized, seamless, and integrated world-class healthcareservices.
Neeman Medical International (NMI) is an International Clinical Researchprovider operating across three locations spanning North America, Asia andLatin America. Each location is backed by comprehensive infrastructure andhighly skilled and experienced personnel.
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New York Life LLC
New York Life Insurance Company,(www.newyorklife.com) a Fortune 100
company founded in 1845, is the largest mutual life insurance company in the
United States and one of the largest life insurers in the world. Headquartered in
New York City, New York Lifes family of companies offer life insurance,
annuities and long-term care insurance. New York Life Investment
Management LLC provides institutional asset management and retirement plan
services. Other New York Life affiliates provide an array of securities products
and services, as well as institutional and retail mutual funds.The mission of New York Life is to maintain its superior 'financial strength',
adhere to the highest standards of 'integrity' and demonstrate 'humanity' by
treating its customers, agents and employees with compassion, consideration
and respect.
New York Life is one of the largest and strongest life insurance companies in
the world with more than USD$215 billion assets under management and has
received among the highest ratings for financial strength from the life insurance
industry's principal rating agencies: A.M. Best (AA+), Standard & Poor's (AA+),
Moody's (Aa1), Fitch (AAA). According to Moody's, "New York Life's rating
reflects the company's good quality investment portfolio, ample liquidity, andsound capitalization, as well as the good growth potential of its international
business.
As a leader in the insurance industry, New York Life continues to bring to its
operations new management concepts, advanced technologies, new
distribution and training systems and innovative insurance products.
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Children Plans
Parenting is all about creating the right environment for your children to grow in. Thecare & love that you shower on them must also be accompanied with the properplanning for their future. Helping your child "win the battle of life" is the best gift that aParent can give to his child. Max New York Life with their children plans makes itpossible for you to achieve this dream of giving your child a happy and financiallysecured future. Following are the products, which will provide financial support to yourchildren, while pursuing their dream careers, getting married, buying a home etc:
Children's Endowment to 18 (Par)
Children's Endowment to 24 (Par)
SMART Steps
SMART Steps Plus
SMART Steps Single Premium
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Retirement Plans
People retire but needs don't. Max New York Life with their retirement planscomes forward to support you in your old age and makes the unfulfilled dreams ofyour life come true. Retirement is like a second life, where you can fulfill all yourdreams, which you have been pushing aside in your past because of lack of time.Our retirement plans make sure that you maintain your comfortable lifestyle anddon't compromise with your wishes because of lack of financial resources in yourold age.
Easy Life Retirement (Par)
SMART Invest Pension
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Health Plans
A very common saying - "Heath is Wealth", may have become old but it's true.Diseases can grab anyone at anytime. So, you have to pre-plan in such a waythat you don't have any financial constraint at the time, when your loved ones arein severe pain. Everybody believes that "prevention is better than cure" and adaptstrict diet plans, exercise daily for it as well but no matter how well you take careof your self, diseases can grab you anytime. So, Max New York Life's Health
Plans have been designed to take into account the diverse set of needs at timesof an individual's ill health. These health plans provide you financial security atthe time of health treatments required.
LifeLine MediCash
LifeLine Wellness Plus
LifeLine MediCash Plus
LifeLine Safety Net
LifeLine Wellness
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Savings Plans
It must be admitted that a certain degree of instability lies in every individual's life.Foreseen and unforeseen needs can arrive at any point of time. Max New YorkLife's savings plans will help you. Our dual benefits saving plans recognizes yourneed for a complete all round financial protection and therefore provides you lifecover and helps in the growth of your money.
Money will fly soon, if not taken care of. Therefore, we offer you diverse savingsplans, which would undoubtedly suit your needs and your budget.
Whole Life Participating
Life Gain Plus 25 (Par)
20 year Endowment (Par)
Life Pay Money Back
Endowment to Age 60 (Par)
Life Gain Endowment
Life Gain Plus 20 (Par)
Life Partner
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Rural Plans
Can anybody remember when the times were not hard and money notscarce?
Max New York Life's Rural Plans have been tailored especially to meet all kindsof requirements of rural customers or investors. The Hassle free procedures andLow & affordable premiums, being the key features of rural plans, proves MaxNew York Life exceptional in offering their incredible services to all the classes ofour society. The following Rural plans have been designed keeping in mind the
rural investors. So that they don't have to worry about the high premium rates andcomplex application forms.
Easy Term Policy
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What is Max VijayThe Background As human beings we all have dreams and aspirations, a desire to achieve andgo beyond. Go beyond the present, changing our lives and for some, changingthe lives of others too for the better. We are all firm believers in the hand ofdestiny, however that doesnt deter us from trying, thankfully. Yet there arethose, who through the drudgeries and miseries of their everyday life,sometimes feel trapped refusing to seek and explore an otherwise unexploredpath.The Vision Created with the vision to empower every Indian to secure his dreams, MaxVijay is an honest endeavor to provide financial security to the under-servedmasses by creating a life insurance product rooted in a deep understanding oftheir financial needs.So what is Max Vijay, a salutation, a victory path or an insurance policy?Max Vijay is not just another life insurance policy of MNYL; Max Vijay is thesymbol of victory of the common man, a beacon for a better tomorrow. Webelieve that true win for India lies in encouraging people to save their hardearned money, a small contribution that would go on to change their future.While the underlying reality remains that MoneyIt just slips through MaxVijay initiative will empower people, provide hope and will offer insurance cumsaving solutions to the under-served packed in the form of an InsuranceSavings Box (Beema Gullak)Max New York Life Insurance Company Limited proudly presents a
unique Life Insurance policy Max Vijay which is
About making better tomorrow possible
A Clear sight of goal - Fulfillment of dream
A belief in the path to achieve the goal, and
Vijay is the Triumph of human life
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Chapter- 8
MARKET RESEARCH
What is Market Research?
Market research is the systematic design, collection, analysis, and reporting of
data and findings relevant to a specific marketing situation facing the company.
Market research firms fall in to the three categories:
1) Syndicated-service research firms-These firms gather consumer and tradeinformation, which they sell for a fee.
2) Customs market research firms-These firms are hired to carry out specific
projects. They design the study and report the findings.
3) Specialty-line market research firms-These firms provide specialized
research services to other firms.
Benefits of Market Research
Information gained through marketing research isn't just "nice to know." It's solid
information that can guide your most important strategic business decision.
Market research is effective when the findings or conclusions you reach have a
value that exceeds the cost of the research itself.
Market research guides your communication with current and potential
Customers
Once you have good research, you should be able to formulate more effectiveand targeted marketing campaigns that speak directly to the people you're trying
to reach in a way that interests them. For example, some retail stores ask
customers for their zip codes at the point of purchase. This information, which
pinpoints where their customers live, will help the store's managers plan suitable
direct mail campaigns.
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Market research helps you identify opportunities in the marketplace.
For example, if you are planning to open a retail outlet in a particular geographic
location and have discovered that no such retail outlet currently exists, you have
identified an opportunity. The opportunity for success increases if the location is in
a highly populated area with residents who match your target market
characteristics. The same might be true of a service you plan to offer in a specific
geographic area or even globally, via the Internet.
Market research minimizes the risk of doing business.
Instead of identifying opportunities, the results of some market research may
indicate that you should not pursue a planned course of action. For example,
marketing information may indicate that a marketplace is saturated with the type
of service you plan to offer. This may cause you to alter your product offering or
choose another location.
Market research helps you evaluate your success.
Information gathered through market research helps you to determine if you're
reaching your goals. In the above example, if your product's target market is
women between the ages of 35 and 50, then you're making progress toward your
goal. (If not, this information can indicate a needed change in marketing strategy!)
Marketplace competition is information about the other companies
Within your area of business. Research answers these questions: Who are my
primary competitors in the market? How do they compete with me? In what
ways do they not compete with me? What are their strengths and weaknesses?
Are there profitable opportunities based upon their weaknesses? What is their
market niche? What makes my business unique from the others? How do my
competitors position themselves? How do they communicate their services to
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the market? Who are their customers? How are they perceived by the market?Who are the industry leaders? What is their sales volume?
Environmental factors information uncovers economical and political
Circumstances that can influence your productivity and operations. Questions
to be answered include: What are the current and future population trends?
What are the current and future socio-economic trends? What effects do
economic and political policies have on the your target market or my industry?
What are the growth expectations for my market? What outside factorsinfluence the industry's performance? What are the trends for this market and for
the economy? Is the industry growing, at a plateau, or declining?
Target market. What is the best target market for the products or services being
offered by the organization? How large is the target market and how can it be
described? What are the attitudes, opinions, preferences, lifestyles, and so on of
its members?
Products/services. Regarding particular, products and services, how satisfied or
dissatisfied is the target. market with what is currently available?
What product features and benefits do those consumers desire? How do they
compare the organizations product with those offered by competitors?
Price.How much value does the target market place on the product in question?
What products are they willing to substitute for the product in question? What
prices are charged for those substitutes? What advantages in features or
benefits or appealsdoes the organizations product have that might allow it to
charge a higher price?
Distribution. What distribution channel is the target market most likely to use
when purchasing the product in question? Is the organizations pricing in line with
what the target market expects to pay for the product when purchased through
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that channel? Does the pricing include the size of margin the channel traditionallyexpects to receive? Will the channel be able to provide the service or support
needed for the product?
Promotion. What can the organization say in its advertisements about its product
that will appeal to the target market and lead them to consider the organizations
product more attractive, than those offered by competitors?
Through what medium(s) (television, newspaper, billboards, etc.) should the
organization advertise? What specific vehicles (i.e., what specific televisionprograms or newspapers) should the organization use to carry the
advertisements? How often should the advertisements appear, and how much
money should the organization spend on advertising? Should personal selling be
used and, if so, how? What kinds of promotions would have a favorable effect on
the target market?
Market Research
The Process
Market research, like other components of marketing such as advertising, can be
quite simple or very complex. You might conduct simple market research such as
including a questionnaire in your customer bills to gather demographic information
about your customers. On the more complex side, you might engage a
professional market research firm to conduct primary research to aid you in
developing a marketing strategy to launch a new product.
Regardless of the simplicity or complexity of your marketing research project,
you'll benefit by reviewing the following seven steps in the market research
process.
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Step One: Define the Problems, the decision alternatives, and the researchobjectives:
The market research process begins with identifying and defining the problems
and opportunities that exist for your business, such as:
1 Launching a new product or service.
2 Low awareness of your company and its products or services.
3 Low utilization of your company's products or services. (The market is familiar
with your company, but still is not doing business with you.)
4 A poor company image and reputation.
5 Problems with distribution, your goods and services are not reaching the
buying public in a timely manner.
Step Two: Set Objectives, Budget and Timetables
Objective:With a marketing problem or opportunity defined, the next step is to
set objectives for your market research operations. Your objective might be to
explore the nature of a problem so you may further define it. Or perhaps it is to
determine how many people will buy your product packaged in a certain way and
offered at a certain price. Your objective might even be to test possible cause and
effect relationships. For example, if you lower your price by 10 percent, what
increased sales volume should you expect? What impact will this strategy have
on your profit?
Budget: How much money are you willing to invest in your market research?
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How much can you afford? Your market research budget is a portion of youroverall marketing budget. A method popular with small business owners to
establish a marketing budget is to allocate a small percentage of gross sales for
the most recent year. This usually amounts to about two percent for an existing
business. However, if you are planning on launching a new product or business,
you may want to increase your budget figure, to as much as 10 percent of your
expected gross sales. Other methods used by small businesses include analyzing
and estimating the competition's budget, and calculating your cost of marketing
per sale.
Timetables:Prepare a detailed, realistic time frame to complete all steps of the
market research process. If your business operates in cycles, establish target
dates that will allow the best accessibility to your market. For example, a holiday
greeting card business may want to conduct research before or around the
holiday season buying period, when their customers are most likely to be thinking
about their purchases.
Step Three: Select Research Types, Methods and Techniques
There are two types of research: primary research or original information
gathered for a specific purpose and secondary research or information that
already exists somewhere. Both types of research have a number of activities and
methods of conducting associated with them.
Secondary research is usually faster and less expensive to obtain that primary
research. Gathering secondary research may be as simple as making a trip toyour local library or business information center or browsing the Internet.
See Market Research Types, Methods and Techniques for more details about the
activities and methods for primary and secondary research.
Step Four: Design Research Instruments
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The most common research instrument is the questionnaire. Keep these tips inmind when designing your market research questionnaire.
1 Keep it simple.
2 Include instructions for answering all questions included on the survey.
3 Begin the survey with general questions and move towards more specific
questions.
4 Keep each question brief.
5 If the questionnaire is completed by the respondent and not by an interviewer
or survey staff member, remember to design a questionnaire that is graphically
pleasing and easy to read.
6 Remember to pre-test the questionnaire. Before taking the survey to the
printer, ask a few people-such as regular customers, colleagues, friends or
employees-to complete the survey. Ask them for feedback on the survey's
style, simplicity and their perception of its purpose.
7 Mix the form of the questions. Use scales, rankings, open-ended questions
and closed-ended questions for different sections of the questionnaire. The
"form" or way a question is asked may influence the answer given.
Basically, there are two question forms: closed-end questions and open-
end questions.
Step Five: Collect Data
To help you obtain clear, unbiased and reliable results, collect the data under the
direction of experienced researchers. Before beginning the collection of data, it is
important to train, educate and supervise your research staff. An untrained staff
person conducting primary research will lead to interviewer bias.
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Stick to the objectives and rules associated with the methods and techniques youhave set in Step Two and Step Three. Try to be as scientific as possible in
gathering your information.
Step Six: Organize and Analyze Data
Once your data has been collected, it needs to be "cleaned." Cleaning research
data involves editing, coding and the tabulating results. To make this step easier,
start with a simply designed research instrument or questionnaire.
Some helpful tips for organizing and analyzing your data are listed below.
1 Look for relevant data that focuses on your immediate market needs.
2 Rely on subjective information only as support for more general findings of
objective research.
3 Analyze for consistency; compare the results of different methods of your
data collection. For example, are the market demographics provided to you
from the local media outlet consistent with your survey results?
4 Quantify your results; look for common opinions that may be counted together.
Step Seven: Present and Use Marketing Research Findings
Once marketing information about your target market, competition and
environment is collected and analyzed, present it in an organized manner to the
decision makers of the business. For example, you may want to report your
findings in the market analysis section of your business plan. Also, you may want
to familiarize your sales and marketing departments with the data or conduct a
company-wide informational training seminar using the information. In summary,
the resulting data was created to help guide your business decisions, so it needs
to be readily accessible to the decision makers.
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RESEARCH STUDY
8.1. RESEARCH OBJECTIVES
The objective of the project is to find out the consumer Satisfaction or
Preference and behavior of customer towards Insurance Sector especially
towards MAX NEW YORK.
What all are the stimuli effecting there choices before selecting a Insurance
company. Is it the credibility, good return or celebrity endorser.
It also helps in letting the above Insurance know its basic position in relation to its
competitors in the market & how better can it help re-design its product in
achieving higher sales growth.
The study of this research also analyses the findings and provide MAX NEW
YORK with the effective recommendations or suggestions.
RESEARCH METHODOLOGY
Research Design
A research design is a type of blue print prepared depending on various types of
blueprints available for the collection, measurement and analysis of data. A
research design calls for developing the most efficient plan of gathering the
needed information. The design of research study is based on the purpose of the
study.
A research design is the specification of methods and procedures for acquiring
the information needed. It is overall operational pattern or framework of
the project that stipulates what information is to be collected from
which source by what procedures.
Types, Methods and Techniques
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Secondary Research
Usually the easiest and least expensive, secondary research is information that
already exists somewhere. It may be a study, a group of articles on a topic, or
demographic or statistical data gathered by someone else. For example, the
demographic data about car owners in your county available from your Chamber
of Commerce may be just the information you need-and it's already gathered!
Secondary Research Activities
1 Review and analyze the existing data on your target markets available from
magazines, books, published research studies, government publications, etc.
2 Evaluate the competition.
3 Assess environmental factors such as social, economic, political, etc.
Secondary Research Methods
Because secondary research already exists, no specific scientific method or
technique is needed to collect information. Instead, your efforts are spent locating
and gathering market information from reliable sources. Don't forget the Internet.
Many of the resources listed below, such as magazines, trade associations and
government resources now have materials available online.
Some resources for gathering secondary research information include:
1 Libraries and other public information centers - Look in reference
centers for resource materials and other existing data on your market.
2 Books and business publications - Many books have been written on
specific industries and markets. Look for helpful existing data and
environmental factors.
3 Magazines and newspapers - Each and every day, studies and other
survey results are released as news events. Also, look into news about
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environmental factors such as the leading economic indicators or theupcoming local political elections.
4 Trade associations - Most associations have reports on the industries they
serve, the standards they operate under and leaders in the field.
Many even conduct educational seminars on trends and other issues.
Associations are also helpful in researching the competition. Chambers of
Commerce - The local Chamber is a terrific resource for information on the
community you hope to serve, other local businesses and maps of the area.One can also learn from other members at Chamber networking events.
1 Banks, real estate and insurance companies may keep information and
statistics on the communities they serve.
2 Wholesalers and manufacturers - Contact these enterprises for
information on the industry standards, customers, costs, distribution, potential
problems
3 Indian government resources can provide extensive demographic data on
population, markets and the economy like Census Bureau of India .
4 Media representatives - Advertising salespeople at TV, radio, and print
media outlets keep information on the markets their viewers, listeners, and
readers to help influence potential advertisers.
5 Competition - Ask directly for company brochures, menu of products and
services, prices, annual reports, etc. One may have to disguise him/her self
as a potential customer!
Primary Research
Sometimes, the information you need doesn't exist-anywhere! You've searched
the Internet, you scoured the library, journals and databases all to no avail. That's
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when you may need to conduct primary research, or research conducted for aspecific purpose. FYI, the secondary research you may have used was probably
someone's primary data once.
Primary