Insurance Project 1172407)Var

7/29/2019 Insurance Project 1172407)Var

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1.1 INTRODUCTION OF THE STUDY

The Business of Insurance is related to the protection of the economic values of the assets. Every

human being has the tendency to save to protect him from risks or events of future. Insurance is one

form of savings where in people try to assure themselves against risks or uncertainties of future. It is

assurance against risks or events or losses. People can save their earnings either in the form gold,

fixed assets like property or in banking and insurances. All the savings of people of a country account

for gross domestic savings. In India, although savings rate is high but people prefer to invest either in

gold or fixed assets so that they can make money out of it. Hence insurance sector is still untapped in

India

1.1.1 What is Insurance ?

Insurance is a tool by which fatalities of a small number are compensated out of funds (premium

payment) collected from plenteous. Insurance is a safeguard against uncertain events that may occur

in the future. It is an arrangement where the losses experienced by a few are extended over several

who are exposed to similar risks. It is a protection against financial loss arising on the happening of

an unexpected event. Insurance companies collect premium to provide security for the purpose. Loss

is paid out of the premium collected from people and the insurance companies act as trustees to the

amount so collected. These companies have proposal forms which are filled to give details of

insurance required. Depending upon the answers in the proposal form insurance companies assess the

risk and decide on the premium. Insurance companies are risk bearers. They underwrite the risk in

return for an insurance premium. the function of insurance is to provide protection, prevent losses,

capital formation etc. hence insurance can be defined as a tool in which a sum of money as a premium

is paid by the insured in consideration of the insurers bearing the risk of paying a large sum .it may

also be defined as a contract wherein one party (insurer) agrees to pay the other party (insured) or his

beneficiary, a certain sum upon a given contingency against which insurance is required. Insuranceindustry commands massive funds through sales of insurance products to large number of clients.

Insurers also create liabilities and commit themselves to compensate for losses occurring to the

policyholders on future date. It also plays an important role in process of capital formation.


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1.1.2 Nature of Insurance

Risk sharing and risk transfer:Insurance is used to share the financial losses that might occur to an individual or his family on the

happening of specified events. The loss arising from such events are shared by all the insured in the

form of premium. Example: suppose in a village, there are 250 houses, each valued at

Rs.200000.Everyyear one house gets burnt, resulting into a total loss of Rs.200000.If all the 250

owners come together and contribute Rs.800 each, the common fund would be Rs200000.This is

enough to pay to the owner whose house gets burnt. Thus the risk of one owner is spread over 250

house owners of the village.

Risk assessment in advance:Insurance companies are risk bearers. They assess the risk before insuring to charge the amount of

premium.

Its not gambling or charity:The uncertainty is changed to certainty by insuring property and life because the insurer promises to

pay a definite sum at damage or death. Insurance is antithesis of gambling. Failure of insurance

amounts to gambling because the uncertainty of loss is always looming. Moreover insurance is not

possible without premium. So it is different from charity because charity is given without

consideration.

Huge number of insured people:It is essential to insure larger number of people or property to make cost of insurance less

consequently premium would also be less.

Assists in capital formation:Insurance provides capital to society. Accumulative funds are invested in productive channels.


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1.1.3 Semantics

Risk: It is defined as an uncertainty of a financial loss. It is the unintentional decline in ordisappearance of value arising from contingency.

Policy: It is the document which embodies the insurance contract Whole life policy: It is the policy under which the amount of policy will be paid only on death of

the insured. Premiums may be payable throughout the life or for a limited period.

Endowment policy: Endowment policies entitle the insured to receive the amount of the policyon his reaching a certain age and premiums also stops. If death occurs earlier, amount of the

policy will be paid at that time and payment of premium will also stop at that time.

Claim: It is the amount which an insurer has to pay against a policy. Reinsurance: It refers to placing a part of the risk by an insurer with another insurer. The object

is to reduce the possible loss to be borne by the original insurer, who pays premiums at the

ordinary rates to the reinsurer. Reinsure must pay commission to the original insurer.

Premium: A periodic payment made on an insurance policy. Insurance penetration: It is defined as insurance premium as a share of gross domestic product. Insurance density: Insurance density is defined as per capita expenditure on insurance premium

i.e. premium per capita.

Actuary: The actuary is a specialist who combines an understanding of risks and mathematicaltechnique to develop financial products to manage these risks, price these products. He helps in

designing insurance plans and then evaluates the financial risk of the company which it takes

while selling an insurance policy.


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1.1.4 Types of Insurance

Insurance is broadly divided in two segments, based on the nature of insurance, those are:

1. Life Insurance &

2. Non-Life Insurance or General Insurance.

It can be again subdivided into the following categories:

Fire Insurance. Marine Insurance. Social Insurance & Miscellaneous Insurance. (Health insurance, Liability Insurance etc.

1.1.5 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 insuredagainst similar risk.

Insurance is a plan, which spreads the risk and losses of few people among a largenumber of people.


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1.1.6 Functions of insurance:

Primary functions:

Provide protection: - Insurance cannot check the happening of the risk, but can provide for thelosses of risk.

Collective bearing of risk: - Insurance is a device to share the financial losses of few among manyothers.

Assessment of risk: - Insurance determines the probable volume of risk by evaluating variousfactors that give rise to risk.

Provide certainty: - Insurance is a device, which helps to change from uncertainty to certainty.

Secondary functions:

Prevention of losses: - Insurance cautions businessman and individuals to adopt suitable device toprevent unfortunate consequences of risk by observing safety instructions.

Small capital to cover large risks: - Insurance relives the businessman from security investment,by

paying small amount of insurance against larger risks and uncertainty.

Contributes towards development of larger industries.

1.1.7 Insurance companies have two sources of income for covering these costs:

Premiums 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, investmentincome depends

on market conditions, interest rates, economy etc. and varies from year toyear. Because of the

uncertainty associated with the investment income, insurancecompanies must generate enough

income from premiums to cover the bulk of their expenses.


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1.1.8 Some of the important milestones in the life insurance business are as:-

1818: Oriental Life Insurance Company, the first life insurance company on Indian soil started

functioning.

1870: Bombay Mutual Life Assurance Society, the first Indian life insurance company started its

business.

1912: The Indian Life Assurance Companies Act enacted as the first statute to regulate the life

insurance business.

1928: The Indian Insurance Companies Act enacted to enable the government to collect statistical

information about both life and non-life insurance businesses.

1938: Earlier legislation consolidated and amended to by the Insurance Act with the objective of

protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers and provident societies are taken over by the central

government and nationalized. LIC formed by an Act of Parliament, viz. LIC Act, 1956, with a capital

contribution of Rs. 5 crore from the Government of India. The General insurance business in India,

on the other hand, can trace its roots to the Triton Insurance Company Ltd., the first general insurance

company established in the year 1850 in Calcutta by the British.

Some of the important milestones in the general insurance business in India: 1907: The

Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance.

1957: General Insurance Council, a wing of the Insurance Association of India, frames a code of

conduct for ensuring fair conduct and sound business practices.

1968: The Insurance Act amended to regulate investments and set minimum solvency margins and

the Tariff Advisory Committee set up.

1972: 107 insurers amalgamated and grouped into four companies viz+ the National Insurance

Company Ltd., the New India Assurance Company Ltd., the Oriental Insurance Company Ltd. and

the United India Insurance Company Ltd. GIC incorporated as a company.

1.1.9 Insurance Sector reforms


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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.

The Malhotra committee was set up with the objective of complementing the reforms initiated in the

financial sector. There forms were aimed at creating a more efficient and competitive financial

system suitable for the requirements of the economy keeping in mind the structural changes currently

underway and recognizing that insurance is an important part of the overall financial system where it

was necessary to addressthe need for similar reforms In 1994, the committee submitted the report

and some of the key recommendations included.

i) 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.ii) Competition

Private Companies with a minimum paid up capital of Rs.1bn should be allowed to enter theindustry.

No Company should deal in both Life and General Insurance through a single entity. Foreign companies may be allowed to enter the industry in collaboration with the 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.


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iii) 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.

iv) Investments

Mandatory Investments of LIC Life Fund in government securities to be reduced from 75% to50%.

GIC and its subsidiaries are not to hold more than 5% in any company (There current holdingsto be brought down to this level over a period of time).

v) 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.

The committee emphasized that in order to improve the customer services and increase the coverage

of the insurance industry should be opened up 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.100 crores. 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.


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1.1.10 History of Insurance Global

For now we know the meaning of insurance, different types of insurance. Now let us know the history

and reasons for and behind different types of insurance. Insurance has existed for thousands of years.

The first ever type of insurance was Property Insurance. It became popular about 3000 BC in China.It all started when Chinese merchants, as well as their investors, wanted to ensure that they would see

a profit from their goods that they shipped overseas. In the event that a ship was lost at sea, an

insuring partner would reimburse the owners of the ship and goods. To pay for the loss the merchant

would be sold into slavery to the insurer until the debt was repaid. This was so because, a merchant

could not afford to pay for the lost goods or even to buy a ship unless someone invested. Property

insurance was also seen in Babylon as well. In Babylon, merchants and investors entered into a

contract, in which the supplier of money for a trade agreed to cancel the loan if the trader was robbed

of his goods. The trader who borrowed the money paid an extra amount for this protection in addition

to the usual interest. As for the lender, collecting these premiums from many traders made it possible

for him to absorb the losses of the few. Later this contract was extended to include provisions for a

family's home and even the death of the insured, where life insurance came into existence. Slowly

this concept started to spread across other places like Greek, Roman. Since ancient times,

communities have pooled some of their resources to help individuals who suffer loss. Until the 1950s,

most insurance companies in the United States were restricted to provide only one type of insurance,

but then legislation was passed to permit fire and casualty companies to underwrite several classes of

insurance. Many firms have since expanded and also were responsible for many mergers. From this

brief accounting of history we can see how insurance came into existence. Fortunately for us we no

longer have to sell ourselves into slavery if our car is stolen nor we have to be scared of losses due to

absence of reserves. However we can be confident that we will be compensated for our loss. Without

people wanting to secure their investments and great tragedies throughout history we may not have

insurance as we know it today resulting in peace of mind.

1.1.19 History of Insurance Industry in India

The insurance industry in India over the past century has gone through big changes. In India this

industry reveals the 360 degree turn. 360 degree turn means that it started in India from being an open


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competitive market to nationalization and back to a liberalized market again. Insurance industry in

India started as a fully private system with no restriction on foreign participation in the Nineteenth

Century. Before independence, a few British insurance companies dominated the Market. Life

insurance was first set up in India through a British company called the Oriental Life Insurance

Company in 1818, followed by the Bombay Assurance Company in 1823 and the Madras Equitable

Life Insurance Society in 1829. With largest number of life insurance policies in force in the world,

Insurance happens to be a mega opportunity in India. Its a business growing at the rate of 15-20

%annually and presently is of the order of Rs 450 billion. Together with banking services, it adds

about 7 %to the countrys GDP. Gross premium collection is nearly 2 %of GDP and funds available

with LIC for investments are 8 %of GDP. Yet, nearly 80 %of Indian population is without life

insurance cover while health insurance and non-life insurance continues to be below international

standards. And this part of the population is also subject to weak social security and pension systems

with hardly any old age income security. This itself is an indicator that growth potential for the

insurance sector is immense. A well-developed and evolved insurance sector is needed for economic

development as it provides long term funds for infrastructure development and at the same time

strengthens the risk taking ability. It is estimated that over the next ten years India would require

investments of the order of one trillion US dollar. The Insurance sector, to some extent, can enable

investments in infrastructure development to sustain economic growth of the country. The growing

number of wealthier as well as aging Indian middleclass is set to offer a strong business potential for

the countrys untapped life insurance market. Insurance is a federal subject in India. There are two

legislations that govern the sector-The InsuranceAct-1938 and the IRDA Act-1999.The insurance

sector in India has come a full circle from being an open competitive market to nationalization and

back to a liberalized market again. Tracing the developments in the Indian insurance sector reveals

the 360 degree turn witnessed over a period of almost two centuries.

1.1.20 Contribution of the Insurance sector to the Indian economy

Some surveys have predicted that India and China will play a very vital role in the years to come.

Indian economy can be termed as an emerging economy as it is doubling its GDP in 3 to 5 years and

moreover it is not dependent on any particular sector for its GDP. If we look at the GDP of the Indian

economy very closely over the years, we can easily come to know the changing structure of the


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economy. We can also come to know the changing contribution of the various sectors like agriculture,

manufacturing and the service sector. In the financial year 1993-94, agricultural sector contributed to

31%, manufacturing accounted to 26.3% and the service sector contributed to 42.7% of the total GDP

of the country. Thus over the years as India became an emerging economy in2003-04 manufacturing

sector contributed for 21.7 %, manufacturing contributed for 26.8whereas service sector contributed

for 51.4% of the total GDP. There has been 7.5% growth in the total GDP of the country and is

estimated to grow at 8.0% in 2006-07. The Indian economy has shown signs of strong performance

despite a rise in oil prices, high inflation rate and abnormal rains in many parts of the country. The

overall growth of the Indian economy has been equally supported by all the three sectors of the

economy, i.e. the agriculture, manufacturing and the service sector. Insurance, together with the

banking sector, contributes to about 7.3 % of the total GDP of India, and the gross premium collected

contributes to about 2% of the total GDP of the country The insurance sector in India has completed a

full circle from being an open competitive market to nationalization and back to a liberalized market

again. Tracing the developments in the Indian insurance sector reveals the 360 degree turn witnessed

over a period of almost 200 years.


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1.2LIFE INSURANCE

Life insurance is a contract between an insured (insurance policy holder) and an insurer, where the

insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of

the insured person. Depending on the contract, other events such as terminal illness or critical illness

may also trigger payment. The policy holder typically pays a premium, either regularly or as a lump

sum. Other expenses (such as funeral expenses) are also sometimes included in the benefits.

The advantage for the policy owner is "peace of mind", in knowing that the death of the insured

person will not result in financial hardship for loved ones and lenders. It is possible for life insurance

policy payouts to be made in order to help supplement retirement benefits; however, it should be

carefully considered throughout the design and funding of the policy itself. Life policies are legal

contracts and the terms of the contract describe the limitations of the insured events. Specific

exclusions are often written into the contract to limit the liability of the insurer; common examples

are claims relating to suicide, fraud, war, riot and civil commotion.

Life-based contracts tend to fall into two major categories:

Protection policies designed to provide a benefit in the event of specified event, typically alump sum payment. A common form of this design is term insurance.

Investment policieswhere the main objective is to facilitate the growth of capital by regular orsingle premiums. Common forms (in the US) are whole life, universal life and variable life

policies.

1.2.1 Parties to a Contract

There is a difference between the insured and the policy owner, although the owner and the insured

are often the same person. For example, if Joe buys a policy on his own life, he is both the owner and

the insured. But if Jane, his wife, buys a policy on Joe's life, she is the owner and he is the insured.

The policy owner is the guarantor and he will be the person to pay for the policy. The insured is a

participant in the contract, but not necessarily a party to it. Also, most companies allow the payer and

owner to be different, e. g. a grandparent paying premiums for a policy on a child, owned by a

grandchild.


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The beneficiary receives policy proceeds upon the insured person's death. The owner designates the

beneficiary, but the beneficiary is not a party to the policy. The owner can change the beneficiary

unless the policy has an irrevocable beneficiary designation. If a policy has an irrevocable

beneficiary, any beneficiary changes, policy assignments, or cash value borrowing would require the

agreement of the original beneficiary.

In cases where the policy owner is not the insured (also referred to as the celui qui vit or CQV),

insurance companies have sought to limit policy purchases to those with an insurable interest in the

CQV. For life insurance policies, close family members and business partners will usually be found

to have an insurable interest. The insurable interest requirement usually demonstrates that the

purchaser will actually suffer some kind of loss if the CQV dies. Such a requirement prevents people

from benefiting from the purchase of purely speculative policies on people they expect to die. With

no insurable interest requirement, the risk that a purchaser would murder the CQV for insurance

proceeds would be great. In at least one case, an insurance company which sold a policy to a

purchaser with no insurable interest (who later murdered the CQV for the proceeds), was found liable

in court for contributing to the wrongful death of the victim.

1.2.2 Contract terms

Special exclusions may apply, such as suicide clauses, whereby the policy becomes null and void if

the insured commits suicide within a specified time (usually two years after the purchase date; some

states provide a statutory one-year suicide clause). Any misrepresentations by the insured on the

application may also be grounds for nullification. Most US states specify a maximum contestability

period, often no more than two years. Only if the insured dies within this period will the insurer have

a legal right to contest the claim on the basis of misrepresentation and request additional information

before deciding whether to pay or deny the claim. The face amount of the policy is the initial amount

that the policy will pay at the death of the insured or when the policy matures, although the actual

death benefit can provide for greater or lesser than the face amount. The policy matures when the

insured dies or reaches a specified age (such as 100 years old).


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1.2.3History of Life Insurance Sector in India

The Oriental Life Insurance Company, the first corporate entity in India offering life insurance

coverage, was established in Calcutta LIC Zonal Office, Night View from Connaught Place Park in

1818 by BipinBehariDasgupta and others. Europeans in India were its primary target market, and itcharged Indians heftier premiums. The Bombay Mutual Life Assurance Society, formed in 1870, was

the first native insurance provider. Other insurance companies established in the pre-independence

era included

Bharat Insurance Company (1956)

United India (1906)

National Indian (1906)

National Insurance (1906)

Co-operative Assurance (1906)

Hindustan Co-operatives (1907)

Indian Mercantile

General Assurance

Swadeshi Life (later Bombay Life)

The first 150 years were marked mostly by turbulent economic conditions. It witnessed, India's First

War of Independence, adverse effects of the World War I and World War II on the economy of India,

and in between them the period of worldwide economic crises triggered by the Great depression. The

first half of the 20th century also saw a heightened struggle for India's independence. The aggregate

effect of these events led to a high rate of bankruptcies and liquidation of life insurance companies in

India. This had adversely affected the faith of the general public in the utility of obtaining life cover.


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1.2.4Nationalization

In 1955, parliamentarian AmolBarate raised the matter of insurance fraud by owners of private

insurance companies. In the ensuing investigations, one of India's wealthiest businessmen, Ram

KishanDalmia, owner of the Times of India newspaper, was sent to prison for two years. Eventually,the Parliament of India passed the Life Insurance of India Act on 1956-06-19, and the Life Insurance

Corporation of India was created on 1956-09-01, by consolidating the life insurance business of 245

private life insurers and other entities offering life insurance services. Nationalization of the life

insurance business in India was a result of the Industrial Policy Resolution of 1956, which had

created a policy framework for extending state control over at least seventeen sectors of the economy,

including the life insurance.

1.2.5Current status

LIC Zonal Office, at Connaught Place, New Delhi, designed by Charles Correa, 1986. Over its

existence of around 50 years, Life Insurance Corporation of India, which commanded a monopoly of

soliciting and selling life insurance in India, created huge surpluses, and contributed around 7% of

India's GDP in 2006. The Corporation, which started its business with around 300 offices, 5.7 million

policies and a corpus of INR 459 million (US$ 92 million as per the 1959 exchange rate of roughly

Rs.5 for a US $,[4] has grown to 25000 servicing around 350 million policies and a corpus of over

INR8 trillion (US$145.6 billion)

1.3 Types of Insurance policy

There are various types of life insurance available to an individual depending upon the sole motive of

insurance in order to meet contingencies. Below are types of life insurance options available to an

individual:


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Term Life Insurance:

Term life insurance plans provide insurance to an individual for a fixed tenure. It is the pure and

cheapest form of life insurance for an individual. This type of policy is suitable for people who are

unable to pay high insurance in order to buy endowment policies.

Whole Life insurance:

Whole life policies are totally opposite to term life plans. A whole life insurance policy covers risk to

an individual for their whole life and generally no pay backs are provided under these types of

policies.

Endowment Life Insurance policy:

Endowment life insurance policies are referred as traditional policies as well. Endowment policies

covers risk to an individual for a specific period of time as per the opted policy and it also pay backs

sum assured and promised bonuses at time of maturity as well.

Money Back Insurance policy:

Money back insurance policy is a type of life insurance under which money is paid to an individual at

different stages of life yet covering their risk for a specific period of time.

Unit Linked Insurance Plans:

Unit linked insurance plans are the modern form of insurance. In addition to insurance cover provided

by the provider, money is also invested in various avenues therefore providing opportunity to derive

good returns as well. So, it serves as an insurance policy and investment plan.

Retirement Plans:

These policies are specially meant to provide steady income to an individual after their retirement.

These kinds of policies enable a person to be independent maintaining good lifestyle.

Savings and investment plans:

These plans help you to save money and also provide you investment opportunity to grow your

money.


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Child Insurance policy:

These types of policies are meant especially for children. The basic motive of these policies is to

provide financial assistance to a child at various stages of their education and thus making their bright

future.

1.4 Government Policies Regarding Life Insurance

Insurance Regulatory and Development Authority (IRDA) 1999

Reforms in the insurance sector were initiated with the passage of the IRDA bill in December 1999.it

was set up as an independent body and it has been able to frame globally compatible legislations. The

IRDA was set up to protect the interests of holders of insurance policies, to regulate , promote and

insure orderly growth of the insurance industry and for matters connected therewith or incidental

there to. This act extends to whole of India. With the establishment of this act, government amended

Insurance act 1938, Life Insurance Act 1956 and General Insurance Act 1972.IRDA was formed on

the recommendations of Malhotra Committee. In 1999 government of India has set up Malhotra

Committee to examine the structure of insurance industry and recommend changes, under R.N

Malhotraformer governor of RBI.

1.5 Indias life Insurance Industary

First year premium underwritten by Indias life insurance industry rose by 6.43% year-on-year during

the quarter ended June 2012. This rise marked the second consecutive quarterly increase since March

2012 and reversed the decline that had lasted five consecutive quarters since December 2010.For the

quarter ending June 2012, the state-owned Life Insurance Corporation (LIC) saw year-on-year growth

of 8.31% in first year premium underwritten, and the company accounted for approximately 74.29%

of total premium underwritten, an increase from 73.00% during the previous year. LIC is Indias

largest insurance group and its market share has grown to more than 60% since the quarter ended

March 2009.


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1.5.1 Life Insurance: Keeping Up with Economic Growth

With relatively low insurance coverage density and insurance penetration, India has been a largely

untapped market with, hence, abundant scope for expanding its insurance businesses. After the

liberalization of the industry in late 1999, which allowed private players to participate in Indiasinsurance businesses, insurance coverage density grew by a compound annualised growth rate of

19.63% between 2001 and 2011, amounting to a premium of INR 2,458.73 per capita. Indias

insurance penetration, measured as total premium over gross domestic product, rose from 1.61%

during the financial year (FY) ended in March 2001 to a record high of 4.11% during FY 2010.

Private insurance providers such as SBI Life, ICICI Prudential, and HDFC Life Insurance have all

made headway into the insurance market, with first year premiums amounted to INR 8.88 billion,

INR 7.21 billion, and INR 6.74 billion, respectively, during the quarter ended June 2012. Although

private insurance providers saw first year premium growth at a mere 1.34% on average, MetLife

India Insurance, for one, saw its first year premiums grow in excess of 80% since the quarter ended

December 2011.

Despite the liberalisation of Indias insurance market, much still need to be done towards the ultimate

goal of improving the nations insurance penetration and coverage. In the short run, market observers

might remain cautious as the modest rise in first year premiums during the quarter ended June 2012

was accompanied by a 4.52% y-o-y decline in the number of policies sold. However, with improvingproduct awareness and increasing demand for long-term financial investment solutions from rising

household income, long-term growth opportunities in the insurance industry overshadows threats

implied by present prevailing macroeconomic situation.

1.6 India Market Life Insurance Update March-2012

The life insurance industry continues to experience a fall in new premiums during the current fiscal

year ending March 2012. Over the past 18 months, the growth of the sector had stalled with the

insurers grappling with new products to cope with changing regulations and new distribution

strategies. The sector is expected to close the year with a contraction in premiums of 13-15 per cent.

Meanwhile, there have been some reports of potential shareholding changes in Indian life insurance


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joint ventures. There are reports that New York Life might exit from its joint venture with the local

Max Group and ING might do likewise in respect of its stake in ING Vysya Life, both due to global

developments and as part of their overall Asia strategy. The Fiscal Budget for the next financial year

beginning April 2012 was recently presented in the Parliament. While the life insurance industry had

earlier submitted a long wish list seeking changes in the direct taxes and rules to stimulate the

industry, due to compulsions of fiscal discipline, the government has proposed no major changes,

except proposing to make higher life cover in investment products mandatory for seeking tax relief,

and hiking the VAT (service tax) on the insurance premiums.

1.6.1 Changing Trends in the life Insurance:

Along with the other objectives of insurance like financial security, tax benefits etc. one of the major

objectives is saving and investment. Traditional life insurance policies like endowment were

becoming unattractive and not meeting the aspirations of the policyholders as the policyholder found

that the sum assured guaranteed on maturity had really depreciated in real value because of the

depreciation in the value of money. The investor was no longer content with the so called security of

capital provided under a policy of life insurance and started showing a preference for higher rate of

return on his investments as also for capital appreciation. It was, therefore found necessary for the

insurance companies o think of a method whereby the expectation of the policy holders could be

satisfied. The objective of providing a hedge against the inflation through a contract of insurance

pushed insurer to link the insurance policy with market and thus the industry observed the beginning

of Unit linked insurance policy (ULIP).

1.7 India insurance 2012:

All factors are in place for the Indian life insurance industry to blossom into one of the fastest

growing financial services markets in the world. The still nascent market is at an inflection point

rising incomes driven by economic growth are boosting demand, and increasingly sophisticated

consumers with differing needs are driving some differentiated plays. For companies wanting to

address this opportunity, a me too approach will prove insufficient. To emerge as winners, they


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must re-examine their strategies and commit to a few bold, breakthrough approaches. This will not

only put them in pole position in the race for customers, but will also help them build sustainable and

profitable businesses.

1.7.1 Strong growth and profit potential for Indias life insurers

Indias life insurance market has grown rapidly over the past six years, with new business premiums

growing at over 40 per cent per year. This impressive growth has been driven by liberalization of the

sector, that enabled the entry of a host of new players with significant growth aspirations and capital

commitments. These players have contributed to the sectors development by significantly enhancing

product awareness, promoting consumer education and information, and creating more organized

distribution channels. But the market is still at a nascent stage in its evolution. The ratio of life

insurance premium to GDP in India is currently about 4 per cent, much lower than developed market

levels of 6 to 9 per cent. In several segments of the population, penetration is lower than potential.

For example, in urban areas, penetration of life insurance in the mass market is about 65 per cent, and

it is considerably less in the low-income unbanked segment. In rural areas, life insurance penetration

in the banked segment is estimated to be about 40 per cent, while it is marginal at best in the

unbanked segment. This will change as India sees strongly accelerating household income and a more

favourable demographic profile over the next two decades.

Annual Premium Equivalent (APE) of 19 to 23 per cent from 2007 to 2012. Such exponential growth

is likely to be fuelled by the following factors:

Greater insurance intensity per capita, as the average per capita income increases. The emergence of

a larger insurable population with a greater appetite to purchase protection products is likely to drive

increase in per household insurance premiums from about Rs. 1,300 to Rs. 3,000 - Rs. 4,100 by 2012.

Broader and inclusive coverage, with the emergence of newly bankable households in significantly

large numbers and considerable supply-side growth. Both these factors will augment penetration in

urban and rural areas. Rural penetration is likely to increase, from about 25 per cent at present to 35

42 per cent in 2012, and penetration in the low-income segment in urban India will rise from 30 per

cent today to 35 - 40 per cent in 2012.


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A more balanced, sustainable and annuity-based business profile as life insurance players adjust

their product mix by reducing share of single premiums from about 48 per cent currently to between

35 and 40 percent in 2012.

1.7.2 Key challenge: current business models traditional and undifferentiated

Indias life insurance market has grown rapidly from 2001 to 2007. New business premiums have

grown at the compounded annual growth rate (CAGR) of 41 percent, and combined total premium

growth has been around 28 per cent per year over this period. But while this growth is impressive, the

industry is still at an ascent stage. While players are at different stages of development and market

presence, their strategies and business models are largely one-size-fits-all: low-margin single-

premium policies and ULIPs have mainly driven premium growth, and the distribution models are

still fairly undifferentiated. Over the next few years, life insurance players need to overcome key

challenges to create a winning proposition.

1.7.3 Need to strengthen core product proposition

While life insurance premiums have grown over the last few years, low-margin single-premium

products and potentially volatile ULIPs have accounted for mostof the growth. These products have

proven easier to sell, but focusing exclusively on these could impair growth and long-term

profitability for Indias life insurers. Single-premium policies doubled their share of overall industry

new business premium (NBP) from 24 per cent in 2005 to 48 per cent in 2007. With low charge

structures, single-premium product profitability is marginal. Unit-linked policies accounted for as

much as 49 per cent of NBP in 2007, a substantial increase from 9 per cent in 2004.

1.7.4 Untapped opportunity in health and pensions

Life insurance players have only just begun addressing areas beyond traditional life products. There is

an untapped opportunity in health insurance and pensions, where life insurance players so far have no

meaningful presence:


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Health insurance. Currently, only around 14 per cent of the population is covered by healthinsurance of any form, of which only about 15 to 20 percent is covered through health insurance

provided by insurance players. As a result, only about 1.5 to 2 per cent of total healthcare

expenditure in India is covered by insurance players. Further, adjusting policy size for purchasing

power parity shows that health insurance in India is about one-fifth the size of that in countries

such as the United States, Germany and South Africa.

Pensions. According to the Old Age Social and Income Security (OASIS report, 1999), there willbe 113 million Indians over 60 years of age by 2016 and 179 million by 2026. For this segment,

longevity risks are on the riseas advanced healthcare has improved life expectancy, it has also

increased the risk that people will outlive their savings. Indians will have an expected lifespan of

80 years, i.e., live a full 20 non-earning years. Healthcare costs have outstripped general inflation,

eroding retirees purchasing power. Savings and investment risks are intensifying, with rising

inflation.

REVIEW OF LITERATURE

Horton (2007) Stated that embedded value has been widely adopted by European and Canadian life

insurance companies for supplementary performance reporting and increasingly by US insurers for

management purposes. It has important implications for the international debate over the appropriate

use of fair values in financial reporting. But EV has still not been accepted by standard setters (e.g.

IASB) for inclusion in the main financial statements. The concept of Market Consistent Embedded

Value has been developed primarily by actuaries utilizing modern financial economics. This paper

analyzes how both top-down and bottom-up methodologies for estimating MCEV may lead to

unrealistic allowance for risk and explores the dangers of double counting of elements in the MCEV

'economic balance sheet', of a misunderstanding of the synergistic nature of overall firm value, and of

a nave belief in market efficiency. It outlines potential empirical research with wider implications for

'fair value' accounting and reporting.

Jeffrey (2008)Presented that the Internet has the potential to significantly reduce search costs by

allowing consumers to engage in low-cost price comparisons online. This paper provides empirical


23/54

evidence on the impact that the rise of Internet comparison shopping sites has had for the prices of

life insurance in the 1990s. Using micro data on individual life insurance policies, the results indicate

that, controlling for individual and policy characteristics, a 10 percent increase in the share of

individuals in a group using the Internet reduces average insurance prices for the group by as much as

5 percent. Further evidence indicates that prices did not fall with rising Internet usage for insurance

types that were not covered by the comparison websites, nor did they in the period before the

insurance sites came online. The results suggest that growth of the Internet has reduced term life

prices by 8 to 15 percent and increased consumer surplus by $115-215 million per year and perhaps

more. The results also show that the initial introduction of the Internet search sites is initially

associated with an increase in price dispersion within demographic groups, but as the share of people

using the technology rises further, dispersion falls.

Ibbotson (2008)Surveyed thatfinancial planners and advisors have recently started to recognize that

human capital must be taken into account when building optimal portfolios for individual investors.

But human capital is not just another pre-endowed asset class that must be included as part of the

portfolio frontier. An investor's human capital contains a unique mortality risk, which is the loss of all

future income and wages in the unfortunate event of premature death. However, life insurance in its

various guises and incarnations can hedge against this mortality risk. Thus, human capital affects both

the optimal asset allocation and the optimal demand for life insurance. Yet historically, asset

allocation and life insurance decisions have consistently been analyzed separately both in theory and

practice. In this paper, we develop a unified framework based on human capital in order to enable

individual investors to make both decisions jointly. We investigate the impact of the magnitude of

human capital, its volatility, and its correlation with other assets as well as bequest preferences and

subjective survival probabilities on the optimal portfolio of life insurance and traditional asset classes.

We do this through five case studies that implement our model. Indeed, our analysis validates someintuitive rules of thumb but provides additional results that are not immediately obvious.

Siddiqui (2009)Stated that In India, the history of life insurance dates back to the year 1818, with the

Oriental Lie Insurance Company in Calcutta. At that time a higher premium was charged for Indian


24/54

lives than the English lives, as Indian lives were considered riskier for coverage. In 1870, the first

company to charge same premium for both Indian and non-Indian lives was, The Bombay Mutual

Life Insurance Society. The life insurance regulation formally began in India in 1912 after the

passage of The Life Insurance Companies Act of 1912 and the Provident Fund Act of 1912.

The Government of India liberalized the insurance sector in March 2000, with the passage of the

Insurance Regulatory and Development Authority (IRDA) Bill. This act lifted all entry barriers for

private and foreign companies to enter the Indian market. Two legislations, which govern this sector,

are: The Insurance Act - 1938, and the IRDA Act - 1999.

Mihir (2006) Stated that Life insurance policies are no longer seen solely as a means of insuring life.

Due to many new features introduced by life insurers, they are seen in the new light of serving

savings and even investment purposes besides the basic purpose of insuring life. The present study

discusses the rates of return given by different types of policies, and the effect of mortality on these

rates of return across age, sum assured, and maturity period in each type of policy studied.

Comparisons in different categories were made for both the unadjusted and mortality-adjusted rates

of return. Analysis was made to determine the type of relationship that the unadjusted and mortality-

adjusted rates of return follow and to determine their degree of sensitivity to mortality.

The findings indicate that different types of policies give different rates of return and that mortality

does have an effect on the rates of return. Endowment plans have higher rate of return with mortality

incorporated, while for unit-linked investment plans, the rate of return is higher when it is treated

purely as an investment instrument. The study also revealed that the unadjusted and mortality-

adjusted rates of return follow a linear relationship that is very similar to the capital asset pricing

model. The study opens a further scope of research by extending the methodology to include other

relevant risk factors besides mortality, and for different types of policies across companies.


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3.1 Need of the Study

To analyze the customer perception towards the public and private life insurance companies. To study the level of satisfaction among customers. To study the overall functioning of life insurance companies.

3.2 Scope of the Study

The study is limited only to Phagwara city due to shortage of time. The study focuses on Consumers

perception towards life insurance or life insurance companies.


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RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problem. Advanced learners

dictionary of current English lays down the meaning of research as `` A careful investigation or

inquiry especially through search for new facts in any branch of knowledge. Research is thus anoriginal contribution to an existing stock of knowledge making for its advancement. It involves

systematic collection, analysis and reporting of data and finding relevant solution to a specific

situation or problem.

4.1 Research Design

Research design specifies the methods and procedure for conducting a particular study. It is a series

of advance decisions that taken together comprise a master plan or model for the conduct of an

investigation. So research design provides a framework of plan for study which guides the collection,

measurement, analysis and interpretation of data. The researcher should select the research design

which is appropriate in achieving the objective of the study.

The Research design was descriptive in nature.

4.2 Sampling Design

Sample size of the study: For the current study sample size was 150 respondents. Sample unit: Various Plans of Insurance are taken for comparison in Phagwara. Sample procedure: The sample procedure used was convenience sampling.

4.3 Data collection & analysis

The data collection was the process of forming an inventory of the required information and finally

sorting the information, so that only desirable information is left with us. The sources of data may be

either primary or secondary.

Primary sources: The primary data was that which was collected a fresh and for the first time for

the problem at hand, Method of collecting primary data may include observation, survey by means of

questionnaire, interviews etc.


27/54

Primary data in this project was collected by way of structured questionnaire containing both the open

ended and close ended questionss.

Secondary sources: The Secondary data which has been collected by someone else and may be

used by some other person. Secondary sources of data include use of Books, Journals, and internet

services.The data was collected for this project through book and internet services.

Analysis of data and interpretation :

After collecting the data the analysis of data had been done through various statistical tools and

techniques. The analysis of data requires a number of closely related operations such as establishment

of categories, the applications of these categories to raw data through tabulation. Thus it helps to

classify the raw data into some purposeful and usable categories. After analysis interpretations are

done i.e. to explain the findings on the basis of analysis.

4.4 Limitations of Study:-

Every research work does have some limitations and so this research work is also having its

limitations. The following are the limitations of this research study.

Some respondents might not given the correct information due to their lack of interest and shortageof time.

Lack of time availability Objectives and the purposes of the study and the STATEMENTs had to be explained to the

respondents and their responses may be biased.


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OBJECTIVES OF THE STUDY

To identify the position insurance companies holds among other private players.

To find out the strengths and weaknesses of the companys insurance schemes

To study consumers awareness towards insurance products

To identify the customers perception about the company and its products.


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Demographic Profile of Respondents:

Table 5(a): Demographic Profile

Demographic Factors No. of Respondents Percentage of Respondents

Age ( in years)

18-25 10 10

26-35 50 30

36-45 60 40

Above 45 30 20

Total 150 100

Gender

Male 90 60

Female 60 40

Total 150 100

Analysis and Interpretation:

Itwas found that majority of the respondents i.e.40% were between the age group of 36-45 and

majority of the respondents i.e.60% were male.


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STATEMENT .1 HOW MANY SHOWING THE NECESSITY OF HAVING A INSURANCE COVER ?

5.1 TABLE SHOWING THE NECESSITY OF HAVING A INSURANCE COVER

S.No Opinion Respondents Percentage

1 Yes 120 80

2 No 30 20

Total 150 100

5.1 CHART SHOWING THE NECESSITY OF HAVING A INSURANCE COVER

6060

0 0

0

10

20

30

40

50

60

No.of

respondents

yes no

RSA

Other companies


31/54

STATEMENT 2. NUMBER OF GENERAL INSURANCE POLICIES HELD BY YOU ?

5.2 TABLE SHOWING NO. OF GENERAL INSURANCE POLICIES HELD BY RESPONDENTS

S.No No. of policies No. Of Respondents Percentage (%)

1 1 62 51.67

2 2-4 41 34.17

3 More than 4 17 14.17

Total 120 100

Findings: The above table shows that 51.67% of respondents hold 1 policy, 34.17% holds 2 to 4 policies and

the rest 14.17% holds more than 4 general insurance policies.

Inference: It is inferred that a higher percentage (51.67%) of respondents holds 1 general insurance policy.

5.2 CHART SHOWING NO. OF GENERAL INSURANCE POLICIES HELD BY RESPONDENTS

51.67

34.17

14.17

0

10

20

30

4050

60

No.o

fresponden

ts

1 2 to 4 More than 4

No.of policies


32/54

STATEMENT . 3 DO YOU WHETHER THE GENERAL INSURANCE POLICIES ARE TAKEN

FROM THE SAME COMPANY

5.3 TABLE SHOWING WHETHER THE GENERAL INSURANCE POLICIES ARE TAKEN FROM

THE SAME COMPANY

S.No Opinion No. Of Respondents Percentage (%)

1 Yes 66 55

2 No 54 45

Total 120 100

Findings: The above table shows that 55% of respondents hold general insurance policy with the same

company and 45% of respondents hold it in various other companies.

Inference: It is inferred that a higher percentage (55%) of respondents holds general insurance policy with the

same company.

5.3 CHART SHOWING WHETHER THE GENERAL INSURANCE POLICIES ARE TAKEN FROM

THE SAME COMPANY

INTERVAL ESTIMATION: WHETHER THE GENERAL INSURANCE POLICIES TAKEN FROM

THE SAME COMPANY

Formula:

55

45

0

10

20

30

40

50

60

No.o

frespondents

Yes No


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No. of respondents who have taken policies from the same company: 66

No. of respondents who have not taken policies from the same company: 54

n = sample size = 120

p= Number of yes = 66 = .55

Sample size 120

q = 1-p = 1-.55 = .45

Z 2/ = 1.96 at 95% confidence level

__________

Standard error =n

pq= .55 * .45 = 0.0454

120

Interval estimation= pn

pq2/Z

= (0.55 1.96(0.0454)

= 0.4610>p>0.639

= 46.1%, 63.9%

Conclusion

Hence, we conclude that the percentage of respondents who have taken policies from the same company lies

between 46.1% to 63.9%

n

pq/2Zp


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STATEMENT.4 WHERE DO PRIVATE INSURANCE SECTOR NEED TO IMPROVE ?This STATEMENT was asked to know where private companies are lacking. It might be in term ofservice, return, information, verity or easy claim.

5.4 TABLE SHOWING DO PRIVATE LIFE INSURANCE COMPANIES NEED TO IMPROVE

No. of respondents % of respondents

Service 36 30

Return 12 10

Information 18 15

Verity 6 5

Easy claim 48 40

5.4 Figure showing do private life insurance companies need to improve

INTERPRETATIONFrom the research it was found that there is a need for the private player to improvement in certain sector to

complete with the government sector companies, majority of the people th i nk t ha t p eop l ethink that private companies need to improve in easy claim and information.

30

10

155

40

Need to improve

Service

return

Information

verify

Easy claim


35/54

STATEMENT .5 WHICH SECTOR THEY CHOOSE PUBLIC OR PRIVATE? reason

5.5 TABLE SHOWING SECTOR CUSTOMER CHOSE PUBLIC OR PRIVATE

No. of respondents % of respondentsPublic 72 60

Private 48 40

Total 120 100

5.5 Figure showing sector customer chose public or private

INTERPRETATIONAfter the survey it was found that still major portion of customers go for public insurance companies,but with the entry of more and more private companies the scenario is changing rapidly, people need of more andbetter returns are opting for private companies, and this can be justified by the increasing market share of

private companies in the Indian insurance sector. There are various ways in which private companiesare found much more lucrative than public companies and the fact which support this statement are as follows:1 .Ver s a t i l i t y o f p r oduc t s 2 .E f f i c i en t f und manager s 3 .Be t t e r c us t omers e r v i c es 4. More return 5.rgular follow up. 6.quick settlement

60

40

sector chose

Public

Private


36/54

STATEMENT .6 WHICH LIFE INSURANCE COMPANY WILL YOU PREFER?

o LICo HDFCo ING Vysyao Met life India insuranceo Birla sun lifeo ICICI Prudentialo TATA AIG

Table 5.6 LIFE INSURANCE COMPANY THEY PREFER

5.6 TABLE SHOWING Life insurance Company they prefer

Options Number of Respondents % age

LIC

HDFC

ING Vysya

Met life India insurance

Birla sun life

60

18

6

6

6

50%

15%

5%

5%

5%


37/54

ICICI Prudential

TATA AIG

18

6

15%

5%

Figure 5.6 Life insurance Company they prefer

Interpretation

The respondents were asked which life insurance company they will prefer. As indicated by above

table, 55% voting was given to LIC, 13% to HDFC, 5% to ING vysya, 3% to Met life india

insurance, 7% to Birla sun life, 15% to ICICI Prudential and rest of the 2% toTATA AIG.

60

15

5

5

5

15

50 LIC

HDFC

ING Vysya

Met life India insurance

Birla sun life

ICICI Prudential

TATA AIG


38/54

STATEMENT. 7 DO YOU SATISFIED WITH THE POLICY ?The STATEMENT was asked to know that what percentage of customers is satisfied with the policies

5.7 : Table showing that you Satisfied with the policy

No. of respondents % of respondentsSatisfied 72 60

Not satisfied 24 20

Cant say 24 20

Total 120 100

5.7 Figure showing you Satisfied with the policy

INTERPRETATIONIt was founded that majority of customer are not satisfied with their current policy

6020

20

satiscation

satisfed

not satidfied

cant say


39/54

STATEMENT . 8 WHAT IS YOUR OPINION TOWARDS INSURANCE COMPANIESS OFFERING

OF CUSTOMER CENTRIC PRODUCTS

5.8 TABLE SHOWING RESPONDENTS OPINION TOWARDS insurance companiesS

OFFERING OF CUSTOMER CENTRIC PRODUCTS

S.No Opinion No. Of Respondents Percentage (%)

1 Highly agree 12 10

2

Agree 96 80

3 Neither agree nor disagree 6 5

4 Disagree 6 5

5 Highly disagree - -

Total 120 100

Findings: The above table shows that 10% of respondents, who are policy holders with insurance companies

highly agree, 80% of them just agree, 5% of them neither agree nor disagree and the rest 5% of them disagree

that insurance companies is known for offering customer-centric products.

Inference: It is inferred that a higher percentage (80%) of respondents, who are policy holders with insurance

companies have agreed that insurance companies is well known for offering customer centric products.

8.3

0

80

3.3

8.3

0 20 40 60 80 100

Highly agree

Agree

Neither agree nor disagree

Disagree

Highly disagree

No.of respondents


40/54

STATEMENT .9 WHAT IS YOUR OPINION ON THE SERVICE OF insurance companies ?

5.9 TABLE SHOWING THE RESPONDENTS COMMENT ON THE SERVICE OF insurance

comapnies

Sr.No Comment No. Of Respondents Percentage (%)

1 Excellent 48 40

2 Very good 60 50

3 Moderate 12 10

4 Poor - -

5 Very poor - -

Total 120 100

Findings: The above table shows that 40 % of respondents have indicated the service of insurance

companies as excellent, and 50% of them have stated it as very good and 10% of them have indicated it as

moderate.

Inference: It is inferred that a higher percentage (50%) of respondents have indicated that the service rendered

by as very good.


41/54

5.9 CHART SHOWING THE RESPONDENTS COMMENT ON THE SERVICE OF insurance

comapnies

38.33

50

11.67

0 00

10

20

30

40

50

60

Excellent Very good Moderate Poor Very poor

No.ofrespondents


42/54

STATEMENT .10 WHICH SOURCES BY WHICH THE RESPONDENTS BECAME FAMILIAR OF

INSURANCE

5.10 TABLE SHOWING SOURCES BY WHICH THE RESPONDENTS BECAME FAMILIAR OF

S.No Source of information No. Of Respondents Percentage (%)

1 Ads (print, radio, TV) 42 35

2 Insurance agents 27 23

3 Friends & Relatives 51 42

4 Others - -

Total 120 100

Findings: The above table shows that 35% of respondents have indicated advertisement, 23.33% of them havestated insurance agents and 41.67% of them have indicated friends & relatives as means by which they came to

know about insurance companies.

Inference: It is inferred that a higher percentage (41.67%) of respondents has indicated friends and relatives as

means by which they came to know about insurance companies.

5.10 CHART SHOWING SOURCES BY WHICH THE RESPONDENTS BECAME FAMILIAR OF

insurance companies

Others

0% Ads (print,

radio, TV)

35%

Insurance

agents

23%

Friends &

Relatives

42%


43/54

STATEMENT .11 THE PERIOD OF INSURANCE COVER HELD BY RESPONDENTS.?

5.11 TABLE SHOWING THE PERIOD OF INSURANCE COVER HELD BY RESPONDENTS.

S.No Period of insurance cover No. Of Respondents Percentage (%)

1 Annual policy 61 50.83

2 1-5 year 35 29.17

3 5-10 year 11 9.17

4 10-15 year 13 10.83

5 Greater than 15 years - -

Total 120 100

Findings: The above table shows that 50.83% of respondents hold annual policy, 29.17% of them hold 1-5

year policy cover, 9% of them hold 5-10year policy and 10.83% of them hold 10-15 year policy.

Inference: It is inferred that a higher percentage (50.83%) of respondents holds annual policy.

5.11 CHART SHOWING THE PERIOD OF INSURANCE COVER HELD BY RESPONDENTS.

50.83

0

9.17

10.83

29.17

0 10 20 30 40 50 60

Annual policy

1-5 year

5-10 year

10-15 year

greater than 5 years

period

ofinsurance

cover

No.of respondents


44/54

STATEMENT .12 THE AMOUNT OF YEARLY INSURANCE PREMIUM PAID ?

5.12 TABLE SHOWING THE AMOUNT OF YEARLY INSURANCE PREMIUM PAID

S.No Yearly premium paid No. Of Respondents Percentage (%)

1 Less than Rs.5000 43 35.83

2 Rs.5000-15000 58 48.33

3 Rs.15000-25000 12 10

4 Greater than Rs.25000 7 5.83

Total 120 100

Findings: The above table showsthat 35.83% of respondents have been paying insurance premium less than

Rs.5000 yearly, 48.330% of them have been paying premium between Rs.5000-15000 yearly, 10% of themhave been paying between Rs.15000-25000 as yearly premium and 5.83% of them have been paying more than

Rs.25000 as yearly premium.

Inference: It is inferred that a higher percentage of respondents (48.3%) have been paying yearly insurance

premium between Rs.5000-15000

5.12 CHART SHOWING THE AMOUNT OF YEARLY INSURANCE PREMIUM PAID

35.83

48.33

10

5.83

0 10 20 30 40 50

No.of respondents

Less than Rs.5000

Rs.5000-15000

Rs.15000-25000

Greater than Rs.25000


45/54

APPLYING KARL PEARSONS CORRELATION COEFFICIENT BY COMPARING ANNUAL

INCOME AND THE YEARLY PREMIUM AMOUNT PAID

Premium amount Less than

Rs.5000

Rs.5000 15000 Rs.15000 -

25000

More than

Rs.25000

No. of respondents 43 58 12 7

Annual income Less than

Rs.2 lakhs

Rs.2-5 lakhs Rs.5-10 lakhs Rs.10-20

lakhs

Above Rs.20

lakhs

No. of respondents 31 51 20 9 9

Premium amount (X) Annual income(Y)

43 31

58 51

12 20

7 9

0 9

xy

r = --------------------

_________

x2 - y2

__ __

x = (X - X) ; y = (Y - Y)


46/54

A

Premium

(X) x x2

Annual

income (Y) y y2

xy

43 13 169 31 7 49 91

58 28 784 51 27 729 756

12 -18 324 20 -14 16 72

7 -23 529 9 -15 225 345

0 0 0 9 -15 225 0

X = 120 x2= 1806 Y= 120 y

2= 1244 xy = 1264

__

X = 120 = 30

4

__

Y = 120 = 24

5

x2 = 1806 ; y2 = 1244 ; xy = 1264

1264

r = -------------------------- = .8433

_____________

1806 * 1244


47/54

Conclusion:

The variables annual income and premium amount paid are positively correlated. Hence, the annual income

has an impact on the premium amount paid.

STATEMENT .13 THE SATISFACTORY LEVEL TOWARDS VARIOUS FEATURES OF

GENERAL INSURANCE POLICY TAKEN

5.13 TABLE SHOWING RESPONDENTS SATISFACTORY LEVEL TOWARDS VARIOUS

FEATURES OF GENERAL INSURANCE POLICY TAKEN

S.No Attributes of

general insurance

cover

Highly

satisfied

Satisfied Neither

satisfied nor

dissatisfied

Dissatisfied Highly

dissatisfied

Total

1 Low premium 9 92 9 10 - 120

2 Claim settlement 26 86 7 1 - 120

3 Larger risk coverage 21 83 13 3 - 120

4 Money back

guarantee

7 41 62 10 120

5 Easy access to

agents

21 39 58 2 - 120

Total 84 341 149 26 0 600

5.13 CHART SHOWING RESPONDENTS SATISFACTORY LEVEL TOWARDS VARIOUS

FEATURES OF GENERAL INSURANCE POLICY TAKEN


48/54

9

21

7

21

8683

41 39

9 7

13

6258

10

1

3

10

20 0 0 0 0

26

92

0

10

20

30

40

50

60

70

80

90

100

Low

premium

Claims

ettlement

Largerrisk

coverage

Moneyback

guarantee

Easyaccessto

agents

no.ofrespondents

Highly satisfied

Satisfied

Neither satisfied nor

dissatisfied

Dissatisfied

Highly dissatisfied


49/54

STATEMENT .14 GENERAL INSURANCE COVER THAT IS MOST FAVORED BY RESPONDENTS

5.14 TABLE SHOWING GENERAL INSURANCE COVER THAT IS MOST FAVORED BY

RESPONDENTS

APPLYING WEIGHTED AVERAGE METHOD TO THE TABLE

Most favored insurance

cover

Rank 1 Rank 2 Rank 3 Rank 4 Rank 5 Rank 6 Rank 7 Rank 8

Auto/car insurance 85 15 4 16 - - - -

Health insurance 34 64 9 13 - - - -

Hospital cash insurance 2 29 65 17 4 2 1 -

Personal accident insurance - 7 38 65 4 6 - -

Travel insurance 1 - - 5 22 53 37 2

Householders insurance - 4 - 3 77 35 1 -

Shopkeepers insurance - - 5 - 11 24 72 8Others - - - - 16 - 7 97

8 7 6 5 4 3 2 1

Most favored insurance

cover

1 2 3 4 5 6 7 8 W.A RANK

Auto/car insurance 85 15 4 16 - - - - 24.7 1

Health insurance 34 64 9 13 - - - - 23.306 2

Hospital cash insurance 2 29 65 17 4 2 1 - 19.94 3

Personal accident insurance - 7 38 65 4 6 - - 17.67 4

Travel insurance 1 - - 5 22 53 37 2 9.9 6

Householders insurance - 4 - 3 77 35 1 - 12.72 5

Shopkeepers insurance - - 5 - 11 24 72 7 8.25 7

Others - - - - 16 - 7 92 4.72 8


50/54

Formulae:

Average score = [(R1*8 + R2*7 + R3*6 + R4*5 + R5*4 + R6*3 +R7*2 + R8*1)]

Total weights

Sample calculation:

Average score = [(85*8 + 15*7 + 4*6 + 16*5 + 0*4 + 0*3 + 0*2 + 0*1)] =24.7

36

Findings: The above table clearly shows that auto/car insurance is been ranked I by majority of respondents,

health insurance ranked II, hospital cash insurance ranked III followed by personal accident insurance,

householders insurance, travel insurance, shopkeepers insurance and other insurance (fire insurance, marine,

rural insurance, etc) which are ranked as IV, V, VI, VII and VIII respectively.

Inference: It is inferred that auto/car insurance is the most favored insurance cover among majority of

respondents.

5.14 CHART SHOWING GENERAL INSURANCE COVER THAT IS MOST FAVORED BY

RESPONDENT

24.7

19.9417.67

9.9

12.72

8.25

4.72

23.306

0

5

10

15

20

25

30

Auto/car

insurance

Health

insurance

Hospitalcash

insurance

Personal

accident

insurance

Travel

insurance

Householders

insurance

Shopkeepers

insurance

Others

No.o

frespondents


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6.1 FINDINGS OF STUDY

Private companies are providing better services than public companies as 64% respondents aresatisfied with their services.

People are aware more of the public sector insurance as it is there in the market for more than 50years.


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CONCLUSION

Life insurance is a relatively low involvement product, even for those who have voluntary cover. It is

not something that occupies consumers minds at times other than the time of consideration /

purchase. The result of this is a low level of awareness and understanding of life insurance products,

and more generally, of the operation of life insurance companies.There is confusion in the minds of

consumers between life insurance, general insurance, health insurance, and some investment products

(such as endowment products).


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RECOMMENDATIONS OF THE STUDY Majority of the respondents, who are policy holders with their company have felt that the

premium being paid is comparatively higher with the premium rates of other insurance

companies. Hence, amendments can be made in this regard by offering insurance cover at

reasonable premium rates to the customers.

The promptness of claim settlement procedure can be maintained as it is one of the importantaspects which would enhance the reputation of the company, as well as build trust in the minds

of the customers. Also, it helps to retain existing customers and attract new customers.

The company has to focus more on the auto/car insurance segment and health insurancesegment. Majority of the respondents have preference towards auto/car insurance as it is a must

to have insurance for their vehicles by law. Therefore, the company has got enough

opportunities to earn huge profits from both these segments.

The company can create more awareness about its products among potential customers bymeans of advertisements and efficient insurance agents, which in turn will help in increasing its

customer base.


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Harris, T.F. (1999). "Actuarial Aspects of Individual Life Insurance and Annuity Contracts"

Winsted, Connecticut: Actex Publications.

Dash, Mihir, C., Lalremtluangi (September 15, 2006).,A Study on Risk-Return Characteristicsof Life Insurance Policies Available at SSRN: http://ssrn.com/abstract=1303350 or

http://dx.doi.org/10.2139/ssrn.1303350

Horton, Joanne(January 9, 2007) Market Consistent Embedded Values as 'Fair Value'Measurements for Life Insurance Accounting:Available at SSRN:

http://ssrn.com/abstract=956104 or http://dx.doi.org/10.2139/ssrn.956104

Jeffrey R. and Goolsbee(October 2008) Does the Internet Make Markets More Competitive?Evidence from the Life Insurance Industry KSG Working Paper No. 00-007. Available at SSRN:

http://ssrn.com/abstract=253795 or http://dx.doi.org/10.2139/ssrn.253795

Roger G., Chen, Peng(May 2009)Human Capital, Asset Allocation, and Life Insurance Yale ICFWorking Paper No. 05-11. Available at SSRN: http://ssrn.com/abstract=723167

Siddiqui, Saif, (February 8, 2010) Indian Life Insurance Sector: An Overview Available atSSRN: http://ssrn.com/abstract=1339447

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