CHAPTER-1

INTRODUCTION

1
INDUSTRY PROFILE

Insurance in India

The insurance sector in India has come a full circle from being an open competitive
market to nationalization and back to a liberalized market again. Tracing the
developments in the Indian insurance sector reveals the 360 degree turn witnessed over a
period of almost two centuries.

A brief history of the 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:

• 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 nationalized. 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:

2
 • 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 (Nationalization) Act, 1972 nationalized

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.

The Insurance Regulatory and Development Authority

Reforms in the Insurance sector were initiated with the passage of the IRDA Bill in
Parliament in December 1999. The IRDA since its incorporation as a statutory body in
April 2000 has fastidiously stuck to its schedule of framing regulations and registering
the private sector insurance companies.

The other decision taken simultaneously to provide the supporting systems to the
insurance sector and in particular the life insurance companies was the launch of the
IRDA’s online service for issue and renewal of licenses to agents.

The approval of institutions for imparting training to agents has also ensured that the
insurance companies would have a trained workforce of insurance agents in place to sell
their products, which are expected to be introduced by early next year.

Since being set up as an independent statutory body the IRDA has put in a framework of
globally compatible regulations. In the private sector 12 life insurance and 6 general
insurance companies have been registered.

3
ROLE OF IRDA

Section 14 of IRFDA Act, 1999 lays down the duties, powers & functions of IRDA. The
power & functions of the Authority shall include:

1. Issue to the applicant a certificate of registration, renew, modify,

withdraw, suspend or cancel such registration.
2. Protection of the interests of the policy holders, insurable interest,
settlement of insurance claim, surrender value of policy & other terms & conditions
of contracts of insurance.
3. Specifying requisite qualifications, code of conduct, & practical training
for intermediary or insurance intermediaries & agents;
4. Calling for information from, undertaking inspection of, conducting
enquiries & investigations including audit of the insurers, intermediaries, insurance
intermediaries & other organizations connected with the insurance businnes;
5. Control & regulations of the rates, advantages, terms & conditions that
may be offered by insurer in respect of general insurance business not so controlled &
regulated by the Tariff Advisory Committee under the section 64U of the Insurance
Act, 1938 (4 of 1938).
6. Adjudications of disputes between insurers & intermediaries or insurance
intermediaries.

4
COMPANY PROFILE

Tata AIG Life Insurance Ltd.

Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint venture company,
formed by the Tata Group and American International Group, Inc. (AIG). Tata AIG Life
combines the Tata Group’s pre-eminent leadership position in India and AIG’s global
presence as one of the world’s leading international insurance and financial services
organization. The Tata Group holds 74 per cent stake in the insurance venture with AIG
holding the balance 26 per cent. Tata AIG Life provides insurance solutions to
individuals and corporates. Tata AIG Life Insurance Company was licensed to operate in
India on February 12, 2001 and started operations on April 1, 2001.

Company’s Mission

We focus on the needs of our customers and create confidence, trust and loyalty by
offering a wide range of innovative insurance solutions.

Strengthened by our commitment to professional management, we ensure the continued

growth and advancement of our employees.

Company’s Vision
Tata AIG Life Insurance has a deep rooted commitment to improve the quality of life
of its customers, employees and stakeholders. We aim to be the most preferred General
Insurance Company. We do this by our efforts which strives to make Tata AIG Life
Insurance a corporate with values.

• Increase Customer Value.

• Integrated efforts
5
The TATA Group

Tata is a rapidly growing business group based in India with significant international
operations. Revenues in 2007-08 are USD 62.5 billion (around Rs. 251,543 crores), of
which 61% was from business outside India. The Group’s Net Profit for 2007-08 is USD
5.4 billion (around Rs. 21,578 crores). The Group employs around 350,000 people
worldwide. The business operations of the Tata Group currently encompass seven
business sectors - Communications and Information Technology, Engineering, Materials,
Services, Energy, Consumer Products and Chemicals. The Group's 28 publicly listed
enterprises have a combined market capitalisation of around $60 billion, among the
highest among Indian business houses, and a shareholder base of 2.9 million. The major
companies in the Group include Tata Steel, Tata Motors, Tata Consultancy Services
(TCS), Tata Power, Tata Chemicals, Tata Tea, Indian Hotels, Tata Teleservices and Tata
Communications.

AIG Group

American International Group, Inc. (AIG), a world leader in insurance and financial
services, is the leading international insurance organization with operations in more than
130 countries and jurisdictions. AIG companies serve commercial, institutional and
individual customers through the most extensive worldwide property-casualty and life
insurance networks of any insurer. In addition, AIG companies are leading providers of
retirement services, financial services and asset management around the world. AIG's
common stock is listed on the New York Stock Exchange, as well as the stock exchanges
in Ireland and Tokyo.
6
SWOT ANALYSIS

Strengths

• Disciplined fund management - Years of experience in asset management, and a

strong track record in managing funds.

• Innovative - Known for being an innovator in providing world-class pragmatic

financial solutions, with a constant focus on customization and flexibility

• Customer Satisfaction - A highly committed sales force, with customer

satisfaction as the key driving force.
• Transparency in Services - Daily declaration of fund performances, regular
performance benchmarking, well regulated asset management, and monthly
newsletter on market updates.

Weaknesses-

• Employees – Less number of personnel

• Tata AIG Life Insurance employs around 4328 people in its various businesses
and has 112 branches across 134 cities as compared to ICICI Prudential has 735
offices, 22 Bank assurance partners and over 2.4 lakh advisors therefore it should
increase its offices.
• Training Department – Tata AIG Life Insurance has a limited number of
trainers in its branches, because of which advisors are not properly trained, so it
should work on developing its training department.

Opportunities

• India's economic development made it a most lucrative Insurance market in the

world and post liberalisation the entry of foreign partners has been allowed.
• Life Insurance industry is growing at an unprecedent pace so to survive in the
Industry they should analyse the emerging requirements of the policyholders /
insurers and they are in the forefront in providing essential services and
7
 introducing novel products. Thereby they can become niche specialists, who
provide the right service to the right person in right time
• The impact of Information Technology in Insurance business is being felt at an
accelerating pace. In the initial years IT has been used more to execute back
office functions like maintenance of accounts, reconciling broker accounts, client
processing etc. With the advent of "database concepts", these functions are better
integrated in an administrative efficiency.
• The real evolution is however emerged out of Internet boom. The Internet has
provided brand new distribution channels to the Insurers. The technology has
enabled the Insurer to innovate new products, provide better customer service and
deeper and wider insurance coverage to them.
• In the present competitive scenario, a key differentiator is the professional
customer service in terms of quality of advice on product choice along with policy
servicing. Servicing focus is on enhancing the customer's experience and
maximizing his convenience. This calls the effective CRM system, which
eventually creates sustainable competitive advantage and enables to build long
lasting relationship.

Threats

• Private and Foreign entrants in the Insurance Industry made others difficult to
retain their market. Higher customer aspirations lead to new expectations and
compel him to move towards the insurer who provides him the best service in
time. It becomes less viable for them even to maintain the functional networks or
competitive standards and services.
• With the entry of private and foreign players in the Insurance business, people
have got a lot of options to choose from. Radical changes are taking place in
customer profile due to the changing life style and social perception, resulting in
erosion of brand loyalty.

8
 • The conflict of IRDA and SEBI over certain products in recent time has made the
survival tough for some crucial products of Life Insurance. Some guidelines has
been changed like lock–in period, company’s margin, number of Life Advisers
etc. which is making the operation of this industry very tough.

Market share of various Life Insurance Companies

• LIC (Life Insurance Corporation of India) still remains the largest life
insurance company accounting for 64% market share. Its share, however, has
dropped from 74% a year before, mainly owing to entry of private players with
innovative products and better sales force.

• ICICI Prudential Life Insurance Co Ltd is the biggest private life insurance
company in India. It experienced growth of 58% in new business premium,
accounting for increase in market share to 8.93% in 2007-08 from 6.97% in
2006-07.
• Bajaj Allianz Life Insurance Co Ltd has reported a growth of 52% and its
market share went up to 6.98% in 2007-08 form 5.66% in 2006-07. The company
ranked second (after LIC) in number of policies sold in 2007-08, with total
market share of 7.36%.
• SBI Life Insurance Co Ltd in terms of new number of policies sold, the
company ranked 6th in 2007-08. New premium collection for the company was
Rs 4,792.66 crore in 2007-08, an increase of 87% over last year.
• Reliance Life Insurance Co Ltd Total collected was Rs 2,792.76 crore and its
market share went up to 2.96% from 1.23% a year back. It now ranks 5th in new
business premium and 4th in number of new policies sold in 2007-08.
• HDFC Standard Life Insurance Co Ltd with an income of Rs 2,680 crore in
FY2007-08, registering a year-on-year growth of 64%. Its market share is 2.88%
and it ranks 6 th among the insurance companies and 5th amongst the private
players.
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 • Birla Sun Life Insurance Co Ltd market share of the company increased from
1.22% to 2.11% in 2007-08. The company moved to the 7th position in 2007-08
from 8the a year before, pushing down Max New York Life insurance company.
• Max New York Life Insurance Co Ltd has reported growth of 73% in 2007-08.
Total new business generated was Rs 641.83 crore as against Rs 387.51 crore.
The company was pushed down to the 8th position from 7th in 2007-08.
• Kotak Mahindra Old Mutual Life Insurance Ltd the fiscal 2007-08, the
company reported growth of 80%, moving from the 11th position to 9th. It
captured a market share of 1.19% in 2007-08. Last year the company doubled its
branch network to 150 from 74.
• Aviva Life Insurance Company India Ltd ranking dropped to 10th in 2007-08
from 9th last year. It has presence in more than 3,000 locations across India via
221 branches and close to 40 bancassurance partnerships. Aviva Life Insurance
plans to increase its capital base by Rs 344 crore. With the fresh investment, total
paid-up capital of the insurer would go up to Rs 1,348.8 crore.

MAJOR COMPETITORS

PRIVATE PLAYERS IN INSURANCE SECTORS

India still has low insurance penetration of 1.95 percent, 51st in the world. Despite the
fact that India boosts a saving rate of around 25 percent, less than 5 percent is spent on
insurance. The insurance landscape in India is undergoing major changes. Close to
foreign competition since nationalization in 1956, the life insurance industry had been
protected from competitive pressures. Now, with the reopening of the sector, several new
players have entered the scene.

LIFE INSURANCE COMPANIES

10
 Year of
S. No. Insurers Foreign Partners
Operation

1. Standard Life Assurance,

HDFC Standard Life Insurance Co. Ltd. 2000-01
UK

2.
Max New York Life Insurance Co. Ltd. New York Life, USA 2000-01

3.
ICICI-Prudential Life Insurance Co. Ltd. Prudential , UK 2000-01

4.
Om Kotak Life Insurance Co. Ltd. Old Mutual, South Africa 2001-02

5.
Birla Sun Life Insurance Co. Ltd. Sun Life, Canada 2000-01

6. American International
Tata-AIG Life Insurance Co. Ltd. 2000-01
Assurance Co., USA

7. BNP Paribas Assurance

SBI Life Insurance Co. Ltd. 2001-02
SA, France

ING Insurance
8.
ING Vysya Life Insurance Co. Ltd. International B.V., 2001-02
Netherlands

9.
Allianz Bajaj Life Insurance Co. Ltd. Allianz, Germany 2001-02

10
Metlife International
. Metlife India Insurance Co. Ltd. 2001-02
Holdings Ltd., USA

11 Reliance Life Insurance Co. Ltd. (Earlier --- 2001-02

. AMP Sanmar Life Insurance Co. from

11
 Year of
S. No. Insurers Foreign Partners
Operation

3.1.2002 to 29.9.2005)

12
Aviva International
. AVIVA 2002-03
Holdings Ltd., UK

13
. Sahara Life Insurance Co. Ltd. --- 2004-05

14
. Shriram Life Insurance Co. Ltd. Sanlam, South Africa 2005-06

15
. Bharti AXA Life Insurance Co. Ltd. AXA Holdings, France 2006-07

16
Future Generali India Life Insurance
. Generali, Italy 2007-08
Company Ltd.

17
. IDBI Fortis Life Insurance Company Ltd. Fortis, Netherlands 2007-08

18
Canara HSBC OBC Life Insurance
. HSBC, UK 2008-09
Company Ltd.

19 Aegon Religare Life Insurance Company Religare, Netherlands 2008-09

. Ltd.
12
 Year of
S. No. Insurers Foreign Partners
Operation

20
Prudential of America,
. DLF Pramerica Life Insurance Co. Ltd. 2008-09
USA

21
Dai-ichi Mutual Life
. Star Union Dai-ichi 2008-09
Insurance, Japan

22
Legal & General Middle
. India First life insurance company 2009-10
East Limited, UK

23
. Life Insurance Corporation of India --- 1956-57

13
 Chapter 2

RESEARCH
METHODOLOGY

RESEARCH METHODOLOGY

14
The research is carried on in a proper planned and systematic manner. This
methodology includes:
 Familiarization with the concept of insurance and its various terms.

 Thorough study of the information collected.

 Conclusions based on findings.

The research methodology which is adopted to conduct this study are both qualitative as
well as quantitative.

Qualitative

In order to identify the insurance needs of the Indian population with respect to their
emotional, physical & financial conditions and to match the needs of the population
with the products in hand require to conduct the qualitative study.
Quantitative
In order to understand the market segmentation of insurance products and to study the
various factors which influence the purchase decision of insurance products require the
quantitative study.

REVIEW OF LITERATURE

BACKGROUND OF THE PROBLEM

The entire Insurance sector is divided into 2 broad categories:

• General Insurance

• Life Insurance

Further Life Insurance is sub-divided into two categories:

• TRADITIONAL INSURANCE PLANS

• ULIPS (Unit Linked Insurance Plans)

15
Traditional products are basically the term plans and the whole life plans, in which risk
cover is the foremost objective of the customers. In case of term plans the sum assured is
given to the nominee of the life to be insured in case of his death, there is no maturity
claim, whereas in case of whole life some amount is paid after a certain period of time.

ULIPS were introduced couple of years back in the Indian market. These include the
endowment policies and money back policies that have the investment benefit along with
the risk cover i.e. the certain portion of the premium paid by the customer is used for the
risk cover and rest is further invested in the funds offered by the company.

So when the private players entered the market they decided to introduce market driven
plans named ULIP which promised a very attractive return to the consumers. Birla Sun
Life was the first company to establish the concept of ULIP. Though this concept was
very attractive but still a number of policies got lapsed, then the private players came up
with an idea of 3 years lock in period, so that number of policies lapsing could be
reduced, which worked well.

Now since the expectations of investors have increased who are investing their money, so
the money flow in mutual funds and stock market has increased gradually because the
returns are as high as 25% - 30%. But still Life Insurance is Safe Avenue while
promising you good returns, this would be clear from the following points:

• Returns in ULIPs are also as high as 25% - 30%, while it also gives life cover in
case of mishappening such as death, disability, etc.

• Risk in ULIPs is less as compared to mutual funds and stock market, as ULIPs
offer different funds with different combinations of debt and equity.

• Fund management fee in ULIPs is 1.25% as compared to the fee in mutual funds
2.5%.

• The entire fund of the investor can be eroded under mutual fund if market crashes,
but under ULIPs at least principle amount plus bank rate is guaranteed.
16
 • ULIPs provide insurance cover as well as good returns.

• Capital gains are not taxable under ULIPs.

• Most companies offering ULIPs provide a number of free switches to its

investors, if they would like to switch their funds, but these switches are
chargeable under mutual funds.

Most of the investors in the Indian market are not aware of these benefits of Life
Insurance, but as the awareness is increasing more and more investors are joining this
sector, resulting in increased turnover year over year.

OBJECTIVES OF THE STUDY

The objectives mark the right direction to carry out any study. So, the objectives of this
study are as under:-

 To learn and understand the market segmentation of insurance products.

 To identify the insurance needs of the Indian population with respect to their
emotional, physical and financial conditions.

 To study the various factors which influence the purchase of insurance products

 To match the needs of the population with the products in hand or else design a
new product.

RESEARCH DESIGN

DESCRIPTIVE RESEARCH

17
This study is based on a descriptive research design wherein the risks and returns
associated with the various products have been studied and the reasons for customer
perception regarding these products have been found out.

UNIVERSE
The areas of North and West Delhi are selected as the Universe to conduct this study.

SAMPLE DESIGN
As the research is based on analyzing the consumer preference among various investment
avenues in the market such as stock market, mutual funds, life insurance, fixed
deposited., for that a sample size of 100 was taken , which was picked up on random
basis for the purpose of survey. Simple Random Sampling has been adopted to conduct
this study.

SAMPLE UNIT
The sample unit considered for this study is Investor who invests in various avenues
available in the market. The respondents have been selected from the Universe defined
above.

SOURCES OF DATA COLLECTION:

Both the Primary and Secondary sources have been used to collect the desired data for
the study.

Primary data collection has been done through the means of:
• Questionnaires- In order to get the primary data, a close ended questionnaire has
been design to conduct the study.
• Interviews- In addition to the questionnaire, some other relevant questions were
also asked to get the information regarding their marked choices.
.

18
Secondary data: These include books, the internet, company brochures, product
brochures, the company website, competitor’s websites etc, newspaper articles etc

DURATION
The study has been conducted in the duration of 7 Weeks which is as follows:
Phase – I (3/06/10-08/06/10):- The first phase of training is all about the classroom
training in which they told about the general concepts about the insurance.
Phase – II (09/06/10-19/06/10):- The second phase of training is all about the company
profile and different operations.
Phase – III (19/06/10-30/06/10):- In the third phase market research was conducted.
Phase – IV (1/07/10-11/07/10):- Fourth Phase is about the data analysis and its
interpretation.
Phase – IV (12/06/10-21/07/10):- Documentation was done in the final phase.

SAMPLE SIZE:
Total sample of 100 was selected which is as follows:
West Delhi Area - 60
North Delhi Area - 40

SCOPE OF THE STUDY

In the present scenario as our economy is growing and the per capita income is rising
people at large have got more money with them to invest in the market, who according to
their choice invest in share market, government bonds, life insurance, mutual funds, real
estate. If a consumer chooses to invest in mutual funds there are 33 mutual fund
companies, if one chooses to invest in stock market there are hundreds of companies
listed on the stock exchange, if he chooses to invest in life insurance there are 16
companies present such as ICICI PRUDENTIAL., AVIVA LIFE INSURANCE, KOTAK
LIFE INSURANCE, SBI LIFE INSURANCE, TATA AIG LIFE INSURANCE, LIC,
BAJAJ ALLIANZ, etc.; so in order to study the consumer preferences, the various factors
19
that influence the buying behavior of a consumer buying life insurance, a sample of 100
was chosen from DELHI.

LIMITATIONS OF THE STUDY

By working on this project, a lot of knowledge about the insurance sector in INDIA has
been gained. However, there were many limitations or problems that I faced while
working on this project. The following are the limitations:

 Small Sample Size: The study was relied more on the primary data and the data
was collected from a small population of 100, therefore, the findings may not be
applicable in their true sense when it is applied in general.

 Time Constraint: As the duration of internship was only 7 weeks, therefore, it

was very difficult to conduct the entire study about the vast insurance sector

 Small Universe: The study is restricted only to some areas of Delhi which
ignores the entire public in general

 Biased Responses: The answers of the customers could have been biased which
may affect the analysis of the study.

20
 Chapter 3
CONCEPTUAL
DISCUSSION

THEORY & CONCEPTS USED IN THE PROJECT

21
WHAT IS AN INVESTMENT?

Investment is the commitment of money or capital to purchase financial instruments

or other assets in order to gain profitable returns in the form of interest, income
{dividend}, or appreciation of the value of the instrument.It is related to saving or
deferring consumption. Investment is involved in many areas of the economy, such as
business management and finance no matter for households, firms, or governments. An
investment involves the choice by an individual or an organization such as a pension
fund, after some analysis or thought, to place or lend money in a vehicle, instrument or
asset, such as property, commodity, stock, bond, financial derivatives (e.g. futures or
options), or the foreign asset denominated in foreign currency, that has certain level of
risk and provides the possibility of generating returns over a period of time.

WHAT IS AN INSURANCE?

GENERAL DEFINITION:

In the words of John Magee, " Insurance is a plan by themselves which large number of
people associate and transfer to the shoulders of all, risks that attach to individuals. "

FUNDAMENTAL DEFINITION:

In the words of D.S.Hansell, “Insurance accumulated contributions of all parties

participating in the Scheme. "

CONTRACTUAL DEFINITION:

In the words of Justice Tindall,"Insurance is a contract in which a sum of money is paid

to the assured as consideration of insurer’s incurring the risk of paying a large sum upon
a given contingency."

CHARACTERISTICS OF INSURANCE

 Sharing of risks
 Cooperative device
 Evaluation of risk
22
  Payment on happening of a special event
 The amount of payment depends on the nature of losses incurred.
 Insurance is a plan, which spreads the risk and losses of few people among a large
number of people.
 The insurance plan is a plan in which the insured transfers his risk on the insurer.

FUNCTIONS OF INSURANCE

PRIMARY FUNCTIONS

1. Provide protection: - Insurance cannot check the happening of the risk, but can
provide for the losses of risk.
2. Collective bearing of risk: - Insurance is a device to share the financial losses of
few among many others.
3. Assessment of risk: - Insurance determines the probable volume of risk by
evaluating various factors that give rise to risk.
4. Provide Certainty: - Insurance is a device, which helps to change from
uncertainty to certainty.

SECONDRY FUNCTIONS:

1. Prevention of losses: - Insurance cautions businessman and individuals to adopt

suitable device to prevent unfortunate consequences of risk by observing safety
instructions.

2. Small capital to cover large risks: - Insurance relives the businessman from
security investment, by paying small amount of insurance against larger risks and
uncertainty.

WHY WE NEED INSURANCE?

23
 Premature Death
1 out of 4 people don’t reach the age of 60.
 You are providing your family with a lifestyle.
 This lifestyle is dependent on your continued income generating capability.
 If this income were to stop unfortunately, how would your family meet its
financial requirements?
 My responsibility is to help you protect your family financially in event
something unfortunate happens…

Living too long

7 out of 10 people endure retirement instead of enjoying it.
 Do you want financial independence post retirement?
 Imagine living beyond your working years on a depleted income.
 However, you would want to maintain your some living standards and be
financially independent.
 My responsibility is to help you secure a financially stable future post retirement.

Children’s Future
To get a premier MBA degree in year 2015 will cost Rs. 18lakh.
 It is your responsibility to provide your children with best possible education they
can have.
 Do you want to compromise on their future?
My responsibility is to help you build financial assets for your children’s future.

DO I NEED INSURANCE?

HUMAN LIFE CONCEPT

Your life is your most valuable asset. This is easily proved if we were to assign a
monetary value to your life; this value depends on your income- earning potential or your
Human Life Value.

24
Your income supports your family. Helps them to get the most out of life. Month after
month, year after year, you and your dependents live the best way you can use the money
you earn. This money enables your household to run smoothly, your children to college,
takes care of the medical bills, your vacations and helps maintain your lifestyle.

On the basis of your income or earning potential, we can calculate your Human Life
Value. A simple rule of thumb to compute it as follows: multiply your present annual
income by the number of years until you plan to retire.

This does not take in factors such as inflation or an increase in your income over time.
Therefore, your Human Life Value is a great deal higher than the amount calculated
above.

What if an unfortunate incident happens in your life and you were unable to work? Your
income would stop. Your family is then, at a risk of losing all your future income. The
potential cost of losing your income is too great to ignore.

PROTECTING YOUR MOST VALUABLE ASSET

If something were happen to you, here are a few possible ways of dealing with the
financial implications:

1. Draw from your savings: But how long would the funds last? A lifetime of
savings could be used up in a few months.
2. Borrow from others: Who will lend you the money? Even family and friends can
only help to an extent. And anyway, this would only be a short-term solution.
3. Sell your assets: What price will you get for your assets? Would you like to sell
your home? Your car?
4. Transfer the risk to an insurance company.

We recommend that you transfer the risk to an insurance company. It’s cheaper, safer and
smarter in the long run.
25
If you insure the risk, your money outflow is actually miniscule. For the sake of
illustration, an annual premia payout of approx. Rs. 25 for 15 years guarantees your
family will receive Rs. 1000 – if something happens to you in that situation a small price
to pay for providing peace of mind to your family. A smaller sum is payable for
transferring the risk of disability.

Another advantage of transferring the risk is that you remove the uncertainty.

So do take care to protect your most valuable asset…..your life!

WHAT ARE MUTUAL FUNDS?

A mutual fund is a professionally managed type of collective investment scheme that
pools money from many investors and invests it in stocks, bonds, short-term money
market instruments and other securities. Mutual funds have a fund manager who
invests the money on behalf of the investors by buying / selling stocks, bonds etc. It is
a substitute for those who are unable to invest directly in equities or debt because of
resource, time or knowledge constraints. Benefits include professional money
management, buying in small amounts and diversification.

Mutual fund units are issued and redeemed by the Fund Management Company based
on the fund's Net Asset Value (NAV), which is determined at the end of each trading
session. NAV is calculated as the value of all the shares held by the fund, minus
expenses, divided by the number of units issued. Mutual Funds are usually long term
investment vehicle though there are some categories of mutual funds, such as money
market mutual funds which are short term instruments.

Currently, the worldwide value of all mutual funds totals more than $US 26 trillion.
The United States leads with the number of mutual fund schemes. There are more
than 8000 mutual fund schemes in the U.S.A. Comparatively, India has around 1000
mutual fund schemes, but this number has grown exponentially in the last few years.
The Total Assets under Management in India of all Mutual funds put together touched
26
a peak of Rs. 5,44,535 crs. at the end of August 2008.

WHAT ARE GOVT. BONDS?

A bond is a debt investment in which an investor loans a certain amount of money, for a
certain amount of time, with a certain interest rate, to a company. A government bond is
a bond issued by a national government denominated in the country's own currency.
Bonds issued by national governments in foreign currencies are normally referred to as
sovereign bonds. The first ever government bond was issued by the English government
in 1693 to raise money to fund a war against France. It was in the form of a tontine.

Government bonds are usually referred to as risk-free bonds, because the government can
raise taxes to redeem the bond at maturity. Some counter examples do exist where a
government has defaulted on its domestic currency debt, such as Russia in 1998 (the
"ruble crisis"), though this is very rare. As an example, in the US, Treasury securities are
denominated in US dollars. In this instance, the term "risk-free" means free of credit risk.
However, other risks still exist, such as currency risk for foreign investors (for example
non-US investors of US Treasury securities would have received lower returns in 2004
because the value of the US dollar declined against most other currencies). Secondly,
there is inflation risk, in that the principal repaid at maturity will have less purchasing
power than anticipated if the inflation outturn is higher than expected. Many governments
issue inflation-indexed bonds, which should protect investors against inflation risk.

WHAT ARE FIXED DEPOSITS?

Fixed deposits are loan arrangements where a specific amount of funds is placed on
deposit under the name of the account holder. The money placed on deposit earns a fixed
rate of interest, according to the terms and conditions that govern the account. The actual
amount of the fixed rate can be influenced by such factors at the type of currency

27
involved in the deposit, the duration set in place for the deposit, and the location where
the deposit is made.

Fixed deposits are a credible way to make a return on investment that is somewhat higher
than a standard savings account. The use of fixed deposits can also be helpful when
working with various types of currency. By establishing what is known as a Foreign
Currency Fixed Deposit or FCFD, it is possible to choose the type of currency involved
in the deposit and lock in a rate of interest. If the choice of currency is a good one, this
means the investor can enjoy a healthy fixed deposit currency rate for the duration of the
deposit and earn more than with a standard fixed deposit strategy. However, going with
an FCFD does contain a slightly higher amount of risk, since the funds deposited must be
converted to the currency of choice and then converted back when the deposit is fulfilled.
If the currency did not fare well in the interim, there is some chance of obtaining a loss,
due to the changes in the rate of exchange from the time the fixed deposit was activated
until the time the deposit is considered complete.

Chapter 4
28
 DATA ANALYSIS
&
INTERPRETATION

DATA ANALYSIS

1. What is your age?

• Less Than 20 • 30-45
• 20-30 • More Than 45

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Less than 20 yr 12 12
20-30 yr 37 37
30-45yr 33 33
Above 45 yrs 18 18
TOTAL 100 100

29
 less than 20 20-30 30-45 more than 45

12
18

37

33

Inference: It can be observed from the pie-chart that:

• 12% of the investors are less than that of 20 years of age.
• 37% lie in the age group of 20-30 years as such investors are returns oriented
and are risk takers.
• 33% lie in the age group of 30-45 years as these investors want safe products.
• Only 18% of the investors lie in the age group of more than 45 years. Such
investors are risk averse.

2. What is your marital status?

• Married

• Unmarried

MARITAL STATUS

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Married 82 82
Unmarried 18 14
TOTAL 100 100

30
 married unmarried
18%

82%

Inference- It can be seen from the pie-chart that:-

• 82% of the investors are married as they have dependents so they are more
conscious towards the health and life of their family members.

• 18% of the investors are unmarried.

31
3. What is your annual income?

• Less than 1,00,000 • 2,50,000-5,00,000

• 1,00,000-2,50,000 • More than 5,00,000

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Income less than 1 Lac 15 15
1-2.5 Lac 36 36
2.5- 5 40 40
More than 5 Lac 9 9
TOTAL 100 100

less than 1lac 1-2.5 lac 2.5-5 more than 5

9% 15%

40%
36%

Inference- It can be derived from the pie-chart that

• 15% of the investors are in the income group of less than 1 lac.

• 36% of the investors lie in the income slab of 1-2.5 lacs.

• 40% of the investors are in the income group of 2.5-5 lacs.

32
 • 9% of the investors lie in the age group of more than 5 lacs.

4. Which Avenues do you prefer for investment?

• Stock Market • Govt. Bonds

• Mutual funds • Fixed deposit

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Stock Market 37 37
Mutual Funds 22 22
Govt. Bonds 32 32
Fixed Deposit 9 9
TOTAL 100 100

stock market mutual funds

govt. bonds fixed deposit

9%

37%

32%

22%

Inferences- It can be inferred from the pie-chart that

• 37% of the investors invest in stock market due to its high returns capability and
investors are risk takers as well.
• 22% of the investors invest in mutual funds as they are quite structured avenues,
offer good returns and are safe too.
• 32% of the investors invest in govt. bonds as they are safe investment options and
risk associated is less.
33
 • 9% of the investors invest in fixed deposits as they are the traditional investment
avenues.

5. Are you aware about the benefits of Insurance?

• Yes • No

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Yes 91 91
No 09 09
TOTAL 100 100

yes No
9%

91%

Inference- It can be seen from the pie-chart that

• 91% of the investors are aware about the benefits of insurance.

• 7% of the investors are unaware of the benefits of insurance.

34
6. Are you and your family members insured?

• All members including you • No

• Only you

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

All members including you 77 77
Only you 13 13
No one 10 10
TOTAL 100 100

35
 all members including you only you no one

10%

13%

77%

Inference- It can be derived from the pie-chart that

• 77% of the investors have taken insurance plans for their family as well as
themselves as they are concerned about their dependents.
• 13% of the investors have taken insurance plans for themselves only.
• 10% of the investors have neither taken insurance plans for
their family nor for themselves.

7. If yes, from which company are you insured?

• LIC • HDFC

• ICICI • TATA AIG

• OTHERS

36
 SAMPLE SIZE 100 FREQUENCY PERCENTAGE
LIC 47 47
ICICI 27 27
HDFC 11 11
TATA AIG 5 5
Others 10 10
Total 100 100

LIC ICICI HDFC TATA AIG

6%
12%

52%
30%

Inference- It can be observed from the pie-chart that

• 47% of the investors invest in LIC insurance plans due to their good records of
returns and safety.
• 27% the investors invest in ICICI as it holds a good record in private sector
insurers and has a huge customer equity.
• 11% of the investors have taken insurance plans from HDFC due to their good
experiences with it.
• 10% have taken plans from other insurance companies like birla sun life, SBI life

37
8. Which of the following features which affects your purchase?

• Brand • EMI

• Returns • Time Period

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Brand 32 32
EMI 08 08
Returns 43 43
Time period 17 17
TOTAL 100 100

brand Emi returns time period

17%
32%

43% 8%

Inference- It can be seen from the pie-chart that

• 32% of the investors are affected by the brand image of the company in the
market as it reflects their past performances as well.

38
• 8% of the investors are affected by EMIs that is demanded by the plan.
• 43% are concerned with the returns offered by the plan.
• 17% are concerned with the tenure of the plans.

39
9. What is the annual premium you are paying?

• 5000-10000 • 25000-50000

• 10000-25000 • Above 50000

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

5000-10000 09 9

10000-25000 36 36

25000-50000 38 38

Above 50000 17 17

TOTAL 100 100

5000-10000 10000-25000 25000-50000 Above 50000

9%
17%

36%

38%

Inference- It can be seen from the pie-chart that

• 9% of the investors pay an annual premium between Rs.5000-10000.

• 36% pay an annual premium in the range of Rs.10000-25000.
• 38% pay an annual premium of Rs.25000-50000.
• 17% of the investors pay an annual premium above Rs.50000.

40
Q10.Which type of plan you prefer now?

• Traditional plans

• ULIPs

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Traditional 12 12

ULIPs 88 88
TOTAL 100 100

Traditional ULIP

12%

88%

Inference: It can be observed from the pie-chart that

• 88% of the investors prefer ULIPs over Traditional plans due to several
benefits they offer.
• 12% of the investors still prefer Traditional plans over ULIPs due to
unawareness about the products and its benefits.

41
11. If your preferred avenue has been changed then please mentions the reason

• Potential for better returns. • Flexibility in investment.

• Greater transparency. • Higher liquidity

SAMPLE SIZE 100 FREQUENCY PERCENTAGE

Potential for better return 52 52
Greater transparency 20 20
Flexibility in investment 18 18
Higher liquidity 10 10
TOTAL 100 100

Potential for
10 better return

18 Greater
Transparency
52
Flexibility in
Investment
20
Higher
Liquidity

Inference- It can be seen from the pie-chart that

• 52% of the investors are interested in potential for better returns.

• 20% of the investors are prefer transparent services.

42
• 18% of the investors wants flexibility in investment..
• 10% of the investors investaccordig to the company’s liquidity.

Chapter – 5
Findings,
Recommendatio
ns &
Conclusion

43
FINDINGS
After collecting primary data and analyzing them graphically it can be concluded that:

• 12% of the investors are less than that of 20 years of age.37% lie in the age group
of 20-30 years as such investors are returns oriented and are risk takers.33% lie in the
age group of 30-45 years as these investors want safe products with assured
returns.Only 18% of the investors lie in the age group of more than 45 years. Such
investors are risk averse.

• It was found that in a sample of 100, 36 (36%) of people had annual income
between Rs.100000-250000. Out of these 36, 14 people pay a premium below Rs.
10000, 22 pay premiums between Rs. 10000-20000.

• In the same sample of 100, 40 (40%) people had annual income between Rs.
250000-500000. Out of these 25, 7 people pay premium between Rs. 10000-20000,
14 people pay premium between Rs. 20000-50000, and 9 of them pay premium above
Rs. 500000.

• The highest market share from the sample was of LIC with 47% respondents
having LIC policy, followed by ICICI PRUDENTIAL with a market share of 27%,
HDFC STANDARD LIFE with 11% share , TATA AIG with 5% and OTHERS with
10% share.

• Most people choose LIC for its Brand Image and since it is a PSU, also it offers to
its customers’ low EMIs, but on the other hand private players offer better returns.

• It was found that most of the people considered “Returns 43%” as a major factor
while buying insurance with positive responses, 32% “Brand Image” as the prime
factor, 8(8%) prefer “EMI” and 17(14%) prefer “Time Period”.

44
 • The most preferred avenue for investment was found out to be Stock Market
preferred by 37% respondents, followed by Mutual Fund preferred by 22%
respondents, 32% preferred Govt. Bonds, 9% preferred Fixed Deposit.

• Out of the entire sample of 100, 78(78%) preferred Traditional Insurance Plans,
and 22(22%) preferred ULIPs 3 years ago but in present scenario 12% prefer
Traditional Plans and 88% prefer ULIPs. Among the reasons for this change 52(52%)
respondents prefer “Potential for better returns”, 20(20%) prefer “Greater
Transparency”, 18(18%) prefer “Flexibility in investment” and 10(10%) prefer
“Higher liquidity”.

Recommendations for whole Insurance Industry

• As it can be seen that that most of the investors are inclined toward stock market
and mutual funds there is a strong need to take some important steps on the part of
government and insurance companies which would help this sector grow at a faster
pace.
• The government should make life insurance mandatory, because most of the peole
live with the myth “I don’t need insurance”, so this myth should be eradicated from
the mind of the consumers by highlighting the benefits of life insurance, government
can launch campaigns to increase awareness especially in the rural sector.
• The companies should highlight the advantages of life insurance in comparison to
other investment avenues such as mutual funds, stock market, as only ULIPs offer
returns plus life cover which other investment options do not provide, also capital
gains or maturity amount is exempted from tax under Section 10(10) D of the Income
Tax Act.
• There should be strong distribution channel of the insurance companies so that
they are closely connected to consumers, distribution channel that is the agents of life
insurance companies are foundation of life insurance business, they must be properly
trained by the companies to sell products according to the needs of the customer, give
suitable suggestions to the customer to make his/her future secure.
45
Recommendations for Tata AIG Life Insurance

If Tata AIG Life Insurance wants to become a market leader it has to work on certain
areas:

• Tata AIG Life Insurance employs around 4328 people in its various businesses
and has 112 branches across 108 cities as compared to ICICI Prudential has 735
offices, 22 Bank assurance partners and over 2.4 lakh advisors therefore KLI
should increase its offices.

• Tata AIG Life Insurance has a limited number of trainers in its branches, because
of which advisors are not properly trained, so it should work on developing its
training department.

• Increase expenditure on promotion and advertising to make people think of Tata

AIG Life Insurance whenever they think of insurance.

• Transparency in the system i.e. conductance and training of Life Advisers, in

customer relationships, reporting should be there.

CONCLUSION

Earlier Life Insurance was taken as an option for risk cover or a tax saving by people. But
in the present scenario the mind set and outlook of people has changed a lot. They now
consider Life insurance as an investment opportunity in long run. Clients have also
shifted a lot from traditional plans to Unit linked insurance plan (ULIP). ULIP provide
the investor with benefits like Potential for better returns. Under IRDA guidelines,
traditional plans have to invest at least 85% in debt instruments which results in low
returns. On the other hand, Ulips invest in market linked instruments with varying debt
and equity proportions and if you wish you can even choose 100% equity option. There is
46
also Flexibility in investment. The top most advantage which ULIPs offer over traditional
plans is the flexibility offered to the customer to customise the product according to their
needs:
1. Flexibility to invest the money the way customer wants: Unlike traditional
plans, Ulips allow customer to full discretion to choose the fund option most
appropriate to their risk appetite.

2. Flexibility to change the fund allocation: Ulips also give the customer an
option to change the fund allocation at a later stage through fund switching facility.

Last but not least ULIP also provide investor with ;Higher Liquidity (Better exit
options), the possibility to withdraw your money before maturity (through surrender or
partial withdrawals) is higher in case of Ulips as compared to traditional plans and also
the exit costs are lower. Therefore In ULIPs, a part of the investment goes towards
providing a life cover and the residual portion of the ULIP is invested in a fund which in
turn invests in stocks or bond. The value of investments alters with the performance of
the underlying fund opted by the customer In short we can say that ULIP is managed
according to the customer’s specific needs and offers them unprecedented flexibility and
transparency.

47
BIBLIOGRAPHY

48
 BIBLIOGRAPHY

BOOKS

1. Insurance Distribution – An Introduction, Insurance Series, ICFAI

University
2. Kothari, C.R: Research methodology,2nd edition,1990, New age
international (p) ltd,New delhi
3. IC-24, Legal Aspect of Life Insurance issued by IRDA
4. Marketing Management –Philip Kotler,13th edition

WEBSITES

• http://www.tataAIGlifeinsurance.com

• http://www.irdaindia.org/

• www.google.com

• http://economictimes.indiatimes.com

49
Annexure

50
 Questionnaire

Contact Information
Name: Occupation:
Address: Phone No.:
Gender:

1. What is your age?

1. Less Than 20
2. 20-30
3. 30-45
4. More Than 45

2. What is your annual income?

1. Less than 1,00,000

2. 1,00,000-2,50,000

3. 2,50,000-5,00,000

4. More than 5,00,000

3. What is your marital status?

1. Married :

2. Unmarried:

4. Which Avenues do you prefer for investment?

1. Stock Market
2. Mutual funds
3. Govt. Bonds
51
 4. Fixed deposits

5. Are you aware about the benefits of Insurance?

1. Yes
2. No
6. Are you and your family members insured?
1. All members including you
2. Only you
3. No one
7. If yes, from which company are you insured?
1. LIC
2. ICICI
3. HDFC
4. TATA AIG
5. Others
8.Which of the following features which affects your purchase?
• Brand
• EMI
• Returns
• Time Period
9. What is the annual premium you are paying?
1. 5000-15000
2. 15000-30000
3. 30000-50000
4. Above 50000

10. Which type of plan you prefer now?

1. Traditional plans
2. ULIPs

52
11. If your preferred avenue has been changed then please mentions the reason

1. Potential for better returns.

2. Greater transparency.
3. Flexibility in investment.
4. Higher liquidity.

(Signature)

53