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Submitted In the Partial Fulfillment for the Award of the Degre e

Submitted to:

Submitted by:



Session: 2008-2011


T h i s p r o je c t t i t l e d



REGARDING KOTAK MAHINDRA BANK be i n g s u b m i t t e d b y m e i n









Ad m i n i s t r a t i o n


t he

d e gr e e

a wa r d


G ur u

N a n a k I n st i t u t e o f Ma n a g e m e n t an d Tec h n o l o g y, a ffi l i a t e d t o
P u n ja b Tec h n i c a l U n iv e r s i t y J a l a n d ha r.



A t t h e o u t se t , I wo u l d l i k e t o t h a n k t h e s t a ff o f K O TAK


operating me



pr o je c t



and as

a p pr o v a l
we l l



as giving me

g u i d a n ce i n t h e p r o b l e m s f a c e d .

A h e a r t f e l t t h a n k t o t h e m a n y r e s p o nd e n t s s u r v e ye d wh o s e
i d e a s , cr i t i c a l i n s i g h t s a n d s u g ge s t i o n s h av e b e e n i nv a lu a b l e
in the preparation of this report.

In todays corporate and competitive world, I find that insurance sector has
the maximum growth and potential as compared to the other sectors.
Insurance has the maximum growth rate of 70-80% while as FMCG sector
has maximum 12-15% of growth rate. This growth potential attracts me to
enter in this sector and KOTAK LIFE INSURANCE has given me the opportunity
to work and get experience in highly competitive and enhancing sector.
Companies now are tapping a lot of ways to capture the market and hence
adopting different ways to hold the large portion of the market.
My summer training learning helped me a lot to complete my project in order
to learn a lot of things of the corporate. As a project trainee the first task
given to me was to understand the basic behaviour of the consumer in order
to manipulate the market according to our target competition. For this I
developed a questionnaire and I did my survey in Jaipur city.
This job training also helped me a lot in understanding the process of
building effective marketing channels for life insurance products by
establishing network of life insurance advisors.
The success story of good market share of different market organizations
depends upon the availability of the product and services near to the
customer, which can be distributed through a distribution channel. In
Insurance sector, distribution channel includes only agents/advisors or
agency holders of the company. If a company like KOTAK LIFE INSURANCE,
adequate agents in the market, they can capture big market as compared to
the other companies.

The story of insurance is probably as old as the story of mankind. Tendency
of a human being to secure themselves against loss and disaster has been
from the starting of world. They sought to avert the evil consequences of fire
and flood and loss of life and were willing to make some sort of sacrifice in
order to achieve security. Though the concept of insurance is largely a
development of the recent past, particularly after the industrial era past
few centuries yet its beginnings date back almost 6000 years as per
Functions of insurance:

Provide Protection: The primary function of insurance is to provide

protection against future risk, accidents and uncertainty. Insurance
cannot check the happening of risk, but can certainly provide for the
losses of risk. Insurance is actually a protection against economic loss,
by sharing the risk with others.

Collective bearing of risk: Insurance is an instrument to share the

financial loss of few among many others. Insurance is a mean by which
few losses are shared among larger number of people. All the insured
contribute the premiums towards a fund and out of which the persons
exposed to a particular risk is paid.

Assessment of risk: Insurance determines the probable volume of

risk by evaluating various factors that give rise to risk. Risk is the basis
for determining the premium rate also.

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

uncertainty to certainty. Insurance is device whereby the uncertain
risks may be made more certain.

Small capital to cover larger risk: Insurance relieves the

businessmen from security investments, by paying small amount of
premium against larger risks and uncertainty.

Contributes towards the development of industries: Insurance

provides development opportunity to those larger industries having
more risks in their setting up. Even the financial institutions may be
prepared to give credit to sick industrial units which have insured their
assets including plant and machinery.

Means of savings and investment: Insurance serves as savings and

investment, insurance is a compulsory way of savings and it restricts
the unnecessary expenses by the insured's For the purpose of availing
income-tax exemptions also, people invest in insurance.

Source of earning foreign exchange: Insurance is an international

business. The country can earn foreign exchange by way of issue of
marine insurance policies and various other ways.

Risk free trade: Insurance promotes exports insurance, which makes

the foreign trade risk free with the help of different types of policies
under marine insurance cover.

Insurance is divided into two basic zones:

General Insurance

Life insurance

Insurance of the non life assets are called general insurance, this includes
loss of asset against water, fire, earthquake etc. With the opening up of the
Indian Market in Insurance sector for private players, in General Insurance
the monopoly of the general Insurance public sectors companies has been
broken. With the entrance of the new private player market innovative
technique has been introduced to capture the market. In general Insurance
around 17% of the market has been captured by the private players.
General Insurance is a sector which alone has many type of insurance
coverage in it like Fire Insurance, Marine Insurance, motor Insurance, Liability
Insurance, Engineering Insurance etc.
The Non Life Insurers:

National Insurance Co. Ltd

New Indian Assurance Co. Ltd

Oriental Insurance Co. Ltd

United India Insurance Co. Ltd

Tata AIG General Insurance Co. Ltd

Bajaj Allianz General Insurance Co. Ltd

IFFCO Tokio General Insurance Co. Ltd

ICICI Lombard General Insurance Co. Ltd

Reliance General Insurance Co. Ltd

Royal Sundaram Alliance Insurance Co. Ltd

Bharti Axa General Insurance


Life insurance is a contract under which the insurer (Insurance Company) in
Consideration of a premium paid undertakes to pay a fixed sum of money on
the death of the insured or on the expiry of a specified period of time,
whichever is earlier. In case of life insurance, the payment for life insurance
policy is certain. The Event insured against is sure to happen only the time of
its happening is not known. So life insurance is known as Life Assurance.
The subject matter of insurance is life of human being. Life insurance
provides risk coverage to the life of a person. On death of the person
insurance offers protection against loss of income and compensate the
titleholders of the policy.
Roles of Life Insurance

Life insurance as an investment: Insurance products yield more

than any other investment instruments and it also provides added
incentives or bonus offered by insurance companies.

Life insurance as risk cover: Insurance is all about risk cover and
protection of life. Insurance provides a unique sense of security that no
other form of invest can provide.

Life insurance as tax planning:

tax saving mechanism too.

Insurance serves as an excellent

Importance of Life Insurance

Protection against untimely death:

Life insurance provides
protection to the dependents of the life insured and the family of the
assured in case of his untimely death. The dependents or family
members get a fixed sum of money in case of death of the assured.

Saving for old age: After retirement the earning capacity of a person
reduces. Life insurance enables a person to enjoy peace of mind and a
sense of security in his/her old age.

Promotion of savings: Life insurance encourages people to save

money compulsorily. When life policy is taken, the assured is to pay
premiums regularly to keep the policy in force and he cannot get back
the premiums, only surrender value can be returned to him. In case of
surrender of policy, the policyholder gets the surrendered value only
after the expiry of duration of the policy.

Initiates investments: Life Insurance Corporation encourages and

mobilizes the public savings and channelizes the same in various
investments for the economic development of the country. Life
insurance is an important tool for the mobilization and investment of
small savings.

Credit worthiness: Life insurance policy can be used as a security to

raise loans. It improves the credit worthiness of business.

Social Security: Life insurance is important for the society as a

whole also. Life insurance enables a person to provide for education
and marriage of children and for construction of house. It helps a
person to make financial base for future.

Tax Benefit: Under the Income Tax Act, premium paid is allowed as a
deduction from the total income under section 80C.

To determine customer buying behavior
segmentation for Kotak Life Insurance.





The objectives of the present study are as following:

Proper understanding and analysis of life insurance industry.

To know about brand awareness of Kotak Life Insurance and customers

preference about Kotak Life Insurance.

Conduct market survey on a sample selected from the entire

population and derive opinion on that research.

To help company in establishing a network of Life Insurance Advisors

and to promote the benefits those are provided by Kotak Life Insurance
to its Life Insurance Advisors.

To offer suggestions based upon findings.

All the findings and conclusions are based on the survey done in the working
area within time limit. I tried to select a sample representative of the whole
group during my job training. I have collected data from 100 respondents for
studying Customer Buying Behaviour and Market Segmentation, selected
randomly from different areas in Jaipur such as:

Public places like shopping centers, malls, restaurants etc.

Employees of Government Departments

Employees of Private Firms

Business / Self Employed

For recruitment of Life insurance Advisors, I have collected data from 200
respondents from following groups:

Chartered Accountants

Tax Consultants


Share Brokers


Working Professionals

House Wives

Retired Persons


Research was initiated by examining the secondary data to gain insight into
the problem. The primary data is evaluated on the basis of the analysis of
the secondary data.
The data for this research project has been collected through self
administration. Due to time limitation and other constraints direct personal
interview method is used. A structured questionnaire was framed as it is less
time consuming, generates specific and to the point information, easier to
tabulate and interpret. Moreover respondents prefer to give direct answers.
In questionnaires open ended and closed ended, both the types of questions
has been used.
Secondary Data: It was collected from internal sources. The secondary
data was collected on the basis of organizational file, official records, news
papers, magazines, management books, preserved information in the
companys database and website of the company.
Primary data: Individual respondents, Chartered Accountants, Tax
Consultants, Insurance Agents, Auto loan providers were personally visited
and interviewed. They were the main source of Primary data. The method of
collection of primary data was direct personal interview through a structured
Since it is not possible to study whole population, it is necessary to obtain
representative samples from the population to understand its characteristics.

Sampling Units: Individual respondents for studying Customer

Buying Behaviour and Market Segmentation, selected randomly from
different areas in Jaipur, like various shopping malls and markets,
Government Offices. Chartered Accountants, Tax Consultants, Lawyers,
Business Men, Professionals and House Wives of Jaipur for recruitment
of Life Insurance Advisors

Sample Technique: Random Sampling

Research Instrument: Structured Questionnaire

Contact Method: Personal Interview


Study of Customer Buying Behaviour and Market Segmentation: 100


Recruitment of Life Insurance Advisors for Kotak Life Insurance: 200



The mode of collection of data is based on Survey Method and Field Activity.
Primary data collection is based on personal interview. I have prepared the
questionnaire according to the necessity of the data to be collected.

The research is confined to certain parts of Jaipur and does not

necessarily show a pattern applicable to all of country.

Some respondents were reluctant to divulge personal information

which can affect the validity of all responses.

In a rapidly changing industry, analysis on one day or in one segment

can change very quickly. The environmental changes are vital to be
considered in order to assimilate the findings.


Life insurance came to India from England in 1818 when oriental life
insurance company started in Calcutta by Europeans. After this many
insurance companies had been started in India. But these companies were
looking after only the needs of European community established in India.
Indian people were not being insured by these companies. First Indian life
insurance company came as Bombay mutual life insurance assurance.
Second company was Bharat insurance company came in 1896. After this the
united India in Madras, national Indian and national insurance in Calcutta and
the co-operative assurance in Lahore were established in 1906.

To regulate Indian insurance business first insurance act came in 1912

as life insurance company act and provident fund act. These acts consist of
premium rates tables and periodical valuations of companies. In the first two
decade of 20th century many life insurance companies were started. So the
insurance act came in 1938 to governing life and non life insurance
companies and to provide strict state control. In 1956 the life insurance
business in India was nationalized. In 1956 life insurance corporation of India
(LIC) was created to spreading life insurance much more widely particularly
in rural areas. In that year LIC had 5 zonal offices, 33 divisional offices and
212 branch offices. In 1957 the business of LIC of sum assured of 200crores,
1000crores in 1970, and 7000crores in 1986.
In 1999, the Insurance Regulatory and Development Authority (IRDA) was
constituted as an autonomous body to regulate and develop the insurance
industry. The IRDA was incorporated as a statutory body in April, 2000. The
key objectives of the IRDA include promotion of competition so as to enhance
customer satisfaction through increased consumer choice and lower
premiums, while ensuring the financial security of the insurance market. The
IRDA opened up the market in August 2000 with the invitation for application
for registrations. Foreign companies were allowed ownership of up to 26%.
The Authority has the power to frame regulations under Section 114A of the
Insurance Act, 1938 and has from 2000 onwards framed various regulations
ranging from registration of companies for carrying on insurance business to
protection of policyholders interests.
Role of IRDA:

Protecting the interests of policyholders.

Establishing guidelines for the operations of insurers and brokers.

Specifying the code of conduct, qualifications and training for

insurance intermediaries and agents.

Promoting efficiency in the conduct of insurance business.

Regulating the investment of funds by insurance companies.

Specifying the percentage of business to be written by insurers in rural


Handling disputes between insurers and insurance intermediaries.

Changing perception of Indian customers:

Indian Insurance consumers are like Indian Voters, they are soft but when
time is right and ripe, they demand and seek necessary changes. De-tariff of
many Insurance Products are the reflection of changing aspirations and
growing demand of Indian consumers.
For historical years, Indian consumers were at receiving end. Insurance
Product was underwritten and was practically forced onto consumers on a
Take-it-As-it-basis. All that got changed with passage of IRDA act in 1999.
New insurance companies have come into existence leading to open
competition and hence better products for customers.
Indian customers have become very sensitive to Coverage / Premium as well
as the Products (read Risk Solution), that is given to them. There are not
ready to accept any product, no matter even if that is coming from the
market leader, should that product is not serving the purpose. A case in point
is ULIP Product / Group Life and Credit Life in Life Insurance segment and
Travel / Family Floater Health and Liability Insurance in the Non-life segment
are new age Avatar. The new products are constantly being demanded by
Indian consumers, which is putting huge pressures on Insurance companies
(Read Risk Under-writers) and Brokers to respond.
Customers are looking at Insurance for covering Pure Risk now which I have
covered in my next section. Another good reason why we are seeing quick
changes in the buying behavior of Insurance from mere Investment to risk
mitigation is the cost of Replacement of Goods (ROG) or Cost of Services
Now Indian customers are aware of insurance industry and insurance
products provided by companies. They have become more sensitive. They
would not accept any type of insurance product unless it fulfills their
requirements and needs. In historic days customers looking at insurance
products as a life cover which can provide security against any unacceptable
events, but now customers look at insurance products as an investment as
well as life cover. So todays customers wants good return from the
insurance companies. The Indian customers forms the pivot of each
companys strategy.
Investment of Indian household savings (as a % in different sector)














Source: www.avivaindia.com

Changing face of Indian insurance industry:

After the Insurance Regulatory and Development Authority Act have been
passed there has been establishment of many private insurance companies
in India. Previously there was a monopoly business for Life Insurance
Corporation of India (L.I.C.) who was the only life-insurance company for the
people till 2000. L.I.C. still holds 71.4% of the market share in 2006. But after
the introduction of private life insurance companies there is a great
competition in Indian market now. Everyone is trying to capture the fresh
market here and penetrate it with aggressive marketing strategies. Today
life-insurance is not only limited up to just life risk cover and maturity period
bonuses but changed to greater return from the investments. With the
introduction of the unit linked insurance policies these companies are
investing the money in different investment instruments like shares, bonds,
debentures, government and other securities. People are demanding for
higher returns with the life risk cover and private companies are giving 3040% average growth per annum. These life-insurance companies have every
kind of policies suiting every need right from financial needs of, marriage,
giving birth and rearing up a child, his education, meeting daily financial
needs of life, pension solutions after retirement. These companies have
every aspects and needs of our life covered along with the death-benefit.

In India only 25% of the population has life insurance. So Indian lifeinsurance market is the target market of all the companies who either want

to extend or diversify their business. To tap the Indian market there has been
tie-ups between the major Indian companies with other International
insurance companies to start up their business. The government of India has
set up rules that no foreign insurance company can set up their business
individually here and they have to tie up with an Indian company and this
foreign insurance company can have an investment of only 24% of the total
start-up investment.
Indian insurance industry can be featured by:

Low market penetration.

Ever growing middle class component in population.

Growth of customers interest with an increasing demand for better

insurance products.

Application of information technology for business.

Rebate from government in the form of tax incentives to be insured.

Today, the Indian life insurance industry has more than a dozen private
players, each of which are making strides in raising awareness levels,
introducing innovative products and increasing the penetration of life
insurance in the vastly underinsured country. Several of private insurers have
introduced attractive products to meet the needs of their target customers
and in line with their business objectives. The success of their effort is that
they have captured over 28% of premium income in five years.
The biggest beneficiary of the competition among life insurers has
been the customer. A wide range of products, customer focused service and
professional advice has become the mainstay of the industry, and the Indian
customers forms the pivot of each companys strategy. Penetration of life
insurance is beginning to cut across socio-economic classes and attract
people who have never purchased insurance before.
Life insurance is also now being regarded as a versatile financial
planning tool. Apart from the traditional term and saving insurance policies,
industry has seen the entry and growth of unit linked products. This provides
market linked returns and is among the most flexible policies available today
for investment. Now products are priced, flexible, and realistic and sustain so
people in better position to understand the risk and benefits of the product
and they are accepting these innovative products.
So it is clear that the face of life insurance in India is changing, but
with the changes come a host of challenges and it is only the credible
players with a long term vision and a robust business strategy that will

survive. Whatever the developments, the future and the opportunities in this
industry will surely be exciting.
The number of companies in Insurance particularly in Life Insurance has
changed drastically now the number is in 17. List of them are mentioned as
below :
1. ICICI Prudential Life Insurance
2. TATA AIG Life Insurance
3. Max New York Life Insurance
4. AVIVA Life Insurance
5. Bharti AXA Life Insurance
6. Kotak Mahindra Life Insurance
7. Reliance Life Insurance
8. SBI Life Insurance
9. HDFC Standard Life Insurance
Birla Sun Life Insurance
Sahara Life Insurance
ING Vysya Life Insurance
And so on
Increasing growth since liberalization:


LIC (in billion Rs.)


Possibilities for insurance companies in India:

Further deregulation of the market.

Greater concern for the customers.

Newer products and services.

Competition and quality consciousness.

Cost effective operations.

Restructuring of the public sector.

Consolidation of domestic insurance markets.


Technology driven shift in product design.

Actual operations and distribution.

Convergence of financial services.


Globally, insurers increasingly are pressured by the demands of their clients.
The development of global insurance industry over the past few years was
influenced by booming stock markets which enabled considerable capital
gains to be made in non life business. Increase in insurers equity capital
increased underwriting capacity, while demand did not develop at the same
pace, resulting in decrease in insurance policies prices. The stock market
boom of the past few years led to demand for unit linked insurance products.
The global insurance industry is growing at rapid pace. Most of the
markets are undergoing globalization. Lot of mergers and acquisition are
taking place in the insurance world. The rapidity in the industry,
technological improvement has resulted in pressures on a few economic
parameters. The world insurance industry is at peak of its globalization
Global insurance market is increasing by an average of six percent per
year since 1990. Insurance companies have collected $2443.7 billion
premium worldwide according to the global development of premium volume
in 144 countries in 2005. $1521.3 has been generated as life insurance
premium and $922.7 as non life insurance premium. The US accounted for
35% of global life and non life premium, Japan had global share of 21%, and
UK was having 10% of global share.
Influence on Indian Insurance Industry:
In this era of globalization, insurance companies face a dynamic global
environment. Dramatic changes are taking place owing to the
internationalization of activities, appearance of new risk, new types of covers
to match with new risk situations, and unconventional and innovative ideas
on customer services. Low growth rates in developed markets, changing
customers needs, and the uncertain economic conditions in the developing

world are exerting pressure on insurers resources and testing their ability to
survive. Now the existing insurers are facing difficulties from non-traditional
competitors those are entering the retail market with new approaches and
through new channels.
India has a rapidly growing middle class and this section can afford to
buy insurance products. This shows the attraction that the Indian market
holds for foreign insurers who have been putting pressure on developing
countries as well as on India to open up its market.

Life Insurance Penetration as a % of GDP

United Kingdom






United States









Source: www.indianinsuranceresearch.com


Indian economy is growing in reference to global market. Business of

insurance with its unique features has a special place in Indian

It is a highly specialized technical business and customer is the most

concern people in this business, therefore this business is able to spur
the growth of infrastructure and act as a catalyst in the overall
development of Indian economy.

The high volumes in the insurance business help spread risk wider,
allowing a lowering of the rates of the premium to be charged and in
turn, raising profits. When there is a bigger base, the probabilities
become more predictable, and with system wide risks balanced out,
profits improve. This explains the current scenario of mergers,
acquisitions, and globalization of insurance.

Insurance is a type of savings. Insurance is not only important for tax

benefits, but also for savings and for providing security. It can be
serving as an essential service which a welfare state must make
available to its people.

Insurance play a crucial role in the commercial lives of nations and act
as the lubricants of economic activities. Insurance firms help to spread
the potentially financial consequences of risk among the large number
of entities, to mobilize and distribute savings for productive use,
facilitate investment, support and encourage external trade, and
protect economic entities against external risk.

Insurance and economic growth mutually influences each other. As the

economy grows, the living standards of people increase. As a consequence,
the demand for life insurance increases. As the assets of people and of
business enterprises increase in the growth process, the demand for general
insurance also increases. In fact, as the economy widens the demand for new

types of insurance products emerges. Insurance is no longer confined to

product markets; they also cover service industries. It is equally true that
growth itself is facilitated by insurance. A well-developed insurance sector
promotes economic growth by encouraging risk-taking. Risk is inherent in all
economic activities. Without some kind of cover against risk, some of these
activities will not be carried out at all. Also insurance and more particularly
life insurance is a mobilizer of long term savings and life insurance
companies are thus able to support infrastructure projects which require long
term funds. There is thus a mutually beneficial interaction between insurance
and economic growth. The low income levels of the vast majority of
population have been one of the factors inhibiting a faster growth of
insurance in India. To some extent this is also compounded by certain
attitudes to life. The economy has moved on to a higher growth path. The
average rate of growth of the economy in the last three years was 8.1 per
cent. This strong growth will bring about significant changes in the insurance
At this point, it is important to note that not all activities can be insured. If
that were possible, it would completely negate entrepreneurship. Professor
Frank Knight in his celebrated book Risk Uncertainty and Profit emphasized
that profit is a consequence of uncertainty. He made a distinction between
quantifiable risk and non-quantifiable risk. According to him, it is nonquantifiable risk that leads to profit. He wrote It is a world of change in
which we live, and a world of uncertainty. We live only by knowing something
about the future; while the problems of life or of conduct at least, arise from
the fact that we know so little. This is as true of business as of other spheres
of activity. The real management challenges are uninsurable risks. In the
case of insurable risks, risk is avoided at a cost.


Insurers Business Model:
Profit = Earned Premium + Investment Income Incurred Loss Underwriting
Insurers make money in two ways:
1. Through Underwriting, the processes by which insurers select the risks
to insure and decide how much in premiums to charge for accepting
those risks, and
2. By investing the premiums they collect from insured.
The most difficult aspect of the insurance business is the underwriting of
policies. Using a wide assortment of data, insurers predict the likelihood that
a claim will be made against their policies and price products accordingly. To
this end, insurers use actuarial science to quantify the risks they are willing
to assume and the premium they will charge to assume them. Data is
analyzed to fairly accurately project the rate of future claims based on a
given risk. Actuarial science uses statistics and probability to analyze the
risks associated with the range of perils covered, and these scientific
principles are used to determine an insurer's overall exposure. Upon
termination of a given policy, the amount of premium collected and the
investment gains thereon minus the amount paid out in claims is the
insurer's underwriting profit on that policy.

An insurer's underwriting performance is measured in its combined ratio. The

loss ratio (incurred losses and loss-adjustment expenses divided by net
earned premium) is added to the expense ratio (underwriting expenses
divided by net premium written) to determine the company's combined ratio.
The combined ratio is a reflection of the company's overall underwriting
profitability. A combined ratio of less than 100 percent indicates underwriting
profitability, while anything over 100 indicates an underwriting loss.
Insurance companies also earn investment profits on float. Float or
available reserve is the amount of money, at hand at any given moment that
an insurer has collected in insurance premiums but has not been paid out in
claims. Insurers start investing insurance premiums as soon as they are
collected and continue to earn interest on them until claims are paid out.
Naturally, the float method is difficult to carry out in an economically
depressed period. Bear markets do cause insurers to shift away from
investments and to toughen up their underwriting standards. So a poor
economy generally means high insurance premiums. This tendency to swing
between profitable and unprofitable periods over time is commonly known as
the "underwriting" or insurance cycle.
Finally, claims and loss handling is the materialized utility of insurance. In
managing the claims-handling function, insurers seek to balance the
elements of customer satisfaction, administrative handling expenses, and
claims overpayment leakages.
Investment Management
Investment operations are often considered incidental to the business of
insurance, and have traditionally viewed as secondary to underwriting. In the
past risk management was the most important part of business, whereas
today the focus has shifted to fund management. Investment income is a
large component of insurance revenues, skilful and careful management of
funds. Insurance is a business of large numbers and generates huge amount
of funds over time. These funds arise out of policyholder funds in the case of
life insurance, and technical and free reserves in the non-life segments. Time
lag between the procurement of premium and the payment of claim provides
an interval during which the funds can be deployed to generate income.
Insurance companies are among the largest institutional investors in the
world. Assets managed by insurance companies are estimated to account for
over 40% of the worlds top ten asset managers.
Returns on investments influence the premium rates and bonuses and
hence investment income will continue to be an important component of
insurance company profits. In life insurance, benefits from insurance profits
accrue directly to policy holders when it is passed on to him in the form of a

bonus. In non life insurance the benefits are indirect and mostly by the
creation of an investment portfolio. Investment income has to compensate
for underwriting results which are increasingly under pressure. In the case of
insurance, the difference between revenue and the expenses is known as
operating surplus.

Revenue = Premium

Expenses = (Sum of Claims + Commission

procurement of business + Operating expenses)

Operating Surplus = (Revenue Expenses)



Net investment income includes income from trading in and holding stock
market securities including government securities, special deposits with the
central government, loans to several public utilities and service providers in
state government.
Insurance premium collected is converted in a pool of fund then
divided in to four expenses.

To pay the expenses of the management

To pay agency commission

To pay for the claims

Surplus money will be invested in govt. securities

Requirements of an insurance risk

Insurance normally insure only pure risks .However, not all pure risk is
insurable .certain requirements usually must be fulfilled before a pure risk
can be privately insured .From the view point of the insurer, there are ideally
six requirement of an insurable risk:

There must be a large number of exposure units

The loss must be accidental and unintentional

The loss must be determinable and measurable

The loss should not be catastrophic

The chance of loss must be calculable

The premium must be economically feasible

Comparison of Insurance with other Similar Factors

1. Insurance and Gambling compared
Insurance is often erroneously confused with gambling .There are two
important differences between them .First , gambling creates a new
speculative risk ,while insurance is a technique for handling an already
existing pure risk .thus ,if you bet Rs 300 on a horse ,a new speculative
technique is created ,but if you pay Rs 300 to an insurer for fire insurance
,the risk of fire is already present and is transferred to the insurer by a
contract. No new risk is created by the transaction.
The second difference between insurance and gambling is that
gambling is socially unproductive, because the winners gain comes at the
expense of the loser .In contract; insurance is always socially productive,
because neither the insurer nor the insured is placed in a position where the
gain of the winner comes at the expense of the loser. The insurer and the
insured have a common interest in the prevention of a loss. Both parties win
if the loss does occur .Moreover, consistent gambling transaction generally
never restore the losers to their former financial position .In contract
,insurance contracts restore the insureds financially in whole or in part if a
loss occurs.
2. Insurance and Hedging compared
The concept of hedging is to transferring the risk to the speculator through
purchase of future contracts .An insurance contract, however, is not the
same thing as hedging .Although both technique are similar in that risk is
transferred by a contract, and no new risk is created, there are some
important difference between them. First, an insurance transaction involves
the transfer of insurable risks, because the requirement of an insurable risk
generally can be met .However, hedging is a technique for handling risks
that are typically uninsurable ,such as protection against a decline in the
price agriculture products and raw materials.
A second difference between insurance and hedging is that insurance
and hedging is that insurance can reduce the objective risk of an insurer by
application of the law of large numbers. As the number of exposure units
increases, the insurers prediction of future losses improves, because the
relative variation of actual loss from expected loss will decline .thus, many
insurance transactions reduce objective risk. In contract, hedging typically
involves only risk transfer , not risk reduction .The risk of adverse price
fluctuation is transferred because of superior knowledge of market conditions
.The risk is transferred, not reduced, and prediction of loss generally is not
based on the law of large numbers.

Various types of life insurance policies:

Endowment policies: This type of policy covers risk for a specified

period, and at the end of the maturity sum assured is paid back to
policyholder with the bonuses during the term of the policy.

Money back policies: This type of policy is for periodic payments of

partial survival benefits during the term of the policy as long as the
policy holder is alive.

Group insurance: This type of insurance offers life insurance

protection under group policies to various groups such as employers
employees, professionals, co-operatives etc it also provides insurance
coverage for people in certain approved occupations at the lowest
possible premium cost.

Term life insurance policies: This type of insurance covers risk only
during the selected term period. If the policy holder survives the term,
risk cover comes to an end. These types of policies are for those
people who are unable to pay larger premium required for endowment
and whole life policies. No surrender, loan or paid up values are in such

Whole life insurance policies: This type of policy runs as long as the
policyholder is alive and is covered for the entire life of the
policyholder. In this policy the insured amount and the bonus is
payable only to nominee on the death of policy holder.

Joint life insurance policies: These policies are similar to

endowment policies in maturity benefits and risk cover, but joint life
policies cover two lives simultaneously such as married couples. Sum
assured is payable on the first death and again on the death of survival
during the term of the policy.

Pension plan: a pension plan or annuity is an investment over a

certain number of years but does not provide any life insurance cover.
It offers a guaranteed income either for a life or certain period.

Unit linked insurance plan: ULIP is a kind of insurance plan which

provides life cover as well as return on premium paid over a certain
period of time. The investment is denoted as units and represented by
the value called as net asset value (NAV).


Insurance has to be sold the world over. The Touch point with the ultimate
customer is the distributor or the producer and the role played by them in

insurance markets is critical. It is the distributor who makes the difference in

terms of the quality of advice for choice of product, servicing of policy post
sale and settlement of claims. In the Indian market, with their distinct
cultural and social ethics, these conditions will play a major role in shaping
the distribution channels and their effectiveness. In today's scenario,
insurance companies must move from selling insurance to marketing an
essential financial product. The distributors have to become trusted financial
advisors for the clients and trusted business associates for the insurance
Challenges for insurance companies and intermediaries in India

Building faith about company in the mind of clients.

Building personal credibility with the clients.

Different distribution channels in India:

A multi-channel strategy is better suited for the Indian market. Indian
insurance market is a combination of multiple markets. Each of the markets
requires a different approach. Apart from geographical spread the sociocultural and economic segmentation of the market is very wide, exhibiting
different traits and needs. Different multi-distribution channels in India are as

Agents: Agents are the primary channel for distribution of insurance.

The public and private sector insurance companies have their branches
in almost all parts of the country and have attracted local people to
become their agents. Today's insurance agent has to know which
product will appeal to the customer, and also know his competitor's
products to be an effective salesman who can sell his company, the
product, and himself to the customer. To the average customer, every
new company is the same. Perceptions about the public sector
companies are also cemented in his mind. So an insurance agent can
play an important role to create a good image of company.

Banks: Banks in India are all pervasive, especially the public sector
banks. Many insurance companies are selling their products through
banks. Companies which are bank owned, they are selling their
products through their parent bank. The public sector banks, with their
vast branch networks, are helpful to insurance companies. This
channel of selling insurance is known as Bank assurance.

ICICI Prudential

SBI Life
Birla Sun Life
ING Vysya Bank

ICICI Bank, Bank of India, Citibank,
Allahabad Bank, Federal Bank, South
Indian Bank, Punjab and Maharashtra
Cooperative Bank
State Bank of India
Deutsche Bank, Citibank, Bank of
Rajasthan, Andhra Bank
Vysya Bank

Aviva Life Insurance

ABN Amro Bank, Canara Bank

HDFC Standard Life

HDFC Bank, Union Bank, Indian Bank

Met Life

Karnataka Bank, J&K Bank

Source: Hindu Business Line, January 08, 2007

Brokers: Now a days different financial institution are selling

insurance. These financial institutions are known as brokers. They are
taking some underwriting charges from the insurance companies to
sell their insurance products.

Corporate agents: Corporate agency is a cross selling type of

channel. Insurance companies tie-up with business houses in other
industries to sell insurance either to their employees or their
customers. Insurance industry, during the past 2 years has witnessed a
number of such strategic tie-ups and alliances. Corporate agents have
become a major force to reckon with in distributing insurance products.
Such as- Bajaj Allianz tied up with Maruti Udyog and Ford for auto
insurance and Tata AIG life has tied up with Tata tea, Khaitans
Williamson major and bridge foundation for selling rural policies.

Internet: In this technological world internet is also a channel of

selling insurance. This can be as direct marketing.


Now the Indian consumer is knowledgeable and sensitive. Consumers are
increasingly more aware and are actively managing their financial affairs.
People are increasingly looking not just at products, but at integrated
financial solutions that can offer stability of returns along with total
protection. In view of this, the insurance managers need to understand more
about the details that go into the introduction of insurance products to make
it attractive in this competitive market. So now days an insurance manager
requires leadership, commitment, creativity, and flexibility. "Every family in
every village in the country should feel safe and secure". This vision alone
will help to bring the new ideas to the insurance manager.
Financial, marketing and human resource polices of the corporations
influence the unit mangers to make decisions. Performance of insurance
company depends on the effectiveness of such policies. Insurance
corporations formulate and revise these policies from time to time to ensure
that the performance of the managers is best for the organization.
In the competitive market, insurance companies are being forced to adopt a
strictly professional approach in marketing. The insurance companies face
the challenge of changing the uninspiring public image of the industry.
Some of the important marketing elements are

Marketing mix.

The importance of relationship.


Value addition.



Insuring service quality.

Effective pricing.

Customer satisfaction research.

The growth of insurance sector is governed largely by factors external to it.

The following factors influence the market and demand of product Government policies.

Growth in population.

Changing age profile.

Income wise distribution of the population.

Level of insurance awareness.

The pricing of the policies.

The economic climate of the country.

The aversion to risk.

Social and political features of the country.

Growth scenario in the world.

Different companies adopt different approaches in their marketing strategies.

One approach is focus upon product quality which can give confidence in the
mind of customers that they are offered by best featured products. And other
approach is focusing on customers needs, which involve a heavy investment
in developing relationships with policyholders. Under this approach customer
can expect a range of products and service offered to him. Third approach is
market segmentation under which the population can be divided into several
homogeneous products and groups, the effort should be tie clients to the
company by customized combination of coverage, easy payment plans, risk
management advice, and convenient and quick claim handling.
An insurance product can be classified into three phases:
Core product: In insurance industry the core product is the policy that
provides protection to the customers.

Expected product: Because of competition customers start to expect more

from an insurance product. Then insurance companies provide some tangible
attributes in their product to differentiate from competitors, such as Brand
Some additional features in existing product
By providing instruction manual with the policy
Augmented product: An insurance company can provide different types of
services to differentiate their products Post sales services.
Branches in different places for customers.
Customer complaint management.
Payment option convenient to customers.
The entry of private players and their foreign partners has given domestic
players a tough time, because the opening up of the sector has not brought
in only foreign players, but also professional techniques and technologies.
The present scene in India is such that everyone is trying to put in the best
efforts. There are marketing strategies more for survival than growth. But the
most important gift of privatization is the introduction of customer-oriented
services. Utmost care is being taken to maximize customer satisfaction.
Success of an insurance company depends on four important

Identification of markets: Identification of markets means need to

understand the trends in culture and businesses constantly, through
conducting research and analysis. Insurance companies can take this
job on their own or assign it to an external agency. Relying on an
external agency can be risky due to the questionable loyalty of the

Assessment of risks (of the insured and the insurance

corporation) and estimation of losses: Efficiency of actuaries and
assessors of the insurance policies in fixing premiums and settling
claims is foremost an important area for achieving overall efficiency in
operations. The quality of assessing the risk and estimation of losses
has the largest claim on the performance of an insurance company.
Well trained, experienced and expert hands are needed for the

Penetration into and exploitation of markets: Market penetration

or exploitation of a company can be identified with the growth in

number of policies in each type of insurance, growth rate in earnings or

turnover, companys market share, increase in number of branches
and divisions etc. Efforts of the company as a whole and that of the
divisions and branches are assessed to measure the effectiveness.

Control over investment and operating costs: Control over

resources such as men, machines, and materials at each level of the
organization provides measures of efficiency of a unit as well as the
organization. Investment control and expense control are dealt
separately and the effectiveness of managements decisions at
various levels is to be assessed separately.

To find best prospects:

Allocating marketing strategies against market potential.

Estimating potential for specific products within local markets.

Identifying high opportunity areas.

Measuring agency performance relative to market potential.

Optimizing your agency network against market potential.

Attributes to develop marketing strategies:

Channel data: - Useful to know future buying preferences, learning

about products and purchase channels.

Consumer attitudes.

Consumption data: - Useful to evaluate annual premiums, number of

annuities owned, value of annuities, and with which company the
current policy is held.

Effective Strategies for Insurance Agents:

Learn how to construct a mental image for success.

Learn how to find a proper perspective and how to turn off all the
signals that cause people not to buy from you.

Learn how to get and set more appointments.

Learn how to convert a new lead into sales.

Learn how to act when you meet a client for the first time.

Learn how the order in which you explain the types of policies can
double your income.

Take Easy steps to avoid delays in issuing policies.

(About Kotak Mahindra Old Mutual Life Insurance)

Kotak Mahindra is in business since 1985 as a partnership between Uday

Kotak and Mr. Mahindra, and insurance part of their business came into
existence in the year 2001.
Evolution of Insurance business in Kotak Mahindra business is like this:YEAR




Trade Finance


Corporate Finance


Car Finance


Investment Banking


Goldman Sachs


Ford Credit

Brokerage and Distribution

Commercial Vehicle


Consumer Finance


Mutual Fund


Old Mutual Plc

Life Insurance



KMOM- The Partnership and Lineage

A 26% - 74% Joint Venture Between

As stated above Kotak Mahindra Life Insurance has Joint venture with Old
Mutual plc.
Old Mutual Plc is the 12th largest Insurance Company in the world. It has its
base of over 4 million life assurance policyholders. It has one of the best
Payouts among insurers in the world. It has one of the best Solvency
Ratios among insurers in the world. A FTSE 100 financial services group and
ranks as a Fortune Global 500 company.The Old Mutual group manages in
excess of 239 billion pounds in funds (Dec06). The company is 160 years old
and has prominent presence in the United States and the United Kingdom.
Now the question arises that why for the business in India of life insurance
Kotak Mahindra chose Old Mutual plc and vice versa.
Features of Kotak Mahindra and Old Mutual plc at a glance:


Brand Equity

Domain Knowledge

Branch Network


Entrepreneur Employees

Product Innovation

Knowledge of Indian Market

Training Expertise

Access to customer base

Global Perspectives

Distribution Associates

System and Process

Multi Channel Working System


Term Plans

Kotak Term Assurance Plan

Kotak Preferred Term Plan

Endowment Plans

Kotak Endowment Plan

Kotak Money Back Plan

Kotak Child Advantage Plan

Kotak Capital Multiplier Plan

Kotak Retirement Income Plan

Kotak Premium Return Plan

Unit Linked Plans

Kotak Retirement Income Plan (Unit Linked)

Kotak Safe Investment Plan II

Kotak Flexi Plan

Kotak Easy Growth Plan

Kotak Privilege Assurance Plan


Employee Benefits

Kotak Term Group Plan

Kotak Credit-Term Group Plan

Kotak Complete Cover Group Plan

Kotak Gratuity Group Plan

Kotak Superannuation Group Plan


Kotak Gramin Bima Yojna

If we look at the status of Kotak Life Insurances market share in

comparison of other private company in comparison of premium


Market Share (%)

Bajaj Allianz


ICICI Prudential


HDFC Standard Life


SBI Life


Birla Sun Life


Tata AIG


Max New York




Kotak Mahindra Old Mutual



ING Vysya



Reliance Life



Met Life



Sahara Life



Shriram Life


If we talk the growth of Insurance industrys private players in

recent years, the data will reflect:-

Structure of Kotak Life Insurance

Managing Director: GAURANG SHAH


Vice President (Training and Management Development): ARUN


Vice President (HR): SUGATTA DUTTA

Vice President (Distribution Development and Planning) :


Appointed Actuary : JOHN BRYCE

Its hierarchy in Kotak Life Insurance is like this:





HR &

















3. No. of Respondents Holding Kotak Life Insurance



















Networking is needed to be made broad as the number of branches

with Kotak Life Insurance is only 75 and only 7 states are touched by
the company so, there is a huge untapped market available for Kotak

Marketing in terms of the media via advertisements on Television to
small commercials on FM, hoardings and signage etc. has to be made
because there were respondents who havent even heard about Kotak

Life Insurance.
Awareness camp for sub-urban area should be focused.
State and Central Government employees should be targeted because
of reasons like:
They dont have Life Insurance cover other than that provided by
their respective employers and LIC.
Most of them are underinsured.
They have a stable source of income and social security.

Kotak Life Insurance recruits its advisors mainly through personal

reference, through advertisement and through walk-in interviews. They

must also recruit them though placement agencies on trial basis.

Kotak Life Insurance must build its reputation by focusing on service
quality. Better service quality. Better service quality may be in the
Issuing policy in time.
Providing claims in time.
Making customers aware about their status of policy.

During the data collected, it has been found that people have great
awareness about various companies but a lot more has to be done,
especially by smaller companies like Kotak Life Insurance to establish their
market presence.
People are beginning to look beyond LIC for their insurance needs and are
willing to trust private players with their hard earned money.
People in general have been influenced by the marketing activities of
insurance companies. A high penetration of print, radio and TV ad campaigns
over the years is beginning to have its impact now.
Another important trend was in terms of people viewing insurance as a tax
saving and investment instrument as much as protective one.

The general satisfaction levels among public with regards to policy and
agents still requires improvement. Here lies the opportunity for a relatively
new comer like Kotak Life Insurance. LIC has never been known for prompt
service or customer oriented methods but Kotak Life Insurance can build its
reputation based on these factors.



Dear Sir/Madam,
I am a BBA student of Punjab technical university,
Jalandhar , and presently doing a market survey on Customer Buying
Behaviour with a focus on Market Segmentation for Life Insurance Products.
I request you to kindly furnish information on the questionnaire below.
I assure you that your identity shall not be disclosed and the data shall be
used only for academic purpose.


Q 1) Do you have any life insurance policy?

a) YES

b) NO

Q 2) Are you aware about the Life Insurance products or will

prefer to purchase the Life Insurance products of (mark ):
ICICI Prudential Life Insurance

HDFC Standard Life Insurance

SBI Life Insurance
Kotak Life Insurance
TATA AIG Life Insurance
Reliance Life Insurance

Q3) Which companys insurance policy do you have?


Q4) Term of your insurance policy?

a) < 5 years

c) 10 20 years

b) 5 10 years

Q5) What do you think are the benefits of Life Insurance?

a) Covers future uncertainty
b) Tax Savings


c) Investments
d) Comprehensive investment and risk coverage instrument

Q6) Which feature of Life Insurance policy will you consider while
a) Money Back Guarantee
b) Larger Risk Coverage
c) Low Premium
d) Companys Credibility
e) Easy Access to Agents

Q7) How have you bought / would buy a Life Insurance policy?
a) Customer approaching insurance company / agent
b) Insurance company / agent approaching the customer

Q8) Are you satisfied with your Life Insurance policy?

a) Highly Satisfied

b) Satisfied

c) Not So Satisfied



Q9) According to you, what is the right age to buy insurance?

a) < 25 years


c) 35- 45 years



d) > 45 years

e) Anytime


Respondents Profile







(<2 lakhs,

2-5 lakhs,

5-10 lakhs,



Dear Sir/Madam,
JALANDHAR, and presently doing Market Research on LIFE INSURANCE
ADVISORS for KOTAK LIFE INSURANCE, ludhiana. It is requested to
kindly furnish the following information:

Name: _____________________________________ Age: _______________



Contact Nos. : ___________________________________________________
E mail: _________________________________________________________
Q1) Educational Qualification

Post Graduate

Q2) Number of years are you in ludhiana

Less than 5 years
More than 5 years

Q3) Occupation


(Please mention below the type of business/ profession you are in,
in case of service please mention your organisation name and

Q4) Your annual household income

< 2 lakhs

2 5 lakhs
5 10 lakhs
> 10 lakhs

Q5) What is your perception about insurance sector?

Laborious & Lucrative
Laborious but not Rewarding
Easy & Rewarding
Easy but not Rewarding
No Idea

Q6) Are you aware of KOTAK LIFE INSURANCE?


Q7) Are you associated with any insurance company as Life

Insurance Advisor?



Are you satisfied with the company, if so, reasons thereof:


Q8) Would you like to avail a business opportunity with KOTAK


Q9) How much time can you spare for this business opportunity?
a) Few hours daily



c) Cannot commit specific time schedule