1

CHAPTER NO. 01 INSURANCE MARKET

INSURANCE MARKET
THE CONCEPT OF INSURANCE

The business of insurance is related to the protection of the economic value of an asset for which a normal life time exists during which it is expected to perform. However if the asset gets Damaged, Destroyed or is made non functional by the occurrence of some unfortunate event the owner of the assets suffers .Insurance is a mechanism to reduce the financial implications of such consequences.

The mechanism involves people who are exposed to the same risk come together and agree that if any one of the members suffers a loss the others will share the loss . Thus people facing common risk come together and make their contribution towards a common fund whose amount is determined beforehand on the basis of past data and experiences.

The fundamental underlying principle of insurance is 1) Losses must be definite and discreet in time and place 2) Losses must not be fortuitous in nature and beyond the control of the insured 3) Losses must be large enough to cause a financial burden 4) Losses must be measurable or calculable and a monetary amount should be determined to compensate the loss

5) Past history of the specific losses should exist to help the actuaries to estimate frequency severity and costs involved and determine fair rates of insurance. 6) The cost of insurance should be affordable by the parties and should be a fraction of the value of the insured Item. Thus we see that a large number of homogenous units (people .companies, Entitles) with a similar potential for loss exposure must be available for insurance and this is generally referred to as The Law of large numbers.

Life Insurance

Almost 4,500 years ago, in the ancient land of Babylonia, traders used to bear risk of the caravan trade by giving loans that had to be later repaid with interest when the goods arrived safely. In 2100 BC, the Code of Hammurabi granted legal status to the practice. That, perhaps, was how insurance made its beginning. Life insurance had its origins in ancient Rome, where citizens formed burial clubs that would meet the funeral expenses of its members as well as help survivors by making some payments. As European civilization progressed, its social institutions and welfare practices also got more and more refined. With the discovery of new lands, sea routes and the consequent growth in trade, Medieval guilds took it upon themselves to protect their member traders from loss on account of fire, shipwrecks and the like. Since most of the trade took place by sea, there was also the fear of pirates. So these guilds even offered ransom for members held

captive by pirates. Burial expenses and support in times of sickness and poverty were other services offered. Essentially, all these revolved around the concept of insurance or risk coverage. That's how old these concepts are, really. In 1347, in Genoa, European maritime nations entered into the earliest known insurance contract and decided to accept marine insurance as a practice The first step... Insurance as we know it today owes its existence to 17th century England. In fact. it began taking shape in 1688 at a rather interesting place called Lloyd's Coffee House in London, where merchants, shipowners and underwriters met to discuss and transact business. By the end of the 18th century, Lloyd's had brewed enough business to become one of the first modern insurance companies.

Insurance and Myth... Back to the 17th century. In 1693, astronomer Edmond Halley constructed the. First mortality table to provide a link between the life insurance premium and the average life spans based on statistical laws of mortality and compound interest. In 1756, Joseph Dodson reworked the table, linking premium rate to age.

Enter companies... The first stock companies to get into the business of insurance were chartered in England in 1720. The year 1735 saw the birth of the first insurance company in the American colonies in Charleston, SC.

In 1759, the Presbyterian Synod of Philadelphia sponsored the first life insurance corporation in America for the benefit of ministers and their dependents. However, it was after 1840 that life insurance really took off in a big way. The trigger: reducing opposition from religious groups.

The growing years... The 19th century saw huge developments in the field of insurance, with newer products being devised to meet the growing needs of urbanization and industrialization. In 1835, the infamous New York fire drew people's attention to the need to provide for sudden and large losses. Two years later, Massachusetts became the first state to require companies by law to maintain such reserves. The great Chicago fire of 1871 further emphasized how fires can cause huge losses in densely populated modern cities. The practice of reinsurance, wherein the risks are spread among several companies, was devised specifically for such situations. There were more offshoots of the process of industrialization. In 1897, the British government passed the Workmen's Compensation Act, which made it mandatory for a company to insure its employees against industrial accidents. With the advent of the automobile, public liability insurance, which first made its appearance in the 1880s, gained importance and acceptance? In the 19th century, many societies were founded to insure the life and health of their members, while fraternal orders provided low-cost, members-only insurance.

Even today, such fraternal orders continue to provide insurance coverage to members as do most labor organizations. Many employers sponsor group insurance policies for their employees, providing not just life insurance, but sickness and accident benefits and old-age pensions. Employees contribute a certain percentage of the premium for these policies.

Life Insurance in India Although insurance in its present form has been brought to India by the British and other colonial powers the concept of collective cooperation to share a particular risk is as old as the dawn of human civilization. India was a major trading power in ancient times and some examples of sharing risks can be found such as ships carried cargo of several traders together instead of a single individual. In the Mogul army a life annuity was granted to the family on the demise of a soldier against some regular contribution in his life time. The Joint family system of India is also an embodiment of the same concept.

Early attempts Life insurance in its modern form came to India from England in 1818 with the formation of the Oriental Life Insurance Company in Kolkata and with the passage of time Indians were also covered by this company. By 1868 there were 285 companies operating in India and were primarily into insuring the European lives, those Indians who were offered were charged an extra premium of 15 to 20% and treated as substandard lives.

First Indian Company The first insurance company under the title "the Bombay life insurance society" started its operations in 1870 and started insuring lives of Indians at standard rates. Later "oriental Govt. life insurance co." was established in 1874 which emerged as the leading insurance company in India.

Pre Independence history With the various freedom movements various leaders encouraged domestic life insurance companies to enter the fray. In 1914 there were only 44 companies and in 1940 this number grew to 195.From here on the growth of life insurance was quiet steady except in 1947-48 during the partition of India.

Nationalization of Insurance Business 1956 After Independence our nation was moving towards a Socialistic pattern of society and with the main aim of spreading the concept to rural areas and to channel the money into nation building activities the government of India Nationalized the life insurance business and formed "The Life Insurance Corporation of India" by merging about 250 life insurance companies. The Life Insurance Corporation of India started functioning from 1.9.1956 and today is the largest insurer in the country with one central office, seven zonal offices and over 2,048 branch offices with a workforce of 1,25,000 employees and over 8,00,000 life insurance agents.

Evaluate your life insurance needs : Life Insurance is one of the most popular savings/ investment vehicles in India. Ironically, its probably the least understood too. An insurance policy offers much more than just tax planning and investment returns. It offers the ability to plan for unforeseen events that could affect family's financial profile adversely.

Factors to consider: Financial profile and needs are different from person to person, and the same is true for insurance needs. However, irrespective of the differences, the number of

dependents PH has and their financial needs are the most important factors to consider.

Issues to consider while evaluating the above factors include: 1) The wealth, income and expense levels of PH dependents, 2) Their significant foreseeable expenses, 3) The inheritance PH would leave on them, and 4) The lifestyle PH wants to provide for them.

How much insurance does a person need? Obviously the above factors mean nothing to the insurance planning process unless they are quantified. Globally, the time-tested approach used by insurance and financial planners is the capital needs analysis method.

Risk cover versus investment returns: Insurance options range from policies with low premium that offers a PH almost no returns to those with high premium that effectively offer post-tax returns of around 8% to 9.5% p.a. These returns are at the lower end of fixed-income returns available today and hence are relatively unattractive. I recommend PH buy an insurance policy skewed towards investment returns only if you are in the high-tax bracket, prefer to invest in low-risk, fixed-income options and have exhausted all the other such investment options available. See Financial Investment Options and Government Schemes Directory for details of low-risk, fixed-income investment options available.

Whole life versus limited period: As PH grow older, he may not have as many dependents (his children would become self-dependent) or his wealth may reach a level where it can support his dependents financial needs in the event of his death. These possibilities bring us to the interesting question on whether he should insure himself, for whole life or for a limited term. Obviously, the cost of insurance for the latter is lower. I recommend him to insure for whole life only if he never expect his wealth to reach a level where it can support the financial needs of his dependents.

10

Tax Planning: The premium paid for an LIC policy also qualifies for tax rebate under Section 88 of the Income Tax Act. The maximum premium amount that can qualify for rebate is Rs60, 000 per annum and you get a rebate equivalent to 20% of the premium paid, from your tax liability for the year. In step 3, deals about steps in selecting a life insurance policy.

Understand how much insurance PH need: This is the single most important factor to evaluate before PH select a life insurance policy. For this, he must consider the current expense profile of his dependents and the current wealth level of his family. Also, consider what is his dependents risk tolerance level is. Is he adequately Insured, this planning tool can take him step-by-step in addressing this issue.

Selecting Premium Paying Term (PPT): How long he want to pay his insurance premium for? Key factors this decision could depend upon are 1) How many years he see himself earning a regular income 2) The level of his regular savings 3) The amount he can commit to paying regularly as insurance premium 4) How long he want to be insured versus how long he expects to pay a premium for?

11

Key factors, such as Does he want to participate in bonus/ profit share? 1) What is the primary objective of his seeking insurance 2) Mainly risk cover, mostly investment returns? 3) Does he want accident cover? For a detailed understanding of the factors he need to consider while selecting a life insurance policy, and the rationale for the same, use Insurance Planner. This planning tool will also take him step by step and arrive him at a shortlist of life insurance policies appropriate for him, based on his personal profile.

What is life Insurance? Life insurance is a contract for payment of money to the person assured (or to the person entitled to receive the same) on the occurrence of the event insured against. Usually the contract provides for Payment of an amount on the date of maturity or at specified periodic intervals or at death, if it occurs earlier. Periodical payment of insurance premium by the assured, to the corporation who provides the insurance.

Who can buy a life insurance policy? Any person above 18 years of age, who is eligible to enter into a Valid contract. Subject to certain conditions, a policy can be taken on the life of a spouse or children.

12

What is a Whole Life Policy? When most people think of life insurance, they think of a traditional whole life policy. These are the simplest policies to understand: You pay a fixed premium every year based on your age and other factors, you earn interest on the policy's cash value as the years roll by, and your beneficiaries get a fixed benefit after you die. The policy takes you into old age for the same premium you started out with. Whole life insurance policies are valuable because they provide permanent protection and accumulate cash values that can be used for emergencies or to meet specific objectives. The surrender value gives you an extra source of retirement money if you need it.

What is an Endowment policy? Unlike whole life, an endowment life insurance policy is designed primarily to provide a living benefit and only secondarily to provide life insurance protection. Therefore, it is more of an investment than a whole life policy. Endowment life insurance pays the face value of the policy either at the insured's death or at a certain age or after a number of years of premium payment. Endowment life insurance is a method of accumulating capital for a specific purpose and protecting this savings program against the saver's premature death. Many investors use endowment life insurance to fund anticipated financial needs, such as college education or retirement.

13

What is a Money Back policy? This is basically an endowment policy for which a part of the sum assured is paid to the policyholder in the form of survival benefits, at fixed intervals, before the maturity date. The risk cover on the life continues for the full sum assured even after payment of survival benefits and bonus is also calculated on the full sum assured. If the policyholder survives till the end of the policy term, the survival benefits are deducted from the maturity value.

What is An Annuity Scheme? Annuity schemes are those wherein your regular contributions over a period of time (or a one-time contribution) accumulate to form a corpus with the insurer. This corpus is used to yield you a regular income that is paid to you until death starting from your desired retirement age. Some annuity schemes have the option to pay your survivors a lump sum amount upon your death in addition to the regular income you receive while you are alive.

What are With Profit and Without Profit Plans? The insurer distributes its profits among it policyholders every year in the form of a bonus/ profit share. An insurance policy can be "with" or without profit. In the former, any bonus declared is allotted to the policy and is paid at the time of maturity/ death (with the contracted amount). In a without profit plan, the contracted amount is paid without any profit share. The premium rate charged for a with profit policy is therefore higher than for a "without" profit policy.

14

What is Bonus? An insurer distributes its profits among it policyholders every year in the form of a Bonus. Bonuses are credited to the account of the policyholder and paid at the time of maturity. Bonus is declared as a certain amount per thousand of sum assured. The term "bonus" is used interchangeably with "with profit".

What are guaranteed Additions? In some policies, the insurer guarantees the bonus/ profit declared as a certain amount per thousand of sum assured. This assured bonus will be credited to the policyholder irrespective of the performance of insurance company and is known as Guaranteed Additions. Guaranteed Additions will be payable at the end of the term of the policy or early death of the policyholders.

What are Loyalty Additions? In some policies, over and above Guaranteed Additions, the insurer will declare and credit to the policyholder, an additional amount per thousand of sum assured every 5 years, depending on its performance. This additional amount is known as Loyalty Addition.

What are Survival Benefits? In some policies, a part of the sum assured is paid to the policyholder in the form of Survival Benefits, at fixed intervals before the maturity date. The risk cover for life continues for the full sum assured even after payment of survival benefits and bonus is also calculated on

15

the full sum assured. If the policyholder survives till the end of the term, the survival benefits will be deducted from maturity value.

What are Accident Benefits? On payment of an additional premium of Re1 per Rs1000 of Sum Assured per year, the assured is entitled to the following benefits:In case of accidental death, the nominee shall receive double the sum assured. In case of total and permanent disability due to accident, risk coverage continues without further payment of premium. In addition, an amount equal to the sum assured is paid to the assured in monthly installments spread over 10 years. However, subsequent accidental death will not entitle the nominee for double the sum assured.

What are Disability Benefits? If the assured becomes totally and permanently disabled due to any accident, he need not pay future premiums and his policy shall remain in force for the full Sum Assured.

What are the various modes of payment for premium? Premiums, other than single premiums, can be paid by the policyholders to the insurer in yearly, half-yearly, quarterly or monthly installments or through a Salary Savings Scheme. If the mode of payment is yearly or half-yearly, some insurers give a rebate of 3% and 1.5% respectively on the premium. If the mode of payment is monthly, some insurers charge an additional 5% (this additional charge is waived for the Salary Saving Scheme).

16

What is Salary Savings Scheme? Salary Savings Scheme provides for payment of premiums through monthly deductions by the employer from the salary of employees. For this scheme, the additional charge of 5% of the premium usually added for the monthly mode of payments will be waived.

What loans are available against life insurance policies? At present loans are granted on unencumbered polices as followsUp to 90% of the Surrender Value for policies, where the premium due is fully paid-up, and Up to 85% of the Surrender Value for policies where the premium due is partly paid-up. The minimum amount for which a loan can be granted under a policy is Rs150. The rate of interest charged is 10.5% p.a., payable halfyearly. Loans are not granted for a period shorter than six months, or on the security of lost policies (the assured must have the duplicate policies) or on policies issued under certain plans. Certain types of policies are, however, without loan facility.

What is Surrender Value? The cash value payable by the insurer on termination of the policy contract at the desire of the policyholder before the expiry of policy term is known as the surrender value of the policy. Generally, a policy can be surrendered provided the policy is kept in force for at least 3 years. The

17

bonus is also added to the surrender value if the policy has been in force, in most cases, for at least 5 years.

What is a Death Claim? The claim is usually payable to the nominee/assignee or the legal successor, as the case may be. However, if the deceased policyholder has not nominated/assigned the policy or not made a will, the claim is payable to the holder of a Succession Certificate or such evidence of title from a Court of Law.

What is Nomination/Assignment of a Policy? When the policy money becomes due for payment on the death of the policyholder, it can be paid only to that person who is legally entitled to give a valid and effective discharge to the corporation. If the policy bears nomination, the claim is settled in favor of the nominee. Similarly, if the policy is assigned, the assignee receives the claim amount. It should be noted that an assignment of a policy automatically cancels the existing nomination. Hence, when such a policy is reassigned in favor of the policyholder, it is necessary to make fresh nomination.

What are Medical and Non-Medical Schemes? Life insurance is normally offered after a medical examination of the life to be assured. However, to facilitate greater spread of insurance and also as a measure of relaxation, some insurers do offer insurance cover without any medical examination, subject to certain conditions.

18

How do you effect a Change of Address and Transfer of Policy Records? When a policyholder wants to change his address in the insurers records, notice of such change should be given to the Branch office servicing his policy. Policy records can be transferred from the Branch Office that services the policy to any other Branch Office nearest to the policyholders place of residence. The correct address facilitates better services and quicker settlement of claims. When does a policy lapse? When the premium is not paid within the days of grace provided after the due date, the policy lapses. The grace period in case of yearly, half-yearly and quarterly modes of payment is one month and in case of the monthly mode of payment, it is 15 days.

How can a lapsed policy be revived? A lapsed policy may be revived during the lifetime of the assured, but within a period of 5 years from the due date of the first unpaid premium and before the date of maturity. Revival of a lapsed policy is considered either on non-medical or medical basis depending upon the age of the life assured at the time of revival and the sum to be revived. If the revival of the policy is completed by payment of over-due premium within 14 days from the expiry of the grace period, only the late fee for one month has to be paid.

Can a policy be altered? No alteration is permissible in the policy document - the evidence of contract, unless both the parties to the contract agree. After the policy

19

is issued, a policyholder in a number of cases finds the terms not suitable to him/her and desires to change them to suit his/her convenience. As all insurers also realize that insurance is a long term contract, certain changes under given circumstances might necessitate an alteration of the contract. Keeping in view the basic principles of insurance and administrative convenience, most insurers permit some alterations. Though, it is generally found that as a rule, insurers do not permit alterations resulting in lower rates of premier and within the 1st year from the commencement of the policy.

What is the difference between Life Insurance and General Insurance? A Life Insurance deals with various plans connected with the life of a person, whereas all kinds of non life insurance policies are issued by the General Insurance companies.

What are the documents to be executed at the time of taking insurance? A Proposal form should be filled in by the person taking insurance without concealing any material facts. The values for which insurance is to be taken is also decide by the party taking insurance. No bills, documentary proofs are taken by the insurance companies at the time of taking insurance, as the insurance is a contract of utmost good faith. Premium is to be given along with the proposal form for completing the insurance transaction after which the insurance company issues the cover note or policy.

20

CHAPTER NO. 02 INSURANCE SECTOR REFORMS

21

Insurance Sector Reforms

Why It became Inevitable? Despite the phenomenal success of The Life Insurance

Corporation of India the government and the public at large were not satisfied with it and by signing the GATT accord the Government of India was committed to open up the insurance sector to both domestic and international firms. A committee under the chairmanship of late Mr. R.N Malhotra was formed (ex governor RBI) and came to conclude that the monopoly of LIC lead to the lack of sensitivity towards policy holders and only 22% of the insurable population was insured. The committee thus recommended a number of measures to revamp LIC and to allow foreign companies to operate in India with an Indian partner. It felt that this would lead to a greater scope in product innovation and service improvement as well. In 1999 the Insurance Regulatory and Development Authority Bill was passed by the government to facilitate the growth and regulate the newly opened insurance sector and to guarantee the investments made by the people. On August 15, 2000 the sector was finally opened for foreign sector participation.

Deregulation came with certain conditions: Firstly, all new foreign players entering the Indian market must set up a joint venture with a local company.

22

Secondly, the maximum share the foreign player can hold is 26%, with the local company (or companies) holding the balance. Regulators are currently reconsidering the foreign equity cap of 26%.

Proactive steps taken by the IRDA for development of the market: 1) Market regulation by prudential norms. 2) Registration of players who have the necessary financial strength to withstand the demands of a growing and nascent market. 3) Implementation of a solvency regime that ensures continuous financial stability. 4) Presence of an adequate number of insurers to provide competition and choice to the customers. 5) Development of market capacity by asking insurers to retain bulk Of the premium within the country and to exhaust local market

Capacity before reinsuring abroad. In todays highly competitive financial services environment, effective organizations will employ technology in a strategic role to achieve competitive edge. Technology will play an increasing role in aiding design and administering of products, as well in efforts to build life-long customer relationships. Insurance A thriving insurance sector is of vital importance to every modern economy. First because it encourages the savings habit. Second because it provides a safety net to rural and urban enterprises and productive individuals. And perhaps most importantly it generates long-

23

term investible funds for infrastructure building. The nature of the insurance business is such that the cash inflow of insurance companies is constant while the payout is deferred and contingency related. The insurance industry in India has registered a growth of 10.5 % in the life insurance market and a 13% growth in the non life insurance market. This is primarily because of the liberalization of the insurance sector and the consumer awareness drive launched by both L.I.C and private sector players. As the consumer of insurance is waking up to newer needs. The Indian insurer is also getting there to meet them. Through product and market research and no doubt through observation of consumer behavior changes are effected in the kind of products and features coming out into the market. The concept of Insurance The business of insurance is related to the protection of the economic value of an asset for which a normal lifetime exists during which it is expected to perform. However if the asset gets Damaged, destroyed or is made non functional by the occurrence of some unfortunate event the owner of the assets suffers. Insurance is a mechanism to reduce the financial implications of such consequences. The mechanism involves people who are exposed to the same risk come together and agree that if any one of the members suffers a loss the others will share the loss and make good the loss. Thus people facing common risk come together and make their contribution towards a common fund whose amount is determined beforehand on the basis of past data and experiences.

24

CHAPTER NO. 03 LIFE INSURANCE MARKET

25

LIFE INSURANCE MARKET

STATISTICS Population : 1.07 : 4th largest in the world in terms of Purchasing

Billion Economies Power Parity (PPP). Saving Rate GDP growth Rate

: : : :

Around 20 % of GDP Over 7.3% 900 million 70 million only

Estimated insurable population Insured population

Insurance premium as a percentage of GDP: 2 % Size of market, life and Non-life Total global insurance premium Rate of Annual Growth year 2004-05 Non-life : : : : $9.94 billion $ 2422 billion Life 21.57

13.5 %

Number of Registered Companies: Type of BusinessLife Insurance Public sector Private sector Total General Insurance Public insurance Private Total : : : 4 9 13 : : : 1 14 15

26

TOP PRIVATE LIFE INSURERS IN INDIA NAME OF THE COMPANY 1 2 3 4 5 6 7 8 9 10 ICICI prudential life Insurance Company Ltd. HDFC Standard Life Insurance Company Ltd. Max New york Life Insurance Co. Ltd. OM Kotak Mahindra Life Insurance Co. Ltd. Birla Sun Life Insurance Company Ltd. TATA Aig Life Insurance Company Ltd. SBI Life Life Insurance Company Ltd. ING Vysaya Life Insurance Company Ltd. Allianze Bajaj Life Insurance Company Ltd. Aviva Life Insurance Company Ltd.

27

The life Insurance market in India is an underdeveloped market that was only tapped by the state owned LIC till the entry of private insurers. The penetration of life insurance products was 19 percent of the total 400 million of the insurable population. The state owned LIC sold insurance as a tax instrument. Not as a product giving protection. Most customers were under-insured with no flexibility or transparency in the products. With the entry of the private insurers the rules of the game have changed.

The 15 private insurers in the life insurance market have already grabbed nearly 21.57% of the market in terms of premium income. The new business premiums of the 15 private players had tripled to Rs. 13,153 crore in 2004 with the business increasing in the year 2004. Meanwhile state owned LICs new premium business has fallen.

Innovative

products,

aggressive

marketing

and

distribution

combination that has enabled private insurance companies to sign up Indian customers faster than anyone ever expected. Indians, who have 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 growing popularity of the private insurers shows in other ways. They are coining money in new niches that they have introduced. The state owned companies still dominate segments like endowments and money back policies. But in the annuity or pension products business the private insurers have already wrested over 78 percent of the market. And in the popular unit-linked insurance schemes they have a virtual monopoly, with over 90 percent of the customers.

28

The private insurers also seem to be scoring big in other ways they are persuading people to take out bigger policies. For instance, the average size of a life insurance policy before privatization was around Rs. 50, 000. That has risen to about Rs. 80,000. But the private insurers are ahead in this game and the average size of their policies is around Rs.1.1 lakh-way bigger than the industry average. Market share and growth LIC dominated the life insurance market with 87.4% of the total premiums collected during FY 2003. Its premium income increased 42.8% during FY 2004 from Rs.348.920 mn in FY 2003 to Rs 498219 mn in FY 2004 by comparison LICs premium income had increased 25.1 % during 2003 and 21.2% during 2004. The private life insurance companies have improved their market shares while LICs market share is down in the financial year ended 2003-04 during the year the market share of private life insurers has improved from 12.96% to 21.9% while LICs market share in terms of premium collected is down to 78% as against 87% during the year before. The life insurance industry on the whole underwrote first year premium of Rs. 18,710.15 Crores during the year and recorded a growth of 10.48% over the previous year while LIC witnessed a growth rate of just about 1.93% in the first year premium at Rs.16284.69 Crores, the growth rate of private insurers is much higher at 153%. The first year premium collected by the 15 private players however is just about 2425.46 Crores i.e., 14.89% of LICs first year premium collected. Among the private players ICICI prudential led with a market share of 6.25% (premium collection is about 750.91 Crores) followed by Allianz

29

bajaj at 3.4% (premium collection is about 449.86 Crores). Further a comparison of the individual single premium underwritten by the private players and LIC reveals a decline of 3.42 % and 61.29 % at Rs.287.97 Crores and Rs.1161.71 Crs respectively. Under the group insurance scheme the premium underwritten by the private players and LIC stood at 376.79 crs and Rs. 3647.82 crores with lives covered at 17.35 lakh and 45.10 lakh respectively the market share of the private insurers and LIC in terms of premium underwritten for group insurance was 9.36%, 90.64% respectively. The entire marketing process results in messages arising out of the organization to the audience which are in the control of the company where as there are some messages that reaches the companys audience which are not entirely in the hands of the company.

30

1% 3% 2% 9% 5% 7% TATA AIG KOTAK BIRLA 11% MAX-NEWYORK ING.VYSYA HDFC 4% 28% 5% MET LIFE BAJAJ ALLIANZ ICICI PRU SBI LIFE AVIVA 9% AMP SANMAR SAHARA LIFE 15% 1%

31

MARKET SHARE OF LIFE INSURANCE CO. & PRIVATE INS. CO.

22%

LIC PRIVATE

78%

NEW BUSINESS PREMIUM UNDERWRITTEN BY PRIVATE LIFE INSURERS FOR 2003-04 AND 2004-05 2009--10 2009-10 2009-10 2009-10 0.96 1.18 PRIVATE 12.96 21.93 0.68 1.48 LIC 87.04 78.07 2.4 2.45 0.7 0.89 0.39 1.11 1.12 1.92 0.12 0.22 0.96 3.39 4.01 6.25 1.05 1.91 0.41 0.76 0.15 0.36 0 0.01

TATA AIG KOTAK BIRLA Max-NewYork ING.VYSYA HDFC MET LIFE ALLIANZ BAJAJ ICICI PRU SBI LIFE AVIVA AMP SANMAR SAHARA LIFE

32

BUSINESS PREMIUM UNDERWRITTEN BY PRIVATE INSURERS AND LIC INDUSTRY FOR 2008-09 & 2008-09
100 90 80 70 60 50 40 30 20 10 0 2008-09 2008-09

INSURANCE INDUSTRY A SWOT ANALYSIS Major Strengths: 1) Premium rates are increasing and so are commissions 2) The variety of products is increasing. 3) Prospects expect more services from their brokers 4) Flexibility in payment of premium 5) Flexibility in investment option. 6) Open office structure. 7) Competitive environment.

Major Weaknesses 1) Insurance companies are often slow to respond to changing

33

needs. 2) There is an increasing trend of financial weakness among the companies. 3) There are more competitors for agencies to compete with banks and Internet players Opportunities 1) The ability to cross sells financial services is barely being tapped and can still be developed by collaborative efforts. 2) Technology is improving to the point that paperless transactions are available. 3) The client's increasing need for an "insurance consultant" can open new ways to service the client and generate income. Threats 1) The increasing cost and need for insurance might hit a point where a backlash with occur. 2) Government regulations on issues like health care, mold and terrorism can quickly change the direction of insurance. Increasing expenses and lower profit margins will hit hard on the smaller agencies and insurance companies. 3) Increasing expenses and lower profit margins will hit hard on the smaller agencies and insurance companies. 4) Increasing in the number of private players in the market.

34

Factors Responsible for the Likely success of Insurance Companies. Several factors are responsible for the likely success of the various Insurance companies in general; viz. 1 The A change in the attitude of the population 2 An open and transparent environment created under the IRDA. 3 A well-established distribution network. 4 Trained professionals to build and sell the product. 5 A more rationale approach to the investment criteria 6 Encouragement of newer and better products. 7 A stringent accounting practice to prevent failures amongst the insurers. 8 A level playing field at all stages of development in the sector for all the players.

35

CHAPATER NO. 04 COMPANY PROFILE (ICICI)

36

COMPANY PROFILE
INTRODUCTION OF ICICI PRUDENTIAL LIFE INSURANCE CO LTD.

ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse and prudential (PLC), a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was the first among private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudential's equity base stands at Rs. 9.25 billion with ICICI Bank and Prudential (PLC) holding 74% and 26% stake respectively. In the period April-December 2005, the company garnered Rs 8.6 billion of new business premium for a total sum assured of over Rs 73.6 billion and wrote nearly 3,45,000 policies. The company has a network of over 50,000 advisors; as well as 7 bank assurance tie-ups. Today, ICICI Prudential has emerged as the No. 1 private life insurer in the country, with a wide range of flexible products that meet the needs of the Indian customer at every step in life.

37

ICICI NETWORK:

38

ABOUT PRUDENTIAL

Origins: When Prudential was founded in London in 1848 it provided professional people with loans secured by life assurance. The market was later broadened when insurance policies, with penny premiums collected by agents, were sold by the industrial branch to the working classes in the second half of the nineteenth century. Industrial assurance was an innovation in insurance. The actuarial methods , until then had been applied to insurance for the better off social classes were combined with the traditional method of direct selling through agents that had successfully been used by friendly societies and burial clubs. The Prudential brand values of integrity, value for money and security were established and built the company's reputation. Success in this market meant that by the 1900s Prudential insured one third of the UK population. Expansion Over the decades Prudential has extended the product portfolio to meet customers' needs. Following the First World War new policies for single women, family and home protection were introduced. The establishment of group pensions in 1929 added a further range of products to the business. During the 1950s and 1960s, Prudential's ordinary branch focused on life cover, long term savings products and retirement annuities. Traditional industrial branch products declined, although home service was still in demand. By the 1970s Prudential had established a wide range of assurance, investment and savings products.

39

The focus on adopting new sales and marketing techniques to promote products dominated the 1980s. The sales force was restructured to deal better with customer needs and new channels of communication were opened through telephone sales and Independent Financial Advisers. The 1990s saw further diversification of products and methods of communication. In 1997 Scottish Amicable was acquired, strengthening Prudential's position in the IFA sector.

Recent Events Prudential's UK business has undergone a strategic review to meet customer's changing needs including the closure of the direct sales force, the transfer of our general insurance operations to Winterthur Insurance and the relaunch of a single UK brand with the award-winning Plan from the Pru campaign, an impartial guide to financial planning. Today Prudential's UK Insurance Operations provide a range of financial products and services through a diversified distribution model which includes agreements with Abbey National Bank and Zurich Financial Services. Prudential is the leading distributor of with-profits bonds through IFAs, and continues to lead the market in its other chosen product areas, including corporate pensions and bulk and individual annuities.

40

ICICI COMPANY VISION

To make ICICI Prudential the dominant Life and Pensions player built on trust by world-class people and service. This we hope to achieve by: Understanding the needs of customers and offering them superior products and service Leveraging technology to service customers quickly, efficiently and conveniently Developing and implementing superior risk management and investment strategies to offer sustainable and stable returns to our policyholders Providing an enabling environment to foster growth and learning for our employees And above all, building transparency in all our dealings. The success of the company will be founded in its unflinching commitment to 5 core values -- Integrity, Customer First, Boundary

less, Ownership and Passion. Each of the values describes what the company stands for, the qualities of our people and the way we work. We do believe that we are on the threshold of an exciting new opportunity, where we can play a significant role in redefining and reshaping the sector. Given the quality of our parentage and the commitment of our team, there are no limits to our grow.

41

Promoters: ICICI and Prudential came together in 1993 to form Prudential ICICI Asset Management Company, which has today emerged as one of the leading mutual funds in India. The two companies bring together two of the strongest financial service brands in Asia, known for their professionalism, excellent quality of service and long term commitment to YOU. Riding on the success of this relationship, the two companies joined hands once more in 2000, to form ICICI Prudential Life Insurance, with a commitment to provide leading-edge life insurance solutions. ICICI Bank has 74% stake in the company, and prudential plc has 26%. ICICIBank: ICICI Bank (NYSE:IBN) is Indias second largest bank with an asset base of Rs. 106812 crore. ICICI Bank provides a broad spectrum of financial services to individuals and companies. This includes mortgages, car and personal loans, credit and debit cards, corporate and agricultural finance. The Bank services a growing customer base of more than 7 million customer accounts and 5 million bondholders accounts through a multi-channel access network. This includes about 450 branches and extension counters, 1675 ATMs, call centers and Internet banking (www.icicibank.com). ICICI Bank posted a net profit of Rs.1, 206 crore for the year ended March 31, 2005. ICICI Bank is the only Indian company to be rated above the country rating by the international rating agency Moodys and the only Indian company to be awarded an investment grade international credit rating. The Bank enjoys the highest AAA (or equivalent) rating from all leading Indian rating agencies.

42

Management:

Board of Directors The ICICI Prudential Life Insurance Company Limited Board comprises reputed people from the finance industry both from India and abroad. Mr. K.V. Kamath, Chairman Mr. Mark Norbom Mrs. Lalita D. Gupte Mrs. Kalpana Morparia Mrs. Chanda Kochhar Mr. Kevin Holmgren Mr. M.P. Modi Mr. R Narayanan Ms. Shikha Sharma, Managing Director

Management Team Ms. Shikha Sharma, Managing Director Mr. Sandeep Batra, Chief Financial Officer & Company Secretary Mr. Shubhro J. Mitra, Chief - Human Resources Mr. Puneet Nanda, Head - Investments Ms. Anita Pai, Chief - Customer Service and Operations Mr. V. Rajagopalan, Appointed Actuary Mr. Dipan Bhattacharya - Chief Information Technology

43

ICICI Pru in the News: ICICI Prudential Life hikes capital to Rs 675 cr ICICI Prudential Life has hiked its capital by Rs 50 crore to Rs 675 crore in view of booming business. Hiking the capital for the ninth time since its inception in December 2000, the 74:26 joint venture between ICICI Bank and Prudential (PLC) said the additional capital would be used for meeting capital adequacy norms stipulated by the Insurance Regulatory and Development Authority. 'ICICI Prudential has grown exponentially over the past three years,' its Managing Director Shikha Sharma said in a statement. In the life insurance business, expenses were incurred up front while the revenue (in the form of premium) stream was staggered, and this necessitated a life insurance Company to regularly infuse capital during the first 5-7 years in order to support the growth of business. With an authorized capital of Rs 1,200 crore, the second generation life insurers premium mop up had crossed Rs 1,000 crore in December 2005. The insurance company, which expanded to 54 locations across the country, so far sold over 5.50 lakh policies for a sum assured of over Rs 13,000 crore.

44

Best Life Insurer Award:

In the short span since the insurance sector was opened up, ICICI Prudential Life Insurance has literally dictated the markets evolution. Catering to all age and income segments, the company started out with the traditional insurance policies that were easy to understand. The idea was to entire customers used to LIC' style of functioning. Soon, ICICI Prudential began exploring new areas. It introduced modern products, like the market-linked product where returns are linked to the market performance of the underlying assets. ICICI Prudential leads in virtually all parameters: size of agent force, number of policies sold, total sum assured, premium income and productivity of agents. It has set exact standards for its range of products, riders offered, quality of information in promotional material and even in the insurance awareness events organized. What has been in favor of ICICI Prudential is its range of products in each segment of life insurance-traditional, unit-linked and singlepremium options, be they for retirement plans or child plans. With such a comprehensive bouquet, it caters to all financial goals of a customer. ICICI Prudential also has a strong sales network and tie-ups with banks to offer bank assurance products. Its supplementary marketing channels contribute close to 30 per cent of its premium income. The company is now reaching out to new and untapped markets. ICICI Prudential works closely with NGOs and micro-finance institutions to spread awareness about the concept of insurance in rural areas. This helps meet the social obligations mandated by IRDA, but the company

45

has gone a step ahead by actively involving the villagers and working closely with them. The gap between ICICI Prudential and the second-in-line private insurer is vast. In fact, this hiatus has led some analysts to wonder if the company isnt a trifle too aggressive. But others say this has more to do with the companys customer-centric focus, its pan-India presence and superior risk management and investment strategies. ICICI Prudential is not, however, resting on its laurels. The company will continue to innovate and set the standards.

ICICI Pru has 40% of private life insurance market: Mumbai: ICICI Prudential Life Insurance has increased its market share among private life insurers to nearly 40%, from 33% as of endDecember. The companys first-year premium income in the AprilJanuary period stood at Rs 464.6 crore, accounting for 39.3% of the Rs 1,364 crore premium booked by all private life insurers together. Considering the entire life market, including the Rs 9,780 crore booked by Life Insurance Corporation, ICICI Pru''s market share works out to around 4.17%. The life insurance market continues to be dominated by LIC which has about 87.8% share. This is only a marginal dip from its 88.2% share in end-December. These comparisons are only for first year or new business premium. If renewal premium were to be taken into account, LIC''s share would increase further to over 96%. According to business figures brought out by the Insurance Regulatory and Development Authority (IRDA), the first-year premium mobilized by ICICI Prudential Life Insurance in the first ten months of

46

`03-04 amounted to Rs 464.4. This is more than twice the premium income generated by its closest rival Birla Sun Life which raised Rs 195 crore during the same period. HDFC Standard Life and Tata AIG have retained their third and fourth positions. Interestingly, there are three companies that are neckand-neck in the battle to be among the top five with a market share of close to 7% - Allianz Bajaj, Max New York Life and SBI Life Insurance. In the group insurance market, LIC''s share in the country is around 93%. Among the private companies, SBI Life, Birla Sun Life and HDFC Standard Life dominate the group insurance segment. SBI Life, with its group policies for mortgage loan protection and depositor insurance, has close to 45.8% of the group market among private companies. Birla Sun Life has a 23.4% share, followed by HDFC Standard Life which has a 18.4% share. Except these three companies, other players have a negligible presence in the group market. But, with over a month to go for the close of financial year, the rankings could still change dramatically. More so, because insurance companies,

particularly LIC, go into an overdrive in mobilizing new business.

47

FACT SHEET:

THE COMPANY ICICI Prudential Life Insurance Company is a joint venture between ICICI Bank, a premier financial powerhouse, and prudential plc, a leading international financial services group headquartered in the United Kingdom. ICICI Prudential was amongst the first private sector insurance companies to begin operations in December 2000 after receiving approval from Insurance Regulatory Development Authority (IRDA). ICICI Prudentials equity base stands at Rs. 925 crore with ICICI Bank and Prudential plc holding 74% and 26% stake respectively. In the period April-December 2008, the company garnered Rs 860 crore of new business premiums for a total sum assured of over Rs 7,360 crore and wrote nearly 345,000 policies. Today the company is the No.1 private life insurer in the country.

DISTRIBUTION: ICICI Prudential has one of the largest distribution networks amongst private life insurers in India, having commenced operations in 69 cities and towns in India. These are: Agra, Ahmedabad, Ajmer, Allahabad, Amritsar, Aurangabad, Bangalore, Bareilly, Bhatinda, Bhopal, Bhubhaneshwar, Calicut, Chandigarh, Chennai, Coimbatore, Dehradun, Durgapur, Faridabad, Goa, Guntur, Gurgaon, Guwahati, Gwalior, Hyderabad, Hubli, Indore, Jaipur, Jalandhar, Jamnagar, Jamshedpur, Jodhpur, Kanpur, Karnal, Kochi, Kolkata, Kolhapur, Kota, Kottayam,

48

Lucknow, Ludhiana, Madurai, Mangalore, Meerut, Mumbai, Mysore, Nagpur, Nasik, Noida, New Delhi, Patiala, Pune, Raipur, Rajkot, Ranchi, Rourkela, Salem, Siliguri, Surat, Thane, Thrissur, Trichy, Trivandrum, Udaipur, Vadodara, Vapi, Varanasi, Vashi, Vijayawada and Vizag.

The company has seven banc assurance tie-ups, having agreements with ICICI Bank, Federal Bank, South Indian Bank, Bank of India, Lord Krishna Bank and some co-operative banks, as well as over 160 corporate agents and brokers. It has also tied up with organisations like Dhan for distribution of Salaam Zindagi, a policy for the socially and economically underprivileged sections of society. ICICI Prudential has recruited and trained about 50,000 insurance advisors to interface with and advise customers. Further, it leverages its state-of-the-art IT infrastructure to provide superior quality of service to customers.

49

PRODUCTS:

Insurance Solutions for Individuals: ICICI Prudential Life Insurance offers a range of innovative, customer-centric products that meet the needs of customers at every life stage. Its 20 products can be enhanced with up to 6 riders, to create a customized solution for each policyholder. Savings Solutions Secure Plus is a transparent and feature-packed savings plan that offers 3 levels of protection. Cash Plus is a transparent, feature-packed savings plan that offers 3 levels of protection as well as liquidity options. Save?n?Protect is a traditional endowment savings plan that offers life protection along with adequate returns. Cash Back is an anticipated endowment policy ideal for meeting milestone expenses like a child?s marriage, expenses for a child?s higher education or purchase of an asset. LifeTime & LifeTime II offer customers the flexibility and control to customize the policy to meet the changing needs at different life stages. Each offer 4 fund options? Preserver, Protector, Balancer and Maximiser. LifeLink II is a single premium Market Linked Insurance Plan which combines life insurance cover with the opportunity to stay invested in the stock market.

50

Premier Life is a limited premium paying plan that offers customers life insurance cover till the age of 75. Invest Shield Life is a Market Linked plan that provides capital guarantee on the invested premiums and declared bonus interest. Invest Shield Cash is a Market Linked plan that provides capital guarantee on the invested premiums and declared bonus interest along with flexible liquidity options. InvestShield Gold is a Market Linked plan that provides capital guarantee on the invested premiums and declared bonus interest along with limited premium payment terms.

51

Protection Solutions LifeGuard is a protection plan, which offers life cover at very low cost. It is available in 3 options ? level term assurance, level term assurance with return of premium and single premium. Child Plans SmartKid education plans provide guaranteed educational benefits to a child along with life insurance cover for the parent who purchases the policy. The policy is designed to provide money at important milestones in the childs life. Smart Kid plans are also available in unit-linked form ? both single premium and regular premium. Retirement Solutions ForeverLife is a retirement product targeted at individuals in their thirties. Secure Plus Pension is a flexible pension plan that allows one to select between 3 levels of cover.

Market-linked retirement products LifeTime Pension II is a regular premium market-linked

pension plan InvestShield Pension is a regular premium pension plan with a capital guarantee on the investible premium and declared bonuses. ICICI Prudential also launched Salaam Zindagi?, a social sector group insurance policy targeted at the economically underprivileged sections of the society.

52

Group Insurance Solutions ICICI Prudential also offers Group Insurance Solutions for companies seeking to enhance benefits to their employees. ICICI Pru Group Gratuity Plan: ICICI Prus group gratuity plan helps employers fund their statutory gratuity obligation in a scientific manner. The plan can also be customized to structure schemes that can provide benefits beyond the statutory obligations. ICICI Pru Group Superannuation Plan: ICICI Pru offers a flexible defined contribution superannuation scheme to provide a retirement kitty for each member of the group. Employees have the option of choosing from various annuity options or opting for a partial commutation of the annuity at the time of retirement. ICICI Pru Group Term Plan: ICICI Pru?s flexible group term solution helps provide affordable cover to members of a group. The cover could be uniform or based on designation/rank or a multiple of salary. The benefit under the policy is paid to the beneficiary nominated by the member on his/her death.

53

Flexible Rider Options: ICICI Pru Life offers flexible riders, which can be added to the basic policy at a marginal cost, depending on the specific needs of the customer. Accident & disability benefit: If death occurs as the result of an accident during the term of the policy, the beneficiary receives an additional amount equal to the sum assured under the policy. If the death occurs while traveling in an authorized mass transport vehicle, the beneficiary will be entitled to twice the sum assured as additional benefit. Accident Benefit: This rider option pays the sum assured under the rider on death due to accident. Critical Illness Benefit: protects the insured against financial loss in the event of 9 specified critical illnesses. Benefits are payable to the insured for medical expenses prior to death. Major Surgical Assistance Benefit: provides financial support in the event of medical emergencies, ensuring benefits are payable to the life assured for medical expenses incurred for surgical procedures. Cover is offered against 43 surgical procedures. Income Benefit: This rider pays the 10% of the sum assured to the nominee every year, till maturity, in the event of the death of the life assured. It is available on SmarKid, SecurePlus and CashPlus.

54

Waiver of Premium: In case of total and permanent disability due to an accident, the premiums are waived till maturity. This rider is available with SecurePlus and CashPlus

55

ABOUT THE PROMOTERS ICICI Bank is India's second-largest bank with total assets of about Rs.112,024 crore and a network of about 450 branches and offices and about 1750 ATMs. It offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital, asset management and information technology. ICICI Bank posted a net profit of Rs.1,637 crore for the year ended March 31, 2005. ICICI Bank's equity shares are listed in India on stock exchanges at Chennai, Delhi, Kolkata and Vadodara, the Stock Exchange, Mumbai and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). Established in London in 1848, Prudential plc, through its businesses in the UK and Europe, the US and Asia, provides retail financial services products and services to more than 16 million customers, policyholder and unit holders worldwide. As of June 30, 2005, the company had over US$300 billion in funds under management. Prudential has brought to market an integrated range of financial services products that now includes life assurance, pensions, mutual funds, banking, investment management and general insurance. In Asia, Prudential is the leading European life insurance company with a vast network of 24 life and mutual fund operations in twelve countries China, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.

56

CHAPTER NO. 05

DATA ANALYSIS & INTERPRETATION

57

DATA ANALYSIS AND INTERPRETATION

1. RESPONDENTS MONTHLY INCOME DETAILS

QUANTUMN OF MONTHLY INCOME 5000-10000 10000-15000 15000-20000 ABOVE 20,000 TOTAL

TOTAL RESPONDENTS

PERCENTAGE

39 45 16 10 110

35% 41% 15% 9% 100%

50% 40% 30% 20% 10%

5000-10000 10000-15000 15000-20000 ABOVE 20,000

0%
INFERENCE: 41% of the respondents earning 10000/- to 15000/income, 35% are 5000/- to 10000/-, 15% are 15000/- to 20000/and 9% of the respondents earning more than 20000/-.

58

2. PERCENTAGE OF AMOUNT RESPONDENTS WOULD LIKE TO SAVE FROM THEIR MONTHLY INCOME

PERCENTAGE OF AMNDENTS LIKE TO SAVE FROM MONTHLY INCOME

TOTAL RESPONDENTS PERCENTAGE %

5% 5%-10% 10%-20% 20%-30% ABOVE 30% TOTAL

14 33 47 9 7 110

13% 31% 42% 8% 6% 100%

45% 40% 35% 30% 25% 20% 15% 10% 5% 0%

PERCENTAGE %

5% 5%-10% 10%-20% 20%-30% ABOVE 30%

FINDINGS: This is clear from the above figures that out of 110 respondents 42% would like to save 10-20% from their monthly income, 31% of them would like to save 5-10%, 13% want to save 5%, 8% want to save 20-30% and 6% want to save above 30% of their income.

59

3.RESPONDENTS OPINION ON ICICI PRUDENTIAL LIFE INSURANCE COMPANY

OPINION ON ICICI PRUDENTIAL COMPANY GOOD BAD NO OPINION TOTAL

TOTAL NO OF RESPONDEN TS 105 5 0 110

PERCENTAGE %

96% 4% 0% 100%

4%

96%

FINDINGS:

It is clear from the above sample size of 110

respondents 96% of the respondents are having good opinion on ICICI prudential life insurance company, 4% are having opinion on the company. bad

60

4. RESPONDENTS VARIOUS OPTIONS GENRALLY CONSIDER FOR INVESTMENT

RESPONDENTS OPTIONS OF INVESTMENTS FIXED DEPOSITS MUTUAL FUNDS INSURANCE SHARES CHIT FUNDS TOTAL 29 20 32 25 4 110 26% 18% 29% 23% 4% 100% TOTAL NO RESPONSES PERCENTAGE %

4% 23%

26% FIXED DEPOSITS MUTUAL FUNDS 18% INSURANCE SHARES CHIT FUNDS

29%

FINDINGS:

It is clear from the above sample that out 110

respondents 29% like to invest in insurance, 26% like to invest in fixed deposits, 23% like to invest in shares, 18% like to invest in mutual funds and 4% like to invest in chit funds.

61

5. RESPONDENTS OPINIONS ON FACTORS CONSIDER WHILE INVESTING THEIR MONEY

FACTORS

TOTAL NO OF RESPONSES

PERCENTAGE % 34% 5% 52% 9% 100%

PROFITS LIQUIDITY SAFETY TAX BENEFITS TOTAL

37 6 57 10 110

9% 34% PROFITS LIQUIDITY 52% SAFETY TAX BENEFITS 5%

FINDINGS: 52% of the respondents consider safety while investing the money, 34% return, 9% tax benefits and 5% of the respondents consider liquidity while investing the money.

62

6. RESPONDENTS OPINION ON IMPACT ON THEIR SAVINGS WITH THE CURRENT BUDGET-2006

IMPACT ON SAVINGS WITH CURRENT BUDGET-2005 YES NO TOTAL

TOTAL RESPONSES

PERCENTAGE %

69 41 110

63% 37% 100%

37%

YES 63% NO

FINDINGS: It is clear from the above sample of 110 respondents, 63% of respondents has given opinion that there is impact on their savings with the current budget -2005, 37% were not having impact on their savings.

63

7. RESPONDENTS PREFERED TIME HORIZON FOR INVESTMENT (INYEARS)

TIME HORIZON OF INVESTMENT (IN YRS) MINIMUM 1-2 YEARS MINIMUM 1-3 YEARS MINIMUM 1-4 YEARS ABOVE 5 YEARS TOTAL 33 34 23 20 110 30% 31% 21% 18% 100% TOTAL RESPONSES PERCENTAGE %

18%

30% MINIMUM 1-2 YEARS

21%

MINIMUM 1-3 YEARS MINIMUM 1-4 YEARS 31% ABOVE 5 YEARS

FINDINGS: It is clear from the above sample of 110 respondents, 31% of the respondents preferred 1-3 years as time horizon to invest, 30% are 1-2years, 21% are 1-4years and 18% are more than 5years as time horizon to investment.

64

8. RESPONDENTS AWARE ABOUT CAPITAL GUARANTEE SCHEMES OF ICICI PRUDENTIAL LIFE INSURANCE COMPANY

AWARENESS ABOUT ICICI PRULIFE SCHEMES YES NO TOTAL

TOTAL RESPONSES

PERCEBTAGE %

58 52 110

53% 47% 100%

47% 53% YES NO

FINDINGS: It is clear from the above sample of 110 respondents 53% of the respondents are aware of ICICI PRUDENTIAL LIFE INSURANCE COMPANY schemes and 47% are not aware of the company schemes.

65

9. RESPONDENTS KNOW ABOUT THE SCHEMES THROUGH DIFFERENT MARKETING CHANNELS

RESONDENTS KNOW ABOUT THE SCHEMES

TOTAL RESPONSES

PERCENTAGE %

ADVISORS OF COMPANY MANAGEMENT TRAINEES ADVERTISEMENTS OTHERS TOTAL

16 40 29 25 110

15% 36% 26% 23% 100%

23%

15% ADVISORS OF COMPANY MANAGEMENT TRAINEES 36%

26%

ADVERTISEMENTS OTHERS

FINDINGS:

36% of the respondents came to know about the

capital guarantee schemes through management trainees,26% through advertisements,15% through advisors and 23% from others.

66

10. RESPONDENTS INTRESTED ORGANIZATIONS FOR INVESTING THEIR MONEY

INTRESTED ORGANIZATIONS FOR INVESTMENTS TOTAL RESPONSES PERCENTAGE %

LIC ICICI PRU LIFE SBI LIFE INSURANCE HDFC OTHERS TOTAL

58 32 6 5 9 110

52.72% 29.09% 5.45% 4.54% 8.18% 100%

60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%

52.72%

29.09%

5.45% LIC LIC ICICI PRU LIFE ICICI PRU LIFE SBI LIFE INSURANCE

4.50% HDFC HDFC

8.18%

OTHERS OTHERS

SBI LIFE INSURANCE

FINDINGS: 52.72% of the respondents are interested for investing their money in LIC, 29.09% in ICICI, 5.45% in SBI, 4.54% in HDFC and 8.18% in others.

67

11. RESPONDENTS OPINION ON THE BENEFITS OF THE SCHEMES OF ICICI PRUDENTIAL LIFE INSURANCE COMPANY
RESPONDENTS ON BENEFITS OF ICICI SCHEMES TOTAL RESPONSES PERCENTAGE %

REASONABLE NOT REASONABLE CAN NOT SAY TOTAL

62 8 40 110

56% 7% 37% 100%

60% 50% 40% 30% 20% 10% 0%

56%

37%

7%

REASONABLE

NOT REASONABLE

CAN NOT SAY

FINDINGS: 56% of the respondents opinion on the benefits of the schemes of ICICI prudential life insurance company are reasonable, 7% are not reasonable, 37% of the respondents cant say.

68

12 RESPONDENTS OPINION ON INCREASE OF MARKET SHARE WITH THESE SCHEMES OF ICICI PRUDENTIAL LIFE INSURANCE COMPANY

RESPONDENTS OPINION ON INCREASE OF MARKET SHARE YES NO CANT SAY TOTAL

TOTAL RESPONSES

PERCENTAGE %

67 14 29 110

61% 13% 26% 100%

26% YES NO CANT SAY 13% 61%

FINDINGS: 61% of respondents opined that the benefits given by ICICI PRU are satisfied, 13% respondents are not satisfied and 37% cant say.

69

13 RESPONDENTS OPINION ON THE CAPITAL GUARANTEE SCHEMES OF ICICI PRUDENTIAL LIFE INSURANCE COMPANY RESPONDENTS OPINION ON ICICI SCHEMES GOOD EXCELLENT AVERAGE POOR TOTAL 66 8 23 13 110 60% 7% 21% 12% 100% TOTAL RESPONSES PERECENTAG E%

12%

21% 60% 7%

GOOD EXCELLENT AVERAGE POOR

FINDINGS: 60% of the respondents opined that capital guarantee schemes are good, 21% average,7% excellent and 12%poor.

70

14) AGE OF THE RESPONDENTS

RESPONDENTS AGE BELOW 30 30-40 40-50 ABOVE 50

TOTAL

PERCENTAGE % 18% 39% 33% 10%

100%

10%

18% BELOW 30 30-40 39% 40-50 ABOVE 50

33%

FINDINGS: 1. From the above sample of 110 respondents 18% are below the age of 30. 2. From the above sample of 110 respondents 39% are the age group of 30-40. 3. From the above sample of 110 respondents 33% are age group of 40-50. 4. From the above sample of 110 respondents 10% are the age group of above 50.

71

OVERALL FINDINGS:

1.Majority of the people (69%) know about ICICI PRU LIFE. 2.Most of the people (42.72%)have very good opinion about ICICI PRU LIFE. 3.By this research it is clear that most of the respondents consider safety while investing their money. 4.Most of the respondents in this research were from IT sector so they need tax benefits schemes so there is more scope for insurance sector to attract IT sector employees. 5.It is clear by the research that most of the people (47.72%) are interested in saving 10%-20% from their monthly income for their future period. 6.It is clear by research that majority of the respondents take insurance to secure their lives and for tax benefits and also for future profits. 7.It is clear by the research that most respondents (62.72%) has given opinion that there is impact on their savings with the current budget2008. 8.It is clear by the research that most of the people are not proper awareness regarding the schemes of ICICI PRU LIFE.

9.It is clear by the research that most of the people are choosing LIC for their investments. And less no of people are choosing ICICI PRU LIFE to invest their money.

72

10.

Most of the respondents have given the reasonable opinion on the

benefits given by ICICI PRU LIFE schemes and they had good opinion on the schemes. 11. Most of the respondents have given an opinion that they can

invest their money up to a time horizon of 1-3 years. 12. Kurnool is a potential city for the marketing of Insurance products;

it has a mix of High and Middle class, Employees and Business class people. Further it must be noted that a large number of software companies have emerged or have set up their branches and are providing handsome compensation packages to their employees

73

CHAPTER NO. 06

CONCLUSION (ON CONSUMER BEHAVIOR)

74

Conclusions on Consumer Behavior

Thus from overall project has helped me to learn a lot which is not there in books. The practicality of the subject is totally seen in the real sense. This live experience gave me an opportunity to learn new things, which could be implemented in practical by the company to excel itself in the segment. I thank ICICI PRUDENTIAL LIFE INSURANCE

COMPANY for providing this opportunity to me as a summer trainee and shown the path of knowledge and experience which will help me to succeed in the career and excel into bright future Changing customer behavior in insurance buying Customers know generally what a policy covers; they also know that there are several fine prints in insurance contracts, which they do not know, or perhaps care to know, at the time of buying. And they also seem to generally conclude that when it comes to making a claim under an insurance policy, there could be several issues of which they are just unaware at the time of buying the policy in the first place. Changing Expectations While the fresh air of competition in every sector of the economy brings in major changes in consumer expectations. The insurance industry has witnessed a few unique aspects, such as regulationinspired efforts to educate insurance buyers, and a vast change in the skills and capabilities of the intermediaries involved in distribution.

75

Motivating factors 1) In respect of life insurance, potential buyers are driver to buying a policy for one or more of three major reasons: security of the money invested, saving for one of more specific purposes, and the availability of tax benefit. 2) Customers are increasingly known to place less reliance on the tax benefit factor, and stress more on the security aspect and the enduse objective. 3) The challenge of the insurance companies is to address the motivating factors imaginatively and come up with genuine solutions. Take for example, the consumer's objective of taking a policy to save money for higher education of a child. 4) A potential buyer primarily expects that the saving should be a painless process and that the money saved should be absolutely safe. The challenge is to provide not only convenient payment options, but also mechanisms that could offer some measure of protection and relief to the customer if he is forced to disrupt the payment arrangement for unforeseen reasons. 5) On the issue of the consumers perception of security of the money invested, there are two important aspects. The second is how to address more effectively the question about the dependability of the new generation companies that potential new insurance buyers raise during sales calls especially outside metros and in small towns (referred to in publicity jargon as buyers in the SEC B and C categories). Both insurance companies and the Regulator need to address this behavioral challenge more actively.

76

Customers' experience: 1) There has been a vast change in the approach of the insurance agent from the pre-liberalization days. While the agent in the past established informal contacts with potential buyers and often depended on referrals from friends and family members, the new age companies insist on a professional, and often aggressive stance on the part of the sales staff. 2) Customer expectations in this regard revolve around two key aspects: first, whether the customer is getting truthful advice from the agent, or if he is pushing a product that yields him the highest commission rate. Invariably, the customers today expect the insurance agent (and other intermediaries such as the bank assurance sales staff) to provide ready comparison of competitors' products and how the product the agent is suggesting is superior to the others. 3) The second aspect of customers' perception about the new generation of insurance agents is the level of continuing commitment of the agent to arrange post-sale service. Potential insurance customers increasingly make arrangements to pay periodical premiums directly through the electronic medium, or though automatic transfers from their bank accounts, thereby bypassing the need for regular post-sale service by the agents, customers would tend to place more reliance on the direct standard of service from the company concerned.

77

4) Instances of customers requiring agents to arrange for loans against their policies, or change nominations etc. are rare. Therefore companies need to gear themselves to provide high service standards directly.

78

Premium shopping 1) Customers have the general feeling that as insurance products become more complex, and they get bundled with several riders. It is becoming impossible to make price comparisons between different companies. 2) An increasingly larger segment of customers now questions why the premium rate should be the same for a policy if bought direct from the company over Internet. or through a channel considered simpler, such as the bank assurance channel. There is logic in the insurance companies passing on the cost saving to customers in such cases. 3) It is time the Regulator seriously considered the customer expectations of differential premium rates for the same policy bought through different channels and allowed the practice. For example, it is common for banks abroad to offer a higher interest rate to exclusive Internet clients. 4) It should therefore be conceivable to offer premium rebate to insurance buyers who consciously decide to approach the company directly for buying a policy (after presumably taking the trouble of educating themselves about the product features and other aspects). and choose to deal with the company directly for future servicing needs.

79

High expectations One aspect of customer service from new age insurance companies that remains to be tested widely is the claim payment record. While consumers seem to be satisfied that the survival benefits under a life insurance policy would get paid rather promptly from the tech-savvy new companies, obviating the need for interlocution by the insurance agent, insurance buyers are not yet convinced about hassle-free payment in the event of a claim. Whether under a life policy or a general insurance policy. This is especially so in respect of rider benefits such as critical illness or hospitalization benefits.

80

Employee Behavior 1) An employee is an individual who works for another or for some organization and has some characteristic due to the nature if his occupation that affect his buying decisions and his behavior in general. This is because of their limited incomes but at a more or less fixed rate. They do not want to take up high risks and prefer the passively managed schemes and have the ability to save up to 20-30 % of their incomes for their personal and families safety and contingencies as well as to evade tax and thus are the most loyal customers of the insurance sector. 2) It is observed that the private sector employees on the overall receive higher salaries than the government and public sector employees and thus are a veryhigh potential segment to be tapped. 3) Employees have a limited income at any given point of time and therefore require more time to make available resources to take up insurance policies along with detailed tax planning and evaluating the benefits of the scheme thereby the calls focused on employees have a longer turnaround time. Finally employees have a greater change to invest in child care policies as most of them inhibit a dream to collect small sums of money to meet their children's education expenses at later stages and are also very keen on the additional benefits given in a policy.

81

Other Conclusions 1) A major limitation as we see is the expanse of our target market (94% of the Indian market being untapped); though large it is not clearly defined. This makes the search for our potential customers even more challenging. 2) The willingness of the respondents to divulge information may affect the validity of the project and the answers given by the respondents would be assumed to be true. 3) The state of mind as well as the behavior of the respondent at the time of conducting the survey can affect the meaning of the project. 4) Life insurance has become synonymous with LIC a major percentage of the population is reluctant to rely on private life Insurance Player.

Activities to promote life insurance among people The strategies are: a) Public places hoardings b) Advertisements on TV channel: So, they will advertise in these timings (cricket matches, serials, news)

Factors responsible success of the insurance Companies Several factors are responsible for the likely success of the various Insurance Companies in general: 1) The change in the attitude of population. 2) An open and transparent environment created under the IRDA. 3) A well-established distribution network.

82

CHAPTER NO. 07 BIBLOGRAPHY

83

BIBILOGRAPHY
1) www.iciciprulife.com 2) www.einsuranceprofessional.com 3) www.bimaonline.com 4) www.ciionline.org 5) www.mindbranch.com 6) www.irdaindia.com 7) Insurance Journals 8) Consumer Behavior Leon G.Schiffman and Lazar Kanuk 9) Services Marketing Zeithmal Valorie