A REPORT ON Customers PERCEPTION TOWARDS LIFE INSURANCE AFTER PRIVATIZATON

LIST OF ILLUSTRATIONS
LIST OF FIGURES S.No 1 2 3 4 5 6 7 TITLE OF FIGURES No of males and females surveyed Educational qualifications of males Educational qualifications of females Popularity percentage of life insurance companies Familiarity of schemes among people Purpose of Insurance Ranking of some benefits of insurance (figures expressed in %) Insurance as the viable option for investment Availability of Insurance Cover Estimate of IT professionals enrolled into insurance Type of investment interested in Mode of premium payment Services provided by the insurance company (figures expressed in %) Returns given by the insurance company (figures expressed in %) Ratings of various insurance companies Privatization of insurance Availability of good services after privatization PAGE No. 34 35 35 36 37 38 39

8 9 10

40 40 41

11 12 13

42 42 43

14

44

15 16 17

44 45 46

LIST OF TABLES S.No 1 2 3 4 TITLE OF TABLES Popularity percentage of life insurance companies Familiarity of schemes Purpose of Insurance Ranking of some benefits of insurance (figures expressed in %) Estimate of IT professionals enrolled into insurance Mode of premium payment Ratings of various insurance companies PAGE No. 36 37 38 39

41

6 7

42 44

PURPOSE, SCOPE AND LIMITATIONS

The purpose of this report is to find out the change in the perception of the people towards life insurance after privatization and to understand and compare the current insurance market with the market existing before opening up of the industry for the private and outside players with some current issues and latest development. This report also takes in to consideration the new innovative and contemporary products available to the customers in the market and to which level they are satisfied with these products and what is their recommendation for any changes that should be done in the products. The project report is structured

according to the data procured from the websites of life insurance companies, IRDA annual report, and insurance council of India and through the survey conducted by means of preparing a questionnaire. A small sample size is taken for conducting the survey. The survey is conducted only in the Delhi so the statistical data collected, analyzed and results drawn only reflects views and perception of local residents, professionals about the life insurance and

insurance products. So the results through this effort may vary and deviate from the actual findings and proceedings.

INDUSTRIAL ANALYSIS
Historical Background: The Indian economy is currently showing signs of vibrancy; it is also depicting a qualitative change in its composition. which had been essentially built on agricultural The economy wealth, has

transformed itself in stages over the period of the five year plans, initially into an economy, where industry assumed a leadership role accompanied by a perceptible change in the last few years or so with an accent on information technology and other service sectors. Today, the Gross Domestic Product of the countr y is predominantly derived from the services sector. integral part. Government's decision to accept the recommendations of the This will naturally have its effect on the state of capital market of which insurance sector is an

Committee on Reforms in th e Insurance Sector and to constitute an interim Insurance Regulatory Authority, by an executive order in January 1996, to look into the modifications, the regulatory frame work of the insurance sector, has resulted in the establishment of a statutory body, for regulating the players and in broadening the sector by admission of new players from the private sector. Such a development has had a ripple effect leading to the establishment and development of professional institutions that are connected with the industry. aspects. As more than 42% of the country's current GDP is being generated by the services sector, obviously necessary steps are required to be taken to sustain this process of growth and towa rds this end a coordinated approach is necessary. And insurance being a service industry could prima facie act as an engine of growth. In this regard, the history of development of insurance industry in India has 7 Subsequent sections of this report deal with these

been

one

of

under-performance

and

under-achievement.

Appreciation for the necessity to cover risks of both personal lives and property has been very poor. insurance market has been In fact, the growth in the life driven by income tax mainly

considerations and this had been the primary reason why the urban population has been a major beneficiary of life policies. Coverage of property to risks of different types has always been a secondary consideration of its owners and has been prompted by lenders' requirements. Unless there exists a compulsion on the part of All these characteristics of the current owners to cover the risks of loss, the industry shall not move in the high gear for development. market are changing, albeit slowly, as a result of the transformation that has been ushered in with t he current developments in the insurance sector. The compelling reason for the same which was to provide an opportunity for the consumers to have a choice in the matter of selection of their risk bearers is slowly unfolding into a system whereby newer and newer dimensions are being added to the product profiles that the companies produce. There is still considerable work to be done in this area by insurance companies. But decidedly the f irst step in this direction has now been taken by admission of new p layers and the Authority hopes that this step, though small in nature, will be a significant one. In the statements that follow, the Authority portrays some basic and fundamental statistics that relate to the Indian economy which are relevant to the insura nce industry. Also added to these statements is a short table which depicts the state of insurance penetration in the Indian context. A discerning reader may note that the level of development of insurance in the country is still not on the same level as the development noticed in the neighborhood but the increase shown in a period of the past few years is encouraging.

The opening of the market to private participation is a bold experiment and was necessitated by the public perception of a necessity to have a free availability of choice to customers. Hopes were entertained that the opening up of the market will deepen the insurance penetration, bring about a rationalization of premium structure, end cross subsidization, provide covers which were lacking in the market and provide the necessary resources for infrastructure development. The functioning of the old insurers gave enough hopes to nurture and encourage these thoughts. The new companies have also supported this philosophy by their current actions; however, they have been active for so little a time that their effect on the market will be felt only in the years to come. Some of the hopes have been achieved - in the areas of innovation of products, extension of facilities to cus tomers etc.

CURRENT DEVELOPMENTS IN ULIP

It is nearly seven years since the Indian insurance market was opened up. In life insurance, we have seen unprecedented growth which is continuing. By the end of the financial year 2007 -08 we are likely to see more than twenty life insurance companies in India. A frequently asked question is: what is the optimum number of insurance companies that is ideal for Indias needs? Considering that life insurance penetration is 3% of GDP and that one is aiming at say 7% or 8% of GDP, that va st sections of people are still not covered by life insurance and large geographical areas are

untouched by insurance, we can say that we have a long way to go and that there is room for more insurance companies. The annual new business growth has been a round 100% for the last three years and it looks likely that such a growth will continue for some time. That such an incredible growth, to a great extent, has been due to ULIP products is another matter

TABLE 1 MILESTONES OF INSURANCE REGULATIONS IN THE 20THCENTURY

Year Significant 1912 Regulatory Event The Indian Life Insurance Company Act 1938 1938The Insurance Act: Comprehensive Act to regulate

insurance business in India 1956 Nationalization of business in india 1972 1972Nationalization insurance business in India 1993 1994 Setting up of Malhotra Committee Recommendations of Malhotra Committee 1995 Setting up of Mukherjee Committee of general life insurance

1996

Setting up of (interim) Insurance Regulatory

Authority (IRA) 1997 The Government gives greater

autonomy to LIC, GIC and its subsidiaries with regard to the restructuring of boards and flexibility in investment norms aimed at channeling funds to the

10

infrastructure sector 1998 The cabinet decides to allow 40% foreign equity in private to

insurance

companies-26%

foreign companies and 14% to NRIs, OCBs and FIIs 1999 The Standing Committee headed by Murali Deora decides that foreign equity in private insurance should be limited to 26%. The IRA bill is renamed the Insurance Regulatory and Development

Authority (IRDA) Bill1999Cabinet clears IRDA

Bill2000President gives Assent to the IRDA

Bill Sources: Various Monopoly Raj The nationalization of life insurance was justified mainly on three counts. (1) It was perceived that private companies would not promote insurance in rural areas. (2) The Government would be in a better position to channel resources for saving and investment by taking over the business of life insurance. (3) Bankruptcies of life insurance companies had become a big problem (at the time of takeover, 25 insurance companies were already bankrupt and another 25 were on the verge of bankruptcy). The experience of the next four decades would temper these views.

Life Story of the Life Insurance Corporation The life insurance

industry was nationalized under the Life Insurance Corporation (LIC) Act of India. In some ways, the LIC has become very successful. (1) Despite being a monopoly, it has some 60-70 million policyholders. Given that the Indian middleclass is around 250-300 million, the LIC has managed to capture some 30 odd percent of it. (2) The level of customer satisfaction is high for the LIC (one of the

11

findings of the Malhotra Committee, see below). This is somewhat surprising given the frequent delays in claim settlement. (3) Market penetration in the rural areas has grown substantially. Around 48% of the customers of the LIC are from rural and semi-urban areas. This probably would not have happened had the charter of the LIC not specifically set out the goal of serving the rural areas. One exogenous factor has helped the LIC to grow rapidly in recent years: a high saving rate in India. Even though the saving rate is high in India (compared with other countries with a similar level of development), Indians exhibit high degree of risk aversion. Thus, nearly half of the investments are in physical assets (like property and gold). Around twenty three percent are in (low yielding but safe) bank deposits. In addition, some 1.3- percent of the GDP are in life insurance related savings vehicles. This figure has doubled between 1985 and 1995. Life Insurance in India: A World Perspective In many countries, Insurance has been a form of savings. Table 2 shows that in many developed countries, a significant fraction of domestic saving is in the form of (endowment) insurance plans. This is not surprising. The prominence of some developing countries is more surprising. For example, South Africa features at the number two spot. India is nestled between Chile and Italy. This is even more surprising given the levels of economic development in Chile and Italy. Thus, we can conclude that there is an insurance culture in India despite a low per capita income. This bodes well for future growth. Specifically, when the income level improves, insurance (especially life) is likely to grow rapidly.

12

Malhotra Committee
Liberalization of the Indian insurance market was recommended in a report released in 1994 by the Malhotra Committee, indicating that the market should be opened to private-sector competition, and ultimately, foreign private-sector competition. It also investigated the level of satisfaction of the customers of the LIC. Curiously, the level of customer satisfaction seemed to be high. The union of the LIC made political capital out of this finding (The following are the purposes of the committee. (a) To suggest the structure of the insurance Industry, to assess the strengths and weaknesses of insurance companies in terms of the objectives of creating an efficient and viable insurance industry, to have a wide coverage of insurance services, to have a variety of insurance products with a high quality service, and to develop an effective instrument for mobilization of financial resources for development. (b) To make recommendations for changing the structure of the insurance industry, for changing the general policy framework etc. (c) To take specific suggestions regarding LIC and GIC with a view to improve the functioning of LIC and GIC. (d) To make recommendations on regulation and supervision of the insurance sector in India. (e) To make recommendations on the role and functioning of surveyors, intermediaries like agents etc. in the insurance sector. (f) To make recommendations on any other matter which are relevant for development of the insurance industry in India. The committee made a number of important and far-reaching recommendations.(a) The LIC should be selective in the recruitment of LIC agents. Train these people after the identification of training needs.

(b) The committee suggested that the Federation of Insurance Institute, Mumbai should start new courses and diploma courses for intermediaries of the insurance sector. (c) The LIC should use an MBA specialized in Marketing (a similar suggestion for the GIC subsidiaries). (c) It suggested that settlement of claims were to be done within a specific time frame without delay. (d) The committee

13

has several recommendations on product pricing, vigilance, systems and procedures, improving customer service and use of technology. (f) It also made a number of recommendations to alter the existing structure of the LIC and the GIC. (g) The committee insisted that the insurance companies should pay special attention to the rural insurance business. (h) In the case of liberalization of the insurance sector the committee made several recommendations, including entry to new players and the minimum capital level requirements for such new players should be Rs. 100 crores (about USD 24 million). However, a lower capital requirement could be considered for a co-operative sectors' entry in the insurance business. (i) The committee suggested some norms relating to promoters equity and equity capital by foreign companies, etc.Mukherjee Committee Immediately after the publication of the Malhotra Committee Report, a new committee (called the Mukherjee Committee) was set up to make concrete plans for the requirements of the newly formed insurance companies. Recommendations of the Mukherjee Committee were never made public. But, from the information that filtered out it became clear that the committee recommended the inclusion of certain ratios in insurance company balance sheets to ensure transparency in accounting. But the Finance Minister objected. He argued (probably on the advice of some of the potential entrants) that it could affect the prospects of a developing insurance company.

Insurance Regulatory Act (1999) After the report of the Malhotra Committee
came out, changes in the insurance industry appeared imminent. Unfortunately, Instability in Central Government, changes in insurance regulation could not pass through the parliament. The dramatic climax came in 1999. On March 16,1999, the Indian Cabinet approved an Insurance Regulatory Authority (IRA) Bill that was designed to liberalize the insurance sector. The bill was awaiting ratification by the Indian Parliament. However, the BJP Government fell in April 1999. The deregulation was put on hold once again. An election was held in late1999. A new BJP-led government came to power. On December 7, 1999, the new government passed the Insurance Regulatory and Development Authority (IRDA) Act. This Act repealed the monopoly conferred to the Life Insurance Corporation in 1956 and to the General Insurance Corporation in 1972. The authority created by the Act is now called IRDA. It has ten members. New licenses are being given

14

to private companies (see below). IRDA has separated out life, non-life and reinsurance insurance businesses. Therefore, a company has to have separate licenses for each line of business. Each license has its own capital requirements (around USD24 million for life or non-life and USD48 million for

reinsurance).Some Details of the IRDA Bill On July 14, 2000, the Chairman of the IRDA, Mr. N. Rangachari set forth a set of regulations in an extraordinary issue of the Indian Gazette that details of the regulation. Regulations The first covers the Insurance Advisory Committee that sets out the rules and regulation. The second stipulates that the "Appointed Actuary" has to be a Fellow of the Actuarial Society of India. Given that there has been a dearth of actuaries in India with the qualification of a Fellow of the Actuarial Society of India, this becomes a requirement of tall order. As a result, some companies have not been able to attract a qualified Appointed Actuary (Dasgupta, 2001). The IRDA is also in the process of replacing the Actuarial Society of India by a newly formed institution to be called the Chartered Institute of Indian Actuaries (modeled after the Institute of Actuaries of London). Curiously, for life insurers the Appointed Actuary has to be an internal company employee, but he or she may be an external consultant if the company happens to be a non-life insurance company. Third, the Appointed Actuary would be responsible for reporting to the IRDA a detailed account of the company. Fourth, insurance agents should have at least a high school diploma along with training of 100 hours from a recognized institution. More than a dozen institutions have been recognized by the IRDA for training insurance agents (the list appears online at

http://www.irdaonline.org/press.asp).Fifth, the IRDA has set up strict guidelines on asset and liability management of the insurance companies along with solvency margin requirements. Initial margins are set high (compared with developed countries). The margins vary with the lines of business (for example, fire insurance has a lower margin than aviation insurance). Sixth, the disclosure requirements have been kept rather vague. This has been done despite the recommendations to the contrary by the Mukherjee Committee

recommendations. Seventh, all the insurers are forced to provide some coverage

15

for the rural sector. (1) In respect of a life insurer, (a) five percent in the first financial year; (b) seven percent in the second financial year; (c) ten percent in the third financial year; (d) twelve percent in the fourth financial year; (e) fifteen percent in the fifth year (of total policies written direct in hat year). (2) In respect of a general insurer, (a) two percent in the first Financial year; (b) three percent in the second financial year; (c) five percent thereafter (of total gross premium income written direct in that year).New Entry Immediately after the passage of the Act, a number of companies announced that they would seek foreign partnership. In mid-2000, the following companies made public statements that they already were in the process of setting up insurance business with foreign partnerships (see Table 3). However, not all the partnerships panned out in the end (see below) There are three other companies with "in principal" approvals:(1) Max New York Life. It is a partnership between Delhi based pharmaceutical company Max India and New York Life, the New York based life insurance company.(2) ICICI Prudential Life Insurance Company. This is a joint venture between Mumbai based Industrial Credit & Investment Corporation and the London based Prudential PLC. (3) IFFCO Tokio General Insurance Company. It is a joint venture between Indian Farmers' Fertilizer Cooperative and Tokio Marine and Fire of Japan. To date (end of April 2001), the following companies have thus been granted licenses: ICICI -Prudential, Reliance General, Reliance Life, Tata-AIG General, HDFC-Standard Life, Royal-Sundaram, Max-New York Life, IFFCO-Tokio Marine, Birla-SunLife, Bajaj-Allianz General, Tata-AIG Life, ING-Vyasa, Bajaj-Allianz Life, SBI-Cardiff Life. Note that all of these companies are either in the life insurance business or in the non-life insurance business. No license has been granted for reinsurance business so far (the size of the reinsurance business can be 10-20% of the total revenue). No stand-alone health insurance company has been granted license so far. Enter the Dragon On December 28, 2000, the State Bank of India (SBI) announced a joint venture partnership with Cardif SA (the insurance arm of BNP Paribas Bank). This partnership won over several others (with Fortis and with GE Capital). The entry of the SBI has been awaited by many. It is well known that the SBI has long harbored plans to become a universal bank (a universal bank has business in banking, insurance and in security). For bank with more than 13,000 branches all over India, this would be a natural expansion. In the first round of license issue,

16

the SBI was absent. There were several reasons for this delay. First, the SBI was seeking a foreign partner to help with new product design. Second, it did not want the partner to become dominant in the long run (when the 26% foreign investment cap is eventually lifted). It wanted to retain its own brand name. Third, it wanted a partner that is well versed in the universal banking business. This ruled out an American partner (where underwriting insurance business by banks have been strictly forbidden by law). Cardif is the third largest insurance company in France. More than 60% of life insurance policies in France are sold through the banks. Fourth, the Reserve Bank of India (RBI) needed to clear participation by the SBI because in India banks are allowed to enter other businesses on a "case by case" basis. Over the course of the next twelve months, the SBI will sell insurance in 00 branches. Over a period of 2-3 years it will expand operation in 500 branches. Initially it will hold 74% ownership of the joint venture company with Cardif. Over time, it will dilute its holding to 5060%.The SBI entry is groundbreaking for several reasons. This was the first for a bank to enter the insurance market. This kind of synergy between a bank and an insurance company is extremely rare in many parts of the world. In Continental Europe, it is called bancassurance (in France) or allfinanz (in Germany). Second, even though the regulators have said that banks would not (generally) be allowed to hold more than 50% of an insurance company, the SBI was allowed to do so (with a promise that its share would be eventually diluted).

Broken Marriages Several partnerships broke down during the year 2000.
Probably the most dramatic breakdown took place between Hindustan Times (a newspaper group) and the Commercial Union of the UK. The management of Hindustan Times realized that they are heavily reliant on a steady daily cash flow (Kumari, 2001). Insurance is a completely different business. Their shareholders would revolt if they faced large one-time losses (common in insurance business).Similarly, by the end of July 2000, Kotak-Mahindra and Chubb declared their divorce. Dabur Group and Allstate also parted company. Allianz and Alpic broke their partnership.Re-pairing of Partners A curious trend has developed by the end of 2000. Several divorced partners have come back to the field to tie knots to some other partners. Dabur has decided to tie the knot with another divorcee - Commercial Union. Allianz has announced a new partnership

17

with the giant Indian scooter-maker Bajaj.Back to the Future: Mostly Swaraj with a Foreign Twist At present, 312 million middle class consumers in India have enough financial resources to purchase insurance products like pension, health care, accident benefit, life, property and auto insurance. Only 2.5 per cent of this insurable population, however, have insurance coverage in any form. The potential premium income is estimated at around US $80 billion. This will place India as the sixth largest market in the world (after the US, Japan, Germany, UK and France).

18

CHAPTER-2 RESEARCH OBJECTIVES AND METHODOLOGY

OBJECTIVES OF THE STUDY:
1. To understand the growth of bancassurance in india as a new concept 2. To suggest the ways and means to improve the existing performance by way of collecting responses from the customers. 3. To know the awareness of the customer and view points of the customer about insurance as well as bancassurance. 4. Which distribution channel would customer preferred to get insurance policy through banks.

RESEARCH METHODOLOGY OF THE STUDY

RESEARCH Research can be defined as the search for knowledge, or as any systematic investigation, with an open mind, to establish novel facts, usually using a scientific method.
RESEARCH DESIGN: The research design is defined as, it is the plan for collecting and utilizing data so that desired information can be obtained. There are two types of research design:

1. QUALITATIVE: Qualitative research a method of inquiry employed in many different academic disciplines, traditionally in the social sciences, but also in market research and further contexts. Qualitative researchers aim to gather an in-depth understanding of human behavior and the reasons that govern such behavior.

2. QUANTITATIVE: Quantitative research design is the standard experimental method of most scientific disciplines. Quantitative experiments all use a standard format, with a few minor inter-disciplinary differences, of generating a hypothesis to be proved or disproved. This hypothesis must be provable by mathematical and statistical means, and is the basis around which the whole

19

experiment is designed. The two basic means of obtaining primary quantitative data and descriptive research our survey and observation..

1.SURVEY METHODS involves a direct questioning of respondents, where is observation entails recording responded behavior. Surveys involve the administration of a questionnaire and may be classified, based on the method or mood of administration, as:

1. traditional telephone interviews

2. in-home personal interviews

3. Mail surveys

4. Internet surveys

2. OBSERVATIONAL METHODS may be classified as structured or unstructured, disguised or on disguised, and natural or contrived. The major methods are:

a.) personal observation

b) .mechanical observation

DATA COLLECTION: There are two sources of data collection:

PRIMARY DATA COLLECTION In primary data collection, we collect the data our self using methods such as interviews and questionnaires. There are many methods of collecting primary data and the main methods include:

questionnaires interviews Observations

SECONDARY DATA COLLECTION

20

All methods of data collection can supply quantitative data (numbers, statistics or financial) or qualitative data (usually words or text). Quantitative data may often be presented in tabular or graphical form. RESEARCH DESIGN: Exploratory Research. EXPLORATORY RESEARCH: aims to gain familiarity and new insights into any phenomenon while analytical research aims at analyzing the current scenario and thereby using that to project the future performance. This research aims at studying the historical performance of the company in bancassurance and it also evaluates the future prospects of the company SAMPLING SIZE: 50 CUSTOMERS SAMPLING TECHNIQUE:

SAMPLING DESIGN: A sampling design is a definite plan for obtaining a sample given population. There are different methods of sampling. Here Convenience sampling technique has been used.

CONVENIENCE SAMPLING This method of sampling involves selecting the sample elements using some convenient method without going through the rigor of sampling method. The researcher may make use of any convenient base to select the required number of samples. Accordingly, the area selected for the study was DELHI-NCR.

SAMPLING INSTRUMENTS: NO.OF QUESTIONS: TYPE OF QUESTIONS: Both open ended and close ended questions

LIMITATIONS OF THE STUDY:

21

 Time has played a biggest constraint that the research could not be carried out comprehensively as the duration of the study was only a month As a research contains the secondary data for knowing the customer perception or satisfaction

The sample size for collecting the primary data was meager as it includes only 75 respondents hence the conclusion would not be a universal one Personal biases and prejudices of the customers may also affect the study.

22

23

Questionnaire
Name__________________________________________ Age_____ Gender: Male/Female Educational Qualification: a) Engineering b) CA/MBA c) MCA d) Others If Others. Specify_______________________ Email id __________________________________

1. Tick the life insurance companies you are familiar with:1) LIC 3) SBI Life 2) 4) ICICI-Prudential Bajaj-Allianz

24

5)

Max New York Life

6)

Birla Sun Life

2. Tick the types of schemes you are familiar with:1) Term plan 2) Endowment plan 3) Money Back plan 4) ULIP ( Unit Linked Insurance Plan) 5) Child plan 6) Pension plan

3. Tick on what the life insurance company provides? a) Security for life b) Investment Opportunity c) Tax Benefits d) High returns e) Pension

4. Rank the following benefits of Insurance on a 1-5 scale:

_____ Financial Expenses _____ loved Ones future security _____ Exemption from tax _____ Mortgage payments/Rent fund _____ College/School Education

25

5. Do you think insurance is the viable option for investment?

Yes

No

Why?........................................................................................................................ ..................... 6. Do you have any insurance cover? Yes No

If Yes, then which company?.......................................................................................................

7. What type of investment are you interested in?

Short term

Long term

ULIP

Why?.................................................................................................................. ..........................

8. What is idea behind your investment in insurance? Tax Benefit Future Security High Returns

9. What is the mode of your premium payment?

1) Monthly 2) Quarterly 3) Half-Yearly 4) Yearly

26

10. Are you happy with the services provided by the insurance company? Yes No

11. Are you happy with the returns given by the insurance company? Yes No

12. Which is the most trusted insurance company at present? (Both in the public and the private sector) Rate on the basis of 1-5 scale appropriate no.) 1- least trusted . 5- Most trusted (Tick the

LIC SBI-Life ICICI-Prudential Bajaj-Allianz Birla- Sun Life

1 1 1 1 1

2 2 2 2 2

3 3 3 3 3

4 4 4 4 4

5 5 5 5 5

13. Entry of large no. of private insurance companies is good for the public?

Yes

No

14. After privatization whether the public is getting good products/service?

Yes

No

15. What do you think about the role of the IRDA? Regulator . . Facilitator A govt. body

27

ANALYSIS OF THE study

The survey was conducted to understand the knowledge and perception of the people towards life insurance after privatization. The response is quantified by means of response obtained in the form of answers and views put forward by the people in a survey conducted. The survey includes response from professionals, businessmen, daily workers, and housewives and working in different sectors and fields in delhi. Almost everyone knew insurance and relates insurance with LIC and those who have invested in insurance products mainly invested for availing tax exemption and all traditional reasons of investing like risk coverage and loved ones future security while some of them also said that insurance is not a good option for investment due to inflation and when long term gains were considered. Use of bar, line graphs, tables and pie diagrams are done to represent the findings of the survey.

28

No of males and females software professionals surveyed

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 24 7

male

female

Educational qualifications of males

16.66 Engg. CA/MBA 20.83 58.33 MCA Others

4.16

29

Educational qualifications of females

42.85

42.85

Engg. CA/MBA MCA Others

14.28 0

Popularity percentage of life insurance companies

61.29 45.16 41.93 61.29

LIC 80.64 ICICI BAJAJ 67.74 BIRLA HDFC SBI

Even though, the private sector insurance companies are increasing, the most sought after insurance company even among people is LIC which has the highest market share in India. This is also depicted by the pie-chart as shown above.

30

CATEGORY

RESPONSE (in %)

1. LIC 2. ICICI 3. BAJAJ 4. Birla 5. HDFC 6. SBI

80.64 67.74 61.29 41.93 45.16 61.29

Familiarity of Schemes

25.8 58.06 38.7 term plan endowment plan money back ULIP 67.74

Among many plans available, the most preferred one among the mass is money back plan. This plan helps you to withdraw your money at regular intervals and still staying insured. This plan is famous for its high liquidity advantage. The other product gaining popularity is ULIP (unit linked insurance plan), as its serve multiple purpose, it give high returns, tax benefit, life insurance , critical illness cover and is admired for its flexibility for paying premium amount.

31

SCHEMES
1. Term plan 2. Endowment plan 3. Money back 4. ULIP

RESPONSE (in %)
25.8 38.7 67.74 58.06

Objective for investment in Insurance

Among the surveyed people about 61.29% view insurance tax saving product. Life insurance plans of some private insurance companies are giving 100% tax exemption. Even the IT returns are also 100% tax free on annual basis. After that around 46 percent buy insurance to cover risk followed by good returns and savings objective.

CATEGORY

RESPONSE (in %)

32

1. Life Insurance 2. Investment 3. Tax Benefit 4. High Returns 5. Savings

45.16 32.25 61.29 22.58 29.03

Ranking of some benefits of insurance (figures expressed in %)

Among some benefits of insurance, loved ones security secured the least percentage i.e. overall the highest rank. So, people take insurance so that their loved ones and they themselves get secured and enjoy the life cover.

CATEGORY
33

RESPONSE (in %)

1. Final Exp. 2. Loved ones security 3. Income Needs 4. Housing Loans 5. Children Edu.

254 187 200 316 374

Insurance as the viable option for investment

80% 60% 40% 20% 0% yes no 20%

80%

Among the surveyed, 80% of them said that insurance is the viable option for investment. The reasons were there that it is the medium of tax benefit, risk coverage and regular savings. But, 20% of them said that it is not favorable for investment due to inflation and comparatively less returns than other financial instruments.

34

Availability of Insurance Cover

Among the people surveyed, 90% of them said that they had life-insurance cover but only 10% of them were devoid of insurance but were planning to take one in the future.

Estimate of IT professionals enrolled into insurance

About 54.83% of IT professionals have chosen LIC as their premier insurance investment company. And the rest all insurance companies having their insurance cover are far less

35

as compared to LIC. So, this illustrates that even the IT professionals have faith in LIC as their most favored life insurance company.

INSURANCE COMPANY
1. LIC 2. Birla Sun-Life 3.ICICI 4.MetLife 5. Bajaj- Allianz 6. ING-Vyasa 7. SBI-Life 8. Tata- AIG 9. HDFC 10. Reliance

RESPONSE (in %)
54.83 6.45 12.90 3.22 6.45 3.22 6.45 3.22 3.22 6.45

Type of investment interested in

16.12

32.25 Short term Long term

54.83

ULIP

About 54.83% people said that the type of investment which they are interested in is long term investment. This is because they wanted to reap benefits for a longer term. Long life insurance cover will naturally give them high risk coverage and higher returns.

36

Mode of premium payment

38.7

38.7 quarterly monthly

22.58

22.58

half yearly yearly

About 38.7% of them said that they paid their premium through quarterly and yearly mode. And only 22.58% favored monthly and half yearly medium of premium payment.

MODE OF PREMIUM PAYMENT

1. Quarterly 2. Monthly 3. Half- yearly 4. Yearly

RESPONSE (in %)
38.7 22.58 22.58 38.7

Services provided by the insurance company (figures expressed in %)

37

100 80 60 40 20 0

90.32

6.45

Yes

No

About 90.32% of people said that they were happy with the services provided by the insurance company. And only 6.45% were not satisfied. This shows that life insurance companies are fairly performing well especially in India.

Returns given by the insurance company (figures expressed in %)

80 60 40 20 0

70.96

Yes 22.58 No

Yes

No

About 70.96% of people have view that they were happy with the returns given by the insurance companies. But 22.58% were not. The reason for their dissatisfaction is that they think that other financial instruments like bonds, shares, debentures, securities and

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INSURANCE COMPANY
1. LIC

RATING
4.64

mutual funds are other good options for investment and they think that insurance does not provide investment opportunity for the short term.

Ratings of various insurance companies

5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0

4.64 4.03 3.12 3.16 3.12

LIC

SBI-Life

ICICI

Bajaj-Allianz Birla SunLife

LIC of India is the most preferred life insurance company even among software professionals as depicted through the above bar graph. It has a rating of 4.64. The other private life insurance companies are having less percentage of share of it.

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2. SBI-Life 3. ICICI 4. Bajaj- Allianz 5. Birla- Sun Life

4.03 3.12 3.16 3.12

Privatization of insurance

25 20 15 10 5 0 Yes No 7 24

78 % people of those surveyed were of the view that privatization is good for the public. This is because they think that the many private insurance companies have come up with some attractive plans like ULIPs which are fetching good returns even for a short period. Only 22% of them think that that investing in a private insurance company is risky because the returns are not guaranteed.

Availability of good services after privatization

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19.35

Yes No 70.96

About 70.96 % of people think the insurance companies are providing good services even after privatization. This is because they have come up with some new schemes and plans which are innovative and are giving better returns even for a short period than compared to plans pertaining to public sector insurance company like LIC. Only 19.35% think that services are not good after privatization as they have less belief on these private life insurance companies or they do not consider life insurance as important investment option and also the private insurance companies have high premium allocation charges and high surrender charges, fixed charges and other formalities.

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CONCLUDING REMARKS Unit Linked products are finally products of choice. If you feel equipped to manage your investments on your own or are not comfortable with long lock -ins or you can't make the most of these tax breaks, you may be better off investing elsewhere after securing your life insurance needs. 1. There is a great need to disclose the risk involved in the schemes properly to the investor/insurance seeker by the insurance/investment companies. 2. The Insurance Regulatory and Development Authority has to issue set of guidelines on ULIP policies offered in the m arket. 3. The charges in the initial years should be brought down. 4. The high returns (above 20 per cent) are definitely not sustainable over a long term, as they have been generated during the biggest Bull Run in recent stock market. 5. Investors/Insu rance seeker has to take switching charges into consideration as they have a long -term implication on the returns generated.

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REFERENCES 1. www.irdaonline.com 2. www.licindia.com 3. www.lifeinsurancecouncil.com 4. www.sbilife.co.in

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Changes
1. 2. 3. 4. 5. 6. 7. Analysis Suggestions Limitations Add conclusions Add some details of the co. Make it cut short the historical background Impact of privatization

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