PROJECT REPORT OF METLIFE INDIA INSURANCE CO. PVT. LTD.

ON SUMMER TRAINING REPORT PROJECT TITLE Brand Awareness of Metlife Metlife India Insurance co. Pvt. Ltd. NOIDA OFFICE K-4 SEC 18, OCEAN HIGHTS BUILDING NOIDA U.P. (India) SUBMITTED TO: SUBMITTE BY: MRS. RUPA RATHEE RAMPAL FACULTY: MBA ROLL NO.-40 HINDU INSTITUTE OF MANAGEMENT SEM. :3RD

AKNOWLEDGEMENT I would like to take this opportunity to thank all those people who have directly or indirectly helped me to provide my training program a success. My stint with Metlife India Insurance co. Pvt. Ltd. It was an experience that will go a long way in molding my corporate behavior. Firstly I would like to extend my sincere thanks to Mr. VIPIN BALIAN for providing me with this opportunity to work in an out to the ordinary project that made my internship with Metlife India Insurance co. Pvt. Ltd. a great learning experience that I have gained here. My sincere thanks to my industry mentor MR. VIPIN BALIAN from (MET LIFE NOIDA BRANCH) and MRS RUPA RATHEE faculty mentor (institute of Management) for giving their valuable time and suggestion and the kind of guidance at various stages of this project. I would also like to mention special thanks to all production managers and other staff members at the speedomax office of Metlife India Insurance co. Pvt. Ltd. That was a constant source of information about the nuances of business, for providing me great working environment at Metlife India Insurance co. Pvt. Ltd. . (RAMPA L)

PREFACE: Progress is a continuous process. It is relative and absolute. We can t stop a certain destination and declare that target has been achieved and we need not go further. The summer training program is designed to give the future managers feel of the corporate happenings and work culture. These real life situations are entirely different from the stimulated exercise enacted in an artificial environment inside the classroom and it is precisely because of this reason that this summer training program is designed, so that the manager of tomorrow not feel ill in the case when the time comes to shoulder responsibilities. The summer training is a bridge between the institution and organization. Summer training program made us to understand how theoretical knowledge will be applied in the practical field. It was exactly in this context that I was privileged to join Met Life Insurance (No one US Insurance Company) on the 1nd of May 2006, as a summer trainee.. Met Life Insurance is known not only for its professional management, but also for its enlightened and progressive approach towards employee welfare and betterment of the society. The experience that I have gathered over the past two months has certainly provided me with an orientation, which, I believe, will help me shoulder any assignment successfully in future. During this period the report which I made was done after a deep, comprehensive and full-fledged study and is based on my original research and investigation.

Table of Content . Acknowledgement . Preface . Executive Summary . Company Profile . Introduction . Objective . Research methodology . Hypothesis . Analysis . Product Range . Limitations . Conclusion . Recommendation . Bibliography Annexure - Questionnaire

Executive Summary o The project basically aims to perform the Brand Awareness for Metlife insurance company private limited. o In this project the special emphasis lies on insurance product of Metlife insurance company. o To analyze how investment decisions are made in Indian insurance market keeping in view the existing potential and trends of insurance industry.

COMPANY PROFILE With over 137 years of experience, the MetLife companies serve millions of customers in the Americas and Asia with one goal in mind to build financial freedom for everyone. The MetLife companies are a leader in group benefits that serve 88 of the top one hundred FORTUNE 500* companies, and provide benefits to 37 million employees and family members through its plans sponsors in the U.S. The MetLife companies are also ranked #1in group life and #1 in commercial dental in the U.S. The MetLife companies are the number one life insurer in the U.S. with approximately US $2.8 trillion of life insurance in force. In India, MetLife was incorporated in 2001, and aims to differentiate itself through customized need based selling, simple and innovative products, and technology-backed service experience, to tread its path to build financial freedom for everyone.

Our Vision and Mission Build financial freedom for all through leadership in providing financial advice and building long-term relationships through innovative protection, accumulation and retirement products, robust underwriting processes and creating world-class customer service experience for our customers. We want to provide customers in India with world-class solutions for financial security, and in the process add significant value to our shareholders, associates and society. Our Core Values We lead through Innovation to offer world class and competitive products to our customers We build Long Term Relationships with our customers by creating a world class service experience through operational excellence and the innovative use of technology We create a Customer Centered and Result Focused Vision that inspires each one of our Associates and has their buy-in We are committed to creating a High Performance Organization by creating an environment that allows each one of our Associates to perform at their peak. As a result we will also be recognized as an Employer of Choice We are committed to Partnering with our internal and external Customers for mutual success We work with Integrity, Fairness and Financial Prudence in all our dealings keeping the interests of our Shareholders, Customers and Associates paramount

Corporate Partners As the vital channel for MetLife s products, we have chosen some exemplary banks and financial institutions. These will serve as the interface between our customers and we to aid us understand the unique needs and aspirations of every Indian. And update our products with features that form the cornerstones of financial freedom.

Management Team Rajesh Relan (Managing Director) Chaner chellani (officer agency sales) Miro farrigua (chief financial officer) B Ashwin (Chief Administrative Officer) K P sarma (appointed actuary) Phanesh msvs (chief actuary) K R Anil Kumar (chief planning, legal and compliance officer and financial controller) Smitashree menon (director HR) Sanyog Jain (director (training and development) Pankaj Raj (dep. Director marketing) Sameer Bansal (dep. Director bank assurance & business partner ships) M S Suresh (GM employee benefits)

Objectives The main objectives of Sales Promotions areTo educate customers in the right use of product. To maintain friendly and cordial relations with the public. To persuade proposed customers to buy existing products. To establish goodwill for the product.

RESEARCH METHODOLOGY Type of the Research : Exploratory Research Sampling Type : Employees, Govt.Employees, Self Employed Sample size : 70 Sampling Unit : Ghaziabad, Delhi, Data Collection Method: 1. Primary Sources . Customer Visit 2. Secondary Data . Concerned Data . Business news papers, magazines, Journals Internet.

Hypothesis 1. The marketing strategies of Ltd. have a direct bearing with the a consumer s mind. 2. Marketing strategies practices in comparison to other aspects Research frame MetLife Insurance company pvt. perception of the products or service in have highest influence on profitability and factors.

The study involved an analysis of the marketing strategies and public relations practices of a leading newspaper daily. As the thesis project tried to establish a relationship between the marketing strategies, Promotion of the company, It s Brand marketing, consequences in terms of profitability, the framework for the research was chosen to be EXPLORATORY in nature. Exploratory research is that part of the overall market research, which is used to discover something new. Normally in any case there can be a number of opportunities or possible problems and it is impractical to study each of them. Exploratory research in such a case is very useful to find out the most likely alternatives. These alternatives are then turned into hypothesis. Hypotheses are tentative and logical answers to questions that serve as guides for most research projects. The various means of going about or executing exploratory research are Survey of knowledgeable person Case study This thesis report is largely based on Survey of knowledgeable persons and Survey of knowledgeable persons. The case study method could not be applied to a very great extent due to the intricacies involved and hence its role was limited.

Methods Used Under This Study 1. SURVEY OF KNOWLEDGEABLE CUSTOMER This pertains to the collection of data from a primary source. People those who have MetLife Policies and those people who have other company policies. About the product of MetLife. It s brand awareness. DEPTH INTERVIEW A larger part of the information was collected using this method. Although there was a proper formal questionnaire for the customer either MetLife or any other company , the interview with Sales Manager of the company was a more flexible one. This helped in obtaining facts and data that would not have been obtained otherwise. PRIMARY DATA Lucky enough to be a part of MetLife Insurance Company, myself it was easy to meet with the Sales Manager 1. Vipin Balian ( Sales Manager ) 2. Rishi Raj ( Sales Manager ) 2. SEARCH OF SECONDARY DATA Probably the quickest and the most economical way of finding possible hypothesis to take advantage of others work and utilize earlier efforts. Secondary data gives one a n already built platform to work on. A large volume of basic research is reported in professional and trade journals and these sources are maintained in public libraries, newspapers, , and government documents. Specifically speaking, this method is most convenient for students and is also the most economical. Constraints of cost time and also overall research tools and resources make this method most dependable. While doing this project on MetLife India Insurance Company Ltd. the secondary data was collected from:

1. INTERNET www.google.com www.metlife.co.in www.metlife.com http://en.wikipedia.org/wiki/Marketing_strategy 2. MAGAZINES & NEWSPAPERS BUSINESS TODAY TIMES OF INDIA BUSINESS LINE ECONOMIC TIME

ANALYSIS 1. life insurance corporation control 79 % of Insurance market Delhi And NCR regions where as MetLife is fastly emerging and its rank is now 9th and its growth rat is 146% . 2. Maximum policies are brought by the age group of 30-40 followed by 25-30 AGE GROUP STAKE 30-40 .30 25-30 .18 20-25 .16 30-35 .12 40-45 .10 45-50 .10 50(ABOVE .04 3. The role of channel of in information in insurance has a significant part to play. The public perception in long term investment giving low returns need to be changed as per my studies the maximum reach in the market is through advisors /insurance agents which almost has 40% reach stake .The second most reachable channel of information is Friends and relatives which contributes 25% TV/Media holds 30% and brokers investment agent has 5% stake in the channel through which information about insurance about insurance is disseminated. 4. The customers preferences amongst attributes of service and credibility is slightly more towards credibility as 51% persons has preference at credibility where as rest 49% preferred services over credibility.

5. The customer preferences amongst the four attributes of investment in insurance viz Investment ,saving for future ,risk cover & tax saving is as below Order First preference Second preference Third preference Fourth preference 1 RISK COVER SAVING FOR FUTURE INVESTMEN T INVESTMENT 2 TAX SAVING RISK COVER TAX SAVING TAX SAVING 3 SAVING FOR FUTURE TAX SAVING SAVING FOR FUTURE RISK COVER 4 INVESTMENT INVESTMENT RISK COVER SAVING FOR FUTURE 6. Results drawn on the basis of likert scale rating method gave Following conclusions :( 1) As far as service is concerned MetLife Insurance is the best service provider Closely followed by LIC and ICICI Prudential. The excellent customer perception about service of MetLife insurance is due of its Bank partner, which has been the best service provider among private and Public sector banks in India. (2) In terms of accessibility LIC is No. one followed by MetLife is No.9 in Life Insurance Company, the accessibility of LIC can be attributed to the vast network of its agents operating in life insurance services in the country. MetLife swiftly gaining ground due of enhanced network of distribution (Branches) and insurance agent/advisor. Company has 53 branches and a advisor force of 50000 persons. (3) The credibility of LIC is far better than all other insurance companies operating in India. The reason behind the high credibility of LIC is due of its being a public sector undertaking apart it is the oldest life insurance company operating since 1955 in India. Customer Preferences Of Following Attributes In Buying Life /General Insurance (a) Investment (b) Saving for future (c) Risk cover

(d) Tax saving METLIFE PRODUCT PORTFOLIO Risk of living too long Saving + risk cover Met pension Met bhavishya Met advantage plus Met suvidha Met sukh Risk of dying too soon Whole life-met 100 Met surakhsa Met mortgage Risk of disability & major illness: ADB, TERM, WOP and CI Protection Whole life Term life Riders Multipurpose Met ultimate Met smart plus Met smart premier Accumulation Endowment Retirement Money back and annuities Pension product

Plan name Met surakhsa Met mortgage Minimum entry Age 18 yrs 18 yrs Maximum entry Age 60 yrs(TA),50 yrs(trop) 60 yrs Maximum maturity age 65 yrs 65 yrs Minimum sum assured Ta :50,000; trop : 2 lacks 50000 Term of policy 5,10,15,20,25 yrs (TA); 15&20 yrs (trop) 5 to 25 yrs premium paying term Eq. to premium paying option Eq. to premium paying option Premium paying Options Single pay ,regular pay, limited pay Single pay, limited pay(2/3 of policy term) Minimum premium Rs 600(TA), Rs 2500(trop) As applicable to minimum FA Bands Plus, gold ,platinum & platinum plus No bands Riders allowed ADB, CI No riders Death benefit FA+ RIDERS (IF ANY) Out standing loan Maturity benefit Ta(nil),trop (110 % of premium paid) nill Surrender value Ta(nil) Single pay Bonus nil nil Plan options Ta, trop NA

Plan name Met 100 Met bhavishya Met sukh Minimum entry Age 0 (non par), 15 YRS (PAR) Option A Option B 15 yrs Maximum entry Age 75(NON PAR) 8, 50 12,50 55 yrs Maximum maturity age 1OO YRS OF AGE 21,71 25,75 75 yrs Minimum sum assured 50000 100,000 100,000 75000 Term of policy 100 YRS Option A Option B 20 yrs premium paying term 15 yrs (par), 20 YRS , 25 YRS 21-age of child 25age of child 20 yrs Premium paying Options LIMITED PAY : 15 YRS , 20, 25 YRS rguler rguler regular Minimum premium RS 2500 (>15 YRS) NON PAR, RS 1000 (<15 YRS ) PAR ,GOLD:RS 2500, PLATINUM : RS 7000 Rs 6000 Rs 6000 As applicable to minimum FA Bands NON PAR: 1,2,3,4,5 PAR GOLD ,PLATINUM No bands No bands Silver, gold ,platinum Riders allowed all all all all Death benefit FA+RIDERS+RB+TB (PAR) FA+RIDERS (NON PAR) 4 death benefits 4 death benefits FA +accrued GA+ riders)if any) Maturity benefit FA+RB+TB (PAR) FA (NON PAR) Option A Option B Money back FA+ GA Surrender value Applicable after 3 policy Years Applicable after 3 policy Applicable after 3 policy Applicable after 3 policy Years Bonus RA + TB for par option Money back

Money back GA Plan options Par, non par Option A Option B NA

Plan name Met smart Met ultimate Met advantage Minimum entry Age 0 yrs 0 yrs 20 yrs Maximum entry Age 70 yrs 70 yrs 55 yrs Maximum maturity age 1OO YRS OF AGE 1OO YRS OF AGE Vesting age Minimum sum assured 60000 100,000 Not assured Term of policy 100 YRS 99 yrs Minimum 10 yrs premium paying term Till the policy term 10 yrs Up to vesting age Premium paying Options Regular Rgular regular Minimum premium RS 24000 / Rs 12000 for minor Rs 5000 Rs 10000 bands No bands No bands No bands Riders allowed No riders No riders No riders Death benefit Met smart plus & met smart premier Varies in option A ,B & C Various options Maturity benefit Account value Account value Various options Surrender value No charges after 10 Years No charges after 10 Years No charges a fter 5 Years bonus NA Min 3.5% net int. Gauranted NA Plan options Met smart plus & met smart premier Option A ,B & C 8 annuity options

COMPITITORS OF METLIFE INDIA Insurers Premium (Rscr) 271.00 124.00 90.00 HDFC Standard 70.00 69.00 48.00 Aviva 39.00 Reliance Life 33.00 28.00 Kotak Mahindra Old Mutual 26.00 22.00

19.00 Shriram Life 4.50 Sahara Life 1.70 Bharti Axa Life 0.72

HISTORICAL PERSPECTIVE Insurance is over one and one-half centuries old in India. The first general insurance company. Title Insurance Company Ltd. was established in 1850. Life Insurance comes in its present form to India from the U.K. in 1880. With the establishment of the Oriental Life Assurance Company in Calcutta. The first Indian-owned Life Insurance Company, the Bombay Mutual Life Assurance Society, was set up in 1871. The Indian Life Assurance Companies Act 1912 was the first statutory measure to regulate the life insurance business in India. By 1938, the Insurance market was buzzing with 176 companies both life and non-life. In 1938, the earlier legislation was consolidated and amended by the Insurance Act, 1938. With comprehensive provisions for detailed and effective control over Insurance.

INSURANCE BUSINESS IN INDIA With an annual growth rate of 15-20% and the largest number of life insurance policies in force, the potential of the Indian insurance industry is huge. Total value of the Indian insurance market (2004-05) is estimated at Rs. 450 billion (US$10 billion). According to government sources, the insurance and banking services contribution to the country's gross domestic product (GDP) is 7% out of which the gross premium collection forms a significant part. The funds available with the state-owned Life Insurance Corporation (LIC) for investments are 8% of GDP. Till date, only 20% of the total insurable population of India is covered under various life insurance schemes, the penetration rates of health and other non-life insurances in India is also well below the international level. These facts indicate the of immense growth potential of the insurance sector. The year 1999 saw a revolution in the Indian insurance sector, as major structural changes took place with the ending of government monopoly and the passage of the Insurance Regulatory and Development Authority (IRDA) Bill, lifting all entry restrictions for private players and allowing foreign players to enter the market with some limits on direct foreign ownership. Though, the existing rule says that a foreign partner can hold 26% equity in an insurance company, a proposal to increase this limit to 49% is pending

with the government. Since opening up of the insurance sector in 1999, foreign investments of Rs. 8.7 billion have poured into the Indian market 21 private companies have been granted licenses. Innovative products, smart marketing, and aggressive distribution have enabled fledgling private insurance companies to sign up Indian customers faster than anyone expected. Indians, who had always seen life insurance as a tax saving device, are now suddenly turning to the private sector and snapping up the new innovative products on offer. The life insurance industry in India grew by an impressive 36%, with premium income from new business at Rs. 253.43 billion during the fiscal year 2004-2005, braving stiff competition from private insurers. RNCOS s report, Indian Insurance Industry: New Avenues for Growth 2012 , finds that the market share of the state behemoth, LIC, has clocked 21.87% growth in business at Rs.197.86 billion by selling 2.4 billion new policies in 2004-05. But this was still not enough to arrest the fall in its market share, a s private players grew by 129% to mop up Rs. 55.57 billion in 2004-05 from Rs. 24.29 billion in 2003-04. Though the total volume of LIC's business increased in the last fiscal year (2004-2005) compared to the previous one, its market share came down from 87.04 to 78.07%. The 14 private insurers increased their market share from about 13% to about 22% in a year's time. The figures for the first two months of the fiscal year 2005-06 also speak of the growing share of the private insurers. The share of LIC for this period has further come down to 75 percent, while the private players have grabbed over 24 percent. There are presently 12 general insurance companies with four public sector companies and eight private insurers. According to estimates, private insurance companies collectively have a 10% share of the non-life insurance market. Though the focus of this market research report is on the potential growth on the Indian Insurance Sector, it also talks about the market size, market segmentation, and key developments in the market after 1999. The report gives an instant overview of the Indian non-life insurance market, and covers fire, marine, and other non-life insurance. The data is supplied in both

graphical and tabular format for ease of interpretation and analysis. This report also provides company profiles of the major private insurance companies. The life insurance industry clocked 49 per cent growth in new businesses, while general insurance players saw 16 per cent increase in April, the first month of the current financial year. Strong performance by Life Insurance Corporation, ICICI Prudential and SBI Life helped the 16 player-strong life insurance industry to mop up Rs 2,982 crore in April this year compared with Rs 1,996 crore collected in the same month last year, according to data compiled by the Insurance Regulatory and Development Authority. However, some life insurers such as Bajaj Allianz, ING Vysya Life and Reliance Life saw a decline in premium collections during the period under review. The country's largest life insurer, LIC, saw new premiums grow 57 per cent to Rs 2,134 crore in April by selling 15,89,684 policies against Rs 1,355 crore a year ago. It had a market share of 71.56 per cent in April. The 15 private players together saw their business grow 32 per cent to Rs 848 crore with a market share of 28.44 per cent

INTRODUCTION What is Insurance? Insurance is a contract between two parties whereby one party called insurer undertakes in exchange for a fixed sum called premiums, to pay the other party called insured a fixed amount of money on the happening of certain events. Insurance is a protection against financial loss arising on the happening of an unexpected event. Insurance companies collect premiums to provide for this protection. A loss is paid out of the premiums collected from the insuring publi c and the Insurance Companies act as trustee to the amount collected. The economic value of a human life arises out of its relations to the other live s. Whenever continuance of a life is financially valuable to others, either to fami ly dependents, business associates, or educational and philanthropic situations, th e necessity for the life insurance is present. For example, in a life policy by paying a premium to the Insurer, the family of the insured person receives a fixed compensation on the death of the insured. Similarly, in car insurance, in the event of the car meeting with an accident, t he insured receives the compensation to the extent of damage.

It is a system by which the losses suffered by a few are spread over many, exposed to similar risks. Why should you like to take Insurance? Insurance is desired to safeguard oneself and one s family against possible losses on account of risk and perils. It provides financial compensation for the losses suffered due to the happening of any unforeseen events. By taking a life Insurance a person can have peace of mind and need not worry about the financial consequences in case of any untimely death. Let us consider the family of four, which consist of a man, a woman and their tw o children. The earning member of the family works hard to get the money flowing to meet the requirements of his family. They have plans to have their own house constructed in the next two years. Everything is going as per the plans. What could be the various events that could upset the plans? Burglary Death Accidental Permanent Disability Sickness & Critical Illness

All these events are forfituous in nature, i.e., they are out of control of the family and more in the hands of destiny. Moreover all of these events can actually erode the wealth of the family. In order to reduce the element of risk to which this family is subjected and to safeguard the wealth or economic value, insurance should be carried out. Insurance ensures protection of economic value of assets. Assets are insured against the risk of being destroyed or made nonfunctional due to any accidental occurrence. There are two different branches of insurance, which are Life and Non-Life Insurance. While Life Insurance insures the life of a person, Non-life insures everything else. Certain Insurance contracts are also made compulsory by legislation. For example, Motor Vehicle Act 1988 stipulates that a person driving a vehicle in a public place should hold a valid insurance policy covering Act risks. Another example of compulsory insurance pertain to the Environment Protection Act, Wherein a person using a carrying hazardous substances (as defined in the Act) must hold a valid public liability (Act) policy.

What are the other benefits of taking Insurance? 1. Tax Relief: Under section 88 of Income Tax Act, a portion of premium is paid for life insurance policies are deducted from tax liability. Similarly, exemption is available for Health Insurance Policy premiums. a. Money paid as claim including Bonus under a life policy is exempted from payment of Income Tax. However annuities received under certain pension plans are taxable. 2. Encourages Savings: An insurance scheme encourages thrift among individuals. It inculcates the habits of saving compulsorily, unlike other saving instruments, wherein the saved money can be easily withdrawn. 3. The beneficiaries to an insurance claim amount are protected from the claims of creditors by affecting a valid assignment. 4. For a policy undertaken the MWP Act 1874, (Married Woman s Property Act), a trust is created for wife and children as beneficiaries. 5. Life Policies are accepted as a security for a loan. They can also be surrendered for meeting unexpected emergencies. 6. Based on the concept of sharing of losses, the society will benefit as catastrophic losses are spread globally.

Concept of Risk Integral with the concept of insurance is the concept of risk. In the insurance parlance risk is called as peril. Only where risk prevail, is insurance applicab le. Define Risk Risk is defined as possibility of adverse results flowing from any occurrence. T he degree of risk may or may not be measurable. Uncertainty gives rise to risk and for risk to exist there should be at least tw o possible outcomes of which one is undesirable. Greater the uncertainty, greater the risk. Situation Occurrence of death is a certainty. Then why does life-insurance exist at all. Solution Well, death is the ultimate truth of life, but the timing of death is uncertain. This is from where the element of uncertainty comes up in Life Insurance.

In insurance parlance risk implies: Peril to be insured against e.g. Fire, theft etc. Person/ Property e.g. young people vis--vis old people. While we are on this subject, let discuss insurance and assurance, the two terms , which are used interchangeably and also understood wrongly at times. Insurance is used with reference to financial protection against a possibility, such as fire, accidental damage, theft, or medical expenses: motor insurance, household insurance, travel insurance, health insurance. Event that must occur at time, such as death, are provided for by assurance.

There is very limited coverage Life -Insurance funds account for only 10 % of gross household saving in financial assets; Life -Insurance premiums constitute only 6 % of gross domestic savings (GDS): only 22 % of the insurable population has been tapped according to the 1993 Malhotra Committee Report (A report prepared by a committee tasked with determining the status of Insurance in India), indicating low market penetration. There are high premiums and low returns. A competitive industry should be able to increase coverage, mobilize larger savings and provide higher returns. 80 % of LIC Investment is in the public sector. A very small proportion of LIC investments are in the private sector. A comparison across countries shows that India is ranked 27 in mobilizing saving in the form of Insurance. In countries such as South Africa and the U.K. Life -Insurance premiums constitute over 50 % of GDS. Life Insurance premiums account for over 25 % of GDS in the U.S., Japan & France, because premiums account for less than 6 % of GDS in India, there is a tremendous scope for mobilizing Insurance savings, assuming that India achieves conditions existing in the aforementioned countries in the future.

INSURANCE PENETERATION

LIBERALISATION

While effecting reforms in the banking sector and capital markets during the 1990s the GOI also recognized the importance of Insurance as an important part of the overall financial system where it was necessary to undertake similar reform measures. In April 1993, the COI appointed a Committee on Reforms in the Insurance Sector (The Malhotra Committee). The Committee, which submitted its report in January 1994, recommended that the Insurance business in India be opened up to private players and laid down several guidelines for managing the transition. The decision to allow private companies to sell Insurance products in India rests with Indian Parliament. Opening up the Insurance sector required crossing at least two legislative hurdles. These were the passage of the Insurance Regulatory Authority (IRA) Bill, which would make IRA a statutory

regulatory body and amendment of the LIC and GIC Acts, which would end their respective monopolies. Subsequently, in pursuance to the announcement made by the Union Finance Minister in his Budget Speech of 1998-99 the Insurance Regulatory & Development Authority (IRDA) Bill 1999 was passed by both Houses of Parliament. The bill was assented to by the President and notified on December 29, 1999 coming into force the Insurance industry has been opened up for the private sector. The Act provides for the establishment of a statutory IRDA to protect the Insurance interest s policy holders and to regulate, promote and ensure orderly growth of the Insurance industry. The IRDA Act was formed by an Act of Parliament on April 19, 2000. The IRDA Act also seeks to amend the Life Insurance Act, 1956. The General Insurance Business (Nationalization) Act 1972, and the consequential provisions in the Insurance Act, 1938 with a view to seizing the exclusive privilege of LIC & GIC in the life and non-life businesses respectively. Under the IRDA Act, an Indian Insurance Company will be allowed to conduct Insurance business provided it satisfies the following conditions.

It must be formed and registered under the Companies Act, 1956. The aggregate holdings of equity share by a foreign company either by itself or through its subsidiary companies or its nominees should not exceed 26 % paid up equity capital of the Indian Insurance Company. IrDA s sole purpose must be to carry on the life Insurance business or general Insurance business or reinsurance business. It has also been provided in the IRDA Act that on or after the commencement of the Act, no insurer will be allowed to carry on the life Insurance and general Insurance business in India, unless it has a paid up equity capital of Rs. 1 billion. For carrying on the reinsurance business, the minimum paid up equity capital has been prescribed as Rs. 2 billion. The Reserve Bank of India

(RBI) has also issued guidelines for banks, prior into the Insurance business. The RBI would give permission to banks on a case-by-case basis, keeping in view all relevant factors. Banks having a minimum net worth of Rs. 5 billion and satisfying other criteria in respect of capital adequacy profitability, non performing asset (NPA) level and track record of existing subsidiaries can undertake Insurance business through joint ventures, subject to certain safeguards. Following the passage of the IRDA Act by March 2001, nine new life Insurers had received a license from IRDA: 5 new non life insurers had also received licenses. Although private Insurance companies have commenced operations during FY 2001, the nationalized Insurance companies are expected to dominate the market in the near future. ICICI Prudential Life Insurance, a private insurance company, had sold an estimated 6,387 policies till end of FY 2001. HDFC Standard Life which commenced operations in December 2000 has set a target of 25,000 fresh policies in the first year of operation. The limiting factor for prospective private insurers will be the extensive and costly distribution structure required. The new entrants cannot expect to duplicate the extensive distribution network of the nationalized Insurance companies. Building a

distribution network is expensive and time consuming. Private insurers are expected to follow a strategy similar to that of the foreign banks, i.e. starting from the affluent segment and gradually building up the distribution network to reach out to the middle income ( even if urban) segment.

Purpose of Insurance Assets are insured against the risk of being destroyed or made non functional through accidental occurrence. Concept of Risk Possibility of adverse results flowing occurrence. Uncertainty gives risk to risk. For risk to exit there should be at least two possible outcomes of which one is undesirable. In insurance parlance risk implies: Peril to be insured against e .g . fire, theft etc . . Person/property e. g. young people vis--vis old people. Risk is condition where there is a possibility of an adverse deviation from an expected outcome. Mechanism of Insurance People exposed to the same risks together and pool funds to each individual against risk.

Therefore, risk is spread out. Insurance companies collect money in advance and create a fund from which losses are paid