A SYNOPSIS

On A comparative study of effectiveness of marketing strategies implementation in insurance sector (A case study of LIC and Birla sun life for insurance) Submitted to DAVV INDORE
In partial fulfillment of the Degree of

Master of Business Administration (2009-2011)

Submitted to: Miss. Shweta Dhand

Submitted by: jaymala Patidar

Lecturer,mist,indore

MBA III sem

ACKNOLEDGEMENT

I would like to take this opportunity to express my sincere thanks to my revered Project instructor Miss. Shweta Dhand to help me to complete this project. Without their guidance & motivation this wouldnt have been possible. I thank her for her valuable time that she gave me. I would also like to thank to Head of Department (MBA) Mr. Shantanu Verma for making available of all the resources in college without which completion of project was not possible. Thanks to Devi Ahilya Vishwavidyalaya, Indore for their curriculum to give me the opportunity to create a project.

TABLE OF CONTENTS

1.

Introduction 1.1 Literature Review 1.2 Objective

2.

Research Methodology 2.1 Research Design 2.2 Tools for Data Collection 2.3 Tools for Data Analysis

3. References:

introduction

Insurance is an upcoming sector, in India the year 2000 was a landmark year for life insurance industry, in this year the life insurance industry was liberalized after more than fifty years.Insurance sector was once a monopoly, with LIC as the only company, a public sector enterprise. But nowadays the market opened up and there are many private players competing in the market. There are fifteen private life insurance companies has entered the industry.After the entry of these private players, the market share of LIC has been considerably reduced. In the last five years the private players is able to expand the market (growing at 30% per annum) and also has improved their market share to 18%. For the past five years private players have launched many innovations in the industry in terms of products, market channels and advertisement of products, agent training and customer services etc.

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.
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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 countrys 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 and 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: milestones in the life insurance business in India Year 1912 1928 1938 1956 Milestones in the life insurance business in India The Indian Life Assurance Companies Act enacted as the first statute to regulate the life insurance business The Indian Insurance Companies Act enacted to enable the government to collect statistical information about both life and non-life insurance businesses Earlier legislation consolidated and amended to by the Insurance Act with the objective of protecting the interests of the insuring public. 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: milestones in the general insurance business in India Year Milestones in the general insurance business in India

1907 1957 1968 1972

The Indian Mercantile Insurance Ltd. set up, the first company to transact all classes of general insurance business General Insurance Council, a wing of the Insurance Association of India, frames a code of conduct for ensuring fair conduct and sound business practices The Insurance Act amended to regulate investments and set minimum solvency margins and the Tariff Advisory Committee set up. 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.

Through this project I want to study about the life insurance industry and also doing the comparative analysis between two insurance players in this industry. They are,

Life insurance Corporation of India Birla sun life insurance

Company profile:- The largest life insurance company in India, Life Insurance Corporation is fully
owned by the government. It provides individual life insurance, group insurance and pension plans. Its subsidiaries include Life Insurance Corporation of India International, LIC Nepal, LIC Lanka, LIC Housing Finance and LICHFL Care Homes. It has over 12 million policy holders and over 9 lakh agents. It has underwritten more than 120 million policies.

LIC saw computers in 1964. Today the company is on the Internet and is utilizing Information Technology in servicing its clients. It has bagged various award including:Loyalty Awards 2008 in Insurance Sector, NDTV Profit Business Leadership Award 2007, CNBC Awaaz Consumer Awards 2007 and Outlook Money NDTV Profit Awards 2007. LIC provides a rewarding career as sales agents. It offers world class training, freedom to work and unmatched financial strength. The Life Insurance Corporation (LIC) was established about 44 years ago with a view to provide an insurance cover against various risks in life. A monolith then, the corporation, enjoyed a monopoly status and became synonymous with life insurance. Its main asset is its staff strength of 1.24 lack employees and 2,048 branches and over six lack agency force. LIC has hundred divisional offices and has established extensive training facilities at all levels. At the apex, is the Management Development Institute, seven Zonal Training Centres and 35 Sales Training Centres. At the industry level, along with the Government and the GIC, it has helped establish the National Insurance Academy. It presently transacts individual life insurance businesses, group insurance businesses, social security schemes and pensions, grants housing loans through its subsidiary; and markets savings and investment products through its mutual fund. It pays off about Rs 6,000 crore annually to 5.6 million policyholders.

MAJOR PLAYER IN LIFE INSURANCE SECTOR AND THEIR SHARE HOLDING PATTEN

Name of the company Allianz Bajaj Life Insurance Co Aviva Life Insurance Birla Sun Life Insurance Co HDFC Standard Life Insurance Co ICICI Prudential Life Insurance Co ING Vysya Life Insurance Co. Life Insurance Corporation of India Max New York Life Insurance Co. MetLife Insurance Co. Om Kotak Mahindra Life Insurance Reliance insurance SBI Life Insurance Co TATA- AIG Life Insurance Company

Nature of Holding Private Private Private Private Private Private Public Private Private Private Private Private Private

Literature Review
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There are many scholars who already have put their efforts and thoughts before this detail information about the Indian Insurable Industry. Ramkumar D (2003) studied the role of relationship marketing in life insurance sector. Rajesham Ch (2004) revised that insurance sector has been playing a leading role..

study, to give

Rajesh C Jampala and B Venkiteswaram Rao (insurance marketing ,April 2005)i n h i s a r t i c l e s ales promotion in Insurance sector (A study of LIC) as s e r t s t h a t , s a l e s promotion helps in maximizing sales volume and value besides keeping competitors at bay .S a l e s p r o m o t i o n i s g e n e r a l l y b r o k e n i n t o 3 m a j o r c a t e g o r i e s s u c h a s c o n s u m e r o r i e n t e d , trade oriented and sales force oriented activities. The consumer oriented promotions are a part of the promotional pull strategy. These promotions include tax benefits, payment of bonus, provision of accidental benefits an h i g h e r n o n medical limits. Tax benefit is one of the major weapons in the arsenal o f strategies at the disposal of the corporation to promote sales. The tax saving measure is the greatest mobilize for business for the corporation. Even the Indian consumer has traditionally looked at life insurance as an instrument for tax saving, rather than as a prudent investment decision, or even as a protection device. Another important consumer oriented promotion of LIC is provision of accident and disability benefits offered to the insured. Trade promotional measures of LIC include salary saving scheme besides bringing more occupations under insurance cover, including hazardous occupations. Salary saving s c h e m e i s a v e r y s u c c e s s f u l t r a d e p r o m o t i o n s t r a t e g y l a u n c h e d b y t h e c o r p o r a t i o n t o t a p business from the salaried class. LIC makes an arrangement with the employer to deduct their insurance premium from the employees salary and remit it to the corporation. The basic advantage that the corporation waives 5% additional charge on the scheme, resulting in a great benefit to the policy holders.

Jack Burke (Insurance marketing, July 2004) in his article CROSS SELLING emphasis that people depend on insurance agents or brokers for the selection of a n d b u y i n g o f p o l i c i e s r e l a t e d t o l i f e , h e a l t h , a u t o m o b i l e s e t c . b u t i t h a s been found that most agents or brokers specialize in selling policies related only to p a r t i c u l a r f i e l d . T h e statistics showed that the average American had 7.2 insurance policies i.e., selling more than one policy to their client. This can be specified as cross selling or multiline marketing. M o r e p o l i c i e s p e r c l i e n t m e a n l o w e r a c q u i s i t i o n c o s t , h i g h e r c l i e n t r e t e n t i o n a n d g r e a t e r profit. (Source: Insurance chronicle The ICFAI University Press, July-2005)

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Despite the adoption of the Gramm-Leach-Bliley Act (also called Financial Services Modernization Act) in November 1999, there have been few strategic attempts in consolidating financial and insurance businesses and some of them (i.e. the Citigroup/Travelers or the General Electric/ Employers Re. mergers) have failed. This, despite the fact that some of the research papers cited in the attached literature review do identify diversifications gains from potential consolidation of banking and insurance firms. However, the inability of banks and insurance companies to merge effectively has not stopped the convergence process from a product offering standpoint. The Insurance Information Institute routinely publishes a chart of financial and insurance products available through major financial services companies from all sectors (financials, securities, P/C insurance, and life insurance). The chart demonstrates that all major financial services companies offer a diversified range of financial and insurance services. This suggests that, although some issues like consumer privacy provisions, data consolidations and other technological differences between both industries need to be ironed out, the convergence process is on its way.

Refereed Papers .

Carrow Kenneth A. Citicorp-Travelers Group merger: Challenging barriers between banking and insurance. Journal of Banking and Finance 25 (2001): 1553-1571.

This paper is conceptually similar to the one cited above, in that the author investigates whether the announcement of a merger between Citicorp and Travelers abnormally impacted stock prices of financial and insurance companies. Analysis of abnormal returns surrounding the merger show that life insurance companies and large banks experienced significant stock price increases, while the returns of stocks of smaller banks, health insurers, and property/casualty insurers remain relatively unchanged.

Estrella, Arturo. Mixing and matching: Prospective financial sector mergers and market valuation, Journal of Banking and Finance 25 (2001): 2367-2392.

This paper analyses which types of mergers are likely to be most productive for banks and other financial firms in the United States. The author acknowledges that the extent to which different business activities are fundamentally distinct induces a tradeoff between diversification gains and loss of efficiency. The research considers life insurance, property/casualty insurance, securities, and commercial firms as potential matches for firms and concludes that potential diversification gains arise from almost all combinations involving banking and insurance. The paper stands out because it shows, unlike other earlier research, that property and casualty insurance companies offer larger diversification gains to banks than life insurance companies.

Industry Publications

Armstrong, Ed and Buse, P. (1996). Youve got the green light, whats it worth? ABA Banking Journal, Vol. 88, Sept., 13-18.

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The article projects that banks would add 5-10 percent to their after tax profits if they aggressively pursue their insurance opportunity." The author develops a pro forma statement for banks selling 12 different insurance items.

Boros, Joan E. (2002). Are Convergence Products Happening? National Underwriter, Life & Health/Financial Services Ed., May 27, 2002.

The author states that convergence depends on its definition. She offers very useful definitions for convergence:
1) Merger of banks and insurers, heretofore independent, into a financial supermarket with

endless cross-selling potential. 2) A combination of insurance and capital markets products moving into a union and uniformity, or separate markets performing the same functions. This could also be labeled as securitization of insurance risk and or insurancization of financial risk.

Crystal, Mary (1997). That was then, this is tomorrow. Bank Marketing, Vol. 30, 1, Dec.97/Jan.98, 28-52.

This panel discussion on bank marketing suggests more direct interaction with customers by direct mail or personal contact. Doing it pro-actively and by alternative methods: call centers, PC-banking, internet banking and supermarket banking. Using branding and other retail marketing skills. Bankers have tried to cut down on personal contact and may have alienated their customers.

Gjertsen, Lee Ann (2002). Insurance Agents Thrift Seeks OK to Widen Reach. The American Banker, May 13, 2002.

Insurance agents of New Jersey, Connecticut and Massachusetts founded an association as Independent Insurance Agents and Brokers and have applied for a charter for an association savings bank. The bank products are to be sold by the independent insurance agents that own their own agencies. The bank is to be named InsurBanc.

Gorski, Lorraine (2002a). The New Producers. Bests Review, May 2002, p.45-48.

The article describes how insurers can use the banks customer base to reach new customers. Banks have the trust of their customers and that would be a good distribution channel for life insurance, especially in the midlevel or mass market. Banks could represent 3-4 different insurers therefore the insurance products need to be competitive (for the customer and the representative) and specific for bank employee selling. Furthermore, stable relationships are necessary and the product needs to be branded and well advertised. Underwriting will stay with the insurers but selling may go both ways by insurance agents or bank employees.

Gorski, Lorraine (2002b). Banking on Policy Holders. Bests Review, July 2002, p.44-47.

Insurers have founded banks to offer banking products. One hundred and thirty five applications were made between Jan.1, 1997 and May 31, 2001. Insurance banks have an uphill battle to convince their customers to
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establish a bank account because it is hard to determine when and why an insurance customer needs a bank account. On the other hand, it is easier for a bank that provides a loan to sense when insurance is necessary. Since most people already have a bank account, customer as well as agents have to be motivated to deal with another financial institution or to switch. In addition these new institutions often have no brick and mortar establishment but rather rely on Internet applications and Internet interactions. Establishing banks enable insurers to get into the trust business and offer a sophisticated retirement package and to be able to cross-sell insurance products to their customers and to earn fee income. Although this can be done through partnerships, some insurers want to do it alone and thus to avoid finding later on unpleasant surprises. They count on their name recognitions and the availability of their agents (State Farm, Allstate). Increasing brand awareness, direct mailing, providing up-to-date interest rates should help to lure customers. Most insurance firms have hired experienced bankers to create and manage these banks.

Hogan, John D (2001). Financial Services Reform: The Gramm-Leach-Bliley Act and its implications for insurance, Journal of Financial Service Professionals, January 2001, pp. 33-38.

In this paper, the author contends that the impact of the GLB Act on the insurance industry is unclear. It had been widely assumed that the banking industry would quickly expand into non-banking activities, as synergies could be expected from the large bank customer information base and frequent contacts with customers. However, this quick response has not taken place, partly because of perception of risk in the insurance business. The author also cites a research study by The Federal Reserve Bank of Atlanta that suggests that bank holding companies will add insurance products to their lines of business for sound reasons such as: 1) small increment costs involved, 2) the presence of existing customer relationships, 3) revenue diversification, 4) absence of interest rate risk in insurance compared with loans and 5) banks web-based marketing capability.

McDaniel, David (1995): Agents worst nightmare: Banks are gaining the edge to sell insurance in a big way. Bests Review [Property/Casualty], Vol. 96, 2, June, 28-33.

The article explains that insurance agents are afraid of banks cutting into their business as they have in Europe where banks are far more efficient than agents. The article lays out how to make the proposed legislation ineffective, by warning of unsubstantiated tie-ins and bank coercion, proposing 10-day waiting periods, state legislation, and tough fire walls.

Milligan, John (1996). Banking like it used to be. US Banker, Vol. 106, Nov. p.61-65.

First Long Island Bank prospers because it serves a small niche of small privately owned companies and upscale consumers that it coddles by being available both in person/ phone and online.

Pasini, Roy (1997). Alliances Lawson cites three issues critical to future. Underwriters Report, 92nd year, #19, 5/8/97.

The author states that the insurance industry can defend itself against the invasion by banks through better customer service and greater use of technological efficiencies.

Weber, Irene (2002). No Sale. Bests Review, May 2002, p. 50-51.

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OBJECTIVES OF STUDY
The entry of foreign MNCs and the conductive business environment fostered by the government, it is no wonder that the re-entry of private insurance has marked a second coming for the sector. In just five years, the sector has undergone a makeover, offering more choice, better services, quicker settlement, tighter regulation and greater awareness s the environment become more and more competitive and services and products become alike, creating a differentiation is becoming extremely tough. Thus, this project objective is as follows. To study of outcome. Study of sales. Number of investors. To study of buying behavior. To study of impact or decision making.

RATIONALE OF STUDY:-

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RESEARCH METHODOLOGY
RESEARCH:Research is defined as a careful, critical inquiry or examination in seeking facts or principles; diligent investigation in order to ascertain something. Research i s essentially a systematic enquiry seeking facts through objective verifiable methods in order to discover the relationship among them and to deduce from the board principles or laws. It is really a method of critical thinking. RESEARCH PROBLEM The insurance industry is highly competitive in nature today. Many players a r e finding through their customers for their different schemes. In this scenario, the companies need to know what the customers ask for and their needs time to time. For this they are doing regular researches and studies on the changing customer perceptions. This research analyze the perceptions and preferences of the public which helps them to gain competitive advantage over their competitors RESEARCH DESIGN Research Design: A researcher attempting to conduct a study should necessarily prepare aplan which will help him to attain his ultimate aim. This plan is the research design. It is a plan for the collection and analysis of data. Research Design can be defined as the planned sequence of the entire process involved in conducting a research study. In this project work, the research design used is descriptive researcher TYPE OF RESEARCH Descriptive research: This study follows descriptive research method. A descriptive study involves formulating the objective of the study, defining the population and selecting the sample, designing the methods of data collection and analysis of the data and results. Descriptive studies aim at portraying accurately the characteristics of a particular group or situation.

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A Descriptive study may be concerned with the attitudes or views (of a people) towards anything. RESEARCH METHODOLOGY:-Research methodology deals with the objective of a research study, the method of defining the research problem, the type of hypothesis

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formulated the type of data collected, methods used for collecting and analyzing the data etc.

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Methodology includes the collection of primary data and secondary. Research methodology may be defined as the procedure by which researchers go about their work of describing, explaining and predicting phenomena. It deals with the cognitive processes imposed in research by the problems arising from the nature of its subject matter. Research methodology is the description, explanation and justification of various methods of conducting research.

DATA COLLECTION METHOD SOURCE OF DATA Source of data used for the study can be classified into
(A) Primary source

B) Secondary source

(A) primary source:Primary data are first hand information and are collected from various sources like: Through structured questionnaire Observation Informal interviews,

(B) Secondary source:The secondary source consists of readily data and is already compiled statistical statements and reports. Secondary datas are collected from; Business Magazines Internet Annual reports Journals TOOLS FOR THE ANALYSIS OF DATA:-The analysis of data requires advance planning design. Sampling method:-Convenient sampling was used to collect data from the sample. A sample, as the name implies, is a smaller representation of a larg as whole. In other words a large as whord a selction of the latter in such a way that they rare representative of the universe is called sample. A single member of a population is referred to as population element. When some of the elements are selected with the intention of finding out something about the population from which they are taken, that group of elements is referred as a sample and the process of selection is called sampling. Sample size:18

The sample consisted of 100 respondents in indore. Population:Population refers to the total of items about which information is derived. Population of the study consisted of peoples in various parts of indore District; the researcher met the various peoples as per the reference given by the organization Sampling unit: The sampling unit consisted of various peoples in indore District. Area of the study:The study was conducted in various parts of indore District. Time period of study:The study was conducted for a period of one month Research Design:Research design provides the glue that holds the research project together. A design is used to structure the research, to show how all the major parts of the research project the sample of groups, measures, treatment or programs, and methods of assignment work together to try to address the central research questions. The study will conduct on the bases of survey through questionnaires given to respondents. Sampling Design Population:: Indore Sample Size:: Population of 100 Sample Technique:: Convenience Sampling Statistical Tools:: Correlation

DATA COLLECTION:
Primary data:
Primary data is collected through face-to face interaction with employees of the insurance companies, by meeting them in personal.

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Secondary data: The secondary data used for their study are inclusive of the data collected from the internet, catalogues and brochures and magazines.

Scope of the study:

This study can be conducted by comparing the performances & products of three private & government insurance players in insurance industry.

The number of respondents to be surveyed can be improved. The study can be conducted in Indore city only. This study can be conducted to analyze the market stand of birla sun life Company limited and Life insurance Corporation of India insurance companies.

LIMITATIONS
Thought the present study aims to achieve the above mentioned objectives in full earnest and accuracy, it may be hampered due to certain limitations, some of the limitations of this study may be summarized as follows,

This study is limited to two private insurance companies only. (birla sun life company limited & Life insurance corporation of India) This study is limited to Indore city only. And getting accurate responses from the respondents due to their inherent problems. They may be refusing to co-operate. Respondents may have to be contacted repeatedly or alternate respondent may have to be identified.

REFERENCES:Books: Aaker David (2004) Strategic Marketing Management Kotler, Phjilips & Kevlin Lene Keller Websites: www.marketingpower.com

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www.wikibooks.org

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