PROJECT REPORT

ON
MRKETING STRATEGIES
OF
“LIFE INSURANCE INDUSTRY”

Submitted in partial fulfillment of the requirements

For the award of the degree of

Bachelor of Business administration

Session:- 2018-2019

Affiliated to Maharshi Dayanand University (Rohtak)

Submitted To:- Submitted By:-

Mrs. Tanuja Garg Manisha

(Assistant Professor) BBA 6TH Sem

(Business Administration Dept.) College Roll No.30760

D.A.V Centenary College

NH-3, NIT Faridabad

 ACKNOWLEDGEMENT

To begin with I would like to offer my sincere thanks to all the employee’s of HDFC
STANDARD LIFE INSURANCE Under whose guidance and enlightening pathfinder
navigation, I am able to complete this project. In particular I would like to thanks all my
colleagues at my job place for their co-operation and contribution. I am very thankful to
D.A.V Centenary College, Faridabad, faculty guide, my Training Officer incharge, and other
staff members, colleagues and friends for their encouragement, support, guidance and for
undergoing management training and preparing the training report.

MANISHA
 TABLE OF CONTENT

CHAPTER TOPIC PAGE NO.

1. INTRODUCTION TO THE TOPIC 1-4

2. REVIEW OF LITRETURE 5-11

3. INDUSTRIAL PROFILE 12-19

4. STUDY OF COMPANIES 20-38

5. RESEARCH METHODOLOGY 39-43

A. OBJECTIVES OF THE STUDY

B. RESEARCH DESIGN

 METHODS OF DATA COLLECTION

 DEFINE POPULATION

 SAMPLING UNIT

 SAMPLING METHOD

 SIZE OF SAMPLING

C. LIMITATIONS OF THE STUDY

6. DATA ANALYSIS & INTERPRETATION 44-54

7. CONCLUSION & SUGGESTIONS 55-57

8. BIBLIOGRAPHY 58-59

9. ANNEXURE 60-63
 CHAPTER-1
INTRODUCTION
TO THE
TOPIC
 INTRODUCTION OF THE INDUSTRY

INTRODUCTION

The Insurance sector in India governed by Insurance Act, 1938, the Life Insurance Corporation
Act, 1956 and General Insurance Business (Nationalisation) Act, 1972, Insurance Regulatory and
Development Authority (IRDA) Act, 1999 and other related Acts. With such a large population
and the untapped market area of this population Insurance happens to be a very big opportunity
in India. Today it stands as a business growing at the rate of 15-20 per cent annually. Together
with banking services, it adds about 7 per cent to the country’s GDP .In spite of all this growth
the statistics of the penetration of the insurance in the country is very poor. Nearly 80% of Indian
populations are without Life insurance cover and the Health insurance. This is an indicator that
growth potential for the insurance sector is immense in India. It was due to this immense growth
that the regulations were introduced in the insurance sector and in continuation “Malhotra
Committee” was constituted by the government in 1993 to examine the various aspects of the
industry. The key element of the reform process was Participation of overseas insurance
companies with 26% capital. Creating a more efficient and competitive financial system suitable
for the requirements of the economy was the main idea behind this reform.

Since then the insurance industry has gone through many sea changes .The competition LIC
started facing from these companies were threatening to the existence of LIC .since the
liberalization of the industry the insurance industry has never looked back and today stand as the
one of the most competitive and exploring industry in India. The entry of the private players and
the increased use of the new distribution are in the limelight today. The use of new distribution
techniques andS the IT tools has increased the scope of the industry in the longer run.
HISTORY OF INSURANCE SECTOR

The business of life insurance in India in its existing form started in India in the year 1818 with
the establishment of the Oriental Life Insurance Company in Calcutta. Some of the important
milestones in the life insurance business in India are given in the table 1.

Table 1: milestone’s in the life insurance business in India

Year Milestones in the life insurance business in India

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

1928 The Indian Insurance Companies Act enacted to enable the government to
collect statistical information about both life and non-life insurance
businesses

1938 Earlier legislation consolidated and amended to by the Insurance Act with
the objective of protecting the interests of the insuring public.

1956 245 Indian and foreign insurers and provident societies taken over by the
central government and nationalised. LIC formed by an Act of Parliament,
viz. LIC Act, 1956, with a capital contribution of Rs. 5 crore from the
Government of India.

The General insurance business in India, on the other hand, can trace its roots to the Triton
Insurance Company Ltd., the first general insurance company established in the year 1850 in
Calcutta by the British. Some of the important milestones in the general insurance business in
India are given in the table 2.

Table 2: milestone’s in the general insurance business in India

Year Milestones in the general insurance business in India

1907 The Indian Mercantile Insurance Ltd. set up, the first company to transact
all classes of general insurance business

1957 General Insurance Council, a wing of the Insurance Association of India,

frames a code of conduct for ensuring fair conduct and sound business
practices

1968 The Insurance Act amended to regulate investments and set minimum
solvency margins and the Tariff Advisory Committee set up.

1972 The General Insurance Business (Nationalisation) Act, 1972 nationalised

the general insurance business in India with effect from 1st January 1973.

107 insurers amalgamated and grouped into four companies viz. the
National Insurance Company Ltd., the New India Assurance Company Ltd.,
the Oriental Insurance Company Ltd. and the United India Insurance
Company Ltd. GIC incorporated as a company.

Indian Insurance Market – History

Insurance Market- Present:

The insurance sector was opened up for private participation four years ago. For years now, the
private players are active in the liberalized environment. The insurance market have witnessed
dynamic changes which includes presence of a fairly large number of insurers both life and non-
life segment. Most of the private insurance companies have formed joint venture partnering well
recognized foreign players across the globe.

There are now 29 insurance companies operating in the Indian market – 14 private life insurers,
nine private non-life insurers and six public sector companies. With many more joint ventures in
the offing, the insurance industry in India today stands at a crossroads as competition intensifies
and companies prepare survival strategies in a detariffed scenario.

There is pressure from both within the country and outside on the Government to increase the
foreign direct investment (FDI) limit from the current 26% to 49%, which would help JV
partners to bring in funds for expansion.

There are opportunities in the pensions sector where regulations are being framed. Less than 10
% of Indians above the age of 60 receive pensions. The IRDA has issued the first licence for a
standalone health company in the country as many more players wait to enter. The health
insurance sector has tremendous growth potential, and as it matures and new players enter,
product innovation and enhancement will increase. The deepening of the health database over
time will also allow players to develop and price products for larger segments of society.

State Insurers Continue To Dominate:

 There may be room for many more players in a large underinsured market like India with a
population of over one billion. But the reality is that the intense competition in the last five years
has made it difficult for new entrants to keep pace with the leaders and thereby failing to make
any impact in the market.

Also as the private sector controls over 26.18% of the life insurance market and over 26.53% of
the non-life market, the public sector companies still call the shots.

The country’s largest life insurer, Life Insurance Corporation of India (LIC), had a share of
74.82% in new business premium income in November 2005.

Similarly, the four public-sector non-life insurers – New India Assurance, National Insurance,
Oriental Insurance and United India Insurance – had a combined market share of 73.47% as of
October 2005. ICICI Prudential Life Insurance Company continues to lead the private sector
with a 7.26% market share in terms of fresh premium, whereas ICICI Lombard General
Insurance Company is the leader among the private non-life players with a 8.11% market share.
ICICI Lombard has focused on growing the market for general insurance products and increasing
penetration within existing customers through product innovation and distribution.

Reaching Out To Customers:

No doubt, the customer profile in the insurance industry is changing with the introduction of
large number of divergent intermediaries such as brokers, corporate agents, and bank assurance.

The industry now deals with customers who know what they want and when, and are more
demanding in terms of better service and speedier responses. With the industry all set to move to
a detariffed regime by 2007, there will be considerable improvement in customer service levels,
product innovation and newer standards of underwriting.

Intense Competition:
In a de-tariffed environment, competition will manifest itself in prices, products, underwriting
criteria, innovative sales methods and creditworthiness. Insurance companies will vie with each
other to capture market share through better pricing and client segmentation.

The battle has so far been fought in the big urban cities, but in the next few years, increased
competition will drive insurers to rural and semi-urban markets.

Global Standards:

While the world is eyeing India for growth and expansion, Indian companies are becoming
increasingly world class. Take the case of LIC, which has set its sight on becoming a major
global player following a Rs280-crore investment from the Indian government. The company
now operates in Mauritius, Fiji, the UK, Sri Lanka, Nepal and will soon start operations in Saudi
Arabia. It also plans to venture into the African and Asia-Pacific regions in 2006.

The year 2005 was a testing phase for the general insurance industry with a series of catastrophes
hitting the Indian sub-continent.

However, with robust reinsurance programmes in place, insurers have successfully managed to
tide over the crisis without any adverse impact on their balance sheets.

With life insurance premiums being just 2.5% of GDP and general insurance premiums being
0.65% of GDP, the opportunities in the Indian market place is immense. The next five years will
be challenging but those that can build scale and market share will survive and prosper.

LIFE INSURANCE CORPORATION OF INDIA (LIC):

Life Insurance Corporation of India (LIC) was formed in September, 1956 by an Act of
Parliament, viz., Life Insurance Corporation Act, 1956, with capital contribution from the
Government of India. The then Finance Minister, Shri C.D. Deshmukh, while piloting the bill,
outlined the objectives of LIC thus: to conduct the business with the utmost economy, in a spirit
of trusteeship; to charge premium no higher than warranted by strict actuarial considerations; to
invest the funds for obtaining maximum yield for the policy holders consistent with safety of the
capital; to render prompt and efficient service to policy holders, thereby making insurance
widely popular.

Since nationalisation, LIC has built up a vast network of 2,048 branches, 100 divisions and 7
zonal offices spread over the country. The Life Insurance Corporation of India also transacts
business abroad and has offices in Fiji, Mauritius and United Kingdom. LIC is associated with
joint ventures abroad in the field of insurance, namely, Ken-India Assurance Company Limited,
Nairobi; United Oriental Assurance Company Limited, Kuala Lumpur and Life Insurance
Corporation (International) E.C. Bahrain. The Corporation has registered a joint venture
company in 26th December, 2000 in Kathmandu, Nepal by the name of Life Insurance
Corporation (Nepal) Limited in collaboration with Vishal Group Limited, a local industrial
Group. An off-shore company L.I.C. (Mauritius) Off-shore Limited has also been set up in 2001
to tap the African insurance market.

Some Areas of Future Growth:

Life Insurance:

The traditional life insurance business for the LIC has been a little more than a savings policy.
Term life (where the insurance company pays a predetermined amount if the policyholder dies
within a given time but it pays nothing if the policyholder does not die) has accounted for less
than 2% of the insurance premium of the LIC (Mitra and Nayak, 2001). For the new life
insurance companies, term life policies would be the main line of business.

Health Insurance:
Health insurance expenditure in India is roughly 6% of GDP, much higher than most other
countries with the same level of economic development. Of that, 4.7% is private and the rest is
public. What is even more striking is that 4.5% are out of pocket expenditure (Berman, 1996).
There has been an almost total failure of the public health care system in India. This creates an
opportunity for the new insurance companies.

Thus, private insurance companies will be able to sell health insurance to a vast number of
families who would like to have health care cover but do not have it.

Pension:

The pension system in India is in its infancy. There are generally three forms of plans: provident
funds, gratuities and pension funds. Most of the pension schemes are confined to government
employees (and some large companies). The vast majority of workers are in the informal sector.
As a result, most workers do not have any retirement benefits to fall back on after retirement.
Total assets of all the pension plans in India amount to less than USD 40 billion.

Therefore, there is a huge scope for the development of pension funds in India. The finance
minister of India has repeatedly asserted that a Latin American style reform of the privatized
pension system in India would be welcome (Roy, 1997). Given all the pros and cons, it is not
clear whether such a wholesale privatization would really benefit India or not (Sinha, 2000).

PRESENT SCENARIO OF INSURANCE INDUSTRY

 India with about 200 million middle class household shows a huge untapped
potential for players in the insurance industry. Saturation of markets in many
developed economies has made the Indian market even more attractive for global
insurance majors. The insurance sector in India has come to a position of very high
potential and competitiveness in the market. Indians, have always seen life
insurance as a tax saving device, are now suddenly turning to the private sector
that are providing them new products and variety for their choice.

 Consumers remain the most important centre of the insurance sector. After the
entry of the foreign players the industry is seeing a lot of competition and thus
improvement of the customer service in the industry. Computerisation of
operations and updating of technology has become imperative in the current
scenario. Foreign players are bringing in international best practices in service
through use of latest technologies

 The insurance agents still remain the main source through which insurance
products are sold. The concept is very well established in the country like India but
still the increasing use of other sources is imperative. At present the distribution
channels that are available in the market are listed below.

Direct selling

Corporate agents

Group selling

Brokers and cooperative societies

 Customers have tremendous choice from a large variety of products from pure
term (risk) insurance to unit-linked investment products. Customers are offered
unbundled products with a variety of benefits as riders from which they can
 choose. More customers are buying products and services based on their true
needs and not just traditional moneyback policies, which is not considered very
appropriate for long-term protection and savings. There is lots of saving and
investment plans in the market. However, there are still some key new products
yet to be introduced - e.g. health products.

 The rural consumer is now exhibiting an increasing propensity for insurance

products. A research conducted exhibited that the rural consumers are willing to
dole out anything between Rs 3,500 and Rs 2,900 as premium each year. In the
insurance the awareness level for life insurance is the highest in rural India, but
the consumers are also aware about motor, accidents and cattle insurance. In a
study conducted by MART the results showed that nearly one third said that they
had purchased some kind of insurance with the maximum penetration skewed in
favor of life insurance. The study also pointed out the private companies have
huge task to play in creating awareness and credibility among the rural populace.
The perceived benefits of buying a life policy range from security of income bulk
return in future, daughter's marriage, children's education and good return on
savings, in that order, the study adds.

APPLICATION OF INFORMATION TECHNOLOGY IN INSURANCE SECTOR :

There is a evolutionary change in the technology that has revolutionized the entire insurance
sector. Insurance industry is a data-rich industry, and thus, there is a need to use the data for trend
analysis and personalization.

With increased competition among insurers, service has become a key issue. Moreover,
customers are getting increasingly sophisticated and tech-savvy. People today don’t want to
accept the current value propositions, they want personalized interactions and they look for more
and more features and add ones and better service

The insurance companies today must meet the need of the hour for more and more personalized
approach for handling the customer. Today managing the customer intelligently is very critical
for the insurer especially in the very competitive environment. Companies need to apply
different set of rules and treatment strategies to different customer segments. However, to
personalize interactions, insurers are required to capture customer information in an integrated
system.

With the explosion of Website and greater access to direct product or policy information, there is
a need to developing better techniques to give customers a truly personalized experience.
Personalization helps organizations to reach their customers with more impact and to generate
new revenue through cross selling and up selling activities. To ensure that the customers are
receiving personalized information, many organizations are incorporating knowledge database-
repositories of content that typically include a search engine and lets the customers locate the all
document and information related to their queries of request for services. Customers can hereby
use the knowledge database to mange their products or the company information and invoices,
claim records, and histories of the service inquiry. These products also may be able to learn from
the customer’s previous knowledge database and to use their information when determining the
relevance to the customers search request
 CHAPTER-2

REVIEW OF LITERARURE

COMPARISON BETWEEN RETURN ON ULIPS AND

CONVENTIONAL POLICIES
ULIP VS TRADITIONAL INSURANCE PLAN

It wasn't too long back, when the good old endowment plan was the preferred way to insure
oneself against an eventuality and to set aside some savings to meet one's financial objectives.
Then insurance was thrown open to the private sector. The result was the launch of a wide
variety of insurance plans, including the ULIPs.

Two factors were responsible for the advent of ULIPs on the domestic insurance horizon. First
was the arrival of private insurance companies on the domestic scene. ULIPs were one of the
most significant innovations introduced by private insurers. The other factor that saw investors
take to ULIPs was the decline of assured return endowment plans. Of course, the regulator --
IRDA (Insurance and Regulatory Development Authority) was instrumental in signaling the end
of assured return plans.

Today, there is just one insurance plan from LIC (Life Insurance Corporation) -- Komal Jeevan --
that assures return to the policyholder.

These were the two factors most instrumental in marking the arrival of ULIPs, but another factor
that has helped their cause is a booming stock market. While this now appears as one of the
primary reasons for their popularity, we believe ULIPs have some fundamental positives like
enhanced flexibility and merging of investment and insurance in a single entity that have really
endeared them to individuals.

SUM ASSURED:

Perhaps the most fundamental difference between ULIPs and traditional endowment plans is in
the concept of premium and sum assured.
When you want to take a traditional endowment plan, the question your agent will ask you are --
how much insurance cover do you need? Or in other words, what is the sum assured you are
looking for? The premium is calculated based on the number you give your agent. With a ULIP it
works in reverse. When you opt for a ULIP, you will have to answer the question -- how much
premium can you pay? Depending on the premium amount you state, you are offered a sum
assured as a multiple of the premium. For instance, if you are comfortable paying Rs 10,000
annual premium on your ULIP, the insurance company will offer you a sum assured of say 5 to
20 times the premium amount. In the case of LIC's ULIP, the sum assured--premium relationship
works the traditional way. So you need to state how much sum assured you are looking for and
your premium is calculated as 1/10th the sum assured. If you have opted for a sum assured of Rs
100,000, your annual premium will be Rs 10,000.

INVESTMENTS:

Traditionally, endowment plans have invested in government securities, corporate bonds and the
money market. They have shirked from investing in the stock markets, although there is a
provision for the same. However, for some time now, endowment plans have discarded their
traditional outlook on investing and allocate about 10%-15% of monies to stocks. This
percentage varies across life insurance companies.

ULIPs have no such constraints on their choice of investments. They invest across the board in
stocks, government securities, corporate bonds and money market instruments. Of course, within
a ULIP there are options wherein equity investments are capped.

EXPENSES:

ULIPs are considered to be very expensive when compared to traditional endowment plans. This
notion is rooted more in perception than reality.
Sale of a traditional endowment plan fetches a commission of about 30% (of premium) in the
first year and 60% (of premium) over the first five years. Then there is ongoing commission in
the region of 5%. Sale of a ULIP fetches a relatively lower commission ranging from as low as
5% to 30% of premium (depending on the insurance company) in the first 1-3 years. After the
initial years, it stabilizes at 1-3%. Unlike endowment plans, there are no IRDA regulations on
ULIP commissions. Mortality expenses for ULIPs and traditional endowment plans remain the
same as also the administration charges. One area where ULIPs prove to be more expensive than
traditional endowment is in fund management. Since ULIPs have an equity component that
needs to be managed actively, they incur fund management charges. These charges fluctuate in
the 0.80%-1.50% (of premium) range.

FLEXIBILITY:

As we mentioned, one aspect that gives ULIPs an edge over traditional endowment is flexibility.
ULIPs offer a host of options to the individual based on his risk profile.

There are insurance companies that offer as many as five options within a ULIP with the equity
component varying from zero to a maximum of 100%. You can select an option that best fits
your objectives and risk-taking capacity.

Having selected an option, you still have the flexibility to switch to another option. Most
insurance companies allow a number of free 'switches' in a year.

Another innovative feature with ULIPs is the 'top-up' facility. A top-up is a one-time additional
investment in the ULIP over and above the annual premium. This feature works well when you
have a surplus that you are looking to invest in a market-linked avenue, rather than stash away in
a savings account or a fixed deposit.

ULIPs also have a facility that allows you to skip premiums after regular payment in the initial
years. For instance, if you have paid your premiums religiously over the first three years, you can
skip the fourth year's premium. The insurance company will make the necessary adjustments
from your investment surplus to ensure the policy does not lapse.
With traditional endowment, there are no investment options. You select the only option you
have and must remain with it till maturity. There is also no concept of a top-up facility. Your
premium amount cannot be enhanced on a one-time basis and skipped premiums will result in
your policy lapsing.

TRANSPARENCY:

ULIPs are also more transparent than traditional endowment plans. Since they are market-linked,
there is a price per unit. This is the net asset value (NAV) that is declared on a daily basis. A
simple calculation can tell you the value of your ULIP investments. Over time you know exactly
how your ULIP has performed.

ULIPs also disclose their portfolios regularly. This gives you an idea of how your money is being
managed. It also tells you whether or not your mutual fund and/or stock investments coincide
with your ULIP investments. If they are, then you have the opportunity to do a rethink on your
investment strategy across the board so as to ensure you are well diversified across investment
avenues at all times.

With traditional endowment, there is no concept of a NAV. However, insurers do send you an
annual statement of bonus declared during the year, which gives you an idea of how your
insurance plan is performing.

Traditional endowment also does not have the practice of disclosing portfolios. But given that
there are provisions that ensure a large chunk of the endowment portfolio is in high quality
(AAA/sovereign rating) debt paper, disclosure of portfolios is likely to evoke little investor
interest.

LIQUIDITY:

Another flexibility that ULIPs offer the individual is liquidity. Since ULIP investments are NAV
based it is possible to withdraw a portion of your investments before maturity. Of course, there is
an initial lock – in period (3 years) after which the withdrawal is possible.
TAX BENEFITS;

The return on the ULIPs till date has been on an average 11.45% and that on the conventional
policies is 6% (both calculated on IRR basis). Thus, the return on the ULIPs outperforms the
returns on the conventional policies. However, the returns on the Postal Life Insurance comes
close to the returns on ULIPs i.9.75%

DANGERS FACED BY CONVENTIONAL POLICIES:

The source of high returns for companies that dealt with conventional insurance products in the
form of assured returns has drained out. It will thus be, VERY DIFFICULT for these companies
to meet their contractual obligations.
The cash outflow for the company is 13, 20,000/- and the insurance company gets only 1,
20,000/- (the readers should note that these are in paid till the last year and not at the initial
stage). For this the company will have to earn a return @ 18% p.a. (compounded quarterly)
which in today’s market situation is very difficult. The system is opaque.
The insurer is not aware about where the amount is invested.
The returns are lesser in longer term as compared to ULIP.
ULIP allows flexibility to increase returns at higher risk or moderate returns at low risk
depending on the risk appetite of the client.
ULIP is an excellent mix of Insurance & Investments.
The long term return (7 yrs & above) on any Equity Market in the world is double digit positive,
except during the times of Great Depression.
 PERCEIVED DANGERS AND POINTS TO BE KEPT IN MIND

WHILE INVESTING IN ULIP

Investment and returns depend on the performance of the Markets which can get volatile.
The initial cost of ULIP is high, thus making Mutual Funds a better investment opportunity than
any insurance product.
Converting the ULIPs to a Mutual Fund policy and marketing on these terms by some Private
Sector.The knowledge of the agent of ULIPs is sometimes limited and he is thus, is not in a
position to explain to the client the risks and dangers associated with ULIPs.
Large positions by the clients to Risky Fund.

As with most insurance polices, life assurance is a contract between the insurer and the policy
owner (policyholder) whereby a benefit is paid to the designated Beneficiary (or Beneficiaries) if
an insured event occurs which is covered by the policy. To be a life policy the insured event must
be based upon life (or lives) of the people named in the policy. Insured events that may be
covered include - death and accidental death.

Life policies are legal contracts and the terms of the contract describe the limitations of the
insured events. Specific exclusions are often written into the contract to limit the liability of the
insurer; for example claims relating to suicide, fraud, war, riot and civil commotion.

Life based contracts tend to fall into two major categories:

 a) Protection Policies - designed to provide a benefit in the event of specified event,
typically a lump sum payment.

b) Investment Policies - where the main objective is to facilitate the growth of capital by
regular or single premiums.

Insurance Regulatory and Development Authority (IRDA) Act, 1999

Prior to 1999 there were only two players in the market:

1 Life Insurance Corporation Of India (LIC)

2.General Insurance Corporation (GIC)

Then to protect the interests of the policyholders and to ensure growth of the insurance industry,
IRDA was set up. After this the private players started entering the market.

Constitution of IRDA

1. The insurance regulatory and development authority consist of the following members:

a) Chairperson

b) Less than 5 whole time members

c) Less than 4 part time members.

2. Members should be person of ability, integrity & standing.

3. They should have experience in the field of

4. Life Insurance

5. General Insurance

6. Actuarial science

7. Finance

8. Economics

ULIP(UNIT-LINKE INSURANCE PLAN)

Unit-linked insurance plans, ULIPs, are distinct from the more familiar with profits policies sold
for decades by the Life Insurance Corporation. With profits policies are called so because
investment gains (profits) are distributed to policyholders in the form of a bonus announced
every year. ULIPs also serve the same function of providing insurance protection against death
and provision of long-term savings, but they are structured differently. In with profits policies,
the insurance company credits the premium to a common pool called the life fund, after setting
aside funds for the risk premium on life insurance and management expenses. Every year, the
insurer calculates how much has to be paid to settle death and maturity claims. The surplus in the
life fund left after meeting these liabilities is credited to policyholder’s accounts in the form of a
bonus. In a ULIP too, the insurer deducts charges towards life insurance (mortality charges),
administration charges and fund management charges. The rest of the premium is used to invest
in a fund that invests money in stocks or bonds. The number of units represents the
policyholder’s share in the fund. The value of the unit is determined by the total value of all the
investments made by the fund divided by the number of units. If the insurance company offers a
range of funds, the insured can direct the company to invest in the fund of his choice. Insurers
usually offer three choices an equity (growth) fund, balanced fund and a fund that invests in
bonds. In both with profits policies as well as unit-linked policies, a large part of the first year
premium goes towards paying the agents commissions.
How do these ULIPs work?

Unit-linked insurance policies promise a host of benefits. While some of these features are
known, it is important to look at the fine print. The well-known points mentioned prominently
are that the charges are mentioned to you clearly, you have a choice of funds; your fund value is
NAV (net asset value) based and also your policy need not necessarily lapse if you are unable to
pay the premiums. In the fine print, there is a clause that states that if, after a minimum premium
payment is made, you are unable to pay the subsequent premiums, the cover under the policy
will continue and the premiums towards the life cover will be debited from the unit fund. In case
the unit value is inadequate to cover charges, the policy will terminate.
Let’s take a numerical example of how this works. Suppose you are paying a premium of Rs
10,000 per year and the sum assured by the policy is Rs 5, 00,000. In a unit-linked policy, part of
the premiums you pay will be allocated towards the life cover or sum assured and the balance
would be invested in a fund of your choice. Let’s assume that Rs 4,000 per year is going towards
the expenses to maintain the fund as well as your life cover and the balance Rs 6,000 is invested
in a debt fund. This policy is for 15 years. If at the end of five years you are unable to pay your
premiums, assuming a growth rate of 5% per annum on your fund, the balance in your fund at
the end of five years would be Rs 34,811. Now, out of this balance, every year the company
would deduct Rs 4,000 in order to keep your policy alive. So every year, your fund will reduce
by Rs 4,000 but the balance will continue to grow at 5%. Thus, at the end of the 15th year, you
will be left with a fund balance of Rs 6,711. This is assuming that you do not pay any premiums
after the fifth year. In this case, there is also no minimum balance required to be maintained in
the fund. In case such a minimum balance is required, this could lead to lapse of the policy. All
this sounds okay so long as the growth rate is 5%.
At a lower growth rate, your fund value at the end of the fifth year may not be sufficient to
sustain the deductions for the remaining term. For instance, let’s assume that the fund grows at
only 2% per annum. In such a case, at the end of the twelfth year, your fund will have a value of
Rs 3,263 and that will not be sufficient to make the deductions for the next year. In such a
scenario, your policy will terminate.
The next thing to remember is that in case of a death claim, the insurance company promises to
pay the sum assured or value of fund, whichever is higher. While making this promise, it is
assumed that you will pay your entire premiums. If you stop paying premiums, then obviously
the value of the fund is bound to be lower than the sum assured, unless there is a very high
growth. Therefore, insurers vary their deductions for risk cover once this option comes into
force. These deductions vary slightly between companies. In case of ICICI Pru, the deductions in
amounts of risk cover change from year to year in order to cover the risks. That means in case of
ICICI Pru, the deduction could be higher if the company has to cover its risks. In Aviv’s case too,
the deductions from the fund for risk cover vary from year to year depending on the age of the
policyholder and the sum at risk. In the case of Reliance; every year a fixed amount of risk cover
and other charges would be recovered from your fund. At the time of death claim, the difference
between sum assured and unpaid premiums would be paid to you. In our example, on death at
the end of say 10th year, the sum assured of Rs 5 lakhs minus the unpaid portion of premiums
from fourth to ninth year - Rs 54,000 - will be paid out. This applies only in cases where the sum
assured is greater than the fund value. In ICICI Pru and Om Kotak case, this facility is available
after at least three years’ payments are made. Aviva Life Insurance Company provides a similar
clause in its unit-linked policies but there the minimum term for premium payment before
exercising this option is two years. In the case of Birla Sun Life, the calculation is a little
different. The company pays the sum assured plus the fund value as claim. If a policyholder does
not pay a premium, an automatic loan is provided to him from whom the premium is paid.

There is no impact on the sum assured. However, the death benefit would be reduced by the
amount of loan availed. But if the fund value is inadequate to cover the charges and fees, the
policy will lapse.
Instead of going into these calculations, if you are really unable to pay the premium, you might
be better off with another option that the company provides. At the end of the fifth year, you can
reduce your sum assured to zero. That means the insurance company will deduct only the fund
management fee from your fund balance and not the life cover charges. Your fund will reduce to
the extent of the fund management fees. On death or maturity, the beneficiaries would receive
only the fund value
Are ULIPs similar to mutual funds?

Structure wise ULIPs are similar to mutual funds but both differ in their objective. Because of
the high first-year charges, mutual funds are a better option if you have a five-year horizon. But
if you have a horizon of 10 years or more, then ULIPs have an edge. To explain this further, a
ULIP has high first-year charges towards acquisition (including agents’ commissions). As a
result, they find it difficult to outperform mutual funds in the first five years. But in the long-
term, ULIP managers have several advantages over mutual fund managers. Since policyholder
premiums come at regular intervals, investments can be planned out more evenly. Mutual fund
managers cannot take a similar long-term view because they have bulk investors who can move
money in and out of schemes at short notice.

Why do insurers prefer ULIPs?

Insurers love ULIPs for several reasons. Most important of all, insurers can sell these policies
with less capital of their own than what would be required if they sold traditional policies.
In traditional with profits policies, the insurance company bears the investment risk to the extent
of the assured amount. In ULIPs, the policyholder bears most of the investment risk.
Since ULIPs are devised to mobilize savings, they give insurance companies an opportunity to
get a large chunk of the asset management business, which has been traditionally dominated by
mutual funds. The return on the ULIPs is calculated on the basis of Net Asset Values (NAVs) of
various funds. These NAVs are calculated as the value of Investments (in Stocks or Bonds)
divided by the outstanding number of Units.
 CHAPTER-3

COMPANY PROFILE

COMPANY PROFILE
HDFC Standard Life Insurance Co. Ltd. is a joint venture between HDFC Ltd., India's largest
housing finance institution and Standard Life Assurance Company, Europe's largest mutual life
company. It was the first life insurance company to be granted a certificate of registration by the
IRDA on the 23rd of October 2000.

Standard Life, UK was founded in 1825 and has experience of over 180 years. Companies. The
company is rated as "very strong" by Standard & Poor's (AA) and "excellent" by Moody's (Aa2).

HDFC Standard Life's cumulative premium income, including the first year premiums and
renewal premiums is Rs. 672.3 Crores for the financial year, Apr-Nov 2005. So far the company
has covered over 11,00,000 individuals and has declared 5th consecutive bonus in as many years
for its 'with profit' policyholders.

HDFC Standard Life Insurance Co. Ltd was incorporated on 14th august 2000. It is a joint
venture between Housing Development Finance Corporation Limited (HDFC Ltd.) India and UK
based Standard Life Company. Both the joint venture partners being one of the leaders in their
respective areas came together in this 81.4:18.6 joint venture to form HDFC Standard Life .

The MD and CEO of HDFC Standard Life Mr. Deepak Satwalekar, has given the company new
directions and has helped the company achieve the status it currently enjoys. HDFC Standard
Life brings to you a whole range of insurance solutions be it group or individual or NAV services
for corporations, they can be easily customized as per specific needs.

HDFC Standard Life Insurance India boasts of covering around 8.7 lakh lives by March'2007.
The gross incomes standing at a whopping Rs. 2, 856 crores, HDFC Standard Life Insurance
Corporation is sure to become one of the leaders and the first preference for any life insurance
customer.

The Bank assurance partners of HDFC Standard Life Insurance Co Ltd are HDFC, HDFC Bank
India Limited, Union Bank of India, Indian Bank, Bank of Baroda, Saraswati Bank and Bajaj .

The various products by HDFC Standard Life include:

INDIVIDUAL PRODUCTS:
Protection Plans

 Term Assurance Plan

 Loan Cover Term

 Assurance Plan

Investment Plans:

 Single Premium Whole Life Plan

Pension Plans:

 Personal Pension Plan

 Unit Linked Pension Plan

 Unit Linked Pension Plus

Savings Plans:

 Endowment Assurance Plan

 Unit Linked Endowment

 Unit Linked Endowment Plus

 Money Back Plan

 Children's Plan

 Unit Linked Youngster

 Unit Linked Youngster Plus

GROUP PRODUCTS
  Group Term Insurance
 Group Variable Term Insurance

 Group Unit Linked Plan

OTHER PRODUCTS

 Rural Products
 Social Development Insurance Plan

 Tax Benefit Schemes

The premium payment options available to the customers vary from online payment to
direct desk payments at the HDFC Standard Life Branches, by courier services or in drop
boxes provided. You can also pay by ECS or Automatic Debit System or credit cards or
standing instruction mandate.

.
The lapsation and renewal policy of HDFC Standard Life are clearly defined on the
official website. Online renewal forms are also available.
HDFC Standard Life Insurance Company Ltd. is one of India's leading private life
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 The Standard Life Insurance Company, a leading
provider of financial services from the United Kingdom. Both the promoters are well known for
their ethical dealings and financial strength and are thus committed to being a long-term player
in the life insurance industry.

life 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 one of the subsidiaries of Standard
Life plc, leading providers of financial services in the United Kingdom. Both the promoters are
well known for their ethical dealings and financial strength and are thus committed to being a
long-term player in the life insurance industry - all-important factors to consider when choosing
your insurer. Our key strengths Financial Expertise As a joint venture of leading financial
services groups, HDFC Standard Life has the,

financial expertise required to manage your long-term investments safely and efficiently. Range
of Solutions We have a range of individual and group solutions, which can be easily customized
to specific needs. Our group solutions have been designed to offer you complete flexibility
combined with a low charging structure. Track Record so far Our cumulative premium income,
including the first year premiums and renewal premiums is Rs. 1532.21 Crores Apr-Mar 2005 -
06. We have covered over 1.6 million individuals out of which over 5,00,000 lives have been
covered through our group business tie-ups.

TYPES OF PRODUCTS

GROUP PRODUCTS:

One-stop shop for employee-benefit solutions

HDFC Standard Life has the most comprehensive list of products for progressive employers who
wish to provide the best and most innovative employee benefit solutions to their employees. We
offer different products for different needs of employers ranging from term insurance plans for
pure protection to voluntary plans such as superannuation and leave encashment.

We now offer the following group products to our esteemed corporate clients:

a) Group Term Insurance

b) Group Variable Term Insurance

c) Group Unit-Linked Plan

 An investment solution that provides funding vehicle to manage corpuses with Gratuity,
Defined Benefit or Defined Contribution Superannuation or Leave Encashment schemes of
your company

 Also suitable for other employee benefit schemes such as salary saving schemes and wealth
management schemes

Individual Products

We at HDFC Standard Life realise that not everyone has the same kind of needs. Keeping this in
mind, we have a varied range of Products that you can choose from to suit all your needs. These
will help secure your future as well as the future of your family.

Protection Plans:

You can protect your family against the loss of your income or the burden of a loan in the event
of your unfortunate demise, disability or sickness. These plans offer valuable peace of mind .

Our Protection range includes:

a) Term Assurance Plan

b) Loan Cover Term Assurance Plan

c) Home Loan Protection Plan

Investment Plans:

Our investment products are well suited to meet your long-term needs.
Our Investment range includes

a) Single Premium Whole Of Life plan

b) Unit Linked Wealth Maximiser

Pension Plans:

Our Pension Plans help you secure your financial independence even after retirement.
Our Pension range includes :-

 Personal Pension Plan

 Unit Linked Pension

 Unit Linked Pension Plus

 Unit Linked Pension II

 Unit Linked Pension Maximiser II

Our Immediate Annuity plan will aid you in receiving income post retirement and securing you
financial independence.

Savings Plans:

Our Savings Plans offer you flexible options to build savings for your future needs such as
buying a dream home or fulfilling your children’s immediate and future needs.
Our Savings range includes
a) Endowment Assurance Plan

b) Assurance Plan

c) Savings Assurance Plan

d) Children’s Plan

e) Money Back

f) Unit Linked Endowment

g) Unit Linked Endowment Plus

h) Unit Linked Endowment Suvidha

I) Unit Linked Endowment Suvidha Plus

J) Unit Linked Endowment II

k) Unit Linked Endowment Plus II

l) U nit Linked Young Star

m) Unit Linked Young Star Plus

n) Unit Linked Young Star Suvidha

o) Unit Linked Young Star Suvidha Plus

p) Unit Linked Young Star II

q) Unit Linked Young Star Plus II

r) Unit Linked Enhanced Life Protection II

s) SimpliLife
Rural Product:

HDFC GRAMIN BIMA MITRA YOJANA

Timely preparedness for uncertainties of the future can go a long way towards living a life of
confidence. HDFC Gramin Bima Mitra Yojana provides this preparedness through robust returns
even on an investment as small as Rs. 500 by adding 50% to your original investment in 3 years.
In addition to the guaranteed returns, the plan offers the security of a life insurance cover and the
flexibility to exit prematurely. HDFC Gramin Bima Mitra Yojana is a special offering from
HDFC Standard Life, exclusively for the benefit of our rural customers.

Eligibility:

To be eligible for this plan, age at entry of the life assured must be between 18 and 50 years of
age. This policy can be taken only on a single-life basis.

Premium:

A single premium of Rs. 500 is due on the date of commencement. There are no further
premium/s due.
Social Product

Development Insurance Plan:

Development Insurance plan is an insurance plan which provides life cover to members of a
Development Agency for a term of one year. On the death of any member of the group insured
during the year of cover, a lump sum is paid to that member’s beneficiaries to help meet some of
the immediate financial needs following their loss.

Eligibility:

Members of the development agency and their spouses with:

- Minimum age at the start of the policy 18 years last birthday

- Maximum age at the start of policy 50 years last birthday

Premium Payments:

The premium to be paid will be quoted per member in the group and will be the same for all
members of the group.
The premium can only be paid by the Development Agency as a single lump sum that includes
all premiums for the group to be covered. Cover will not start until the premium and all the
member information in our specified format has been received.

The premium rate is Rs. 25 per Rs. 10,000 of lump sum, per member.
Benefits:

On the death of each member covered by the policy during the year of cover a lump sum equal to
the sum assured will be paid to their beneficiaries or legal heirs. Where the death is as a result of
an accident, an additional lump sum will be paid equal to half the sum assured. There are no
benefits paid at the end of the year of cover and there is no surrender value available at any time.

The role of the Development Agency:

Due to the nature of the groups covered, HDFC Standard Life will be passing certain
administrative tasks onto the Development Agency. By passing on these tasks the premium
charged can be lower. These tasks would include:

 Submission of member data in a specified computer format.

 Collection of premiums from group members.

 Recording changes in the details of group members.

 Disbursement of claim payments and the mortality rebate (if any) to group
members.

These tasks would be in addition to the usual duties of a policyholder such as:

 Payment of premiums

 Reporting of claims

 Keeping policy holder information up to date

Prohibition of rebates:

Section 41 of the Insurance Act, 1938 states

No person shall allow or offer to allow, either directly or indirectly, as an inducement to any
person to take out or renew or continue an insurance in respect of any kind of risk relating to
lives or property in India, any rebate of the whole or part of the commission payable or any
rebate of the premium shown on the policy, nor shall any person taking out or renewing or
continuing a policy accept any rebate, except such rebate as may be allowed in accordance with
the published prospectus or tables of the insurer.
 Chapter-4

RESEARCH METHODOLOGY
RESEARCH METHODOLOGY

SAMPLING PLAN

Universe:-The universe is comprised of the general public.

Sampling Technique:-The Random Sampling Method was chosen for the purpose
of this study.

Sample Size: - The study consists of opinions of 100 customers of Kotak Life
Insurance.

DATA SOURCES

Data are generally of two kinds:

1 Primary Data: - Primary Data are those that are collected for the first time and original in
nature and they are obtained by a study specifically designed to fulfill the data needs of
the problem at hand.
2 Secondary Data: - Secondary Data are those that are not originally collected but rather
obtained from published or unpublished sources.
 DATA COLLECTION TOOL

A semi-structured kind of questionnaire was designed which contained both open- ended and
multiple-choice questions. The questionnaire was equally important both to the customers as
well as to the company to draw out its prospects. The questionnaire was designed to meet all
the objectives of the survey fully and helped us in knowing the needs of the customers and
the market value and image of the company from those who already had an experience with
the KLI.

The data source of my project is both Secondary data as well as Primary data.

PRIMARY DATA COLLECTION

1 Direct interaction with sale department of KLI.

2 Questionnaires were used to conduct Customer survey as well as

Consumer survey

3 SECONDARY DATA COLLECTION

1 Internet
2 Books on Insurance
 OBJECTIVES OF THE STUDY

1. To enhance my knowledge on Life Insurance companies.

2. To appraise the present scenario of Life Insurance in India.

3. To study the consumer’s perception about various life insurance companies.

4. To know the level of awareness about HDFC Standard Life Insurance to the

Customers.

5. To analyze the threats and opportunities of HDFC Standard Life Insurance.

6. To find the best life insurance plan offered by HDFC Standard Life Insurance.
 Chapter-5

DATA ANALYSIS

DATA ANALYSIS
The data collected was analyzed as follows:
 1) INVEST OR NOT?

Invest or No. As a
Not in % of
insurance total
plans

Yes 13 0.54

No 11 0.46

24 1

Explanation: 54% of the population was in favor and others said no.

2) INSURED OR NOT?

Life Insurance Cover No. As a % of

total

Yes 10 0.42

No 14 0.58

24 1
Explanation: 42% of the people said that they are insured with Life Insurance Company and
others said no.

3) REASONS FOR GETTING LIFE INSURANCE

Reasons for No. As a % of

Investment total

Safety & security 8 0.470588235

Savings 4 0.235294118
Retirement 3 0.176470588
Others 2 0.117647059

17 1
 REASONS FOR INVESTMENTS
Safety&security

12% Savings
18% 46%
Retirement
24%
Others

Explanation: When the people were asked as what is the reason of getting insured, following
result came out:
1 Major reason is safety & security, 46%.
2 Another reason came out to be Savings (24%)
3 Then came retirement solutions n others (18% & 12% respectively)

4) LEVEL

OF INCOME

Income As a % of total

above5 0.314285714

b/w 2-5 0.542857143

below 2 0.142857143
 Explanation: The major parts of income of persons lie between 2-5 L p.a.

5) FACTORS THAT ARE CONSIDERED MOST IMPORTANT WHILE INSURING

LIFE

Most Important

High returns 12

Safety 16

Liquidity 6

Tax free proceeds 10

Flexibility 6
Explanation: The major factor considered was safety of their money. Then other factors like rate
of returns, tax exemption, liquidity, etc were considered while going to buy LIFE INSURANE
product.

6. PREFERENCE TO PLANS

PLANS PERCENTAGE

Life Insurance Corporation 15

KSIP II 14

Money Back Plans 26

Kotak Capital Multiplier 16

Hdfc Standard Life 29

 Preference to Plans

35
30
cent
age
Per

25
20
15
10
5
0
LIC KSIP II Money Back KCMP Hdfc Std life
Plan
Plans

Explanation: Hdfc Std Life has highest preference among the four followed by LIC,
KSIP II & Kotak Capital Multiplier respectively. This shows that there is shift from
traditional towards ULIP plans.

SUGGESTIONS & RECOMMENDATIONS

1. With the entry of many other private companies in this sector, company is facing tough
competition and so focus of Hdfc standard Life Insurance commences advertising and
promotion

2. Customers are required to be educated about the various services they can avail
through Hdfc standard Life Insurance get them associated with Hdfc standard s Life
Insurance.

3. To meet the needs of all types of customers, more plans should be launched.
4. Training process should be enhanced efficient Team Leader must be assigned to the
trainees who lead them in the right direction and motivate them to put in there best.

5. The dissatisfied customers should be dealt with appropriately should be satisfied so that they
do not break the relationship with company.

6. Complaints should be registered and solved as fast as possible.

7. New policies and programmes should be launched to compete with private players.

CONCLUSION
CONCLUSION

1 Stiff competition among the private players in the insurance sector.

1 People have a preference for the traditional plans.
2 People are less aware of ulip plan.
3 Among the different product offered by HDFC Standard life insurance had started the
child plan in ulip traditional category in the best current scenario
4 This report describes the market size and growth prospects of the insurance industry
in India.
5 The report also analyses key issues influencing the industry structure in India
including recent regulation related to foreign investment and entry of private insurers.

6 The market share of government-owned companies, increasing competition and new

regulation are also highlighted in this report.

7 Lack of awareness among the citizens.

 LIMITATIONS OF THE STUDY

The study was undertaken for a period of two months, so there was a constraint of time as well as
efforts.

1 Another constraint is some sort of biasness in my study. This study remains an analysis of
all what I gathered from my observation, the personal interaction, the information from
any seniors and colleagues and the questionnaire they were asked to fill.
2 Sample size being too small is not a true representative of the whole universe.
3 Lack of cooperation by the respondent of the questionnaire.
4 Errors might have crept into the report during the typing and compilation
5 Area covered was confined to some regions only.
6 Due to the presence of LIC, people refused to say anything regarding the influence of
private insurance companies.
7 Lack of availability of actual data.
 APPENDICES

BIBLIOGRAPHY

Website

1 www.HDFC Standard Life Insurance.com

2 www.Insuremagic.com
3 www.Life Insurance Corporation.com

Books

 ARTHUR MEIDAN (1996), “MARKETING OF FINANCIAL SERVICES.”

 SCHIFFMAN & KAUNAK (2000), “CONSUMER BEHAVIOR.”

 QUESTIONNAIRE

(The details collected in this questionnaire will be kept confidential.)

Q1. Name -: ___________________________________________________.

Q2. Date of Birth -: __________ (DD) __________ (MM) __________ (YYYY)

Q3. Gender-: Male Female

Q4. Occupation: Government Salaried Business

Others (specify) ____

Q5. What is Your Family‘s Annual Income (Rs. Lakhs):

Below 2 2 -5 above

Q6. Do you have Insurance? YES NO

Q7. The insurance policy you have taken is of which company?

Q8. Which policy you opted for?

Q9. Rate the following investment factors in your order of importance in choosing life insurance.

Very Important ‘1’ Important ‘2’ Somewhat Important ‘3’ Less Important ‘4’

Q10. Are you aware of ULIPs Plans? YES NO

(If NO)

(i) Do you make investments? YES NO

(ii) If yes, what are your investment concerns?

Income replacement at death/disability

Building Cash reserves

Retirement

Asset Purchase 0