INSURANCE Project - Copy

8/8/2019 INSURANCE Project - Copy

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[T company name]

Submitted By:

Abhishek Kumar Mishra

M B A-2nd sem

RIMT-IMCT Mandi

Gobindgarh (Punjab)

Summer Training Report

Project On:To Study Insurance sector by Comparing different life Insurance productsavailable in the market & To study the Insurance scenario & studyingConsumer Behavior and Awareness regarding life Insurance.With SpecialReference To HDFCSLIC .

Industry Guide:

Mr.Sudhir Kumar

BDM

HDFC Standard Life

Patna


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I express my sincere gratitude to my industry guide Mr.Sudhir Kumar, BDM, HDFC Standard Life. Patna, for his ableguidance, continuous support and cooperation throughout myproject, without which the present work would not have beenpossible. I am also thankful to my friends and families whosesilent support led me to complete my project.

I would also like to thank the entire team of HDFCStandard Life., the constant support and help in the successfulcompletion of my project

(Signed)Abhishek Kumar Mishra

IInd semMBA-Sec A

RIMT-IMCT Mandi Gobindgarh (Punjab)


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The following Summer Internship Report titled To StudyInsurance sector by Comparing different life Insuranceproducts available in the market & to study the worldInsurance scenario & studying consumer behavior andAwareness regarding life Insurance in tricity is herebyapproved as a certified study in management carried out andpresented in a manner satisfactory to warrant its acceptance as aprerequisite for the award of Master in Business Administration forwhich its has been submitted. It is understood that by thisapproval the undersigned do not necessarily endorse or approveany statement made, opinion expressed or conclusion drawntherein but approve the Summer Internship Report only for thepurpose it is submitted.

Summer Internship Report Examination Committee for evaluationof Summer Internship Report.

Organization Guide:

Signature

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Name

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Designation

Address...............................................................................

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Tel

No

Email

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EXECUTIVE SUMMARY

HDFC Standard Life Insurance Company Ltd. is one of India's leading private

insurance companies, which offers a range of individual and group insurance

solutions. It is a joint venture between Housing Development Finance Corporation

Limited (HDFC Ltd.), India's leading housing finance institution and a Group

Company of the Standard Life, UK. HDFC as on July 31, 2010 holds 74 per cent of

equity in the joint venture. The company is marketing life insurance products and

unit linked investment plans. From my research, I found that the company has a lot

of competition from other private insurers like Birla Sun Life and Tata AIG, Bajaj

Allianz etc. It also faces competition from LIC. To compete effectively HDFCSL could

launch cheaper and more reasonable products with small premiums and short

policy terms (the number of years premium is to be paid). The ideal premium would

be between Rs. 5000 Rs. 25000 and an ideal policy term would be 10 20 years.

The Insurance sector, after the opening up, provides greater opportunities. Several global players

have emerged and the market has changed significantly. In the changed scenario, the expectation

is that the low Insurance premium as a percentage of GDP prevailing in India will improve and

will offer better opportunities to the insurance players.

The Indian consumer has a false perception about insurance they feel that it would

not benefit them if they do not live through the policy term. Nowadays however,

most policies are unit linked plans where a customer is benefited even if their death

does not occur during the policy term. This message should be conveyed to

potential customers so that they readily invest in insurance.

Family responsibilities and high returns are the two main reasons people invest in

insurance. Optimum returns of 16 20 % must be provided to consumers to keep

them interested in purchasing insurance.


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1. Company Profile

2. Introduction to Insurance

i). Definition of Insurance

ii). Functions of Insurance

iii). Limitation of Insurance

iv). Kind of Insurance

3. Indian Life Insurance Industry

i). Overview

ii). Historical Perspective

iii). Present Scenario

iv). Market share of Life Insurance Companies

v). Expenses of the Life Insurers

vi). Investments of Insurers

4. Research Design

5. Comparative analysis

i). Premium of Life Insurers

ii). Traditional Life Insurance Products

6. Marketing Problems

7. SWOT Analysis

8. Distribution Channels

9. Consumer Behavior


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Company Profile

Incorporated in Oct.'77 as a public limited company Housing Development Finance

Corporation (HDFC) was promoted by the Industrial Credit and Investment

Corporation of India with initial equity reservation for the International Finance

Corporation (Washington) and his Royal Highness, the Aga Khan.

The corporation provides housing loans to individuals, corporates and developers.

Its Centre for Housing Finance (CHF) provides technical assistance to national

governments and housing finance institutions in developing countries in South Asia

and Africa. It is also a co-ordinator of the coalition of housing finance institutions in

Asia and the Pacific, a public and private sector partnership project, funded by the

United Nations Development Programme (UNDP). The company, which has been

working closely with National Housing Bank to frame, appropriate foreclosure norms

so that securitisation of housing debt is possible.

HDFC sees mergers and acquisitions as a route to grow. Notably, it has acquired

the entire shareholding of Home trust Housing Finance Company (HT), a 100%

subsidiary of Gujarat Ambuja Cements (GACL), for a consideration of Rs 50.01 cr. HT

has now become a 100% subsidiary of HDFC. HDFC has also acquired 26% of the

equity of GRUH Finance (GRUH) for a consideration of Rs 9.99 cr, which also was

held by GACL. HDFC now holds 55% of GRUH's equity and, consequently, GRUH has

also become a subsidiary of HDFC. Both these acquisitions have helped to expand

its network further.

HDFC has formed various joint ventures in areas like insurance, mutual funds,

property portal, and IT-enabled services. These joint ventures are expected to

contribute significantly to HDFC's growth. As a part of the opening up of the

Insurance sector, the IRDA issued the first set of registrations to private sector

companies in Oct. 2000. HDFC Standard Life Insurance Company (HSLIC) was the

only life insurance company to be granted a registration in the first phase. HSLIC is


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a joint venture between India's largest housing finance provider, HDFC and Europe's

largest mutual life assurance company, the Standard Life Assurance Company (U.K).

HDFC has signed memoranda of understanding with State Bank of India (SBI), Trans

Union International Inc. (Trans Union) and Dun & Bradstreet Information Services (D

& B) to set up a credit information bureau (CIB) in India. The company has been

named as Credit Information Bureau (India). The CIB will collect consumer and

commercial credit-related data and will package, market, sell and distribute credit

reports to banks, financial institutions and businesses that agree to contribute

relevant data to the CIB on a regular and continuous basis.

Tata Consultancy Services (TCS) and HDFC have jointly promoted Intelnet Global

Services (IGSL) to provide IT-enabled services (ITES) to prospective clients in the US

and other developed countries. The JV will offer a spectrum of services that will

include on-line information and support through call centres, relationship

management and back office data processing.

HDFC was awarded the ICSI(Institute of Company Secretaries of India) award for

excellence in Corporate Governance for the year 2003.

As of March 2007, it had a network of 234 offices in India. It also covers various

locations through its outreach programmes which has helped the corporation to

disburse housing loans in morethan 2,400 towns and cities in India. It has also

supplemented the distribution channel through the appointment of Direct Selling

Agents (DSA).

During 2004-2005 the company has set up a venture capital company and has

launched a property fund called HDFC Property Fund. A trustee company, HDFC

Ventures Trustee company and an asset management company, HDFC Venture


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Captial Ltd have been incorporated for the Fund. During 2004 the company's

subsidiary of the corporation signed a Shareholder's Agreement to subscribe to 10%

of the equity captial of Egyptian Housing Finance Company(EHFC). The Company

has also entered into a Technical Services Contract to provide technical assistance

to EHFC for 2 years.

The Company has also been invited as consultancy assignments to share its

expertise on


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INTRODUCTION

Insurance may be described as a social device to reduce or eliminate risks of loss to

life and property.Once Frank H. Knight said Risk is uncertainty and uncertainty is one of the

fundamental facts of life. Insurance is the modern method by which man make the

uncertain certain and the unequal, equal. It is the mean by which success is almost

guaranteed.

DEFINITION OF INSURANCE

The term insurance has been defined by different experts. The views expressed by

them through various definitions can be classified into three categories.

GENERAL/SOCIAL DEFINITION

1. In the words of John Magee, Insurance is a plan by which large number of

people associate themselves and transfer to the shoulders of all, risks that

attach to individuals.

FUNDAMENTAL/ECONOMIC/BUSINESS DEFINTIONS

1. According to Federation of Insurance Institutes, Mumbai, Insurance is

the method in which a large number of people exposed to similar risk

make contribution to a common fund out of which the losses suffered by

the unfortunate few, due to accidental events, are made good.

CONTRATUAL/LEGAL DEFINITIONS


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1. In the words of Justice Tindall, Insurance is contract in which a sum of

money is paid to the assured as consideration of insurers incurring the

risk of paying large sum upon a given contingency.

FUNCTIONS OF INSURANCE

The functions of insurance may be categorized as below:

PRIMARY FUNCTIONS

1. Provide Protection:

2. Collective Bearing of risk:

3. Evaluation of risk:

4. Provide certainty against risk:

SECONDARY FUNCTIONS

1. Prevention of losses:

2. Small capital to cover larger risks:

3. Contributes toward the development of larger enterprise;

OTHER FUNCTIONS

There are indirect functions of insurance which benefits the economy indirectly.

Some of such functions are:

1. Means of Savings and Investment:

2. Source of Earning Foreign Exchange:


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KINDS OF INSURANCE

The Insurance can be divided from two angles.

1. Business Point of View

2. Risk Point of View

BUSINESS POINT OF VIEW

LIFE INSURANCE: In this the subject matter of insurance is life of human being.

The insurer will pay the fixed amount of insurance at time of death or at the expiry

of certain period.

GENERAL INSURANCE: The general insurance includes property insurance, liability

insurance and other form of insurance. Fire and marine insurance are strictly called

property insurance.

SOCIAL INSURANCE: Pension plans, disability benefits, unemployment benefits,

sickness insurance and industrial insurance are the various forms of social

insurance.

RISK POINT OF VIEW

Insurance is divided into property liability and other form from high point of view.

1.Property Insurance:

2.Marine Insurance: _

(A)Fire Insurance: Fire insurance covers risks of fire.

(b)Miscellaneous Insurance: The Property, goods, machine, furniture,

automobile, valuable articles, etc .


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THE INSURANCE INDUSTRY IN INDIA

An Overview

With the 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 per cent annually and presently is of the order ofRs 450 billion (for the

financial year 2004 2005). Together with banking services, it adds about 7% to

the countrys Gross Domestic Product (GDP). The gross premium collection is nearly

2% of GDP and funds available with LIC for investments are 8% of the GDP.

Even so nearly 80% of the Indian population is without life insurance cover while

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

standards. A large part of our population is also subject to weak social security and

pension systems with hardly any old age income security. This in itself is an

indicator that growth potential for the insurance sector in India is immense.

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

development as it provides long term funds for infrastructure development and

strengthens the risk taking ability of individuals. It is estimated that over the next

ten years India would require investments of the order ofone trillion US dollars.

The Insurance sector, to some extent, can enable investments in infrastructure

development to sustain the economic growth of the country. (Source:

www.indiacore.com)

HISTORICAL PERSPECTIVE

The history of life insurance in India dates back to 1818 when it was conceived as a

means to provide for English Widows. Interestingly in those days a higher premium

was charged for Indian lives than the non - Indian lives, as Indian lives were

considered more risky to cover.


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The Bombay Mutual Life Insurance Society started its business in 1870. It was

the first company to charge the same premium for both Indian and non-Indian lives.

The Oriental Assurance Company was established in 1880. The General

insurance business in India, on the other hand, can trace its roots to Triton

Insurance Company Limited, the first general insurance company established in

the year 1850 in Calcutta by the British. Till the end of the nineteenth century

insurance business was almost entirely in the hands of overseas companies.

Insurance regulation formally began in India with the passing of the Life

Insurance Companies Act of 1912 and the Provident Fund Act of 1912.

Several frauds during the 1920's and 1930's sullied insurance business in India. By

1938 there were 176 insurance companies.

The first comprehensive legislation was introduced with the Insurance Act of

1938 that provided strict State Control over the insurance business. The insurance

business grew at a faster pace after independence. Indian companies strengthened

their hold on this business but despite the growth that was witnessed, insurance

remained an urban phenomenon.

The Government of India in 1956, brought together over 240 private life insurers

and provident societies under one nationalized monopoly corporation and Life

Insurance Corporation (LIC) was born. Nationalization was justified on the

grounds that it would create the much needed funds for rapid industrialization. This

was in conformity with the Government's chosen path of State led planning and

development.

The non-life insurance business continued to thrive with the private sector till

1972. Their operations were restricted to organized trade and industry in large

cities. The general insurance industry was nationalized in 1972. With this,

nearly 107 insurers were amalgamated and grouped into four companies


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KEY MILESTONES

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 by the Insurance Act with the

objective of protecting the interests of the insuring public.

1956: 245 Indian and foreign insurers along with provident societies were taken

over by the central government and nationalized. LIC was formed by an Act of

Parliament- LIC Act 1956- with a capital contribution of Rs. 5 crores from the

Government of India.

2000: The IRDA Bill was passed in the parliament in the year 1999. IRDA from its

inception in the year 2000 has fastidiously stuck to its schedule of framing

regulations and registering the private sector insurance companies.

INDUSTRY REFORMSReforms in the Insurance sector were initiated with the passage of the IRDA Bill in

Parliament in December 1999. The IRDA since its incorporation as a statutory body

in April 2000 has fastidiously stuck to its schedule of framing regulations and

registering the private sector insurance companies.


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PRESENT SCENARIO - LIFE INSURANCE INDUSTRY IN INDIA

At Present 16 life insurance companies are operating in India. Out of 16 companies

15 are private players and one i.e. Life Insurance corporation of India is in Public

sector holding major portion of Life insurance market share in India. The list of Life

insurance companies is as follow:

S.No

NAME OF THE COMPANY

1. Bajaj Allianz Life Insurance Company

Limited.

2. Birla Sun Life Insurance Co. Ltd

3. HDFC Standard Life Insurance Co. Ltd

4. ICICI Prudential Life Insurance Co. Ltd

5. ING Vysya Life Insurance Company Ltd.

6. Life Insurance Corporation of India

7. Max New York Life Insurance Co. Ltd

8. Met Life India Insurance Company Pvt. Ltd.

9. Kotak Mahindra Old Mutual Life InsuranceLimited
http://www.bajajallianz.co.in/http://www.bajajallianz.co.in/http://www.birlasunlife.com/http://www.hdfcinsurance.com/http://www.iciciprulife.com/http://www.ingvysyalife.com/http://www.licindia.com/http://www.maxnewyorklife.com/http://www.metlife.co.in/http://www.omkotakmahindra.com/http://www.omkotakmahindra.com/http://www.bajajallianz.co.in/http://www.bajajallianz.co.in/http://www.birlasunlife.com/http://www.hdfcinsurance.com/http://www.iciciprulife.com/http://www.ingvysyalife.com/http://www.licindia.com/http://www.maxnewyorklife.com/http://www.metlife.co.in/http://www.omkotakmahindra.com/http://www.omkotakmahindra.com/


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10. SBI Life Insurance Co. Ltd

11. Tata AIG Life Insurance Company Limited

12Reliance Life Insurance Company Limited.

13Aviva Life Insurance Co. India Pvt. Ltd.

14 Sahara India Life Insurance Co, Ltd.

15 Shriram Life Insurance Co, Ltd.

16 Bharti AXA Life Insurance Company Ltd.

The life insurance industry in India grew by an impressive 36%, with premium

income from new businesses at Rs. 253.43 billion during the fiscal year 2004-

2005. Though the total volume of LIC's business increased in the last fiscal year

(2004-2005) compared to the previous one, its market share came down from

87.04 to 78.07%.

The 14 private insurers increased their market share from about 13% to about 22%

in a year's time. The figures for the first two months of the fiscal year 2005-06 also

speak of the growing share of the private insurers. The share of LIC for this period

has further come down to 75%, while the private players have grabbed over 24%.

With the opening up of the insurance industry in India many foreign players have

entered the market. The restriction on these companies is that they are not allowed

to have more than a 26% stake in a companys ownership.
http://www.sbilife.co.in/http://www.tata-aig.com/http://www.reliancelife.co.in/http://www.avivaindia.com/http://www.saharalife.com/http://www.sbilife.co.in/http://www.tata-aig.com/http://www.reliancelife.co.in/http://www.avivaindia.com/http://www.saharalife.com/


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Since the opening up of the insurance sector in 1999, foreign investments of Rs. 8.7

billion have poured into the Indian market and 14 private life insurance companies

have been granted licenses.

MARKET SHARE:-

KEY MARKET INDICATORS

Life and non-life market in India Rs. 127213.73 Crore

Global insurance market (as on

31st December, 2005)

US $ 3425.71 billion

Nominal growth 4.9 per centInflation adjusted 2.5 per centGrowth in premium underwritten

Life(in India and abroad in 2005-

27.78 per cent


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06)

Geographical restriction for newplayers

None

Equity restriction Foreign promoter can hold up to

26 per cent of the equity(Source: IRDA)

The contours of insurance business have been changing across the globe and the

rippling effects of the same can be observed in the domestic markets also. Insurers

are increasingly introducing innovative products to meet the specific needs of the

prospective policyholders. An evolving insurance sector is of vital importance for

economic growth. While encouraging savings habit it also provides a safety net to

both enterprises and individuals. The insurance industry also provides crucial

financial intermediary services, transferring funds from the insured to capital

investment, critical for continued economic expansion and growth, simultaneously

generating long-term funds for infrastructure development. In fact infrastructure

investments are ideal for asset-liability matching for life insurance companies given

their long term liability profile. According to preliminary estimates published by the

Reserve Bank of India, contribution of insurance funds to financial savings was 14.2

per cent in 2005-06, viz., 2.4 per cent of the GDP at current market prices.

Development of the insurance sector is thus necessary to support continuedeconomic transformation. Social security and pension reforms too benefit from a

mature insurance industry. The insurance sector in India, which was opened up to

private participation in the year 1999, has completed six years in a liberalized

environment. With an average annual growth of 37 per cent in the first year

premium in the life segment and 15.72per cent growth in the nonlife segment,

together with the largest number of life insurance policies in force, the potential of

the Indian insurance industry is still large.

Life insurance penetration in India was less than 1 per cent till 1990-91. During

the 1990s, it was between 1 and 2 per cent and from 2001 it was over 2 per

cent. In 2005 it had increased to 2.53 per cent. The impetus for growth has come

from both the public and private insurers. In the public sector, the re-alignment has


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been pronounced in respect of Life Insurance Corporation which has succeeded in

reversing the initial decline in the first year premium underwritten, and has

reported a healthy growth for two consecutive years. As against this, the non-life

public sector insurers have been rather slow to respond to the evolving competition.

Both the Authority and the industry have been playing an active role in increasing

consumer awareness. In addition, the insurance companies in general and private

insurance companies in particular, are reaching out to untapped semi-urban and

rural areas through advertisement campaigns and by offering products suitable to

meet the specific needs of the people in these segments.

The penetration ratios of health and other non-life insurances in India is also well

below the international level. These facts indicate immense growth potential of the

insurance sector. Since opening up of the insurance sector in 1999, 23 private

companies have been granted licenses and foreign investment of Rs.1688.67

crore have been made into the Indian market. Innovative products, imaginative

marketing, and aggressive distribution have enabled fledgling private insurance

companies to sign up Indian customers faster than anyone expected. While at the

time of opening up of the sector, life insurance was viewed as a tax saving device,

policyholders perspective is slowly changing and they are taking insurance cover

irrespective of tax incentives. The insurable populace is looking for avenues which

are offering products which suit their specific requirements, and plenty of choices

are available in the market today.

With the registration of Shriram Life Insurance Company Ltd., promoted jointly with

Sanlam & Shriram the number of companies operating in the life insurance industry

has increased to fifteen. The new entrant commenced underwriting life premium in

February, 2006. During the two months of operations, the company issued 20,237

policies with total premium ofRs.10.32 crore. (Source: IRDA)

(

The total number of policies sold by insurance companies in India during the year

2002-03 was 25370674 out of which LIC contributed 24525580 i.e. 96.6%

whereas private players contributed merely 825094 i.e. 3.4%. During the year


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2003-04 the number of policies sold by LIC increased by 9.87%, so touching the

figure 26968069. During this year private players also showed remarkable growth

of101.05% so the number of policies sold by them touched 1658847. Thus the

total number of policies sold by LIC and Private players put together during this year

was 28626916. Till the year 2005-06 the overall contribution of private players to

the total number of policies sold became 10% i.e. 3846288, though number of

policies ( 31484095) sold by LIC is still increasing but its total share in the market

is decreasing because of competition of private players.

(Source: IRDA)

Expenses of the Life Insurers

Section 40 B of the Insurance Act provides that no insurer shall in respect of life

insurance business transacted in India, spend as expenses of management in

excess of the prescribed limits. The expense of management includes all

commission payments and any amounts of capitalized expenses. The Insurance

Rules further lay down the manner of computation of the prescribed limits. A major

expense head for the life insurers is commission. As against the industry average

of22.52 per cent (24.06 per cent in 2004-05), LIC incurred an expense of25.26

per cent (26.37 per cent in 2004-05) towards commission on first year premium;

for the private insurers it worked out to 17.54 (17.69 per cent in 2004-05). The

commissions paid by LIC towards the single premium were 1.10 per cent as

against the average of the private insurers at 1.07 per cent. The industry average

was 1.09 per cent. There was a decline in the commissions paid by 1.54 per

cent. In the case of some private insurers there was an increase in the level of

commissions paid, where as commissions paid by LIC declined by 1.11 per cent.

The average commission paid on renewal premium by the new insurers averaged

3.96 per cent as against LICs 5.57 per cent. The total pay-out by the life


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insurance industry on account of commissions in 2005-06 stood at Rs.8643.29

crore as against Rs.7104.46 crore in 2004-05.

Total Amount of Commission Paid(in

Rs. Lakhs)Insurer 2004- 05 2005-06

First YearLIC 307456.78 346825.35Private Sector 74722.57 132356.84Total 382179.35 479162.19

Single PremiumLIC 8304.22 16208.52Private Sector 1314.42 2903.38Total 9618.64 19111.90

RenewalLIC 309212.67 346985.22

Private Sector 9435.64 19050.49Total 318648.31 3666035.71 Total Commission

LIC 624973.67 710019.09Private Sector 85472.63 154310.71Total 710446.30 864329.80(Source: IRDA)

Management expenses of private insurers continue to exhibit a mixed trend during

2005-06, with some insurers exceeding the limits prescribed by the Act. Of the

fourteen private insurers nine insurers were within the stipulated limits. In the case

of Metlife, there was a decline from 207.45 per cent in the previous year to

143.95 percent this year. ING Vysya, having contained its expenses within limits in

the previous year at 66.36 per cent, slightly breached the limits at 104.44 per

cent in 2005-06. In case of Reliance Life, the allowable expense limits declined to

168 per cent as against 297 per cent in 2004-05. It was the second year of

operations for Sahara Life, while Shriram Life had commenced operations in 2005-

06, both the insurers exceeded their limits on management expenses. Management

expenses of LIC continued to be within the allowable limits. Alternate channels of

distribution like bancassurance, direct marketing, internet and telemarketing reduce

costs and enable insurers besides reaching a wider customer base. While agency

force remained the mainstay of most insurance companies, insurers are making

efforts to explore new channels. Most companies have successfully tapped the

bancassurance route both with commercial and cooperative banks. Insurers have


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also initiated on-line sale of policies. It is pertinent to note that the reduction in

marketing costs would enable insurers to provide affordable insurance to low

income households. The operating expenses as a per cent of gross premium

underwritten, for the private insurers worked out to 23.72 per cent (28.85 per cent

in 2004-05). Major expense head for the private insurers was:

Employee expenses at 37.45 per cent (34.79 per cent in 2004-05)

Training expenses(including agents training and seminars) at 6%(6.96% in

2004-05)

Advertisement and Publicity at 10.51% (11.31% in 2004-05)

Depreciation expenses 5.13% (6.15% in 2004-05)

(Source: IRDA)

(Source: IRDA)

In the case of LIC, the operating expenses constituted 6.65 per cent of the gross

premium

underwritten as against 8.31 per cent in 2004-05. Employee remuneration and

welfare benefits accounted for 59.57 per cent of the operating expenses of LIC in

2005-06 as against 72.33 per cent in the previous year. Compared to LIC, the

private sector insurers have leaner organizational structures. Thus, despite

competitive salary structures, their employee expenses comprised 35 per cent of

the total operating costs.

(Source: IRDA)

Benefits Paid

The life industry paid gross benefits ofRs.35264.40 crore in 2005-06

(Rs.28700.57 crore in 2004-05) constituting 33 per cent of the gross premium

underwritten (34.64 per cent in 2004-05). The benefits paid by the private

insurers showed an increase of434 per cent at Rs.1307.61 crore (Rs.244.85


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crore in 2004-05), constituting 9 per cent of the premium underwritten by them

(2.96 per cent in 2004-05). LIC paid benefits ofRs.33956.79crore in 2005-06,

comprising 37 per cent of the premium underwritten by them (Rs.28440.45

crore in 2004-05, 38 per cent of the total premium underwritten). Given that life

insurers traditionally do not reinsure a significant component of their business, the

benefits paid by them net of reinsurance were Rs.35317.98 crore (Rs.28668.97

crore in 2004-05). It may be mentioned that a larger proportion of group business

is re-insured. In addition, given the fact that a major segment of the new business

underwritten by the life industry is unit linked, the investment risks are borne by the

policyholders.

(Source: IRDA)

Retention RatioLIC traditionally re-insures only a small component of its business, and during the

financial year 2005-06, Rs.34.54 crore was ceded as re-insurance premium

(Rs.42.95 crore in 2004-05). Similarly, in the case of private insurers, only a small

component of the business was reinsured, with group business forming the major

component. The private insurers ceded Rs.101.71 crore (Rs.64.79 crore in

2004-05) as premium towards reinsurance. It may be interesting to view this in the

context of the fact that the risks pertaining to the investments component of the

unit linked insurance products continue to be borne by the policyholders and asignificant component of the new business premium underwritten by the industry in

2005-06 was towards unit linked products.

Investment Income

As the operations of the life insurers stabilize, their investment base gets

strengthened, resulting in investment income forming a significant component of

their total income. Due to significant jump in the premium underwritten by LIC in

2005-06, the share of Investment income (inclusive of capital gains) in the total

income declined to 30 per cent as against 32.31 in 2004-05. As against this,

share of investment income for the new life insurers was 15.25 per cent in 2005-

06, as against 6.05 per cent in the previous year. In the case of LIC, contribution of

investment income to total income has been around 30 per cent in the last three


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years. In respect of private insurers, this proportion has been steadily declining upto

the year 2004-05. However, there was a reversal in 2005-06 with the investment

income more than doubling at 15.25 per cent.

(Source: IRDA)

Profits of the Life Insurers

Life insurance industry is capital intensive, and insurers are required to inject capital

at frequent intervals to achieve growth in premium income. Given the high rate of

commissions payable in the first year, expenses towards setting up operations,

training costs incurred towards developing the agency force, creating a niche for its

products, achieving reasonable levels of persistency, providing for policy liabilities,

and maintaining the solvency margin, make it difficult for the insurers to earn

profits in the initial five to seven years of their operations. SBI Life Insurance

Company is the first private sector company to turnaround with net profit of Rs.2.03

crore in 2005-06. Bancassurance continued to be the companys key distribution

channel and contributed over 43 per cent of the premium underwritten by the

insurer. The company has succeeded in achieving an early break even on account

of its lower cost of operations. However, the insurer still continues to report a

deficit in the Revenue A/c. Shriram Life, which commenced operations in February,

2006, too reported net profit of Rs.2.56 crore mainly due to investment income

on shareholders funds and yet to commit funds towards various capital and

revenue expenditure. All the private insurance companies reported deficit in their

Revenue Accounts in 2005-06, which needed injection of further capital by the

shareholders. Other than Sahara and Shriram, all the private insurers made capital

calls during the year. Metlife could not complete the process of allotment of shares

by 31st March. The total losses of the private insurers as on 31st March, 2006 stood

at Rs.3790.81 crore as against Rs.2590.32 crore on 31st March, 2005, i.e., an

increase of 46.34 per cent over the previous year. The continued financial

support through equity injections reflected the promoters commitment in

stabilizing the insurers operations. During 2005-06 insurers continued to declare

bonus despite reporting deficit in the Revenue Account. It may be recalled that in

2003-04, recognizing the need of the new insurers to declare bonuses to maintain


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their competitive stance in the market, the Authority had permitted declaration of

bonus despite non-availability of actuarial surplus. subject to compliance with the

conditions imposed by the Authority. LIC, continued to report surplus ofRs.12,733

crore from operations as against Rs.15884.26 crore in 2004-05, of which

Rs.621.77 crore was transferred to the Government of India (Rs.696.60 crore in

2004-05) in tune with the provisions of Section 28 of the LIC Act, 1956.

(Source: IRDA)

Premium Underwritten By Life Insurers

The life insurance industry recorded a premium income ofRs.82854.80 crore

during the financial year 2005-06 as against Rs.66653.75 crore in the previous

financial year, recording a growth of 24.31 per cent. The contribution of first year

premium, single premium and renewal premium to the total premium wasRs.15881.33 crore (19.16 per cent); Rs.10336.30 crore (12.47 per cent);

and Rs.56637.16 crore (68.36 percent), respectively. In the year2000-01, when

the industry was opened up to the private players, the life insurance premium

was Rs.34,898.48 crore which constituted ofRs. 6996.95 crore of first year

premium, Rs. 25191.07 crore of renewal premium and Rs. 2740.45 crore of

single premium. Post opening up, single premium had declined from Rs.9,194.07

crore in the year 2001-02 to Rs.5674.14 crore in 2002-03 with the withdrawal

of the guaranteed return policies. Though it went up marginally in 2003-04 toRs.5936.50 crore (4.62 per cent growth) 2004-05, however, witnessed a

significant shift with the single premium income rising to Rs. 10336.30 crore

showing 74.11 per cent growth over 2003-04.

(Source: IRDA)

Investment Pattern of Life Insurance Companies

As on 31st March, 2006, the total investments by the insurance industry have

grown by 13.66 per cent to Rs.529483.10 crore as against Rs.465863.89 crore

in the previous year. Investments by the life insurers increased by 13.7 per cent to

Rs.487150.69 crore. While the investments by the LIC increased by 10.87 per

cent, in the case of private insurers, the growth was 130.05 per cent.

(Source: IRDA)


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(Source: IRDA)

INVESTMENT OF LIFE INSURERS: FUND WISE (Rs.

Crore)INSURE

R

Life Fund Pension &GeneralAnnuityFund

GroupExcludingGroupPension &AnnuityFund

Unit LinkedFund

Total of All

200

6

200

5

200

6

2005 2006 2005 2006 200

5

2006 2005

LIC

389447.52

361428.87

36157.64

11462.00

26737.53

42639.42

11428.45

2758.67

463771.14

418288.99

Private

Sector

7741.13

4790.98

1106.65

561.75

72.09

41.43

14459.58

4788.77

23379.55

10162.94


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Total

397188.65

366219.85

37264.29

12023.78

26809.62

42680.85

25888.13

7527.45

487150.69

428451.93

(Source: IRDA)


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RESEARCH DESIGN

INTRODUCTION

A Research Design is the framework or plan for a study which is used as a guide in

collecting and analyzing the data collected. It is the blue print that is followed in

completing the study. The basic objective of research cannot be attained without a

proper research design. It specifies the methods and procedures for acquiring the

information needed to conduct the research effectively. It is the overall operational

pattern of the project that stipulates what information needs to be collected, from

which sources and by what methods.

TITLE OF THE STUDY

To Study Insurance sector By Comparing different life Insurance products

available in the market & what is the world Insurance scenario and

studying consumer behavior and Awareness regarding life Insurance

STATEMENT OF THE PROBLEM

This study was undertaken to identify different types insurance plans offered by

various Life Insurance companies in India. A survey was undertaken to understand

the various plans and products of the Life insurance companies

In effect plans (insurance products) should be flexible to suit individual

requirements. This research tries to analyze some key factors which influence the

purchase of insurance like the term of the policy, the type of company, the amount

of annual premium payable (capacity and willingness to spend), risk taking ability

and the influence of advertising. Solutions and recommendations are made based

on qualitative and quantitative analysis of the data.


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RESEARCH METHODOLOGY

TYPE OF DATA COLLECTED

There are two types of data used. They are primary and secondary data. Primary

data is defined as data that is collected from original sources for a specific purpose.

Secondary data is data collected from indirect sources.

PRIMARY SOURCES

These include the survey or questionnaire method, telephonic interview as well as

the personal interview methods of data collection.

SECONDARY SOURCES

These include books, the internet, company brochures, product brochures, the

company website, competitors websites etc, newspaper articles etc.

SAMPLING

Sampling refers to the method of selecting a sample from a given universe with a

view to draw conclusions about that universe. A sample is a representative of the

universe selected for study.

Convenience sampling is used in exploratory research where the researcher is

interested in getting an inexpensive approximation of the truth. As the name

implies, the sample is selected because they are convenient. This non probability

method is often used during preliminary research efforts to get a gross estimate of

the results, without incurring the cost or time required to select a random sample.(Source: www.statpac.com)

SAMPLE SIZE

The sample size for the survey conducted was 50 respondents.
http://www.statpac.com/http://www.statpac.com/


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Insurance is one of the fastest growing sectors of economy. With a boom in Indian

economy in recent years this sector has assumed unprecedented importance. Yet

with the advent of new players the whole arena has gone very competitive

In order to have a comparative analysis of various products of leading companies

both in private sector as well as in public sector we will have to first study their

respective plans. It has been observed that there is much diversity in the plans of

the different players. A minute and detailed analysis would follow below. Before

proceeding further I would like to mention that for the purpose of this study the

major players in the life insurance industry which includes companies like ICICIPrudential Life Insurance, LIC, HDFC Standard Life Insurance, Aviva Life Insurance,

Kotak Mahindra, SBI Life, Tata-AIG Life Insurance Bajaj Allianz Life Insurance & Birla

Sun Life Insurance has been selected. The simple reason behind selecting these

companies is that these companies presently hold majority of market share of life

insurance industry.


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TRADITIONAL LIFE INSURANCE PRODUCTS OFFERED BY VARIOUS

COMPANIES

CHILDREN PLANS

GROUP LIFE SCHEMES

Group Term Insurance - HDFCStandard Life

Super Suraksha & Swarna Ganga - SBILife

.

:1.

Kotak Term Grouplan - OM Kotak Group Protection Solutions - Birla Sun Life .

Creditplus - Aviva Life Group Term Assurance - AMP Sanmar ).

INVESTMENT PLANS

Jeevan Kishore (LIC) Children's Plan (HDFC)

ICICI Pru Smart Kid My child - Birla Sunlife

SBI Scholar Young Achievers - Aviva Life


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Bima Plus(LIC) ICICI PRU Assure Invest (ICICI PRU Life)

Flexible Bond - HDFC Standard Life Young Sanjeevan (SBI Life) .

LifeBond - Aviva Life Single Premium Bond (Birla

Sun Life)

PENSION PLANS

New Jeevan Akshay I (LIC) Varishtha Pension Bima Yojana (LIC)

ICICI Pru Forever Life (Deferred Pension) Sanjeevan (SBI Life)

Swarna Vishranthi (Allianz Bajaj) Pensionplus (Aviva Life)

Special plansAsha Deep II with Profits (LIC) ICICI Pru Life Time (ICICI PRU Life)

HealthFirst - Tata AIG Birla Sunlife Medicare

LIFE INSURANCE CORPORATION OF INDIA (LIC)

LIC has an excellent money back policy which provides for periodic payments of

partial survival benefits as long as the policy holder is alive. 20% of the sum

assured is payable after 5, 10, 15 and 20 years and the balance 40% is payable at

the 20th year along with accrued bonus. (www.lic.com)

For a 25 years term , 15% of the sum assured becomes payable after 5,10,15 and

20 years and the balance 40% plus the accrued bonus becomes payable at the 25 th

year. An important feature of these types of policies is that in the event of the death

of the policy holder at any time within the policy term the death claim comprises of

full sum assured without deducting any of the survival benefit amounts which have

already been paid. The bonus is also calculated on the full sum assured.

LIC offers 66 different plans; plans are formulated for specific occasions whole life

plans, term assurance plans, money back plan for women, child plans, plans for the


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handicapped individuals, endowment assurance plans, plans for high worth

individuals, pension plans, unit linked plans, special plans, social security schemes

diversified portfolio of products. HDFC Standard could diversify its product portfolio.

It could add more plans for high worth individuals and women.

The guaranteed sum assured in case of the death of the policyholder is larger in LIC

than in HDFC Standard Life.

Switching from one fund to another is cheaper for LIC it is only Rs. 100 to switch

from one fund to another.

There are however some drawbacks to investing in LIC. The allocation charges are

higher. Therefore the money invested in the fund is lower than what HDFC Standard

will invest. This is true across all policies. HDFC Standard covers its costs over the

policy term whereas LIC charges a high amount for the first five years and then

charges a very nominal amount from the 6th year onwards. The investment benefit

is not as high as HDFC Standard.

ICICI PRUDENTIAL

ICICI Prudential is a stiff competitor for HDFC Standard. The company is a merger

between ICICI Bank which is the biggest private bank in India and Prudential Plc

which is a global life insurance company.

The company has an investment plan which is market related Invest Shield Life. In

this plan even if the market falls, the premium will be returned to investors. It is a

guaranteed plan which ensures the company carefully invests your money.

The company is very well advertised. The advertisements are showcased in movies,

television, newspapers, magazines, bill boards, radio etc. The company has an

excellent brand ambassador Mr. Amitabh Bacchan. His promotion of the company

builds trust and faith in the minds of our people.


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However the charges are very high in the plans offered by ICICI Prudential. It is 35%

during the first year, 15% in the next year and 3% from the third year onwards. Also

a higher minimum premium of Rs. 8000 is charged. Hence the policies are not

accessible to the lower strata of the society. (Source: www.iciciprulife.com)

BIRLA SUN LIFE

Birla Sun Life Insurance Company Limited is a joint venture between The Aditya

Birla Group, one of the largest business houses in India and Sun Life Financial Inc., a

leading international financial services organization. The local knowledge of the

Aditya Birla Group combined with the expertise of Sun Life Financial Inc., offers a

formidable protection for your future. (Source: www.birlasunlife.com)

The Aditya Birla Group has a turnover close to Rs. 33000 crores with a market

capitalization of Rs. 53400 crores (as on 31st March 2006). It has over 72000

employees across all its units worldwide. It is led by its Chairman - Mr. Kumar

Mangalam Birla. Some of the key organizations within the group are Hindalco and

Grasim.

Sun Life Financial Inc. and its partners today have operations in key markets

worldwide, including Canada, the United States, the United Kingdom, Hong Kong,

the Philippines, Japan, Indonesia, India, China and Bermuda. It had assets under

management of over US$343 billion, as on 31st March 2006. The company is a

leading player in the life insurance market in Canada.

Being a customer centric company, BSLI has invested heavily in technology to build

world class processing capabilities. BSLI has covered more than a million lives since

inception and its customer base is spread across more than 1000 towns and cities

in India. All this has assisted the company in cementing its place amongst the

leaders in the industry in terms of new business premium income. The company has

a capital base of 520 crores as on 31st July, 2006.
http://www.iciciprulife.com/http://www.iciciprulife.com/


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Its Flexi Life Line Plan offers life long insurance cover till the policy holder is 100

years of age. There are guaranteed returns of 3% p.a. net of policy charges after

every 5 years from the eleventh policy year onwards. However the charges are very

high. The initial charges for the first year are 65%. Hence the fund value is greatly

reduced.

BAJAJ ALLIANZ

Bajaj Allianz is a joint venture between Allianz AG with over 110 years of experience

in over 70 countries and Bajaj Auto, a trusted automobile manufacturer for over 55

years in the Indian market. Together they are committed to offering you financial

solutions that provide all the security you need for your family and yourself. Bajaj

Allianz is the number one private life insurer for the year 2005 2006. It is leading

by 78 crores. It has experienced a whopping growth of 216% in the last financial

year.

The company has sold 13, 00,000 policies and is backed by 550 offices across India.

It offers travel insurance, motor insurance, home insurance, health and corporate

insurance. The entry age could be zero years which allow even new born babies to

be insured. (Source: www.bajajallianz.com)

TATA AIG

Tata Aig is a joint venture between the Tata group and American International

Group Inc. In one of the plans the company offers hospital cash benefit wherein it

will pay Rs. 2500 per day in case of hospitalization and Rs.12.5 lakhs in case the

person suffers from any critical illness. Annual premium is much less (about Rs.

6712) to avail such a good benefit. Charges are relatively low compared to HDFC

Standard for some policies.

The company offers high coverage plans at low cost. There is a plan even for a

policy term of 1 year. Your family can continue to enjoy their current lifestyle even

in the case of something happening to you. These plans are very flexible and HDFC


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Standard could adopt this idea of insuring individuals for short periods of time. For

example; there is a family of four. The only earning member is the father.

He has just taken a loan from a bank of 20 lakhs to purchase a new home. He is

able to repay the loan with his current salary in 15 years. The problem arises if

something were to happen to him within these fifteen years. Not only will the family

face the emotional and financial loss of their father but they will also have to repay

the home loan or risk being homeless. (Source: www.tataaig.com)


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Lack of awareness about the unit linked funds in the market

No money back plan present in the product portfolio

SUGGESTIONS FOR IMPROVEMENT

Advertise about the company and its products it motivates individuals to

purchase insurance

Create a positive perception about insurance.

Speak about the good features a plan offers like high returns, life cover, tax

benefits, indexation, accident cover while prospecting customers

Try to sell the product/plan which the consumer requires and not the plan

where the advisors benefit is higher

Improve the efficiency in operations

Bring out policies with small premiums payable for short periods of time Rs.

5000 Rs. 10000 per annum for 10 years

Attract the youth of India with higher returns on investment as returns are

the motivating factor which influence purchase of insurance

Promote insurance in colleges and corporate houses

Should have partial withdrawals from the first year onwards

Tap the rural market where there is large potential

Diversify product portfolio

Make products more straight forward reduce complexities


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SWOT ANALYSIS

SWOT analysis is a basic, straightforward model that provides direction and serves

as a basis for the development of marketing plans. It accomplishes this by assessing

an organizations strengths (what an organization can do) and weaknesses (what anorganization cannot do) in addition to opportunities (potential favorable conditions

for an organization) and threats (potential unfavorable conditions for an

organization). The role of SWOT analysis is to take the information from the

environmental analysis and separate it into internal issues (strengths and

weaknesses) and external issues (opportunities and threats). Once this is

completed, SWOT analysis determines if the information indicates something that

will assist the firm in accomplishing its objectives (a strength or opportunity), or if it

indicates an obstacle that will hamper the fulfillment of its objectives.

.

In SWOT, strengths and weaknesses are internal factors while opportunities and

threats are external factors.

The study of Internal Strength and weaknesses is known as SAP (Strategically

Advantage Plan)

The study of external Opportunities and Threats is termed as ETOP

(Environmental Threats and Opportunities Profile)

Following are the Strengths and Weaknesses of HDFC LTD and Threats and

Opportunities that environment provides to the company.

Strengths Weaknesses

Opportunities Threats


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Strengths

1. Backing of the HDFC as well

as Group Company of the

Standard Life, UK.2. Great business knowledge;

can meet the requirements of

all kinds of industries.

3. Has the financial expertise

required to manage long-term

investments safely and

efficiently.

4. It has entered into

bancassurance agreements

HDFC Bank, Union Bank Of

India, Indian Bank, Saraswat

Bank, Bajaj Capital Bank Of

Baroda

Weaknesses

1. Fund maintenance charges on

the slightly higher side than its

rivals, say ICICI Prudential.2. Narrow range of Products.

3. Has not covered companies

enough.

Opportunities

1. Growing Corporate India

2. Lot of scope for progress as

this sector of business is still

in its infancy stage.

3. LIC losing its hold of the

market due to poor service

standards.

4. Has not reached the interiors

of rural India.

Threats

1. Increasing number of

competitors

2. Political debates with respect to

outsourcing


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We shall use the SWOT Analysis in the following model which would help us in

understanding how we can complement our internal strength and weakness to our

external opportunities and threats.

INTERNAL

STRENGTHS WEAKNESS

OPPORTUNITIES

EXTERNAL

THREATS

SO Stands for a strategy in which internal strengths of the company are used tomake the best benefits out of opportunities provided by the environment.

ST Stands for a strategy in which strengths of the company are used to reduce thethreats from the environment.

OW Stands for a strategy in which opportunities from the environment are used tominimize the internal weaknesses of the firm.

TW Stands for a strategy which is made in order to ensure that external threatstogether with internal weaknesses dont adversely affect the performance of thecompany.

Company should utilize the business skills of its expert people and team to capturerural market in India.

By entering into agreement with various banks like HDFC Bank, Union Bank Of India,Indian Bank, Saraswat Bank, Bajaj Capital Bank Of Baroda company can reducethreat from its competitors.

SO OW

ST TW


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Distribution ChannelsThere was a time when captive agents wrote the bulk of an insurance companys business.But increasingly people are buying insurance products from independent producers andinstitutional channels such as banks, broker-dealers, IFAs and wire houses. In a way, this isgood news for insurance companies.

Managing a captive agency force is an expensive business. Studies estimate that insurancecompanies invest anywhere between $65,000 and $200,000 in training each agent. Thisinvestment often does not deliver the desired return because there is a great deal ofattrition among agents. Besides training, there are huge operational overheads attached tomaintaining a captive force.

Independent producers and institutional channels are likely to bring new efficiencies into thedistribution framework and corner a larger percentage of the policies written. For instance,banks and large broker-dealers already have huge networks in place, existing relationshipswith customers and brand equity. If insurance companies are able to position themselves aspreferred partners with these channels, they could quickly increase their market share and

at the same time bring down their cost per business acquisition.

Role of Distribution Channels in Value Creation in insurance companies

Distribution accounts for the largest element in insurers costs and impact theprofitability.

Distribution capabilities strongly influence product design in insurance.

Distribution channels have a direct impact on the insurers market image.

Integrity of distribution channel is the key concern of the regulatorymechanism.

Opening up Indias insurance sector: Key influences on Distribution channels

Emergence of alternative channels such as Bancassurance and CorporateAgents is reshaping the insurance industry.

Insurance penetration levels will rise sharply with multi distribution channel.

Widespread recognition of the need for qualified, trained sales force to servethe increasingly discerning insurance buyers.

Emergence of online and offline insurance education and training initiatives ischanging the range and quality of insurance services.

Emergence of new channels will have positive impact on rebating and suchundesirable practices in the industry.

Widening choice of distribution channels will eventually drive down thepremium level.

Evolution of alternate Distribution channels in India: Areas ofsupportive official measures

Need to encourage and nurture new channels such as Bancassurance toutilise the existing infrastructure to optimum extent.

Policy measures should encourage insurers to take full responsibility fortraining and skill building.


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Encouraging self-regulation.

Strengthening the consumer grievance redressal mechanism.

Type of Intermediaries With Insurance Business

Insurance AgentsCorporate AgentsInsurance BrokersSurveyors and Loss Assessors

New distribution channels are now on the Indian horizon. Research has predictedthat in five years time, 50% of the insurance business would be done byBancassurance, 20% by Corporate Agents and Brokers and only 30% by the Agents.

Insurance Agents

A critical element of insurance sector reforms is the development of resources having theright skills and expertise in each segment of the industry so as to provide qualityintermediation to market participants. Quality intermediation requires the personnel workingin the industry to

(i) Follow a certain code of conduct


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(ii) Have an understanding of business and skills to service differentconstituents in the market.

It may be recognized that agents are a critical link between the insurer and the insured andthey should be fully equipped to sell insurance.

Insurance BrokersBrokers, in their role as intermediaries, bridge the information and knowledge gap existingbetween insurance companies and buyers of insurance. This knowledge gap is likely toincrease after general insurance products are freed from tariffs. The comfort that wasderived from tariffed pricing and common policy terms and conditions will no longer beavailable to customers. In this scenario, brokers have realized that their roles and serviceswill acquire greater significance and value in the days to come and are gearing up for thecoming events.

During 2005-06, 31 broking licenses were issued, of which one was a composite brokinglicense. Total number of valid licenses till 31st October, 2006 are 231.

Surveyors and Loss Assessors The Government of India proposed the establishment of a professional body forstreamlining, regulating and developing the profession of surveyors and loss assessors, onsimilar lines of Chartered Accountants, Cost and Works Accountants and CompanySecretaries. The Government appointed a Committee under the chairmanship of ShriK.N.Bhandari to look into the suitability of forming an Institute for Surveyors and LossAssessors. The Committee, in its report submitted in June, 2003, recommended that theGovernment, IRDA and the industry should do everything possible to promote establishmentof an Institute for Surveyors. As a follow up, IRDA constituted an ad hoc Committee ofSurveyors and Loss Assessors to set in motion the establishment of the Institute. Theinstitute has been incorporated under Section 25 of the Companies Act, 1956 under thename Indian Institute of Insurance Surveyors and Loss Assessors with registered office atHyderabad.

IndividualAgents

CorporateAgents

Brokers

Referral

DirectBusiness

Banks

Others

PrivateSector

59.71 16.87 8.92 0.83 7.06 6.61

LIC 98.37 1.25 0.32 0.06 0.00 0.00Total 85.67 6.38 3.15 0.31 2.32 2.17Source: IRDA


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and online renewals.

DISTRIBUTION CHANNELS

(Source: http://www.allianzbajaj.co.in/lifeinsurance)


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SBI LifeSBI Life extensively leverages the SBI Group as a platform for cross-sellinginsurance products along with its numerous banking product packages such ashousing loans and personal loans. SBIs access to over 100 million accounts acrossthe country provides a vibrant base for insurance penetration across every regionand economic strata in the country ensuring true financial inclusion.SBI Life has aunique multi-distribution model encompassing Bancassurance, Agency and GroupCorporates.

Agency Channel, comprising of the most productive force of more than 25,000Insurance Advisors, offers door to door insurance solutions to customers.

Name of Corporate AgentState Bank of IndiaState Bank of HyderabadState Bank of MysoreState Bank of Patiala

State Bank of Bikaner & JaipurState Bank of TravncoreState Bank of SaurashtraMarwar Gramin BankParvatiya Gramin BankKrishna Grameena Bank

MAX NEWYORK LIFE INSURANCEMax New York Life has identified individual agents as its primary channel ofdistribution.

The Company places a lot of emphasis on its selection process, which comprisesfour stages - screening, psychometric test, career seminar and final interview. Theagent advisors are trained in-house to ensure optimal control on quality of training.

Having set a best in class agency distribution model in place, the company isspearheading a major thrust into additional distribution channels to further grow itsbusiness. The company is using a five-pronged strategy to pursue alternativechannels of distribution. These include:

Franchisee model

Rural business

Direct sales force involving Group insurance

Telemarketing

Bancassurance

Corporate alliances(Source: http://www.maxnewyorklife.com/Home/About%20Us.aspx)


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AVIVA LIFE INSURANCEAviva has 156 Branches in India (including rural branches) supporting itsdistribution network. Through its Bancassurance partner locations, Aviva productsare available in 497 towns and cities across India. With a strong sales force ofover 27,000 Financial Planning Advisers (FPAs), Aviva has initiated an innovativeand differentiated sales approach to the business. Through the Financial HealthCheck (FHC) Avivas sales force has been able to establish its credibility in themarket. The FHC is a free service administered by the FPAs for a need-basedanalysis of the customers long-term savings and insurance needs. Depending onthe life stage and earnings of the customer, the FHC assesses and recommends theright insurance product for them.

ING Vysya Life InsuranceIt has a dedicated and committed advisor sales force of over 21,000 people,working from 140 branches located in 74 major cities across the country and over

3,000 employees. It also distributes products in close cooperation with the INGVysya Bank network. The Company has a customer base of over 4,50,000 & isheadquartered at Bangalore.(Source: http://www.ingvysyalife.com/aboutus.htm)


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AGE GROUP OF SURVEYED RESPONDENTS

TABLE 1:

Age

Frequency Percent

18-25years 24 48.026 35 years 11 22.036 49 years 9 18.050 60 years 3 6.0Above 60years

3 6.0

Total 50 100.0

Analysis:

From the chart above we find that 48% of the respondents fall in the age group of

18 25 years, 22% fall in the age group of 26 35 years and 18% fall in the age

group of 36 49 years.

6%6%

18%

22%

48% Above 60years

50 60years

36 49years

26 35years

18-25years

Age


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Therefore most of the respondents are relatively young (below 26 years of age).

These individuals could be induced to purchase insurance plans on the basis of its

tax saving nature and as an investment opportunity with high returns.

Individuals at this age are trying to buy a house or a car. Insurance could help them

with this and this fact has to be conveyed to the consumer. As of now many

consumers have a false perception that insurance is only meant for people above

the age of 50. Contrary to popular belief the younger you are the more insurance

you need as your loss will mean a great financial loss to your family, spouse and

children (in case the individual is married) who are financially dependent on you.

Profession

Frequency PercentStudent 11 22.0Housewife 1 2.0WorkingProfessional

22 44.0

Business 9 18.0Self Employed 4 8.0GovernmentServiceemployee

3 6.0

Total 50 100.0


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Analysis:

From the chart above it can clearly be seen that 44% of the respondents are

working professionals, 22% are students and 18% are into business. Therefore the

target market would be working individuals in the age group of 18 25 years,

interested in good returns on their investment and saving income tax.

MARKET SHARE OF LIFE INSURANCE COMPANIES

Life Insurance Company Name

Frequency Percent

Valid HDFC Standard 3 6.0

Birla Sun Life 2 4.0

Aviva Life Insurance 3 6.0

Bajaj Allianz 3 6.0

LIC 26 52.0

Tata AIG 3 6.0

ICICI Prudential5 10.0

ING Vysya 3 6.0

Bharti Axa 1 2.0

Others 1 2.0

Total 50 100.0

6%8%

18%

44%

2%

22%

GovernmentServiceemployee

Self Employed

Business

WorkingProfessional

Housewife

Student

Profession


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Analysis:

In India, the largest life insurance company is Life Insurance Corporation of India. It

has been in existence in India since 1956 and is completely owned by the

Government of India. Today the organization has grown to 2048 offices serving 18

crore policies and has a corpus of over 340000 crore INR.

The largest private insurance company in India is ICICI Prudential. It is a joint

venture between ICICI Bank and Prudential plc, a leading international financial

services group headquartered in the UK.

The second largest private life insurance company is Bajaj Allianz. It has more than

550 offices and over 60000 insurance consultants.

2%2%

6%

10%

6%

52%

6%

6%4%

6%

Others

Bharti Axa

ING Vysya

ICICIPrudential

Tata AIG

LIC

Bajaj Allianz

Aviva LifeInsurance

Birla Sun Life

HDFCStandard

Life Insurance Company Name


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Premium Paid Annually

Frequency Percent Valid PercentCumulative

Percent

Valid Rs. 5000 Rs. 10000 22 44.0 44.0 44.0

Rs. 10001 Rs. 15000 13 26.0 26.0 70.0

Rs. 15001 Rs. 24900 9 18.0 18.0 88.0Rs. 25000 Rs. 50000 1 2.0 2.0 90.0

Rs. 50001 Rs. 60000 2 4.0 4.0 94.0

Rs. 60001 Rs. 80000 2 4.0 4.0 98.0

Rs. 80001 Rs. 100000 1 2.0 2.0 100.0

Total 50 100.0 100.0

Analysis:

From the chart above we find that, 44% of the respondents surveyed pay an annual

premium less than Rs. 10001 towards life insurance. 26% of the respondents pay an

annual premium less than Rs. 15001 and 18% pay an annual premium less than Rs.

25000. Hence we can safely say that HDFC would be able to capture the marketbetter if it introduced products/plans where the minimum premium starts at Rs.

5000 p.a.

2%4%

4%

2%

18%

26%

44%

Rs. 80001 Rs. 100000

Rs. 60001 Rs. 80000

Rs. 50001 Rs. 60000

Rs. 25000 Rs. 50000

Rs. 15001 Rs. 24900

Rs. 10001 Rs. 15000

Rs. 5000 Rs. 10000

Premium Paid Annually


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Popular Insurance Plan

Frequency PercentValid Term Insurance 17 34.0

Endowment Plan 23 46.0

Pension Plans 3 6.0

Child Plans 2 4.0

Tax saving plans 5 10.0

Total 50 100.0

Analysis:

From the chart given above we can clearly see that 46% of the respondents hold

endowment plans and 34% of the respondents hold term insurance plans.

Endowment plans are very popular and serve two purposes life cover and savings.

10%

4%

6%

46%

34%

Tax savingplans

Child Plans

PensionPlans

EndowmentPlan

TermInsurance

Popular Insurance Plan


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If the policy holder dies during the policy term the nominee gets the death benefit

that is, sum assured and accumulated bonus. On survival the policy holder receives

the survival benefit with a bonus.

A term plan is a pure risk cover plan wherein the insured pays a lower premium for

a higher sum assured. Term insurance is the cheapest form of insurance and helps

the policy holder insure himself for a relatively low premium. For the returns

sensitive investor term plans do not find favor as they do not offer a return in case

the individual does not die during the policy term.

AWARENESS OF UNIT LINKED INSURANCE PLANS

Unit Link Investment Plans

Frequency Percent

Valid Yes 29 58.0

No 21 42.0

Total 50 100.0

42%

58%

No

Yes

Unit Link Investment Plans


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Analysis:

From the chart given above we find that 58% of the respondents are aware of unit

linked life insurance plans and 42% are not aware of such plans. These plans should

be promoted through advertising. The company can advertise through television,

radio, newspapers, bill boards and pamphlets. This would increase awareness and

arouse curiosity in the minds of the consumer which would enable the company to

market its products more effectively.

Unit linked plans are those where the benefits are expressed in terms of number

of units and unit price. They can be viewed as a combination of insurance and

mutual funds. The number of units a customer would get would depend on the unit

price when they pay the premium.

When the policy matures the individual gets his fund value. The value of his fund is

calculated by multiplying the net asset value and number of units held by them on

that day.

CONSUMER WILLINGNESS TO SPEND ON LIFE INSURANCE PREMIUM

Willingness to invest on Life Insurance Premium

Frequency Percent

Valid < Rs. 6000 8 16.0Rs. 6001 Rs. 10000 13 26.0

Rs. 10001 Rs. 25000 21 42.0

Rs. 25001 Rs. 50000 7 14.0

Rs. 50000 Rs. 100000 1 2.0

Total 50 100.0


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Analysis:

From the graph above, we can clearly see that 42% of the respondents would be

willing to spend between Rs. 10001 Rs. 25000 for life insurance. 26 % would be

willing to spend between Rs. 6001 Rs. 10000 per annum. Only 16% would be

willing to spend more than Rs. 25000 per annum as life insurance premium.

We could say that the maximum premium payable by most consumers is less than

Rs. 25000 p.a. This is further reduced as most customers have already invested

with LIC, ICICI Prudential, Birla Sun Life, Bajaj Allianz etc.

There are 15 insurance companies in India inclusive of LIC. Hence to capture a

larger part of the market the company could introduce more reasonable plans with

lesser premium payable per annum.

CHART SHOWING IDEAL POLICY TERM

Ideal Policy term

Frequency Percent

Valid 3 to 5 years 9 18.0

Rs. 50000 Rs.100000

Rs. 25001 Rs.50000

Rs. 10001 Rs.25000

Rs. 6001 Rs.10000

< Rs.6000

Willingness to invest on Life Insurance

25

20

15

10

5

0Frequency

17

21

138

Willingness to invest on Life InsurancePremium


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6 to 9 years 8 16.0

10 to 15 years 17 34.0

16 to 20 years 6 12.0

21 to 25 years 4 8.0

26 to 30 years 1 2.0

More than 30 years 1 2.0

Whole life policy 4 8.0

Total 50 100.0

Analysis:

From the chart given above it can be seen that 34% of the respondents prefer a

policy term of 10 15 years, 19% prefer a term of 3 5 years and 16% prefer a

term of 6 9 years. This means more plans could introduce wherein the premium

paying term is less than 15 years.

The outlook of insurance as a product should be changed from something which you

pay for your whole life (whole life policy) and do not receive any benefit (the

nominee only receives the benefit in case of your death) to an extremely useful

investment opportunity with the prospects of good returns on savings, tax saving

opportunities as well as providing for every milestone in your life like marriage,

education, children and retirement.

8%2%

2%

8%

12%

34%

16%

18%

Whole lifePolicy

More than30 years

26 to 30Years

21 to 25Years

16 to 20Years

10 to 15

Years

6 to 9 years

3 to 5 years

Ideal Policy term


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FACTORS THAT MOTIVATE RESPONDENTS TO PURCHASE INSURANCE

Motivation to buy insurance

Frequency PercentValid Advertisements 4 8.0

High Returns 13 26.0

Advice from friends 8 16.0

Family responsibilities 14 28.0

Tax Rebate 11 22.0

Total 50 100.0

Analysis:

From the chart above it can be seen that 28% of the respondents purchase life

insurance to secure their families, 26% take life insurance to get high returns, 16%

purchase insurance on the advice of their friends, 22% purchase for getting tax

rebates and 8% purchase insurance because of the influence of advertisements.

The main purpose of insurance is to cover the financial or economic loss that occurs

to the family in case of the uncertain death of the policy holder. But nowadays this

trend is changing. Along with protection (life cover), a savings element is being

added to insurance.

22%

28%

16%

26%

8%

Tax Rebate

Familyresponsibilities

Advice fromfriends

High ReturnsAdvertisements

Motivation to buy insurance


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With the introduction of the new unit linked plans in the market, policy holders get

the option to choose where their money will be invested. They can invest their

money in the equity market, debt market, money market or a combination of these.

The debt and money markets usually have low risk attached whereas the equity

market is a high risk investment option.

PREFERRED COMPANY TYPE OF THE RESPONDENTS

Type of Company

Frequency Percent Valid PercentCumulative

Percent

Valid Governmentowned company 35 70.0 70.0 70.0

Private Company 15 30.0 30.0 100.0

Total 50 100.0 100.0

30%

70%

PrivateCompany

Governmentownedcompany

Type of Company


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Analysis:

From the graph above we find that 70% of the respondents preferred to purchase

insurance from a government owned company, 30% of the respondents preferred a

private company. So more and more can attract by advertising through television,

newspapers, magazines and radio.

MINIMUM EXPECTED RETURN ON INVESTMENT

Return Expected

Frequency Percent

Valid < 5% 2 4.0

5% - 10 % 7 14.0

11% - 15 % 8 16.0

16% - 20 % 11 22.0

21% - 25% 8 16.026% - 30% 5 10.0

31% - 40% 4 8.0

41% - 50% 2 4.0

>50% 3 6.0

Total 50 100.0


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Analysis:

From the chart above it can clearly been seen that 22% of the respondents would

like 16 20% returns, 16% would like returns between 21 25% and 16% would like

returns of 11 15% on their investments. Therefore the average return on

investment should be at least 16 20 %.

Most consumers are willing to adapt to some amount of risk but still want some

guaranteed returns. Therefore the bulk of investment should be made in the

balanced fund with 50% debt and 50% equity. The returns on the Secure Fund are

guaranteed as these involve investment is government securities and the debt

market. But the returns on these instruments are low (8 10%). If the company

invests in shares, returns are higher (39%) but correspondingly risk borne by the

policy holder is also higher. Therefore a good combination of the two instruments is

often a wise choice.

6%4%8%

10%

16%

22%

16%

14%

4%

>50%

41% - 50%

31% - 40%

26% - 30%

21% - 25%

16% - 20 %

11% - 15 %

5% - 10 %

< 5%

Return Expected


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APPENDIX

A SURVEY ON

MARKET SEGMENTATION FOR INSURANCE INDUSTRY

Dear Sir/ Madam,

I am a student of University Business School. As part of the requirements for myMasters Degree in Business Administration I am required to do a research basedproject. Kindly spend a few minutes of your valuable time and fill in thisquestionnaire. All the information provided by you will be used only for academicpurposes and will be strictly confidential.

Which company/ companys insurance policies do you hold?o HDFC Standardo Birla Sun Lifeo Aviva Life Insuranceo Bajaj Allianzo LICo Tata AIGo ICICI Prudentialo ING Vysyao Bharti Axao Others (specify name)

What is the approximate premium paid by you annually (in Rupees)?

o Rs. 5000 Rs. 10000o Rs. 10001 Rs. 15000o Rs. 15001 Rs. 24900o Rs. 25000 Rs. 50000o Rs. 50001 Rs. 60000o Rs. 60001 Rs. 80000o

Rs. 80001 Rs. 100000o More than Rs. 100000 ( specify premium)

What kind of insurance policy would suit you best in your current stage of

life?


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o Life Insuranceo Life Insurance and Investment Planso Pension Planso Child Planso Tax saving plans

Are you aware of the new unit linked insurance plans in the market?

o Yeso No

How much would you be willing to spend per annum if you were to go foran investment/ insurance plan?

o Less than Rs. 6000o Rs. 6001 Rs. 10000o Rs. 10001 Rs. 25000

o Rs. 25001 Rs. 50000o Rs. 50000 Rs. 100000o More than Rs. 100000

Which according to you is an ideal policy term? (Number of years youwould be willing to pay premium)

o 3 to 5 yearso 6 to 9 yearso 10 to 15 yearso 16 to 20 yearso 21 to 25 yearso 26 to 30 yearso More than 30 yearso Whole life policy

What motivates you to purchase insurance/ investment plans?

o Advertisementso High Returnso Advice from friends

o Family responsibilitieso Tax Rebate


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In which kind of company would you prefer to make a purchase ofinsurance?

o Government owned companyo Private Company

Typically what kind of returns would you look at from your investments?(Please note: Higher returns involve greater risk)

o Less than 5%o 5% - 10 %o 11% - 15 %o 16% - 20 %o 21% - 25%o 26% - 30%

o 31% - 40%o 41% - 50%o More than 50%

Personal Details:

Name:

Gender:

o Male

o Female

Age group:

o 18 25 yearso 26 35 yearso 36 49 years

o 50 60 yearso Above 60 years

Profile of respondent:

INSURANCE Project - Copy

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